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Greek Government introduces new Law bringing changes to Defence Procurements

Friday, March 12, 2021

The Greek Parliament has passed a new Law (L. 4782/2021), amending current legislation on public procurements and defence procurements. The full title of the Law is the “Modernization, simplification and reform of the regulatory framework of public contracts, particular provisions of procurement in the sectors of defence and security and other provisions for the development, infrastructure and health” (GovGazette No. 36/Α/9.3.2021).

As to Defence Procurements, the new provisions amend the main Defence Procurement Law 3978/2011 which had introduced both new procedural procurement rules in line with EU Law (Dir.2009/81/EC). In addition, in the wake of a wave of alleged scandals relating to defence procurements, Law 3978/2011 had formalized the 2009 MoD Ethics Order and introduced new and more stringent ethics rules. Commercial agents were been literally ousted, only defence manufacturers were allowed to actively engage the MoD and numerous transparency and integrity requirements (such as restrictions on use of certain corporate vehicle- offshore companies) were imposed. To view our 2012 newsletter on Law 3978/2011 click on https://www.ballas-pelecanos.com/up/files/Defence_Procurement_Law_No.pdf

The new provisions re-introduce a certain degree of flexibility but also introduce new restrictions.

The present newsletter deals with the Ethics aspects of defence procurement, governed by Law 3978/2011, as amended by L. 4782/2021.  Procedural aspects shall be dealt in a future newsletter.

In particular, with regards to Ethics:

  • Article 8 L. 3978/2011 on “Transparency and Conduct Rules applied by the organs of the Armed Forces” is replaced. The new Article 8, inter alia: (a) expressly allows informative updates to the military and civilian personnel of the Armed Forces (AF) by an economic undertaking in the course of AF’s market research. In this respect, the involved personnel is that of the AF, departing from the previous wording, which referred to the personnel of the MoD (b) No prior notice to and/or approval by the functional heads, be it a Director/supervisor/Chief of staff, is required by the personnel communicating with the economic undertakings for said informative updates. The only requirement is the immediate (on the same day) upload/website posting of the contact (press) release on the internet site of the MoD and/or the relevant General Staff and/or the relevant directorate (c) The engagement by an economic undertaking, in whatever employment, work or mandate capacity, of military and civilian personnel of the Armed Forces, who handle procurement contracts, is now expressly elevated to a disciplinary offence for said personnel
  • Article 9 L.  3978/2011 on “Transparency and anti-corruption rules which are imposed on the economic undertakings” is abolished altogether
  • Articles 9 and 10 L. 3978/2011 (“Integrity Clause”) are merged in a new Article 10 with same title as former Article 9 (“Transparency and anti-corruption rules which are imposed on the economic undertakings”). The aim is to simplify the rules of contact between the economic undertakings and the awarding/procurement authority. The new consolidated Article 10, inter alia, (a) expressly allows the economic undertakings and their legal representatives who participate in procedures to conclude and implement supply, services or works contracts in the area of defence to use commercial agents of PD 219/1991 (Dir 86/653/EC). This lifts the former wholesale prohibition/exclusion of all manner of mediation services in favor of bona fide commercial agents (b) provides for an active obligation of the economic undertaking to provide binding declarations against, inter alia, engagement in antitrust activities. This is a shift in emphasis towards a more active role of the economic undertaking itself whereas in the former legislation the onus lay with the awarding authority to include such statements/Integrity clause in the contract (c) expressly provides for an obligation by the economic undertaking activated at the time of the tender award to file as part of the award/ratification documentation a solemn declaration that, inter alia, they have not used any non-authorized mediation services, as well as having content corresponding to the above binding declaration (in sort, a solemn declaration that they have abided by their binding declaration) (d)  The “transparency” Former Article 11 on “Audits and inspections of economic undertakings”, which provided for extensive investigative powers of the awarding authority, is abolished (Article 178 L. 4782/2021). The rationale is that this provision imposed an asphyxiating control over the economic entity and limited economic freedom, and that the administrative burden of the awarding authority along with the complexity in its implementation was disproportionate to the actual contribution of said provision to its transparency aims. For review convenience, the above information is provided also in table-form as per herein below:

Law 3978/2011 before the changes

Law 3978/2011 as amended by L. 4782/2021

Previous position: Obligations to the personnel of the MoD

New rule: Obligations to the personnel of the Armed Forces (AF)

Previous position: AF market research not included as a situation lawfully entitling an economic undertaking to provide info update to AF on products/services

New rule: Informative updates can now be provided in the course of market research by AF

Previous position: Prior notice to functional Head/Chief of Staff needed before contact/informative update by an economic undertaking

New rule: No prior notice needed

Previous position: Prohibition on economic entities in employing in private sector of AF officers within three (3) years from retirement or resignation

New rule: The engagement by an economic undertaking of active AF personnel, who handle procurement contracts, is now a disciplinary offence for said personnel (including engagement within three (3) years from leaving office)

Former Articles 9 and 10 L. 3978/2011 (“Integrity Clause”) are now merged in a new Article 10 with same title as former Article 9 (“Transparency and anti-corruption rules which are imposed on the economic undertakings”).

Previous position: Companies participating in procurement procedures or implementing contracts were prohibited from having/using any intermediary, middle-man or broker during the process for the conclusion and implementation of a contract

New rule: The new Article 10 L. 3978/2011 expressly allows the use of bona fide commercial agents of PD 219/1991 (Dir. 86/653/EEC)

Previous position: The awarding authority included in the contract Documentation binding declarations on antitrust and other issues concerning the participating undertaking

New rule: The participating economic undertaking is obliged to provide binding declarations on antitrust and other issues

Previous position: - At the time of the tender award the economic entity must provide in effect a solemn declaration that they have abided by the Integrity clause

New rule: At the time of the tender award the economic entity must provide in effect a solemn declaration that they have abided by their binding declarations

Previous position: Article 11 provided for extensive investigative powers of audit and inspection of the economic entity

New rule: Article 11 is now abolished

Previous position: Economic entities were prohibited from using offshore companies as subcontractors/suppliers/service providers in relation to the contract subject-matter

New rule: Said defence procurement-specific prohibition is now abolished – offshore company involvement is dealt with in the wider framework of public procurement rules

This newsletter is distributed for information purposes only. It is not intended to be relied upon nor should it be understood or used as legal advice. For legal advice on defence procurement matters please contact Gregory Pelecanos, Senior Partner, ([email protected]) or Panayiotes Yiannakis, Senior Associate, ([email protected]), or Alexander Rammos, Senior Associate ([email protected]).