DEFENSE PROCUREMENTS Law No. 3978/2011

News Release: 4 December, 2012

1. Ethics

   "Article 8. Transparency and Conduct Rules applied by the organs of the Armed Forces.

   1. The military and civilian personnel of the MoD, irrespective of the type of employment relationship and in the ambit of its authority, is allowed to have contacts only with the legal representatives of the economic undertakings which participate in procedures for the conclusion and implementation of contracts.

   2. Prior to each contact notice is given to the head of the competent service and to the head of the respective general staff or to the general head of the respective General Directorate. After each contact a report is drawn up for the respective file. An announcement relating to each contact is uploaded on the MoD's website on the day the contact occurred.

   3. ..... (see below)

   4. Updates by companies concerning military equipment are allowed only in the context of the technical dialogue of art 31 or in the context of presentations or informative meetings organized by the relevant agencies for the presentation of new technological evolutions in specific areas, as well as in the context of their participation in international exhibitions and conferences.[ Note re Art 31: the MoD may initiate a technical dialogue prior to initiating procurement procedures. The technical dialogue is initiated either by uploading an invitation on the Mod website or by special invitation were state secrets may be involved. The dialogue can generally last 15-60 days or more at the discretion of the MoD. Its purpose is to gather information and advice on essential technical matters].

   5. Violation of these provisions are disciplinary infractions for which the following penalties can be imposed:

   1. as to military personnel, the applicable usual or statutory disciplinary penalties

   2. as to civilian administrative employees, the penalties provided for in Law No. 3528/2007, (Code on the Status of the State's Civilian Administrative Employees and Employees of Legal Persons of Administrative Law)

   3. as to personnel employed under a civil law contract, the penalties provided for by Law No. 410/1988 , unless the violation is a breach of essential duties permitting termination of the employment contract

   4. as to lawyers and the personnel of the State's Legal Council, the penalties provided by the respective disciplinary provisions."

   COMMENT: Article 8 incorporates the basic provisions of the November 24, 2009 "Ethics Order", which is not abolished and hence seems to remain in full effect. The ambit of the restriction remains the same. However the new law refers only to contacts during "procedures for the conclusion and implementation of contracts" i.e. at any time after official initiation of the process for conclusion and during implementation of contracts, whereas the Ethics Order covers also the period before any procedure is officially initiated. In view, though, of para. 4 which restricts the companies' opportunities to present new advances, it would seem that the practical effects of the Ethics Order are not substantially changed. All contacts (whatever their nature or medium) between the MoD and companies are restricted only to companies' legal representative, i.e. officially authorized representatives appointed as attorneys in fact or holders of powers of attorney by the governing bodies of companies. No commercial agents or sales representatives can initiate or participate in such contacts in such a capacity. The process remains substantially unchanged (prior notice to functional heads, report and website) with the difference that the website posting occurs on the same day but after the meeting rather than prior to the meeting. The residual authority of the GDDIA is absent from the law, but such matters normally fall within its scope of authority in any case.

   The law does not change the fact that these restrictions are binding on the MoD civilian and military personnel and not on third parties. Thus, penalties are not provided for with regard to third parties violating the law. The penalties are extended though to lawyers and members of the State's Legal Council.

   One significant change seems to involve contacts initiated by companies. According to the law, contacts with the purpose of providing the MoD with information on new technologies or new products must be initiated by the MoD (art 31 technical dialogue or meetings conferences organized by the competent service). It would seem that the practice of companies to organize events with such a purpose is now limited to events in the context of international exhibitions (e.g. Defendory or Fairnborough) or conferences, rather than on an ad hoc basis.

2. Anti-corruption and Transparency A) Anti-corruption

   "Art 8 §3: "The military and civilian personnel of the MoD irrespective of the type of employment is prohibited from soliciting, accepting, directly or indirectly, any

   material favour, gift or exchange, when it is handling cases in the scope of the exercise of its authority, even where their actions are not criminal."

   COMMENT: The extension of the prohibition against soliciting and accepting favours and benefits to cover even actions which are not, legally speaking, crimes, would seem to prohibit even accepting favours or benefits which otherwise would be considered tokens of appreciation or harmless social niceties.

   "Art. 9: Transparency and anti-corruption rules which are imposed on the economic undertakings.

   1. 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 are prohibited from having or using any intermediary, middleman or broker during the process of conclusion and performance of the contract.

      COMMENT: This provision seems to introduce a wholesale prohibition against engaging agents and sales representatives for provision of services and using their services when a procurement process has been initiated leading up (possibly) to a contract and during the implementation phase after award. It does not seem illegal to engage agents and representatives for services prior to commencement of procurement procedures. The use of the terms "intermediary, middleman and broker" would seem to exclude any and all manner of mediation services.

   2. The economic undertakings of paragraph 1 receive professional advisory services in relation to a contract only from law offices, tax, technical and economic advisers.

      COMMENT: Bona fide consultants for legal, tax, technical and economic matters are allowed. This provision seems consistent with LD 5227/31 declaring illegal any agreement for commissions in relation to transactions with the State or State agencies with the exception of fees for technical and scientific services. However fees which "exceed the usual measure or are disproportionately excessive" in relation to the services rendered or which shall be rendered, "are invalid as to the excessive amount" (art 2.2)

   3. The economic undertakings of paragraph 1 and their legal representatives are prohibited from using offshore companies or other...