What Is an Offset Agreement?

An offset agreement is a special type of arrangement most often concluded in connection with the purchase of military equipment or other contracts essential to national security. The essence of offset is that the foreign supplier, in addition to fulfilling the main contract, undertakes to provide specific benefits to the purchasing state. These may include technology transfer, investments in the domestic industry, training programs, or research and development cooperation. Through offset, the economic and technological benefits of major defense procurements can be significantly enhanced.

This guide explains in detail what an offset agreement is, the legal basis for its operation in Poland, the obligations it imposes, the advantages it offers, and the risks involved. It also discusses examples of offset commitments and provides practical tips for entities engaged in such contracts.

What Is an Offset Agreement? (Definition)

An offset agreement is a contract concluded between the State Treasury and a foreign supplier of military equipment or other strategic products. Under this agreement, the supplier must meet additional obligations. These are the so-called offset obligations. They may include:

• technology transfer to Polish entities;
• production or assembly of equipment in Poland;
• establishment of production plants or service lines;
• training of specialists;
• research and development (R&D) carried out with Polish institutions;
• the participation of Polish companies in supply chains.

Offset is therefore a way of transferring part of the economic benefits to the buying country. It is also a tool for building defence capacity.

Legal Basis for Offset Agreements in Poland

In Poland, the key legal act regulating offset is the Act of 26 June 2014 on Agreements Concluded in Connection with Procurement of Fundamental Importance for National Security

The Act specifies:

• when offset can be used;
• who can conclude offset contracts (in Poland, as a rule, the Minister of National Defence);
• rules for verifying offset obligations;
• the manner in which they are performed and controlled.

The act aims to ensure that strategic purchases will support the development of the defence industry and the technological competencies of the state. Especially with the participation of foreign suppliers.

Offset Obligations – Scope and Types

Offset obligations can be divided into several categories. In practice, their content depends on the type of order and the supplier’s capabilities.

1. Technology transfer

This is the most crucial element of offset. It includes the transfer of technical knowledge. It is necessary to enable the production, service or modernisation of military equipment in Poland.

Technology transfer may include:

• technical documentation;
• production licenses;
• technical training;
• know-how regarding the service and modernisation of equipment.

2. Production or assembly in Poland

A foreign supplier may be required to launch:

• assembly lines;
• manufacturing facilities;
• service facilities.

The aim is to increase the independence of the state and create jobs.

3. Industrial cooperation

It can involve:

• the participation of Polish companies in supply chains;
• subcontracting;
• joint defence and arm projects.

4. Research and development cooperation

Includes:

• research and development (R&D) projects;
• creation of laboratories;
• cooperation between universities and industry.

5. Training and competence development

Obligations may involve:

• training for engineers;
• military training;
• certification and specialised courses.

What Is the Procedure for Concluding an Offset Agreement?

1. Identifying the need to purchase

The purchase of military equipment of strategic importance is the starting point. The Ministry of National Defence evaluates whether the offset is justified in a given case.

2. Offset negotiations

These are conducted by the Polish side with the foreign supplier, covering:

• the scope of technology;
• type of benefits;
• schedule;
• methods of control.

3. Conclusion of the contract

The contract is signed by the Minister of National Defence and a foreign supplier. This is a separate agreement from the main purchase contract.

4. Implementation of obligations

The supplier fulfils its obligations, often for years. Their performance is controlled by the relevant institutions.

5. Verification and settlement

Offset obligations are settled according to their economic value and compliance with the agreement. Otherwise, there is a risk of sanctions.

Benefits of an Offset Agreement

A well-prepared offset agreement brings many benefits to the state and the economy:

• building local technological competences;
• reducing dependence on foreign services;
• new job places;
• strengthening the national defence industry;
• development of scientific and research cooperation;
• increasing state security;
• capital and investment flows.

Offset is therefore a strategic development tool.

Risks and Controversies of Offset Agreements

Despite the potential benefits, offset agreements also carry significant risks.

1. Difficulties in verifying execution

Technology transfer or R&D collaboration is difficult to measure precisely.

2. Delays in implementation

Offset obligations often extend over many years, sometimes with delays.

3. Risk of incorrect valuation

Not all investments have the same real value for the economy.

4. Criticism of offset as a mechanism

Some experts indicate that offset can:

• lead to dependence on foreign suppliers;
• not bring the expected results;
• be a political tool, not an economic one.

Practical Example – Offset Implementation in Poland

An example is the agreement on the acquisition of helicopters for the Polish army. The offset commitments provide, for example:

• establishment of service facilities in Poland;
• training of military personnel;
• handing over part of the technical documentation;
• the participation of Polish companies in the production of components.

According to information from the Ministry of National Defence, the offset was to enable the maintenance of equipment in the country and the transfer of advanced technologies to industry. You can read more about it here.

Significance of Offset Agreements for the Defence Industry

Offset is a tool that strengthens defence potential. Both through investments in production facilities and long-term technological competencies. For Poland, it is especially important due to the need to modernise military equipment and develop domestic companies.

Offset Agreement – summary

An offset agreement is a specific and complicated tool used in large defence purchases. On the one hand, it enables technology transfer, industrial development and increased strategic security. On the other hand, it requires precise negotiations, control and long-term coordination. Proper preparation of the contract and the support of specialists can significantly increase the benefits for the state and reduce the risks associated with its implementation.

If you are planning to conclude an offset agreement, participate in negotiations with a foreign supplier or want to verify the correctness of offset obligations, contact our firm. We will help you assess risks, prepare documents, analyse the scope of technology transfer and ensure full legal security of the project.

FAQ – Frequently Asked Questions About Offset Agreements