In defence procurement, Industrial Participation (IP) in the target country is a common condition and requirement for supply contracts.
In an industrial participation agreement, the seller (a company) must commit to compensating the value of the purchasing contract to the purchaser (a country), either in whole or in part. The aim is to ensure industrial participation via a purchasing contract that will create the agreed added value for the procuring country. The requirements and processes for industrial participation are defined in accordance with each target country’s national regulations and any contract-specific requirements. The European Union also regulates the framework for industrial participation.
Patria operates in the defence sector, in which industrial participation is a general requirement and condition of defence contracts. Patria can export its products either directly through a project or, if the government purchasing defence materiel from Patria so requires, via other industrial participation arrangements or activities. When deciding on involvement in projects requiring industrial participation, Patria considers factors such as its business interests, the value of industrial participation and its relation to the value of the main agreement or transaction. Senior management must also steer and supervise any activities related to industrial participation in accordance with clearly stated responsibilities.
Industrial participation arrangements and activities comply with the regulations and practices of the countries in question. These arrangements may also include externally created industrial participation activities and collaboration with others who have industrial participation obligations (that is, with those considered to be third parties to the agreement), but only as long as this is permissible under the applicable regulations and practices.
Bilateral industrial participation relief or exchanges are also possible if they are conducted with a permit from the relevant authorities and in accordance with the applicable regulations and contractual terms and conditions. Patria’s management, Board of Directors and the Board’s Audit Committee are duly notified of the company’s industrial participation obligations.
All industrial participation obligations and activities are governed by the following unconditional requirements:
- Industrial participation obligations and activities that are permissible under the applicable legislation, regulations and international agreements must comply with legislation and regulations.
- The arrangements must comply with the Patria Group’s ethical and standardisation practices, the Patria Group’s Ethical Code of Conduct, and the guidelines and other instructions governing industrial participation.
- Applicable due diligence reports must be made on any and all partners and vendors related to such arrangements and transactions, with a special focus on anti-bribery and anti-corruption.
- In order to mitigate legal risks and ensure the compliance of Patria’s industrial participation activities, Patria must conduct a comprehensive legal analysis of the industrial participation regulations applicable in the country in question.
- All relevant financial and non-financial risks must be assessed and systematically controlled.
Carrying out Patria’s industrial participation obligations:
Since the beginning of 2022, industrial participation has been part of the Global Division’s operations and is being managed in accordance with the aforementioned principles. Patria’s obligations are based on both the agreements transferred from the Land business unit at the end of 2021 and new agreements that were signed in 2022.