1 Offset Contracts Christian Sylvain (ECCO Chairman) ICC Commission on Commercial Law and Practice (CLP) PARIS 13 November

Definition of OFFSET Offset means any condition or undertaking that encourages local development or improves a Party’s balance-of-payments accounts, such as the use of domestic content, the licensing of technology, investment, counter ‑ trade and similar action or requirement. GPA 1994-Revised April 2014 Applicable only to non-members 2 The information in this document is ECCO property and is intended solely for the addressees. Reproduction and distribution are prohibited. Thank you.

AREVA UNIVERSITY – Christian SYLVAIN – April 17th, 2013 Offsets : Overview Country ACountry B Supplier CUSTOMER S.O.E. » Price » Technical » Timescale » Financing » General Conditions MAIN CONTRACT Customer’s government OFFSET CONTRACTOFFSET LEGISLATION - Expressed as a % of the amount imported under the principal contract - Comes into force on the same date as the principal contract - Penalties and bank guarantees OFFSET CONTRACT Creates an economic benefit by adding value locally Two processes in parallel Equipment in exchange for payment

Specificities of the Market 4 Customer is a government body 30 to 100% offset with confusing requirements Different policy in each country Indirect offsets outside the Vendor’s core business Not recognized by International Institutions (except WTO) The information in this document is ECCO property and is intended solely for the addressees. Reproduction and distribution are prohibited. Thank you.

Main Characteristics of an Offset Contract Unilateral contract Non-monetary contract Condition for signing the main contract Contract subjected to bank guarantees and penalties Contract negotiated with politicians and senior government officials 5 The information in this document is ECCO property and is intended solely for the addressees. Reproduction and distribution are prohibited. Thank you.

Known and unknown risks Unknown Multitude of unpredictable local contingencies Bankruptcy or buy-out of local partners Known Offset contract amount underestimated Performance lead times underestimated 6 The information in this document is ECCO property and is intended solely for the addressees. Reproduction and distribution are prohibited. Thank you.

Business & Legal Risks Monetary - Cost of Offset - Failure to budget for all costs - Hidden costs or liabilities Legal - Liability: effective legal agreement - Contracts dictate business - Variety of laws Operational - Logistics challenges - Sourcing - Order accumulation - Partnerships in foreign countries Reputational - Media exposure - Ethical issues Commercial - Non-performance (blacklisting) - Creating competition - Protecting intellectuel property - Accuracy, corruption, fraud 7 The information in this document is ECCO property and is intended solely for the addressees. Reproduction and distribution are prohibited. Thank you.

Offset requires a Specific Contract A contract with a government body Condition Precedent Clause Stabilization Clause Intangible Clause Economic Stabilization Clause Choice of Law Clause 8 The information in this document is ECCO property and is intended solely for the addressees. Reproduction and distribution are prohibited. Thank you.

ICC Guide Published in October The information in this document is ECCO property and is intended solely for the addressees. Reproduction and distribution are prohibited. Thank you.

The information in this document is ECCO property and is intended solely for the addressees. Reproduction and distribution are prohibited. Thank you. 10 Thank you European Club for Countertrade & Offset Association under the French law of no. W rue Louise Michel Levallois-Perret France