Offsets and Ethics & Compliance Programs

1. www.ecco-offset.eu Offsets and Ethics & Compliance Programs Christian Sylvain (ECCO Chairman) Jean Pierre Chevallier (ECCO Member, Thalès) September 14, 2012 – Madrid International Forum on Business Ethical Conduct IFBEC Madrid Sept 2012

2. Government Procurement Rules & Emerging Regulations WTO Government Procurement Agreement EU directives: 2004/17/EC, 2004/18/EC, 2009/81/EC, Art18TFEU, Art 346TFEU Brazil Russia Buy American Act European Union 27 members US India China Canada South Korea Taiwan Norway Switzerland South Africa Singapore Israel Saudi Arabia UAE Koweit Others IFBEC Madrid Sept. 2012 Confidential

3. Trends & Challenges • In general, offsets are now requested for all government procurement (energy, transport, telecommunications) and defense contracts. • Direct offsets are gaining ground to the detriment of indirect offsets, particularly in the BRICS countries and the Middle East, since emerging countries are keen to acquire technology and move into production. • Direct offsets are operations carried out directly with local industry and incorporated into the supply chain, with no intermediaries. • These offsets are only possible if the main contract has been signed. The corruption risk is therefore extremely low for offset contracts. • Indirect offset obligations are met principally in the form of purchase valuation, training or investment in a wide range of projects which, in most cases, are decided on collectively. They may be part of the company’s corporate social responsibility program. • Indirect offset operations very often require the services of an advisor (agent, consultant) but they have the immense advantage of protecting the company’s core business and its value added. • There are very few documented cases of corruption in relation to offset programs. IFBEC Madrid Sept. 2012 Confidential

4. Best Practices • As regards importing and exporting governments • Buyers to draw up clear rules and indicate them in invitations to tender, and sellers to record their direct and indirect offset proposals • Adopt a financial monitoring system for offsets according to type, category and classification, and measure the impact on the eeconomy (GDP, sales, jobs, production capacity) • Publish all of the above • As regards international institutions • The WTO has to do all it can to encourage states, particularly the BRICS countries, to join the GPA. • International banking institutions must include a clause prohibiting offsets in loan contracts, echoing theiranti-corruption clauses • Apply reciprocity rules for international government procurement contracts • As regards companies • Create a dedicated offset department, with unambiguous procedures for operation and decision-making • Join an offset association (ECCO, GOCA, etc.) • Provide specific training for all those involved in the chain of decision-making for international trade • As regards associations • Give a systematic reminder of ethics rules and publish clear recommendations on the precautions to be taken • Recommend implementing ISO 26000 • Create specific offset training programs IFBEC Madrid Sept. 2012 Confidential

5. Registration on www.ecco-offset.eu IFBEC Madrid Sept. 2012 Confidential