The DOJ issued a Pilot Program1 that provides its latest answer to a critical question in FCPA practice: What benefits does a company receive for self-reporting potential FCPA violations?

The German Federal Ministry of the Interior recently published its administrative guidance introducing a “no spy  guarantee” requirement for companies entering into certain  procurement contracts with the German Federal  Government. The German Federal Public Procurement Chamber has now issued the first decision regarding the admissibility of a “no spy guarantee” under public  procurement law (VK Bund, VK 2-39/14, dated 24 June 2014). 1. Decision of the Federal Public Procurement Chamber The decision of the Federal Public Procurement Chamber might  be the starting point for a number of future proceedings regarding the implementation of a “no spy guarantee” as a self-declaration into tender procedures. What comes quite as a surprise – and what should particularly alert German subsidiaries of U.S.-based parent companies – is that the proceeding before the Procurement Chamber was initiated by the German competitor of a German subsidiary of a U.S.-based company, whereas many may have expected that the first proceeding before a Procurement Chamber would be initiated by a German subsidiary of a U.S.-based company after being excluded from a tender procedure by a public authority. In the proceeding at hand, the public authority planned to award the contract to the German subsidiary. However, the competitor claimed in the review procedure that the public authority was required to restart the tender procedure and to reenter into the review of suitability and to require the bidders to submit for this purpose a “no spy” self-declaration pursuant to the administrative guidance issued by the Federal Ministry of the Interior. The Procurement Chamber rejected this argument mainly due to formal reasons: The tender procedure had been initiated before the administrative guidance was published. Bidders should note that the Procurement Chamber confirms the prevailing public opinion in Germany and states that U.S. companies and their German subsidiaries are obliged to disclose data to U.S. security authorities (e.g., pursuant to the USA Patriot Act). 2. Self-declaration not part of review of reliability Pursuant to the administrative guidance, the self-declaration has to be part of the review of reliability and it will be implemented into the tender procedure as a supplementary proof of suitability. However, in its decision the Procurement Chamber clearly states that the problem of a data disclosure by U.S.-based companies cannot be solved with such a supplementary proof of suitability; because the review of reliability can only take into account circumstances that can be attributed to the bidder and can be influenced by him. Only these circumstances can be considered for the assessment of his reliability. This, however, is not the case for a bidder’s legal obligations in his national jurisdiction: ” Only circumstances that the bidder can influence are attributable to the bidder. However, if the bidder is subject to particular obligations under the laws of another country he cannot circumvent (here the USA Patriot Act 2001), it is inadmissible to question the bidder’s reliability even if, subsequently, the bidder inevitably violates the provisions of another law, in this case with regard to the disclosure of data.” (VK Bund, 2-19/14, dated 24 June 2014). The Chamber underlines that the fact that only circumstances that a bidder can influence may be part of the review of reliability also derives from the European Directives on Procurement Law:  Pursuant to Art. 57 Para. 4 lit. c) Directive RL 2014/24/EC, a contracting authority may only exclude a bidder from a tender procedure (inter alia) if the contracting authority can demonstrate by appropriate means that the bidder is guilty of grave professional misconduct which tenders its integrity and reliability questionable. According to the Procurement Chamber, it seems questionable whether it can be qualified as grave professional misconduct if a bidder is obliged to disclose data due to the laws in his national jurisdiction. 3. Self-declaration as a further requirement for execution of the contract According to the Procurement Chamber, the self-declaration should rather be qualified as a further requirement regarding the execution of the contract pursuant to Sec. 97 Para. 4 Sentence 2 GWB. However, the Chamber did not assess this question any further because the requirement of a self-declaration in the tender at hand was already rejected due to formal reasons (see above). If the self-declaration is indeed qualified as a supplementary requirement regarding the execution of the contract it will require a formal legal basis, which does not (yet?) exist in Germany. The administrative guidance is no such statutory basis. 4. Key learning points The requirement of a “no spy” self-declaration is likely to be applied to all tender procedures which involve security-sensitive data and have been initiated after 30 April 2014. German subsidiaries of U.S.-based parent companies should be aware that German competitors or competitors from other countries will review thoroughly upcoming tender procedures which could include security-sensitive data. It is likely that they will initiate proceedings whenever a “no spy” self-declaration was not required in the tender procedure, but also whenever a German subsidiary of a U.S.-based company submits such a selfdeclaration  (questioning the validity of such a declaration). The legality of future tender procedures will depend on how the “no spy” self-declaration will be implemented and on the content of the self-declaration. This will determine whether or not a statutory basis (i.e., an amendment of the German public procurement legislation) is required. Furthermore, the admissibility of a contractual “no spy” clause under German civil law, in particular the applicable rules governing general terms and conditions deserves detailed review. In view of the legal uncertainties surrounding the “no spy” clause, affected bidders should file complaints against the public authority immediately after receiving tender documents that include a “no spy” self-declaration in order to preserve their rights and to prevent from being forced to submit a self-declaration which may be wrongful. Since the legal situation is rather unclear at the moment, bidders should seek legal advice if they intend to participate in a tender procedure. This article was first published as a newsletter by Baker & McKenzie partners Dr. Marc Gabriel, Dr. Susanne Mertens, and Prof. Dr. Joachim Scherer as well as Jonathan C. Poling.

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