Offset Arrangements

Offset arrangements are compensatory trade agreements (offset contracts), mostly concluded between the government of one country and a corporation of another country. They are particularly frequent in the sphere of procurement decisions on military goods. In Austria, the competence for offset arrangements lies with the Federal Ministry of Labour and Economy while the Federal Ministry of Defence is in charge of procurement decisions. Currently, no new offset arrangements are being contracted by the Federal Ministry of Labour and Economy.

Eurofighter offset arrangement

In 2003, Austria purchased 18 Eurofighter interceptors from the Eurofighter Jagdflugzeug GmbH. The Austrian party to the contract is the Federal Ministry of Defence. In line with established international practice, Austria required offset arrangements (i.e. compensation) from the Eurofighter Jagdflugzeug GmbH. This "compensation" related to specific projects that were considered beneficial for the Austrian economy. Consequently, the Federal Ministry of Labour and Economy concluded an offset contract with the Eurofighter Jagdflugzeug GmbH. The Federal Ministry of Labour and Economy decides on the recognition of the individual projects in line with the offset arrangements and only after thorough examination.

Initially, the offset volume amounted to 4 billion euros over a period of 15 years. This equaled an offset ratio of 204.2 per cent for the purchase agreement excluding VAT, with the initial price for the 15 Eurofighter interceptors amounting to 1.959 billion euros. In 2007, Austria cancelled the purchase of 3 interceptors, thereby reducing the total purchase number to 15. As a result, the offset volume was revised automatically to roughly 3.5 billion euros.

As to the years from 2003 to 2018, the total level of recognized offset transactions amounted to 4.5 billion euros or 1,861 transactions by 338 companies. Eurofighter was informed by letter dated December 12th 2019.

Related to the investigation procedure carried out by the Central Public Prosecutor's Office for Combating Economic Crimes and Corruption the Federal Ministry of Labour and Economy is, if these investigations bring to light new and grave facts concerning the years 2003 to 2010, which then lead to serious doubts regarding the recognizability of certain offset agreements, still allowed to cancel former recognitions.

Contact

Trade and Competition Policy Analyses and Strategies: Gegengeschaefte@bmaw.gv.at