The Saeima1 has adopted and
the President has proclaimed the following law:
Defence
Industry Law
Chapter I
General Provisions
Section 1. Terms Used in the Law
The following terms are used in the Law:
1) defence industry - merchants and scientific
institutions engaged in the development, production, repair, or
disposal of military or dual-use technologies or products;
2) Ministry of Defence logistics project - a set of
measures related to the targeted research, acquisition,
introduction, maintenance, and modernisation of goods,
infrastructure, or services required for the development of the
capabilities of the National Armed Forces;
3) security and continuity of operations - a set of
measures to plan and implement the physical, operational,
information space, and cyberspace protection of the defence
industry in order to enhance the security of the supply of
defence industry products and related services;
4) security of supply - a guarantee in respect of the
supply of goods or provision of services necessary for the
National Armed Forces within the framework of which a possibility
of third party intervention is reduced to the minimum and which
is necessary to ensure the performance of the tasks entrusted to
the National Armed Forces in accordance with the national laws
and regulations or within the scope of international commitments
of the Republic of Latvia;
5) strategic partnership - a form of cooperation
between the Ministry of Defence and its strategic partner which
provides for the integration of defence industry representatives
into the national defence system, along with their targeted
training for continuous work in times of national threat,
including an emergency situation, a state of exception, and
war;
6) strategic partner - a capital company with which a
strategic partnership contract is concluded.
Section 2. Purpose of the Law
The purpose of the Law is to ensure the security of the supply
of goods and provision of services required by the National Armed
Forces to fulfil their national defence tasks and international
obligations and also to enhance the development of the defence
industry.
Section 3. Involvement of State
Administration Authorities in the Development of the Defence
Industry
State administration authorities shall be involved in the
development of the defence industry and the application of the
security of supply principles within the scope of their
competence. State administration authorities holding shares in
State-owned capital companies shall set objectives compatible
with the development of the defence industry for the inclusion
thereof in the overall strategic objectives of the capital
companies.
Chapter
II
Support for the Development of Industrial and Technological Base
of Sustainable Defence
Section 4. Enhancing the Support for
the Development of Industrial and Technological Base of
Sustainable Defence
(1) The support for the development of industrial and
technological base of sustainable defence is a set of such
well-targeted and organised development support measures at
national and international levels which are taken to strengthen
State defence and security and to extend the base of mobilisation
resources of the National Armed Forces and which are applicable
in the defence industry to such activities as research,
knowledge, and technology transfer, development, testing, and
putting into production of new technologies or products, and also
enhancing export capacity, international cooperation, and
recognition.
(2) The Ministry of Defence shall be the institution enhancing
the support for the development of an industrial and
technological base for sustainable defence and also the
coordination of activities of other State, local government, or
non-governmental institutions for the support for the development
of an industrial and technological base for sustainable
defence.
(3) The support for the development of industrial and
technological base of sustainable defence includes:
1) identification of the defence industry and the related
security of supply priorities in policy planning documents;
2) preparation of the laws and regulations required for the
support for the development of industrial and technological base
of sustainable defence;
3) identification of State and local government authorities
involved in ensuring the support for the development of
industrial and technological base of sustainable defence and
coordination of their involvement;
4) identification, introduction, maintenance, coordination,
and improvement of the forms (mechanisms) of the support for the
development of industrial and technological base of sustainable
defence;
5) cooperation with associations and foundations representing
the defence industry interests;
6) international cooperation in the field of the support for
the development of industrial and technological base of
sustainable defence.
Section 5. Mechanisms for the
Support for the Development of Industrial and Technological Base
of Sustainable Defence
(1) Support for the development of the defence industry is
organised:
1) within the framework of the State budget allocated to the
defence industry development support;
2) by engaging other personnel, material, technical, and
infrastructure resources available to the Ministry of
Defence;
3) by engaging State support instruments available to the
defence industry and also equivalent local government commercial
activity aid mechanisms;
4) by attracting funding from European Union programmes or
foreign financial aid;
5) by attracting funding from other international
organisations or funds, programmes or mechanisms maintained by
them and available for the support for the development of
industrial and technological base of sustainable defence;
6) within the framework of bilateral or multilateral
transnational cooperation projects;
7) by facilitating the attraction of co-financing and
investments, including foreign investments, from legal persons
governed by private law and natural persons to support the
development of innovative military or dual-use technologies and
products.
(2) The Ministry of Defence may introduce, organise, finance,
and support the following mechanisms to ensure the support for
the development of industrial and technological base of
sustainable defence:
1) defence innovation research programmes;
2) support programmes and funds for the research and
development of military or dual-use technologies and
products;
3) individual military research and development projects;
4) defence innovation activities;
5) defence industry product exhibitions and demonstration
events, including the participation of the defence industry in
international defence and security exhibitions and other
international events;
6) defence industry product, including prototype, testing and
evaluation activities;
7) consultations with defence industry merchants and
non-governmental organisations representing their interests;
8) European Defence Fund, North Atlantic Treaty Organisation
(NATO), or transnational projects in defence research and the
research and development of military or dual-use products;
9) support programmes for master's or doctoral studies related
to the development of the defence industry;
10) engaging the personnel of the National Armed Forces in the
training of specialists required by strategic partners.
(3) The Cabinet shall determine the procedures by which the
Ministry of Defence conducts project competitions for the support
for the development of military or dual-use products by
prescribing the following:
1) the procedures for preparing and announcing project
competitions;
2) the procedures for evaluating project applications and
taking decisions on the winners of competitions;
3) the procedures for awarding aid and ensuring control in
respect of the use of the provided aid according to the intended
purposes.
(4) Fundamental and applied research projects in which the
goods of strategic significance are used (created) or information
the disclosure of which may compromise national security is used
(created) and which are independently implemented by the Ministry
of Defence or capital companies in which the Ministry of Defence
is the holder of State capital shares shall be organised by the
Ministry of Defence without applying the procedures and
requirements for financing, evaluation, and administration of
projects specified in the Law on Scientific Activity.
Section 6. Regulatory Requirements
for the Control of Aid for Commercial Activity
The implementation of the measures referred to in this Law and
the mechanisms for the support for the development of industrial
and technological base of sustainable defence which correspond to
the characteristics set out in Section 5 of the Law on Control of
Aid for Commercial Activity shall conform to the regulatory
requirements for the control of aid for commercial activity.
Section 7. Cooperation with
Associations and Foundations of the Defence Industry
(1) When developing and implementing the policy for the
support for the development of industrial and technological base
of sustainable defence, the Ministry of Defence shall consult
with associations and foundations of the defence industry. The
Ministry of Defence shall determine the association or foundation
that may nominate its representatives to the North Atlantic
Treaty Organisation (NATO) Industrial Advisory Group.
(2) A person who corresponds to the requirements laid down in
the law On Official Secret for the receipt of a special permit
for access to an official secret may be appointed as a
representative to the North Atlantic Treaty Organisation (NATO)
Industrial Advisory Group. Where necessary, the representative of
the association or foundation of the defence industry who has
been appointed to cooperate with the Ministry of Defence shall
also receive a special permit for access to an official secret in
accordance with the procedures laid down in the law On Official
Secret.
Chapter
III
Security of Supply
Section 8. Enhancement and Control
of the Security of Supply
(1) The Ministry of Defence shall enhance the security of the
supply of goods and provision of services necessary for the
fulfilment of the national defence tasks and international
obligations of the National Armed Forces. Within the framework of
the Ministry of Defence logistics projects, the security of
supply shall be enhanced by assessing the influencing factors,
defining and setting requirements facilitating the security of
supply, and ensuring control of their fulfilment.
(2) Factors influencing the security of supply shall be
assessed and requirements facilitating the security of supply
shall be set and their fulfilment controlled by a commission
established by the Ministry of Defence.
Section 9. Factors Influencing the
Security of Supply
(1) Factors that may influence the security of the supply of
goods or provision of services required by the National Armed
Forces include:
1) nationality of the merchant, its owners, beneficial owners,
and employees essential to the merchant's performance;
2) possibilities to cooperate with the defence sector of the
merchant's country of origin (if other than the Republic of
Latvia) in the field of ensuring the supply of the respective
goods or provision of services;
3) role of the merchant's country of origin (if other than the
Republic of Latvia) in the national security system of the
Republic of Latvia;
4) involvement of the merchant and the employees essential to
the merchant's performance in the National Armed Forces
mobilisation system;
5) location and distance of the merchant's production or
service provision facility from the consumer in the defence
sector;
6) necessity to cross national borders to supply goods or
provide services;
7) estimated duration of the cooperation between the merchant
and the National Armed Forces from start to completion;
8) the security and resilience of the supply chain of raw
materials, components, and other means of production critical to
the production of goods or provision of services;
9) the merchant's ability to ensure the availability of
introduction and after-sales services and also the transfer of
related knowledge and technologies;
10) the merchant's ability to ensure the continuity of the
supply of goods or provision of services in times of national
threat, including an emergency situation, a state of exception,
and war;
11) the quality of the overall performance indicators of the
merchant's commercial activity, including the reputation of the
merchant, its owners, beneficial owners, and employees essential
to the merchant's performance;
12) the technical competence of the merchant and of the
employees essential to the merchant's performance and also the
professional qualifications of the employees;
13) the technological capacity of the goods or services to be
purchased;
14) the market situation and availability of the goods or
services to be purchased, including equivalent alternatives;
15) the merchant's ability to ensure compatibility of the
goods with other goods in the possession of the National Armed
Forces.
(2) The Ministry of Defence may identify other factors
influencing the security of supply, insofar as they do not
contradict the provisions of this Law or other laws and also
international legal norms binding on the Republic of Latvia in
the field of defence and security procurements.
Section 10. Requirements for
Enhancing the Security of Supply
(1) When determining requirements for enhancing the security
of supply, the Ministry of Defence shall base itself on the
identified factors influencing the security of supply referred to
in Section 9 of this Law.
(2) The requirements for enhancing the security of supply for
procurement procedures carried out within the framework of the
Ministry of Defence logistics projects shall be set by a unit of
the Ministry of Defence, i.e. the contracting authority.
(3) After assessing the factors influencing the security of
supply referred to in Section 9, Paragraph one of this Law within
the framework of the Ministry of Defence logistics projects, the
Ministry of Defence shall set the requirements for enhancing the
security of supply with regard to:
1) identification of the merchant, its owners, beneficial
owners, including employees essential to the merchant's
performance;
2) the organisation of the merchant's production or service
provision process, including related logistics, physical,
industrial, labour, information security, and cyber security;
3) the ensuring of the status and accessibility of the
intellectual property rights of the project framework;
4) the availability of support for the introduction,
maintenance, repairs, improvements, modernisation, compatibility,
and disposal of products (both goods and services), including
associated spare parts and the user training system required;
5) the identification, engagement, and mutual cooperation of
the merchant's subcontractors essential to the security of
supply;
6) the creation, maintenance, replenishment, and management of
reserves of raw materials, components, other means of production,
or finished products essential to the security of supply;
7) the involvement of the merchant in the planning and
preparation of the National Armed Forces mobilisation system;
8) the internal analysis of the security of supply risks and
the development of measures to prevent or mitigate their possible
consequences.
(4) The Ministry of Defence may identify and impose on the
merchant other requirements for enhancing the security of supply,
insofar as they do not contradict the provisions of this Law or
other laws and also international legal norms binding on the
Republic of Latvia.
(5) In order to ensure the security of supply, the Ministry of
Defence shall manage investments in the national defence
industry. The Ministry of Defence may, in accordance with the
laws and regulations governing the performance of State
administration tasks, fully or partially delegate the
coordination of the processes related to the management of
investments in the national defence industry and the development
of the production of military goods to valsts sabiedrība ar
ierobežotu atbildību "Valsts aizsardzības korporācija" [State
limited liability company National Defence Corporation].
(6) In order to enhance the security of supply, the Ministry
of Defence shall, as a matter of priority, assess the
possibilities of implementing the Ministry of Defence logistics
projects in cooperation with other North Atlantic Treaty
Organisation (NATO) member countries, European Union Member
States, or countries of the European Economic Area.
(7) The Cabinet shall establish the procedures for the
application of the requirements enhancing the security of supply
in procurement procedures and shall determine the logistics
projects for which the requirements enhancing the security of
supply shall be set and the factors influencing the security of
supply shall be assessed.
Section 11. Implementing a Strategic
Partnership
(1) In order to enhance the security of supply, the Ministry
of Defence can establish a strategic partnership by concluding
strategic partnership contracts with the capital companies to
whom the special permit (licence) for commercial activities with
the goods of strategic significance or the certificate of a
military manufacturer has been issued. The conclusion of a
strategic partnership contract requires the authorisation of the
Cabinet.
(2) The Ministry of Defence may conclude a strategic
partnership contract:
1) with a capital company which has at least two years of
appropriate commercial experience in the supply of the respective
goods or services and this experience has been acquired while
performing supply or providing services to the National Armed
Forces or the armed forces of other North Atlantic Treaty
Organisation (NATO) member countries, European Union Member
States, or countries of the European Economic Area;
2) with a newly-established capital company formed for such
purpose by an association (consortium) of capital companies, with
the majority of shareholders (stockholders) meeting the
requirements laid down in Clause 1 of this Paragraph.
(3) The Cabinet shall set the conditions and procedures for
establishing a strategic partnership. A strategic partnership may
be established if the conditions set by the Cabinet are found to
be fulfilled within the framework of the Ministry of Defence
logistics project.
(4) The Ministry of Defence, when concluding a strategic
partnership contract, shall determine:
1) the purpose of the strategic partnership;
2) the management mechanism for the strategic partnership;
3) the contracts for the supply of goods or provision of
services under the strategic partnership framework;
4) the conditions for ensuring the continuity of production
and supply of goods or provision of services under the strategic
partnership framework during a threat to national security,
including an emergency situation, a state of exception, and
war;
5) the conditions for the creation, maintenance,
replenishment, and management of the reserves of raw materials,
components, other means of production, or finished products
intended for ensuring the continuity of the production, supply of
goods or provision of services under the strategic partnership
framework;
6) conditions for the involvement of employees essential to
the performance of the strategic partner, including performance
of the capital company, in the National Armed Forces mobilisation
system;
7) the conditions in respect of monitoring the performance of
the contracts for the supply of goods or provision of services
under the strategic partnership framework, the maximum profit
threshold, which must not exceed 10 per cent, and also the
handling of cases where the maximum profit threshold is
exceeded;
8) the conditions in respect of handling the cases where the
strategic partner is operating at a loss in the performance of
the contracts for the supply of goods or provision of services
under the strategic partnership framework;
9) the mechanism and procedures for auditing the contracts for
the supply of goods or provision of services concluded under the
strategic partnership;
10) the conditions of the security and continuity of
operations appropriate to the strategic partnership
framework.
(5) A strategic partnership shall be concluded in accordance
with the laws and regulations regarding procurements in the
fields of defence and security.
(6) A strategic partner shall inform the Ministry of Defence
in writing, at least once every three months, of all essential
objects of infrastructure, means of production, other essential
logistical resources involved in the performance of the contracts
for the production and supply of goods or services concluded
under the strategic partnership framework and also of the
employees recruited for the performance of the aforementioned
contracts.
(7) A strategic partner shall inform in writing, at least once
every 12 months, all employees recruited for the performance of
the contracts for the production and supply of goods or services
concluded under the strategic partnership framework and essential
to the performance of the capital company of their role and
duties with regard to the involvement in the National Armed
Forces mobilisation system and also in ensuring the continuity of
production and supply of goods or provision of services under the
strategic partnership framework during a threat to national
security, including an emergency situation, a state of exception,
and war.
(8) A strategic partner shall immediately inform the Ministry
of Defence in writing if any of the characteristics of insolvency
of a legal person specified in the Insolvency Law is likely or is
actually identified in the activities of the capital company or
if the merchant faces other, including unforeseen, significant
risks that threaten the performance of the strategic partnership
contract and the strategic partnership framework contracts for
the supply of goods or services.
(9) If, after assessment of the information referred to in
Paragraph eight of this Section, the Ministry of Defence
establishes that the threat to the performance of the strategic
partnership contract and strategic partnership framework
contracts for the supply of goods or services cannot be
eliminated within the framework of the respective strategic
partnership contract, it shall, in accordance with the procedures
laid down in the Law on Governance of Capital Shares of Public
Entity and Management of Capital Companies Thereof and the State
Administration Structure Law, prepare and may advance a proposal
on the acquisition of national ownership in the person of the
Ministry of Defence or acquisition of decisive influence in the
capital company of the strategic partner.
(10) If the strategic partner or the Ministry of Defence
establishes that the strategic partner corresponds to any of the
signs referred to in Paragraph eight of this Section, the
strategic partner has the obligation to request and obtain the
approval of the Ministry of Defence for all its transactions with
property or financial resources with a framework value exceeding
10 thousand euros.
(11) Within the framework of a strategic partnership, the
Ministry of Defence may, for a period not exceeding the duration
of the strategic partnership contract, transfer property in its
possession, including land and the right of superficies, to the
strategic partner for gratuitous use, insofar as this is
necessary for the performance of the strategic partnership
contract or individual contracts for the supply of goods or
services within its framework, for the enhancement of the
security of supply or the security and continuity of operations
of the strategic partner and does not affect the competition of
such products on the internal market of the European Union which
are not directly intended for military purposes.
Chapter
IV
Security and Continuity of Operations of Defence Industry
Section 12. Enhancement of Security
and Continuity of Operations of the Defence Industry
(1) The Ministry of Defence shall enhance the security and
continuity of operations of the national defence industry.
(2) The Ministry of Defence may enhance the security and
continuity of operations of the defence industry imposing on the
defence industry such physical, industrial, labour, information
security, and cyber security requirements, procedures, and
principles as are applied in the field of national defence,
insofar as this does not contradict the provisions of this or
other laws and also international legal norms binding on the
Republic of Latvia in the field of continuity of operations of
the defence industry.
(3) In its operations, the defence industry shall comply with
the requirements for security and continuity of operations set by
the Ministry of Defence. Failure to comply or incomplete
compliance with such requirements may be the ground for the
Ministry of Defence to restrict or terminate cooperation with the
respective defence industry representative in accordance with the
procedures laid down in this Law and other laws and regulations
governing the security and continuity of operations of the
defence industry.
Section 13. Measures to Enhance
Security and Continuity of Operations of the Defence Industry
(1) The Ministry of Defence may, within its competence and
available resources, implement the following measures to enhance
the security and continuity of operations of the defence
industry:
1) to organise consultations of the Ministry of Defence
experts on the research, development, testing, certification,
marking, packaging, manufacture, storage, transport,
demonstration, sales, repair, modification, modernisation, or
disposal of the defence industry products, including essential
components or prototypes designed or adapted specifically for
military use;
2) to perform the testing of defence industry products,
including essential components or prototypes designed or adapted
specifically for military use, using specialised products, goods,
or infrastructure in the possession of the Ministry of
Defence;
3) to organise, in accordance with the procedures laid down by
the Cabinet, training for the defence industry employees in the
use of specialised logistical resources designed or adapted
specifically for military use;
4) to create and allow, for a period not exceeding three
years, the use of specialised infrastructure of the Ministry of
Defence to such commercial company which has obtained the special
permit (licence) for commercial activities with the goods of
strategic significance issued by the Ministry of Defence or the
certificate of a military manufacturer if the respective
infrastructure is required by the commercial company for the
development and storage of the defence industry products under
initial development, testing, or production designed or adapted
specifically for military use, including essential components or
prototypes, or for the processing and protection of restricted
access information or information containing official secrets
related to the development of such products;
5) to allow, for a period not exceeding three years, the use
of specialised products or goods in the possession of the
Ministry of Defence to such commercial company which has obtained
the special permit (licence) issued by the Ministry of Defence
for commercial activities with the goods of strategic
significance or the certificate of a military manufacturer if the
respective products or goods are required for testing the defence
industry products under initial development or production by the
merchant designed or adapted specifically for military use,
including essential components or prototypes;
6) to acquire and maintain specialised products or goods,
services or infrastructure required in order to comply with the
provisions of Paragraph one of this Section.
(2) The costs of the defence industry security enhancement
measures referred to in Paragraph one, Clauses 4 and 5 of this
Section for the use of the property in the possession of the
Ministry of Defence shall be reimbursed by the respective defence
industry merchant at actual cost.
(3) While enhancing the security of the supply of goods and
provision of services, the Ministry of Defence may take over from
the merchant, by way of compensation for the costs incurred, into
State ownership the prototypes of such defence industry products
designed or adapted specifically for military use by the national
defence industry merchant, including their essential components,
which for technical reasons cannot be certified as ready-to-use
products.
Section 14. Supervision of Strategic
Partnership and the Support for the Development of Industrial and
Technological Base of Sustainable Defence
Supervision of strategic partnership and the support for the
development of industrial and technological base of sustainable
defence shall be carried out by the State Audit Office in
accordance with the procedures laid down in the State Audit
Office Law.
Transitional
Provisions
1. The Cabinet shall, by 15 December 2024, issue the
regulations referred to in Section 10, Paragraph seven of this
Law.
2. The Cabinet shall, by 15 December 2024, issue the
regulations referred to in Section 11, Paragraph three of this
Law.
3. The Cabinet shall, by 1 March 2025, issue the regulations
referred to in Section 13, Paragraph one, Clause 3 of this
Law.
The Law has been adopted by the Saeima on 27 March
2024.
President E. Rinkēvičs
Rīga, 10 April 2024
1The Parliament of the Republic of
Latvia
Translation © 2024 Valsts valodas centrs (State
Language Centre)
