Defence& Security
Procurement
Contributing editor
Matthew L Haws

2018

© Law Business Research 2018

Defence & Security
Procurement 2018
Contributing editor
Matthew L Haws
Jenner & Block LLP

Reproduced with permission from Law Business Research Ltd
This article was first published in March 2018
For further information please contact editorial@gettingthedealthrough.com

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CONTENTS
Global overview

5

Norway41

Matthew L Haws
Jenner & Block LLP

Christian Bendiksen and Alexander MollanBrækhus Advokatfirma DA

Australia6

Poland47

Anne Petterd, Geoff Wood and Sally Pierce
Baker McKenzie

Maciej Zalewski and Maciej SzymańskiWhite & Case

Canada12

Qatar54

Ben Mills
Conlin Bedard LLP

Arnaud Depierrefeu
Simmons & Simmons Middle East LLP

Germany17

Turkey59

Wolfram Krohn and Tobias Schneider
Dentons Europe LLPŞafak Herdem and Mert Deveci
Herdem Attorneys at Law

Italy23

United KingdomAnna Masutti
LS LexJus Sinacta – Avvocati e Commercialisti

Elizabeth Reid, Simon Phippard, Brian Mulier, Michael Stocks,
Lucy England and Victoria Moorcroft
Bird & Bird LLP

Japan28
Kohei Masuda, Ryuichi Nozaki, Yuri Suzuki
and Yuko Nihonmatsu
Atsumi & Sakai

United States

63

69

Matthew L Haws, Steven J Seiden, Grant B Schweikert,
Marc A Van Allen and Carla J Weiss
Jenner & Block LLP

Korea35
Wonil Kim, Sang-Hyun Ahn, Jin Kee Jung and Sung Duk Kim
Yoon & Yang LLC

2

Getting the Deal Through – Defence & Security Procurement 2018
© Law Business Research 2018

PREFACE

Preface
Defence & Security Procurement 2018
Second edition
Getting the Deal Through is delighted to publish the second editionof Defence & Security Procurement, which is available in print, as ane-book and online at www.gettingthedealthrough.com.
Getting the Deal Through provides international expert analysis in
key areas of law, practice and regulation for corporate counsel, crossborder legal practitioners, and company directors and officers.
Throughout this edition, and following the unique Getting the Deal
Through format, the same key questions are answered by leading
practitioners in each of the jurisdictions featured. Our coverage thisyear includes a new chapter on Canada.
Getting the Deal Through titles are published annually in print.
Please ensure you are referring to the latest edition or to the online
version at www.gettingthedealthrough.com.
Every effort has been made to cover all matters of concern toreaders. However, specific legal advice should always be sought fromexperienced local advisers.
Getting the Deal Through gratefully acknowledges the efforts of all
the contributors to this volume, who were chosen for their recognised
expertise. We also extend special thanks to Matthew L Haws ofJenner & Block LLP, the contributing editor, for his assistance indevising and editing this volume.

LondonFebruary 2018www.gettingthedealthrough.com 3© Law Business Research 2018

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Atsumi & Sakai

Japan
Kohei Masuda, Ryuichi Nozaki, Yuri Suzuki and Yuko Nihonmatsu
Atsumi & Sakai

Legal framework
1

2

What statutes or regulations govern procurement of defence
and security articles?

Procurement by the Ministry of Defence is governed by a complex setof laws and regulations including the Public Accounting Act, stipulated
at a country level, as well as official directives and circular notices stipulated independently by the Ministry of Defence. These laws, regulations, official directives, etc, are to undergo review in light of changes insocial circumstances and the environment affecting defence and security procurement and other factors. In particular, on 1 October 2015, following the establishment of the Acquisition, Technology and Logistics
Agency (ATLA), amendments were made to a large number of related
rules and regulations. The main laws and regulations governing the
procurement of defence and security articles are listed below.
Laws and regulations:• Public Accounting Act;• Act on Prevention of Delay in Payment under Government
Contracts;• Act on the Responsibility of Government Employees Who Executethe Budget;• Cabinet Order on Budgets, the Settlement of Accounts, andAccounting;• Temporary Special Provisions of Cabinet Order on Budgets, theSettlement of Accounts, and Accounting; and• Rules on Administrative Handling of Contracts.
Official directives:• Official Directive regarding the Implementation of Procurement ofEquipment and Services;• Official Directive regarding Supervision and Inspection of
Procurement Items;• Official Directive regarding Calculating Basis for Target Price ofProcurement Items; and• Detailed Regulations on Administrative Handling of Contracts
under jurisdiction of the Ministry of Defence.
Official Directives of the ATLA:• Official Directives regarding Contract Administration at the ATLA;• Official Directive regarding Supervision and Inspections ofProcurement Items procured by Central Procurement;• Official Directive regarding the Administration of Target Price
Calculation by the ATLA; and• Official Directive regarding Cost Audit Administration by the
ATLA.
Notices, circular notices, etc, of the ATLA:• Outline of Contract Administration Handling;• Administration Outline for Administration of Target Price
Calculation by the ATLA;• Administration Outline for Official Directive regarding Cost Audit
Administration by ATLA; and• Implementation Outline of System Investigation and Import
Investigations, etc, for Central Procurement.

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How are defence and security procurements identified assuch and are they treated differently from civil procurements?

The procurement of defence and security articles is, for the most part,the responsibility of the ATLA. This agency is subject to official directives, circular notices, etc, stipulated independently by the Ministry of
Defence or the ATLA, as outlined above. In this sense, procurement by
the agency is treated separately from civil procurements.
3

How are defence and security procurements typicallyconducted?

According to The Guidance for Bid and Contract (ATLA Public NoticeNo. 1 of 1 October 2015), the procedures for defence and security articles procurement can be summarised as follows.
• As a rule, in order to become a procurement counterparty, one must
apply for bid participation eligibility screening and go through thescreening process. If eligible, the applicant’s name is recorded in
the register of qualified bidders, and notice is sent to the applicant
with the results of the eligibility screening.
• Public notice is made in the case of a general competitive bidding,and notice is sent to the counterparty in the case of a designatedcompetitive bidding or discretionary contract.
• The counterparty pays a bid deposit to the Chief Secretary
Treasurer of the ATLA (revenue), unless exempted from depositby public notice or regular notice.
• The bid participant or government counterparty negotiating a discretionary contract submits a bid document or an estimate. Thereis also an electronic bidding and bid-opening system (central
procurement).
• The process of determining the successful bidder can be summarised as follows:• the bidder who offers the lowest tendered price equal to or
lower than the target price (the target price or the target priceplus the sum of the consumption tax rate and the local consumption tax rate, expressed as a percentage) will be the successful bidder;• however, if the bid is conducted by the comprehensive evaluation method, the bidder must indicate its price, performance,
capability, technology, etc, in its application, and the successful bidder will be the bidder whose tendered price is within
the target price and whose performance, capability, technologies, etc, relating to the bid (Performance) meets all theminimum requests and requirements critically required for
the Performance specified in the publication or public noticeof such bid (including the bid instructions related thereto) andthat receives the highest score according to the Method ofComprehensive Evaluation; and• when the successful bidder is determined, or when negotiation
results in agreement in the case of a discretionary contract,the counterparty submits a contract in accordance with theprescribed procedures, and pays the contract deposit (unless
exempted). The contract is deemed concluded when the certifying officer certifies the contract and thereafter an officer incharge of ‘acts to assume debts’ signs and seals the contract
together with the counterparty.

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Are there significant proposals pending to change the defence
and security procurement process?

At time of writing, no legislative bills have been submitted to the Diet.
5

Are there different or additional procurement rules for
information technology versus non-IT goods and services?

The Ministry of Defence has established information security management standards by importing international standards commonly usedby private companies inside and outside Japan. The Ministry requires
companies that build information systems to implement measures
pursuant to such standards, and also constantly reviews measures bymonitoring international standards and social trends.
In particular, the Ministry of Defence contractually requires thecounterparty company to implement the following measures, with theimplementation of such measures ensured via voluntary audits by thecompany itself and audits conducted by the Ministry of Defence:• implementation of information security management system forprocurement consisting of three stages: Basic Policy (‘securing
information security of procurement of equipment and services’),Standards, and (Audit) Implementation Outline pursuant to international standards regarding information security management;• companies that build information systems for the Ministry of
Defence are required to establish an information security management system similar to the above; and• there are audits by the Ministry of Defence pursuant to the (Audit)
Implementation Outline to confirm that the information security
management system built by the relevant company is in compliance with the Basic Policy and Standards implemented by the
Ministry of Defence, and that the information security measurestaken in accordance with the Implementation Outline prepared by
the company are conducted properly.
In addition, considering the importance of information security, theMinistry of Defence also applies information security measures equivalent to those detailed above to the supply of certain equipment otherthan information systems.
6

Are most defence and security procurements conducted inaccordance with the GPA or other treaty-based procurement
rules, or does this jurisdiction commonly use the national
security exemption to procure them?

The Ministry of Defence is a procurement agent subject to the GPA, andprocurement of defence and security articles is conducted in accordance with the GPA. Further, government procurement is regulated byeconomic partnership agreements with the following countries, andthus procurement must be conducted in accordance with the following:• the Japan–Singapore Economic Partnership Agreement;• the Japan–Mexico Economic Partnership Agreement;• the Japan–Chile Economic Partnership Agreement;• the Japan–Philippines Economic Partnership Agreement;• the Japan-Peru Economic Partnership Agreement; and• the Japan–Australia Economic Partnership Agreement.
Disputes and risk allocation
7

How are disputes between the government and defence
contractor resolved?

In addition to regular litigation proceedings, complaints regarding government procurement can be resolved at the Office for Government
Procurement Challenge System established by the Cabinet Office(CHANS: www5.cao.go.jp/access/japan/chans_main_ j.html).
There are no special dispute resolution procedures applicable only
to defence and security contractors.
8

To what extent is alternative dispute resolution used toresolve conflicts? What is typical for this jurisdiction?

Litigation is the typical method used to resolve conflicts, and out-ofcourt dispute resolution is rarely used. Since 1996, there have been nocases filed with CHANS against the Ministry of Defence.

9

What limits exist on the government’s ability to indemnify
the contractor in this jurisdiction and must the contractor
indemnify the government in a defence procurement?

Indemnity by the government is conducted in accordance witharticle 29, paragraph 3 of the Constitution.
On the other hand, as a rule, the government is not allowed toenter into guarantee agreements with respect to liabilities owed bycompanies or other juristic persons (article 3 of the Act on Limitationof Government Financial Assistance to Juridical Persons). However, ina court precedent, a loss indemnity agreement by a local government
was deemed null and void as being in breach of article 3 of the Act on
Limitation of Government Financial Assistance to Juridical Persons.
The liability of a contractor under a defence and security articles
procurement agreement is provided in the contract it enters into withthe government, and thus depends on the individual case. However,
the government would rarely claim indemnity from a contractor unlessrequired in the Civil Code (defect liabilities, etc).
10 Can the government agree to limit the contractor’s liability
under the contract? Are there limits to the contractor’s
potential recovery against the government for breach?
There are no laws or regulations that restrict the government from limiting the liability of a defence and security articles contractor under thecontract, or restrict the defence and security articles contractor fromrecovering loss or damages from the government due to breach of contract. Limitations, if any, are subject to the terms and conditions of eachcontract.
11 Is there risk of non-payment when the government enters
into a contract but does not ensure there are adequate funds
to meet the contractual obligations?
When the government enters into a procurement contract, normally
it must conduct an ‘act to assume national treasury debts’ (article 15of the Fiscal Act), and as the necessary budget is secured by such act,
there is basically no risk of non-payment.
12 Under what circumstances must a contractor provide a parent
guarantee?
A parent guarantee would be necessary if it is clearly required under thebid terms. A parent guarantee may be required when procurement isconducted through a special purpose company, for example.
Defence procurement law fundamentals
13 Are there mandatory procurement clauses that must be
included in a defence procurement contract or that will beread into the contract regardless of their actual inclusion?
When the government determines the successful bidder in a tender orthe counterparty to a discretionary contract, the contract officer, among
others, must prepare a written contract that includes the particulars of
the purpose of the contract, contract price, performance period andcontract guarantee and other necessary matters (article 29-8, paragraph 1 of the Public Accounting Act; article 100 of the Cabinet Orderon Budgets, the Settlement of Accounts, and Accounting). For the
Ministry of Defence, a contract must be prepared for ‘each successful
bid, etc’, and a contract must be prepared for all defence and security
articles, without exception.
Further, a contract will not become final and binding until signed
and sealed by both the contract officer and the counterparty, and the
preparation of a written contract by such signing and sealing is one of
the requirements for the conclusion of contracts.
There are no particular clauses that would be read into a contract
without actually being included therein.
14 How are costs allocated between the contractor andgovernment within a contract?
The General Terms and Conditions published by the Ministry of
Defence (www.mod.go.jp/igo/procurement/pdf/kokoroe_bessi2.pdf )do not refer to contract expenses. It is considered normal for each party
to bear its own expenses.

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15 What disclosures must the contractor make regarding its costand pricing?
The contractor must submit a bid form or an estimate sheet to the
Ministry of Defence.
The contractor has no legal obligation to disclose any information,
but when the government enters into certain contracts specified bycabinet order or statute that cause expenditures to be incurred by thenational government, the government must publish information concerning the contract price, among other things.
16 How are audits of defence and security procurements
conducted in this jurisdiction?
In order to improve the fairness and transparency of defence and security procurements, the Ministry of Defence takes measures to ensure
the appropriateness of contracts and to enhance checks and balances.
First, as part of an effort throughout the government to ‘ensure
appropriateness of public procurement’, the Ministry of Defence has
been expanding the use of a ‘comprehensive evaluation bid method’and streamlining its bidding procedures. In addition, in response to anumber of cases in 2012 of overcharging and manipulation of producttest results by contractors, the Ministry of Defence has been steadily
working on measures to prevent recurrence of these problems, suchas enhanced system inspections, reviewing penalties and ensuring theeffectiveness of supervision and inspections, and otherwise putting
more effort into prevention of misconduct, improvement of fairness
and transparency and ensuring contracts are appropriate.
Further, with the aim of strengthening checks and balances, theATLA has established an Audit and Evaluation Division to carry out
internal audits, as well as conducting multilayered checks on the
ATLA from both inside and outside through audits by the Inspector
General’s Office of Legal Compliance and deliberations at the Defence
Procurement Council, whose members are outside intellectuals.
Further, it is also making efforts towards raising compliance awarenessby enhancing its education division and providing thorough educationon legal compliance to its personnel.
In the case of defence and security procurement, the supplier’s
records of costs are inspected in relation to the production cost of procured defence and security articles, in accordance with the contractual
terms, etc (‘Special clause regarding securement of reliability of documents and implementation of system inspection’, ‘Special clause on
securement of reliability of documents related to contracts concerning
import goods, etc and implementation of import procurement inspections’) (www.mod.go.jp/j/procurement/kadaiseikyujian/), and whenever needed, cost audits are conducted to confirm that the price of eachitem’s cost and consumption quantity is appropriate.
17 Who gets the ownership rights to intellectual property
created during performance of the contract? What licences
are typically given and how?
Under the special terms published by the Ministry of Defence, any
copyright works created during the performance of a contract are
required to be transferred and a ‘certificate of transfer of copyright’and ‘certificate of non-exercise of author’s moral right’ to be submitted
together with the work product.
18 Are there economic zones or other special programmes inthis jurisdiction commonly utilised by foreign defence andsecurity contractors for financial or other procurement
related benefits?
No.
19 Describe the process for forming legal entities, including joint
ventures, in this jurisdiction.
The process for forming legal entities is described below:
1. Advance preparations:• determine basic matters (such as organisational form, statedcapital, business descriptions and succession of assets); and• check whether there is any other company of the same
trade name at the same location of head office at the legal
affairs bureau.

302.

Preparation of articles of incorporation:• determine the purposes, trade name, location of the head
office, minimum amount of contributed assets, name ororganisational name and address of the incorporator (mattersrequired to be stated in the original articles of incorporation)and other matters.
3. Notarisation of articles of incorporation by notary public.
4. Contribution:• the incorporator pays the money to be contributed in fullor tender all property other than monies with respect to theshares issued at incorporation without delay after subscribing
for such shares issued at incorporation.
5. Appointment of officers at incorporation:• the incorporator appoints directors at incorporation without
delay after the completion of capital contribution;• in the case of a company with company auditors, company
auditors are appointed; and• appointment of officers at incorporation is determined by amajority of the voting rights of the incorporators.
6. Examination by directors at incorporation:• directors at incorporation examine whether the capital contribution has been completed and whether any incorporation
procedures are in breach of any laws and regulations or thearticles of incorporation.
7. Appointment of directors at incorporation:• in the case of a company with a board of directors, a representative director at incorporation is appointed (as decided bya majority of the directors at incorporation).
8. Registration of incorporation:• registration of incorporation must be made within two weeks
from the later of the date of termination of examination by
the directors at incorporation and the date designated by
the incorporator.
9. Notification to the relevant government agencies:• tax office, prefectural tax office, municipal government (tax or
national pension), labour standards office (employment insurance, workers’ accident compensation insurance), pension
office (health insurance, employee pension), etc.
20 Are there statutes or regulations enabling access to copies
of government records? How does it work? Can one obtain
versions of previous contracts?
In accordance with the Act on Access to Information Held by the
Administration, any person may request the head of an administrative organ t0 disclose administrative documents, and the head of suchadministrative organ who receives such request for disclosure must
disclose such administrative documents except in the following cases:• Information concerning an individual (excluding information concerning the business of an individual who operates the said business), where it is possible to identify a specific individual from a
name, date of birth or other description contained in the information concerned (including cases where it is possible to identify a
specific individual through comparing the said information withother information), or when it is not possible to identify a specificindividual, but disclosure of the said information is likely to cause
harm to the rights and interests of an individual. This is provided
however, that the following information shall be excluded:• information that is made public, or information that is scheduled to be made public, pursuant to the provisions of laws andregulations or by custom;• information that is found necessary to be disclosed in order toprotect a person’s life, health, livelihood or property; and• if the said individual is a public officer; officers and employees of the incorporated administrative agencies; local public
officers; and officers and employees of the local incorporated
administrative agencies. And when the said information pertains to the performance of his or her duties, the portion of thesaid information pertaining to the job of the said public officer
etc, and the substance of the said performance of duties.
• Information concerning a juridical person or other entities (excluding the state, incorporated administrative agencies, local public
entities and local incorporated administrative agencies, hereinafter referred to as a ‘juridical person’), or information concerning
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•

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the business of an individual who operates the said business, whichcorresponds to the following, provided that information that isfound necessary to be disclosed in order to protect a person’s life,
health, livelihood, or property shall be excluded:• information that, when disclosed, is likely to cause harm to therights, competitive position or other legitimate interests of thesaid juridical persons or of the said individual;• information customarily not disclosed by the juridical person or the individual, which has been voluntarily provided in
response to a request by an administrative organ on the condition of non-disclosure, or information for which it is foundreasonable to set such a condition in light of the nature of theinformation or the circumstances at the time.
Information for which there are reasonable grounds for the headof an administrative organ to find that disclosure is likely to cause
harm to national security, cause damage to the relationship ofmutual trust with another country or an international organisation,or cause a disadvantage in negotiations with another country or aninternational organisation.
Information for which there are reasonable grounds for the headof an administrative organ to find that disclosure is likely to cause
impediments to prevention, suppression or investigation of crimes,
the maintenance of prosecutions, the execution of punishment,
and other matters concerning maintenance of public safety andpublic order.
Information concerning deliberations, examinations or consultations internally conducted by or mutually conducted between stateorgans, incorporated administrative agencies, local public entities
and local incorporated administrative agencies, where disclosure
is likely to cause unjust harm to the open exchange of opinions or
the neutrality of decision-making, cause unjust confusion among
citizens, or bring unjust advantages or disadvantages to specificindividuals.
Information concerning the affairs or business conducted by astate organ, an incorporated administrative agency, a local public
entity or a local incorporated administrative agency, where disclosure is likely to have the following risks or is likely to hinder theproper execution of the said affairs or business due to the nature of
the said affairs or business:• risk of making it difficult to accurately understand facts concerning affairs pertaining to audits, inspections, supervision,
examinations, imposition or collection of tax, or facilitating
wrongful acts regarding such affairs, or making it difficult to
discover such acts;• risk of causing unjust damage to the property benefit of thestate, an incorporated administrative agency, local public entities or a local incorporated administrative agency concerning
affairs pertaining to contracts, negotiations or administrative
objections and litigations;• risk of causing unjust hindrance to the fair and efficient execution of affairs pertaining to research and study;• risk of causing hindrance to the maintenance of impartial andsmooth personnel practices in the affairs pertaining to personal management; and• risk of causing damage to the legitimate interests arisingfrom corporate management with regard to the business ofan enterprise managed by the state or a local public entity, an
incorporated administrative agency, or a local incorporated
administrative agency.

21 What are the rules regarding eligible suppliers and supply
chain management and anti-counterfeit parts for defence andsecurity procurements?
As a condition of participating in competitive bidding (other than for
construction work), any person who meets the following conditions
may not participate in competitive bidding:• Any person who falls under the descriptions of articles 70 and 71
of the Cabinet Order on Budgets, the Settlement of Accounts, andAccounting (article 70 of the foregoing Cabinet Order);• If a sales, lease, contracting, or other contract is put out to tenderpursuant to article 29-3, paragraph (1) of the Public Accounting Act(hereinafter referred to as an ‘open tender’), the contract officer
may not permit a person who falls under any of the following items••

to participate, unless there are special grounds for doing so, forexample:• a person who is incapable of concluding the relevant contract;• a person who received an order of commencement of bankruptcy proceedings and has not had the person’s rights restored;• a person who falls under any of the items of article 32, paragraph (1) of the Act on Prevention of Unjust Acts by Organised
Crime Group Members (Act No. 77 of 1991) (article 17 of theforegoing Cabinet Order);If a contract officer determines that a person who wishes to participate in an open tender falls under any of the following items, thecontract officer may prevent the person from participating in open
tenders for a period of not more than three years. The same applies
to the proxies, managers and employers of such a person:• if the person has intentionally carried out construction, manufacturing or any other service in a careless manner or acted
fraudulently with regard to the quality or volume of an object
in the course of performing a contract;• if the person has obstructed the fair implementation of a tender or has hindered a fair price from being reached or colluded
with others to obtain an unlawful profit;• if the person has obstructed the successful bidder from entering into a contract or obstructed a party to a contract from performing the contract;• if the person has obstructed an official from performing theofficial’s duties in a supervision or inspection;• if, without a justifiable reason, the person has not performed
a contract;• if, under a contract, the price is to be fixed after the signingof the contract, and the person has intentionally claimed an
excessive amount as such price based on false facts;• if the person has employed a proxy, manager or other employee
who is not eligible to participate in an open tender pursuant tothis paragraph (not including this item) in the conclusion or
performance of a contract; andAny person who currently faces a de-nomination under the ‘Outlineof de-nomination, etc. concerning procurement of defence andsecurity articles, etc. and services’.

There are no specific rules regarding supply chain management andanti-counterfeit parts relating to defence and security procurements.
International trade rules
22 What export controls limit international trade in defence andsecurity articles? Who administers them?
With regard to export controls that limit international trade in defence
and security articles, the Foreign Exchange and Foreign Trade Act stipulates certain provisions relating to security trade controls, which are
enforced by the Ministry of Economy, Trade and Industry.
23 What domestic preferences are applied to defence andsecurity procurements? Can a foreign contractor bid on a
procurement directly?
There is no mechanism for applying domestic preferences to defence
and security procurements. For the acquisition of defence and security articles, a number of acquisition methods are currently adopted,
including domestic development, international co-development or
production, domestic production under licence, utilisation of civilian
goods, import, etc. The appropriate method is selected depending on
the characteristics of the particular defence and security articles inquestion. The Analysis and Assessment of the Acquisition Program,the new Acquisition Strategy Plan and Acquisition Plan published by
ATLA on 31 August 2017, adopts a policy of domestic development, production and maintenance for certain items.
The Guidance for Bid and Contract (ATLA Public Notice No. 1 of
1 October 2015) contains provisions pursuant to which foreign business operators may apply for screening of eligibility for participationin tender, which indicates that it is possible for foreign companies todirectly participate in procurement tender. However, in the case of procurement from a foreign company, this is usually done by a Japanesetrading company on their behalf.

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24 Are certain treaty partners treated more favourably?
There are no treaty partners that are treated more favourably.
25 Are there any boycotts, embargoes or other trade sanctions
between this jurisdiction and others?
ExportThere are export controls that require the permission or approval of the
Minister of Economy, Trade and Industry.
Defence and security articles that require permission include
export of ‘weapons, articles related to weapons of mass destruction,
articles related to conventional weapons and articles that are likely to
be used for development, etc of weapons of mass destruction or conventional weapons’. ‘Articles related to weapons of mass destruction’refers to articles related to nuclear, chemical weapons, biological weapons and missiles, and ‘articles related to conventional weapon’ refers tostate of the art materials processing, electronics, computers, communication devices, sensor or laser, navigation equipment, marine related
equipment and propulsion devices.
Those subject to approval include all exports of articles bound forNorth Korea as the place of destination.
ImportPrimary import controls applicable to defence and security articles
include restriction on specified regions under which approval is requiredfor import from specified countries of origin or places of shipment.
Pursuant to this restriction, approval of the Minister of the Economy,
Trade and Industry is required for import of weapons of which thecountry of origin or place of shipment is Eritrea, and Type I DesignatedSubstances defined in the Act on the Prohibition of Chemical Weapons
and the Regulations of Specific Chemicals (Chemical Weapons ControlAct) of which the counties of origin or the places of shipment are specified countries or regions. Further, in terms of current economic sanctions, the approval of the Minister of the Economy, Trade and Industry
is required for the importation of any articles for which the country oforigin or the place of shipment is North Korea, and the importationof weapons for which the country of origin or the place of shipment is
Liberia, are effectively prohibited as a result.
Articles that require approval regardless of the country of origin or
the place of shipment include:• explosives;• military aircraft, engines for military aircraft, tanks and otherarmed vehicles and components thereof, warships, military armaments, guns and other firearms, other weapons, bombs, swords,
spears and other similar weapons, and components of the foregoing items; and• specified substances under the Chemical Weapons Control Act.
2017 Amendments to the Foreign Exchange and Foreign Trade
Act (FEFT)
The amendments to the FEFT were promulgated in 24 May 2017 andcame into effect on 1 October 2017. These, in particular, strengthen(i) penalties for the regulations concerning the import/export and tradeof technologies and (ii) administrative sanctions concerning import/
export regulations.
26 Are defence trade offsets part of this country’s defence andsecurity procurement regime? How are they administered?
There are no trade offsets at the moment, although the Ministry of
Defence is considering their introduction.
Ethics and anti-corruption
27 When and how may former government employees take up
appointments in the private sector and vice versa?
There are no restrictions preventing former public officers from takingup appointments in the private sector, or vice versa.
However, the following is a summary of appointments that are prohibited as a rule:• a public officer currently in office, engaging in communications
with an ‘interested enterprise’ (including enterprises defined bylaw), who has executed, offered or is obviously intending to offer
to execute a contract for defence and security articles (excluding

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•

•

those where the total amount of the contract is less than ¥20 million) for the purpose of assuming a position in such enterprise or
its subsidiary corporation (in summary, a corporation directly or
indirectly holding a majority of voting rights);
a public officer engaging in communications with an enterprise(not limited to the ‘interested enterprises’) for the purpose of having another public officer or former public officer assume a positionin such enterprise or its subsidiary corporation; anda former public officer who currently holds a position in the enterprise demanding or requesting performance or non-performanceof acts in the course of his or her duties in relation to a contract forsuch enterprise, or in relation to administrative measures against
such enterprise (the scope of prohibited acts differs depending on
the position the public officer had at the time of office) to the division within the government agency where said public officer had
held a position while he or she served as a public officer. The prohibition period after departure from public office is unlimited withrespect to the execution of contracts and administrative measuresthat said former public officer himself or herself handled, and is
two years with respect to other cases.

Getting a position at an enterprise immediately after leaving public
office will lead to suspicion of a breach of the foregoing restrictions oncommunications. In practice, there is a cooling-off period of at least
three months before assuming a position in the private sector after
leaving office as public officer.
The above-mentioned restrictions also apply to public officers with
fixed terms of office, and public officers hired on a public-private personnel exchange.
Further, in order to ensure transparency, public officers or former
public officers must file notices with certain prescribed persons including the Minister of Defence in cases where:(i) they promise, while in office, to assume a position in an enterprise
after leaving office; and(ii) after having held a managerial position in public office, they
assume a position in an enterprise within two years after retirement (except where a notice in relation to item (i) has already been
filed).
Certain information, contained in notices filed as above, is also madepublic.
28 How is domestic and foreign corruption addressed and what
requirements are placed on contractors?
There are no special restrictions related to bribery that specificallytarget government procurement. Such matters are generally covered
under the offence of bribery under the Criminal Code. The main crimes
under the Criminal Code regarding bribery and applicable to enterprises are the giving, offering or promising of bribes, as listed below:• any bribe to a public officer in relation to the performance of his or
her official duties;• any bribe, upon request, to a potential public officer in relation to
the performance of official duties for which he or she is expected tobe responsible;• any bribe, upon request from a public officer in relation to the performance of his or her official duties, to a person other than said
public officer (who is not required to be a public officer);• any bribe to a former public officer in relation to said former public
officer having conducted an unlawful act or refraining from conducting a reasonable act upon request while in office; or• any bribe to a public officer as a reward for said public officer
arranging or having arranged for another public officer to conduct
an unlawful act or refrain from conducting a reasonable act in thecourse of his or her duties upon request.
In the procurement of defence and security articles, the specifications
thereof are generally very specific and there is no market price. In manycases, contracts are executed upon calculating an estimated price using
cost accounting with a view to preventing overcharging by contractors.
Contractual special clauses are generally required for cost accounting and management for the purpose of preventing overcharging bycontractors, and cost audits are conducted. See question 16 for moredetails.
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Other than the above, cartels (bid-rigging) and other similar acts
are prohibited under the Anti-Monopoly Act, obstruction of auctions is prohibited under the Criminal Code, the Unfair Competition
Prevention Act and the Act on Elimination of Involvement in Bid
Rigging etc. There are also punishments for failure to act, and criminal penalties or administrative monetary penalties apply in the case of
violation.
Any enterprise that has violated any of the restrictions or requirements stated above, or otherwise engaged in acts unfairly or in bad
faith, making false statements in tendering documents, performing acontract negligently without due care, or breaching a contract will be
de-nominated from procurements for defence and security articles fora certain period (one month to three years depending on the degree ofseriousness of the violation, and in the case of refusal to comply withsystem research, until the same resumes) (www.mod.go.jp/j/procurement/kadaiseikyujian/pdf/20130801_1.pdf ). In addition, enterprisesthat have capital ties or personal relationships with an enterprise thatwas de-nominated may barred from participation in open and selective
tendering procedures for agreements for similar types of defence andsecurity articles (www.mod.go.jp/j/procurement/chotatsu/naikyoku/
nyuusatu_seifu/2016/09/01a.html).
Public officers are subject to the National Public Service Ethics
Code in order to ensure public trust in the fairness with which public
officers execute their duties. Pursuant to this Code:• the following acts with interested parties (defined in the Code,including enterprises with which a public officer has executed,
offered to execute or obviously intends to offer to execute a contract for defence and security articles in relation to which such
public officer is involved in administering. Any interested parties
to a post that a public officer served within the past three years shallcontinue to be regarded as interested parties for at least three years
after the transfer. In addition, where any interested party of a public officer contacts another public officer, such interested party will
also be regarded as an interested party of the other public officer
depending on the expectation of influence asserted by such interested party) and as such prohibited as a rule from:• receiving a gift of money, goods or real estate;• borrowing money;• receiving services free of charge;• receiving assignment of private equity;• receiving entertainment and paid dining;• going on a trip, playing golf and other entertainment (such as
mahjong) together (including in the case of splitting the bill);• demanding any interested party have a third party conduct anyof the above; and• it is not prohibited to dine together if the public officer pays hisor her own costs, but where the cost of their respective payments exceeds ¥10,000, notice needs to be filed with the Ethics
Supervisory Officer, except in certain specific cases such as buffet
parties.

Any public officer who has violated the foregoing is subject to disciplinary action. There are no provisions on sanctions that would be directly
applicable on the interested party side.
29 What are the registration requirements for lobbyists orcommercial agents?
There are none.
30 Are there limitations on the use of agents or representatives
that earn a commission on the transaction?
No.
Aviation
31 How are aircraft converted from military to civil use, and viceversa?
In August 2010, the Ministry of Defence finalised guidelines for thedesign of a system for conversion to civil use, and in 2011 put in placea system for companies wishing to conduct conversion to civil use. Up
to now, technical documents for conversion to civil use of F7 engines
loaded onto US-2 rescue flying-boats and P-1 fixed-wing patrol aircraft
have been disclosed and published upon request from commercial
enterprises. In December 2016, ATLA announced that it had enteredinto an agreement with IHI Corporation on conversion to civil use inrespect of F7-10 engines loaded onto P-1 fixed-wing patrol aircraft inorder to sell them to the Japan Aerospace Exploration Agency (JAXA).
The Ministry of Defence rarely procures aircraft configured for civilian
use for conversion to military use, preferring instead to purchase equipment that has already been converted for military use.
32 What restrictions are there on manufacture and trade ofunmanned aircraft systems or drones?
Under the Aircraft Manufacturing Industry Act, airplanes and rotorcraft with a structure that people cannot board and with a gross weightof 150 kilograms or over are included in the definition of ‘aircraft’ subject to restrictions on the method of manufacturing and repair. Below
are the primary restrictions:• the manufacturing or repair (including modification) of aircraftis subject to a licensing system. Permission of the Minister of
Economy, Trade and Industry is required for each plant;• manufacturing or repair must be conducted by permitted business
operators in a manner approved by the Minister of Economy, Tradeand Industry, which must also be confirmed by an aircraft inspector; and• permitted business operators may, as a rule, only deliver a manufactured or repaired aircraft to others along with a manufacturingconfirmation document prepared by an aircraft inspector.
On 10 December 2015, the Ministry of Economy, Trade and Industry
announced it would request manufacturers, importers and sellers of

Kohei Masuda
Ryuichi Nozaki
Yuri Suzuki
Yuko Nihonmatsu

info@aplaw.jp
ryuichi.nozaki@aplaw.jp
yuri.suzuki@aplaw.jp
yuko.nihonmatsu@aplaw.jp

Fukoku Seimei Building
2-2-2 Uchisaiwaicho, Chiyoda-ku
Tokyo 100-0011
Japan

Tel: +81 3 5501 2111
Fax: +81 3 5501 2211
www.aplaw.jp

33

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unmanned aircraft to make voluntary efforts to ascertain the owner ofunmanned aircraft.
Miscellaneous
33 Which domestic labour and employment rules apply toforeign defence contractors?
Labour and employment rules are domestic laws and as such do not
apply unless a contractor has an office and employs employees inJapan. If an enterprise has an office and employs employees in Japan,
it must pay Japanese labour insurance and employee pension insurance. Having the proper labour insurance and employee pension insurance policies in place and not being slack in payment of premiums will
generally be a requirement for qualification to participate in open andselective tendering procedures.
34 Are there any specific rules that contractors, foreign ordomestic, are bound by in defence contracts?
No.
35 Do contractors avail themselves of these rules when they
perform work exclusively outside of the jurisdiction?
Not applicable.
36 Must directors, officers or employees of the contractor
provide personal information or certify that they fulfil any
particular requirements to contract with a government entity?
One trigger for disqualification from bidding is being a ‘juridical person or other organisation in which a designated organised crime groupmember serves as an officer thereof ’ (see question 21). As a result,enterprise bidders are required to submit a pledge at the time of bidding, declaring that none of their ‘officers, etc’ belongs to an organised
crime group.
37 What registration or licensing requirements exist to operate
in the defence and security sector in the jurisdiction?
There are no registrations or licensing requirements.
38 What environmental statutes or regulations must contractors
comply with?
Green Purchasing Act
The Green Purchasing Act came into force in 2001.
In the procurement process, the national government must endeavour to select ‘eco-friendly goods’ with low environmental impact (inparticular: recyclable resources; products that have low environmental
impact based on the ability to reuse or recycle or through the use of raw

34materials or parts with low environmental impact; and services thathave low environmental impact). In response to this, the Ministry of
the Environment has established a basic policy applicable to all governmental agencies in respect of a wide variety of procurement items. The
Ministry of Defence has also set its own corresponding procurement
goals (www.mod.go.jp/j/procurement/chotatsu/buppin/kankyo2016.
html) for 2016. However, the procurement goals of the Ministry of
Defence primarily target stationery, office supplies, air conditioners,
lighting, general official vehicles, etc. In regard to goods and services
that are key defence and security items, the targets are limited to construction of public facilities, tires for passenger cars, two-stroke engine
oil, disaster supplies, etc.
Green Contract Act
The Green Contract Act (came into force in 2007).
Moving forward further than the Green Purchasing Act, the Green
Contract Act requires the national government to endeavour to promote procurement contracts with serious consideration for the reduction of greenhouse gas emissions, etc. In response thereto, the Cabinet
has established a basic policy that covers six types of contracts:• the purchase of electricity;• the purchase and lease of automobiles;• the procurement of vessels;• the design of governmental building renovations that include
a guaranteed reduction in the cost of electricity and fuel, etc, byoperation of governmental buildings that is greater than the renovation cost;• other building designs; and• industry waste disposal.
In response to the above, specific fuel economy and other environmental performance requirements may be specified in procurement specifications for many defence articles, among other things.
39 Must companies meet environmental targets? What are these
initiatives and what agency determines compliance?
As mentioned in question 38, for the six types of contracts covered by
the Green Contract Act, requirements for specific fuel consumption
and other environmental performance may be provided in the specifications for bidding. In such cases, enterprises must submit bids thatmeet such requirements. Evaluation will be conducted by the ATLA,
which is the agency managing procurement.
40 Do ‘green’ solutions have an advantage in procurements?
Nothing other than that which is specified in question 38.

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