Croatia

The Defence Inspectorate controls the disposal of assets according to its yearly plan, approved by the Defence Minister. However, information on this is limited. There is yearly control by the SAO, whose reports are publicly available. However, detailed information on disposal of assets is lacking.

According to the Annual report on defence for 2013, the Defence Inspectorate scrutinizes the disposal of all assets according to its yearly plan, which is approved by the Defence Minister. However, the Defence Inspectorate's final findings on asset disposals are not publicly available. In the Annual report on defence, which is published, disposal of weapons and properties is reported. The MoD has also announced in the Annual report on defence that they have finished the data base of military property, listing property according to those which could potentially be for military use and those which would not be. While the final list of properties is not available online, the NGO Center for Peace Studies has published the list and locations of former military properties given to the state Agency for the management of state properties for future management.

It is not clear what percentage of defence and security expenditure in the current budget year is dedicated to spending on secret items relating to national security and the intelligence services. It is assessed that more than eight per cent of expenditure may be dedicated to secret items in total.

The Ministry of defence procurement plan for 2013 categorized most procurements as classified. It is likely that more will be declassified, where procurements have been set as classified at the beginning of the procurement process and cannot be declassified until the expiration of the contract. The Ministry has improved transparency over the last 3 years by publishing information on plans for procurement however, as well as details of already conducted procurements. In the Annual Report on defence for 2013, the MoD reported that less then 10% of procurement was classified. For year 2014, the MoD announced that it was expected only 5.74% of its procurement to be classified.

There is much less information available in relation to the security/intelligence sector. The only data which is publicly available is a total budget for each institution. Furthermore, research indicates that the budget for the Military Security Intelligence Agency has been spread widely across different items in the Ministry of defence budget and cannot be estimated.

Two parliament committees are in charge of supervision of secret budget items: the Domestic Policy and National Security Committee and the defence Committee. When the committees have discussions on classified items they are closed to public and members are not allowed to publicly discuss the classified data. However, the committee members who are supposed to have security clearance have full information on budget and can investigate and question all budget lines. There was not quite enough independent evidence to be assure that information on secret items, is sufficiently detailed to award a score of 4.

The State Audit Office makes regular (yearly) audits of the military and police. However the intelligence services have never been audited by the State Audit Office but rather with internal audit bodies. SAO audit reports are submitted to the Croatian Parliament (National Security Committee, defence Committee) and the Croatian State Attorney's Office after they are finalized by SAO. If the documentation includes classified information (all Intelligence Agency reports are like that), the report cannot be published without the permission of the individual who has classified it, in accordance with the provisions of the Data Secrecy Act. This is why audit reports from Civil and Military Intelligence Agencies are classified and not available to all MPs but rather only to members of the defence and National Security Committees only. The scope of report is not known to the public. The reports are not debated in plenary parliamentary debate due to their secrecy. Only MPs with security clearance can read (and then debate) reports.

In Croatia's legislation there is no mention made of off–budget military expenditures which leads to the conclusion they are not officially permitted. Additionally, there are no media or official reports about any off-budget military expenditure.

As mentioned in question 27, there are no reports of off-budget expenditures occurring in the defence sector in Croatia.

Information or documents can be classified in one of four different categories. The categories top secret or secret can be classified by: the President of Croatia,the President of the Croatian Parliament, the Prime Minister, Cabinet Ministers, the Chief State Prosecutor, the Armed Forces Chief of Staff and leaders of the security intelligence agencies.

The state authority which in charge of scrutinizing classification is the Office of the National Security Council. Its authorities supervise classification and declassification procedures, and the process of access to classified/declassified information and conduct measures that would protect an approach to classified information and implementation of obligations which derive from international contracts and agreements on the protection of classified information. According to the FOI Act, if a citizens requests classified information, the public authority is obliged, before making a final decision, to conduct a proportionality and a public interest test. The Information Commissioner may review this procedure but can not declassified information on its own. Croatia is assessed to have a strong regime of openness through its right to information act.

Formally, the Republic of Croatian is the beneficial owner of all state companies. However, some of them are governed by persons from or close to defence and security institutions. In that sense, the MoD governs (directs and manages) the Alan Agency for Trading with Army Equipment and Pleter Usluge Ltd, which provides cafeterias and shops in barracks along with the Zrakoplovno tehnički centar, which services aircraft. The MoD also governs two hotels. Overall reported income from these companies is mentioned in yearly state audit report. For the year 2012 this income was less than 1% of overall defence budget. A list of all companies run by the MoD is not published. However overall business reports of those companies are available in state Financial Agency (FINA). The owner of those businesses is formally Republic of Croatia, but they are managed and directed by MoD. The score has been selected on the basis that while the scale of commercial businesses does not appear to be significant, all of them are not publicly disclosed.

All state owned companies including the one run by the MoD are subject to State Audit. The MoD governs (directs and manages) the Alan Agency for Trading with Army Equipment and Pleter Usluge Ltd, which provides cafeterias and shops in barracks along with the Aeronautical technical canter (ATC), which services aircraft. The MoD also governs two hotels. The most recent audit reports available on-line for the MoD are for the ATC from 2012 and for the Alan Agency from 2010. Audit is not implemented on a yearly basis. All companies have published anti-corruption plans on their web-site and the ATC also publishes regular yearly reports.

There is no evidence at all of unauthorised private enterprise by military or other defence ministry employees. The government through the Art. 14 of Act on Service in the Armed Forces outlaws any unauthorized private enterprise. Authorization for such activities has to be given the minister.

The President of Croatia, who is also Commander in Chief, publicly insists on combating corruption in most of his public appearances. Minister of defence Ante Kotromanović has declassified most of the MoD's procurement contracts and has organised presentations of public procurement plans before the Defence Committee and before the National Council for Monitoring the Implementation of Anti-Corruption Strategy. However, there is no evidence that this is reflected throughout the defence ministry and armed forces by similar commitments from senior ministry staff and senior armed forces officers.

RESPONSE TO REVIEWER: Unfortunately public evidence could not be found to verify this in time for publication.

The Act on Service in the Armed Forces (together with the Penal Code) prescribes measures for personnel found to have taken part in forms of bribery and corruption. More broadly, sanctions for corrupt activities at the judicial level tend to be punished with low and at times, conditional sanctions which imply effectiveness is lacking.

Two such cases recently featured in the media. One related to a General who was arrested and charged with alleged misuse of army resources to build a business zone in the village Sibinj. The first instance court declared him guilty of mobilizing military construction vehicles and staff without authorization. The General appealed this conviction claiming that he has received oral and but not a written order. The case is still pending. In 2013, two high ranking officials from Military Intelligence Agency were also prosecuted for taking Agency money intended for informants. As mentioned in Question 50, the outcomes of military disciplinary cases are closed to the public and as such it is difficult to verify consistency and effectiveness in the enforcement of sanctions.

Whistle-blowing is not particularly encouraged by the government. The initiatives from some NGOs, opposition parties as well as from the president of Croatia for adopting an Act on whistle-blowers was not welcomed by the government which is claiming that current legislation is good enough for whistle-blower protection (some weak provisions on whistle -blowing are integrated in Penal Code. However, NGOs and media have reported on several cases when whistle blowers were punished after they have disclosed information on corruption. There is no public evidence of any process started to promote whistle-blowing in regard to corruption cases in the defence and security sector.

Every employee, civilian or military, in a sensitive position (if he/she has access to classified information), is subject to a security clearance. The Law on Preventing Conflicts of Interest defines conflict of interests for the following military state officials: Chief Inspector of Defence, Chief and Deputy Chief of General Staff of the Croatian Armed Forces, commanders and deputy commanders of the Croatian Armed Forces and the Support Command, the director and deputy director of the Croatian Military Academy and commander of the Croatian Coast Guard. The Law on Service in the Armed Forces states that active military personnel, civil servants and employees are not allowed to:
- conduct independent economic or professional activity
- perform work or provide services to the legal entity
- be a member of the administrative or supervisory board of a company.

According to Yearly report on defence for 2013, MoD has reportedly adopted internal rules which specify the obligations and responsibilities of persons involved in the preparation, implementation and execution of public procurement contracts. Moreover the MOD keeps a record of all steps in the preparation and implementation of public procurement procedures, which helps it investigate any suspicion of a conflict of interest or corrupt activity. Also functions within the implementation of public procurement are separated in a way that the same person cannot be responsible for the preparation of the procurement and control the execution of the contract. However, those internal rules are not published publicly.

The number of civilian and military personnel is accurately known and details of numbers of personnel throughout the ministry and armed forces are made public by the Ministry of defence in the regular yearly Report on defence. Personnel data is also available on gender basis, and on military rank.

The salary and allowances of all government employees is publicly available information. Basic payment is defined by a government act - 5108.84 HRK (688,82 EUR) gross. This basic is increased for 0.5 per cent for every working year and then multiplied by the coefficient of complexity of the job. However, the salary for military intelligence staff is classified.

Army and MoD personnel receive their salary no later than the 15th of the month for the previous month. Until November 201, the salary was paid by the 5th of the month, and later was shifted to 15th due to the new central payroll system introduced by the government.

The Law on Service in Armed Forces defines the criteria for the appointment of military personnel. The President of Croatia, according to the Constitution and Defence Act, appoints high ranking military personnel (on the proposal from the Government and after obtaining the opinion of the Defence Committee of the Croatian Parliament). The Minister of defence prescribes criteria for evaluation, and the selection process and award of ranks and promotion of military personnel in the ranks. The Minister also proposes candidates for senior military posts to the President.

Although past reports in the media have pointed to a lack of transparency and non-meritocratic appointments, especially at the top level, research found there have been no similar reports in recent years. Measures can therefore be assessed as likely to be working, although further examination is needed to categorically state that they are strong enough to guarantee that independent, objective and merit-based assessments occur in practice.

It is not clear if the appointment system is linked to objective job descriptions. Article 92 notes that promotions may occur annually on the basis of an annual plan to promote the number and structure of ranks however. This indicates that promotions are at least likely to be driven by organisational needs.

The Law on Service in Armed Forces defines in criteria for promotions. Articles 107-110 of the Law make provisions for personnel to be assessed by their immediate superior and their superior in turn, however there is no mention of a promotions board or similar process. This is therefore likely to be insufficient for middle and senior ranked officers (see Q42). Article 110 also allows individuals to request a review if dissatisfied. In this case, the individual's superior is required to assemble a commission of at least three members of equivalent rank and professional standing to further review the assessment.

The Minister of defence prescribes criteria for evaluation (Rules on Assessment of Military Personnel) and the selection process and award of ranks and promotion of military personnel in the ranks. In an yearly report on defence the MoD publishes cumulative data on promotions.

It is assessed likely that existing measures are working, however more detailed scrutiny is required as it could not be verified whether these measures are strong enough to guarantee that promotions are consistently objective and meritocratic in practice. There are no clear provisions in the Law on Service requiring promotion boards to be held outside of the command chain for example, nor further details that verify the strength of formal appraisal processes or independent oversight. Although past reports in the media have pointed to a lack of transparency and non-meritocratic promotions however, especially at the top level, research found there have been no similar reports in recent years. Other factors also suggest improvements in meritocracy, such as that Croatia's first female general was promoted in April 2014.

Republic of Croatia suspended compulsory conscription service in 2008, although it remains a legal right of the state to reintroduce. According to the Long term Plan for Development of Croatian Military forces 2015-2024, Croatia may re-activate compulsory conscription only in a case of possible armed aggression on the national territory.

Conscription was abolished in 2008. Voluntary military training is controlled by the 'Regulations on voluntary military training', which does not include rules against bribery. Bribes are overall banned within the Penal Code but there are no special regulations related to voluntary military training and selection. Bribery of officials in return for preferred postings is possible, although research found no clear evidence that bribery is actually taking place.

There are no media or official audit report about any &quoute;ghost soldiers&quoute;. However, the budget of Military Intelligence Agency (which is part of MoD budget) is unknown to the public and some of it parts may be at risk of being used for ghost employees.

Military personnel receive their salaries via bank accounts. Commanders are not included in the salary chain. The Defence Minister, in accordance with the regulations governing the material and financial operations, determines which persons from the armed forces can manage financial accounts and establishes their rights and duties.

RESPONSE TO REVIEWERS: Agree with comments. Score changed.

There is no clear Code of Conduct for military personnel, although the Law on Service in Armed Forces provides some limited direction regarding acceptance of gifts. The Rule-book on Serving in Armed Forces defines the value of gifts someone in the army can accept. For civil servants the Ethical Code directs against conflicts of interest and misuse of entrusted powers. All civilian MoD staff are also obliged to respect the Code of Ethics for Civil Servants.

Since there is no specific Code of Conduct for military personnel there are no official sources on the same. Overall data on the number of misconducts investigated by the military police is given in the Yearly Report on defence, that is debated by parliament. Cumulative data is published in the report on the number of cases before the military disciplinary court (in categories: misconduct, disobedience, negligent performance).

The MoD has appointed an Ethics Commissioner who is monitoring implementation of the Ethical Code and is responsible for receiving complaints of employees, citizens and other persons in connection with possible corruption and unethical behaviour of state employees. The MoD Ethics Commissioner received one application for unethical conduct in 2013.

Score awarded on the basis that although there is no evidence of a Code of Conduct, there is evidence that relevant breaches and prosecutions may be publicised.

The yearly report on defence for 2013, makes no mention of any MoD anti-corruption related training. However, it does state that according to the MoD all employees of the Independent Sector Procurement Department completed a specialist training program on public procurement, passed a legislative examination (of legislation that regulates public procurement in Croatia) and hold a certificate in Public Procurement from the Ministry of Economy. There are regular updates to their required knowledge (for each employee) who is expected to taking part in 32 lessons (over a period of three years from the date of commencement of validity of the certificate). It is unknown to what extent this training includes anti-corruption topics. As of April 2014, Croatia is engaged in the Self-Assessment Questionnaire and Peer Review Process as a part of NATO Building Integrity Programme.

There is no official policy to make public outcomes of the prosecution of defence services personnel for corrupt activities. While the outcomes of all civil court cases are public (for example Rončević, Kruljac), the outcomes (judgements) of military disciplinary court cases are not known to the public. Through the media, the public has become aware of the case involving persons in the Military Intelligence Agency stealing money from the informants budget. However, the trial will be closed to the public because of the classified nature of the data. Due to the secrecy, length, and complexity of legal procedures around those cases there is some public speculation and scepticism over whether prosecutions have been suppressed or inappropriately sanctioned.

Facilitation payments are illegal under Article 348(2) of the Penal Code, which provides penalties to punish offenders ranging from three months to five years imprisonment. The Rule Book, &quoute;On Serving in Armed Forces&quoute; also limits the value of gifts (which could also form a facilitation payment) that someone in the army can accept.

No evidence was found of facilitation payments or similar cases occurring in the military. There is little wider indication that mechanisms are effectively used or capable of discouraging occasional facilitation payments however. Facilitation payments were most frequently reported in construction works. More broadly, sanctions for corrupt activities at the judicial level tend to be punished with low and at times, conditional sanctions which imply effectiveness is lacking.

RESPONSE TO GOVERNMENT REVIEWER: Comments accepted, however the wider evidence provides little to confirm that the provisions under the penal code are likely to be used effectively or are capable of discouraging occasional facilitation payments. Discussion and sources updated. Score maintained.

Building integrity and the fight against corruption is recognized only in one MoD strategic document: The Strategic Defence Review from 2013. It discusses the reform of management practices which will include the range of organizational solutions and measures aimed at improving achievement in building integrity and fighting corruption. Particular emphasis will be on improving the training of civilian and military personnel on this subject, review and explanation of responsibilities and procedures, improving coordination of the bodies responsible for supervision and to strengthen transparency in public procurement and budget execution.


The Strategic MoD Plan 2014-2016, as well as the Annual MoD Action Plan for 2014 or Long Term Development Plan of Croatian Military Forces 2015-2024 do not address anti-corruption measures.

There is no known systematic training in corruptions issues for commanders. Some training does take place sporadically, mostly as part of international missions.

Croatian contingents in international missions are usually part of contingents of bigger countries, so Croatian troops are not involved in any particular major peacekeeping procedures and thus no particular monitoring takes place. Reports on participation in peacekeeping mission do not mention any personel related to corruption monitoring either. The score has been selected on the basis of the lack of clarity on the subject.

Training on addressing corruption risks is applied very selectively or irregularly and dominantly in the international framework. Domestic deployment training have not been referred to in this issue. Reports on the participation of the Croatian Armed Forces in peace support operations do not mention any guidelines or staff training, on addressing corruption risks in contracting whilst on deployed operations or peacekeeping missions.

From the list of MoD public contracts with private companies it is not visible that private military companies are used. It is unknown if some classified contracts involve private security companies, but most probably those are the companies who are producing and selling weapons, and are not providing operational staff to military. According to the interview with source 3, the MoD is considering engaging private security staff for the protection of MoD property. There is no evidence of regulations forbidding this use. Private companies are subject to all national legislation related for combating corruption.

The key act prescribing public procurement is the Public Procurement Act (PPA). defence & Security procurement is mentioned in Article 11 which lists exceptions to this act:
1. the supply of military equipment, including any parts, components and/or sub assemblies thereof,
2. the supply of sensitive equipment, including any parts, components and/or sub assemblies thereof,
3. works, supplies and services directly related to the equipment referred to in points 1 and 2 of this paragraph for any and all elements of its life cycle,
4. works and services for specifically military purposes,
5. sensitive works and sensitive services.

Procurement in these cases is regulated by a separate Regulation on Procurement for Defence and Security Purposes (RPDSP).

RPDSP regulates different models of public procurement processes in the security sector (restricted procedures, negotiated procedure with and without prior publication and competitive dialogue).
Article 6 exempts RPDSP from reviewing every contract valuable less than 200 000 kn (without VAT) for the procurement of goods or services and procurement of works less than 500 000 kn.

RPDSP regulates the cycle of public procurement (public procurement announcement, notification of concluded contracts, participation deadlines, offer and appeal delivery, reasons for exclusion and conditions for economic agents ability, technical specifications and criteria for offer selection, subcontracting as well as legal protection of competitor and statistical reporting).
The RPDSP regulates three types of contracting: procurement of works, procurement of goods and procurement of services and recognizes four different procedures of public procurement:
1. restricted procedure (every interested company can ask for participation in procedure wherein only those who are called from the contractor can submit their offer)
2. negotiated procedure with prior publication (contractor addresses the companies by his choice and negotiates about contract terms with one or more agents)
3.tPublic procurement negotiated procedure without prior publication
4.tCompetitive dialogue (every company can ask for participation, based on public call) is based on the public call for tenders. Then, contracting authority negotiates with competitors aiming to find one or more acceptable solutions on the basis of which chosen competitors will be called to submit their offer).

There are no mechanisms when it comes to continuous independent control over the public procurement procedures in the field of defence. Although for every procurement tender, a special committee is set up which is intended to oversee the whole process and finally decide on the best offer, this committee is internally established and can not be considered fully independent.

The post ante control, if it comes to appeal on public procurement procedure, is done by the State Commission for Control of Public Procurement Procedures. The Parliamentary defence Committee has the authority to give its opinion to the Ministry of defence when it comes to public procurement for values exceeding 5 million euros. The opinion is given before public procurement procedures are initiated and the Committee has issued one such positive opinion in 2013. There was some media criticism directed at the MoD as it is technically possible to avoid this reporting obligation by dispersing the procurement contract via several smaller contracts (or via a consortium) as was the case listed above where a contract was made with several Croatian companies for military equipment.

The MoD publishes on its website the list of all completed contracts from the previous year, as well as the plan for public procurement for current/following years. Most of the procurement is also announced in the Official Gazette. A limited amount of procurement information is published on the MoD website although the criteria to determine which information is published on MoD website is not clear. However, there are a number of procurement decisions that are not published due to secrecy. The amount of classified contracts has significantly decreased in the last 2 years and in 2013 was 12 %, and for 2014 is predicted to be just 5.74%. According to regulation RPDSP, the MoD can, in specific cases, start the procedure for public procurement without previous notice.

It appears the government may discriminate to some extent between companies on the grounds of integrity, however there is no evidence of any formal requirement for clauses against corrupt behaviour to be included in contracts, or requiring contractors to put anti-corruption compliance programmes in place.

Procedures and standards for bidders are regulated in the PPA and specially in regulation RPDSP. In general, bidders are required to have prove their technical and expert capability to implement the contract and if it concerns classified data they are required to have adequate certificates based on security clearance. Technical specifications are defined in Additon III of RPDSP, article 28 and they include national, European and international appropriate standards. It is also stipulated that the bidder will be removed from the competition if the company or its advocate has a final judgement against them and/or is convicted of terrorism, financing terrorism, money laundry, public provocation on terrorism, recruiting for terrorism, training for terrorism and/or terrorist organisation i.e. for criminal acts regulated by the state from which economic agent comes.

RESPONSE TO PEER REVIEWER. Comments noted. The key issue here is the lack of requirement for companies to demonstrate that they can and will take active measures to ensure appropriate compliance. Score has been changed from 2 to 1 during final review on the basis that there is no evidence that companies are required to sign ‘no-corruption’ (or equivalent) clauses in all contracts with the government (one of the stipulated score criteria).

It is recognized that the government has made some positive early progress by introducing a set of standards for public procurement that require contracts and bidders' suitability to be disclosed. This includes provisions under Article 67(1) of the Public Procurement Act excluding parties with previous convictions for accepting or offering a bribe, abuse of position and official powers, fraud or concealing unlawfully obtained money, or corresponding criminal acts in their home country.

Key strategic documents which set out the procurement requirements for defence are: the National Security Strategy (NSS), the Croatian Armed Forces Long term Development Plan 2015 -2024 (LDP) and the MoD Strategic Plan 2014 -2016, together with Strategic Defence Review from 2013. The most outdated of these documents is the NSS which was published in 2002 but is the foundation for the other strategies. The governments attempts to bring a new NSS have failed several times. The NSS from 2002 is still in force and it has not been revised although circumstances are changed drastically (for example Croatia is now a full member state of NATO and the EU). The MoD have stated frequently that the key document for planning public procurement for the upcoming year is the budget projection which is made by Ministry of Finance. Due to the serious MoD budget cuts for the last few years planned capital procurement has been reduced.

The MoD publishes a plan (Mod Procurement Plan) for public procurement for the incoming year. The procurement plan consists of data such as the item or service procured, planned beginning of procurement procedure, whether it is a one-time contract or framework agreement as well as the amount estimated for above mentioned procurement. Besides that, for every planned public procurement, the type of public procurement procedure, is applied. There is no public data available for classified procurement. Procurement from this domain are not clearly identified except specific cases determined in strategic documents (example: MiG service necessity). In the MoD Strategic Plan 2014-2016 information is announced with requirements for equipment.
However, some unplanned purchases may appear during the year. In that case, am update to the procurement plan is announced and published. In 2014, the procurement plan was updated 5 times.

Given the complex legislation which deals with public procurement, there are several elements that could end up reducing competition and which tend to encourage direct contracting. RPDSP predicts different public procurement procedures: restricted procedure, negotiated procedure with and without prior publication and competitive dialogue. Negotiated procedure is defined as a procedure where contractor is contacting potential bidders on his own choice and negotiates the contract conditions with one or more bidders. The most sensitive procedure which can end in procurement from only one bidder is a negotiated procedure without prior publication. RPDSP articles 8-10 defines when is this procedure applied, concerning procurement of public works, procurement of goods and services. Direct contracting is also possible in those cases which fall under classified public procurement. The ratio of classified contracts (according to Annual report on defence for 2013) was less then 10%. Single sourcing is also possible in &quoute;small public procurement&quoute; (up to 200.000 HRK). The score has been selected on an estimate of the proportion of the total value of contacts use single-source.

There are no regulations regarding the selection and activity of tender board commissions. Inside the MoD there is a public procurement unit which is responsible for conducting procurement processes but the way that the personnel in this unit are selected is not known. The MoD reported that it has adopted internal rules which specify the obligations and responsibilities of persons involved in the preparation and implementation of public procurement, and the execution of public procurement contracts. The MOD keeps an audit record of all steps taken in the preparation and implementation of public procurement procedures so that they can more easily determine if there is a potential conflict of interest or corrupt activity. Also functions are separated within the implementation of public procurement in a way that the same person cannot be responsible for the preparation of the procurement and control the execution of the contract. However, those internal rules are not published. There are examples when the government has established an inter-sector committee comprised of high ranking state officials for bigger procurement contracts (E.g. Patria vehicles, patrol ships). The Patria vehicle procurement resulted in a major international scandal although without any official indictment .

Commissions decisions are subject to audits by the State Commission for Control of Public Procurement Procedures which is an independent state body for resolving appeals relating to the public procurement procedures.

According to the 2013 Eurobarometer business survey on corruption, 58% of Croatian respondents stated that collusive bidding was widespread in public procurement, although there is no data specific to defence.

The Public Procurement Act and Penal Code outlaws collusion, but there is no legislation specific to defence, although defence is covered with the scope of these laws. There is also no evidence of enforcement of measures to punish colluding companies.

According to the MoD, all employees of the Independent Sector Procurement Unit completed a specialist training program in the field of public procurement, passed the legislation examination that regulates public procurement in Croatia and hold a certificate in Public Procurement from Ministry of Economy. Regular updates of the required knowledge for employees occurs in the form of 32 lessons over a period of three years from the date of commencement of validity of the certificate.

In Feb 2014, the MoD has also reported to the parliamentary National Council for Implementation of Anti-corruption Strategy that there are ongoing efforts to fill vacant positions within Independent Sector Procurement Unit with qualified staff which may indicate shortcomings in the department’s ability to fulfil its obligations, such as limited staff shortages.

The State Commission for Control of Public Procurement Procedures is in charge of appeal processes. PPA forbids discrimination against competitors as well as discriminatory behavior towards contractors. Further, RPDSP explicitly lays out 12 instances which are to be considered as discriminatory behavior (e.g. via giving information to selected bidders, discrimination on the basis of nationality etc.).

Croatia also has an Anti-Discrimination Act which prohibits discrimination in procuring or providing goods and services. There is no data available on whether companies have sought this discrimination protection.

The State Commission, in the appeal process, decides on the legality of procedures, actions, failures to act and decisions as well as specific acts brought in. The State Commission also has the power to decide on other claims. All the decisions made in the appeals processes in front of the State Commission are publicly released on their web page. Before deciding on the merits, the State Commission must examine
whether there is a formal and legal presupposition in accordance with the Article 159 of the PPA. One of these presuppositions requests that the appeal contains proof of payment of the appeals process fee.

The President, deputies and other members of the State Commission are appointed by the Croatian Parliament on recommendation of the Croatian Government. Members of the State Commission cannot be a member of any political party during their mandate nor can they be a member of any interested association which could bring forth a case of conflict of interest. In appealing against the State Commission decision there is a possibility, if the party is still not satisfied, to start an administrative dispute in front of proper administrative court.

In accordance with information available in the appeals database sent to the State Commission in 2013, the Commission received 12 appeals on public procurement procedures in cases which involved the MoD as a contractor. In 4 cases the Commission granted an appeal and annulled the public tender.

The Penal Code, 'misuse of position and authority' (Art 252-254, Art 291), punishes illegal favors, the giving and receiving bribes, trading in influence etc. with a sentence of 1 to 12 years imprisonment. Equally, the Conflict of Interests Act forbids officials from exerting undue influence in getting jobs or public procurement contracts. Sanctions for this regulation violation are brought by the Prevention from Conflicts of Interest Committee which can warn the official or suspend part of his/her monthly payment. Anti-discrimination act punishes discrimination in public services by financial fee up to 30.000 HRK.

Offsets area in Croatia are minimally regulated by the new regulation, &quoute;Instruction on the Manner and Conditions of the Application of the Offset Program&quoute; from the Ministry of defence and Ministry of Economy, Labour and Entrepreneurship. However in this document corruption risk or anti-corruption measures are not specified clearly.
This Instruction has to some extent improved the offset framework compared to the previous regulation, but is
still inadequate. Terms such as transparency, ethical conduct and anticorruption measures are not mentioned. The instruction requests the conclusion of offset programs in regard to weapons and military equipment procurement contracts to the amount of €2,000,000 (equivalent in HRK). Hence, offsets have almost become a legal obligation in the conclusion of larger deals, and for any exceptions from the conclusion of offset programs, permission from the Ministers of Defence and Economy is required.

It is important to mention here the Committee for the Offset Program, which represents the state in the contracting and implementation of the offset program. The Instruction requires that the Committee is appointed by the Minister of Economy. The Committee is made of three representatives of the Ministry of Economy, three representatives of the Ministry of Defence, two representatives of the Ministry of Finance and one representative from both the Croatian Chamber of Economy and the ALAN Agency (the former Agency for the Control of Production for the Needs of Export and the Import and Export of Weapons and Military Equipment). The Instruction provides that at the request of the president of the Committee a representative of the President of Croatia may be included, as well as the representatives of government bodies and other relevant institutions. The Instruction further prescribes how the tasks of the Committee are defined by the Rules of Procedure of the Committee. The information about the manner of preparation and execution of the offset agreement is not publicly released, in accordance with the Law on the protection of the secrecy of information and the Regulation of the protection of the secrecy of defence information. The preparation and execution of the offset are, as a rule, subject to the same type and degree of secrecy as is the weapons and military equipment procurement linked to the offset contract. If the type and degree of secrecy of the procurement procedure are not determined, the offset procedure being executed is generally classified as a “business secret”.
From the stated, it is visible that the offset programs remain almost entirely in the domain of secrecy, which largely undermines their transparency. Finally, although a full member of the EU, Croatia still has not adopted the Code of Conduct for the conclusion of offset programs, which the European Defence Agency has opened for signing. There is no evidence of due diligence or auditing requirements.

No. Although Croatia is undertaking offset programs, there are no regulations requiring high standards of transparency concerning such offset programs.

While signing the main contract is regulated by PPA and RPDSP, offset contracts are regulated by the 'Instruction' which carried less weight legally than an act. The document of 'Instruction' does not mention competition requirements but rather gives power to Minister of defence and Minister of Economy to directly negotiate conditions of offset contracts with the contractor.

Croatia does not separately regulate the role of possible intermediaries in the public procurement procedure. Their eventual role must not go out of boundaries of the existing legal framework regulating public procurement (and also the Penal Code) but there is no specific regulation of this area.

Detailed information of the major financial packages surrounding a contract are not available. After signing the contract, MoD is obliged, no later than 48 days, to publish total agreed amount and implementation period (for non classified contracts only). However, there are exemptions about certain information on contract conclusion which do not have to be published (way of payments, penalties for breaching the contract etc). Information on concluded contracts do not have to be published if the same would in any way impede the law or would be opposite to public interest in any way. This is specially true in cases which are important to defence and/or security interests of the country , could harm the legitimate business interests of public or private companies or harm fair competition between companies.

Anti-corruption programs are not required of companies with whom the MoD directly concludes a contract, which leads to the conclusion that no requirement is likely to be made of sub–contractors. Although there is a special chapter in RPDSP defining criteria for sub–contracting, among them there is no demand for anti-corruption programs.

The legislation does state that the main contractor has to adhere to the Public Procurement Act. Article 86 of the PPA stipulates some requirements on disclosure of subcontractors' share of the public procurement contract and information on the subcontractors (name, company name, abridged company name, seat, personal identification number and account number) however .

Although in the recent past there were indications that could suggest that defence acquisition decisions are based on political influence, in recent times such indications are not visible. One of the examples is the process of decision-making about repairs (in Ukraine), instead of buying fighter air-crafts. Although there was criticism of how this decision lacked broader discussions, there were no reports on political influence regarding the same on the Ukrainian side. There were some discussions in the media of potential American interference in the decision making process to stop equipment repairs in Ukraine. Allegedly, Croatia was breaching NATO criteria by sending fighter aircrafts for repair to a non-NATO state. The rumours have been denied by the Ukrainian Embassy in Zagreb and by the MoD.