Latvia

According to official information and MOD officials (interviewed since 2009), the real estate of the Ministry of Defence, the NAF and its subordinate institutions are managed by the National Defence Military Objects and Procurement Center (VAMOIC) within the MOD. All auctions are announced on the centre's website.

An additional layer of accountability and transparency is added by the Law on Property Disposal of a Public Body, which requires that the Cabinet of Ministers must approve the final decision about any disposal of state property. All the decisions of the Cabinet of Ministers are public and are available online. As stated by the experts interviewed, there is no evidence of the defence sector breaking or avoiding these rules.

Particular objects of interest may generate detailed coverage from the national or local media. All asset transactions are monitored by the Auditor General and reported on publicly on annual basis. There have been no violations of the rules identified by the Auditor General during the last three years, according to the reports published.

There is less publicly available information on non-real estate assets, including the disposal of weapons; however, the NATO Peer Review report confirms the existence of legislation governing asset disposals in general.

External audits are carried out by the Auditor General's office, which was ranked as Latvia's strongest public institution in the 2011 National Integrity Systems study by TI. According to experts interviewed, it is regarded as a highly independent institution.

The Auditor's reviews are detailed and recommendations are very concrete, as evidenced in the publicly available reports. All the materials are published online, except for the part audited under the Rules of National Security. The Auditor General conducts audit of all activities of the MOD.

According to the MOD officials interviewed, the Auditor General can also initiate a specific audit, including one on asset disposal, if deemed necessary by findings of the general audit or media publications, although this appears not to have taken place recently. Additionally, as mentioned in Question 22, the proceeds of asset disposals could be more transparent.

It appears that information on classified expenditure is not made public by the government.

The defence budget is constructed according to the Law on Management of Budgets of Finances and published as a part of the State budget. The home page of the State budget provides details on managing assets such as property, procurement, personnel expenditures, acquisitions, training, and levies to the international institutions. The budget is published in the form of budget programmes to allow an overview of various activities within the defence sector.

The Latvian defence budget is public, apart from details about the body of National Security within MOD - the Military Police and Defence Intelligence and Security Service. These two bodies are scrutinized by the Parliament and the Auditor General, as confirmed by political sources and MOD officials interviewed.

In interviews, MOD officials revealed that approximately 5% of defence budget is spent on secret items. MOD sources consider this appropriate since according to the law and existing practice the secret part of the budget is discussed at the National Security Committee of the Parliament. The expenditure of the security institutions is audited by a special unit of the Auditor General, according to several MOD officials. The score has been selected on the basis that such information is not disclosed by the government.

By law, the Parliamentary Committee on National Security is devoted to scrutinizing the actions of the national security institutions, and is given full access to budget documents related to the Military Police and Defence Intelligence and Security Service. Its members possess security clearances and there is no speculation on information being withheld from the Committee.

All the documents released by the Auditor General are available to the relevant Parliamentary committees, such as the Audit and Budget Committee, National Security Committee and the DIACP. According to the annual report (Page7), in 2013 the Auditor General visited the Parliamentary Audit Committee twenty-one times. According to Source 1, the Auditor also spoke at the DIACP.

According to the law on National Security Institutions (Article 7), the secret part of the budget is debated by the National Security Committee. It is also audited by Auditor General staff with security clearances. According to Source 1, no detailed information is provided to the public. Sources 5 and 6 stated that the risk due to the lack of an open debate on the issue is mitigated through the oversight of various other government institutions involved such as the Auditor General and Constitutional Protection Bureau (CPB). The Auditor reviews expenditure of the funds while the CPB provides clearance to access security information for all individuals. There is no evidence of public debate on classified budgets.

Laws related to budgets formation and defence funding states that national defence activities shall be funded through the states budget. Officials interviewed (Source 2 and Source 7) confirmed that off-budget activities are not allowed by the law. They also stated that all items and activities related to defence are listed in the official budget, which includes details such as gifts and transfers. No off-budget items have been recorded in the last four years, according to independent reports from the Auditor General. For example, the Annual Report 2013 (Page 10-11) states that in 2013 there was international aid amounting to 1,5 millions lats, but in 2012 it was 4,2 million lats. There is narrative description of the most important items in the same report.

Laws related to budgets formation and defence funding states that national defence activities shall be funded through the states budget. Officials interviewed (Source 2 and Source 7) confirmed that off-budget activities are not allowed by the law and they do not exist in practice. This is also demonstrated by the annual reports of the MOD and the Auditor General's reports.

According to the Article 23 of the law on Budgets and Financial Management, the financial flows of MOD are managed by the State Vault of the Ministry of Finance, adding an additional layer of oversight.

The Article 2 of the Law on State Secrets defines what constitutes national secrets, while Article 4, paragraph 2 defines information that can be protected. Article 7, Paragraph 3 establishes the agencies responsible for the observance of the State Secrets Act, namely the Constitution Protection Bureau (CBP or the Satversmes aizsardzības birojs/SAB), the Security Police and Defence Intelligence and Security Service (DISS). Management of the State Secret lies with the Cabinet, as determined by Article 7, Paragraph 2. The Cabinet has issued regulations on objects of state secrets and a document that regulates the secrets protected by NATO and other international institutions.

According to experts interviewed (Source 6a And Source 14), in practice, Latvia does not have an institution overseeing access to information or monitoring the access to information system, which leaves classification of information to discretion of each ministry. There is, however, the Data State Inspectorate of Latvia and the Ombudsman which oversee and monitor access to information. The Ombudsman’s Office of the Republic of Latvia received an “A” status accreditation in 2015. There are risks that the secrecy rules might be applied without legitimate grounds.

As reported in the media, the government has had instances of setting secrecy rules for matters involving financial deals (such as hiring a consultant for an insolvent company with state guarantees) or the performance evaluation form of the head of the anti-corruption agency. (5)

According to the MOD official (Source 8) and confirmed by the expert (Source 6) interviewed, the Latvian military does not have a history of involvement in commercial activities.

As indicated on the homepage of the ministry, MOD owns some real estate, which is managed transparently and with all finances accounted for. As explained by the legal expert interviewed (Source 14), the system has been made more transparent by establishing a separate unit of MOD that manages the assets. All properties are listed in the Land register and the data is publicly accessible; rental is only possible under legally limited conditions. Income and management practices are audited annually by the Auditor General.

According to the experts interviewed (Source 6a and Source 14), there is no history of the Latvian military being engaged in commercial activity, except for the commercial leasing of real estate property. The income from the commercial lease of real estate is reported in the Annual Reports of the Ministry, which are publicly available online. The lease agreements of all real estate owned by MOD are scrutinized by the Auditor's General office, as indicated in their audit results that are available to the public on the Auditor’s home page. The Auditor General's office was ranked as Latvia's strongest public institution in the 2011 National Integrity Systems study by TI.

According to the official information reviewed and the government officials interviewed, the real estate of Ministry of Defence, the NAF and its subordinate institutions are managed by the National Defence Military Objects and Procurement Center (VAMOIC) within the MOD since 2009. All auctions are announced on the Center's website.

An additional layer of accountability and transparency is added by Article 5 of the Law on Property Disposal of a Public body, which requires that the Cabinet of Ministers must carry the final decision about any disposal of the state property. As stated by the experts interviewed, there is no evidence of the defence sector breaking or avoiding these rules. All the decisions of the Cabinet of Ministers are public and are available online.

According to the experts interviewed (Source 6a and Source 14), there is no history of the Latvian military being engaged in commercial activity, except for the commercial leasing of real estate property. The lease agreements of all real estate owned by MOD are scrutinized by the Auditor's General office, as indicated in their audit results that are available to the public on the Auditor’s home page. The Auditor General's office was ranked as Latvia's strongest public institution in the 2011 National Integrity Systems study by TI.

The income from the commercial lease of real estate is reported in the Annual Reports of the Ministry, which are publicly available online.

According to the official information reviewed and the government officials interviewed, the real estate of Ministry of Defence, the NAF and its subordinate institutions are managed by the National Defence Military Objects and Procurement Center (VAMOIC) within the MOD since 2009. All auctions are announced on the Center's website.

An additional layer of accountability and transparency is added by Article 5 of the Law on Property Disposal of a Public body, which requires that the Cabinet of Ministers must carry the final decision about any disposal of the state property. As stated by the experts interviewed, there is no evidence of the defence sector breaking or avoiding these rules. All the decisions of the Cabinet of Ministers are public and are available online.

Law on Prevention of Conflict of Interest in Activities of Public Officials, which applies to civilian civil servants and military officers, restricts the types of employment public servants can undertake. Additional employment of senior military officers is restricted to five professions (including doctor and scientist), and to employment authorised by international treaties, laws and Cabinet decrees. Other military officers are permitted to engage in additional employment only if it does not create a conflict of interest and a written authorization from a commander has been received. Similar restrictions apply to civil servants. (Section 7) The Law also restricts other forms of commercial activity.

Law on Prevention of Conflict of Interest in Activities of Public Officials also establishes a duty to provide asset declarations, at least parts of which are publicly available. The declarations are verified by the Constitution Protection Bureau, the State Revenue Service, and the Prevention and Combating of
Corruption Bureau can verify information provided and ascertain that the Law has not been violated.

Section 30 of the Law states that should the restrictions be violated, the public official shall forfeit all income gained from unauthorised employment, and establishes that violations could be subject to administrative and criminal sanctions.

Furthermore, the Law on Prevention of Defalcation of Governmental and Municipal Property prohibits various commercial activities using government funds, such as giving loans (Article 4), establishing a 0% lease agreement (Article 5) and the use of intermediaries (Article 6), in addition to establishing the best practice in using the government and municipal property.

According to the report of the CCPB regarding implementation of the UNCAC (page 6), there are several clauses in the criminal code of Latvia which charge officials for the illicit use of government property, namely clauses 179, 318, 319 and 180. The UNCAC review provides recommendations for improving the criminal code with some ad hoc norms corresponding to the Article 17 of UNCAC. According to Source 11, these actions will have to be prioritized by the government that was appointed in November 2014 following the October Parliamentary elections.

No evidence of unauthorised enterprise has been located.

According to the Transparency International study, political parties and parliament are the least trusted of all institutions and sectors analysed within the framework of the report (page 10). The anti-corruption researcher (Source 6) interviewed admits that there has been no communication on integrity issues from the leadership of defence sector in the last four years. The last minister who was outspoken about corruption was Imants Lieģis (2009-2010), as is evidenced from his web blog.

In 2012, the MOD engaged in the NATO Building Integrity Initiative under the leadership of Minister Artis Pabriks and supervised by the Parliamentary secretary Veiko Spolitis. The report among other things states:

&quoute;The Latvian reply to the Self-Assessment Questionnaire (SAQ) was impressive and the commitment shown by senior leadership and the openness of MoD officials in the Peer Review meetings demonstrates Latvia’s commitment to reducing the risk of corruption. Within the MoD’s main departments, there is a good understanding of corruption risks at the very senior level and the processes, or necessary adjustments, needed to tackle them. The positive feedback from MoD officials demonstrates that all the key decision makers have embraced the strong anti-corruption message from the Government. The Peer Review noted a comprehensive and systematic approach towards Building Integrity for the last ten years.&quoute;

MOD has made steps to follow up on the BI, reporting bi-annually to the Parliamentary Anti-Corruption Subcommittee. However, the ministry has done little to publicise the report and the process. According to the officials interviewed, besides reporting to the Parliamentary Committee, there are no public events held around the BI program. The report on BI is difficult to find on the ministry’s home page.

The interviewed experts are not aware of the details of the BI program, which is further indication of a lack a active communication by the MOD.

The Latvian Criminal Code criminalises active and passive bribery and abuse of influence (Chapter XXIV), prescribing sanctions of imprisonment of up to five years (or up to 11 years in aggravated cases where involvement of high-level officials or groups is ascertained), fines, community service and prohibition from some forms of employment.

Criminal investigations of cases potentially involving corruption are carried out by the Military Police and the Corruption Combating and Prevention Bureau, if necessary. In 2011, the Military Police handed over a case involving 11 MOD officials to the Prosecutor's Office. According to the officials interviewed, this case was discovered internally. There are no publicly available reports about the work of the Military Police.

According to media sources, a criminal investigation was started in a case of used navy ship purchases from the Netherlands. The Commander of the Navy was dismissed immediately following the discovery of the case and the public was informed about it. According to the MOD officials interviewed, criminal charges were not applied in this case. Although not confirmed by the MOD officials, the experts interviewed are convinced that the investigation was started because of the minister taking an active stand against corruption and this would not have happened under the previous leadership prior to 2009. Media reports exist of the People’s party (the party of the previous minister of defence) blocking the dismissal of the Navy Commander on grounds of mismanagement of the purchase.

According to the Law on the Corruption Combating and Prevention Bureau (Article 7, Paragraph 3), the CCPB is also responsible for controlling the conflict of interest of public officials, including MOD personnel. The media reported that in 2010, 5% of administrative fines (4 individuals) were issued to the officials of the National Armed Forces, compared to 60% officials in municipalities. The most recent reports from CCPB do not register any offences related to the defence sector.

There is little information available publicly about how cases are closed.

There is no specific legislation protecting whistleblowers, according to a report published by TI in 2013. While the Labour Law (Article 9) protects employees against retaliation, there is no evidence that this clause has ever been used in institutions or in courts. Article 26 entitles whistleblowers to compensation, but reports on whistleblowing do not show that this has occurred.

According to MOD officials interviewed, the MOD has established the Audit and Inspection Department as the official agency for whistleblowers to report corruption allegations to. There is no official communication on the Ministry's Home Page with information for potential whistleblowers. Officials of the MOD interviewed confirm that the anonymity of a whistleblower is protected as long as it is feasibly possible in order to solve the case. Officials claim that all relevant information is checked and acted upon, but there is no independent way of confirming this. There are no known cases of retaliation against a whistle blower within the Defence system.

According to Source 8, ministers and their cabinets can act as an additional informal channel for whistleblowing. The source reported cases when the ministry has acted upon such information, for example, in the case of mismanagement of one military object in rural Latvia, but there does not appear to be any documented evidence for this case. Given the lack of specific legislation and public information relating to mechanisms for whistleblowing, score 1 has been selected.

According to the MOD officials interviewed, the Ministry has conducted an additional evaluation of high risk personnel, in line with the recommendations of the 2012 BI Report. This is evidenced in the MOD's annual anti-corruption plan for 2012-2013, which is sent to the CCPB for review.

The BI Report the report endorsed the most significant risk areas as including personnel-related issues such as receiving of bribes and gifts, unauthorised employment, and favouritism. The senior official interviewed stated that personnel-related risks were controlled by two elements: all employees are subject to DISS activity and secondly, a rotation system with the possibility to build a career within the system, including the possibility of serving outside the country, which is considered a privilege. The personnel policy is carried out in accordance with the Ruling of the Minister 185, where Section C is devoted to development of personnel, including addressing training needs.

In addition, Source 7 stated that as of 2012, personnel participate in a one-day training course on anti-corruption issues annually. The course is led by a certified MOD trainer. The source explained that previously the anti-corruption training was carrying out by CCPB personnel and happened on request and only occasionally. There are no documents or other evidence to confirm the effectiveness of the training, nor is the scope of the personnel trained clear. There is no official information provided on the ministry’s home page about such training being delivered.

There is a Code of Ethics for the ministry, which is published on the ministry's home page and which applies to personnel in sensitive positions as well, but there is no mechanism for implementation of the code, such as an Ethics Board or a similar body.

Score 2 has been selected to reflect lack of clarity over which positions constitute sensitive ones, what mechanisms of selection and oversight are applied, and how comprehensive the training received is.

The National Defence Document (Article 23) establishes that in time of peace the number of civil servants, military and other personnel should not exceed 17000 and the number of professional forces 5500.

The actual number of soldiers and employees is verified through the MOD submitting employment information to the State Revenue Service, as mandated by the Cabinet Regulation no. 827, and through regular publications of numbers of employed personnel alongside their pay rates within the MOD's publicly available pay database. The Auditor General makes regular assessments of the remuneration system and actual payments in the defence sector and reports findings publicly. All information is publicly available on the Auditor General website.

The experts and the officials interviewed agree that the risk of having unaccounted personnel in the Latvian defence system is very low. The experts mentioned that the payment system through the State Vault of the Ministry of Finance is an element of personnel accountability - through the publication of actual salary lists for all military and civil public officials. The audit official confirmed that unaccounted personnel is a very rare form of embezzlement in Latvia and to their knowledge, there have not been such cases in defence institutions. Thus is it very unlikely that the stated personnel numbers are not valid.

Basic pay and allowances are defined in laws and regulations. (8, 9) Salary lists for all military and civil public officials are published on a monthly basis on the home page of the ministry (2, 8). This is established by the Law on Public Service Article 92, Paragraph 2, to which amendments were introduced in June 2010. The database contains information on allowances, but not for allowances paid to soldiers participating in international missions.

The Auditor General makes regular assessments of the remuneration system and actual payments in the defence sector and reports findings publicly. All related information is publicly available on the home page of the Auditor General (3).

According to officials interviewed, there is a routine and timely payment system in the ministry that functions well and is legally well established. A legal expert (Source 6) states that there have been no problems related to pay in the government in more than a decade. Even in times of economic downturn in 2008-2009, all salaries were paid on time, according to various sources at the ministry. The Auditor General carries out regular assessments of the remuneration system and actual payments in the defence sector. Delays of payments has not been noted as an issue up until now.

An additional element of control and transparency are the actual salary lists for all military and civil public officials, which are published on a monthly basis. Basic pay and allowances are defined in laws and regulations and are not subject to discretionary adjustments. (7, 8)

The rules of appointments for officers are described in Article 23 of the Military Service Law. Paragraph 4 of this article stipulates that the Certification Board, established at the Ministry, is responsible for evaluation prior to promotion. The Commander of the National Armed Forces is appointed under Article 14, paragraph 1 of the Law on National Armed Forces. The commander is appointed by the Parliament on recommendation from the President of Latvia for a 4-year term.

There is no public evidence of breaching these rules, but it is equally difficult to find independent evidence to verify adherence to the rules. According to MOD officials at various levels, the procedures are followed in the defence sector. Source 10 and Source 8 state that systems provide for clear growth and rules, although there are no documents or independent sources available to verify the practice. There is an internal HR policy document (Ruling of the Minister 185), which describes career development steps within the defence system and sets the standards in the area. The Auditor General looks at some of these issues in their regular annual reviews of the defence system.

There are clear and strict rules for appointment, known requirements and regular Certification Board Reviews. All is clearly described and there is no evidence of breaching these rules. The extent of oversight over each promotion, however, is unclear.

According to MOD officials at various levels, personnel promotions are effected through formal appraisal processes and promotions boards for all personnel, though there is no evidence of independent scrutiny being paid to the promotion of senior personnel.

The rules of appointments and career progress for military personnel are described in the Military Service Law. Paragraph 4 of this document stipulates that the Certification Board established at the Ministry is responsible for evaluation prior to promotion. The regulation which determines the work of the board or its composition is not a publicly available document. Source 10 and source 8 point out that system is based on merit, although there are no documents or independent sources available to verify the practice. Section 33 describes progress through the ranks with general requirements soldiers need to fulfil to progress, but more detailed regulations are not available.

As explained by Source 7 and Source 2, military personnel are on occasion assigned to civil service duties in order to ensure best use of their skills, because the Latvian defence system is too small to allow narrow specialisation throughout the career.

There is no public evidence of breaches in the procedure. The Auditor General looks at these issues regularly in their annual reviews of the defence system and has not identified problems with the appointment merit system.

According to the information provided by the Ministry of Defence on their web page, and as confirmed by MOD official interviewed (Source 2), the Latvian National Armed Forces have had a professional army since 2007.

The Law on the National Armed forces stipulates in Article 5, paragraph 2 that the National army in peace time consists of: professional troops, voluntary service (Zemessardze, or National Guard), civil personnel and reserve soldiers. The voluntary service is not conscription-based. It is regulated by the Law on the National Guard (likums “Par Latvijas Republikas Zemessardzi”) defining the terms of reference and obligations on the side of the volunteer and the state. According to both the MOD official and expert interviewed (Sources 2 and 6) there are no bribery cases known in regards to the voluntary service.

According to the information provided by the Ministry of Defence on their web page, the Latvian National Armed Forces have had a professional army since 2007. There is no voluntary conscription and the armed forces are based on voluntary military service.

The Law on the National Armed Forces (Article 5, paragraph 2) stipulates that the national army in peace time consists of: professional troops, voluntary service members (Zemessardze, or the National Guard), civil personnel and reserve soldiers. It is regulated by the Law on the National Guard (likums “Par Latvijas Republikas Zemessardzi”) defining the terms of references and obligations on the side of the volunteer and the state. According to both interviewees, no bribery cases regarding the voluntary service are known.

The Auditor General audits voluntary service in the same way as the national forces and issues annual reviews of the effectiveness of the system. The Auditor has not identified problems with bribery in the voluntary service. Procedures for addressing corruption in relation to voluntary service are regulated by the Criminal Code of Latvia, Law on Conflict of interests and others. The general rules in place and its application have been acknowledged as well functioning by the international organisations such as GRECO and EU. According to the experts there is no reason to believe that these rules are not applied as regards to dealing with the voluntary service.

There is no evidence of ghost soldiers in the Latvian armed forces and the risk of it occurring is very low due to the strength and routine nature of the payment systems, as well as the public availability of information on personnel numbers and pay rates.

The National Defence Document (Article 23) establishes that in a time of peace the number of civil servants, military and other personnel should not exceed 17 000 and the number of professional forces 5500. In 2012 the online media of the Ministry of Defence, Sargs.lv, reported that there were 4500 soldiers serving. The actual number of soldiers and employees is verified through the MOD submitting employment information to the State Revenue Service, as mandated by the Cabinet Regulation no. 827, and through regular publications of numbers of employed personnel alongside their pay rates within the MOD's publicly available pay database.

The Auditor General makes regular assessments of the remuneration system and actual payments in the defence sector and reports findings publicly. All information is publicly available on the home page of the Auditor General. No findings as to ghost soldiers have been mentioned in the last 4 years. According to the expert interviewed, problems with ghost soldiers have not been present in Latvia. The expert confirmed that unaccounted personnel is a very rare form of embezzlement in Latvia and has not applied to defence to the source’s knowledge.

A MOD official interviewed stated that since Latvia moved to professional army in 2007, all the payroll recipients are accounted for. Both interviewees agree that the risk of having unaccounted personnel in the Latvian defence system is very low. Experts point out that an additional element of control and transparency are the actual salary lists for all military and civil public officials, which are published on a monthly basis. The home page posts names and actual salaries received in 7 entities managed by MOD, including the Ministry and the Armed Forces. This is done in accordance with the Amendments to the Public Service Law of 2010.

Experts interviewed stated chains of command as strictly separated from chains of payment throughout the ministry and armed forces, with pay being calculated and distributed through a separate unit within the MOD. This was also confirmed by the BI Peer Review Report. There is, however, little public evidence confirming how this occurs/is overseen in practice. According to MOD officials payment can only be influenced through a due legal procedure, such as a disciplinary committee. MOD officials confirmed that this due process is used in the ministry, but provided no further details.

The Civil Service Law defines the basic duties of officials. The Ministry of Defence Code of Ethics, issued in 2005 and reviewed in 2010, lays out the ethical and professional values of all civilian and military employees. It is published on the main home page of the MOD and is freely accessible.

There is no specific code of conduct for military personnel, although the provisions of the MOD Code of Ethics do apply to military officers. Some very general regulations are contained within the Cabinet Regulation No. 947, 'Rules of Procedure for the Soldier and National Guardsmen Military Discipline', which includes criminal offences (which in turn includes corruption-related practices) among those which would breach the standards of military conduct.

This was raised as a recommendation in the NATO Peer Review and the Latvian government is currently working on adopting a Code. There are general provisions and training on values and general conduct within the National Armed Forces, presented in paper format during the research. For example, a booklet on values and how they are enforced is published in pocket format and distributed to everyone. The NATO peer review concluded that: &quoute;...the Code is well designed, concise and quite concrete. The establishment of The Commission of Ethics of MoD is a very good example of good practice.&quoute; According the the MOD official (Source 7), the Ethics committee has not been meeting however. There is no publicly available information as to who members of the committee are. No violations of the MOD's code of conduct have been recorded since its inception in 2005.

Conflicts of interest are regulated by the Law on Conflict of Interest of Public Officials. This law regulates receipt of gifts, ownership and activity in other businesses, post separation employment and benefits and general conflict of interest. The Law is quite specific; for example, it lists the types of gifts that officials are permitted to accept. (Section 13) The Law also obliges public officials to publish annual income and asset declaration, which has been publicly available since 1995. The primary responsible institution for the implementation of the law in CCPB, which can issue administrative fines based on the above mentioned law. Media reported that in 2010 5% of administrative fines (4 individuals) were issued to the officials of the National Armed Forces, compared to 60% of officials in municipalities.

The system has been commended for the transparency of asset declarations in various international reports both by government and non-government organisations. GRECO noted that the conflict of interest regime for public officials, while comprehensive, is complex and rigid. According to Source 7 the level of compliance with the submission of income and asset declarations is 100% on time, which can be verified by accessing the online public database.

There have been no registered breaches of the internal MOD Code of Ethics since its inception in 2005. There are penalties for violations of the law however, such the law regarding conflict of interest for corruption risk-related activities such as combining several jobs.Similarly, the Rules of Procedure for the Soldier and National Guardsmen Military Discipline' provide for administrative, disciplinary and criminal consequences for breaches of the standards of military conduct.

The Law on Prevention of Conflict of Interest in Activities of Public Officials provides for publishing of information with regard even to minor offences of the regulation. According to the Law, CCPB is responsible for the oversight of the conflict of interest of public officials in the defence sector. CCPB appears to carry out these duties without disruption, as both confirmed by the anti-corruption expert interviewed and a representative of CCPB. CCPB publishes all the administrative punishments it metes out to public officials on its home page.

The Military Police and CCPB conduct criminal investigations where necessary, handing cases to the Prosecutor's Office for prosecution. In 2010 the head of the Navy was removed from office while preliminary investigations into a case within the Latvian Navy were being carried out. The military police investigated mismanagement of public funds by the members of the National Armed Forces. These cases were published in the media. (5, 6)

Three out of 16 tasks in the ministry's “Corruption Prevention Action Plan 2012-2013” are devoted to training. Two (Task 11 and Task 15) are related to the Code of Ethics: to carry out ethics consultations and organise discussions around ethics dilemmas. According to Source 7, these have not been completed to date. Another task (Task 14) is concerned with attending training on conflict of interest regulations in the School of Public Administration, and is dependent on the course being provided by the school.

As confirmed by the MOD sources, there are ongoing conversations about the further training needs. A training on conflict of interest for senior military command was planned in 2014. The sources also stated that the Defence Academy intends to add anti-corruption themes to its law studies curriculum, but that there are no concrete plans in place yet.

There is no official information provided on the ministry’s home page about anti-corruption training being delivered. A MOD official interviewed (Source 7) stated that as of 2012, personnel attend a one-day training session annually on various anti-corruption issues run by a certified MOD trainer. The source explained that previously the anti-corruption training was carrying out by CCPB personnel and happened occasionally and on request. There are no documents or other evidence to confirm the effectiveness of the training, nor is the scope of the personnel trained clear. A CCPB source interviewed could not comment on the quality of training.

In October 2013 anti-corruption training was conducted to middle career class officers at the National Defence Academy, in March 2014 same training was given again, targeting officers in middle management positions - OF3 to OF5, who are posted to human resources, procurement or leadership positions. Both classes total 55 officers (taking into account the size of National Armed Forces, this appears to be an adequate number).

Score 2 was selected as the training programme is not yet well-established and it is not possible to establish whether it is regular.

Cases of corruption have been published in the media, but in the course of this research it was found there was difficulty in obtaining follow-up information as to how cases have ended. One anti-corruption expert interviewed explained that these cases often get lost in the law enforcement system and, although there is independent investigative journalism present in Latvia, there is not enough independent media power to follow up on each story. A legal expert has indicated that MOD has largely provided comments on such cases on demand, rather than proactively. There is no information on the MOD website on how cases are concluded. As mentioned in Question 65, experts explained that even in cases where procurement procedure is reversed by the oversight bodies, procurement officials who have carried out decision mostly remain unpunished where violations that do not amount to a criminal offence have taken place.

A representative of CCPB and an anti-corruption expert have both indicated that facilitation payments in Latvia are forbidden through the Criminal Code that considers a bribe to be any amount given to an official in exchange for influence or action. According to GRECO, the frequently amended provisions on bribery in Latvian criminal law provide a fairly sound basis for the criminalisation of corruption offences. This, combined with strong rules for receipt of gifts by public officials, de facto prohibits facilitation payments.

Policy on gifts is described in Article 13 of the Law on Prevention of the Conflict of Interest in Activities of Public Officials. A public official fulfilling the duties of office is permitted to accept only diplomatic and official gifts, e.g. gifts by official representatives of foreign states or by the authority in which the relevant official serves. Public officials are prohibited from privately accepting gifts if the public official has carried out certain official functions in relation to the donor in a period of two years prior to receipt of the gift. Public officials are also prohibited to carry out such functions regarding persons from whom they have accepted gifts in a past period of two years, according to the law.The CCPB is responsible for the overall oversight and implementation of the gift policy and can issue administrative fine and start a criminal investigation. All the administrative decisions of CCPB are published online, as is information about completed criminal investigations.

The TI study published in 2012 concluded that Latvia's gift restriction policy was adequate.

The NATO Building Integrity (BI) report on Latvia states that there is no military doctrine which directly addresses corruption in the Armed forces (paragraph 41). The reports finds that ethical issues are included in the general requirements for officers and soldiers.

According to official information, the Latvian military currently participate in operational deployments as part of NATO (Afghanistan) and the EU (the Central African Republic). A MOD source and senior politician interviewed (Source 7 and Source 4) stated that currently there is no need for specific anti-corruption doctrine for deployment of the Latvian troops, as the troops have been part of bigger deployment operation and therefore their interacting directly with the local environment is non-existent and corruption risks are very minimal.

There is no strong public evidence suggesting that the armed forces are aware of corruption as a strategic risk for operations.

According to a MOD official (Source 7), general anti-corruption training is delivered for commanders as a part of their regular training. The NATO Building Integrity report states that ethical issues are included in the general requirements for officers and soldiers (Paragraph 41). Two sources involved with the military (Source 4 and Source 7) stated that there were no corruption risks facing the Latvian commanders in the current deployment situations as they are not taking any decisions and not interacting with the local environment. Specific training is therefore not considered necessary.

MOD officials (Source 7 and Source 8) indicated that National Armed Forces could be planning to include topics on corruption issues to the pre-deployment briefing, as well applying corruption risk assessments prior to new deployments, but there is no evidence of practical steps taken.

According to ministry sources and political officials interviewed, the government has not considered it cost effective to employ inspectors for military deployments since no purchases were made there and troops did not come into direct contact with the local environment. A Military Police officer tends to be deployed to monitor conduct, but there is no evidence that the officers are tasked with monitoring corruption issues.

According to sources in the ministry and political officials interviewed, it has been not been considered cost effective to conduct training on procurement issues for troops deployed or in peacekeeping missions because Latvian troops have not come into direct contact with the local environment or performed procurement activity. Therefore no specific guidelines are provided.

MOD officials (Sources 7 and 8) indicated that National Armed Forces could be planning to include topics on corruption issues to the pre-deployment briefing, as well applying corruption risk assessments prior to new deployments, but there is no evidence of practical steps taken.

According to an anti-corruption expert interviewed, Latvia does not have any tradition of employing PMCs. MOD sources (Source 4 and Source 2) have stated all operational duties have been carried out by the civil or military personnel of MOD and NAF since its establishment in 1991. The MOD's website indicating employers salaries and procurement agreements signed also show that no evidence any PMCs are engaged. However, there also does not appear to be any statutory restriction on the use of PMCs.

According to the experts interviewed (Source 6a, Source 14) Latvia has a procurement system which fully corresponds to the EU standards, including in defence and security procurement. The 2006 Public Procurement Law applies to procurement in the field of defence and security, except for classified procurement procedures following a Cabinet decision not to apply the procurement regulations. The NATO BI Peer Review report confirms that these are the only exceptions.

It is unclear to what extent exempt procurement procedures are independently supervised. The Law on Budget & Financial Management stipulates that secret expenditure has to be reviewed by a special parliamentary committee. However, it is unclear whether this refers to intelligence expenditure, which is overseen by the National Security Committee, or to classified procurement expenditure as well. The Auditor General, some of whose staff possess security clearances, scrutinises procurement generally. It is thus likely that some form of independent scrutiny does apply to exempt items, but we have not been able to confirm this through publicly available sources.

According to analyses of MOD home page and an MOD official interviewed (Source 2), parts of the procurement cycle are disclosed to the public through long term planning documents and public announcements of tenders. The MOD website specifies that the unit responsible for procurement procedures is the State Centre for Defence Military Sites and Procurement. Procurement is based on long-term defence strategies and the flow from strategy to individual procurement procedures is scrutinised by the parliamentary Defence, Internal Affairs and Corruption Prevention Committee. A requirements document prepared by a committee of MOD stakeholders is a basis for specific decisions. (see Q62 and Q63 for an analysis of these processes and supporting sources) Asset disposal is governed through separate laws. (see Q22 and Q23)

In 2010 the Auditor General criticized the Latvian MOD in its special report into the purchase of five minesweeper vessels for not doing enough to connect the strategy to the implementation of procurement plans. According to one MOD source (Source 10), there is work being done inside MOD to improve this connection. Another MOD source (Source 2) has indicated there was a mid term plan procurement shared with representatives of The Latvian Federation of Security Industry during an industry day, although this document is not available on the Ministry’s home page.

A political figure interviewed (Source 4) indicated there is an increased level of publicly shared information in the light of the increase in defence spending to 2020 accepted by the Parliament in July 2014. Expenditure will be increasing three-fold from 225 million to 638 million euros in 2020, as projected by the MOD in communication materials.

According to official communication and an MOD official (Source 7), in 2009 the MOD established the National Defence Military Objects and Procurement Center (VAMOIC), a specialised entity designed to deal with procurement issues. This separated this function from the planning functions in the Ministry. During the same reform the Chief Inspection was also moved up in the hierarchy of the ministry in order to give it more power. According to another MOD official (Source 10), the Ministry has been recently working to further increase internal control mechanisms, especially with regards to the decentralised aspect of the procurement process. Source 10 also indicated this is largely related to the work of NAF units in the region.

At the government level, specific control responsibility for this area rests with the Procurement Supervision Bureau (PSB) under the MOF, which is tasked under Article 80 of Public Procurement Law to monitor the legal conformity of procurement procedures and examine complaints regarding violations of the procurement procedure. The Bureau's annual report indicates it carries out inquiries based on complaints from procurement parties and on their own initiative. In 2013 the Bureau states it acted upon 552 complaints and carried out audits of 79 procurement procedures. Independent experts interviewed considered the PSB to be a trusted public institution.

The Auditor General audits all the government institutions, including procurement procedures and outcomes. According to the National Integrity Study the Auditor General was the best performing public institution in Latvia in 2011, scoring highly on independence, resources and professionalism. Reports of all the above mentioned oversight institutions are made public and are available online.

There have been cases in the past where MOD has carried out procurement with clear breaches of conflict of interest mechanisms that were not stopped by formal control mechanisms. For example, the 2009 case regarding procurement of five minesweeper vessels for the Latvian navy came to light following the change of government. The Auditor General issued a special report about this case criticising many elements of the deal.

Procurement decisions also have to be justified to the parliamentary Defence, Internal Affairs and Corruption Prevention Committee, creating an additional layer of oversight.

Transparency and proactive publication of purchases is mandated by Section IV of the Procurement Law, requesting mandatory announcement prior to procurement, results and the actual agreement. Article 25 of the Procurement Law stipulates that all information regarding procurement shall be sent to the Procurement Supervision Bureau, which shall publish this information within 3 days of receipt.

According to independent experts (Source 6a and Source 14) interviewed, there is a good level of transparency regarding existing procurement procedures. As described by the experts, the public procurement sections of ministry websites usually contains information about signed public procurement contracts indicating what is being procured, the name of the provider, contract amount, contract execution deadline, etc. A Cabinet Order (No. 21) describes what is required to be published.

Experts consider the general compliance level with transparency requirement as high. MOD publishes extensive lists of procurement announcements and maintains a home page with existing agreements. The MOD does not systematically publish forward purchase plans, although some acquisitions are announced. There is an annual procurement plan and a short term plan (2014-2016), which is not publicly available, but according to the sources in MOD (Source 2) and industry (Source 16) was shared with the industry during an Industry day in May 2010, where around 70 items planned for purchase were listed.As explained by MOD source there are no restrictions in participation, and the defence expert expressed no concerns over accessibility to the event. This information is not publicly available, however. One example of a forward purchase mentioned in the media regards the Tracked Armored Vehicles procurement process, which lasted about 2 years before purchase was made. The media has noted the long term planning is occurring within the National Armed Forces. (12, 13)

There are no specific requirements for companies beyond what the Procurement Law requires. According to the anti-corruption experts interviewed, the requirements of the law are very weak and can be applied only after a final court judgement in, for example, bribery cases (as stated in Article 39(1) Paragraph 1). According to the Procurement Law ,Article 39(1) Paragraph 1, the commissioning authority has to exclude from bidding a tenderer found guilty of (among other issues) of corruption.

According to the industry expert, there is some movement from the newly established Defence Industry Federation side to start working on industry standards, but it is at a very early stage. A MOD source (Source 7) explained that for certain procurements military contractors are required to have a Industrial Security Certificate and/or License for Dealing with Strategic Goods, based on requirements by Defence and Security Procurement Law (as stated in Article 15). This involves the companies undergoing special checks by the security services that include their integrity record. The industry source also considered the Industrial Certificate to serve as a basic industry standard.

A MOD official (Source 2) considers the overall government’s anti-corruption strategy as a reference to the need for companies to avoid corruption and the work of the CCPB as a deterrent against corrupt behavior.
The CCPB has published the OECD Guidelines for Sustainability in the Private Sector that refer to anti-corruption measures. According to a CCPB source, the MOD is not using these guidelines in their communication or training at the moment however.

The 2012 State Defence Concept states that 'Procurement and logistics projects are synchronised with the development priorities of combat capabilities' (para 26). The MOD sources interviewed (Source 2, Source 10 and Source 3) stated that the procurement planning system has become more systematic in recent years
and that procurement planning is based on the National Security planning and policy documents. The National Defence plan serves as a basis for procurement planning system. The National Armed Forces 12-Year Development Plan is created on the basis of of the National Defence Plan, followed by Armed Forces Medium Term Development Plan (4 years) and a yearly action plan. The most recent 12-year plan was adopted in June 2012.

The Defence Strategy is openly published and is passed by the Latvian parliament.

In 2010, the Auditor General issued a special report on purchases of 5 anti-mine vessels, criticising, among other things, lack of consistency between procurement and planning documents, stating for example (page 8, paragraph 30) that the 12-year development plan has not been updated since adoption. There have been no similar criticisms in the Auditor’s report in the recent years, but this shows that the flow from defence strategies to particular acquisitions is verified by independent audits.

According to political figures interviewed (Source 1, Source 17 and Source 4,) the Parliament is increasing synchronisation between the procurement and planning documents, which is considered important in light of the increase in defence spending accepted by the Parliament in July 2014: spending is projected to increase three-fold from 225 million to 638 million euros in 2020, as indicated in MOD communication materials. In addition, the parliamentary Defence, Internal Affairs and Corruption Prevention Committee (DIACP) also reviews the compatibility of the budgets with the he armed forces' Development Plan and Armament Plan.

The MOD sources interviewed (Source 2, Source 19 and Source 3) stated that the procurement planning system has become more systemic in the recent years. The National Defence plan serves as a basis for procurement planning system. The NAF 12 Year Development Plan is created on the basis of of the National Defence Plan, followed by Armed Forces Medium Term Development Plan (4 years) and a yearly action plan. The most recent 12 year plan was adopted in June 2012. Annual and short-term procurement plans (the recent one encompassing 2014-16) are prepared and either published or shared with industry representatives. (Source 16) All this indicates prior planning and setting of requirements. However, in 2010 Auditor General issued a report on the legitimacy of purchasing five Anti-mining vessels, criticising the planning system. The report mentioned that the 12 year plan had not been updated since its adoption in 2000 and also identified other discrepancies of procurement planning (page 8, paragraph 30). The most recent Plan, however, was adopted in 2012.

The Law on Public Procurement sets out requirements of clarity in providing quantity and quality specifications, which are to be contained in all tender announcements (there is evidence that this is carried out). This is preceded by a needs assessment done by the armed forces and the preparation of a Requirements Document, which specifies required capabilities and the rationale for them. The Requirements Document is reviewed by the advisory board to the minister consisting of the Chief of Defence, Chief of Staff, State Secretary, Undersecretaries of State and Political Director. Based on this review, the Minister of Defence makes the decision to start the new project or not. Announcement of the procurement procedure done by the State Centre for Defence Military Sites and Procurement.

The Public Procurement Law, Section 2, states that free competition and fair treatment of suppliers is one of the purposes of the law. The Law also contains other provision meant to prevent the lessening of competition, for instance restrictions on participation of suppliers who, due to prior association with a project, would possess an unfair advantage.

However, the Law also foresees a number of procurement procedures apart from open tenders. According to a 2014 study carried out by TI UK, the Latvian government had used single-sourcing for 37% of contracts (in value).

The study shows (p34) that the Latvian Armed Forces experienced a decline in non-competitive procurement from 30% of total contracts signed in 2010 (or 44% of the €3.7M total value) to approximately 28% of contracts (31% of €11.3M total value) in 2011. The main agency responsible for this decline was the Army, whose non-competitive procurement percentage decreased from 46% of a total spend of €3.1M in 2010 to just over 25% in 2011 out of a total spend of just over €7.8M. On the other hand, the Air Force, which over the two year period accounted for a very minor portion of total Armed Forces spend, witnessed a near 30% increase in non-competitive procurement.

The government does not provide clear justification for each single source deal, however the study concluded that qualitative data suggested two key reasons: &quoute;First, the supply and security of information for defence procurements is a challenge and therefore new contractors may not provide the same level of assurance to the MoD that it can meet the requirements according to tender requirements and proposed prices during crises. Second, detailed technical specifications and requirement may limit the number of available contractors to just one. Finally, the equipment purchased by Latvia must be interoperable with other forces, and this may in turn limit the number of contractors.&quoute; (pp6-7)

Latvia uses tender boards in competitive tenders.

Law on Prevention of the Conflict of Interest in Activities of Public Officials prescribes specific regulations regarding conflict of interest. Members of tender boards are considered subject to this law under Article 4, Paragraph 1(24). The Public Procurement Law (Article 23) prohibits acting in a situation conflict of interest.

According to the law the CCPB is the central institution for the oversight of the Conflict of Interest Law and is mandated to issue administrative fines for breaches of the law.

According to the experts interviewed (Source 6a, Source 14), obsolete provisions that stipulated administrative liability for violations in this area and the lack of a designated institution with a mandate to apply these administrative sanctions had created a long-term problem regarding the accountability of procurement officials.

Decisions of tender boards are subject to independent audit by the Procurement Supervision Bureau. According to the Public Procurement law Article 80, the PSB is an independent institution under the supervision of Ministry of Finance. The annual report of the bureau indicates it carries out inquiries based on complaints from procurement parties and on their own initiative. In 2013 the Bureau acted upon 552 complaints and carried out audits of 79 procurement procedures.

According to the experts interviewed (Source 6a, Source 14) the PSB is a trusted public institution. The Auditor General audits all the government institutions, including procurement procedures and outcomes, and according to the National Integrity Study the Auditor General was the best performing public institution in Latvia in 2011.

Decisions and reports of all above mentioned oversight institutions are public and available online.

The Procurement Law establishes competition as a principle of procurement, and the Competition Law prohibits '[a]greements between market participants, which agreements have as their purpose
or consequence the hindrance, restriction or distortion of competition', including price-fixing, division of markets, etc. The Competition Law establishes the Competition Council (Article 4, Para 1) as an independent institution carrying out investigations into breaches of the Competition Law.

Article 19(1), Paragraph 3 of the Procurement Law bans companies from participating in public tenders where a final decision has been taken that they have broken the rules of fair competition. According to the anti-corruption expert there are no known cases of this article being enforced. MOD sources (Source 2 and Source 7) state there is no evidence of such practices in the defence sector, and no evidence to the contrary has been found.

Cabinet Decision no. 1418 (December 2009) establishes the State Defence Military Objects and Procurement Centre as the unit within the MOD responsible for centralised procurement for the Ministry and the armed forces. (4)

According to a MOD source (Source 10) procurement staff are trained on a regular basis. The source indicated a key challenge is in applying the military rotation discipline to procurement experts, since the Latvian system is small and provides little room for manoeuvre. As suggested by the NATO Building Integrity review, there are preliminary plans to combine these positions with civil posts to ensure the effectiveness of the application of the complex procedures. The report to the parliament on Recommendations recognises that there was a rotation of the top level procurement management personnel in the Ministry in 2013 and acknowledges the shortage of experts.

Another MOD source (Source 7) stated that procurement is partly decentralized and the Ministry has to monitor the quality of experts carrying out smaller decentralized procurements more closely. An anti-corruption expert also commented that MOD faces a challenge in balancing the needs in expertise and need to rotate the staff.

Experts explained that even in cases where procurement procedure is reversed by the oversight bodies, procurement officials who have carried out decision mostly remain unpunished where violations that do not amount to a criminal offence have taken place.

Any individual who is or has been interested in acquiring the right to enter into a procurement contract or who is qualified for being selected is entitled to submit a complaint to the Procurement Supervision Bureau under Public Procurement Law, Article 83. The PSB is mandated as an independent institution under the supervision of Ministry of Finance under Article 80 of the Law.

As reported in the PSB Annual Report (p1), in 2013 the PSB accepted 744 such applications for review and adopted decisions regarding 552 of these applications. The report does not specify if the interference in the procurement process was minor, or how many procurement procedures were stopped as a result of these decisions.

Regarding the application of negotiation procedure as a way of concluding the contract page 3 of the report indicates that 52 out of 220 of the procedures were disallowed; i.e., 25% of the requests from government and municipality entities were turned down by the bureau.

According to an anti-corruption expert and an industry expert interviewed, the complaint mechanism is widely used by the businesses and no discrimination has been observed so far. Both experts view the bureau as an independent institution vis-a-vis businesses. Each also indicated that for genuine (non-malicious) complaints, companies are well protected against discrimination in future procurements (the Public Procurement Law also stipulates non-discrimination of bidders). All complaints as well as the decisions of the bureau are published online, and they can be appealed through the court system.

The Latvian Criminal Code criminalises active and passive bribery and abuse of influence (Chapter XXIV), prescribing sanctions of imprisonment of up to five years (or up to 11 years in aggravated cases where involvement of high-level officials or groups is ascertained), fines, community service and prohibition from some forms of employment. This also applies to individuals acting on behalf of legal persons. Coercive measures such as fines can be applied to legal persons.

According to Article 19(1) of the Public Procurement Law, sanctions can only be applied to individuals and entities which have received a final verdict from a criminal court case regarding corruption and tax evasion. An individual or company is denied participation in a tender if they have tax debts in Latvia of more than 150 euro, if they have breached competition law and given false information about the state of their business, as well as if they have have final court judgement of illegal employment from countries outside the EU. No debarment policies are in place for corruption.

The TI National Integrity study has suggested creating white lists of positive examples and the NATO Peer Review report suggest debarring: &quoute;Debarring corrupt companies is a strong deterrent against corruption. We strongly advise that companies that have committed corruption can be legally debarred from future tendering. Acknowledging the fact that this would require a change in the law it would, however, benefit anti-corruption measures in all state agencies.&quoute; According to the document provided by MOD to the parliament about implementation of Building Integrity Program, this recommendation is not being addressed at the moment, as it concerns more stakeholders in the government and the private sector.

Inactivity on debarment issue is confirmed by MOD sources interviewed. According to one MOD source (Source 10) the Ministry would apply the Procurement Law (and thus sanction corrupt entities) if such cases happened, but there have been no cases reported to date. An anti-corruption expert (Source 6) also stated that individuals who have been charged with corruption are less likely to participate in public tenders.

Score 3 has been selected to reflect the existence of legal sanctions and lack of administrative sanctions such as debarment.

While there is no official policy on offsets and thus it cannot be excluded that they could be used on a case-by-case basis, there is no evidence of offset contracts having been implemented by the Latvian MOD. As explained by MOD source (Source 2), offsets have not been used in Latvian defence procurement to date, largely due to the limited number of large projects, which were affected by economic crises. The analysis of the agreements signed by MOD and NAF, as well as calls for procurement, confirm that there are no offset projects carried out at the moment. An industry expert (Source 16) also confirmed that there are no offset projects at the moment.

While there is no official policy on offsets and thus it cannot be excluded that they could be used on a case-by-case basis, there is no evidence of offset contracts having been implemented by the Latvian MOD. As explained by MOD source (Source 2), offsets have not been used in Latvian defence procurement to date, largely due to the limited number of large projects, which were affected by economic crises. The analysis of the agreements signed by MOD and NAF, as well as calls for procurement, confirm that there are no offset projects carried out at the moment. An industry expert (Source 16) also confirmed that there are no offset projects at the moment.

While there is no official policy on offsets and thus it cannot be excluded that they could be used on a case-by-case basis, there is no evidence of offset contracts having been implemented by the Latvian MOD. As explained by MOD source (Source 2), offsets have not been used in Latvian defence procurement to date, largely due to the limited number of large projects, which were affected by economic crises. The analysis of the agreements signed by MOD and NAF, as well as calls for procurement, confirm that there are no offset projects carried out at the moment. An industry expert (Source 16) also confirmed that there are no offset projects at the moment.

According to the Public Procurement Law, all contractors have to adhere to the eligibility criteria set by the contracting government agency. One MOD source (Source 10) stated that eligibility criteria limit the participation of intermediaries in the procurement because they often cannot show previous experience or similar qualifications.

Another MOD source (Source 7) stated that agents and intermediaries are a limited choice in the Latvian defence procurement. The source added that Latvia uses the NATO procurement system in cases of limited contracting power or technical knowledge.

The Defence Ministry publishes sources such as the names of signatories to agreements and implementing parties on the web, which is indicative of a degree of control on their use.

The Public Procurement Law has several requirements as regards to publicising the agreements, including the specifications of the bid. An MOD source (Source 10) has indicated that the MOD informs the public about all major purchases and significant details of agreements prior to signature. There is evidence that the media has reported details on major agreements, including post-delivery obligations and the score has been selected accordingly.

The Latvian Public Procurement Law does not appear to contain any regulations directly applicable to or mentioning subcontractors. MOD sources (Source 2 and Source 7) have confirmed the government does not have any formal policy requiring anti-corruption programmes for contractors and/or subcontractors. One MOD source (Source 10) admitted that the government's policy towards control of subcontractors is weak in general. Another (Source 7) explained that for certain procurements military contractors are required to have a Industrial Security Certificate and/or License for Dealing with Strategic Goods. This involves the companies undergoing special checks by the security services that include their integrity record. An industry source states that they consider the Industrial Certificate to serve as a basic industry standard.

There is no evidence to suggest defence acquisitions are made under political influence from selling nations. One political figure (Source 4) who has been involved in dealing with foreign governments has stated there is no evidence that purchases are made under political pressure. MOD officials (Sources 2 and 7) also state there is evidence that purchases made under the bilateral agreements are consistently based on the National Strategic defence Plan and Procurement Need Analyses (see Q62 and Q63 for analysis of requirement-setting and the flow from strategic plans to particular procurement decisions). The sources explained that wide inquiries were made to the supplying governments before making the recent decision on buying armoured vehicles, for example. All sources state that they believed the national strategic and financial interests of Latvia were taken into account when taking this decision.

An academic expert (Source 5) interviewed confirmed that procurement is carried out professionally. More than 10 years ago Defence Minister Ģ.V.Kristovskis was accused of flying to the UK at a company’s (BAE Systems) expense and was criticised for this in media. There have been no such cases in media since.

RESPONSE TO PEER REVIEWER 1: There is no evidence of undue influence in this case.