Policies Towards Foreign Direct Investment

Poland welcomes foreign investment as a source of capital, growth, and jobs, and as a vehicle for technology transfer, research and development (R&D), and integration into global supply chains.  The government’s Strategy for Responsible Development identifies key goals for attracting investment, including improving the investment climate, a stable macroeconomic and regulatory environment, and high-quality corporate governance, including in state-controlled companies.  By the end of 2018, according to IMF and National Bank of Poland data, Poland attracted around USD 228.5 billion (cumulative) in foreign direct investment (FDI), principally from Western Europe and the United States.  In 2018, reinvested profits again dominated the net inflow of FDI to Poland.  The greatest reinvestment of profits occurred in services and manufacturing, reflecting the change of Poland’s economy to a more service-oriented and less capital-intensive structure.

Foreign companies generally enjoy unrestricted access to the Polish market.  However, Polish law limits foreign ownership of companies in selected strategic sectors, and limits acquisition of real estate, especially agricultural and forest land.  Additionally, the current government has expressed a desire to increase the percentage of domestic ownership in some industries such as banking and retail which have large holdings by foreign companies and has employed sectoral taxes and other measures to advance this aim.  In March 2018, Sunday trading ban legislation went into effect, which is gradually phasing out Sunday retail commerce in Poland, especially for large retailers.  In 2019, stores operated an average of one Sunday a month, and in 2020 a total ban will be in effect (with the exception of seven Sundays).  In 2019, the government introduced a draft bill requiring producers and importers of sugary and sweetened beverages to pay a fee.  Polish authorities have also publicly favored introducing a digital services tax.  Because no draft has been released, the details of such a tax are unknown, but it would presumably affect mainly foreign digital companies.

There is a variety of agencies involved in investment promotion:

• The Ministry of Development has two departments involved in investment promotion and facilitation: the Investment Development and the Trade and International Relations Departments.  The Deputy Minister supervising the Investment Development Department was appointed in 2019 to be ombudsman for foreign investors.   https://www.gov.pl/web/przedsiebiorczosc-technologia/ 
• The Ministry of Foreign Affairs (MFA) promotes Poland’s foreign relations including economic relations, and along with the Polish Chamber of Commerce (KIG), organizes missions of Polish firms abroad and hosts foreign trade missions to Poland.   https://www.msz.gov.pl/ ; https://kig.pl/ 
• The Polish Investment and Trade Agency (PAIH) is the main institution responsible for promotion and facilitation of foreign investment. The agency is responsible for promoting Polish exports, for inward foreign investment and for Polish investments abroad.  The agency operates as part of the Polish Development Fund, which integrates government development agencies.  PAIH coordinates all operational instruments, such as commercial diplomatic missions, commercial fairs and programs dedicated to specific markets and sectors.  The Agency has opened offices abroad including in the United States (San Francisco and Washington, D.C, Los Angeles, Chicago, Houston and New York).  PAIH’s services are available to all investors.  https://www.paih.gov.pl/en 

• The American Chamber of Commerce has established the American Investor Desk – an investor-dedicated know-how gateway providing comprehensive information on investing in Poland and investing in the USA https://amcham.pl/american-investor-desk 

Limits on Foreign Control and Right to Private Ownership and Establishment

Poland allows both foreign and domestic entities to establish and own business enterprises and engage in most forms of remunerative activity per the Entrepreneurs’ Law which went into effect on April 30, 2018.  Forms of business activity are described in the Commercial Companies Code.  Poland does place limits on foreign ownership and foreign equity for a limited number of sectors.  Polish law limits non-EU citizens to 49 percent ownership of a company’s capital shares in the air transport, radio and television broadcasting, and airport and seaport operations sectors.  Licenses and concessions for defense production and management of seaports are granted on the basis of national treatment for investors from OECD countries.

Pursuant to the Broadcasting Law, a television broadcasting company may only receive a license if the voting share of foreign owners does not exceed 49 percent and if the majority of the members of the management and supervisory boards are Polish citizens and hold permanent residence in Poland.  In 2017, a team comprised of officials from the Ministry of Culture and National Heritage, the National Broadcasting Council (KRRiT) and the Office of Competition and Consumer Protection (UOKiK) was created in order to review and tighten restrictions on large media, and limit foreign ownership of the media.  While no legislation has been introduced, there is concern that possible future proposals may limit foreign ownership of media sector as suggested by governing party politicians.

In the insurance sector, at least two management board members, including the chair, must speak Polish.  The Law on Freedom of Economic Activity (LFEA) requires companies to obtain government concessions, licenses, or permits to conduct business in certain sectors, such as broadcasting, aviation, energy, weapons/military equipment, mining, and private security services.  The LFEA also requires a permit from the Ministry of Development for certain major capital transactions (i.e., to establish a company when a wholly or partially Polish-owned enterprise has contributed in-kind to a company with foreign ownership by incorporating liabilities in equity, contributing assets, receivables, etc.).  A detailed description of business activities that require concessions and licenses can be found here:  https://www.paih.gov.pl/publications/how_to_do_business_in_Poland 

Polish law restricts foreign investment in certain land and real estate.  Land usage types such as technology and industrial parks, business and logistic centers, transport, housing plots, farmland in special economic zones, household gardens and plots up to two hectares are exempt from agricultural land purchase restrictions.  Since May 2016, foreign citizens from European Economic Area member states, Iceland, Liechtenstein, and Norway, as well as Switzerland, do not need permission to purchase any type of real estate including agricultural land.  Investors from outside of the EEA or Switzerland need to obtain a permit from the Ministry of Internal Affairs and Administration (with the consent of the Defense and Agriculture Ministries), pursuant to the Act on Acquisition of Real Estate by Foreigners, prior to the acquisition of real estate or shares which give control of a company holding or leasing real estate.  The permit is valid for two years from the day of issuance, and the ministry can issue a preliminary document valid for one year.  Permits may be refused for reasons of social policy or public security.  The exceptions to this rule include purchases of an apartment or garage, up to 0.4 hectares of undeveloped urban land, and “other cases provided for by law” (generally: proving a particularly close connection with Poland).  Laws to restrict farmland and forest purchases (with subsequent amendments) came into force April 30, 2016 and are addressed in more detail in Section 6: Real Property.

Since September 2015, the Act on the Control of Certain Investments has provided for the national security-related screening of acquisitions in high-risk sectors including: energy generation and distribution; petroleum production, processing and distribution; telecommunications; media and mining; and manufacturing and trade of explosives, weapons and ammunition.  Poland maintains a list of strategic companies which can be amended at any time, but is updated at least once a year, usually in late December.  The national security review mechanism does not appear to constitute a de facto barrier for investment and does not unduly target U.S. investment.  According to the Act, prior to the acquisition of shares of strategic companies (including the acquisition of proprietary interests in entities and/or their enterprises) the purchaser (foreign or local) must notify the controlling government body and receive approval.  The obligation to inform the controlling government body applies to transactions involving the acquisition of a “material stake” in companies subject to special protection.  The Act stipulates that failure to notify carries a fine of up to PLN 100,000,000 (approx. USD 25,000,000) or a penalty of imprisonment between six months and five years (or both penalties together) for a person acting on behalf of a legal person or organizational unit that acquires a material stake without prior notification.

The governing Law and Justice party formed a new treasury ministry to consolidate the government’s control over state-owned enterprises.  The government dissolved Poland’s energy ministry, transferring that agency’s mandate to the new State Assets Ministry.  The Deputy Prime Minister and Minister of State Assets announced that he would seek to consolidate state-owned companies with similar profiles, including merging Poland’s largest state-owned firm Orlen with state-owned Energa.  At the same time, the government is working on changing the rules of governing state-owned companies to have better control over the firms’ activities.  A new government plenipotentiary for the reform of ownership oversight will be appointed.

As part of the COVID-19 anti-crisis shield, the Ministry of Development plans to offer two-year takeover protection for Polish firms with a minimum of EUR 10 million (almost $10 million) in turnover.  The bill creates “a temporary complex framework of control over actions which could threaten the safety, order, and public health by entities from outside the EU and EEA,” according to authors of an impact study.  Qualifications are extended for public firms, or firms from a variety of specified fields.  The State Assets Ministry is preparing similar and more permanent measures.

Other Investment Policy Reviews

The 2018 OECD Economic Survey of Poland can be found here:

http://www.oecd.org/eco/surveys/economic-survey-poland.htm 

Additionally, the OECD Working Group on Bribery has provided recommendations on the implementation of the OECD Anti-Bribery Convention in Poland:  http://www.oecd.org/daf/anti-bribery/poland-oecdanti-briberyconvention.htm 

In March 2018, the OECD published a Rural Policy Review on Poland.  According to this review, Poland has seen impressive growth in recent years, and yet regional disparities in economic and social outcomes remain large by OECD standards.  The review is available at: http://www.oecd.org/poland/oecd-rural-policy-reviews-poland-2018-9789264289925-en.htm 

Business Facilitation

The Polish government has continued to implement reforms aimed at improving the investment climate with a special focus on the SME sector and innovations.  Poland reformed its R&D tax incentives with new regulations and changes encouraging wider use of the R&D tax breaks.  As of January 1, 2019, a new mechanism reducing the tax rate on income derived from intellectual property rights (IP Box) was introduced.  Please see Section 5 of this report for more information.

A package of five laws referred to as the “Business Constitution”—intended to facilitate the operation of small domestic enterprises—was gradually introduced in 2018.  The main principle of the Business Constitution is the presumption of innocence of business owners in dealings with the government.

Poland made enforcing contracts easier by introducing an automated system to assign cases to judges randomly.  Despite these reforms and others, some investors have expressed serious concerns regarding over-regulation, over-burdened courts and prosecutors, and overly burdensome bureaucratic processes.  The way tax audits are performed has changed considerably.  For instance, in many cases the appeal against the findings of an audit now must be lodged with the authority that issued the initial finding rather than a higher authority or third party.  Poland also enabled businesses to get electricity service faster by implementing a new customer service platform that allows the utility to better track applications for new commercial connections.

In Poland, business activity may be conducted in the forms of a sole proprietor, civil law partnership, as well as commercial partnerships and companies regulated in provisions of the Commercial Partnerships and Companies Code.  Sole proprietor and civil law partnerships are registered in the Central Registration and Information on Business (CEIDG), which is housed by the Ministry of Development:

https://prod.ceidg.gov.pl/CEIDG.CMS.ENGINE/?D;f124ce8a-3e72-4588-8380-63e8ad33621f 

Commercial companies are classified as partnerships (registered partnership, professional partnership, limited partnership, and limited joint-stock partnership) and companies (limited liability company and joint-stock company).  A partnership or company is registered in the National Court Register (KRS) and kept by the competent district court for the registered office of the established partnership or company.  Local corporate lawyers report that starting a business remains costly in terms of time and money, though KRS registration in the National Court Register averages less than two weeks according to the Ministry of Justice and four weeks according to the World Bank’s 2020 Doing Business Report.  A 2018 law introduced a new type of company—PSA (Prosta Spółka Akcyjna – Simple Joint Stock Company).  PSAs are meant to facilitate start-ups with simpler and cheaper registration procedures.  The minimum initial capitalization is 1 PLN (approx. USD 0.26) while other types of registration require 5,000 PLN (approx. USD 1,315) or 50,000 PLN (approx. USD 13,158).  A PSA has a board of directors, which merges the responsibilities of a management board and a supervisory board.  The provision for PSAs will enter into force in March 2021.

New provisions of the Public Procurement Law (“PPL”) transposing provisions of EU directives coordinating the rules of public procurement came into force on October 18, 2018.  These regulations apply to proceedings concerning contracts with a value equal to or exceeding the EU thresholds.

Polish lawmakers are gradually digitalizing the services of the KRS.   The first change, which entered into force on March 15, 2018, was the obligation to file financial statements with the Repository of Financial Documents via the Ministry of Finance website.  There is also a new requirement for representatives and shareholders of companies to submit statements on their addresses.  A requirement to file financial statements exclusively in electronic form entered into force on October 1, 2018, and, beginning in March 2021, all applications will have to be filed with the commercial register electronically.  A certified e-signature may be obtained from one of the commercial e-signature providers listed on the following website: https://www.nccert.pl/ 

• General information, National Court Register (KRS): https://ms.gov.pl/en/national-registers/national-court-register/general-information-on-the-national-court-register/ 
• Forms in English, National Court Register (KRS):https://ms.gov.pl/en/national-registers/national-court-register/application-forms-used-in-krs/ ;
• Electronic KRS access: https://ms.gov.pl/en/national-registers/national-court-register/electronic-access-to-the-national-court-register/ 

Agencies with which a business will need to file in order to register in the KRS: Central Statistical Office to obtain a business identification number (REGON) for civil-law partnership http://bip.stat.gov.pl/en/regon/subjects-and-data-included-in-the-register/ 

ZUS – Social Insurance Agency http://www.zus.pl/pl/pue/rejestracja 

Ministry of Finance http://www.mf.gov.pl/web/bip/wyniki-wyszukiwania/?q=business percent20registration 

Both registers are available in English and foreign companies may use them.

Poland’s Single Point of Contact site for business registration and information is:  https://www.biznes.gov.pl/en/ 

and an online guide to choose a type of business registration is: https://www.biznes.gov.pl/poradnik/-/scenariusz/REJESTRACJA_DZIALALNOSCI_GOSPODARCZEJ 

Outward Investment

The Polish Agency for Investment and Trade (PAIH), under the umbrella of the Polish Development Fund (PFR), plays a key role in promoting Polish investment abroad.  More information on PFR can be found in Section 7 and at its website: https://pfr.pl/ 

The Minister of Foreign Affairs and the Minister of Development (formerly called the Minister of Entrepreneurship and Technology) have significantly reformed Poland’s economic diplomacy.  The Polish Information and Foreign Investment Agency (PAIiIZ) was reformed in February 2017 to become the Polish Agency for Investment and Trade (PAIH).  Trade and Investment Promotion Sections in embassies and consulates around the world have been replaced by PAIH offices.  These 70 offices worldwide constitute a global network and include six in the United States.

PAIH assists entrepreneurs with administrative and legal procedures related to specific projects as well as helps develop legal solutions and find suitable locations, and reliable partners and suppliers.

The Agency implements pro-export projects such as “the Polish Tech Bridges” dedicated to expansion of innovative Polish SMEs.

Poland is a founding member of the Asian Infrastructure Investment Bank (AIIB).  Poland co-founded and actively supports the Three Seas Initiative, which seeks to improve north-south connections in road, energy, and telecom infrastructure in 12 countries on NATO’s and the EU’s eastern flank.

Under the Government Financial Support for Exports Program, the national development bank BGK (Bank Gospodarstwa Krajowego) grants foreign buyers financing for the purchase of Polish goods and services.  The program provides the following financing instruments:  credit for buyers granted through the buyers’ bank; credit for buyers granted directly from BGK; the purchase of receivables on credit from the supplier under an export contract; documentary letters of credit post-financing; the discounting of receivables from documentary letters of credit; confirmation of documentary letters of credit; and export pre-financing.  In May 2019, BGK and the Romanian development bank EximBank founded the Three Seas Fund, a commercial initiative to support the development of transport, energy and digital infrastructure in Central and Eastern Europe.  In July 2019, BGK, the European Investment Bank, and four other development banks (French Deposits and Consignments Fund, Italian Deposits and Loans Fund, the Spanish Official Credit Institute and German Credit Institute for Reconstruction), began the implementation of the “Joint Initiative on Circular Economy” (JICE), the goal of which is to eliminate waste, prevent its generation and increase the efficiency of resource management.  BGK also opened two international offices in 2019:  London and Frankfurt.

PFR TFI S.A, an entity under the umbrella of the state-owned financial group PFR, supports Polish investors planning to or already operating abroad. PFR TFI also manages the Foreign Expansion Fund (FEZ), which provides loans, on market terms, to foreign entities owned by Polish entrepreneurs.  https://www.pfrtfi.pl/  and https://pfr.pl/en/offer/foreign-expansion-fund.html 

Poland has concluded bilateral investment agreements with the following countries: Albania (1993); Argentina (1992); Australia (1992); Azerbaijan (1999); Bangladesh (1999); Belarus (1993); Canada (1990); Chile (2000); China (1989); Egypt (1998); India (1997 – terminated in March 2017;   a 15 year sunset clause applies); Indonesia (1993); Iran (2001; although Poland supports international sanctions regimes); Israel (1992); Jordan; Kazakhstan (1995); Kuwait (1993); Macedonia (1997); Malaysia (1994); Moldova (1995); Mongolia (1996); Morocco (1995); Norway (1990); Serbia and Montenegro (1997); Singapore (1993); Slovakia (1996 termination under consultations); South Korea (1990); Switzerland (1990); Thailand (1993); Tunisia (1993); Turkey (1994); Ukraine (1993); United Arab Emirates (1994); the United States (1994); Uruguay (1994); Uzbekistan (1995); Vietnam (1994).

In May 2020, all EU-member states, except Sweden and Finland, signed an agreement of termination of intra-BITs concluded by the member states. This will terminate Poland’s final BIT, which is with Slovakia.  Sweden and Finland will sign bilateral agreements with Poland terminating the “sunset clauses.” in their existing BITs.  During the notice period, as stipulated in most of the intra-EU BITs, all the obligations assumed by Poland remain in force.  Moreover, most of the intra-EU BITs contain sunset clauses that prolong the treaty protections.

The United States and Poland signed a Treaty Concerning Business and Economic Relations in 1990 that was amended and re-ratified in October 2004 due to Poland’s entrance into the EU.  A current list of all Poland’s BITs, including the documents themselves, can be found at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/168#iiaInnerMenu 

Poland has signed double taxation treaties with over 80 countries.  The United States shares a double taxation treaty with Poland; an updated bilateral tax treaty was signed in February 2013 and is awaiting U.S. ratification.  The “Agreement between the United States of America and the Republic of Poland on Social Security” prevents double taxation, enables resumption of payments to suspended beneficiaries, and allows transfer of benefit eligibility.

The Polish tax system underwent significant changes in 2018, many of which became effective in 2019 or will become effective in 2020.

In 2019, the most important changes involved:

• An obligatory split payment mechanism;

• A “White List” of VAT taxpayers (along with their VAT numbers and bank account details) and tax-deductible costs;

• Relief from income taxes for bad debts;

• Major changes to the processes for “withholding tax” (postponed until 1 July 2020);

• A new matrix of VAT rates;

• The replacement of VAT returns with a new Uniform Control File (JPK) structure;

• An agreement on cooperation in tax matters;

• Incentives for registering intellectual property, a.k.a. “IP Box” (See Section 5 for more details); and

• New rules for accounting for tax loss.

More information can be found at http://taxsummaries.pwc.com/ID/Poland-Overview 

Some U.S. investors have expressed concern that Poland’s tax authorities do not always consistently uphold presumably binding tax decisions and sometimes seek retroactive payments after a reversal.  In 2019, tax offices carried out nearly one-fifth fewer audits than in 2018. Irregularities were found more often, but the amount recovered to the budget was lower.  This trend has been observed for a few years and shows that the tax system is being effectively sealed and taxpayers are more accurately selected for audits. The double taxation treaty does not cover stock options as part of remuneration packages, according to some investors.

Transparency of the Regulatory System

The Polish Constitution contains a number of provisions related to administrative law and procedures.  It states administrative bodies have a duty to observe and comply with the law of Poland.  The Code of Administrative Procedures (CAP) states rules and principles concerning participation and involvement of citizens in processes affecting them, the giving of reasons for decisions, and forms of appeal and review.

As a member of the EU, Poland complies with EU directives by harmonizing rules or translating them into national legislation.  Rule-making and regulatory authority exists at the central, regional, and municipal levels.  Various ministries are engaged in rule-making that affects foreign business, such as pharmaceutical reimbursement at the Ministry of Health or incentives for R&D at the Ministry of Development.  Regional and municipal level governments can levy certain taxes and affect foreign investors through permitting and zoning.

Polish accounting standards do not differ significantly from international standards.  Major international accounting firms provide services in Poland.  In cases where there is no national accounting standard, the appropriate International Accounting Standard may be applied.  However, investors have complained of regulatory unpredictability and high levels of administrative red tape.  Foreign and domestic investors must comply with a variety of laws concerning taxation, labor practices, health and safety, and the environment.  Complaints about these laws, especially the tax system, center on frequent changes, lack of clarity, and strict penalties for minor errors.

Poland has improved its regulatory policy system over the last several years.  The government introduced a central online system to provide access for the general public to regulatory impact assessments (RIA) and other documents sent for consultation to selected groups such as trade unions and business.  Proposed laws and regulations are published in draft form for public comment, and ministries must conduct public consultations.  Poland follows OECD recognized good regulatory practices, but investors say the lack of regulations governing the role of stakeholders in the legislative process is a problem.  Participation in public consultations and the window for comments are often limited.

New guidelines for RIA, consultation and ex post evaluation were adopted under the Better Regulation Program in 2015, providing more detailed guidance and stronger emphasis on public consultation.  Like many countries, Poland faces challenges to fully implement its regulatory policy requirements and to ensure that RIA and consultation comments are used to improve decision making.  The OECD suggests Poland extend its online public consultation system and consider using instruments such as green papers more systematically for early-stage consultation to identify options for addressing a policy problem.  OECD considers steps taken to introduce ex post evaluation of regulations encouraging.

Bills can be submitted to the parliament for debate as “citizen’s bills” if authors collect 100,000 signatures.  NGOs and private sector associations most often take advantage of this avenue.  Parliamentary bills can also be submitted by a group of parliamentarians, a mechanism that bypasses public consultation and which both domestic and foreign investors have criticized.  Changes to the government’s rules of procedure introduced in June 2016 reduced the requirements for RIA for preparations of new legislation.

Administrative authorities are subject to oversight by courts and other bodies (e.g., the Supreme Audit Chamber – NIK), the Office of the Human Rights Ombudsman, special commissions and agencies, inspectorates, the Prosecutor and parliamentary committees.  Polish parliamentary committees utilize a distinct system to examine and instruct ministries and administrative agency heads.  Committees’ oversight of administrative matters consists of: reports on state budgets implementation and preparation of new budgets, citizens’ complaints, and reports from the NIK.  In addition, courts and prosecutors’ offices sometimes bring cases to parliament’s attention.  The Ombudsman’s institution works relatively well in Poland.  Polish citizens have a right to complain and to put forward grievances before administrative bodies.  Proposed legislation can be tracked on the Prime Minister’s webpage, https://legislacja.rcl.gov.pl/  and the parliament’s webpage: https://www.sejm.gov.pl/sejm9.nsf/proces.xsp 

Poland has consistently met or exceeded the Department of State’s minimum requirements for fiscal transparency: https://www.state.gov/e/eb/ifd/oma/fiscaltransparency/273700.htm.  Poland’s budget and information on debt obligations were widely and easily accessible to the general public, including online.  The budget was substantially complete and considered generally reliable.  NIK audited the government’s accounts and made its reports publicly available, including online.  The budget structure and classifications are complex and the Polish authorities agree more work is needed to address deficiencies in the process of budgetary planning and procedures.  State budgets encompass only part of the public finances sector.

The European Commission regularly assesses the public finance sustainability of Member States based on fiscal gap ratios.  In 2020, Poland’s public finances will be exposed to a high general government deficit, uncertainty in financial markets resulting primarily from the macroeconomic environment, the effects of the fight against the COVID-19 epidemic, and the monetary policy of the NBP and major central banks, including the European Central Bank and the U.S. Federal Reserve.

International Regulatory Considerations

Since its EU accession in May 2004, Poland has been transposing European legislation and reforming its regulations in compliance with the EU system.  Poland sometimes disagrees with EU regulations related to renewable energy and emissions due to its important domestic coal industry.

In 2018, Poland saw significant increases in wholesale electricity prices due largely to an increase in the price of coal and EU emissions permits.  The government’s initial plans of proposing a new law to protect household consumers from rising electricity prices put it at odds with the European for lack of notification of what amounted to state aid.  The Polish energy market regulator (URE) also criticized the proposed law for not reflecting the market rate for electricity and claimed the proposed law threatened URE’s independence.  In 2019, under EU State Aid rules, the European Commission approved Poland’s plan to compensate energy-intensive companies for higher electricity prices resulting from indirect emission costs under the EU Emission Trading Scheme (ETS).  Poland’s plan will cover the period 2019-2020 and will benefit companies active in Poland in sectors facing significant electricity costs and which are particularly exposed to international competition.

Poland participates in the process of creation of European norms.  There is strong encouragement for non-governmental organizations, such as environmental and consumer groups, to actively participate in European standardization.  In areas not covered by European normalization, the Polish Committee for Standardization (PKN) introduces norms identical with international norms, i.e., PN-ISO and PN-IEC.  PKN actively cooperates with international and European standards organizations and with standards bodies from other countries.  PKN has been a founding member of the International Organization for Standardization (ISO) and a member of the International Electro-technical Commission (IEC) since 1923.

PKN also cooperates with the American Society for Testing and Materials (ASTM) International and the World Trade Organization’s (WTO) Agreement on Technical Barriers to Trade (TBT).  Poland has been a member of the WTO since July 1, 1995 and was a member of GATT from October 18, 1967.  All EU member states are WTO members, as is the EU in its own right.  While the member states coordinate their position in Brussels and Geneva, the European Commission alone speaks for the EU and its members in almost all WTO affairs.  PKN runs the WTO/TBT National Information Point in order to apply the provisions of the TBT with respect to information exchange concerning national standardization.

Useful Links:

http://ec.europa.eu/growth/single-market/european-standards/harmonised-standards/ 

http://eur-lex.europa.eu/oj/direct-access.html?locale=en )

Legal System and Judicial Independence

The government has continued to implement and introduce new measures related to the judiciary that has drawn criticism from legal experts, NGOs, and international organizations.  Observers noted in particular the introduction of an extraordinary appeal mechanism in the 2017 Supreme Court Law.  The extraordinary appeal mechanism states:  final judgments issued since 1997 can be challenged and overturned in whole or in part for a three-year period starting from the day the legislation entered into force on April 3, 2018.  By the end of 2019, the Extraordinary Appeals Chamber had received 79 complaints.  The majority were submitted by the Justice Minister; nine were submitted by the Human Rights Ombudsman.  As of December 29, 2019, the Chamber had reviewed nine complaints, of which five were accepted, and four were rejected.  All five complaints which the chamber accepted regarded civil law.  Twenty-three cases were pending; the status of the remaining 47 cases was unavailable.

In April and May 2018, the Polish President signed into law amendments to the common courts law, the National Judiciary Council law, and the 2017 amendments to the Supreme Court law.  This was in response to the December 2017 European Commission rule of law recommendation and infringement procedure triggered under Article 7 of the Lisbon Treaty for what the Commission considered to be “systemic threats” to the independence of the Polish courts.  The key concerns focused on the Polish government’s ability to remove up to 40 percent of the Supreme Court’s judges and the justice minister’s power to discipline judges.  Separately, the Commission has sought redress through the European Court of Justice (ECJ).  The Polish government has countered that its reforms do not infringe judicial independence and are intended to make court operations more efficient and transparent.

On July 2, 2018, the European Commission launched an infringement procedure against Poland, two days before provisions of the revised Supreme Court law lowering the mandatory retirement age for judges went into effect (affecting 27 of the 74 Supreme Court justices at that time).  On September 24, 2018 the European Commission referred the country’s amended Supreme Court law to the ECJ, stating “the Polish law on the Supreme Court is incompatible with EU law as it undermines the principle of judicial independence, including the “irremovability” of judges.”   On October 19, 2018, the ECJ issued an interim injunction requiring the government to reinstate those judges who had been retired under the amended law.  On November 19, 2018, the government submitted legislation to automatically reappoint all justices retired under the Supreme Court law to fulfill the ECJ’s interim measures, and President Duda signed the legislation into law on December 17, 2018.  On June 24, 2019, the ECJ issued a final judgement regarding the Polish law on the Supreme Court, confirming in full the position of the Commission.

On April 3, 2019 the Commission launched an infringement procedure on the grounds that the disciplinary regime for judges undermines the judicial independence of Polish judges and does not ensure the necessary guarantees to protect judges from political control, as required by the ECJ.  On October 10, 2019 the Commission referred this case to the ECJ.  On January 14, 2020, the Commission asked the ECJ to impose interim measures on Poland, ordering it to suspend the functioning of the Disciplinary Chamber of the Supreme Court.  On April 8, 2020, the ECJ ruled that Poland must immediately suspend the application of the national provisions on the powers of the Disciplinary Chamber of the Supreme Court with regard to disciplinary cases concerning judges, confirming in full the position of the Commission.  This order applies until the Court will have rendered its final judgment in the infringement procedure.

A new law signed on December 20, 2019 amending a series of legislative acts governing the functioning of the justice system in Poland entered into force on February 14, 2020.  The law enables judges to be disciplined for public activities incompatible with the principles of the independence of the courts and the independence of judges, actions which may considerably impair the functioning of the justice system, and for actions which question the judicial appointments of other judges.  On April 29, 2020, the Commission sent a Letter of Formal Notice to Poland regarding this new law on the judiciary, the first step of infringement procedures.

The Polish legal system is code-based and prosecutorial.  The main source of the country’s law is the Constitution of 1997.  The legal system is a mix of Continental civil law (Napoleonic) and remnants of communist legal theory.  Poland accepts the obligatory jurisdiction of the European Court of Justice (ECJ), but with reservations.  In civil and commercial matters, first instance courts sit in single-judge panels, while courts handling appeals sit in three-judge panels. District Courts (Sad Rejonowy) handle the majority of disputes in the first instance.  When the value of a dispute exceeds a certain amount or the subject matter requires more expertise (such as those regarding intellectual property rights), Circuit Courts (Sad Okregowy) serve as first instance courts.  Circuit Courts also handle appeals from District Court verdicts.  Courts of Appeal (Sad Apelacyjny) handle appeals from verdicts of Circuit Courts as well as generally supervise the courts in their region.

The Polish judicial system generally upholds the sanctity of contracts.  Foreign court judgements, under the Polish Civil Procedure Code and European Community regulation, can be recognized.  However, there are many foreign court judgments which Polish courts do not accept or accept partially.  There can also be delays in the recognition of judgments of foreign courts due to an insufficient number of judges with specialized expertise.  Generally, foreign firms

are wary of the slow and over-burdened Polish court system, preferring other means to defend their rights.  Contracts involving foreign parties often include a clause specifying that disputes will be resolved in a third-country court or through offshore arbitration.  (More detail in Section 4, Dispute Settlement.)

Laws and Regulations on Foreign Direct Investment

Foreign nationals can expect to obtain impartial proceedings in legal matters.  Polish is the official language and must be used in all legal proceedings.  It is possible to obtain an interpreter.  The basic legal framework for establishing and operating companies in Poland, including companies with foreign investors, is found in the Commercial Companies Code.  The Code provides for establishment of joint-stock companies, limited liability companies, or partnerships (e.g., limited joint-stock partnerships, professional partnerships).  These corporate forms are available to foreign investors who come from an EU or European Free Trade Association (EFTA) member state or from a country that offers reciprocity to Polish enterprises, including the United States.

With few exceptions, foreign investors are guaranteed national treatment.  Companies that establish an EU subsidiary after May 1, 2004 and conduct or plan to commence business operations in Poland must observe all EU regulations.  However, in some cases they may not be able to benefit from all privileges afforded to EU companies.  Foreign investors without permanent residence and the right to work in Poland may be restricted from participating in day-to-day operations of a company.  Parties can freely determine the content of contracts within the limits of European contract law.  All parties must agree on essential terms, including the price and the subject matter of the contract.  Written agreements, although not always mandatory, may enable an investor to avoid future disputes.  Civil Code is the law applicable to contracts.

Useful websites (in English) to help navigate laws, rules, procedures and reporting requirements for foreign investors:

• Polish Investment and Trade Agency: https://www.paih.gov.pl/en 
• Polish Financial Supervision Authority (KNF): https://www.knf.gov.pl/en/ 

• Office of Competition and Consumer Protection (UOKIK):https://uokik.gov.pl/legal_regulations.php 

• https://www.biznes.gov.pl/en/przedsiebiorcy/ 

Competition and Anti-Trust Laws

Poland has a high level of nominal convergence with the EU on competition policy in accordance with Articles 101 and 102 of the Lisbon Treaty.  Poland’s Office of Competition and Consumer Protection (UOKiK) is well within EU norms for structure and functioning, with the exception that the Prime Minister both appoints and dismisses the head of UOKiK.  This is supposed to change to be in line with EU norms, however, as of January 2020 the Prime Minister was still exercising his right to remove and nominate UOKiK’s presidents. (EU directive 2019/1.)

The Act on Competition and Consumer Protection  was amended in mid-2019.  The most important changes, which concern geo-blocking and access to fiscal and banking secrets, came into force on September 17, 2019.  Other minor changes took effect in January 2020.  The amendments result from the need to align national law with new EU laws.

Starting in January 2020, UOKiK may intervene in cases when delays in payment are excessive.  UOKiK can take action when the sum of outstanding payments due to an entrepreneur for three subsequent months amounts to at least PLN 5 million (approx. USD 1.25 million).  In 2022, the minimum amount will decrease to PLN 2 million (approx. USD 500,000).

The President of UOKiK issues approximately 100 decisions per year regarding practices restricting competition and infringing on collective interests of consumers.  Enterprises have the right to appeal against those decisions to the court.  In the first instance, the case is examined by the Court of Competition and Consumer Protection and in the second instance, by the Appellate Court.  The decision of the Appellate Court may be challenged by way of a cassation appeal filed to the Supreme Court.  In major cases, the General Counsel to the Republic of Poland will act as the legal representative in proceedings concerning an appeal against a decision of the President of UOKiK.

All multinational companies must notify UOKiK of a proposed merger if any party to it has subsidiaries, distribution networks or permanent sales in Poland.

Examples of competition reviews can be found at:

https://www.uokik.gov.pl/news.php?news_id=15526   (battery market)

https://www.uokik.gov.pl/news.php?news_id=15987   (Agora Eurozet)

https://www.uokik.gov.pl/news.php?news_id=15941   (Nord Stream 2)

https://www.uokik.gov.pl/news.php?news_id=15685  (UPC)

https://decyzje.uokik.gov.pl/bp/dec_prez.nsf 

The President of UOKiK has the power to impose significant fines on individuals in management positions at companies that violate the prohibition of anticompetitive agreements.  The amendment to the law governing UOKiK’s operation, which entered into force on December 15, 2018, provides for a similar power to impose significant fines on the management of companies in the case of violations of consumer rights.  The maximum fine that can be imposed on a manager may amount to PLN 2 million (approx. USD 500,000) and, in the case of managers in the financial sector, up to PLN 5 million (approx. USD 1.25 million).

Expropriation and Compensation

Article 21 of the Polish Constitution states: “expropriation is admissible only for public purposes and upon equitable compensation.”  The Law on Land Management and Expropriation of Real Estate states that property may be expropriated only in accordance with statutory provisions such as construction of public works, national security considerations, or other specified cases of public interest.  The government must pay full compensation at market value for expropriated property.  Acquiring land for road construction investment and recently also for the Central Airport and the Vistula Spit projects has been liberalized and simplified to accelerate property acquisition, particularly through a special legislative act.  Most acquisitions for road construction are resolved without problems.  However, there have been a few cases in which the inability to reach agreement on remuneration has resulted in disputes.  Post is not aware of any recent expropriation actions against U.S. investors, companies, or representatives.

Dispute Settlement

ICSID Convention and New York Convention

Poland is not a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington Convention).  Poland is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

Poland is party to the following international agreements on dispute resolution, with the Ministry of Finance acting as the government’s representative: the 1923 Geneva Protocol on Arbitration Clauses; the 1961 Geneva European Convention on International Trade Arbitration; the 1972 Moscow Convention on Arbitration Resolution of Civil Law Disputes in Economic and Scientific Cooperation Claims under the U.S.-Poland Bilateral Investment Treaty (BIT) (with further amendments).

The United Nations Conference on Trade and Development (UNCTAD) database  for treaty-based disputes lists four cases for Poland involving a U.S. party over the last decade.  The majority of Poland’s investment disputes are with companies from other EU member states.  According to the UNCTAD database, over the last decade, there have been 17 known disputes with foreign investors.

There is no distinction in law between domestic and international arbitration.  The law only distinguishes between foreign and domestic arbitral awards for the purpose of their recognition and enforcement.  The decisions of arbitration entities are not automatically enforceable in Poland, but must be confirmed and upheld in a Polish court.  Under Polish Civil Code, local courts accept and enforce the judgments of foreign courts; in practice, however, the acceptance of foreign court decisions varies.  Investors say the timely process of energy policy consolidation has made the legal, regulatory and investment environment for the energy sector uncertain in terms of how the Polish judicial system deals with questions and disputes around energy investments by foreign investors, and in foreign investor interactions with state-owned or affiliated energy enterprises.

A Civil Procedures Code amendment in January 2016, with further amendments in July 2019, implements internationally recognized arbitration standards and creates an arbitration-friendly legal regime in Poland.  The amendment applies to arbitral proceedings initiated on or after January 1, 2016 and introduced one-instance proceedings to repeal an arbitration award (instead of two-instance proceedings).  This change encourages mediation and arbitration to solve commercial disputes and aims to strengthen expeditious procedure.  The Courts of Appeal (instead of District Courts) handle complaints.  In cases of foreign arbitral awards, the Court of Appeal is the only instance.  In certain cases, it is possible to file a cassation (or extraordinary) appeal with the Supreme Court of the Republic of Poland.  In the case of a domestic arbitral award, it will be possible to file an appeal to a different panel of the Court of Appeal.

International Commercial Arbitration and Foreign Courts

Poland does not have an arbitration law, but provisions in the Polish Code of Civil Procedures of 1964, as amended, are based to a large extent on UNCITRAL Model Law.  Under the Code of Civil Procedure, an arbitration agreement must be concluded in writing.  Commercial contracts between Polish and foreign companies often contain an arbitration clause.  Arbitration tribunals operate through the Polish Chamber of Commerce, and other sector-specific organizations.  A permanent court of arbitration also functions at the business organization Confederation Lewiatan in Warsaw and at the General Counsel to the Republic of Poland (GCRP).  GCRP took over arbitral cases from external counsels in 2017 and began representing state-owned commercial companies in litigation and arbitration matters for amounts in dispute over PLN 5 million (approx. USD 1.5 million).  The list of these entities includes major Polish state-owned enterprises in the airline, energy, banking, chemical, insurance, military, oil and rail industries as well as other entities such as museums, state-owned media and universities.

The Court of Arbitration at the Polish Chamber of Commerce in Warsaw, the biggest permanent arbitration court in Poland, operates based on arbitration rules complying with the latest international standards, implementing new provisions on expedited procedure.  In recent years, numerous efforts have been made to increase use of arbitration in Poland.  In 2019, online arbitration courts appeared on the Polish market. The first such court, the Online Arbitration Court, became active in February 2019 and Ultima Ratio, which was set up by the Association of Polish Notaries, commenced operations in April 2019.  These new institutions operate entirely online, and their founders hope to offer low-cost and expedient venues for resolving small civil and commercial claims.  Due to their recent launch, it is not yet possible to judge their success.  However, the development itself reflects the need for reliable, fast and affordable alternatives to state courts in smaller disputes.

Polish state courts generally respect the wide autonomy of arbitration courts and show little inclination to interfere with their decisions as to the merits of the case.  The arbitral awards are likely to be set aside only in rare cases.  As a rule, in post-arbitral proceedings, Polish courts do not address the merits of the cases decided by the arbitration courts.  An arbitration-friendly approach is also visible in other aspects, such as in the broad interpretation of arbitration clauses.

In mid-2018, the Polish Supreme Court introduced a new legal instrument into the Polish legal field: an extraordinary complaint.  Although this new instrument does not refer directly to arbitration proceedings, it may be applied to any procedures before Polish state courts, including post-arbitration proceedings (see Section 3 for more details).

Bankruptcy Regulations

Poland’s bankruptcy law has undergone significant change and modernization in recent years.  There is now a bankruptcy law and a separate, distinct restructuring law.  Poland ranks 25th for ease of resolving insolvency in the World Bank’s Doing Business report 2020.  Bankruptcy in Poland is criminalized if a company’s management does not file a petition to declare bankruptcy when a company becomes illiquid for an extended period of time or if a company ceases to pay its liabilities.  https://www.paih.gov.pl/polish_law/bankruptcy_law_and_restructuring_proceedings 

Capital Markets and Portfolio Investment

The Polish regulatory system is effective in encouraging and facilitating portfolio investment.  Both foreign and domestic investors may place funds in demand and time deposits, stocks, bonds, futures, and derivatives.  Poland’s equity markets facilitate the free flow of financial resources.  Poland’s stock market is the largest and most developed in Central Europe.  In September 2018, it was reclassified as developed market status by FTSE Russell’s country classification report.  The stock market’s capitalization amounts to around 48 percent of GDP.  Although the Warsaw Stock Exchange (WSE) is itself a publicly traded company with shares listed on its own exchange after its partial privatization in 2010, the state retains a significant percentage of shares which allows it to control the company.  WSE has become a hub for foreign institutional investors targeting equity investments in the region.

In addition to the equity market, Poland has a wholesale market dedicated to the trading of treasury bills and bonds (Treasury BondSpot Poland).  This treasury market is an integral part of the Primary Dealers System organized by the Finance Ministry and part of the pan-European bond platform.  Wholesale treasury bonds and bills denominated in PLN and some securities denominated in Euros are traded on the Treasury BondSpot market.  Non-government bonds are traded on Catalyst, a WSE managed platform.  The capital market is a source of funding for Polish companies.  While securities markets continue to play a subordinate role to banks in the provision of finance, the need for medium-term financial support for the modernization of the electricity and gas sectors is likely to lead to an increase in the importance of the corporate bond market.  The Polish government acknowledges the capital market’s role in the economy in its development plan.  Foreigners may invest in listed Polish shares, but they are subject to some restrictions in buying large packages of shares.  Liquidity remains tight on the exchange.

The Capital Markets Development Strategy, published in 2018, identifies 20 key barriers and offers 60 solutions.  Some key challenges include low levels of savings and investment, insufficient efficiency, transparency and liquidity of many market segments, and lack of taxation incentives for issuers and investors.  The primary aim of the strategy is to improve access of Polish enterprises to financing.  The strategy focuses on strengthening trust in the market, improving the protection of individual investors, the stabilization of the regulatory and supervisory environment and the use of competitive new technologies.  The strategy is not a law, it sets the direction for further regulatory proposals.  Poland is one of the most rigorously supervised capital markets in Europe according to the European Commission.

The Employee Capital Plans program (PPK)—which is designed to increase household saving to augment individual incomes in retirement—could provide a boost to Poland’s capital markets and reduce dependence on foreign saving as a source for investment financing.  The program has been halted due to the outbreak of the COVID-19 pandemic.

High-risk venture capital funds are becoming an increasingly important segment of the capital market.  The market is still shallow, however, and one major transaction may affect the value of the market in a given year.  The funds remain active and Poland is a leader in this respect in Central and Eastern Europe.

Poland provides full IMF Article VIII convertibility for current transactions.  Banks can and do lend to foreign and domestic companies.  Companies can and do borrow abroad and issue commercial paper, but the market is less robust than in Western European countries or the United States.  The Act on Investment Funds allows for open-end, closed-end, and mixed investment funds, and the development of securitization instruments in Poland.  In general, no special restrictions apply to foreign investors purchasing Polish securities.

Credit allocation is on market terms.  The government maintains some programs offering below-market rate loans to certain domestic groups, such as farmers and homeowners.  Foreign investors and domestic investors have equal access to Polish financial markets.  Private Polish investment is usually financed from retained earnings and credits, while foreign investors utilize funds obtained outside of Poland as well as retained earnings.  Polish firms raise capital in Poland and abroad.

Recent changes in the governance structure of the Polish Financial Supervisory Authority (KNF) are aimed at increasing cross governmental coordination and a better-targeted response in case of financial shocks, while achieving greater institutional effectiveness through enhanced resource allocation.  KNF’s supplementary powers have increased, allowing it to authorize the swift acquisition of a failing or likely to fail lender by a stronger financial institution.

Money and Banking System

The banking sector plays a dominant role in the financial system, accounting for about 70 percent of financial sector assets.  The sector is mostly privately owned, with the state controlling about 40 percent of the banking sector and the biggest insurance company.  Poland had 30 locally incorporated commercial banks at the end of December 2019, according to KNF.  The number of locally-incorporated banks has been declining over the last five years.  Poland’s 538 cooperative banks play a secondary role in the financial system, but are widespread.  The state owns eight banks.  Over the last few years, growing capital requirements, lower prospects for profit generation and uncertainty about legislation addressing foreign currency mortgages has pushed banks towards mergers and acquisitions.  KNF welcomes this consolidation process, seeing it as a “natural” way to create an efficient banking sector.

The Polish National Bank (NBP) is Poland’s central bank.  At the end of 2019, the banking sector was overall well capitalized and solid.  Poland’s banking sector meets European Banking Authority regulatory requirements.  The share of non-performing loans is close to the EU average and recently has been falling.  In December 2019, non-performing loans were 6.6 percent of portfolios.  According to the S&P Rating Agency, Poland’s central bank is willing and able to provide liquidity support to the banking sector, in local and foreign currencies, if needed.

The banking sector is liquid, profitable and major banks are well capitalized, although disparities exist among banks.  This was confirmed by NBP’s Financial Stability Report and stress tests conducted by the central bank.  Profitability increased 12.5 percent in 2019 as a result of solid GDP growth, a pickup in investments and low provisioning costs, and remained at a reasonable level (ROE at 7.0 percent in 2019).  Nevertheless, profits remain under pressure due to low interest rates, the issue of conversion of Swiss francs mortgage portfolios into PLN, and a special levy on financial institutions (0.44 percent of the value of assets excluding equity and Polish sovereign bonds).  The ECJ issued a judgement in October 2019 on mortgages in Swiss francs, taking the side of borrowers.  The ECJ annulled the loan agreements, noting an imbalance between the parties and the use of prohibited clauses.  An additional financial burden for banks resulted from the necessity to return any additional fees they charged customers who repaid loans ahead of schedule.

Since 2015, the Polish government established an active campaign aiming to increase the market share of national financial institutions.  Since 2017, Polish investors’ share in the banking sector’s total assets exceeds the foreign share in the sector.  The State controls around 40 percent of total assets, including the two largest banks in Poland.  These two lenders control about one third of the market.  Rating agencies warn that an increasing state share in the banking sector might impact competitiveness and profits in the entire financial sector. There is concern that lending decisions at state-owned banks could come under political pressure.  Nevertheless, Poland’s strong fundamentals and the size of its internal market mean that many foreign banks will want to retain their positions.

The financial regulator has restricted the availability of loans in euros or Swiss francs in order to minimize the banking system’s exposure to exchange risk resulting from fluctuations.  Only individuals who earn salaries denominated in these currencies continue to enjoy easy access to loans in foreign currencies.

In 2019, NBP had relationships with 26 commercial and central banks and was not concerned about losing any of them.

Foreign Exchange and Remittances

Foreign Exchange

Poland is not a member of the Eurozone; its currency is the Polish zloty.  The current government has shown little desire to adopt the Euro (EUR).  The Polish zloty (PLN) is a floating currency; it has largely tracked the EUR at approximately PLN 4.2-4.3 to EUR 1 in recent years and PLN 3.7 – 3.8 to USD 1.  Foreign exchange is available through commercial banks and exchange offices.  Payments and remittances in convertible currency may be made and received through a bank authorized to engage in foreign exchange transactions, and most banks have authorization.  Foreign investors have not complained of significant difficulties or delays in remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties, or management fees.  Foreign currencies can be freely used for settling accounts.

Poland provides full IMF Article VIII convertibility for currency transactions.  The Polish Foreign Exchange Law, as amended, fully conforms to OECD Codes of Liberalization of Capital Movements and Current Invisible Operations.  In general, foreign exchange transactions with the EU, OECD, and European Economic Area (EEA) are accorded equal treatment and are not restricted.

Except in limited cases which require a permit, foreigners may convert or transfer currency to make payments abroad for goods or services and may transfer abroad their shares of after-tax profit from operations in Poland.  In general, foreign investors may freely withdraw their capital from Poland, however, the November 2018 tax bill included an exit tax.  Full repatriation of profits and dividend payments is allowed without obtaining a permit.  A Polish company (including a Polish subsidiary of a foreign company), however, must pay withholding taxes to Polish tax authorities on distributable dividends unless a double taxation treaty is in effect, which is the case for the United States.  Changes to the withholding tax in the 2018 tax bill increased the bureaucratic burden for some foreign investors (see Section 2).  The United States and Poland signed an updated bilateral tax treaty in February 2013 that the United States has not yet ratified.  As a rule, a company headquartered outside of Poland is subject to corporate income tax on income earned in Poland, under the same rules as Polish companies.

Foreign exchange regulations require non-bank entities dealing in foreign exchange or acting as a currency exchange bureau to submit reports electronically to NBP at http://sprawozdawczosc.nbp.pl .  An exporter may open foreign exchange accounts in the currency the exporter chooses.

Remittance Policies

Poland does not prohibit remittance through legal parallel markets utilizing convertible negotiable instruments (such as dollar-denominated Polish bonds in lieu of immediate payment in dollars).  As a practical matter, such payment methods are rarely, if ever, used.

Sovereign Wealth Funds

The Polish Development Fund (PFR) is often referred to as Poland’s Sovereign Wealth Fund.   PFR is an umbrella organization pooling resources of several governmental agencies and departments, including EU funds.  A strategy for the Fund was adopted in September 2016, and it was registered in February 2017.  PFR supports the implementation of the Responsible Development Strategy.

The PFR operates as a group of state-owned banks and insurers, investment bodies, and promotion agencies.  The budget of the PFR Group initially reached PLN 14 billion (USD 3.5 billion), which managers estimate is sufficient to raise capital worth PLN 90-100 billion (USD 22-25 billion).  Various actors within the organization can invest through acquisition of shares, through direct financing, seed funding, and co-financing venture capital.  Depending on the instruments, PFR expects different rates of return.

In July 2019, the President of Poland signed the Act on the System of Development Institutions.  Its main goal is to formalize and improve the cooperation of institutions that make up the PFR Group, strengthen the position of the Fund’s president and secure additional funding from the Finance Ministry.  The group will have one common strategy.  The introduction of new legal solutions will increase the efficiency and availability of financial and consulting instruments.  An almost four-fold increase in the share capital will enable PFR to significantly increase the scale of investment in innovation and infrastructure and will help Polish companies expand into foreign markets.  While supportive of overseas expansion by Polish companies, the Fund’s mission is domestic.

PFR plans to invest PLN 2.2 billion (USD 520 million) jointly with private-equity and venture-capital firms and PLN 600 million (USD 140 million) into a so-called fund of funds intended to kickstart investment in midsize companies.

Since its inception, PFR has carried out over 30 capital transactions, investing a total of PLN 8.3 billion (approx. USD 2 billion) directly or through managed funds.  PFR, together with the support of other partners, has implemented investment projects with a total value of PLN 26.2 billion (approx. USD 6.5 billion).  The most significant transactions carried out together with state-controlled insurance company PZU S.A. include the acquisition of 32.8 percent of the shares of Bank Pekao S.A. (PFR’s share is 12.8 percent); the acquisition of 100 percent of the shares in PESA Bydgoszcz S.A. (a rolling stock producer); and the acquisition of 99.77 percent of the shares of Polskie Koleje Linowe S.A.  PFR has also completed the purchase, together with PSA International Ptd Ltd and IFM Investors, of DCT Gdansk, the largest container terminal in Poland (PFR’s share is 30 percent).

In April 2020, the President of Poland signed into law an amendment to the law on development institution systems, expanding the competencies of PFR as part of the government’s Anti-Crisis Shield.  The amendment expands the competences of PFR so that it can more efficiently support businesses in the face of the coronavirus epidemic.  The fund will provide PLN 100 billion (USD 25 billion), in financial support for companies, known as the Financial Shield.

Poland’s Ministry of Funds and Regional Development supports implementation of responsible business conduct (RBC) and corporate social responsibility (CSR) programs.  The Ordinance of the Minister of Investment and Development of May 10, 2018, established working groups responsible for sustainable development and corporate social responsibility.  The chief function of the working groups is to create space for dialogue and exchange of experiences between the public administration, social partners, NGOs, and the academic environment in CSR/RBC.  Experts cooperate within 5 working groups: 1) Innovation for CSR and sustainable development; 2) Business and human rights; 3) Sustainable production and consumption; 4) Socially responsible administration, and 5) Socially responsible universities.  The greater team issues recommendations concerning implementation of the CSR/RBC policy, in particular the objectives of the Strategy for Responsible Development – a strategic national policy document.

In 2017, on the initiative of the then existent Ministry of Economic Development, a partnership was established for the translation into Polish of the Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector.  The parties involved included representatives of the business sector, industry organizations and NGOs.  The Polish version of the Guidelines was announced on June 29, 2018.  The document, available on the OECD NCP website , is a practical tool explaining how to implement the principles of due diligence, taking into account risks related to child labor, forced labor, water use, hazardous waste, etc.

In May 2017, the Council of Ministers adopted the National Action Plan (NAP) for the Implementation of the United Nations Guiding Principles on Business and Human Rights 2017-2020 (UNBHR-GPs).  In December 2018, the Midterm report from the implementation of National Action Plan for UN Business and Human Rights Guidelines was adopted by the Council of Ministers.  Here is the link to this document: https://www.gov.pl/documents/1149181/1150183/Raport_ percentC5 percent9Ar percentC3 percentB3dokresowy_z_realizacji_KPD.pdf/029a9586-2f1a-e655-4d18-00b6abe4a5a1 

An increasing number of Polish enterprises is implementing the principles of CSR/RBC in their activities.  One of these principles is to openly inform the public, employees, and local communities about the company’s activities by publishing non-financial reports.  Sharing experience in the field of integration of social and environmental factors in everyday business activities helps build credibility and transparency of the Polish market.

In Poland, provisions relating to responsible business conduct are contained within the Public Procurement law and are the result of transposition of very similar provisions contained in the EU directives.  For example, there is a provision for reserved contracts, where the contracting authority may limit competition for sheltered workshops and other economic operators whose activities include social and professional integration of people belonging to socially marginalized groups.

Independent organizations including NGOs, business and employee associations promote CSR in Poland.  The Responsible Business Forum (RBF), founded in 2000, is the oldest and largest NGO in Poland focusing on corporate social responsibility:  http://odpowiedzialnybiznes.pl/english/ .  CSR Watch Coalition Poland, part of the OECD Watch international network aims to advance respect for human rights in the context of business activity in Poland in line with the spirit of the UNBHR-GPs and the OECD Guidelines for Multinational Enterprises (MNEs): http://pihrb.org/koalicja/ 

Research shows that sustainability and CSR are increasingly translating into consumer choices in Poland.  According to SW Research for Stena Recycling, nearly 70 percent of Poles would like their favorite products to come from sustainable production and are willing to switch to more sustainably produced products.

Starting in 2018, approximately 300 Polish companies were required to publish a non-financial information statement alongside their business activity report.  This requirement is tied to the January 26, 2017, amendment of the Act on Accounting, which implements the directive 2014/95/UE into Polish law.  The rules of the act concern companies that fulfill two out of the three of the following criteria: the average annual number of employed persons numbers over 500; the company’s balance sheet totals over PLN 85 million (approx. USD 30 million), or gross earnings from the sale of commodities and products for the fiscal year amount to at least PLN 170 million (approx. USD 46 million).  Many companies voluntarily compile CSR activity reports based on international reporting standards.

In February 2020, the Responsible Business Forum presented its 2019 “Responsible Business in Poland. Good Practices” report, which is the most comprehensive CSR review in Poland, with a record number of responsible business activities featured.  In total, the 2019 report contains 1,696 practices reported by 214 companies.  Environmental practices are the most dynamically growing area – an increase of over 35% in relation to the previous report.  Examples of activities include activities related to reducing the consumption of plastic, a circular economy, conservation of biodiversity, environmental education, and counteracting the climate crisis.  Poland maintains a National Contact Point (NCP) for OECD Guidelines for Multinational Enterprises: https://www.gov.pl/web/fundusze-regiony/krajowy-punkt-kontaktowy-oecd 

The NCP promotes the OECD MNE Guidelines through seminars and workshops.  Investors can obtain information about the Guidelines and their implementation through Regional Investor Assistance Centers.

Information on the OECD NCP activities is under this link:

https://www.gov.pl/web/fundusze-regiony/oecd-ncp-activities 

Poland is not a member of the Extractive Industries Transparency Initiative (EITI) or the Voluntary Principles on Security and Human Rights.  The primary extractive industries in Poland are coal and copper mining.  Onshore, there is also hydrocarbon extraction, primarily conventional natural gas, with limited exploration for shale gas.  The Polish government exercises legal authority and receives revenues from the extraction of natural resources and from infrastructure related to extractive industries such as oil and gas pipelines through a concessions-granting system, and in most cases through shareholder rights in state-owned enterprises.  The Polish government has two revenue streams from natural resources: 1) from concession licenses; and 2) from corporate taxes on the concession holders.  License and tax requirements apply equally to both state-owned and private companies.  Natural resources are brought to market through market-based mechanisms by both state-owned enterprises and private companies.

Poland has laws, regulations, and penalties aimed at combating corruption of public officials and counteracting conflicts of interest.  Anti-corruption laws extend to family members of officials and to members of political parties who are members of parliament.  There are also anti-corruption laws regulating the finances of political parties.  According to a local NGO, an increasing number of companies are implementing voluntary internal codes of ethics.  In 2019, the Transparency International (TI) index of perceived public corruption ranked Poland as the 41^st (five places lower than in 2018 TI index) least corrupt among 180 countries/territories.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

The Polish Central Anti-Corruption Bureau (CBA) and national police investigate public corruption.  The Justice Ministry and the police are responsible for enforcing Poland’s anti-corruption criminal laws.  The Finance Ministry administers tax collection and is responsible for denying the tax deductibility of bribes.  Reports of alleged corruption most frequently appear in connection with government contracting and the issuance of a regulation or permit that benefits a particular company.  Allegations of corruption by customs and border guard officials, tax authorities, and local government officials show a decreasing trend.  If such corruption is proven, it is usually punished.

Overall, U.S. firms have found that maintaining policies of full compliance with the U.S. Foreign Corrupt Practices Act (FCPA) is effective in building a reputation for good corporate governance and that doing so is not an impediment to profitable operations in Poland.  Poland ratified the UN Anticorruption Convention in 2006 and the OECD Convention on Combating Bribery in 2000.  Polish law classifies the payment of a bribe to a foreign official as a criminal offense, the same as if it were a bribe to a Polish official.

At its March 2018 meeting, the OECD Working Group on Bribery urged Poland to make progress on carrying out key recommendations that remain unimplemented more than four years after its Phase 3 evaluation in June 2013.

For more information on the implementation of the OECD Anti-Bribery Convention in Poland, please visit:  http://www.oecd.org/daf/anti-bribery/poland-oecdanti-briberyconvention.htm 

Resources to Report Corruption

Centralne Biuro Antykorupcyjne (Central Anti-Corruption Bureau – CBA)
al. Ujazdowskie 9, 00-583 Warszawa
+48 800 808 808
kontakt@cba.gov.pl
www.cba.gov.pl ; link: Zglos Korupcje (report corruption)

The Public Integrity Program of the Batory Foundation, which served as a non-governmental watchdog organization, has been incorporated into a broader operational program (ForumIdei) run by the Foundation.  The Batory Foundation continues to monitor public corruption, carries out research into this area and publishes reports on various aspects of the government’s transparency.  Contact information for Batory Foundation is: batory@batory.org.pl; 22 536 02 20.

Poland is a politically stable country.  Constitutional transfers of power are orderly.  The last presidential elections took place in June 2020 and parliamentary elections took place in October 2019; observers considered both elections free and fair.  Prime Minister Morawiecki’s government was re-appointed in November 2019.  Local elections took place in October 2018.  Elections to the European Parliament took place in May 2019.  The next parliamentary elections are scheduled for the fall of 2023.  There have been no confirmed incidents of politically motivated violence toward foreign investment projects in recent years.  Poland has neither insurgent groups nor belligerent neighbors.  The Overseas Private Investment Corporation (OPIC) provides political risk insurance for Poland but it is not frequently used, as competitive private sector financing and insurance are readily available.

Poland has a well-educated, skilled labor force.  Productivity, however, remains below OECD averages but is rising rapidly and unit costs are competitive.  In the last quarter of 2019, according to the Polish Central Statistical Office (GUS), the average gross wage in Poland was PLN 5,198 (approx. USD 1,293 per month) compared to 4,864 (approx. USD 1,200) in the last quarter of 2018.  Poland’s economy employed roughly 16.619 million people in the third quarter of 2019.  Eurostat measured total Polish unemployment at 2.9 percent, with youth unemployment at 7.9 percent in December 2019.  GUS reports unemployment rates differently and tends to be higher than Eurostat figures.  Unemployment varied substantially among regions: the highest rate was 8.6 percent (according to GUS ) in the north-eastern part of Poland (Warmia and Mazury), and the lowest was 2.8 percent (GUS) in the western province of Wielkopolska, at the end of the third quarter of 2019.  Unemployment was lowest in major urban areas.  Polish workers are usually eager to work for foreign companies, in Poland and abroad.  Since Poland joined the EU, up to two million Poles have sought work in other EU member states.

A January 2018 revision of the Law on Promoting Employment and Labor Market Institutions introduced greater regulatory control over the “simplified procedure” of hiring foreigners from six countries (Ukraine, Belarus, Georgia, Armenia, Moldova and Russia), which allows foreigners from these countries to work in Poland without a work permit for six months.  According to the Ministry of Family, Labor and Social Policy, 1.6 million “simplified procedure” work declarations were registered in 2019, of which almost 1.5 million were for Ukrainian workers (approximately the same number as a year earlier).  Under the revised procedure, local authorities may verify if potential employers have actual job positions for potential foreign workers.  The law also authorizes local authorities to refuse declarations from employers with a history of abuse, as well as to ban employers previously convicted of human trafficking from hiring foreign workers.  The January 2018 revision also introduced a new type of work permit for foreign workers, the so-called seasonal work permit, which allow for legal work up to nine months in agriculture, horticulture, tourism and similar industries.  Ministry of Family, Labor and Social Policy statistics show that during 2019, 183,941 seasonal work permits of this type were issued, of which 179,466 went to Ukrainians.  Ministry of Family, Labor and Social Policy statistics also show that in 2019, 330,495 thousand Ukrainians received work permits, compared with 238,334 in 2017.

Polish companies suffer from a shortage of qualified workers.  According to a 2020 report by the Ministry of Family, Labor and Social Policy, several industries suffer shortages, including the construction, manufacturing, and transportation industries.  The most sought-after workers in the construction industry include concrete workers, steel fixers, carpenters, and bricklayers.  Manufacturing companies seek welders, woodworkers, machinery operators, locksmiths, electricians, and electromechanical engineers.  Employment has expanded in service industries such as information technology, manufacturing, and administrative and support service activities.  The business process outsourcing industry in Poland has experienced dynamic growth.  The state-owned sector employs about a quarter of the work force, although employment in coal mining and steel are declining.

Since 2017, the minimum retirement age for men has been 65, and 60 for women.  Labor laws differentiate between layoffs and dismissal for cause (firing).  In the case of layoffs (when workers are dismissed for economic reasons in companies which employ more than 20 employees), employers are required to offer severance pay.  In the case of dismissal for cause, the labor law does not require severance pay.

Most workers hired under labor contracts have the legal right to establish and join independent trade unions and to bargain collectively.  In January 2020, the revised law on trade unions entered into force, which expanded the right to form a union to persons who entered into an employment relationship based on a civil law contract and to persons who were self-employed.   Trade union influence is declining, though unions remain powerful among miners, shipyard workers, government employees, and teachers.  The Polish labor code outlines employee and employer rights in all sectors, both public and private, and has been gradually revised to adapt to EU standards.  However, employers tend to use temporary and contract workers for jobs that are not temporary in nature.  Employers have used short-term contracts because they allow firing with two weeks’ notice and without consulting trade unions.  Employers also tend to use civil instead of labor contracts because of ease of hiring and firing, even in situations where work performed meets all the requirements of a regular labor contract.

Polish law requires equal pay for equal work and equal treatment with respect to signing labor contracts, employment conditions, promotion, and access to training.  The law defines equal treatment as nondiscrimination in any way, directly or indirectly on the grounds of gender, age, disability, race, religion, nationality, political opinion, ethnic origin, denomination, sexual orientation, whether or not the person is employed temporarily or permanently, full time or part time.

The 1991 Law on Conflict Resolution defines the mechanism for labor dispute resolution.  It consists of four stages: first, the employer is obliged to conduct negotiations with employees; the second stage is a mediation process, including an independent mediator; if an agreement is not reached through mediation, the third stage is arbitration, which takes place at the regional court; the fourth stage of conflict resolution is a strike.

The Polish government adheres to the International Labor Organization’s (ILO) core conventions and generally complies with international labor standards.  However, there are several gaps in enforcing these standards, including legal restrictions on the rights of workers to form and join independent unions.  Cumbersome procedures make it difficult for workers to meet all of the technical requirements for a legal strike.  The law prohibits collective bargaining for key civil servants, appointed or elected employees of state and municipal bodies, court judges, and prosecutors.  There were some limitations with respect to identification of victims of forced labor.  Despite prohibitions against discrimination with respect to employment or occupation, such discrimination occurs.  Authorities do not consistently enforce minimum wage, hours of work, and occupational health and safety, either in the formal or informal sectors.

The National Labor Inspectorate (NLI) is responsible for identifying possible labor violations; it may issue fines and notify the prosecutor’s office in cases of severe violations.  According to labor unions, however, the NLI does not have adequate tools to hold violators accountable and the small fines imposed as punishment are an ineffective deterrent to most employers.

The United States has no FTA or preference program (such as GSP) with Poland that includes labor standards.

* In Poland, the National Bank of Poland (NBP) collects data on FDI.  An annual FDI report and data are published at the end of the following year.  GDP data are published by the Central Statistical Office.  Final annual data are available at the end of May of the following year.

Results of table are consistent with the data of the National Bank of Poland (NBP).  NBP publishes FDI data in October/November.
A number of foreign countries register businesses in the Netherlands, Luxemburg and Cyprus, hence results for these countries include investments from other countries/economies.

Note: NBP publishes only total amounts of portfolio investment assets.
Results of the table are consistent with data from the National Bank of Poland (NBP). NBP publishes FDI data in October/November.
A number of foreign countries register businesses in the Netherlands, Luxemburg and Cyprus hence results for these countries include investments from other countries/economies.