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Poland

Executive Summary

In the thirty years since Poland discarded communism and the fifteen years since it joined the European Union (EU), Poland’s investment climate has continued to grow in attractiveness to foreign investors, including U.S. investors.  Poland’s economy has experienced a long period of uninterrupted economic expansion since 1992. In 2018, Poland’s economy again gained momentum with approximately 5 percent growth as consumption continued to increase and spending of EU funds accelerated public investment.  Most economists, however, predict a slowdown in 2019 to around 4 percent gross domestic product (GDP) growth. Poland moved from middle to high-income status according to the FTSE Russell’s annual classification report. However, some proposed economic legislation continued to dampen optimism in some sectors (e.g. retail, media, energy, digital services), and investors have pointed to lower predictability and the outsized role of state-owned and state-controlled companies in the Polish economy as an impediment to long-term balanced growth.  

Prospects for future growth, driven by domestic demand and inflows of EU funds from the 2014-2020 financial framework, will continue to attract investors seeking access to Poland’s dynamic market of over 38 million people, and to the broader EU market of over 500 million.  Poland’s well-diversified economy reduces its vulnerability to external shocks, although it depends heavily on the EU as an export market. Foreign investors also cite Poland’s well-educated work force as a major reason to invest, as well as its proximity to major markets such as Germany.  U.S. firms represent one of the largest groups of foreign investors in Poland. The volume of U.S. investment in Poland is estimated at around USD 6 billion by the national bank of Poland in 2017, although including indirect investment flows through subsidiaries may place it as high as USD 43 billion, according to the American Chamber of Commerce in Poland.  Historically foreign direct investment (FDI) was largest in the automotive and food processing industries, followed by machinery and other metal products and petrochemicals. “Shared office” services such as accounting, legal, and information technology services, including research and development (R&D), are Poland’s fastest-growing sectors for foreign investment.  The government seeks to promote domestic production and technology transfer opportunities in awarding military tenders. There are also some investment and export opportunities in the energy sector—both immediate (natural gas), and longer term (nuclear, energy grid upgrades, and offshore wind)—as Poland seeks to diversify its energy mix and reduce air pollution.

Defense is another promising sector for U.S. exports. The Polish government is actively modernizing its military inventory, presenting good opportunities for U.S. defense industry. In 2018, it signed its largest-ever defense contract when committing to purchase the PATRIOT missile defense system, and in 2019 it signed a contract to buy the High Mobility Artillery Rocket System (HIMARS).  In February 2019, the Defense Ministry announced its updated technical modernization plan listing its top programmatic priorities, with defense modernization budgets forecasted to increase from approximately USD 3.3 billion in 2019 to approximately USD 7.75 billion in 2025.  Information technology and cybersecurity along with infrastructure also show promise, as Poland’s municipalities focus on smart city networks. A USD 10 billion central airport project may present opportunities for U.S. companies in project management, consulting, communications, and construction. The government seeks to expand the economy by supporting high-tech investments, increasing productivity and foreign trade, and supporting entrepreneurship, scientific research, and innovation through the use of domestic and EU funding.

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 has proposed a new law to protect household consumers from rising electricity prices, but the bill was at odds with the European Commission (EC) for the lack of notification of what amounted to state aid measures. 

Some organizations, notably private business associations and labor unions, have raised concerns that policy changes have been introduced quickly and without broad consultation, increasing uncertainty about the stability and predictability of Poland’s business environment.  Some examples include a one-time bank holiday (to celebrate 100 years of Poland regaining independence) with less than a month warning, and a major tax overhaul passed after firms had already prepared budgets for the coming year. Previous proposals to introduce legislation on media de-concentration raised concern among foreign investors in the sector; however, these proposals seem to be stalled for the time being.  

The Polish tax system underwent many changes over the last three years with the aim of increasing budget revenues, including more effective tax auditing and collection.  The November 2018 tax bill included a number of changes important for foreign investors, such as penalties for aggressive tax planning, changes to the withholding tax, incentives for R&D, and an exit tax on corporations and individuals.  

As the largest recipient of EU funds (which contribute an estimated 1 percentage point to Poland’s GDP growth per year), any significant decrease in EU cohesion spending would have a large negative impact on Poland’s economy.  Draft EU budgets foresee a 24 percent decrease in Poland’s Cohesion funds in the next cycle. Also, observers are closely watching the European Commission’s proceedings under Article 7 of the Lisbon Treaty, initiated in December 2017, regarding rule of law and judicial reforms.  These include the introduction of an extraordinary appeal mechanism in the enacted Supreme Court Law, which could potentially affect economic interests, in that final judgments issued since 1997 can now be challenged and overturned in whole or in part, including some long-standing judgments on which economic actors have relied.  

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 60/100

36 of 180

http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 33 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 41.70 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2017 USD 12,604 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2017 USD 12,730 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

3. Legal Regime

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 decision, 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 Entrepreneurship and Technology.  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 years.  The government introduced a central online system to provide access to the general public to regulatory impact assessment (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 can 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., 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 external audit agency (NIK) reports.  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, http://legislacja.rcl.gov.pl/   and Parliament’s webpage: http://www.sejm.gov.pl/Sejm8.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. Poland’s supreme audit institution (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 budget encompasses only part of the public finances sector.  In 2018, Poland continued its work to reform the budgetary process to increase the effectiveness and efficiency of spending and to simplify the budget structure. The completion of the first stage of these efforts is expected by the end of 2019.

International Regulatory Considerations  

Since Poland’s EU accession (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 Commission (EC) for the lack of notification of what amounted to state aid measures before they took effect.  The Polish energy market regulator (URE) also criticized the proposed bill for household power bills not reflecting the market rate and claimed the proposed law threatened URE’s independence.

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 the 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 is a member-founder of International Organization for Standardization (ISO) and a member of International Electro-technical Commission (IEC) since 1923.

PKN also cooperates with ASTM International (American Society for Testing and Materials) (ASTM) International and the World Trade Organization’s WTO Agreement on Technical Barriers to Trade (WTO/TBT).  Poland has been a member of WTO since July 1, 1995, and was a member of GATT since 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 Agreement on Technical Barriers to Trade 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

During the year the government continued to implement and introduce new measures related to the judiciary that drew strong criticism from some legal experts, NGOs, and international organizations.  Some observers have criticized in particular the introduction of an extraordinary appeal mechanism in the recently enacted Supreme Court Law, which they believe could affect economic interests, in that final judgments issued since 1997 could be challenged and overturned in whole or in part over the next three years, including some long-standing judgments on which economic actors have relied.  As of February 6, 2019, the Justice Minister has submitted five extraordinary complaints to the Chamber. The first complaints are to be reviewed on April 3.

In December 2017, the European Commission triggered a disciplinary proceeding under Article 7 of the Lisbon Treaty for what it considered “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.

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 in response to the December 2017 European Commission rule of law recommendation and infringement procedure. In December 2017, the European Commission triggered a disciplinary proceeding under Article 7 of the Lisbon Treaty for what  the Commission considered determined 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. 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 August 2, 2018, the Polish Supreme Court ruled to suspend further implementation of the mandatory retirement age provisions of the amended Supreme Court law, and requested that the European Court of Justice rule on whether these provisions comply with EU law. The Polish President Andrzej Duda refused to acknowledge the Supreme Court’s suspension of the mandatory retirement provisions. On September 24, the European Commission referred the country’s amended Supreme Court law to the European Court of Justice (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.”  The European Commission asked the ECJ to review the law and order interim measures to restore the Supreme Court to its composition before the revised law was implemented. In September and October, the president continued to implement the amended Supreme Court law by appointing judges to the newly created disciplinary and extraordinary appeals chambers and to positions vacated by voluntarily retired judges. Some judicial experts, NGOs, and international organizations saw the Polish President’s appointments as an attempt to preempt any adverse ruling by the ECJ. On October 19, the ECJ issued an interim injunction requiring the government to reinstate those judges who had been retired under the amended law.  On November 19, 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. By the end of 2018, the ECJ had not announced a date for considering the European Commission’s case against Poland’s Supreme Court law.

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 International Court of Justice (ICJ), 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 in intellectual property right matters), 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. One of the reasons for delays in the recognition of judgments of foreign courts is 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:

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 set to change to be in line with EU norms in 2019 with implementation of EU directive 2019/1.

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:

In 2015, the President of UOKiK was granted the power to impose significant  fines on people in management positions in companies that violate the prohibition of anticompetitive agreements.  The recently adopted 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 526,000) and, in the case of managers in the financial sector, up to PLN 5 million (approx. USD 1.32 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 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 UNCTAD database   lists four cases involving a U.S. party.  The majority of Poland’s investment disputes are with other EU member states.  According to the UNCTAD database, over the last decade, there have been some 19 known disputes with other 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, however, in practice; 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 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,  is 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 5 million zloty (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.

In 2018, the Court of Arbitration at the Polish Chamber of Commerce in Warsaw, the biggest permanent arbitration court in Poland, adjusted its arbitration rules to the latest international standards, implementing new provisions on expedited procedure. In recent years, numerous efforts have been made to increase use of of arbitration in Poland.  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.

On April 3, 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 25 for ease of resolving insolvency in the World Bank’s Doing Business report 2019.  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  

6. Financial Sector

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 35 percent of GDP, but management want to increase it  increase it to 50 percent in 2023. 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 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 will not become a law, however, it will set 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.

High-risk venture capital funds are becoming an increasingly important segment of the capital market.  According to Bain and Company/CEE, PE/VC investments in Poland in 2018 dropped to EUR 2.0 billion from EUR 2.2 billion in 2017.  The market is still shallow 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. Inflation remained below the National Bank of Poland’s medium-term target rate of 2.5 percent in 2018. The Monetary Policy Council maintains a dovish tone, saying they expect to raise raises in late 2020 at the earliest.

Confidence in the banking regulator was shaken in 2018 by allegations of corruption that led to the resignation of the head of the Polish Financial Supervisory Authority (KNF).  Recent changes in the governance structure of the 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.  A legislative amendment improved funding of the KNF by granting greater budgetary independence. It also enlarged the composition of the Authority, increasing the number of government representatives, but only four out of nine voting members are designated by the government.  Additionally, KNF’s supplementary powers 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 predominantly privately owned, with the state controlling about one third of the banking sector and the biggest insurance company. Poland had 34 locally incorporated commercial banks at the end of August 2018, according to the KNF.  The number of locally-incorporated banks has been declining over the last five years. Poland’s 550 cooperative banks play a secondary role in the financial system, but are widespread. The state owns eight banks (up from five in February 2016). 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.  The KNF welcomes this consolidation process, seeing is as “natural” way to create an efficient banking sector.

The Polish National Bank (NBP) is Poland’s central bank.  At the end of 2018, 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.  Between January-June 2018 non-performing loans were seven percent of portfolios. According to 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. This was confirmed by a stress test undertaken by the European Banking Authority in November 2018.  Two Polish banks were among the most stress-resistant of all 50 banks participating in the test. Profitability increased slightly in 2018 as a result of rapid GDP growth, a pickup in investments and low provisioning costs, and remained at a reasonable level (ROE at 7.5 percent after nine months of 2018).  Nevertheless, profits remain under pressure due to low interest rates, the unsolved 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).

In general, supervision and risk management contained excessive risk-taking.  Since 2015, the Polish government established an active campaign aiming to increase the market share of national financial institutions.  In 2017, for the first time Polish investors’ share in the banking sector has reached over 50 percent of the sector’s total assets, and exceeded the foreign share in the sector.  The State controls about 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 whole financial sector. There is concern that lending decisions at state-owned banks could come under political pressure, especially after allegations of questionable loans being issued by a newly state-owned bank in 2018.  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

The national bank (NBP) did not provide information on correspondent banking relationships in 2018.  In 2017, NBP had relationships with 25 banks 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 3.77 to UDS 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 freely be used for settling accounts.

Poland provides full IMF Article VIII convertibility for current transactions.  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 (see Section 2). Full repatriation of profits and dividend payments is allowed without obtaining a permit.  However, a Polish company (including a Polish subsidiary of a foreign company) 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 (FX) regulations require non-bank entities dealing in foreign exchange or acting as a currency exchange bureau to submit reports electronically to the National Bank of Poland (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 government does not maintain a Sovereign Wealth Fund.  However, the government established the Polish Development Fund (PFR), 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 at which point the Ministry of Economic Development took supervision over the Fund (this ministry was re-named the Investment and Development Ministry in 2018).  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 PFR group initially reached PLN 14 billion, which managers estimate is sufficient to raise capital worth PLN 90-100 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. PFR intends to launch a new fund of funds in 2018 with the aim of financing capital investments valued at PLN 50-100 million (USD 14.7 – 29.4 million).  In March 2019, the Entrepreneurship Ministry presented a draft law, which aimed at formalizing and improving 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. An almost four-fold increase in the share capital will enable PFR to significantly increase the scale of investment in innovation, infrastructure and help Polish companies expand into foreign markets. While supporting overseas expansion of Polish companies, the fund’s mission is domestic.  Until now, the group’s operations had been based on the strategy of responsible development, not legal regulations.

9. Corruption

Resources to Report Corruption

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 2018, the Transparency International (TI) index of perceived public corruption ranked Poland as the 36th (the same as in 2017) 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)

Ujazdowskie 9, 00-583 Warszawa
+48 800 808 808
kontakt@cba.gov.pl
www.cba.gov.pl  ; link: Zglos Korupcje (report corruption)

The Batory Foundation, Public Integrity Program serves as a non-governmental watchdog organization.  The foundation can be reached by whistleblowers at +48 (22) 536 0257 or op@batory.org.pl.

10. Political and Security Environment

Poland is a politically stable country.  Constitutional transfers of power are orderly.  The last presidential elections took place in May 2015 and parliamentary elections took place in October 2015; observers considered both elections free and fair.  The new government formed in November 2015. There was a change of the Prime Minister in December 2017 and a major government reshuffle in January 2018. Local elections took place in October 2018. Elections to the European Parliaments will take place in May 2019.  The next parliamentary elections are scheduled for the fall of 2019. The next presidential election is scheduled for May 2020.

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.

11. Labor Policies and Practices

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 2018, according to the Polish Central Statistical Office (GUS) the average gross wage in Poland was PLN 4,864 (approx. USD 1,293 per month)  compared to 4,517 (approx. USD 1,200) in the last quarter of 2017.  Poland’s economy employed roughly 16.617 million people in the third quarter of 2018. Eurostat measured total Polish unemployment at 3.7 percent, with youth unemployment at 11.5 percent in December 2018.  GUS reports unemployment rates differently and tends to be higher than Eurostat figures.  Unemployment varied substantially between regions, the highest rate (9.9 percent according to GUS ) in the north-eastern part of Poland (Warmia and Mazury), and the lowest at 3.2 percent  (GUS ) in the western province of Wielkopolska, in the third quarter of 2018.  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 2018, of which almost 1.5 million were for Ukrainian workers (compared to 1.7 million a year earlier). Under the revised procedure, local authorities may verify if potential employers have actual job positions for potential foreigner 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 of the law on promoting employment and labor market institutions introduced also 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 and tourism and similar industries. The Ministry of Family, Labor and Social Policy statistics show that during 2018 121,436 seasonal work permits of this type were issued, of which 119,929 went to Ukrainians. Ministry of Family, Labor and Social Policy statistics also show that in 2018, 238,334 thousand Ukrainians received  work permits, compared with 192, 547 in 2017.

At the same time, the Ministry of Family, Labor and Social Policy statistics show a growing number of work permits issued to workers from South and East Asia.  For example, the number of work permits for the Nepalese workers has grown from 7,000 in 2017 to 19,912 in 2018. While the the number of work permits for Bengali workers increased from 2,412 in 2017 to 8,341 in 2018.

Despite this influx of foreign workers, Polish companies suffer from a shortage of qualified workers.  The most sought-after specialists are engineers, IT specialists, salespersons, project managers, and technical advisors.  Manufacturing companies seek welders, bricklayers, and machinery operators.  Employment has expanded in service industries such as information technology, manufacturing, 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.

In 2017, a retirement law entered into force that lowered the minimum retirement age for men (from 67 to 65) and for women (from 67 to 60).  The Parliament passed a bill on December 15, 2017, abolishing the limit beyond which Poles do not pay pension or disability contributions, a move which would have  increased social insurance contributions by 5.4 billion PLN/year (USD 1.5 billion). The Constitutional Court ruled the law unconstitutional on November 14, 2018.

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.  On July 25, 2018, the president signed the revision of the law on trade unions to expand 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.  The law is the result of the 2015 the Constitutional Court ruling that found any limitation to the freedom of association violates the constitution, and required the government and parliament to amend the law on trade unions.  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 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.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2017 $518,587 2017 $526,466 http://www.worldbank.org/en/country  
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2017 $5,729 2017 $12,604 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Host country’s FDI in the United States ($M USD, stock positions) 2017 $812.6 2017 ** BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Total inbound stock of FDI as % host GDP 2017 46.0 2017 48.5 UNCTAD data available at

https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  

* In Poland the National Bank of Poland (NBP) collects data on FDI. Annual FDI report/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.

**Data are suppressed to avoid disclosure of data of individual companies


Table 3: Sources and Destination of FDI (as of end of 2017)

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 239,624 100% Total Outward 30,322 100%
Netherlands 46,157 19.3% Luxemburg 6,615 21.8%
Germany 41,883 17.5% Czech Republic 3,282 10.8%
Luxemburg 33,186 13.8% Switzerland 2,459 8.1%
France 21,972 9.2% Netherlands 2,372 7.8%
Spain 14,438 X% Cyprus 2,233 7.4%
“0” reflects amounts rounded to +/- USD 500,000.

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.


Table 4: Sources of Portfolio Investment (as of June 2018)

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 37,685 100% All Countries 24,017 100% All Countries 13,669 100%
Luxemburg 6,251 17% Luxemburg 5,262 4% U.S. 2,860 21%
Intl Orgs 2,557 7% Germany 1,017 3% Intl Orgs 2,557 19%
France 1,509 4% Ireland 683 3% Sweden 1,200 9%
Germany 1,349 4% Austria 665 3% Luxemburg 989 7%
Sweden 1,240 3% Italy 644 3% France 903 7%

Note: NBP publishes only total amounts of portfolio investment assets.

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 or Cyprus hence results for these countries include investments from other countries/economies.

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