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, Labor, 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 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 Parliament for debate as “citizens’ bills” if authors collect 100,000 signatures in support for the draft legislation. 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 Ombudsperson, 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 Ombudsperson’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/2020-fiscal-transparency-report/
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 2021, Poland’s public finances will continue to 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.
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.
Legal System and Judicial Independence
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 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. There are many foreign court judgments, however, 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.)
Since coming to power in 2015, the PiS government has pursued far-reaching reforms to Poland’s judicial system. The reforms have led to legal disputes with the European Commission over threats to judicial independence. The reforms have also drawn criticism from legal experts, NGOs, and international organizations. Poland’s government contends the reforms are needed to purge the old Communist guard and increase efficiency and democratic oversight in the judiciary.
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. On February 25, 2021, the Sejm passed an amendment to the law on the Supreme Court, which extended by two years (until April 2023) the deadline for submitting extraordinary complaints. The bill is now waiting for review by the opposition-controlled Senate. During 2020, the Extraordinary Appeals Chamber received 217 new complaints. During 2020, the Chamber reviewed 166 complaints, of which 18 were accepted, and 13 were rejected. Seventy-three cases were pending at the end of 2020 the status of the remaining cases was unavailable.
On April 8, 2020, the European Court of Justice (ECJ) issued interim measures ordering the government to suspend the work of the Supreme Court Disciplinary Chamber with regard to disciplinary cases against judges. The ECJ is evaluating an infringement proceeding launched by the European Commission in April 2019 and referred to the ECJ in October 2019. The commission argued that the country’s disciplinary regime for judges “undermines the judicial independence of…judges and does not ensure the necessary guarantees to protect judges from political control, as required by the Court of Justice of the EU.” The commission stated the disciplinary regime did not provide for the independence and impartiality of the Disciplinary Chamber, which is composed solely of judges selected by the restructured National Council of the Judiciary, which is appointed by the Sejm. The ECJ has yet to make a final ruling. The European Commission and judicial experts complained the government has ignored the ECJ’s interim measures.
On April 29, 2020, the European Commission launched a new infringement procedure regarding a law that came into effect on February 14, 2020. The law allows judges to be disciplined for impeding the functioning of the legal system or questioning a judge’s professional state or the effectiveness of his or her appointment. It also requires judges to disclose memberships in associations. The commission’s announcement stated the law “undermines the judicial independence of Polish judges and is incompatible with the primacy of EU law.” It also stated the law “prevents Polish courts from directly applying certain provisions of EU law protecting judicial independence and from putting references for preliminary rulings on such questions to the [European] Court of Justice.” On December 3, the commission expanded its April 29 complaint to include the continued functioning of the Disciplinary Chamber in apparent disregard of the ECJ’s interim measures in the prior infringement procedure. On January 27, 2021, the European Commission sent a reasoned opinion to the Polish government for response. If not satisfied, the Commission noted it would refer the matter to the ECJ.
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
Biznes.gov.pl is intended for people who plan to start a new business in Poland. The portal is designed to simplify the formalities of setting up and running a business. It provides up-to-date regulations and procedures for running a business in Poland and the EU; it supports electronic application submission to state institutions; and it answers questions regarding running a business. Information is available in Polish and English. https://www.biznes.gov.pl/en/przedsiebiorcy/
Competition and Antitrust 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 March 2021, the Prime Minister was still exercising his right to remove and nominate UOKiK’s presidents.
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 ($1.7 million). In 2022, the minimum amount will decrease to PLN 2 million ($510,000).
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.
As part of new COVID-related measures, the Polish Parliament adopted legislation amending the Act of July 24, 2015, on the Control of Certain Investments, introducing full-fledged foreign direct investment control in Poland and giving new responsibilities to UOKiK. Entities from outside the EEA and/or the OECD have to notify the Polish Competition Authority of the intention to make an investment resulting in acquisition, achievement or obtaining directly or indirectly: “significant participation” (defined briefly as 20 percent or 40 percent of share in the total number of votes, capital, or profits or purchasing or leasing of an enterprise or its organized part) or the status of a dominant entity within the meaning of the Act of July 24, 2015, on the Control of Certain Investments in an entity subject to protection. The new law entered into force on July 24, 2020 and is valid for 24 months.
On October 28, 2020, the government proposed new legislation by virtue of which the tasks pursued by the Financial Ombudsman will be taken over by UOKiK. According to the justification of this legislation, the objective of the draft is to enhance the efficiency of protection, in terms of both group and individual interests of financial market entities’ clients. According to the new regulations, a new position of coordinator conducting out-of-court procedures in matters of resolving disputes between financial market entities and their clients will be established. Such a coordinator will be appointed by UOKiK for a four-year term. Moreover, the new proposal provides for creating the Financial Education Fund (FEF), a special-purpose fund managed by UOKiK.
Additional provisions in the proposed legislation concern the UOKiK’s investigative powers, cooperation between anti-monopoly authorities, and changes to fine imposition and leniency programs. One of the amendments also stipulates that the President of UOKiK will be elected to a 5-year term and the dismissal of the anti-monopoly authority will only be possible in precisely defined situations, such as: legally valid conviction for a criminal offense caused by intentional conduct and the deprivation of public rights or of Polish citizenship. Adoption of these solutions is linked to the implementation of the EU’s ECN+ directive.
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=16649 (Gazprom NS2)
https://www.uokik.gov.pl/news.php?news_id=17202 (Orlen/Polska Press)
https://www.uokik.gov.pl/news.php?news_id=17198 (BPH Bank spread clauses)
Decisions made by the President of UOKiK can be searched here:
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 ($510,000) and, in the case of managers in the financial sector, up to PLN 5 million ($1.27 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.
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 three 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 16 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 ($1.27 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. Their presence reflects the need for reliable, fast and affordable alternatives to state courts in smaller disputes. Online arbitration is becoming increasingly popular with exporting companies. One of the reasons is the possibility to file claims faster for overdue payments to foreign courts.
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).
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
In order to reduce the risk of overwhelming the bankruptcy courts with an excess of cases resulting from the pandemic, changes have been introduced in the bankruptcy process for consumers, shifting part of the duties to a trustee. A second significant change is the introduction of simplified restructuring proceedings. During restructuring proceedings, a company appoints an interim supervisor and is guaranteed protection against debt collection while seeking approval for specific restructuring plans from creditors. The simplified proceedings enjoy great support among entities at risk of insolvency, but are limited in time until June 30, 2021. Some of the solutions provided in the simplified restructuring procedure are the implementation of recommendations from Directive 2019/1023 of the European Parliament and of the Council (EU) of June 20, 2019. It is likely that, taking advantage of the state of the epidemic, the government is testing new solutions, which may continue to be applied after the economic situation has returned to normal.