Latvia and the United States share a bilateral investment treaty that came into force in December 1996.  Latvia has also concluded bilateral investment agreements with Armenia, Austria, Azerbaijan, Belarus, BLEU (Belgium-Luxembourg Economic Union), Bulgaria, Canada, China, Croatia, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Israel, Kazakhstan, Korea, Kuwait, Kyrgyzstan, Lithuania, Moldova,  Netherlands, Norway, Poland, Portugal, Romania, Singapore, Slovakia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, Uzbekistan, and Vietnam.

Latvia has concluded the Treaty on Avoidance of Double Taxation with the United States, which entered into force on December 30, 1999.

Transparency of the Regulatory System

The Latvian government has amended its laws and regulatory procedures in an effort to bring Latvia’s legislation in compliance with the EU and WTO GPA requirements.  A number of legislative changes were aimed at increasing the transparency of the Latvian business environment and regulatory system.  At the same time, the massive legislative changes carried out in a short period of time have led to some laws and regulations that could be subject to conflicting interpretations.  The Latvian government has developed a good working relationship with the foreign business community (through FICIL) to streamline various bureaucratic procedures and to address legal and regulatory issues as they arise.  Additional information on the regulatory system in Latvia is available here: http://rulemaking.worldbank.org/en/data/explorecountries/latvia 

Public finance and debt obligations process is transparent. Detailed information on the national budget process is available on the website of the Latvian Ministry of Finance: https://www.fm.gov.lv/en/s/budget/ .

International Regulatory Considerations

As a member state of the EU, Latvia has incorporated European norms and standards into its regulatory system.  As a member of the WTO, Latvia has the duty to notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade.  As a member of the European Union, Latvia is a signatory to the WTO Trade Facilitation Agreement.

Legal System and Judicial Independence

Latvia has a three-tier court system comprising district (city) courts, regional courts, and the Supreme Court.  In addition, the Constitutional Court reviews the compatibility of decrees and acts of the President of the Republic, the government, and local authorities with the constitution and the law.  Unless otherwise stipulated by law, district courts are the courts of first instance in all civil, criminal, and administrative cases.  Regional courts have appellate jurisdiction over district court cases and original jurisdiction for certain cases specified in the Civil Code, such as cases on the protection of patent rights, trademarks, and geographic indicators, as well as cases on the insolvency and liquidation of credit institutions.  The Supreme Court is the highest-level court in Latvia and – depending on the origin of the case – has either de novo review of both factual and legal findings or, in instances where it is the second appellate court reviewing a case, cassation review of only legal findings.

City and regional courts are administered by the Ministry of Justice (www.tm.gov.lv ), while the Supreme Court and Constitutional Court are independent.

Many observers have voiced concerns about the length of civil cases in Latvia, and the nature and opacity of judicial rulings have led some investors to question the fairness and impartiality of some judges.  These concerns are not specific to foreign or local investors, however, and the court system is generally viewed as applying the law equally to the interests of foreign and local investors.  Although the Ministry of Justice has enacted reforms designed to reduce the backlog of cases in the lower courts, improvements in the judicial system are still needed to accelerate the adjudication of cases, to strengthen the enforcement of court decisions, and to upgrade professional standards.

Laws and Regulations on Foreign Direct Investment

Incoming foreign investment in Latvia is regulated by the Commercial Law.  The website of the Latvian Investment and Development Agency is a helpful resource for navigating the rules and procedures governing foreign investment.  (http://www.liaa.gov.lv/en/invest-latvia/investor-business-guide/operating-environment  ).

Competition and Anti-Trust Laws

Competition-related concerns are supervised by the Competition Council (CC).  More information can be accessed at:  http://www.kp.gov.lv/en 

Expropriation and Compensation

Cases of arbitrary expropriation of private property by the Government of Latvia are extremely rare.  Expropriation of foreign investment is possible in a very limited number of cases specified in the Law on Expropriation of Real Property for Public Interest.  If the owner of the property claimed by the government deems the compensation inadequate, he or she may challenge the government’s decision in a Latvian court.

Dispute Settlement

ICSID Convention and New York Convention

Latvia has been a member of the International Center for the Settlement of Investment Disputes (ICSID) since 1997 and a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1992.  Judgments of foreign arbitral courts that are made in accordance with either can therefore be enforced in Latvia.  The Civil Procedure Law stipulates that the judgments of foreign non-arbitral courts can be enforced in Latvia.

Investor-State Dispute Settlement

There have been no claims by U.S. investors under the Bilateral Investment Treaty against Latvia.

On December 22, 2017, the World Bank International Center for Settlement of Investment Disputes (ICSID) ruled that Latvia had violated its bilateral investment treaty with Lithuania and ordered Latvia to pay 3.7 million euros to a Lithuanian energy company in a dispute over the nationalization of a heating and hot water supply system.  According to a local law firm, this is the first decision on the merits in an ICSID case against the Republic of Latvia.  More information is available here: https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/478/uab-v-latvia 

International Commercial Arbitration and Foreign Courts

On January 1, 2015, the Law on Arbitration courts came into force to regulate the establishment and operation of local arbitration courts in Latvia.  According to the information available in the register, there are 70 arbitration institutions registered in Latvia (https://www.ur.gov.lv/lv/registre/organizaciju/skirejtiesas/skirejtiesu-saraksts/ ).  In most commercial agreements, parties opt to refer their disputes to arbitration rather than to the Latvian courts.

The Civil Procedure Law contains a section on arbitration courts.  This section was drafted on the basis of the United Nations Commission on International Trade Law (UNCITRAL) model, thus providing full compliance with international standards.  The law also governs the enforcement of rulings of foreign non-arbitral courts and foreign arbitrations.  The full text of the law in English can be found here: https://likumi.lv/ta/en/id/50500-civil-procedure-law 

Bankruptcy Regulations

There are two laws governing bankruptcy procedure:  the Law on Insolvency and the Law on Credit Institutions (regulating bankruptcy procedures for banks and other financial sector companies).

According to the latest World Bank’s Doing Business Report Latvia ranked 55th out of 190 countries in terms of ease of resolving insolvency.  More information is available here: http://www.doingbusiness.org/data/exploreeconomies/latvia#resolving-insolvency .

The business community has expressed concerns over inefficiency and allegations of corruption in Latvia’s insolvency administration system.  To tackle the issue, the Latvian government has partnered with the European Bank for Reconstruction and Development and in September 2019 launched a project “Support for Debt Restructuring in Latvia”. More information available here: https://www.ebrd.com/news/2019/support-for-debt-restructuring-in-latvia-project-launched.html 

Investment Incentives

The Cross-Sectoral Coordination Center of Latvia is the main agency in charge of National Development Planning.  In accordance with the Law on the Development Planning System (https://likumi.lv/doc.php?id=175748 ), national development planning documents are prepared for a long-term (up to 25 years), medium-term (up to seven years) and short-term (up to three years). More information available here: https://www.pkc.gov.lv/en/national-development-planning/national-development-planning 

In addition, Latvia has identified the following sectors as having the highest potential for new investment: woodworking, metalworking and mechanical engineering, transport and storage, information technology (including global business services), green technology, health care, life sciences, and food processing.  The information is disseminated to the general public and potential investors via the Latvian Investment and Development Agency’s official website (http://liaa.gov.lv/invest-latvia/sectors-and-industries ), and through its representative offices (http://liaa.gov.lv/contacts/representative-offices ).

Because the Latvian government extends national treatment to foreign investors, most investment incentives and requirements apply equally to local and foreign businesses.  Latvia has three special economic zones and two free ports in which companies benefit from various tax rebates (real estate, dividend, and corporate income) and do not pay VAT.  The full list of investment incentives is available here: http://www.liaa.gov.lv/en/invest-latvia/investor-business-guide/business-incentives .

Latvia does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are five free trade areas in Latvia.  Free ports have been established in Riga and Ventspils.  Special economic zones (SEZ) have been created in Liepaja, a port city in western Latvia; Rezekne, a city in eastern Latvia; and an additional SEZ in Latgale, the poorest region in Latvia, which borders Russia and Belarus.

Somewhat different rules apply to each of the five zones.  In general, the two free ports provide exemptions from indirect taxes, including customs duties, VAT, and excise tax.  The SEZs offer additional incentives, such as an 80-100 percent reduction of corporate income taxes and real estate taxes.  To qualify for tax relief and other benefits, companies must receive permits and sign agreements with the appropriate authorities: the Riga and the Ventspils Port Authorities, for the respective free ports; the Liepaja SEZ Administration; the Rezekne SEZ Administration; or the Latgale SEZ Administration.  The SEZs are expected to be in place until 2035.

Performance and Data Localization Requirements

Except for specific requirements for investors acquiring former state enterprises through the privatization process, there are no performance requirements for a foreign investor to establish, maintain, or expand an investment in Latvia.  In the privatization process, performance requirements for investors, both foreign and domestic, are determined on a case-by-case basis.

Under Latvian Immigration Law, foreign citizens can enter and reside in Latvia for temporary business activities for up to three months in a six-month period.  For longer periods of time, foreigners are required to obtain residence and work permits.  The Latvian Investment and Development Agency, together with the Office of Citizenship and Migration Affairs, has created a guide to help third-country nationals interested in working in Latvia obtain work permits: http://workinlatvia.liaa.gov.lv/ 

A third-country national may obtain a five-year temporary residence permit if he or she has made certain minimum equity investments in a Latvian company, certain subordinated investments in a Latvian credit institution, or purchased real estate for certain designated sums, subject to limitations in each case.  More information is available here: http://www.liaa.gov.lv/en/trade-latvia/market-entry/working-and-living .

Latvia’s Law on Personal Data Processing, implementing the EU’s General Data Protection Regulation, entered into force in July 2018.  Full text of the Law available here: https://likumi.lv/ta/en/en/id/300099-personal-data-processing-law 

More information is available here:  https://www.dvi.gov.lv/en/ 

Real Property

Latvia recognizes the full spectrum of property rights, including mortgages and liens.  According to the latest World Bank Doing Business Report, Latvia is ranked 25th out of 190 countries in terms of ease of registering property.  Latvia does not have significant problems with unclear legal titles.  More information: http://www.globalpropertyguide.com/Europe/Latvia/Buying-Guide  and http://www.doingbusiness.org/data/exploreeconomies/latvia#registering-property .

Intellectual Property Rights

In an effort to harmonize its legislation with EU and WTO requirements, Latvia has established a legal framework for the protection of intellectual property rights (IPR), including legislation to protect copyrights, trademarks, and patents.  The Law on Copyrights strengthens the protection of software copyrights and neighboring rights.  Foreign owners may seek redress for violation of their IPR through the appellation council at the Latvian Patent Office, as well as through private litigation.  In copyright violation cases, aggrieved parties can request that the use of the pirated works be prohibited, pirated copies be destroyed, and violators compensate them for losses (including lost profits).  The criminal law stipulates penalties for copyright violations.

The United States has signed a Trade and Intellectual Property Rights Agreement with Latvia.  Latvia is a member of the World Intellectual Property Organization (WIPO) and party to the Paris Convention, the Berne Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, and the Geneva Phonograms Convention.  In addition, the Latvian government has amended all relevant laws and regulations to comply with the requirements of the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to which Latvia acceded by joining the WTO.

The business community has raised concerns regarding the enforcement of IPR in Latvia.  As in much of Eastern and Central Europe, piracy rates are relatively high.  Latvian law enforcement authorities have the authority to investigate IPR infringement cases.

Every year, the European Commission publishes a report describing the customs detentions of articles suspected of infringing IPR.  These statistics are available here: https://ec.europa.eu/taxation_customs/business/customs-controls/counterfeit-piracy-other-ipr-violations/ipr-infringements-facts-figures_en  .

Latvia is not listed in USTR’s Special 301 Report or included in the Notorious Market List.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

Clare Zimmerman
Economic Officer, U.S. Embassy Riga, Latvia
+371 6710-7000
ZimmermanCN@state.gov

List of Attorneys in Latvia, compiled by the Consular Section of the U.S. Embassy in Riga: https://lv.usembassy.gov/u-s-citizen-services/attorneys/.

American Chamber of Commerce of Latvia: http://www.amcham.lv/en/home 

Contact at Copyright Offices

Ms. Ilona Petersone
Director of Copyright Division, Ministry of Culture of the Republic of Latvia
+371 6733-0240
Ilona.Petersone@km.gov.lv

Contact at Industrial Property Offices

Mr. Sandris Laganovskis
Director of the Patent Office of the Republic of Latvia
+371 670 99 608
valde@lrpv.lv

Capital Markets and Portfolio Investment

Latvian government policies do not interfere with the free flow of financial resources or the allocation of credit.  Local bank loans are available to foreign investors.

Money and Banking System

Latvia’s retail banking sector, which is composed primarily of Scandinavian retail banks, generally maintains a positive reputation.  Latvian banks servicing non-resident clients, however, have come under increased scrutiny for inadequate compliance with anti-money laundering standards.  In 2018, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) identified Latvia’s third-largest bank as a “foreign bank of primary money laundering concern” and issued a proposed rule prohibiting U.S. banks from doing business with or on behalf of the bank.  The Latvian bank regulator has also levied fines against several non-resident banks for AML violations in recent years.

Latvia is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body.  On August 23, 2018, MONEYVAL issued a report finding that Latvia’s AML regime was in substantial compliance with only one out of eleven assessment categories, was in moderate compliance with eight areas, but in low compliance with two areas.  In late 2019 and early 2020, MONEYVAL and the Financial Action Task Force (FATF) concluded that Latvia has developed and implemented strong enough reforms for combating financial crimes to avoid increased monitoring via the so-called “grey list.”  While it will continue enhanced monitoring under MONEYVAL to continue strengthening the system, with this decision, Latvia became the first member state under the MONEYVAL review to successfully implement all 40 FATF recommendations. The most recent MONEYVAL report can be found at: https://rm.coe.int/anti-money-laundering-and-counter-terrorist-financing-measures-latvia-/16809988c1 .

According to Latvian banking regulators, its regulatory framework for commercial banking incorporates all principal requirements of EU directives, including a unified capital and financial markets regulator.  Existing banking legislation includes provisions on accounting and financial statements (including adherence to international accounting), minimum initial capital requirements, capital adequacy requirements, large exposures, restrictions on insider lending, open foreign exchange positions, and loan-loss provisions.  An Anti-Money Laundering Law and Deposit Guarantee Law have been adopted.  An independent anti-money laundering unit (FIU) operates under the supervision of the Ministry of Interior.  Some of the banking regulations, such as capital adequacy and loan-loss provisions, reportedly exceed EU requirements.

According to the Finance Latvia Association, total assets of the country’s banks at the end of 2019 stood at 23.20 billion euros.  More information is available at: https://www.financelatvia.eu/en/industry-data/ .

Securities markets are regulated by the Law on the Consolidated Capital Markets Regulator, the Law on the Financial Instrument Market, and several other laws and regulations.

The NASDAQ/OMX Riga Stock Exchange (RSE) (www.nasdaqomxbaltic.com ) operates in Latvia, and the securities market is based on the continental European model.  Latvia, together with Estonia and Lithuania have agreed to create a pan-Baltic capital market by creating a single index classification for the entire Baltic region.  Latvia is currently rated by various index providers as a frontier market due to its small size and limited liquidity.  More information is available here: https://www.ebrd.com/news/2019/latvia-takes-next-step-toward-a-panbaltic-capital-market.html 

Foreign Exchange and Remittances

Foreign Exchange

The currency of Latvia is the euro.  There are no restrictions on exchanging currencies or capital movement and foreign investors are allowed to extract their profits in any currency with no restraints.  As of April 17, 2020, one euro is worth USD  1.0888.  Details available here: https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-usd.en.html 

Remittance Policies

Latvian law provides for unrestricted repatriation of profits associated with an investment.  Investors can freely convert local currency into foreign exchange at market rates, and have no difficulty obtaining foreign exchange from Latvian commercial banks for investment remittances.  Exchange rates and other financial information can be obtained at the European Central Bank web site:  https://www.ecb.europa.eu/stats/exchange/eurofxref/html/index.en.html .

Sovereign Wealth Funds

Latvia does not have a sovereign wealth fund.

Private enterprises may compete with public enterprises on the same terms and conditions with respect to access to markets, credit, and other business operations such as licenses and supplies.  The Latvian government has implemented the requirements of the EU’s Third Energy Package with respect to the electricity sector, including opening the electricity market to private power producers and allowing them to compete on an equal footing with Latvenergo, the state-owned power company.  The country’s natural gas market has also been liberalized, creating competition among privately owned gas suppliers.

SOEs are active in the energy and mining, aerospace and defense, services, information and communication, automotive and ground transportation, and forestry sectors.

Latvia as a member of the EU is a party to the Government Procurement Agreement within the framework of the World Trade Organization, and SOEs are covered under the agreement.

Detailed information on Latvian SOEs is available in the OECD Review of the Corporate Governance of State-Owned Enterprises in Latvia, which is available here:  http://www.oecd.org/daf/ca/oecd-review-corporate-governance-soe-latvia.htm .

Senior managers of major SOEs in Latvia report to independent boards of directors, which in turn report to the line ministries.  SOEs are operating under the Law On Public Persons Enterprises and Capital Shares Governance.  The law also establishes an entity that coordinates state enterprise ownership and requires annual aggregate reporting.  Detailed information on Latvian SOEs is available here: http://www.valstskapitals.gov.lv/en/  .

For additional information please see here: http://www.oecd.org/latvia/corporate-governance-in-latvia-9789264268180-en.htm .

Privatization Program

The Law on Privatization of State and Municipal Property governs the privatization process in Latvia. State JSC “Posessor” (https://www.possessor.gov.lv/ )  uses a case-by-case approach to determine the method of privatization for each state enterprise.  The three allowable methods are:  public offering, auction for selected bidders, and international tender.  For some of the largest privatized companies, a percentage of shares may be sold publicly on the NASDAQ OMX Riga Stock Exchange.  The government may maintain shares in companies deemed important to the state’s strategic interests.  Privatization of small and medium-sized state enterprises is considered to be largely complete.

Latvian law designates six State Joint Stock Companies that cannot be privatized:  Latvenergo (Energy and Mining), Latvijas Pasts (Postal Services), Riga International Airport, Latvijas Dzelzcels (Automotive and Ground Transportation), Latvijas Gaisa Satiksme (Aerospace and Defense), and Latvijas Valsts Mezi (Forestry).  Other large companies in which the Latvian government holds a controlling interest include airBaltic (Travel), TET (Information and Communication), Latvian Mobile Telephone (Information and Communication), and Conexus Baltic Grid (Energy).  While Latvia sold a 20 percent stake in national carrier airBaltic to a private investor in early 2016, the government to date has not been successful in finding a strategic investor for the airline.

Awareness of and implementation of due diligence principles of corporate social responsibility (CSR)/Responsible Business Conduct is developing among producers and consumers.  Two of the most active promoters of CSR are the American Chamber of Commerce in Latvia and the Employers’ Confederation of Latvia.  The Latvian Ministry of Welfare has also taken an active part in promoting CSR.  Several initiatives have been particularly active on CSR, including the Institute for Corporate Sustainability and Responsibility (https://www.incsr.eu/ ) the Corporate Social Responsibility Platform (http://www.ksalatvija.lv/en ), and the Human Development Award (http://www.cilvekaizaugsme.lv/home/ ).

Latvia adheres to the OECD Guidelines for Multinational Enterprises.  Latvia’s National Contact Point for the Guidelines can be contacted through this website: https://www.mfa.gov.lv/en/policy/economic-affairs/oecd/latvian-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises .  Latvia also promotes the United Nations Guiding Principles on Business and Human Rights, endorsed by the UN Human Rights Council in 2011.

Latvian law enforcement institutions, foreign business representatives, and non-governmental organizations have identified corruption and the perception of corruption as persistent problems in Latvia.  According to the 2019 Corruption Perception Index by Transparency International, Latvia ranks 44th out of 180 countries (in order from the lowest perceived level of public sector corruption to the highest).

In an effort to strengthen its anti-corruption programs, the Latvian government has adopted several laws and regulations, including the Law on Money Laundering and the Law on Conflicts of Interest.  The Conflicts of Interest Law imposes restrictions and requirements on public officials and their relatives.  Several provisions of the law deal with the previously widespread practice of holding several positions simultaneously, often in both the public and private sector.  The law includes a comprehensive list of state and municipal jobs that cannot be combined with additional employment.  Moreover, the law expanded the scope of the term state official to include members of boards and councils of companies with state or municipal capital exceeding 50 percent.  Latvia became a member of the OECD Anti-Bribery Convention in 2014.  In line with OECD recommendations the government is working to strengthen anti-corruption enforcement and improve the functioning of its independent agency, the Anti-Corruption Bureau (KNAB).

Under Latvian law, it is a crime to offer, accept, or facilitate a bribe.  Although the law stipulates heavy penalties for bribery, a limited number of government officials have been prosecuted and convicted of corruption to date.  The law also provides the possibility of withdrawing charges against a person giving a bribe in cases where the bribe has been extorted, or in cases where the person voluntarily reports these incidents and actively assists the investigation.  In addition, the Latvian government has adopted a whistleblower law that requires all government agencies and large companies to establish protocols to accept whistleblower complaints and protect whistleblowers from reprisals.

KNAB is the institution with primary responsibility for combating corruption and carrying out operational activities in response to suspected or alleged corruption.  The Prosecutor General’s Office also plays an important role in fighting corruption.

KNAB has also established a Public Consultative Council to help increase public participation in implementing its anti-corruption policies, increasing public awareness, and strengthening connections between the agency and the public.  More information is available here: https://www.knab.gov.lv/en/knab/consultative/public/ .

There is a perceived lack of fairness and transparency in the public procurement process in Latvia.  A number of companies, including foreign companies, have complained that bidding requirements are sometimes written with the assistance of potential contractors or couched in terms that exclude all but preferred contractors.

A Cabinet of Ministers regulation provides for public access to government information, and the government generally provided citizens such access.  There have been no reports the government has denied noncitizens or foreign media access to government information.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Corruption Prevention and Combating Bureau
Citadeles iela 1, Riga, LV 1010, Latvia
+371 67356161
knab@knab.gov.lv

Contact at “watchdog” organization:

Delna (Latvian affiliate of Transparency International)
Citadeles iela 8, Riga, LV-1010
+371 67285585
ti@delna.lv

There have been no reports of political violence or politically motivated damage to foreign investors’ projects or installations.  The likelihood of widespread civil disturbances is very low.  While Latvia has experienced peaceful demonstrations related to internal political issues, there have been rare incidents when these have devolved into crimes against property, such as breaking shop windows or damaging parked cars.  U.S. citizens are cautioned to avoid any large public demonstrations since even peaceful demonstrations can turn confrontational.  The Embassy provides periodic notices to U.S. citizens in Latvia, which can be found on the Embassy’s web site: http://riga.usembassy.gov/.

The official rate of registered unemployment in February 2020, according to Eurostat, was 6.4 percent (https://ec.europa.eu/eurostat/statistics-explained/index.php/Unemployment_statistics ).  The Latvian State Employment Agency (LSEA) reported 6.8 percent unemployment at the end of March 2020.  Unemployment is significantly higher in rural areas.  A high percentage of the workforce has completed at least secondary or vocational education.  Foreign managers praise the high degree of language skills, especially Russian and English, among Latvian workers.  However, there is a shortage of mid- and senior-level managers with Western-style management skills.

Companies must keep wages above the legally specified minimum of 430 euros per month, as of April 2019.  Union influence on the wage setting process is limited.  Trade unions do not have significant influence on the labor market.  Additional information on trade unions in Latvia is available here: http://www.worker-participation.eu/National-Industrial-Relations/Countries/Latvia .

One challenge employers have faced since Latvia joined the EU is that many skilled employees can find better employment opportunities in other EU countries.  Unofficial statistics suggest that more than 240,000 people have moved from Latvia to other EU countries since May 1, 2004.  Despite the fact that the macroeconomic situation has stabilized, skilled and unskilled workers continue to emigrate.  The government is implementing a strategy to entice people who have left Latvia to return.

According to several reports, despite the relatively high unemployment rate by Western standards, there is a significant shortage of workers in manufacturing, wholesale and retail, transport and storage, and ICT sectors.  The largest share of registered unemployment is comprised of persons with only primary or secondary education who do not possess the needed, specialized skills.  To address this problem, the Latvian government has approved a list of highly skilled professions that employers may use to recruit professionals from abroad to work in Latvia: https://www.em.gov.lv/en/news/18513-the-government-supports-the-application-of-simplified-conditions-for-the-attraction-of-highly-qualified-foreign-professionals .

The Labor Law addresses discrimination issues, provides detailed provisions on the rights and obligations of employees’ representatives, and created the Conciliation Commission, a mechanism that can be used in the workplace to resolve labor disputes before going to arbitration.  Victims of sexual harassment in the workplace can also submit a complaint to the Office of the Ombudsman and the State Labor Inspectorate.

Full-time employees in Latvia work 40 hours a week.  Normally, there are five working days per week, but employers may schedule a sixth workday without offering premium pay.  Employees are entitled to four calendar weeks of annual paid vacation per year.  Employers are prohibited from entering into an employment contract with a foreign individual who does not have a valid work permit.

Latvia is a member of the International Labor Organization (ILO) and has ratified all eight ILO Core Conventions.

Due to the fact that Latvia is a high income country as defined by the World Bank, it only qualifies for DFC’s programs for energy infrastructure projects.

Latvia is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA), which also provides risk insurance.

* Source for Host Country Data: http://www.fm.gov.lv/en/s/macroeconomics/main_macroeconomic_indicators/   https://statdb.bank.lv 
https://data.oecd.org/fdi/fdi-stocks.htm 

Luxembourg is considered a tax haven and it is believed that the ultimate source of this portfolio investment is primarily Russia.

Mike Ritchie
Economic Officer
Samnera Velsa iela 1, Riga, Latvia, LV-1510
+371 6710 7000
RigaCommerce@state.gov

Transparency of the Regulatory System

The regulatory system remains a challenge for some investors. Local business leaders report that bureaucratic procedures often are not user-friendly and that the interpretation of regulations is inconsistent and unclear. Businesses and private individuals complain of low-level corruption, including in the process of awarding government contracts and the granting of licenses and permits. Businesses also note that they would like to have more opportunity to consult with lawmakers regarding new legislation and that new legislation sometimes appears with little advance notice.

However, the government is making efforts to improve transparency using technology. For example, the parliament’s website contains all draft legislation, and public tenders must be published electronically in a central database. Ministries also post many, but not all, draft laws under consideration. All government procurement tenders are required to be posted on-line in a centralized database. In March 2014, Transparency International released a report recommending new laws aimed at protecting whistle-blowers, encouraging lobbying transparency, preventing and controlling conflicts of interest, and increasing transparency in political party funding. Some of the recommendations have already been addressed by introducing a whistleblower protection law and a new law on lobbying in 2017. The World Bank’s Doing Business Report ranked Lithuania 11th out of 190 in 2020. Lithuania scored especially high in the categories of Registering Property (4rd), Enforcing contracts (7th) Dealing with Construction Permits (10th) and Starting a Business (34st). It did less well in the categories of Resolving Insolvency (89th) and Getting Credit (48th).

International Regulatory Considerations

Since May 1, 2004, in accordance with its European Union membership, Lithuania has applied European Union trade policies, such as antidumping or anti-subsidy measures. The European Union import regime applies to Lithuania. The country is a member of the WTO and it notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

The Lithuanian legal system stems from the legal traditions of continental Europe and complies with the EU’s acquis communautaire. New laws enter into force upon promulgation by the President (or in some cases the Speaker of the parliament) and publication in the official gazette, Valstybes Zinios (State News). Several possibilities exist for commercial dispute resolution. Parties can settle disputes in local courts or in the increasingly popular independent, i.e., non-governmental, Commercial Court of Arbitration. Lithuania also recognizes arbitration judgments by foreign courts. Domestic courts generally operate independently of government influence. Lithuania’s EU membership has given foreign firms the additional right to appeal adverse court rulings to the European Court of Justice.

The Lithuanian court system consists of courts of general jurisdiction that deal with civil and criminal matters, and includes the Supreme Court, the Court of Appeals, District Courts, and local courts. In 1999, Lithuania established a system of administrative courts to adjudicate administrative cases, which generally involve disputes between government regulatory agencies and individuals or organizations. The administrative court system consists of the High

Administrative Court and District Administrative Courts.

The Constitutional Court of Lithuania is a separate, independent judicial body that determines whether laws and legal acts adopted by the parliament, president, and the government violate the Constitution.

Laws and Regulations on Foreign Direct Investment

Lithuanian law provides that foreign entities may establish branches or representatives offices, and there are no limits on foreign ownership or control. A foreigner may hold a majority interest in a local company in Lithuania. However, there are some areas of the economy where investment is limited, such as in sectors related to national security and defense of the State, and licensing is necessary for activities related to human life and health, or which are deemed potentially risky. The national investment promotion agency Invest Lithuania provides a detailed overview of the relevant laws and regulations on foreign investment. http://www.investlithuania.com 

Competition and Anti-Trust Laws

There is a domestic Competition Council, which is responsible for the prevention of competition law violations. For more information:

Expropriation and Compensation

Lithuanian law permits expropriation on the basis of public need, but requires compensation at fair market value in a convertible currency. The law requires payment of compensation within three months of the date of expropriation in the currency the foreign investor requests. The compensation must include interest calculated from the date of publication of the notice of expropriation until the payment of compensation. The recipient may transfer this compensation abroad without any restrictions. There have been no cases of expropriation of private property by the Lithuanian government since 1991. There is an ongoing process to restitute property expropriated during World War II and the Soviet occupation. While the Lithuanian government returned most of this property, including Jewish communal property, in 2011, private property restitution remains incomplete.

Dispute Settlement

ICSID Convention and New York Convention

Lithuania is a member state to the International Centre for the Settlement of Investment Disputes (ICSID) Convention. It is also a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Lithuania law recognizes and enforces arbitral body decisions.

Investor-State Dispute Settlement

According to Lithuanian law, State owned enterprises (SOE) have no privileges in conducting business, competing for supply, and/or in implementing projects, enforcing contracts, and accessing finance. While Baltic Institute for Corporate Governance (BICG) reports suggest that there have been cases of SOE executives extracting benefits for their own personal gain by way of guided tenders, exercising favoritism when selecting providers of goods or services, or giving business to friends and family members, the Embassy has no records of complaints from either foreign or domestic companies regarding the outcome of dispute settlement cases with state companies.

International Commercial Arbitration and Foreign Courts

According to the Lithuanian Arbitration Court, the arbitration process should be completed within six months, but depending on the complexity of a dispute and with the agreement of both parties, this period can be extended. Also, before a process starts, the Arbitration Court has 30 days to decide if it will accept the dispute and three months to prepare all the needed materials for the arbitration process. Decisions of the Lithuanian Arbitration Court may be appealed to international institutions, such as the International Court of Arbitration.

Bankruptcy Regulations

Lithuania passed the current Enterprise Bankruptcy Law in 2001 This law applies to all enterprises, public establishments, commercial banks, and other credit institutions registered in Lithuania. The law provides a mechanism to override the provisions of other laws regulating enterprise activities, assuring protection of creditors’ rights, recovery of debts, and payment of taxes and other mandatory contributions to the State. This law establishes the following order of creditors’ claims: claims by creditors that are secured by a mortgage/pledge of debtor; claims related to employment; tax, social insurance, and state medical insurance claims; claims arising from loans guaranteed or issued on behalf of the Republic of Lithuania or its government; and other claims. Bankruptcy can be criminalized in cases of intentional bankruptcy. The Law on the Bankruptcy of Natural Persons was introduced in Lithuania in 2013. The World Bank’s Ease of Doing Business survey ranks Lithuania 89th in the category of “resolving insolvency”.

Investment Incentives

The Lithuanian government taxes corporate income and capital gains at 15 percent and the personal income tax rate is 20 percent. The value added tax is 21 percent, and the annual real estate tax ranges from 0.3 to three percent, depending on the market value of a property. For more details, please visit https://investlithuania.com/investor-guide/running-your-business/ 

https://investlithuania.com/investor-guide/running-your-business/ 

Lithuanian municipalities provide special incentives to investors who create jobs or invest in infrastructure. Municipalities may tie designation criteria to additional factors, such as the number of jobs created or environmental benefits. Strategic investors’ benefits could include favorable tax incentives for up to ten years. Municipalities may grant special incentives to induce investments in municipal infrastructure, manufacturing, and services.

Foreign Trade Zones/Free Ports/Trade Facilitation

Lithuania has seven Free Economic Zones (FEZs) located near the cities of Kaunas,

Klaipeda, Siauliai, Kedainiai, Panevezys, Akmene, and Marijampole. The FEZs in Kaunas and Klaipeda have attracted the most business; there are more than one hundred companies from 17 countries operating in the Klaipeda FEZ, and 34 in the Kaunas FEZ. Companies operating in FEZs must follow the same accounting and reporting rules as companies operating in the rest of the country.

Companies that invest or are operating within the zones enjoy: – six years’ exemption from corporate income tax and a 50 percent reduction during the

• six years’ exemption from corporate income tax and a 50 percent reduction during the
• exemption from real estate tax;
• no tax on foreign company dividends.

Performance and Data Localization Requirements

In January 2017, the parliament passed legislation providing for a Startup Visa, designed for non-EU entrepreneurs wishing to start or expand information technology, biotech, nanotech, mechatronics, electronics, or laser technology businesses. For more information on the new Startup Visa, visit: http://www.startuplithuania.lt/en/news/lithuanias-startup-visa-scheme-explained .

Lithuania also participates in the EU BlueCard program, which simplifies the residency and work permit application process for highly-skilled non-EU citizens. Once secured, the BlueCard is valid for up to three years and can be extended for an additional three years. BlueCard holders are also eligible to apply for permanent residency after five years. For more information on the BlueCard program, visit: http://www.eubluecard.lt/ .

Nevertheless, foreign investors that do not qualify for these programs, including U.S. citizens, may face difficulties obtaining and renewing residency permits. U.S. citizens can stay in Lithuania no more than 90 days without a visa (and no more than 90 days in any six-month period). Those who stay longer face fines and deportation. However, foreigners may only submit residency permit applications after they arrive in Lithuania. Therefore, the Embassy recommends applicants work with Lithuanian embassies and consulates to review documentation required for a permit well in advance of their first visit to Lithuania. For more information on the various types of visas and their requirements, visit: http://www.migracija.lt/index.php?-1488882078 .

Lithuania provides special incentives to strategic investors. The criteria by which the national government or a municipality designates a strategic investor vary from project to project. In general, the national government requires that a strategic investor initially invest $50 million or more. Municipalities may tie the designation criteria to additional or other factors, such as the number of jobs created and the environmental benefits that accrue. Strategic investors’ rewards include special business conditions, such as favorable tax incentives for up to ten years. Significant tax incentives apply to foreign investments made before 1997. Municipalities may grant special incentives to induce investments in municipal infrastructure, manufacturing, and services.

The Lithuanian government does not follow “forced Localization” policy and foreign investors can use domestic and foreign content in goods or technology alike. As a member of the European Union, Lithuania follows the General Data Protection Regulation. Enforcement is carried out by the State Data Protection Inspectorate. Foreign IT providers are not required to turn over source code and/or provide access to the encryption.

Real Property

Lithuanian law protects foreign investments and the rights of investors in several ways:

• The Constitution and the Law on Foreign Capital Investment protect all forms of private
• International agreements, such as the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards, offer protection.
• Bilateral agreements with the United States and other western countries on the mutual
• The Law on Capital Investment in Lithuania and other acts regulate customs duties, taxes, and relationships with financial and inspection authorities. This law also establishes dispute settlement procedures.
• In the event of justified expropriation, applicable law entitles investors to compensation

• Foreign investors may defend their rights under the Washington Convention of 1965 by

• State institutions and officials are obligated to keep commercial secrets confidential and must pay compensation for any loss or damage caused by illegal disclosure. Lithuania legalized the possibility of hiring private bailiffs to enforce court judgments in 2003.

Lithuania’s commercial laws conform to EU requirements, and include the principles of the free establishment of companies, protection of shareholders’ and creditors’ rights, free access to establishment of companies, protection of shareholders’ and creditors’ rights, free access to information, and registration procedures. Relevant laws include: the Company Law and Law on Partnerships (2004), the Law on Personal Enterprises (2004), the Law on Investments (1999), the Law on Bankruptcy of Enterprises (2001), and the Law on Restructuring of Enterprises (2001). The Civil Code of 2000 governs commercial guarantees and security instruments. It provides for the following types of guarantee and security instruments to secure fulfillment of contractual obligations: forfeiture, surety, guarantee, earnest money, pledge, and mortgage.

Intellectual Property Rights

Lithuania has significantly improved intellectual property rights (IPR) protection in recent years, and members of the innovation community report that IPR infringement and theft is infrequent. Lithuania joined the World Intellectual Property Organization (WIPO) in 2002 and it party to many of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty. Lithuania joined the World Trade Organization in 2001 and so is party to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Following EU accession, Lithuania extended protection to member states’ trademarks, designs, and applications. Lithuania brought its national law protecting biological inventions into compliance with EU Directive 98/44 in June 2005.

In 2008, Lithuania was removed from USTR’s Special 301 Watch List and is not currently included in the Notorious Markets List.

For additional information about treaty obligations and points of contact at local IPR offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .

The State Patent Bureau provides a list of patent attorneys at the following link: https://vpb.lrv.lt/en/ 

Capital Markets and Portfolio Investment

Government policies do not interfere with the free flow of financial resources or the allocation of credit. In 1994, Lithuania accepted the requirements of Article VIII of the Articles of Agreement of the International Monetary Fund to liberalize all current payments and to establish non-discriminatory currency agreements. Lithuania ensures the free movement of capital and does not plan to impose any restrictions. The government imposes no restrictions on credits related to commercial transactions or the provision of services, or on financial loans and credits. Non-residents may open accounts with commercial banks.

Money and Banking System

The banking system is stable, well-regulated, and conforms to EU standards. Currently there are 14 commercial banks holding a license from the Bank of Lithuania, nine foreign bank branches, two foreign bank representative offices, the Central Credit Union of Lithuania and 65 credit unions. Two hundred-eighty EU banks provide cross-border services in Lithuania without a branch operating in the country, and three financial institutions controlled by EU licensed foreign banks provide services without a branch. Nearly all foreign banks are headquartered in Sweden, Norway and Denmark. By the end of 2018 the total assets of major Lithuanian banks were $32.1 billion:

Swedbank – 32.9% (www.swedbank.lt )

SEB – 28.7% (www.seb.lt)

Luminor –20.8% (www.luminor.lt)

Other smaller banks:

• Citadele (www.citadele.lt )
• Siauliu Bankas (www.sb.lt )
• Medicinos Bankas (www.medbank.lt )
• Finasta (http://finasta.com/lit/lt )
• Revolut (www.revolut.com  )
• European Merchants Bank (www.europeanmerchantbank.com )
• Mano Bankas (www.mano.bank )

Effective January 1, 2015, all of the banks are controlled by the European Central Bank and the Bank of Lithuania. There is no restriction on portfolio investment. The right of ownership to shares acquired through automatically matched trades is transferred on the third working day following the conclusion of the transaction. The Vilnius Stock Exchange is part of the OMX group of exchanges and offers access to 80 percent of all securities trading in the Nordic and Baltic marketplace. OMX is owned by the U.S. firm NASDAQ and the Dubai Bourse. The supervisory service at the Bank of Lithuania oversees commercial banks and credit unions, securities market, and insurance companies. Lithuanian law does not regulate hostile takeovers.

Foreign Exchange and Remittances

Foreign Exchange

Lithuania has no restrictions on foreign exchange.

Remittance Policies

Lithuanian remittance policies allow free and unrestricted transfers.

Sovereign Wealth Funds

Lithuania does not maintain any Sovereign Wealth Funds.

At the beginning of 2019, the Lithuanian government was majority or full owner of 48 enterprises. Throughout 2017, the government consolidated many duplicative state-owned enterprises (SOEs) in response to OECD recommendations reducing the number of its companies from 130. The SOE sector is valued at approximately $5.8 billion and employs just over 42,000 people. The greatest number of SOEs by value are found in the electricity and gas sector (38%), followed by transportation (36%) and extractive industries including fishing, farming, and mining (21%). The transportation sector (which in Lithuania’s definition includes the postal service) accounts for over half of all SOE employment, followed by the electricity and gas sectors, which accounts for about one fifth. The largest SOE employers are Lithuanian Railways, Ignitis Group, and Lithuanian Post, which collectively employ over 23,000 people.

A list of SOEs is available at the Governance Coordination Center site: https://vkc.sipa.lt/apie-imones/vvi-sarasas/ 

In response to OECD recommendations issued during Lithuania’s accession process, the government passed several laws to reform SOE governance, addressing such issues as the hiring, firing, and oversight of top management, the introduction of independent board members to professionalize and depoliticize SOE boards and strengthen independent and pragmatic decision making, and a requirement for SOE CEOs to certify financial statements.

Privatization Program

The government has privatized most state enterprises and property, with foreign investors purchasing the majority of state assets privatized since 1990. These include companies in the banking and transportation sectors. Some foreign companies have complained about a lack of transparency or discrimination in certain privatization transactions. Major assets still under government control include the railway company (Lietuvos Gelezinkeliai), Lithuania’s three international airports (Vilnius, Kaunas, and Klaipeda), Lithuanian post (Lietuvos Pastas), as well as energy companies controlled by Ignitis Group holding company.

Although Lithuania’s high private sector contribution to GDP is evidence of a strong private sector, the concept of Corporate Social Responsibility (CSR) is still new in Lithuania, especially in rural areas where there is little or no foreign investment. The understanding of the concept is frequently linked to philanthropy, rather than partnership. The private sector appears more interested in its own business affairs rather than displaying a real commitment to social issues.

There are, however, an increasing number private-public partnerships, as well as social projects, where the private sector is involved in supporting volunteerism, environmental restoration, and scholarships. Furthermore, successful participation in the European Union market requires higher standards of CSR. Foreign investors in Lithuania have played a very important role in promoting CSR. In 2009, the government developed and approved a National Corporate Social Responsibility Development Program aimed at promoting CSR. Also, in the past few years there has been growing interest from both government and NGOs in promoting CSR values by organizing competitions and awards ceremonies such as the Social and Labor Ministry’s annual Socially Responsible Business Awards Ceremony, Confederation of Industrialists’ Awards, and others. Also, after Lithuania acceded to the OECD Anti-Bribery Convention in 2017, more business organizations and the legal community have started to promote the importance of companies adopting anti-bribery compliance programs.

A Eurobarometer survey on corruption conducted in 2017 showed that Lithuania lags behind other EU countries on scores concerning both perceptions and actual experience of corruption. Among the survey results: 93 percent of Lithuanian respondents said they think that corruption is widespread in Lithuania; 17 percent indicated that they were asked or expected to pay a bribe in the past 12 months; and 29 percent believe that the only way to succeed in business is to have political connections.

More than 50 governmental institutions regulate commerce in one way or another, creating opportunities for corrupt practices. Large foreign investors report few problems with corruption. On the contrary, most large investors report that high-level officials are often very helpful in solving problems fairly. In general, foreign investors say that corruption is not a significant obstacle to doing business in Lithuania and describe most of the bureaucrats they deal with in Lithuania as reasonable and fair. Small and medium enterprises (SMEs) perceive themselves as more vulnerable to petty bureaucrats and commonly complain about extortion. SMEs often complain that excessive red tape virtually requires the payment of “grease money” to obtain permits promptly. Business owners maintain that some government officials, on the other hand, view SMEs as likely tax-cheats and smugglers, and treat the owners and managers accordingly.

Paying or accepting a bribe is a criminal act. Lithuania established in 1997 the Special Investigation Service (Specialiuju Tyrimu Tarnyba) specifically to fight public sector corruption. The agency investigates approximately 100 cases of alleged corruption every year, but has yet to bring charges against high-level officials for corrupt practices. Lithuania ratified the UN Convention Against Corruption in December 2006. Transparency International (TI) also has a national chapter in Lithuania. TI ranked Lithuania 35th out of 180 in its 2019 Perceptions of Corruption Index with a score of 60 out of 100 (TI considers countries with a score below 50 to have serious problems with corruption.). Medical personnel, local government officials, among others, were cited by TI as prone to corruption.

Lithuania ratified the UN Anticorruption Convention in 2006 and acceded to the OECD Anti-Bribery Convention in 2017.

Resources to Report Corruption

Special Investigation Service
Jakšto g. 6, 01105 Vilnius, Lithuania
Tel: 370-5266333
Fax: 370-70663307
Email: pranesk@stt.lt

Transparency Internationa
Sergejus Muravjovas, Executive Director
Transparency International
Didžioji st. 5, LT–01128, Vilnius, Lithuania
Tel: 370 5 212 69 51
info@transparency.lt | skype: ti_lithuania

Since its independence in 1991, Lithuania has not witnessed any incidents involving politically motivated damage to projects and/or installations.

Lithuanian labor is relatively inexpensive compared to Western Europe. However, employment regulations are often stricter than those in other EU countries, according to some foreign investors. By law, white-collar workers have a 40-hour workweek. Blue-collar workers have a 48-hour workweek with premium pay for overtime. Maternity leave in Lithuania is granted for up to 126 days, and the government compensates 100 percent of the mother’s salary. A father is also allowed to take paternity leave for one month. His salary is compensated 100 percent as well. Sick leave in Lithuania is granted up to 14 days at any one time and no more than 90 days a year. For the first two days, the salary compensation is 80 – 100 percent, paid by the employer, with the rest of the days being compensated by SODRA (Lithuanian Social Security body) at 80 percent of salary. Lithuania is a member of International Labor Organization (ILO) and has ratified its core conventions.

The government adjusts the monthly minimum wage periodically. Since 2020, Lithuania’s minimum monthly wage is $679. The average monthly wage is approximately $1,522.

The ability of Lithuanians to work legally in EU countries generated a sizable outflow of labor, causing a domestic shortage of skilled construction workers, truck drivers, shop assistants, medical nurses, and medical specialists. In 2019 unemployment rate stood at 6.7 percent.

Lithuania’s management-labor relations are good. Labor unions are not considered overly influential in Lithuania, according to some foreign investors. There have been no major strikes or labor disruptions since 1991.

Lithuania has one of the best-educated workforces in Central and Eastern Europe. Lithuania ranks fourth among the EU states in terms of population with higher education and first in the Baltic States. Lithuania is one of the five EU members with the highest percentage of people speaking at least one foreign language. Ninety percent of Lithuanians can speak at least one other language – usually English, Polish, and/or Russian – apart from their mother tongue.

Major Lithuanian companies specializing in IT, biotechnology, laser technology, etc., cooperate closely with the leading Lithuanian technological universities, which provide companies with R&D services and offer students specialized on-the-job training programs. This way companies are able to attract a large number of qualified specialists for both local and international projects. Some technology companies, however, have noted challenges in finding highly- skilled workers with advanced technical degrees.

In 2017, the parliament passed a new Labor Code. These changes aim to encourage foreign investment and job creation by simplifying some employment conditions and clarifying other requirements. The new law decreases the advanced notice required when employers terminate an employment contract, and adds new contract options for employers, such as project-based contracts and job-sharing contracts. The law also clarifies previous informal practices by requiring non-union employers to form works councils to represent employee interests, and requiring employers to establish and publicize standard company compensation policies.

Coverage from the Overseas Private Investment Corporation (OPIC) (www.opic.gov) is available for U.S. investments in Lithuania.

* Source for Host Country Data: Lithuanian Statistics Department and Bank of Lithuania

Jonas Vasilevicius, Commercial Specialist
Tel: 370-5 2665671
VasileviciusJ@state.gov
U.S. Embassy Vilnius
Akmenu str. 6
Vilnius, Lithuania

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 

Poland’s Plan for Responsible Development identifies eight industries for development and incentives: aviation, defense, automotive parts manufacturing, ship building, information technology, chemicals, furniture manufacturing and food processing.  More information about the plan can be found at  this link: https://www.gov.pl/web/fundusze-regiony/plan-na-rzecz-odpowiedzialnego-rozwoju .  Poland encourages energy sector development through its energy policy, outlined in the November 2018 published draft report “Polish Energy Policy to 2040” and updated and expanded in 2019.  While this strategy has not yet been finalized, the government has generally followed the directions of development in the policy.  The updated draft policy can be found at:  https://www.gov.pl/web/aktywa-panstwowe/zaktualizowany-projekt-polityki-energetycznej-polski-do-2040-r .  The draft policy foresees a primary role for fossil fuels until 2040 as well as strong growth in electricity production.  The government will continue to pursue developing nuclear energy and offshore wind power generation, as well as distributed generation, but may revise the time frame for reaching landmarks in these areas.  The draft policy remains skeptical of onshore wind.  Poland’s National Energy and Climate Plan for years 2021-2030 (NECP PL) has been developed in line with the EU Regulation on the Governance of the Energy and Climate Action and was submitted to the European Commission https://ec.europa.eu/energy/topics/energy-strategy/national-energy-climate-plans_en#the-process .

A government strategy aims for a commercial 5G network to be operational in all cities by 2025.

Investment Incentives

A company investing in Poland, either foreign or domestic, may receive assistance from the Polish government.  Foreign investors have the potential to access certain incentives such as:  income tax and real estate tax exemptions; investment grants of up to 50 percent of investment costs (70 percent for small and medium-sized enterprises); grants for research and development; grants for other activities such as environmental protection, training, logistics, or use of renewable energy sources.

Large priority-sector investments may qualify for the “Program for Supporting Investment of Considerable Importance for the Polish Economy for 2011-2030.”  The program, amended in October 2019, is one of the instruments enabling support for new investment projects, particularly relevant for the Polish economy.  Its main goal is to increase innovation and the competitiveness of the Polish economy.  Under the amended program, it is possible to co-finance large strategic investments as well as medium-sized innovative projects.  Projects that adapt modern technologies and provide for research and development activities are awarded.  The program is also conducive to establishing cooperation between the economic sector and academic centers.  The support is granted in the form of a subsidy, based on an agreement concluded between the Minister of Development and the investor.  The agreement regulates the conditions for the payment of subsidies and the investment implementation schedule.  Under the program, investment support may be granted in two categories: eligible costs for creating new jobs and investment costs in tangible and intangible assets.  Companies can learn more at: https://www.paih.gov.pl/why_poland/investment_incentives/programme_for_supporting_investments_of_major_importance_to_the_polish_economy_for_2011_-_2030 

https://www.gov.pl/web/rozwoj/program-wspierania-inwestycji-o-istotnym-znaczeniu-dla-gospodarki-polskiej-na-lata-2011-2030 

The Polish Investment Zone (PSI), the new system of tax incentives for investors which replaced the previous system of special economic zones (SEZ), was launched September 5, 2018.  Under the new law on the PSI, companies can apply for a corporate income tax (CIT) exemption for a new investment to be placed anywhere in Poland.  The CIT exemption is calculated based on the value of the investment multiplied by the percentage of public aid allocated for a given region based on its level of development (set percentage).  The CIT exemption is for 10-15 years, depending on the location of the investment.  Special treatment is available for investment in new business services and research and development (R&D).  A point system determines eligibility for the incentives.

The deadline for utilizing available tax credits from the previous SEZ system is the end of 2026 (extended from 2020).  The new regulations also contain important changes for entities already operating in SEZs, even if they do not plan new investment projects.  This includes the possibility of losing the right to tax incentives in the event of fraud or tax evasion.  Investors should consider carefully the potential benefits of the CIT exemption in assessing new investments or expansion of existing investments in Poland.

More information on government financial support:

https://www.paih.gov.pl/why_poland/investment_incentives 

The Polish government is seeking to increase Poland’s economic competitiveness by shifting toward a knowledge-based economy.  The government has targeted public and private sector investment in R&D to increase to 1.7 percent of GDP by 2020.  During the seven year period of 2014 to 2020, Poland will receive approximately USD 88.85 billion in EU Structural and Cohesion funds dedicated to R&D.  Businesses may also take advantage of the EU primary research funding program, Horizon 2020.

More information:

Ministry of Funds and Regional Development:

https://www.gov.pl/web/fundusze-regiony/otwarte-konkursy-nabory-dotacje-i-dofinansowania 

Ministry of Economic Development:

https://www.gov.pl/web/rozwoj/programy-i-projekty 

Ministry of Science and Higher Education:

http://www.nauka.gov.pl/horyzont-2020/ 

As of January 1, 2019, the Innovation Box, or IP Box, reduces the tax rate applicable to income derived from intellectual property rights to 5 percent.  Taxpayers applying the IP Box shall be entitled to benefit from the tax preference until a given right expires (in case of a patented invention – 20 years).  In order to benefit from the program, taxpayers will be obliged to separately account for the relevant income.  Foreign investors may take advantage of this benefit as long as the relevant  is registered in Poland.

The Polish government does not issue sovereign guarantees for FDI projects.  Co-financing may be possible for partnering on large FDI projects, such as the planned central airport project or a nuclear project.  For example, the state-owned Polish Development Fund (along with Singaporean and Australian partners) purchased 30 percent of the Gdansk Deepwater Container Terminal.

Foreign Trade Zones/Free Ports/Trade Facilitation

Foreign-owned firms have the same opportunities as Polish firms to benefit from foreign trade zones (FTZs), free ports, and special economic zones (since January 2019, they make up the Polish Investment Zone).  The 2004 Customs Law (with later amendments) regulates operation of FTZs in Poland.  The Minister of Finance establishes duty-free zones.  The Ministers designate the zone’s managing authorities, usually provincial governors, who issue operating permits to interested companies for a given zone.

Most activity in FTZs involves storage, packaging, and repackaging.  As of April 2019, there were seven FTZs: Gliwice, near Poland’s southern border; Terespol, near Poland’s border with Belarus; Mszczonow, near Warsaw; Warsaw’s Frederic Chopin International Airport; Szczecin; Swinoujscie; and Gdansk.  Duty-free shops are available only for travelers to non-EU countries.

There are bonded warehouses in:  Bydgoszcz-Szwederowo; Krakow-Balice; Wroclaw-Strachowice; Katowice-Pyrzowice; Gdansk-Trojmiasto; Lodz -Lublinek; Poznan-Lawica; Rzeszow-Jasionka, Warszawa-Modlin, Lublin, Szczecin-Goleniow; Radom-Sadkow, Olsztyn-Mazury.  Commercial companies can operate bonded warehouses.  Customs and storage facilities must operate pursuant to custom authorities’ permission.  Only legal persons established in the EU can receive authorization to operate a customs warehouse.

Performance and Data Localization Requirements

Poland has no policy of “forced localization” designed to force foreign investors to use domestic content in goods or technology.  Investment incentives apply equally to foreign and domestic firms.  Over 40 percent of firms in Special Economic Zones are Polish.  There is little data on localization requirements in Poland and there are no requirements for foreign information technology (IT) providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption).  Exceptions exist in sectors where data are important for national security such as critical telecommunications infrastructure and in gambling.  The cross-border transfer rules in Poland are reasonable and follow international best practices, although some companies have criticized registration requirements as cumbersome.  In Poland, the Telecommunications Law (Act of 16 July 2004 – unified text, Journal of Laws 2018, item 1954) includes data retention provisions.  The data retention period is 12 months.

In the telecommunication sector, the Office of Electronic Communication (UKE) ensures telecommunication operators fulfill their obligations.  In radio and television, the National Broadcasting Council (KRRiT) acts as the regulator.  Polish regulations protect an individual’s personal data that are collected in Poland regardless of where the data are physically stored.  The Personal Data Protection Office (UODO) enforces personal data regulations.

Post is not aware of excessively onerous visa, residence permit or similar requirements inhibiting mobility of foreign investors and their employees, though investors regularly note long processing times due to understaffing at regional employment offices.  U.S. companies have reported difficulties obtaining work permits for their non-EU citizen employees.  Both regulatory challenges and administrative delays result in permit processing times of 3 to 12 months.  This affects the hiring of new employees as well as the transfer of existing employees from outside Poland.  U.S. companies have complained they are losing highly-qualified employees to other destinations, such as Germany, where labor markets are more accessible.  The problem is especially acute in southern Poland.

Generally, Poland does not mandate local employment, but there are a few regulations that place de facto restrictions e.g., a certain number of board members of insurance companies must speak Polish.

Polish law limits non-EU citizens to 49 percent ownership of a company’s capital shares in the air transport, radio and television broadcasting sectors as well as airport and seaport operations.  There are also legal limits on foreign ownership of farm and forest lands as outlined in Section 2 of this report under Limits on Foreign Control and Right to Private Ownership and Establishment.  Pursuant to the Broadcasting Law, a TV broadcasting company may only receive a license if the voting share of its foreign owners does not exceed 49 percent and if they hold permanent residence in Poland.  In the insurance sector, at least two members of management boards, including the chair, must speak Polish.

Real Property

Poland recognizes and enforces secured interests in property, movable and real.  The concept of a mortgage exists in Poland, and there is a recognized system of recording such secured interests. There are two types of publicly available land registers in Poland: the land and mortgage register (ksiegi wieczyste), the purpose of which is to register titles to land and encumbrances thereon; and the land and buildings register (ewidencja gruntow i budynkow), the function of which is more technical as it contains information concerning physical features of the land, class of land and its use.  Generally, real estate in Poland is registered and legal title can be identified on the basis of entries in the land and mortgage registers which are maintained by relevant district courts.  Each register is accessible to the public and excerpts are available on application, subject to a nominal fee.  The registers are available online.

Poland has a non-discriminatory legal system accessible to foreign investors that protects and facilitates acquisition and disposition of all property rights, including land, buildings, and mortgages.  However, foreigners (both individuals and entities) must obtain a permit to acquire property (See Section 1 Limits on Foreign Control and Right to Private Ownership and Establishment).  Many investors, foreign and domestic, complain the judicial system is slow in adjudicating property rights cases.  Under the Polish Civil Code, a contract to buy real property must be made in the form of a notary deed.  Foreign companies and individuals may lease real property in Poland without having to obtain a permit.

Widespread nationalization of property during and after World War II has complicated the ability to establish clear title to land in Poland, especially in major municipalities.  While the Polish government has an administrative system for reviewing claims for the restitution of communal property, former individual property owners must file and pursue claims in the Polish court system in order to receive restitution.  There is no general statute of limitations regarding the filing or litigation of private property restitution claims, but there are exceptions for specific cases.  For example, in cases involving the communist-era nationalization of Warsaw under the Bierut Decree, there were claims deadlines that have now passed, and under current law, those who did not meet the deadlines would no longer be able to make a claim for either restitution or compensation.  During 2019, Warsaw city authorities continued implementing a 2015 Law dubbed the Small Reprivatization Act.  This Law aimed to stop the problem of speculators purchasing Warsaw property claims for low values from the original owners or their heirs and then applying for a perpetual usufruct or compensation as the new legal owner.  Critics state the law might extinguish potential claims by private individuals of properties seized during World War II or the communist era, if no one comes forward to pursue a restitution claim within the time limit.  Any potential claimants who come forward within six months after publication of the affected property by the City of Warsaw will have an additional three months to establish their claim.  The city began publishing lists in 2017 and continued to do so during 2019.  The city’s website contains further information on these cases and the process to pursue a claim: http://bip.warszawa.pl/Menu_podmiotowe/biura_urzedu/SD/ogloszenia/default.htm?page=1 .

It is sometimes difficult to establish clear title to properties.  There are no comprehensive estimates of land without clear title in Poland.

The 2016 Agricultural Land Law banned for five years the sale of state-owned farmland under the administration of the National Center for Support of Agriculture (NCSA).  Long-term leases of state-owned farmland are available for farmers looking to expand their operations up to300 hectares.  Foreign investors can (and do) lease agricultural land.  The 2016 Agricultural Land Law also imposed restrictions on sales of privately-owned farmland, giving the NCSA preemptive right of purchase.

The 2016 Agricultural Land Law adversely affected tenants with long-term state-owned land leases.  According to the law, leaseholders who did not return 30 percent of the land under lease to NCSA would not be eligible to have their leases extended beyond the current terms of the contract.  Currently, over 400 entities, including U.S. companies, face the prospect of returning some currently leased land to the Polish government over the coming years.  Some of these entities appealed to the Ombudsman, who requested the Constitutional Tribunal to verify the law’s compliance with the constitution.  In June 2019, the Polish parliament amended the Agricultural Land Law to loosen land sale requirements.  The amendment increased the size of private agricultural land, from 0.3 to 1.0 hectare that could be sold without the approval of the NCSA.  The new owner is not allowed to sell the land for five years.  The 2019 amendment did not change the land lease situation for larger operators, many of whom continue to remain ineligible to have their land leases extended.  The Law on Forest Land similarly prevents Polish and foreign investors from purchasing privately-held forests and gives state-owned entities (Lasy Panstwowe) preemptive right to buy privately-held forest land.

Intellectual Property Rights

Polish intellectual property rights (IPR) law is stricter than European Commission directives require.  Poland is a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.  Enforcement is improving across all sectors of Poland’s IPR regime.  Physical piracy (e.g., optical discs) is not a significant problem in Poland.  However, online piracy continues to be widespread despite progress in enforcement, and a popular cyberlocker platform in Poland is included on the 2019 Notorious Markets List.  Poland does not appear in the U.S. Trade Representative’s Special 301 Report.

Polish law requires a rights holder to start the prosecution process.  In Poland, authors’ and creators’ organizations and associations track violations and share these with prosecutors.  Rights holders express concern that penalties for digital IPR infringement are not high enough to deter violators.

In March 2019, amendments to the Act on Industrial Property Law came into force which are intended to implement  EU Trademark Directive 2015/2436.  The legislation introduced, inter alia, the abandonment of the graphical representation requirement, a new mechanism for trademark protection renewals, extended licensee’s rights, as well as remedies against counterfeit goods in transit and against infringing preparatory acts.  The changes provide new tools to fight against infringement of trademark rights.

In April 2019, the EU adopted two directives on copyright, including: 2019/790 on copyright in the digital single market and 2019/789 regarding online broadcasting and re-broadcasting.  Member states are required to transpose the reforms into national legislation by June 2021.  The Ministry of Culture and National Heritage is responsible for drafting and implementing the legislation which has not yet been made available for public consultations.

In February 2020, additional amendments to Act on Industrial Property entered into force which adapt Polish standards on inventions to those of the EU so as to streamline and speed up proceedings before the Polish Patent Office.  The amendments to the Act also extend the exemption from patent and trademark renewal fees to support start-up entrepreneurs.  The legislation complies with relevant provisions of the European Patent Convention and the Patent Cooperation Treaty.

In July 2020, amendments to the Code of Civil Procedure entered into force which, among other things, creates and operationalizes specialized IPR courts.  Poland’s new specialized courts will oversee casesrelated to all types of IPR, including copyright, and trademarks, industrial property rights, and unfair competition.  New departments for IP matters will be created at the District Courts in Gdansk, Katowice, Poznan, and Warsaw, and specialized departments will be established in the Courts of Appeal in Warsaw and Katowice.  This will replace the current system in which intellectual property matters, including those relating to highly specialized issues such as patents, plant varieties, and trademarks, are examined by commercial departments of common courts.

A specialized court that was previously established within the 22nd Department of the District Court in Warsaw for cases involving EU trademarks and community designs will lose the exclusive competence to deal with those cases and will consider IP claims regarding computer programs, inventions, designs utility, topography of integrated circuits, plant varieties, and trade secrets of a technical nature (i.e., matters of advanced complexity).  In order to conduct proceedings in these cases, it will be necessary to have highly trained judges who are familiar with IPR/IT issues.  The new rules also require parties in IPR cases to be represented by professional lawyers, legal advisers, and patent attorneys.  The changes represent a positive step for the court system, further contributing to the speed and efficiency of proceedings.

Tax incentives for IPR known collectively as “IP Box” or “Innovation Box,” included in the November 2018 tax amendment, have been applicable since January 2019.  See Section 4 – Investment Incentives.

Polish customs tracks seizures of counterfeit goods but statistics for the reporting period are currently unavailable.

General information on copyright in Poland: http://www.copyright.gov.pl/pages/main-page/copyright-in-poland/general-information.php 

Polish Patent Office: http://www.uprp.pl/o-urzedzie/Lead03,14,56,1,index,pl,text/ 

Ministry of Digitalization: https://www.gov.pl/cyfryzacja/co-robimy 

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/details.jsp?country_code=PL 

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.

State-owned enterprises (SOEs) exist mainly in the defense, energy, transport, banking and insurance sectors.  The main Warsaw stock index is dominated by state-controlled companies. The government intends to keep majority share ownership and/or state-control of economically and strategically important firms and is expanding the role of the state in the economy, particularly in the banking and energy sectors.  Some U.S. investors have expressed concern that the government favors SOEs by offering loans from the national budget as a capital injection and unfairly favoring SOEs in investment disputes.  Since Poland’s EU accession, government activity favoring state-owned firms has received careful scrutiny from Brussels.  Since the Law and Justice government came to power in 2015, there has been a considerable increase in turnover in managerial positions of state-owned companies (although this has also occurred in previous changes of government, but to a lesser degree) and increased focus on building national champions in strategic industries to be able to compete internationally.  SOEs are governed by a board of directors and most pay an annual dividend to the government, as well as prepare and disclose annual reports.

List of companies classified as “important for the economy” is at this link:  https://nadzor.kprm.gov.pl/spolki-z-udzialem-skarbu-panstwa 

Among them are companies of “strategic importance” whose shares cannot be sold, including:  Grupa Azoty S.A., Grupa LOTOS S.A., KGHM Polska Miedz S.A., and Energa S.A.

The government sees SOEs as drivers and leaders of its innovation policy agenda.  For example, several energy SOEs established a company to develop electro mobility.  The performance of SOEs has remained strong overall and broadly similar to that of private companies.  International evidence suggests, however, that a dominant role of SOEs can pose fiscal, financial, and macro-stability risks.

As of April 2020, there were over 370 companies in partnership with state authorities.  Among them there are companies under bankruptcy proceedings and in liquidation and in which the State Treasury held residual shares.  Here is a link to the list of companies, including under the control of which ministry they fall: http://nadzor.kprm.gov.pl/spolki-z-udzialem-skarbu-panstwa . 

The Ministry of State Assets, established after the October 2019 post-election cabinet reshuffle, has control over 200 enterprises.  Their aggregate value reaches several dozens of billions of Polish zlotys.  Among these companies are the largest chemical, energy, and mining groups; firms in the banking and insurance sectors; the Warsaw Stock Exchange; Poczta Polska (the national postal operator); and transport companies.  This list does not include state-controlled public media, which are under the supervision of the Ministry of Culture or the State Securities Printing Company (PWPW) supervised by the Interior Ministry.  Supervision over defense industry companies has been shifted from the Ministry of Defense to the Ministry of State Assets.

The value of stock owned by the state in publicly-held companies, many of which are the biggest companies in their sectors, was worth over PLN 113 billion (USD 30 billion) in 2017.  The same standards are generally applied to private and public companies with respect to access to markets, credit, and other business operations such as licenses and supplies.  Government officials occasionally exercise discretionary authority to assist SOEs.  In general, SOEs are expected to pay their own way, finance their operations, and fund further expansion through profits generated from their own operations.

On February 21, 2019, an amendment to the Act on the principles of management of state-owned property was adopted, which provides for the establishment of a new public special-purpose fund – the Capital Investment Fund.  The Fund is a source of financing for the purchase and subscription of shares in companies.  The Fund is managed by the Prime Minister’s office and financed by dividends from state-controlled companies.  In 2020, the Fund’s revenues are expected to reach PLN one billion PLN (USD 240 million).

A commission for the reform of corporate governance was established on February 10, 2020, by the Minister of State Assets.  The commission will develop recommendations regarding the introduction of a law on consortia/holdings; changes in the powers of supervisory boards and their members, with particular emphasis on the rights and obligations of parent companies’ supervisory boards; changes in the scope of information obligations of companies towards partners or shareholders; and other changes, including in the Commercial Companies Code.  According to the Deputy Minister of State Assets and Government Plenipotentiary for Reform of Ownership Supervision over State Treasury Companies, the new law will be realistic and attractive to foreign investors.

Since coming to power in 2015, the governing Law and Justice party has increased control over Poland’s banking and energy sectors.  In April 2020, it announced plans to tighten rules regarding takeovers of Polish companies by investors from outside the European Union.

OECD Guidelines on Corporate Governance of SOEs

In Poland, the same rules apply to SOEs and publicly-listed companies unless statutes provide otherwise.  The state exercises its influence through its rights as a shareholder in proportion to the number of voting shares it holds (or through shareholder proxies).  In some cases, an SOE is afforded special rights as specified in the company’s articles, and in compliance with Polish and EU laws.  In some non-strategic companies, the state exercises special rights as a result of its majority ownership but not as a result of any specific strategic interest.  Despite some of these specific rights, the state’s aim is to create long-term value for shareholders of its listed companies by adhering to the OECD’s SOE Guidelines.  State representatives who sit on supervisory boards must comply with the Commercial Companies Code and are expected to act in the best interests of the company and its shareholders.  The European Commission noted that “Polska Fundacja Narodowa” (an organization established to promote Polish culture worldwide and funded by Polish SOEs) was involved in the organization and financing of a campaign supporting the controversial judiciary changes by the government.  The commission stated this was broadly against OECD recommendations on SOE involvement in financing political activities.

SOE employees can designate two fifths of the SOE’s Supervisory Board’s members.  In addition, according to Poland’s privatization law, in wholly state-owned enterprises with more than 500 employees, the employees are allowed to elect one member of the Management Board.  SOEs are subject to a series of additional disclosure requirements above those set forth in the Company Law.  The supervising ministry prepares specific guidelines on annual financial reporting to explain and clarify these requirements.  SOEs must prepare detailed reports on management board activity, plus a report on the previous financial year’s activity, and a report on the result of the examination of financial reports.  In practice, detailed reporting data for non-listed SOEs is not easily accessible.  State representatives to supervisory boards must go through examinations to be able to apply for a board position.  Many major state-controlled companies are listed on the Warsaw Stock Exchange and are subject to the “Code of Best Practice for WSE Listed Companies.”

On September 30, 2015, the Act on Control of Certain Investments entered into force.  The law creates mechanisms to protect against hostile takeovers of companies operating in strategic sectors (gas, power generation, chemical, petrochemical and defense sectors) of the Polish economy (see Section 2 on Investment Screening), most of which are SOEs or state-controlled. In 2020, the government plans to introduce new legislation preventing hostile take overs.

The SOE governance law of 2017 (with subsequent amendments) is being implemented gradually.  The framework formally keeps the oversight of SOE supervision centralized, while transferring the responsibilities from the Ministry of the Treasury to the Prime Minister’s Office (PMO) and the Ministry of State Assets.  The Ministry of State Assets exercises ownership functions for the majority of SOEs.  A few sector-specific ministries (e.g., Culture and Maritime Economy) also exercise ownership for SOEs with public policy objectives.  The PMO oversees development agencies such as the Polish Development Fund and the Industry Development Agency.

Privatization Program

The Polish government has completed the privatization of most of the SOEs it deems not to be of national strategic importance.  With few exceptions, the Polish government has invited foreign investors to participate in major privatization projects.  In general, privatization bidding criteria have been clear and the process transparent.

The majority of SOEs classified as “economically important” or “strategically important” is in the energy, mining, media and financial sectors.  The government intends to keep majority share ownership of these firms, or to sell tranches of shares in a manner that maintains state control.  The government is currently focused on consolidating and improving the efficiency of the remaining SOEs.

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.

Poland is not eligible for DFC programs outside of energy infrastructure projects.  Post is not aware of any existing agreements between Poland and OPIC.

* 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.

Tisha Loeper-Viti
Trade and Investment Officer
U.S. Embassy Warsaw
+48 22 504 2522
Loeper-VitiTR@state.gov