- 7 maja 2020
- Category: Advocacy & Legal Updates
AmCham is involved in an initiative aiming to stop further amendments to the Act of 24 July 2015 on the control of certain investments that are being processed by the Polish Government. The proposed amendments have not been made public and there is no official link to the draft legislation. However, AmCham analyzed the draft which has been sent to a very limited public consultation and is currently working on its official position paper of the proposed changes to the law on the control of certain investments. We also cooperate very closely with the U.S. Embassy in Poland in that respect.
The draft law introduces a new mechanism that would control foreign investment in Poland which affects all non-EU entities that want to invest in a Polish entity covered by protection. It applies to the acquisition of shares and stock of the Polish entity, including reaching 10%, 20% and 40% of the voting threshold, obtaining or increasing a share in the profits of that entity, as well as concluding an agreement providing for the management of that entity or the transfer of profit by that entity, including indirect acquisition through subsidiaries.
A new category of entities covered by protection is defined in the draft law which include companies that have activities connected with telecommunication, electricity generation, production of chemicals, production of pharmaceutical products, or IT. A non-EU entity which intends to acquire dominance over an entity covered by protection is obliged to constantly submit to the President of the Office of Competition and Consumer Protection its intention to do so. The draft law is related to combatting the economic consequences of COVID-19 and comes with a 24 month sunset clause.
AmCham supports the purpose of the draft law which is to protect public order, public security, or public health. But, the drafted version from April 28, 2020 is alarming because it:
1) Creates another layer of legal uncertainty and hinders the process of investments in Polish companies.
According to the draft law, non-EU companies need another consent from the President of the Office of Competition and Consumer Protection. Currently, there is already a notification requirement to the same office regarding concentration. The rules for the notification of concentration to the President of the Office of Competition and Consumer Protection are set forth in the Competition and Consumer Protection Act of 16 February 2007 which provides for the proceeding of merger control cases.
Moreover, according to the proposed law, the President of the Office of Competition and Consumer Protection can object to the acquisition if there is any potential threat to public order, public security, or public health. The criterion of “any potential threat” is unprecise and could be anything up to an individual’s interpretation. Therefore, there is no certainty that a positive decision will be issued by the President of the Office of Competition and Consumer Protection.
2) Prolongs the investment process in Poland
According to the draft law, the proceeding before the President of the Office of Competition and Consumer Protection can last up to 240 days (60 days for the initial screening + 90 days for a decision after initiating an inspection proceeding + an additional 90 days in particularly complicated cases or when there is a reasonable probability of a threat to public order). Taking into consideration the dynamics of the investment market, such a long process can prevent non-EU companies from conducting any business transactions in Poland.
3) Affects all EU subsidiaries of non-EU companies
According to the draft law, an EU subsidiary with its parent company outside the EU is covered by the notification obligation. In practice, it means that for instance a U.S. company with significant business in Europe cannot acquire shares/stocks of a Polish company through its EU subsidiary without the prior consent of the President of the Office of Competition and Consumer Protection.
4) Creates many legal ambiguities
It is not clear enough which entities are covered by the notification obligation in business practice. The catalog of “protected businesses” is extensive and goes beyond businesses being essential to national security, public health, and critical infrastructure.
5) Bears risk of huge fines or/and imprisonment
Breach of the proposed law (i.e. acquisition or gaining a significant interest or dominant position without submitting the notification to the President of the Office of Competition and Consumer Protection) is subject to a fine of up to PLN 100,000,000 (an extremely high fine cap in the Polish law) or imprisonment from 6 months up to 5 years, or both penalties jointly. In the context of the imprecise legal provisions in the draft law causing doubts about its applicability, the proposed penalties bear the risk of reporting every transaction involving U.S. companies to the President of the Office of Competition and Consumer Protection.