Category: Poland

Climate change-related risks have climbed to the top of the agenda of various stakeholders across the globe: governments, international organizations, NGOs, businesses, and ordinary citizens. The Global Risk Report 2020, presented this year at the World Economic Forum in Davos, demonstrates that climate-related risks – including extreme weather, climate action failure, natural disasters, biodiversity loss, and human-made environmental disasters – are among the top five long-term risks over the next ten years. Most notably, according to survey respondents, the failure of climate change mitigation and adaptation is this year’s number one long-term risk by impact. The report underscores that, in the 2020s, “concerted action is required not only to reduce emissions but also to develop credible adaptation strategies, including climate-proofing infrastructure, closing the insurance protection gap, and scaling up public and private adaptation finance.”

The CO2 reduction targets pledged in the 2015 Paris Agreement (adopted under the UN Framework Convention on Climate Change) look insufficient given that over the last five years the adverse effects of climate change have been more rapid and severe than expected and are continuing to grow exponentially. The Intergovernmental Panel on Climate Change 2018’s “Special Report on Global Warming of 1.5°C” warns that avoiding the worst effects of climate change will “require rapid and far-reaching transitions of energy, land, urban and infrastructure (including transport and buildings) and industrial systems.”

In January 2020, the European Union adopted the European Green Deal – an ambitious package of measures designed to cut greenhouse gas emissions, invest in cutting-edge research and innovation, and preserve Europe’s natural environment. It is estimated that achieving the EU’s goal of climate neutrality by 2050 will require at least EUR 1 trillion of investments. There is a clear tension between calls to create a green society and the urge in less-developed regions, such as CEE, to boost economic growth through investment in carbon-heavy energy and transport infrastructure projects. Poland will be particularly affected by the transition and will need to undergo profound economic and social transformation. Therefore, the Just Transition Mechanism will support those most affected – including Poland if it subscribes to the European Green Deal – through a package of financial and practical support worth at least EUR 100 billion.

A global response to climate change involving new investments will inevitably generate legal disputes. Such disputes may arise out of commercial contracts relating, for example, to carbon emission trading schemes, licensing of climate change technology such as Carbon Capture and Storage, supply of renewable energy, decommissioning of non-renewable power plants, and adaptation of existing buildings and infrastructure, including transportation systems, to a warming climate. Climate-related disputes may also arise as a result of investors’ claims concerning regulatory measures implemented by states and driven by climate change action. Several such claims have already been brought against states which are amending solar energy investment incentives, suspending wind energy offshore development, or phasing out nuclear power. There will also be disputes with local communities impacted by new investments affecting arable land or fisheries.

In 2014, the International Bar Association published a report on “Achieving Justice and Human Rights in an Era of Climate Disruption.” Its key part relates to dispute resolution and recognizes that arbitral institutions offer specialized procedures and dispute settlement methods apt to resolve climate-related disputes, such as review panel proceedings, fact-finding commissions, and mediation or conciliation.

In this vein, in November 2019 the ICC Commission on Arbitration and ADR published a report on Resolving Climate Change Related Disputes through Arbitration and ADR, which identifies several features that may serve the effectiveness of resolving climate-related disputes and provides sample wording which can be introduced to dispute-resolution mechanisms. These features include securing climate-change-related expertise of arbitrators and experts to ensure that decisions reflect sound and up-to-date scientific and technical knowledge; providing procedural tools which take into account the complexity, urgency, and special sensitivities of the climate-change response (such as expedited procedures, time and cost management techniques; emergency, interim, and conservatory measures; and multi-tiered conflict escalation procedures, including mediation, expert determination, and dispute boards); the possibility of integrating climate-change policy or law into the dispute-resolution procedure; the possibility of adopting an increased measure of transparency of arbitration; and providing options for involving third parties in the dispute-resolution procedure. The existing caseload of major arbitral institutions like the ICC, SCC, and PCA already proves that arbitration of climate-related disputes is in use and growing.

By Malgorzata Anna Surdek, Partner, CMS Poland

This Article was originally published in Issue 7.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

 

Dentons has advised ING Bank Slaski on a multimillion acquisition financing and refinancing of a portfolio of Polish solar projects with an aggregate capacity of 45 MW. The financing was granted to a project company controlled by a fund managed by Aberdeen Standard Investments, which was advised by Rymarz Zdort.

Dentons reports that the transaction involved 22 obligors, “which significantly increased the complexity of the process and documentation.” The finance documents are subject to Polish, English, and Swiss law.

Dentons’ team included Partners Agnieszka Lipska and Agnieszka Kulinska, Senior Associate Jan Dubinnski, and Associates Lukasz Blaszczak, Jakub Walawski, Filip Rucinski, Andrzej Sarnacki, Dominika Krysiak-Bogdzio, and Katarzyna Kaptur.

Rymarz Zdort’s team included Partners Marcin Iwaniszyn and Marek Durski, Counsels Jakub Rachwol and Jakub Krzemien, and Associates Robert Smigielski, Patryk Gelar, Adrian Augustyniak, Kacper Stanosz, and Andrzej Granat.

Jacek Kosinski Adwokaci i Radcowie Prawni has advised Dubai-based VC Shibumi International on its investment in Hustro, a Wroclaw-based company that operates in the construction sector. Hustro was advised by solo practitioner Maksymilian Imbirski.

According to Jacek Kosinski Adwokaci i Radcowie Prawni, “the goal of the partnership is to create a software solution that limits the negative effects of construction site issues. In particular, the main goal of the software would be to help manage claims in FIDIC contracts. Hustro focuses on financial, legal, scheduling, and productivity improvements and targets large general contractors. Shibumi’s investment financing also includes obtaining corporate control over Hustro within the first stages of developing the product.”

Jacek Kosinski Adwokaci i Radcowie Prawni’s team included Managing Partner Jacek Kosinski and Legal Advisor Natalia Rutkowska.

White & Case has advised PKO Bank Polski on a tender offer to the holders of its EUR 750 million notes and USD 1 billion notes issued by its subsidiary, PKO Finance AB.

According to White & Case, “PKO Bank Polski acquired its own notes with an aggregate principal amount of EUR 250 million and the notes issued by PKO Finance AB with an aggregate principal amount of USD 195,410,000.”

White & Case’s team was co-led by Warsaw-based Partner Marcin Studniarek and London-based Partner James Greene and included Counsel Bartosz Smardzewski and Associate Michal Truszczynski in Warsaw and Associate James Clarke in London.

CMS has advised Real Assets Advisers on its structuring of the joint acquisition of 33% of Acciona Energía Internacional by AXA Real Asset and Acciona S.A.

According to CMS, “Acciona Energía Internacional owns 52 renewable energy assets, including mostly onshore wind farms with a combined net generation capacity of 2.3 gigawatts. This portfolio is spread across six continents, with the assets located mainly in OECD countries, including the U.S., Mexico, Canada, Italy, Portugal, South Africa, and Australia.”

CMS’s team wasled by Partner Piotr Ciolkowski and Counsel Michal Andruszkiewicz and included Senior Associate Krzysztof Mrozik.

CMS Warsaw has announced that it will be joined by five former Clifford Chance lawyers in August, including Slawomir Czerwinski and Mateusz Stepien, who will join as Partners, Jaroslaw Gajde, who will join as Counsel, Antoni Wandzilak, joining as Senior Associate, and Dominika Pietkun, joining as Associate. 

According to CMS, Slawomir Czerwinski will be responsible for the “further development of cooperation with private equity funds.” According to the firm, “for fifteen years he has been advising PE and VC funds on M&A transactions, disinvestments, and joint ventures. Slawomir has extensive experience in corporate transactional advisory services for sector investors, with particular focus on the healthcare, financial services, FMCG, and infrastructure sector.” Czerwinski is a graduate of the University of Warsaw and the Kozminski University. He spent the last 13 years with Clifford Chance, and the two before that with Baker McKenzie.

Mateusz Stepien has, for the last 12 years, “supported private equity funds in M&A transactions, restructuring and joint ventures,” according to CMS. “His experience focuses around transactional advisory for financial, real estate, infrastructure, FMCG, and healthcare companies.” Stepien holds a Master’s degree from the University of Warsaw. He will join CMS after spending almost 12 years with Clifford Chance. 

“In the past three years our corporate transactions lawyers have worked on the largest number of mergers and acquisitions on the Polish market, which is why we offer our clients unique expertise and comprehensive transactional experience,” said Andrzej Posniak, Managing Partner of CMS Warsaw.  “We have decided to strengthen our corporate transactions group by an absolutely fantastic (as experts and colleagues) team of lawyers with vast experience on the private equity market.“

“Once Covid-19 eases, the transactional processes are going to speed up,” added Partner Rafal Zwierz. “In Poland, one can find very interesting assets, also in industries that are less dependent on economic fluctuations and thus giving an opportunity for the expected return on investment even in periods of greater uncertainty.”

On April 9, 2020, CEE Legal Matters reported that Dentons had advised Hines Poland Sustainable Income Fund on the sale of a portfolio of six Polish distribution parks and the Nord Point office building in Warsaw to Chinese investor CGL Investment Holdings Corporation Limited. We spoke to Mietek Godzisz, Head of Hines in Poland, about the deal. 

CEELM: To start, please tell our readers about the Hines Poland Sustainable Income Fund.

Mietek: The Hines Poland Sustainable Income Fund is a private closed-end fund focused on investing in yielding office and industrial assets in Poland. The fund’s strategy is to target, within these two asset classes, properties that are both of high-quality at purchase and offer the potential for further improvement in their sustainability features. The fund was first closed in July 2014 with a total capitalization of EUR 155 million in equity, with the equity commitments made by institutional, public, and private investors. Between 2014 and 2016, the fund invested in assets worth approximately EUR 250 million in gross asset value, including in three office assets in Warsaw and six logistics and industrial parks across Poland. Under the fund’s regulations, there are specific requirements and improvement targets in sustainability that Hines — as the general partner and fund manager — was required to achieve during the first years of the hold period. Hines met all these sustainability requirements by Hines by early 2019.

CEELM: What do you think made these particular targets attractive to CGL Investment Holdings Corporation Limited?

Mietek: I believe that CGL Investment Holdings Corporation Ltd was attracted to the industrial/logistics portfolio of the fund owing to the defensive locations of these parks, the quality of tenant base, and the sustainability of this well-diversified portfolio. As a result of the competitive bid process, CGL emerged as the most motivated bidder, but also a reliable, large strategic player, and so one capable of completing the transaction as anticipated. We were very happy to grant exclusivity to CGL, which proved to be the right decision, as CGL has pursued the transaction with focus and discipline through the efficient closing despite the global uncertainty arising from the Coronavirus pandemic.

CEELM: What would you say were the most complex aspects of the deal?

Mietek: As the assets of the fund’s industrial portfolio was very diverse, including a multi-tenanted park with a significant office component in Warsaw, CGL needed more time for the due diligence that might have been expected. This caused some slow-down in the transaction process. Such a decline in the deal dynamics was a challenge to manage as we all know that time often kills deals. It was both the fund’s and CGL’s job to keep all the involved teams, including the advisers, properly focused and disciplined throughout the process, which we did well, I would say. We were fortunate to have CGL as the counter-party who was as committed as we were to get the deal through the finish line as soon as practicable.

CEELM: How was the legal work involved in the deal split between your in-house legal function and your external advisors?

Mietek: We actually do not have an internal legal function in Poland. Therefore, we worked with external counsel at the asset level in Poland, and another counsel at the fund level in Luxembourg. Naturally, the Polish level legal work scope was significantly broader as the entire portfolio deal was carried under Polish law. The work of coordinating the counsels, including to some extent the counter-party counsel, was carried out by our asset manager and myself throughout the transaction process. As with any complex transaction, there were problems to address, including some that were legal in nature, but none proved too difficult to resolve for CGL, Hines, or our attorneys. I do not recall any issue to be of gravity that would threaten the transaction or cause unusual concern.

CEELM: What were the main considerations for in choosing Dentons to assist you on this deal?

Mietek: Dentons has long been the law firm of first-choice in Poland, in particular for larger real estate transactions. That said, we carried out a fair market selection process among several law firms prior to engaging Dentons for the job. In our and the fund manager’s opinion, Dentons offered the best overall value proposition, considering the Dentons’ team dedicated to the deal and the fee structure proposed.

SSW Pragmatic Solutions has assisted Games Operators with its initial public offering and listing on the Warsaw Stock Exchange.

According to SSW Pragmatic Solutions, “the funds raised during the IPO will allow for the production of new games. The company intends to develop 7 to 14 projects, the details of which have not yet been announced. About 80% of the funds raised will be allocated for development and 10% for marketing. By the end of 2020, the company plans to release about ten more games.”

SSW Pragmatic Solutions helped Games Operators acquire approval for the prospectus for the IPO earlier this spring (as reported by CEE Legal Matters on March 11, 2020).

SSW Pragmatic Solutions’ team included Partner Szymon Okon, Senior Associate Tomasz Kwasniewski, and Junior Associate Piotr Motor.

Rymarz Zdort has advised Cordia International on its PLN 229.4 million acquisition of a majority stake in Polnord S.A. DLA Piper advised Polnord on the deal.

Cordia International is a Hungarian construction and development company and a member of the Futureal group. It executes residential development projects in Poland, Romania, Hungary, and Spain.

Polnord is a Polish construction and development company operating on the residential and commercial property markets and is listed on the regulated market of the Warsaw Stock Exchange.

According to Rymarz Zdort, “the recapitalization allowed Polnord to fulfill its obligations under a credit loan agreement and maturing bonds. For Cordia, the Polnord acquisition is in line with its growth strategy in Poland.”

Rymarz Zdort’s team was led by Partners Pawel Zdort and Ewa Bober and included Partners Krzysztof Sajchta, Iwona Her, and Magdalena Pyzik-Walag, Senior Associates Leszek Cyganiewicz and Michal Milewski, Counsel Irmina Trybalska, and Associates Arkadiusz Karwala, Aleksander Jakubisiak, and Jakub Cichuta.

DLA Piper’s team was led by Partner Jakub Domalik-Plakwicz and included Senior Associate Mateusz Zalenski, Counsel Wojciech Kalinowski, and Associate Adam Marszalek.

Even as the solutions adopted by the Polish Parliament in an attempt to mitigate the negative consequences of Covid-19 do not introduce many significant changes as far as the financing sector is concerned, some of the amendments concerning business financing are certainly noteworthy.

Renegotiation of Bank Loans

Based on the Anti-Crisis Shield, businesses will be able to renegotiate the terms and conditions of loans taken out before 8 March 2020, including repayment schedules. Financing banks are obliged to assess borrowers’ economic and financial standing as of 30 September 2019 at the earliest, while disregarding any negative effects that the current crisis might have on borrower operations. It is worth keeping in mind that for any contractual amendments to be made, borrowers and lenders have to reach compromises that are satisfactory to both parties.

Loan Repayment Guarantees

The Polish National Development Bank (BGK) will be able to guarantee the repayment of loans taken out by businesses other than micro- and small enterprises with the aim of ensuring their financial liquidity. Such guarantees will be available upon application and, as a rule, granted for a fixed period and amount, securing up to 80% of the outstanding amount of the loan. Additionally, they may take the form of public aid.

Although specific terms and conditions of this scheme, as well as other types of support to be made available by BGK, are yet to be announced, their general outline – along with a list of financing banks – is available at https://www.bgk.pl/pakietpomocy/ (in Polish).

One of the advantages of guarantees provided by BGK is that they increase the likelihood of obtaining (or maintaining) a loan through securing its repayment over a specified period and tend to be more cost-effective or otherwise more economically advantageous than guarantees offered by commercial banks. This is, among others, due to the fact that BGK does not take a commission for issuing certain types of guarantee and in some cases even subsidises the repayment of interest on loans secured by its guarantees.

Insurance and Export Guarantees

Amendments to the Anti-Crisis Shield provide for the possibility of insuring, among others, instruments such as bank loans, credit limits for issuing guarantees or letters of credit. The purpose of such insurance is to protect lenders (especially banks) in case of losses sustained in connection with the financing of export contracts.

Issuers and businesses meeting certain criteria (particularly regarding the export of domestic products) may apply for export insurance – either as policy holders or insured parties – and insurance guarantees. The detailed terms and conditions of such insurance are to be specified in relevant agreements made with the Export Credit Insurance Corporation

Industrial Development Agency’s Support Scheme

Forms of support offered by the Industrial Development Agency (ARP) will include, in particular, loans, guarantees, hire-purchase agreements, and other means of business financing. Support will be available to businesses experiencing financial difficulties (having recorded a decrease in economic turnover that meets specific statutory thresholds) as a consequence of bans and restrictions relating to Covid-19. However, businesses that are subject to restructuring proceedings or have been declared bankrupt will not be eligible for support.

Support will be granted upon request, based on agreements specifying the terms and conditions on which the support is to be granted and how it can or cannot be used. The entire procedure may be performed online and relies largely on applicants’ own statements. The beneficiaries of the scheme will receive support enabling them to maintain financial liquidity throughout the current epidemic, as well as for a period of 12 months thereafter, when it is hoped that the negative economic impact of Covid-19 will be less pronounced.

Financial Shield

The Polish Development Fund (PFR) is launching a support scheme comprising a:

• Financial Shield for Microenterprises (employing at least one person), worth PLN 25 billion;
• Financial Shield for Small- and Medium-Sized Enterprises, worth PLN 50 billion; and
• Financial Shield for Large Enterprises, worth PLN 25 billion and consisting of the Liquidity Shield, Financial Shield, and Capital Shield

The support afforded to micro-, small-, and medium-sized enterprises will predominantly take the form of partially non-repayable financial subventions, which are to compensate for some of the losses sustained as a consequence of the Covid-19 epidemic. On the other hand, large enterprises can receive non-gratuitous and fully repayable financial support, preferential financing with and investment financing using capital instruments, on market terms and as public aid.

To be eligible for such support, businesses must meet certain criteria. These include, in particular: (i) having recorded a specific decrease in economic turnover; (ii) having had conducted business prior to the end of 2019; (iii) being subject to no pending bankruptcy, restructuring, or liquidation proceedings; (iv) having an ultimate beneficial owner (UBO) with tax residence in Poland; and (v) having no arrears in payment of taxes and social security contributions.

As a rule, funds transferred to businesses as part of the Polish Development Fund’s scheme will not be subject to judicial or administrative enforcement.

Support will be provided based on an appropriate agreement, specifying how the funds are to be used and – in the case of subventions and other types of non-repayable financial support – on what conditions and to what extent such funds do not have to be repaid (with the key factors including job retention and continued operation). The procedure itself is to be fairly straightforward, relying on applicants’ statements and being completed almost entirely online. More information about the scheme can be found at https://pfr.pl/tarcza.html (content in Polish).

By Katarzyna Sawa-Rybaczek, Partner, and Lukasz Czerepak, Junior Associate, Penteris