Category: Poland

Over the past years the Polish Office of Competition and Consumer Protection (UOKiK) has been intensifying measures aimed at investigating tendering procedures.

Since the beginning of 2015 twelve decisions have been issued in bid-rigging cases, in nine of which fines were imposed. More than 30 bid-rigging cases are still on UOKiK’s agenda. The main concern with the increased interest in identifying and eliminating bid-rigging cartels is that, as a result of such practices, the price paid by the contracting party is typically approximately 20% higher than it would have been in an unrestricted competition environment. In this context, two of the recent bid-rigging decisions are particularly interesting.

Guideline Decision on Joint Bidding

It is a common practice for independent entrepreneurs to combine their skills, know-how, and capacities in order to submit an attractive joint offer as a consortium for lucrative contracts. Both the EU and the Polish competition regulators recognize the economically justifiable reasons for this kind of cooperation. In principle, joint bidding constitutes a commonly accepted and lawful practice. The previously uncertain boundaries to this practice have been defined by UOKiK in a decision that has recently been affirmed by a judgment of the Court of Appeal in Warsaw.

The UOKiK’s decision concerned a public tender for collection and transport of municipal waste in the mid-size Polish city of Bialystok. The Polish competition authority held that two core market players – MPO and ASTWA – had colluded in bidding jointly for the contract. Even though UOKiK found their agreement to be restrictive by object, as it was designed to preserve existing market shares by circumventing open market competition, no fines were imposed on the cartelists. UOKiK explained its decision to forgo financial repercussions by pointing to the precedentiary character of the case, which should form guidelines on future practices of bidders anticipating a consortium for joint-bidding purposes.

The decision was appealed and overturned by the competition court (the court of first instance). However, the Court of Appeal in Warsaw followed the reasoning of UOKiK and ruled in line with the initial decision, holding that, in general, companies may bid jointly as a consortium in order to combine services where neither of them has technical or other capabilities to perform the contract independently. By contrast, the Court held that where each of the consortium members has the capacity to bid independently, joint bidding constitutes a restrictive, bid-rigging cartel. Therefore, when considering whether to bid jointly tenderers should always assess their independent and combined potential. If the economic necessity and other pro-competitive considerations do not outweigh the anticompetitive effects, UOKiK will not hesitate to initiate proceedings.

Collusive Practices Between Relatives

Lack of decision-making independence due to family ties between entrepreneurs has been historically found non-collusive, basing of the single economic unit concept. However, the withdrawal of a bid by one of the tenderers that has the object or effect of market sharing with a competing relative is at risk of being qualified as a restrictive concerted practice.

In a recent judgment on the bid-rigging practices between two companies providing road landscape and maintenance services, the competition court had to revise its previous assessment of the single economic unit argument for excusing collusive behavior of related tenderers. Although UOKiK’s fine-imposing decision from 2011 was overturned by the court of first instance in 2013, this judgment was overturned on appeal. In the second-round review the competition court recognized the existence of bid-rigging practices between two companies owned by a separated husband and wife, respectively. The arrangement between the couple was to withdraw the lower bid if the other one was the second best. Consequently, the contractor had to accept the higher bid. The competition court concluded that to the extent submission of separate bids by related entrepreneurs or companies owned by relatives is permissible, alignment of bids or any other collusive arrangement cannot be excused on the basis of the single economic unit argument.

By Arkadiusz Ruminski, Associated Partner, and Marta Smolarz, Senior Associate, Noerr

This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Tax dodging may cost Poland over EUR 11 billion a year. It is estimated that corporate tax evasion accounts for around EUR 2 billion annually. VAT frauds alone may cause the State budget losses of EUR 9 billion every year. These numbers have encouraged the Polish government to increase efforts aimed at closing existing loopholes. 

General Anti-Avoidance Regulation

On July 15, 2016, a new GAAR (General Anti-Avoidance Rule) clause was introduced into the tax system in Poland. This GAAR applies not only to future transactions but to all “optimizations” made in past years if they result in tax benefits after July 15, 2016. Accordingly, all transactions of an “optimizing” or restructuring nature should be verified to confirm whether they may be subject to GAAR. 

According to the GAAR, lawful legal transactions with the main purpose of obtaining a tax advantage must not be permitted to result in tax benefit. Tax benefits include reducing, postponing, or avoiding tax liability or creating an entitlement to a tax refund or an excessive tax refund.

The new law will apply to any action that is carried out solely for the purpose of achieving a tax benefit which is considered as artificial by the tax authority. An artificial action is understood as an action that would not be carried out by a taxpayer acting in a reasonable manner and whose objectives are not contrary to the purpose of the tax law. GAAR requires certain circumstances to be taken into account when deciding whether a solution was in fact artificial or not; for example, splitting up a transaction without any reasonable justification or implementing a transaction with the involvement of intermediaries despite there being no good business reason to involve them.

GAAR only applies to transactions resulting in tax benefits in excess of approximately EUR 22,000 in the settlement period in question. See below for changes applicable to VAT-related matters. 

Transfer Pricing Regulations

Recent changes to the transfer pricing rules implement the recommendations of the BEPS (Base Erosion and Profit Shifting) initiative of the Organization for Economic Cooperation and Development (OECD). The new enhanced reporting requirements should enable OECD countries’ taxing authorities to identify structures used to transfer profits among tax jurisdictions. Unifying the reporting requirements will facilitate the exchange of information among tax authorities and make it easier for them to effectively track potential tax evasion. In Poland, most of the new obligations will be effective from January 1, 2017, and will affect big corporations as well as medium and small market players.

Anti-VAT Frauds Rules

Although GAAR itself does not apply to VAT, similar amendments have been introduced to the act on VAT based on the concept of the abuse of rights. In the event of an abuse of law, activities subject to the VAT rules will only give effect to those tax results that would have occurred in the absence of transactions/actions constituting an abuse of law. The definition of “an abuse of law” is even more general than the definition of an artificial action. According to the amended provisions of the act on VAT, an abuse of law is defined as an activity that that is subject to VAT that is carried out as part of a transaction/action that, despite meeting the formal requirements specified in the provisions of the act on VAT, basically was aimed at deriving tax benefits that are contrary to the intention of those provisions.

Taxation of Closed-End Investment Funds

The most recent initiative by lawmakers is the introduction of the taxation of closed-end investment funds. Currently, EU/EEA-based investment funds enjoy a general corporate tax exemption. As profits are only taxable at the investor level upon exit, closed-end funds are often used in tax optimization structures. Although in some cases these funds are indeed used mainly to avoid or to defer the payment of tax, the shutdown of the exemption may severely harm the private equity market. Moreover, such a measure seems to be redundant, as the general anti-abuse regulation should deal with artificial structures created to avoid taxation. 

These are only some of the initiatives aimed at closing existing loopholes. The government is determined, according to Prime Minister Beata Szydlo, to “tighten the leaking tax system and fight those that drain money from the state budget.” People who purposefully cheat the state by issuing false or void VAT invoices are a particular target. According to the draft amendment to the criminal code, severe penalties for VAT fraud should enter into force in Poland at the end of year 2016, including potentially even 25 years of imprisonment for VAT extortion on a large scale.

By Ron Given, Partner, and Anna Sekowska and Bartlomiej Sikora, Senior Associates, Wolf Theiss Poland

This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The number of patent infringement cases in Poland is steadily growing. However, even the best drafted patents and clear infringement background may prove insufficient for effective enforcement in cases where a matter has not been properly prepared. The summary below focuses on key legal remedies available for patent holders to effectively counteract infringing activity in Poland and indicates the key aspects that need to be addressed.

Legal remedies available for patentees in Poland are relatively broad and can be applied either before or during the main patent case. Nonetheless, Polish civil procedure and case law set out quite stringent rules for how to prove patent violation. Such rules should be duly observed to effectively enforce a patent.

Interim Injunction and Statement of Claim

In most cases, an interim injunction is of key importance in immediately stopping infringement. Such an injunction can be sought by patent holders either before initiating or during the main patent infringement case. In practice, patentees seek an interim injunction to prevent infringers from unauthorized activities or to seize the infringing products during the term of the main court action. If an injunction motion is filed before initiating the main court case, such a motion is, in principle, examined by the court without hearing the other party (ex parte) and immediately– so that the important factors of promptness and surprise are retained.

Two prerequisites must be demonstrated to obtain an injunction: (i) a corroboration of patent infringement claims, and (ii) a so-called legal interest in granting the injunction. A patent infringement case is deemed corroborated if a court finds, based on the case background presented in the injunction motion, that infringement is prima facie likely, even without conducting evidentiary proceedings at this stage. In patent cases such corroboration is usually shown by filing evidence that the defendant manufactures, offers, or sells infringing products, together with private expert opinions showing that such questioned products fall within the scope of the patent being enforced. As injunction decisions can be appealed and defendants often attach to their complaints contradicting private opinions in order to undermine the charge of infringement, it is particularly important for patentees that the private expert opinions they file with their injunction motion are precise and convincingly show that the patented invention was used by the defendant.

In turn, a legal interest exists where the lack of an injunction would prevent or substantially hinder the enforcement of a final judgment or would otherwise preclude or significantly hamper the very purpose of the main court proceedings. For example, the patentee can show here that continued infringement during the main patent infringement case (which in some cases can last as long as two to three years) would cause irreparable harm to the rightholder. 

Importantly, when granting an injunction before the main court action, the court will oblige the patentee to file a statement of claim within a maximum period of two weeks under the sanction of lifting the injunction. In practice, this means that at the moment of filing the injunction motion the patentee should already have a statement of claim, together with all necessary evidence materials to prove the infringement. Apart from evidentiary (corroboration) material being attached to the injunction motion, patent holders may apply in a statement of claim for an opinion of a court-appointed expert to confirm that the questioned products indeed fall within the scope of a patent being enforced. As there are no specialized patent courts in Poland, in the majority of cases such a court-appointed expert opinion is crucial to obtaining a final judgment. 

Certain Other Remedies 

Even before the transposition in 2007 of EU Directive 2004/48 on the enforcement of intellectual property rights (the “Enforcement Directive”), the Polish legal system offered a broad range of instruments aimed at strengthening the effective enforcement of patents, including securing evidence, handling infringing products, and the method of calculating monetary claims. Following the implementation of the Enforcement Directive, the scope and prerequisites of such measures were adjusted to EU laws and are now commonly applied for by patentees in infringement cases.

By Tomasz Koryzma, Partner, and Marek Oleksyn, Counsel, CMS

This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here

Compared to 2015 – a very busy year for Polish M&A with the value of deals growing by 79% to EUR 6.9 billion, which positively distinguished Poland from other CEE countries – 2016 has turned out to be less intense. Still, although policies of Poland’s right wing government – the Law and Justice Party, which was elected in November 2015 – may have weakened investors’ sentiment somewhat, economic data remains respectable at 132 deals (compared with 177 in 2015). 

In terms of value, the most significant transactions in the first half of 2016 were undoubtedly the Q1 sale of shares in Smyk Group by Empik Media & Fashion to Bridgepoint fund (with a deal value of PLN 1.06 billion (EUR 239 million)) and the Q2 acquisition of 87.2% of the shares of Bank BPH SA by Alior Bank SA GE Capital for PLN 1.225 billion (EUR 276 million). 

The largest transaction in Q3 was the sale of 26.2 million shares (an approximate 10% stake) of Bank Pekao by UniCredit. The Italian firm sold a portion of its stake in Poland’s second-biggest lender for PLN 3.3 billion (EUR 683 million). UniCredit’s disposal of Bank Pekao shares came amid a drive by the Polish government to boost the state’s role in the economy and wrest back more control over the domestic financial industry from foreign firms, which control about 60 percent of Polish banking assets. Although UniCredit continued to hold a controlling shareholding in Bank Pekao corresponding to 40.1% of the company’s share capital, national insurer PZU disclosed on September 28, 2016, it was launching talks to purchase a “significant” stake in Bank Pekao from UniCredit. According to a comment made by Treasury Minister Dawid Jackiewicz, it is a “priority” for the government and state-run companies to gain control of Bank Pekao. Moreover, amid the government-pushed efforts to “repolonize” the banking sector, Poland’s largest listed bank, PKO BP, announced on September 21, 2016, that it will buy the Polish leasing operations of Raiffeisen in a deal for PLN 850 million (EUR 192 million), with the parties expecting the transaction to be concluded by the end of 2016. 

The largest transaction of 2016 on the Polish M&A market to date was the recently announced sale of all the shares of Allegro Group by South Africa-based global Internet and entertainment group Naspers Limited. The firm sold its stake in the most popular online shopping destination in Poland (with more than 20 million registered users) to private equity funds (Cinven Ltd, Permira, and Mid Europa Partners) for approximately PLN 12.7 billion (USD 3.25 billion).

The referendum in the UK regarding its exit from the EU resulted in strong declines on the stock exchanges around the world, including the Warsaw Stock Exchange, with its main market indices losing 200 points since the beginning of April 2016. Even positive macroeconomic data such as a falling unemployment rate amounting only to 9.7 per cent in November (the lowest percentage since 2008) did not help the Warsaw Stock Exchange. 

It is possible that recent events such as Brexit, the migration crisis in Europe, and the elections in the United States will cause European economies to slow down and may negatively influence the number of M&A transactions in Poland as well. In addition to the overall economic outlook, the new EU Market Abuse Regulation (MAR) expanding the disclosure and record-keeping obligations of issuers of securities currently listed on EU regulated markets may further the trend of delisting companies from the Warsaw Stock Exchange in the coming months. Even though the introduction of MAR may not necessarily be the decisive factor for management decision makers of listed companies, it may well tip the balance towards delisting. Through the end of July, only nine new companies undertook IPOs on the Warsaw Stock Exchange, while 19 delisted. 

Despite the slowdown of M&A activity, Poland still remains one of the strongest markets in the CEE region in terms of deals. With an expected year-end push to close deals, we believe Poland will remain a leader among CEE marketplaces. 

By Ron Given, Partner, Dariusz Harbaty, Senior Associate, and Joanna Wajdzik, Associate, Wolf Theiss Poland

This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The new law on data protection matters at the European level has been discussed at length over the last few years. It will finally come into force as a Regulation on May 25, 2018. These new provisions will unify personal data protection measures in the EU, and therefore certain changes to data protection standards will be introduced in Poland too. Since the lawfulness of data processing is a key aspect, a closer look at the impact of the Regulation on the commonly used basis for data processing in Poland – consent by the data subject to the processing of his or her personal data – is useful.

Under the Regulation, such consent will have to meet certain criteria. Consent must be specific, informed, unambiguous, and granted voluntarily prior to data collection. Similar conditions for data processing have already been imposed indirectly in Poland, based on case law and the relevant literature. Now, clear guidelines will be issued on the requirements for consent. Specifically, according to the Regulation, consent to data processing will not be deemed to have been granted voluntarily in the case of a clear imbalance between the data subject and a data controller. This is the case in particular when the controller is a public authority, or when the controller makes a service conditional upon consent even though consent is not necessary for the purpose of that particular service. According to the Regulation, consent must be an unambiguous affirmative act; hence a lack of response by the data subject or pre-ticked boxes will not be sufficient to allow lawful data processing. 

As a rule, neither the current Polish provisions nor the Regulation require any specific form of approval for data processing (with the exception of sensitive data). Hence the data subject may signal agreement by ticking a special box on a website or by choosing certain settings for information society services. In any case, the data subject should actively confirm acceptance of the processing of his or her personal data. Importantly, the data controller must be able to prove that consent has indeed been granted. 

According to the Regulation, special attention must be paid to the scope of consent. Polish companies must be aware that consent covering multiple data processing operations exposes them to the risk of illegal data processing. The Polish authorities are consequently questioning consent that is granted when different data processing purposes are combined in one statement (such as the performance of an agreement and online marketing). Once the Regulation enters into force, the different instances of consent will have to be separated so that each is specifically tailored to a particular data processing operation. 

A substantial change for Poland will be the introduction of special protection for children by limiting their ability to consent to data processing. Until now this issue has not been subject to legal regulation. Polish law only requires parental authorization for the processing of sensitive data. For other kinds of personal data, there is no clear opinion in the literature as to when it is required. As a consequence of information society services, the Regulation introduces an obligation for data controllers to obtain parental consent to the processing of the data of children under 16. The minimum age may be lowered by Member States to 13 years. It is not yet clear what minimum age Poland will set for this particular consent.

The Regulation specifies an administrative fine of EUR 20 million for infringement of its provisions, including those on consent to data processing. For a company, this fine may be increased up to 4% of its total worldwide annual turnover in the preceding financial year. Polish law has not previously stipulated fines of this kind; only criminal liability has been specified. In practice it has rarely been applied, and therefore the new type of liability will be a good incentive for Polish companies to carefully and fully verify data processing measures 

By Arkadiusz Ruminski, Associated Partner, Katarzyna Ziolkowska, Senior Associate, Noerr 

This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.