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CMS Cameron McKenna in Kyiv has advised the European Bank for Reconstruction and Development (EBRD) on a EUR 6 million project in Lviv and a EUR 10 million project in Chernivtsi aimed at developing and renewing the critical fast tram system and district heating utilities in those cities. Both loans are subject to the issuance of city council guarantees.

The CMS team consisted of Senior Associate Vyacheslav Ovechkin and Associate Tetyana Mykhailenko.

Editorial Note: Originally, the article title erroneously reported the deal had been concluded in Poland, instead of Ukraine. We apologize for the mistake and confusion it might have caused.  

Despite recent changes in the Serbian foreign exchange regulations aimed at liberalizing of the market and decreasing restrictions on various financing and banking operations, Serbian residents are still prevented, if not prohibited, from keeping their foreign currency assets with foreign banks and financial institutions.

To be more specific, Serbian residents may hold foreign exchange in bank accounts abroad only in limited circumstances and exclusively subject to the National Bank of Serbia (“NBS”) approval.

By law, Serbian residents may open a bank account abroad in the following circumstances:  

1) to finance construction works abroad; 

2) to pay in profits earned in the local currency from the performance of construction works abroad, for the purpose of repatriation of profits following the completion of these projects; 

3) to finance research abroad; 

4) to cover current operating costs of representative offices or branches of legal entities abroad and to pay for services in international freight and passenger transport; 

5) to place a guarantee deposit for the purpose of participating in an auction or a tender, and/or for the purpose of placing bids for the acquisition of shares if the foreign co-contractor so requests or the regulations of the given country so prescribe; 

6) to make a guarantee deposit under a guarantee issued by a foreign bank to a resident who performs construction works abroad, up to the amount specified in the bank’s request for guarantee deposit and/or guarantee agreement;

7) to use a foreign financial credit intended for making payments abroad, if the disbursement of the credit is conditional upon holding funds with a foreign bank; 

8) to purchase securities abroad in accordance with the law regulating foreign exchange operations; 

9) to deposit and to invest funds of insurance companies abroad – subject to NBS approval issued pursuant to the law regulating insurance; 

10) to collect donations and monetary contributions from abroad for scientific, cultural, or humanitarian purposes; 

11) to collect compensation under a court ruling abroad, if the ruling sets out that collection is to be effected via a foreign bank account;

12) to cover costs of medical treatment abroad, as well as the costs of residing abroad for the purposes of such treatment, and 

13) to cover tax and other fiscal duties toward foreign state (grantor of a concession) arising out of concession proceeds – provided that the rules of that foreign state prescribe that these duties can be settled only from an account opened in that state.

If a Serbian resident meets the requirements for opening an account abroad, he or she still needs to obtain permission from the NBS to do so. 

The procedure for applying for NBS permission is rather straightforward. The request needs to contain data such as details about the resident (legal or natural person – and if legal entity, the address of its head office and telephone number, scope of business, ID number, etc.), grounds for holding foreign exchange abroad, amount and the time period for which such permission is requested, and the name of the country and details about foreign bank in which the account will be opened. 

The NBS may reject the request to open an account if it deems that the purpose for which the application is made does not fall under any of the prescribed grounds.

When it is granted, permission is granted for one year or for as long as the need for keeping the account abroad exists (in case of long-term projects, e.g., construction works abroad). There is no deadline for the NBS to issue its approval following submission of a complete request for opening of a foreign account, but in practice the NBS usually falls within general administrative procedure, which envisages a 30-day deadline for issuance of administrative decisions. 

Legislation is explicit that a Serbian resident holding foreign exchange on a bank account abroad contrary to NBS regulations will be fined for the offence between approximately EUR 870 and EUR 17,390, whereas a responsible person (in case of legal entity) will be fined between approximately EUR 45 to EUR 1,300.

The applicant has to provide the NBS with the foreign bank account number within 30 days from the day of opening the account and with balance of funds therein. 

At this moment, it cannot be foreseen whether the financial regulator will reconsider this restrictive legislative framework in the near future in order to relax this rather important aspect of business activity. In practice we are faced with a number of requests from companies active in various industries investigating options and potential loopholes to work around these restrictions. 

By Milica Popovic, Local Partner, CMS

This Article was originally published in Issue 2.6. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

After a critical 2014 marked by political instability, one major bank’s unexpected collapse, and another being provided significant liquidity support by the Government, the main challenge for 2015 was to stabilize and restore confidence in the Bulgarian banking sector.

The unfavorable events of 2014 revealed major weaknesses on an institutional level and shortcomings in supervisory practices, and they hastened (at least temporarily) the outflow of deposits. The State provided a credit line of BGN 3.3 billion (approved by the European Commission under EU State Aid rules) to address the turmoil and to alleviate liquidity pressures. 

After dealing with short-term challenges arising from the failure of the Corporate Commercial Bank, the focus shifted to making significant long-term reforms in the banking sector. The Bulgarian authorities took a three-pronged approach in an attempt to restore confidence in the banking system: implementing the EU’s Bank Recovery and Resolution Directive (“BRRD”), strengthening banking supervision and carrying out Asset Quality Reviews (“AQR’s”), and conducting stress tests of Bulgarian banks.

In August 2015, the new Act for Recovery and Resolution of Credit Institutions and Investment Intermediaries (the “Act”) was adopted. The Act implements the BRRD provisions that seek to address bank instability at an earlier stage and to minimize negative consequences and control contagion, as well as to regulate the use of public funds to save troubled banks. The Bulgarian National Bank (“BNB”) was appointed as the resolution authority for banks in Bulgaria. 

The Act imposes a range of new obligations on banks, all of whom – including the BNB – are required to dedicate significant time and resources to ensure compliance. Recovery plans in accordance with the Act will have to be prepared in the first half of 2016, which, along with the pending AQR’s, is expected to put pressure on staff workloads and use up other available (already limited) resources. Interestingly, the two processes will run in parallel. Hence, any problems that might be exposed through the AQR’s would have to be handled within the new BRRD framework at a time when market participants are still adjusting, both institutionally and operationally. This said, the industry seems cautiously optimistic that the AQR’s are unlikely to reveal any major flaws. 

Scrutinizing and updating the supervisory practices of the BNB has been another major item on the 2015 agenda. The BNB emerged from the banking crisis with a new management team committed to reforming banking supervision. A “Plan for Reform and Enhancement of Banking Supervision in Bulgaria” was adopted in October 2015. There have been a number of structural changes within the BNB as well. A new Directorate of “Distance Supervision” has been established, and a department of “Risk Analysis Related to Market Behavior” will be created within the existing “Banking Supervision” Directorate, aimed at strengthening internal controls within the BNB. In addition, to comply with the BRRD provisions for operational independence and avoidance of conflict of interest, the BNB will create an independent “Resolution of Banks” Directorate. The BNB has publicly stated its desire to restore confidence in its own expert potential, as well as in the Bulgarian banking sector as a whole.

The BNB has prioritized both the update of supervisory practices and the achievement of full compliance with the Basel core principles for effective banking supervision. Bulgarian authorities have declared their intention to enter into close cooperation with the Single Supervisory Mechanism at the European Central Bank (“ECB”). Various other measures are directed at establishing proper and more robust oversight. 

Accordingly, AQRs will be performed on the entire banking system (which includes 22 Bulgarian incorporated banks but excludes the branches of foreign banks operating in Bulgaria), based on the methodologies applied by the ECB in its comprehensive assessment. Weak asset quality and collateral with overstated value have been recognized as major items that should be addressed. Banks will have to put efforts into cleaning their balance sheets and finding effective solutions for decreasing the rate of non-performing loans (NPLs). 

The AQRs and stress tests are to be completed within a tight timeframe, by mid-2016. As an immediate effect, they are expected to result in a somewhat reduced appetite by the banks and greater selectivity towards borrowers (but given the existing liquidity this is anticipated to be of short-term effect).

Operating conditions remain challenging, and corporate sector indebtedness, affecting banks via NPLs and risk of corporate bankruptcy, is still high compared to other EU member states. Nevertheless, the reform process has been set in motion. Although it may take some time for the full effect of the changes to be felt, the banking sector in Bulgaria has started to slowly recover from the 2014 crisis. BNB’s conservative approach in the past has led to the establishment of strong capital buffers, which support financial stability and will contribute to handling any further negative effects relating to unanticipated bank losses. In general, there was no significant outflow of deposits from the banking sector as a whole, as deposits appear to have been redistributed within the Bulgarian banking system. The reform agenda was implemented relatively quickly and robustly. It is now important to stay the course.

By Elitsa Ivanova, Head of Banking and International Finance, CMS Sofia

This Article was originally published in Issue 2.6. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Swiss franc-denominated or indexed loans enjoyed great popularity in Croatia. Following the recent and dramatic strengthening of the Swiss franc, loans denominated or indexed in that currency became over-burdensome for consumers in Croatia, leading the Croatian Parliament to pass two amendments to the Croatian Consumers Act regulating the rights and obligations of both lenders and borrowers.

The first amendment to the Consumer Lending Act (Official Gazette No. 9/15) fixed the CHF/HRK exchange rate below the market exchange rate in loans containing a currency clause for a period of 12 months, thus forcing the banks to absorb the difference. The second amendment (Official Gazette No. 102/15) went even further, introducing additional measures to deal with the strengthening Swiss francs and increasing the interest rates on Swiss franc- denominated or indexed loans in Croatia. 

Under the second amendment to the Consumer Lending Act, lenders/banks are obligated to convert loans denominated in CHF to EUR-denominated loans, and loans denominated in HRK indexed to CHF to EUR-indexed HRK loans according to the exchange rate applicable at the disbursement date (for the conversion of interest) or the date of the loan agreement (for the conversion of principal). Banks are obligated to provide a repayment schedule to the affected borrower within 45 days of the amendment entering into force. Once the repayment schedule is delivered, the borrowers have 30 days to notify the bank if they accept the loan conversion calculation. Should they fail to do so, the loan will continue to subsist. 

The question which arises here is whether there is justification for measures imposed by the second amendment to the Consumers Lending Act, keeping in mind the legislature’s goal when proposing the amendment: to put borrowers in the same position they would have been in had they taken out EUR-denominated or HRK-denominated loans indexed to EUR. 

The second amendment applies to all types of loans, regardless of the social background of the borrowers or the purpose of the loan, so borrowers obtaining loans for luxury purchases will be put in the same position as those taking out loans to acquire 40-square meter apartments for living.

Furthermore, although only 1% of the Croatian population was granted loans denominated in CHF and HRK loans indexed to CHF, the effect of the second amendment will affect the entire population (because of considerable shortfalls in the State’s budget arising out of losses suffered by the banks, among other things). Additionally, the amendment would adversely affect borrowers who were granted loans in other currencies and other prospective borrowers as the increased legal uncertainty could indirectly lead to an increase in interest rates. And that’s all not even mentioning the damage suffered by the banks and the banking system. 

Additionally, the second amendment raises several constitutional issues, including a potential breach of the principle of legal certainty and prohibition of retroactive effect and a conflict with core principles of free enterprise and market and property ownership. As a result, some of the leading Croatian banks have challenged the amendments before the Constitutional Court and requested that the second amendment application be suspended pending the Court’s decision on its constitutionality. 

Although some support for the arguments that the second amendment should be suspended can be found in existing Constitutional Court case law (such as that irrevocable losses may occur to the Croatian banking system as a whole in the period before the final decision on constitutionality of the amendment is made), the Constitutional Court rejected the banks’ request for suspension in its decision of 11 November, 2015. 

By refusing to suspend the second amendment application, the Constitutional Court missed the opportunity to take a sound approach and temporarily suspend the forced conversions required under the amendments. The consequence of the Constitutional Court’s decision is that banks have to comply with the second amendment; i.e., perform the conversions or risk potential initiation of misdemeanor proceedings and associated fines, as well as facing potential claims for damages by borrowers. 

It remains to be seen how the Constitutional Court will ultimately decide regarding the constitutionality of the second amendment to the Consumers Lending Act. Regardless of its decision, the issue of the effect of the conversion that will have taken place between the moment of the second amendment’s entry into force and the moment of the Constitutional Court’s final decision becomes enforceable remains. In any case, Croatian citizens will suffer a short-term effect of the Swiss franc issue.

By Damir Topic, Senior Partner, and Martina Kalamiza, Senior Associate, Divjak Topic Bahtijarevic

This Article was originally published in Issue 2.6. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Under current Albanian law the insolvency proceedings applicable to companies are not applicable to banks.

The Albanian Law On Banks provides for a special administrative regime – the obligatory winding up of a bank – that can be initiated upon a decision of the Bank of Albania. However, even this special regime may not always be an option, considering the impact that the winding up of a systemic bank would have on the entire system. 

In the European Union, the onset of the financial crisis in 2007 demonstrated the importance of setting up a dedicated resolution regime for credit institutions, as it became clear that initiating insolvency proceedings over an insolvent or over-indebted credit institution could have severe repercussions for the financial system as a whole due to that bank’s interconnectedness with other market players. In addition, because of key functions that banks perform (including accepting deposits, granting credit, and processing payments), the repercussions could affect a nation’s economy as a whole.

To provide a set of resolution tools that facilitate the resolution of banks without resorting to taxpayers’ money, the European Bank Recovery and Resolution Directive, or BRRD, was approved on April 15, 2014, and was published in the Official Journal of the EU on June 12, 2014.

Although Albania is not a member of the European Union, efforts are being made to harmonize Albanian legislation with European legislation in order to meet the obligations arising from the Stabilization and Association Agreement that Albania signed with the EU in June 2006. Accordingly, a new law is currently being drafted to implement the BRRD into the Albanian legal framework: the Act on the Recovery and Resolution of Banks and Credit and Savings Companies is expected to be introduced to the Parliament by the first part of 2016. This legislation will also make necessary amendments to existing acts, such as the Law On Banks in the Republic of Albania.

The implementation of the BRRD into the Albanian legal framework will introduce a new resolution regime as a third option alongside insolvency and bailout and will be applicable to banks as well as other deposit-taking institutions such as credit and savings companies. Unlike the BRRD, however, investment firms will not be included. 

The new law, much like the BRRD, will also make a distinction between two different sets of proceedings which can be initiated if an institution experiences financial difficulties: recovery and resolution.

Recovery proceedings are conducted by institutions independently. Although the supervisory authority has the power to require an institution to initiate a recovery action, the institution has to prepare a recovery plan on its own, and all recovery measures are private law arrangements that do not involve any sovereign or official powers. A guideline approved by the Bank of Albania in 2014 already obligates banks to prepare recovery plans. With the implementation of the BRRD by the new law, the Bank of Albania’s guideline will have to be amended in order to include credit and savings companies and to be aligned with the wording of the new law.

Resolution is another area in which planning takes place up front, which simplifies the task of selecting the most appropriate course of action in an emergency. Unlike recovery planning, the resolution authority rather than the institution must draw up the resolution plan.

The new law will provide that resolution proceedings can only be initiated if the following conditions or triggers (set forth in the BRRD) are met: the institution is failing or is likely to fail; there is no reasonable prospect that any alternative private sector measures or supervisory action would prevent the failure of the institution within a reasonable timeframe; and resolution is necessary in the public interest.

Once the resolution conditions have been satisfied and resolution proceedings have been initiated, the resolution authority can deploy resolution tools such as the sale-of-business, bridge-institution, asset-separation, and bail-in tools.

The new resolution regime represents a major step towards restoring the principles of the market economy, which dictate that if an institution fails, its shareholders and creditors should be first in line to absorb the risks and losses before a dedicated resolution fund financed by the banking industry steps in. This is an objective that the BRRD seeks to achieve through the new bail-in tool. The possibility to use the bail-in tool would be a remarkable development in Albanian law.

In order to assure sufficient funding for a bail-in procedure, the new Albanian law will set out a minimum requirement for funds and eligible liabilities (MREL), similar to Article 45 of the BRRD. 

The implementation of the BRRD will require the creation of a national resolution authority.

By Sokol Nako, Partner, and Olta Kore and Xhet Hushi, Associates, Wolf Theiss

This Article was originally published in Issue 2.6. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

It has been almost two years since the new Czech Civil Code came into force on January 1, 2014. The new law was anticipated with some trepidation, as the changes brought by it influenced all areas of Czech civil law, including commercial property leases. Consequently, professionals were curious to learn the practical implications of the new law for their business.

New Leases. Any Significant Changes?

Judging from our experience in the past two years, the new Civil Code has not significantly affected newly entered lease agreements and certainly has not caused any revolution in the field of commercial real estate leases. This conclusion stands even though new lease agreements are, naturally, fully governed by the new Civil Code. The reason for this is that the vast majority of statutory provisions regulating commercial leases may be modified or contracted out of in lease agreements, allowing for greater freedom of contract. Therefore, parties do not usually rely on the applicable law. In fact, the new law has even strengthened the already existing tendency to set out the rights and obligations of the parties quite comprehensively in the lease itself, so that they can avoid, to the maximum extent possible, application of statutory provisions.

Old Leases and Their Treatment

When it comes to leases concluded before the new law came into effect, the situation is more interesting. The general rule of the new Civil Code that agreements concluded under the old law remain – simply speaking – governed by the old law does not apply to real estate leases. As a result, all aspects of property leases concluded before January 1, 2014 are regulated by the new law (except for the establishment of the lease and rights and obligations of the parties which arose prior to this date). 

This may have a significant influence on rights and obligations of the parties, especially if the parties relied, at the time of conclusion of the lease, on the then applicable law and did not set out the terms and conditions in detail in the agreement.

Although the changes brought by the new law are not extensive, there are some new provisions to be aware of. As an example, the new Civil Code stipulates a longer notice period of six months for commercial real estate leases entered into for an indefinite period of time. Further, the party to which a termination notice has been delivered has one month to object to the notice, or forfeits the ability to contest it before the courts. Moreover, where the lease is terminated by a notice served by the landlord, the tenant is entitled to a compensation for the benefit that the landlord or a new tenant gained by taking over the client base developed by the departing tenant, unless the termination of the lease resulted from a gross breach of the tenant’s obligations. Although this provision will hopefully rarely be applied in practice, it has been heavily discussed within the legal profession, and parties to new leases often choose to contract out of this provision.

Indeed, these, as well as many other statutory provisions can be modified or excluded by the parties when entering into a new lease. As outlined above, the current tendency is to have the rights and obligations of the parties set forth in the lease agreement quite comprehensively – a trend that has grown more prominent in recent years, especially following the implementation of the new law. Finally, it can also be observed that, due to an increased availability of vacant prime non-residential premises on the Czech market, the rights and obligations of the parties to a lease have become more balanced, from the tenants’ perspective. This is especially true with respect to leases concerning office premises. On the other hand, based on our experience representing various large landlords and tenants, in retail premises usually only anchor tenants have the power to negotiate considerably favourable conditions of their lease.

By Jan Myska, Partner, and Pavel Srb, Associate, Wolf Theiss

This Article was originally published in Issue 2.6. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Whether in the Czech Republic, in our CEE region, or elsewhere in the world, its amazing to observe and be part of the energy sector. This reaction is fueled by developments in economy, in the energy industry and technologies, and also by ever-shifting governmental policies, especially in the area of the support of renewables and carbon emissions reduction. One of the key themes of any review of these policies is inconsistency.

Although some elements or general strategic goals are regulated in international treaties and on the EU level (e.g., carbon emission reduction goals), often in a very ambitious way, concrete energy policies still remain firmly embedded on a national level and are exposed to national politics and idiosyncrasies. This creates a terrible mélange, which may be at first look funny, but in fact is fairly dangerous as it stimulates high hopes (e.g., low energy costs for consumers), which are impossible to deliver without a consistent and well-organized effort across the EU.

The attitude towards nuclear energy is a typical example. The approach varies from positive acceptance (in Czech Republic, Hungary, and Poland), through hesitation and weakening public support (in Slovakia) to outright rejection (in Austria and Germany). I recently discussed with a London-based lawyer and a distinguished expert on nuclear projects the question whether Central and Eastern Europe may witness a new nuclear build in coming years. He said: “This looks to me only marginally more likely than Jeremy Corbin (a leftist Labour Party leader) becoming Prime Minister.” The comparison certainly stands in that the acceptance of both new nuclear build and Jeremy Corbin is a politically supercharged topic. Will anything ever happen?

Czech Story: There and Back Again

If we look at the Czech Republic, the public tender for a key contract for the new nuclear build in Temelin was aborted by the leading Czech utility CEZ in April 2014 and, despite the substantial costs and efforts already incurred, the project does not seem to be on its way to resurrection. Nonetheless, the Czech Republic is still strongly “pro-nuclear” if we are to believe the State Energy Policy approved by the Czech government. Czechs seem to be unfazed by the unequivocal “No” to nuclear energy in Germany and a similar dislike in Austria.

In the State Energy Policy, the Czech government proudly and unconditionally declares that it supports: (A) a new nuclear build which would produce around 20 TWh of electricity annually and presumably be completed between 2030 and 2035, (B) the extension of the lifespan of the nuclear power plant units in Dukovany to 50 or 60 years, and (C) development of replacement units in Dukovany after they reach the end of their lifespan. All in all, “in the long-term, the nuclear energy could exceed a 50% share in power generation,” says the Czech government. 

International Context Always Plays a Role

Is this realistic in the context of German and Austrian resistance to nuclear energy? It seems unlikely that the Czech government would be able to simply ignore this type of pressure, irrespective of what the Policy says. The growing threat of a terrorist attack is also not very helpful to the cause. At the same time, I believe that these obstacles could be tackled by smart diplomacy and increased security measures. 

As the Czech people ironically say, money comes only in the first place (meaning that – in capitalism – almost everything is about money). Consistent with this, I believe that the greatest challenge will not be political issues but funding. It seems that Czech politicians support the idea of a new nuclear build with just the very small caveat that the government must provide no financial support to the project and that, consequently, it should be a strictly private enterprise, perhaps co-sponsored by the key contractor. 

The Hinkley Point C lesson from the UK shows us that without governmental financial support (whether in the form of a contract for difference or otherwise), a new nuclear build is simply unthinkable. The low “base load” power prices are not going to rise any time soon and the continuing support of the renewables simply makes nuclear power not competitive.

I still believe that the new nuclear build in the Czech Republic (or elsewhere in CEE) may proceed in 2016 or 2017 – but only if the politicians find a way to accept reality.

By Tomas Rychly, Partner, Wolf Theiss

This Article was originally published in Issue 2.6. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

As a brief introduction, in October 2015 the Polish parliamentary elections were held, which resulted in the Law and Justice Party (PiS) obtaining the majority in the Polish Parliament (Sejm). Therefore, the PiS formed the Government. A few months earlier, in May 2015, Andrzej Duda from the PiS won in the presidential elections.

The root of the dispute around the Constitutional Tribunal is the appointment of 5 judges by the previous Sejm, in which the majority was held by Citizen’s Platform (PO) and Polish Peasants Party (PSL), which represented the ruling coalition for the previous 8 years. The PiS, who at that time was the opposition, raised that the appointment of the 5 judges was in breach of the Act on the Constitutional Tribunal and, further, that the term of office of 2 judges out of the 5 appointments was to expire under the new Sejm, which was convoked after the elections in November 2015. In order to officially become judges of the Constitutional Tribunal and to be admitted to judging, the appointed persons must take an oath before the President of Poland. The President until now did not accept an oath from those 5 judges.

The PiS, having the majority in the new Sejm, passed resolutions dismissing the 5 judges appointed by the previous Sejm and subsequently appointed 5 new judges. The voting took place in the night, breaching normal procedure and, most of all, in breach of the guarantees that the judges of the Constitutional Tribunal cannot be dismissed. The President accepted the oath from the newly appointed judges during the night as well. The following day in the morning the Constitutional Tribunal passed the verdict that the appointment of 3 judges by the previous Sejm was in accordance with the law, whereas the appointment of the 2 judges (whose term of office expired under the new Sejm) was in breach of the law. As a result, the Constitutional Tribunal decided that the President should accept the oath from the 3 correctly appointed judges.

The Constitutional Tribunal is composed of maximum 15 judges. At the moment only 10 participate in judging. With regards to the 5 judges appointed by the previous Sejm who were dismissed by the new Sejm, as well as the 5 new judges appointed by the new Sejm, there is a material legal and political dispute.

A situation where the 3 judges appointed by the previous Sejm and 2 new judges appointed by the new Sejm would be admitted to the Constitutional Tribunal would constitute a solution both in accordance with the law as well allowing political compromise. However, the will of the majority in the Sejm and the will of the Polish President are necessary in order to implement such a solution. As there are no signs of such will, we can expect a long term conflict diminishing the position and, in fact, undermining the constitutional role of the most important court in Poland.

By Zbigniew Drzewiecki, Managing Partner, Drzewiecki, Tomaszek i Wspolnicy

This Article was originally published in Issue 2.6. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In recent years, Poland, like many countries in the CEE region, has undertaken significant actions in order to ensure the development of its infrastructure.

Despite the fact that many projects have been carried out or are at an advanced stage (e.g., a waste incineration plant in Poznan, a district court in Nowy Sacz, and a poviat (district) hospital in Zywiec), many infrastructure projects still need to be implemented. This includes projects of a significant value and with a nationwide impact. Market specialists estimate that the railway, waste-to-energy, healthcare, road, street lighting and thermal efficiency sectors require the most investment. 

Projects in Poland receive support from the government and public sector partners, including the Ministry of Infrastructure and Construction (road and railway projects) and the General Directorate for National Roads and Motorways (road projects). For instance, the Ministry of Infrastructure and Construction and the Ministry of Economy carry out various programs to maximize infrastructure development. This includes programs which provide financial assistance in obtaining professional advisory services by the public parties (projects from the waste management, roads, healthcare, revitalization, and thermal-efficiency-improvement sectors are most desirable) and advisory assistance for public parties with implementing regulations such as the ‘National Railway Program until 2023’ (which provides approximately EUR 16 billion for railway projects until 2023) and the ‘National Road Construction Program for 2014-2023’ (which provides approximately EUR 25 billion for road projects until 2023). Such actions aim to improve quality standards on the part of public entities and to accelerate tender proceedings. 

When it comes to project financing, European Union (EU) financing programs still have the biggest impact on the development of infrastructure. Currently, Poland benefits from EU programs for the years 2014-2020 and is actually the biggest beneficiary among all EU countries (EUR 82.5 billion). It has not yet been decided whether Poland will participate in EU funding after 2020. Opinions on this subject vary; however, a decrease or discontinuance of EU funding after 2020 will likely increase the growth of public-private partnership (PPP) ventures. Also, international financial institutions such as the EIB and the EBRD have been active in helping finance infrastructure projects which have been struggling to obtain private financing for the full amount of their value. 

In 2015, the Polish government improved the legal system in matters related to infrastructure by means of the Minister of the Economy’s Regulation of 11 February 2015 on risk categories and the factors to be considered in their assessment and the Act on Revitalization of 9 October 2015 (which determines, among other things, that particular payments for private partners may be classified as current public expenditures, and therefore recorded off balance sheet for public parties). 

2015 was a breakthrough year in Polish infrastructure. Many complex and innovative projects were commenced – and many more were already in progress: the first healthcare PPP project of big scale (the construction of the poviat hospital in Zywiec), the first government PPP project (the construction of the district court in Nowy Sacz), the pioneer PPP provincial road projects (the construction and maintenance of provincial roads in the Kujawsko-Pomorskie and Dolnoslaskie voivodships), as well as large nationwide railway investments. As recent reports show, the number of PPP projects in Poland is still increasing, as is the number of private investors. 

By Wadim Kurpias, Partner, and Marta Kulhawik, Lawyer, CMS

This Article was originally published in Issue 2.6. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.