Real Property Reprivatization Decisions in Warsaw May Be Revoked

WarsawLegislation recently passed by the Polish Parliament grants a Parliamentary Commission the right to rescind reprivatization decisions previously issued with respect to real property in the city of Warsaw. Such a rescission would remove the legal grounds for return of the property to the ex-owner or its legal successor, which could lead to seizure of the real property by the government.

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Investment environment in the Czech Republic 2017

cee-mapIn this Article, I will share with you some legal insights regarding investment in the Czech Republic and summarize important points characterizing legal environment here in 2017.

If you are thinking about investing in the Czech Republic you will need to consider a wide range of factors from technical to tax. It is likely that you will be focused on particular business opportunities and whether they are worth your money or not. You will be dreaming about high returns, multiplied EBITDAs and, with this in mind, you will use your imagination to compile the perfect plan to increase the value of your investment. I honestly believe that legal matters may be some of the last aspects you consider – particularly as they deal with the least pleasant pictures of conflicts, stress and gradual devastation of the investment.

But wait a moment and consider a different angle: Everybody likes to be protected, right? Well, this is exactly what the law is for!

Let’s look at the investment environment in the Czech Republic in 2017 through our brand new glasses and try to summarize the most important points. Continue Reading

The Obligation to Re-employ Following an Invalid Termination of Employment

Human_Resources_HR

I was driven to write this article by two pieces of seemingly unrelated information. The first was the fact that, in the Czech Republic – after adoption of the last substantial amendment to the Czech Labor Code – there is currently another substantial and apparently complex amendment to the Czech Labor Code in progress. The second comes from the unpleasant discovery that, at least for the following four years, there is seemingly no plan for anything similar in Slovakia.

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Real Estate Acquisition: Factors to Consider Before a Transaction

The legal rules of real estate acquisition in Hungary differ dependent on whether the acquisition is for arable or non-arable land (residential and commercial properties), by Hungarian residents or non-residents and whether by natural or legal entities. Such diversity in the regulation is due to the fact that real estate is viewed as limited in number or volume and, particularly in relation to arable agricultural land, is considered to be a very precious natural resource. Strict legal regulation of the trading of real estate is additionally justified by its high market value and the risk of speculative transactions.

In many cases, it can be more cost effective to acquire a business entity that owns real estate, as far as transfer tax and company tax on income resulting from sale of ownership interest are concerned. Continue Reading

Be Fair, or the (Polish) Government Will Chase You!

Shopping MallPolish law continues its drive toward regulating commercial activities in Poland. This time, it is with the new Act on Counteracting Abuse of Contractual Advantage in Trading Agricultural and Grocery Products, signed into law by the President, will enter into force in six months’ time, on 12 July 2017.

The Act aims to restore the even playing field in commercial relations between small suppliers of food product and big distributors that treat such suppliers unfairly by making them accept time-extended payment deadlines and requiring additional remuneration for exposing their produce in premium shelf space, and terminate contracts with them without good reason. Why big retail chains resort to such practices, the government has concluded, is that they have a surplus of bargaining power – which stems from their strong economic position – over independent grocery suppliers.

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EU Plans Changes in Investor Dispute Settlement Mechanism

European FlagThe system of investment protection is experiencing radical changes at the level of the European Union (EU). While so far, the protection of foreign investments was guaranteed by bilateral agreements, this is about to change and a unified multilateral system is proposed to be established. How does this initiative influence investor-to-state dispute settlement mechanism (ISDS)?

Current System of the ISDS

Under the current ISDS regime, in case of a breach of investment protection standard included in a bilateral investment treaty, an investor can seek protection against measures of a host state before an arbitral tribunal composed of arbitrators selected by parties to hear the particular case.

Despite the fact that this method of ISDS is included in almost 3,200 bilateral investment treaties worldwide, it is nowadays facing a strong criticism. Lack of neutrality, transparency and legitimacy and, at the same time, unpredictability and expensiveness are the most frequently used arguments of opponents of this system.

And precisely solution of these shortcomings had EU in mind when it presented its proposal to replace the current ad hoc system of ISDS in which tribunals are constituted on case-by-case basis by a permanent investment court.

What Can be Expected?

Transformation of the current ISDS mechanism shall be conducted in two steps.

Firstly, provisions on permanent bilateral investment courts will be included in newly negotiated free trade agreements and later, once a greater consensus is built, these will be replaced by a multilateral investment court. This is considered to be a final destination of the ISDS reform within the EU efforts to create a unified multilateral system of investment protection.

While the first step was already taken when the EU included in its newly negotiated trade agreements with Canada and Vietnam provisions regulating establishment of a bilateral investment court, the second phase has started only recently. On 14-15 December 2016, the Canadian government and the EU hosted a first of a series of intra-governmental discussions aimed on establishment of a permanent multilateral investment court.

Permanent Multilateral Investment Court

Given that only the first meeting on establishment of the multilateral investment court took place, limited information is now available on how this should be organized. However, the EU has suggested that, same as with the bilateral investment courts, also with respect to the multilateral investment court, the inspiration will be taken from domestic and other, already existing international judicial bodies.

The main features of the new multilateral investment court thus should be as follows:

  • Two-tier system – Unlike the current ISDS system, there should be a First Instance Panel, decisions of which could be appealed to an Appellate Panel based on factual, as well as legal reasons.
  •  Permanent judges – Judges will no longer be selected by parties to a dispute; however, the cases will be allocated randomly to judges who are appointed by agreement parties, i.e. states. The judges shall fulfill strong ethical criteria and also new provisions ensuring their impartiality should be implemented. As a result, a double-hat syndrome allowed under the current regime enabling arbitrators in one case to act as counsels in a different one should be limited.
  •  Permanent staff and secretariat of the multilateral investment court.
  •  Strengthened transparency of proceedings.

While many see this initiative as a step forward, especially because it is expected to increase predictability, consistency and impartiality of decisions, it also has its critics. For example, loss of investor’s right to nominate its judge or extension of a time necessary for resolution of a dispute caused by introduction of the Appellate Panel are seen as problematic.

What Is Next?

Given that the talks are at their very beginning, we shall see how they will proceed and whether enough states will express their interest in being part of this project because the multilateral investment court should be set up only once a minimum number of participants is found.

The next informal ministerial meeting is planned to take place on 20 January 2017 at the world Economic Forum in Switzerland. Luckily, and as opposed to highly criticized negotiations of the Transatlantic Trade and Investment Partnership, negotiations on the multilateral investment court should be conducted in public and transparent manner.

We will keep you posted.

The Polish Dream of Electric Cars

Electric CarCertain changes in regulations, somewhat challenging for the renewable energy sector, and the government’s declarations of support to the coal industry might suggest that Poland is not much interested in “going green”. Still, it turns out that electric cars may fit in its energy strategy just well.

Surely, the electric cars are as “green” as the energy powering them. In the case of Poland though, the energy is still sourced mainly from the coal-fired power plants. Nevertheless, Poland is notorious for its air pollution, and in the cities in particular, this is to a great extent caused by exhaust emissions. Expansion of electric vehicles may thus be a relief to the lungs of many people now suffering from the poor air quality.

Dream Big

The Plan for Development of E-Mobility in Poland, announced by the Ministry of Energy in September 2016, and revised after consultations in November 2016, assumes that by 2025 there will be 1 million electric vehicles on the Polish roads. Reaching this target requires a drop in the prices of such vehicles, and further development of the energy grid and recharging infrastructure. Car-pooling and car-sharing are also taken into account as possible support to the transition, since these models allow the costs to be shared among many individuals, making the electric vehicles more affordable.

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New Obligations for Large Companies in the Czech Republic

Large companies in the Czech Republic will have to comply with new corporate and social responsibility obligations.

First, starting January 14, 2017, employees in joint-stock companies with more than 500 employees in an employment relationship will have the right to elect and recall at least one-third of members of the supervisory board, unless articles of association would provide for a greater share. Employees, however, may never be entitled to elect more members of the supervisory board than the general meeting is entitled to. The overall number of members of the supervisory board in such large companies has to be divisible by three to ascertain exact number of members elected by employees. Smaller companies that do not fall within the scope of laid down criteria may subordinate themselves to this new model of elections on a voluntary basis. Continue Reading

Will the Law Catch Up (in Poland)?

E-SignatureIt will be a story about how the Law chases after the ever-changing world, especially the technology aspect in that world, and how it is difficult for the Law to catch up – and even if it makes the run, achieving the anticipated goal is not certain.

The Law in Poland was tasked with the purpose of “catching up” when a new form of legal actions was introduced into Polish Civil Code on 8 September 2016. It is so called “documentary form”. The purpose was to simplify commercial relations by allowing the parties to enter into an agreement in less formalized form.

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New Personal Insolvency Regime in Slovakia

Highway sign exit showing next exit BankruptcyStarting from March 1, 2017, the Slovak personal insolvency regime will change. The new system aims to make personal insolvency available to a wider debtor audience, while keeping it simple and cost efficient. Today, only individuals with assets over €1,659.70 can seek declaration of bankruptcy. Otherwise, the proceedings could be stopped and the doors to a “fresh start” closed for “poor” debtors (also called No Income No Asset debtors (NINA)). It is important to understand the motivation behind the new rules as one may find the new proceeding too open and accessible, leaving a lot of room for abuse and little protection for creditors. Indeed, the insolvency proceedings could be complicated, with lots of pre-opening scrutiny and much bigger involvement of a court, but that would obviously increase the costs of such proceedings.

So, what is changing? First of all, the law introduces two ways in which a debtor can be relieved of his/her debts. The first is through a bankruptcy proceeding, where the debtor basically gives up all of his/her property. The second is an installment payment plan, in which case the debtor keeps his/her assets but has to pay to unsecured creditors at least 30% of their claims over a five-year period. The final effect of these proceedings is that any outstanding receivable after these two procedures, irrespective of whether it is registered in the proceedings or not, becomes unenforceable.

Also unenforceable is (i) interest exceeding 5% per annum, accrued before the decision on insolvency is issued by a court, (ii) any interest accruing after the declaration of bankruptcy or after the creditor protection kicks in (so-called “decisive date”), (iii) any receivable arising under a promissory note (thus turning promissory notes of individuals into worthless security), (iv) contractual penalties and penalties imposed by state authorities (if obligation triggering the penalty was breached prior to the decisive date), (v) claims of affiliated parties and (vi) fees incurred by the parties to the insolvency proceeding in relation to the proceedings.

There are a group of claims that are not affected by the insolvency proceedings such as (i) the receivable of a creditor – individual − that has not been registered in the proceedings due to the fact that they have not been notified in writing of the insolvency proceedings, (ii) secured claims up to the value of the pledged asset or (iii) non-monetary claims. These claims survive.

Secondly, the law introduces the so-called “homestead exemption” that applies to one property identified by a debtor. The purpose is obviously to secure some housing for a debtor or at least some proceeds for future rent. The amount has not been determined yet, but secured creditors should be safe as the exempted amount is only deducted if the sale proceeds exceed the secured claim. Plus, pledged property is only sold if (i) a creditor with the first ranking pledge registers its claim in the bankruptcy proceedings or (ii) if the value of the pledged asset exceeds the priority secured claim and the second ranking creditor registers its claim in the bankruptcy. In other words, despite the pending bankruptcy proceeding, the priority creditor still has a right to sell the pledged assets outside of the bankruptcy. There is one restriction related to homestead exemption. The sale proceeds, after deducting the homestead exemption amount, have to cover costs of sale and at least part of the registered claims. For this purpose, it will be up to the trustee to estimate the value of real estate and decide whether they will proceed with the sale or not. If the creditor disagrees with the trustee, they may pay for an expert opinion but if the sale proceeds are not sufficient, the creditor would have to cover the costs of auction.

For debtors who decide to keep their assets, an installment payment plan is available. A similar installment payment plan has been available under the existing regime, but it missed several details. Under the new regime, there is a minimum recovery threshold for unsecured creditors − 30% − which at the same time must exceed the potential recovery in bankruptcy by 10%. The debtor should be left with some money to cover the living costs of his/her family and, if not, only bankruptcy would be available. How much is needed for living is to be decided by the trustee and the court and let’s hope they will use their discretion wisely.

Installments can be paid monthly, half-yearly or annually, depending on the overall amount to be paid. In the case of a secured receivable, the installment plan starts to apply once the asset is sold and while there is still some part of the claim outstanding. The amount of installments is determined by a court. The debtor and creditor are free to agree on different installments. Creditors will also have a right to object to the draft installment plan within a 90-day period after its publication in the Official Journal. The plan runs for five years and neither the trustee nor court supervises its fulfillment. If the debtor fails to follow the plan due to anything other than material reasons, the creditor can ask the court to cancel the debt relief.

Petition for the cancellation of debt relief is basically the only protection the creditor has and it can be filled within six years from either the termination of the bankruptcy proceeding or approval of the installment payment plan and only based on specific grounds. One can expect that creditors will find this ex-post protection insufficient but, as mentioned above, the reason behind this was to avoid ex-ante scrutiny that could substantially complicate and slow down proceedings.

Although not related to personal insolvencies, an amendment also introduces significant changes to the restructuring proceedings. Given previous bad experience with the treatment of unsecured creditors, in any new restructuring, unsecured creditors have to get at least 50% of their claims over a maximum of five years and at the same time their recovery has to be 20% higher than recovery in insolvency. Otherwise, the court has to reject the plan. This is not an easy condition to meet and, thus, one can expect that companies will prefer to restructure their debts out of court.

The list of changes could go on and are not restricted to insolvency law only. Court enforcement is changing substantially as well. Let us hope that courts will be familiar with them and will have capacity to deal with the expected increased number of filings.

Merry Christmas and stay with us in 2017!!!!

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