When two do the same, it is not the same. This old saying is true especially when comparing legal regulations in different countries. Businesses that are present in various jurisdictions sometimes tend to expect the same, when, at first glance, the regulation seems to be similar. Continue Reading
Pending Brexit, on January 11, 2019, the Polish government made available for consultation the draft act on the rules of residence of British nationals and their family members in the Republic of Poland due to the UK’s withdrawal from the European Union and the European Atomic Energy Community. According to the act, upon the UK’s leaving the European Union, British nationals residing in Poland will have
12 months (i.e. until March 31, 2020) to confirm their rights by obtaining a temporary residence permit (zezwolenie na pobyt czasowy) or permanent residence (zezwolenie na pobyt stały). The right to apply will be granted to all British nationals and their family members, even if they are not British citizens: spouses and children (up to 21 and dependent) and parents (dependent), who had been legally residing in Poland until the day of the UK’s withdrawal from the European Union.
Applications in this regard will be processed by voivodeship offices, with the right to appeal any negative decisions to the Office for Foreigners. After receiving a positive decision, the person concerned will obtain a residence card with a special “Brexit” annotation, indicating the acquisition of the card in connection with the withdrawal of the UK from the EU. Temporary residence cards will be issued for a three-year period, unless conditions for permanent residency are met and a permanent residence permit is issued.
The project provides for maintaining of, among other things, the right to reside and work on the same terms as the Polish citizens in the interim period, as well as after receipt of a “Brexit” residence card.
It is proposed that the act enter into force on March 30, 2019, but its final form may be changed over the course of the legislative process.
On November 23 this year, the Ministry of Energy published its draft Polish Energy Policy until 2040 (PEP2040). This long-awaited document is significant for both the energy sector and the entire economy; however, it is subject to social consultations until January 15, 2019, and its assumptions may (but do not have to) evolve.
A Generational Structural Change
A key principle of PEP2040 is the declaration to alter the structure of fuels used to generate electricity. This is the first official statement by the government declaring a marked reduction in dependency on coal (virtually by 50%) and in favor of nuclear power plants.
While it is forecast that in 2020 Poland will need 165TWh of electricity, of which 128.8TWh will be generated from coal (lignite and bituminous) – i.e. approximately 78%, with 0% from nuclear power plants – as early as 2035, the demand for energy is anticipated to be 215.6TWh, of which 46% would be generated from coal and approximately 10% from nuclear sources. In 2040, it is estimated that the demand for energy will amount to 231.8TWh, of which 32% would be generated from coal and approximately 18% from nuclear sources.
Regarding Poland’s energy policy, this is a groundbreaking change. Coal energy would constitute less than a third of the energy mix, while nuclear power plants would generate a fifth of the output volume.
Why Is a State Dependent on Coal Striving to Become Dependent on the Atom?
To date, Polish energy policy has largely relied on using coal to generate electricity, which – given the rising costs of coal mining and CO2 emission authorizations – has rendered electricity in Poland some of the most expensive in Europe. As the profile of the Polish economy is significantly dependent on manufacturing, it is thought that this policy may be ineffective in the long run – notwithstanding the substantial environmental issues. Relying on gas as the fuel for producing electricity is out of the question, because Poland relies on imports (78%, mostly from the Russian Federation) for this resource.
Introducing nuclear power plants to the Polish energy mix will help reach three objectives: (i) generation stability at 0% CO2 emissions; (ii) diversification of the generation structure; and (iii) nuclear power plant utilization safety, including access to different fuel sources.
Moreover, Poland expects Polish entities to execute 60% of the project value in constructing the new nuclear plants, which would be truly impressive.
Concept Work Already Underway
Many years ago, Poland’s energy groups established a special purpose company to execute the first Polish nuclear power plant. Research was undertaken, a world-class advisory firm was selected, and target locations were specified. The location was by the Baltic Sea – Kopalino or Żarnowiec (where construction of a nuclear power station began but was abandoned in the 1980s) – or in Central Poland, in Bełchatów (which has the largest systemic lignite-burning power plant in the world, with an output capacity of 5.47GW).
Six Nuclear Reactors, the First One in 2033
The Ministry of Energy, as set forth in PEP2040, plans to launch operations of the first 1-1.5GW reactor in 2035. The remaining five reactors are expected to be live by 2043. Poland plans for the total nuclear power plant output capacity to reach 6-9GW.
This tight schedule is required because so many coal sources built in the previous century are being abandoned and there is a need to balance power in the national electro-energy system. Additionally, it will make it possible to easily reduce greenhouse gas emissions in line with the increasingly restrictive EU climate policy.
The Roadmap Outlined in PEP2040
The Minister of Energy suggests the following schedule:
2018 – Develop a financing model (in our opinion, this is a very ambitious deadline).
2019 – Enact legislative changes to enable the execution of nuclear power plants and organize nuclear supervision technical support.
2020 – Select the final location of the first Kopalino/Żarnowiec reactor.
2021 – Select the technology and the general contractor.
2024 – Begin to construct the first reactor, and then the remaining reactors.
2027 – Launch a new landfill site for low- and medium-radioactivity waste.
2033 – Launch the first nuclear reactor.
Then, every two years until 2043 – Launch the remaining five nuclear reactors.
Evidently, the timeframe for launching the first reactor is 15 years and, looking at projects recently completed in Europe, it should be realistic.
The Ministry’s objective is rather ambitious from the point of view of Polish energy policy and transforming the structure of electricity generation from coal to (i) coal, (ii) renewables and (iii) nuclear. Technologically, this would be a quantum leap for Polish industry and the economy.
However, the nuclear energy program has been pursued seriously by Poland’s governments since 2009. So far, as per the Supreme Audit Office report of 2018, expenditures on this program amount to US$200 million, with the effects of those actions still being rather negligible.
Reverse trends can be observed in the EU: nuclear energy is being abandoned, while there is increased use of RES in the energy mix. Truth be told, the fundamentals of the nuclear program remain at the government’s discretion, as the State Treasury controls the energy sector.
By determining the financing model, it will be possible to single out parties that are interested in constructing the first nuclear power plant. For now, Poland does not have the means to see the investment through. With energy prices decreasing in adjacent countries, a question arises as to the profitability of the investment (even if the price takes into account the reasonable costs of Poland’s energy security). Making legislative adjustments in Poland to accommodate nuclear energy is another large unknown.
A great opportunity will present itself for the domestic industry and EPC contractors. Such contractors would need to gear up to meet the quality and staffing requirements so that 60% of the manufacturing and construction costs could remain in Poland, as expected in the PEP2040.
PEP2040 is subject to social consultations. We hope to find out what the final shape of PEP2040 will be in the first quarter of 2019.
The Polish Parliament has recently adopted a new law implementing certain changes to the Polish financial system (“the Act”). The aim is to strengthen supervision over capital markets and improve protection of investors, but it will significantly impact the timing and cost of raising capital through debt securities offered outside the public market.
The new law amends the Banking Law to implement the provisions of the Bank Recovery and Resolution Directive. Currently, this is a very controversial issue, given the recent resignation of the Chair of the Polish Financial Supervision Authority and the fact that the new law allows the takeover of a bank with equity below certain thresholds or with a risk of such equity falling below certain thresholds. However, this post, in fact, deals with other issues raised by the new law.
The other provisions of the Act affect the financing of a business through private issue of debt securities (i.e. securities issued to private investors, not offered or traded on the public market).
Until now, debt capital could be acquired in several ways – either through bank debt, loans from non-banking institutions (e.g. private investors) or through issue of debt securities. Issuers seeking debt capital could choose to issue bonds or promissory notes, with the latter being the preferred type. The advantage of bonds over loans was the exemption from the transfer tax (podatek od czynności cywilnoprawnych) which, as far as loans are concerned, amounted to 2% of the loan value.
The private issue and placement of bonds was relatively easy. As long as the bonds were offered to a closed and defined group of no more than 150 potential investors, there was no requirement to hold a public offering, prepare a prospectus and discuss the issue with market supervisors, brokers or depository agents. It was sufficient to prepare a simple offering memorandum, print out the bond documents and offer them to selected investors. All these formalities could be completed within one day and did not require any approval from the market regulator. Such bonds were not registered anywhere and, unless the company was listed on the public market, the issuer was under no obligation to report any details about the issue of the bonds (the real size of the privately issued corporate bonds market is not known). Bonds issued this way were fully tradable securities.
The ease of issuing securities connected with a certain lack of transparency had led, in the government’s view, to serious abuses. High-risk corporate bonds were offered to individual customers through a network of banks and ubiquitous financial advisors. The investors were assured that an investment in corporate bonds is “as safe as a bank deposit”. The notorious Polish debt-collection company Getback, now insolvent, offered – through a network of banks, financial advisor and brokers – risky corporate bonds to more than 9,200 bondholders (including 9,064 individuals), with the total issue price exceeding PLN 2.6 billion (approx. €600 million). The company is now in administration, but it is almost certain that the bondholders will not get their all their money back.
This triggered a two-pronged government response.
Poland implemented the MIFID II Directive, thus forcing the investment firms offering securities to disclose whom they represent while offering securities and limiting their possibility to charge commission and receive remuneration from the securities issuers.
The new Act also changed the concept and procedure for issuing “private” securities.
For the sake of transparency, since the new act came into effect, all bonds offered by the Polish issuers [or in Poland] will need to be dematerialized, meaning that bonds cannot be in the form of a printed document, but need to be registered with the National Securities Depository (Krajowy Depozyt Papierów Wartościowych or KDPW). They will exist only as an entry in the KDPW computer system, as is the case of securities traded on the Warsaw Stock Exchange.
This change raises two points.
First, if KDPW is going to take over the dematerialization of all such bonds and other securities, it will mean a significant increase KDPW workload. Will KDPW be able to cope, quickly and efficiently, with the registration of so many new documents? Certainly, it will take longer to enter into the required agreement with KDPW and register new bonds, so the amendment will impact the timing of new bond issues.
Second, as KDPW is not a charity, it will charge fees and commissions for bonds registration. Thus, there will be a pricing impact, making acquisition of capital through bonds more expensive. Such cost will be transferred onto the bondholders, who will receive a lower return on their bonds, or on issuers, as raising capital will become more expensive.
Finally, for the purpose of increasing the transparency of the market, KDPW will make certain information publicly available, allowing the public to learn about the existing situation of the issuer, as far as their indebtedness is concerned.
The amendment further provides that the issuer will have to enter into a contract with an issuing agent, being a licensed investment firm having the right to keep the register and deposit of securities. The issuing agent will need to assure they act independently from the issuer and that there is no conflict of interest. The issuing agent will have the duty to verify whether the issuer meets the criteria for issuing and offering the bonds and keep the register of bondholders. Without positive verification by the issuing agent, no bond offering will be closed. Finally, the issuing agent will be liable for damages caused by non-performance of its duties. Certainly, obligatory appointment of an issuing agent will provide additional protection to investors, but it will also impact the timing and costs of the offering.
The act provides for a certain temporary period – all bonds issued and not redeemed before 1 July 2019 in the form of documents are to remain in force and there is no duty to retain an issuing agent until this date. However, the issuer of such bonds needs to inform KDPW, by 31 March 2020, of certain details of such bonds, including the number of bonds, their yield and their face value.
 The Act on amendment of certain acts in connection with strengthening the supervision over the financial market and protection of investors. The new law was passed on November 9 and is yet to be signed into law by the President
 Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council
 There are tax exemptions for loans extended by the shareholders to companies.
 Such financial advisors were representing themselves as advisors to the investor while their remuneration was paid by the issuer of securities they offered.
 The Act provides that also other securities – such as mortgage bonds and certificates in private closed-end investment funds – need to be dematerialized and registered with KDPW.
Like any other major change of legislation, the recodification of Czech private law in 2014 has raised a long list of interpretation issues. At the end of August 2018, the High Court in Prague outlined (since the decision has not yet been confirmed by the Supreme Court) an interpretation with respect to one of the items on the list. It clarified the meaning of the term “a part of an enterprise that would imply a significant change of the existing structure of the enterprise or a significant change in the scope of business of the company”. Continue Reading
In Poland, every 11 November is National Independence Day, commemorating the day Poland regained its independence in 1918, following what historians refer to as the partitions, where Russia, Austria and Prussia annexed parts of Poland so that it disappeared from the map of Europe for 123 years.
To celebrate the day, Poles participate in a variety of events, such as military parades, national runs (wearing the official state colours) and, for gym lovers, 100-push-up challenges. They also indulge in baked goose with apples. Some get carried away and choose to celebrate in more radical ways – which is not always appreciated by law enforcement (let us not deliberate on that).
This year, 11 November is a Sunday – is it bad luck for Polish employees, who enjoy long weekends? Not at all. The Polish parliament has decided that the 100th anniversary is so seminal, 12 November will be a day off.
Large-scale public-private partnership (PPP) projects are not common in Poland. However, the amendment to the PPP law, which came into effect in September 2018, should change this.
Therefore, we welcome the fact that, recently, the Port of Gdańsk announced a tender for a PPP advisor for the Central Sea Port Project (available in Polish). Thus, the “anchors are aweigh” for this project, which is estimated to cost between €1.4 billion and €2.14 billion, consisting of a new quay to be equipped with two berths, enabling ships carrying various types of cargo to be serviced.
The contracting authority is seeking an advisor comprising a multidisciplinary team of (i) engineers, (ii) financial experts and (iii) lawyers for a multiyear contract that will run through the proposed tender for a private partner to commercial and financial close.
The RES auctions are fast approaching – the first one, for existing installations, is due to start on October 17.
The long-awaited RES auctions start tomorrow. This year, the President of the Energy Regulatory Office has divided the auctions into two rounds: 17-25 October for existing installations and 5-20 November for new installations.
The auction system is based on periodically held auctions during which renewable energy producers offer to generate a certain amount of energy for a guaranteed price over the course of 15 years. The Ministry of Energy has determined the amount of energy it intends to contract through the system. The auctions are divided into five “baskets”, with the bidding for each basket to be held on a different date:
- The first basket is for installations burning biogas from a variety of landfills (e.g. waste and biogas from sewage treatment plants)
- The second basket is for hydro energy, geothermal and offshore wind farm installations
- The third basket is for installations utilizing agricultural biogas only
- The fourth basket is for onshore wind farms and photovoltaic power plants
- The fifth basket is for hybrid RES installations
On 1 October 2018, the amendment to the Slovak Cadastral Act came into effect. The Amendment introduced a number of provisions that speed up and improve the registration of real estate with the Cadastral Register. Selected provisions of the Amendment are outlined below. Continue Reading
Many countries inside the European Union are still struggling to come up with clear regulations that would provide a predictable set of rules for the blockchain technology. However, smaller nations like Liechtenstein and Malta have sorted it out. Continue Reading