Business Constitution – major amendments (part 1) | Legal Alert

Soon – on April 30th, 2018 – the Business Constitution which is composed of five acts of law dated March 6th, 2018 shall enter into force:

1. Entrepreneurs Law Act,
2. act on the principles of participation of foreign entrepreneurs and other foreign persons in the economic life in the Republic of Poland,
3. act on the Central Registration and Information on Business and Information Center for Entrepreneurs,
4. act on the Spokesperson for Small and Medium Enterprises and
5. act on the provisions introducing the Entrepreneurs Law Act and other business-related acts of law.

The entry into force of the Business Constitution shall result in the repealing of the act on the freedom of business activities, act on business activities pursued by foreigners and act on the services provided within the territory of the Republic of Poland. Those acts shall be replaced by the aforementioned acts of law, but also by numerous amendments of the remainder of the legislation relevant for business activities pursued in Poland.

The solutions launched under the Business Constitution shall reduce the fragmentation of regulations on one issue or domain between the act on the freedom of economic activities, which has been amended plenty of times, and separate acts of law only to a limited extent. At the same time, it shall introduce a range of changes which have been long awaited by entrepreneurs, among which the following ones are the most important:

1. Basic rules in the entrepreneur – authority relationship

The Entrepreneurs Law shall introduce the following principle „Everything which is not forbidden is allowed”, which means that each entrepreneur shall be allowed to pursue their business in a way which suits them, provided that they do not infringe any expressly defined legal bans or restrictions.

The new regulations also introduce a range of additional rules which guarantee business stability and predictability, modelled after the principles defined in the Administrative Procedure Code, which include i.a. entrepreneur’s presumption of honesty, clarification of factual doubts to the benefit of the entrepreneur, friendly interpretation of the legislation or legal certainty principle, according to which the authority shall not be able to give up on the common practice of resolution of similar cases under the same factual and legal circumstances with no legitimate reason.

Although the authorities have already been obliged to apply most of the provisions included in the Entrepreneurs Law introduced directly or indirectly by the Polish Constitution, in practice those principles have not been duly respected both by the authorities and by their supervisors (court and administrative institutions). Furthermore, there haven’t been so far clear analogical regulations with respect to supervision proceedings to which the Administrative Procedure Code does not apply as a general rule, which made it hard for entrepreneurs to defend their rights, including before the official initiation of the administrative proceedings.

What is important, most of those principles shall have to be applied by the authorities not only in proceedings initiated in the new legal environment after April 30th, 2018, but also in those initiated on the grounds of the legislation applicable so far other than completed prior to April 30th, 2018.

2. Tripartition of business activities regulation

The catalogue of business activities regulation forms has been put in order. Three basic forms: concessions, permissions and entry to the register of regulated activities have been left.

According to the Entrepreneurs Law, it is required to apply for a concession only when such an activity cannot be performed as free or once an entry to the register of regulated activities is made or a permission is granted, provided that such an activity is of major importance for the national security or safety of citizens or another important public interest.

What is more, concessions can be granted in the form of administrative decisions made at the discretion of the minister competent for the business area which requires the respective concession (unless independent provisions state otherwise), which means that the concession authority shall be entitled to decide whether to grant a concession to a given entrepreneur or to refuse it to a more limited extent than requested in the application even if the entrepreneur meets all the statutory criteria of eligibility for concession.

As for permissions for business activities, which are a milder form of control than concessions, they shall be able to be awarded in areas which are less strategic than areas which require concessions by various bodies or entities in compliance with the content of independent acts of law. Furthermore, permissions for business activities are to be equivalent to related administrative decisions in the light of the new regulations, which means that the permission-giver shall have to grant a permission for business activities as soon as it deems the respective entrepreneur compliant with the criteria of performance of business activities to the extent subject to the obligation of applying for the permission.

Apart from concessions and permissions for business activities, the Entrepreneurs Law includes yet another form of regulation for business activities, that is entries to the register of regulated activities. Such entries shall be applicable to the so-called regulated activities or, speaking otherwise, activities defined in independent provisions whose performance depends on whether the entrepreneur meets statutory conditions. What is important, the institution which maintains the register shall always have to make an entry to that register upon the entrepreneur’s request, once the latter submits their last statement on eligibility for a given business area.

After April 30th, 2018 concessions, concession promises, concession amendment promises, permissions and entries to the register of regulated activities valid as of the entry into force of the new acts of law shall remain valid or effective.

As for proceedings against entrepreneurs initiated but not resolved prior to April 30th, 2018, including proceedings for awarding, amendment or withdrawal of concessions, concession promises, permissions, consents and licenses, the provisions applicable so far shall remain in force.

3. Legal explanations, individual interpretations and interpretation practiced so far

The new legislation introduces the function of the Spokesperson for Small and Medium Enterprises, who shall be able to request ministers for legal clarifications of the most complicated provisions which regulate commencement, pursuing and stopping of business activities to the extent of their practical use. Such legal clarifications can also be issued ex officio.

Should an entrepreneur observe such legal clarifications, they cannot undergo any administrative, financial sections or punishments to the extent to which they observed the legal clarifications of the relevant authority in the amount higher than resulting from such clarifications.

The same consequences shall be brought by the observation by such an entrepreneur of the individual interpretation they have applied for and so-called established interpretation practice, which, according to the Entrepreneurs Law, corresponds to the clarifications as to the scope and way of application of such provisions which impose on the entrepreneur the duty to pay the public assessment and social or health insurance premiums, and which prevail in individual interpretations issued under the same factual and legal circumstances within a given settlement period and within 12 months before its commencement.

The purpose of the aforementioned legal institutions related to the interpretation of the legislation is not only to increase the legal awareness of the entrepreneurs but also to decrease the risk of heterogeneous practice of authorities from different regions of our country or different levels of the administrative structures.

Both the clarifications and anonymized individual interpretations shall be published in the respective Bulletin of Public Information (BIP).

4. Increase in legal certainty among entrepreneurs through introduction of principles of development of normative acts related to business law

What often prevents Polish and foreign companies from investing more in Poland is the permanent legal uncertainty or, speaking otherwise, no certainty with regard to the content of future legislation and its interpretation and application by various authorities.

In order to meet the investors’ expectations, except for the aforementioned legal certainty and legal clarifications, interpretations and established interpretation practice, the Entrepreneurs Law also introduces specific principles of development of legal projects within the area of economic law.

In particular, a principle shall be introduced according to which the legislation intervention with respect to commencement, performance or discontinuance of business activities should be the last resort only if the purpose of the intended change cannot be achieved with other measures. Moreover, should works on a normative act project be started, legislators shall have to observe the proportionality and adequacy principles and strive to prevent new administration duties from emerging, reduce information duties or make it possible to fulfill those duties online. Ministers shall also be obliged to check regularly how the normative acts work and report the results of their checks every year to the Council of Ministers.

The estimated effect of the aforementioned solutions should be the reinforcement of the legislative discipline and reduction of regulation burdens suffered by entrepreneurs targeted by the legal provisions. Nevertheless, it must be emphasized that those principles shall not be applicable to legislative initiatives brought by citizens.

5. Transfer of all the dispersed regulations applicable to foreign entrepreneurs to one and only act of law

The principles of business activities pursued by foreign entrepreneurs in the Republic of Poland have been fragmented and dispersed among various acts of law, which made it even harder for foreign investors to comprehend the Polish legal environment.

As for the act on performance of business activities by foreign entrepreneurs and other foreigners in the Republic of Poland, it consolidated the provisions which have been dispersed so far, which allows it to reduce even out to a large extent interpretation discrepancies associated with relationships between specific acts and enable the legislation applicable to foreign entrepreneurs in Poland to be relatively homogenous.

The subject act comprehensively encompasses all the issues related to foreign branches and representative offices in Poland as well as those related to cross-border service activities and international cooperation of various entities with respect to services. Such a solution is to a great extent a repetition of the regulations in force so far with only slight changes introduced – e.g. slight simplification of their functioning, whereas with respect to representative office a major change is the introduction of the duty to renew the entry of each representative office once in every two years, which is to make data from the register of representative offices more up-to-date.

It must be highlighted, however, that not only the aforementioned act of law shall be applicable to activities pursued by foreign entrepreneurs in Poland but also the Entrepreneurs Law, because pursuant to article 1 thereof, the Entrepreneurs Law shall regulate any business activity pursued „within the territory of the Republic of Poland” regardless of whether it is pursued by a Polish or foreign entrepreneur.

Contact us to learn more:

Anita Palukiewicz – Counsel

Rafał Włodarski – Senior Associate, Attorney at Law