Poland

Risk assessment

Growth will slow in 2013

After recording the strongest growth in the EU in 2011, the economy slowed sharply in 2012. One of the main reasons is the decline in investment. The sharp European slowdown, combined with a set of government measures intended to reduce the public deficit has strongly affected the economy. Private consumption has been hit by the fall in household confidence, by the deterioration in the labour market (13% unemployment) and by the freezing of civil service salaries. Moreover, inflation reached 3.8%, which contributed to depress domestic demand. In 2013, the government will support growth through investment and a targeted stimulus policy.  A €52 billion support scheme spread over 3 years (8% of GDP) was approved at the end of 2012. Investment will be boosted by €10 billion of spending on road and rail infrastructures and by a €10 billion capitalisation of the national bank to support the demand for projects (1.6% of GDP). Meanwhile, the government is making armament a priority. Poland is thus the only European country increasing its defence budget in 2013 (+7%). Donald Tusk hopes to boost employment through this sector. In addition, as a result of the austerity measures in place, the current account deficit fell in 2012. In 2013 European activity will remain sluggish. Consequently, the volume of Polish exports, largely directed towards Germany (30% of exports) is expected sluggish. As to imports, Poland renegotiated the price of gas from Russia (90% of gas imports) and obtained 15% reduction, or about 1 billion dollars. The impact of foreign trade on GDP is, however, limited because of the lack of commercial openness compared with other central European countries. As in the second half-year 2012, inflation is expected to decrease in 2013 in connection with the fall in the oil price.
In response to the observed slowdown, the Polish authorities are loosening their monetary policy. For the first time since 2009 and after having even raised the key rate by 0.25 basis points early in 2012, the authorities began to soften their monetary policy in November 2012 by 0.25 basis points. If, as in 2012, the zloty does not depreciate against the euro, the Central Bank will adjust its key rate (by 0.5 basis points) to 4% in 2013 to support private consumption, which represents 50% of GDP. The government has set itself the objective of increasing consumption by 5% of GDP. The governor of the central bank has, moreover, undertaken to reduce interest rates in the event of an economic slowdown. In 2012, the construction sector suffered from a slowdown in investment and a decline in household confidence. The multiplicity of players has weakened the sector, which will benefit in 2013 from public investment support.

Public finances improving 

The Public Finance Development and Consolidation Plan drawn up by the government in order to be compliant with Maastricht criteria from 2013 will be continued. The public deficit is expected to be slightly higher than that of 2012, because of the public spending measures to stimulate the economy. The increase in this spending, estimated at 1.9% of GDP, will be offset by a rise in revenues linked to the recovery of consumption. Moreover, Donald Tusk has announced numerous privatisations in key economic sectors such as banks (PKO Bank) and energy (ZE Pak, Lotos). Public debt is expected to stabilise, as a result, at about 55% of GDP. However, it is vulnerable to investors’ risk aversion as a large proportion of the debt is held by non-residents. Furthermore, foreign direct investment flows will suffer from European sluggishness meaning that the current account deficit will not be fully funded. However, Poland has the best European structural fund take-up rate, although as the main beneficiary country it could see a cut in the flow of structural funds, as France and Germany want to reduce their contributions. The Polish banking system seems relatively robust with capitalisation ratios in excess of the Basel III minimum. However, the subsidiaries of foreign banks (BNP, Uni Crédit, Citi, Deutsche bank), whose head offices are mostly located in the eurozone, represent two thirds of the banking sector, which weakens the financing of the economy. Nevertheless, there was no marked deleveraging by European banks in 2012 with regard to Poland. The banks remain strongly exposed to exchange rate risk, foreign currency loans to household amounting to 14% of GDP.

A fairly stable political context

The autumn 2010 presidential election brought Bronislaw Komorowski to the presidency. The Prime Minister, Donald Tusk, leads a coalition between his centre-right party (PO), in power since October 2007, and the Polish People’s Party (PSA). The general elections of 9 October 2011 confirmed the coalition’s position. The government’s action has contributed greatly to improving the Polish business environment, although the Prime Minister, was slow to become aware of the effects of the European crisis on the Polish economy. The latest opinion polls show growing popular discontent with the current policies of fiscal austerity. The radicalisation of the opposition parties and the rising unemployment rate could result in social unrest and violent protests. Moreover, wealth gaps are increasing rapidly, notably between the east and the west of the country.

Payment incident index

MEANS OF PAYMENT AND COLLECTION METHODS

Bills of exchange and cheques are not widely used, as they must meet a number of formal issuing requirements in order to be valid.

Nevertheless, for dishonoured and protested bills and cheques, creditors may resort to a fast-track procedure resulting in an injunction to pay.

Until now, cash payments were commonly used in Poland by individuals and firms alike, but under the “Freedom of business activity Act” (Ustawa o swobodzie działalności gospodarczej), of 2 July 2004, which came into force on 21^st August 2004, companies are required to make settlements via bank accounts for any transaction exceeding the equivalent in złotys of 15,000 Euros even when payable in several instalments.

This measure aims to counter fraudulent money laundering.

One highly original instrument is the weksel in blanco, an incomplete promissory note bearing only the term "weksel" and the issuer’s signature at the time of issue.

The signature constitutes an irrevocable promise to pay and this undertaking is enforceable upon completion of the promissory note (amount, place and date of payment) in accordance with a prior agreement between issuer and beneficiary.

Weksels in blanco are widely used, as they also constitute a guarantee of payment in commercial agreements and the rescheduling of payments.

Bank transfers have become the most widely used payment method. Leading Polish banks – after an initial phase of privatisation and a second phase of concentration – use the SWIFT network, which offers a cheap, flexible and quick domestic and international funds transfer service.

Where possible, it is advisable not to initiate recovery proceedings locally due not only to the cumbersome formalities and the high cost of legal action, but also to the country’s lengthy court procedures: it takes almost two years to obtain a writ of execution due to the lack of judges adequately trained in the rules of the market economy and proper equipment.

However, there are significant efforts to improve the efficiency of the courts.

Serving a demand for payment, properly accompanied by proof of debt, reminds the debtor of his obligation to pay the outstanding sum, plus any accrued interest.

Since the term of limitation for receivables arising from a merchandise sales contract, and any ensuing past-due interest, is only two years, suppliers should exercise extreme vigilance.

From 1^st January 2004, interest may be claimed as of the 31^st day following delivery of the product or service, even where the parties have agreed to a longer payment time. The legal interest rate will apply from the 31^st day until the contractual payment date.

Thereafter, in case of late payment, the tax penalty rate will apply and it will very often be higher than the legal interest rate, unless the contracting parties have agreed on a higher interest rate.

It is advisable to seek an out-of-court settlement based on a payment schedule drawn up by a public notary, which includes an enforcement clause that allows creditors, in the event of default by the debtor, to go directly to the enforcement stage, subject to acknowledgement by the court of the binding nature of this document.

Creditors may seek an injunction to pay (nakaz zaplaty) via a fast-track and less expensive procedure, provided they produce positive proof of debt (like unpaid bills of exchange, unpaid cheques or weksels in blanco, or else acknowledgements of debt). If the judge is not convinced of the substance of the claim – a decision he alone is empowered to make – he may refer the case to full trial.

Since 1^st January 2010, when the claims are certain, the district court of Lublin has jurisdiction throughout the country, to handle electronic injunction to pay.

The clerk of the court examines the merits of the application, to which is attached the list of the available evidence, then, with its electronic signature, he validates the ruling granting the injunction to pay.

This fast, economic and flexible process became very successful.

Ordinary proceedings are partly in writing with the parties filing submissions accompanied by all supporting case documents (original or certified copies) and partly oral with the litigants, their lawyers, and their witnesses heard on the main hearing date.

At such legal proceedings, the judge is required, as far as possible, to attempt conciliation between the parties.

Although each party bears his own legal costs incurred in the course of the proceedings, after making a ruling the court will generally require the losing party to bear most of the cost of the procedure.

Commercial disputes are generally heard by the economic courts (sąd gospodarczy), falling under the jurisdiction of either district courts (sąd rejonowy) or regional courts (sąd okręgowy), depending on the value of the claim.