Statutory restrictions on investing in strategic sectors in Poland
The Act on Control of Certain Investments (the "Act") entered into force in October 2015, introducing restrictions on m&a transactions in Poland. The Act created an exception to EU freedom of capital movement, as it empowered the prime minister or minister of energy to object to transactions in which Polish companies operating in sectors deemed strategic for the national economy are involved.
Scope of the Act
Share deals and asset deals are covered by the Act if they result in the acquisition of control over a strategic company or the acquisition of a significant participation in such a company. The Act defines "significant participation" as at least 20 % of the voting rights in the target entity. The Act applies to companies operating in strategic sectors of the Polish economy, such as telecommunications, power generation and distribution, fuel production, transport and storage, production of chemicals, manufacture and trade of arms, ammunition and military technologies, etc. In order to fall under the control regime provided by the Act, the company active in these sectors has to be enumerated in the Ordinance issued by the Council of Ministers. Seven strategic companies are included in the list at the moment.
Protected entities may be state-owned companies or private undertakings. Investors obliged to comply with the Act include Polish entities and companies registered abroad (EU and non-EU undertakings).
Procedural provisions and sanctions
The authorities responsible for applying the Act are the minister of energy with regard to energy sector cases and the prime minister for other sectors. Investors are obliged to notify these authorities, which shall initiate proceedings lasting up to 90 days and that can be prolonged by requests for additional data (as a "stop the clock" rule, known from merger control proceedings carried out by competition authorities, is applicable). The authorities are empowered to object to a transaction based on reasons of national security or public order, or if additional information was not provided.
A negative decision may be challenged before the administrative court, whereas acquisitions implemented in spite of the objection or without notification are null and void. Additionally, the Act provides severe sanctions for breach of the notification duty: a fine of up to PLN 100 million (approximately EUR 24 million) or imprisonment of six months to five years.
The Act establishes the prime minister and the minister of energy as authorities empowered to review and ban certain m&a transactions. Potential investments in strategic sectors may therefore require additional notification and approval, and investors should be ready for relatively long proceedings. As the Act does not provide any turnover thresholds and requires the investor to notify the acquisition of at least a 20 % stake in a target, this law can also cover transactions that are not filed to the competition authority, since the acquisition of a minority stake is in principle not notifiable in Poland.
This article was up to date as at the date of going to publishing on 10 December 2018.