Control of foreign investments in Poland: The competition authority’s current procedural guidance
On 9 May 2024, the Office of Competition and Consumer Protection (UOKiK) published updated guidance on notifications to the regulator and conducting proceedings under the Control of Certain Foreign Investments Act. The amended provisions of the act, which significantly expanded the scope of its application, entered into force almost four years ago, in July 2020. At that time, the regulator was granted additional powers to protect Polish companies deemed vital for public order, security or health (as we discussed in the article “Control of certain investments: new protective provisions”). The regulator published its first guidance on the new rules in 2022.
The current guidance reflects the experience UOKiK has gathered over the years since the amended provisions went into effect. The office is also responding to businesses’ questions and doubts on the substantive and procedural aspects of this rather complicated legal regime. At the same time, UOKiK is seeking to reduce the transactional risk associated with application of these rules. Although, as indicated in the text, the guidelines are not legally binding, publication of the guidelines implies that UOKiK will follow them when applying the act.
Current state of regulation—categories of protected entities
The Control of Certain Investments Act came into effect in 2015, but was significantly amended in 2020 to protect Polish companies from acquisition by entities outside the European Union, the European Economic Area, or the Organisation for Economic Co-operation and Development. The amendment introduced a comprehensive framework for oversight of actions by foreign entities deemed to pose a threat to public security, order and health in relation to the deteriorating economic situation caused by the Covid-19 epidemic. The amendment included a sunset provision, and was originally intended to be in effect for two years, but in 2022 it was extended for another three years due to the finding of “an international situation distorting the market or competition.” The current rules will remain in force until 24 July 2025.
In essence, the Control of Certain Investments Act extends the protection to two categories of companies deemed vital for state security, and introduces two separate foreign investment control mechanisms for these protected entities.
Under the criteria set forth in the act, the first category (introduced in 2015) is for entities of strategic importance to the state. These entities are enumerated in the list of protected entities, published in the form of a regulation of the Council of Ministers and updated annually. The current regulation of 27 December 2023 covers 17 protected entities, including fertiliser company Grupa Azoty SA, copper company KGHM Polska Miedź SA, telecoms Orange SA and Polkomtel sp. z o.o., and energy companies Orlen SA, Tauron Polska Energia SA and Unimot Terminale sp. z o.o. Transactions involving acquisition of dominance or significant participation in protected strategic Polish companies by non-EU entities are subject to control by the competent ministers (currently, the Minister of State Assets and the Minister of Defence).
The recently published guidance applies exclusively to the second category of Polish companies identified in the 2020 amendment to the act, and refers only to the powers granted to the regulator in applying the amended provisions. (These additional powers of oversight of economic investments are applied by UOKiK alongside its control of business concentrations, which it has been carrying out for decades.) The protection of domestic companies applies to acquisitions of businesses with their registered office in Poland by entities (natural or legal persons) from outside the EU, the EEA or the OECD. Such foreign entities are also required to report transactions to the president of UOKiK.
In this category, the set of protected entities is much broader than the list of strategic companies. It includes any company meeting both of two criteria. First, the company’s revenue from sales of products and services in Poland in either of the last two financial years preceding the filing exceeded the equivalent of EUR 10 million. Second, it meets one of the following tests:
- It is a public company
- It holds assets included in the consolidated list of facilities, installations, equipment and services constituting critical infrastructure (referred to in the Crisis Management Act of 26 April 2007)
- It does business in certain areas, including generation and transmission of electricity, gas, fuels, telecommunications, food processing, manufacture of drugs, chemicals or fertilisers, manufacture and sale of explosives, weapons or ammunition, and products of technology for military use, or
- It creates software used in services essential to society, such as energy, fuel, water supply, cash supply, card payments, hospital operations, prescription drug sales, transportation and food supply.
Proceedings before the competition authority, control powers and sanctions
The foreign investment control is a two-stage procedure (analogous to the procedure for control of concentrations of undertakings).
The first stage is screening to assess whether the case warrants further control. This stage should be completed within 30 business days after the filing.
If the case requires further control, the second stage of the proceedings is initiated, i.e. control proceedings as such, which lasts up to 120 business days. Pursuant to the UOKiK guidance, only cases that may pose a threat to public order, safety or health are referred to the second phase. In particular, this may relate to cases where there is even a potential risk of, for example, moving production overseas, shutting down a plant, exporting technology, or otherwise threatening the activities conducted by the company in question.
UOKiK’s current practice indicates that most foreign investment control cases are completed at the screening stage. According to data presented in UOKiK reports on its activities in 2020–2023, a total of 19 notifications were considered during this period, and only one of them led to a phase-two investigation, which was discontinued based on a finding that the transaction did not pose a threat to public order or safety.
The president of UOKiK may issue a decision not to object to the transaction, or to object to the transaction (i.e. prohibit the transaction). Significantly, acquiring or attaining dominance or a significant stake in a protected entity without filing the required notification, or despite issuance of a decision by the regulator objecting to the transaction, is legally void, without the need for an additional act by the president of UOKiK.
In cases specified in the act, the regulator may also limit the acquirer’s exercise of corporate rights under the acquired shares. In extreme cases where the purchaser fails to comply with statutory requirements or a decision objecting to the investment, the regulator may order divestment of the shares of the protected company within a specified period. In both of these civil sanctions, the aim is to restore the status quo ante, or at least to nullify as much as possible the private-law effects of the violation.
The decision by the regulator may be appealed to the administrative court.
The act also provides for criminal sanctions. A fine of up to PLN 50 million, and/or imprisonment for 6 months to 5 years, may be imposed on persons who improperly acquire an interest in a protected company. However, criminal sanctions may be ordered exclusively by the court.
Scope of revised guidance
As pointed out by UOKiK, it was updating the procedural guidance because of the need to resolve doubts in interpretation raised by businesses, and based on the regulator’s experience applying the act. The document addresses more broadly than before issues of who is obliged to notify a planned investment to UOKiK. The scope of information and documents that notifiers must provide is also discussed in detail, including formal requirements for notice and the required enclosures (e.g. certified translation of foreign documents and legalisation of foreign official documents by the Polish consulate).
The guidance indicates that investors have an additional obligation to prepare and submit to the president of UOKiK the FDI part of the form (Part B; Part A is filled out by UOKiK), on top of the information and documents submitted for the control procedure itself. The Polish regulator is obliged to forward information on each reportable foreign direct investment in Poland to the European Commission and other member states via the contact point established under the EU’s FDI Screening Regulation (2019/452). Within 15 calendar days of receiving the completed FDI form, the Commission and member states may submit comments on the transaction, provide an opinion, or ask the investor to provide further information.
The FDI form is filed in English, and failure to submit the form along with the other documentation for the planned investment may needlessly delay the proceedings. The guidance links to a site where the FDI form can be downloaded.
Hopefully the new guidance will help businesses negotiate the difficulties posed by the Control of Certain Investments Act.
Andrzej Madała, Competition & Consumer Protection practice, Wardyński & Partners
