The parliament is working on an amendment to the Sanctions Law. Will there be expropriations?
The sanctions law in practice
The Law on Special Solutions to Counter Supporting Aggression against Ukraine and to Protect National Security, commonly referred to as the Sanctions Law, came into force on 16 April 2022. It introduced a list of natural and legal persons, in addition to those in force within the European Union, to which those entities considered to be supporting the Putin regime are included. Under the Sanctions Law, 51 decisions were issued by the end of June 2022. The effect of being placed on the sanctions list is the immediate freezing of all economic and financial resources of such an entity. In practice, this began to give rise to serious problems – employees were not paid, contractors were unable to receive payment.
Greater protection of employees’ interests is needed
The explanatory memorandum of the Draft Law points out that the consequences of being on the Polish or EU sanctions list are not only borne by the owners of the companies, but by ordinary employees (including Polish citizens) who cannot receive the wages or other benefits due from the employer. The proposed solutions are intended to enable both the fulfilment of obligations towards employees and to allow the disposal of “frozen” assets.
Basic assumptions of the project
The key assumptions of the project are:
- The possibility of introducing a compulsory administration into a sanction-listed entity:
- It would be established in the form of an administrative decision by the minister competent for economy for a period of 6 months, with the possibility of prolongation to a maximum of 12 months, if it proves necessary to maintain jobs in the enterprise, to maintain within the scope of its activity the provision of public utility services or the performance of other tasks of public character or to protect the economic interests of the Republic of Poland.
- The administrator would have to act in order to maintain the continuity of the company’s activity, manage it, exercise rights from shares and dispose – with the owner’s consent – of assets and other “frozen” economic resources of the entity,
- The administrator may only be established in order to take over the assets of the enterprise by the State Treasury.
- Acquisition of ownership of a sanction-listed entity by the Treasury.
- Will be possible for reasons of important public interest or for reasons of ensuring state security,
- With compensation corresponding to the market value of the funds, funds or economic resources to be taken over,
- Compensation will not be paid to the sanctioned entity, but will be subject to a ‘freeze’.
- Benefits from the Guaranteed Employee Benefits Fund for employees of the sanctioned entity.
The amendment provides that a sanctioned entity may apply for benefits from the Guaranteed Employee Benefits Fund to satisfy employee claims that it is unable to pay due to a lack of funds. If the entrepreneur does not submit such an application, the employees themselves will also have the right to apply for payment of benefits. The benefits will be paid once for a period of up to three months, while the amount of one month’s benefit will not be allowed to exceed the average salary for the previous quarter. In the case of possible restructuring or bankruptcy proceedings, receipt of benefits from the FGŚP under the Sanctions Act will exclude the possibility of receiving benefits in these proceedings.
Impact of the proposed law
There is no doubt that the clarification of the provisions of the Sanctions Act was necessary due to the practical problems of the functioning of entities included in the sanctions list or in the EU sanctions lists. The biggest controversy will certainly be the possibility of seizing the assets of such persons, and this on the basis of discretionary and undefined criteria.
Our sanctions lawyers will follow the further development of the project on an ongoing basis.