Foreign Investment Control in Poland

Updated:06.06.2024

Foreign Investment Policy in Poland – Legal Framework

1. The Act on Control of Certain Foreign Investments

Most countries in the world protect their strategic interests by controlling foreign investments. In Poland, the Act of July 24, 2015 on the Control of Certain Investments (the “Act”) regulates restrictions on Foreign Direct Investment (FDI).

The Act outlines the rules and procedures for the control of certain investments that have acquired or obtained a significant share or dominant position in Polish entities operating in strategic sectors.

Any foreign investor intending to enter into a transaction that falls under the scope of the Act must undergo clearance procedure before the Minister or the President of the Office for Competition and Consumer Protection.

2. Executive Regulation on Control of FDI in Poland

The Act is supplemented by an Executive Regulation of the Council of Ministers dated December 16, 2022 (the “Regulation”). The Regulation specifies groups of foreign investments that are subject to the clearance procedure.

Which investors are subject to FDI control in Poland?

Interestingly, FDI Regulation does not provide a separate definition of a foreign investor. The regulations stipulates that FDI screening requirement applies only to foreign investors, referred to as acquirers, who are:

• natural persons without EU, EEA or OECD citizenship; and/or
• foreign companies that have not been established in the EU, EEA or OECD for at least two years prior to the date of application.

Furthermore, subsidiaries of the aforementioned entities, as well as their branches and representative offices, are considered non-resident entities of an EU, EEA or OECD member state.

The act does not stipulate a minimum period for an individual to hold citizenship of a non-EU, EEA or OECD country. It is sufficient that at the moment of undertaking an intention to invest in Poland the individual holds such citizenship.

What is a circumvention clause?

FDI Act also provides “circumvention clause” or “abuse of law clause”, which enables it to launch verification proceedings against companies or individuals from EU, EEA or OECD member states if there are indications of abuse or circumvention of FDI regulations in Poland. In practice, this regulation is designed to capture creation of artificial structures or acquisition of companies just in order to circumvent Polish FDI regulations.

Verification procedures may be also launched if entity acquiring or achieving significant participation or acquiring dominance:

• does not actually conduct business on its own behalf other than activities related to the acquisition or achievement of significant participation or acquisition of dominance, or
• does not have a permanent establishment, office, or personnel in the territory of a member state.

What types of transactions are subject to FDI control in Poland?

Foreign investment clearance is required for a transaction consisting of acquisition of significant participation or dominance in a protected entity. 

Significant participation of dominance shall be understood as:

• acquiring 20% or more of the shares/stocks or number of votes in the constituent body of a protected entity, or
• obtaining control, i.e. ability to decide on the direction of the protected entity’s business.

Is indirect and subsequent acquisition subject to FDI control in Poland?

Yes – Polish FDI regulation act also covers events of significant participation or dominance achieved through indirect or subsequent acquisition. 

Indirect or subsequent achievement of significant participation may include as example:

• amendment of the articles of association with respect to the preference of shares or the granting of right to profit,
• redemption of company shares,
• by renting / leasing a organized part of other company business,
• fiduciary acquisition or acquisition of shares for and at order of another party.

Acquisition of which target companies are subject to FDI control?

FDI Act in article 12d (1-3) identifies four types of entities that are subject to protection, i.e. its acquisition will be subject to FDI clearance procedure.

General criteria – Polish company with turnover exceeding 10 mln EUR

Acquisition of target company may be subject to FDI regulation if it meets the basic criteria which is:

• qualified as entrepreneur with,
• registered office in Poland and,
• turnover exceeding 10 mln EUR in Poland (in 2 last years).

 

All public companies are subject to the Polish FDI regime regardless of their industry or sector. Public company is defined as a company that has at least one share admitted to trading on a regulated market, which includes an alternative trading system within the territory of Poland.

FDI regime covers purchase of entrepreneurs being owners of assets that are disclosed in the unified list of facilities, installations, equipment and services included in the critical infrastructure, as defined in Article 5b Section 7(1) of the FDI Act.

The list also distinguishes European critical infrastructure located on the territory of Poland and European critical infrastructure located on the territory of other European Union member states, which might have a significant impact on the Republic of Poland. The list is of classified nature.

Foreign Investment Policy covers purchase of IT and Technologies entrepreneurs engaged in the provision of developing or modifying software:

• for the control of power plants, networks, or the operation of facilities or systems for the supply of electricity, gas, fuel, fuel oil, or district heating;
• for the management, control, and automation of drinking water supply or wastewater treatment facilities; or
• for the operation of equipment or systems used for voice and data transmission or for data storage and processing, or
• to operate equipment or systems used for the provision of cash, card payments, conventional transactions, for the settlement or management of securities and derivative transactions, or for the provision of insurance services, or
• to operate hospital information systems, to operate equipment or systems used in the sale of prescription drugs, and to operate a laboratory information system or laboratory tests, or
• to operate equipment or systems used in the transportation of passengers or goods by air, rail, sea or inland waterway, road transportation, public transportation or logistics, or
• to operate equipment or systems used in food supply.
• entrepreneurs providing cloud computing data collection or processing services.

Foreign Investment clearance covers purchase of entrepreneurs engaged in business activities that involve:

• generation of electricity, or
• production of motor gasoline or diesel fuel, or
• pipeline transportation of crude oil, motor gasoline or diesel fuel, or
• storage and warehousing of motor gasoline, diesel fuel, natural gas, or
• underground storage of crude oil or natural gas, or
• production of chemicals, fertilizers and chemical products, or
• manufacture and marketing of explosives, weapons and ammunition, and products and technology for military or police use, or
• regasification or liquefaction of natural gas, or
• transshipment of crude oil and its products in seaports, or
• distribution of natural gas or electricity, or
• transshipment in ports of primary importance to the national economy within the meaning of Article 2(3) of the Act on Sea Ports and Harbors of December 20, 1996.

What is the Foreign Investment Control procedure in Poland?

FDI Authority and timing of notification

The President of the Office of Competition and Consumer Protection is the competent authority to decide on FDI notifications.

The transactions must be notified in advance as the foreign investor is under obligation to refrain from carrying out the transaction until the deadline by which the OCC President’s decision should be issued (see below).

Consequently, the transaction covered by the notice may be carried out provided that the OCC President does not notify any objection to it.

The regulations provide exceptions to prior notification to the Chairman of the OCCP in the case of an indirect acquisition as a result of an action under foreign law. Then the notification can be made after the acquisition is made within one of the statutory deadlines.

FDI evaluation criteria

The criteria for evaluating a foreign investments transaction are vague and they include assessment from perspective of:

• protection of public order,
• protection of public safety,
• protection of public health,
• inability to establish the nationality of the buyer,
• negative impact on projects and programs of interest to the European Union.

Who applies for foreign investment clearance?

As a general rule, the buyer is obliged to notify the competent authority of the acquisition or achievement of a significant shareholding or assumption of dominance in a protected company.

There are two exceptions to the above general rule.

• The first exception in the case of indirect acquisition or achievement of a significant position – the obligation to notify is on a derivative or associated company. 
• The second exception – the target company is the party obliged to notify the competent authority in the case of complementary acquisitions, i.e. when the buyer acquires or achieves a significant stake in the target company or gains dominance over the target entity through:
  • cancellation of the target company’s shares or acquisition of the target company’s own shares;
  • demerger of the target company; and/or
  • a change in the articles of association of the target company resulting in a change in personal rights.

Stages of FDI clearance

The OCCP’s proceedings are divided into two phases in order to select those cases that do not require further scrutiny (non-controversial cases) and those that require further scrutiny.

Phase one

In phase one, the OCCP Chairman has a 30-day deadline to issue a decision or move the case to phase two. Phase One involves a preliminary investigation to gather information and documents.

Based on the materials collected, the OCCP Chairman will either close the proceedings at this stage or forward for further clarifications.

Phase two

In phase two, the OCCP Chairman will conclude the inspection proceedings with the issuance of one of two decisions:

1. an authorizing decision or,
2. a decision objecting to the acquisition or achievement of significant participation or acquisition of dominance over a covered entity.

This decision must be issued no later than 120 days from the date of initiation of these proceedings.

Proxy for service in Poland

An entity filing a notification that does not have a place of residence or stay or registered office in Poland or another EU member state, if it has not appointed an attorney in Poland to conduct FDI clearance, is required to appoint a proxy for service in Poland.

Failure to do so will result in letters in the course of the proceedings being abandoned. 

When should a foreign investor expect an objection to a transaction from the President of the OCC?

A decision to object to a transaction that is the subject of a foreign investor’s notification will be issued in the following cases:

1. Failure of the filer to correct formal deficiencies in the filing within the prescribed time period, or failure of the filer to provide documents or information requested by the OCCP,
2. Failure of the applicant to provide additional written explanations upon the request of the President of the OCCP within the prescribed period,
3. The existence of a potential threat to public order, public security or public health in Poland as a result of the transaction, taking into account Articles 52(1) and 65(1) of the Treaty on the Functioning of the EU and Article 4(2) of the Treaty on European Union,
4. The impossibility to determine whether the buyer is a citizen of an EU, EEA or OECD member state or has been a citizen of an EU, EEA or OECD member state for at least two years prior to the date of notification of the establishment,
5. The possibility of the transaction having a negative impact on projects and programs of interest to the EU.

While the first two conditions are strictly procedural, the third and fifth conditions are subject to individual assessment by the President of the OCCP.

This assessment will be made taking into account the norms resulting from the provisions of European law, i.e. the Treaty on the Functioning of the EU and the Treaty on European Union. These conditions can be met if there is even a potential risk, such as:

What are the risks associated with a transaction not being submitted to the OCCP Chairman for approval?

Firstly, any transaction made without notification or in contravention of the Chairman of the OCCP’s objection is invalid under the law. This is a legal consequence that occurs automatically and does not require the Chairman of the OCCP to issue an administrative act for its effectiveness.

In the case of certain types of indirect acquisitions (e.g., acquisitions under foreign law), the act also provides for sanctions such as the inadmissibility of exercising rights from shares or stock. 

Poland’s regulations also provide for severe fines, as follows:

• up to PLN 100 million for companies listed in the Regulation
• up to PLN 50 million for other covered entities

In addition, the entity obliged to notify may face a prison sentence of six months to five years.

If you are a foreign investor or are planning an investment in Poland, remember your obligation to notify the President of the OCCP of your intention to make a transaction.

Contact our team of experts at [email protected] for professional advice and support in the process of obtaining the necessary permits. Avoid unnecessary risks and ensure your investment meets all legal requirements.

FAQ – Foreign Direct Investment Control in Poland

The Polish legal framework for foreign investment imposes restrictions on foreign investors who are natural persons without EU, EEA or OECD citizenship and companies that have not been established in the EU, EEA or OECD for at least two years.

In Poland, foreign investments are managed through a procedure involving notifying the President of the Office for Competition and Consumer Protection (OCCP) at the earliest stage of a transaction.

The OCCP bases their evaluation on the protection of public order, safety, and health.

Yes, in Poland, a decision by the President of the OCCP to object to a foreign investment transaction can be appealed to an administrative court within 30 days from the date of the decision.

This highlights the importance of understanding Polish law and the legal framework when investing in Poland.

No, foreign investment control and merger control, despite that run by the same authority (UOKiK) are different and independent procedures in Poland. In practice, one is followed by another, and they both proceed the closing of the transaction.