Polish Government to Strengthen Foreign Investment Screening Laws in IT

The rules for entities from outside of the European Economic Areas (‘EAA’) acquiring Polish companies are to be strengthened. Details of a new legislative proposal were leaked to the press last week.

The new laws will probably require the consent of the Competition authority for acquisition of a stake of even 10% in companies in a range of industries.

Poland will probably join a host of jurisdictions that will tighten foreign investment screening regulations during the pandemic. According to the Polish officials, the government cannot allow Polish companies to be taken over at a significant discount caused by the pandemic by foreign investors (mostly Chinese). The first proposals for tightening the investment screening regime were added to a draft of an act on subsidies for interest rate payment in early April. However, the draft was later ditched, probably due to lobbying by business pressure groups.

The government has not abandoned the idea of tighter investment screening. Such act is on the official legislative agenda and last week the details of the draft law were leaked to the press.

According to the leaks, the Polish Competition authority will have to consent to an acquisition of even a 10% stake in a company that owns or operates ‘critical infrastructure’. Critical infrastructure, under Polish law, is very broadly defined. It encompasses not only utilities, energy or defence, but also banks and almost all telecommunications infrastructure.

Moreover, the requirement to obtain the approval will also extend to acquiring stakes in contractors or suppliers of such companies. The penalty for not obtaining such a permit will be a fine of up to PLN 100 million, and the Competition authority will have 180 days to determine if the proposed transaction is a ‘hostile takeover’ and issue a decision.

The details of the draft law are yet to be published. If the law will be passed, it will probably apply to almost all IT transactions, since it will cover every company that offers services to Polish banks, utilities or major telecom operators. This will impede or may even prevent many transactions for months to come.

At Maruta Wachta we are following this issue closely.


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