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Last will sent by sms and inheritance of Gmail – i.e. inheriting in 21st century

Posted on by Tomasz Krzywański

It has been known for a long time that the law does not catch up with life. In particular, the modern life, where the majority of thigs are done through the Internet or with the use of a smartphone. What if – caught off guard by the circumstances – we send our last will also by sms or we leave it in the cloud? Who will inherit our works saved on the server of an electronic mail? The problem is not as abstract as it may seem.

 

Sudden circumstances

Let us imagine such situation: a Polish citizen, a writer, goes on a journey to the other end of the world, e.g. to Australia. There, he dies in an accident. Soon before his death he sends an sms to his life partner in which he informs her that he has finished work on a new novel. The novel is saved in a Gmail inbox in its working version. At the same time, he informs her that he wrote the novel for her and, if anything happens to him, he wants all of his assets – including the rights to the book – to belong to her.

This is almost like a film plot. But the legal problems which the potential heiress will have to cope with are quite real. Let us look at the closely.

 

Last will sent by e-mail or sms

If the hero of our story sends an sms with his last will during his stay in Poland, then there would be no doubt – this would not be considered as a last will. Our civil code contains detailed guidelines regarding the form of the last will. The testator should write all of his/her last will in handwriting, sign it and date it. An alternative solution is a visit at the notary.

Fortunately, the last will was drawn up when our writer was outside of Poland. There are countries in which there is quite a lot of freedom as regards the form of dispositions in the event of death. For example, in the matter of Van der Merwe v. Master of the High Court and another, the Supreme Court in South Africa approved an unsigned draft of the last will sent to a friend by e-mail immediately before one’s death as the last will of the deceased. In the case of Mellino v Wilkins considered by the Australian Supreme Court, the last will in the form of a recording on a DVD was considered to be valid. The DVD was described by the deceased as “my last will” and – even highly informally – it contained the testator’s dispositions concerning his assets. In the matter of Rioux v. Coulombe, the Supreme Court in Quebec considered as the last will a Word document, saved on an external hard disc, which was indicated by the testator in her letter found at the location where she committed suicide. In the United States, in a publicised case of Estate of Javier Castro,  the court in Ohio approved as the last will a document which was prepared by Mr Javier Castro soon before his death, already being in the hospital, on his tablet and signed on the screen with a touch pen. The last will was also signed by his brothers, as his witnesses. Finally, in the matter of Nichol v Nichol the Supreme Court decided that a draft sms saved on the phone may constitute a last will if it ends with the statement “my last will”.

In other words, if our hero had sent an sms with his last will while being in any of the aforementioned countries – there is a chance that the court would have considered it to be his last will. What is more, it is also possible that a Polish court, considering the matter, would also admit the existence of such last will. That is because, according to the Haguq Convention on collision of rights regarding the form of last will dispositions, it is sufficient for the form of the last will to be consistent with the internal law of the country in which the testator drawn up his/her last will. But it is better not to tempt fate and prepare the last will in advance in writing or before a notary.

 

Inheritance of Gmail

The validity of the last will does not, however, solve the problems in our matter. That is because the heiress of the writer still has to gain access to his mailbox where he recorded his latest novel.

Let us assume that the testator never provided her with the password. In the case of Gmail, it will first be necessary to submit an application to Google for access to the data gathered in the account of the deceased person. Even if the request is granted, the heirs will have to obtain a court judgement issued in the United States, approving the text of statements suggested by Google. In other words – this is a long and bumpy road.

 1_tk

the site with an application to collect data from the account of the deceased person

 

What is important, even if the heiress has a password to the Gmail account of the deceased, then, according to the conditions of using the Google services, any logging into his account would have an illegal character (only the holder of the account is entitled to use the same). In the event that Google finds out about the unauthorized access, it would immediately block and close the account.

That is why, the best solution which I recommend is previous use of the manager of inactive accounts. This is where we can specify what will happen with our Gmail and other Google services after our death. We have a possibility of specifying who may gain access to our services and to what extent. Google will automatically notify such persons if the user is inactive for a certain period of time. Thanks to the manager of inactive accounts, we may save a lot of hassle to our relatives connected with access to our digital assets gathered under the Google services.

 

site of the manager of inactive accounts

 

Summary

According to research, only 13 out of 100 Poles aged over 50 have drawn up a last will (link). I suppose that a few per cent of people from this group decided what will happen to their digital assets after their death. Therefore, it seems that the aforementioned facts apply to most of us. If we do nothing, our mailboxes, photographs in the cloud, not to mention our portfolio of cryptocurrencies, may fall into non-existence and oblivion.

What to start the drawing-up of a good last will with? Definitely not with an sms. But this will be discussed on the text article.

 

 

The author of the article is Tomasz Krzywański, an attorney-at-law at GWW.

 

 

A few words about succession management – an analysis of the draft law

Posted on by Lexplorers

Under the “100 changes for companies” package, work is being performed at the Seym on the draft law on succession management of an enterprise of a natural person. It is aimed to serve as a rescue for the paralysis of functioning of the company after the death of its owner. The provisions will apply to nearly 80% of Polish entrepreneurs.

 

 

 

Chaos after the death of entrepreneur

Currently, if the entrepreneur conducts an individual business activity (based on an entry in the Central Register of Individual Business Activity – CEIDG), then, in principle, at the time of his/her death, the company ends its existence. Its brand is forfeited, all concessions, licences and permits expire, similarly to all agreements concluded with employees. Although heirs inherit the assets and liabilities of the deceased, from the operational point of view, they must create an enterprise from the scratch. If there is also a dispute between the heirs, then, for a period of a few months or years, the company may be in a condition of a critical paralysis.

 

A suggestion – a succession manager

As a rescue for the paralysis of the enterprise, the legislator suggests an institution of succession management, i.e. temporary management of the enterprise after the death of kits owner.

In order to appoint succession management, it is necessary to:

  1. indicate the succession manager;
  2. obtain the consent of the appointed person to serve the function of the succession manager;
  3. make an entry in CEIDG.

The requirements which the manager will have to meet will not be high. It must be a natural person who is fully capable of performing legal acts. The criteria of affinity or qualification are not stipulated in the law. And this is correct, because they should not be stricter than the formal conditions for the conduct of a business activity by entrepreneurs. Therefore, a succession entrepreneur may be both a beloved grandson who has some talent in business, a professional who deals with asset management or an appointed commercial representative.

The succession manager may be appointed still during the life of the entrepreneur, and after his/her death. The appointed management, similarly to the known institution of commercial representation (prokura), will be authorized to take court and out-of-court decisions on behalf of the entrepreneur. However, contrary to the commercial representative, the manager will also be obliged to run the enterprise. The manager will act on his behalf, but on the account of the owners of the enterprise.

 

From the hands to the manager to the hands of the successor

The enterprise, from the time of death of the entrepreneur to the time of being taken over by the heirs, will operate under the name of the enterprise with the addition of the phrase “inherited”. The basic rule will be the manager’s care over the enterprise until the time of division of the inheritance, but with a time limit of up to 2 years from the death of the entrepreneur. The draft anticipates certain exceptions from this rule. They are aimed both at the extension of that period, and at the relevant shortening, e.g. in the event that within two months of the death of the nestor, no heir accepts the inheritance or, on the contrary, the business inheritance is taken over only by one heir.

 

At the time of expiry of the succession management, the person serving the function of the manager is obliged to immediately hand over the enterprise to the successor. In order for the heir not to take over a “pig in a poke”, he/she has a right to request the manager , within one month of the expiry of the management, to submit a written report of the enterprise, including an indication of the condition in which the enterprise is at the time of expiry of the succession management.

What liability is borne by the manager? Similarly to a receiver or an administrator of real estate, s/he will bear liability for damages caused as a result of undue fulfilment of his/her duties. Therefore, the principle of fault will apply here.

The manager will also be held liable for a damages caused to the heir, the beneficiary of legatio vindicatio, the spouse of the entrepreneur and third parties subject to general rules – both liability in tort and liability for a failure to perform or undue performance of an obligation.

 

Concessions, licences, permits

So far, all administrative decisions expired upon the death of their addressee and, in many sectors, this meant the end of the business. Concessions, permits, licences connected with the business activity condition further “life” of the enterprise as a business entity.

The draft law introduces a category of “decisions connected with the enterprise” – this term refers to any concessions, licences, permits and authorizations connected with the conduct of a business activity, in particular those stipulated in the Act on the Freedom of Business Activity. Decisions connected with the enterprise will no longer expire automatically, with the exception of those which are connected with the entrepreneur himself, e.g. licence of a restructuring adviser. Personal achievements, e.g. a passed examination, may not be subject of succession.

The above does not mean that heirs may sit back and do nothing. Is the succession management is established, then, within 3 months of the date of its approval, it will be required to submit an application has to be submitted to a relevant authority for confirmation of a possibility of execution of the decision. If no management is established, then the owner of the enterprise should, within 6 months, submit an application for the decision to be transferred to him/her. Otherwise, decisions connected with the enterprise will expire after the lapse of the aforementioned deadlines.

 

Contractual relations

The legislator did not overlook the existing problem of continuation of contractual relations established during the life of the entrepreneur, both with contractors, clients and employees.

The remedy is supposed to be constituted by the rule, according to which the appointed succession manager will be able to exercise all the rights and fulfil all the duties under the concluded agreements. This rule will not apply to the agreements whose execution depends on personal characteristics of the deceased entrepreneurs. If the manager is established before the death of the entrepreneur, he will be able to exercise the rights and fulfil the duties deriving from the concluded agreements without any obstacles and delays. In the second situation – when the succession management is not established upon the death, the execution of the agreements will be suspended until the time of appointment of the manager by the heirs. Therefore, the dates cease to run, and one should restrain from the fulfillment of the benefits until establishing a manager.

Will the same rule apply to contracts of employment? Until now, on the date of death of the employer, all the contracts of employment expired, which sometimes constituted a big problem. The solution is to be the rule of continuation. It will be fully followed if the succession manager is appointed at the time of death. The situation of employees whose employer did not appoint a manager will be different. The period of 30 days from his/her death will be most important. With the lapse of the last day of that period, contracts of employment will expire, unless, before the lapse of that period, an agreement is concluded regarding continuation of the co-operation. So what should an employee do for those 30 days? This period will be treated as a period of excused absence from work.

If the period of 30 lapses, the contract of employment will expire and, upon the appointment of a manager, the enterprise will commence recruitment in the same professional group, and there will be a parachute mechanism offered to former employers in the form of an offer to return to work, subject to the previous terms and conditions. There is one condition – an intention of taking on the employment will have to be notified within one month of the date of establishment of the succession management.

 

Tax aspect

The draft law introduces a complete novum consisting of granting the legal-tax personality of an inherited enterprise. An inherited enterprise will therefore be a separate payer of VAT, excise tax, income tax, tonnage tax, ship tax and tax on gambling.

The legislator also gave a tip of the hat to the heirs whom were exempted from tax on inheritance and donation at the time of take-over of a single-person enterprise. Before now, such exemption applied only to closely-related people. Two conditions were introduced which will have to be jointly met in order to be awarded such exemption:

  • the acquisition has to be reported to the head of the revenue office,
  • the acquired enterprise has to be run for at least 5 years.

 

Summary

Polish entrepreneurs waited for a long time for someone to think of their interest when they will no longer be able to do so. The act is not simple, but it tackles a number of important problems. Complex regulation of the problem will require an introduction of changes in approximately 20 legal acts. Even though similar solutions have existed in individual EU states for years (e.g. a commercial power of attorney after the death of the entrepreneur), we get the impression that so far no-one has addressed the problem of succession concerning a one-person enterprise in such a wide perspective.

If the legislative process ends efficiently (and so far it has been welcomed by all political parties), then the new law will come into force within the next few months.

 

 

The author of the article is Katarzyna Adamin, a lawyer at the individual client advisory team of GWW.

Winnings in sports competition and PIT tax return

Posted on by Tomasz Piejak

Sports competitions evoke great emotions. Winnings – great pride, satisfaction and … often involve significant amounts of money. And we know that the latter is inevitably of interest to the fiscal office. In this article, I will present briefly how a Polish sportsman should settle accounts with a tax office in connection with the obtainment of a prize in sports competitions.

 

Taxation of a prize awarded in Poland

An important element of sports competition is rivalry between participants, and on the formal side – the rules of selecting the winners. The received prize for winning a sports competition is closely related with the effect of direct rivalry between players, which is relevant from the point of view of tax consequences in Poland. That is because it is determined that the prize for winning a sports competition is taxed differently than income for practising sports as such.

In the event that a sportsperson receives a prize not for his/her mere participation in the competition, but for winning it as a result of beating his/her rivals (other players), such prize is subject to a flat tax at the rate of 10%. Such tax is most commonly charged by the organizers of the competition (as the payer), without taking into account the costs of obtaining revenues. Meanwhile, in the event of obtainment of a prize in kind (non-cash), the winner him/herself should pay the organizer the due amount of flat-rate tax before he/she receives the prize. Usual practice in such event is that the organizer “grosses-up” the prize by adding to it a cash prize to cover the tax.

In view of the fact that it is the organizer who is responsible for proper settlement of accounts with the tax office, the sportsperson does not need to submit any other tax returns in this regard.

 

 

… and abroad

According to international agreements on avoidance of double taxation, it is a rule that income of sportspersons, including prizes for winning sports competition, is subject to taxation both in the country of performance of sports activity and in the country of tax residence of the sportsperson. And a relevant method of avoiding double taxation is applied, which will be discussed below.

A situation is different as regards the obtainment of income from sports activity which is fully or partially paid for from public funds of one or both countries or when a competition is held as part of cultural exchange between such countries. Then such income may be taxed only in the country of tax residence of the sportsperson.

The situation is still different if income is obtained in the country with which Poland has not concluded an international agreement. In such case, income is taxed in the country of tax residence of the sportsperson. However, there is no obstacle for it to be subject to taxation, to the full value, also in the country in which the sports activity is performed.

In the situation when, according to an international agreement, the sportsman’s prize is subject to taxation only in Poland, then we will only have the flat-rate, 10% tax. The only difference is that the duty to pay the tax is not a duty of the foreign organizer of the competition, but of the winner himself who must additionally disclose the prize in his/her annual tax return.

In other cases, the prize is subject to taxation in the country of performance of the sports activity. At the same time, according to the Polish tax provisions, a sportsperson who is a Polish tax resident, is subject to taxation in Poland with regard to all of his income, regardless of the source of such income. And this also means the income obtained abroad.

Fortunately, international agreements concluded by Poland regarding avoidance of double taxation prevent this “injustice”. The first of the methods of prevention of double taxation is the so-called method of exemption with progression. According to this method, profit deriving from the participation in sports events (including prizes awarded for winning a competition) organized abroad is exempted from taxation in Poland. At the same time, it has an influence on an increase of the percentage rate used to calculate tax due on income obtained in Poland. Such profit is taxed according to general rules (according to the tax scale), and therefore, despite all, it has to be disclosed in the Polish tax return. In every case of application of the method of exemption with progression, the increased percentage rate will not, however, be higher than 32%. In the case of other forms of taxation of income in Poland (e.g. linear tax or flat-rate tax) or in the event that no income is achieved in Poland, there is no need at all to disclose in Polish tax returns the income achieved from sports activity performed abroad.

The second method is the so-called method of proportional accounting, commonly referred to as a tax credit. It application does not exempt income achieved abroad from taxation in Poland. Therefore, a sportsperson must take such income into account in the Polish tax return and – in the case that it constitutes a prize for winning a competition – must pay a flat-rate tax on it, to the value if 10%. At the same time, it is possible to reduce the tax due in Poland by the amount if tax paid in the country in which the sports competition took place (and from which the prize for winning the competition originates). Therefore, in the case that in the country of performance of sports activity a tax was paid, then the tax due in Poland is reduced by the value of the tax paid abroad. If the amount of foreign tax equals or exceeds the amount of the tax due in Poland, then the sportsperson will not pay the tax in Poland on the received prize.

 

Summary

Practising sports may definitely constitute a lucrative course of income. Competition and rivalry are, however, connected with significant stress and great pressure from coaches and fans. That is why, obtaining prizes or other income from practising sports, one should not forget that proper settlements have to be done with the Polish tax office.  This will save the sportsperson stress connected with any irregularities disclosed during tax control and will allow him to concentrate on preparation for future competitions.

 

 

The author of the article is Tomasz Piejak, trainee attorney-at-law at GWW. The article was written in co-operation with Agnieszka Szymańczyk, a tax adviser at GWW.

How to correctly amend a public procurement contract?

Posted on by Grzegorz Karwatowicz

An amendment of the concluded public procurement contract in comparison with the text of the offer is subject to numerous restrictions. The last amendment to the Public Procurement Law introduced significant modifications to them. Particular controversies are evoked by an option of the amendment to the contract which is conditioned only upon the value of such changes, regardless of the substantive criterion. Will each amendment in this case be consistent with the provisions of law?

 

 

What is the wording of the new provision?

The amendment to the Public Procurement Law of 22 June 2016 significantly modified a possibility of amending the public procurement contract. One of the most interesting aspects of the amendment is the introduction of a new exception to the prohibition of the amendment to the contract, stipulated in Art. 144 section 1 point 6 of the Public Procurement Law.  It provides for an amendment to the provisions of the concluded public procurement contract in comparison with the text of the offer forming the basis for the selection of the contractor if  “(…) a total value of such changes is lower than the amounts specified in the provisions issued on the basis of art. 11 section 8 and is lower than 10% of the value of the contract, as originally specified in the contract, for contracts for services or deliveries, and in the case of contracts for construction work – is lower than 15% of the value of the contract originally specified therein”.

 

 

Prerequisites justifying an amendment to the contract

According to the quoted provision, an amendment to the procurement contract is conditions upon the meeting of two (cumulative) conditions. The first arises when a total value of the changes introduced in the contract is lower than the amount of the so-called “EU thresholds”. The second is met when the amendment to the contract does not exceed 10% of the original remuneration of the contractor in the event that the contract is granted for construction work, and when the contract concerns deliveries or services – 15% of the original remuneration of the contractor.

While commenting upon the prerequisite for an amendment to the public procurement contract based on Art. 144 section 1 point 6 of the Public Procurement Law, we should note that the legislator disregarded in it something that we were very used to in an analysis of a possibility of amending a public procurement contract before the coming into force of the amendment to the Public Procurement Law, namely the substantive condition. Therefore, if the substantive condition is not present in the provision, then the basis for an amendment to the public procurement contract under Art. 144 section 1 point 6 of the Public Procurement Law may, in fact, be any amendment to the contract, provided that its financial consequences (its value) do not exceed the thresholds established in this regard.

 

 

An amendment to the contract in view of the principles of public funds expenditure

The lack of establishment of substantive conditions, and conditioning an amendment to the contract merely on its value has led to the situation in which both contractors and contracting parties approach the application of this provision in quite a “creative” way.

I am aware of a case of  contractor who unjustifiably applied to the contracting party for an increase of his remuneration because Art. 144 section 1 point 6 of the Public Procurement Law simply allows such behaviour. At the same time, the contractor, in exchange for the increased remuneration, did not plan to provide the contracting party with not only an equivalent service, but any service at all. Such cases (although bizarre) do not happen very rarely. In particular in the situation where the contracting party uses EU funds and is vitally interested in the completion of the subject matter of the contract within a time limit which will guarantee that it obtains this type of support. Then it is more willing to compromise with the contractor and Art. 144 section 1 point 6 of the Public Procurement Law becomes the legal basis for such compromise.

Of course, in the aforementioned situation, there are no grounds to amend the public procurement contract. Attention should be paid to the fact that the provision talks about a “value of the changes”, and therefore we should interpret it in such a way that a (possible) increase of the remuneration of the contractor must always be followed by the contractor’s service for the contracting party. It is only then that we can talk about an increase of the contractor’s remuneration.

At the same time, this may not be a virtual or non-equivalent service. We should remember that in addition to the provisions of the Public Procurement Law, contracting parties are bound by the provisions of the Act on Public Finance stipulating the rules of public funds expenditure. One of them, stipulated in Art. 44 section 3 point 1 letter a requires that public funds are expended “in a purposeful and economical manner, subject to the following rules: a) the achievement of the best possible effects of such expenditure”. By the way, an obligation to apply those rules is not predetermined by the fact that a given entity has a status of an entity from the public finance sector, but the fact that public funds are expended. This means that the rules of public funds expenditure apply even to those contracting parties which are from outside the public finance sector, if they expend public funds.

 

Summary

Therefore, if the contracting party agrees to an annex to the agreement, increasing the remuneration of the contractor, and this takes place on the basis of Art. 144 section 1 point 6 of the Public Procurement Law, he should not only make sure that the value of the change does not exceed the thresholds specified in that provision, but also that the value of the change of the remuneration of the contractor constitutes the equivalent to his service performed for the contracting party. Only then will such an amendment be consistent with the binding provisions.

 

The author of the article is Grzegorz Karwatowicz, a lawyer at GWW.

 

New fee for rainwater

Posted on by Marta Banasiak

On 1 January 2018, a new act – the Water Law – will come into force. This act, still at the stage of work on it, evoked numerous controversies, in particular with regard to the estimated growth of fees for water extraction from one’s own water intake points. Nevertheless, a change of the method of calculation and payment of fees for water extraction and waste water removal has become a fact. Is it really such a big change and what does it mean in practice for the owners of real estate?

 

 

The old is going away…

The current fee on rainwater removal depended on a number of factors. One of them was the purpose of the land, which translated directly to the value of the unit rate of the fee. Another was the size of the contaminated hard-surface space. This method of calculation of the fee will apply for the last time for 2017.

 

“Tax on the falling rain”

A new solution introduced by the Act of 2017 is the introduction of a fee for reduction of natural retention which will apply to real estate which does not have sewage systems. The new fee has already been christened a “tax on the falling rain”. That is because its purpose is to stimulate real estate owners to use rainwater by, for instance, construction of retention tanks.

The fee will be calculated on the real estate which is located in areas deprived of sewage systems, provided that two conditions are met. Firstly, the surface area of the real estate may not exceed 3500 m2. Secondly, it must be developed in such a way that more than 70% of its surface is excluded from biologically-active area. In this way, the areas deprived of sewage systems which were previously outside the scope of application of the act will now be subject to a fee for reduction of natural retention. The above will apply to all real estate meeting the aforementioned criteria. They will be both large-surface sites, such as supermarkets or warehouses, but also residential estates, office buildings and housing communes.

 

Will it be more expensive?

A fee for the reduction of natural retention should not constitute an important item in the balance sheet of the enterprise. However, the fact that the fee will be calculated and paid for the first time in 2018 means that its value should definitely be calculated as part of the general costs of business. That is because so far those areas were not covered by the duty of making such payments.

Maximum rates specified in the act (the regulation specifying unit rates of the fees is still awaiting publication) are characterized by quite a big spread. Their value mainly depends on the capacity of the water retention facilities. The rate of the fee for one square meter of the permanently-sealed surface connected with the soil amounts to PLN 1.00 per one year in the situation when there are no water retention facilities in the real estate. Meanwhile, in the event that the capacity of the retention facilities is higher than 30% of the annual drainage from the sealed surfaces, the rate is ten times lower and amounts to PLN 0.10 per 1 m2 per 1 year.

Therefore, for a site with hardened surface of 8000 m2, the value of the fee will be between PLN 800 – PLN 8000, depending on the presence and capacity of facilities for water retention from hardened surfaces.

 

To whom? And when?

The authority competent to determine the value and to collect the new fees will be a vogt, a mayor or a president of a city, depending on the location of the real estate which is subject of the fee. The owner of real estate will not have to determine the value of the fee on his own. It will be determined ex officio and notified to the entities obliged to pay it. The payment of the amount due should be made to the bank account of the relevant communal (municipal) office within 14 days of the date of delivery of the information.

 

Summary

A fee for the reduction of natural retention constitutes a new financial instrument introduced by the Water Law. It is aimed to constitute an incentive to owners of real estate of areas deprived of sewage systems to invest in rainwater retention solutions. Is it worth investing in them? Such an investment will definitely contribute to the reduction of the fee.  But in practice it may turn out that the return of the expenditure on such facilities will occur only after dozens of years.

 

 

The author of the article is Marta Banasiak, a trainee attorney-at-law at GWW.

 

Does the preliminary agreement entail an entitlement to dispose of the real estate for construction purposes?

Posted on by Lexplorers

Before the commencement of the construction, the investor must fulfil a number of duties. One of them is to submit a statement on holding a right to dispose of the real estate for construction purposes. This is also one of the conditions for obtainment of a permit for construction. But not only. Such an obligation also arises at the time of reporting an intention to perform construction work or submission of an application for approval of the construction design. Even though it is clear that the right to dispose of real estate for construction purposes derives from the ownership title, what happens in the situation in which we only have a preliminary agreement?

 

 

 

Who has a right to dispose of the real estate?

A catalogue of rights constituting a title to dispose of the real estate for construction purposes is specified in the act – the Construction Law. But it is not limited only to the ownership title. Such title is also constituted by the right of perpetual usufruct, the holding of a right to manage the real estate or the establishment of a limited property right to the benefit of the investor. Construction may also be conducted on the basis of an obligation relationship, such as lease or tenancy. However, it is necessary for such relationship to entail a right to perform construction work. All of the aforementioned conditions are characterized by their definitiveness. But how to approach preliminary agreements or promises which merely constitute “preparation” for the conclusion of the relevant promised agreement? Recently, this concern has been settled.

 

Preliminary agreement

The Supreme Administrative Court, in its judgement of 17 July 2017 (II OSK 2316/16), stated that each obligation relationship which, in its essence, covers a right to perform construction work, forms the basis for the disposal of the real estate. It is not justified to distinguish between a definite agreement and a preliminary agreement, because each of them constitutes and obligation relationship, and their evaluation is performed on the basis of the provisions of the civil law. Therefore, if a preliminary agreement or a promise is sufficiently detailed to include the right to perform construction work, then the investor may submit an application for a permit for construction.

 

Is this really so simple?

Such a solution may seem very beneficial for the investor. If, due to various reasons, the time of conclusion of the promised agreement is delayed whether due to negotiations of the term of the agreement or other circumstances concerning either party, then the investor may, without waiting for the conclusion of the agreement in its final shape, apply to the relevant authority for a permit for construction. This helps to accelerate the formal aspects of the proceedings. In consequence, if the application is complete and meets all the requirements, it is possible to commence the construction after 65 days from the submission of the application.  Such a deadline for consideration of the matter by the authority is stipulated in the Construction Law.

A possibility of applying for a permit for construction before the applicant becomes the owner of the real estate seems to be a good solution. However, there is a risk that during the period of performance of the construction work by the investor on the real estate, the owner does not proceed with the conclusion of the promised agreement. Then the problem may be the issue of mutual settlements and claims. In order to avoid such situation, it is recommended to enter into a preliminary agreement in the form of a notarial deed. Such a form of an agreement provides for the entry of the claims driving from the agreement in the land and mortgage register of the real estate, and therefore it constitutes a certain form of security of the interests of the investor. Moreover, a good solution seems to be the inclusion in the preliminary agreement of provisions concerning a contractual penalty.

 

Summary

The basing of the right to dispose of real estate for construction purposes on the preliminary agreement definitely constitutes a promising solution for the investor for whom time is of essence. However, in order to make sure that more is gained than lost, one should remember about the sufficient level of detail of the provisions of such agreement and its form. It is important not only to include the provisions concerning the rights of the investor to conduct the construction work on the real estate, but also the method of settlement of accounts in the event of possible withdrawal of the owner before the signature of the promised agreement. That is why it is in the interest of the investor to precisely prepare the agreement or order its preparation from professionals in this field.

 

 

The author of the article is Roksana Waltrowska, a lawyer at GWW.

Statute of limitations after 6, and not 10 years – changes in the Civil Code

Posted on by Urszula Darkowska

On 9 July of the current year, the amended provisions of the Civil Code, regulating the statute of limitations of claims, will come into force. Changes are significant, because they cover not only the reduction of the basic period of statute of limitations of claims, but they also change the method of application of the statute of limitations institution in matters of claims against consumers. Getting ahead of ourselves, we should point out at the beginning that the act constitutes a significant breakthrough in the principle known to every law student that the statute of limitations is taken into account by the court only at the request of the defendant.

 

 

A shorter period of statute of limitations

Firstly, we should point out to the shortening of the basic statute of limitations of property claims, from 10 to 6 years. This means that claims will become time-barred sooner, which, according to the intention of the authors of the act, is aimed at encouraging creditors to initiate court proceedings faster. The shortening of the period of the statute of limitations applies to the basic period of the statute of limitations of claims which applies when special provisions do not anticipate a different period of the statute of limitations. Moreover, the new, shortened period of the statute of limitations, i.e. 6 instead of 10 years, will apply also to claims covered by final and enforceable court judgement or a settlement agreement concluded before the court or approved by the court. At present, such claims become time-barred after the lapse of 10 years.

Meanwhile, no changes were made to the three-year period of the statute of limitations applicable to claims for periodical benefits and claims connected with the conduct of a business activity.

The legislator also did not decide to interfere with the periods of the statute of limitation regulated in special provisions, such as, for example, the two-year period of the statute of limitations of claims resulting from the contract for performance of work.

 

 

The period of the statute of limitations will lapse at the end of the calendar year

What is more, for the needs of the institution of the statute of limitations, the legislator changed the method of determination of the lapse of the statute of limitations. The new regulation stipulates that the statute of limitations will always lapse on the last day of the calendar year. This means that the claims will not become time-barred exactly after 2, 3 or 6 (instead of 10) years, counting from the date of maturity of the claim, but always at the end of the calendar year. Therefore, in order to specify when the claim becomes time-barred, the specific date of arising of the claim will not have any importance, the year will be sufficient. For example, a claim for the payment of the rent for December 2018, payable by 10 January 2019, will become time-barred as a periodical claim after 3 years, but not on 10 January, but only on 31 December 2022.

We may assume that the new solution is aimed at elimination of disputes concerning the date of arising of the claim. However, in practice the determination of a specific date when the debtor should satisfy the claim will still be required. If nothing else, this will be of relevance for the determination of the date since when the creditor has been entitled to interest on the principal amount of the claim.

In practice, in the majority of cases such solution will mean the extension of the period for the pursuit of claims in excess of the period of the statute of limitations specified in the act. For example, a claim for payment of the remuneration for the performance of the service (subject to a two-year period of the statute of limitations), covered by an invoice whose payment deadline lapsed on 3 January 2018, will become time-barred not on 3 January 2020, but on 31 December 2020. In the case of claims which are subject to the new, six-year period of the statute of limitations, the application of the discussed rule may, in some cases, lead in practice to the extension of the period of the statute of limitation to nearly 7 years.

The rule that the end of the period of the statute of limitations is to fall at the end of the calendar year will not apply to the periods of the statute of limitations shorter than two years. In such cases, the lapse of the period of the statute of limitations will still be determined as so far, i.e. as of the specific calendar day, with reference to the specific date of the arising of the claim, and not on the last day of the calendar year.

 

The court will not take into account time-barred claims against consumers

An important  novum is the exclusion of the possibility of pursuing claims due against the consumers after the lapse of the period of the statute of limitations. That is because in Art. 117 of the Civil Court, an additional provision is made which stipulates that “After the lapse of the period of the statute of limitations, one may not demand the satisfaction of a claim against a consumer.” In the justification of the draft act, it was stated that, according to the new regulations, the effect of the statute of limitations will occur by the force of the law itself. In this way, according to the new provisions, a possibility will be excluded of compulsory satisfaction of a time-barred claim.

In practice, this means that in matters against consumers, the court will examine ex officio whether a claim of the plaintiff is time-barred.  If it is time-barred, then the statement of claim covering such time-barred claim will be subject to dismissal. We should emphasize that the taking into account the statue of limitations of the claim will not depend on the submission of a relevant objection by the consumer. At present, the lapse of the period of the statute of limitations is acknowledged by the court only in response to the objection raised by the defendant, regardless of whether the defendant is an entrepreneur or consumer. The new solution will significantly strengthen the protection of consumers in court proceedings. In view of introduction of a provision which directly excludes a possibility of demanding the satisfaction of a claim against a consumer after the lapse of a period of the statute of limitations, suits covering time-barred claims will not have a chance of success, even if the consumer does not raise an objection based on the statute of limitations. And we can suspect that in practice even in the situation when the consumer does not undertake any defence.

However, at the same time, the new provisions stipulate that in exceptional cases the court may, upon consideration of the interests of both parties, override the lapse of the period of the statute of limitations of the claim against a consumer if this is justified by equity reasons. Exercising this right, the court should consider, in particular: (1) the length of the period of the statute of limitations, (2) the length of the period from the lapse of the statute of limitations to the time of pursuing the claim, (3) the character of the circumstances which lead to a waiver of pursuit of the claim by the rights-holder, including the influence of the obligated party on the rights-holder’s delay in pursuit of his claims.

Therefore, a decision on overriding the lapse of the statute of limitations will depend on the evaluation by the court of the circumstances of a given case. The court should follow the principles of equity in the taking of decisions on overriding the statute of limitations of claims. At the same time, overriding the statute of limitations of a claim against a consumer should be an exception and not a rule. Such situation may occur, for instance, when it is the defendant consumer who, by his action, causes a creditor’s delay in referring the matter to the court, and not much time passes from the lapse of the statute of limitations.

 

Application of the new rules to claims which are already pending

The legislator decided that the new provisions on the statute of limitations of claims will apply to claims which arise before the date of coming into force of the amendment to the act, which are not time-barred on that day. This means, inter alia, that the amendment to the Civil Code will affect the statute of limitations of claims which started to be time-barred even before the date of the amendment’s coming into force.

At the same time, the legislator introduced a principle according to which if, pursuant to the new provisions, the period of the statute of limitations is shorter than according to current provisions (i.e. 6 instead of 10 years), then the statute of limitations starts to take course on the date of coming into force of new provisions. Even though this means that the period of the statute of limitations is shortened, but it starts to take its course on the date of coming into force of new provisions.

Does this mean that the claim whose ten-year period of the statute of limitations is coming to an end, restarts to be time-barred for a period of another 6 years upon the coming into force of the new provisions? We will not have to deal with such a paradox. The interim provisions of the new act stipulate that if the period of the statute of limitations, started before the date of coming into force of new provisions, occurs subject to the currently-binding regulations concerning the statute of limitations, then the claim will become time-barred upon the lapse of such earlier period. For example, a claim which has been mature since 2008, and which is subject to ten-year period of the statute of limitations, will, upon the coming into force of the new provisions changing the ten-year to six-year period of the statute of limitations, become time-barred in 2018, and not in 2024.

What is more, the impact of the new act on the existing claims of consumers has been regulated separately. Namely, claims of consumers which arise before the date of coming into force of a new act and not time-barred on that date, are governed by the current provisions concerning statute of limitations. This means that claims of consumers which already exist on the date of entry into force of the amendment become time-barred at the same time as so far. The period of the statute of limitations of such claims will not, therefore, be reduced from 10 to 6 years. This is good news for, for instance, borrowers who have planned to lodge statements of claim, not long before the lapse of the ten-year period of the statute of limitations of the claims, against banks for return of overpayment in the repayment of the credit which arose as a result of, for instance, the application by the bank of forbidden clauses.

On the other hand, in matters where time-barred claims are pursued against consumers, with regard to which no objection based on the statute of limitations has been lodged until the date of coming into force of the amendment to the Civil Code, courts will obligatorily have to take the statute of limitations into account. Therefore, in particular, entrepreneurs who are currently in court disputes with consumers should take into account the new provisions on the statute of limitations because they may affect the result of the matters already pending against such consumers.

 

Summary

The new regulation of the statute of limitations will apply not only to claims arising after the date of its coming into force, but will also extend to obligations existing before which have not become time-barred yet. Therefore, both consumers and entrepreneurs may experience its consequences already this year. A change of the basic period of the statute of limitations from 10 to 6 years means mainly the reduction of time for the pursuit of claims in court, as well as the time for enforcement of the claims covered by the final and enforceable judgement or a settlement agreement concluded before the court. We may also assume that in connection with the exclusion concerning the principle of a possibility granted to courts to take into account time-barred claims of entrepreneurs against consumers, the number of statements of claims lodged by collection companies covering such time-barred claims will drop significantly.

 

 

The author of the article is Urszula Darkowska, attorney-at-law at GWW.

 

Limits of the number of foreigners in Polish sports unions

Posted on by Maciej Grzesiuk

Once, it was very popular in the Polish Ekstraklasa to hire Africans and Brazilians. An excellent example is Pogoń Szczecin whose basic team, in a match with Amika Wronki in 2006, had no fewer than 10 Brazilians. Leaving aside the issue of whether or not it is justified for foreigners to take part in national competitions, are there any limits set by the law regarding this type of procedure?

 

 

How is this regulated in the provisions of PZPS [Polish Volleyball Federation], PZPN [Polish Football Federation] and PZPR [Polish Handball Federation]?

The Rules of PlusLiga and Women’s Volleyball League are quite restrictive about the definition of a “foreigner” on the court. According to their provisions, a foreign player is considered to be not only a player with a foreign passport, but also a Polish player who has the citizenship of another country and participates in the competition on the basis of a certificate issued by FIVB at the consent of the relevant national federation associated in FIVB (other than PZPS). The regulatory provisions of PZPS are limited to the statement that none of the teams may have fewer than 3 Polish players. A Polish player is defined as a player who has only Polish citizenship.

A foreign player, as defined by the regulatory provisions of PZPN means a player who has the citizenship of the country from outside the European Union, the European Economic Area or the European Free Trade Association. In the football Ekstraklasa, in the season of 2017/2018 and the following seasons, there are no restrictions as to the number of foreigners entitled to play. However, in first title Ekstraklasa matches, a team may not have more than 2 foreign players.

The Polish Handball Federation does not treat as foreigners players from the European Union, from the states-signatories of the EU accession treaty, from the EEA member states and players who are holders of the Pole’s Card. Only players from outside those territories are treated as foreign players. According to the provisions of PZPR, in individual competitions, maximum 3 foreign players may play as members of a given team.

 

And what does ECJ say to that?

For the first time, the Court of Justice of the EU spoke about football players in the context of free movement of workers in its judgement in the matter of Walrave (C-36-74) dated 12 December 1974. In that judgement, the Court paid special attention to the economic aspect. The prohibition of discrimination on grounds of nationality applies in the situation when a player undertakes a business activity the main purpose of which is money earning. In the event that he plays in a national representation, the main factor is of a sports and not economic character. Therefore, according to ECJ, the above prohibition does not affect the composition of the national team.

In the famous case of Bosman (C-415/93), the Court, in its judgement of 15 December 1995, stated that the scope of free movement of workers also extends to professional players. Internal regulations in member states which limit whether the percentage or number of hired foreigners do not apply to citizens of other member states.[1] The Court decided that this provision also applies in the situation of hiring players by football clubs.

What is very important in the context of the discussed issue is the judgements of the Court in the matter of Nihat Kahveci (C- 152/08) and Simutenkov (C-265/03). In those matters, the Court relied on the rules concerning co-operation between Member States of the European Community with Turkey and Russian Federation. In consequence, it stated that a professional player with Russian citizenship (Simutenkov) and Turkish citizenship (Kahveci), who is legally hired by a club having a registered office in a member state, may not be subject to the provision concerning the limitation of the number of players from foreign countries which are not parties to the EEA treaty.

 

Summary

Limits concerning the hiring of foreigners by Polish sports clubs are not excessively restrictive, in particular in the event of citizens of member states of the European Union. This means that clubs may look for sports talents anywhere where they consider this to be appropriate. The question is whether this will not be to the detriment of the national team whose members may only be players with the Polish citizenship?

 

The author of the article is Maciej Grzesiuk, an attorney-at-law at GWW.

 

 

[1] L. Mitrus, Commentary to Art. 45, [in:] D. Miąsik (ed.), N. Półtorak (ed.), A. Wróbel (ed.), Treaty on Functioning of the European Union. Commentary. Volume I (Arts. 1-89) , LEX 2012

Judgement of ECJ regarding “the rule of law” in Poland – what’s next with the European Arrest Warrant?

Posted on by Joanna Waśko

Comments do not die away after yesterday’s (25 July 2018) precedent judgement of the Court of Justice of the European Union regarding a citizen of Poland – A. Celmer (C-218/16). Contrary to common opinions, the Court did not determine that the rule of law and independence of the judicial authority was violated in Poland. But it opened the door for Member States to carry out such assessment and refuse, on its basis, the execution of European Arrest Warrants (EAW) issued by Poland.

 

How does EAW work?

The European Arrest Warrant is an instrument of co-operation between EU Member States providing for faster (than extradition) mutual surrender of wanted citizens of such states. Its operation is based on a mechanism of mutual recognition of court judgements. EAW is issued by a judicial authority of the requesting state and submitted directly to judicial authorities of the member state in whose territory the wanted person resides. The judicial authorities of that state take a decision whether the EAW should be executed and whether the wanted person should be surrendered. The mandatory and optional grounds for refusal to execute EAW are specified in Council Framework Decision (2002/584/JHA).

Yesterday’s judgement is not the first judgement in the history of ECJ in which ECJ spoke about the influence which an infringement of basic rights of citizens in the state issuing an EAW has upon the justification of a refusal to execute the same [1].

 

 

What happened in Ireland?

A Polish citizen, A. Celmer, is wanted under three European Arrest Warrants issued by Polish authorities, in connection with illegal trade in intoxicants. He was detained and placed before a court in Ireland, which was supposed to decide whether or not the issued arrest warrants should be executed. A. Celmer stated that, in view with recent reform of the judicial system in Poland, he may face a risk of an unfair trial in Poland and this may constitute the grounds for refusal to execute the EAW.

 

 

Court’s concerns

In view with the raised concerns, the Irish court decided to apply to ECJ with a request for a preliminary ruling. ECJ was supposed to determine whether it is sufficient for a refusal to execute an EAW if the judicial authority responsible for deciding upon the surrender of the wanted person, in the situation where, as a result of the surrender, the rights of such person to a fair trial may be violated, determines that in the state to which such citizen is to be surrendered there are actually irregularities which pose a risk to a fair trial. The Irish court wondered if, in this situation, the court should additionally determine that, taking into account the circumstances of a given matter, such an unfair trial would affect a specific person in whose matter the EAW has been issued. The court also asked what information and guarantees may be required from the judicial authority issuing the arrest warrant in order to carry out an appropriate evaluation of the situation and avoid a possible risk of exposing the surrendered person to an unfair trial.

 

The concerns of the Irish court were evoked, among others, in the context of changes and reforms of the Polish judicial system, in reaction whereto the European Commission called the EU Council to determine an obvious risk of a serious breach by Poland of the rule of law.

 

Response of ECJ

The Court stated that the existence of a real risk that the person in respect of whom an EAW has been issued will suffer a breach of his fundamental right, including the right to a fair trial, is capable of permitting the executing judicial authority to refrain from giving effect to the European Arrest Warrant. At the same time, the Court emphasized that “(…) maintaining the independence of judicial authorities is essential in order to ensure the effective judicial protection of individuals, including in the context of the European Arrest Warrant mechanism”.

Therefore, in the event that the judicial authority executing an EAW, has any concerns whether the execution thereof might expose the surrendered person to a breach of his fundamental rights, including the right to a fair trial, due to deficiencies occurring in the judicial system of a given state, it should carry out a two-stage test.

Firstly, the court must assess, based on objective, reliable, exact and duly-documented information, whether a real risk arises in the state issuing the arrest warrant that the fundamental rights will be breached in connection with the occurring deficiencies, including the lack of independence of the courts of that state. ECJ stated that the information contained in the aforementioned proposal addressed by the EC to the EU Council “is particularly relevant for the purposes of that assessment”.

At this point, ECJ also explained what aspects determine the meeting of the requirement of independence and impartiality of courts. It emphasized that an important requirement in this aspect is the existence of rules, “(…) particularly as regards the composition of courts and the appointment, length of service and grounds for abstention, rejection and dismissal of their members.”

Secondly, if the judicial authority executing the EAW concludes that there is a real risk of a breach of the right to a fair trial, it should proceed with the next stage of the assessment. This time – whether in the particular circumstances of the case, there are substantial grounds for believing that, following his surrender, the requested person will run that risk. In the opinion of ECJ, that specific assessment is also necessary where, as in the present instance, the issuing Member State has been the subject of a reasoned proposal of the Commission seeking a determination by the Council that there is a risk of a breach by that Member State of the rule of law.

 

 

What is next with the EAWs issued by Polish courts?

The judgement of ECJ gives the grounds to Member States to refuse to give effect to EAWs issued by Polish courts. Of course the situation is not such that the court may automatically use these grounds to refuse execution. However, if the person who is a subject of the EAW refers to those grounds (and we may imagine that this will be an argument which will be often used), each court will have to carry out the aforementioned two-stage test. However, it seems dangerous that the Court suggested that the procedure initiated by EC in a matter concerning a breach to the rule of law as a result of the judicial reform in Poland may constitute the grounds for such assessment by the courts of other Member States. In other words, it “hinted” in this way that in the case of taking decisions about giving effect to Polish EAWs, a particularly detailed analysis of the situation should be carried out. It may turn out to be of key importance what the Irish court which submitted the request for the preliminary ruling to the ECJ will do.

The judgement of the Court may prove to be a dangerous precedence which will paralyse execution of European Arrest warrants issued by Poland abroad. Taking into account the fact that Poland particularly often reaches for that instrument (possibly too often – we are among the leaders of the EU states in this respect), it may turn out that prosecution of Polish citizens abroad will become much more difficult.

 

[1] ECJ judgement of 5 April 2016 in combined matters of C-404/15 PPU and C-659/15 PPU – Aranyosi and Caldararu

 

 

 

The author of the article is Joanna Waśko, an attorney-at-law at GWW.

Permits for transport of wastes will expire

Posted on by Marta Banasiak

In recent times, businesses received electrifying information that a register was established, as expected for more than 5 years, of entities marketing products, products in packaging and entities managing wastes. The establishment of the Register and the rules of being entered therein may, however, baffle quite a few entrepreneurs. In the worst case, a failure to follow the new rules may even entail the suspension of the operations of the enterprise for some time.

 

 

A duty of entry in the register

For those uninitiated in the matter, I explain that the duty of entry in the newly-established register will extend to entrepreneurs conducting a certain type of activity, let us call it the “environmental” activity. The group of the selected ones will include, among others, wastes transporting entities. And it is those entities which should exercise special caution in order not to fall in the trap set up for them by the provisions of law which may effectively suspend, at least for some time, the operation of their wastes transporting business. That is because one of the anticipated changes is ….. the expiry of permits for transport of wastes. But this will not happen straight away.

 

What about the already-issued permits?

Today we can say that an entity wishing to provide wastes transport services has been obliged “since always” to obtain a relevant permit. This was based on the Act on Wastes of 2001 and such solution (using, by the way, a very interesting legal structure) was transferred to the currently-binding law of 2012. But nothing lasts forever. Starting on 24 January 2018, i.e. the date on which the aforementioned Register was established, permits for transport of wastes will no longer be issued. They were replaced by a duty of an entity transporting wastes to have an entry in the Register. Confirmation of the fulfilment of this issue will be a unique registration number allocated individually to a given entrepreneur.

 

Interim period

A question arises what about the permits which were issued before the magical date of establishing the Register? The answer is certainly satisfactory for businesses, namely …. they remain valid. But – because, after all, there is always a certain “but” – they remain valid only for a certain, precisely specified period of time. The border date is 24 July 2018. After that date, all permits issued for transport of wastes will expire and an entrepreneur who wishes to continue an activity in this sector should have an entry in the Register. A delay in applying to the office with a relevant request may, in consequence, entail a situation where the business of transport of wastes is carried out without administrative decisions required by law.

 

Summary

During the present interim period, after waking up from the initial shock connected with the establishment of the Register, an entrepreneur providing wastes transport services should submit an application in the office for an entry or an update of an entry if such entry has already been obtained in other circumstances. This will protect him against inability to carry out wastes transport services according to the provisions of law, but most of all against high fines.  In such case, they will definitely not be lower than PLN 1000, and their top limit, at least theoretically, may even be a million PLN.

 

 

The author of the article is Marta Banasiak, a trainee attorney-at-law at GWW.