Poland’s competition office publishes updated guidelines on foreign investment (FDI)

In May 2024, Poland’s Office of Competition and Consumer Protection (UOKiK) published updated procedural guidelines on foreign direct investment control (FDI), which clarify a number of issues arising in practice in relation to the notification of foreign investment. 

According to the President of UOKiK, the modifications streamline the procedures and clarify the obligations of business entities, and were issued in response to the numerous needs reported to the UOKiK both by business entities and the lawyers representing them. The scope of the guidelines has been expanded to include additional procedural and practical issues, resolving some of the practical interpretative problems that have arisen.

Background

In July 2020, an amendment to the Act on the Control of Certain Investments entered into force, and provided the UOKiK with expanded powers to control investments in addition to the existing merger control system. The purpose of these amendments was to safeguard Polish companies of strategic importance against takeovers by entities from outside the EU, the European Economic Area (EEA) and the Organisation for Economic Cooperation and Development (OECD). The UOKiK’s regulations on foreign investment control are currently valid until 24 July 2025, but the applicability of the regulations may be extended.

The UOKiK’s investment control activities have resulted in 15 formal proceedings to date in addition to a greater number of notifications.

Who is obliged to legalise foreign official documents?

In practice, the onus is on foreign investors to report transactions and the notification must include a number of documents. In the past, however, there have been doubts on the form in which foreign documents should be submitted to the UOKiK.

As per the updated guidelines, foreign official documents attached to notifications should be legalised before certified translations are prepared. If the country where the documents originate is a party to the Hague Convention, the documents should bear an apostille clause. If, however, the documents originate from countries with which Poland has signed international treaties abolishing the legalisation requirement, an apostille clause is not required.

The hitherto practice of many business entities has often been to submit documents without the required apostille clause. Efforts to legalise the submitted documents were often made during the course of the proceedings at the UOKiK’s request. Such conduct has resulted in proceedings extended in some cases by months even if the UOKiK did not have reservations about the investment.

EU FDI form

The UOKiK noted that many parties are still unaware of the obligation imposed on competition authorities to send to the European Commission an additional FDI Form to the European Commission, informing it of a given foreign direct investment. This lack of awareness raises doubts and may result in negative consequences for business entities investing in Poland.

The updated guidelines clearly indicate that investors submitting an investment notification to the UOKiK should also promptly complete an FDI Form (Part B) to avoid any delays in the proceedings. (According to the guidelines, the FDI Form should be completed in English).

Other practical changes

The new guidelines also contain other practical changes:

• Types of protected entities: when assessing whether a Polish business entity is engaged in a protected activity and whether an investment it is participating in may be subject to notification, the UOKiK will take into account the classification included in the Polish Classification of Activities (PKD). In doing so, the activity actually being performed is assessed regardless of whether it is a main or auxiliary activity.
• Earned revenue prerequisite: when calculating the revenue (in order to verify whether the notification threshold has been met), it is also necessary consider the revenue earned by the protected entity through a transaction with a company positioned higher in the same capital group, if it has not participated in the given transaction.
• Intra-group revenue: the UOKiK confirmed that intra-group revenue is assessed in the same way as merger control processes. This means that the total revenue of a protected entity does not include revenue earned between companies belonging to the same group that are subsidiaries of the protected entity.
• Transactions carried out through special purpose vehicles from outside the EU, EEA or OECD: as noted by the UOKiK, the registered office or nationality of the entity controlling the capital group that the special purpose vehicle involved in the transaction belongs to should be taken into account when analysing the need to notify the transaction, instead of the registered office of the special purpose vehicle. If the entity controlling the special purpose vehicle is a national of, or has its registered office in an EU, EEA or OECD country, the transaction does not qualify as an investment by an entity having its registered office outside the EU, EEA or OECD. In such a case, the transaction does not need to be reported to the UOKiK.
• Choice of control authority for concurrence of notification obligations: the provisions of the Act currently provide for two different investment control regimes: (i) before the UOKiK, and (ii) before other authorities. In the past, this resulted in confusion regarding which authority a notification should be submitted to in the event of a concurrence of obligations. According to the UOKiK, based on the provisions of the Act, an investor should first check whether the general provisions will apply to its investment project (i.e. those provisions imposing an obligation to notify other authorities, such as the Minister of Defence). If the general provisions do not apply, the investor should file a notification with the UOKiK if the thresholds and conditions are met.
• Types of decisions made by the UOKiK in the course of control proceedings: the Act does not specify what must be done in a situation where the prerequisites for issuing an objection after the inspection proceedings are not met. In such a case, the UOKiK will resolve the case by issuing a formal decision discontinuing the control proceedings, which  is good news from the point of view of ensures legal certainty for an investor.

Summary

As the failure to notify transactions to the UOKiK under the Act gives rise to significant risks (including potential criminal liability), it is extremely important to check carefully whether a particular investment project is subject to notification and, if so, to report it correctly.

It is significant that, as the UOKiK specifies, the authority in practice often refuses to initiate proceedings on the grounds that a given transaction is not subject to notification. The most common reason is that the ultimate beneficiary of the foreign investment has its registered office or nationality in an EU, EEA or OECD member state. In practice, investors submit notifications to the UOKiK also in doubtful situations (i.e. when there may be arguments for non-notification) to avoid the risk of failing to comply with the notification obligation.

The updated guidelines are a tool that can be useful for an individual assessment of the notification obligation.

For more information on these guidelines and foreign direct investment regulations in Poland, contact your CMS client partner or these CMS experts.