UIA SEMINAR Budapest – Hungary March 26-27, 2010 Date of the session: 27 March 2010 FOREIGN DIRECT INVESTMENTS „FDI REGULATIONS, RESTRICTIONS TO FDI IN CERTAIN SECTORS AND PRIVATISATION - THE POLISH EXPERIENCE” Robert Malecki Karniol Małecki & Partners Law Office, Świętojerska, St. 5/7, Warsaw phone: , fax: © UIA 2009

BASIC INFORMATION ABOUT POLAND Total Area of Poland km 2 – 9th place in Europe Capital CityWarsaw Population Number of Students GDP (PPP) billion of USD – 21 st place in The World Rank, 9th in Europe GDP growth rate 20091,7% Inflation Rate 20093,5% Currency Exchange Rate Złoty (PLN, zł) 1EUR = 4,1PLN 1USD = 2,9PLN Average Monthly Pay903 EUR Unemployment Rate10,8% The Most Recent Data 2

Polish Membership in International Organisations United Nations (UN) Organisation for Security and Co-operation in Europe (OSCE) The International Monetary Found (IMF) 1986 – (rejoined) The World Bank Council of Europe The World Trade Organisation (WTO) The organisation for Economic Cooperation and Development (OECD) The North Atlantic Treaty Organisation (NATO) European Union (EU) 3

Poland became a member of the European Union on 1 May On 21 December 2007 Poland joined the Schengen Area. Poland in European Union The next stage of integration will be joining the Monetary Union and the adoption of the Euro as the official currency of Poland. ≈2013 4

Inflow of FDI to Poland 2000 – 2009 (BN EUR) Source: PAIZ*Data from 2009 are approximate. 5

Project Trends Analysis Average No of Projects: 268 Source: FDI Intelligence from Financial Times Ltd. 6

 Constitution of The Republic of Poland of 2 nd April 1997 art. 20. A social market economy, based on the freedom of economic activity, private ownership, and solidarity, dialogue and cooperation between social partners, shall be the basis of the economic system of the Republic of Poland.  The Act on Freedom of Business Activity of 2 nd July 2004 art The assumption, conduct and termination of economic activity shall be free to all on an equal-rights basis, subject to conditions determined in provisions of law.  The Commercial Companies Code of 15 th September 2000  The Act on the National Court Register of 20 th August 1997  The Act on Commercialisation and Privatisation of 30 th August 1996 The basic Acts regulating business activity in Poland 7

Business Entities in Poland 8 BUSINESS ENTITIES IN POLAND BUSINESS ENTITIES IN POLAND SOLE TRADER SOLE TRADER PARTNERSHIPS COMPANIES COOPERATIVES FOUNDATIONS OTHERS COOPERATIVES FOUNDATIONS OTHERS LIMITED LIABILITY COMPANY LIMITED LIABILITY COMPANY GENERAL PROFESSIONAL LIMITED PARTNERSHIP LIMITED PARTNERSHIP LIMITED JOINT-STOCK PARTNERSHIP LIMITED JOINT-STOCK PARTNERSHIP JOINT -STOCK COMPANY JOINT -STOCK COMPANY REPRESENTATIVE OFFICE REPRESENTATIVE OFFICE EUROPEAN COMPANY (SE) EUROPEAN COMPANY (SE) B.E. ORGANISA- TIONAL UNITS B.E. ORGANISA- TIONAL UNITS BRANCH OFFICE BRANCH OFFICE STATE-OWNED ENTERPRISE STATE-OWNED ENTERPRISE

Conduct of Business Activity in Poland by Foreign Business Entities Foreign entities which may start up and carry on their business activities in Poland under the same rules and conditions as for Polish individuals or companies:  Citizens of the member states of EU and EFTA  Legal persons having their registered offices in EU or EFTA  Organizational units without legal personality but having legal capacity of EU or EFTA  Citizens of other countries than described above who meet certain requirements defined in Act on Freedom of Business Activity (e.g. permission for settlement, refugee status, etc.) Other foreign entities may start up or carry on their business activities in Poland in form of:  Limited Partnership  Limited Joint-Stock Partnership  Limited Liability Company  Joint-Stock Company Also they may join said partnerships or companies and take up or acquire shares in them. unless any international agreement provides otherwise 9

Limitations on The Freedom of Business Activity: Concessions Concession:  an individual administrative act under which a competent body (usually a minister) permits the commencement and performance of a business activity in a particular field.  it is granted for a period of time between 5 and 50 years. Business activities which require concessions (seven activities):  The exploration for and identification of mineral resources, their extraction, the container-free storage of substances and the storing of mining production waste, including in underground mines;  The production, transformation, storage, transmission, distribution and marketing of fuels and energy;  The broadcasting of radio and television programmes;  Air transport;  The provisions of protection and security services for individuals and property;  The production and marketing of explosives, weapons and ammunition as well as products and technologies meant for the army and/or the police;  Carrying casinos; 10

Limitations on The Freedom of Business Activity: Licenses & Permits Permits and Licenses:  An administrative decisions which shall be issued if an applicant fulfils all requirements provided by law.  They are required for more then 29 areas of business activity. The most important business activities which require such Licenses or Permits:  The operation of banks, insurance companies, brokerage agencies, investment funds or pension funds.  Railways stations  National and international road transport (including goods and passengers)  Conduction of business in special economic zones  Forwarding agency  Wholesale trade and manufacturing of alcoholic beverages  Tourism agencies  Lotteries and gambling  Private investigation and detective services 11

Limitations on The Freedom of Business Activity: Regulated Activities Regulated activity – an economic activity the pursuit of which requires the satisfaction of special conditions laid down in provisions of law and entry into the register of regulated activities. Some of the business activities which require entry into the register of regulated activities:  Production or spillage of spirits  Manufacturing of tobacco products  Organizing horse races  Currency exchange involving the buying and selling foreign exchange and intermediation in this area  Storage of personal and payroll records of employers  Driver training center  Conducting psychological laboratory Polish law provides 29 types of regulated business activities. 12

Acquisition of Real Estate by Foreigners The Act of 24 th March 1920 on Purchase of Real Estate by Foreigners As a general rule acquisition of real estate or shares in the company owning real estate in Poland requires obtaining a permit of Minister of Internal Affairs and is subject to the Minister of National Defence having no objections thereto. Such authorization applies to: (1)natural persons not having Polish nationality (2)legal persons not having their registered offices in Poland (3)partnerships of persons indicated in point (1) and (2) having their registered offices outside Poland and established under the laws of a foreign country  legal persons and commercial partnerships with their registered offices in Poland, controlled directly or indirectly by foreigners described in points (1), (2) and (3) However foreigners being citizens or business entities of the European Economic Area member countries or Swiss Confederation do not need an authorization for acquiring real estate in Poland except agricultural land dedicated for agricultural use during transitory term. 13

The public sector in Poland represents more than 20% of the economy. There are important sectors in which the State Treasure still dominates, such as: power (85%) transport (65%) mining (52%) chemicals (30%) In April 2008 the Government adopted „Privatisation Plan for the Years ” which provides privatisation of over 800 state-owned business units. About Privatisation 14

Privatisation Definition of privatisation: Direct privatisation:  taking up shares in increased initial capital of sole shareholder companies of the State Treasury, established as a result of commercialisation, by subjects other than the State Treasury or other state legal persons (...);  transferring shares held by the State of Treasury in companies; Indirect privatisation: A disposal of all tangible and intangible assets of a State enterprise or a company established as a result of commercialisation in the form of:  a sale of enterprise;  contributing an enterprise to the company;  giving an enterprise to be used for consideration. 15

Privatisation procedures 1. PUBLICLY ANNOUNCED OFFER 2. PUBLIC TENDER 3. NEGOTIATIONS ON THE BASIS OF PUBLIC INVITATION 4. ACCEPTANCE OF AN OFFER IN RESPONSE TO A CALL 5. PUBLICLY ANNOUNCED AUCTION 6. SALE OF SHARES ON THE REGULATED MARKET The shares owned by the State Treasury may be transferred in the following manner: * Privatisation procedures are provided by the Commercialisation and Privatisation Act of 30 August 1996 (Journal of Laws of 2002, No. 171, item 1397, as amended, hereinafter referred to as the “Act”). Particular procedures are selected by the Minister of Treasury, taking into consideration the degree of complexity of the envisaged transaction, as well as the size and financial standing of the entity. 16

Poland is an Attractive Place to Invest In the EU financial framework Poland may benefit from a substantial financial support. Highly-qualified workers and well- educated specialists. In 2012 Poland and Ukraine are organising The European Football Championships. Convenient location A 38 million consumer market. Strong economy Freedom of business activity Constant econokmic growth 17

Robert Małecki Karniol Małecki & Partners Law Office Thank You for your attention 18