NEWSLETTER - June 2012

Dear Sirs,

we introduce you to the June edition of our newsletter where you will find a number of interesting information’s about the project changes in regulation of the banking Enforceable (BTE), presented by the Ministry of Economy. In the current edition of the continuing series of articles, which introduce you to the changes in the Code of Civil Procedure (CCP). In this issue we discuss one of the main points of these changes, which is the liquidation of proceedings in commercial cases. We provide you with the information on the proposed amendment to the Act on payment deadlines in commercial transactions. As usual, we have prepared a number of judgments - this month we will discuss the judgment of the Court of Appeal in Wroclaw regarding contractual penatlies and the judgment of the Supreme Administrative Court, regarding the way in which the tax authorities should treat loans for paying dividends to joint stock companies shareholders.

We hope you enjoy this issue.

Your Weremczuk Bobel & Partners law team.


Draft amendment to the bank enforcement order

The Ministry of Economy submitted a draft amendment to the regulation on bank enforcement order (BEO).

The bank enforcement order is an institution which aims at protecting bank’s claims against its debtors. Its essence is that if a bank customer – at the moment of concluding a contract – makes an appropriate statement on submission to enforcement, the bank may issue BEO, if the customer does not fulfill the obligation. It means that the bank can seek to satisfy its claims without a court proceeding. The role of the court is limited to a declaration of enforceability whereas the bank enforcement order appended to a declaration of enforceability is the basis for levy of execution by the bailiff.

BEO was criticized many times. It was argued, inter alia, that is it an institution of authoritarian nature because in practice the bank can always force its client to submit a declaration of submission to enforcement.

The project of the Ministry of Economy aims at limiting the use of BEO. So far using BEO could secure all bank activities (resolution SN III 14/99). According to the proposed amendment, BEO can only be use to secure such activities as lending, cash loans, granting and confirming bank guarantees and sureties, and opening and confirming letters of credit. Moreover, the bank will be required to provide the client with specific information about BEO.
Furthermore, according to the proposed project, courts appending the enforceability clause to BTE will not only examine whether the BEO protects bank activities and the debtor has made an effective declaration of submission to execution, but also they will be required to check if the bank has fulfilled its obligation to provide the customer with the necessary information on BEO.

In conclusion, it should be noted that this is only a draft amendment. It is the Parliament that will decide on the final shape of this regulation, however, it is possible that it will be accepted in a similar form to the one described above.

Jerzy Kozerski, lawyer


A complete lack of damage does not exempt from payment of liquidated damages

The Court of Appeal in Wroc³aw in the judgment of 15 March 2012 decided that a complete lack of damage justifies only a reduction of liquidated damages.

Liquidated damages is an institution that fulfills various functions. In addition to compensatory function, one of the main tasks of liquidated damages is to discipline parties of a contract, who more likely to fulfill their obligations if threatened with a fine. This role of liquidated damages suggests that the lack of damage does not relieve the debtor from the obligation to pay.

The Court of Appeal stated that in this particular case there are preconditions for reduce penalty. This institution (reduction) involves a situation in which the court has the right to decrease a penalty if the following conditions occur – a commitment was made in large extent or penalty is grossly excessive. In this case, the Court of Appeal observed the latter. This means that the two conditions do not have to be fulfilled collectively – it is enough when one of them occurs.

The consideration of the Court of Appeal on the relation between the liquidated damages and the wrongful act of the debtor is also worth mentioning. As a rule the debtor shall be liable for liquidated damages if a breach of contract (in this case – premature termination) occurs for reasons for which he is responsible (it is usually based on the principle of guilt). The court held that despite the literal wording of the agreement between the parties, the debtor is liable for a breach of contract even if he is not guilty, which is permissible under article 471 § 1 of the Civil Code. This means that under the agreement the parties can significantly extend the debtor’s liability on account of liquidated damages.

Judgment of the Court of Appeal in Wroclaw of 15 March 2012 I ACa 101/12

Jerzy Kozerski, lawyer


The loan for the payment may be deducted

Supreme Administrative Court in sentence from 3 April 2012 decided that raising the loan by the company to pay dividends to shareholders may be threat as expense associate with conducting business.
In support of this thesis Supreme Administrative Court cited a number of arguments. Particular, court said, it is irrational for company – from economic point of view – to stop investing only to provide founds for future payment of dividends to shareholders. It’s worth to add that until resolution on distribution of profits, profits are property of company and that’s why company may easy dispose of funding being consent of profits.

The above decision of Supreme Administrative Court is fully justified, it is also favorable for tax payer. It should also be noted that taking loan by creditor for payment of dividends should be classified as expense associate with conducting business because main aim of each company is to profit.

Noteworthy is the fact that existing judicial decision is not fully consistent. In particular NSA in its resolution of 12 December 2011 (file no FSP 2/11) presented an opinion opposite to the presented in this ruling. We all should have hope, that the courts clarify their opinion and develop a consistent line of judicial decision, which will be consistent with the principle that in case of doubt court should decide in favor of the taxpayer.

Supreme Administrative Court in Warsaw on April 2012 II FSK 249/12

Jerzy Kozerski, lawyer


Jurisdiction of economic court

Despite the elimination of a separate proceeding in commercial cases, disputes between entrepreneurs will still be adjudicated by economic courts.

Last month we wrote about a major change in the Code of Civil Procedure (CPC), which includes the liquidation of a separate proceeding in commercial cases. We also mentioned that commercial matters will still be recognized by specialized courts. However, we should analyze what kind of matters will be considered as commercial cases and what consequences it will have.

Regardless of the repletion of the provision of the Code of Civil Procedure regarding the proceedings in commercial cases, the Act on recognition by the courts of commercial matters still remains in force and it defines commercial issues. In accordance with appropriate provisions, a commercial matter is a matter which fulfills all three conditions: applies to civil law relations, takes place between companies and concerns their business. The Act also provides an additional overview of matters considered as commercial, which includes matters regarding corporate relations, civil liability of members of company governing bodies, on bankruptcy law, etc.
However, it should be noted that the distinction between ordinary civil and commercial cases is a formal one and it does not affect procedural matters as economic courts proceed the cases in accordance with the provision on a general proceeding. Moreover, considering a commercial case by ordinary civil court will not result in the invalidity of a proceeding.

Although the distinction between common and commercial issues is still valid, it only affects the organization of the court. This seemingly insignificant consequence will have a positive impact on the practice because commercial matters will be handled by experienced and specialized judges, which should result in faster recognition of cases.

Act of 24 May 1989 on the recognition by the Courts of Commercial matters

Jerzy Kozerski, lawyer

Draft amendment to the Act on payment dates in commercial transactions

Due to the necessity to implement the Directive 2011/7/UE, the Minister of Economy has presented the main points of the draft amendment to the Act on payment dates in commercial transaction.

Under current law, regulated by the Act of 13 June 2003, there is a general rule that a creditor is entitled to statutory interest on the 31st day after the fulfillment of his service until the date of payment or maturity of a claim. This regulation aims at preventing payment gridlocks, which currently pose a significant problem for many entrepreneurs.

The draft legislation guidelines include some important changes. One of the most significant is that the creditor will not be entitled to charge interest if the debtor demonstrates that it is not at fault for the delay in payment. This constitutes a serious limitation of liability of the debtors compared to the regulation contained in Civil Code, according to which the creditor may demand interest for a delay, even if the delay is caused by circumstances for which debtor is not liable.

Another potential change is a possibility for the creditor to choose to claim interest under the general rules described in Civil Code or the new kind of “statutory interest for late payment in the amount of the reference rate, at least eight percentage points”. At present, it is difficult to determine which solutions will be more profitable for the creditor, because it depends on the amount of interest. However, the idea that the creditor has choice should be regarded as a positive sign.
These changes will definitely be implemented as they are required by the EU.

The guidelines of the draft legislation amending the Act on payment dates in commercial transactions.

This Newsletter is for general informational purposes only. It is not intended and shall not be treated as professional advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

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