The Polish FDI regime, introduced in 2020, establishes a foreign investment screening mechanism governed by the Polish Competition Authority (UOKiK). It supplements the 2015 investment control regime, which is governed by the relevant ministries, involves a limited—but constantly increasing—number of strategic entities and is applicable regardless of an investor's "nationality.".

Summary of major changes in 2023

• The FDI regime is still in development in Poland, and there are limited precedential decisions available. The UOKiK has issued seven clearance decisions since 2020. Only one transaction was subject to a more detailed review in control proceedings, and the UOKiK has not objected to any of the transactions reviewed under the FDI regime. Most of the filings were rejected as falling outside of the FDI rules
• Recently, the practice has been to submit (in unclear cases) a simplified letter informing the UOKiK about a given deal to receive confirmation that the filing is not required. This is a response to ambiguous FDI rules and the authority's lack of a formal pre-notification or consultation procedure, which often makes an FDI assessment particularly burdensome and uncertain
• The UOKiK has so far focused on the oil & gas industry, payment, transportation and food sectors, but transactions concerning a very broad group of sectors/industries could also be scrutinized
• An investor's nationality is not of key importance. Approved investors have come from China, Egypt, Saudi Arabia, Singapore and Ukraine

Who files?

All non-EEA and non-OECD nationals (natural persons who do not have EEA or OECD citizenship) or non-EEA and non-OECD entities (entities without a registered office in the EEA or OECD at least for the past two years) are obliged to file for clearance when entering into any of the covered transactions, except for indirect acquisitions, where the acquired entity holding dominance or a qualified holding in the covered entity has a duty to make a post-closing filing.

The FDI rules include specific provisions against circumventing the EEA/OECD-domicile rule, in particular: covering subsidiary entities, branches or representative offices of a non-EEA/non-OECD national or non-EEA/non-OECD entity that are also regarded as non-EEA/non-OECD entities; and even if an acquisition is pursued by an EEA/OECD citizen or an entity having its registered office within the EEA/OECD, the buyer may still be regarded as "foreign" if there is an allegation of circumvention of the law, such as where the buyer does not carry out any business activity other than holding shares or controlling other entities, or does not run a sustainable enterprise or employ staff within the EEA/OECD.

Types of deals reviewed

There are three types of deals involving covered entities that require clearance.

The first is direct or indirect acquisition of control over the covered entity, including: holding more than 50 percent of votes at the general/shareholders' meeting or 50 percent or more of the capital; having the right to appoint and/or dismiss the majority of the members of the management board or the supervisory body of the covered entity; and having any other right to decide on directions of the covered entity's business, including under an agreement with the covered entity.

Secondly, direct or indirect acquisition of a qualifying holding in the covered entity, representing 20 per- cent or more of the votes at the general/shareholders' meeting; share capital; and/or share in distributed profits, requires clearance. This includes the acquisition of any holding that would bring the buyer above 40 percent of votes, share capital or share in distributed profits.

Finally, the purchase or lease of the enterprise (or an organized part thereof) of the covered entity through an asset deal also requires clearance.

The clearance obligation will also be triggered if any of the above results from: redemption of shares of a covered entity; a covered entity's purchase of its own shares; or the merger or spin-off of a covered entity.

Scope of the review

The UOKiK may issue an objection if the transaction poses at least a potential threat to public order, public security or public health in Poland, or when the transaction might have a negative impact on projects or programs of interest to the EU. Therefore, political considerations might become the basis for potential objection decisions issued by the UOKiK.

A transaction made without the required notification or in spite of an objection by the UOKiK is null and void.

In the case of an indirect acquisition through transactions not governed by Polish law—such as a merger of non-Polish entities resulting in a change of control over a covered entity—even though such transactions will not be unwound, the acquirer will not be allowed to exercise its corporate rights in the covered Polish company.

Additionally, a breach of the clearance obligation would constitute a criminal offense punishable by a fine of up to PLN 50 million (US$12.4 million) and/or imprisonment for up to five years.

Finally, in case of an indirect acquisition, a person required by law or by an agreement to manage the affairs of a subsidiary that has not submitted the required notification will also be subject to a fine of up to PLN 5 million and/or imprisonment for up to five years if such person was aware of the acquisition being made.

Review process timeline

The FDI review procedure before the UOKiK takes up to 30 business days, but it can be extended for a further 120 calendar days if the UOKiK decides to initiate control proceedings. Deadlines are suspended when the UOKiK is waiting for requested information and documents.

How foreign investors can protect themselves

Merging parties need to take the FDI rules into account each time they contemplate a transaction with a Polish element, for example when a Polish company is a direct target of the deal or belongs to the target's group.

Most transactions require an assessment of whether an FDI filing is required in Poland. It is often a complex process requiring obtaining data from the parties to the transaction, including detailed information on the capital group structures, the ultimate beneficial owner's domicile, and the transaction structure and scope of the businesses of Polish targets.

Moreover, because the FDI rules can be interpreted in many ways and consultation with the UOKiK is sometimes necessary, the FDI analysis should be contemplated and started early on in the transaction process. If FDI filing is required, it might take several weeks to collect the required data and prepare the filing.

As in other jurisdictions, it is therefore critical for foreign investors to consider Polish FDI issues in planning and negotiating transactions. In particular, an investor should ensure that it introduces a condition precedent related to obtaining FDI clearance in Poland, where appropriate, prior to closing. It may also be appropriate for merging parties to allocate the potential risks related to FDI proceedings.

In most cases, obtaining quick clearance would require ensuring that an FDI notification is drafted in a clear and informative manner and supplemented with convincing evidence proving that the completion of the transaction would not lead to any concerns. This requires not only an in-depth knowledge of the transaction dynamics, but also efficient cooperation between different teams of advisers and smooth communication with the client.

Following submission of an FDI filing, it is crucial to be proactively involved in the proceedings, establish a good working relationship with the UOKiK and promptly reply to all its questions.

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