COVID-19 pandemic in light of the law on payment gridlocks

Poland
Available languages: PL

Regulations effective January 1, 2020.

On January 1, 2020, provisions of the Act of 19 July 2019 amending certain acts to reduce payment backlogs ("the Law") entered into force, granting, inter alia, the President of the Polish Competition Authority ("President of the UOKiK") the power to impose an administrative financial penalty on business entities with undue delays in accomplishing cash benefits. The amount of this penalty depends, among others, on the value of late payments and the delay period. This amendment was intended to increase the effectiveness of the fight against the so-called payment gridlocks.

Market situation in connection with the COVID-19 pandemic

Along with the COVID-19 pandemic, the topic of payment gridlocks and a possible intervention of the UOKiK in this regard raise interest in the market. The National Debt Register (“KRD”), which constantly monitors the condition of individual industries, points to a systematic increase in debt of business entities who, due to the pandemic, had to limit or even cease their operations. The survey carried out by IMAS International at request of the KRD shows that with the outbreak of a pandemic, the problems of business entities of the SME sector with timely settlement of payments have increased significantly and currently as many as 63% have such.

Statutory exclusions

Under the current legal framework there are no grounds to claim that the outbreak of the COVID-19 pandemic may result in exclusion of the Law. However, its provisions already provide for the circumstances under which the President of UOKiK waives the imposition of an administrative financial penalty (mandatory or optionally).

The President of the UOKiK settles for an admonishment if a party to the proceedings encounters problems in settling its own liabilities, which are equal to or less than the value of cash benefits not received or received past the deadline during the investigation period (and thus is a victim of the payment gridlock itself). For many business entities who would be able to demonstrate the above, given the current situation, there will be an opportunity to avoid an administrative financial penalty.

Furthermore, the President of the UOKiK renounces of imposing an administrative financial penalty if undue delay in accomplishing cash benefits occurred due to force majeure. Whether the President of UOKiK will classify the COVID-19 pandemic as a force majeure based on a specific case will be subject to the Office's individual evaluation. Not without significance is whether a business entity will be able to properly argue such a qualification of its situation.

The last, optional condition for waiving the imposition of an administrative financial penalty is a "justified case". The interpretation of this concept will remain at the discretion of the President of UOKIK. Thus far, there is no indication as to which facts will be considered "justified case" (so far, no Office practice in this respect has been established).

Future prospects in the face of the Anti-Crisis Shield

The Polish parliament recently adopted a new law aimed at providing support to business entities affected by the pandemic (the so-called Anti-Crisis Shield). While the work on this new solution was still ongoing, voices could be heard from the market (among others, from the Lewiatan Confederation, representing the interests of Polish businesses) that given the pandemic, the application of regulations on payment gridlocks should be suspended. However, the regulations adopted so far have not included any provisions modifying or amending the power of the President of UOKiK under the Law.

Since the current situation is developing very dynamically, the issue of payment gridlocks requires ongoing monitoring. It is not excluded that business entities’ demands will be taken into account to some extent.