The New Year has brought a new round of finger pointing between Russia and Ukraine over who is responsible for the current interruption in gas supplies to the EU. Russia accuses Ukraine of not paying for gas delivered earlier, and more recently for siphoning off gas intended for delivery further west. Ukraine in turn claims that it has paid for all gas as agreed, and more over that the Russian side is in effect using gas as a political weapon.

Caught in the middle is the EU. Poland, at least in the current situation, has been able to avoid shortages of gas by relying on an alternative gas pipeline that runs through Belarus as opposed to Ukraine. Our neighbors to the south are not so fortunate. Member states such as Bulgaria and Romania rely on Russian gas imports through Ukraine for the majority of their heating needs.

The recent interruption in gas supplies hightlights the need for the EU to come up with a comprehensive energy policy, one that to date remains elusive. The Lisbon Treaty envisages the adoption of a common approach to energy development and conservation, as well as energy security, across the EU. But as recent events have illustrated such policy is only in theory. EU member states continue to pursue their own national agendas regarding energy, as evidenced by Germany's agreement with Russia to construct a gas pipeline under the Baltic Sea, which in effect would bypass Poland altogether. France, on the other hand, long ago embraced the use of nuclear energy to produce electricity. To date, France produces 70 percent of its electricity from nuclear power plants, while Poland has so far completely shunned the use of nuclear power.

All of this simply goes to show that contrary to what EU leaders may like to claim, the EU in effect has no comprehensive energy policy, at least not one that is free of outside influence. To a very large extent, EU energy policy is being set by our neigbors to the east. Not in Brussels.

-- Paul B. Fogo

The current government took office at the end of 2007 promising to make legal reform a top priority. And true to its word, the new government formed a new commission in the Sejm, referred to as the Friendly State Commission (“Commission”), to recommend amendments to current regulations in order to improve ’s business environment. Led by Sejm Deputy Janusz Palikot, the Commission has since proposed nearly 90 legislative amendments; however, less than 10 percent have actually been voted on by the Sejm. Nearly 80 out of the 90 proposed bills have never been voted on by the full Sejm. Why?

Creditors have been eagerly waiting adoption of one of the Commission’s key proposals that would permit multiple creditors to participate in one mortgage as security for a debtor’s financial obligations. Under current regulations each creditor must establish an individual mortgage against a debtor’s real property to secure repayment. But as of today, this proposal has been stuck in committee for further review.

A second set of amendments awaiting action by the Sejm would, if adopted, reduce the capital requirements to create both a limited liability company and joint-stock company from the current thresholds of PLN 50,000 and PLN 500,000, respectively, to PLN 5,000 and PLN 100,000.

Moreover, employers are still waiting for the Sejm to take action on another of the Commission’s proposals that would make the hiring of temporary workers much more flexible. Under current regulations, an employee hired on a temporary basis over a three month term may be deemed to be a ful- time employee entitled to full benefits and protections provided by the Labour Code. The Sejm has yet to take any action on this bill.

The Sejm needs to act upon the remaining 90 percent of the draft amendments proposed by the Commission. A passage rate of less than 10 percent, at least according to my understanding, would equal an “F” on a test exam. What are you guys waiting for?

-- Paul B. Fogo 

The Polish government, led by Prime Minister Donald Tusk, has announced its intention to adopt the Euro in Poland by 2012. That was, at least, until the opposition conditioned its approval on submitting the entire issue to the public in the form of a national referendum. It seems that in order for Poland to actually adopt the Euro, as it committed itself to do when signing the Treaty of Accession, it must first (some would argue this point) amend the Constitution. Specifically Article 227, which entrusts the National Bank of Poland with exclusive power to issue currency and determine monetary policy. By adopting the Euro, Poland would in fact be delegating primary responsibility for monetary policy to the European Central Bank.

Amendment of the Consitution may be accomplished by the government by majority vote. Alternatively, a proposed amendment to the Constitution may be voted upon by the public in the form of a national referundum. With respect to a change in the role played by the National Bank of Poland in the issuance of currency and determination of monetary policy, such amendment may be submitted to the public for approval, but such referendum is not required.

The opposition's desire to submit such amendment to a public referendum seems to me to be based more on a political game of brinksmanship as opposed to a legal requirement.What would Poland do if the public rejected the amendment of the Constitution to permit adoption of the Euro?

Prior to EU accession the Polish electorate voted in a national referendum to approve signing of the Treaty of Accession. This same Treaty includes the obligation for Poland to adopt the Euro at a future date. I see no need to resubmit the issue to another referendum. Polish voters agreed to adopt the Euro more than four years ago. Enough of the political posturing.

-- Paul B. Fogo

An investor wishing to purchase a Polish company, if not careful, may end up on the hook for the seller's unpaid tax obligations at the time of sale. To guard against such calamity, a purchaser usually obtains a "certificate" from the tax authorities confirming what, if any, tax obligations the target company may have outstanding. With this information in hand a purchaser can ensure that any tax obligations are satisfied by the seller at the time of sale.

Tax obligations include not only corporate income and real property taxes, but also any social security tax obligations payable by the company with respect to its employees. Unfortunately, Poland's social security administration, otherwise referred to as ZUS, does not always agree to issue a similar "certificate" regarding the social security obligations of a target company. In fact, in many cases ZUS refuses to provide any information to the prospective purchaser of a company, leaving the purchaser with no choice but to walk away from the deal or simply take the word of the seller and hope that all required social security payments have in fact been paid. In many cases, the purchaser only learns after the fact that he or she is now on the hook for unpaid social security contributions owed by the previous owner of the company.

It is time for ZUS to step up to the plate and provide the requested certificates of payment when so requested. Recently, ZUS has been ordered to provide such information in several court rulings, but despite such rulings ZUS continues to refuse to issue the requested certificates. Enough is enough.

-- Paul B. Fogo

Last week EU Finance Ministers agreed to lift the minimum level of protection for individual bank deposits to Euro 50,000 as part of a multi-pronged effort to restore faith in the banking sector. Up until last week Poland had resisted the call to take any specific actions vis-à-vis the banking sector, believing that Poland’s banking sector was somehow immune to the crisis spreading from the West. Prior to last week individual deposits in Polish banks were only guaranteed against loss up to Euro 22,500, and even this amount was not fully protected as the rate of protection only extended to 90% of the actual amount. Previously deposits exceeding Euro 22,500 were not protected at all. Now at least deposits of up to Euro 50,000 are protected in full.

Other EU member countries have raised the level of protection even higher. Austria, the Netherlands and Belgium, among others, have decided to provide full protection to individual bank deposits up to Euro 100,000. Ireland has taken this one or two steps further, announcing plans to provide 100% protection to all bank deposits, to include not only retail deposits but commercial deposits as well…with no cap on the amount insured.

Granted, Polish banks seem to have avoided the most egregious lending practices that served as the catalyst for the current turmoil in financial markets, but Poland is by no means immune from the current crisis. Last week the Warsaw Stock Exchange saw 20% of its value disappear. The Polish government can no longer continue to stick its head in the sand and pretend that Poland is immune to the current turmoil. The EU can only do so much. Poland and the other member states must step up to the plate and be much more proactive in order to stave off the on-going crisis.

-- Paul B. Fogo