A draft anti-corruption law currently being discussed by the Polish government will have serious consequences for all businesses operating in Poland if it is passed in its current form.
Among other things, the “Law on Transparency in Public Life” would require practically all public entities, including all businesses that are at least 20 percent state owned to record all of their contracts worth over 2,000 PLN (approximately $600) in a register that in many cases will be fully available to public.
It would also require them to publish details about business related credit card expenses.
In other words, to take but one example, material details (including value and scope of work) of a contract between a U.S. pharmaceutical company and a state owned hospital could be available for all to see.
Similarly, if a representative of a U.S. company goes out to dinner with a representative of a Polish SOE and the latter picks up the check, everyone will know about it.
The law would also require almost all government employees and many “public sector related” employees (such as managers in businesses that are at least 20 percent state owned and procurement officials at state owned enterprises) to complete publicly available asset declaration forms.
To supplement the already existing register of “professional lobbyists” information about “non-professional lobbyists” (i.e. those with a role in the legislative process, but not being paid to lobby by specific clients, such as trade union representatives) ) will also be published.
The law would also prohibit former public officials from serving on the boards of private companies for at least 3 years after leaving absent a specific waiver and would require all companies (whether state-owned or private) to institute broad compliance programs including anti-corruption codes, anti-corruption training, mechanisms for internal reporting and whistleblowing, and regular audits.
Potential violations will be investigated by the Central Anti-Corruption Bureau (CBA) but will be prosecuted by the Office of Competition and Consumer Protection (UOKIK) in an administrative proceeding (thereby limiting the opportunities for appeals).
Penalties for failing to implement the law’s compliance program requirements can be severe — up to almost $3 million for each violation, plus mandatory debarment from public contracting for 5 years.
In order to facilitate detection of violations, the law would allow prosecutors to officially designate anyone who comes forward with information about corporate wrongdoing as a “whistleblower” (“sygnalista” in Polish) which, among other things, will have the practical effect of making it impossible for the company to fire the individual without paying two years salary as compensation.
In addition to the law on public transparency, the government is also considering a separate law on corporate liability which will facilitate prosecution of companies for any offense (including, but not limited to, corruption) related to the company’s activity.
Among other things, the law on corporate liability would remove the current requirement that the responsible individual employee be successfully prosecuted before the company can be prosecuted. It would also impose severe penalties — up to 30 million PLN (approximately $8 million) for each violation and would provide for additional penalties in cases where the company failed to undertake an adequate internal investigation and/or failed to adequately remediate the disclosed violations. .
The corporate liability law would also supplement the whistleblower provisions of the transparency law by providing financial rewards for whistleblowers.
Finally, the law would also provide for successor liability in mergers and acquisitions which means that acquirers could “inherit” the liability of companies they acquire.
The public transparency and corporate liability are still in draft form and may be modified before they are passed. However, it seems highly likely that they will pass in light of the support that the enjoy from the ruling PIS party and the intelligence services (who, according to some see the transparency law as a means to gain valuable information about government officials which can then be used in internal political battles).
In light of these developments, companies operating in Poland, especially those with state contracts, should thoroughly review their business operations, refresh their due diligence on local business partners (especially important given the likelihood that additional information about them will come out and be made available to their competitors and anti-corruption activists), make sure that they have strong compliance programs in place and monitor the progress of the legislation.
Tom Firestone, pictured above left, is a partner in the Washington, DC and New York offices of Baker & McKenzie. His practice focuses on international white collar criminal defense and compliance, with a special focus on Eastern Europe and the former Soviet Union. He previously spent 14 years at the U.S. Department of Justice, first as an Assistant U.S. Attorney in the Eastern District of New York and then as Resident Legal Adviser and Acting Chief of the Law Enforcement Section at the U.S. Embassy in Moscow. He can be contacted here.
Radoslaw Nozycowski, above right, is Counsel at Baker & McKenzie Krzyzowski i Wspólnicy Spólka Komandytowa in Warsaw and co-head of the compliance practice in the Warsaw office. He has participated in transactions conducted by leading IT companies in Poland and also has wide experience in litigation. He is recommended by Chambers Europe and Legal 500 for TMT law. He can be contacted here.