Contracts with the entities from all over the world have become a standard now. Many of which are concluded with Polish companies. However, what still may be problematic is the jurisdiction, the governing law and the execution on one’s rights, especially when we need to act fast, otherwise the client may be exposed to irreversible damages. Can we take any legal actions in Poland towards a foreign company’s Polish contractor, in order to block him from further hazardous activities, despite different than Polish governing law and jurisdiction?
To answer the above raised question – of course we can!
Injunction Decision in Poland
General rules of an injunction decision in Poland
In Poland you can secure either your monetary or non-monetary claims by obtaining the injunction decision by the court. This is a quick and no costly way of securing the rights of the client.
General rule of when the injunction can be granted by the Polish court directly derives from the Polish Code of Civil Procedure, meaning – the injunction can be granted when the following conditions are jointly met:
- The claim to be secured is probable;
- On he part of the applicant (beneficiary), there is a legal interest in granting the injunction, expressed either in the existence of a risk of the effectiveness of the future execution of a possible decision granting the claim or that the lack of security will prevent or seriously impede the achievement of the purpose of the proceeding in the case;
- The security method is reasonable, appropriate and not excessive.
One of the crucial effects of granted injunction – it is immediately executed toward the obligor and any other third party.
Injunction of monetary and non-monetary claims
When it comes to the monetary claims, the Polish Code of Civil Procedure provides a closed catalogue of ways to secure monetary claims, which are:
Monetary claims are secured by:
1) seizure of movable property, labor remuneration, receivables from a bank account or other claim or other property right;
2) encumbering the obligor's real estate with a forced mortgage;
3) establishing a prohibition on the sale or encumbrance of real estate that does not have an established land and mortgage book or whose land and mortgage book has been lost or destroyed;
4) encumbering a ship or a ship under construction with a maritime mortgage;
5) establishment of a prohibition on the sale of cooperative ownership rights to premises;
6) establishment of receivership over the obligee's enterprise or farm, or an establishment that is part of the enterprise or part of it, or part of the obligee's farm.
When it comes to injunction of the non-monetary claims, the Polish legislator was more liberal, as the Polish Code of Civil Procedure provides us only with the examples of the injunction, leaving its catalogue open. Not excluding the ways provided for securing monetary claims. In particular, the court may:
1) normalize the rights and obligations of the parties or participants in the proceedings for the duration of the proceedings;
2) establish a prohibition on the disposal of objects or rights involved in the proceedings;
3) suspend enforcement proceedings or other proceedings aimed at enforcement of the judgment;
4) regulate the manner of custody and contact with minor children;
5) order the entry of an appropriate warning in the land register or in the relevant register.
In practice, this is almost unlimited ways to secure the client’s non-monetary rights, provided that the chosen injunction method is appropriate and not excessive.
Injunction decision in Poland before the general proceeding
In Poland it is possible to get the injunction decision before the general proceeding even starts. However, when granting the injunction before the initiation of the general proceedings, the court shall set a time limit within which the letter initiating the general proceedings should be filed under pain of loss of the injection. This deadline shall be no shorter than 2 weeks.
It shall mean that within this period – as long as the injunction decision has been granted – the beneficiary needs to file a lawsuit against its obligor, otherwise the injunctions fails.
Technical aspects of an injunction decision in Poland
Due to the fact that the purpose of the injunction decision is to secure the claim before the other party takes negative actions towards the beneficiary, the Polish law states that the court should provide the injunction decision immediately, no longer than within 7 days after delivery of the injunction motion. From the practical point of view – the injunction decision can be issued by the Polish court within 2-3 weeks up to maximum 1-2 months.
The costs of an injunction proceeding are not excessive either. For the injunction motion – despite of which type of claim (monetary or non-monetary) that has to be secured, there is a fixed fee of 100 PLN (25 EUR). However, if we seek for the injunction of a monetary claim before the general proceeding, the court fee shall be ¼ of the regular court fee for a lawsuit in such matter, with the cap of 200 000 PLN (40 000 EUR).
GET THE INJUNCTION DECISION IN POLAND DESPITE OF A DIFFERENT JURISDICTION
Knowing already all the benefits from the injunction decision in Poland, shall we come back to the main question raised in the beginning of this article of whether despite of a different chosen jurisdiction between the parties, a foreign company may secure its rights in Poland and block its counterparty from negative movements.
The answer to this question directly derives from the Polish Code of Civil Procedure which states that:
“The Polish jurisdiction in injunction proceedings also exists if the injunction can be executed in the Republic of Poland or have effect in the Republic of Poland”.
From the abovementioned disposition, we may get the following conclusions.
Firstly, the Polish Code of Civil Procedure indicates that the place of execution of the injunction may be in Poland, so that the existence of jurisdiction of Polish courts in the injunction proceedings may be embraced. We can talk about such situation when may be the case when the goods that are subject to seizure (e.g., the movable property to be seized for security purposes) or encumbrance (e.g., the real estate to be encumbered by a statutory mortgage for security purposes) are located in Poland, when a Polish bank maintains a bank account that holds our legal opponent’s receivables subject to seizure, or our legal opponent’s business or farm, over which a compulsory administrator is to be established for injunction purposes, is located in Poland.
Secondly, evoking (by the injunction) the effect in the Republic of Poland, which justifies the acceptance of the domestic jurisdiction of Polish courts in injunction proceedings, refers to the situation when a decision on the granting of injunction has been issued, which is not enforceable, but produces a certain legal effect in Poland.
This shall mean that even though a foreign entity has concluded a contract with a Polish company and they have chosen different than Polish law and/or jurisdiction, such foreign entity can still look for security of its right before the Polish court if the injunction can be executed or have an effect in Poland.
Case study
A foreign company (the Client), who used to be the controlling owner and ultimate beneficial owner of its obligor (Polish company), has reached out to Viroux & Partners in search for securing its rights after finding out about loosing control, among others, on the said Polish company, due to the hostile takeover.
The Client and the Polish company has concluded couple years earlier a loan (investment) agreement on behalf of which the Client has provided the Polish company with the outstanding funds for its development. In the loan (investment) agreement the parties have established conditions when the loan amount shall be returned to the Client. One of such repayment event was the circumstance when the lender ceases to indirectly directly control 50% of the borrower’s voting share capital.
Due to the fulfillment of the repayment event set by the parties in the loan agreement and despite of UK governing law and jurisdiction chosen by the parties in the said loan agreement, Viroux & Partners has filed to the Polish court the injunction motion before the proceeding in order to secure the Client’s monetary claims towards the Polish company. Viroux & Partners provided the Polish court with the arguments that both, the injunction can be exercised in Poland as well as the granting injunction will have an effect in Poland as the obligor is a Polish company and any means of injunction requested concern its operations and its assets, and thus will be exercised in Poland.
Once the injunction is granted, the Client will have 2 weeks to file a lawsuit against this Polish company, which now will have to be done before the UK court, as chosen by the parties in the loan agreement.
Prepared by team from Viroux & Partners:
Marta Michalkiewicz, Senior Associate