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The Warsaw Voice » Other » June 11, 2008
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Changes to Procedures for Financial Settlements Between Companies
June 11, 2008   
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Robert Jędrzejczyk, legal counsel and partner at Gide Loyrette Nouel, talks to Beata Gołębiewska.

Given the considerable fluctuations in exchange rates and their impact on the economy, should we expect that procedures for settlements in foreign currencies will be relaxed?
In compliance with Art. 358 of the Civil Code, financial obligations in Poland may only be expressed in Polish zlotys unless the parties to the transaction have a foreign exchange permit. This principle, known as the foreign currency principle, is still in force in spite of Poland's accession to the European Union, and often causes problems during mutual settlements between companies and individuals. Hopefully, these problems will soon be overcome.

What should these changes consist of?
A draft amendment to the Civil Code is now almost finished. In accordance with the amended provisions, if the financial liabilities are expressed as a sum of money represented in a foreign currency, the debtor may - but does not have to - remit the payment in Polish zlotys unless a relevant legal act, a judgment or the nature of a given legal activity, requires that the payment be remitted in a foreign currency.

Will the problems related to mutual settlements in foreign currencies disappear?
Yes, the problems related to settlements in foreign currencies will disappear, but this will not remedy the problem posed by the solvency of creditors.

The new provisions should be seen as a welcome change as the foreign currency principle was a relic of the past that placed companies and individuals at peril and exposed them to the exchange rate risk.

When the proposed changes are accepted, the value of the foreign currency for the purposes of respective settlements will be determined each time according to the average exchange rate published by the National Bank of Poland on the day when the settlement becomes payable.

But if the debtor seeks to take advantage of exchange rate fluctuations and takes their time making the payment, the creditor loses out. The new regulations include measures to prevent such situations. In the event of a delayed payment on the part of the debtor, the creditor may demand payment in zlotys according to the exchange rate published by the National Bank of Poland on the day when the settlement becomes payable, and, of course, they may also charge penalty interest for the delayed payment.

Will the amendments to the act facilitate any other procedures?
With regard to banking and civil law, the proposed amendments provide for the possibility of creating shared accounts. The amended Civil Code will most probably contain a new chapter entitled "A Shared Bank Account," which will replace the inadequate legal regulations that exist in this regard. A shared bank account will enable associated companies, such as construction consortia established for the purpose of long-term construction projects, to make mutual settlements, which may be of significant importance for projects such as the Euro 2012 soccer championships to be held in Poland and Ukraine. Shared bank accounts will also help develop cash pooling services in Poland. These services are based on gathering financial means deposited by respective co-owners in a shared bank account and managing these amounts in an effective way by the pool leader.

Shared bank accounts have many advantages. They make it possible for associated companies to credit one another with the use of funds available within the group. They also ensure a higher credit rating for the entire group and create a scale effect.

Robert Jędrzejczyk is a legal advisor, a partner at GLN Warsaw, and an international partner in the Gide Loyrette Nouel.

He is also an arbitrator at the Arbitration Court at the Polish Chamber of Commerce in Warsaw. He has substantial knowledge of the energy sector, privatizations, infrastructure projects (including those related to the Euro 2012 soccer championships to be held in Poland and Ukraine) and labor law. He has recently advised some of the largest companies in the energy, smelting and automotive sectors. He sits on the supervisory boards of two major privatized co-generation companies.

GLN Law Firm, Metropolitan Building, 1 Piłsudskiego Sq., 00-078 Warsaw, reception +48-22 344 00 00; fax +48-22 344 00 01, www.gide.com
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