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The Warsaw Voice » Law » October 29, 2008
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October 29, 2008   
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Legal Headache Before Euro Conversion
Prior to adopting the euro, Poland will have to make hundreds of changes in almost every area of its legislation. The euro conversion will necessitate changes not only in the banking act, but also regulations that directly concern ordinary citizens. Poland's central bank is assessing exactly what changes are needed before the euro can replace the zloty.

In the first step to conversion, the Polish currency will enter ERM2, the European Exchange Rate Mechanism, which aims to keep fluctuations in exchange rates under control. The good news is that this stage will not require amendments to the constitution, because under ERM2 the zloty will remain Poland's only legal currency and the central bank will retain its powers.

However, Polish legislation awaits massive changes before the actual conversion date. Several hundred legal acts that name specific sums or otherwise refer to the national currency will have to be amended. For example, the commercial code will need to alter the regulation that sets the lowest nominal value of a single share at zl.1.

A new law will regulate the issue of bank notes and coins, the duration of the changeover period when prices in stores have to be displayed in both euros and zlotys, the principles of currency exchange and general guidelines concerning the contents of contracts, public registers and perpetual registers. Dual-currency prices may be introduced before the adoption of the euro. Poland will also adopt regulations to combat unjustified price increases, possibly using laws employed during the devaluation in 1995 and when Poland entered the EU in 2004.

Before it joins the eurozone, Poland will have to amend the constitution, mainly its clauses that refer to the role and sovereignty of the central bank.

Clerks to Carry the Can for Blunders
The Economy Ministry is preparing a draft bill to make clerks bear the financial consequences of erroneous decisions, abuse of power and obstruction. The plans have been endorsed by the influential Confederation of Polish Employers. A recent report by the Central Auditing Office found that clerks are responsible for many mistakes, including approval of incomplete license applications and requiring extra documents that are not mentioned in regulations.

Restrictions for Rating Agencies
The European Committee recently proposed legislation to restrict conflict-of-interest issues with rating agencies and impose tighter supervision. "The financial crisis has proven the self-regulatory mechanisms on this market to be inefficient," said Internal Market Commissioner Charlie McCreevy. Under the Commission's proposal, a rating agency would not be allowed to rate the condition of financial institutions when contracts with those institutions account for more than 5 percent of its annual income. The Commission is also considering a special register of rating institutions. Agencies that fail to adjust to the new regulations would face revocation of their licenses to operate in Europe.

Regulations for Better Development Policies
EU funds absorption will get easier and the definition of development policy will change when several laws are amended in conjunction with the disbursement of EU structural funds and the Cohesion Fund. The laws set for amendment include the law on public finance.

Currently, most EU funds that are not absorbed within one year have to be returned to the state budget and can be disbursed again only when another budget period begins. The new regulations will broaden the category of non-expiring funds, as they are called, which beneficiaries would be able to retain.

Improvements for Reinsurance Companies
Reinsurance companies will soon find it easier to work in Poland in both the life and non-life insurance sectors. The government adopted Oct. 14 a draft amendment to the insurance law, submitted by the Finance Ministry. The changes were necessitated by EU regulations.

Reinsurance companies will be obliged to invest assets in line with the "prudent person" rule, that is, observing the general principles outlined in the insurance law.

Reinsurance is offered to insurance companies to insure them against losses that result from accumulated risks and disasters on a large scale. It also helps insurers get a larger piece of the market and find new customers.

More Powers for Tax Inspectors
A draft amendment to the law on tax inspection, prepared by the Ministry of Finance, will give more authority to inspectors, including the ability to demand information from website administrators. The change will help tax inspectors fight online tax evasion and simplify supervision over the absorption of EU funds.
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