Poland Plans to Cancel Bilateral Investment Treaties With EU

  • Treaties no longer needed as Poland is stable, minister says
  • Country faces $2.3 billion in claims before arbitration courts

Poland’s government is seeking to cancel bilateral investment agreements with other European Union members, saying such treaties drive up legal costs and are used to pile “pressure” on the Warsaw government over economic issues.

Special tools for protecting investments, used mainly during the late 1980s and 1990s when trust in Poland and it’s legal system was low, are no longer needed, according to a statement from the Treasury Ministry on Thursday. The bilateral investment treaties, known as BITs, stipulate that disputes are settled through international arbitration, not in Polish courts.

The announcement comes as Poland’s three-month-old government has been on a collision course with the European Union, which is checking whether the ruling party is adhering to democratic standards, as well as credit rating companies after Standard & Poor’s downgrade last month. It has irked big business, including foreign investors, who they have accused of failing to share their profits with Poles, by raising taxes on banks and planning to to the same for retailers.

“If the government decides on terminating these treaties, this will be done in line with international law and good practice,” the ministry said in an e-mailed statement. “Arbitration proceedings are often used as an additional element of pressure on Poland in economic relations.”

Deputy Prime Minister Mateusz Morawiecki this month mentioned BITs as a legal risk in discussions by the government on forcing banks to convert their foreign currency-denominated loans, which could cost the industry billions of zloty. Most of Poland’s banking assets are owned by foreign lenders, including Banco Santander SA, Commerzbank AG and Banco Comercial Portugues SA.

“For this government, foreign investments aren’t a priority and such agreements may tie its hands to some extent,” Piotr Palenik, an analyst at Warsaw-based ING Bank Slaski SA, said on Friday.

Foreign ‘Privileges’

As a member of the EU since 2004, Poland has reached a “level of democracy” that guarantees its courts are free from political influence and where foreign investors don’t need such “privileges,” Deputy Treasury Minister Mikolaj Wild was cited as saying by PAP news agency.

Poland, which signed BITs with 60 countries, is currently in 11 arbitration cases guided by such treaties, with claims totaling as much as 9 billion zloty ($2.3 billion), the ministry said. The termination of these treaties won’t immediately come into effect, as many of the agreements have guarantees of investment protection for years after the BIT is canceled. In the case of Poland’s deal with Germany it’s 20 years, while similar contracts with France and Holland envisage protection for an additional 15 years, according to data found on the website of Poland’s foreign investment agency.

The announcement comes one week after the government unveiled its $250 billion multi-year investment plan aimed at accelerating economic growth.

“Claims of investors, just like all other businessmen operating in Poland, will be judged by certain laws,” Wild said, according to PAP. “That’s not always the case in arbitration.”

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