A couple of weeks ago the Polish Government announced that it wants to cancel all of its 60 Bilateral Investment Treaties (BITs). Subsequently, the Government stated that its intention is first and foremost focussed on the BITs it has concluded with the other EU Member States (the so-called intra-EU BITs). Poland has concluded intra-EU BITs with almost all other EU Member States (except with Ireland, Italy and Malta).
Deputy Treasury Minister Mikolaj Wild stated that as a member of the EU since 2004, Poland has “reached a level of democracy which guarantees that its courts are free from political influence and where foreign investors don’t need such “privileges” such as the BITs”. Moreover, he claimed that the BITs drive up legal costs and are used to put “pressure” on the Government regarding economic issues. More specifically, Deputy Prime Minister Mateusz Morawiecki – correctly – 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 Polish Zloty. Most of Poland’s banking assets are owned by foreign lenders, including Banco Santander SA, Commerzbank AG and Banco Comercial Portugues SA.
Poland is currently involved in 11 investment treaty arbitration cases with claims totalling as much as 9 billion Zloty ($2.3 billion).
However, it should be stressed that the termination of these treaties will not come into effect immediately, as most of the BITs contain long periods of continued guaranteed of investment protection (sunset clauses) after they are cancelled. For example, the BIT between Poland and Germany has a 20 years sunset clause, while the BITs with France and The Netherlands guarantee investment protection for an additional 15 years. However Poland has also announced that it would seek to reduce or even cancel the “sunset clauses”, although it remains to be seen whether the other Contracting States would agree to that.
Nonetheless, the intention of the Polish Government is clear: no investment protection any longer for foreign investors. Indeed and as we have reported previously, such a step would also fit the efforts of the European Commission to force the EU Member States to terminate their BITs. Accordingly, investors must take appropriate measures before making new investments in Poland as well as consider restructuring existing investments.