Poland: New Law On Export Finance

Last Updated: 16 April 2019
Article by Mateusz Toczyski, Tomasz Zwoliński and Jarosław Bełdowski

The draft new Polish law on export insurance guaranteed by the State Treasury and amendments to the Law on Bank Gospodarstwa Krajowego ("New Law") was published on the website of the Government Legislation Center on 14 March 2019.

The New Law will replace in full the current Law of 7 July 1994 on export insurance guaranteed by the State Treasury. In order for the New Act to come into force this year, the Sejm should submit it to the President for assent before the end of the parliamentary cycle. Otherwise, the bill will require a new procedure in the new parliament. It does seem possible to pass the bill this year, but as there are only a few months of this Sejm and Senate left, the schedule of work on the bill will be quite tight.

Improvements and new solutions

The New Law does not change the basic principles of export insurance guaranteed by the Polish State Treasury. In particular, the official export support system will continue to be administered by Korporacja Ubezpieczeń Kredytów Eksportowych S.A. ("KUKE"). However, the New Law will introduce numerous improvements and new solutions addressing many concerns which have been raised by market participants in recent years.

A legal alert such as this cannot cover all the proposed solutions and detailed provisions are still subject to change as the legislative process continues. Therefore, we present the key changes that the New Law would introduce in the official Polish export support system.

The State Treasury will give KUKE a liquidity guarantee

The State Treasury will explicitly guarantee obligations assumed by KUKE when the latter grants support to market participants. This will ultimately confirm the existing understanding among banks that are KUKE's customers that the scheme complies with Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and the amending Regulation (EU) No. 648/2012 ("CRR") – see Articles 14 and 15 of the New Law. In practical terms, the State Treasury's guarantee will be an ultimate remedy for KUKE's customers. At the same time, it seems to be a dead letter in practice since pursuant to Article 36 of the New Law, the State Treasury will give KUKE a liquidity guarantee, meaning KUKE is unlikely to run out of funds when financing its liabilities under the official export support scheme.

Exemptions from the Polish origin requirement

The Polish origin requirement concerning exported goods and services is expressed in terms of manufacturing a certain percentage of a product in Poland. This requirement is being maintained, but there will be significant exceptions. As regards insurance for exposure with a credit term of up to two years or where export insurance relates to a large-scale special national interest, export insurance will still be possible even if it fails to meet the Polish origin requirement, provided that consent is obtained from the Export Insurance Policy Committee [Polish: Komitet Polityki Ubezpieczeń Eksportowych]. National interest in this context is understood as a measurable increase in Polish exports or employment, or a measurable increase in the share that a Poland-based business has in a foreign market. The New Law thus refers to solutions used by many foreign export credit agencies, based on national interest. See Article 7 of the New Law.

KUKE may take over the risk of failing to maintain minimum Polish origin

Under current practice, banks have resolved the issue of risk of exporters failing to meet the Polish origin requirement by entering into direct agreements with exporters. Under the New Law, KUKE may take over this risk through signing a direct agreement with the exporter. See Article 17 of the New Law.

New products in KUKE's offer

The financial products eligible for export insurance, which in practice has covered bank credit facilities and forfaiting (occasionally leasing), will be explicitly extended to credit lines in the form of guarantees, letters of credit and issues of debt securities such as bonds. This should result in the development of general insurance conditions for new financial products, which will make KUKE's offer more attractive. See Article 3(2) of the New Law.

KUKE will insure a foreign subsidiary of a Polish domestic business

The New Law includes authorization for KUKE to insure agreements (and instruments financing those agreements) with foreign businesses that are controlled by businesses having their seat or residence in Poland. The term "control" will be flexible, based on the Polish Accounting Act. This innovation is crucial where importing countries require or create more favorable business and legal conditions for exporters with subsidiaries in those importing countries. Moreover, it will be possible for a domestic business to obtain export insurance for its foreign subsidiary, which may be useful if the foreign country prohibits its companies from applying for insurance abroad. The New Law will also introduce the possibility of insuring financial instruments that finance direct investments of domestic businesses abroad. See Articles 6 and 7 of the New Law.

Insurance of syndicated contracts

The New Law will make it possible to insure syndicated contracts (to the extent performed by Polish businesses) where the Polish business is only one of the co-contractors. The innovation consists in enabling the payment of insurance indemnity to a foreign business which forms part of the contractor syndicate. See Article 6(1)(2) of the New Law.

Automatic subrogation by KUKE into rights and obligations of the policyholder will be relaxed

When paying insurance indemnity, KUKE will be authorized to withhold its automatic subordination into rights and obligations of the policyholder, e.g., those arising under collateral security. To date, automatic subrogation has often generated a significant workload (for KUKE and its customers) if the legal system of the importing country did not provide for such subrogation or made it non-viable in terms of court and legal costs. See Article 13(2) of the New Law. 

Streamlining internal practices at the Export Insurance Policy Committee

Measures have been proposed to improve the efficiency of the Export Insurance Policy Committee [Polish: Komitet Polityki Ubezpieczeń Eksportowych] (the "Committee"), whose decisions have to date often prejudged or blocked the possibility of export insurance in specific cases. The Committee will have a maximum three members (currently seven), made up of one representative from the ministries most concerned. Voting can be done by means of remote communication and the unanimity rule will be relaxed. The Committee will be able to issue preliminary opinions. See Articles 31 and 32 of the New Law.

Flexibility in deviations from the GIC

The Minister in charge of public finance will no longer be the authority approving the General Conditions of Insurance ("GIC") for insurance products offered by KUKE. See Article 9 of the current Export Insurance Law of 1994 which does not give KUKE any flexibility in deviations from GIC, even if it is justified in specific cases. However, one should bear in mind that, both now and in the future, GIC must not be in conflict with the Council Directive 98/29/EC of 7 May 1998 on the harmonization of the basic provisions relating to export credit insurance for transactions with medium and long-term cover.

We will keep you posted on any significant developments.

The draft New Law is available here (in Polish only).

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