Amended regulations on Combating Payment Gridlock signed by the president

On 4 November 2022, the Sejm adopted the amended Act Combating Excessive Delays in Commercial Transactions (known as the Act Combating Payment Gridlock). On 14 November, the Amending Act was signed by the President and the Act currently awaits publication in the Journal of Laws. The amendment introduces numerous changes for enterprises, including the obligation to inform about the status of a large enterprise or to submit annual reports on payment terms applied in commercial transactions.

On 4 November 2022, the Sejm adopted nine out of ten amendments of the Senate to the Act on Combating Excessive Delays in Commercial Transactions of 8 March 2013 (Journal of Laws of 2022, item 893), known as the “Act Combating Payment Gridlock” and the Public Finance Act of 27 August 2009. On the same day, the Act amending the above-mentioned acts (“Amending Act”) was adopted by the Sejm. The President signed the Amending Act on 14 November 2022 and the Act currently awaits publication in the Journal of Laws. The main changes, simplifications and restrictions introduced by the amendment are presented below.

Amended scope of application of the Act Combating Payment Gridlock

The first amendment clarifies the scope of application of the Act Combating Payment Gridlock. After the entry into force, the Act Combating Payment Gridlock will no longer apply to debts under bankruptcy proceedings or any other restructuring proceedings, but only from the date of declaration of bankruptcy or the opening of restructuring proceedings.

Until then, the provisions of the act will have to be applied in full, therefore, as long as the bankruptcy is not declared or the restructuring proceedings are opened, creditors will be obliged to comply with the requirements of the Act Combating Payment Gridlock.

Simplified reporting obligation on the status of large enterprise

The Amending Act simplifies the obligation to provide a statement on the status of a large enterprise that a party to a transaction must submit. Now, such statement must be made with regard to each commercial transaction once it is effected.

When the amendment to the Act Combating Payment Gridlock comes into force, this obligation will have to be fulfilled only once, with relation to the same entity, at the latest once the first transaction has been effected, and when the status of a large enterprise is acquired later, at the conclusion of the following transaction. When the status of a large enterprise is lost, the statement must be provided at the latest when the first commercial transaction between the parties has been concluded after the loss of such status.

Limitation to contractual exclusion of the right to assign claims

Another change is the restriction to contractual exclusion of the right to assign claims in certain circumstances. In accordance with the Amending Act, the provisions of a contract that exclude or restrict the creditor’s right to assign claims will be ineffective in transactionswhere the debtor is a large enterprise and the creditor is an SME.

Such provisions will become ineffective if no payment is made at the payment due date. This means that the provisions prohibiting the creditor to assign the claim when the deadline for payment has not yet expired will remain legally binding, however, from the first day after the expiry of that deadline, an SME will be able to assign the claim it has against a large enterprise regardless of the existence of such contractual stipulation. It should be remined that in accordance with the general provisions of the Civil Code, the assignment of claims is practically always permissible without the consent of the debtor, unless otherwise stipulated in the contract.

It is worth adding that this provision will not apply to transactions in which the debtor is a public body. In that case the contractual prohibition of assignment will also apply after the expiry of the payment deadline.

Limited circle of entities obliged to submit reports

An important change introduced by the Amending Act is the limitation of the circle of entities that are obliged to submit reports on payment terms applied in commercial transactions. After the entry into force of the amendment, this obligation will cease to apply to tax groups, and will only apply to taxpayers whose value of income obtained in the tax year exceeded the equivalent of EUR 50 million. In addition, public entities which are healthcare entities and state and local government companies which are healthcare entities are exempted from that obligation.

Limited scope of report

Apart from the above personal exemption described above, the Amending Act also excludes certain categories of liabilities from the obligation to report them. And so, payments made as part of insurance and reinsurance activity as well as time-barred payments and payments resulting from commercial transactions entered into by entities being part of the same capital group will not be reported.

It is also worth pointing out that the scope of information to be included in the report has also changed.

Definition of excessive delay

The Amending Act also clarifies the definition of excessive delay in payment. Excessive delay arises if the amount of due and payable indebtedness or late payments exceeds PLN 2 million during the course of three consecutive months.

Soft summons by the President of UOKiK without the need to initiate proceedings

The amendment to the Act Combating Payment Gridlock also affects the proceedings concerning excessive delays in payments carried out by the President of the Office of Competition and Consumer Protection (UOKiK). The Amending Act grants the President of the UOKiK the possibility of extending the so-called soft summons to the parties to commercial transactions which are not public entities in matters related to preventing excessive delays in performing monetary obligations without the need to initiate any formal proceedings. The entity to which the summons was sent may submit its position on the matter within the time limit set by the President of the UOKiK, not shorter than 14 days from the date of receiving the summons.

Administrative fines

The Amending Act also introduces changes to the financial penalties imposed by the President of the UOKiK. So far, in the event of an excessive delay in performing monetary obligations, the President of the UOKiK was obliged to impose a financial penalty, while after the amendment to the Act Combating Payment Gridlock it will be only the right of the President of the UOKiK.

The Amending Act also introduces the mechanism for calculating the amount of such fines, as well as the circumstances to be taken into account when imposing the fines, such as:

• the gravity and circumstances of the infringement,
• actions of the party in order to cease the infringement, cooperation of the party that committed the infringement with the President of the UOKiK,
• payment by the party in the course of the proceedings of all past due payments together with statutory interest for delay in commercial transactions.

The Amending Act also provides for the possibility of reducing the administrative fine by 20 % if it is paid in whole within 14 days from the date of serving the decision and the enterprise waives its right to request re-examination of the matter.

Additionally, an obligatory increase in the penalty was introduced for a recurrent infringement, i.e. if within 2 years from the date on which the first decision became final, President of the UOKiK again finds an excessive delay in payment by the same entity, the administrative fine will be increased by 50%.

In accordance with the Amending Act, the entity on which the penalty was imposed, will be able to request deferment of payment of the fine or splitting it into installments.

Entry into force

Most of the adopted amendments will enter into force after 14 days after the publication date, except for the provisions concerning deadlines for submitting reports, the value of payments not subject to reporting, correction of reports or imposing a fine on persons responsible for submitting reports, which will enter into force on 1 January 2023, and the provisions regarding ineffectiveness of the contractual exclusion or limitation of the creditor’s right to assign receivables, which will come into effect two months after the publication date. Please note that the existing provisions will apply to commercial transactions concluded before the date of entry into force of the amendment.

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