Trends, developments and prospects
What is the general state of the construction sector in your jurisdiction, including current trends, notable recent transactions/developments and future prospects?
The construction sector is growing year by year, with the number of housing projects steadily increasing, as well as the number of structural investments that are mostly financed from EU funds (eg, modernisation and development of the existing road network and construction of express roads). However, in financial terms, the most significant structural investment over the coming years will be the modernisation of railway lines, estimated at over Zl60 billion.
The biggest planned domestic investments include the construction of the Central Communication Airport, a new airport located between Warsaw and Lodz with capacity to handle up to 100 million passengers a year.
What primary and secondary legislation governs the construction sector in your jurisdiction?
Construction is governed by public law (the Construction Law) and private law (the Civil Code 1964).
The Construction Law governs the conditions under which construction investments can be carried out, establishes the rules for issuing permits for construction works, regulates aspects relating to commissioning buildings and sets technical conditions for building structures, among other things.
The Civil Code provides the regulatory framework governing contracts for construction works. It defines certain contractual provisions for construction contracts, including with regard to the rights and responsibilities of the parties (Articles 651, 652, 654 and 655) and their liability towards each other and third parties. It also makes reference to the regulations governing other agreements (eg, contractual provisions for specific work, warranty for defects and quality guarantee from a sale agreement). Certain Civil Code provisions concerning construction contracts may be modified by the parties, while others are expressly prohibited from alteration.
The Civil Code provisions governing construction contracts are not comprehensive, thus allowing contractual parties to regulate in detail their mutual rights and responsibilities.
An investor may conclude a construction contract under either the ‘build’ formula (having already prepared its own construction design) or the ‘design and build’ formula (ie, mutually agreeing that the contractor be responsible for preparation of the construction design based on the instructions of and in cooperation with the investor).
Which authorities regulate the construction sector and enforce construction law, and what is the extent of their powers?
Matters regulated under the Construction Law (depending on the subject at issue) are handled by the competent local government authorities or the national government administration, including with regard to the possibility of appealing any government decisions to the administrative courts.
For matters regulated by the Civil Code, the parties to a construction contract have extensive competence over the governance of their mutual rights and responsibilities under the contract through the organic fundamental principles of civil law (eg, following the principle of freedom of contract; see Article 353 of the Civil Code). They are entitled to refer any potential disputes involving such matters to the common courts.
What licensing requirements and procedures apply to construction projects in your jurisdiction (eg, planning consents)?
The Construction Law stipulates which types of construction work and work performed in relation to specified construction structures require a permit before being carried out, and whether an obligation to declare the intention to carry out construction work applies (eg, smaller-scale work such as construction of a family house). The competent local government authorities will issue a building permit at the request of any interested party. Depending on whether the property in question is covered by the local development plan, the investor may be required to obtain approval of the building development conditions before applying for a building permit (if a local development plan is not available).
The administrative part of the construction process is finalised (as the case may be, pursuant to the law) by obtaining an occupancy permit or declaring the completion of construction work to the building supervision authority. This administrative body verifies that the construction work has been performed in accordance with either the permit or the declaration of intent to carry out construction work.
Professional licensing and qualification
What licensing requirements and procedures apply to construction professionals, including any required qualifications?
The Construction Law sets the requirements for architects, engineers and construction specialists in terms of education, qualifications and professional experience needed to perform their jobs, which constitute the basis for determining the scope and type of construction work supervised by them.
Do any special rules and restrictions apply to foreign construction professionals?
There are no formal or legal requirements for establishing and running business activity in the construction sector.
Project structures and relationships
What corporate/formal structures are available for construction projects in your jurisdiction? What are the advantages and disadvantages of each? Are any structures explicitly prohibited?
There are no formal restrictions regarding the legal form or legal nature for running business activity in the construction sector. The most common legal form is the limited liability company (which is the most popular legal form for conducting any business activity in Poland), followed by the one-person businesses run by a natural person.
The advantage of a one-person business is the lack of applicable minimum capital requirements; a disadvantage is that the entrepreneur is liable (with all of their assets) for the obligations that arise out of their business activity.
The advantage of a limited liability company is the applicable minimum share capital amount (Zl5,000); in principle, there are no disadvantages.
Relationship management Are there any special considerations for managing relationships with:
(a) Joint venture partners (where applicable)?
Joint venture agreements are not governed by any specific provisions of the Civil Code or any other laws. However, there is no doubt as to their admissibility on the basis of the principle of freedom of contract. Commercial law companies established for the purposes of executing joint venture projects are subject to the Code of Commercial Companies, among other laws.
(b) Contracting government entities in public-private partnerships (or other construction projects with a public element)?
A public-private partnership is one of the primary forms of cooperation between public-sector entities (in particular, those regulated by the Public Finance Act) and private-sector entities with regard to joint execution of an investment or service within the scope of the public services sector. Public-private partnerships are regulated by either the Public-Private Partnership Act (19 December 2008) or the Concession for Construction Works or Services Act (9 January 2009).
As a general principle, a contractor of construction work may use subcontractors. Exclusion or restriction of this right may be specifically regulated in a construction contract. The Civil Code and the Public Procurement Law require contractors who intend to use subcontractors to declare this fact by providing a subcontractor agreement to the investor. These regulations govern the establishment of the investor’s joint and several liability for the contractor's obligations to subcontractors in the event of the contractor's default in payment to a subcontractor, as well as setting the rules for payment of such debt and settlement between the investor and the contractor regarding the remuneration paid to subcontractors.
(d) Architects, designers, engineers and any other related professionals?
In a partnership, only the representatives of liberal professions (eg, lawyers, architects, pharmacists and construction engineers) may become partners.
(e) Any other relevant parties typically involved in construction projects?
Within the administrative terms of the Construction Law, in addition to the contractor and investor, participants in the construction process include a construction work planner, site manager and construction site supervisor.
Under civil law, the construction contract may also provide for the involvement of a project engineer or a substitute investor to act on the investor’s behalf, properly supervising construction work carried out by the contractor or executing the project from the beginning to the end.
Contracts and performance
Standard contract forms
What standard contract forms are used for construction projects in your jurisdiction? To what extent do parties deviate from these standard forms?
There are no mandatory templates for construction contracts. Governance of mutual rights and responsibilities rests with the contractual parties, taking into account the applicable laws. In accordance with the principle of freedom of contract, the parties may define a legal relationship at their own discretion, unless the objective or content of the contract does not preclude the nature of the relationship, act or social conduct (Article 353 of the Civil Code).
Definition of ‘construction work’
How is ‘construction work’ legally defined?
Article 3(7) of the Construction Law defines ‘construction work’ as “construction, but also reconstruction, assembly, renovation or demolition of a construction structure”. This law also includes definitions of ‘construction’, ‘reconstruction’ and ‘renovation’, among others.
Are there any rules or restrictions on the governing law of construction contracts?
In general, it is up to the contractual parties to decide on the competent law that will govern the construction contract.
Are construction contracts subject to any formal requirements?
Construction contracts concluded under the Public Procurement Law (Article 139(2)) or private law (Article 648(1) of the Civil Code) must be in written form. However, there is a difference in rigour regarding default in concluding a written construction contract: under the Civil Code, it must be in written form under the rule of ad probationem (ie, the consequence of non-compliance is that the testimony of witnesses or the parties as to performance will not be admissible in the case of a dispute); whereas in principle a contract for public procurement must be concluded in writing in order to be valid under the rule of ad solemnitatem (ie, non-compliance results in invalidity).
Are there any mandatory or prohibited provisions in relation to construction contracts?
A construction contract should define the subject of works (ie, what it should involve or result in) and specify remuneration or at least the basis for calculating remuneration (this may be a flat remuneration, estimated cost of remuneration or mixed remuneration). However, in general the parties have extensive competence regarding regulation of the content of the contract. In accordance with the principle of freedom of contract, the parties may define a legal relationship at their own discretion, if the objective or content of the contract does not preclude the nature of the relationship, act or social conduct (Article 353 of the Civil Code).
Can any terms be implied in construction contracts?
As the Civil Code serves as the general regulatory framework for construction contracts, its provisions are used by analogy in respect of other agreements (eg, a contract for specific work – Article 556 of the Civil Code) and general provisions concerning obligations (eg, default interest – Article 481 of the Civil Code). An example of such a provision in a construction contract relates to warranty for defects, which in principle may be modified by means of declarations of the parties where such parties are entrepreneurs (eg, extension of liability beyond the scope of the Civil Code, narrowing or even exclusion of such liability). However, with respect to consumers, the liability period for defects in a building may not be shorter than five years and modification thereto is prohibited (any provision to this effect will be invalid and replaced with statutory provisions). In addition, construction contracts concluded under the Public Procurement Law are subject to mandatory provisions (eg, Article 144d sets provisions for specific contractual penalties in given circumstances).
How are risks typically allocated between parties to construction contracts?
It is up to the contractual parties to define the scope and terms of their contractual liability. On the grounds of civil law, a business entity bears responsibility based on the principle of fault-based liability or no-fault liability, depending on the circumstances. Liability of a contractual party may be complemented by the principle of fairness. Polish law does not define the term ‘fault’; however, fault may be described as unlawful conduct which violates the requirement of precaution adopted in the applicable interpersonal relations. Such a violation is verified with respect to a person who has committed wrongful conduct. Fault may be attributed only to a person who acts with sufficient background and was able to have foreseen their actions.
The investor is liable under the general principles arising out of responsibility for proper cooperation with the contractor in execution of the contract, and in particular for a timely payment of the agreed remuneration. It is generally accepted that the investor is liable for defects of the construction design. Similarly, the investor bears risks associated with weather, soil and hydrological conditions or discovery of archaeological stations in the ground of the investment property. The investor also bears risks associated with the actions of the public administration authorities.
The contractor is responsible for performance of work within the timeframe specified by the parties in the contract, as well as for the quality of work. If the work is not completed within the specified timeframe due to a fault that is non-attributable to the contractor, the contractor will be exempt from liability. However, the case law also acknowledges that the parties may extend the scope of responsibility, excluding certain circumstances, where non-performance of work within a specified timeframe was attributable to the investor and force majeure, although some standpoints allow for extension of the contractor's responsibility for force majeure as a form of warranty liability.
Limitation of liability
How and to what extent can parties to construction projects contractually limit or exclude their liability?
Contractual liability in Polish civil law is governed by the principle of fault (Article 471 and following of the Civil Code). However, the parties may modify their liability in the contract (Article 473 of the Civil Code). For example, the contractor may extend its liability, giving it a warranty nature. The contractor will then basically be responsible for each case of failure to perform work within a specified timeframe (excluding circumstances attributable to the investor or force majeure).
The parties may also define circumstances, principles and penalties for breach of the contractual provisions (in the form of contractual penalties).
How are liquidated damages typically calculated and to which liabilities are they usually applied?
Contractual penalties are agreed between the parties by means of negotiation – they may concern a failure to perform work within a specified timeframe, failure to remedy a defect within a warranty period or a quality guarantee period, or breach of other material obligations defined in the contract. Pursuant to Article 483 of the Civil Code, the parties may reserve in the contract that damage resulting from non-performance or improper performance of a non-monetary liability shall be remedied in the form of a contractual penalty. It is acknowledged in the case law and legal doctrine that the obligation to pay a contractual penalty is not subject to the occurrence of damage, but rather only to the existence of the circumstances provided for in the contract on which payment of a penalty depends (Article 484 of the Civil Code). The amount of penalty (rate), grounds and circumstances must be clearly defined in the contract under pain of invalidity. It may be reserved in the contract that the injured party may claim damages in excess of the contractual penalty stipulated in the contract. A debtor may apply to the court to decrease the amount of the penalty under the court procedure of mitigation of penalty, provided that the obligation has been performed to a large extent or where the amount of penalty is grossly excessive. In principle, payment of the penalty does not release the debtor from performance of their obligation (Article 483 of the Civil Code).
The most common penalty is for delay in performance of work, calculated for each delayed day and a penalty for withdrawal from the contract. Penalty levels are determined either through a percentage reference to the contract value or by providing a specific amount.
Increasingly often, a contract will include a limit on the penalty that one party may impose on the other for breach of contract (eg, 20% of the remuneration).
How are force majeure clauses treated in your jurisdiction? Is there a legal definition of force majeure events?
The term ‘force majeure’ is not defined in Polish law. Legal doctrine and jurisdiction provide that force majeure constitutes:
- accidental or natural external events;
- events that are impossible (or almost impossible) to be foreseen; and
- events the effects of which cannot be prevented.
No-fault liability (where the entrepreneur may be liable on such basis) is excluded due to the occurrence of force majeure events (Article 435 of the Civil Code).
To remove any doubts concerning interpretation which may arise during performance of a contract, parties usually provide for specific events that will be considered as force majeure – which, if they occur, will not involve liability for damages or contractual liability.
General performance obligations
What are the general performance obligations of contractors and employers?
The most important obligation of the contractor is to perform work in a timely and due manner, while the investor is obliged to pay the agreed remuneration in accordance with the specified terms and conditions of payment.
How are project delays typically handled? Do any set rules, restrictions or procedures apply in this regard?
Much depends on the provisions adopted in the contract, without which there is generally no legal means or regulation to resolve such situation. In general, investors strive to implement provisions pursuant to which contractors will be obliged in the case of delay in performance of work to:
- increase the speed of work;
- reorganise work at the construction site;
- assign more employees or equipment; and
- implement other changes to the construction work.
Investors also include in the contract provisions for contractual penalties for non-achievement of milestones in the schedule of work, although the right to impose such a contractual penalty on a contractor where construction works are ultimately completed within a contractual timeframe raises significant doubts (courts assume that if the whole contract has been performed in due time, improper performance of an obligation does not occur, therefore the investor should not be entitled to contractual penalties for non-achievement of milestones).
To what extent can the parties make variations to the contract? Do any set rules, restrictions or procedures apply in this regard?
In general there are no restrictions under civil law on the rights of contractual parties to make variations to the contract, regardless of the stage of contract performance. Any aspect of the contract may be amended – from completion date and remuneration to the terms of contractual liability. The primary rule here is the principle of freedom of contract. If a change does not preclude the nature of the relationship, act or social conduct, it is admissible (Article 353 of the Civil Code).
However, different rules apply to variations to construction contracts concluded under the Public Procurement Law. Pursuant to Article 144 of this law, a contract for a public procurement may be amended only in the circumstances explicitly provided for in the contract and in cases set out in the law (which includes a closed catalogue of situations where variations to a public procurement contract are permitted).
What are acceptable grounds for the termination of a contract?
Under civil law, the parties may terminate a contract by mutual or unilateral declaration of will. The Construction Law does not provide a direct possibility for a notice of contract termination; however, when applying by analogy the Civil Code provisions governing contracts for specific work, the investor has the right to withdraw from the contract where the contractor delays commencement or completion of work to such an extent that it is unlikely to perform the work within the agreed time – provided that the investor has already specified an additional deadline for the contractor (Article 635 of the Civil Code in connection with Article 656 of the Civil Code). Such deadline may not be too short and must be achievable by the contractor. Likewise, the investor may withdraw from a contract or entrust another person with correction or further performance of specific work at the cost and risk of the contractor, if the latter performs work in a defective manner or contrary to the contract. Before exercising this right, the investor must call on the contractor to change the manner of performance and specify an appropriate timeframe for this purpose (Article 636(1) of the Civil Code in connection with Article 656 of the Civil Code).
In addition, pursuant to Article 491 of the Civil Code, the investor may withdraw from the contract if the contractor delays performance of the obligation. The investor should first specify an additional timeframe for the contractor to complete performance, failing which the investor will be entitled to withdraw from the contract. Without specifying an additional timeframe or after failure to complete performance within it, the investor may also demand performance and remedies for damages resulting from the delay. The investor may also withdraw from the contract if the contractor delays only part of the work. In such a case, the right to withdraw from the contract is restricted – at the investor's choice – to either that particular part of the work or the entire remaining part of the non-performance. The investor may fully withdraw from the contract if partial performance would be insignificant due to the nature of the obligation or to the purposes intended for it in the contract, as known to the party in delay.
In addition, Article 395 of the Civil Code provides the possibility to reserve in the contract that one or both parties shall be entitled to withdraw from the contract within a specific time period. When exercising the right of withdrawal, the contract is deemed to be not concluded (the effect of ex tunc) and the parties must return to each other what was provided to them by the other party unchanged, unless the change was necessary in the ordinary course of dealings.
It is common to stipulate in contracts the circumstances giving rise to a right to withdraw from the contract (this applies mostly to investors) – for example, in the event of delay in performance of work specified as an exact number of days in relation to a progress of works determined in the schedule of works, or in the event of filing for bankruptcy.
Notably, the right to make a declaration of withdrawal from the contract is reserved within a timeframe stipulated in the contract; otherwise this right will be invalid.
Remedies for breach
What remedies are available for the breach of construction contracts?
Construction contracts usually provide for contractual penalties in the event of breach of the contract’s specific provisions, or a right to withdraw from the contract. Within the warranty period for defects, the contract may also provide for substitute performance of removal of defects to a third party, at the contractor’s cost and risk, if it fails to remove a reported defect within the specified timeframe.
Types of financing
What types of financing are used for construction projects in your jurisdiction? Which are the most common? Are there any restrictions on available financing methods?
The most common methods of financing construction works are bank loans, using one’s own funds or availing of EU subsidies.
What forms of security are used in construction project financing?
The most common forms of security used in financing construction works are:
- open notes; and
- assignments of receivables from current and future tenants.
The investor's damages for non-performance or improper performance of the contract may be secured against the contractor by a bank guarantee, insurance guarantee or monetary deposit (ie, the amount retained by the investor from the contractor's partial remuneration). The most common security levels are 5% and 10% of the contractor's remuneration.
In public procurements, there is a catalogue of permitted forms of securing the investor's (ie, contracting authority’s) damages, in which the contractor may lodge a security (Article 148 of the Public Procurement Law).
Pursuant to Article 649 of the Civil Code, the contractor may demand guarantee of payment for construction works (ie, a bank or insurance guarantee).
Methods and timing
What are the typical methods and timing of payment for construction work? Are there any restrictions on ‘pay when paid’ and ‘pay if paid’ provisions? Do any other rules, restrictions or procedures apply?
The most common method is partial payment for completed and accepted stages of works defined in the contract.
Polish law does not provide for ‘pay when paid’ and ‘pay if paid’ provisions.
However, Article 143a of the Public Procurement Law stipulates that payment of the remuneration due to the contractor for accepted construction works is subject to provision of evidence of payment of the remuneration due to subcontractors and further subcontractors (whether in a single payment or paid in instalments). If the contractor fails to provide such evidence, the investor has the right to withhold payment.
How can the contractor secure itself against non-payment by the employer? Under what circumstances can the contractor suspend work for non-payment?
Pursuant to Article 649 of the Civil Code, the contractor may demand guarantee of payment for construction works (ie, a bank or insurance guarantee). It is not possible to exclude or restrict, by means of a contract, the contractor’s right to demand the investor to establish a guarantee for payment for performed construction work. It usually rests with the contractor to secure the investor's claims, also in the case of payment of undue remuneration or its part to the contractor. If a contractor does not obtain a payment guarantee within the timeframe that it has specified (no less than 45 days), the contractor has the right to withdraw from the contract by fault of the investor (Article 649 of the Civil Code).
The investor may not refuse to pay remuneration despite non-performance of construction works if the contractor (ie, general contractor) was prepared to perform the works, but was prevented by reasons attributable to the investor.
Pursuant to Article 651 of the Civil Code, the contractor must notify the investor immediately if the documentation, construction site, machinery or devices provided by the investor are not suitable for proper performance of works, or if there are any other circumstances that may affect proper performance of works. In such case, the contractor shall not be liable for the effects of such obstacles.
How can subcontractors secure themselves against non-payment by the contractor? Under what circumstances can subcontractors suspend work for non-payment?
Similarly, a subcontractor has the right to demand from the general contractor a guarantee of payment for construction works (ie, a bank or insurance guarantee) based on Article 649 of the Civil Code.
On what grounds can payments be withheld?
In accordance with the general rules of obligations, the investor may withhold payment of remuneration if the contractor delays performance of its obligations (Article 488 of the Civil Code). The investor may also withhold payment of the entire remuneration if there are any material defects observed in the works during final acceptance. If minor defects are observed, the investor may withhold payment of the part of remuneration that corresponds to the value of defected works. Removal of defects updates the investor's obligation of payment.
However, the parties to the contract may substantiate withholding of payment of remuneration due to occurrence of specific circumstances – but these circumstances should not favour the investor's position in relation to the contractor.
What recourse is available to employers in the event of the contractor’s insolvency?
Investors usually reserve the right to withdraw from the contract if an insolvency application is filed for a contractor. Some investors also reserve the right to take over contracts with subcontractors and to enter into subcontracts in place of the contractor.
What mandatory insurance coverage applies to parties involved in construction projects? Is any additional coverage recommended?
Professional liability insurance (corporate) is mandatory in respect of architects. However, as this does not provide a full guarantee of or security for the investor's interests where the design and construction works have a significant value, the investor should include in the contract with designers special provisions regarding holding additional insurance for conducted business activity.
When regard to contractors of construction works, it is normally required to have ‘construction all risk’ and ‘erection all risk’ insurance policies at least equal to the amount of the contractor’s contractual remuneration.
What tax liabilities arise in relation to construction projects?
Value added tax (VAT) is settled by the seller who delivers goods or renders services. Since 2017, a reverse charge system has been used for VAT. Settlement of VAT on construction services using the reverse charge system is mandatory for legal persons and organisational units without legal personality, and natural persons purchasing services listed in Annex 14 (Items 2-48) to the Value Added Tax Law (if all of the specified conditions are met).
The list of construction services covered by the reverse charge system is closed. Services included on the list are identified using the Polish Classification of Goods and Services and related methodology guidelines.
Are there any tax incentive schemes to promote construction and development in certain areas?
In general, there are no tax allowances or incentives for contractors in the construction service sector.
What environmental protection legislation and regulations apply to construction projects in your jurisdiction?
The Environmental Protection Law sets environmental protection requirements for newly built or rebuilt construction structures, complexes and installations, and imposes an obligation to consider environmental protection during construction works. In general, Polish law provides a wide number of regulations across several legal acts which set requirements and minimum standards for specific construction structures, including with regard to their location.
What environmental authorisations and certifications are required for construction projects and how are they obtained?
An environmental impact assessment must be conducted before commencing and executing a construction project. It is the first stage of this process, preceding obtaining a building permit. Pursuant to a 2008 law on publishing information about the environment and its conservation, public participation in environmental protection and environmental impact assessments, decisions are issued by competent local government authorities or competent government administration authorities, depending on the type of project.
‘Green’ regulations and incentives
Are there any regulations or incentive schemes in place to promote the construction of energy-efficient and low-carbon buildings?
The following regulations are relevant:
- The Act on Energy Performance of Buildings (29 August 2014);
- The Regulation of the Minister of Infrastructure and Development on Methodology of Determining Energy Performance of Buildings or Parts of Buildings and Energy Performance Certificates (27 February 2015);
- The Regulation of the Minister of Infrastructure and Development on Performing and Detailed Scope of Verification of Energy Performance Certificates and Protocols from the Inspection of Heating or Air Conditioning Systems (17 February 2015);
- The Regulation of the Minister of Infrastructure and Development on Templates of Protocols from the Inspection of Heating or Air Conditioning Systems (17 February 2015); and
- Council of Ministers Resolution 91 on Adoption of the National Plan for Increasing the Number of Nearly Low Energy Buildings (22 June 2015).
Employment and labour law
What employment and labour legislation applies to construction projects in your jurisdiction? What rights and protections are provided to construction workers?
All employment contracts concluded with employees employed in the course of construction works by contractors and subcontractors are regulated by the general Labour Law, which sets the rules governing employment, remuneration, occupational health and safety and fire protection, among other things.
Occupational health and safety
What occupational health and safety regulations apply to construction projects?
Certain industry regulations provide stricter governance regarding working conditions (eg, work at heights or with heavy machinery).
What types of employment contract are typically used for constructions work? Are there any mandatory or prohibited provisions in relation to employment contracts?
The most common form of employment at construction sites is by way of an employment contract, although civil law contracts (eg, a mandate contract or a contract for specific work) may apply to persons with construction authorisations or special qualifications required by law (eg, site managers and managers of relevant disciplines).
What rules, restrictions and considerations apply to the hiring of foreign workers?
EU citizens are privileged in respect of taking up employment in Poland, as are citizens of countries with which the European Union has entered into agreements on free movement of persons; in most cases these people may take up employment in Poland without obtaining a work permit. As a general principle, a person holding the nationality of an EU member state or a country with which the European Union has entered into agreements on free movement of persons may be freely employed in Poland.
Persons from countries not subject to free movement of employees may work in Poland after obtaining a work permit, which is issued by a voivode (provincial governor) competent for the employer's registered office or a competent starosta (district administrator).
On 1 July 2018 the Regulation of the Minister of Labour, Family and Social Affairs on Determining Cases when Work Permits for Foreigners are Issued Irrespective of Specific Conditions for Issuing Work Permits for Foreigners entered into force, which facilitates the employment of foreigners to a degree. The annex to this act lists several professions in the construction industry that are now subject to simplified employment procedures.
What regulations and procedures are in place to combat corruption, bribery, fraud, collusion and other dishonest practices in the construction sector in your jurisdiction?
There is no single law in Poland that regulates this matter in a holistic and complementary manner. Applicable regulations are spread over numerous laws, including the Criminal Code 1997, the Penal Fiscal Code 1999, the Code of Commercial Companies 2000 and the Public Procurement Law 2004.
What best practices are advised to ensure compliance with the relevant anti-corruption rules?
Provisions concerning anti-corruption activities are usually included in construction contracts involving foreign entities. Polish entrepreneurs rarely introduce such provisions on their own initiative, instead seeking in principle to impose on the contractor a general obligation to notify competent state authorities of any breach of the common applicable law.
What courts are empowered to hear construction disputes in your jurisdiction? Are there any specialist construction courts?
Matters pertaining to public law (eg, the Construction Law, which governs the provision of building permits) are decided by administrative courts, while matters pertaining to the performance of a construction contract (regardless of whether the party is a private entity, a local government, the State Treasury or entities owned by a local government or the State Treasury) are decided by common courts. Depending on the type or value of the subject of a dispute, cases at first instance are decided by district or regional courts.
What issues are commonly the subject of construction disputes?
The most common issue referred to the courts relates to charging contractual penalties for failure to meet the agreed timeframe for performance of construction works, which results from disputes over whether non-performance of a contract was caused due to reasons attributable to the contractor or the investor. The second most common matter concerns the performance of obligations under the warranty for defects or quality guarantee. The third most common issue relates to subcontractors seeking remuneration from the investor under its joint and several liability with the contractor where the contractor has failed to properly settle with them.
Statute of limitations
What is the statute of limitations for filing construction-related claims?
Following legislative changes in 2018, claims concerning business activity (including payment of remuneration under the construction contract) become statute barred after three years – the end of the barred period falls on the last day of the calendar year in which the claim has become due (Article 118 of the Civil Code).
Claims concerning warranty for defects become barred within a timeframe defined in the construction contract. If the contract does not regulate this issue, claims become barred after five years for a building and two years for other issues. Contractual parties may extend this timeframe. In the construction sector, the most common validity period of the warranty for defects is five to eight years. The period of guarantee is usually connected with the period of liability for the warranty for defects. The Civil Code established a two-year quality guarantee period.
Is pre-litigation mediation required or advised for construction disputes?
Mediation is not mandatory, although before referring a case to hearing (after a suit has been filed), the courts encourage the parties to seek amicable settlement of the dispute. The settlement agreement concluded by the parties before a mediator must be approved by the court in order to have the same legal force as a court settlement.
Mediation has not been very popular, although the number of cases where parties decide to mediate is increasing. However, this does not translate into an increase in cases effectively resolved through mediation.
How often is arbitration used to resolve construction disputes? What arbitration forms and institutions are typically used?
Disputes are usually referred to arbitration where a contractual party is a foreign entity. Cases are most often referred to arbitration where the value of the dispute is significant. The number of cases where the parties resort to arbitration is increasing.