Why entrepreneurs should prepare for a change in civil procedure?

6 changes in the CCP with a significant impact on business. 6 reasons to read this article.

On 7 November 2019 and 1 January 2020, two amendments to the Code of Civil Procedure will come into force, which will have a significant impact on conducting business in Poland and even on maintaining the financial liquidity of the entrepreneur.

According to the authors of the new regulations, their aim is, inter alia, to simplify the proceedings conducted between entrepreneurs and to improve the collection of mutual receivables. Here is a subjective selection of 6 significant changes of practical importance for anyone running their own business.

I. From 7 November, a judgment of the Court of First Instance obliging a debtor to pay a certain amount to a creditor, although not legally binding, will be a security title without any additional formalities. In practice, this means that after obtaining a favourable judgment, the creditor will have the opportunity to refer the case to the bailiff who, even before the debtor lodges an appeal, will collect the amount awarded in the judgment from his bank accounts and transfer it – for the duration of further court proceedings – to the deposit of the Minister of Finance. If further proceedings reveal that the judgment of the Court of First Instance was incorrect, the bailiff will order the return of the amount secured in deposit to the debtor. If the court of second instance upholds the judgment, the money from the deposit will go straight to the creditor after the enforcement clause is obtained.

The mechanism discussed here has both advantages and disadvantages. It guarantees the creditor the effectiveness of the judgment and protects it against a situation in which, after a few years, it would obtain a favourable judgment, which could no longer be enforced due to the debtor’s poor financial standing. For an entity that has been wrongly sued and convicted, the new rules mean that capital will be frozen for several years. If such a verdict is for a large amount of money, it may seriously destabilise the business.

II. In cases pending between entrepreneurs, the claimant and the respondent will be required to present all evidence useful for resolving the case already at the stage of the statement of claim and the statement of defence. In the case of a statement of defence, the court may set the defendant a time limit of up to one week to complete all formalities in this respect. If you receive a statement of claim, we encourage you to contact your lawyer immediately.

III. After 1 January 2020, the judgment of the court of first instance in a commercial case will not be the worst that can happen to the debtor. In a situation in which:

a. the debtor will be delayed in paying the invoice for at least 3 months;

b. arrears from unpaid invoices do not exceed PLN 75,000 gross;

c. both parties to the transaction are entrepreneurs;

the creditor will be able to apply for security in court before filing a claim for payment, and the court will automatically grant that security to the creditor during the proceedings. The debtor will learn about the security from the bailiff when the bank accounts are seized. The secured amount will be deposited (see point I).

IV. From 1 January 2020, the statutory interest rate in commercial transactions shall be increased. It will raise from 9.5 % to 11.5 %, with one exception: the increase will not be extended to public medical debtors.

V. Under the new rules, parties will be able to agree not to use certain types of evidence in a possible future court dispute, e.g. evidence from e-mail correspondence or evidence originating during the contract negotiation period. Such an agreement can be included in any contract between entrepreneurs, so it is important to read carefully after 7 November 2019 drafts of such documents received for signature from the other party, including the final provisions in the contracts.

VI. After 7 November, in disputes between traders, the possibility to examine witnesses will be limited (with some exceptions). Therefore, the importance of e-mail correspondence and written documents increases. Entrepreneurs should make sure that all important business arrangements related to the negotiation, content and manner of contract performance find their trace in the correspondence.

The procedural changes described above will concern only new cases initiated before the court after the amendment comes into force. Therefore, by the end of the year, it is worthwhile to settle all outstanding invoices not paid to contractors.