Polish FDI Screening: Navigating the Act on Control of Certain Investments for Non-EU Buyers

In recent years, Poland has joined the growing global trend of implementing robust foreign direct investment (FDI) screening mechanisms. As international capital flows continue to shape the Polish economy, the government has established a comprehensive legal framework to protect strategic sectors while maintaining an open business environment. The Act on Control of Certain Investments, introduced in 2015 and significantly expanded in 2020, represents Poland’s response to increasing concerns about foreign takeovers of sensitive industries, particularly from non-EU investors.

For international investors eyeing Polish assets, understanding this regulatory landscape has become essential to successful transaction planning. The screening mechanism creates an additional layer of compliance requirements that can significantly impact investment timelines, deal structures, and even the feasibility of certain acquisitions. With potential fines reaching up to PLN 50 million and criminal sanctions including imprisonment of up to 5 years for violations, the stakes for investors have never been higher.

This comprehensive guide aims to navigate the complexities of the Polish FDI screening regime, providing foreign investors with practical insights into the scope, procedures, and strategic considerations needed to successfully complete transactions subject to this oversight. Whether you’re planning a greenfield investment or considering an acquisition of a Polish company, mastering these regulations is now a critical component of your investment strategy.

What is the Polish Act on Control of Certain Investments?

The Polish Act on Control of Certain Investments (the “Act”) establishes a national security review system for foreign investments in strategic sectors of the Polish economy. Initially introduced in 2015, the Act was designed to protect key industries from potentially harmful foreign takeovers. The legislation was significantly expanded in 2020 in response to the COVID-19 pandemic and growing concerns about foreign control of critical infrastructure and technologies.

The Act creates a mechanism through which designated governmental bodies can review, approve, or block foreign investments that may pose a threat to public order, security, or health. It applies to both direct acquisitions of Polish companies and indirect transactions where control of Polish entities changes through upstream ownership changes.

Unlike some investment screening regimes that focus exclusively on non-EU investors, the Polish system has both a permanent component targeting specific strategic sectors regardless of investor origin, and a temporary regime with broader scope that specifically addresses non-EU/non-OECD investors. This dual approach reflects Poland’s balanced strategy of protecting national interests while maintaining its position as an attractive destination for foreign capital.

Which sectors fall under the Polish FDI screening mechanism?

The Polish foreign investment control regime covers two distinct groups of sectors. The permanent screening mechanism focuses on entities operating in strategically important industries including:

• Energy generation and distribution
• Oil and gas storage, transmission, and processing
• Telecommunications
• Chemical manufacturing and trading
• Defense industry enterprises

The temporary screening mechanism, which was expanded in response to the COVID-19 pandemic and is currently in effect through 2025, covers a much broader range of protected entities including:

• Critical infrastructure operators
• Software developers for critical infrastructure
• Entities processing sensitive data
• Companies in the medical, pharmaceutical, and food processing sectors
• Utilities providers
• Entities developing critical technologies (including AI, robotics, cybersecurity)

This expanded scope reflects the Polish government’s recognition that national security concerns extend beyond traditional military and energy sectors to encompass digital infrastructure, healthcare, and emerging technologies that may impact Poland’s technological sovereignty.

How does the screening process work for non-EU investors?

For non-EU and non-OECD investors, the Polish FDI screening process involves several distinct steps. First, investors must determine whether their planned transaction falls within the scope of the Act. This assessment should consider both the nature of the target company (whether it qualifies as a protected entity) and the transaction structure (whether it would result in “significant participation” or “dominance” as defined in the law).

Once the applicability is confirmed, the investor must submit a notification to the appropriate authority—either the President of the Office of Competition and Consumer Protection (UOKiK) or the Minister of State Assets, depending on the sector involved. The notification must include detailed information about the transaction, the investor, and the target company.

After receipt of a complete notification, the authority has an initial review period of 30 business days to either approve the transaction or initiate a formal control procedure. If a formal procedure is opened, the review period extends by an additional 120 calendar days, during which the authority conducts a thorough assessment of the potential impact on public security, order, or health.

What constitutes “significant participation” under the Polish screening law?

Under the Polish FDI screening regime, “significant participation” is a key threshold concept that triggers the notification requirement. The Act defines significant participation as:

1. Acquisition of at least 20% of voting rights or profits in a protected entity
2. Acquisition of at least 20% of shares or stocks
3. Gaining a dominant position in the company
4. Acquisition of part of an enterprise that constitutes a financially independent business

For investors, understanding this concept is crucial because even indirect acquisitions can trigger the screening requirement. For example, if a foreign investor acquires a company outside Poland that controls a Polish protected entity, this indirect change of control would still require notification and approval under the Act.

Importantly, the assessment of significant participation looks at the aggregate holdings. This means investors cannot circumvent the requirements by structuring a transaction as multiple smaller acquisitions that individually fall below the thresholds but collectively exceed them.

Can the Polish government block foreign investments completely?

Yes, the Polish authorities have the power to completely block foreign investments that are deemed to present a threat to public security or order. The Act provides the reviewing authority with three possible decisions at the conclusion of the screening process:

• Approval of the transaction without conditions
• Conditional approval with specific requirements or restrictions
• Prohibition of the transaction

The decision to block an investment must be based on objective and non-discriminatory criteria related to legitimate public interests. While the Act provides considerable discretion to authorities, their decisions must be justified and can be challenged through administrative courts if investors believe the rejection was unwarranted.

In practice, outright prohibitions are rare. The Polish government generally seeks to balance security concerns with its interest in attracting foreign capital. When issues arise, authorities often prefer to negotiate conditions or modifications to the transaction rather than imposing a complete block.

If you’re navigating a complex transaction that may fall under the screening regime, Kopeć Zaborowski Attorneys at Law offers comprehensive legal support through every stage of the review process, helping clients structure their investments to address potential security concerns while achieving their business objectives.

What are the consequences of non-compliance with the Polish screening requirements?

Non-compliance with the Polish foreign investment control requirements can result in severe penalties for investors. The Act establishes both administrative and criminal sanctions:

Administrative penalties include fines of up to PLN 50 million (approximately €11 million) that may be imposed on the acquiring entity. Additionally, the law provides for nullification of transactions completed without required approval, meaning the investor would gain no legal rights from the acquisition despite having paid the consideration.

On the criminal side, individuals responsible for executing unauthorized transactions face potential imprisonment of up to 5 years. This can include board members, directors, or other representatives who knowingly proceed with a notifiable transaction without obtaining the necessary clearance.

Beyond these formal penalties, non-compliance can also lead to significant reputational damage and complications in future dealings with Polish authorities. The government may apply heightened scrutiny to subsequent investment attempts by entities with a history of circumventing the screening requirements.

How long does the Polish FDI screening process typically take?

The timeline for completing the Polish FDI screening process depends on whether the case requires a standard review or an extended investigation. The statutory timelines are:

• Initial review period: 30 business days from submission of a complete notification
• Extended review period (if formal proceedings are initiated): additional 120 calendar days

In practice, the actual duration can vary significantly. Straightforward cases involving non-sensitive sectors may be cleared within the initial 30-day period. However, complex transactions or those involving critical infrastructure often require the full review period and may even face extensions if the authorities request additional information.

Investors should note that the clock only starts running once the notification is deemed complete. Authorities often request supplementary information, which can effectively extend the pre-filing phase. For transaction planning purposes, it’s advisable to build in a buffer of 4-6 months to account for the entire process, especially for investments in sensitive sectors.

Are there exemptions or simplified procedures for certain types of investors?

The Polish investment screening law does provide certain exemptions and differentiated treatment based on the origin of the investor. The most significant distinction is between EU/OECD investors and those from other countries.

Investors from EU or OECD countries benefit from a more limited application of the temporary screening regime. While they still fall under scrutiny when investing in the core strategic sectors covered by the permanent mechanism, they face fewer restrictions when investing in the broader range of sectors added under the temporary regime.

Additionally, certain transaction types may qualify for exemptions, including:

• Intra-group restructurings (provided the ultimate beneficial ownership doesn’t change)
• Small-scale investments that don’t reach the “significant participation” thresholds
• Investments specifically approved under other statutory frameworks

The law also contains a de minimis exemption for entities with annual turnover in Poland below €10 million in any of the two financial years preceding the notification. However, this exemption is narrowly applied and doesn’t extend to all sectors.

How does Poland’s FDI screening compare to other EU member states?

Poland’s approach to foreign investment screening aligns with the broader European trend toward increased scrutiny of inbound investments, but has several distinctive features. Compared to screening mechanisms in countries like Germany, France, or Italy, the Polish system is:

More focused on specific sectors rather than transaction value thresholds. While some EU countries trigger reviews based on the size of the investment, Poland primarily looks at the strategic importance of the target’s activities. The Polish regime also features a dual structure with both permanent and temporary components, whereas most EU counterparts have established permanent frameworks without time limitations.

In terms of review timelines, Poland’s process (30+120 days) is roughly in line with EU averages, though somewhat longer than the most efficient systems. The enforcement approach in Poland tends to be more formalistic, with less emphasis on informal pre-notification consultations than seen in countries like France or the Netherlands.

One notable distinction is Poland’s explicit focus on non-EU/OECD investors in its temporary regime, which creates a more pronounced differentiation based on investor origin than some other EU screening systems. This reflects Poland’s strategic concerns about investments from certain regions while maintaining relatively open access for allies.

What practical steps should investors take to navigate the Polish screening process successfully?

To successfully navigate the Polish FDI control mechanism, foreign investors should adopt a proactive and strategic approach:

1. Early assessment: Conduct a preliminary analysis during the initial transaction planning to determine whether the investment falls within the scope of the screening law.
2. Transaction structuring: Consider whether alternative investment structures might reduce regulatory concerns while still meeting business objectives.
3. Prepare comprehensive documentation: Gather detailed information about the investor’s ownership structure, financing sources, and business plans for the target to address potential security concerns.
4. Develop mitigation strategies: Identify potential security concerns in advance and prepare proposals for addressing them, such as governance arrangements or commitments regarding sensitive assets.

Engaging experienced legal counsel with specific expertise in Polish foreign investment controls is essential. Kopeć Zaborowski Attorneys at Law offers specialized services in this area, providing strategic guidance throughout the process from initial assessment through notification preparation and negotiation with authorities. Their team’s experience with both the Polish screening mechanism and cross-border transactions ensures efficient navigation of these complex requirements.

How might Poland’s FDI screening regime evolve in the coming years?

The Polish foreign investment screening landscape is likely to continue evolving in response to both domestic priorities and EU-level developments. Several trends appear likely to shape the regime’s future:

First, the temporary regime introduced during the pandemic and currently extended through 2025 may be integrated into the permanent framework, potentially with modifications based on implementation experience. This would expand the permanent scope of protected sectors beyond the current narrow focus.

Second, Poland is likely to refine its approach to technologies with dual-use potential, particularly in areas like artificial intelligence, quantum computing, and biotechnology. As these fields grow in strategic importance, the screening mechanism may be adjusted to specifically address investments in these emerging technologies.

Finally, ongoing harmonization efforts at the EU level, including the implementation of the EU FDI Screening Regulation and cooperation mechanisms between member states, will continue to influence Poland’s approach. This may lead to procedural adjustments to enhance alignment with EU-wide practices while maintaining Poland’s distinct focus on its national security priorities.

For investors with long-term interests in Poland, staying attuned to these regulatory developments will be essential for strategic planning and risk management.

Bibliography

1. Act of 24 July 2015 on Control of Certain Investments (Journal of Laws of 2020, item 2145, as amended)
2. Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union
3. European Commission, “Guidance to the Member States concerning foreign direct investment and free movement of capital from third countries, and the protection of Europe’s strategic assets” (March 2020)
4. OECD, “Investment Screening in Times of COVID-19 and Beyond” (June 2020)
5. Polish Office of Competition and Consumer Protection (UOKiK), “Guidelines on the control of certain investments” (2021)