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Paying the price for a bad bill
2008-11-24 | Paweł Pucher | CREview MAPIC Report | komentarz
| In Poland, the Act on Establishment and Operation of Large-Area Commercial Buildings was in force for over a year from the middle of 2007. During that period, it almost completely blocked opportunities for building new retail spaces of over 400 square meters in size. However, the Polish Tribunal rejected the law, ruling it unconstitutional in its entirety, thus sharing the objections over the legal act’s contradiction with the Polish basic law and the EU law which were made by numerous groups, organizations, and institutions.
There are many indications that the Tribunal’s ruling, which eliminated controversial limitations in investment activities, will not be an end to the issue. A number of retail chains and developers who remain active in the market of large commercial space as well as financial institutions which invest in this sector of the market have incurred measurable losses as a result of the bill on large-area commercial buildings passed by the former Parliament. In connection with the Act, some were forced to change their investment plans significantly by, where possible, altering the scope of their investments or ceasing to build specific developments or backing out from their financial engagement in other investors' projects. Others, risking significant prolongation of the investment process, chose the arduous course of making efforts to obtain decisions on establishing large-area retail spaces or on operating the already existing ones which, nota bene, despite lack of executive acts to the bill, ended with success, i.e. with obtaining a now redundant permit for operating a large-area commercial space.
Thanks to the unequivocal ruling of the Tribunal, the businesses which were wronged by the banned regulations have fairly good chances to receive reimbursement from the State Treasury for costs incurred in relation to the efforts to obtain the useless permits, as well as to recover from the Inland Revenue part of the profits lost as a result of investments either abandoned or deferred in time. Article 4171 § 1 of the Civil Code (together with the remaining regulations regarding liability for damages) constitutes a basis of liability of the State Treasury for so-called legislative lawlessness, with which we are certainly dealing in the case of the large-area retail buildings. What remains is to prove the loss and a causative relationship between passing the lawless bill or the decisions issued on its basis and the damage. In many specific cases, this will not be that difficult.
The most disputable issue is the circle of entities which could file for such damages. Undoubtedly, damages are due to a business person who, under the provisions of the banned act, petitioned for a building permit or for a permit on operating a large-area retail building (if he did not receive a permit, he can demand both a return of the expenses incurred in relation to issuance of the permit and benefits he has lost as a result of delays in his investment connected with his endeavors to obtain the permit). On the other hand, it might be considered controversial for a situation to develop in which demands for damages are raised by those who, despite being forced to change their investment plans, failed to undertake efforts to obtain the permits required by the banned legislation. The evaluation of the situation is made much more complicated by the circumstance in which many of the business people backed out from filing petitions for issuance permits on establishing a large-area commercial space, convinced (as were many lawyers) that obtaining the permit would be impossible until a time when a competent minister issued an executive regulation to the Act – which, in fact, never took place either.
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