Sunday, bloody Sunday

Draft amendments to labour regulations drawn up by politicians from the League of Polish Families (LPR) political party proposed a ban on trading on Sundays and national holidays in all stores except for low-price markets and small outlets selling foodstuffs

The draft was not received well by the Special Parliamentary Committee for Codification Change, which rejected the idea on March 15th this year. This was not, however, the only bill aimed at restricting the business activities of large stores, in particular those of supermarkets and hypermarkets. For many years, representatives of certain political groups have been saying in public that there is a need to introduce more stringent restrictions on the locations of shopping facilities with large retail floor space, known commonly as supermarkets or hypermarkets. These aspirations manifested themselves in a bill submitted by a group of MPs in December 2005 entitled the ‘Large-Scale Shopping Facilities Act’. For the whole of 2006 the special parliamentary committee worked on modifications to the bill, of which the first version met not only with devastating criticism from specialists in the field of legislation, but also with a negative reception on the part of the government. The LPR was not discouraged by this defeat, however – they made the formal modifications required and dropped a few controversial provisions. Finally, on March 1st this year, the final version of the bill was put before a parliamentary forum.

 Law to be amended

 The arrival in Poland of ‘large-scale shopping facilities’ is already subject to statutory regulation, although this term is not used explicitly. Regulations in force relating to facilities of a retail floor space of over 2,000 sqm can be found in the act of March 27th 2003 on Spatial Planning and Development, which provides for the unconditional requirement that the locations of such retail premises must be included in a study and the local zoning plan (art. 10 section 2.8). This entire procedure is carried out at the municipal level, and involves the requirement to perform a series of consultations and to seek the opinions of a number of institutions, even at the study stage. This long and labour-intensive process includes, among other things, an evaluation of the impact of the planned investment on the natural environment, and, because it is performed publicly, all those interested have the opportunity to express their opinions and make comments. 

The envisaged bill contains two principle areas of change to the current legal requirements as outlined above and in each of these areas it radically widens the scope of control over the matter regulated. 

Firstly – by using the definition of ‘retail floor space’ taken from the Spatial Planning and Management Act, the bill states that it applies to shopping facilities of an area starting from 400 sqm upwards.

Secondly – the restrictions apply not only to the location, but also to the operation of shopping facilities, which has not been subject to detailed restrictions up to now.

Unlimited control

 Apart from the need to carry out all of the currently required procedures relating to spatial planning and environmental protection, the creation of a shopping outlet with a retail floor space exceeding the limit provided for in the Act will require one more permit – an administrative decision issued by the head of the municipality, local mayor, or city president. Before the permit can be issued, the local council must issue a positive opinion, and, in the case of facilities with a retail floor space of over 2,000 sqm – also the opinion of the local provincial council, which is based on further detailed analyses, the scope of which is provided for in secondary regulations.

Business activity in such premises will be permitted only for entities which are granted the relevant permit to set up the facility. The permit will be limited in time, issued for no less than 10 years, and will only be transferable up until the moment business activities start on the premises. If the business entity does not open for business within 3 years of the moment the permit is granted, then the permit expires. Any change to the surface area, sector of industry or type of service will require an amendment to the permit. Violation of the Act will be punishable with a fine of between PLN 10,000 and PLN 100,000.

As can be seen, the increases politicians are predicting with regard to the level of control over the location of large-scale shopping facilities – when the time comes for drafting the relevant bill – have turned into an attempt to restrict in a fundamental manner the way all businesses are run. The dramatic lowering of the threshold for retail floor space, excess of which falls under the scope of the Act, means that the restrictions will apply not only to supermarkets, but also to medium-sized facilities, irrespective of the sector in which they operate. In this way many businesses will operate subject to tight administrative restrictions as provided for in the granted permit.

Holding firms back

 Those drawing up the Large-Scale Shopping Facilities Act have decided to meddle with the scope of freedom of commercial activity guaranteed by the Polish Constitution. Under art. 22 of the Constitution, restriction of the freedom of commercial activity is possible by way of an act of law, but only when a major public interest is at stake. Those drawing up the bill deem the need to protect local trade and the related labour market, integrity of cities and urban infrastructure, the municipal infrastructure, etc. to be a major public interest. Not to belittle these issues – although whether they are relevant to the location and operation of large shopping facilities is a question which is arguable and for which there is little evidence – it needs to be said that, citing the need to protect these, plans are afoot to introduce extraordinarily wide restrictions on business activity. The actual development of a shopping facility is already subject to restriction – giving an investor 3 years to obtain a permit for occupancy of a building has led to a drastic increase in the commercial risk involved in such an investment. In addition to this, the Act only allows the transfer of a permit prior to the commencement of business activity, and therefore a firm which is going to invest and begin trading cannot be absolutely sure that in the event of commercial failure it will be entitled to sell the premises to another investor. Any change to the business activity already being conducted may require a permit and for the whole procedure to be gone through again. In such a situation, how is a business supposed to respond to shifts in the market, unfavourable financial results or new trends? On top of all of that, no distinction at all is made in the Act between a supermarket and a large bookshop, clothes store, or car showroom. They will be affected by the restrictions provided for in the Act to the same extent, although the nature of their business is so different, and any potential negative impact of those restrictions on local trade or employment can be considered highly questionable. It seems highly likely therefore that in its current form the bill will be found to be unconstitutional, because it restricts a constitutional freedom in a manner for which there can be no justification. Due to similar considerations, the bill should be deemed contrary to EU law – Directive 2006/123/EC on Services in the Internal Market states that all forms of restriction of the services market (including trade) should be abolished by the end of 2009, unless they are justified due to the “overriding public interest”. It seems that in their eagerness to regulate commercial activity the MPs have gone decidedly too far. 

A hiding for the investor

 It should be supposed that if the Act is passed in its present form, it will be rejected by the Constitutional Tribunal. If this does not happen the consequences of it being implemented could be very serious for several industries. The process of investment in facilities covered by the Act is already a long one, and it will become even longer and burdened by grave risk. Moreover, the lack of the option of selling the premises along with the permit while activity is ongoing will be a major factor for many investment funds not in this line of business who, when investing, assume liquidation of assets after a specific period. This should seriously limit interest in ventures of this kind, and by the same token reduce the number of orders of this kind placed in the property development sector. In turn restrictions with respect to conducting business activity in premises of this kind could become barriers to the expansion of small and medium-sized businesses, who most probably will limit their expansion just so that their business activity does not become subject to restrictive regulations in this Act.

Will reason prevail?

 There will be more negative consequences should the Act come into force in its present form, and probably they cannot all be predicted at this stage. It is possible that in the course of parliamentary discussions more amendments will be made to this Act. The question is, however, should such an act be passed at all? In my view the objectives of its authors with respect to increased control over the location of large-scale shopping facilities can be achieved on the basis of the existing construction, environmental, and above all spatial planning and development regulations.     

Michał Kozłowski

Partner, legal advisor

Krawczyk & Partners law firm

Ttitle/subtitles added by the editors.