Compliance issues when conducting business in Poland

June 3, 2014

It is worth looking at three main issues which can be encountered when doing business in Poland: the first is the legal, institutional and industry framework; the second deals with mentality on the conduct of corruption and bribery; and the third point touches on the relationship between businesses and the government.


Issue 1 – Legal system

The definitions in the Polish Penal Code (Kodeks Karny) of terms such as corruption, bribery and embezzlement are not much different from other countries which have developed laws combating corrupt practices (for example, both making and accepting bribes are crimes. The Polish anti-corruption bureau (Centralne Biuro Antykorupcyjne), police and prosecutor’s office are all actively engaged in fighting corruption; however, the challenge rests elsewhere. The laws appear to be well-established, although probes into corruption and prosecution thereof lack efficiency and transparency. For example, court verdicts may not always be publicly accessible, and investigations by anti-corruption forces (including the final trial) are lengthy, although mostly considered just. Media coverage in Poland generally covers only high-profile cases, indicating that it is difficult to retrieve media information on a local business partner by a foreign partner.


Issue 2 – Mentality of the local people

The second challenge that exists in Poland involves the mentality of its people, which is understandable given that Poland does not have a consistent and holistic policy dealing with unethical behaviour. There are laws and campaigns as well as new bills about corruption, although given the lack of education on this topic and the lack of consistency and “holistic-ness” of Poland’s policy in dealing with unethical behaviour it is easy understand why there is no experience, and consequently a blind eye by businesses and the public on the matter. Training an already-established view on corruption can be difficult, but isn’t impossible, provided that this perspective is understood and approached accordingly.


Issue 3 – Government involvements in business

The final point of this overview relates to the relationship between businesses and the Polish government. The government still holds a stake in many industries, such as healthcare and telecommunications, and the existence of procurement processes no doubt involve businesses interacting with the government; however, the transparency in these procurements are sometimes doubtful. Not long ago, a large international corporation was fined for sponsoring “training courses” for doctors in exchange for choosing their products over other offers. These “training courses” were, in fact, holiday trips with lavish entertainment. Other scandals were discovered in the IT industry, where public procurement was constructed in a way to favour a specific company, and bribes were being accepted. One of the ministries was involved in such conduct for several years, with arrests being made recently. More information about these can be found through the local media, given the limited public access to court cases. Enquiries can also be made to industry experts or businesses engaging in the same industry. One must not forget that Poland, as in many other countries, also has businesses run and held by politicians or relatives of politicians, increasing the risk of illicit conduct taking place.


Compliance due diligence in Poland

Poland is a great economy to do business in; however, the three main points – legal framework, mentality of the local people, and business and politics intertwining – should be taken into account, understood and monitored accordingly when a company is engaging with partners and opening businesses in the country. Conducting effective due diligence which covers the above issues and includes making enquiries about government affiliations and misconduct happening within the industry will help a business understand more about their third parties and monitor them accordingly. This also applies for foreign companies expanding their own businesses in Poland. Implementing controls is essential to prevent a culture which involves passiveness of corrupt practices emerging, and will reduce the risk of liability in the Polish legal system, and possibly the FCPA and UK Bribery Act.


 Corruption cases in Poland

Case 1. Netline, a Polish IT company

In 2011, the Poland CBA and the prosecutor’s office suspected the company paid bribes to government officials in return for winning bids. From 2006 to 2010, the turnover of Netline rose up thirty times despite the financial crisis, from US $1.3 million to $35 million.

Case 2. Johnson & Johnson, a US-based pharmaceutical company

In 2011, they agreed to pay US $70 million for FCPA charges for alleged bribery of European doctors including Polish doctors. It is reported that the US authorities also sent letters to AstraZeneca, Baxter, Eli Lilly and Bristol-Myers Squibb requiring information regarding business practices in Brazil, China, Germany, Greece, Italy, Poland, Russia and Saudi Arabia.

Case 3. Schering-Plough, a US-based pharmaceutical company acquired by Merck in 2009

In 2004, before the acquisition, Schering-Plough was charged by the SEC for making improper payments to a charitable organisation in Poland to induce its director to influence the health fund's purchase of Schering-Plough's pharmaceutical products.

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