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A new law has been passed on the use of the Polish language in agreements relative to transactions to be conducted in Poland. The Act on the Polish Language of October 7, 1999 consists of only 19 articles, but will have a consequential impact on foreign investors due to a few significant new regulations which become effective in the next few months and should not be ignored by those interested in conducting business in Poland. Some of the Act's provisions may create problems for foreign investors who fail to comply with the Act.

Duties regarding the form of agreements

First and foremost if a party to an agreement to be performed in Poland is a Polish entity, the agreement must be concluded in Polish. Fortunately foreign language versions of the agreement may exist and even prevail, but the Polish version will be binding, unless provisions of the agreement provide otherwise. Consequences for parties concluding an agreement in breach of this requirement are severe. Namely, in the event of a dispute, the evidence of witnesses and evidence in the form of a statement by the parties concerning the performance of the agreement will not be admissible. However, these evidences will be admissible if both parties consent to that effect or if the fact of performance of the agreement is made probable in writing. It should be stressed that the mere creation of a foreign language version of an agreement does not fulfill the requirement for a "fact which makes the performance probable."

Pursuant to statutory definition, a Polish entity is:

The Act does not specify when an agreement should be regarded as "performed in Poland". For this reason, as long as court precedents or legal doctrine do not define what should be understood by this term, all agreements where at least one party is a Polish entity should be executed in the Polish language as well as any other language preferred by the parties.

Use of the Polish language in legal transactions

In accordance with the Act, the Polish language should be used in legal transactions between Polish entities and when at least one party is a Polish entity. It specifically refers to names of goods and services, offers, advertisements, instructions, information about the nature of goods and services, guarantees, invoices, bills and receipts. The use of exclusively foreign designations in reference to legal transactions in Poland, except trade names, is prohibited. All foreign descriptions of goods and services introduced to the market require a simultaneous Polish language version. The legislation does contain certain exceptions, for example:

In addition, unless the special provisions provide otherwise, any official act which is subject to state authority and any declarations made to these authorities should be concluded in Polish. Inscriptions and information materials in public institutions and designated for public receipt must be prepared in the Polish language. They could be accompanied by foreign language translations, based on the terms and conditions prescribed by the Minister of Internal Affairs.

With respect to liability for non-compliance with the Act, the exclusive use of a language other than Polish in legal transactions subjects the parties to a fine of 20 to 5,000 PLN (approximately 5 to 1,200 USD) and for continued non-compliance, eventually a sanction imposing a payment of 100,000 PLN (approximately 23,000 USD).

The Act on the Polish Language will come into force on May 9, 2000. Foreign companies that conduct their business activity in Poland therefore must immediately become familiar with and prepare for the requirements of the Act in order to ensure compliance with the Act.

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