Poland: centre stage

Talk to Polish lawyers, and they speak of optimism and ambition. They point to their country’s sustained economic growth, with gross domestic product rising even during the worst years of the recession. Theirs, after Ukraine, is the most populous country in central Europe, they say, with huge reserves of shale gas and an inflow of EU funding to finance infrastructure development. What is more, Poland borders the economic powerhouse of Germany and has easy road and rail access to other wealthy western European countries.

The future is bright, say Poland’s lawyers, and yet NATO forces are massing on their country’s eastern border, flexing their muscles in response to Russia’s aggression against the sovereignty of their neighbour, Ukraine. Some 60%-70% of Poland’s apple harvest, an export market worth €400m, remains unsold as Russia responds to international sanctions by imposing sanctions of its own.

Poland’s pig farmers have also, for the same reason, lost a lucrative market, with processing plants unable to meet running costs, and politicians urging them to give pork away to developing African countries.

Poland’s political landscape is in flux, too. After seven years of the authoritarian Donald Tusk in charge, Ewa Kopacz was sworn in as the country’s new prime minister on 22 September. She is the second woman prime minister of Poland, and is said to be vulnerable to predators both inside and outside the centre-right Civic Platform party.

Could Poland’s economic and political fragility, combined with Russia’s power games, create an instability that frightens away international investors? Or do Poland’s lawyers have good reason to remain so bullish?

‘The Polish economy is constantly growing and that trend will continue into the foreseeable future,’ Maciej Gawronski, head of the Warsaw office of international firm Bird & Bird, insists. ‘Poland is undergoing continuous transformation. It has moved away from a socialist to a capitalist system and has undergone its first wave of infrastructure investments. Now it is focusing on moving towards [becoming] a knowledge and innovation economy and an information society.’

One consequence of this transformation, continues Gawronski, is that Poland has evolved into a ‘dynamic and aggressive market’ for law firms.

‘There is strong price pressure,’ he says, ‘a demand for fixed fees, a mixed understanding of value coming from legal services, as well as a tendency to get into disputes because of a reluctance to make decisions. There is also a constant opening up of the legal market, increasing numbers of new lawyers coming out of universities, too much information and regulation, and the growing commoditisation of legal services. All of this makes it challenging for law firms to grow.’

How does Bird & Bird plan to meet this challenge? ‘[Nationally], we need to deal with the sluggish court system. Over-regulation is also an issue,’ Gawronski replies. However, as a firm, Bird & Bird needs to focus on those practice areas where it can show ‘unrivalled expertise’ and where it is already ‘ahead of the market’. He says: ‘Intellectual property is our rising practice area. New patent and unfair competition disputes, not only in pharmaceuticals, but also in information technology, including cloud computing, the chemical industry, flooring, machinery and electronics.’

And what about politics? ‘We in Poland talk a lot about politics and generally complain,’ he replies. ‘The paradox is that politics does not affect the economy all that much.’

Warsaw firm Drzewiecki Tomaszek Wspolnicy managing partner Zbigniew Drzewiecki points out that, after Latvia and Lithuania, Poland’s economy is the fastest-growing in the EU. ‘Economic projections,’ he says, ‘suggest that our economy will grow at a rate of 2.5% per annum through to 2030, making us one of the world’s top 20 economies. Even now, we are the ninth-largest economy in the EU and 23rd in the world by GDP.’

Drzewiecki continues to list reasons why law firms should have confidence in Poland’s future. ‘Poland is the financial hub of central and east Europe (CEE). The value of initial public offerings last year was €1.13bn, placing us fifth in Europe. This is why global players, such as Goldman Sachs, Credit Suisse, UBS, Société Générale, HSBC, Morgan Stanley and Merrill Lynch, are already here. We are the largest EU funds beneficiary with €68bn in the years 2007-2013 and €106bn projected for 2014-2020. Foreign direct investments into the country since 2006 total more than $100bn.’

The Gazette asks if there are any barriers at all to Poland’s growth. Drzewiecki replies: ‘Naturally, as anywhere, there are obstacles that impede faster growth.’

The country should focus on liberalising the labour market, he says, on privatising the still very sizeable state-owned sector and on improving the competitiveness of agriculture and transport infrastructure. ‘Bureaucracy, poorly working public procurement and demographics are also areas of concern,’ he adds.

Grzegorz Namiotkiewicz, managing partner (Warsaw) of magic circle firm Clifford Chance, which has a team of more than 70 lawyers in Poland, is equally bullish. ‘From the perspective of 22 years here, Poland has been a good investment for Clifford Chance and its clients,’ he says. ‘The combination of a deep knowledge of the local legal, economic and business environment, along with the firm’s global network and standards, has been the right offering for Polish clients and our international entities with interests here.’

What market sectors are the most dynamic? ‘Energy, infrastructure and defence,’ Namiotkiewicz replies. The Polish government is continuing ‘substantial investments’ in the construction of new power stations, the country’s first nuclear power plant, shale gas projects, liquefied natural gas terminals, gas pipelines and gas storage facilities. It is also spending heavily on modernising the road, rail and airport infrastructure.

‘Armament tenders related to the modernisation of the Polish army, estimated to have a value of around €32bn, are another attractive business opportunity for law firms in Poland,’ says Namiotkiewicz. ‘In addition, 2014 and 2015 are likely to be the last years of direct privatisation, where investors will be able to find large, valuable assets including energy and infrastructure companies and telecom operators.’

The Gazette next talks to an eight-lawyer firm in Krakow, Poland’s second city – the eight lawyers comprising four adwokat (similar to barristers) and four radca prawny (similar to solicitors). Golenia Hanusa Wojtyczek partner Michal Hanusa relates that interest in property sharply declined during the economic turndown.

‘Krakow is Poland’s top tourist destination and there was a lot of inward investment from the UK and Ireland as people bought holiday flats prior to the recession,’ he says. ‘But in 2008-2010, many of these same people tried to sell their properties. Now that has all changed again, and there is an upward movement in the real estate market.’

The pollution caused smog, similar to London’s in the 1950s and 1960s. Residents have been told to convert their fires to gas or electricity, some of the latter ideally generated by wind power or clean energy source

Andrew Kozlowski, CMS Cameron McKenna

Hanusa is confident about the country’s economic future. ‘Some people fear that the Ukraine crisis and Russian sanctions could stall growth,’ he says, ‘but this is not the first time that the Polish economy has had to react to outside influences. Also, it is not smart to put all your interests in one market. Perhaps it will encourage the agricultural sector, in particular, to look for markets apart from Russia.’

CMS Cameron McKenna has operated in Poland for almost 20 years, having opened ‘from scratch as a green field development’ by managing partner Andrew Kozlowski. The firm now has offices in Warsaw and Poznan. He says the final ‘two or three years’ of the recession were the worst, although ‘EU funding of infrastructure development softened the blow’ and at least the banks were forced to make ‘fewer dud loans’. He points to renewable energy as a growth area.

‘The government used to subsidise all wind-farm developments,’ says Kozlowski, ‘until, two years ago, it decided only to do so for wind farms in an advanced stage of completion.’

He alludes to the city of Krakow’s decision to ‘outlaw the use of old furnaces’ for heating people’s homes. ‘The pollution caused smog, similar to London’s in the 1950s and 1960s,’ he says. ‘Residents have been told to convert their fires to gas or electricity, some of the latter ideally [powered] by wind power or other clean energy sources.’

Business process outsourcing is another growing opportunity, with HSBC, Shell and UBS, among others, already outsourcing work to Poland, he says. Finally, Kozlowski discusses the current ‘political issues’ with Russia. ‘Meat, fruit and vegetables are no longer being exported to Russia,’ he says. ‘This is a particularly acute problem as agriculture is a big business in Poland.’

Jan Rolinski, co-founding partner in 2004 of Warsaw firm Wiercinski Kwiecinski Baehr (WKB), practises public procurement law, having built his experience advising on Poland’s largest infrastructure projects – such as road building, sports stadia, gas terminals, big IT projects and power stations. ‘Wind farms are a hot topic because of the requirement for energy distributors to ensure that part of their output is from renewable energy sources,’ he says. ‘It is all part of our international obligations [to reduce emissions] and is expected to be profitable.’

He adds that Poland has the largest deposits of shale gas in Europe and that WKB advises international and state-owned players who have been awarded licences for exploration. Rolinski comments on the impact of politics on the legal sector. ‘Politics is not important to private law firms practising in Poland, but only to state-owned enterprises,’ he says. ‘A change of government might have a slight impact, but as a rule, legal practice is free of political interference.’

DLA Piper regional managing partner Krzysztof Wiater, a corporate lawyer, says: ‘Poland is a hub for multinational businesses keen to develop their presence in CEE. With a stable democracy, continuous economic growth and convenient access to other CEE countries, Poland remains a gateway to the region and the opportunities it presents.’

What are these opportunities? ‘The Polish market is still developing,’ he replies. ‘As such, there are still many attractive areas of growth for sectors such as agriculture, infrastructure, rail and renewable energy. What is more, the geopolitical situation in our immediate region [the crisis in Ukraine] has created business opportunities that we had not expected to develop at such a pace – defence and aviation, for instance.’

Unalloyed optimism, then, from the legal sector of a country that last century survived first the brutalities of Nazi invasion and then the stranglehold of Soviet occupation and ideology. There is clearly a healthy cohort of home-grown law firms, but also many big name international players who have teamed up with local lawyers to capitalise on the latter’s in-depth knowledge of Polish law and procedure.

The Ukraine crisis is a cloud on the horizon, but in contrast Poland’s substantial shale gas reserves, its developing economy and its geographical position as a CEE hub are the fundamentals on which the legal community bases its confidence.

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Jonathan Rayner is Gazette staff writer