1. Is there construction-relevant COVID-19 regulation?
As at 29-03-2020, there has been enacted an act of 2 March 2020 on specific arrangements for preventing, preventing and combating COVID-19, other communicable diseases and the resulting emergencies (“COVID-19 Act”).
Under the COVID-19 act the regular Polish legislation re. development process (i.e. Construction Law, Planning and Development Act; Monumental Protection Act) does not apply to the design, construction, reconstruction, overhaul, maintenance and demolition of buildings, including changes in use, in connection with the COVID-19 countermeasure (meaning means all activities related to the control of the infection prevention of dissemination, prevention and mitigation of impacts, (including socio-economic impacts) of COVID-19; "Countermeasures"). In addition, Polish Public Procurement Law does not apply to service, supply or works contracts awarded in connection with the prevention or suppression of an epidemic in an area in which an epidemic or epidemic-threat has been declared.
Currently, there is an advanced legislation process re. a very extensive amendment to the COVID-19 Act (“COVID-19 Amendment”). As communicated by the government, the COVID-19 Amendment is to be enacted soon, nevertheless the draft Act is still subject to changes. The COVID-19 Amendment For more details on the scope of the COVID-19 Amendment please see below.
2. Subsidies and other government support for employer, contractor and other involved parties? (generic, high level only).
The COVID-19 Amendment [not enacted yet and subject to changes] has been conceived as a package of intervening solutions for many sectors. It provides for solutions such as (i) tax exemptions for micro enterprises, (ii) subsidies for individual contractors and the self-employed, (iii) deferment of payment dates of certain public levies (etc.), (iv) some facilitation for the tourism industry, (v) suspension of obligations under lease agreements in shopping malls, (vi) several banking instruments, and other support mechanisms.
As regards the construction sector the following intervention in Public Procurement Contracts should be highlighted:
[Intervention re. Public Procurement Contracts]
In public procurement contracts, if the circumstances related to the occurrence of COVID-19 may affect or influence the proper performance of the contract, the Contracting Authority may, in agreement with the contractor, amend the contract, in particular by:
- changing the date of performance of the contract or its part, or temporary suspension of performance of the contract or its part,
- a change in the way supplies, services or works are performed,
- a change in the scope of the contractor's performance and a corresponding change in the contractor's remuneration (provided that the increase in remuneration caused by each such change does not exceed 50% of the original contract value).
The similar regulation relates to the contracts between the contractors and subcontractors (further subcontractors).
3. Can the effects of the Epidemic be deemed to be force majeure (or similar legal concepts)? What are the price and time consequences?
Concept of force majeure applies under Polish law, but it is not defined in the legislation. It is controversial whether the current situation meets the definition of force majeure. Answer to this question requires detailed analysis of the specific contract. Most of the practitioners tend to opine that, as for now, force majeure generally does not apply to standard construction contracts.
[Possibility of judicial review of the construction contract]
There are two mechanisms of judicial change of the contractual relations that may be applied in an extraordinary change of relations:
- the rebus sic stantibus clause (in principle applicable to all contracts):If owing to an extraordinary change of circumstances, the performance of an obligation would entail excessive difficulties or would threaten one of the parties with a glaring loss, which the parties did not predict at the moment of the conclusion of the contract, a court of law may, having weighed the parties' interests, according to the principles of community coexistence, determine the manner of the obligation's performance, the amount of the obligation or it may even rule on termination of the contract. When terminating the contract, a court of law may, where necessary, rule on the settlements between the parties, bearing the principles set out in the preceding sentence in mind.
- the valorisation clause (applicable only to works contracts and construction contracts):If as a result of a change of the circumstances which might not have been predicted, the completion of the project would jeopardise the party accepting the commission with a glaring loss, a court of law may increase the lump sum or terminate the contract.
The application of these provisions requires the intervention of the court, which requires bringing an action and conducting a court proceeding. Moreover, the case law indicates that such an action should be brought when the agreement whose content the court is to modify has not yet been executed.
4. Does the Epidemic give rise to termination rights to either party?
Not per se. However, the application of the rebus sic stantibus clause allows for the termination (please see above).
5. Do the measures currently being taken in relation to the Epidemic amount to change in law? What are the price and time consequences?
Please see above (however, the situation is still too dynamic in Poland for full assessment).
6. Are there any other issues relevant to COVID-19 the construction industry should be aware of?
It should be highlighted that complete exclusion of the regular development legislation with regard to Countermeasure (as described above) is a very far-reaching solution. The situation in Poland is still very dynamic. More changes in the industry and legislation are likely to come.