Warsaw, 24 November 2022
Commentary by the Union of Entrepreneurs and Employers: economic regulations should come into force once a year, after at least 12 months – a recipe for regulatory instability
- According to a Grant Thornton study, in the period from January to September 2022, the average vacatio legis period for laws and regulations governing business in Poland was 31.9 and 6.9 days respectively.
- Year on year, the tendency to reduce the length of the vacatio legis period increases, forcing businesses to implement new regulations immediately, which becomes particularly difficult with the start of each new calendar year, when the accumulation of the introduction of new regulations is observed.
- Too short vacatio legis period is a real barrier to the development of Polish business, with particular emphasis on micro, small and medium-sized enterprises, which account for 99.8 per cent of businesses in Poland.
- For years, the Union of Entrepreneurs and Employers has been calling for the introduction of a principle whereby all economic regulations come into force only on 1 January of a given year and are preceded by at least 12 months of vacatio legis.
The stability and predictability of the legal and regulatory environment is one of the basic elements necessary for the continuous development of domestic enterprises. Meanwhile, the law in Poland changes too often and entrepreneurs have far too little time to adapt to new regulations. Companies’ confidence in the state therefore remains limited, and this translates into a decline in investment potential.
The Union of Entrepreneurs and Employers has long taken the view that all new economic regulations should come into force simultaneously on the first day of January with a 12-month vacatio legis. This will give businesses a year to adapt to the changes in the law and reduce the amount of time needed to implement new procedures and requirements. This bold move would definitely change entrepreneurs’ perception of Poland as – in many cases – a business-hostile environment in terms of the quality and pace of legislative change. Such a pro-business refocusing would also help officials, who, with more time to refine documents, could improve the quality of legal acts, which today are often drafted in haste and enacted in the same way – many times with numerous errors.
As calculated by Grant Thornton analysts in the study Zwolnij, szkoda firm! Vacatio legis w polskim prawie gospodarczym as recently as 2011, the average vacatio legis of legal acts regulating the rules of conducting business activity in Poland was 53.2 days for acts and 19.8 days for regulations. At the time – from today’s perspective – it was a relatively comfortable situation. In 2022, in the period from January to September, as the referenced report reads, this time has decreased to 31.9 days for acts and 6.9 days for regulations. At a time of rising business costs, these figures cannot instil optimism – especially when one considers the continuing trend of reducing “response times” to new legislation.
Data provided by Grant Thornton also shows that as many as 44 of the 78 laws that came into force in 2021 had a vacatio legis of between 0 and 14 days. Similarly, as many as 178 of the 355 regulations that came into force in 2021 were implemented “on the fly”. Of the 78 laws that came into force last year, only 4 were subject to a minimum six-month vacatio legis. Similarly, only 4 out of 355 regulations received a vacatio legis of minimum three months. Statistics show the abuse of Art. 4 of the Act on promulgation of normative acts and certain other legal acts, and the use of provisions on “important state interest requiring immediate entry into force of a normative act”.
The tendency to abruptly shorten the vacatio legis in the context of laws entering into force with the arrival of the new year is also worrying. Here, the average vacatio legis for laws is 25.8 days, and for regulations 5.9 days. This only demonstrates an unnecessary haste in the creation and implementation of laws, which entrepreneurs often cannot keep up with. However, once they manage to implement the new regulations in their business, it often turns out that – while the vacatio legis is still in effect or immediately afterwards – numerous amendments are introduced, destroying the new order that has just been established.
Meanwhile, while in 2021 the average vacatio legis of the Polish law was 33 days, in the Czech Republic it was 98.7 days, and while in the same year the average vacatio legis for regulations was 7.2 days, in Sweden it was 76.6 days. Both countries compared with Poland are members of the European Union, so they are bound by similar procedures to our country.
The problem is relevant for all businesses operating under Polish law, but it is most acutely felt by representatives of the SME sector, which often does not have specialised units responsible for thorough analysis of legislative acts. It is worth mentioning that SMEs account for as much as 99.8 per cent of domestic enterprises, while employing 67.4 per cent of those working in the business sector. Therefore, the “problematic” vacatio legis particularly affects companies generating every second zloty (49.6% of GDP according to PARP data), which are the flywheel of the Polish economy.
It should be remembered that the creation of a business-friendly legal and regulatory environment should be one of the main objectives pursued by the state. This is particularly important at a time of economic turbulence and general uncertainty about the development of the macroeconomic situation. Today, however, the legislative environment forces companies to adapt immediately to new regulations, which is time-consuming and costly – often companies in the SME sector have to use the services of specialised external entities in order to implement new regulations immediately. The lack of order in the issue of vacatio legis – bearing in mind also the tendency to reduce it every year – already makes companies take a close look at the issue of planning investments in Poland, which should be treated as a priority in the current economic situation. The uncertain legislative environment disturbs continuous economic development.
For years, the Union of Entrepreneurs and Employers has been calling for the introduction of a principle whereby all economic regulations come into force only on 1 January of a given year and are preceded by at least 12 months of vacatio legis. We believe that this solution would be a good answer to the problem of an increasingly unstable regulatory environment for companies.