Warsaw, 23 September 2022 

Position of the Union of Entrepreneurs and Employers (ZPP) on the revision of the Union Customs Code

The Union of Entrepreneurs and Employers (ZPP) welcomes the initiative of the European Commission to make customs regulations better adapted to the challenges of digital transformation and the pro-climate agenda of the European Union. The presented initiative contains several key areas to be revised in order to strengthen the current legal framework, such as e-commerce operations, risk management, data analytics capacity and the protection of the single market against non-EU compliant imports from third countries.

UCC regulations may be hard to put into practice for small and medium-sized enterprises. Therefore, it should be kept in mind that the proposed changes do not worsen the situation of SMEs, which, especially in the e-commerce sector, are young entities and find it more challenging to adapt to legal changes.

The Union Customs Code revision is one of several pieces of legislation that will majorly impact importing products to the single market, including those sold and purchased through e-commerce. Speaking of which, the Market Surveillance Regulation entered into force in July 2022, and currently, the European Commission is working on revising the General Product Safety Directive. The above legislative changes will significantly affect both traditional and online trading. In order to ensure further e-commerce development, it is necessary to properly assess the effects of the regulation and its impact on the trading conditions in the European Union. In addition, it is needed to ensure sufficient time for entities actively involved in trade to familiarize themselves with the proposed changes and ensure proper and equal enforcement of the adopted provisions.

Based on the expertise and experience of companies associated in the ZPP, we have developed recommendations for the European legislator to revise the Union Customs Code that best meets the needs of all trade participants and stakeholders. The paragraphs below describe the most important thematic issues.

Cooperation between customs authorities

The biggest challenge for the European Union is establishing efficient cooperation between customs and non-customs authorities. To effectively implement and enforce the new regulations, there is a need to tighten the joint action between the Member States’ customs services and the tax authorities collecting VAT. The future could lead to creating a unified customs process that could take place through a single official communication channel with the public administration.

Creating a single framework for customs clearance would be beneficial for the single market and would make international trade safer. For this reason, we consider it equitable to use data already possessed by the public authorities and foster mutual exchange between relevant administrative units. Such simplification of procedures would benefit honest merchants, whose regular and compliant business operations would be easier to conduct. It would also be easier for customs authorities to reduce the workload due to more straightforward procedures.

We recommend simplifying the process for both public authorities and entrepreneurs by effectively using the collected data that has already been made available to public authorities. At the same time, this will ensure an adequate level playing field and market protection against dishonest entities that may threaten consumers and entrepreneurs who conduct business honestly.

Entities that trade fairly within the single market create positive added value for the European Union. Therefore, they should not be burdened with additional obligations hindering their activities. The threat that should be counteracted by the UCC revision is the entities introducing products to the block, disregarding the fulfilment of tax obligations. Additionally, the products introduced by these entities may be dangerous to end consumers as they may not meet European safety standards.

The reform of the e-commerce package carried out in 2021 introduced a number of improvements in the functioning of customs procedures. An important tool contributing to this is the Import One Stop Shop (IOSS), which introduced a central reporting and collection mechanism for import parcels worth up to EUR 150.

Given the above, we consider it appropriate to improve the efficiency of customs clearance by using the data already held by the office, efficient data transfer and adopting better procedures that will effectively implement cooperation between the customs services of the Member States and fiscal authorities. We recommend considering the possibility of verifying data that are collected by customs as “data of comparable quality”. The ultimate desired effect will be the unification of procedures for honest traders and increased detection of irregularities for dishonest market actors.

Trusted traders as beneficiaries of simpler rules

To increase the performance of the EU Customs Union, the legislator should consider supporting well-established businesses proven to be compliant with regulations and shift the focus of the customs authorities to fraud and other risk areas.

For small and medium-sized enterprises, compliance with UCC may present challenges and require hardship to respect customs conditions to retain secure and honest trade for their clients. Paring the requirements down should consider the position of diligent merchants.

UCC improvements need to concentrate on forming cohesive, performant processes and instruments for authorities as well as awareness of outcomes on business. Currently, the most distinguished challenge for the European Union is the collaboration between customs and non-customs authorities across the Member States. Improving cooperation between those as well as further development of mechanisms (i.e. Import One Stop Shop) will benefit all parties.

The beneficiaries of these changes shall not only be Authorized Economic Operators. Performant, simplified processes of centralized clearance and capability for reconciliation of the entries in Import One Stop Shop for legitimate business owners, as well as small and medium enterprises, self-clearance in a similar way as VAT reporting and settlement, would smoothen the trade processes and reduce actions required from customs authorities at the border.

The approach to data exchange

To further back customs enforcement, we need to extend the quality and quantity of currently available data. Providing a single-window system that will ease customs processes, improve risk management, and improve data input, reusing it for authorities, vendors, and consumers is a good strategy. This is the key to effectively tackle down challenges brought to the light by modern e-commerce.

Nevertheless, convergent and standardized interfaces between new and existing systems shall be established to avoid redundant reporting. Platforms are already reporting VAT data for third-party sales conducted on their marketplaces via the IOSS. Moreover, Payment Service Providers will share data via the Central Electronic System of Payment Information, beginning in 2024. Data sharing, data exchange between systems, and shares of data provided by the other actors in the supply chain will surely improve the detection of fraud, non-financial risks, and undervaluation.

Of course, enforcement measures and appropriate liability must exist along with the beforementioned data exchange improvements. It is worth noting that despite taking steps regarding the exchange of customs data, not all carriers are accountable for customs declarations in regard to Article 23.3 of the UPU Convention.

Furthermore, the European Commission shall watch for privacy and data security issues regarding sensitive information and whether the exchange is done in secure environments unavailable to malicious third parties. Special attention shall be paid to the exchange of information on shipping labels, tax references or IOSS registration numbers.

Caution should be paid during the regulation of responsibility for the data shared in those systems. Marketplaces, for example, depend on data provided by the merchants as-is and may not have measures to verify the accuracy of most of the indicators.

Development of the e-commerce market and challenges related to the effective collection of VAT and customs duties

The experience gained by the participants of the IOSS reporting mechanism allows for the formulation of several proposals for improvements that may make it easier for entities to report the emergence of such obligations and pay the tax amount to meet the tax obligation. Moreover, the recommended changes will allow for more effective tax collection.

Strengthening the functioning of the IOSS by removing the inconsistencies between national customs authorities and the discrepancies between customs and VAT legislation will remove the current legal uncertainty about the procedures in use.

We believe efficient data reconciliation between customs and tax authorities (VAT) will allow for mutual verification of data already held by public administration entities. A practical example of the lack of such cooperation is the inability of customs authorities in several key countries unloading imported goods to recognize IOSS numbers in H1 customs declarations. Such an inconvenience leads to the necessity of double VAT taxation, despite the fact that they qualify for the procedure under the IOSS.

We recognize the Member States’ actions within the VAT Committee that agreed on a temporary solution for the return of double-paid VAT under the IOSS procedure. However, this is a temporary solution and does not address the problem’s root cause, incompatibility with the customs IT system.

Another aspect that requires improvement is the lack of security for IOSS numbers. Currently, it is impossible to verify entities registered in the system by the tax authority and merchants. It is only possible to check whether the given IOSS number is valid without the possibility of specifying the entity using the given number.

In addition, the system supporting the IOSS procedure does not have a comprehensive link between the vendor ID and the shipment transaction level. That means the misuse of IOSS numbers can be either accidental or deliberate because the tax payment at the border is then charged to the entity registering the IOSS number and not the one shipping the parcel. The IOSS registrant becomes burdened with the need to reconcile the differences between IOSS declarations and EU customs data. This is a deliberate action to mislead the tax authorities. In such a situation, the IOSS registrant is charged and must prove the unauthorized use of the code. The treasury loses VAT revenue.

In view of the above, we listed several recommendations introducing changes to the functioning of the IOSS system to make it complementary to the EU customs policy.

Firstly, a permanent mechanism should be implemented to prevent double taxation of shipments. The temporary solution introduced should be considered positive. However, to maintain the system’s coherent operation, comprehensive solutions are necessary.

Secondly, national customs administrations should be strengthened so that they can verify all shipments eligible for IOSS, including those covered by the H1 customs declaration.  It will remove the need for multi-channel sellers to maintain a dual import regime for low-value shipments. Additionally, this will also benefit the administration as it will not have to manage a double system for low-value imports.

Thirdly, the protection and security of IOSS-based verification should be strengthened. The system shall ensure the safety and protection of IOSS registrants from the potential consequences of tax extortion. In our opinion, this will ensure a level playing field by preventing misuse of IOSS numbers.

Fourthly, it is necessary to resolve the existing discrepancies between VAT and customs regulations. An example of such a solution is the IOSS VAT scope and the new customs competent office rule under article 221 (4) the UCC / IA leading to non-IOSS eligible shipment <150 EUR, such as B2B and excisable products, requiring immediate clearance in the final delivery country leading to capability issues with brokers and customs logistics partners.

Fifthly, we think the most optimal solution is to transfer responsibility for non-financial risks to importers. The importers in the supply chain generally have the best knowledge of the product purchased.

The party with the best access to customs data shall be selected to calculate customs fees if the legislator considers the expansion of the aggregator’s responsibility. Mostly, Business-To-Consumer sales take place under the DDU/DAP Incoterms’ well-established rules, so the customs clearance responsibility is on the final customer. From our view, in the process of DDP sale, the merchant shall be responsible for custom duties since they have insights regarding the country of the import as well as the customs clearance process.

 

See: 22.09.2022 Position of the Union of Entrepreneurs and Employers (ZPP) on the revision of the Union Customs Code

Warsaw, 21 June 2022

Position of the Union of Entrepreneurs and Employers (ZPP) on the Data Act

 

The European Union has made its strategy – Shaping Europe’s digital future – one of its top priorities. One element of the initiative is the European Data Strategy. The strategy aims to create a single data market in the European Union, which will increase Europe’s global competitiveness in access to data use in the economy and ensure control over entities generating data. Moreover, it is based on putting people first in technology development, guaranteeing users’ rights in the digital world, and protecting and promoting European values.

On February 23, 2022, the European Commission presented a draft regulation on harmonized rules on fair access to and use of data. The regulation, also known as the Data Act, is the second piece of EU law proposed under the European Data Protection Strategy alongside the proposed regulation – the Data Governance Act.

The project aims to make Europe a global leader in tapping the constantly growing potential of the data economy. Data-based solutions can bring tangible benefits to businesses and consumers in the European Union. Increasing the efficiency of data use may lower the costs of creating new products and providing services and thus increase their availability. It is also possible to improve sustainability and energy efficiency and shift to fewer emissions and more efficient transport systems, which will help meet the pro-climate goals set in the European Green Deal.

The Data Act regulates the legal status, technical conditions and economic issues, which are the basis for the use of data. It aims to unlock the untapped potential of industrial data, 80 per cent of which remains unused by the European Commission.^[1] The Commission assumes that by 2028, the value of GDP generated by using data under the new regulations will increase by EUR 270 billion.^[2]

The Union of Entrepreneurs and Employers (ZPP) assesses positively the provisions encouraging producers to invest in generating higher quality data. We believe this is essential to increase business competition and consumer welfare in the European Union.

However, we note that the project did not altogether avoid its shortcomings. The provision that grants governments and the EU public institutions the right to access specific enterprises in “exceptional need” deserves criticism. According to Chapter II of the draft regulation, the obligatory and free access of public entities to enterprises’ data should be conditional on the existence of a “public emergency”. Its definition can be found in article 2, paragraph (10) of the draft regulation.^[3]

‘public emergency’ means an exceptional situation negatively affecting the population of the Union, a Member State or part of it, with a risk of serious and lasting repercussions on living conditions or economic stability, or the substantial degradation of economic assets in the Union or the relevant Member State(s);

The above definition provides an extensive interpretation framework for qualifying a given situation as a state of “public emergency”. Consequently, there may be a high risk that a public authority’s position in requesting ‘exceptional need’ data will be misused. Such a solution will lead to lower legal certainty and may expose enterprises to damages caused by compulsory and free disclosure of collected data.

The Data Act, in Article 20, introduces a redress mechanism in cases of exceptional data transfers by a private entity. However, this mechanism is based on a general formulation that will require a complex assessment each time the additional costs are incurred for the entrepreneur. Such a procedure will extend the process of examining the submitted applications and does not guarantee the coverage of the company’s losses caused by the activities of a public authority.

Summing up, ZPP supports the increase in the use of data collected in the European Union and the levelling of conditions for their fair use. However, as proposed, the Data Act has some legal shortcomings that may lead to a weakening of the position of enterprises vis-à-vis public entities and introduce legal uncertainty in the area of law enforcement.

We call on European legislators to keep a proportion of the proposed regulation by limiting the disclosure of data to public authorities only to what is strictly necessary and by preventing the creation of rules that could restrict the development of ambitious SMEs. During the inter-institutional negotiations, we consider it necessary to develop solutions that will not contradict the current and future legislative acts in the field of the digital economy.

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^[1] https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1113

^[2] https://ec.europa.eu/newsroom/dae/redirection/document/83541

^[3] https://ec.europa.eu/newsroom/dae/redirection/document/83521

 

See more: 21.06.2022 Position of the Union of Entrepreneurs and Employers (ZPP) on the Data Act

Warsaw, 7 June 2022

 

Position of the Union of Entrepreneurs and Employers (ZPP) on the reintroduction of stay-down obligation in the Digital Services Act

 

The Union of Entrepreneurs and Employers (ZPP) expresses its concern about the return of the so-called “stay down” provision to DSA compromise text. Stay down obligation requires companies to ensure that illegal content does not reappear on the platform after its removal. The proposal does not define exactly how intermediary service providers would have to fulfil the above obligation. There are concerns that in practice it may lead to general internet monitoring and set a standard, which is technically impossible to attain.

The prohibition of general internet monitoring stems from the e-Commerce Directive, a 20 years-old predecessor of the Digital Services Act. The Directive urged intermediaries to step up their efforts to combat illegal or harmful content, and, at the same time, included the prohibition of general internet monitoring. Due to the risk of censorship and damaging influence on fundamental rights, this practice has been ruled out already in the early days of the internet. Later on, several court judgments confirmed that scanning content uploaded and circulated on the internet is illegal.

The European Parliament has already rejected the stay down provision during the DSA negotiations. Therefore, it is all the more surprising that this obligation is suddenly reintroduced in the latest compromise text, appearing after the conclusion of a political agreement by European negotiators. A group of organizations including CCIA, Act the App, Dot Europe, Developers Alliance, Allied for Start Ups, Eco De and EUROISPA has criticized changing the compromise text on the eleventh hours. “We  urge the co-legislators to refrain from introducing a provision, that was already discussed at length and rejected in various staged of the co-legislative discussions and even during trlogue negotiations” – we read in the organizations’ statement.

ZPP shared the aforementioned concerns. Ahead of the upcoming vote on the DSA scheduled for June 16, we call on the policymakers to stick to the results of previous rounds of negotiations. The introduction of the stay down obligation will not only be a form of overstepping negotiation mandate, but also will lead to clear negative effects for internet users. Finally, by demanding companies to ensure that deleted content does not reappear on the internet, the EU imposes on companies obligations that are impossible to fulfill.

 

See more: 07.06.2022 Position of the Union of Entrepreneurs and Employers (ZPP) on the reintroduction of stay-down obligation in the Digital Services Act

Warsaw, 31 May 2022

 

Position of the Chief Expert in digital economy of the Union of Entrepreneurs and Employers (ZPP) on biometrics regulation

 

In recent times it has been loud about the regulation of biometrics due to the EU’s Artificial Intelligence Act. Biometry is a scientific field that measures living creatures to determine their individual characteristics. It is widely used for identity verification, authorization of access to information systems or for identification of persons, and rapid technological progress is conducive to its popularization. In the Artificial Intelligence Act, the EU has decided to set certain limits for the development of technology in order to protect fundamental rights and freedoms. This is why, among other things, the European Commission’s proposal includes a ban on real-time biometric face recognition in public places.

Using artificial intelligence to recognize faces without explicit permission and processing these data for a closer unknown purpose brings to mind the dystopian visions of sci-fi movies. The European Data Protection Board, together with Wojciech Wiewiórski, the European Data Protection Supervisor, called for a ban on the use of artificial intelligence to automatically recognize the biometric features of people in public space. In their opinion, such tools constitute an unacceptable interference with the rights and freedoms of citizens.

On the opposite side than privacy defenders, there are law enforcement agencies, which emphasize the need to use new technologies to ensure security. Service officers call for the possibility of recognizing faces in the case of persons wanted or suspected offenders to be maintained. As they emphasize, the use of technology would remain limited and it would be used only in specific situations, rather than for screening the population.

Member States remain divided on this idea. Just a few days ago, the French Presidency raised the issue, that it could be difficult to find an agreement on the rules on artificial intelligence for law enforcement authorities, including the ban on real-time face recognition in public space. Some EU countries are demanding stricter bans, while others want more freedom for law enforcement authorities to use face recognition and high-risk technology. After all, the EU is an area without borders, which is exploited by criminals moving between countries and making it difficult for justice to work. According to Europol data, 70% of organized criminal groups in the EU operate in more than three Member States, and in almost two-thirds of cases among their members there are people from different countries.

Here we are coming to another point, namely the regulation that allows law enforcement authorities to exchange certain information, such as fingerprints, DNA data and vehicle owners information across the EU. The exchange of such information is possible under the 2005 Prüm Convention on a cross-border cooperation to combat terrorism, cross-border crime and illegal immigration. The convention was originally signed by seven Member States and, on the basis of this, the EU Council adopted in 2008 the Prüm Decision, which has already been applied to all Member States. In short, if Polish officers suspect that the person they are looking for is in Greece, they may ask the Greek authorities to check the fingerprints in their database. However, there is no centralized, automated system that would facilitate the exchange of information. This is about to change soon.

In December 2021, the European Commission submitted a legislative package to strengthen cross-border police cooperation. The package included a proposal for a Prüm II regulation. The new regulation is intended to significantly automate the exchange of information between Member States’ services, but also to extend the catalog of information that can be processed, to inter alia facial images, photographs, criminal records and driving license data. The final effect will be a huge system for comparing suspects’ images using face recognition algorithms in an automated process.

Human rights defenders warn that in this way the EU can create the largest system of mass biometric surveillance in the world. How has it happened that the EU, on the one hand, wants to prohibit the use of artificial intelligence for face recognition in the Artificial Intelligence Act
 and, on the other, is working on a system for the automation of face recognition in the Prüm II Regulation? The difference is in time. The Artificial Intelligence Act prohibits real-time face recognition. The Prüm II Regulation is intended to allow the search of databases, namely the retrospective identification of faces. How does this translate into respect for fundamental rights? EDRi (European Digital Rights) analysts, who are fighting for digital rights say that retrospective face analysis can have equally serious effects – for example, to determine where the person was and with whom the person was seen 5 years ago, which may be completely different in the light of the information currently available. Finally, the automation of the information exchange process is nothing else than a reduction in procedural and judicial safeguards, which ensure that data is only made available to the services of other countries when it is actually necessary.

In conclusion, what we can see is undoubtedly a chaos in the area of biometrics regulation. The EU institutions praise their struggle to respect privacy in regulations such as the Artificial Intelligence Act, while at the same time implementing invasive solutions under the Prüm II Regulation. The ZPP has repeatedly stressed the consequences arising from creating conflicting rules, but we are deeply amazed at the level of inconsistencies in the solutions proposed for the regulation of biometric facial recognition.

 

Kamila Sotomska
Chief Expert for the digital economy

 

See more: 31.05.2022 Position of the Chief Expert in digital economy of the Union of Entrepreneurs and Employers (ZPP) on biometrics regulation

Warsaw, 23 May 2022 

Position of the Union of Entrepreneurs and Employers (ZPP) on the report of the European Parliament for a Directive on improving the working conditions in platform work

 

Work carried out through digital labour platforms is developing in Europe with tremendous momentum. This is demonstrated by the pace of development of more than 500^[1] platforms currently operating in the single EU market. The number of people who work through platforms is also growing rapidly. Currently, this is 28 million people, and it is expected that in 2025 there will be as many as 43 million “platform workers.”^[2] The above shows, how prospective market is the provision of services through digital labour platforms.

The European Commission presented on 9 December 2021 a proposal for a directive aimed at improving working conditions through digital platforms and supporting their sustainable development. In order to improve working conditions, the European Commission envisages for persons performing work, access to labour rights and social benefits.

This would be achieved through the reclassification of the employment status. Today, most of the contractors are engaged in professional activities through digital platforms on the basis of self-employment. The Commission proposal seeks to substantially change this proportion in favour of work based on an employment relationship, the existence of which would be presumed. The removal of this presumption would lie on the platform side, which is intended to remove the burden of action from the person performing work. Furthermore, the Directive contains rules regarding the verification of decisions taken by automated algorithms and the right to human verification, and regulates access by public authorities to data collected and processed by platforms.

The draft is currently under way in the European Parliament, which is working on its mandate for further interinstitutional negotiations. The rapporteur for the proposal concerning a directive on improving working conditions in the Committee on Employment and Social Affairs (EMPL) is Ms. Elisabetta Gualmini.

At EMPL committee meeting on 19 May 2022, the presented project resulted in a considerable indignation among representatives of platform companies’ organizations, as was the case with experts and legislators on labour law and the digital economy. The report by Ms. Gualmini extends the set of criteria necessary to recognize the employment status of a person earning his/her living through a platform to a person working on the basis of an employment relationship. The Commission’s proposal contains five conditions, two of which must be met in order to create a presumption of employment through the digital labour platform. The proposal by Ms. Gualmini deletes this provision from Article 4, by which the set of criteria is extended to a “non-exhaustive list” and transfers it to the recitals in the draft directive, i.e. to a non-binding part of the provisions.

The rapporteur’s proposal is highly interfering with the relationship between platforms and their contractors. This is due to the strong opinion held by the Member regarding the self-employed, which was expressed in the explanatory memorandum to the project – “False self-employment in the platform economy leads to uncertainty, low wages, security risks and the refusal of any rights arising from the employment status, including social protection.”^[3]

Extending the scope of the Directive to automated and partially automated monitoring and decision-making systems will in practice mean, that the vast majority of persons performing work will be within the scope of the Directive, since even the use of current common methods of organizing work by human resources departments (e.g. attendance reporting systems) will also be covered by the Directive.

The division of persons performing work into self-employed and employed on the basis of an employment relationship is incomplete. It does not take into account the existence of other forms of employment in the Member States. For example, in Poland function civil law agreements which would not be reflected in the division proposed in the Directive.

Moreover, the inconsistencies between the solutions presented in the proposal can be seen on the basis of the practice of working through platforms. In order to improve working conditions, the legislator has been driven largely by the model of operation of the largest digital labour platforms that act as an intermediary in supply or transport. Doubts arise when the above proposal is applied to other services such as repair, cleaning and care services. In this event, the platform only mediates in linking the consumers concerned and contracting parties. In view of the above, it is difficult to justify the reason why such a platform should employ a qualified professional, a cleaner or a care person. The platform is merely an intermediary and therefore it is not an entity in the labour relations of the self-employed.

The intermediation in linking contractors with consumers is not a new market mechanism. Persons performing the work of cosmetics sellers, to whom the intermediary companies supplied products, catalogues and contact databases, were not considered to be employed by those companies. So far, the status of self-employment in the context of the above-described work, has not been called into question. For this reason, it is difficult to understand the justification for regulating similar work, which has the only difference that it is done via the internet digital platform.

We welcome the initiative to regulate platform work. The European Union can become a pioneer in the field of legal solutions for this sector. However, from the moment the Commission presented its proposal, ZPP has drawn attention to the insufficient consideration of the voice of the “platform workers”, which are to be affected by these regulations.

The majority of “platform workers” is satisfied with the current form of work done through digital labour platforms – this is the conclusion of a study carried out by ZPP among platform contractors.^[4] The changes introduced by the Directive could lead to the loss of two main advantages for persons working through platforms, namely the flexibility and a low entry threshold.

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^[1] https://ec.europa.eu/social/BlobServlet?docId=24991&langId=en

^[2] https://ec.europa.eu/commission/presscorner/detail/en/ip_21_6605

^[3] https://www.europarl.europa.eu/doceo/document/EMPL-PR-731497_EN.docx

^[4]https://zpp.net.pl/en/zpp-survey-95-of-platform-workers-are-satisfied-with-the-cooperation-with-the-platforms-most-of-them-are-against-compulsory-employment-contracts/

 

See more: 23.05.2022 Position of the Union of Entrepreneurs and Employers (ZPP) on the report of the European Parliament for a Directive on improving the working conditions in platform work

Warsaw, 11 May 2022

 

Position of the Union of Entrepreneurs and Employers (ZPP) on a proposal for a Directive on improving the working conditions in platform work

 

In December 2021, the European Commission presented a proposal for legislation to improve the situation of workers performing work through digital labour platforms.[1] There are over 500 platforms in the European Union, which create 28 million jobs.[2] The growing popularity of this form of earning money is directly related to the ongoing digitization and the increasingly common need for flexibility in employment. At the same time, it is important to recognize that this model of work is not new and has been used in the traditional economy.

The proposed directive sets out several conditions determining whether the existing relationship between the platform and the worker is an employment relationship. For a platform to be considered an employer, its relationship with the person carrying out the work would have to meet two of the five criteria laid down. Such legal requirements would lead to a change in the form of employment of some self-employed contractors into employees contracted by platforms. In our opinion, the introduction of provisions imposing on “platform workers” a specific formula of cooperation with the platform is unnecessary and, what is more – as our study shows – contrary to the will and expectations of the interested parties themselves.

Flexibility in employment is a precious value for many people. It is related to, inter alia, self-regulation of working time by the person performing the work, which is convenient for people who cannot take up full-time employment or at fixed times. Often, people experiencing difficulties entering the labour market decide to cooperate with the intermediary of digital platforms. This applies to young people with no professional experience or people of migrant origin. Limiting the earning potential of these groups of people, especially in the current context, would be inadvisable.

At the beginning of 2022, ZPP conducted a survey among platform workers, based on individual interviews. As much as 95 per cent of respondents confirmed their satisfaction with the economic activity performed via online platforms, and the terms of cooperation with them were described as understandable and fair respectively by 98 and 96 per cent of respondents.[3] Moreover, despite the low market entry threshold, 93 per cent of respondents indicated that they were satisfied with their financial situation.

The main argument of the European Commission for the adoption of the directive is to strengthen the position of platform workers by improving their social protection and access to benefits conditional on having full-time employment.[4] However, this goal does not meet the expectations of the workers themselves. Most respondents say they do not want a law that would require the platform to hire them full time.[5]

It should be noted that the proposal for the directive includes certain solutions that can be damaging to the development of services based on digital platforms. For instance, we are concerned about the obligation to apply the provisions of the jurisdiction territorially corresponding to the place of work. In the

case of cross-border employment, workers often change their place of residence due to the nature of the work. Considering the treaty principle of free movement of workers, performing online work in one Member State should be regarded as equivalent in each Member State and its jurisdiction, irrespective of the declared workplace.

The legal presumption of the existence of an employment relationship is not beneficial to the functioning of enterprises. The draft directive leaves it to the Member States to determine the legal framework. This can lead to significantly different legal conditions in the Member States, creating severe obstacles to the uniform functioning of online platforms on the EU market.

In addition, the possibility of rebutting the presumption of an employment relationship may lead to an increase in legal disputes, which will be time-consuming and entail high administrative costs. It will be a mechanism with an increased risk of abuse, and thus it should be expected that a high percentage of disputes will not have a factual basis for its initiation.

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[1] https://data.consilium.europa.eu/doc/document/ST-14450-2021-INIT/en/pdf

[2] https://ec.europa.eu/social/BlobServlet?docId=24991&langId=pl

[3] https://zpp.net.pl/en/zpp-survey-95-of-platform-workers-are-satisfied-with-the-cooperation-with-the-platforms-most-of-them-are-against-compulsory-employment-contracts/

[4] https://ec.europa.eu/social/BlobServlet?docId=24991&langId=en

[5] https://zpp.net.pl/en/zpp-survey-95-of-platform-workers-are-satisfied-with-the-cooperation-with-the-platforms-most-of-them-are-against-compulsory-employment-contracts/

 

See more: 11.05.2022 Position of the Union of Entrepreneurs and Employers (ZPP) on a proposal for a Directive on improving the working conditions in platform work

Warsaw, 26 April 2022 

 

Position of the Union of Entrepreneurs and Employers on the Consumer Credit Directive review

 

The European Commission has proposed a new Directive regulating consumer credit in June 2021.^[1] The proposal is intended to replace the existing Consumer Credit Directive of 2008.^[2] The draft rationale states that the current legal Act has not fully met its objectives, and therefore a revision is necessary. The aim is to introduce provisions that provide a clear legal framework for the financial industry’s economic activities and adapt regulations fit for the digital transformation. The rapidly expanding possibilities of electronic payments and socio-economic trends following it are causing consumers to change their habits in favour of the use of tools that have not yet been legally regulated.

The change in consumers’ behaviour necessitates an appropriate technological adaptation of financial products. This is due to the progressive digitalisation of commerce, payment methods and financial services. As a result, creditworthiness assessment mechanisms are often based on automated decision-making systems and products information is commonly provided in electronic form. The legislation aims to harmonise laws at the European level and strengthen consumer protection.

The Union of Entrepreneurs and Employers (ZPP) recognises the need to revise the provisions of the Consumer Credit Directive. We believe that it should create a legal framework that stimulates the development of the financial technology sector, which is undergoing significant changes and not make excessive barriers to the development and innovation of European businesses. Regulation should seek to strengthen consumer protection and increase consumer welfare in the digital environment through access to modern and secure digital tools. In our analysis of the proposal’s text, we identified several solutions in the draft that may be detrimental to the development of FinTechs in Europe and negatively affect the quality of available digital tools and consumer satisfaction with their use. In the following position paper, we set out our concerns regarding the revision proposal.

Buy-Now-Pay-Later

The development of FinTechs in Europe is very dynamic. There are already over 300 such companies in Poland, and the vast majority of them are young enterprises not older than 4 – 5 years.^[3] The lack of regulations excessively limiting the use of modern digital tools is of great importance for the development of financial technology companies. Currently, the fastest-growing functionality in e-commerce is the ‘buy-now-pay-later. This enables the consumer to purchase online and pay later with no fee (or a very low fee). This instrument kicked off in Sweden and has become popular in Scandinavian countries. It is now rapidly gaining popularity in Europe as the e-commerce sector develops. The data presented shows BNPL’s share of the total e-commerce payment industry at 7.4 per cent of the European market, over 20 per cent share in the Swedish market and only four per cent lower share in the German market. This positions BNPL as an ordinary payment instrument for European consumers.

Access to secure financial services is beneficial to consumers and allows them to fulfil their daily needs. Low-interest (or interest-free) online loans are, as a rule, low-rate financial instruments. Therefore, they are not equivalent to high-value bank loans to purchase a house or a car. BNPL has a low risk of increasing consumer insolvency. BNPL operators offer many solutions to fit the product to the customer’s needs. However, the ability to create tailored offerings for customers may be limited due to disproportionate regulatory burdens on operators, which may lead to the creation of instruments that are unintuitive and incomprehensible to consumers.

Creditworthiness assessment

The creditworthiness requirements introduced by the proposed Directive should be customised to the type of financial commitment. The different lengths and costs of credit should determine the adequate assessment of credit risk in relation to the actual threat of insolvency. Socio-economic factors should influence the distinction between BNPL as a flexible payment option, loans with a high-interest rate or additional charges and products with a high commitment amount. Furthermore, e-commerce companies have their own reliable debt risk assessment systems based on online purchase history or credit fraud databases. This makes BNPL a low-risk service which should be reflected in the proposed Directive. In addition, it is a service characterised by immediate execution, so the traditional method of credit assessment based on manual verification of documents, such as income certificates, is inadequate for the needs of e-commerce and more costly than an assessment based on automated systems. Consumers may be reluctant to share their documents online, or it may prove too burdensome. As a result, this would be at the loss of FinTech companies and exclude some consumers from accessing credit tools.

Low-value loans

The current Act includes under the scope loans between €200 and €75,000. The proposed Directive extends its provisions to all loans with a value equal to or less than €100,000. This means that the Directive provisions will cover small purchases using BNPL.

Many BNPL users do not perceive this financing method as a loan. This is due to the tool’s flexibility, which can be tailored to the needs of a specific offer. It can take the form of a delayed repayment for a set period (e.g. 30 or 60 days), or it can be spread in instalment. Another possibility is to buy ‘on trial’ without making an immediate payment. Free trial shopping is complementary to the online shops’ free returns policies. The above makes it difficult for the consumer to associate BNPL with classic consumer credit. It is also not entirely clear how the different types of BNPL should be classified. Depending on the service provided, it can take the form of various contact obligations known to law.

Pre-contractual information obligations

Another factor that may negatively affect the development of innovative financial products may be the excessive pre-contractual information obligation enshrined in the draft Directive. FinTech products are becoming increasingly popular thanks to simple and transparent rules. This is a major difference from traditional banking products, burdened with restrictive information obligations. Loan amounts in BNPL are low and short-term, so there is no need to provide detailed information on held commitments.

Moreover, a large number of users purchase through mobile devices. Consequently, BNPL is also most commonly used for purchases via mobile phones or tablets. The introduction of a broad information obligation will result in the illegibility of the proposed offer. It may result in the unclarity of the service to the consumer’s detriment. In addition, it might lead consumers to give consent without knowing the actual terms of the agreement. This can lead to a dangerous situation called ‘consent-fatigue’. This is a phenomenon where the user is presented with a large amount of information to read and accept before using a product or service. A large amount of information shown causes a feeling of overwhelm on the consumer, who wants to use the tool as efficiently as possible without time-consuming familiarisation with voluminous information content. This psychological effect leads to a threat to the consumer’s attention who, accepting the rules without familiarisation, may fall prey to fraud and accept unfavourable conditions. This is a negative phenomenon resulting from a disproportionate information obligation on the operator. Considering the above, we believe that the increased information obligation will not benefit the consumers if an effective way of presenting and prioritising the information is not ensured.

In conclusion, we recognise the need to review consumer credit legislation and adapt it to the new demands of digital transformation. However, we note that specific provisions of the new Directive may halt the dynamic development of FinTech companies in Europe and be detrimental to consumers. Given the importance of consumer protection in the line with the case-law of the Court of Justice of the EU and the legislative activity of the European Institutions, there is no doubt that the welfare of consumers is a value that should be paramount when creating a new law. For this reason, we urge European legislators to consider the comments made above in order to make the provisions of the Consumer Credit Directive the most beneficial to the European economy.

***

^[1] https://ec.europa.eu/info/sites/default/files/new_proposal_ccd_en_3.pdf

^[2] https://eur-lex.europa.eu/legal-content/PL/ALL/?uri=CELEX%3A32008L0048

^[3] https://www.ican.pl/b/jak-wyglada-polski-fintech-rzut-oka-na-branze/PMQpOzRdk

 

See more: 26.04.2022 Position on the review of the Consumer Credit Directive

Warsaw, 28 March 2022 

Position of the Union of Entrepreneurs and Employers (ZPP) on Poland becoming independent of Russian supplies of primary commodities

 

Diversification of gas supply is the key to become independent of Russia

Union of Entrepreneurs and Employers welcomes the announcements about the recapitalisation of investment projects in the gas sector. The development of strategic infrastructure, such as the Świnoujście LNG terminal, the FSRU floating regasification unit in the Gdańsk Bay, or the gas interconnectors with Lithuania and Slovakia, is a solid basis providing technical means for the diversification of gas supply. The above initiative opens us up to new directions for partnership, which, in the long term, will certainly contribute to a reduction in gas prices and, above all, to a complete withdrawal from the Russian supply.

Forecasts for future years indicate that market demand for natural gas could increase by as much as 50% over the next 10 years. Peak-day gas demand, on the other hand, can periodically increase by up to over 100% compared to previous demand records reported in 2019-2021. In view of the emerging challenges related to the efficient transmission of such a large volume of gas, it is also important to enhance the domestic transmission system.

Nuclear energy will be an important factor in building energy independence

Growing concerns about the electricity availability, as well as its cost to the end user, raise legitimate questions about nuclear power. We appreciate the position of the Ministry of Climate and Environment on the need to speed up the construction of nuclear reactors. Nuclear energy will be another element in the optimum structure of the energy mix, which will translate into stability of electricity supply for domestic industry and all households.

It should be noted that it is not possible to fully replace coal energy with renewable energy sources. Such a solution would be highly risky from the point of view of the stability of the domestic energy system. For this reason, we call for action to be taken as soon as possible to ensure the effective implementation of investments in nuclear energy.

In our opinion, Poland now has exceptionally favourable political conditions to start building a power plant. In view of the current conflict with Russia, all the EU Member States are looking for ways to become independent of that country’s energy resources. One of the measures most frequently chosen by EU countries is to change their approach to nuclear energy, thereby extending the lifetime of existing nuclear units or expanding the infrastructure with completely new power plants.

Furthermore, the European Commission’s recent decision on taxonomy, which recognises nuclear and gas energy as transition sources on the road to climate neutrality, should encourage us to invest in nuclear energy. The EC’s modified position allows us to obtain preferential financing for nuclear-based energy projects.

Unused potential of RES

New investments in gas and nuclear energy are definitely needed, but they are also highly capital intensive regarding public finances. In our opinion, it is also worth using legal solutions that do not involve any financial burden on the state budget. One action that can be taken immediately by the lawmakers is to amend the so-called anti-windmill law. Liberalising the 10H rule included in this law would contribute to the development of private distributed energy production, requiring little government funding. Energy from onshore wind farms may be the cheapest source of energy, which is important both for individual consumers and for Polish entrepreneurs, for whom energy is an increasing cost of conducting business activities. Such a move would also contribute to the development of Poland’s energy independence – and in a very short period of time, which is why we are calling for this regulation to be changed as soon as possible.

Embargo on Russian oil

Contrary to the fears of some commentators, there are many indications that Poland is able to manage without Russian oil supplies. The oil port capacity would more than make it possible to import oil by sea in quantities that would meet Poland’s demand. Meanwhile, supply sources can be successfully diversified. An example of a valuable initiative in this respect is the partnership between PKN Orlen and Saudi Aramco, under which the Saudi company has undertaken to supply between 200 000 and 400 000 barrels of oil per day. In general, there is plenty of oil in the world but, of course, increasing production cannot happen overnight for logistical and technological reasons. According to available data, Polish oil reserves can secure domestic demand for about three months of standard consumption.

In view of the above, it makes sense to include the embargo on Russian oil in the sanctions imposed on the country. We believe that Poland should take a particularly firm stance on this and urge its European partners to adopt the most far-reaching solutions.

Conclusions

The decision to invade Ukraine should be met with a firm stance by the Western world, primarily by isolating the Russian Federation in all areas of international trade, with particular emphasis on the energy industry.

The Polish Government has accurately defined the areas that require immediate investment to ensure the stability of the domestic energy system, including the country’s energy independence. We would like to draw attention to the additional measures that can be taken without burdening the treasury with further projects. It is also important to respond to these problems with actions that do not further increase the – already very high – producer and consumer inflation.

 

See: 28 March 2022 Position of the Union of Entrepreneurs and Employers (ZPP) on Poland becoming independent of Russian supplies of primary commodities