Legal Eye: Retail restrictions

The Act, which takes effect on September 18, imposes an entirely new layer of permit and zoning requirements on retailers having a sales area of at least 400 sqm, including both new and existing construction.

Retail developers will now have to seek approval from the local authorities if the sales area will exceed 400 sqm. And in the event the area exceeds 2,000 sqm, the entire approval procedure will need to be repeated at the regional level. Existing retailers will need to provide certain information to the local authorities as well.

Of equal or more importance, the Act also amends current zoning regulations by now requiring the adoption of a local master plan before a building permit may be issued for any retail development containing at least 400 sqm in sales area.

More red tape

Before an investor may even apply for a building permit, approval will first need to be obtained from the local authorities. Approval will be at the discretion of the local town council following review of the planned development by the local mayor. Any review should take into account the impact of the development on: (i) the consumer; (ii) competition; (iii) unemployment; (iv) local infrastructure; and (v) the environment. The Act provides the above criteria as overall guidelines, but leaves the drafting of such detailed criteria to the Ministry of Economy.

Construction or operation of a store without the required approval will be subject to a fine of up to zł.1 million.

Zoning

The Act amends current zoning law as well, by reducing the threshold at which a local master plan must be in place in order to issue a building permit. Previously, a building permit could be issued based upon an outline planning decision in the event a local master plan did not exist for most projects containing a sales area of up to 2,000 sqm.

Legality

During the Parliamentary voting, the Senate rejected the Act. The lower house, the Sejm, had enough votes at the time to override the Senate's rejection. The Act has been hotly debated in the legal community, with many commentators and the Senate itself concluding that it violates the Constitution, in particular Articles 22 and 31, which ensure the freedom of business activity and equal protection before the law. Supporters of the Act have cited the need to protect the environment, as well as the need to protect competition at the local level. Opponents counter saying that the Act is discriminatory in its selective application.

The Act appears to violate the Treaty Establishing the EU, in particular Articles 3 (free movement of capital), 14 (preserving the internal market), 43 and 44 (right of establishment) and 48 (EU companies are afforded national treatment). With respect to the 400-sqm threshold, the Act will certainly affect a large number of Poland-based retail operators as well as investors from other EU member states. The 2,000-sqm threshold, however, will arguably have a greater negative impact on EU-based retailers in comparison to Polish retailers due to the large number of foreign investors active in Poland in this size category. Consequently, intervention by the EU Commission is quite possible if the Polish authorities fail to act.

Paul Fogo is a senior attorney with Miller, Canfield, Babicki, Chelchowski & Partners fogo@pl.millercanfield.com