New regulation on payments of remuneration to subcontractors within construction contracts in Poland on the way

By Dr Robert Lewandowski, lawyer at Derra, Meyer & Partners in Warsaw

The Polish legislator has recently proposed a significant amendment to the regulation of  the terms of construction contracts under the Polish Civil Code which awaits being signed by the Polish president soon and should take effect as of 1^st June 2017. This new regulation refers to the content of Article 647 ¹ of the Polish Civil Code (PCC) which currently states that   the investor and contractor shall jointly bear liability for the payment of remuneration to a subcontractor engaged within construction work provided by contractor. The current wording of Article 647 ¹ PCC protects subcontractors,  as a weaker party against contractors  in the case of their bankruptcy or   financial meltdown. This provision will  now be subject to new amendments according to which the investor shall only be liable, along with the constructor, for the payment of the remuneration of a subcontractor if the investor fails  to reject the subcontractor within 30 days upon receiving notification of their engagement in the construction work from the contractor. The notification and the rejection notice must be made in the written form otherwise they are null and void. Moreover, the financial liability of the investor with regard to the payment of subcontractor’s  remuneration will be limited to the amount of the remuneration previously agreed with the contractor within the main construction contract. The proposed amendment aims  to protect the interests of investors who often in the past were victims of fraudulent arrangements made between contractors and subcontractors in order to cheat money from investor who paid twice  the same remuneration to the subcontractor as well as to the contractor.  Additionally, the liability of the investor towards paying the subcontractor will be limited to the amount agreed with the main contractor and thus this will hinder the constructor and their subcontractor to arrange a higher remuneration amount exceeding the value of the main contract.  The question arises as to whether the new law will sufficiently protect the interests of subcontractors within a construction project. The term of 30 days seems to be too long and may foster uncertainty  within the  relationship between the contractor and the subcontractor in the future. It should also be assumed that the 30 – day – term cannot be shortened  contractually by the parties. To avoid this deadlock , subcontractors should enter the contracts with their constructors upon being sure that they have been accepted by the investor, otherwise any prior commencement with subcontracted  work puts them at risk  of losing their pay. Time will tell how the new proposed amendment, should it come into force, will effect subcontractors.