State retains control over 15 privatised companies

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The Polish Ministry of the State Treasury’s aspirations with respect to retaining some control over privatised enterprises are about to go through the final stage of legislation. The Ministry has published a draft regulation concerning a list of companies of key importance to the public interest or security. In essence, the regulation will identify 15 companies where the government would hold a 'gold veto'. This is not the first time that State Treasury prerogatives in relation to companies being sold to private investors are being defined.

Companies under the 'gold veto'

It was hoped that the debate concerning the institutionalisation of State Treasury control over privatised enterprises would be concluded before the end of 2004 (PL0408106F), with the law instituting the 'gold veto' coming into force in early 2005. However, the legislative process had been delayed due to, among other things, a disagreement as to whether KGHM Polska Miedź SA, the country’s largest copper producer, should be included in the list of companies over which the State Treasury should retain special rights. The draft of the statute presented by the Ministry of the State Treasury (Ministerstwo Skarbu Państwa, MSP) included KGHM among the companies over which government prerogatives would extend. Acting on the suggestion of the Office of the Committee for European Integration (Urząd Komitetu Integracji Europejskiej, UKIE), however, the government removed KGHM from the list in late 2004, thus reducing the list to 14 companies.

In justification of its position, UKIE cited the European Court of Justice (The Court of Justice of European Communities, ECJ) authority to the effect that enterprises engaging in the extraction and processing of copper are not considered strategic. However, after the draft legislation was submitted to the appropriate parliamentary commission, KGHM Polska Miedź SA reappeared once more on the list of strategic companies. This change was reflected in Article 8 of the draft, which states that companies of strategic significance include those 'whose object of operations comprises the extraction and processing of copper ore, where the company’s share in the extraction and processing of copper ore within the Republic of Poland exceeds 70%.' This formulation makes for a straightforward summary of the government’s intent about which companies - if the legislature is permitted - will be subject to special supervision by the state.

Criticisms of the regulation

On 3 June 2005, the lower chamber of Poland’s parliament finally voted on the legislative act regarding the State Treasury’s special authority over companies of particular significance to the public interest or public security. It should be noted that the Act was criticised by all sections of the political spectrum. Civic Platform (ကPlatforma Obywatelska, PO) deputies questioned what they saw as the vague character of the very concept of 'public security', which the Act adopts as the basic criterion for selection of companies falling under its ambit. PO politicians also posited a number of solutions which, as they saw it, would provide for the safeguarding of State Treasury interests without paralysing the companies concerned. Yet, by and large, the PO’s contribution was deemed unacceptable by the State Treasury on the grounds of European law.

Disapproval of the proposed law was also expressed by the League of Polish Families (Liga Polskich Rodzin, LPR), although this party’s criticism was different to that of the PO. LPR dismissed the entire Act as being an exercise in underhanded propaganda, devised to lull the public into a false sense of security while, what LPR views as, the undiscriminating sale of state assets to 'robber' capitalists continues unchecked. LPR has set itself the goal of putting a complete hold on further privatisation.

State Treasury prerogatives

The basic character of the rights extended to the State Treasury for companies deemed to be of strategic significance is fleshed out in Article 2 of the Act, which provides that: 'the minister charged with the State Treasury may express objection with respect to a resolution adopted by the Board of Directors or to another act in law executed by the Board of Directors devised to dispose of assets of the company of rudimentary importance to its operations.' Such objection may be raised where 'there arises a reasonable suspicion that such act in law violates the public interest or public security'.

The Act does not name-check the companies that fall within its ambit. It does, however, lay down the criteria subject to which the Council of Ministers is to draw up (by way of a regulation) the list of companies with strategic importance to public security or the public interest; such a list should be ready by 30 September of each year. By late November 2005, only a draft of this regulation had been published on the Ministry of the State Treasury website; it listed 15 companies, including KGHM. Again, however, questions remain as to the exact connection between copper mining and national security (see Mataczyński 2005 reference below).

Opinions of the social partners

The idea of granting the State Treasury a gold veto with respect to actions of certain privatised companies has elicited a lively response from some of the social partners. Their interest was particularly evident in 2004, when the entire matter was at the general proposal stage. Criticisms were voiced by various experts as well as by members of the business community, mostly by those affiliated to the Polish Federation of Private Employers Lewiatan (Polska Konfederacja Pracodawców Prywatnych Lewiatan, PKPP Lewiatan). The employers were worried that the Ministry of the State Treasury might be tempted to extend its control over dozens of companies. Such a tendency might compromise the privatisation process in Poland by making potential investors wary of committing themselves to undertakings in which the government retains a hand and which, thus, operate by something less than market economy rules - something which the Polish economy could ill afford. True enough, some of the enunciations heard in the first half of 2004 could suggest that the State Treasury would like a gold veto in a more extensive number of companies than the 15 companies eventually listed.

It may be concluded that consultations with the social partners (the government goes to some lengths to cite these in its justification of the proposed regulation), as well as the strong criticisms voiced by economic and legal experts and by the oppository PO, have led the powers-that-be to scale back their appetites with respect to the privatised enterprises. Needless to say, much importance in this respect is attached to the reminders that whatever legal structure is ultimately devised must comply with pertinent European laws.

Nonetheless, some of the trade unions - and certainly those active within KGHM Polska Miedź SA - welcome the existence of a state influence over their employing enterprises. The fact that the state has a guaranteed say in the running of the enterprise apparently makes for a feeling of security among employees, as a guarantee of sorts that they need not worry about sudden large-scale redundancies.

Commentary

Now that the Ministry of the State Treasury has proposed its draft regulation concerning the gold veto, there is little to suggest that it may be willing to contemplate any substantial amendments. Also, it seems that, apart from the disagreement as to whether or not KGHM Polska Miedź SA should be classified as a strategic enterprise, there are no serious questions about the substance of the document. The fact that, in the end, only 15 companies were deemed important enough to warrant a gold veto is commendable.

Nevertheless, the working report released by the European Commission on the 22 July 2005, dealing with 'special rights in privatised companies in the enlarged Union', provides less grounds for optimism concerning the policies of the Polish leadership. This document lists no less than 50 Polish companies in which the state, by one method or another, retains a privileged position with respect to their operations. Perhaps then, the legislative act of the State Treasury regarding companies of special significance to the public interest or public security and its executive instrument should be viewed not so much as an expression of the State’s excessive ambitions, but as a curbing of such aspirations. (Piotr Sula, Institute of Public Affairs (Instytut Spraw Publicznych, ISP) and Wrocław University (Uniwersytet Wrocławski, UWr))

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