Litigation Portal: The Private International Law dated 4 February 2011 went into force on 16 May 2011. What effect does the new law have on transactions involving real estate in Poland?
Sylwia Moreu-Żak: First and foremost the new law addresses the issue of the form of a legal act transferring title to real estate. Under the prior law, from 1965, this issue was governed by general regulations with respect to the form of legal acts, meaning that, as an alternative, the form of the transaction could be governed by the regulations in force at the place the transaction was concluded. Thus it sometimes happened—although it was controversial in the legal doctrine—that the land register courts in Poland would recognise the effectiveness of a foreign deed transferring title to real estate in Poland when the form of the deed complied only with the requirements of local law at the place the deed was made. Now Art. 25(2) and 41(1) of the current Private International Law provide that the form of a legal act that includes disposal of real estateis subject to the law in force at the place where the real estate is located. The form of an agreement disposing of real estate in Poland is thus governed by Polish law, which requires that such transactions be concluded in the form of a notarial deed. However, an agreement in which a party merely promises to transfer title to real estate in Poland may still be effectively concluded in compliance with the requirements of the law in force at the place where the agreement is concluded.
May a deed transferring title to real estate in Poland be concluded before a notary from another country?
The law does not expressly address this issue. In the commentaries there is also no uniform position on whether the form of a notarial deed is met only when the deed is drawn up by a Polish notary. In one ruling, the Polish Supreme Court took the position that the requirement of the form of a notarial deed may be met only when the deed is prepared by a Polish notary. This holding should be supplemented at least in one sense, because a Polish consul is also authorised to prepare a notarial deed, within a limited scope and under certain conditions. Given the existence of this Supreme Court ruling, however, it would not be prudent to attempt to conclude an agreement transferring title to real estate located in Poland before a notary from another country.
So how can the owner sell real estate in Poland if one of the parties is abroad?
The most practical solution is to grant a power of attorney to conclude the deed of sale in Poland. The new Private International Law fortunately does not provide for special requirements with respect to the legal act of issuing a power of attorney. Under the general rule set forth in Art. 25(1), it is sufficient to comply with the form required at the place of issuance of the power of attorney. If a power of attorney is issued abroad, it is important to remember as well the requirement for legalisation, that is, the requirement for certification by the Polish diplomatic mission, or with respect to countries that are parties to the Hague Convention of 1961, the requirement to obtain an apostille clause for the power of attorney.
The Private International Law does introduce separate regulations with respect to the substantive law governing powers of attorney. Generally, a power of attorney will be subject to the law chosen by the principal. If no choice of law is made, the new act provides a set of complicated rules for determining the law governing the power of attorney. In practice, this will mean that if the document does not specify the applicable law, the power of attorney will be subject to the law of the state where the principal has its registered office or conducts its regular operations, or where the principal’s enterprise is located if the attorney acts there regularly, or the law of the state in which the attorney in fact acted. However, given the difficulties the notary or the land register court may have analysing a power of attorney under unfamiliar foreign law, it is recommended in the case of a power of attorney for a Polish real estate transaction to state expressly in the power of attorney that it is governed by Polish substantive law—particularly if the attorney does not have a permanent address in Poland.
Do these limitations apply as well to the sale of shares of a Polish company that holds title to real estate in Poland?
No, these restrictions apply only to disposal of real estate and do not apply to transactions in shares of Polish companies. The situation would be different, however, in the case of sale of an enterprise or an organised part of an enterprise which includes real estate in Poland among the assets. In that case, compliance with the Polish regulations concerning the form in which the transaction is conducted is unavoidable.