Following the posts on the Government Legislation Centre website can be an interesting experience. Sometimes, seemingly trivial legal changes lead to a number of serious consequences. It is likely that such consequences will touch businesses in a specific market rarely mentioned in public debate. This is the market for telecommunication services at Polish prisons. Seemingly innocuous, the proposed changes could completely eliminate Polish companies from this market.
On 4 November 2021, two bills regarding amendments to the Criminal Enforcement Code and the Prison Service Act were published on the Government Legislation Centre website:
- Act Amending the Prison Service Act and Certain Other Acts of 2 November 2021 (item no. UD287 on the Council of Ministers legislative agenda)
- Act Amending the Criminal Enforcement Code and Certain Other Acts of 29 October 2021 (item no. UD282 on the Council of Ministers legislative agenda).
Both bills would disrupt the business of a number of entities offering telecommunications services in Polish prisons.
It should first be stressed that telecommunications is a regulated activity under the Business Law of 6 March 2018 and the Telecommunications Law of 16 July 2004. Under current law, in accordance with the Criminal Enforcement Code of 6 June 1997, prisoners are entitled to maintain contact with their families and close ones through visits, correspondence, telephone conversations, parcels and money transfers, and other such means of communication.
Art. 8 §3, 105 §1, and 105b §§1–2 of the Criminal Enforcement Code set forth the rights of prisoners to contact their attorney or defence counsel and to use pay telephones in prisons, while Art. 217c §§1–2 provides for the right of detainees to use a telephone.
While these regulations are clear and do not require great effort to interpret them, for unknown reasons, the proponents of both of the aforementioned bills claim that there are currently no telecommunications providers of any kind in prisons, which is contrary to reality. The proposed amendments assert that detainees are deprived of basic rights guaranteed by the code. This conclusion can be drawn from the justification of both drafts, as according to the justification of bill UD287, its purpose is to “ensure the implementation of the right of persons held in custody to make telephone calls under the assumption that these calls will be made in the same manner and on the same principles in all penitentiary units” (p. 66).
The bills provide for inclusion in the Prison Service Act and the Criminal Enforcement Code of regulations allowing the Minister of Justice to select one entity to be entrusted with providing telecommunications services in all prisons in Poland, while eliminating other businesses from that industry. Such an action would create a monopoly, cause centralisation, eliminate competition in the relevant market, and undermine constitutional principles guaranteeing business freedom.
The proposed amendments utterly ignore existing telecoms. They also overlook the issue of ownership of the infrastructure which de facto constitutes a component of their business. The proposals are a legislative steamroller that leaves no room for manoeuvre for entities active in the market for many years.
A reading of the proposal give the impression that prisoners do not have any opportunities to use devices for telecommunications. Therefore, it is difficult for an uninformed reader to assess the proposed changes, as they do not in any way take into account the existence of entities providing telecommunications services in prisons. At this point, important questions arise: Are there really no businesses providing prisoners with access to telecommunications? Are the prepaid telephones mere dummies, and are prisoners denied their statutory guarantees under current law? Why do the drafters ignore existing telecommunications companies, which, after all, employ many workers?
Industry resistance, criticism from trade groups and regulatory bodies
There is a noticeable commotion in the telecom industry over the negative impact of the proposed regulations on the market for telecommunications services. It must also be mentioned that the proponents of the changes, although aware of the existence of telecom trade associations and bodies responsible for protection of the rights of telecom businesses, omitted these entities from the invitation to submit opinions in the public consultation. It was only after the issue was publicised that companies could turn to relevant institutions for support.
The substance of these bills can only be criticised, as they do not reflect the complicated provisions of other laws regulating activity on the telecommunications market. The proposed inclusion of these regulations in legal acts whose scope does not include regulation of telecommunications companies should also be condemned. Telecoms had no real chance to examine the proposed changes, especially as their trade associations were left out of the consultation.
After the issue was publicised, critical comments on the proposed changes in the public consultation were raised by the following institutions:
- Polish Chamber of Commerce for Electronics and Telecommunications (KIGEiT)
- Polish Chamber of Digital Economy (KIGC)
- Polish Chamber of Ethernet Communications (KIKE)
- Ombudsman for SMEs
- President of the Office of Electronic Communications
- President of the Office of Competition and Consumer Protection
- President of the Public Procurement Office.
Many of the comments were identical. They focused attention on the unjustified elimination of businesses from the relevant market, creation of a monopoly on the market for providing telecom services in prisons, restriction of business freedom, violation of EU law, and the security of telecommunications services provided in prisons, which could be stripped from specialised entities overnight and entrusted to unspecified units. They have also drawn attention to the superficial reasoning and complete disregard for the legal and factual situation of telecoms.
What about compensation for extinguishing business in a market worth PLN 20 million?
The proposed amendments would completely eliminate a number of entities from the telecommunications industry. Most of these units are specialised in a certain field and do not derive income from any other business. The main issue is that the proposed regulations do not specify the compensation proposal for telecommunications companies that, as a result of their adoption, would lose the ability to continue their business overnight. The disregard for ownership of telecommunications infrastructure that has been installed at prison facilities across the country is also striking, as the delivery of services over many years has led companies to build a complete infrastructure and to hire and train specialised staff.
As currently drafted, the bills also overlook the deinstallation of any devices. Thus, not only would they eliminate a number of entities from the market, which will be deprived of funds overnight, but in addition, they do not specify who is to bear the costs of deinstallation. They will probably have to be borne by the companies in their own interest, unless a far-reaching interpretation of the proposed changes also includes the transfer, by virtue of law, of ownership of infrastructure elements to units subordinate to the Minister of Justice, which would constitute another curiosity.
The industry chambers emphasise these elements in their positions, pointing to the need for a transition period of several years so that businesses can adapt to the new market situation (i.e. in real terms, as a result of monopolisation, to rebrand themselves).
The described actions could be found to be a kind of expropriation. Today, it is indeed difficult to encounter regulations so intensely interfering with business freedom.
The Civil Code provides solutions governing the liability of the State Treasury for damages. The situation in which telecoms find themselves at present warrants a concern that the proposed changes may violate Art. 22 of the Polish Constitution (“Limitations upon the freedom of economic activity may be imposed only by means of statute and only for important public reasons”), as it is impossible to discern any important public interest in the amendment. On the contrary, the public interest is actually harmed.
The principle of business freedom imposes certain obligations on public authorities. On one hand, these obligations are of a negative nature and boil down to a ban on issuing legal acts interfering with the principle of business freedom. Activation of a potential compensation procedure for injury resulting from a normative act, which is regulated by Art. 4171 of the Civil Code, requires a predicate ruling for assertion of the claims for damages. Businesses determined to respond firmly will probably not remain passive in the face of the adoption of the new regulations in their current form, and will use any available legal means to satisfy their claims and obtain due compensation. It is highly likely that they will seek relief from the Constitutional Tribunal if the proposed changes are adopted in their current form.
Public debate and response to comments needed
It is still possible to modify the proposals to adequately safeguard the interests of the conflicting parties. But that would require a public debate where the stakeholders can make their comments. If, on the other hand, the bills as they stand are examined only from the perspective of the possibility to challenge specific regulations, they appear to fall short of the principles of proper legislation.
Additionally, there is the issue of damages caused by the de facto expropriation of telecoms. Regulating this issue would benefit both the state and the businesses. Awarding adequate compensation would secure the interests of the telecoms while allowing the State Treasury to avoid more radical claims.
The proposed changes violate business freedom, as evidenced by a number of critical voices of key organisations and entities protecting the interests of undertakings. Since significant problems are already being signalled at the public consultation stage, it is worth considering changes. Certainly, it would be helpful if the proposed provisions included a longer transition period, adequate compensation for the businesses affected, and a broader justification or impact assessment of the regulations, which is currently lacking.
A reconciliation conference was scheduled for 11 January 2022. It will be worth following the legislative process and seeing how the proponents of the changes address the comments submitted.
Filip Marcinkowski, Government Claims practice, Wardyński & Partners