Back to the past part 1 – the planned return to proceedings in commercial cases

The Ministry of Justice has prepared a draft amendment to the Civil Procedures Code and certain other acts which, together with the justification, are written on almost 300 pages.

A return to commercial proceedings is planned after seven years. Will the new proposals be advantageous for entrepreneurs? Will they actually contribute to the acceleration of proceedings or can they prove to be a nightmare and difficult in pursuing claims?

One thing is certain: according to the Ministry of Justice, the experiment involving the withdrawal from commercial proceedings failed.

Commercial proceedings were stopped in 2012…

Commercial proceedings had existed in the Polish civil procedure from 1 October 1989 until 3 May 2012.

It arises from the draft amendment to the Civil Procedures Code and certain other acts of 16 September 2011 (Journal of Laws of 2011, item 1281) that one of the reasons for abolishing commercial proceedings in 2012 was the lack of grounds for maintaining separate proceedings for commercial cases.

According to the authors of the bill from 2011, commercial matters did not differ by type of demands appearing in them from ‘normal’ civil cases. Therefore, they should not be subjected to separate procedural rigours. The authors of the bill did not agree that the entrepreneurs appearing in them as professionals in business should demonstrate greater care in handling their affairs, including court matters. Consequently, they also disagreed with the assertion that greater requirements can be set for entrepreneurs in this respect.

Over-formalization of the proceedings and excessive rigour resulted in a risk of decisions being based on the ‘formal truth’ which could be a potential source of such adverse phenomena as bankruptcy and an increase in unemployment.

The authors of the bill argued that professionalism in the area in which the entrepreneur operates professionally cannot be treated in the same way as professionalism in the area of legal knowledge and its practical application. Experience shows that this was a correct assumption.

The objective of the bill from 2011, which had the objective of eliminating commercial proceedings, was the simplification of the structure of the proceedings in whole, as well as streamlining and accelerating them.

It is noteworthy that, despite eliminating commercial proceedings, commercial courts (constituting specialized divisions of the ordinary courts) were not liquidated. It was acknowledged that it was purposeful to take advantage of the specializations of commercial court judges to date. Consequently, the Act on hearings of commercial cases before courts of 24 May 1989 (Journal of Laws No. 33, item 175, as amended) was upheld.

The commercial courts were hearing commercial cases in ‘ordinary’ proceedings from 3 May 2012.

…to be restored after seven years

The Ministry of Justice came to the conclusion that the hearing of commercial cases in ‘ordinary’ proceedings had failed.

The ministry points out that the inflow of commercial cases after the abolition of separate commercial proceedings increased from 1.44 million in 2012 to 1.97 million cases in 2017. During this time, the number of cases in arrears increased from 183k cases to 400k cases. The average duration of proceedings in registered cases increased from 9.1 months to 15.7 months in regional courts and from 6.4 months to 14.1 months in district courts.

It is indisputable that such a situation does not satisfy the requirements of business trading and is unacceptable for the average entrepreneur. Nobody has any doubts that entrepreneurs are interested in the fastest possible end to litigation to be able to focus on their day-to-day business. In proceedings regarding payment, a fast judgment to the benefit of the creditor can determine his further existence.

In contrast with the authors of the bill from 2011, the Ministry of Justice has taken the stance that, as the parties to the business cases are entrepreneurs, i.e. professional entities, more stringent requirements and procedural rigours can be imposed on them. In his opinion, proceedings in civil cases can be accelerated by restoring separate proceedings.

The current draft amendment to the Civil Procedures Code and certain other Acts (‘Bill’) provides for the shortening of some of the times in commercial proceedings with respect to the times provided for the same activities in ‘ordinary’ proceedings and the restriction of the rights of the parties to manage the case.

These changes are intended to accelerate the proceedings. I believe that, with such a high workload of the courts, this is unrealistic. The times for hearing cases will continue to be longer than expected. The only thing that will change will be the rules that apply to the parties.

I believe that commercial cases can be accelerated by filling the vacant judicial positions and providing more assistance to the judges (more assistants, secretarial staff, a better technical infrastructure etc.).

It arises from the information provided by the Ministry of Justice that, at the end of 2018, there were 745 vacant judicial positions in the ordinary courts (at the end of 2016, there were 479 vacancies, while at the end of 2017, there were already 558).

Similarly, with an increasing number of vacant judicial positions and an increasing number of cases flowing into the courts, a mere change in the procedure will not significantly contribute to these cases being heard faster.

In the second part of ‘Back to the past’, I shall explain what is and what is supposed to be a commercial case.