poland: contract enforcement world bank luba beardsley national bank of poland jaroslaw beldowski
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Poland: Contract EnforcementPoland: Contract Enforcement
World BankWorld BankLuba BeardsleyLuba Beardsley
National Bank of PolandNational Bank of PolandJaroslaw BeldowskiJaroslaw Beldowski
Why?Why?Very long time to enforce a simple contract
Why?Why?
Courts are viewed as slow
Why?Why?
Courts are viewed as weak
Public supportPublic support
In accordance with the Public Opinion Polls on In accordance with the Public Opinion Polls on courts conducted from 1998 up to the present timecourts conducted from 1998 up to the present time
negative opinionsnegative opinions about courts are quite stable – about courts are quite stable – 60%60% (50% in 1998) (50% in 1998)
as well as as well as positive onespositive ones – – 20%20% (30% in 1998). (30% in 1998).
Inflow of cases per 100 000 Inflow of cases per 100 000 inhabitants in 1994 - 2003inhabitants in 1994 - 2003
O verall inflow per 100,000 inhabitants, 1994–2003
0
5,000
10,000
15,000
20,000
25,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Inflow of cases by jurisdiction Inflow of cases by jurisdiction in 1994 - 2004in 1994 - 2004
Inflow by jurisdiction, 1994=100
0
100
200
300
400
500
600
700
800
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
cr iminal civi l
land and mor tgage labor
social pr otection commer cial
commer cial r egistr ations f ami ly
Cases concluded and backlog Cases concluded and backlog 1999 – 20041999 – 2004
0
2000
4000
6000
8000
10000
12000
1999 2000 2001 2002 2003 2004
inflow
cases concluded
backlog
Judicial sector expenditure Judicial sector expenditure in Poland, 2002-2004in Poland, 2002-2004
2002 2003 2004
Total 2.6 billion PLN0.6 billion USD
3.3 billion PLN0.8 billion USD
3.7 billion PLN1.0 billion USD
% of GDP 0.3% 0.4% n/a
% of public expenditure 2.9 % 3.3% 3.4%
% expenditure for personnel
67% 61% 60%
% expenditure for property investment
2.8% 5.9 % 7.3%
Source: Ministry of FinancePLN: Polish zloty; USD: American dollar
Size of Size of jjuudicialdicial ssector in Poland ector in Poland and and ssome European ome European ccountriesountries
first instance courts per 1,000,000
inhabitants served by one first instance
court
number of staff per 100,000
number of staff per court
Judges support staff judges court staff
Poland 9 113,442 20 59 22.4 65.3
Netherlands 3 800,000 11 31 64.6 179.1
Austria 25 60,000 1 67 9.8 30.7
Slovakia 10.2 97,803 23 67 18.1 53.1
Hungary 10.9 91,369 27 75 17.8 48.8
Source: CEPEJ, European Judicial Systems (2002).
Court organisation in PolandCourt organisation in Poland
Three-tier court system:Three-tier court system:- 310 district courts (sad rejonowy)310 district courts (sad rejonowy)- 43 regional courts (sad okregowy)43 regional courts (sad okregowy)- 11 appellate courts (sad apelacyjny)11 appellate courts (sad apelacyjny)
The courts are divided into several The courts are divided into several divisions, e.g. 120 district commercial divisions, e.g. 120 district commercial courts, 300 land registration courts, courts, 300 land registration courts,
21 business register courts and 21 business register courts and
10 pledge register courts.10 pledge register courts.
Criminal, Criminal, ccivil, ivil, ccommercial, ommercial, rregistrations egistrations ccases by ases by ccourtsourts
inin 2003 2003
0% 20% 40% 60% 80% 100%
criminal
civil
commercial
registrations
District Courts Regional Courts Courts of Appeal
Commercial procedures at the Commercial procedures at the commercial courtscommercial courts
Three basic types of commercial procedures Three basic types of commercial procedures (disputed claims): trial (regular), simplified.(disputed claims): trial (regular), simplified.
Accelerated proceedings (undisputed claims):Accelerated proceedings (undisputed claims):- admonition orders (up to around 3000 USD),admonition orders (up to around 3000 USD),- payment orders.payment orders.
Registrations (seperate procedures).Registrations (seperate procedures).
Inflow of Inflow of ccases by ases by pproceduresrocedures in in ddistrict istrict (c(commercialommercial)) ccourts, ourts,
1999–20041999–2004
0 100,000 200,000 300,000 400,000
1999
2000
2001
2002
2003
2004
Trial Com Sim Com Sum Judg
Processing time in district Processing time in district courts (commercial cases)courts (commercial cases)
1999 – 2004, in months1999 – 2004, in monthsProcessing time in district courts, commercial cases,
1999–2004, in months
01
234
56
1999 2000 2001 2002 2003 2004
t rial t rial simplified business regist rat ion pledge regist rat ion
Other factors affecting Other factors affecting contractual enforcement in contractual enforcement in
PolandPolandBlaming only courts for the poor contract Blaming only courts for the poor contract enforcement in Poland is not fair as there are also enforcement in Poland is not fair as there are also other players which are involved in the process. other players which are involved in the process. One should not forget about business itself One should not forget about business itself (behavioural patterns shaped by some regulations, (behavioural patterns shaped by some regulations, e.g. access to information, tax incentives) and legal e.g. access to information, tax incentives) and legal professions (notaries, advocates/legal councels professions (notaries, advocates/legal councels and bailiffs). It is why the World Bank report has not and bailiffs). It is why the World Bank report has not been limited to the courts, but it has also covered been limited to the courts, but it has also covered some other issues.some other issues.
How?How?
ProductsProducts
In cooperation with the National Bank of In cooperation with the National Bank of Poland:Poland:
The World Bank Report: The World Bank Report: Legal Barriers to Legal Barriers to Contract Enforcement Contract Enforcement
The EBRD Report: The EBRD Report: The Impact of the The Impact of the Legal Framework on the Secured Credit Legal Framework on the Secured Credit Market Market
Legal Barriers to Contract Legal Barriers to Contract Enforcement Enforcement
ContractsContracts InformationInformation
• AccessibilityAccessibility• Balance between personal data protection & information flowBalance between personal data protection & information flow
Legal ServicesLegal Services• Demand (during contract negotiation & conclusion, when the contract is not honored Demand (during contract negotiation & conclusion, when the contract is not honored
and impact on voluntarily compliance)and impact on voluntarily compliance)• Supply (accessibility, costs & quality of service)Supply (accessibility, costs & quality of service)
Debt Collecting IndustryDebt Collecting Industry DisputesDisputes
Commercial CourtsCommercial Courts• Actual performanceActual performance• Factors contributing to under-performanceFactors contributing to under-performance
Alternative Dispute ResolutionAlternative Dispute Resolution• Constraints to utilizationConstraints to utilization
Enforcement of JudgmentsEnforcement of Judgments BailiffsBailiffs
• Performance Performance • Factors contributing to under-performanceFactors contributing to under-performance
Key FindingsKey Findings
Informed ContractingInformed Contracting Breach of ContractBreach of Contract Legal ServicesLegal Services CourtsCourts BailiffsBailiffs
Informed ContractingInformed Contracting
Limited Access to Information Limited Access to Information Reliance on negativesReliance on negatives Mandatory notification of debtorMandatory notification of debtor Focus on individual consumersFocus on individual consumers
Personal Data are Protected at the Personal Data are Protected at the Expense of Information Flow and Well Expense of Information Flow and Well Functioning Credit SystemFunctioning Credit System
Breach of ContractBreach of Contract
Failure to pay, substandard goods/service Failure to pay, substandard goods/service and third party claims, trigger legal actionsand third party claims, trigger legal actions
At the same time business take other At the same time business take other actionsactions Renegotiating contractRenegotiating contract Seeking other financing Seeking other financing
Legal ServicesLegal Services
Lawyers are seen as the “fire brigade” to Lawyers are seen as the “fire brigade” to be called out only if things go wrongbe called out only if things go wrong
Use of lawyers does not increase Use of lawyers does not increase compliance with the contractcompliance with the contract concerns about reputation and relations concerns about reputation and relations
Lawyers meet the demand but the cost of Lawyers meet the demand but the cost of services is an issue services is an issue
CourtsCourts Demand for court services is among the highest in the region Demand for court services is among the highest in the region
Businesses file lawsuits Businesses file lawsuits • to buy timeto buy time• for tax purposesfor tax purposes• as a matter of principle ( to uphold ethics)as a matter of principle ( to uphold ethics)
Public expenditures and production in the justice sector are very Public expenditures and production in the justice sector are very high but do not translate into court performancehigh but do not translate into court performance
Misplaced functions and weak barriers to accessMisplaced functions and weak barriers to access Cheap labor drives productivityCheap labor drives productivity
Inconsistent court performance blurs the pictureInconsistent court performance blurs the picture Inflexible organization and obsolete management are behind the Inflexible organization and obsolete management are behind the
court problemscourt problems Absence of performance management Absence of performance management Weak central managementWeak central management Lack of investments into technology and innovation Lack of investments into technology and innovation Obsolete business organization and processes Obsolete business organization and processes Overly formalistic procedural designsOverly formalistic procedural designs
Enforcement AgentsEnforcement Agents Sub-optimal Combination of Public Service Aspects & Market Sub-optimal Combination of Public Service Aspects & Market
Elements Elements Significant Entrance BarriersSignificant Entrance Barriers Secured position and inflow of casesSecured position and inflow of cases Private- business organization Private- business organization Price regulation Price regulation Deficient Supervision Deficient Supervision
Minimal CompetitionMinimal Competition Price as a factor : fixed fee with little possibility of deviation paid by third Price as a factor : fixed fee with little possibility of deviation paid by third
partyparty Quality is not a factor: little information on performance and Quality is not a factor: little information on performance and
geographical monopoly of bailiffsgeographical monopoly of bailiffs High number of low-value or uncollectible debt and opaque High number of low-value or uncollectible debt and opaque
incentives of bailiffs to actincentives of bailiffs to act External constrains External constrains
Information, easy transfer of assetsInformation, easy transfer of assets
Future StepsFuture Steps
Currently the report is being discussed Currently the report is being discussed with the local experts and stakeholderswith the local experts and stakeholders
After the consultations, tAfter the consultations, the report will be he report will be released in released in JuneJune 2006 2006
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