The scope of authority of the representative of a foreign undertaking in a Polish branch
Can the scope of authority of the representative of a foreign undertaking in a Polish branch be limited in practice to comply with the principal’s expectations?
As held by the National Appeal Chamber (which adjudicates public procurement disputes in Poland) in its ruling of 24 February 2015 (Case KIO 247/15), one aim of creating a branch and appointing a person to represent the foreign undertaking at the branch is to enable the branch to act without the need to obtain additional authorisations. It follows that the person listed in the National Court Register as the authorised representative in the branch may, on the basis of his authorisation, take any actions connected with the activity of the foreign undertaking in Poland.
The Supreme Court of Poland held in its order of 11 April 2014 (Case I CZ 21/14) that this authority, provided for in Art. 87 of the Business Freedom Act, covers a broad scope. It includes in particular the ability to incur obligations to third parties on behalf of the establishment and to represent it in dealings with the public authorities and the courts. The Supreme Court also held in its resolution of 26 February 2014 (Case III CZP 103/13) that the person at the branch authorised to represent the foreign undertaking whose details are entered in this section of the National Court Register can issue a power of attorney ad litem to represent the foreign undertaking in cases involving claims related to the activity of the branch.
In light of the foregoing, it should be recognised that if an act by the representative is an act that could also be performed directly by the foreign undertaking, through its own foreign management (not through the representative at the branch), i.e. the act falls within the scope of the statutory business purposes of the foreign undertaking, then such act by the representative will be regarded as valid and effectively binding on the foreign undertaking. Among other reasons, this may result from the fact that unlike the authorities of Polish companies, in the case of branches of foreign undertakings there is no ability to include in the National Court Register specific information about the scope of authority of the representative at the branch.
Thus it appears that if a foreign undertaking wishes to effectively limit the scope of action by its representative in a Polish branch, the correct way to do so would not be to limit the scope of activity of the representative himself (whether in the resolution appointing him or in a separate power of attorney issued to him), but rather to limit the scope of the foreign undertaking’s activity performed by the branch.
Art. 86 of the Business Freedom Act indicates the possibility of performance of business activity by a foreign undertaking in Poland exclusively within the scope of business of the foreign undertaking. In other words, while the subject of the foreign undertaking’s activity in Poland cannot be broader than its scope of business in its home jurisdiction, it can be narrower. An appropriate narrowing of the scope of business performed in Poland can effectively limit the scope of activity of the foreign undertaking’s representative in its Polish branch. The narrowing would need to be made in such a manner that the scope of business of the branch excludes activity not desired by the foreign undertaking.
Depending on the specific construction adopted for the function of the representative in the branch, an act by the representative exceeding the scope of the business of the foreign undertaking conducted through the branch may be regarded as an action exceeding the scope of authority, requiring ratification by the foreign undertaking as a condition for its validity.
This narrowing of the scope of business should be set forth in the decision on establishment of the branch in Poland or later decision amending the scope of the business carried out through the branch. More importantly, to ensure the effectiveness of this solution and the security of commerce, the narrowed scope of activity should then be entered in the relevant rubric of the National Court Register. This can be helped by the increasingly frequent practice of the registry courts where the description of the activity entered in the register need not correspond word-for-word with the description used in the 2007 Polish Classification of Activity (PKD) scheme (based on NACE), as adopted in the Council of Ministers’ PKD regulation of 24 December 2007. It is important however that the PKD numbers selected for listing in the register match those included in the description of the business indicated in the decision on establishment of the branch (falling within the scope of business of the foreign undertaking).
However, if the foreign undertaking intends to conduct its full range of business in Poland but does not wish to authorise a specific branch representative to act for it in such a broad scope, then under Art. 89(3)–(4) of the Business Freedom Act it may establish several branches in Poland, appointing a different representative in each case and specifying a different scope of business for each branch, within the broader overall scope of business of the foreign undertaking.
Łukasz Śliwiński, legal adviser, M&A and Corporate practice, Wardyński & Partners