London - Anglo-Polish Perspectives: current legal issues

By contrast, smaller limited liability Polish companies (the so-called 'Sp. z o.o.’) generally have unitary board structures, which are more akin to the UK practice.

The speaker explained that the pragmatic approach in the UK to corporate governance codes (which have been adopted largely on a ‘comply or explain’ basis), do have a counterpart Polish practice with the adoption of a corporate governance code applicable to Polish quoted companies, which also operates on a ‘comply or explain’ basis. There are significant challenges in the years ahead for directors of companies from both jurisdictions as wider duties of ‘corporate social responsibility’ supplement the traditional duties of directors towards their companies and shareholders.

Ros Ashby, who heads up the Personal Injury and Motor Claims Department at PE, has been much involved in representing the interests of Polish insurers in relation to motor insurance claims made as a result of accidents in the UK involving Polish drivers. She explained the Green Card system created in 1953 and applicable to 44 countries mainly in the European area, including Poland and the UK, under which the interests of victims of accidents involving foreign registered vehicles are protected.

She also remarked upon the so-called phenomenon of ‘lorry blind spot’ accidents connected with the vast increase in traffic from Poland in recent years and related to the left wheel drive blind spot on British roads.

By ROS ASHBY

I head the Personal Injury and Motor Claims Department in Pritchard Englefield and

I would like to speak to you today about THE GREEN CARD SYSTEM and the POLISH DRIVER:-

For many years now, my Firm has represented the interests of overseas motor insurers – including various leading Polish insurers in the free market – in circumstances where their insured’s and their drivers bring foreign registered vehicles to the UK and are then involved in road traffic accidents. The system which governs the free movement of these vehicles, and the handling of accident claims arising during the course of their journeys, is known as the Green Card System.

By way of BACKGROUND, following the Second World War, the increase in international road traffic made it necessary to devise a system to manage the movement of vehicles across borders. The task fell to the Economic Commission for Europe, a United Nations body, based in Geneva, and in 1953, the Green Card System came into effect.

The Green Card System is designed to fulfil 2 main OBJECTIVES:

1. To facilitate the movement of vehicles across borders by use of a document – accepted internationally – which proves the existence of motor insurance, AND
2. To ensure that victims of accidents, involving foreign registered vehicles, are properly protected.

There are currently 44 member countries.

The system GEOGRAPHICALLY, is primarily, a European System – it presently includes most, but not all European Countries, west of the Urals and the Caspian Sea and Countries bordering the Mediterranean Sea. For historical reasons, Iran is also a member of the System – as well as Morocco, Tunisia and Israel.

To achieve full membership a country has to:

1. Operate a law requiring compulsory insurance of vehicles AND
2. Have in place certain monetary guarantees that claims can be settled.

Poland qualified for membership in 1958.

For many years the incidence of accident claims in the UK, involving Polish registered vehicles was very low.

However, since 2002 that has all changed.

Between 2002-2007, in my Department, we have seen an increase of over 400% in new cases received from Polish Motor Insurers – the sharpest increase taking place immediately after Poland joined the EU in May 2004. That increase has remained consistent in 2005 and 2006 – but by the end of this year, we expect to have experienced another significant increase in the receipt of new claims.

It is hard – partly no doubt for politically sensitive reasons – to obtain accurate and up to date GOVERNMENT and NATIONWIDE STATISTICS.

But our increase in activity in the handling of these accident claims, does appear to be linked to a marked increase in the flow of Polish commercial vehicles and haulage into the UK – this would seem to be reflected by figures produced by the Department of Transport entitled “Road Freight Statistics 2005” which records that in 2005, 1,472 thousand foreign registered powered vehicles travelled from Great Britain to mainland Europe – more than 3 times the number in 1995. French lorries – 361 thousand – continued to be the most frequent visitors – but 55 thousand were from Poland.

Moreover, the number of vehicles from the New Member States who joined the EU in 2004 – of which of course Poland was one - increased by 62% between 2004 and 2005.

This is a measure of the extent to which EU (membership) has increased the flow of traffic – in a literal and a metaphorical sense! – between Poland and the UK and represents a very positive increase in trade and general association between the two countries.

The downside, of course, is that with more vehicles on the road, there are inevitably more accidents, and the increased number of cases coming into our Department reflects this too.

To an extent this is unavoidable.

However, there is ONE POINT to which I would draw your attention – and you may have seen this in the Press last week – and that is the susceptibility of all overseas left hand drive lorries operating in the UK, to the “lorry blind spot accident”, when lorries side-swipe cars, because the drivers fail to see them when they change lanes.

I understand that the Transport Department intends shortly to hand out up to 90,000 plastic lenses, which apparently offer a wider field of vision through the passenger window, and which will be stuck to the front window of foreign trucks, as they enter the UK at places such as Hull, Liverpool, Newcastle and Harwich.

It remains to be seen over the coming months, however, if they do in fact succeed in bringing about a marked reduction in these types of accidents in the UK.

In general of course, it is to be hoped that the movement and trade between Poland the the UK will continue to grow.

Thank you for listening.
ROS ASHBY 12.12.07

© Pritchard Englefield
All Rights Reserved.

DIRECTORS AND THEIR DUTIES - A BRIEF COMPARISON BETWEEN THE POLISH AND BRITISH APPROACHES

I am an English solicitor specialising in corporate law and not a qualified Polish lawyer. However, I have had reason over a number of years to compare the legal systems in both countries relating to company directors and their duties.

One very important point of difference is that Polish joint stock companies (which are the larger types of Polish company – the so-called “SAs”) have the two-tiered structure of supervisory boards and management boards, which are common on the Continent of Europe. The smaller limited liability Polish companies (the so-called “Sp.Zoos”) generally have a unitary board structure, although sometimes they do have the dual board structure.

In the UK, whilst all things are possible, the norm for both large and small companies is to have a unitary board structure, although to some extent there exists a distinction in the roles and duties of “executive” and “non-executive” directors on such a unitary board.

This difference in the structure for larger companies leads to significant differences in emphasis in the way in which directors under each system fulfil their duties. In general, the management board for the Polish joint stock company is responsible not only for the day-to-day conduct but also for the strategic direction of the business of that company that is subject to the overall supervision of a supervisory board.

In the UK, under the unitary board system, all directors (both executive and non-executive) have responsibilities for the way in which the company’s affairs are conducted. Corporate governance codes (including the London Stock Exchange approved Combined Code) exist in a number of forms in the UK but they tend to operate on a “comply or explain” basis and none of them is mandatory as such, except for the code which is now contained in the Companies Act 2006 which largely, so far as directors’ duties are concerned, came into force, on 1st October 2007.

The 2006 Act has attempted to codify the common law on directors’ duties but in so doing has gone somewhat beyond what the common law was thought to provide. The six main duties of directors under the 2006 Act code are:

1. Duty to act within powers;
   
2. duty to promote the success of the company;
   
3. duty to exercise independent judgment;
   
4. duty to exercise reasonable care, skill and diligence;
   
5. duty to avoid conflicts of interest; and
   
6. duty not to accept benefits from third parties.

The so-called “duty to promote the success of the company” is particularly interesting because un-typically the Act goes some way to spell out what is required to be done in fulfillment of that duty. In particular, directors must have regard (amongst other matters) to:

1. the likely consequences of any decision in the long term,
   
2. the interests of the company’s employees,
   
3. the need to foster the company’s business relationships with suppliers, customers and others,
   
4. the impact of the company’s operations on the community and the environment,
   
5. the desirability of the company maintaining a reputation for high standards of business conduct, and
   
6. the need to act fairly between members of the company” (Section 172 Companies Act 1986).

One of the objectives of the 2006 Act is to de-regulate rules applying to private companies whilst at the same time strengthening disclosure and procedural rules affecting the governance of public companies. However, in contrast to the apparently quite strictly regulated system in Poland, UK law still tends to favour a more pragmatic and flexible approach in regulating the directors’ duties of companies, both public and private. The downside of such an approach is that “you can be damned if you do and damned if you don’t”! In other words, if the company prospers there will be no problem! If the company does badly, then it will come under the scrutiny of the courts or the regulators and the 2006 Act itself provides a growing array of weaponry to challenge the conduct of errant or poorly performing directors.

The UK in many ways was the birthplace of modern capitalism and over many centuries the common law and now statute have reacted and proacted to the spirit of the times. UK company law and Polish company law both in part now derive their life forces from the wider laws of the European Community but, given the different civil law and common law heritages that Poland and the UK respectively enjoy, there are still some differences in the way in which the two countries approach corporate governance issues.

Having stated this, the growing importance of the Warsaw Stock Exchange and the development of a voluntary Polish Corporate Governance Code for Polish companies listed on that Exchange have brought the Polish and UK approaches to the corporate governance, certainly of larger companies, closer together. The fashion for shareholder activism which is spreading across the Western world can in my view only accelerate this process.

It must be said, moreover, that the duties of directors in both jurisdictions are heavy and wide-ranging and that directors must bear in mind not only their duties towards the shareholders of their companies but their wider responsibilities towards the community as well – perhaps encapsulated in the phrase “corporate social responsibility”, a phrase which is becoming increasingly familiar in both countries.

We live in exciting and challenging times for the development of corporate law – in both our countries – and it will be interesting to see how corporate law develops in each jurisdiction in the years ahead.

Many thanks for listening to me.

DAVID GLASS 12.12.07
© Pritchard Englefield 2007
All Rights Reserved.