Following the publications on the Government Legislation Center website can be an interesting experience. Sometimes seemingly insignificant legal changes lead to a number of serious consequences. It is likely that such consequences will affect companies in a specific market that is rarely mentioned in public debate. This concerns the market for telecommunications services in Polish prisons. Seemingly innocuous, the proposed changes could completely eliminate Polish companies from this market.
On November 4, 2021, two bills amending the Penal Enforcement Code and the Correctional Services Act were published on the Government Legislation Center website:
Both bills would disrupt the activities of a number of entities providing telecommunications services in Polish prisons.
First of all, it should be pointed out that telecommunications is an activity regulated by the Business Law of March 6, 2018 and the Telecommunications Law of July 16, 2004. Under the law in force, in accordance with the Penal Code of 6 June 1997, detainees have the right to maintain contact with their families and loved ones through visits, correspondence, telephone conversations, parcels and money transfers, and other means of communication.
Art. 8 §3, 105 §1 and 105b §§1–2 of the Penal Enforcement Code set out the right of prisoners to contact their lawyer or defender and to use payphones in prisons, while Art. 217c §§1-2 provides for the right of prisoners to use a telephone.
Although these regulations are clear and do not require great effort to interpret them, for unknown reasons, supporters of the two aforementioned bills claim that there are currently no telecommunications providers of any kind in prisons. , which is contrary to reality. The proposed amendments affirm that inmates are deprived of fundamental rights guaranteed by the code. This conclusion can be drawn from the justification of the two projects, because according to the justification of the invoice UD287, its object is “to ensure the implementation of the right of prisoners to make telephone calls on the assumption that these calls will be made in the same way and according to the same principles in all prison units” (p. 66).
The bills provide for the inclusion in the Prison Services Act and the Law Enforcement Code allowing the Minister of Justice to select an entity to provide telecommunications services in all prisons in Poland, while eliminating other companies in this sector. Such action would create a monopoly, lead to centralization, eliminate competition in the relevant market and undermine constitutional principles guaranteeing freedom of enterprise.
The proposed changes completely ignore existing telecommunications. They also neglect the question of the ownership of the infrastructure which constitutes a de facto component of their activity. The proposals are a legislative steamroller that leaves no wiggle room for entities that have been in the market for many years.
A reading of the proposal gives the impression that prisoners have no possibility of using telecommunication devices. It is therefore difficult for an uninformed reader to assess the proposed changes, as they take no account of the existence of entities providing telecommunications services in prisons. At this stage, important questions arise: are there really no companies giving prisoners access to telecommunications? Are prepaid phones mere dummies and are prisoners stripped of their statutory safeguards under current law? Why are the editors ignoring existing telecommunications companies, which, after all, employ many workers?
Industry resistance, criticism from trade groups and regulators
There is a perceptible turmoil in the telecommunications industry about the negative impact of proposed regulations on the market for telecommunications services. It should also be mentioned that the proponents of the changes, despite being aware of the existence of professional telecom associations and bodies responsible for protecting the rights of telecom companies, omitted these entities from the invitation to give their opinion during the public consultation. It was only after the problem was made public that companies were able to turn to the relevant institutions for help.
The substance of these bills can only be criticized, as they do not reflect the complicated provisions of other laws regulating activity in the telecommunications market. The proposal to include these regulations in legal acts whose scope does not include the regulation of telecommunications companies must also be condemned. Telecoms had no real chance to review the proposed changes, especially since their trade associations were excluded from the consultation.
After the issue was published, critical comments on the proposed changes in the public comment were issued 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)
- Mediator for SMEs
- President of the Office of Electronic Communications
- President of the Competition and Consumer Protection Office
- President of the Public Procurement Office.
Many comments were identical. They drew attention to the unjustified elimination of companies from the relevant market, the creation of a monopoly in the market for the provision of telecommunications services in prisons, the restriction of freedom of enterprise, the violation of EU law and the security of telecommunications services provided in prisons, which could be stripped of specialized entities overnight and handed over to unspecified units. They also called attention to superficial reasoning and a complete disregard for the legal and factual situation of telecoms.
What about compensation for extinction of business in a market worth 20 million PLN?
The proposed amendments would completely eliminate a number of entities from the telecommunications industry. Most of these units specialize in a certain area and do not derive any income from any other business. The main problem is that the proposed regulations do not specify the proposed compensation for telecommunications companies that, following their adoption, would lose the ability to continue operations overnight. The disregard for the ownership of the telecommunications infrastructure installed in penal institutions across the country is also striking, as the provision of services for many years has led companies to build a complete infrastructure and to hire and train specialized personnel.
As currently written, the bills also neglect the uninstallation of any device. 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 will bear the costs of the deinstallation. They will probably have to be borne by companies in their own interest, unless a broad interpretation of the proposed changes also includes the transfer, by law, of the ownership of infrastructure elements to units subordinate to the minister. justice, which would be another curiosity.
The professional chambers emphasize these elements in their positions, pointing to the need for a transition period of several years so that companies can adapt to the new market situation (i.e. concretely, under the effect of monopolization, to rename itself).
The actions described could be considered a kind of expropriation. Today, it is indeed difficult to encounter regulations interfering so intensely with business freedom.
The Civil Code provides solutions governing the liability of the Public Treasury in the event of damage. The situation in which telecoms currently find themselves justifies the fear that the proposed changes could violate Art. 22 of the Polish Constitution (“Restrictions on the freedom of economic activity may only be imposed by law and only for reasons of important public interest”), since it is impossible to discern an important public interest in the amendment. On the contrary, the public interest is actually harmed.
The principle of freedom of enterprise imposes certain obligations on public authorities. On the one hand, these obligations are of a negative nature and amount to a prohibition on issuing legal acts that infringe the principle of freedom of business. Activation of a possible procedure for compensation of damage resulting from a normative act, governed by art. 4171 of the Civil Code, requires a prior decision to assert claims for damages. Companies determined to take a firm stand are unlikely to remain passive in the face of the adoption of the new regulations in their current form and will use all legal means available to satisfy their claims and obtain fair compensation. It is highly likely that they will seek redress from the Constitutional Court if the proposed changes are adopted in their current form.
Public debate and response to necessary comments
It is still possible to modify the proposals to adequately safeguard the interests of the conflicting parties. But this would require a public debate where stakeholders could provide feedback. If, on the other hand, the bills as they stand are examined only from the angle of the possibility of challenging specific regulations, they appear to fall short of the principles of good legislation.
In addition, there is the question of the damage caused by the de facto expropriation of telecoms. Regulating this issue would benefit both the state and businesses. Granting adequate compensation would safeguard the interests of telecoms while allowing the public treasury to avoid more drastic claims.
The proposed changes violate freedom of enterprise, as evidenced by a number of critical voices from key organizations and entities protecting corporate interests. Since significant issues are already flagged at the public consultation stage, changes should be considered. Certainly, it would be useful if the proposed provisions included a longer transition period, adequate compensation for the companies affected and a broader justification or regulatory impact assessment, which is currently lacking.
A reconciliation conference was scheduled for January 11, 2022. It will be necessary to follow the legislative process and see how the promoters of the amendments respond to the comments submitted.