Covid-19 coronavirus: lifting restrictions on court proceedings in Poland – consequences for financial institutions and other litigants

Starting from 31 March 2020, both commercial and consumer litigation, as well as bankruptcy and restructuring proceedings have generally been put on hold against the pandemic backdrop^[1].   The new regulations adopted on 14 May 2020 — commonly dubbed "Anti-Crisis Shield 3.0" (the Shield 3.0) — aim to lift these restrictions in order to clear the courts' backlog and prepare them for a potential deluge of coronavirus-related cases.

1. Procedural deadlines' unfreeze

• The Shield 3.0 ends the suspension of the procedural deadlines, which have been stayed since 31 March 2020.  The deadlines are to start running anew or continue eight days after the Shield 3.0's official publication.  This applies to all types of court proceedings including both commercial and consumer litigation, as well as insolvency cases.
• The release of the deadlines relates particularly to filing pleadings and challenging court decisions.  This means that parties to proceedings should keep track of already set deadlines, as missing them may negatively impact their cases.
• Despite lifting the suspension, the Shield 3.0 does not repeal the statutory stay on an obligation for companies that have experienced financial pressure because of Covid-19 to file for bankruptcy (the companies becoming insolvent regardless of the pandemic are excluded from this easement). ^[2]

2. Urgent matters list's extension

• The Shield 3.0 extends the list of urgent matters of all restructuring and bankruptcy proceedings, as well as the proceedings on filings to open them.  Consequently, these proceedings may be referred to the nearest operating court in case the competent court is entirely closed due to quarantine measures.  This referral may also delay the commencement of these cases. 
• The urgent matters list does not include commercial and consumer litigation, enforcement cases or injunction proceedings.  However, cases considered to be of high importance can be declared urgent and carried out in spite of the pandemic.  For instance, one of the largest courts in Poland has already decided on an injunction application filed by a consumer in a case where an FX loan is involved.

3. Lifting hearings' lockdown

• Since mid-March, all hearings had been cancelled and the courts could not arrange new public hearings, but the Shield 3.0 has lifted the lockdown on hearings and the courts can arrange and hold hearings.  The preferable format is video hearings so that participants avoid any unnecessary exposure to the virus. A 'traditional' hearing in a courtroom is also an option, should the court determine that there is no health-related risk for attendees.
• Under Shield 3.0,  participants and judges can attend  hearings online from their offices. Up until now, video hearings could only take place when the parties were present in separate court rooms or in another court building, which meant the parties still had to travel to the court. 
• No specific rules on how to organise a hearing online have been established.  This means all the current regulations as to how to prepare a 'traditional' hearing apply, particularly those pertaining to notifying the parties in good time. Likewise, video hearings are to serve the same purposes as hearings conducted in a courtroom, including witnesses and expert witnesses' examinations.  The court should also record the hearings as they would in 'traditional' hearings.  Nevertheless, the question of how to provide public access to video hearings has yet to be determined.
• The introduction of video hearings may bring the risk associated with technical issues.  Their occurrence may lead courts to adjourn cases even more frequently.

4. Sittings in camera instead of public hearings

• A new regulation broadens the court's discretion to arrange a sitting in camera in all types of cases for the duration of the pandemic and up until one year after it ends.  Much as the judges have welcomed the new solution, the Shield 3.0 still gives priority to video or 'traditional' hearings.
• Traditional or video hearings may be replaced with sitting in camera once the following conditions are met: (i) the court deems it necessary to examine the case, where (ii) conducting a public hearing would put the attendees' health at risk and (iii) there is no possibility of conducting the hearing online and (iv) unless the parties object to consider their case at a sitting in camera.  This objection would have to be filed with court within seven days of being informed about arranging the sitting in camera.
• Financial institutions should be aware of this short deadline.  This is decidedly relevant if the institution would like to present or discuss the evidence on a hearing directly to/with the court.

5. A final judgement in camera once the evidence is examined

• Additionally, the Shield 3.0 specifies that in cases where evidence collection has been completed, the court may close the proceedings and issue a judgement at a sitting in camera.
• In this case, the parties are allowed to present their closing arguments in writing.  The court is obliged to ask the parties for the pleadings' submission before the proceedings are closed.
• At this point, it is crucial for the financial institutions to deeply consider all the relevant aspects of the case and include them in its final statement, since the evidence and parties' arguments cannot be discussed further, as often happens during a 'traditional' hearing.

6. New regulation impact on financial institutions

• Noticeably, the most significant development is the courts' return to fairly normal operation, allowing pending proceedings to be continued.  This means an increased amount of court-related work shared with in-house lawyers or external counsel.  Particularly, financial institutions should consider how to effectively gather and circulate documentation which would then serve as evidence in courts. 
• Judges, who govern the largest courts in Poland, estimate that their courts need about a year to deal solely with cases suspended during the pandemic. This means that newly instigated cases will likely be postponed.  Financial institutions may therefore consider other dispute resolution mechanisms, such as arbitration, mediation, or negotiations.  Furthermore, the prospect of a growing number of out-of-court negotiations with clients should be taken into account.
• The lifting of lockdown measures also apply to any pending restructuring and bankruptcy proceedings, which may also be continued on a regular basis.  Nonetheless, the insolvency courts need to deal with the significant backlog, which had already existed before the pandemic and then multiplied by the lockdown measures.  Although a new regime of the consumer bankruptcy which came into force on 24 March 2020 may contribute to the slight easing of the backlog, the number of both consumer and commercial insolvencies is expected to soar significantly after following the Covid-19 crisis.  With this in mind, out-of-court restructuring negotiations remain the preferred solution as it seems to be the most effective way for financial institutions to reach a satisfactory level of a debt recovery.
• Although the speread of the coronavirus appears to have slowed down, it has not fully stopped.  Therefore, some courts may still be limited in their operations and continue to restrict or limit access to their buildings. 
• Many insolvency courts still limit access to their files.  This is inconvenient for creditors, as in principle they are not delivered with the correspondence and therefore, reviewing court files is the only way to stay in the loop with the course of proceedings.
• The initial draft of the Shield 3.0 provided for new forms of e-filing, ie via dedicated government web portals or even by email. Yet, to the surprise of many judges and attorneys, it was not concluded in the final version of the act.

_{1. As extensively reported in this article: https://www.allenovery.com/en-gb/global/news-and-insights/publications/covid-19-coronavirus-litigation-in-poland by the A&O Warsaw Banking Litigation Team.}

_{2. See the extended analysis of the Covid-19 Polish Anti-Crisis Shield for companies under pressure, prepared by the A&O Warsaw Banking Litigation Team available on https://www.allenovery.com/en-gb/global/news-and-insights/publications/covid-19-coronavirus-major-update-to-the-polish-anticrisis-shield.}