How to start gas trading in Poland ?

How to start gas trading in Poland? Guideline for foreign entities and investors on obtaining license on the ground of the Polish Energy law act

Gas trading is a highly-regulated business activity, which requires obtaining specific licenses by interested entities, prior to starting any factual transactions with other market participants.

Trading may have various forms – from transactions only between other traders (without involvement of end-consumers) to complex services including distribution and delivery to end-consumers. Polish Energy Law Act does not distinguish those form in the field of license, which is mandatory for every entity dealing with gas trading. As it is provided in art. 32 section 1 point 4 of the Energy Law Act, gas trading require obtaining license, regardless of the actual business profile of the trader. Some exemptions are intended and they are described in the end of this article.

1. Gaseous fuels trade, foreign trade of natural gas – regulatory approach

As a starting point, main distinguish must be made – there are two types of licenses regarding trade of natural gas: gaseous fuels trade license (in Polish shortened to “OPG”) and foreign trade of natural gas (in Polish shortened to “OGZ”).

OPG is a basic license, mandatory for every entity interested in natural gas trade, limited to territory of Poland. OGZ is supplementary license for entities who are also interested in international natural gas trade. One of the conditions of receiving the license for foreign trade in natural gas (OGZ) is prior receiving the license to trade in gaseous fuels (OPG). This results in obligation to obtain two separate applications must be filed and two separate administrative proceedings shall be conducted. If the license for trade in gaseous fuels (OPG) is not granted, in effect the President of ERO will refuse to grant license for foreign trade in natural gas (OGL).

In case of both licenses, the applicant is obliged to provide documents and information confirming that he has means ensuring adequate performance of the business activities covered by the license or is capable of acquiring them in the future. According to art. 33 section 1 of the Energy Law Act the applicant must fulfil following obligations:

1. has its registered offices or place of residence in the territory of the European Union Member State, Swiss Confederation or a member state of the European Free Trade Agreement (EFTA) – a party to the European Economic Area agreement, or Turkey;
2. has financial means ensuring the correct performance of its activity or is capable of prove the ability to acquire the same financial means – minimum share capital should equal from PLN 10 to 20 million; in other case the President of ERO shall ask for establishing financial securities;
3. employ staff with the adequate professional qualifications referred to in Art. 54 of the Energy Law Act; this art. refers to persons who operate the grids, equipment and installations. In the economic activity encompass exclusively trading in gas, this obligation is limited;
4. has technical capabilities ensuring the correct performance of its activity – Technical capabilities are necessary only in case where network or installation are used, for example generation, transmission, distribution or storage of gaseous fuels or energy;
5. is in no arrears with payment of taxes which constitute income of the state budget, except for cases when the applicant obtained tax release, deferral, rescheduling the payment of tax arrears or tax on instalments or withholding the execution of a decision issued by a relevant tax authority or fiscal control body, as stipulated by the legal provisions in force.

Since September, 2023 there is one additional premise which may be required by the President of ERO to issue a license – the guarantee of the proper performance of the licensed activity given by the applicant. The President of ERO has sole empowerment to assess if the applicant meets this requirement and may reject the application in case of negative result of such assessment (art. 33 section 3d of the Energy Law Act).

The license is granted for a period of time from 10 to 50 years, unless the applicant declares that the activity is planned for shorter than 10 years period of time (art. 36 of the Energy Law Act). In case of the license for foreign trade in natural gas, the President of ERO is obliged to take into account the need for diversification and energy security (art. 32 section 2 of the Energy Law Act).

In the decision granting the license the President of ERO specifies conditions of conducting activity covered by the license (art. 37 section 1 of the Energy Law Act). In many cases they partially repeat the existing regulation.

1.1. License holder obligations – general view

The license holder is obliged to meet several requirements and update the President of ERO on any relevant changes in the factual state.

According to requirements, the most important are:

1. Compliance with applicable laws regarding environment protection, safety-at-work policies and procedures,
2. Providing high standard services in area of licensed activity,
3. Due cooperation with other gas market participants, including prohibition to conduct business with entities that do not have the required licences,
4. Follow and obey to all laws and regulations related with customers and end-users protection, especially in the field of customer service, pricing and non-abusive terms and conditions of the agreements.

According to information and reporting obligations, the most important are:

1. Update on all registry changes, including head office, tax and registry data, limitation or relevant modification of scope of the business activity,
2. Providing information on request by the President of ERO (art. 28 of the Energy Law Act),
3. Providing information related with continuance, shortage or cessation of the licensed activity,

It should also be remembered that trade in gaseous fuels or foreign trade in natural gas without the required license is qualified as crime and punishable by imprisonment from 6 months up to 5 years or a fine up to PLN 5,000,000 (art. 57g section 1 of the Energy Law Act).

Infringement of any obligation related with license may affect in imposing administrative penalty imposed by the President of ERO. 

The most important obligations are combined in appendix to this article, in a tabular form.

1.2. Financial securities – conditions

Obtaining the license (both OPG and OGZ) may be bound with an obligation of providing financial securities. The President of ERO assess and decide if in relation to an applicant there are some doubts whether the applicant ensures the potential satisfaction of the claims of third parties which may occur as a result of an improper conduct of the business subject to the license, including damage of the natural environment (art. 38 section 1 of the Energy Law Act). The factors that increase the likelihood of imposing the obligation:

1. the applicant for license was recently established;
2. the applicant for license cannot present the history of transactions and previous economic activity;
3. the applicant for license concentrate exclusively on trading and do not dispose of assets like real estate, installations and networks.

The financial securities can be established in the form of bank guarantee or insurance guarantee exclusively (art. 38 section 6 of the Energy Law Act). The minimum period of guarantee must be 12 months and has to be renewed at least one month prior to the date of expiration (art. 38 section 4 and 5 of the Energy Law Act). The financial securities has to be supplement within 30 days of use of financial securities (art. 38 section 8 of the Energy Law Act).

The minimum level of guarantees must equals 1/12 of the highest, planned yearly revenues in the next planned 3 years of economic activity (art. 38 section 2 of the Energy Law Act). It should be taken into consideration, that the President of ERO can decide on higher amount. 

Minimum term to establish financial securities by the applicant is 30 days. If securities are not established timely, the application shall be left without recognition (art. 38 section 3 of the Energy Law Act).

The guarantor who issue a guarantee has to be included on the list of guarantors conducted on the basis of art. 52 section 1 of the customs law (art. 38 section 8 of the Energy Law Act). The relevant list is available on the website: https://www.podatki.gov.pl/clo/gwaranci-celni/.

2. Process of application on license

2.1. Application by foreign company

In general, the procedure of obtaining the license (both OPG and OGZ) by the entity registered abroad is the same as in case of the company registered on the territory of Poland. However, there some advantages of application without establishing a company in Poland, but it should be taken into consideration that such advantages refers only to administrative proceeding, without operating and business realities and conditions:

1. lack of additional cost and resources associated with establishing new entity in Poland,
2. higher credibility in case of financial resources (history of transaction and economic activity, higher share capital, possible assets),
3. shorter period needed to start business activity.

Also, there are some disadvantages of application without establishing a company in Poland:

1. additional costs concerning the obligation to present documents translated by a sworn translator and in some cases the obligation to present double documents (for example criminal records issued by the Polish National Criminal Register and its equivalent in the country where the company is registered);
2. in our opinion the President of ERO may verify the applications and all documents in more detailed way (for example whether the applicant has financial means necessary to perform his duties) and the probability that the President of ERO demand financial security on the basis of art. 38 of the Energy Law Act is higher.

2.2. Detailed rules applicable in case of application without establishing a company in Poland:

1.  Foreign entity may conduct a licensed activity in Poland directly, even establishing a branch or commercial expository is not necessary. In such a case interested entity should submit a copy of an appropriate equivalent of the Polish National Court Register in the country of company’s registration (in most cases it is an excerpt from domestic commercial register);
2. certificate of no criminal record for the natural persons authorized to represent the applicant and the members of the supervisory board should be issued by the Polish National Criminal Register and its equivalent in the country where the company is registered (along with a translation into Polish by a sworn translator) and obtained not earlier than 3 months before submitting to the licensing institution;
3. additionally, if the above mentioned persons are not citizens of the country of the company’s registration, it is also required to send an appropriate notice issued by the competent authority of the country of which the above persons are citizens, obtained not earlier than three months prior to submitting to the licensing authority, with a translation by a sworn translator into Polish;
4. information regarding criminal record of the company (as a collective, commercial entity) should come from the Polish National Criminal Register and equivalent register from the country of registration of the company (if such records exist), obtained not earlier than three months prior to submitting to the licensing authority with a translation by a sworn translator into Polish;
5. information of no criminal record of entities having material influence over the applicant or exercising or co-exercising control over it within the meaning of Art. 3 item 1 sections 34, 35 and 36, subsections a), b), e) and f) of the Polish Accounting Act, should be issued by the Polish National Criminal Register, an equivalent register from the country of registration of the applicant (if such records exist) and an equivalent register from the country of registration or citizenship of the above mentioned entities – obtained not earlier than three months prior to submitting to the licensing authority, along with a translation by a sworn translator into Polish;
6. decision of tax authority on the issue of the Tax Identification Number may come from the country of the company’s registration or may be issued by the Polish tax authority;
7. a document certifying registration of the entrepreneur as VAT payer for the needs of intracommunity transactions (EU VAT) may originate from the country of the company’s registration or the entrepreneur may submit a document certifying its registration for the VAT needs in Poland;
8. the accordance of the submitted documents with the law of the place of their issue should be confirmed in the manner specified in art. 3 sentence 1 of the Hague Convention of 5 October 1961 which abrogates the requirement to legalize foreign official documents, i.e. with the application of the apostille clause (unless the agreement between two or more countries abrogated or simplified the legalization or waived the legalization);
9. documents submitted in a foreign language must be translated into Polish by a sworn translator. All the pages of the submitted documentation should be signed by the persons authorized to represent the entrepreneur;
10. if an entrepreneur that has no place of residence or stay or registered office in the Republic of Poland or another EU Member State, Swiss Confederation or member state of the EFTA, has not established attorney to pursue the case of the entrepreneur in the country nor acts by intermediation of a consul of Poland, is obliged to indicate the country representative for the correspondence purposes, unless the correspondence is delivered by electronic means. If there is no indication of such a representative, all documents for the entrepreneur will stay in act files with effect of delivery according to the Art. 40 § 5 of the Administrative Proceedings Code.

3. Costs and fees related to granting the license

The fees for granting license are fixed:

1. license for trade in gaseous fuels – PLN 616 (part III item 44 of an exhibit to the Stamp Fee Act);
2. license for foreign trade in natural gas – PLN 4.244 (part III item 34 of an exhibit to the Stamp Fee Act).

If the applicant is represented by a proxy in administrative proceeding, there shall be additional fee of PLN 17 for each proxy.

Yearly license fee

The license fee for each type of activities covered by specific license is calculated as follow revenues covered by the license in a given year x 0,0005 = annual license fees (art. 34 section 1 and 2 of the Energy Law Act). The fee cannot be less than PLN 1,000 and not more than PLN 2,500,000 (art. 34 ust. 3 of the Energy Law Act).