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Revocation of the license for electricity trading in case of failure to start or perform the licensed activity

Kacper Skalski Legal Counsel, Partner
1 July 2016
Revocation of the license for electricity trading in case of failure to start or perform the licensed activity

The process of obtaining an electricity trading license can take up to several months. Therefore, at the time of obtaining the license, the entrepreneur should take such measures to minimize the risk of losing the license. It is therefore worth bearing in mind the provisions of the Act of April 10, 1997 – Energy Law as well as the Act of July 2, 2004 on Freedom of Economic Activity. The aforementioned regulations specify cases in which the ERO President may or must revoke a license.

In the cases specified in Article 58(3) of the Freedom of Economic Activity Act, the ERO President may revoke a license when:

  1. there will be a threat to the defense or security of the state or the safety of citizens,
  2. if a decision has been issued stating the inadmissibility of the exercise of rights from shares of an entrepreneur under the Law of July 24, 2015 on the control of certain investments,
  3. if the entrepreneur is declared bankrupt.

The occurrence of the aforementioned cases does not entail automatic revocation of the license, since Article 58(3) of the Law on Freedom of Economic Activity uses the expression “the licensing authority may revoke the license.” The ERO President has some discretion in this regard and can assess whether the occurrence of given circumstances should result in the revocation of a license.

At the same time, attention should be paid to the provisions of Article 58(1) and (2) of the Law on Freedom of Economic Activity, which impose an obligation on the ERO President to revoke a license in the event of the occurrence of one of the situations specified below:

  1. a final judgment has been issued that prohibits the licensed activity[1],
  2. the entrepreneur has not commenced the licensed activity within the prescribed period (usually a period of 6 months from the granting of the license), despite a summons from the licensing authority[2],
  3. the entrepreneur permanently discontinued the licensed activity[3],
  4. the conditions of the licensed business activity performed have changed to the extent specified in the law[4],
  5. the entrepreneur grossly violates the conditions set forth in the license or other conditions for the performance of the licensed business activity specified by law[5],
  6. the entrepreneur has failed to remove the factual or legal condition inconsistent with the conditions set forth in the license or with the regulations governing the licensed business[6] within the prescribed period.

If any of the above situations occur, the ERO President is required to revoke the license.

In practice, frequent doubts are raised by entrepreneurs about the revocation of licenses in the event of failure to start the licensed activity within the prescribed period. Each license issued by the President of the ERO specifies the date of commencement of the licensed activity. This does not mean, however, that exactly on that date the entrepreneur is obliged to start the licensed activity.

However, a situation in which an entrepreneur has been issued a license and de facto does not carry out licensed activities cannot last too long.
If the entrepreneur does not start the licensed activity within 6 months from the date of granting the license, he is obliged to inform the President of the ERO and indicate the reasons for not starting the activity.

The performance of the activity covered by the electricity trading license will primarily be the actual sale of energy, whether to end users or to power companies. The entrepreneur should also be able to demonstrate revenue from the activity (for example, through invoices).

According to the position of the President of the ERO, the date of commencement of operations in the case of an electricity trading license is the date of actual commencement of sales of electricity.

The performance of activities covered by the license for trading in electricity will also include trading in electricity on the Polish Power Exchange (POLPX) through a brokerage house or directly by the trader after the trader obtains direct membership in POLPX and is allowed to operate on selected POLPX markets.

The mere failure to commence licensed activities does not automatically revoke the license. The ERO President should set a deadline for the trader to start the licensed activity, and only after the deadline expires without success may he take further steps to possibly revoke the license.

It should be pointed out that mere preparatory activities such as, for example, negotiating with trading partners for the purchase of energy, signing letters of intent or other non-binding documents will not be considered by the ERO President as the performance of licensed activities[7]. So, despite the fact that the entrepreneur will carry out activities aimed at performing licensed activities, this may lead to the revocation of the license.

Bearing in mind the risk of license revocation due to failure to perform licensed activities, as outlined above, it is worth making sure that the licensee will be able to start licensed activities within 6 months from the date of obtaining the license. If this activity is not started, one should take into account the risk of initiating proceedings by the President of the ERO, which may result in the revocation of the license.

If you have any questions, please feel free to contact us – kacper.skalski@rsplegal.pl
[1] Article 58(1)(1) of the Act of July 2, 2004 on Freedom of Economic Activity
[2] art. 58.1.2 of the Act of July 2, 2004 on Freedom of Economic Activity
[3] ibid.
[4] art. 41 sec. 3 item 3 of the Act of April 10, 1997 – Energy Law
[5] art. 58 sec. 2 item 1 of the Act of July 2, 2004 on Freedom of Economic Activity
[6] Article 58(2)(2) of the Act of July 2, 2004 on Freedom of Economic Activity
[7] Judgment of the District Court in Warsaw, Court of Competition and Consumer Protection, dated May 25, 2007, file no. XVII AmE 224/06

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