Since 2023, companies bidding for large public contracts within the European Union have been subject to new obligations under Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market.

The purpose of this Regulation is to ensure a level playing field between companies operating in the EU market and those that benefit from financial support granted by non-EU countries. In practice, this means that businesses receiving foreign subsidies must disclose this information when participating in high-value public procurement procedures.

Who does the regulation apply to?

The new rules do not apply to all tenders. They are relevant only where both of the following conditions are met:

1. the estimated contract value is at least EUR 250 million, and
2. the bidder, its non-autonomous subsidiaries, parent companies, and main subcontractors or suppliers involved in the same tender have received combined financial contributions of at least EUR 4 million from a single non-EU country over the past three years.

In practical terms, the Regulation mainly affects large infrastructure, technology, and strategic supply projects. Although the EUR 250 million threshold limits its scope, internationally active companies – particularly those with non-EU ownership or financing – should carefully review their funding sources.

What is the obligation?

Where both conditions are met, the bidder must submit a declaration to the contracting authority detailing all foreign financial contributions received. This information must be provided together with the tender offer.

The contracting authority then forwards the data to the European Commission, which may conduct a preliminary review and, if necessary, initiate an in-depth investigation. The purpose of such an investigation is to determine whether the foreign subsidy has distorted competition in the EU internal market.

Following its assessment, the Commission may issue one of the following decisions:

• no objection, if it considers the subsidy not to distort competition,
• commitments decision, accepting undertakings proposed by the company to remedy any distortion, or
• prohibition decision, preventing the award of the contract to the bidder if the foreign subsidy confers an undue competitive advantage.

Why is this important for businesses?

These rules require companies to maintain greater control over financial flows originating from non-EU countries, even when such funds are not directly related to public procurement activities. The disclosure obligation covers all types of foreign financial contributions, including capital injections, grants, loans, and state-backed guarantees, whether received directly or indirectly.

In practical terms, compliance may require businesses to:

• develop internal procedures for recording and tracking foreign financial support,
• ensure transparency within corporate groups regarding external financing and ownership structures.

Key points to consider

Companies planning to participate in large public tenders within the EU should already be conducting an audit of their funding sources and developing procedures to monitor potential foreign subsidies. It is also advisable to ensure that responsibility for these matters is clearly assigned within the organisational structure.

Regulation (EU) 2022/2560 signals the European Union’s intention to strengthen the protection of its internal market against unfair competition. For businesses, this means greater transparency — but also the need for careful preparation for the new public procurement environment.

Author:
Bartłomiej Doliński
attorney-at-law

Construction contracts are among the most complex commercial agreements. The scale of the undertaking, the long duration of implementation, and the number of participants in the investment process mean that the risk of non-performance or improper performance of obligations is significant. Therefore, contractual provisions regarding penalties and liability limits are of particular importance. Both mechanisms serve to protect the interests of the parties, although their functions differ.

Contractual penalties – a disciplinary tool

The legal basis for contractual penalties is found in Articles 483–484 of the Civil Code. According to these provisions, the parties may stipulate that in the event of non-performance or improper performance of a non-monetary obligation, the debtor shall pay the creditor a specified amount. In construction practice, penalties are most commonly imposed on the contractor for:

• delay or default in starting or completing the works,
• delay or default in remedying defects,
• withdrawal from the contract due to reasons attributable to the contractor.

It is also common to encounter penalties imposed on the client for withdrawal from the contract due to reasons attributable to them.

The key feature of a contractual penalty is that the creditor does not need to prove the actual amount of damage – it is sufficient to demonstrate a breach of obligation. This significantly facilitates the pursuit of claims. At the same time, the court may reduce the penalty if it is grossly excessive or if the obligation has been largely fulfilled (Article 484 § 2 of the Civil Code). The Supreme Court has ruled that a penalty must not lead to unjust enrichment of the creditor (e.g., Supreme Court resolution of November 6, 2003, III CZP 61/03).

It is also worth noting that compensation exceeding the amount of the contractual penalty can only be claimed if explicitly stipulated in the contract.

Liability limits – a risk management mechanism

Another important contractual instrument is the liability limit. Its purpose is to limit the scope of risk assumed by the contractor or the client. In practice, the following are most commonly used:

• global liability limits (e.g., up to the agreed net or gross remuneration),
• exclusion of liability for indirect damages, lost profits, or data loss,
• limitation of liability during the warranty or guarantee period.

According to Article 473 § 2 of the Civil Code, it is not permissible to exclude liability for damages caused intentionally. In addition, the boundaries of contractual freedom are defined by mandatory provisions and principles of social coexistence. Courts generally accept liability limits in business-to-business relations, treating them as part of commercial risk.

In construction contracts based on FIDIC conditions, limitation clauses are standard, and their acceptance often determines the possibility of undertaking the investment.

Relationship between contractual penalties and liability limits

In practice, the question arises whether contractual penalties are subject to the general liability limit. The answer depends on the content of the contract. It is usually assumed that penalties are included in the global limit, but different solutions are also encountered, meaning the contractor is liable for them without limitation. The lack of clear regulation may lead to interpretative disputes, so this issue should be explicitly addressed in the contract.

Moreover, contracts often include limits for specific types of penalties. For example, a maximum penalty for delay in completing works (e.g., up to 10% of remuneration), a separate limit for withdrawal due to the contractor’s fault (e.g., 20% of remuneration), or a cap on the total amount of all penalties. This approach maintains the disciplinary function of penalties while protecting the contractor from excessive financial burden.

Introducing liability limits, including limits for specific penalties, allows the parties – especially the one potentially obligated to pay – to assess the risk in case of triggering the conditions for penalties or damages.

Summary

Contractual penalties and liability limits serve different functions in construction contracts. Penalties discipline the contractor and facilitate the client’s pursuit of claims in case of contract breach. Liability limits, on the other hand, protect the parties from excessive financial risk. Both mechanisms are permissible under Polish law and widely used in practice, but their effectiveness depends on precise and balanced regulation in the contract. Therefore, proper contract preparation and negotiation with the support of a professional advisor is essential, as they can identify risks and legal consequences arising from the negotiated provisions.

 

Author:
Anna Bigaj
attorney-at-law