Offshore Wind Farms: Polish 'Local Content' in a legal vacuum
Offshore Wind Farms: Polish 'Local Content' in a legal vacuum
Date of publication: 05.09.2021

Introduction

The local content issue in relation to Polish offshore wind farms has recently become the subject of many discussions and concerns in the broadly understood maritime environment. In the following publication I will present this problem from a legal point of view.

Putting quotation marks around local content in the title of this article is not a coincidence, as at the moment it is difficult to speak of such a term and its legal definition in the Polish legal system. This state of affairs is unacceptable and requires an urgent reaction of the Polish legislator, which must be coordinated with the broadly understood Polish maritime sector and must be very well thought out, as these new possible regulations will become the foundation for the offshore wind energy for years to come. It is also worth noting that the best solution for the sector would be to prepare such a list of legal bases that would not require constant additions and amendments. As I have pointed out on many occasions, one of the main problems of the Polish law is its low legislative quality and high volatility, which in this case may have disastrous consequences for the Polish maritime economy in the nearest future.

In my opinion, without changes in mentality of our nation (which may prove to be the most difficult) and a holistic approach to this problem by the Polish legislator and decision-makers, we will repeat the patterns of the past, which have become the source of many problems, often with tragic consequences, for the Polish "local content", as was the case, for example, with the construction of the motorways.

On the other hand, according to very optimistic, but not realistic, plans, Polish offshore wind farms are expected to generate electricity in about 5 years. Assuming the plans for the Polish offshore wind market are carried to completion, the regulations may be prepared "on the fly" and "to be amended later". This type of legislative activity seems to be the worst of all possible ways, as it may lead to the loss of a unique opportunity for the development of the Polish maritime economy, which, considering previous assumptions and the "maritime character" of Poland, seems in fact less significant, e.g. there is no modern Polish register, no real support for the shipbuilding sector in terms of small and medium-sized enterprises, no Polish Coastguard, no social and tax regulations to make Polish workers working in the Polish sector or under the Polish flag attractive to foreign employers of shipowners, and no regulations to prevent unfair competition in the shipbuilding sector.

Definition of local content = domestic value = Polish value

Let us start with the definition of local content, as it seems that everyone understands this term somewhat differently, which may have a fundamental impact on the potential shape of future regulations in this field. In my opinion, local content (I would rather use the Polish term "local value", and in the context of offshore wind market simply "Polish value") should be used as a broadly understood value for a geographical area (understood locally, regionally or nationally) obtained directly or indirectly during a project conducted in a specific geographical area, which will secure the economic interests of employees, entrepreneurs, the state, local governments, etc. on a priority basis in relation to foreign capital and foreign entities. This value may have a multiple character and relate to e.g., employees, locally produced goods, know-how. One of the key issues in defining the above-mentioned concept is that this value should not be too easily and unreflectively imported to the area of project implementation, but used "locally" from the resources available in the above-mentioned area by using constructive priority rules.

Barriers to the development of Polish local content

While discussing the above issues in the broadly understood maritime sector, I came across some barriers, which may lead to the failure of the actual securing of Polish local content in connection with the construction and exploitation of Polish OWF:

  1. A problem of mentality in our nation - if the government, local governments and maritime administration do not approach the Polish OWF as a business project, but try to solve the issue on the basis of habitual patterns of thinking and acting – there is a very thin line between the public and the private sector – then, unfortunately, we will talk about Polish local content only in a marginal way. The Polish state should take care of its citizens and entrepreneurs involved in this project. It is the Polish state that will take advantage of certain powers concerning critical infrastructure, which are Polish OWFs. It is the Polish state that should be looking for every possible way to secure the Polish local content, and not looking for 'excuses' not to do so, such as 'let these issues be solved by free market principles'. I believe that without constructive state protectionism, Polish entrepreneurs are in a much worse market position than most foreign competitors, who often have more resources, are actually supported (sometimes indirectly, sort of "under the skin") by their states, and generally have more experience in wind offshore market than the Polish companies. To be clear, by constructive state protectionism I mean such actions that will increase the chances of Polish entrepreneurs in the "race" for orders in the Polish offshore market and will not become a pretext for securing interests of state-owned enterprises.

  2. Lack of any coordination - the issue of Polish wind offshore is very multifaceted and legally complicated, which requires a highly professional and open to unusual activities coordination team, which does not exist today (the first Polish OWF are supposed to generate energy in 2026 (sic!)). Such a team would have to be created in a very thoughtful manner, detached from short-term political or business interests. The "voice" of Polish local content would absolutely have to be represented as widely as possible in this team. In the following publication, I will outline how many legal spheres are affected by the above-mentioned problem of local content and how much needs to be done on the legal side before we can even talk about its real use.

  3. Needing a special interest group for the Polish local content - in numerous discussions concerning Polish OWF there are many reasonable observations and remarks from the broadly understood marine environment, but this voice is not heard by the decision makers. Ultimately, nobody is trying to translate these observations or comments into an action plan, which would lead to a more optimal solution for the Polish local content, which would be the synergistic effect resulting from the cooperation of various industries, local governments and governmental spheres. Undoubtedly, in Poland we have many experts with different work experience (also in international relations) in the port sector, shipbuilding, ship operation, onshore wind farms. The problem lies elsewhere, though. Nobody actually listens to these experts in order to work out legal solutions that could secure Polish interests in connection with the construction and exploitation of Polish OWF. I therefore call for the creation of a wind offshore lobby for the Polish local content.

  4. "We don’t have experts" – a very common point of discussions, a risk of lack of appropriate resources for execution and maintenance of investments concerning Polish OWF. On the one hand, it has to be taken into consideration that this sector will create from 80,000 to even 100,000 new jobs, but on the other hand, it has to be remembered that Polish employees have been working in foreign offshore or wind offshore industries for years, so we have very qualified personnel, which could "handle" these projects. There is a completely different problem: will the Polish wind offshore industry be able to prepare a competitive offer for Polish workers, since these workers will be in Poland fully taxed and with "full" social insurance?

  5. 'We have time to work on the details' - unfortunately, we do not have this time, especially considering the complexity of the problem and the fact that the Polish legal system is not adapted to properly secure Polish interests in the execution of an OWF investment. How are we supposed to safeguard the interests of Polish entrepreneurs when tenders for the construction and maintenance of the offshore wind farm are due to start soon and Polish entrepreneurs can currently expect a similar level of legal protection from the domestic legal system as in the case of the construction of Polish motorways? Work on appropriate legislation should begin immediately.

  6. "The European Union and international conventions tie our hands" - let us start with the fact that such an attitude results from a certain misunderstanding of the problem. It is enough to start by maintaining the principles of fair competition, e.g., entities infringing environmental, social and labor regulations can be eliminated from tenders in order to level the playing field for Polish companies. What is more, one should consider constructive state protectionism, which would aim at safeguarding the defence of the Republic of Poland or Polish energy security by requiring Polish employees and companies to operate the OWF – which the national legal system recognize as critical infrastructure - in specific sectoral tenders. We might even consider introducing a regulation based on the famous American Jones Act, which has been in force in the USA for over 100 years and safeguards Americans national interests. Seems unrealistic? Maybe at this stage for many yes, because of different patterns of thought, but if at this point the legal and business imagination correlated with the most effective and right foreign solutions does not work properly, we will repeat the common pattern of "Poles being wise after the event".

  7. Logically inconsistent thesis regarding the entities, which are to build OWF - on one hand, there is a need to use the entities with experience in constructing/operating offshore wind farms on the free market basis, on the other hand, to secure the Polish local content, forgetting that many Polish entities have much less experience than foreign competitors in this field. Moreover, it should be remembered that the transfer of the Polish OWF construction project to foreign entities, without the necessary legal protection of Polish entrepreneurs, will lead to the situation, where they may be marginalized in their business models, because each "big player" on this market already has its proven subcontractors. In such a situation, without having any legal support protecting the Polish local content, the investor/constructor of the OWF will use foreign entities: the cheapest (e.g., Chinese) or tried and tested in other investments.

Industries that can benefit from the local content

I will skip the very fact of economic activation resulting from the emergence of a huge business in Poland, which are the offshore wind farms, as this is an obvious issue. Some models indicate the creation of up to 100,000 new jobs in connection with Polish offshore wind farms. However, what draws particular attention, is seeing the problem of local content from the point of view of subcontractors involved in the construction and operation of farms, ports, shipyards and maritime workers in the classic sense. These groups are of course also very important and even crucial, but it is worth noting that there are many more of these industries than one might think, and in order to secure these key spheres of business, we should invite to the discussion on local content the widest possible group of entities that could benefit from Polish offshore wind. As an example:

  1. Exploration of seabed and clearance of unexploded ordnance and chemical weapons - this is currently the first and main obstacle (still unresolved) to the start of a real discussion on the start date of construction of Polish OWFs. On the other hand, it is a huge opportunity for Polish companies specializing in the above fields.

  2. Offshore wind farms protection systems - according to the law on crisis management OWF are the critical infrastructure, so they must be properly protected by the owner or operator of the OWF. In this case it is recommended to limit the possibility of performing the protection of OWF, which are critical for the defence of the Republic of Poland and Poland’s energy security, to Polish separately licensed security agencies.

  3. Servicing of the OWF - in this case the introduction of appropriate parity in terms of the composition of the crew of servicing vessels should be considered. Moreover, if the Republic of Poland would finally create a modern register of shipping, the condition for servicing and maintenance of OWF could be the registration of a vessel under the Polish flag, but in this case changes in the Maritime Labour Convention would be required and the tax and social burden for seaman and service technicians working on these vessels would be reduced.

  4. Accommodation and catering for employees working in the OWF - taking into consideration international experience, these employees usually live on platforms or on "floating hotels", which must be properly catered for. The introduction of appropriate legal restrictions protecting the Polish local content should also be considered in this case.

  5. IT support for OWF and infrastructure related to OWF - taking into consideration the current threats of cyber-attacks and the fact that OWF are treated as critical infrastructure, the Polish local content should be secured also in terms of IT support for OWF and cyber security of OWF.

Necessary changes in Polish law

The scope of potential changes in Polish law, which would secure the Polish local content in the execution of the OWF project in the Polish contiguous zone, is a very broad issue, therefore I will list possible changes in the law, which would secure Polish interests to a large extent in the above-mentioned sphere:

  1. legal definition – urgent introduction of a legal and at the same time broad definition of the local content;

  2. changes in the civil procedure - introduction into the provisions of the Code of Civil Procedure an obligation to examine all disputes concerning Polish OFW in Polish courts and on the basis of Polish law; another possibility would be the creation of a Polish arbitration institution for the examination of disputes, which would be an alternative for to the common courts;

  3. two new contracts in the Civil Code - it would also be appropriate to consider the introduction of two new contracts in the Civil Code, i.e., the offshore construction contract and the offshore maintenance contract;

  4. a modern register of shipping- creating a second Polish register of shipping, which would be a modern alternative to the archaic register currently in force. The new register, apart from its standard functions, would be dedicated to, among others, vessels protecting the OWF, servicing the OWF and, perhaps, as I have already postulated, autonomous ships;

  5. an act which actually activates the shipbuilding industry regarding offshore wind farms - a completely new act, which would regulate an actual and measurable support system for Polish small and medium shipyards and entities cooperating with them. This act would also have to indicate which companies are regarded as operating in accordance with fair competition, and this could be the only basis for taking part in tenders for OWF;

  6. The Act on the Polish offshore sector ("Polish Jones Act") - a completely new act which would systematically regulate key and problematic issues for the Polish sector. This act should consider introducing elements of constructive state protectionism in the area related to the OWF by, among others, obliging the registration of vessels servicing and protecting the OWF in the new Polish register of shipping, appropriate parity of Polish crews on these vessels, servicing the Polish offshore only from Polish ports, etc. What would be the pretext for this...? The defence of Poland and our national energy security;

  7. utilities contracts - although these provisions are already present in the public procurement law, they should be enriched with appropriate legal support correlated with the above postulates;

  8. Polish Coast Guard - the creation of the Polish offshore wind market may prove to be a great pretext for Poland to create a maritime service that would increase safety at sea and protect the Polish coast based on modern and proven foreign solutions. At present, Polish naval forces are too fragmented and often insufficiently equipped to fulfil the minimum requirement of above-mentioned tasks;

  9. Maritime Labour Act - a revision of the accident insurance provisions is definitely required, as their level, as provided by the Act, is not correlated with international standards;

  10. social security and tax regulations - in order to create a new Polish Register of Shipping and correlate it with the relevant obligations arising from, e.g., the new Polish Offshore Act, it would be advisable to consider a legal structure that would reduce the horrendous social and labour burdens that exist under the "Polish flag" and which, as experience shows, marginalize the Polish register in the international shipping arena;

  11. regulations concerning and certifying private companies for the protection of Polish OWF- a very important aspect, as it is the investor or the owner of the OWF who is responsible for the current protection of this infrastructure.

Summary

The purpose of this article is to change the perspective of those interested in Polish offshore wind market. I can only hope that this article will be a contribution to further discussion and new ideas on how to secure the Polish local content. Currently it may get lost in confrontation with "free market principles", which, from the perspective of the realities of economic turnover, in many cases are "free market" only seemingly, because foreign competitors, unlike Polish entrepreneurs, benefit from many direct and indirect forms of real support from the state.

Unfortunately, the majority of current debates ignore this very important element. Certain visions and plans are being discussed, which unfortunately are not at all grounded in the Polish legal reality, which requires immediate and thoroughly considered action of the Polish government and the legislator. The Polish local content must be taken into account in this action on a partnership basis. What is fully justified and what I call for is the creation of a special interest group for the Polish value for offshore wind farms area in the Baltic Sea.

Attorney-at-law - Mateusz Romowicz

Legal Counsel's Office
Legal Consulting-Mateusz Romowicz

kancelaria-gdynia.eu
prawo-korporacyjne.pl
www.kancelaria-odszkodowania.eu

 

Most recent
Meet innovative companies from Poland  
SHOW DOWNLOAD