Investment Screening Mechanism (ISM) in Central and Eastern Europe (CEE) : Case Study of Poland

Poland, like many other countries of the Central and Eastern Europe (CEE) region, has undergone a sinusoidal evolution of its investment screening mechanism (ISM) in the course of a turbulent transition from a planned to a market economy. Initial strict inward foreign direct investment (FDI) controls of the late eighties and early nineties, similar to current solutions in more assertive emerging markets, were soon dismantled under the pressures of European integration. Government control of the strategic enterprises was for long achieved via equity stakes across the region but, as treasuries’ capital participation in such companies faded due to gradual privatisation, the European institutions have often questioned solutions like golden shares leaving strategic enterprises exposed to hostile takeovers. However, as the priorities of the Western European economies channelled by the European Institutions shifted from securing a free rein in CEE to shielding bloc’s enterprises from takeovers by East Asian competitors, also the CEE countries were allowed to follow suit. Poland’s ISM-related developments have been consistent with those trends, though it accumulated a uniquely complicated mosaic of sector-specific ISMs. Throughout the transformation, Poland has kept uninterruptedly olden restrictions on the real estate purchases by foreigners, investment controls in special economic zones (SEZs) and ISM elements in heavily regulated sectors like aviation, banking, insurance and financial services. On top of that, it (1) replaced golden shares challenged by the European Commission with strict controls of enterprises possessing critical infrastructure assets listed secretly in 2010, (2) built sector-specific ISM into hydrocarbon mining permitting in 2014, (3) subjected several designated enterprises operating in the energy and telecommunications sectors to ISM handled by the treasury in 2015, and (4) introduced a temporary cross-sector ISM covering nearly whole economy in the wake of COVID’s outbreak in 2020