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A prize find for corporate lawyers searching Poland’s used bookstores in 1990 was an unlikely gem — the commentaries to the Commercial Code of 1934. The old copies, published some time before 1939, had collected a lot of dust — they were hardly worn. There had been no need to refer to them since the war, and company law hadn’t been taught at Poland’s leading law schools for 50 years. Since only a handful of private companies existed in Poland in 1989, when Solidarity prevailed and Communism fell, knowledge of the company law set out in the commercial code was exotic, left to a few students with the time and inclination for irrelevant learning. When private enterprise returned to Poland in 1990, those commentaries became our Bible — an invaluable guide to how the country’s long-dormant company laws worked. And while the laws never addressed — much less envisioned — the kind of complex business relationships that were by then commonplace in the West, Poland was lucky that it even had a company act. Countries like Russia, Romania, and Ukraine that were also dealing with the fall of Communism did not even have a starting point when private enterprise first appeared on the radar screen of their lawyers. Poland is a different world than it was 10 years ago. Then, the country’s most complex commercial transaction was the sale of an apartment. Last year, we had our first hostile takeover, the unsuccessful attempt of Deutsche Bank AG to acquire BIG Bank Gdanski. That things would change so quickly was unimaginable when Poland officially embraced democracy and a market economy. After years away, many Poles, including myself, returned home bringing firsthand experience with Western business and legal practices. I came back after working in Houston at Vinson & Elkins for 10 years. Many of us had left Poland as students, children, or refugees. While away, we had watched, studied, and participated in the rise of Wall Street and the electronic revolution in the 1980s. On our return, few of us imagined that within a decade our own country would have re-entered the First World. Still, the change did not occur overnight. Political systems and political leaders may be overturned in an instant; legal systems take longer. Within two years of Communism’s collapse, the economy and business worlds had drastically transformed. Meanwhile, the legal system, perplexed and strained, struggled to accommodate situations that had never been anticipated. How do you proceed, for instance, when a huge American oil company and the Polish state-owned oil company want to form a joint venture to develop and distribute oil and gas? Sign an agreement, shake hands, take a photo, promise good faith, toast, and hope for the best? That’s what the parties to such early deals did. And the country then had to write laws and create a legal system to ensure that the deals could work. Our point of reference was that Commercial Code of 1934. The code had never been repealed during all the years when it was not needed. Nor had it been studied by anyone then under the age of 70. But at least the country had lawyers and the example of the West. Poland graduated many lawyers in the decades before Communism fell, perhaps 1,000-1,500 every year. As in the West, law provided a rigorous and interesting course of study, a good academic foundation even if one never intended to practice. I went right into teaching after graduating from the University of Wroclaw law school in 1977. This was the only option for people who wanted to work in international law but did not want to join the highly ideological Ministry of International Affairs. Though there were no international transactions at that time, the world was not closed to us. Unlike other Iron Curtain countries, Poland imposed relatively few travel restrictions on its citizens. While still a student in the early 1970s, I had hitchhiked around the States and Europe. Then, a few years after graduating from law school, I moved to The Hague and studied law at the Institute of Social Studies. I was there in 1981 when martial law was declared in Poland. Through coded messages, my parents warned me not to return home. My friends and I had been active in Solidarity, and many of them had been arrested. With time to fill, I moved to the States and enrolled in Louisiana State University, where I earned two degrees, a J.D. and then an LL.M. Louisiana is a great place to study law if you will someday find yourself in a civil law country in need of a new legal system. Every course is a study of comparative law: “Forty-nine states do that; in Louisiana, we do this.” The educational process provided the perfect grounding for the kind of thinking that would be required in Poland a decade later. My subsequent experience as an associate at Vinson & Elkins was equally fortuitous. I chose first to work in the finance department; eventually I joined a “special transactions” team that handled everything from financings to takeovers. When Solidarity prevailed in 1989, I persuaded my colleagues to be the first Western law firm to open an office in Poland. I returned home eager to be part of the country’s renaissance. In 1993 I moved to the Warsaw office of White & Case. The joint ventures and privatizations we did in the early 1990s would have been simple if done in the States or Europe. But they seemed so complicated at the time. The Poles and the Westerners — mostly Americans — came to these deals with completely different perspectives. The Americans did not understand that the legal system that governed their transactions was designed for transactions of a completely different kind. The Poles simply didn’t understand the business concepts, not to mention the missing legal concepts. Polish law (or society, for that matter) never envisioned, for instance, that a private foreign party would form a joint venture with a state-owned entity to do oil and gas exploration. There was no law to deal with oil and gas concessions. We stretched those commentaries to their limits and looked fruitlessly in the indexes to the codes for the provisions that were needed. Parliament had to pass new laws to deal with virtually every situation that arose. The World Bank helped by sending in consultants from various countries to draft laws that would cover the new business realities. These new laws often were inconsistent with existing Polish law and had to be rewritten. Deals could be delayed for months. Just as the consultants didn’t fully grasp the fine points of Polish law, local businesspeople needed an orientation in the most basic operations of a sophisticated corporate society. Even the concept of investment banking was hard for them to grasp at first. In these early days, for instance, I set up a dinner meeting between our firm’s client, a major state-owned enterprise, and investment bankers from New York. The bankers gave an hourlong presentation about their services and strategies. “Any questions?” one asked at the end of the pleasant evening. All the client’s staff looked deferentially to their director of finance. His only question — “What interest rate are you charging on loans?” — made me realize how far we still had to go. Another time, when our firm was representing commercial bankers from the States, a Polish company asked the client for a $5 million loan to expand production of small, specialized engines. The Polish businessmen proudly detailed their plans to modernize their factory and increase output. “But who is going to buy three times more of these things?” the bankers wanted to know. The question puzzled company executives. In Communist Poland, all that had ever mattered was output. Sales, revenue, and profit were not a manager’s problem. Those years were good and bad. I had come back to my country with a fantastic education and job experience from the West. But my Western clients and my fellow citizens simply could not relate to each other. The Westerners were frustrated by a culture where deals simply couldn’t get signed for months. Someone always had a new point to raise, and the Polish party would wait until the very last minute to bring its lawyers to the table. Then the deal would have to be negotiated all over again. In addition, the Poles were skeptical and uncertain about dealing with foreigners. Even when I was the lawyer representing these foreigners, it was not uncommon for the Polish party to take me aside and whisper in Polish: “Tell me, am I doing the right thing? Is this agreement good for me?” Nevertheless, the lack of a clear road map seemed to deter no one. Warsaw was humming. Then, it was like a small town with just one “international” hotel — the Marriott. That’s where we did our marketing. Every Westerner coming through town would hang out at the lobby bar. The place overflowed with deals. Now, of course, the deals are huge, and the hotels numerous. In the early days, the lack of bench strength in the office forced us to cancel vacations. Today we cancel our trips because a contested tender offer has been made. But for all this quick progress, the change in the legal system is not complete, and frustrating anomalies remain. For instance, last year we represented a consortium of international bankers funding a proposed $1.5 billion acquisition of a Polish telecommunications company. That amount of financing would not have been forthcoming without laws (albeit new laws) in place to protect the lenders’ security in the project. Still, vestiges of the old system vexed the deal. As in any big loan in the States, we had to perfect the security interests. This required 20 filings, not an unreasonable number for a billion-dollar credit. What was less reasonable was that each filing was assigned to a different judge. And each judge had a different view of the filing. The wise men of the Polish judiciary are few. Judges in Poland have no experience in commercial transactions or the practice of law. They go to the bench straight out of law school, and thus have neither the experience nor the confidence to negotiate or make decisions. As a result, they tend to rely on extreme formalism. When challenged, they respond simplistically: “The code says this, end of discussion.” But what if that code was written 50 years earlier and never anticipated the situation at hand? Judgment is required. To avoid these inexperienced judges, arbitration is usually the preferred method of dispute resolution. Other vestiges of the old system result in tremendous inefficiencies — and in poor training of new lawyers. Yes, most of the leading graduates now speak fluent English, and transactional law classes go far beyond teaching how to buy and sell an apartment. But the five years spent in a Polish law school tax a person’s memory, not a person’s creativity or analytical skills. As with judges, they know only one “right” answer to a question. Consequently, beginning lawyers in our office have no experience arguing a position or considering carefully how to make something work when the rules as written do not fit. But with time and training they learn, just as did the people who 10 years ago did not understand the differences between an investment banker and a commercial banker. These same people have now earned seats at the table of Poland’s leading enterprises — and also in companies that have no Polish roots. It is no surprise that today we have an educated young generation willing to compete with their peers across Europe or in America. What is remarkable is that so many people over the ago of 50 have successfully weathered the transformation to political and economic independence. Multinational companies used to have non-Poles running their operations in Poland; now 98 percent of the leading lawyers and business executives in the country are Polish nationals. This journey has not been as daunting as the one Columbus embarked upon: We had a beacon in the Western economies and legal systems, though no road map on how to transform Poland’s. Of course, the final destination is constantly moving. But the bridge that links us is powerful. And that Commercial Code of 1934? It was pushed to its limits and finally crumbled under the weight of so much change. A new commercial code was enacted last year. The once sought-after commentaries are now back in the used bookstores, well-worn artifacts of a fascinating time. Witold Danilowicz is the executive partner of the Warsaw office of White & Case.

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