Restitution in Poland – costs
and obligations after 25 years
of democratic state’s creation
Magdalena Zaleczna
Introduction
• Property rights reflect the county’s economic
system and values accepted by the society. The
national institutional framework indicates the
nature and extent of these rights, the way they are
utilised and thus the possibility of maximizing value
(Eggertson 1996).
• These rights allow the use of resources, but in a
specifically identified society; they need the special
protection provided by public actors to produce the
large scope of benefits.
Introduction:
• Transformation period required a transfer of real property
from public to private actors in form of privatisation as the
fundamental process.
• However, one of the problems created by socialist regimes
legacy was lack of clear property rights settlement. In each
post socialist country there was the different scope of taken
over properties and - in result - a various number of
harmed people.
• The restitution process, understood as settlement of
disputes and claims made ​by previous owners and their
heirs, was a necessary first step to the new order’s
implementation.
Introduction:
• Restitution programs in East and Central Europe
derived energy from revolutionary time of general
change (APPEL 2005). These processes had often
taken place together with the most profound system
changes, in fact in some countries it was an
inevitably and necessary process to establish market
economy.
• Among post socialist and democratic countries
Poland is the only one that did not carry out the
general restitution.
The research question:
Poland is a member of EU, has democratic institutions and
experiences a fast economic development. From this
perspective there are important questions to be asked
about the foundations of the national institutional
framework. They refer to grounds and reasons of lack of
general restitution process in Poland, the functioning of
state with so large “gap” in institutional framework and the
consequences of this situation.
The path dependent approach
The main idea of path dependent described by David
and Arthur warns that there is the possibility of a
lock-in to durably inefficient solutions because of
increasing returns and the influence of small random
events. However, there is necessary to mention that
on the institutional ground there are various
approaches indicating the unique and different
framework due to the institutions’ specificity.
The path shaping and path dependent
approaches
• There are researchers utilizing path dependence and
path shaping approaches in analyzing the socio and
economic transitional environment (NIELSEN at al 1995,
p. 8). The path-shaping process was responsible for
emergence of the Polish new democratic state
introducing in the short period the new rules.
• The embeddedness of new institutions required longer
period and had links to the past and new rules of
governance. The mixture of old and new sculptured the
future.
The past
• Nationalisation and expropriations were tools that enabled
the rise of state ownership – the most welcomed in the
socialist regime. As a consequence, the state took over not
only the largest enterprises, but also medium- and small-sized
firms, with the exception of handicraft workshops. Unlike
other socialist countries, in Poland people were still allowed
to own land.
• The speed and the scale of ownership restructuring depended
on the political situation – the strongest pressure could be felt
in the period of 1948-56, then the grip was slowly being
loosened. Some laws in 70-ties tried to formalise illegal
contracts and “grey” property market.
The transformation
There is a need to underline that during the path
shaping phase there was no strong attempts of general
restitution’s introduction in Poland. This state of affairs
produces the visible sign that restitution was not a
very important factor for Polish politicians.
The first draft had the date of 1.07.1994
(Parliamentary bill No 532) and it focused only on real
properties taken over in Warsaw. The next attempt –
also in 1994 there was the Parliament resolution
imposing the obligation on the government to prepare
the general restitution draft.
The difficult issue
• Restitution in Poland has not been conducted in path
shaping phase because it was on the one hand a really
difficult and complicated process connected with
political, ethical and technical problems, on the other,
was not essential for carrying out economic reforms.
• The work on the introduction of the statutory rules of
restitution have been therefore the result of clashing
moral needs of reparations for victims and the economic
needs of the country. The very substantial value of their
claims was estimated at more than PLN 140 billion
(about PLN 40 billion for Warsaw claims) in 2008.
The lock-in
The lock-in of an institutional path can be a result
of the imperfection of feedbacks on agents'
subjective models and existing organizations and
interest groups strength. This lock-in shapes the
policy and the possibility to adapt new institutions.
Institutional lock-in in surveyed field implicates the
false evaluation that implicated decisions (in fact lack of decisions) are the best possible solution in
current conditions.
The lock-in
Passage of time contributed to the increase in the level
of indifference and even hostility of citizens to meet
restitution claims. This social attitude influences the
political willingness to solve the problem of restitution.
Nowadays, there is a social distrust and feeling that in
difficult financial situation of the State some of the
citizens would be extra awarded by restitution process
and the burden would be paid by the rest of the society.
The negative attitudes are reinforced by media’s news
about frauds and dishonest attempts of bogus owners to
take property over.
Increasing political “returns”
Unpopular decisions are not taken (political supporters are not
discouraged)
Officially, there is “work in progress” as an excuse
Increasing economic “returns”
No need to incur direct expenditure, transaction costs are not visible
Increasing social “returns”
Social amnesia about socialist time
-Keeping existing ownership structure
-Forgetting about not fair behavior
Lock-in
There is only one group of claimants having general legal ground for
restitution - Polish citizens who left their property in previous territory of
Poland (current Ukraine, Belarus, Lithuania) coming to Poland after II
WW and people who were repatriated from Soviet Union and their heirs.
This regulation was the result of Broniowski v. Poland case (Broniowski v.
Poland, no. 31443/96, § 131, ECHR 2004-V), won by Broniowski in
Strasburg. Entitled people have right to 20% of value of left property.
They can ask for a compensation or discount in price or fee when they
are buying public property or are using them. At the end of 2006 the
first compensations were paid. According to information given by
Ministry of Treasury the by the end of Maj 2014, there were taken 56
207 positive decisions and there were issued certificates proving the
right to compensation in the amount of approx. PLN 3 billion.
The hidden costs
Payments from the Restitution Fund from mid-2001 to the end of 2013
as the fulfillment of the only 929 claims had a total amount PLN 1,3
billion. The amendments allow the Restitution Fund to subsidize the
compensation provided according to Article 215 Real Estate
Management Act and, therefore, limited to agricultural properties,
houses and land plots for housing taken over in Warsaw. Every year is
expected to pay PLN 200 million. This is a response to requests
expressed by the Warsaw authorities burdened with the necessity to
pay increasing amount of compensation: in 2005-2008 annual
expenses had a value of PLN 40-50 million, in 2009-10, they amounted
to over PLN 60 million, in the period 2011-12 there was spent on
compensation respectively PLN 305 and 290 million (Projekt
Wieloletniej Prognozy Finansowej miasta stołecznego Warszawy na lata
2014-42).
Łódź case study
Łódź is a specific city having many problems with property
right claims.
The reason is the history, in the past, before the I WW it was
in Russian zone and there was no clear land register.
During a short time of freedom there was not possible to
improve the situation.
In many cases there are no documents for socialist
government decisions and there are problems with dates of
taken over the property.
Łódź case study
Number of claims for restitution in Łódź in years
2008-2012:
2008 - 56
10 was accepted
2009 - 23
18 was accepted
2010 - 25
8 was accepted
2011 - 29
17 was accepted
2012 – 38 4 was accepted
In 2013 the total numer of all claims was 180
Łódź case study
The lock-in issue:
- National legal system (no pressure for a change)
- Local habits and problems:
- no efforts in collecting data about potential claims
- separation of pieces of information from different city
departments
- problem with restitutio in integrum when the
tenement houses are redecorated
- forgery of documents
Conclusions:
The institutional lock-in does not allow for far-reaching
changes from the primary direction. The theoretically
built prosperity being the reason for the previous choice,
can be in reality much smaller than assumed.
In Poland, unlike in the other post socialist states, the
general restitution law was not introduced. This has led to
a strengthening of ownership structures from socialist
time. The moral obligation of compensation is seen mainly
by these whose families were harmed and there is only a
small group.
Conclusions:
Nobody counts the hidden cost of current lack of
general restitution: court cases costs (there is no
collection of restitution verdicts), compensations
paid in the whole value, discouraged investors.
The case of Łódź shows that institutional lock-in is
also strong on local level.
There is a need for a deep change – shaping process
again. To conduct it is necessary to have social
support.
Thank you for your attention