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Construction Consortium in Polish Law

In the Polish construction market, it is a common practice for several entities to jointly take part in public procurement. “Contractors deciding to execute an investment as part of a consortium should carefully construct their agreement. It is crucial considering their joint and several liability towards the ordering party,” note legal advisor Artur Sidor and Anna Matysiak, lawyers from the Pietrzak Sidor & Partners Law Firm, in the newest issue of “Builder”.

Currently, Polish law does not define the term “consortium”. However, according to the view dominant in case-law, a consortium agreement is a private partnership agreement. Legal doctrine emphasises that a consortium agreement is an “atypical private partnership agreement.” The differences between a normal private partnership agreement and a consortium agreement include, among others, the fact that consortium members do not have to provide contribution, which is a rule in private partnership agreements. Additionally, consortium members participate in profit and losses on different terms than private partnership members.

As legal advisor Artur Sidor and Anna Matysiak point out in their article, a consortium agreement consists of three elements: clauses which are common to all consortium agreements, clauses which are dependent on the consortium type and additional clauses. “Contractors have freedom in shaping the content of consortium agreements. The ordering party cannot interfere in the content of the agreement; in particular, they cannot demand that specific clauses be included. What is more, some aspects of the internal functioning of a consortium, for example mutual financial settlements, can be specified in a separate agreement whose content will only be known to consortium members, and will not be disclosed to the ordering party,” the authors note.

According to the provisions of the Public Procurement Law, each consortium member has the status of a contractor. This means that each of them is jointly and severally liable towards the ordering party for the obligations set forth in the contract. “Internal arrangements between consortium members, concerning their performance of particular obligations adding up to the consortium’s entire obligation set forth in the contract, do not influence the liability of consortium members,” the authors emphasise. Joint and several liability of contractors serves to protect the interests of the ordering party as a creditor and to secure the performance of the contract.