A floating offshore wind farm is constructed almost entirely in a shipyard, and then towed to the appropriate location. If Polish shipyards are to be competitive in this regard compared to foreign shipyards, they should receive government support," believes Mateusz Romowicz, a legal advisor from Legal Consulting law firm.

Żaneta Kłostowska: Mr. Romowicz, you have repeatedly pointed out legislative gaps regarding the regulation of Polish local content in the domestic offshore wind sector. Could new technologies such as floating wind farms come to the rescue?

Mateusz Romowicz: Let's start by acknowledging that I don't have sufficient expertise in technical aspects to definitively determine the real possibilities of siting such offshore wind farms in the Polish economic zone, but from what I know, it's not impossible.

Furthermore, from a legal perspective, there may be several interesting issues here, which we can also correlate with securing Polish local content.

I wonder how our archaic and rigid legal system regarding modern technologies and the maritime sector will categorize these offshore wind farms. Will they be classified as ships? Or perhaps as production platforms? Or like jack-ups? This topic could stir up controversy in Poland from a legal standpoint, and what concerns me the most is the passivity of the Polish legislature, which could lead to a stalemate in ambitious and well-justified plans for floating wind farms in the Polish EEZ.

On the other hand, my greater concern often arises from ill-considered and sudden actions by decision-makers, which – to put it mildly – are often detached from market realities and, above all, undermine the Polish supply chain, such as the unfortunate regulation by the Ministry of Infrastructure amending the regulation on the training and qualifications of crews of seagoing vessels, which came into force on June 13, 2022, effectively rendering Polish offshore no longer coastal shipping overnight, blocking Polish entrepreneurs from fulfilling their contracts in this sector.

Apart from the above risks, I see many potential benefits in such a technical solution for securing the Polish supply chain.

Firstly, one of the key advantages of such a solution is that a floating offshore wind farm is built almost entirely in shipyards and then towed to the appropriate location. If Polish shipyards are to be competitive with foreign shipyards in this regard, they should receive government support correlated with various preferential tax regulations so that they can prepare sufficiently attractive bids for the construction of such floating installations. It is worth emphasizing that this support should be dedicated to small and medium shipyards, not just large entities with state participation.

Secondly, since we are dealing with a process that could involve Polish shipyards, we would naturally secure a significant involvement of domestic companies, which by necessity would be "wrapped around" by Polish shipyards carrying out such projects.

What additional challenges or benefits do you see in this solution for Polish offshore wind energy?

Certainly, it will be a legislative challenge because, in my opinion, a floating offshore wind farm is a different type of installation than a traditional wind farm mounted on a monopile. In Poland, the legislature has deemed that only the building components of wind farms that are technically separate parts of the subject matter of the transactions, constituting the technical whole of the wind turbines, such as foundations and masts, should be treated as buildings.

In the case of a floating offshore wind farm, such a qualification would certainly be inadequate, as it does not have foundations but only anchors, which only keep the floating offshore wind farm in a fixed position. Therefore, from a legal perspective, we would not be able to classify it as a building but rather as a very specific floating unit.

If we were to consider such a direction for the Polish EEZ at all, we would certainly need to establish how these floating installations would be legally classified in Poland and appropriately regulate their status, including certification, to prevent them from being treated as units operated in international navigation, which, considering the recent absurd actions by the Ministry of Infrastructure regarding the change in the definition of national shipping, is not so unlikely. For clarification, the current new definition of national shipping in force since June 13, 2022, contains a very unfavorable narrowing of this definition. Currently, coastal shipping is defined as "journeys in the maritime internal waters and territorial sea of the Republic of Poland;" (§ 2 point 22 of the regulation), thus excluding the economic zone and adjacent areas where Polish offshore wind farms will be located. Thanks to this legislative maneuver, the entire offshore sector will be treated as international navigation, and as we know, a floating wind farm is not permanently attached to the seabed, so we should avoid situations where such installations/units require safety cards like ships operated in international navigation.

Furthermore, it would be necessary to consider environmental aspects related to the construction and operation of such farms, including seabed clearance of UXO.

Mr. Romowicz, how is it possible for a floating offshore wind farm to be classified as a ship when it does not have its own propulsion?

The simplest answer would probably be that in Poland, when it comes to bizarre legal constructs in maritime matters – anything is possible. On the other hand, there are known cases abroad where jack-ups, despite the lack of propulsion, were classified and registered as ships. Therefore, if we want to introduce this new technology into the Polish market, we would certainly need to determine how these floating installations would be legally classified to avoid a situation where, despite signed contracts and readiness of the parties, project implementation is blocked by systemic "Catch-22" situations.

Returning to the topic of building floating wind farms, what changes in the law would shipyards need to increase their chances of implementing such projects?

If Polish offshore wind energy were to follow this path, we would certainly need to take care of Polish shipyards to facilitate, and in some cases even enable, the financing of such projects. I mean all shipyards, not just those with state participation, which may not be competent or organizational enough to meet such challenges, especially since they are already involved in other projects such as Miecznik.

Of course, we are talking about a fairly distant time perspective, but as you well know, we will need to quickly participate in bidding and potentially contracting such projects.

In my opinion, the basic legislative tool intended to activate the Polish shipbuilding industry, namely the Act of 2016 on the activation of the shipbuilding industry and complementary industries, urgently needs amendment. In its current form, this legal act is effectively dead. This state of affairs is due to its commercial inadequacy and low legislative level.

As an example, two concepts defined by the legislature in this act do not meet the current needs of the shipbuilding market, let alone the ambitious plans of the offshore wind industry. Specifically, the definitions that determine the applicability of these regulations by shipyards in relation to certain projects contain very restrictive and imprecise understandings of ships and ship construction. These definitions also lack, not surprisingly, floating wind farms, which should be included in these definitions.

What other deficiencies do you see in this law?

The regulations of this law aimed to enable shipyards to pay a lump sum tax for the construction or reconstruction of a ship. Based on these regulations, the choice of taxation with a lump sum tax is made by submitting a declaration by the entrepreneur, and the taxation period with this tax is 3 years. The lump sum tax itself amounts to 1% of the taxable base. The taxable base for the lump sum tax is the revenue from the sale of the ship or ship reconstruction achieved in the tax year, excluding VAT.

It would be necessary to consider introducing a principle whereby shipyards could benefit from this tax in the areas covered by these regulations without any time limit or based on an extended time limit because a 3-year period may prove to be too short for larger shipyard projects, including those related to offshore wind.

Furthermore, it should be emphasized that this law lacks several very important definitions from the perspective of the shipbuilding industry, such as the definition of repair, the actual definition of ship reconstruction (in terms of the scope of activities and actions taken by shipyards), maritime navigation, shipowners, or other entities jointly carrying out the construction or reconstruction of a ship, etc., which significantly limits the application of these provisions in practice.

Once again, I strongly emphasize that the Polish legislature should pay special attention to small and medium-sized enterprises, whose offers to potential clients should be competitive, and these shipyards can best prove themselves in such projects. However, this competitiveness will be conditional primarily on whether the entrepreneur can safely and stably benefit from the "tax incentives" created by the Polish legislature, which requires systemic and – even worse – mental changes as quickly as possible.

Mateusz Romowicz - Legal Counsel

Law Office of Legal Consulting

Legal Consulting - Mateusz Romowicz