B2B CONTRACT VS. REGULATED OUTSOURCING

We advised the national payment institution on the project:

qualification of B2B contracts
in terms of regulated outsourcing

For our client, a national payment institution, we performed a comprehensive legal analysis of the qualification of B2B contracts in terms of regulated outsourcing in light of the Payment Services Act.

Entrusting the performance of operational activities to external providers (outsourcing) is today a standard practice among entities operating in the financial market. By working with external providers, these institutions are able to significantly reduce the cost and raise the standard of services offered.

The rules regarding the use of outsourcing by financial institutions, including the conditions for its admissibility, are set forth in generally applicable legal acts such as the Banking Law or the Payment Services Act, as well as in documents that do not formally have such status, such as the guidelines of the European Banking Authority on outsourcing or the positions and letters of the Polish Financial Supervision Authority.

Determining whether a particular agreement qualifies as an outsourcing in some factual situations can be significantly difficult. This applies, among others, to agreements between a supervised entity and individuals running sole proprietorships (JDG). Under Polish law, individuals running JDGs are treated as entrepreneurs. At the same time, it is common market practice for companies (including supervised entities) to conclude B2B contracts with individuals running JDGs and performing duties within the organizational structure of that company. Since the use of outsourcing by a supervised entity is associated with the need to fulfill a number of obligations (information obligations to the FSA, the correct way to structure the contract, obligations to supervise the relationship, etc.), the determination of whether a given contract constitutes regulated outsourcing assumes significant importance in terms of ensuring regulatory compliance. Failure to fulfill the obligations prescribed by law, resulting from the mischaracterization of the relationship, may give rise to negative supervisory consequences for the institution.

DLK’s advice included:

• legal analysis of the prerequisites for the qualification of an agreement as a regulated outsourcing in light of the applicable law, guidelines and practice of supervisory authorities
• preparation of a legal opinion with practical recommendations as to how the contract should be shaped proving the absence of regulated outsourcing