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Suspended judge fights rearguard action over Polish judicial reforms

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In the bitter five-year battle over the future of the Polish judiciary, judges have often been on the front line. But few more so than Igor Tuleya.

Last week, the Warsaw judge, one of the most outspoken critics of a controversial judicial overhaul introduced by the ruling Law and Justice party (PiS), had his immunity from prosecution revoked in relation to a highly political case three years ago, and was suspended from his duties.

Prosecutors demanded the move so that they could file criminal charges against Mr Tuleya, alleging he had overstepped his powers by allowing journalists to hear and record his ruling on case relating to a disputed 2016 parliamentary vote.

Mr Tuleya dismisses the claims as false and says the move is designed to stifle dissent. “This is an attempt to intimidate judges,” he told the Financial Times in an interview at the central Warsaw court where he has worked for a decade. “And I think it is also about removing an inconvenient judge.”

The softly spoken 50-year-old’s position is a testament to how much Polish politics has changed over that decade. He was appointed to the Warsaw court in 2010 by then-president Lech Kaczynski. Ten years on, Mr Kaczynski’s twin brother Jaroslaw, the PiS leader, is the driving force behind the party’s judicial changes. Now a colleague fetches a key for the room where the interview is to take place as it is not clear whether Mr Tuleya would be given it himself.

The removal of his immunity is both a message to his Polish colleagues and, Mr Tuleya suspects, a gesture of defiance “to European courts and the EU”.

Over the past five years, Warsaw and Brussels have clashed repeatedly over PiS’s judicial changes, with the European Commission launching legal action over fears they undermine rule of law. Those tensions escalated last week when Poland and Hungary threatened to block the EU’s €1.8tn budget and recovery package after European officials struck a deal to link access to the funds to EU principles, including judicial independence.

PiS officials say the changes — which include giving politicians power over the body that appoints judges and creating the Supreme Court disciplinary chamber that removed Mr Tuleya’s immunity — were necessary to reform an inefficient system. Critics see them as an attempt to erode democratic checks and balances.

Born in Lodz in central Poland, Mr Tuleya studied law in Warsaw before becoming a judge aged just 26. Recent events are not the first time he has crossed swords with Poland’s ruling camp.

The biggest previous clash came in 2013 when, ruling on a case dating back to PiS’s first term in power between 2005 and 2007, Mr Tuleya said law enforcement agencies had used tactics reminiscent of the “times of greatest Stalinism”. His comments sparked a backlash from PiS MPs and media loyal to the party, with Zbigniew Ziobro — now justice minister — accusing Mr Tuleya of “political punditry” and demanding he be disciplined.

As well as political and media attacks, Mr Tuleya has been the target of abuse on the street and online. His court has been evacuated after being sent packages feared to contain anthrax, and dog faeces has been smeared on the door of his flat.

“I feel a bit as if I don’t live in my own country. I don’t recognise the Poland that I lived in for many years,” he said.

People who have met Mr Tuleya say he has the fortitude to cope with the pressure. “I would say he is a very tough introvert . . . He understands very well how important the role of an independent judge is. And unfortunately . . . he had to prove it by his own personal example,” said Marcin Matczak, professor of law at the University of Warsaw. “It will be very difficult for this government to crush this guy.”

Protesters rally in support of Polish judge Igor Tuleya outside the Supreme Court in Warsaw. © Omar Marques/Getty

One of Mr Tuleya’s main concerns is that if judicial independence in Poland is destroyed, the ramifications are likely to be felt in other areas of civic life.

“There won’t be a free media. NGOs will be destroyed. We will all have some sort of vision of the world promoted by politicians of the ruling camp imposed on us. And it can’t be ruled out that they are heading for Polexit,” he said, referring to Poland potentially leaving the EU.

But despite such warnings, judges and their supporters have increasingly struggled to rally public opinion. Although the PiS reforms initially sparked big protests, demonstrations have dwindled as the fight over the judiciary has dragged on. This is despite surveys showing Poles are not satisfied with the reforms, with one this year showing 50 per cent of respondents had a negative view of them.

Mr Tuleya said the abstract nature of the changes and relentless state media propaganda had made it hard to engage the public. He also acknowledged that the judiciary needed reform, “but genuine reforms — because what PiS has been doing for five years is exclusively the destruction of the judiciary”.

But he also argued that recent mass protests against a controversial court ruling that paves the way for an almost total ban on abortion were linked to the rule of law, as the Constitutional Tribunal, which issued the decision, had been politicised by PiS.

“It seems to me that today [the protesters] see the consequences of the politicisation of the Constitutional Tribunal, that such a politicised court doesn’t act independently,” he said.

Mr Tuleya, has no intention of giving up his fight for judicial independence. Although prosecutors can now press criminal charges against him, he plans to remain in Poland. But he said he would not voluntarily submit to questioning as that would imply recognition of the disciplinary chamber and its decision to remove his immunity.

If a criminal case went against him, he could face jail. But Mr Tuleya is not deterred. “I can’t turn back,” he said. “I am convinced that I am fighting for a just cause. And so I am also prepared to pay that price.”



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Analysis

Pandemic fuels fast food’s appetite for UK expansion

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Fast-food chains are gobbling up high street sites left vacant by struggling retail and casual dining operators as they target aggressive expansion in the UK.

Adam Parkinson, European vice-president of the Filipino fried chicken group Jollibee Foods Corp, said the company wanted to be in “every major city in the UK” with plans to invest £30m, including opening 10 new outlets in 2021 and a further 15 to 20 next year.

The first will be a flagship site on Leicester Square in London, which is set to open as lockdown restrictions on restaurants lift in May.

German Doner Kebab claimed to be the UK’s “fastest growing restaurant chain” after it announced plans to open between 47 and 49 new outlets this year, doubling its estate and creating roughly 1,800 jobs.

The group, which launched in Berlin in 1989 but is based in Glasgow, had originally planned to open about 25 UK sites this year but Imran Sayeed, its chief executive, said the pandemic-driven boost in demand for takeaway food had spurred wider expansion. “New communities discovered us during the pandemic [and] that opened up avenues for us to look at some of the territories that we had not been looking at,” he said.

Same-store sales jumped 51 per cent last year compared with 2020 and were already up a further 38 per cent this year, Sayeed added.

Others that have announced plans to open multiple sites this year include “fast pizza” company Fireaway, which intends to double its UK estate to 110 sites, aviation-themed Wingstop, a US fried chicken brand, and the US fast-food chain Wendy’s, which has secured five sites for its return to the UK after it exited the market 20 years ago blaming high rents and operating costs.

Fast pizza group Fireaway intends to double its UK estate to 110 sites © Alamy

The growth is being fuelled predominantly by overseas chains which see the UK as an attractive market from which to launch a European expansion.

Jollibee also plans to open its first continental European site in Spain this year, while Wendy’s chief executive Todd Penegor said the company planned to “solidify a good beachhead in the UK to really prove out the model for the broader European business”.

Graeme Smith, managing director at consultancy AlixPartners, which advises Burger King UK, said the UK was a popular place for fast-food chains to establish themselves in Europe because of its “proximity to the US market is terms of cultural trends and even simple things like language”.

Thomas Rose, co-founder of property consultancy P-Three, said established brands such as McDonald’s and Burger King were also weighing expansion but were “more sensitive” about publicising their plans as negotiations were continuing with existing landlords over rent while stores had been closed.

The growth of fast-food chains stands in stark contrast to the travails of the wider restaurant sector, which has suffered under a series of government lockdowns that have allowed takeaway food to be sold but ordered dine-in restaurants to close.

Jollibee plans to open 10 new sites this year, with the first a flagship outlet on London’s Leicester Square © Jollibee

One in six casual dining restaurants shut during 2020, according to the industry research firm CGA, as the pandemic hit a sector already struggling with high debts as a result of private equity ownership, over expansion and increasingly steep operating costs. Overall, 3,267 food-led venues closed — equivalent to 63 a week — CGA data showed.

Rose said that the closure of casual dining chains and the administration of several large retailers such as Philip Green’s Arcadia, owner of Topshop, and Paperchase had opened up opportunities for new entrants to the UK’s fast-food market that would not have been possible before, as landlords desperately seek tenants to take up empty high street lots.

“Fast food was historically excluded from real estate because rents were too high and landlords were more discerning about what brands they chose,” he said.

Parkinson said: “Our prime location is always on the main pedestrianised street on a corner site and they were few and far between pre-Covid but now they are jumping into our laps.”

The rush to expand has in part been driven by significant drops in property prices as the pandemic accelerates consumers’ shift to shop, order food and entertain themselves online.

Rents have fallen as much as 40 per cent in some locations such as London’s Oxford Street but are typically down around 20 to 25 per cent.

Tom Grogan, director of Lemon Pepper Holdings, the franchise owner of Wingstop UK, said the crisis “has allowed us to secure preferential agreements with landlords”.

Sayeed said German Doner Kebab found that demand was driven by teenagers and 20-somethings who were looking for alternative types of fast food: “McDonald’s and Burger King are great brands but people are looking for new things rather than just eating burgers and fried chicken.”



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Investors lambast Sunak’s plans to raise corporation tax

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Shareholders have hit out at the British government’s plans to raise the UK corporation tax rate and warned it could make the country a less attractive place for investment.

Chancellor Rishi Sunak on Wednesday set out plans to increase the corporation tax rate from 19 to 25 per cent for larger businesses in 2023 — the first time it will have been raised since 1974.

The Treasury estimates the move will raise £17bn in 2025-26, but investors expressed concern because of how it could reduce dividend payments by companies.

Richard Buxton, fund manager at Jupiter, an investment group, said Sunak’s proposed increase in the corporation tax rate amounted to a “sizeable bite” out of businesses’ profits.

“When looking at potential profits over a three to five year time horizon investors will have to factor this in, and it will erode earnings and potential dividend growth,” he added.

“In turn, this may at the margin reduce the attraction of UK equities to both domestic and international investors.”

The UK is one of the world’s most popular financial markets for income-seeking investors.

Tom Stevenson, investment director at Fidelity International, a fund manager, said Sunak’s increase in the corporation tax rate would leave the UK just about competitive “but shareholders in the largest, listed companies that will bear the brunt of the measure will not welcome this”.

David Page, head of macro research at Axa Investment Managers, another investment group, said he expected more countries to raise corporation tax rates like the UK, but added: “Does this make the UK less attractive? At the margins yes.”

Nigel Green, chief executive of deVere Group, a financial adviser, said Sunak’s move “will reduce profit after tax and slash the profit available for dividends. This will not go unnoticed by those looking to invest in the UK”.

Sunak said in his Budget speech in the House of Commons that even after his corporation tax reform, the UK’s headline rate would still be the lowest among G7 nations.

But experts said the UK does not look as competitive internationally on other measures, because it is much less generous than other countries — including France and Germany — in the share of capital spending that companies are allowed to set against taxable profits.

An OECD measure of the effective marginal corporate tax rate — the amount of tax a hypothetical company pays on an extra pound of profit — shows the UK is close to the average among developed economies now, but could have one of the toughest regimes among the international organisation’s member nations after 2023.

“The headline rate is not the only thing that matters . . . Mr Sunak is taking a gamble that raising corporate taxes further up the international pecking order won’t have too terrible an effect on investment,” said Paul Johnson, director of the Institute for Fiscal Studies.

Corporation tax rise will give UK relatively high effective rate. Chart showing Effective marginal corporate tax rate, 2019 (%). With the increase in UK's corporation tax in 2023 it will be behind only Australia, Spain and New Zealand in the OECD with the Effective marginal corporate tax rate

The IFS said the extra revenue stemming from the higher rate of corporation tax would in the long run be less than the government’s £17bn a year estimate.

A higher rate would reduce incentives for companies to make investments that would increase profits in later years, it added.

Sunak said on Wednesday the majority of businesses would avoid the corporation tax reform given a rate of 19 per cent would apply to businesses making profits of less than £50,000 each year.

He added the rise in the corporation tax rate to 25 per cent for larger companies in 2023 will be preceded by a new allowance for capital spending, providing a “super-deduction” of 130 per cent on new plant and machinery. 

Dan Neidle, a partner at the law firm Clifford Chance, said the two year tax break would be a strong incentive for companies to accelerate investments that were in the works, although it was not long enough to generate new capital spending that took time to plan.

Tax campaigners TaxWatch UK also criticised the move, saying it would give a tax break to companies that have thrived during the pandemic, including Amazon.

Analysis by TaxWatch found Amazon Services UK, an entity that provides warehousing and delivery services, would have its corporation tax bill wiped out based on its last reported spending on plant and machinery. Amazon declined to comment.

Several smaller companies announced they would bring forward investments as a result of Sunak’s proposed tax break, although larger businesses including defence manufacturer Meggitt said that it would be more difficult to change long term plans.

Tony Wood, chief executive of Meggitt, said the company made “decisions on where to do [the] engineering effort based on what is right for the decade rather than what is right for the two year timeframe”.

But Gavin Cordwell-Smith, chief executive of Hellens group, which owns a paving slab manufacturer in Sunak’s Richmond constituency, said that “as a direct consequence of the [chancellor’s super deduction] announcement, we have already decided to accelerate our growth plans, including a new production line”.

Chemicals maker Christeyns will also bring forward investment plans — and likely increase them — in three factories, said director Nick Garthwaite. 

Some business leaders expressed concern at how Sunak’s planned tax break would only last two years, and be immediately followed by the increase in the corporation tax rate to 25 per cent.

“The chancellor wants a two year investment boom, but we will then go from feast to famine at a time when the consumer recovery might be tailing off,” said one executive.

Additional reporting by Sylvia Pfeifer in London



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China’s leaders focus on post-Covid economy at annual meeting

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China’s National People’s Congress, the country’s annual rubber-stamp parliament session, will convene on Friday for a meeting set to focus on a problem many other countries wished they had: how to rein in an economy that has rebounded from the coronavirus pandemic.

“There have been intense discussions about monetary and fiscal policy,” said Wang Jun at the China Center for International Economic Exchange, a government think-tank in Beijing. “The primary goal is to stabilise leverage, but if policy [tightening] goes too far too quickly it may have a negative impact on financial markets as well as the real economy.”

The NPC will run for about a week and is typically a forum where previously agreed measures and policy objectives are formally approved. Last year’s session, however, was dominated by Chinese president Xi Jinping’s surprise announcement of a stringent national security law for Hong Kong after the city was rocked by anti-government protests in 2019.

The gathering also provides the biggest stage of the year for Xi to project his unchallenged grip on both the government and the Chinese Communist party as he prepares for an unprecedented third term in power in late 2022.

China’s post-Covid recovery contrasts starkly with the situation in the US, where the pandemic has claimed the lives of more than 500,000 Americans and President Joe Biden is pushing Congress to pass a $1.9tn economic stimulus package.

China annual GDP growth rate 2018-2020

Guo Shuqing, one of China’s most powerful financial regulators, warned this week about the dangers of “extremely loose monetary policies” in the US and other pandemic-wracked economies, saying the measures could cause “too much fluctuation” in Chinese financial markets.

He added that China’s property market was still afflicted by “relatively large bubbles” and suggested lending rates would “rebound” this year. Guo, who heads the banking regulator and is also the most senior party official at China’s central bank, pronounced late last year that the real estate sector was the country’s “greatest grey rhino in terms of financial risk”.

Guo’s comments sparked a sell-off on regional markets, illustrating the difficult balance he and other financial officials must attempt to strike. Stimulus measures rolled out by Chinese president Xi Jinping’s administration early last year helped spur investment but also propelled debt levels in the world’s second-largest economy to about 270 per cent of GDP.

“While the leadership feels confident about the economy’s trajectory, there is still a lot of uncertainty,” said Andrew Polk at Trivium, a Beijing-based consultancy. “Authorities need to find a way to unleash consumption and pick up slack from industrial production and real estate investment.”

Shuang Ding, chief China economist at Standard Chartered in Hong Kong, said Beijing was likely to reduce its budget deficit to 3 per cent of GDP, down from 3.6 per cent last year. But he also forecast the Chinese economy would grow at least 6 per cent year on year, with “substantial room for outperformance”, and create 11m jobs.

“The most pressing economic issues are how to withdraw from last year’s expansionary fiscal policy and how to increase consumption,” said Jia Jinjing, an economics professor at Renmin University in Beijing. “The central deficit budget will be lower than last year but still above 3 per cent. We cannot rely too much on increased debt to spur consumption.”

China retail sales growth

NPC delegates will also formally pass the party’s 14th five-year economic plan, which is focused on achieving “self-reliance” in a number of critical technology sectors as well as ambitious environmental goals, including reaching peak carbon dioxide emissions by 2030 and net-zero emissions by 2060.

The NPC session in 2020 was delayed for almost three months by the pandemic and fixated on the imposition of the national security law on Hong Kong.

This year, it is likely to approve measures that will further reduce the pro-democracy camp’s representation in the city’s legislature. It is also expected to unveil rules consolidating Beijing’s hold on an already pro-establishment “election committee” that chooses Hong Kong’s chief executive.

Dozens of Hong Kong democracy activists, including publisher Jimmy Lai and jailed student leader Joshua Wong, have been charged with alleged offences of the security law. In a speech last month, Xia Baolong, head of the Chinese government office responsible for Hong Kong, singled out Lai and Wong as “extremely vile anti-China elements”.

“There doesn’t seem to be any end to the crackdown,” said Willy Lam, a China politics expert at the Chinese University of Hong Kong. “Xi has made up his mind to snuff out Hong Kong’s opposition movement altogether. For ordinary people, Beijing will insist on ‘patriotic education’ in the schools and media.”

A Chinese academic who advises Beijing on Hong Kong issues said the territory had been “too unbridled” prior to last year’s passage of the national security law. “The central government had no other option,” said the academic, who asked not to be identified. “The Hong Kong opposition overestimated its power.”

Additional reporting by Xinning Liu in Beijing



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