Poland's Nationalist Transformation Storms Through Supreme Court

(Bloomberg) -- The transformation of Poland by its nationalist government has upended the Supreme Court, capping a third year of a justice-system overhaul that’s created a schism between the country of 38 million people and the European Union.

A law that took effect Wednesday will force as many as 27 of the 73 judges in the Supreme Court system into retirement without a waiver from President Andrzej Duda, sparking protests in major cities.

Poland's Nationalist Transformation Storms Through Supreme Court

At least 16 of the judges who are suddenly older than the new retirement age have already applied for permission to stay on -- but not Chief Justice Malgorzata Gersdorf, who’s refusing to recognize the change.

“I stand here in defense of the legal order in Poland,” Gersdorf told hundreds of supporters outside the court in Warsaw on Wednesday. “I want to show that there’s a difference between the constitution and its violation.”

‘Will and Whim’

The reform, which the ruling Law & Justice party introduced on the grounds of improving efficiency, is at the center of a conflict that’s turned an exemplar of communist Europe’s transition to democracy into one of the EU’s biggest headaches, jeopardizing billions of euros in aid. The European Commission has recommended disciplining Poland for failing to uphold the bloc’s values, an unprecedented process that could also strip the country of its voting rights.

The overhaul outraged the EU’s leadership and prompted lawmakers to heckle Prime Minister Mateusz Morawiecki as he tried to defend his government’s policies in Strasbourg, France.

“There’s a question of principles, of our common community,” Guy Verhofstadt, leader of the pro-business Liberals in the 28-nation parliament, said during debate. “Reform of the judiciary is certainly a legitimate goal, but forcing judges to retire -- delivering them to the will and the whim of the governing majority -- can never be part of such a reform.”

President Duda considers Gersdorf officially retired and named Jozef Iwulski as her interim replacement. But Gersdorf indicated she’ll go on vacation, a bureaucratic move that averts an immediate confrontation over control of the pinnacle of the court system.

Multidimensional Feud

“This is an important event for the justice system, but from the market’s point of view, it will be more key how Poland’s dispute with the European Commission develops,” Jakub Borowski, chief economist at Credit Agricole Bank Polska SA, said Tuesday. “This dispute is now multidimensional and will probably take some time.”

The zloty staged a rebound against the euro on Wednesday, moving in-sync with emerging-market peers and curbing this week’s decline to 0.2 percent. The currency hit its weakest level since January 2017 on Monday.

As many as 4,000 Poles protested in Warsaw late Tuesday and several hundred on Wednesday morning, according to estimates from City Hall. Protests were also held in Poznan, Krakow and several other cites, according to Obywatele RP, a civil-society group that’s helping organize the rallies.

Lech Walesa

More protesters are expected Wednesday evening in front of the Supreme Court with former President Lech Walesa, the Nobel Peace Prize winner who led the Solidarity movement in the 1980s, attending the demonstrations.

The EU says the disputed legislation gives the Law & Justice party too much sway over the judicial system. The overhaul will leave Polish courts bearing “a striking resemblance to the institutions that existed in the Soviet Union,” according to a report by the Venice Commission, a democracy watchdog. Gersdorf called it a “purge” that will enshrine single-party rule.

The European Commission’s “justification isn’t right and we’ll prove it before the European Court of Justice,” Foreign Minister Jacek Czaputowicz said.

Monday’s “letter of formal notice” from the Commission gives Poland one month to respond and potentially answer calls from Vice President Frans Timmermans for amendments to the reforms. A final warning would come next in the form of a “reasoned opinion,” after which a lawsuit could be filed at the EU court.

“This is the last call for Poland to change something in this area, but it seems that the Polish government feels its power, as Poland has the proper back-up to block sanctions,” said Rafal Benecki, ING Bank Slaski SA’s chief economist. “In the long run, the losses will be visible and it will be visible in EU funds.”

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