Ciech S.A.

Legal Proceedings Report • Jul 29, 2020

The Management Board of CIECH S.A. (the "Company"or "Issuer") herewith informs that today, at a hearing, theProvincial Administrative Court in Krakow (the "WSA"), uponconsideration of a complaint brought by a subsidiary of the Issuer, i.e.Verbis ETA sp. z o.o. S.K.A. (the "Subsidiary"), announcedits judgement in which it dismissed the complaint of the Subsidiary andupheld the decision of the Head of the Małopolskie Province Customs andTax Office in Krakow (hereinafter referred to as the "Decisionof the 2ndInstance" and the "2ndInstance Authority" respectively) dated 11 October 2019. Followingan appeal lodged by the Subsidiary, the 2ndInstanceAuthority upheld the decision of the Head of the Małopolskie ProvinceCustoms and Tax Office in Krakow (hereinafter referred to as the "Decisionof the 1stInstance" and the "1stInstance Authority" respectively) dated 9 July 2019,definingthe amount of the tax liability in the form of tax on goods and servicesfor the fourth quarter of 2013 - i.e. PLN 37,893,505, of which theamount of the disputed liability arising from the Decision of the 1stInstance is PLN 30,775,122.00(the "Liability").

The WSA judgement is not final.

The Decision of the 2ndInstance was dueand payable, and the amount of the Liability, together with interest inthe amount of PLN 12,365,162, has already been paid to the competent taxoffice in connection with the immediate enforceability of the Decisionof the 1stInstance, as advised by the Issuer in its CurrentReport No. 36/2019 of 29 August 2019.

Moreover, the Issuer informed about the pendingproceeding in current reports:

1.1.No. 17/2019 of 22 May 2019,

2.2.No. 26/2019 of 17 July 2019,

3.3.No. 31/2019 of 6 August 2019,

4.4.No. 43/2019 of 24 October 2019.Additionally,the Issuer informed about the pending proceedings and the amount of theLiability in the consolidated statements of the CIECH Group. In theextended consolidated financial statements of the CIECH Group for thefirst quarter of 2020, these proceedings are described inNote3.12 in the section: "Audits of tax settlements in the CIECH Group", inthe paragraph "VAT audit for the fourth quarter of 2013 at VERBIS ETASp. z o.o. S.K.A."

The Subsidiary and its advisors do not agree with theapproach expressed in the WSA judgment. The Subsidiary intends to takefurther procedural steps to defend the tax consequences of its 2013operations by submitting a complaint to the Supreme Administrative Court.

The Management Board of the Company is analysing thecurrent WSA decision in terms of the legitimacy of creating a provisionfor the amount of the Liability and interest. The creation of suchprovision, if any, would result in the reduction of the consolidatedfinancial result, however, it would not involve the need to pay anyadditional amounts since the Liability, together with interest, hasalready been settled.