Romania approves secondary norms to its new FDI regime

November 2022 – The Romanian government has adopted secondary legislation for the organisation and functioning of the FDI Screening Commission (the “CEISD”)—the authority tasked with the review of foreign investments under Romania’s new foreign direct investment (“FDI”) regime. Specifically, the government adopted Government Decision no. 1,326/2022 approving the Regulation on the functioning of the CEISD, which came into force as of 8 November 2022 (the “CEISD Regulation”).

Romania’s new FDI regime was introduced earlier this year through Government Emergency Ordinance no. 46/2022 on measures for applying EU Regulation 2019/452 establishing a framework for the examination of foreign direct investment in the Union (the “EU FDI Regulation”) and amending Competition Law no. 21/1996 (“GEO 46/2022”).

GEO 46/2022 introduced an overhaul of Romania’s FDI regime, with the newly created CEISD taking over the role of screening proposed foreign investments from the Supreme Council of National Defence (“CSAT”) and the introduction of a clear standstill obligation and severe fines in case of gun jumping, among other changes.

Key features of the new FDI regime

Romania’s new FDI regime provides for the screening of both foreign investments and what GEO 46/2022 defines as “new investments” (also including greenfield investments). For an investment to trigger a filing obligation under the new FDI regime, the following cumulative criteria would need to be met:

  • the investment is made by a non-EU investor (generally, either a non-EU national or company registered outside the EU; an EU-registered company directly or indirectly controlled by a non-EU national; or a non-EU company or another legal entity without legal personality organised under the laws of a non-EU state) that would acquire control (defined as per competition rules) over an undertaking, thereby allowing the investor to carry out economic activities in Romania;
  • the investment falls under a list of broadly defined sensitive sectors provided by CSAT Decision no. 73/2012 (the same as under the old FDI regime), while also considering the criteria under Art. 4 of the EU FDI Regulation;
  • the value of the investment exceeds EUR 2 million, although investments below this threshold may be subject to screening if they could impact or raise concerns to national security or public order.

New investments considered for the purposes of the FDI regime pertain to initial investments in tangible and intangible assets within the same perimeter related to (i) the start of the activity of a new undertaking (in a new location, technically independent from other existing units); (ii) the expansion of the capacity of an existing undertaking (in an existing location, due to unmet demand); (iii) the diversification of the production of an undertaking with products/services not available before (in the respective unit); or (iv) a fundamental change in the general production process of an existing undertaking. The definition of a new investment, which is inspired from State-aid rules, is rather general and particular questions may arise in practice, which is why a case-by-case FDI analysis would be recommended, especially regarding a planned capacity expansion or change in the production process of existing undertakings in potentially sensitive sectors.

In addition to the filing triggers, other significant features of the new FDI regime include:

  • regarding timing: for a no-issues, phase I clearance, the authorities have up to 135 calendar days from the moment the filing is deemed complete, as follows: (i) up to 60 days for CEISD to screen the filing and issue a clearance opinion; (ii) another 30 days for the Romanian Competition Council (“RCC”), which also acts as the CEISD Secretariat (through its Foreign Investments Directorate), to issue a clearance decision based on the CEISD’s opinion; and (iii) up to another 45 days from the issuance for the RCC to communicate the clearance decision to the investor. If the CEISD considers that remedies are needed for an investment to be approved or that a proposed investment would affect national security, public order, or projects or programmes of EU interest, it would forward its opinion to the government, which would issue a final decision on the matter. There are no currently applicable deadlines if the government becomes involved in the process.
  • a clear standstill obligation is included under the new FDI law: foreign investments cannot be implemented prior to their approval;
  • significant fines are introduced: up to 10% of the investor’s worldwide turnover in the financial year prior to the sanctioning decision for: (i) gun jumping the FDI clearance obligation, (ii) deliberately providing inaccurate, incomplete or misleading information during the filing process, or (iii) breaching the remedies offered, in case of a conditional clearance;
  • specific transparency rules apply to foreign investments in the media sector: for target companies holding an audio-visual license or running a periodical with an average circulation of at least 5,000 printed copies/day in the last calendar year or a website with at least 10,000 visits/month, the CEISD would run a market test for a 30-day period with respect to the mass-media target company.

Newly enacted rules on the functioning of the CEISD

GEO 46/2022 formally designated the CEISD as the new competent body for FDI screening in Romania since its enactment in April 2022. Moreover, the CEISD was formally established by Decision no. 350/6 June 2022 of the Prime Minister of Romania. However, in the absence of secondary rules on its functioning and organisation, the CEISD was still a dormant body under the new FDI regime, with CSAT continuing rather on a de facto basis to screen foreign investments.

With the recent adoption of the CEISD Regulation, the CEISD could now be considered operational and start to fulfil its role under the new FDI framework.

The CEISD Regulation generally follows along the lines of GEO 46/2022, without major deviations or clarifications, while laying down the necessary framework for the CEISD to operate. The following are among the more noteworthy provisions of the CEISD Regulation:

  • the CEISD Regulation has formalised the possibility for the CEISD to conclude that a notified investment does not fall under the remit of the new FDI law and inform the investor accordingly, without a (clearance) decision being formally issued—this may help streamline the process for investors to receive comfort from the authorities (e.g., in case of filings made on a precautionary basis). The law provides, however, that such a communication sent to the investor does not preclude the CEISD from further considering the investment under the FDI law at a later date, if new information or data that could not be considered during the initial examination becomes available. As such, the comfort letter received from the CEISD (that a particular filing did not fall under the new FDI regime) could be theoretically overturned at a later stage;
  • the FDI filing form has been formally approved, with a few amendments to the initial draft version previously made available for public consultation;
  • the CEISD Regulation also appears to clarify that sensitive sectors under CSAT Decision no. 73/2012 and the criteria under Art. 4 of the EU FDI Regulation would (also) be considered alternatively to determine potential filing requirements, together with Parliament Decision no. 22/2020 approving the National State Defence Strategy for the 2020–2024 period and the European Commission Communication on the EU Security Union Strategy (COM(2020) 605 final);
  • contrary to the initial draft of the CEISD Regulation, there are no provisions with respect to applicable filing or authorisation fees. This does not necessarily mean that the authorities abandoned the idea of introducing filing or authorisation fees, but rather that they left the matter to be decided by parliament under the upcoming law approving and amending GEO 46/2022.

Further changes to the FDI regime in the pipeline

Given the recent change to Romania’s FDI regime, there are still a number of open points where further clarification could be expected following the authorities’ decisional practice. In this respect, the RCC has also recently started publishing its first FDI clearance decisions under the new regime.

However, important questions still remain (e.g., with respect to the scope of the new regime in terms of sensitive sectors or type of (new) investments covered, the manner of determining the investment value, or the clearance timeline for more sensitive cases) and a case-by-case analysis is recommended to mitigate risks, especially given the high fines introduced by GEO 46/2022.

Additional clarity and also further material amendments to the new FDI regime could be brought by the upcoming law for the approval of GEO 46/2022, currently under debate in parliament (the “Draft Law”). The Draft Law was initially adopted and sent for promulgation to the president in July 2022 but the president vetoed it, arguing that it was inconsistent in certain respects.

Given its previous form, the Draft Law could introduce a series of material changes to the (new) FDI regime, including:

  • extending the scope of the FDI filing obligation to also cover (certain) transactions by EU investors;
  • introducing an examination/authorisation fee—the Draft Law version vetoed by the president included an examination fee of 0.1% of the investment value, to be paid by the investor upon submitting the FDI filing, which could have been perceived as excessive and a potential deterrent to foreign investment in Romania. Given the criticism raised by such approach, the updated version of the Draft Law could include lump-sum fees potentially based on investment value thresholds, similar to merger control authorisation taxes;
  • further transitory norms and clarifications may also be expected in the final version of the Draft Law.

Concluding remarks

Screening of foreign investments remains a hot topic in Romania and in the EU in general, especially given the current challenging geopolitical landscape. In this respect, Romania should aim to strike the right balance between protecting its overarching national security interests and ensuring a welcoming foreign investment environment by putting in place a predictable and proportionate FDI screening mechanism.

Given the recent changes in the local FDI regime, the number of filings may be expected to significantly increase, with the authorities adopting a cautious approach in considering and screening potential investments where the scope of the FDI law is not clear-cut and in the absence of a settled decisional practice. It is therefore all the more important to continue monitoring upcoming changes in the law and secondary enactments, together with the authorities’ approach in dealing with particular FDI-related issues.

For more information, please contact the authors of the article. 

Catalin Graure Managing Associate
+40 21 307 1640
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