The Romanian FDI regime has formally shifted to a stricter approach, with EU (including Romanian) investors now being specifically covered. We refer to Law No. 164/2023 (the "FDI Law") aimed at implementing and amending Emergency Government Ordinance No. 46/2022 ("EGO 46"), which was published in the Official Gazette of Romania on 7 June 2023.
Quick background: investments covered by EGO 46
Starting in April 2022, both direct investments (i.e. usually M&A transactions involving the takeover of a Romanian subsidiary or business) and so-called new investments (i.e. extensions of capacity productions, diversification of products and services offered in the market or penetrating a new line of business by an already established investor) have been covered by EGO 46, to the extent the investment occurs in a sensitive sector and exceeds a value of EUR 2m (the "Threshold"). There is a standstill obligation incumbent on investors and hefty fines for jumping the gun, up to 10 % of the worldwide turnover of the investor in breach of the standstill obligation.
The list of sensitive sectors is extremely broad (e.g. security of citizens or communities, which may encompass an extremely wide variety of businesses and activities).
EU investors formally covered by the FDI Law
The FDI Law brings a major shift, as EU (including Romanian) investors will be specifically in scope. For clarity, EU investors are EU citizens, EU-based companies including trustees and EU-based companies controlled by EU citizens and/or EU legal entities that either made an investment or intend to make an investment in Romania.
This means that as of now all investments in a sensitive sector (the list of sensitive sectors remains the same) exceeding the Threshold, irrespective of the investor's nationality, will need to be notified.
While the FDI Law is not entirely clear on whether new investments would also be called in, or only direct investments exceeding the Threshold (even if they are under the merger control thresholds and would therefore not fall under the jurisdiction of the Romanian Competition Council), we understand that the authority's view and intention is to apply the current regime to all types of investments. Further clarity may be expected in legislation to follow.
The concept of investment value will be regulated by secondary legislation, to be issued by the Romanian Competition Council. This is particularly important not only for direct investments (especially in multijurisdictional transactions where the parties have not allocated a transaction price or investment value to the Romanian leg), but also for new investments, where it may be difficult to identify the appropriate value to be accounted for the purposes of calculating the Threshold, i.e. CAPEX or OPEX.
New specific sanction: cancellation of the investment
The FDI Screening Commission is granted the competence to cancel a foreign direct investment in case of national security concerns, based on a procedure to be adopted via a Government Decision. This sanction would be applied on top of the monetary fine for potential gun jumping.
No screening fee
The FDI Law does not regulate a screening fee, as proposed under one of its previous iterations. However, it is likely that a screening fee similar to the clearance fees applicable in merger control cases (i.e. lump sums) will be instated sooner rather than later.
By Georgiana Badescu, Partner, Cristiana Manea, Senior Attorney at law, Darius Trusculete, Attorney at law, Schoenherr