Romania: Gotta Catch 'Em All: Extending The Scope Of The Romanian FDI Screening Regime To EU Investors And Below-Control Acquisitions

December 2023 – A little over one year since Romania's new foreign direct investment ("FDI") screening regime (that we previously wrote about here and here) became fully operational, the Romanian government passed an emergency ordinance meant to further clarify particular aspects under the law (such as the scope of the screening regime, which is further extended) or to translate into law the lessons learnt or the authorities' reading of the rules since applying the new FDI law.

The new changes to the FDI law were introduced by Government Emergency Ordinance no. 108/2023 on amending the supplementing Competition Law no. 21/1996, as well as other normative acts (the "FDI Amendment Law", published in the Official Gazette on 6 December 2023. The new law also aims to transpose under Romanian law some remaining aspects in the ECN+ Directive (please see our comments on the newly introduced competition law changes here) and to further strengthen the investigative powers of the Romanian Competition Council ("RCC"). The RCC is also the authority in charge of formally issuing FDI clearances for no-issue cases, whereas the FDI screening itself is conducted by a separate body under the government's authority, i.e., the FDI Screening Commission ("CEISD").

With the latest changes to the FDI screening regime, the Romanian authorities have reconfirmed their overly cautious approach in terms of assessing and reviewing investments with a local nexus. The previous wording in the FDI law dealing with EU investors that was very ambiguous and led to heated debate and uncertainty on the market as to the scope of screening has now been clarified and made clear that EU investors (including Romanian investors) fall under the scope of FDI screening. At the same time, and in line with the authorities' position that screening would not come as too much of a burden for investors (in a balanced approach between private and national security interests), the FDI Amendment Law hints towards an expedited process for EU investors. This all comes in the aftermath of the Xella decision of the European Court of Justice, where some clear boundaries were set as to the Member States' ability to restrict investments and the interplay between FDI screening and EU law (particularly the freedom of establishment). In this regard, there have also been voices arguing that the local screening of EU investments itself could be perceived as disproportionate and amounting to some form of obstruction of the EU single market and related freedoms, particularly in light of the Xella decision.

On the other hand, and as we can also see from the results of the European Commission's consultation on the evaluation and revision of the EU FDI Screening Regulation (available here), Member States and relevant stakeholders have confirmed a strong preference for maintaining the primary role of the Member State where the FDI was planned and that each Member State determines the scope of the national screening regime based on the local understanding and approach as to national security and public order.

Main aspects to consider under the FDI Amendment Law

We include below some of the main changes brought by the FDI Amendment Law that investors particularly looking at Romania or companies concluding multi-jurisdictional deals with a Romanian nexus and their international counsel should be aware of:

• Investments (including greenfield investments) by EU investors, including Romanian investors, are now clearly within the scope of FDI screening, to the extent the other filing triggers are met. The FDI Amendment Law clarifies the previously ambiguous wording in the law with respect to EU investors that has generated since its inclusion in June 2023 a lot of uncertainty, and numerous filings made by EU investors that generally triggered responses from the RCC and CEISD that the respective investments did not fall under the scope of the law.
  
  On the other hand, the FDI Amendment Law does not bring further clarity as regards the sensitive sectors under the FDI law and how the EUR 2 million de minimis investment threshold should be computed.

• No-issue EU investments will hopefully be screened within a shorter time period (compared to the usual 2–3 month period before) under a fast-track procedure that appears to be introduced, as the law now provides for a shorter deadline of 10 calendar days for the RCC to send the EU investor a clearance letter, from the moment the RCC received the CEISD clearance opinion (compared to the previous 30 calendar days for the RCC to issue the clearance decision followed by a separate term to communicate it to the non-EU investor).
• Below-control investments, granting effective participation in the management of the target, are also subject to screening now – unlike the previous wording of the law that referred to the investor acquiring "control over the administration of the undertaking", the screening trigger was amended to also include, besides the acquisition of control, instances where the investor gains "effective participation in the management" of the target, in line with the definition of FDI under the EU FDI Screening Regulation. This may presumably include rights to appoint representatives to the target's governing bodies, in the absence of strategic veto rights. The FDI Amendment Law brings no further guidance on the matter, nor any minimum shareholding thresholds, to a point that may stir questions and uncertainty for investors and practitioners alike going further.
  
  This amendment had already been hinted at by the RCC's decisional practice, where reference to the EU FDI Screening Regulation was usually made, but the below-control matter was not backed up by the previous wording in the local FDI law.

• An EUR 10,000 filing fee is introduced – the so called "screening contribution" is payable upon filing and is to be returned to the investor in case the authorities conclude that the notified investment did not fall under the scope of the FDI law.

End remark

The latest amendments to the FDI screening regime in Romania come to legally enforce the previous position of the local FDI authorities in some of the more debatable aspects under the letter of the law, especially as regards the scope of FDI screening.

The local FDI regime continues to be very wide in scope and there is still uncertainty as to the interpretation and application of the law in many other respects, but hopefully such matters will be further addressed or clarified either through secondary legislation or with the authorities publishing past clearance decisions or issuing guidance papers.

Against this background, Romania could be further expected to be particularly considered among jurisdictions prone for an FDI filing in case of multi-jurisdictional transactions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.