At the end of December 2020, the Romanian Competition Council (the "RCC") published an updated iteration of the draft Emergency Government Ordinance implementing the FDI Regulation (the "FDI Draft Law"). While the FDI Draft Law is still undergoing the legislative process, it is expected to enter into force soon. As covered here, the new rules will tighten the existing FDI screening, once in force.
Here are the key takeaways:
Parallel filings for merger control and FDI screening
A change of control may trigger merger control ("MC") and/or FDI screening, based on whether the MC turnover thresholds are met or not. While previous legislation did not require a separate FDI filing in case an MC filing was submitted, the FDI Draft Law specifically states that parallel FDI filings will need to be submitted by each foreign investor. Each party is liable for the information provided by it.
The FDI Draft Law also states that MC clearance can only be issued after FDI clearance.
The FDI Screening Commission has a 60-day deadline to review the filing. The review period can be extended if other authorities (such as the Supreme Council for State Defence, "CSAT") need to be consulted. The review period starts as of the date when filing is deemed complete; practically, the authority may revert with additional requests for information which will stay the review period until all information is provided.
Decisions will be communicated to the parties within 45 days from when they are taken.
Sensitive sectors have been amended to mirror the provisions of the EU FDI Screening Regulation.
Essential public services (defined by Law 51/2006 and Government Decision 647/2013) have been removed from the scope of FDI screening. The current main sensitive sectors defined by CSAT continue to be applicable jointly with the new provisions.
Scope of the FDI Draft Law: FDIs and new investments of at least EUR 2m
FDIs are defined as an investment of any kind by a foreign investor1 aiming to establish or to maintain lasting and direct links between the foreign investor and a shareholder, a target company or a part thereof, that benefit from funds provided by the foreign investor to carry out an economic activity in Romania against control rights granted to the foreign investor. Upstream changes of control in an existing investor may also trigger FDI screening.
In addition to FDIs, any new investment in an asset by a foreign investor (including setting up a production facility, extending capacities, diversifying production by introducing new products or materially changing a production process, having an investment value of at least EUR 2m) falls under the ambit of FDI screening.
FDIs (including new investments) not meeting the EUR 2m threshold that may have a significant impact on, or pose significant risks to, public order or security, by "their nature", may also fall under the ambit of FDI screening. Absent other indicia on how to assess these FDIs, filing may be commendable on a fail-safe basis.
Retrospective review of FDIs
The FDI Draft Law states that the FDI Screening Commission may initiate reviews of non-notified FDIs either ex officio, or at the request of any Romanian authority.
The timeframe of a potential retrospective review of completed investments is not specifically indicated, however it is likely that this will be limited to 15 months after completion of the FDI.
The current law is not entirely clear on the applicable transition rules. It seems that a filing obligation might extend to transactions signed prior to the entry into force of the FDI Draft Law, but not yet closed.
In addition to providing inaccurate/incomplete information and gun jumping, the FDI Draft Law sets out a new pecuniary sanction for the foreign investor's failure to observe the terms/commitments - either behavioural or structural - set in a conditional clearance decision.
Fines can range between 1 % to 5 % of the total turnover achieved in the previous FY. It is not clear how the total turnover will be determined. To the extent the competition rules will be applied, the total worldwide turnover may be factored in. Additional guidance is expected (including via implementation norms, expected to be enacted within 30 days as of approval of the FDI law).
1 Defined as non-EU citizens, non-EU based companies including trustees and EU-based companies controlled by non-EU citizens and/or non-EU legal entities that either made an investment or intend to make one
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.