Raluca Nădejde and Ionut Lechea (Bondoc & Associatii) contributed to the development of this publication

When it comes to the Romanian regime regarding FDI, 2023 was a very challenging year in which both the market and the relevant authorities had to adapt to the major legislative changes that occurred in 2022, when new pieces of legislation were enacted in the FDI area.

In Romania, the FDI regime is mainly regulated by Government Emergency Ordinance no. 46/2022 for the implementation of EU Regulation 2019/452(GEO 46/2022), which, among others, defines the relevant concepts, sets out the types of deals reviewed, procedural aspects and potential sanctions.

Who files?

The principle is that the foreign investor or EU investor has the obligation to make an FDI filing in Romania. In case of mergers or other types of transactions, the obligation to file is incumbent on the merging parties or the party/parties acquiring sole or joint control.

"Foreign investor" is defined as: a natural person that is not a citizen of an EU Member state; a legal entity that does not have its registered office in an EU Member State; a legal entity with its registered office in an EU Member State controlled directly or indirectly by a natural person that is not a citizen of an EU Member State or a legal entity that does not have its registered office in an EU Member state; a trustee of an entity without legal personality or a person in a similar position, if they are not an EU citizen or are not established in an EU Member State, or if such an entity was incorporated under the laws of a non-EU Member State.

Types of deals reviewed

Pursuant to GEO 46/2022, the filing is mandatory for an FDI, EU investment or new investment made by a foreign investor or EU investor, that: concerns the fields of activity relevant to national security according to Decision of National Council for Country's Defense no. 73/2012, in conjunction with the criteria set out in article 4 of Regulation 2019/452; and whose value exceeds a threshold of €2 million, calculated at the exchange rate of the National Bank of Romania, applicable to the last day of the financial year prior to the transaction.

By exception, FDIs that do not exceed the threshold of €2 million may also be subject to examination and approval by CEISD, if, by their nature and potential effects, in relation to the criteria set out in article 4 of Regulation 2019/452, may have an impact on security or public order or pose a risk to them.

The fields of activity mentioned above as being relevant to national security according to the Decision of National Council for Country's Defense no. 73/2012, are: security of individuals and of communities; security of frontiers; energy security; transportation security; vital supply systems security; critical infrastructure security; IT&C systems security; security of financial, fiscal, banking and insurance activities; security of weapons, ammunition, explosives and toxic substances production and circulation; industrial security; protection against disasters; protection of agriculture and the environment; and protection of state-owned company privatization or its management.

According to GEO 46/2022, portfolio investments are exempted from examination and approval.

FDI is defined as an investment of any kind that fulfills the following conditions: it is performed by a foreign investor, and its purpose is to establish or maintain long-lasting and direct links between the foreign investor and the target (to which funds are made available for the purpose of carrying out an economic activity in Romania), including FDI that allows the foreign investor to participate effectively in the management or control over the target company.

Both direct and indirect changes of control in the ownership structure of the foreign investor fall under the scope of FDI review if control is acquired by an entity or individual that qualifies as a foreign investor, even if such change in control is outside of Romania. For example, a change of the parent company of the foreign investor would trigger an FDI review if the new parent company qualifies as a foreign investor, even if the new parent company has not carried out any additional FDI in Romania.

"EU investment" is an investment of any kind that is performed by an EU investor with the purpose to establish or maintain long-lasting and direct links between the EU investor and the target to which funds are made available for the purpose of carrying out an economic activity in Romania, including investments that allow the foreign investor to participate effectively in the management or control over the target company.

"New investments" are defined as any investment in tangible and intangible assets related to: the launching of the activity of a new undertaking; expanding the capacity of an existing undertaking; diversifying production of an enterprise through products not previously manufactured; or a fundamental change in the general production process of an existing undertaking.

Scope of the review

The purpose of the review is to examine whether a particular FDI, EU investment or new investment is likely to affect Romania's national security or public order, or projects and programs of interest to the European Union.

Review process timeline

As per GEO 46/2022, there is a maximum term of 135 days for the notifying party to be informed of the approval of the transaction by the Romanian Competition Council, which begins as of the moment the filing may be deemed complete. Additional time may be added if the CEISD requests the opinion of other authorities.

In the case of transactions that are sent by the CEISD to the Romanian government with the recommendation to be either prohibited or approved conditionally, there is no maximum legal time limit for the Romanian government to issue the decision.

As regards EU investments, according to the recent amendments to GEO 46/2022, FDI approval should normally be issued within a maximum of 70 days as of the date when the filing is deemed complete by the CEISD —when no further information/clarifications are requested.

In practice, if a transaction does not raise national security concerns, the FDI approval is issued in about two to two-and-a-half months from having a complete notification file.

How foreign investors can protect themselves

Foreign investors or EU investors can protect themselves by ensuring that any transaction carried out in Romania is pre-assessed internally from an FDI perspective (in other words, verifying if the transaction falls under the criteria set out under GEO 46/2022), followed by formal filing if they conclude that the transaction meets the relevant criteria, in addition to other regulatory clearances that may be required, such as the merger clearance by the Romanian Competition Council.

Also, in case of transactions that fall under CEISD review, CEISD clearance would need to be a condition precedent to the closing of the transaction because a prohibited transaction would trigger the cancelation of the transaction. To the best of our knowledge, this has not yet happened in practice.

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