Last updated: 21 December 2023
All foreign direct investments by EU investors shall be subject to thorough screening, regardless of whether they are subject to screening procedures aimed at economic concentrations, as already applicable to outward investments.
The GEO no. 108/2023, altering the competition law no. 21/1996 and other normative acts, in force since December 6, 2023, clarifies certain aspects related to FDI priory regulated under the law no. 164/2023 of approval of the GEO no. 46/2022 for the application of the Regulation (EU) 2019/452 of the European Parliament and of the Council of March 19, 2019.
Before the entry into force of the new legal provision, EU investments would be subject to screening only if the following three cumulative conditions were met: (i) the investment was subject to screening procedures of economic concentrations, (ii) it was aimed at a « sensitive » field as defined under the law and (iii) the value of the investment in Romania exceeded 2 million euros.
Under the GEO no. 108/2023, all EU investments, whether or not subject to screening procedures aimed at economic concentrations, are subject to screening and approval procedures by the Committee for screening of the foreign investments (CEISD, in Romanian), provided that : (i) the investment tops 2 million euros and (ii) the investment is aimed at a field listed as sensitive under the Decision of the Superior Council of National Defence no. 73/2012, including security of citizens and communities, border security, energy, transports, vital resources supply, critical infrastructure, information and communication systems, financial, fiscal banking and insurance activities, manufacture and circulation of weapons, ammunition, explosives and toxic substances; industrial safety; protection against disasters; protection of agriculture and the environment; protection of state-funded enterprises or their management during privatization.
The new legal provision also comes with a new definition of foreign direct investment, defined as any investment of any nature made by a foreign investor with the aim of establishing or maintaining lasting and direct links between the foreign investor and the entrepreneur or company to which these funds are intended to carry out an economic activity in Romania, including investments allowing effective participation in the management or control of a company carrying out an economic activity.
Also qualifies as foreign direct investment any change in the ownership structure of a foreign legal entity, if such change entails direct or indirect control thereof, by:
- a non-EU resident natural person ;
- a non-EU headquartered legal person; or
- another legal entity, lacking legal personality, organized and operating under the laws of a non-EU State.
Scope
Screening procedures shall apply from now on to both FDI by non-EU investors (non-EU resident natural persons / non-EU headquartered legal persons /EU headquartered legal persons controlled by a non-EU resident natural / legal person), and, in certain cases by FDI contemplated or carried out by an EU-resident investor.
According to the new legal definition, an EU investment is any investment by an EU-investor aimed at establishing or maintaining long-lasting, direct link between the EU-investor and the entrepreneur or the company benefitting of such funding to carry out an economic activity in Romania, including the investments allowing actually taking part in the management or controlling a company carrying out an economic activity.
We remind that an EU-investor is defined as :
- an EU-resident natural person having carried out or intending to carry out an investment in Romania:
- an EU-based legal person having carried out or intending to carry out an investment in Romania;
- an EU-based legal person having carried out or intending to carry out an investment in Romania, directly or indirectly controlled by: an EU-resident natural person / an Eu-headquartered legal person / other EU-based legal person, lacking legal personality, organized under the laws of an EU member State;
- the trustee of an entity lacking legal personality having carried out or intending to carry out an investment in Romania or another person holding a similar position, if EU-resident natural person or EU-based, if legal person or entity incorporated under an EU Member State’s law.
New procedural deadlines
Under the GEO no. 108/2023, EU or outward investors must produce all information requested by the CEISD within the 15 calendar days since the request. The CEISD shall issue a response within 60 calendar days since receipt of a complete file. If the CEISD issues a positive response, the Competition Council will issue an approval decision of the FDI within maximum 10 calendar days for EU investments, and 30 days for all other foreign investments.
FDI Screening fees
According to the GEO no. 108/2023, FDI screening fees (including EU investments) amount to the equivalent of 10,000 euros calculated based on the exchange rate of the NBR (National Bank of Romania) for the last day of the month preceding the submission of the file (see art. 31 paragraph 2 (1)). The fee is payable upon submission of the file and shall be refunded if the CEISD finds that the concerned investment does not meet the FDI screening conditions.
The Committee for foreign investments screening (CEISD)
The law no. 164/2023 provides that a representative of the Ministry of Energy shall join the CEISD, a committee already accommodating representatives of the PM, the Competition Council, the General Secretariat of the government, representatives of the Ministry of Economy, Entrepreneurship and Tourism, of the Ministry of Transport and Infrastructure, of the Ministry of Innovation and Digitization, the Ministry of Finances, the Ministry of National defence, of Internal Affairs, the Ministry of Health and of Foreign Affairs.
The representatives of the Romanian Intelligence and the Foreign Intelligence Services hold seats of permanent guests within the CEISD. At the end of the screening process of the FDI, the CEISD may issue a clearance for the investment, a conditional clearance or, as appropriate, dismiss the application file and reject the investment under screening.
The CEISD response is issued in maximum 60 days since admission of a complete application file. Conditional clearances and dismissals are sent by the CEISD to the government.
The government shall either issue a decision of approval subject to condition or, as the case may be, a dismissal decision.
The CEISD can also annul a FDI if finding that an investment likely to affect security and public order or EU projects and programs was implemented in breach of the obligation of prior clearance.
The annulment deed shall provide for the conditions, the criteria, the timelines, and the procedures for annulment of the investment, laid down under the Decision of the government. It should also be noted that the CEISD can refer a certain applications for clearance to the CSAT (the Superior Council for National Defence) for a thorough screening. In certain cases, such procedure can also be initiated upon request of the CSAT.