Georgiana Bădescu, Cristiana Manea, Sabina Aionesei, Teodora Burduja authored this publication.

Under the Romanian FDI regime, a mandatory filing obligation is triggered by a change of control or an effective participation in the management of a target with a local presence, involving an EU or a non-EU investor, in a sensitive sector and exceeding €2 million. Transactions in genuinely critical sectors below the threshold are subject to voluntary filings and Romanian authorities encourage proactive filings.

Summary of major changes in 2024

• Law no. 231 dated July 17, 2024 brought several updates and clarifications to the existing Romanian FDI regime.
• The law introduced the concept that gun jumping resulting from negligent conduct becomes sanctionable. The same applies to providing inaccurate, incomplete or misleading information by negligence.
• Investments implemented without clearance, and the underlying contracts, are null and void if the transaction was otherwise notifiable. The FDI Screening Commission may also decide on either structural or behavioral remedies to address potential concerns raised by the investment.
• The Romanian Competition Council is expressly empowered to regulate, through guidelines, the conditions, timeline and procedure for reviewing foreign direct investments, as well as the methods for determining the value of the investment for the purpose of the de minimis threshold.
• Emergency Government Ordinance no. 152 dated December 18, 2024 explicitly clarified that the FDI regime applies to Romanian investors as well.

Who files?

Any EU, non-EU or Romanian investor acquiring control or gaining an effective participation in the management of a target with a local presence in Romania is responsible for making an FDI filing. Generally, the direct acquirer in a transaction is a notifying party. In case of mergers or other types of joined transactions, the obligation to file falls on both merging parties and the parties acquiring joint control, or control combined with an effective participation of the management of the target.

Filing is submitted to the Romanian Competition Council to conduct a preliminary review for completeness, for the attention of the FDI Screening Commission, which is in charge of the substantive review.

Types of deals reviewed

Several types of deals are subject to filing, if the other requirements, including the sensitive sector, are also met. These include: acquisitions of control, within the meaning of the EU Merger Regulation, over a target with local presence in Romania; minority shareholdings triggering an effective participation of the management of a target with local presence in Romania, through rights to appoint board members or other executives who may have access to commercially sensitive information of the target (or active minority shareholdings); internal restructurings, consisting of the insertion of a non-EU entity anywhere in the ownership chain of a target with a local presence in Romania, without any change of control; and new or greenfield investments, consisting of capacity expansion, production diversification or entering a new line of business by an established investor.

Portfolio investments and purely passive minority shareholdings not triggering appointment rights are exempted.

Transactions in the following sectors are reviewable from a national security perspective: security of citizens and communities; border security; energy security; transport security; supply systems for the security of vital resources; critical infrastructure security; security of information and communication systems; security of financial, tax, banking and insurance activities; production and distribution of weapons, ammunition, explosives and toxic substances; industrial security; protection against disasters; protection of agriculture and the environment; and protection of the privatization of state-owned companies or of their management teams.

Special transparency rules are applicable in the media and the telecommunications sector.

Scope of the review

The FDI review is aimed at assessing any potential impact of the proposed transaction on national security, public order and projects of European interest. However, the exact scope of the review and the parameters under which the assessment is conducted largely remain blurred, as there is no explicit legal threshold for prohibiting a deal or an investment under the FDI regime.

The silver lining for investors is that only five deals have been prohibited, or investments otherwise discouraged, from the entry into force of the regime in 2022 to-date. Prohibition decisions and conditional clearances have not been published, relying on state secrecy rules that allow full redaction of sensitive documents from a national security perspective.

In its practice to-date, the FDI Screening Commission has claimed broad jurisdiction particularly under the security of citizens and communities' sectors and, until secondary legislation is adopted, will very likely continue doing so.

Clearance decisions are generally published, in a redacted form, however they still serve as a useful tool to clarify the jurisdictional test for particular transaction structures, especially internal restructurings.

Review process timeline

The statutory review timeline for a non-problematic deal is 135 days. In practice, the end-to-end process from filing to clearance takes from two months for EU or Romanian investors, to three months for non-EU investors.

Requests for information theoretically stop the clock, although in practice the average timeline of the end-to-end process does not seem too much affected by one or two requests received throughout the process.

The EU Cooperation Mechanism is generally initiated for non-EU investments. However, the clock is not stopped, and the national review is performed in parallel with any input received through the EU mechanism.

If the FDI Screening Commission is of the view that a deal or an investment is likely to pose national security risks, then they will initiate a phase 2 or an in-depth review, by referring the case to the National Supreme Defense Council (CSAT) for a binding opinion. Under statutory rules, CSAT has 90 days to issue a binding opinion, either to clear the deal based on the results of the in-depth review, to impose conditions or prohibit it altogether. In practice, this timeline can be, and is generally, extended. If CSAT's opinion is to impose conditions or prohibit the deal, the conditional clearance or the prohibition will be adopted under a decision of the Romanian government.

How foreign investors can protect themselves

Risks for gun jumping or failing to notify in Romania are rather significant: fines up to 10 percent of the investor's worldwide turnover and the deal being null and void—with retroactive effect, which will affect ownership over shares or the investment. Against this backdrop, a proactive compliance and careful assessment of transactions with a nexus to Romania should be considered.

If a Romanian FDI filing is ticked, investors should seek adequate contractual protection under the negotiated transaction documents, including a long stop date to secure clearance and specific language on indemnities or conditional clearance.

Conducting a risk assessment before filing, by factoring in past investigations or in-depth reviews regarding the investor, a group company or the target, plus potential ties to sanctioned countries and entities and source of funding, is also crucial to anticipate potential concerns of the Romanian authorities and if the deal is a potential candidate for a phase 2 process. Generally, only very few deals have been subject to phase 2 proceedings to-date, and only five out of a few hundred notified deals were prohibited or otherwise discouraged and pulled out of by investors.

The filing should be as complete and thorough as possible, to preempt potential requests for additional data and information.

Once the filing is submitted, cooperating and keeping an open communication line with authorities can help address potential issues or unclear matters proactively.

Lastly, a potential negative outcome can be challenged before courts of competent jurisdiction.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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