Authors: Roxana Roșca (senior associate), Sergiu Păun (associate)
The Competition Council has launched for public consultation the draft order containing a series of guidelines on how to calculate the value of the investment, as well as on issues related to the notion of control and the notification process, as provided for in GEO 46/2022.
1. Introduction
- The investment control regime in Romania is still a new area for investors, with a regulatory framework that is still being finalised, raising some questions for investors.
- It is worth mentioning that, although the FDI regime (both at national and EU level) was originally conceived as a tool to control and verify foreign (non-EU) investments in Romania, nowadays the control also covers European investors – including Romanian investors.
- The need to have a regulatory framework that is as clear as possible arises especially considering the significant sanctions that can be applied by the authority in case of non-compliance with the rules on investment control in Romania. In this regard, the implementation of a controlled investment without the prior approval of the authority may lead to (i) fines of up to 10% of the investor’s total worldwide turnover in the financial year preceding the sanction and (ii) nullity of the investment (together with the imposition of any behavioural or structural measures to restore the pre-investment situation).
2. Guidelines
In this context, and in particular with a view to addressing some of the uncertainties surrounding the investment control regime in Romania, the Competition Authority is submitting for public consultation a draft set of guidelines (the “Guidelines”) which focus on:
- the rules for calculating the threshold generating the notification obligation;
- certain aspects concerning the documentation underlying the investment and when the notification obligation is triggered.
- the notion of control in the definition of direct investment.
a. Clarifications on the investment value
As a general rule, when the investment takes the form of a transaction, the Guidelines make it clear that the value of the investment is represented by the transaction price, including a number of specific rules depending on the type of transaction (e.g. acquisition of shares, capital increase, granting of a loan).
In the case of multi-jurisdictional transactions, the value of the investment taking place in Romania is relevant, i.e. the value of the assets/company in Romania. In this case, if the value relating to Romania is not individualised, the estimates of the parties may be taken into account. Otherwise, the total value (of the whole operation) will be taken into account.
In the case of investments taking place in several stages, the investment value will be determined by cumulating the values for each stage. In this context, it may be useful to clarify the scenario where investments do not take place on the basis of the same transaction document or investment plan – i.e. what is the time horizon within which investments related to the same project can be considered as a single investment. For example, in the case of economic concentrations, a time horizon of 2 years is envisaged within which transactions between the same parties can be considered as related.
b. Documentation and timing of notification
The Guidelines seek to clarify the scope of the documents on the basis of which the notification may be submitted for the purpose of obtaining the authority’s approval, specifying that they consist of any “document, preliminary agreement, contract or any other arrangement which demonstrates beyond doubt the intention to carry out the foreign investment”. Although the Guidelines do not expressly provide for this, we consider that this condition may also be satisfied by the submission of a non-binding offer or other unilateral acts issued by the investor (especially in the context of greenfield investments).
As regards the timing of the notification, the Guidelines specify that the application for authorisation will be submitted after the negotiations have been completed and the main aspects of the operation have been determined (e.g. price, financing, parties), but before the investment is implemented.
While we understand the need for the authority to carry out the analysis on the basis of final information, we believe that the investor’s interest in avoiding delays in the transaction process due to investment approval should also be taken into account. To this end, it should be possible to submit the notification as early as possible in the process (as long as it can be reasonably expected that the notification requirements are met), including, for example, during the due diligence analysis,.
c. The notion of control
The Guidelines make it clear that the notion of control is to be interpreted in accordance with the competition rules.
However, given that foreign investments are defined as investments “aiming to establish or to maintain lasting and direct links between the investor and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry out an economic activity in Romania, including investments which enable effective participation in the management or control of a company carrying out an economic activity”, the scope of the regulation is broader than the notion of control.
In this respect, it would be useful for the authority to clarify the notion of “lasting and direct links” or to specify the cases in which the investor is considered to be effectively involved in the management of the undertaking. It could also be clarified (in the Guidelines) that intra-group restructuring operations should not fall within the scope of the investment control analysis in Romania.
3. Conclusions
While the Guidelines provide a better understanding of the legal framework, they fail to remove all uncertainties related to investment control in Romania.
In this context, the scope of the strategic areas defined by the CSAT Decision 73/2012 remains extremely broad, reflecting a different social, technological and political framework than the current one. This approach leads to the need to notify a significantly larger number of investments, including cases that currently do not have the same (or any) impact on the relevant strategic areas (e.g. wind or photovoltaic farm developments). It would also have been an opportunity for the competition authority to clarify this issue, which could have helped to streamline the notification process, reduce the workload and maintain a more effective balance between investment control and market dynamics.
