What types of collateral are available?
The collateral package for a Romanian project is relatively similar to global project finance practice and includes security on the assets and rights of the project company as well as its shares. Specific pledges on accounts are possible and typically used as a means of securing the project revenue flow. Contractual rights, which are often some of the most important assets of a project company, can also be pledged specifically, or, alternatively, contracts can be assigned for the pur- poses of security. The asset security package typically will include a pledge on the universality of moveable assets, which has the effect of a pledge on the entire business of the company with the exception of real estate properties (which are subject to separate mortgage agreements). The security package will also typically cover future rights and assets – as a straightforward pledge in the case of everything that is not real estate and in the form of slightly more convoluted structures for real estate, where mortgages over future assets are not allowed. Corporate guarantees are also available as a means to supplement the security arrangements.
There are, however, limits as to what can be included in the security package and especially as to what assets can be enforced against. Thus, concession agreements cannot be assigned and therefore they cannot be enforced against. Similarly, a large number of licences and authorisations cannot be assigned other than with the consent of the granting authority. In some cases, the change in control over the
Exceptionally, for certain moveable assets perfection formalities are different, requiring the transfer or endorsement of the title instrument, in case of moveable security created over certain types of assets such as monies, treasury certificates or registration in special registries, in case of security created over ships and aircraft or over securities.
For real estate assets security is taken through mortgage agreements entered into under authentic form and perfection requires registration with the Land Book. Registration usually takes a few business days to complete, is valid for a period of 15 years and may be renewed.
The execution and registration of mortgages is subject to both notary and registration fees, which depend on the value of the secured amount and, for larger transactions can be approximated to cumulatively reach 0.2 per cent of the secured amount.
Priority is typically given by the time of registration (with the Electronic Archive, the Land Book or other applicable registries) or, for pledges over future rights and moveable assets, from the time these are created or acquired.
Security agent structures are commonly used, typically on the basis of parallel debt structures. Security trustees are generally not used as the concept of ‘trust’ is not recognised under Romanian law. The security agent registers the security in its own name and the separation between its assets and the assets recovered as agent, although contractually built in, has not been tested in practice.
project company is also subject to approval by a regulatory authority.
Public assets (owned by the Romanian state or various public authorities) cannot be transferred or charged in any way. All these restrictions are more or less sector-specific and therefore the security package will vary significantly depending on the nature of the project.
2 Perfection and priority
How is a security interest in each type of collateral perfected and how is its priority established? Are any fees, taxes or other charges payable to perfect a security interest and, if so, are there lawful techniques to minimise them? May a corporate entity, in the capacity of agent or trustee, hold collateral on behalf of the project lenders as the secured party?
Security interests over moveable assets and assignments of receivables are created through simple written agreements and perfected through registration with the Electronic Archive for Moveable Security (the Electronic Archive). The registration with the Electronic Archive takes approximately one day to complete, is valid for five years and may be renewed. The registration of the moveable security is subject to a fixed fee of approximately E30, irrespective of the secured amount.
In addition to the Electronic Archive, security over intellectual property rights should also be registered with the Romanian Trade- mark and Patent Office and security over shares must be registered with the shareholders’ register of the respective company.
3 Existing liens
How can a creditor assure itself as to the absence of liens with priority to the creditor’s lien?
For collaterals that require registration for perfection, a search of the relevant registries or the Land Book, as the case may be, should be conducted. Where, exceptionally, charges are not perfected by registration, they are perfected by the transfer or endorsement of a title and this is also easy to discern for a creditor seeking to take security on the same asset.
4 Enforcement of collateral
Outside the context of a bankruptcy proceeding, what steps should a project lender take to enforce its rights as a secured party over the collateral?
Under Romanian law, the foreclosure procedures differ on the basis of the type of secured asset being enforced against and the procedure chosen by the creditor.
Foreclosure can be done either by the project lender (for move- able assets and provided the debtor is not resisting enforcement) or by enforcement officers. The ability to enforce depends of the existence of an enforceable title for a due obligation in sum certain. Both mortgages and moveable security agreements are enforceable titles. When creditor enforcement is not possible, a court will, at the enforcement officer’s request, swiftly grant the ability to enforce if the conditions are met.
For moveable assets, if the appropriate self-help clause has been inserted in the security agreement, the creditor can take possession of the secured asset. If the creditor cannot do that on its own, it can obtain the support of enforcement officers. Before selling the secured asset, the creditor must send a notification to the other secured credi- tors and to the debtor informing them of the intended sale. The debtor is entitled to oppose the sale. The sale of the secured asset will be made by the method agreed in the security agreement, or, if no specific method has been agreed, in a commercially reasonable manner given the characteristic of the asset and to ensure that the highest price is obtained. The creditor can acquire the asset directly if expressly agreed in the security agreement. Absent such clause, the creditor must first offer third parties the possibility to participate in the sale.
For real estate assets and for moveable assets if the creditor so chooses, a different procedure is applicable. In this procedure enforce- ment directly by the creditor is not possible. The enforcement officer must first formally ask the debtor to pay the due amounts within a certain period from the date of the notice. In the case of real estate assets, after receiving the enforcement officer’s notice, the debtor has the right to ask the court to approve the payment of the entire due amount, within a six-month period, from revenues generated by the mortgaged asset or other revenues available to the debtor. If the debtor has not paid the debt within the 15 days following the formal notice and has not obtained court approval for phased re-payment, the enforcement procedure will continue.
The enforcement officer determines the value of the mortgaged property by itself or by recourse to a third-party expert. After determining the value, the enforcement officer will publish a sale announcement, setting a term for the sale. The sale is made through public auction and the procedures can be repeated if upon the first attempt a certain percentage of the price is not offered by any of the bidders. The creditor can also bid, but it cannot acquire the asset for less than 75 per cent of the value determined by the enforcement officer or third party expert.
Generally enforcement sales are made in local currency, espe- cially given the fact that both buyers and sellers are typically local. A sale by the creditor could be made in foreign currency if the buyer was foreign and if it was commercially reasonable to sell in foreign currency.
5 Bankruptcy proceeding
How does a bankruptcy proceeding in respect of the project company affect the ability of a project lender to enforce its rights as a secured party over the collateral? Are there any preference periods, clawback rights or other preferential creditors’ rights (eg, tax debts, employees’ claims) with respect to the collateral? What entities are excluded from
There are no differences as to the treatment of creditors on grounds of nationality.
6 Foreign exchange
What are the restrictions, controls, fees, taxes or other charges on foreign currency exchange?
Generally there are no exchange controls or restrictions or taxes imposed on foreign currency exchange.
In exceptional circumstances seriously affecting the currency market, the National Bank of Romania may take safeguard measures with respect to certain foreign capital operations such as short-term loans or credits, current account or deposit operations and physical import or export of financial assets. The safeguard measures could consist in additional notification obligations or stricter monitoring, but also in establishing thresholds or other limits on certain types of transactions.
What are the restrictions, controls, fees and taxes on remittances of investment returns or loan payments to parties in other jurisdictions?
There are no restrictions or controls on remittances of investment returns or loan payments to parties in other jurisdictions. Payments of interests, dividends and royalties may be subject to withholding tax to the extent a favourable double taxation treaty does not grant an exemption. The vast majority of project finance is conducted through the use of fiscally advantageous structures that eliminate or reduce withholding tax by recourse to special purpose vehicles established in relevant jurisdictions.
Must project companies repatriate foreign earnings? If so, must they be converted to local currency and what further restrictions exist over their use?
Romanian companies may (but need not) repatriate foreign earn- ings. In principle, no restrictions apply to the use of such earnings, except that, as a rule, payments between residents must be made in Romanian currency.
9 offshore and foreign currency accounts
May project companies establish and maintain foreign currency accounts in other jurisdictions and locally?
Subject to political sanctions and anti-terrorism and money-launder- ing restrictions, project companies are allowed to open and maintain foreign currency accounts in Romania and in other jurisdictions.
bankruptcy proceedings and what legislation applies to them? What processes other than court proceedings are available to seize the assets of the project company in an enforcement?
Generally legal entities relevant to project finance transactions would be subject to insolvency. Exemptions include entities which lack legal personality (such as funds and foundations) or entities governed by public law (at least in part) such as regulators and national com- panies (although local public entities can be subject to insolvency proceedings).
Insolvency is a court-supervised process and, once insolvency procedures have commenced, seizure of the assets of a business will be subject to judicial control. In certain circumstances secured creditors can obtain court approval to enforce against the secured asset in parallel with the insolvency procedure. The project lender benefit- ing of a charge over a secured asset of a bankrupt project company will have priority over other preferential creditors (employees or tax authorities) with respect to the enforcement of its rights against that asset (within the limits of its receivable).
10 Foreign investment and ownership restrictions
What restrictions, fees and taxes exist on foreign investment in or ownership of a project and related companies? Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies? Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions? Would such activities require registration with any government authority?
Romanian and foreign investors are treated equally as a matter of law and their investments and properties are protected by the Roma- nian Constitution and applicable international conventions.
Certain restrictions apply as regards ownership of land by non- residents. Non-residents who are citizens of an EU member state and non-resident legal entities incorporated in accordance with the legislation of a EU member state may acquire ownership over land for secondary residence or headquarters only after the expiry of a five-year period and in the case of agricultural or forestry land, of a seven-year period following Romania’s accession to the European Union. Non-EU citizens and legal entities may only acquire owner- ship rights over land to the extent mutually recognised under the international treaties to which Romania and their respective states of residence are parties. There are no treaties at this date that would grant such mutual rights.
The restriction is typically bypassed in practice by the use of Romanian project companies, as these can freely own land, regard- less of the nationality of their shareholders.
Furthermore, the restriction is particular to land – buildings may be owned by both Romanian and foreign entities. Mortgage enforce- ment by foreign creditors is only limited by their inability to act as buyers of land being sold, but they can freely enjoy the proceeds of the enforcement.
13 Foreign insurance
What restrictions, fees and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies? May such policies be payable to foreign secured creditors?
There are no specific restrictions or taxes on insurance policies pro- vided or guaranteed by foreign insurance companies. However, the provision of insurance and reinsurance services is a regulated activity in Romania. Insurance may be provided by authorised local insur- ers, by EEA insurers having a branch in Romania or notified to the Insurance Supervisory Commission (ISC) as providing services on a cross-border basis, or by insurers from non-EEA states based on the authorisation of their branches with the ISC. Cut-through clauses are not regulated as such under Romanian law, but if, properly drafted, their effects can be replicated in Romania as well.
11 Documentation formalities
Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?
Certain agreements such as the land sale-purchase agreements or the mortgage agreements must be concluded in authentic form to be valid, namely they must be signed by the parties in front of a notary public. Furthermore, to be enforceable against third parties, security interests are subject to the perfection steps outlined in question 2.
Concessions over real estate property and leases with a duration exceeding three years should be registered with the Land Book for enforceability against third parties. For the same reason, the provisions of any shareholder agreement should be reflected in the constitutive act of the project company and filed with the Commercial Registry.
In principle, there are no language restrictions, but agreements that need to be authenticated or filed in original with state bodies are usually entered into (also) in Romanian.
Loan agreements granted by non-residents for a period exceeding one year must be notified to the NBR. The notification is made solely for statistical purposes and does not affect the validity or enforce- ability of the loan agreement.
There is no restriction on making the policies payable to foreign secured creditors and this is typically done through the assignment of the benefit of insurance policies.
14 Foreign employee restrictions
What restrictions exist on bringing in foreign workers, technicians or executives to work on a project?
Generally, foreign citizens can work in Romania based on a work authorisation issued by the Romanian Immigration Office. However, EU and EEA citizens and their family members, regardless of nationality, may reside in Romania freely for up to 90 days. EU and EEA citizens and their family members may reside in Romania for longer than 90 days provided they fall into one of the specific categories provided by law (ie, they are conducting ‘independent’ activities (eg, they are self-employed or working on a freelance basis) or ‘dependent’ activities (eg, they have been locally employed by a Romanian com- pany, without being required a work authorisation)). EU and EEA citizens must also register with the Authority for Foreign Citizens within their first 90 days and to apply for certificate of registration with the Authority for Foreign Citizens.
Other foreign citizens can also benefit from exemptions from the requirement to obtain a work authorisation to the extent they fall
12 Government approvals
What government approvals are required for typical project finance transactions? What fees and other charges apply?
Depending on, inter alia, the nature, location, size and sector of the project, various approvals or permits may be required for any given project. Most large-scale projects will require amendments to zoning and land-use regimes, a building permit and environmental approval for construction works as well as an environmental authorisation for the operation phase. In addition, a large number of sector-specific or minor permits will be required, as most projects do not have a fully integrated permitting process, which means each type of permit has to be dealt with separately.
The permits and authorisations are issued by bodies at various local or central levels or, exceptionally, directly by the government. Typically, the fees and charges applicable for the issuance and main- tenance of permits and authorisations are relatively minor when compared to total project costs, although there are exceptions – such as telecommunications or nuclear licences – when the cost of licences can be material.
Lending (on a professional basis) is a regulated activity that can be carried out only by banks or non-banking financial institutions authorised (or passported) in Romania in accordance with the requirements of the applicable legislation. As professional lending is not clearly defined by legislation and the National Bank of Romania is the only entity entitled to decide whether a certain activity may be qualified as such, foreign lenders that are not authorised or pass- ported in Romania should refrain from granting loans in Romania (except occasionally).
under one of the following categories:
• foreign citizens having a permanent residence in Romania;
• foreign citizens who benefit from exemptions under bilateral agreements/conventions concluded between Romania and other states;
• foreign citizens who are the heads of branches, representative offices or subsidiaries of foreign companies in Romania;
• foreign citizens who are family members of Romanian citizens; and
• foreign citizens legally employed by an EU or EEA member state based company and seconded to Romania, provided the indi- viduals have valid work or residency permits in that specific EU or EEA member state, etc.
The work authorisation may be issued for the purpose of either permanent employment or secondments. Secondments are allowed for a maximum period of one year within a period of five consecutive years.
The work authorisation will be required for the purposes of obtaining a long-term visa for employment or a temporary residence permit for working purposes. However, for secondments, a long-term visa must be procured before applying for the work authorisation with the Romanian Immigration Office.
To the extent foreign employees would, through their work in Romania, come in contact with classified information, they will need to be formally cleared for access to this type of information.
15 Equipment import restrictions
What restrictions exist on the importation of project equipment?
Within the European Union, there are no generally applicable restrictions on the importation of project equipment, although such equipment will need to be compliant with European harmonised or Romanian quality and security standards. Equipment used in certain industries may be subject to additional requirements (such as the obligation to notify the Ministry of Communications on the import of certain types of radio equipment).
Custom tariffs are still applicable to imports from non-EU states, depending on the type of equipment and trade conventions or treaties to which Romania is a party. Intra-EU trade is only subject to certain reporting formalities.
16 nationalisation and expropriation
What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected?
Private property is guaranteed under the Romanian Constitution and expropriation is permitted exclusively on grounds of public utility subject to the prior payment of a fair compensation amount.
Expropriation may only be carried out on a non-discriminatory basis and in accordance with the specific legal procedure, which allows the opportunity of judicial control. Special procedures, quicker and less complex (but still in line with the constitutional principles), are provided by the Romanian law in view of development of certain types of public utility projects (eg, mining, national roads or motorways).
17 Fiscal treatment of foreign investment
What tax incentives or other incentives are provided preferentially to foreign investors or creditors? What taxes apply to foreign
investments, loans, mortgages or other security documents, either for the purposes of effectiveness or registration?
Romania promotes the principle of equality of treatment between domestic and foreign investors. Thus, there are no specific incentives for foreign investors, nor are there specific taxes applicable to foreign investments, loans, mortgages or other security documents.
18 Government authorities
What are the relevant government agencies or departments with authority over projects in the typical project sectors? What is the nature and extent of their authority? What is the history of state ownership in these sectors?
The main government authorities competent to regulate specific projects within different sectors are:
• oil, chemical refining and mineral resources: the National Agency for Mineral Resources which administers natural resources, grants and issues exploration and exploitation licences and permits and establishes fees and royalties;
• electricity, heating and gas: the National Energy Regulatory Authority (ANRE) is the main regulatory authority, grants licences and permits, prepares regulated framework agreements; in the heating sector the National Communal Services Author- ity shares these powers with ANRE; moreover, electrical or gas distribution concession agreements are entered into by the Min- istry of Economy and Commerce, while heating concessions are entered into by local authorities; the National Commission for Nuclear Activities is the nuclear regulator and issues licences and supervises nuclear activity;
• water treatment: the Ministry of Environment – Water Department is responsible for the national strategies and policies and administers and exploits the National System of Water
Management with the assistance of the National Administration
of Romanian Waters which is competent to issue permits for the administration of water resources and to endorse other activities performed on or near water;
• transport and ports: the Ministry of Transport is competent to establish the development strategy for transport and infrastructure, approves the fees due for the issuing of authorisations and licences and acts as regulator in these fields assisted by:
• the National Company of Romanian Highways and Roads
– administers and manages the highways and national roads and is responsible with the construction on new public roads;
• Romanian Rail Authority – manages technical and safety standards and licenses and certifies rail personnel and products;
• the Romanian Naval Authority – responsible for surveillance of the navigation in Romanian waters; certifies maritime and inland water ships, offshore drilling units flying the Romanian flag and naval equipment; registers ships under the Romanian flag;
• the National Company Maritime Ports Administration SA Constanta is the port authority for the Black Sea ports; it develops the transport infrastructure and imposes security, safety and environmental port conditions;
• the National Company Administration of the Navigable Canals is responsible for the maintenance, development and modernisation of the naval transport infrastructure, and issues permits and authorisations for naval transport;
• the River Administration of the Lower Danube is responsible for ensuring navigation conditions on the Danube by means of dredging works, surveys, coast and floating signalisation, internal and international tugging etc; and
• the Romanian Civil Aeronautical Authority is the regulatory authority for air traffic management and ensures licensing of aeronautical personnel;
• telecommunications: the National Authority for Management and Regulatory of Communications is the main regulatory body and issues licences and permits.
All these sectors have a history of state ownership, but a large part of the relevant state interests have been disposed of via privatisation. Moreover, virtually all new developments are made with private par- ticipation (either in full or in part) and state majority participation is the exception rather than the norm.
19 international arbitration
How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?
Romania has ratified various international conventions on arbi- tration such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards from 1958, the Geneva European convention on international commercial arbitration from 1961 and the ICSID Convention on the settlement of investment disputes between states and nationals of other states from 1965.
Romanian courts will recognise a foreign arbitral award, provided that:
• the court rendering such arbitral award had jurisdiction over the judgment debtor, as recognised by the courts of Romania;
• there exists reciprocity regarding the effects of foreign judgments between Romania and the state of the foreign jurisdiction which rendered the arbitral award whose enforcement is sought (in the absence of evidence to the contrary, such reciprocity is presumed);
• such foreign arbitral award was not obtained by fraud or in a manner inconsistent with or contrary to public order and the enforcement thereof would not be inconsistent with or contrary to public order;
• no substantially similar action or proceeding involving the same parties was commenced before a court of competent jurisdiction in Romania before the commencement of the action or proceeding before the foreign jurisdiction which rendered the foreign arbitral award and such action or proceeding in Romania remains pending or has resulted in the subject matter of the foreign judgment being res judicata in Romania; and
• the enforcement of such foreign judgment does not constitute,
directly or indirectly, the enforcement of foreign revenue or criminal laws.
All disputes regarding patrimonial rights may be submitted by the parties to arbitration, with the exception of those regarding rights that may not be subject to settlement (ie, rights that the parties cannot dispose of). No disputes are automatically subject to arbitration.
20 applicable law
Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?
The typical law of the project agreements depends on the type of agreement (eg, concession agreements are governed by Romanian law) and especially on whether or not certain bodies of the Romanian state are parties – in which case Romanian law will almost always be selected. Financing agreements are typically entered into under the law chosen by the lender, with English law being the almost-universal choice. Security documents referring to assets located in Romania are entered under Romanian law.
Regardless of the choice of law, many issues will remain in principle governed by Romanian law. These include tax, enforcement, labour, bankruptcy, all matters which are governed by administrative or regulatory provisions, corporate law applicable to the project company (if Romanian) and other matters which are regulated specifically under Romanian law.
21 Jurisdiction and waiver of immunity
Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?
A Romanian private entity may subject itself to the jurisdiction of foreign courts for commercial matters. Sovereign immunity only applies to the Romanian state and its bodies and waivers are generally deemed valid for commercial transactions.
22 Title to natural resources
Who has title to natural resources? What rights may private parties acquire to these resources and what obligations does the holder have? May foreign parties acquire such rights?
Under the Romanian Constitution subsoil riches of any nature (including oil, gas other mineral resources), the air space, waters with hydropower potential, and those which can be used for the public interest, beaches, territorial waters, natural resources of the economic zone and the continental shelf, as well as other goods which, by law or by their nature, are of public use or interest are public property. They belong to the state, counties, cities or communes, but are some- times administered by other state bodies.
Public property can be leased or granted into concession, on the basis of public competitive processes. Generally, a concession or licence to exploit natural resources will allow the holder to extract and sell such resources, subject to compliance with legal obligations and the payment of a royalty or licence fee. Mining operations
require a Romanian subsidiary and oil and gas exploitation require either a branch or a subsidiary to be established in Romania.
Other assets can be freely owned by any person, regardless of nationality, subject to those set out in question 16.
23 Royalties on the extraction of natural resources
What royalties and taxes are payable on the extraction of natural resources, and are they revenue- or profit-based?
Royalties are revenue based and do not vary according to the nation- ality of the licence holder.
For oil and natural gas, the following royalties are applicable:
• between 3.5 per cent and 13.5 per cent of the value of the gross extracted production;
• 10 per cent of the value of the gross income obtained from oil transport and transit operations; and
• 3 per cent of the value of the gross income obtained from under- ground storage of natural gas.
For mining, the following amounts are due:
• a fixed annual fee per square kilometre of approximately E60 for prospecting, E240 for exploration and E6,000 for exploitation; and
• a mining royalty which varies depending on the type of resource being mined; it is 4 per cent for most resources, but in some cases it is between E0.35 and E3 per mining production unit.
24 Export of natural resources
What restrictions, fees or taxes exist on the export of natural resources?
One of the main rights of the beneficiaries of concession agreements regarding mineral resources is to dispose of the agreed quantity of natural resources, including through export. Except for the specific provisions of those agreements there are no supplementary restrictions regulated by Romanian legislation.
25 Environmental, health and safety laws
What laws or regulations apply to typical project sectors? What regulatory bodies administer those laws?
Romanian legislation has closely implemented the EU directives in the field of environment. The main relevant enactments are:
• Government Emergency Ordinance No. 195/2005 regarding environmental protection;
• Government Emergency Ordinance No. 68/2007 regarding environmental liability and the prevention and remedy of environmental damages;
• Government Emergency Ordinance No. 152/2005 regarding prevention and integrated control of pollution;
• Government Emergency Ordinance No. 57/2007 regarding the regime of natural protected areas, the conservation of natural habitats and wild flora and fauna;
• Law No. 107/1996 regarding water;
• Ministry of Waters and Environmental Protection Order No. 135/2010 for the approval of the methodology of application of the environmental impact assessment for public and private projects;
• Order No. 19/2010 regarding the approval of the methodological guide for the adequate evaluation of the potential effects of plans and programmes over the natural protected areas of community interest; and
• Government Decision No. 445/2009 regarding the environmental impact assessment for certain public and private projects.
The main bodies in charge of the issuance of the environmental regulatory acts and control of environmental laws and regulations are the
Ministry of Environment and Forests, the national and territorial environmental protection agencies and the Environmental Guard.
Health and safety legislation is also harmonised with EU directives. The general legal framework regarding health and safety in Romania is set out under the Romanian Labour Code, Law No. 319/2006 on work safety and health at work and their methodological norms. In addition to the general health and safety norms there are also specific minimum safety and health requirements approved for certain activities.
There are several authorities with competencies in health and safety matters depending on the type of project, for example the Territorial Labour Inspectorate, the National House of Pensions and other Social Rights, etc.
26 Project companies
What are the principal business structures of project companies? What are the principal sources of financing available to project companies?
The project companies are usually set up as limited liability companies or joint-stock companies, depending on the type of project, the number of shareholders and the intended financing structure (limited liability companies cannot issue bonds, nor can they list shares). Recent changes to Romanian company law made the transfer of shares in limited liability companies from current shareholders to third parties more complicated. Thus, the shareholders’ resolution approving the transfer must be published in the Official Gazette and third party creditors of the company have the right to oppose the transfer. Although it appears that the opposition cannot prevent the transfer, the creditors can claim indemnification for any damages resulting from the transfer. The transfer becomes effective only after
the expiry of the term in which third-party creditors can raise the objections or after their objection is rejected, as the case may be. Therefore, a joint stock company (in which the shares are trans- ferred as a rule upon registration in the shareholders’ registry) may have become more attractive as a business structure than a limited liability company.
In practice, the principal sources of financing available to project companies (other than shareholder finance) are loans granted by Romanian and foreign financial institutions, usually in a syndicate for larger projects. The domestic capital market has not so far proved to be a viable alternative for financing and there have been no inter- national capital markets project financings either, although the legal basis for these types of financings is generally in place.
Has PPP-enabling legislation been enacted and, if so, at what level of government and is the legislation industry-specific?
A legal framework applicable to PPPs has been in force for a few years (ie, 2002 to 2006). Until recently, PPPs (although not too many) were implemented on the basis of concession structures or based on public procurement legislation. The parliament has recently approved a draft law on PPPs. The law intended to cover institutionalised PPPs generally, without specific provisions for various industries.
The draft law has not entered into force yet, as the president re-sent it to the parliament for further debates and revisions, based on concerns related to its unclear scope, correlation with EU and Romanian legislation currently in force, and potential lack of transparency and non-discrimination in the procedure for selecting the private partner. If and when a revised form of the law is approved and enters into force, it will have to be seen whether it can boost PPP-based projects in Romania.
What, if any, are the practical and legal limitations on PPP transactions?
What have been the most significant PPP transactions completed to date in your jurisdiction?
Although several relatively high-profile attempts have been made to develop PPP projects (prior to the repealing of the relevant law), these have been generally unsuccessful.