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 agree- ments). The security package will also typically cover future rights and assets as a straightforward pledge: as of 1 October 2011, under the provisions of the new Romanian Civil Code and related legisla- tion issued for its application (together, the New Civil Code), this also includes future constructions whereas, previously, mortgages over future assets were not allowed. Corporate guarantees are also avail- able as a means to supplement the security arrangements.
There are, however, limits as to what can be included in the secu- rity 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 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.
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.
Exceptionally, for certain moveable assets perfection formalities are different, requiring the transfer or endorsement of the title instru- ment, in the case of moveable security created over certain types of assets such as monies, treasury certificates or registration in special registries, in the case of security created over ships and aircraft or over securities.
For real estate assets security is taken through mortgage agree- ments entered into under authentic form and perfection requires registration with the Land Book. In the case of a mortgage over a uni- versality of immovable assets, the mortgage must be registered with the Land Book Office of each immovable asset part of the universality. Registration usually takes a few business days to complete.
Prior to the entry into force of the New Civil Code, the purpose of the registration of the mortgage with the Land Book was to ensure the opposability against third parties. Following the entry into force of the New Civil Code, the purpose of the Land Book registration changes so that the registration is needed for validity purposes. This change applies, however, only to the extent the cadastral registration works have been finalised for each administrative unit (eg, city or village). Until finalisation of cadastral works, the Land Book registration continues to be performed for opposability purposes only. Finalisation of cadastral registration works needs to be checked on a case-by-case basis by creditors and consequently the registration may have opposability or a validity effect depending on finalisation of such works at the location of the mortgaged asset at the time of creation of the mortgage.
- 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 receiva- bles are created through simple written agreements and perfected through registration with the Electronic Archive for Moveable Secu- rity (the Electronic Archive), with the exception of security inter- ests over future assets or securing future obligations with respect to which perfection occurs (subject always to registration) only when the pledgor has acquired the respective asset or respectively, the future obligation is born and thus, becomes actual. This additional perfection requirement for future assets or future obligations does not affect the ranking of the security interest, which is gained starting with the moment of registration with the Electronic Archive (even if, at that stage, the asset has not yet been acquired by the pledgor). A fully perfected security interest is opposable to the other creditors of the pledgor and to the persons that subsequently acquire rights over the secured asset. A perfected security interest is always preferred (it ranks higher) to a security interest that has not been perfected.
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), subject to perfection formalities also being fulfilled at the time when priority is being assessed (eg, for pledges over future rights and moveable assets, perfection occurs at the time these are created or acquired).
Security agent structures are commonly used, with the market moving from parallel debt structures towards ‘straight’ security agent models due to a change in legislation under the New Civil Code, which regulates such structures for the first time.
Under the new legal provisions, the security agent structure allows simultaneous registration, with the same rank, of several beneficiaries of a movable security interest. The security agent is entitled to exercise all rights of the secured creditors who have appointed it and to ensure by itself the perfection of the security interest and the continued validity and amendment of the registration of the security interest, being, at the same time liable towards the beneficiaries of the movable secured interest for its actions.
In another alternative of this concept, the security interest can be created directly in favour of a party designated by the secured creditors and such a party will be entitled to exercise the rights of the secured creditors and will be bound by their obligations. In this version, the security agent is even more than a regular agent, it is actually the holder of the security interest.
The new provisions offer significant advantages over the parallel debt structure that was previously used to deal with the issue of multiple secured creditors sharing one security interest. However, this structure is expressly regulated only with respect to security interests over movable assets (and not in relation to mortgages over immovable assets). For immovable assets, security can be registered for all creditors directly or in the name of the security agent, via parallel debt structure.
Security trustees are generally not used as the implementation of trust-like structures under the New Civil Code is highly formalistic and cumbersome.
- 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.
- 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 moveable 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 and of a determined, liquid and out- standing receivable held by the project lender against the pledgor as resulting from such title. Both immovable and movable mortgages are enforceable titles in the case they are duly concluded in accordance with the law. 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.
The foreclosure means available to a secured creditor in relation to tangible movable assets under the New Civil Code are:
- takeover of the secured asset on account of its receivables
– a creditor may choose to take over the asset on account of its receivables provided that:
- the consent of the pledgor for this purpose is obtained at a date that must be after the occurrence of the event of default; and
- certain third parties are notified in relation to the proposed takeover (eg, guarantors, joint debtors, other secured creditors of the pledgor, etc) and they do not object to such an enforcement procedure. The secured creditor must also register an enforcement notice with the Electronic Archive. The consent of the debtor was not needed under the previous legislation and therefore, the newly enacted provisions complicate the enforcement for secured creditors;
- sale of the secured asset – such a sale must be carried out in a commercially reasonable manner with regards to the method, time, place and any other terms and conditions of the sale. Additionally, specific notification and registration formalities must be observed under this enforcement method; and
- taking possession of the asset for management purposes – this enforcement method is available only for creditors secured with a security interest over the assets of a The assets can be taken into possession only temporarily until the secured receivable is satisfied. The person carrying out management activities in respect of the assets may be either the creditor or a person appointed by the creditor or by the court. Specific notification and registration formalities must be observed under this enforcement method as well.
For real estate assets, as well as for moveable assets if the creditor so chooses, a different procedure is applicable. In this procedure enforcement 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 from the formal notice in the case of immovable property, respectively, one day fol- lowing the formal notice in the case of movable property and has not obtained court approval for phased repayment, 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, especially 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.
- 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 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 non-profit entities (such as associations and foundations) or entities governed by public law(at least in part) such as regulators and national companies (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 benefiting of a charge over a secured asset of a bankrupt project company
- 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- laundering restrictions, project companies are allowed to open and maintain foreign currency accounts in Romania and in other jurisdictions.
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).
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. As a rule, the measures can be applied for a period of maximum six months and must be replaced, amended or ceased at the request of the European Commission.
- 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 Romanian Constitution and applicable international conventions.
Certain restrictions apply as regards ownership of land by non- residents. As of 1 January 2012, non-residents who are citizens of an EU member state and non-resident legal entities incorporated in accordance with the legislation of an EU member state may acquire ownership over land for secondary residence or headquarters, how- ever, acquisition of agricultural or forestry land is still subject to restrictions until 1 January 2014. Non-EU citizens and legal entities may only acquire ownership 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.
What are the restrictions, controls, fees and taxes on remittances of investment returns or payments of principal, interest or premiums on loans or bonds 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 (including on bonds), dividends and royalties from Romania to non residents may be subject to withholding tax to the
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 enforcement 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.
extent a favourable double taxation treaty does not grant an exemption and other exceptions are not applicable (eg, with respect to certain instruments traded on foreign capital markets). The general withholding tax rate is currently 16 per cent.
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.
- 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?
The agreements regarding rights in rem over immovable property (such as the land sale-purchase agreements, mortgage agreements, etc) must be concluded in authentic form to be valid, namely they must be signed by the parties in front of a notary public. Further-
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 earnings. In principle, no restrictions apply to the use of such earnings, collections, transfers and any other such operation resulting from sale of goods or performance of services, irrespective of their legal regime, except that, as a rule, payments between residents must be made in Romanian currency, with certain exceptions strictly provided by law.
more, to be enforceable against third parties, security interests are subject to the perfection steps outlined in question 2. As mentioned under question 2, after the finalisation of cadastral works for each administrative unit, the effects of Land Book registration will change and registration will be a condition for the validity of the relevant in rem rights.
Leases over real estate property should be registered with the Land Book for enforceability against third parties, both under the current legal regime and under the new rules, which will become applicable after the finalisation of the cadastral works for the relevant administrative unit.
For the same reason of enforceability against third parties, the main 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 additionally in Romanian.
Loan agreements granted by non-residents for a period exceed- ing one year must be notified to the National Bank of Romania. The notification is made solely for statistical purposes and does not affect the validity or enforceability of the loan agreement.
- 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 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 maintenance 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. The value of the fee payable for the issuance of the building permit usually depends on the value of the construction.
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).
As Romania joined the European Union in January 2007, the immigration regulations are more favourable for EU citizens than they are for people coming from non-EU countries. EU, EEA and Swiss Confederation citizens and their family members, regardless of nationality, may reside in Romania for a period of three (consecutive) months without any formality being required. Similarly, EU, EEA and Swiss Confederation citizens who enter Romania seeking a job may reside in Romania for a period of up to six months, without any formality being required. Furthermore, EU citizens are not required to obtain a work authorisation and permit if they stay and work in Romania. Nevertheless, they are not exempt from registration with the Immigration Office.
EU, EEA and Swiss Confederation citizens and their family mem- bers may reside in Romania for longer than three months (consecutive) provided they fall into one of the specific categories provided by law (eg, they carry out dependent or independent activities or they have sufficient means of living for themselves and their family members and health insurance). In these cases, the EU, EEA and Swiss Confederation citizens must also register with the Romanian Office for Immigration prior to the expiry of the three months. The Romanian Office for Immigration will issue a registration certificate for EU, EEA and Swiss Confederation citizens or a residency card for their family members, if applicable, both having a renewable expiry period of five years.
The EU, EEA and Swiss Confederation citizens and their family members having, or not having, EU, EEA or Swiss Confederation citizenship who have a continued and legal residence in Romania for at least five years gain the right of permanent residence. This right can be gained after shorter periods of time in certain specific cases set out by law.
For the case of non EU, EEA or Swiss Confederation citizens (foreign citizens), if an employment agreement is about to be signed between a foreign citizen and a Romanian company, the foreigner who will work in Romania must obtain a work permit prior to start- ing to work in Romania.
Maximum secondment period is of maximum one year in a five-year period and a secondment work permit needs to be obtained
- 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 provided 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 insurers, 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.
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.
- 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, but they will also be required to accomplish a number of other registrations or documentation applications. Immigration compliancy processes for Romania are complex and often time consuming and they depend especially on the purpose of the stay in Romania (eg, business, work, study, commercial activities, etc).
from the relevant labour authorities in Romania. Before obtaining the secondment work permit, a secondment visa to Romania must be obtained.
Foreign citizens can also benefit from exemptions from the requirement to obtain a work authorisation to the extent they fall under one of the following categories:
- foreign citizens having a permanent residence in Romania;
- foreign citizens who benefit from exemptions under bilateral agreements and conventions concluded between Romania and other states;
- foreign citizens who were granted a form of protection in Romania;
- foreign citizens who perform temporary teaching, scientific or other temporary specific activities in specialised institutions per- manently or temporarily accredited in Romania, based on bilat- eral agreements or as holder of a right of residence to conduct scientific research and high staff qualified based on the order of the minister of education and research and foreign citizens who perform arts in cultural institutions in Romania, based on the order of the minister of culture;
- foreign citizens who are to perform temporary activities in Roma- nia requested by ministries or other central or local administration bodies or independent administrative authorities;
- 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;
- foreign citizens legally employed by an EU or EEA member state or by the Swiss Confederation-based company and seconded to Romania, provided the individuals have valid work or residency permits in that specific EU or EEA member state or in the Swiss Confederation, etc;
- asylum requestors, after expiry of a one-year period from the date of submitting the asylum application during the procedure of determination of a protection manner on the Romanian terri- tory; and
- tolerated foreign citizens, during the period their stay is tolerated on the Romanian
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.
- 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 National Regulatory Authority for Com- munications and Information Technology 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.
- 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).
- 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.
- 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 and grants licences and permits and prepares regulated framework agree- In the heating sector, the National Communal Services Authority shares these powers with ANRE. Moreover, electrical or gas distribution concession agreements are entered into by the Ministry 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 and Forests – 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 and Infrastructure is competent to establish the development strategy for trans- port 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;
- the 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; and
- telecommunications: the National Authority for Management and Regulatory of Communications is the main regulatory body and issues licences and
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 participation (either in full or in part) and state majority participation is the exception rather than the norm.
- 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 arbitration such as the New York Convention on the Recognition and Enforce- ment 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 entity 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 judg- ments between Romania and the state of the foreign jurisdiction that 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 proceed- ing before the foreign jurisdiction that 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
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 (namely, rights that the par- ties cannot dispose of). No disputes are automatically subject to arbitration.
- 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 that are governed by administrative or regulatory provisions, corporate law applicable to the project company (if Romanian) and other matters that are regulated specifically under Romanian law.
- 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 gener- ally deemed valid for commercial transactions.
- 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 resources of any nature (including oil, gas and other mineral resources), the airspace, waters with hydropower potential, and those that 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.
- 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 nationality of the licence holder.
For oil and natural gas, the following royalties are applicable:
- between 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
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 E35 and E3 per mining production unit.
Since the end of 2011 the government has made several announcements of its intention to increase the level of royalties both in the mining sector and the oil and natural gas sector. Publication of the new rates is expected to take place in mid-2012, however, the date for effective enforcement of the new rates is expected to take place at a later time, following legislative enactment. With respect to oil and natural gas sector, government officials have declared that the increases will be applicable for 2015 to 2024, however, as of 2013 the taxation of ‘exceptional revenues’ of companies in this sector is being considered.
- 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 the relevant concession agreements there are no supplementary restrictions regulated by Romanian legislation.
Territorial Labour Inspectorate, the National House of Pensions and
Other Social Rights, etc.
- 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
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 195/2005 regarding environmental protection;
- Government Emergency Ordinance 68/2007 regarding envi- ronmental liability and the prevention and remedy of environ- mental damages;
- Government Emergency Ordinance 152/2005 regarding prevention and integrated control of pollution;
- Government Emergency Ordinance 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 135/2010 for the approval of the methodology of application of the environmental impact assessment for public and private projects;
- Order 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 com- munity interest; and
- Government Decision 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
number of shareholders and the intended financing structure (limited liability companies cannot issue bonds, nor can they list shares). In June 2010, the Company Law was amended and the transfer of shares in limited liability companies from current shareholders to third par- ties was made 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 ultimately 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 transferred as a rule upon registration in the shareholders’ registry) may have become more attractive as 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.
- Public-private partnership legislation
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 (namely, 2002 to 2006). Until 2010, PPPs (although not too many) were implemented on the basis of concession structures or based on public procurement legislation.
At the end of 2010, the Parliament approved a new law on PPPs, which was subsequently amended in April and October 2011. The new PPP law covers institutionalised PPPs in a general man- ner, without industry-specific provisions. However, following recent amendments the law sets forth conditions required for activities in the fields of gas, thermal and electric energy or potable water to fall under its provisions. Further, in its current form the law also covers PPP projects concerning sectorial agreements (namely, exploitation of public transportation networks, postal, courier and logistics services), services in relation to e-mail and services provided entirely through electronic means, services in relation to the exploitation of certain resources (namely, petrol, gas, coal and other solid fuels) as well as exploitation of ports, airports and other transport terminals.
Certain types of projects and operations are specifically excluded from the scope of PPP legislation, for example, PPP agreements entered into with the purpose of buying or leasing land or existing constructions or other immovable assets, PPP agreements concerning research and development services other than those strictly benefiting the public partner and aimed for its own use, provided that the costs are entirely covered by such partner, PPP agreements for works, supply and service contracts by contracting authorities or entities in the field of defence and security, PPP agreements resulting in the public partners’ ability to provide or exploit public telecommunication networks or supply telecommunication services to the general public and PPP agreements entered into on the basis of certain international treaties or following the application of a procedure typical for an international organisation.
- PPP – limitations
What, if any, are the practical and legal limitations on PPP transactions?
The novelty of the PPP legislation and the various unclear aspects related to its application (including its relatively unclear correlation
with other legislation, eg, on privatisation, public procurement and concession) are often seen as obstacles to the implementation of PPP transactions in Romania. In addition, the new legal framework fails to provide any solutions to common issues for PPP projects, as it does not set up any mechanism to facilitate the financing of these projects.
In addition, PPPs (especially in certain industries and sectors – eg, infrastructure and energy) require a significant permitting effort and the involvement of several regulatory and public authorities. Due to the lack of centralisation in this respect, the unclear legislation and the inconsistent practice, the permitting process is often unclear, convoluted and time-consuming.
- PPP – transactions
What have been the most significant PPP transactions completed to date in your jurisdiction?
No major projects have been completed of late based on PPP structures. The new PPP legislation was passed with the main purpose of supporting such projects, although it does not provide all the relevant instruments in this respect. In April 2011 the government published a list containing 18 projects it intends to develop based on PPP structures, in various sectors, such as infrastructure, energy, environment and health care. No significant public steps were taken by mid-2012 in order to initiate these projects, although they seemed to continue to be listed on the government’s agenda among priority projects.