In a nutshell, non-EU investors acquiring control of an undertaking by making an investment in excess of €2 million in certain sensitive business sectors will be required to secure prior authorization from the newly established Commission for the Examination of Foreign Direct Investments (CEISD).

1. Who is deemed a foreign investor?

• Natural persons, who are not EU citizens, intending to make or having made a foreign direct investment in Romania;
• Legal persons whose registered office is outside the EU, intending to make or having made a foreign direct investment in Romania;
• Legal persons that have their registered office in the EU but are controlled by a natural person, a legal person or any entity without legal personality, residing/based outside the EU, intending to make or having made a foreign direct investment in Romania; and
• Trustees or persons in a similar position of an entity without legal personality, intending to make or having made a foreign direct investment in Romania, if such person or entity is not a citizen of the European Union or does not have its registered office in the EU, or if the entity was incorporated under the laws of a non-EU country.

2. What are foreign direct investments?

• An investment of any kind made by a foreign investor in order to establish or maintain lasting and direct links with the target undertaking or with a separate organizational unit of an undertaking to which such funds are or will be made available, in order to carry out economic activity in Romania, and which enables the foreign investor to exercise control over the management of the undertaking;
• When there is a change in the ownership structure of a foreign legal entity investor, if this change in legal entity makes it possible for control to be exercised, directly or indirectly, by (i) a natural person who is not a citizen of an EU member state; (ii) a legal entity whose registered office is outside the EU; or (iii) another legal entity without legal personality, organized under the laws of a non-EU country.

3. Which investments are subject to the screening procedure and approval by the CEISD?

Apart from the abovementioned foreign direct investments, the new regulations also apply to initial investments—defined as investments made in tangible and intangible assets, within the same perimeter, related to (i) the incorporation of a new undertaking, (ii) the expansion of capacity of an existing undertaking, (iii) the diversification of production of an undertaking into products not previously manufactured, or (iv) a fundamental change in the overall production process of an existing undertaking.

Foreign direct investments and initial investments are subject to the screening procedure if the following conditions have cumulatively been met:

• The investment’s object of activity falls under a sensitive business sector, as identified by the Supreme Council of National Defense (security of citizens and communities, border security, energy security, transport security, supply of vital resources security, critical infrastructure security, security of information and communication systems, security of financial, tax, banking and insurance activities, security of production and circulation of arms, ammunition, explosives, toxic substances, industrial security, protection against disasters, protection of agriculture and the environment and protection of state funded companies or of their management during privatization).
• The investment’s value is in excess of €2 million.

By way of exception, investments not in excess of €2 million may also be subject to examination and approval by the CEISD, if, by their nature or potential effects, they may have an impact on or pose a risk to public security or public order.

4. What is the competent administrative or governmental authority?

The CEISD, a newly formed body under the Romanian Government, without legal personality, is responsible for performing the FDI screening procedure.

The Secretariat of the CEISD will be ensured by a specialized structure within the Romanian Competition Council. This where the notifying party addresses its notification/request for authorization.

he Secretariat of the CEISD is designated as the national contact point responsible for cooperation between EU member states and the European Commission, as provided by the EU FDI Regulation.

However, sanctions for failure to comply with the FDI screening procedure are enforced based on decisions issued by the Romanian Competition Council.

5. Is there a preliminary obligation for the investor?

Yes, any foreign investor wishing to make a foreign direct investment in Romania must submit to the Secretariat of the CEISD a request for authorization of the foreign direct investment.

6. Who is responsible for the mandatory filing?

If the foreign direct investment will take place through a merger of two or more undertakings, each party involved must submit an authorization request for the FDI screening. In all other cases, notification is made by the person or the undertaking(s) acquiring control over one or more undertakings, or control over a part thereof.

7. Can the competent authority review the foreign investment ex officio, i.e. without having received a notice from the investor?

The CEISD can ex officio take notice of a foreign direct investment that might fall within the scope of the FDI regulation, or it may be notified by other authorities in this respect. In such cases, the CEISD may initiate the screening procedure and can propose any of the solutions mentioned below under question no. 9 (authorization/conditional authorization/rejection).

8. Is merger clearance by the Competition Council still required?

Yes, a notification to the Competition Council must be submitted if the foreign direct investment equally constitutes an economic concentration that falls under Competition Law no. 21/1996. In addition a request for authorization must still be submitted to the CEISD. The procedure set forth in Competition Law no. 21/1996 will be finalized in accordance with the solution given by the CEISD following the screening procedure.

Similarly, if a foreign direct investment by a foreign investor results in a change of effective control of an undertaking(s) within the meaning of Competition Law 21/1996 (including operations leading to the creation of joint ventures), and the object of activity falls within the sensitive business sectors mentioned above, the foreign investor must submit an authorization request under the FDI procedure, regardless whether it constitutes an economic concentration within the meaning of competition law.

9. Timeline and solutions of the screening procedure

No later than 60 days from the date the request for authorization is declared complete (with all required information and documents and, where applicable, the opinions issued by Supreme National Defense Council or other authorities), the CEISD will issue a ruling on the investment.

• A CEISD ruling proposing authorization of the investment will be forwarded to the Competition Council which, within 30 days of receipt of the ruling, will issue a decision authorizing the foreign direct investment in accordance with the ruling received.
• If the ruling issued by the CEISD proposes a conditional authorization or a rejection of the investment, it will be sent to the Government in order to issue a Government Decision conditionally authorizing or rejecting the investment.

The decision on the authorization request for the investments will be communicated to the investor, through the CEISD Secretariat, within 45 days of their adoption at the latest.

10. My investment is already pending, do these provisions apply?

Yes, the provisions also apply to pending foreign investments for which an intention to conclude an agreement has been announced or, in the case of a public offer, the parties have announced their intention to make such an offer.

11. My investment was declined by the CEISD, is this decision final?

No, if the solution given by the CEISD is a conditional authorization or rejection of the request for authorization of the foreign investment in Romania, it will be sent to the Government, which will then issue a decision either conditionally authorizing or rejecting the request for authorization of the foreign direct investment.

12. Does the mass-media sector have to undertake special obligations?

Yes. Prior to initiating the screening procedure, the CEISD requires the foreign investor to disclose information, for transparency reasons, about the foreign direct investment if the object of the investment is connected with an undertaking (i) holding an audiovisual license at the national, regional or local level, (ii) publishing a daily periodical that has an average circulation of at least 5,000 copies printed per day in the last calendar year, or (iii) holding a web portal that has a minimum of 10,000 hits per month.

If the CEISD finds no reason for initiating the screening procedure, the foreign direct investment will be considered to not impact security and public order of Romania.

13. What type of sanctions are in place for failing to comply with the FDI screening provisions?

The following activities (if they do not constitute criminal offences) are deemed contraventions:

• Intentionally providing inaccurate, incomplete, or misleading information in the request for authorization of the investment (three-year limitation period);
• Intentionally or negligently implementing a foreign direct investment without obtaining prior approval (five-year limitation period);
• Intentionally or negligently implementing the foreign direct investment by failing to comply with, or by breaching, the commitments undertaken as per the conditional approval (five-year limitation period).

All said, contraventions are sanctioned with an administrative fine, which cannot amount to more than 10 percent of the total global turnover of the financial year preceding the sanction. In cases of newly incorporated undertakings that have not registered any turnover in the financial year preceding the sanction, the administrative fine will range between RON 10 million and RON 50 million.
The provisions on sanctions come into force 30 days after the date of entry into force of the new regulation on FDI screening.