The Romanian Foreign Direct Investment regime is rooted in Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the European Union (the "FDI Regulation").

The FDI Regulation has been implemented into Romanian law by the Government Emergency Ordinance no. 46/2022 ("FDI Ordinance"), with certain amendments introduced by Law no. 164/2023 approving the FDI Ordinance (the "FDI Law").

Absent implementing guidelines and publicly available practice, the broadly drafted FDI regime continues to generate debates/ practical difficulties.

Under the Romanian regime, the Commission for the Examination of Foreign Direct Investments ("CEISD") – comprising representatives of relevant ministries and the president of the Competition Council – is the authority competent to examine the investments falling under the FDI screening framework.

The Romanian Foreign Direct Investment regime provides for a screening mechanism of foreign investments which:

1. fall under one of the sectors laid down by Decision no. 73/2012 of the Supreme Council for National Defense (“CSAT”) (detailed below) and
2. have a value exceeding EUR 2 mil. threshold (although, by way of exception, investments below the EUR 2 million threshold can also be subject to review and authorization if they can impact or entail risks on security or public order).

The FDI Ordinance provides for two types of foreign investments:

1. foreign direct investment – an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign investor and the undertaking concerned or the separate organizational unit of an undertaking, to which the funds are made available or will be made available in order to carry on an economic activity in Romania, and which allows the foreign investor to exercise control over the management of the undertaking.

The foreign direct investment also includes changes in the ownership structure of a foreign investor, should following such change, control be exercised, directly or indirectly by (i) non-EU citizens, (ii) non-EU-based companies or (iii) other non-EU entities without legal personality.

and

2. new investment, defined either as:

• *an investment in tangible and intangible assets located in the same perimeter, linked to the start-up of the activity of a new undertaking (creation of a new site for carrying out the activity for which funding is requested, technologically independent from other existing units), or
• *an expansion of the capacity of an existing undertaking (the increase of production capacity at the existing site due to the existence of an unmet demand)/*a diversification of the production of an undertaking into products not previously manufactured (obtaining products or services not previously produced in the concerned unit)/*a fundamental change in the overall production process of an existing undertaking.

On top of these, the FDI Law brought under the scope of the screening mechanism investments made by EU investors under certain conditions (as detailed below).

The provisions of the FDI Ordinance are not applicable to portfolio investments.

From a procedural standpoint, CEISD may initiate the screening procedure following a notification from the investors under the obligation to notify, a referral from the Romanian Competition Council scrutinizing a merger notification, a referral from a public authority that deems the screening necessary, or out of its own motion.

Following the review, the CEISD may issue either an opinion authorizing the investment/authorizing it with commitments, or an opinion rejecting the authorization request, should the investment affect the security or public order of Romania or be of the nature of affecting projects or programs of interest for the European Union. The opinion authorizing the investment is binding on the Competition Council, which shall issue a decision authorizing the investment within a 30-day period (a decision which shall be communicated to the notifying party within a 45-day period). The opinion authorizing with commitments/rejecting the authorization request is advisory and shall be referred to the Government, in view of the adoption of a Government Decision authorizing with commitments/rejecting the investment.

In terms of screening timeline, CEISD shall issue the opinion within 60 days of the date when the notification is considered effective (i.e., it contains all the necessary information, following the potential additional questions addressed by CEISD – which means that the time period might run from a later date than the filing date). CEISD may launch an in-depth investigation, taking into account the particularities and complexity of the request for authorization or its impact on security and public order. In such cases, CEISD will seek the opinion of the Supreme Council of National Defense (to be issued within 90 days of CEISD’s request).

The Romanian FDI regime provides for administrative fines of up to 10% of the total global turnover derived in the year prior to the issuance of the sanctioning decision.

In addition to the fine, foreign direct investments and new investments shall be subject to an annulment proposal from the CEISD, provided they (i) were implemented in breach of the obligations under the FDI regime and (ii) they affect national security/ public order or are of the nature of affecting projects or programs of interest for the European Union.

Also note a Real Estate Restriction under Romanian law:

From the perspective of real estate acquisition, the Romanian law (i.e., Law no. 312/2005) provides that EU and European Economic Area member states citizens, and, as well, the legal entities incorporated under the laws of such member states, can acquire the ownership right over the lands under the same conditions as those provided for the Romanian citizens and legal entities. However, non-resident legal entities incorporated in accordance with the legislation of an EU member state legislation can acquire lands in Romania only for the purpose of establishing secondary residence and secondary headquarters.

Citizens of non-EU states and of non-EEA and legal entities incorporated under the laws of a non-EU or non-EEA member state) can acquire the ownership right over the lands based on the bilateral treaties and on a reciprocity basis.

The acquisition of ownership rights over buildings by foreign citizens or legal entities is not subject to the aforementioned restrictions provided for lands. However, given that in most cases acquisition of a building entails also the acquisition of the portion of land beneath such building, the aforementioned limitations on the acquisition of lands shall apply mutatis mutandis for the relevant part of the land. Nonetheless, foreign citizens may attempt to obtain a superficies right (right of ownership over the building and right of use over the land beneath - for the entire tenure of the building).

The Romanian FDI regime is focused on matters related to national security/public order. At the same time, under the screening procedure, CEISD shall assess whether the investment entails risks to projects/programs of EU interest, as provided under the FDI Regulation.

The FDI Ordinance defines the “foreign investor” as:

1. natural persons who are not citizens of an EU Member State, intending to make or having made a foreign direct investment in Romania;
2. legal persons whose headquarters is not located in an EU Member State, intending to make or having made a foreign direct investment in Romania;
3. legal persons whose headquarters is located in an EU Member State, intending to make or having made a foreign direct investment in Romania directly or indirectly controlled by a natural person who is not a citizen of an EU Member State/a legal person whose headquarters is not located in an EU Member State, or any other legal entity without legal personality, organized under the laws of a state which is not an EU Member State;
4. fiduciary trustees of entities without legal personality, intending to make or having made an investment in Romania or any other person in a similar situation, provided that they: (i) are non-EU nationals, or (ii) do not have their headquarters in an EU Member State, or (iii) are organized under the laws of a state which is not an EU Member State.

The FDI Law also introduced the screening of notifications transmitted as per Romanian Competition Law (economic concentrations, either notifiable or not), irrespective of the qualification of the investor (EU/ non-EU) provided that they (i) concern the sectors of activity described above and (ii) exceed the EUR 2 million threshold. Uncertainties as regards the interpretation and application of the new provisions regarding EU investments remain.

For these purposes, the term “EU investor” shall refer to:

1. natural persons of an EU Member State, intending to make or having made an investment in Romania.
2. legal persons having their headquarters in an EU Member State, intending to make or having made an investment in Romania.
3. legal persons having their headquarters in an EU Member State, intending to make or having made an investment in Romania, which are directly or indirectly controlled by: natural persons of an EU Member State, legal persons having their headquarters in an EU Member State or any other entity without legal personality organized under the laws of an EU Member State.
4. Fiduciary trustees of entities without legal personality, intending to make or having made an investment in Romania or any other person in a similar situation, provided that they (i) are EU nationals, in the case of natural persons, (ii) have their headquarters in an EU Member State, in the case of legal persons or (iii) are organized under the laws of an EU Member State.

Thus, all the investments from the countries falling under the above-mentioned criteria shall be covered by the FDI framework, subject to meeting the above conditions.

Under the Romanian FDI regime, CSAT Decision no. 73/2012 regulates the areas subject to national security scrutiny in a rather broad manner, namely: security of the citizen and of collectivities; border security; energy security; transport security; security of supply with vital resources systems; critical infrastructure security; security of information and communication systems; security of financial, tax, banking and insurance activities; security of production and circulation of weapons, ammunition, explosives, toxic substances; industrial security; protection against disasters; protection of agriculture and environment; and protection of privatization operations of state-owned companies or their management.

In examining the investment, CEISD shall consider the factors listed in Article 4 of the FDI Regulation, namely:

• the potential effects on critical infrastructure (whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure), critical technologies (including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies), supply of critical inputs (including energy or raw materials, as well as food security), access to sensitive information (including personal data, or the ability to control such information), the freedom and pluralism of the media.
• factors related to the investor (whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding) or its activities (whether the foreign investor has already been involved in activities affecting security or public order in a Member State/ whether there is a serious risk that the foreign investor engages in illegal or criminal activities.)

As a general rule, investments have a value that exceeds EUR 2 million. The threshold shall be subject to CEISD’s screening.

Exceptionally, foreign direct investments below the threshold can also be subject to review and authorization if, by their nature or potential effects considering the criteria laid down in Article 4 of the FDI Regulation, they can impact or entail risks to security or public order. However, in this case, the notification obligation as well as the corresponding sanction for failure to do so do not apply.

Yes, foreign investors intending to make a foreign direct investment or a new investment exceeding the EUR 2 million threshold are under an obligation to notify the CEISD of the investment. While uncertainties remain, we understand the authority’s current reading of the law is that EU investments fall under the notification obligation only insofar as they amount to economic concentrations (irrespective of merger control thresholds).

Yes. The FDI Ordinance expressly provides for a standstill obligation – the investment may not be implemented absent its authorization.

The sanction consists of an administrative fine of up to 10% of the total global turnover in the year prior to the sanctioning decision. On top of that, an investment implemented in breach of the obligation to notify may be reversed (should it affect national security/public order or be of the nature of affecting projects or programs of interest for the European Union).

The sectors regarded as sensitive from a national security/ public order perspective were defined in a CSAT Decision adopted in 2012, long before the emergence of the COVID-19 pandemic. Nevertheless, the preamble of the FDI Ordinance acknowledges that the urgency in adopting the new regime also stems from the possible deleterious effect on the economy of the non-implementation of the FDI Regulation, considering the COVID-19 pandemic.

While the law provides for the online publication of decisions on FDI matters, in practice, very few of them have been made publicly available. From our experience, the authority has been very active in reviewing foreign investments. In practice, this has sometimes led to delays in transactions.

The substantive test for the assessment of risks for national security/ public order entails an analysis of the factors listed in the FDI Regulation (detailed above).

Threats to national security are defined (among others, with relevance for the economic activity) in Law no. 51/1991 on national security as any actions or inactions affecting Romania's strategic economic interests, those having as their effect the jeopardy, illegal management, degradation, or destruction of the natural resources as well as monopolizing or foreclosing access thereto, with consequences at national or regional level.

Absent a public record of all reviews, we cannot provide a quantification of the enforcer’s activity in the past 6 months.

A proposal to amend the FDI regime has recently been submitted by the Romanian Competition Council to the Romanian Government. However, we have no visibility over the date/ form in which the proposal will ultimately be passed (if at all).

Under the current form, the proposal seeks to introduce a number of significant amendments, most notably the alignment of the treatment of EU and non-EU investments.

Among the proposed changes in the current form, we note the following:

• EU investments are defined as investments “of any kind made by a European Union investor for the purpose of establishing or maintaining lasting and direct links between the European Union investor and the entrepreneur or undertaking for which these funds are intended for the purpose of carrying out an economic activity in Romania, including investments which enable effective participation in the management or control of an undertaking engaged in an economic activity.”
• The definition of non-EU investments is partly amended, referring to investments “of any kind made by a foreign investor for the purpose of establishing or maintaining lasting and direct links between the foreign investor and the entrepreneur or undertaking for which these funds are intended for the purpose of carrying out an economic activity in Romania, including investments which enable effective participation in the management or control of an undertaking engaged in an economic activity.”
• Introduction of harsh new sanctions: commitments, agreements or contractual clauses directly or indirectly implementing a foreign direct investment/ EU investment/ new investment shall be null and void where such investment has not been authorized.
• Introduction of an examination fee in the amount of EUR 10,000 which is due at the date of filing.