Major amendments to the Foreign Direct Investment regime in Romania and to the Competition Law

On July 21, 2024 entered into force Law No. 231/2024 for the approval of the Government Emergency Ordinance No. 108/2023 amending and supplementing the Competition Law No. 21/1996 ("Competition Law") and other normative acts (the "Approval Law").

Foreign Direct Investment in Romania

The Approval Law brought important amendments to the foreign direct investment regime in Romania, regulated by Government Emergency Ordinance No. 46/2022 on measures implementing Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for examining foreign direct investment in the Union and amending and supplementing the Competition Law No. 21/1996, (“GEO 46/2022”), as follows: ►Extending the applicability of the sanctions regime to EU investors, as well as to negligent acts.

▸The sanctions regime, previously applicable only to foreign investors, will now also apply to EU investors. Thus, both foreign investors and EU investors who intentionally or negligently implement a foreign investment, a new investment or an EU investment ("FDI") subject to examination and approval by the Foreign Direct Investment Screening Commission (“FIDSC”) under GEO 46/2022, without being authorized or in breach of the commitments undertaken in the conditional authorization decision, risk a fine of up to 10% of the total worldwide turnover obtained in the financial year preceding the sanctioning.

▸As per the amendments brought by the Approval Law, not only the intentional, but also the negligent provision of inaccurate, incomplete or misleading information in an application for FDI authorization will be subject to a fine of up to 10% of the total worldwide turnover obtained in the previous financial year preceding the sanctioning.

▸At the same time, failure to provide the information necessary for the examination and approval of the FDI within the legal deadlines and in a complete and correct manner will also be penalized with the same fine.

▸Moreover, it has been expressly provided that commitments, agreements or contractual clauses based on which an FDI subject to authorization is directly or indirectly carried out will be null and void when the investment has not been authorized by the FIDSC.

► The Competition Council, in consultation with FIDSC and with the advice of the Legislative Council, will have to draw up guidelines that are expected to clarify the conditions, deadlines, and procedures for examining the FDI, as well as the way of establishing the value of the FDI which is subject to examination. In addition, we deem that clarification is also needed with respect to the areas of activity covered by GEO 46/2022. ► The priority of FDI clearance over merger clearance has been removed. The provision previously introduced, according to which, in case of investments subject to both FDI and merger clearance under the Competition Law, the latter procedure will be completed after the FDI clearance application has been settled, was eliminated. Thus, it is now provided only that both an application for FDI authorization and a merger notification will be filed when required. ► FIDSC opinion for the Government. For investments which have been implemented in breach of the FDI regime in Romania and which, in the opinion of the FIDSC, affect the security or public order of Romania or projects or programs of interest to the European Union, the FIDSC may issue an opinion to the Government to order any structural or behavioural measures necessary to restore the situation existing prior to the investment.

Competition Law

► Attorney-client privilege. The undertaking invoking the legal privilege as regards its communication with the external lawyer is obliged to provide to the competition inspectors an adequate justification and the relevant elements in the light of the arguments put forward for this purpose, without, however, having to disclose its content. According to the previous amendments introduced by GEO 108/2023, it was expressly provided that if, in the course of an inspection, the competition inspectors deemed that the undertaking did not bring sufficient legal and factual arguments for support that the relevant document was covered by the legal privilege, they were entitled to immediately read the content of the communication with the lawyer and to make a copy of it. However, according to the new provisions, these specific rights of the competition inspectors have been abolished, remaining in force only the provision specifying that, if the inspectors cannot reach a final conclusion on the privileged character of the communication, being unable to exclude the possibility of it being privileged, they should seal and remove the communication in duplicate, the final decision in relation thereto being taken by the President of the Competition Council. We deem that this last amendment is welcome, as it amends the provisions that were obviously infringing the attorney-client privilege principles already established by the case law of the Court of Justice of the European Union, as well as the fundamental rights of defence and private life.