The Romanian government approved two pieces of legislation governing the country’s Foreign Direct Investment (FDI) regime, which is expected to improve clarity, predictability and alignment with the EU’s FDI Regulation. The approved legislation (i.e. the FDI Amendments) includes a set of amendments to Government Emergency Ordinance no. 46/2022 on the review of investments in certain sensitive sectors in Romania (GEO 46/2022) and Competition Law no. 21/1996.
Specifically, the FDI Amendments are aimed at remedying practical ambiguities observed under GEO 46/2022, ensure consistent application, prevent circumvention and secure Romania’s effective participation in EU cooperation under Regulation (EU) 2019/452. The Amendments emphasise the national security and public order imperative, and the economic importance of legal certainty for investors.
They are also expected to impact the FDI regime by refining its scope, procedure and institutional set-up, timeline for review and fees, and by offering practical insights to investors planning transactions with a Romanian component or planning on investing in the country. (See CMS Expert Guide to Foreign Investment Screening Laws in Romania, which will soon be updated).
The main FDI Amendments contained in the legislation include:
- A narrower list of activities will be put in place in 90 days;
- The filing threshold will be increased from EUR 2 m to EUR 5 m;
- A 12-month aggregation rule will include successive transactions that are individually below the threshold and will create a one-stop shop for linked investments;
- The regime now includes acquisitions of assets in five sensitive sectors: critical and emerging technologies; critical infrastructure; defence and dual-use; pharmaceuticals; and agri-food;
- Internal restructurings are explicitly exempt for EU and OECD investors provided there is no change in effective control or beneficial ownership, and financing is intra-group or sourced exclusively from the EU or OECD;
- The review fee is decreased from EUR 10,000 to EUR 5,000 and will be refunded if the authority misses its deadlines;
- A new electronic platform will been created for submissions and monitoring status;
- The timeline has been reduced for regular reviews with new time limits included for in-depth assessments.
The above new rules will only apply to new filings, not on-going filings.
Scope: who and what will be subject to review
In 90 days after the entry into force of the FDI Amendments, the Romanian government will pass a decision listing the economic sub-sectors subject to FDI review, which is expected to materially change the scope and reach of the FDI regime by limiting the economic sectors in which FDI clearance will be required.
In addition to the investments already falling under the FDI regime’s scrutiny (for more details see CMS Expert Guide to Foreign Investment Screening Laws in Romania), the Draft GEO refines the definitions of both a “foreign direct investment” and an “investment from the European Union” to cover investments where investors acquire assets of any nature in certain sensitive domains such as the following:
- Critical and advanced technologies: artificial intelligence, robotics, semiconductors and electronic components, cybersecurity, aerospace, defence, energy storage, quantum, nuclear, nanotechnologies, biotechnologies;
- Critical infrastructure for energy, water, transport, vital resource supply networks, health, communications, media, finance & banking, insurance, data processing or storage, aerospace, defence, and land and real estate essential for the functioning of the above infrastructures;
- The pharmaceutical sector across the entire chain: R&D, wholesale, retail for medicines, medical devices and active substances;
- Defence industry: activities concerning technologies, systems, components, subassemblies and services intended or used for military purposes, including dual-use items.
- Agri-food sector: production, arable land, irrigation infrastructure, cereal storage and terminals, gene banks and technologies for fertilizer production.
The above domains are only applicable to asset acquisition. The narrower overall scope of review still needs to be adopted.
Thresholds, aggregation and exemptions
The threshold triggering a mandatory filing is increased from EUR 2 million to EUR 5 million. The rules, however, for calculating the value of the investment to determine whether the threshold has been reached remain the same. (For more details, see CMS Expert Guide to Foreign Investment Screening Laws in Romania).
The FDI Amendments expressly include a 12-month aggregation rule: interdependent operations in a one-year period by or between the same parties are treated as a single investment for assessing the EUR 5 million-value threshold. In such cases, the filing obligation arises once the cumulative value reaches EUR 5 million.
The FDI Amendments also allow an investor to notify multiple transactions in one filing for transactions that take place between the same persons or undertakings, and concern the same undertaking or undertakings with similar or interdependent activities.
The FDI Amendments also codify a long-awaited exemption. Intra-group reorganisations or restructurings by an EU investor (or an investor from one of the states that have adhered to OECD) fall outside the scope of the FDI regime if there is no change of control or beneficial ownership and funding for such group reorganisations or restructurings is intra-group or exclusively from EU or OECD sources.
Process and fees
The FDI review fee will be decreased from EUR 10,000 to EUR 5,000, and the fee will be refunded if the investment is not deemed to fall under the applicable law or the new FDI Screening Authority (CEISD) misses its deadlines.
A new electronic platform will be implemented for submissions, which will also allow investors to monitor status. How this will work in practice remains to be seen but this is a welcomed initiative that is expected to streamline the process and clarify the status of filings for investors.
In addition, CEISD will publish annual reports on its activity, which should improve the transparency of the authority and implementation of the FDI legislation.
Timeline
The FDI Amendments bring additional clarity to the assessment procedure and timeline in the following ways:
- Investors have 30 calendar days to respond to the CEISD’s requests for additional information, which can be extended by an additional 15 days. Failure to respond within the deadline closes the procedure to the CEISD.
- The CEISD’s decisions must be issued within 45 days from the date the file is deemed complete.
- In-depth assessments must be concluded within 90 days from initiation and can be extended once by up to 45 days.
For more information on changes to Romania’s new FDI regime, contact your CMS client partner or the CMS experts who contributed to this article: Horea Popescu, Claudia Nagy and Cristina Ciomos-Pop.
