Dumitru Rusu, Partner Voicu & Filipescu

article by Dumitru Rusu, Partner Voicu & Filipescu

Except for a brief press explanation of the director of the Romanian Intelligence Service (SRI) in respect that the role granted by the Government to SRI in the business areas according to the EGO no. 46/2022¹ is part of the implementation of European regulations, this ordinance, entering into force on 18 April 2022, was discreate and without impact on either media or on general public awareness, similar with the direct entering into force of (EU) Regulation no. 2019/452 – FDI Screening Regulation. We have presented the regulation and the draft of the emergency ordinance for implementation in another legal newsletter: https://www.vf.ro/newsletter-october-2020/ .

As a matter of principle, our previous considerations remain valid (with some additions and supplementations described below), this screening mechanism referring to foreign direct investments competing and overlapping with the pre-existing general screening investment mechanism exercised by the Romanian Competition Council and the Supreme National Defence Council(CSAT) according to CSAT Resolution no. 73/2012).

Notable aspects brought by EGO 46/2022:

• This screening mechanism is exercised by CEISD – Commission for Examination of Foreign Direct Investments (Comisia pentru examinarea investiţiilor străine directe), as an inter-ministerial body without legal personality, working in the Government and established by decision of the Prime-Minister (nomination is expected in 30 days from OUG 46/2022).

• CEISD is a deliberative and pre-screening body, of which role is to review all foreign direct investment plans and approves / approves conditionally / rejects or rejects those foreign direct investment that present potential threats for security or public order. CEISD is entitled to take decision and issue mandatory pre-conditional advice to the Competition Council, as the issuer of the formal legal decisions.

• CEISD shall include representatives of the prime minister's office, Ministry of Economy, Energy and Business Environment, Ministry of Finance, Ministry of Foreign Affairs, Ministry of National Defence, Ministry of Justice, Ministry of Internal Affairs and Competition Council. Representatives of the Romanian Intelligence Service (SRI) and Foreign Intelligence Service (SIE) are permanent attendees. The Competition Council assures the secretarial duties of CEISD and it is also the administrative body issuing the formal legal decisions under EGO 46/2022 (given the lack of legal personality of CEISD).

• In brought lines the areas under current general investment scrutiny in Romania overlaps with the areas from the Regulation, given also their quite generality – national security vs. security or public order. However, it worth to mention that the FDI Screening Regulation and EGO 46/2022 and local law for implementation brings on the table some new aspects for the scrutiny, such as the freedom and pluralism of the media or access to sensitive information, as well as specific definitions of critical technologies.

• There is also a minimum materiality threshold of EUR 2 million for the scrutiny by CEISD, but which can be overpassed discretionary (the CSAT review does not include such minimum materiality threshold.

• We have a broader definition of new investment brought by EGO 46/2022, this referring not only to new “classical” investments, i.e. acquisition of business and assets, but also to extension of existing premises, launching of new products and business lines, diversification of activity. It would be difficult to assess how is this implemented in the financial sector, hopefully clarifications to be brought by the application norms.

• There is an obligatory pre-approval with significant sanctions as value for the breaches, i.e. it can be sanctioned (by the Competition Council) with a fine of up to 10% of total global turnover achieved in the financial year preceding the sanction. Fines between RON 10 to 50 million can be applied in absence of turnover for previous year.

• There is a possibility of ex-post review and intervention – this is still unclear but it appears CEISD has such role in a later intervention (ex-post control), with potential protective measures such as suspension of the ownership rights and further forced sale of the participations in public tenders which can be applied. Hopefully clarifications to be brought by the application norms.

• OUG 46/2022 formally excludes the portfolio investment of non-EU investors from its application but the definition is very narrow, being based on two cumulative conditions: (a) the investment is made through a regulated market (stock exchange); (b) the investment does not allow the participation to the direct administration of the target.

• The second condition is very sensitive while it makes reference to the ability to be involved in the direct administration of the target, not to the actual involvement (i.e. if the investor has the right / power to nominate / determine the appointment of its representatives in the management or supervisory bodies of the target and not actual nomination / appointment).

• Application norms are expected to be issued by the Competition Council in 60 days from entering into force of the ordinance – 18 June 2022.

1^ Emergency Government Ordinance (EGO) no. 46/2022 regarding measures for application of (EU) Regulation no. 2019/452 of the European Parliament and the Council from 19 March 2019 for the establishment of a framework for the examination of the foreign direct investments in the EU, as well as for the modification and the amendment of the Competition Law no. 21/1996