Principles Governing Foreign Investments in Romania

The legal regime of foreign investments in Romania is governed by the principle of equal treatment, which means that, subject to the principle of most-favoured-nation treatment, the same legal framework, principles and guarantees are applicable to both foreign and domestic investors.

2017-10-24 11:41:56 - From the Print Edition

At domestic level, the general legal regime of investments is covered by Government Emergency Ordinance No. 92/1997 on the stimulus of direct investments (GEO 92/1997). Direct investments generally cover any participation in the establishment or expansion of an undertaking in any of the forms provided by the law, the acquisition of shares in a Romanian company (except for portfolio investments, which are subject to sector legislation), as well as the establishment or expansion of a Romanian branch by a foreign company. GEO 92/1997 regulates and sets out the following general guarantees and incentives for direct investments in Romania:

- Free access to all fields of the Romanian economy;
- Freedom of forms of investment, meaning that investors may choose any type of companies provided by Romanian law;
- Freedom of means of investment in Romania (contributions in cash, assets or any other rights with economic value);
- Equal treatment (non-discrimination) - Romanian and foreign investors have the same rights and obligations. Some foreign investors, originating from countries with which Romania has concluded Bilateral Investment Treaties or other agreements for the promotion and protection of investment, may however enjoy the more favourable treatment provided under those instruments;
- Guarantees against nationalisation, expropriation and other equivalent measures;
- Right to transfer abroad, subject to the payment of legal taxes and contributions, profits and any other income obtained as a result of the investment, as well as any sums resulting from the liquidation of the investment in Romania or collected as indemnification for expropriation or equivalent measures;
- Disputes between foreign investors and Romania may be settled, at the investor's choice, by the administrative courts of law in Romania, international arbitration under the rules of the International Centre for the Settlement of Investment Disputes (ICSID), or ad-hoc arbitration organised under the rules of the United Nations Commission on International Trade Law (UNCITRAL).

The investment regime in Romania has been improved over the years, particularly since Romania's accession to the European Union (EU). In this regard, Government Emergency Ordinance No. 85/2008 on stimulating investment (GEO No. 85/2008) sets out a general framework for encouraging certain types of investments, such as the production and supply of electric and thermal energy, or the protection and improvement of the environment, water distribution, waste management, workforce services, etc. Incentives range from granting non-refundable sums for purchasing fixed and non-fixed assets and financial aid resulting from newly created jobs, to interest facilities linked to credit commitments, based on state aid schemes and with the observance of EU rules on state aid. State aid can be granted to large, small and medium-sized enterprises, depending on the type of investment, the field in which the investment will be implemented and the rules of the state aid scheme applied. Available aid schemes are usually announced on the state aid website of the Romanian Competition Council (http://www.ajutordestat.ro), or the website of the relevant ministry or local authorities.

At international level, Romania has signed bilateral agreements for the encouragement and reciprocal protection of investments, whose provisions prevail over domestic law. Romania has also entered into international agreements for the avoidance of double taxation (DTT), mostly based on OECD models. In 1994 Romania ratified the Energy Charter Treaty, which is a multilateral investment and trade treaty for the energy industry, also containing substantive protection measures for foreign investments in this sector and dispute resolution mechanisms between investors and host states.

Notably, since 1992 Romania has been a member of the Multilateral Investment Guarantee Agency (MIGA). The MIGA Convention regulates a particular type of international guarantee for foreign investments, aimed at protecting foreign investors from political and non-commercial risks in developing countries (e.g., currency transfer restrictions, expropriation and other similar measures, war), under certain conditions.

Also, in 2005 Romania accepted the OECD Declaration and Decision on International Investment and Multinational Enterprises, thereby adhering to a policy commitment to provide an open and transparent environment for international investments.

Cornelia Tabirta, Senior Associate at Tuca Zbarcea & Asociatii

Tuca Zbarcea & Asociatii operates a China Desk, which comprises dedicated Chinese lawyers and business advisors who work with us on an off-counsel basis and provide the full range of services required by the growing needs of Chinese investors. The group is able to assist clients from all industry's sectors of China's companies on their outward investment plans into Romania. Our strong understanding of the Romanian regulatory landscape and the firm's ability to effectively manage Government relations are a key part of our offer to Chinese investors. For further details, please contact Sorin Vladescu, Head of the firm's Energy and Natural Resources practice group and Partner, China Desk, Tuca Zbarcea & Asociatii at sorin.vladescu@tuca.ro or +40 21 204 88 90