Doing Business In... 2021 Comparisons

Legislative Power

Romania is a civil law jurisdiction where most of the laws are codified. As Romania is a member of the European Union, the European mandatory legislative framework takes precedence over the national laws. The legislative body in Romania is the Romanian parliament, which under certain conditions delegates its legislative powers to the Romanian government. In addition, the national or public authorities are also granted the power to enact mandatory and generally applicable administrative deeds in their area of jurisdiction.

Judicial Power

With respect to the courts, the Romanian Constitution vests judicial powers in the High Court of Cassation and Justice and the common courts (local courts, tribunals and appeal courts, and military courts). In line with the principle of separation of powers, judicial power is independent of legislative and executive powers.

As such, judges solely interpret and apply the law and do not have powers to enact laws (in Romania, a legal precedent is not recognised as a source of law). Nevertheless, courts of law tend to follow the landmark decisions issued by the High Court of Justice. In addition, the High Court of Cassation and Justice also has a responsibility to ensure the unitary interpretation and application of the law.

The Constitutional Court plays an important role by rendering legal provisions unconstitutional and thus ending their effect. 

Court proceedings

Proceedings before the court generally consist of two stages – first instance and the appeal. In some situations, the law provides for a third level of jurisdiction – the second appeal, as well as for other extraordinary means of appeal that are also available under certain conditions and are generally applicable.

The free access to justice is normally conditional upon the payment of a stamp fee. Regarding administrative matters, it should be noted that, as a rule, a preliminary procedure must be followed before addressing the courts of law. 

The main principles, according to the European Convention on Human Rights, are fully applicable in court proceedings, although the duration of the proceedings remains lengthy in most cases (sometimes up to four or five years).

Review by the Romanian Competition Council

Foreign investments require approval from the Romanian Competition Council if the merger control thresholds under 6.1 Merger Control Notification are cumulatively met. 

In Romania, the European framework is applicable for the screening of foreign direct investments (FDIs), the legal basis being the Regulation (EU) 2019/452 of the European Parliament and of the Council on 19 March 2019 (the “FDI Regulation”). The FDI Regulation aims to establish a mechanism for co-operation between member states, and between member states and the European Commission in relation to FDI likely to affect security or public order.

Although the FDI Regulation came into force at European level on 11 October 2020, no specific national legal provisions have so far been issued in Romania. At national level, a draft emergency ordinance currently going through the legislative process is meant to cover the measures required for the application of the FDI Regulation, as well as to amend and supplement Competition Law No 21/1996 (the “Draft GEO”).

According to the Draft GEO, for an investment to be considered an FDI, the following cumulative conditions must be met:

• the existence of a legal person established in a third country/headquartered in a member state, but controlled by a company in a third country;
• the intention to make a direct investment in Romania;
• the existence of a purpose to establish or maintain lasting and direct links between the foreign investor and the entrepreneur;
• the provision of funds for carrying out an economic activity in Romania/if there is a change in the ownership structure of a foreign investor; and
• the foreign investor must be allowed to exercise control over the management of the economic entity.

Foreign investments may be subject to scrutiny and authorisation if their value exceeds the threshold of EUR2 million and if the economic activity concerns one of the following:

• the security of Romania's citizens; borders; energy sector; transport sector; supply systems for vital resources; critical infrastructure; information systems and communications systems; financial, fiscal, banking and insurance activity; industry; production and circulation of weapons, ammunitions, explosives and toxic substances;
• protection against disasters;
• protection of agriculture and environment;
• protection of operations for the privatisation of state-owned enterprises or their related management;
• infrastructure in the following sectors – energy, transport, water management, healthcare, information technology and communications (IT&C), media, data processing or storage, aerospace, defence, electoral or financial infrastructure and sensitive facilities; access to land and real estate of critical importance for the use of infrastructure;
• essential public services, including water supply and sewerage; sanitation and waste management; production, transport, distribution and supply of thermal energy in a centralised system; public lighting; land-use planning and urbanisation; local and county public transport;
• access to critical technologies and dual-use products, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, chemical technologies, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies;
• access to raw materials for health security or food security;
• access to information concerning the protection of Romania's security, sovereignty, and legal order, including investments that involve large-scale access or potential access to the personal data of Romanian citizens or Romanian residents;
• the ability to significantly influence public opinion through information distributed via mass media, which means mass media entities or online outlets will be subject to certain additional rules aimed at FDI transparency;
• critical or potentially critical IT&C infrastructure;
• non-military facilities, essential for the defence of the state;
• other technologies which, if improperly used, could threaten the security or public order of Romania; and
• other actions or economic and strategic areas relevant to the security, sovereignty and internal order of Romania.

Significantly, even if it does not exceed the EUR2 million threshold, the FDI will be subject to examination and authorisation if, by its nature, it could have a significant impact on security or public order (however, no clear criteria in this respect are mentioned in the Draft GEO).

Review by the Romanian Competition Authority

There is currently a similar (less formal) screening in force, covering transactions which are reviewed by the Romanian Competition Authority for merger control purposes (only for transactions exceeding the turnover thresholds – see6. Competition Law). After receiving a merger notification form, the Competition Authority must notify the Supreme Council of National Defence. It is possible for the Romanian government, at the proposal of the Supreme Council of National Defence, to prohibit a transaction from happening, although this has never occurred so far. 

For the application of these provisions, the Supreme Council of National Defence issued Decision No 73/12 listing the areas in which economic concentration operations are subject to control, namely:

• the security of citizens and communities; border security; energy security; transport security; security of vital resources supply systems; security of critical infrastructure; security of information and communication systems; security of financial, tax, banking and insurance activities; security of production and movement of weapons, ammunition, explosives, and toxic substances; industrial security; protection against disasters;
• protection of agriculture and of the environment; and
• protection of the privatisation operations of state-owned companies or of their management.

Currently there is no obligation to notify the authorities of a foreign investment (if the cumulative conditions from the mergers and acquisitions are not met), considering the fact that (i) on the one hand, the Draft GEO is currently undergoing the legislative process, and (ii) on the other hand, should an economic concentration, notified in advance to the Competition Authority, present risks for national security, the Competition Council will notify the Supreme Council of National Defence.

According to the Draft GEO, foreign investors must seek authorisation before the Competition Council prior to implementation. 

In the case of FDI by two or more independent undertakings, an application for authorisation must be submitted by each of the parties involved.

Implementation of an FDI without prior authorisation under the conditions of the emergency ordinance risks being sanctioned with a fine of between 1% and 5% of the total turnover in the financial year prior to the sanction.

If it is considered necessary to impose certain commitments on the investor, the investment will be conditionally authorised. Failure to observe the commitments imposed, whether intentionally or through negligence, is sanctionable with a fine of between 1% and 5% of the total turnover of the financial year preceding the sanctioning decision.

Decisions may be challenged before the administrative contentious courts of law. More specifically, a government decision regarding the prohibition of a foreign investment during merger control proceedings may be subject to an annulment claim according to the general framework regarding administrative deeds issued by the public authorities.

Several types of legal entities can be used as corporate vehicles in Romania, among which, the most commonly used are joint stock companies and limited liability companies, both characterised by the shareholders’ limited liability. As a rule, Romanian regulations do not provide for a different fiscal or foreign investments regime depending on the form of corporate entities.

Limited Liability Companies

The limited liability company is the most popular form of corporate vehicle in Romania, given the flexible governance rules and incorporation procedure.

Corporate governance

The decision-making body is the general meeting of shareholders. In the case of limited liability companies, the law does not distinguish between an ordinary and an extraordinary general meeting. Regarding quorum and voting requirements, these can be determined by the articles of association, without any specific limitations imposed by law.

Specific rules regarding share capital and the number of shareholders

As a result of the latest amendments to Romanian company law, there is no longer a minimum threshold requirement for the share capital of limited liability companies, the sole provision being that the share capital must be entirely paid up by the incorporation date. The share capital can be constituted in RON or foreign currency or a combination of the two. However, payment of the share capital must be made in RON.   

With respect to the number of shareholders, a limited liability company can have as few as one shareholder, but the maximum number cannot exceed 50. Regarding the nationality or citizenship of the shareholders, no specific restrictions are imposed.

Joint Stock Companies

One of the fundamental differences between a limited liability company and a joint stock company (societăți pe acțiuni sau SA)is that in the latter, the share capital may be raised by public subscriptions and the shares can be issued in the form of securities. Joint stock companies are corporate vehicles usually chosen for investment projects, having a complex corporate structure and being the most regulated form of corporate entity under Romanian law. 

Corporate governance

As in limited liability companies, the decision-making body in joint stock companies is the general meeting of the shareholders which, in this case, can be either ordinary or extraordinary, depending on the issues to be decided. However, the fundamental difference is that in the case of joint stock companies, the articles of association must require higher quorum and voting majorities than those required by law for each type of general meeting of shareholders. 

Specific rules regarding share capital and the number of shareholders

The minimum amount of share capital for a joint stock company is RON90,000, the clarifications made for limited liability companies regarding the currency being applicable. On incorporation date, the subscribed share capital of each shareholder must be paid up to 30%, while the remaining 70% must be paid within 12 months of the incorporation. Since July 2019, bearer shares (available in case of joint stock companies) have been outlawed in Romania as a prevention measure against money laundering and financing of terrorism.

Joint stock companies must have a minimum of two shareholders, either natural persons or corporate entities, irrespective of their nationality or citizenship, while the maximum number of shareholders is unlimited. 

Less Common Types of Corporate Vehicle in Romania

There are also other, less common types of corporate vehicle in Romania.

For example, a partnership (societate în nume colectiv) is a corporate vehicle characterised by the fact that the social obligations are guaranteed by the assets of the company and the partners are jointly liable, their liability being unlimited. 

There are also limited partnerships (societate în comandită simplă), representing corporate vehicles characterised by the existence of two types of shareholders: shareholders that are personally liable (comanditați) and shareholders that have a limited liability depending on the amount of the share capital (comanditari). As with a limited partnership, there are limited partnerships by shares (societate în comandită pe acțiuni), the main difference being that in the case of the latter, the share capital is in theform of stocks. 

Other corporate vehicles, such as joint ventures without legal personality (asociere în participație), are also available. 

In Romania, the incorporation process of legal entities is relatively simple, and consists of preparing a file and submitting the application to the local Trade Registry from the company’s headquarters. 

The first thing to do in order to set up a company in Romania is to choose the type of company and verify and book a name for it. The second step is to choose the object of activity according to the NACE codes. It is mandatory to choose a main object of activity and optional to choose several secondary objects of activity. 

Following this, the incorporation file must be prepared, taking into account the list of documents provided on the National Trade Registry website, which include the articles of association, documentation for company headquarters, specimens of signatures, and a declaration by the company founders and directors. 

Checking the availability of a name and reserving it, and the incorporation process, can be done either at the Trade Registry office or online. Once the incorporation file is submitted, the incorporation process usually takes another three to five days.

The fees charged by the Trade Registry are not high. As a rule, for the incorporation of a limited liability company, the cost starts at RON130. 

There are some ongoing reporting and disclosure obligations for Romanian private companies. For example, any amendment to the articles of association or the management bodies of the company must be registered with the competent Trade Registry. 

Moreover, companies have to submit an ultimate beneficial owner statement annually. Last but not least, at the end of each financial year, companies must file approved financial statements and, if one is available, the report of an independent auditor.

The rules concerning the management of companies differ depending on the type of corporate vehicle chosen.

Limited Liability Companies

In the case of limited liability companies, there are not many specific rules with regard to the management of the company – it can be managed by one or more directors, who may or may not be shareholders, and who must be appointed for a limited period of time. 

Unless otherwise provided in the articles of association, the power to represent the company is granted to each director. However, this is used in practice to introduce double signature requirements for certain operations into the articles of association. 

Joint Stock Companies

In the case of joint stock companies, there are two types of management structures, namely: the one-tier structure or the administrator-based system, and the two-tier structure or the dual system.

One-tier structure

The one-tier system consists of a single director or a board of directors with an odd number of members, which can be composed of both executive and non-executive directors. The board of directors may delegate management powers to one or several managers, appointing one of them as a general manager (who can then be the chairman of the board of directors). As a rule, both individuals and legal entities may be appointed as directors of a joint stock company, but they have to be appointed for a limited period of time not exceeding four years, and not exceeding two years in the specific case of the first directors appointed by the articles of association.

There are also some restrictions provided by law for directors of joint stock companies. For example, an individual can be a director of no more than five other joint stock companies headquartered in Romania, except when such individual holds 25% of the shares of the company or acts as a member of the board of directors of the joint stock company owning 25% of the shares. 

Two-tier structure

The two-tier system consists of two different management bodies, namely, the management board and a separate supervisory board. 

The management board is the executive body, composed solely of individuals who carry out the management of the company on a day-to-day basis and represent the company in relation to third parties. The management board is appointed and supervised by the supervisory board. 

In light of the above, the supervisory board’s main function is to supervise the company’s activities, including those of the management board. The supervisory board is appointed by the shareholders, and it therefore represents the company in relation to the members of the management board. As a rule, except if otherwise provided in the articles of association, the supervisory board has no managing powers. Unlike the management board, in the case of the supervisory board, both individuals and legal entities may be appointed as members.

In the case of both limited liability and joint stock companies, directors and officers bear the following types of liability:

• contractual liability – for cases where the director/officers do not fulfil their obligations according to the law/appointing documents;
• criminal liability – for very specific cases where own fault of the director/manager is required; and
• tort liability – other liabilities than those mentioned in the points directly above.

In respect of shareholders, the provisions applicable to limited liability and joint stock companies are similar.

• Rule: the principle is that the liability of shareholders in SRLs is limited to their share capital contributions.
• Exception: a third party may initiate legal action against one or more shareholders if the relevant shareholders have committed actions, outside the course of their usual shareholder prerogatives, that are intentional and amount to gross misconduct. In practice, such legal actions are usually only brought in the context of insolvency proceedings.

In Romania, the employment relationship is mainly governed by:

• European regulations and other international treaties, as well as the Romanian Constitution;
• the Romanian Labour Code (Law No 53/2003) and the Law on social dialogue (Law No 62/2011); 
• collective bargaining agreements (CBAs) (the negotiations for entering a CBA are mandatory in the case of units having more than 21 employees); 
• companies’ internal regulations; and
• individual employment contracts.

A legal source can only provide for a more favourable standard than the legal sources above in the hierarchy of laws.

During the COVID-19 pandemic, some temporary measures have been introduced in Romania in order to support businesses, including covering the wages of the self-employed and workers in danger of being laid off, partially subsidising the wages of those returning to work, and deferral of utility payments for small and medium-sized enterprises.

An employment contract can only be validly concluded in writing, in the Romanian language, no later than the day before the employee starts work. 

Prior to the beginning of employment, the employer must ensure that the employment contract is duly registered in the employees’ general evidence record, which is submitted to the Labour Inspectorate.

An employment contract must comprise the material elements provided by the law and the job description. 

The material terms of the employment contract can only be amended by means of concluding an addendum to the employment contract, and not unilaterally by the employer. The employer is solely entitled to the unilateral change of the place of work by means of delegation or assignment of employees, provided that certain requirements are met. As a rule, the employment contract must be concluded for an unlimited duration. By way of exception, for project-based work, the individual employment contract may also be concluded for a limited duration, under the terms expressly provided by the law.

Irrespective of the duration of the employment contract, the contract can be concluded on a full-time or part-time basis.

Also, in order to test the employee’s skills, a trial period may be agreed when entering an employment contract.

The standard working day for full-time employment is eight working hours per day, five days a week (40 hours per week), and there are no minimum working hours (for employees up to 18 years old, the duration is six working hours/day). The maximum working time during a week cannot surpass the threshold of 48 hours per week, including overtime (an exemption is set out by the law, provided that the average working hours do not surpass 48 hours per week over a reference period of four, six or 12 months).

The standard working hours may be modified based on the work time schedule adopted in connection with certain sectors of activity, units or professions. Nevertheless, the employer must ensure minimum periods of uninterrupted rest of 12 hours per day and a 48-hour break once a week.

The employer is obliged to keep a record of the working hours of each employee. 

For overtime working hours and time worked during public holidays, employees are entitled to free paid hours, otherwise the employees are entitled to supplementary pay of a minimum of 75% of base salary for overtime work and a minimum of 100% of base salary for time worked during public holidays.

Depending on the type of activity conducted by the employer, the particular requirements with regard to working time in the case of night shifts, or special working conditions, must also be observed. 

Under Romanian legislation, the termination of an employment contract must observe legal provisions. As such, an employment contract may be terminated as follows:

• by effect of law, in cases such as:
1. the disappearance of one of the parties;
2. the employee reaching the age of retirement;
3. reaching the end date of a fixed-term contract; or
4. if an employment contract is deemed null and void;
• by agreement of both parties (amicable termination agreement); and
• by unilateral will of one of the parties, provided certain conditions are met.

Termination by Mutual Consent

The employer and the employee are free to agree upon the terms of termination. Severance payment is not a mandatory condition under the law.

In the case of unilateral termination, certain conditions must be met and usually a notice period is required, as well as the reasoning behind the termination decision (by the employer). The only exemption is provided in the case of dismissal or resignation during the trial period or at the end thereof, which is conditional solely upon a termination notice by either party, without notice or any reasoning. 

Termination by the Employee

An employee may terminate an employment contract, provided that a notice period is observed, as follows:

• 45 working days for a management position;
• 20 working days for a non-management position.

If the employer breaches these obligations, the employee can terminate the contract without notice.

Termination by the Employer

The termination of an individual labour agreement at the employer’s initiative (dismissal) must be based upon one of the following limited situations:

• the employee’s disciplinary misconduct;
• if the employee is in police custody or under domicile arrest for more than 30 days;
• the employee’s professional inadequacy;
• the employee’s physical/mental incapacity (as determined through medical expertise); and
• restructuring or closing of a job position.

In the last three situations mentioned above, the employer must grant the employee a prior notice of termination of at least 20 working days.

Some categories of employees are protected from termination, as the law prohibits the dismissal of an employee in situations such as illness leave, rest leave, pregnancy, maternity, and child raising or nursing leave, etc.

In the case of a disciplinary dismissal, the employer must perform a preliminary investigation to establish the misconduct of an employee. The proceedings are expressly provided by the law and special requirements may be comprised within the by-laws. Failure to observe the special provisions in this respect can trigger the annulment of the termination decision by a court of law.

In addition, it should be noted that under Romanian law, dismissal for misconduct is regarded as a last resort in terms of sanctions. The sanctions provided by the law range from written warning, demotion, reduction of base salary by 5–10% for one to three months and, finally, termination of the employment relationship. Therefore, a serious violation of the law, by-laws or employment agreement must take place before an employee can be dismissed for misconduct (the seriousness of the misconduct is a subjective criterion, but the employer can establish within the by-laws the misconduct that triggers the dismissal). 

In the case of dismissal for professional inadequacy, the employer must first establish the grounds of the evaluation procedure. 

A dismissal for reasons not related to the person of the employee is the termination of the individual employment contract due to the restructuring of the employee’s position, for one or several reasons, which are not connected to the employee’s person. The restructuring of the workplace must be effective and have a real and serious cause, otherwise it may be regarded as a wrongful termination by the courts of law.

Collective Redundancy

In Romania, collective redundancy is the dismissal, within a timeframe of 30 calendar days, on economic grounds, of:

• at least ten employees, out of a total of between 20 and 100 employees;
• at least 10% of the employees, out of a total of between 100 and 300 employees;
• at least 30 employees, out of a total of more than 300 employees.

When the employer envisages the need for a collective redundancy, the employer must initiate, within a reasonable time and with a view to reaching an agreement, consultations with the trade union or with the representatives of the employees.

The law fully regulates the consultation and the negotiations with the trade union or the employees’ representative and during such procedure the Territorial Labour Inspectorate and the local public employment office are also notified and made aware of the envisaged restructuring and/or collective dismissal. 

Following the collective dismissal, should the activities that were interrupted leading to the collective redundancy be resumed within 45 calendar days from the dismissal date, the employer must send to the dismissed employees a written communication informing them of the resumption of activities and reinstate them in the same workplace as before, without any examination, contest or trial period. The re-employment is conditional on the agreement of the former employees, which must be granted within five calendar days from the receipt of the notification. Failure to respond or to agree to the employer's proposal entitles the employer to engage new personnel for the vacant positions. 

Should a court declare a termination related to any of the above-mentioned cases null and void, the employee is entitled to damages for abusive termination amounting to the full payment of all financial rights the employee would have obtained if they were not wrongfully dismissed. The court will also rule the reinstatement of the employee, should such a claim be made. 

Trade Unions

A trade union may be established by at least 15 employees within the same unit. For a trade union to acquire legal personality, it must be registered within the special record of trade unions kept by the competent district court.

Two or more trade unions within the same sector of activity can assemble as a union federation, and two or more union federations can assemble as a union confederation. 

The main rights of trade union organisations are:

• to be consulted in the process of the employer’s drawing up of by-laws as well as in collective redundancy proceedings;
• to be informed and to take part in the negotiation and conclusion of collective bargaining agreements;
• to contribute to ensuring gender equality in the workplace; and
• to take appropriate legal action on behalf of their members, in order to safeguard their employment rights.

In order to achieve their goal, trade union organisations have the following tools at their disposal: negotiation; dispute resolution by conciliation; mediation; arbitration; petition; protest; march; rally; demonstration; or strike.

Employee Representatives

In Romania, if there are no representative unions within a company with more than 20 employees, the employees may elect and empower several representatives, by at least half of the total number of employees’ votes.

The duration of the mandate of the representatives is set during the appointment process, and it is limited to a maximum of two years. The employees grant their representatives powers to defend their interests during collective negotiations. 

The main powers of employee representatives are similar to those referred to above in connection with the trade unions, except for the powers granted exclusively to the latter. 

Whether in cash and/or in kind, salary income must be based on an individual employment agreement, a job relationship, secondment agreement, or a special statute provided by law, and it is taxed at a flat tax rate of 10%. The fiscal code also provides for revenues that are considered salary-assimilated income. For Romanian salary income tax purposes, mandatory employee social contributions apply and are deductible.

Taxes must be computed and withheld by resident employers, resident income payers or individuals, in the latter case if salary income is paid by third parties that are non-resident.

Corporate income tax amounts to 16% in Romania and is applied to the difference between the total revenues and expenses booked in accordance with the accounting regulations, adjusted for fiscal purposes by deducting non-taxable revenue and adding non-deductible expenses. There are specific rules in relation to the corporate income tax base computation for taxpayers that apply International Financial Reporting Standards (IFRS), such as financial institutions and listed companies.

The tax rate on dividends is 5%.

The main tax credits/incentives available in Romania are:

• tax exemption for reinvested profits;
• foreign tax credits;
• exemption from profit tax for taxpayers engaged exclusively in innovation and research and development (R&D) activities;
• R&D incentives;
• tax incentives related to professional and technical education;
• reductions for maintaining/increasing equity; and
• local tax exemptions for businesses located in industrial parks.

Pursuant to Law No 296 of 18 December 2020, which generally applies from 1 January 2021, Romania introduced measures for a consolidated tax group regime and several other tax-related changes. The newly enacted law details the conditions required for companies opting for fiscal consolidation, and the obligations that fiscal group members must comply with. The threshold of shareholding or voting rights is set at 75% (once opted in, the fiscal group must be maintained for a minimum of five years).

Thin capitalisation rules applicable to deductibility of borrowing costs incurred by profits tax-payers were amended with effect from 1 January 2018, following the transposition into the Romanian Fiscal Code of the provisions of EU Directive 2016/1164, laying down the rules against tax avoidance practices.

Romania has had transfer pricing documentation requirements since 2008. Transactions with both non-resident related parties and domestic related parties should be documented. Requirements differ based on categories of taxpayers (large, medium-sized or small), on materiality thresholds (annual value of inter-company transactions), and also on the types of transactions (financial transactions, supply of services, purchases).

Since 2005, Romania has had a law that defines the various forms of tax evasion and the applicable sanctions (Law 241/2005). A recent law amendment from 2021 specifies that voluntary payment of the prejudice will enable the guilty party to be sanctioned only with a fine and not imprisonment.

Mergers and acquisitions are subject to notification in Romania if the following thresholds are cumulatively met:

• all undertakings concerned have an aggregate total turnover in the year prior to the transaction exceeding EUR10 million; and
• at least two of the undertakings concerned have a turnover in Romania in the year prior to the transaction exceeding EUR4 million.

The market shares or an overlap in markets is not relevant when assessing the notification obligation.

The net turnover is relevant for verifying the fulfilment of the notification thresholds in Romania (revenues derived from the sale of products and the provision of services), after deduction of taxes (VAT or other taxes directly related to the turnover), as well as of the exports or intra-community deliveries or the intra-group transaction revenues. 

All types of transactions are covered by merger control in Romania, the sole criterion being that a change of control occurs (including joint ventures between independent undertakings, if they fulfil the standalone and long-lasting functions). 

The change of control criterion may be achieved from rights, contracts or any other elements that individually or collectively enable a certain undertaking to have a determining influence through ownership or rights of usage over the entirety, or just parts of an undertaking’s assets. 

There is no specific deadline for submitting the notification, as the undertakings concerned are required to abide by the standstill obligation until competition clearance. Non-observance of this standstill obligation is sanctioned with a fine of up to 10% of the turnover achieved by the undertaking by default in the year prior to the sanctioning decision.

The notifying party (the acquirer of control) submits a specific form to the authority. In practice, a period of two to three months from the submission of the notification form is usually necessary to obtain a clearance decision from the Competition Authority, but this depends on the notification submitted. This timeframe can be shortened or lengthened considering the impact of the economic concentration on the relevant market. Economic concentrations which could give rise to or strengthen a dominant position, or otherwise concern oligopolistic markets, may trigger competition investigations or commitment proceedings, in which case, the estimated timeframe ranges from six months to over a year.

In Romania, anti-competitive agreements are prohibited by the Competition Law. Anti-competitive agreements and/or concerted practices may include horizontal (between competitors) and vertical (between undertakings active on different relevant markets) restrictions of competition and involve:

• price-fixing of products sold to third parties;
• limitation of production or sales;
• partitioning of markets or customers;
• discrimination against, or imposition of, unjustified trading conditions on partners, placing them at a competitive disadvantage; and
• imposing conditions for the conclusion of contracts where these conditions, by their nature or according to commercial usage, have no connection with the subject of the contract.

Such anti-competitive agreements are sanctioned by the Competition Authority with a fine of up to 10% of the total turnover achieved in the year prior to the sanctioning decision. 

The Romanian Competition Authority is required to apply European rules where an agreement or concerted practice may also affect trade between member states (besides the anti-competitive effects altering the Romanian market). 

The Romanian Competition Authority has implemented an effective leniency programme. Under the programme, undertakings that disclose their participation in an anti-competitive agreement or concerted practice may benefit from full immunity (full exemption from fines). This leniency programme has proved to be effective in Romania, given that more and more companies apply for leniency, considering the financial benefits they can gain.

The Romanian Competition Authority recently focused on investigating and sanctioning cartel practices related to public and/or private tender procedures (ie, partitioning of plots, price fixing between bidders, rotating offers, etc), with the contracting authority itself being regarded as a facilitator of anti-competitive agreements between tender participants in some cases. In addition, the Romanian Competition Authority is now focusing on the digital economy by conducting and analysing, through sectorial surveys, the role of algorithmic price tools and their effect on potential anti-competitive collusion behaviour in several concerned industries.

Romanian Competition Law

Under the Romanian Competition Law, it is forbidden for one or more undertaking (in the form of collective dominance) to abuse their dominant position in the Romanian market or a substantial part of it. These abusive practices may consist of:

• the imposition, directly or indirectly, of sale or purchase prices or other unfair trading conditions;
• limiting or controlling production, trading, technological development or investments to the detriment of consumers;
• imposing unequal terms for equivalent services to trading partners, thus causing a competitive disadvantage to some of them (discrimination); and
• conditioning the conclusion of contracts by imposing upon partners the acceptance of certain clauses stipulating additional services which, either by their nature or by commercial usage, do not relate to the scope of such contracts.

Specifically, the Romanian Competition Law presumes, until proven otherwise, that one or more undertakings hold a dominant position, where the market share achieved in the analysed period exceeds 40%.

Where an abuse of dominant position occurs, the Competition Authority may sanction the undertaking concerned with a fine of up to 10% of their total worldwide turnover achieved in the year prior to the sanctioning decision. The abuse may be sanctioned regardless of the territory in which the abusive conduct takes place, if the effects of the anti-competitive behaviour occur in the territory of Romania.

Draft Emergency Ordinance

In addition to the above-mentioned abuse of dominant practices, there is a draft emergency ordinance aiming at amending and supplementing the current law on combating unfair competition which regulates the economic dependency practice. The draft provides the possibility of sanctioning companies with a superior negotiating position to their trading partners (but without necessarily being in a dominant position, respectively, without having a market share of more than 40%), if the following conditions are met:

• there is, and there is proof that there is, an imbalance of forces between trading partners;
• the commercial relationship is essential for one of the parties, in the sense that the relationship with the partner having the superior negotiating position is vital for the existence/maintenance of the other party's business on the market;
• the partner whose activity depends on the party in the superior negotiating position has no other viable and equivalent alternatives towards which to direct its activity; and/or
• the party having a superior negotiating position is likely to cause serious damage to its partner or to harm normal competition on the market, through actions or inactions towards its commercial partner such as:
1. unjustified refusal to provide or buy goods or services;
2. non-compliance with contractual clauses on payment, supply or purchase;
3. the imposition of conditions that are unduly onerous or discriminatory against the object of the contract; or
4. the unjustified modification or termination of commercial relations with the enterprise partner.

The draft emergency ordinance proposes to sanction such economic dependency exploitative practices with a fine ranging from 0.01% to 1% of the infringing party's total turnover in the financial year prior to the sanction, but no more than approximately EUR22,000.

A patent is an industrial property title relating to an invention, which is a product or a process, in all technological fields, that:

• is new – if it does not form part of the state of the art;
• involves an inventive step – if, having regard to the state of the art, it is not obvious to a person skilled in the art; and
• is susceptible to industrial application – if it can be made or used in any industry, including agriculture.

The patent protects the technical and functional aspects of the products and processes of the invention.

In Romania, the entitled authority where applications are submitted and where patents are registered is the State Office for Inventions and Trademarks ("OSIM" for its abbreviation in Romanian). Patent duration is 20 years as from the date of filing the application. For European patents, the duration under paragraph (1) runs from the date on which the regular national filing of the patent application became effective, pursuant to the European Patent Convention.

The patent confers on its owner an exclusive right of exploitation throughout its entire duration. 

Trade marks may consist of any sign, such as: words, personal names included, or designs, letters, numerals, colours, figurative elements, the shape of goods or of the packaging thereof or sounds, provided that such signs are capable of: 

• distinguishing the goods or services of one enterprise from those of other enterprises; and 
• being so represented in the Trademark Register as to enable the competent authorities and the public to determine the clear and precise subject matter of the protection granted to its owner.

In Romania, the right to a trade mark is acquired and protected by registration with OSIM. The right to the trade mark belongs to the applicant that was first to file the trade mark application registration.

Registration of a trade mark takes effect on the date of the regular filing of the trade mark and subsists for a period of ten years. Upon request by the owner, the registration of a trade mark may be renewed at the end of each ten-year period, on payment of the prescribed fee.

Rights in industrial designs are acquired and protected in the territory of Romania by registration with OSIM.

The definition of design consists of the appearance of a product or of a part thereof, in two or three dimensions, resulting from the combination of the main features, particularly lines, outlines, colours, shape, texture and/or the materials of the product itself and/or its ornamentation.

The subject of the application may be registered to the extent to which it constitutes a design, namely (i) it is new, and (ii) it has individual character.

Interested parties may oppose the registration of the design with OSIM, in writing, within two months from the publication.

The terms of protection of a certificate of registration of a design is ten years, counting from the date of constituting the regular deposit and it may be renewed for three successive five-year periods.

Romanian copyright law protects a literary, artistic or scientific work and any similar work of intellectual creation shall be recognised and guaranteed.

Unless proved otherwise, the person under whose name the work was first disclosed to the public shall be presumed to be the author thereof.

The subject matter of copyright are original works of intellectual creation in the literary, artistic or scientific field, regardless of their manner of creation, specific form or mode of expression, and independent of their merit and purpose, such as: 

• literary and journalistic writings, lectures, sermons, pleadings, addresses and any other written or oral works, and also computer programs; 
• scientific works, written or oral, such as presentations, studies, university textbooks, school textbooks and scientific projects and documentation; 
• musical compositions with or without words; 
• dramatic and dramatico-musical works, choreographic and mimed works; 
• cinematographic works and any other audio-visual works; 
• photographic works and any other works expressed by a process analogous to photography; 
• works of three-dimensional art such as – works of sculpture, painting, drawing, engraving, lithography, monumental art, stage design, tapestry, ceramics, glass and metal shaping, and also works of art applied to products intended for practical use; 
• works of architecture, including sketches, scale models and the graphic work that constitutes an architectural project; and
• three-dimensional works, maps and drawings in the field of topography, geography and science in general. 

Copyright gives the author two types of rights:

• moral rights that protect the author from disclosure of their work without their consent, allow the author to use their own name on the work or to remain anonymous, protect the integrity of the work (eg, protect the work from being modified), and allow the author to decide to make changes (right of repentance) or to stop its distribution (right of withdrawal); and
• economic rights that allow the author to prohibit or authorise the use of their work for free or in return for remuneration.

The copyright in a literary, artistic or scientific work comes into being at the time of the work's creation, regardless of the specific form or manner of expression thereof. 

The economic rights last for the author's lifetime, and after the author's death are transferred by inheritance, according to civil legislation, for a period of 70 years, regardless of the date on which the work was legally disclosed to the public. If there are no heirs, the exercise of these rights devolves upon the collective administration organisation mandated by the author during their lifetime or, failing a mandate, to the collective administration organisation with the largest membership in the area of creation concerned. 

The person who, after the copyright protection has expired, legally discloses a previously unpublished work to the public shall enjoy protection equivalent to that of the author's economic rights. The duration of the protection of those rights will be 25 years, starting at the time of the first legal disclosure to the public.

Databases are protected by Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases, while software is protected by Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs.

According to these pieces of legislation, member states must provide for the right of the maker of a database, which shows that there has been qualitatively and/or quantitatively a substantial investment in either the obtaining, verification or presentation of the contents, to prevent extraction and/or re-utilisation of the whole or of a substantial part, evaluated qualitatively and/or quantitatively, of the contents of that database.

Moreover, the European Court of Justice has expressly stated that the protection conferred by sui generis right is reserved for databases which meet a specific criterion, that is to say, in respect of which the maker shows that there has been, qualitatively and/or quantitatively, a substantial investment in the obtaining, verification or presentation of the database contents. As such, the protection conferred by those provisions is reserved, under Article 7(1) of Directive 96/9, for databases which meet a specific criterion, that is to say, in respect of which the maker shows that there has been, qualitatively and/or quantitatively, a substantial investment in the obtaining, verification or presentation of the database contents. 

The main regulations applicable in Romania to personal data protection (hereinafter referred to collectively as "Data Protection Legislation") are:

• Regulation (EU) 2016/679 (GDPR) of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC;
• Law No 102/2005 on the establishment, organisation and functioning of the National Supervisory Authority for Personal Data Processing, with subsequent amendments and completions – republished;
• Law No 129/2018 for the amendment and completion of Law No 102/2005 regarding the establishment, organisation and functioning of the National Supervisory Authority for Personal Data Processing, as well as for repealing Law No 677/2001 for the protection of individuals with regard to the processing of personal data and the free movement of such data;
• Law No 190/2018 on measures to implement Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC; and
• decisions and guidelines regarding different data protection matters issued at European and national level.

In Romania, neither the applicable legislation, nor the decisions and guidelines of the National Supervisory Authority for Personal Data Processing modify the territorial application rules established in the GDPR. Thus, the Romanian data protection authority has competence over the following:

• a controller or processor having its establishment in the European Union, whether or not the processing takes place in the territory of the European Union;
• a controller or processor established outside the European Union, but data subjects located in the European Union when processing activities relate to:
1. the provision of goods or services to data subjects located in the European Union, whether or not a payment is requested by the data subject; and/or
2. the monitoring of data subjects’ behaviour if it occurs within the European Union; and
• a controller not established in the European Union, but in a place where Romanian law applies under public international law.

The authority responsible for enforcing data protection rules in Romania is the National Supervisory Authority for Personal Data Processing (www.dataprotection.ro). The National Supervisory Authority for Personal Data Processing is vested with the following:

• control activity – the authority has the right to carry out investigations, including unannounced investigations, to request and obtain on the spot any information, to pick up copies, to access and verify any premises and equipment;
• complaints resolving activity – the authority must receive and resolve complaints from data subjects in order to ensure protection of data subjects’ rights; and
• enforcement activity – the authority has the right to impose sanctions and/or corrective measures for failure to comply with data protection legislation.

Regarding Competition and Unfair Competition

Implementation in Romania of platform-to-business regulation

Government Emergency Ordinance No 23/2021 regarding the implementation in Romania of Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services (“GEO 23/2021”) was published in Romanian Official Gazette No 339 of 2 April 2021. The provisions of the GEO 23/2021 came into force starting on 12 April 2021. Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services (the “P2B Regulation”) came into force in July 2020 and aims to regulate the relationship between online platforms and professional users by prohibiting certain practices deemed unfair and by improving transparency for professional users.

The main aspects of the law implementing the P2B Regulation in Romania are as follows.

• The Romanian Competition Council is the competent supervisory authority for the implementation of the P2B Regulation in Romania.
• The Romanian Competition Council, upon complaint or ex officio, may conduct in-depth investigations into compliance with the P2B Regulation by providers of online intermediation services. Furthermore, the Romanian Competition Council may conduct preliminary assessments prior to the initiation of in-depth investigations.
• The Romanian Competition Council may apply two types of sanctions, depending on which provisions of the P2B Regulation are breached, namely: (i) a written warning, or (ii) an administrative fine ranging from 0.1% to 1% of the turnover achieved by the provider, in the year prior to the sanction, from online intermediation services (ie, not the total turnover). In any case, the fine cannot exceed RON500,000 per violation. In addition to these main sanctions, the Romanian Competition Council is entitled to impose any other necessary coercive measures. However, there are also some exceptions with regards to the main sanctions:
1. where more infringements of the P2B Regulation are sanctioned by the same decision issued pursuant to GEO 23/2021, the total amount of the fine will not exceed 2% of the total turnover of the sanctioned enterprise achieved in the financial year prior to the sanction; and
2. repeat offenders are sanctioned more severely than first-time offenders; specifically, a fine is automatically applied for any violations of the P2B Regulation committed by an online intermediation services provider within two years of a previous sanctioning decision of the same online intermediation services provider pursuant to the new regulation.
• As with competition regulations, submission of incorrect, incomplete, inaccurate or misleading information is sanctioned with a fine ranging from 0.01% to 1% of the total turnover achieved by the company in the year prior to the sanction. Moreover, the Romanian Competition Council may use the information collected in connection with an investigation of alleged violations of the P2B Regulation in order to initiate an investigation under the Competition Law (sanctions applied based on the Competition Law being higher).

The Romanian Competition Council will issue a regulation containing at least the grievance procedure and the rules regarding the individualisation of the sanctions. Moreover, the supervisory authority will operate a registry of the unlawful acts which have been subject to injunction orders pursuant to GEO 23/2021. 

New unfair competition rules

On 3 June 2020, on the Romanian Competition Council’s website, a draft government emergency ordinance amending and supplementing Law No 11/1991 on unfair competition was published for public consultation. This draft law has not yet been adopted.

As in other jurisdictions, the amendments to the unfair competition law aim to introduce a new unfair practice, namely, abuse of superior bargaining position, thus creating more room for enforcement, even in the absence of a dominant position in the market. Currently, only the abuse of dominant market position is enforced in Romania, meaning that as a rule, only enterprises having a market share above 40% must be cautious in their business interactions. The draft law focuses on the protection of companies that find themselves in an unbalanced business relationship. 

Under the draft law, a superior bargaining position is defined as the position of an undertaking that is not dominant according to Romanian competition law, but is determined by market features, favouring the appearance of significant imbalances that are generated by various factors such as the specific structure of the production or distribution chains, vulnerability to external factors, perishability or seasonality, and the specific relationship between this undertaking and other undertakings active in different markets.

Apart from prohibiting the abuse of a superior bargaining position, the draft law also brings some changes to the list of behaviour deemed as unfair competition practices.

As for the sanctioning regime, under the new regulation, committing an act of unfair competition affecting public interest is to be sanctioned with a fine of between 0.01% and 1% of the total turnover in the year before the sanction is applied, but no less than RON5,500 (approximately EUR1,100) and no more than RON100,000 (approximately EUR20,000) for breaches committed by undertakings. In the case of breaches committed by individuals, the fine amount is between RON5,500 (approximately EUR1,100) and RON11,000 (approximately EUR2,200).

Unfair Trading Practices Directive (UTP Directive) in Romania

Currently, Romania is in the process of transposing the European Directive on unfair trading practices in business–to–business relationships in the agricultural and food supply chain with a draft of the national legislation being before the decision-making chamber of the Romanian parliament. Even though the final adoption of the internal legislation is likely to take at least a few more weeks, if the draft law comes into force without further amendments, Romania will undergo a reform of the legislative framework for food retail. 

The black/grey lists under Romanian law

Like the provisions of the UTP Directive, the draft law establishes:

• a black list of unfair commercial practices, prohibited in all circumstances; and 
• a grey list containing unfair commercial practices, unless they have been previously agreed in clear and unambiguous terms in the commercial agreement or in a subsequently concluded addendum between the parties.

However, the Romanian draft legislation includes a more extensive list of prohibited practices, containing many practices which are not included in the UTP Directive, and the Romanian Competition Council is at liberty to identify and sanction even more practices which are not listed as such in the draft piece of legislation.

Among the practices prohibited under all circumstances, the retailer is also forbidden:

• to charge the supplier a fee for listing its agricultural and food products, as well as for their display and/or secondary placement for sale;
• to require the supplier to charge fees, irrespective of their form and nature, which oblige the supplier to artificially increase the invoice price of the product;
• to delist or threaten to delist one or more agricultural and/or food products in order to exert commercial pressure or retaliate against the supplier;
• to withdraw the supplier's agricultural and/or food products from display as a means of pressure;
• to apply differentiated shelf price schemes for similar agricultural and/or food products from the list of main fresh products, irrespective of their origin and/or supplier; and
• to refuse to include an agricultural and/or food product in the list of main fresh products offered by a short supply chain supplier in a local market context on the grounds of lack of volume and seasonality.

At the same time, with the adoption of this form of the draft legislation, the previous provisions regulating the commercialisation of food products will be repealed.

Sanctions imposed under Romanian law

The draft law attempts to make a more “local” transposition of the text of the UTP Directive. While the draft law also declares its purpose is the same as the UTP Directive (namely, to protect agricultural producers), it gives the Competition Council the power to investigate and sanction not only retailers but also suppliers where contracts contain clauses which are deemed as unfair trading practices or if they are involved in such practices. This might mean that simply accepting a clause which is proposed by a retailer might expose suppliers active in Romania to potential risks and fines.