Project Finance 2021

Last Updated November 04, 2021


Law and Practice


Bondoc & Asociatii is a leading Romanian law firm that covers the entire range of legal services, offering in-depth knowledge of the Romanian market and the specific regulatory and economic local environment. The Banking and Finance practice is made up of two partners and eight other qualified lawyers, who advise on areas such as corporate finance; project finance and PPPs; acquisition finance; asset finance, with a focus on aircraft finance; real estate finance; and regulatory and compliance matters. The team regularly works in close co-operation with White & Case LLP on various cross-border projects, including project finance and energy and infrastructure projects. It was recently involved in the first reserves-based lending for a project offshore Romania and in numerous project finance transactions in the renewable energy industry, in addition to assisting the sponsor in connection with the financing of the construction of the largest logistic centre in South-Eastern Europe.

The nature of the sponsors differs from project to project, but typical sponsors in Romania include local companies and international companies that are active and have well-developed know-how in the industries targeted by projects (eg, real estate/construction, energy, natural resources). Public entities (central or local administrative bodies) and/or financial sponsors may also participate in project financing.

Generally, the lenders involved in project financing in Romania are commercial banks (typically syndicates that include EU and domestic banks) and international financial institutions such as the International Finance Corporation, European Investment Bank or the European Bank for Reconstruction Development, as well as credit export agencies. Many projects are co-financed by such multilateral development institutions, which pursue well-defined strategic investment priorities in Romania.

As a general note, providing financing to companies on a professional basis, by granting loans or providing other type of financing, is a regulated activity in Romania and can be carried out by credit institutions and non-banking financial institutions that are licensed by the National Bank of Romania, as well as EU-licensed credit institutions under the “EU banking passport regime” – for additional details, please see 4.1 Restrictions on Foreign Lenders Granting Loans. In this context, most of the lenders involved in project financings are Romanian or EU-licensed credit institutions.

In connection with the financing of public-private partnership (PPP) projects, a recent amendment of the Government Emergency Ordinance No 39/2018 on public-private partnerships (PPP GEO) also allows investment companies and open-ended investment funds to participate in the financing of PPP contracts, in addition to privately managed pension funds and sovereign development funds.

In general terms, PPP transactions may be structured under Romanian law under either the PPP GEO or Law No 100/2016 on works and services concessions (the Concessions Law). However, the PPP GEO is specific to PPPs and reflects the efforts of the Romanian government to initiate significant public projects and boost private investments in such projects.

Under the PPP GEO, PPP projects are to be carried out by means of a project company that is either owned entirely by the private partner (contractual PPP) or owned by both the private partner and the public partner (institutional PPP).

The PPP GEO is only applicable if the feasibility study – which has to be carried out by the public partner and approved by the government or local authorities (as applicable) prior to initiating the public procurement for the award of the PPP – reflects that more than half of the revenues of the project company would be sourced from payments received from the public partner, as compared to projects under the Concessions Law where most of the revenues of the private partner would be generated from payments from third parties.

In terms of the bankability of a PPP project, the PPP GEO allows the private partner to grant security interest over the rights and receivables under the PPP agreement and over the shares in the project company. Financiers may also benefit from guarantees or other obligations granted/assumed by the public partner. In addition, failure by the private partner to comply with its obligations towards the financiers under the financing arrangements may trigger replacement of the private partner under the PPP agreement (if this is specifically set out under the PPP agreement); such replacement may be initiated by the public partner at the request of the financiers.

On the basis of the PPP GEO, the government has adopted a decision approving 16 strategic objectives to be developed via PPPs, covering railway and metro extensions, hydroelectric power projects and the construction of modern hospitals.

However, there has not yet been any successful PPP under this new legal regime. This is mainly due to changes in the secondary legislation triggered by diverging political interests, which led to the transfer of all PPP projects from an authority (the National Commission for Strategy and Prognosis) to multiple ministries, which are likely lacking sufficient resources to deal with such complex matters, resulting in the lack of any PPP projects being successful.

Despite the major setbacks outlined above and some legal imperfections of the PPP GEO, the current legal framework may prove sufficient to allow successful PPPs to be developed in Romania, subject to a better and more predictable implementing legislation promoted by the government.

No large-scale PPP transaction has yet been implemented in Romania but circumstances may change in the future, given that sectors eligible for PPP structures are of high priority in the investment strategies of the current government, and also in the context of the adoption of the National Recovery and Resilience Plan.

In typical project financing structures, the financing is made directly to the project company incorporated for the sole purpose of a particular project. The project company can be incorporated as either a limited liability company or a joint stock company, but in practice sponsors often chose the limited liability form, because it allows for larger flexibility in terms of corporate governance compared to joint stock companies.

The typical funding techniques for project financing are debt financing and debt & equity financing. Most projects are financed through loans as a more flexible debt financing alternative compared to bonds. Depending on the size and risks of the projects being undertaken, the loan financing may range from bilateral (less usual) and club loans to large, syndicated financings. Project financing usually consists in making available different type of facilities (eg, term loans, working capital, letter of guarantees, VAT financings), and the terms of facilities may vary depending on the phase of the project (development and/or operation). Security is generally taken over all the shares in the project company together with all the assets of the project company (eg, financed assets, real estate, bank accounts, IP rights and receivables).

Project financing documentation follows the usual general regime, restrictions and limitations relating to financing and security interests in Romania.

The typical issues that need to be addressed when structuring a project finance deal relate to the technical feasibility of the project as well as its economic viability, with the role of technical experts and consultants being crucial. From a legal perspective, due diligence should consider the schedule and implementation plan of the project and the impact of any special legislation governing the relevant industry that generally raises specific issues due to highly regulated environments, especially in industries such as oil and gas or mining.

The investments in the transport and energy infrastructure represent a priority in the National Investment and Economic Relaunch Plan, launched by the Romanian government in July 2020.

Furthermore, the Recovery and Resilience Facility (RRF) of the temporary recovery plan at the EU level, NextGenerationEU, creates the prerequisites towards the EU disbursing EUR14.2 billion in grants and EUR14.9 billion in loans to Romania to support the implementation of high-priority investments and reform measures outlined in Romania's recovery and resilience plan. The key reforms and projected investments refer to transportation infrastructure modernisation, clean energy production or the digitalisation of several public sectors (public administration, health and education).

As such, competitive procedures for the implementation of projects (including PPP projects) in sectors where Romania still faces transition gaps such as transportation, energy and healthcare are expected in the following period.

In addition, considering the recent discoveries of important natural gas deposits in the Black Sea (approximately 200 billion cubic metres), especially in the exclusive economic zone (part of the continental shelf), investment opportunities are expected to arise in the oil and gas industry, including offshore, alongside the need to finance such projects.

The typical Romanian law security package includes the following arrangements:

  • a share mortgage agreement granted by the sponsor/shareholders of the Romanian project company to cover the shares in the Romanian project company;
  • a movable mortgage agreement to cover all movable assets of the Romanian entity (tangible or intangible), such as bank accounts, stocks, inventory, equipment and machinery, receivables (including under construction agreement, where applicable, and other project documents), insurance policies and intellectual property rights; alternatively, several movable mortgage agreements can be put in place to cover each or certain categories of assets; and
  • an immovable mortgage agreement to cover the immovable assets of the Romanian project company.

Additional arrangements may be put in place, depending on the transaction and the financed assets. For example:

  • in particular project financings where aircraft or ships are financed on a limited recourse basis, mortgages to cover aircraft, ships or financial collateral; or
  • in oil and gas projects, mortgages to cover industry-specific assets, including assets located outside the Romanian territory (eg, offshore), such as extracted petroleum or marine platforms and related equipment.

Formal Requirements Applicable to Security Arrangements

In terms of documentation, the movable mortgage agreements (which cover the shares in or the movable (tangible and intangible) assets of the Romanian project company) may be executed as a private deed.

Immovable mortgage agreements (which cover the immovable assets of the Romania entity) need to be executed as notarial deeds before the notary public for validity purposes.

Perfection Requirements and Other Formalities

Immovable mortgage agreements (which cover the immovable assets of the Romanian entity) are subject to registration with the relevant land book for perfection purposes.

Movable mortgage agreements (which cover the shares or the movable (tangible and intangible) assets of the Romanian project company) need to be registered with the National Register for Publicity in Movable Property. Depending on the type of assets covered by the mortgage agreement, additional formalities apply, as follows:

  • for shares – registration with the shareholders’ registry held by the directors of the Romanian entity or, in the case of listed companies, the Romanian Central Securities Depository;
  • for bank accounts – confirmation by the account bank granting control to the mortgagee;
  • for goodwill – registration with the Trade Registry;
  • for (registered IP rights) – registration with the relevant IP register;
  • for receivables:
    1. rent receivables deriving from lease agreements over real estate need to be registered with the relevant Land Book; and
    2. notifications to and/or consent from the assigned debtor (while not a perfection requirement, this is used in practice for the additional comfort of secured creditors in order to prepare enforcement, as the payment may not be requested to the relevant debtor until a notification regarding the creation of the relevant security interest is made to it); and
  • for mortgages over aircraft and ships – registration with the relevant registers where such assets are registered, which are kept by the specialised authorities.

Under Romanian law it is possible to conclude a movable mortgage agreement over all the universality of all present and future assets of a company (similar to a floating charge).

Such movable mortgage agreement can generally cover all movable assets (tangible or intangible) of the mortgagor. However, the description of the mortgaged property should include the content and nature of the assets therein. A generic description of the mortgaged property, such as all “movable property” or “all present and future movable property” of the mortgagor, is not satisfactory for creating the mortgage.

In practice, to grant additional comfort to the lenders in an enforcement scenario, these types of arrangements also include a list of all assets or the material assets of the mortgaged universality, which is updated periodically throughout the security period.

The execution of mortgage agreements as notarial deeds before the notary public is subject to notarial fees, which vary depending on the maximum secured amount and number of mortgage agreements that cover the same amount – eg, approximately EUR270 + 0.07% of the amount that exceeds the threshold of EUR105,000 for the first mortgage agreement, and approximately EUR210 for each additional mortgage agreement.

The costs in relation to the registration of the immovable mortgage agreements with the land book consist of 0.1% applied to the secured amount and approximately EUR25 for each immovable asset.

The registrations with the National Register for Publicity in Movable Property cost approximately EUR20 and are usually carried out on the same date the registration form is submitted to the relevant operator. Specific registrations with other public registries trigger additional costs.

Description of Assets

Generally, under Romanian law, the assets that are subject to security interest do not necessarily need to be identified individually in the mortgage agreement in order for a valid security interest to be granted over those assets. However, the description of the mortgaged assets needs to be sufficiently precise in order to allow the identification of such mortgaged assets. With respect to mortgages over a universality of movable assets, a generic description of the mortgaged property – such as all “movable property” or “all present and future movable property” of the mortgagor – is not satisfactory for creating the mortgage.

For mortgages over a universality of movable assets, the description may be made by:

  • drawing up a list of the mortgaged assets, which would also bring additional comfort to the lenders in an enforcement scenario;
  • determining the category to which the assets belong;
  • indicating the quantity of the mortgaged assets;
  • establishing a formula for determining the mortgaged asset; and
  • any other means that reasonably allow the identification of the mortgaged asset.

Please see also 2.2 Charges or Interest over All Present and Future Assets of a Company. In this case, the description of the mortgaged property should include the content and nature of the assets therein (including a universality of assets).

However, for a valid creation of movable mortgage over bank accounts, the mortgage agreement needs to individually identify the relevant bank accounts with the relevant IBAN numbers.

For mortgages over immovable assets, a sufficiently precise description of the mortgaged asset would require the indication of the identification elements mentioned in the relevant land book of the respective asset.

Other Romanian Law-Specific Requirements

For the purposes of creating a valid security interest, the mortgage agreements should reasonably determine the secured amount. While the relevant legal provisions do not provide further criteria or guidance in this respect, setting out a maximum secured amount in the mortgage agreement is reasonably considered a valid method of determining the secured amount in practice.

To the same end, the mortgage agreements need to set out the cause of the secured obligations (in Romanian, cauza obligației garantate), which, in practice, is achieved by corroborating the individualisation of the (finance) documents under which the secured obligations arise with the description of the purpose of the financing.

A Romanian law-governed mortgage agreement may validly secure only obligations that are determined or at least determinable, and the preferred ranking of the mortgage created thereunder may be established only in relation to determined or, at least, determinable obligations.

Restrictions in connection with the grant of security interest and guarantees in the context of financing transactions typically relate to corporate benefit requirements, the financial assistance prohibition, the limitations that may arise out of (other) applications of the capital maintenance rules under Romanian law and general company law limitations.

In the context of project finance, financing is accessed directly by the project company to develop a certain project, and the lenders’ recourse is mostly limited to the project's assets and cash flows – cross/upstream security interests and guarantees by the project company are less likely to be in place. As such, the secured obligations are rather tied to the project company, and the adequate corporate benefit of the project company derives directly from the secured financing transaction. The risk of challenges based on the lack of corporate benefit or lack of legal cause (cauza) and the cancellation of the relevant guarantee/security operation should be rather remote (potentially applicable in case of limited recourse financing structures).

In any case, the existence of adequate and sufficient corporate benefit by reference to the exposure under the guarantee/security provided is still to be determined, as a matter of fact, by the management of the project company, particularly by reference to third-party secured obligations (such as corporate guarantees, warranties and covenants assumed by the sponsor in the financing documentation). Such assessment may also be relevant and would need to be carried out on a standalone basis for shareholders/sponsors (or other third parties) that are incorporated in Romania and grant guarantees or security interest in the context of the project finance, to the extent applicable.

While financial assistance is prohibited under Romanian law, which does not contemplate any “whitewash” procedure, this is less likely to be relevant in the context of project financings.

Capital maintenance rules and general company law limitations may be applicable (for Romanian project companies or shareholders/sponsors or other third-party security interest grantors/guarantors incorporated in Romania), and include the following:

  • the requirement for directors to convene a shareholders meeting to consider whether the Romanian guarantor/security interest provider needs to be dissolved, if the enforcement causes the net assets of the Romanian guarantor/security interest provider (calculated as a difference between its aggregate assets and its aggregate debts) to fall below one-half of its subscribed share capital;
  • a prohibition against the distribution of dividends from fictive profits or from profits that could not have been distributed if a guarantee would be deemed as such; and
  • in relation to guarantees granted by joint stock companies, a prohibition against guaranteeing loans of directors, or against companies where such persons are directors, or shareholders of more than 20% of the share capital.

Existing security interests may by checked/searched by consulting the following public registries:

  • the National Register for Publicity in Movable Property in relation to all movable assets or movable assets accessory to an immovable property;
  • the Land Book in relation to immovable properties;
  • the State Office for Inventions and Trademarks' public registries in relation to intellectual property rights; and
  • the Trade Registry in relation to potential security created over the company’s goodwill.

Inspection of internal shareholders’ registries is also relevant, to check for potential security interests covering the shares issued by Romanian companies.

Checking the special registries on rights over aircraft or ships is also required.

Security interests under immovable mortgage agreements (which cover the immovable assets of a Romanian obligor) are released by means of a release notice issued as a notarial deed and an application form to be submitted to the relevant land book office by the relevant notary public.

On the other hand, security interests under movable mortgage agreements (which cover the shares or other movable (tangible and intangible) assets of the Romanian entity) are released by means of a release notice issued as a private written deed. This is to be followed by a release application form to be submitted to the National Register for Publicity in Movable Property and, depending on the type of assets covered, deregistration from the shareholders’ registry, cancellation of control to the account bank, or deregistration from other relevant public registers.

As a general note, enforcement may be carried out for receivables that are certain, liquid and due and payable (certa, lichida si exigibila), and only based on writs of execution (titlu executoriu). Enforcement is carried out in accordance with the Romanian Civil Code and the Romanian Code of Civil Procedure, and procedures may vary depending on the agreement that is subject to enforcement (ie, loan agreement, guarantee or security interest, as well as the assets subject to security interest).

Loan Agreement

The enforcement of loans is carried out subject to the terms of the underlying facility agreement regulating the conditions to accelerate the loans (entirely or partially). No out-of-court enforcement proceedings are available, and the enforcement is carried out through an enforcement officer, with authorisation and supervision by the relevant courts.

While Romanian law-governed loan agreements entered into with Romanian credit institutions and non-banking financial institutions are writs of execution by effect of the law and no prior judicial proceedings are required to validate the acceleration of the loan, this does not apply to cross-border financing, where the foreign law-governed loan agreement is to be enforced directly against a Romanian borrower. In the latter scenario, before initiating the enforcement, secured lenders would need to obtain a writ of execution in relation to the outstanding claims, either by obtaining a court judgment in the relevant jurisdiction (subject to the recognition of such foreign judgment in line with the principles set out in 3.3 Judgments of Foreign Courts)or by obtaining a European enforcement order based on the provisions of EU Regulation No 805/2004 creating a European Enforcement Order for uncontested claims.


There are no particular enforcement procedures for guarantee agreements. The notes in relation to the enforcement of loan agreements are equally applicable to guarantee agreements, including those regarding obtaining a writ of executions in relation to foreign law-governed guarantee agreements.

Security Interest

Romanian law-governed mortgage agreements are writs of execution by the effect of the law. Therefore, subject to the secured claims being certain, liquid and due and payable (certe, lichide si exigibile), the enforcement could be initiated based only on the mortgage agreement, without it being necessary to obtain a writ of execution in respect to the principal documents originating the main claims (this is particularly relevant in the case of secured obligations arising under foreign law-governed documents). However, the acceleration of the loan should be well documented before initiating the enforcement procedure.

Immovable mortgage

The enforcement of immovable mortgages is a judicial procedure governed by the Romanian Code of Civil Procedure. There are no out-of-court procedures available, and the enforcement may be carried out only through an enforcement officer, with authorisation and supervision by the competent courts.

Generally, the enforcement of immovable mortgages can be achieved through:

  • amicable sale (performed by the debtor himself);
  • direct sale (performed by the court bailiff); or
  • public auction sale – in the case of several real estate assets, separate public auctions will be organised for each real estate asset.

Movable mortgage

The enforcement of movable mortgages may be carried out through:

  • a judicial procedure under the Romanian Code of Civil procedure – through an enforcement officer and subject to the authorisation and supervision of the relevant courts; or
  • out-of-court procedures under the Romanian Civil Code, with limited involvement of the courts and enforcement officers, where most of the enforcement actions are carried out by the creditors themselves.

Depending on the class of assets subject to the movable mortgage agreements, the usual enforcement methods include the following:

  • sale by public auction or direct sale under the Romanian Code of Civil Procedure (in the case of tangible assets and shares);
  • garnishment followed by appropriation of receivable proceeds under the Romanian Code of Civil Procedure (in the case of receivables);
  • sale of the mortgaged assets in a “commercially reasonable manner“ under the Romanian Civil Code;
  • appropriation of the mortgaged assets on account of the secured claims under the Romanian Civil Code; or
  • taking possession of the assets for administration purposes (only in the case of mortgages over the assets of an undertaking) under the Romanian Civil Code.

In terms of restrictions, due to certain conceptual Romanian law limitations and views among practitioners, it is generally recommended that, in the case of multiple secured parties, even if a security agent is appointed, every request and/or application submitted to the enforcement officer or the court should be signed by all secured parties and not only by the security agent. The same applies for the power of attorneys to the law firms mandated to represent the secured parties before the enforcement officer and court.

Even if the mortgage agreements can be enforced independently, an assessment of the conditions for and validation of the acceleration of the loan is ultimately carried out by the court during the enforcement procedure – ie, upon challenges of the enforcement under the Romanian Civil Code of Procedure or authorisation of the sale of movable assets under the Romanian Civil Code.

The choice of foreign law to govern a contract (eg, English law is usually chosen to govern the facility agreement in cross-border transactions) would be recognised as a valid and binding choice of law by the Romania courts, subject to the provisions of the Rome I Regulation.

The submission to the jurisdiction of a foreign court by a Romanian company would be a valid consent to the jurisdiction of that court, subject to the terms of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, the Romanian Civil Code of Procedure, or other international treaties to which Romania is a party.

Post-Brexit, the submission to the jurisdiction of an English court by a Romanian company is subject to the Hague Convention of 30 June 2005 on choice of court agreements (the Hague Convention).

Romanian courts would recognise and enforce a judgment given by an EU/non-EU court against a Romanian company in accordance with and subject to the terms of the Brussels I Regulation and the Romanian Civil Code of Procedure.

Judgments by non-EU courts against a Romanian company would be recognised and enforced by Romanian courts without any retrial and re-examination of the merits of the underlying claim, in principle, in accordance with and subject to the terms of the Romanian Civil Code of Procedure, in the following circumstances:

  • the judgment is final and enforceable according to the laws of the non-EU jurisdiction where it has been rendered (not subject to further challenges);
  • the non-EU court had jurisdiction;
  • there is reciprocity in relation to the effects of foreign court judgments between Romania and that non-EU jurisdiction;
  • the dispute between the same parties had not been previously settled by Romanian courts (even not final) or pending before Romanian courts at the time the judicial proceedings were initiated before the non-EU court;
  • Romanian courts do not have exclusive jurisdiction; and
  • there were no breaches of the legal right to defend.

The judgments of English courts against a Romanian company would be recognised and enforced by Romanian courts in accordance with the rules set out under the Hague Convention (to the extent the relevant matters fall under its scope of application).

In the case of foreign arbitral awards, in principle, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) applies.

In cross-border secured finance transactions with foreign lenders, the finance documents are usually in the English language. In order to be filed with the Romanian enforcement officer and/or courts, any finance document would need to be translated by a sworn Romanian translator (and must include such translator’s statement that the translation is true and correct, and the translator must be provided with an original of relevant document), and such translator’s signature must be legalised by a notary public. Hence, in order to avoid potential delays during enforcement, it is generally recommended that the secured lenders prepare such notarised translations in the Romanian language of the finance documents, particularly the security documents and the loan agreement, prior to initiating enforcement proceedings.

Also, it should be noted that Romanian courts are generally not familiar with complex matters and concepts related to English law-governed loan agreements. Therefore, the unpredictability of the enforcement procedure increases if Romanian courts would be in a position to assess such English law-governed documents and make a judgment based on the Rome I Regulation (ie, during challenges of the enforcement under the Romanian Civil Code of Procedure or authorisation of the sale of movable assets under the Romanian Civil Code).

Apart from restrictions deriving from having the appropriate licence to carry out professional lending activity on the Romanian territory, including on a cross-border basis (see 1.1 Sponsors and Lenders), there are no general restrictions that apply to foreign lenders.

The National Bank of Romania has visibility on any loan agreements concluded for a duration exceeding one year by Romanian residents with non-resident lenders because Romanian residents are obliged to notify such loan agreements to the central bank for statistical purposes (under NBR Regulation No 4/2014 on the reporting of data and statistical information to the National Bank of Romania, as further amended).

The obligation must be fulfilled within 30 days of the conclusion of the agreement, while the obligation to notify the NBR of certain changes to the initial notification (eg, termination of the agreement or modification of the creditor, the debtor or the value of the credit throughout the notified transaction) must be carried out by the Romanian borrowers within 15 days of the amendment.

The granting of security rights or guarantees to foreign lenders is not restricted by Romanian law in terms of professional credit activity. However, in order to comply with the corporate law rules, attention should be paid to the restrictions on the granting of the security or guarantees, as underlined in 2.5 Restrictions on the Grant of Security or Guarantees.

In Romania, the foreign investment regime is currently governed by Government Emergency Ordinance No 92/1997 on stimulating direct investment, which states that all investors have the same rights and obligations, whether they are Romanian or non-resident or foreign residents.

In addition, on 11 October 2020, Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investment in the Union establishing a co-operation mechanism between member states, including between member states and the European Commission, on foreign direct investment likely to affect security or public order became applicable in Romania. At a national level, a draft Emergency Ordinance on measures implementing Regulation (EU) 2019/452 was published for public consultation in late July 2021 and is expected to enter into force in the near future, as consultation closed in mid-August 2021.

Similar provisions establishing specific restrictions on foreign investment are currently included in Competition Law No 21/1996. Under these provisions, the Competition Council must inform the Supreme National Defence Council of all economic concentration operations notified to the Competition Council that can be analysed from the point of view of national security. If, taking specific criteria into account, it is found that such transactions pose a risk to national security, the government may issue a decision prohibiting them, upon a proposal from the Supreme Council for National Defence. On the same note, the Supreme Council of National Defence issued Decision No 73 of 27 September 2012 listing the areas in which the takeover of undertakings or assets is subject to control, such as the security of citizens and communities, the security of borders, energy security, transport security, the security of systems for the supply of vital resources, the security of critical infrastructure, the security of information and communication systems, etc.

Special foreign investment control provisions were enacted in the Petroleum Law 238/2004 according to a relatively recently enacted government emergency ordinance. By means of the new GEO, certain limitations were placed on the transfer of control rights in the oil agreement title holder or if changes in the shareholding structure of the shareholder having control rights over the title holder company occur. If one of those operations occurs, such changes (eg, shareholding structure) must be notified to the National Mineral Resources Agency for approval. For national security reasons, by virtue of a government decision, the state may request the amendment or even the unilateral termination of the concession agreement. The transfer of control in the title holder without previously obtaining the government decision approval may result in the annulment of such transfer. In addition, according to the recent amendments the National Mineral Resources Agency may, for national security reasons, refuse not only the execution of the concession but also the execution of oil operations for the exploration, development and exploitation of an oil field by legal entities effectively controlled by countries outside the European Union or by nationals of such third countries of the European Union.

Generally, there are no restrictions on payments abroad or the repatriation of capital by foreign investors under Romanian law. However, general rules regarding the reporting of certain financial transactions and also money laundering and international sanctions legislation shall be complied with by foreign investors as well as local investors.

The National Bank of Romania is authorised to impose, at its sole discretion, specific restrictions concerning foreign currency exchange transactions pursuant to NBR Currency Regulation No 4/2005, where significant short-term capital fluctuations may cause significant pressure on the currency markets and bring about serious disturbances in the implementation of the NBR’s monetary and currency exchange policies.

There is no legal restriction on project companies holding offshore foreign currency accounts under Romanian law, although project finance agreements may contain limitations on the opening of accounts other than project accounts.

Neither financing nor project agreements need to be registered or filed with any government authority in order to be valid. However, in accordance with Law No 297/2018 on the Publicity Register, documents under private deed that are validly concluded and have the status of enforceable title may be enforced subject to being previously registered with the Publicity Register. In addition, project agreements may be authenticated by a notary public in order to grant the agreement an enforceable title nature.

As set out under 2.1 Assets Available as Collateral to Lenders, security documents should be executed in a specific form (depending on the nature of the assets subject to mortgage) and may need to be registered with the relevant publicity registries.

Just for statistical purposes, Romanian-resident borrowers should notify the National Bank of Romania in relation to mid and long-term cross-border loans (more than one year maturity) (see 4.1 Restrictions on Foreign Lenders Granting Loans). Lack of registration does not affect the effectiveness and enforceability of the facility agreement in any way, and there are no repercussions on the company if such registration is not performed, other than insignificant pecuniary sanctions (ranging between EUR100 and EUR1,000).

Depending on the type of natural resources (mineral resources, oil and gas), there is specific legislation regulating the ownership, use and exploitation thereof. For example, the core legal mining and petroleum legal framework in Romania is Law No 85/2003 and the Petroleum Law No 238/2004 and their implementing norms, respectively, whereas for offshore oil and gas the main legal framework is regulated by Law No 256/2018 on certain measures necessary for the execution of oil operations by holders of oil agreements relating to offshore oil fields.

Similar to other jurisdictions, natural resources in Romania are subject to the public ownership of the Romanian State and their exploitation can only be carried out within the framework of a concession agreement granted by the National Mineral Resources Agency. Title holders are subject to quarterly royalties (with rates ranging from 3.5% to 13.5% for oil and from 3.5% to 13% for gas, in the oil and gas sector) and various sectoral taxes. Title holders may transfer their rights in connection with the concession agreement, subject to a prior approval by means of a government decision upon the proposal of the National Mineral Resources Agency.

The National Mineral Resources Agency is the main regulator of the natural resources industry in Romania, and is responsible for granting permits and licences.

Romanian legislation provides for equal treatment for local and foreign private investors applying for concession rights with respect to mineral resources. However, if a mining concession is granted, foreign investors must establish and maintain a local branch or subsidiary throughout the concession agreement; similar obligations apply for oil and gas concessions.

Although the concept of fiducia, which is similar to the English law trust, has been regulated under Romanian law since 2011, it is not often used in practice in financing transactions due to its excessively formal and onerous regime.

Trust relationships created under a foreign legal regime would be recognised by Romanian courts, subject to Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (the Rome I Regulation), or to the Civil Code provisions in the case of non-EU laws.

However, trust-based structures have not been tested by Romanian courts and there is no indication on what the position of such courts would be when presented with such concept, including whether such arrangements would be deemed compatible with the Romanian international public policy.

In the above context, the following structures are the most commonly used on the Romanian market:

  • the agency structure for security arrangements over movable assets, whereby the lenders appoint the security agent as their representative based on specific provisions of the implementing law of the Romanian Civil Code; and
  • the trust or the parallel debt structure, and/or the joint creditorship structure for security arrangements over movable assets related to foreign law-governed facility agreements, whereby the security agent (as joint creditor with lenders) can claim and enforce the right of the lenders against the borrower and the other obligors.

Perfected mortgages have priority over mortgages that are not perfected (please see 2.1Assets Available as Collateral to Lenders). In the case of perfected competing mortgages, as a matter of principle, the ranking is generally determined by reference to the time at which the registration or perfection formalities were carried out. In the case of security interests over bank accounts, the lender who controls the bank account enjoys a "super-priority" right over a lender who has no control over the mortgage accounts.

In addition to the structural priority of liabilities (secured/unsecured), Romanian law allows for contractual subordination, which is usually established under a subordination or intercreditor agreement. Contractual subordination is effective between the parties to the subordination arrangement and may not be enforceable against third parties (including in an insolvency scenario).

According to the PPP GEO, a project company is a company that is established and operates in accordance with the provisions of Romanian Company Law No 31/1990 (with no restriction being imposed on the form of such company). However, a project company is typically constituted as a limited liability company (societate cu răspundere limitată) because, unlike joint stock companies, such format allows for sole shareholding and offers more flexibility in terms of corporate governance. In addition, recent changes to the Company Law 31/1990 removed restrictions applicable in the case of a transfer of shares to third parties, which can now occur faster, and repealed shareholding chaining restrictions previously applicable to sole shareholder limited liability companies.

The following company reorganisation procedures are provided under Law No 85/2014 on insolvency (the Insolvency Law):

  • insolvency proceedings;
  • ad hoc mandate (mandat ad-hoc); and
  • composition (concordat preventiv).

An improvement of the applicable Romanian legal framework regulating the pre-insolvency options available for the rescue of a company facing financial difficulties is expected to be enacted soon, in the context of implementing the European developments on restructuring and insolvency adopted through EU Directive 2019/1023.

Insolvency proceedings are collective proceedings in which all recognised creditors of the insolvent debtor participate in order to obtain funds for the payment of the debtor's debts, under the conditions established by the category of the debtor, through a judicial reorganisation based on a reorganisation plan, or through bankruptcy. Further details on the insolvency procedure in Romania can be found in the following sections.

The ad hoc mandate is a confidential procedure initiated at the request of the debtor and entails the appointment by the judge of an ad hoc agent. The purpose of the ad hoc agent is to reach, within 90 days of his appointment, an agreement between the debtor and one or more of its creditors, with a view to overcoming the financial difficulties of the debtor, preserving jobs and covering the debtor's claims.

The composition is a procedure initiated at the request of the debtor, and consists of establishing a recovery plan proposed by the debtor and his adviser, subject to the acceptance of creditors holding 75% of accepted and uncontested claims, and approval by the court.

As a general rule, under Romanian law, the commencement of insolvency proceedings suspends all judicial and extrajudicial procedures or enforcement measures initiated by creditors against the insolvent debtor, and the assets and claims they own against the insolvent debtor can be pursued only within the insolvency procedure (except for criminal law procedures).

However, the opening of such a procedure does not suspend any enforcement actions against third-party guarantors or security providers.

From a theoretical perspective, it is possible for secured lenders to request the syndic judge to allow the sale of the assets covered by the security granted to them by the insolvent debtor, in the event of compliance with certain restrictive conditions intended to guarantee the necessary resources for the continuation of the activity of the insolvent debtor. However, in practice, this is rarely approved by syndic judges.

Lenders secured with cash collaterals or mortgages over bank accounts are entitled to request the judicial administrator or the bankruptcy trustee (in the case of bankruptcy) to release for their benefit the amounts held in such accounts mortgaged in their favour.

In addition, after the commencement of insolvency proceedings, interest, surcharges or penalties of any kind or expense – generally referred to as incidental expenses – may not be added to claims arising before the commencement date of the proceedings, except where the asset subject to security interest is sold at a value greater than that of the claim included in the claim table, in which case ancillary rights will continue to accrue up to the value of the claim.

According to Romanian law, funds obtained from the sale of the insolvent debtor’s assets covered by security interest shall be distributed to creditors in the following order:

  • taxes, fees, costs and expenses arising from the sale of the assets (including operation and maintenance costs, expenses in connection with these assets that are incurred after the opening of the insolvency proceedings and judicial administrator fees);
  • claims of secured creditors that arise after the opening of the insolvency procedure (including the principal, interests and ancillary rights); and
  • claims of secured creditors, including all principal, interest, surcharges and penalties of any kind and claims arising from leasing agreements that were terminated before the commencement of the insolvency proceedings.

For the amounts not covered by the sale of the assets subject to their security interest, the lenders will be unsecured. Payments related to unsecured claims are made in the following priority order:

  • taxes, fees, costs and expenses of the insolvency procedure (including operation and maintenance costs, and expenses for the business continuity and for the payment of remuneration to the persons employed);
  • claims under financings made available to the company during the insolvency proceedings;
  • claims arising from employment relations;
  • claims arising during the insolvency proceedings for carrying out the operations of the insolvent company, claims regarding damages for the termination of contracts during the insolvency and claims of good-faith third parties that have returned the assets subject to clawback or their value;
  • budgetary claims;
  • alimony claims, minors’ allowances claims or other regular subsistence payments;
  • claims arising under bank loans and connected interests and fees, claims for the supply of products, services or works, rent, or leasing arrangements and bonds;
  • other unsecured claims; and
  • other subordinated claims.

The main risk faced by lenders when the borrower, security provider or guarantor becomes insolvent is the opening of bankruptcy proceedings against the insolvent debtor, as in such case the lender, acting as a creditor, shall follow the order of priority ranking outlined in 6.3 Priority of Creditors and has no certainty that they will be repaid.

Moreover, regarding volatile assets (such as stocks, inventories, receivables) for which the value of the security interest generally depreciates, there is a significant risk that the amount of the proceeds obtained out of such mortgaged assets may not be as high as expected, especially in the case of long reorganisations that ultimately fail. From a practical perspective, it should also be noted that the insolvency proceeding can jeopardise the day-to-day functioning of the company (debtor; guarantor or other) and, as such, affect the value of the company and recoveries of the lender, also increasing the risk of theft.

According to the claw-back provisions under the Romanian insolvency law, the judicial administrator has the capacity to challenge the guarantee/security interest granted by an insolvent debtor in the following circumstances:

  • if the purpose of the transactions was to conceal assets from creditors or otherwise prejudice their rights and the guarantee/security interest was provided in the two-year period before the opening of insolvency proceedings against the Romanian guarantor/security provider;
  • if the establishment of a preferential right for a claim was unsecured in the six months prior to the opening of proceedings;
  • if acts of transfer or assumptions of obligations were made by the debtor within a period of two years prior to the date of the opening of proceedings with the intention of concealing/delaying the state of insolvency or defrauding a creditor; or
  • ifthe debtor's performance clearly exceeds the compensation received, and the guarantee/security interest was provided in the six-month period before the opening of insolvency proceedings against the Romanian guarantor/security provider.

As a general rule, under Romanian law, bankruptcy proceedings apply to all natural and legal persons qualified as professionals under the Civil Code, except for those engaged in liberal professions. Bankruptcy proceedings also apply to autonomous administrations (regii autonome).

Therefore, all persons who are not qualified as professionals under the Civil Code are outside the scope of bankruptcy proceedings, as are those who exercise liberal professions and also units and institutions of university and pre-university, as well as the national research and development institutions.

There are no restrictions, controls, fees and/or taxes on insurance policies over project assetsprovided or guaranteed by insurance companies.

There are no restrictions under Romanian law on the payment of insurance policies on the project's assets to foreign creditors.

Under Romanian law, payments of principal are not subject to withholding tax, while interest and commission fees are subject to 16% withholding tax, subject to any exemptions or reductions under the double-taxation treaties in place.

From a practical perspective, tax gross-up clauses are generally put in place in cross-border financing transactions with a borrower incorporated in Romania.

Other charges that may apply to lenders who grant loans to entities incorporated in Romania are as follows:

  • court and enforcement fees for judicial proceedings in relation to the financing documents;
  • fees for perfection of the registrations of the security documents with the relevant public registers, depending on the type of secured asset (eg, the National Register for Publicity in Movable Property, the land book, the Trade Register);
  • fees for the notarisation of mortgage agreements over immovable assets; and
  • fees for the notarised certified translations of the finance documents, if applicable.

In corporate finance transactions, there are no regulatory limitations applicable on interest charged to borrowers – the parties are free to contractually determine the applicable interest.

However, limitations are applicable regarding compound interest. As a rule, the interest can be calculated only on the amount borrowed; in exceptional cases, the interest can be capitalised and, therefore, generate other interest only through a special agreement concluded with this purpose, after the due date, and only for the interest owed for a minimum period of one year.

According to the Civil Code, in specific circumstances, the court has the right to reduce the default interest (eg, when the default interest is manifestly excessive by reference to the damage that could have been foreseen by the parties upon the conclusion of the agreement), but such provisions have not yet been tested in courts, as far as is known.

Consumer lending is subject to specific limitations regarding the calculation of the interest rate, disclosure and limitations applicable to interest rate penalties, under the legislation implementing the Consumer Credit Directive 2008/48, as amended, but such legislation is not relevant for project finance transactions.

In principle, private parties are free to choose the law applicable to their contractual arrangements. However, some of the project finance documents must be subject to Romanian law, such as all the mortgage agreements, the PPP agreements and the concession agreements.

As a matter of principle, the parties are free to choose the governing law of the financing agreements, pursuant to Regulation (EC) No 593/2008 of the European Parliament and of the Council, of 17 June 2008, on the law applicable to contractual obligations (Rome I) and the Civil Code. In practice, the agreements concluded between Romanian entities are typically governed by Romanian law, while in cross-border transactions the facilities agreements are governed mainly by foreign law (with the common choice being English law).

Under Romanian law, possession, ownership and other real rights in property, including security interests, are governed by the law of the place where the property is located. Therefore, security documents over assets located on Romanian territory (eg, receivables under Romanian law-governed contracts/insurance policies or bank accounts opened with Romanian banks) are governed by Romanian law.

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Law and Practice


Bondoc & Asociatii is a leading Romanian law firm that covers the entire range of legal services, offering in-depth knowledge of the Romanian market and the specific regulatory and economic local environment. The Banking and Finance practice is made up of two partners and eight other qualified lawyers, who advise on areas such as corporate finance; project finance and PPPs; acquisition finance; asset finance, with a focus on aircraft finance; real estate finance; and regulatory and compliance matters. The team regularly works in close co-operation with White & Case LLP on various cross-border projects, including project finance and energy and infrastructure projects. It was recently involved in the first reserves-based lending for a project offshore Romania and in numerous project finance transactions in the renewable energy industry, in addition to assisting the sponsor in connection with the financing of the construction of the largest logistic centre in South-Eastern Europe.

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