Vol. XVI No.1
January 2011

HERZFELD & RUBIN, P.C. LAWYERS PROFESSIONAL CORPORATION
IN ASSOCIATION WITH
RUBIN MEYER DORU & TRANDAFIR

INSIDE:
Romanian Legislative Summary for 2010

ROMANIAN LEGISLATIVE SUMMARY FOR 2010

Introduction
During 2010 this publication’s articles have covered the major legislative changes which have a significant impact on potential investors in Romania. For details on the articles published during 2010, please visit our Digest Archive at http://www.hr.ro/digest_archive.htm. This article summarizes other important legislation of which investors ought to be aware. Because 2010 was characterized by severe economic difficulties, many laws were adopted in the attempt to reduce the impact of the crisis on the Romanian people. This article presents just a few of the laws adopted in 2010 that have an impact on business activities in Romania.

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Law 202/2010 regarding certain measures for the acceleration of judicial proceedings
Faced with a dysfunctional judicial system with huge delays in bringing cases to trial and the continuous and increasing frustrations of all claimants seeking justice in Romania, the Parliament adopted Law 202/2010. This law, in force since November 26, 2010, substantially amends both the civil procedure code, as well as the criminal procedure code, in order to diminish the administrative burden of the courts and their currently overloaded docket of files. The measures seek to reduce the costs which the courts are facing in relation to the summons system and the communication of all other procedural documents required at trial. Moreover, the law imposes on the courts of law to set hearings at shorter intervals, so that solutions can be rendered much faster than they are now. Another significant aspect of the law is the emphasis put on the role of mediation in disputes. Mediation is still not perceived as a common tool to solve disputed claims, but Law 202/2010 attempts to introduce it in an effort to avoid litigation and reduce costs, as well as save time by using the mediation as an amicable alternative method of resolving disputes.

It remains to be seen how the new law will be implemented in the reality on Romania’s judicial system. Reducing the administrative burden of the courts of law, or for the courts to actually be able to issue decisions faster than they are now can not be achieved only by creating the adequate legal framework; further management measures must be undertaken in relation to the personnel in the courts and to the costs incurred during trial. In fact, the achievement of the main purposes set as such within Law 202/2010 will have to be sustained by more specific measures which shall be established by the new civil, as well as criminal procedure codes. Their entry into force is envisaged for July next year.

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Government Emergency Ordinance no. 64/2010 amending and supplementing Law 7/1996 on cadastre and land registration
Government Emergency Ordinance no. 64/2010 was adopted following the conclusion of the loan agreement between Romania and the International Bank for Reconstruction and Development, dated December 28, 2007. Based on this Government Emergency Ordinance, the Romanian Government undertook to have the general cadastre of the immovable properties in the country performed. Consequently, real estate properties that were not subject to a cadastral study as of yet will, eventually, be able to get registered with their corresponding land books. There are various practical implications of this GEO. For instance, in order to fluidize the performance of the cadastre of all real estate properties in the country, as soon as possible, in case the owner or possessor of the real estate property in question is unknown, the cadastre shall be accomplished ex oficio, and the respective owner or possessor of the immovable shall be further registered as such in the corresponding land book of the immovable, once he is determined. Furthermore, another significant provision put in place by GEO 64/2010 is the fact that not only the owner of the immovable shall be registered with the land book of that immovable, but also the person holding only a possession right over the respective immovable (de facto possession). This is particularly important for potential investors interested in acquiring certain real estate properties, since they would be able to find out this particular information on the property in question from the corresponding office for cadastre and land registration. Another significant aspect of this GEO is the fact that it allows for the registration of the buildings erected until 2001 without a building permit with their corresponding land books. Also, a very significant novelty put in place by this GEO, having a huge impact on developers of real estate projects or for investors interested in becoming part of such projects, is the fact that this GEO allows for the registration of the buildings in the construction phase with their land books, and for parts of the buildings to be registered as such, on each particular execution stage. Practically, this allows the owner of the building to either sell or mortgage the building during any construction stage.

All the amendments put in place by this GEO should actually increase the confidence of the potential interested entities in entering into real estate transactions. The practical impact of this GEO is significant since all real estate sale-purchase agreements can only be concluded if the registration thereof in the cadastre of the respective property has been performed. In practice, investors interested in purchasing real estate first need to solve the cadastre issue and only afterwards can they initiate the development of their envisaged project. Potential investors’ time and costs will be saved after the finalization of the general cadastre of all real estate in Romania. 

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Government Emergency Ordinance no. 30/2010 amending Government Emergency Ordinance no. 60/2009 regarding the “First Home” Program, approved by Law 187/2010
The “First House” program was put in place by the Romanian Parliament in order to provide for opportunities for the public to have access to credits and loans from financial institutions, which otherwise could not be accessible in these difficult financial times. This Government Emergency Ordinance actually initiated a major amendment, namely the extension of the category of potential beneficiaries of the program from the persons who have not held an ownership title over any dwelling until the date that they sought the credit, extending it to persons who have not owned any dwelling since 2000.

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Government Emergency Ordinance no. 76/2010 amending Government Emergency Ordinance no. 34/2006 on the awarding of public procurement contracts, contracts for the concession of public works and contracts for the concession of services
Since public procurement remains one of the most significant tools for private businesses to obtain funding in difficult times, amendments were enacted by through this Government Emergency Ordinance for the purpose of turning the public procurement procedure into a more transparent and smooth one. There are many amendments put in place by this piece of legislation. Some of them refer to the amendment of the estimated value of the public procurement agreement to which the request for offers procedure, the simplest and most expedited procedure, may be applied by the contracting authority. Another key amendment brought by this GEO refers to the enforceability of the decisions adopted by the National Council for Solving Contestations. Consequently, after the entry into force of this new GEO, the contracting authority will be able to conclude the public procurement agreement as soon as the Council has issued its decision rejecting a possible contestation, regardless of whether the claimant decides to appeal the respective decision of the Council before the Court of Appeal or not. Moreover, in case the Council rejects the contestation, the contracting authority will be able to retain part of the participation warranty submitted by the contester, in a percentage corresponding to the estimated value of the agreement. Both the enforceability character of the decisions adopted by the National Council for Solving Contestations, as well as the possibility of the contracting authority to actually sanction a challenge without grounds are both meant to reduce the huge number of contestations and to make potential contesters think twice before using the challenging procedure.

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Government Ordinance no. 29/2010 amending Law 220/2008 on creating the system for the promotion of energy production from renewable sources
Law 220/2008 is an essential piece of legislation in the field of energy production from renewable energy sources. The secondary legislation to be adopted based on this law has been awaited for some time. This Government Ordinance defines certain concepts significant in this area, such as the “gross final energy consumer” or the “renewable energy related obligation”. Furthermore, the Government Ordinance introduced two distinct new chapters to Law 220/2008, i.e., one referring to the administrative procedures with regard to the issuance of licensing documents, and one referring to the certification systems for plumbers.

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Law 169/2010 amending and supplementing Law 85/2006 on insolvency procedures
The amendments put in place by Law 169/2010 were deemed to have two main objectives: to ensure the unitary implementation of insolvency-related legislation, and ensure the celerity of the insolvency procedure.

In order to diminish the number of companies that are subject to insolvency procedures, as well as to avoid the cases where insolvency claims are submitted against large companies for small amounts, the following amendments were adopted by Law 169/2010: the term calculated from the due date up to the date when the debtor’s insolvency is presumed to be overt was increased from 30 to 90 days; also, the threshold of the claim which may represent the ground for submitting the request to commence the insolvency procedure against a debtor has been increased from RON 30,000 to RON 45,000 and, in case of employees, the threshold must equal 6 medium gross wages per economy per employee, such medium gross wage per economy being established in the annual budget of social insurance.

Hopefully, following these new amendments to the insolvency law, potential claimants will cease to use this procedure as a tool to frighten their debtors and the public will finally come to realize that the initiation of insolvency procedures for the wrong reasons may eventually turn against the ones who initiated it. 

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Government Ordinance no. 75/2010 amending Law 21/1996, i.e. the Competition Law
The amendments introduced by Government Ordinance no. 75/2010 actually aim at the alignment of Romanian national legislation in the competition field with the legislation adopted at the European Union level. In line with the new legal provisions, the Competition Council adopted the secondary legislation necessary for the implementation of the amendments put in place by Government Ordinance no. 75/2010.

The new amendments bring some clarification to concepts used in the competition field such as “undertaking” or “relevant market”, defining such concepts in line with European Union standards. Another key amendment refers to the removal of the individual exemption procedure, and the introduction of the self-assessment system, as already put in place by European legislation. Further amendments were adopted in relation to the procedures concerning economic concentrations.

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Government Emergency Ordinance no. 50/2010 on consumer credit contracts
This Government Emergency Ordinance has transposed into the national legislation the provisions of Directive 2008/48/CE of the European Parliament and Council. Since the Romanian lending market has been hugely affected by the economic crisis, this legislation is meant to turn financial institutions into more trustworthy partners for consumers. The new Government Emergency Ordinance seeks to establish principles of transparency and free competition.

Some of the most significant provisions of the new Government Emergency Ordinance, highly appreciated by consumers, are the ones referring to their possibility of early repayment of their loans, to the reimbursement of credits with no costs attached, and to the possibility to withdraw from credit agreements with no cause, or to change the creditor depending on the credit conditions offered.

The Government Emergency Ordinance established a 90-day term following its entry into force, in which the banks and non-financial institutions must undertake the requisite measures in order to ensure their compliance in their credit contracts with the provisions of this GEO.

Furthermore, the GEO obliges lenders to inform potential borrowers both in the pre-contractual stage of the transaction, as well as at the moment of actually concluding the credit agreement, of their rights under law. Consumers are finally recognized as contractual partners of the banks or of the non-financial institutions and, consequently, they are to be treated as such.

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Government Emergency Ordinance no. 43/2010 amending a series of acts, aiming at the administrative simplification of certain authorizations/licenses/procedures, following measures undertaken by the Romanian Government as part of the Simplification Plan corresponding to the Memorandum of Understanding concluded between the European Union and Romania, signed in Bucharest and Brussels on June 23, 2009
By way of this Government Emergency Ordinance, procedures were simplified by amending a series of acts, such as: Law 31/1990, i.e. the Company Law; Law 13/2007, i.e. the Electricity Law; Law 422/2001 for the protection of historical monuments; the Government Ordinance no. 25/2006 for strengthening the administrative capacity of the Romanian Copyright Office. We are not detailing herein the provisions of this piece of law, especially since it actually refers to various other distinct laws. However, the amendments put in place by this GEO attempt to simplify certain procedures for obtaining various authorizations and other such documents put in place by the respective laws.

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The Fiscal Code
Year 2010 brought multiple amendments to the Fiscal Code. The increase in the VAT from 19% to 24% has undoubtedly brought a huge burden on companies. Since the Fiscal Code has been substantially amended in the course of 2010, it is compulsory for any interested investor to check closely the fiscal provisions applicable to any transaction, before entering such transaction. Among the amendments to the Fiscal Code put in place during 2010, there was a special one hugely affecting the micro enterprises. According to an amendment adopted in 2010, the provision regarding the state tax of 3% applicable to the turnover of the micro enterprises was taken put, and replaced with the regular percentage of 16% to the profit. However, since this provision raised huge debates in the economical environment, another amendment was put in place in 2010, in force since the January the 1st, 2011, according to which the former provision of the Fiscal Code was reintroduced, and the state taxe percentage applicable now to micro enterprises is of 3% to the turn over of the company.

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The First Pilot Judgment against Romania
Another difficult moment during the current year has been represented by the issuance by the European Court of Human Rights of the first pilot judgment against Romania, i.e. Maria Atanasiu & Others v. Romania. We have exhaustively treated this subject in our November 2010 Digest article and consequently, we are not going to detail this matter herein. However, attention should be given to this pilot judgment, since the Romanian state is now obliged to find the adequate solutions in order to put in place a coherent and effective restitution system in the 18-month term granted by the Court, or, otherwise, the negative consequences can be highly damaging for Romania.

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Conclusion
Needless to say, the increase in the VAT has burdened a lot the businesses in Romania and it has prevented many potential investors from entering the Romanian market. The adoption of laws relevant in various business sectors may have resulted in the improvement of certain procedures already put in place. However, no major improvements could be seen in the absence of specific laws designated to help the activity of the small and medium enterprises which are the central part of Romania’s economy, and consequently the Romanian legislative power should further adopt the proper solutions in order to support the SMEs redress from the current difficulties which they are currently facing.

Close attention should be paid in the course of 2011 on the proper implementation of all these laws. The substantial amendments to the Fiscal Code alone definitely raise a lot of implementation issues, and hopefully these amendments will help clarify and smoothen fiscal aspects, instead of bringing more confusion. Furthermore, the envisaged entry into force of the new Civil and Civil Procedure Codes, as well as of the Criminal and Criminal Procedure Codes, the debates currently held over the proposed amendment of the Labor Code, all this represents significant steps to be taken within the Romanian legislative framework in the course of 2011. But the most important aspect of all remains the Romanian institutions’ real capacity to properly implement all the laws already adopted.

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Editors Note: It is our policy not to mention our clients by name in The Romanian Digest™ or discuss their business unless it is a matter of public record and our clients approve. The information herein is correct to the best of our knowledge and belief at press time. Specific advice should be sought from us, however, before investment or other decisions are made.

Copyright 2011 Rubin Meyer Doru & Trandafir, societate civila de avocati. All rights reserved. No part of The Romanian Digest™ may be reproduced, reused or redistributed in any form without prior written permission from the publisher.

 
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