On Monday, 18 April 2022, the Government Emergency Ordinance no. 46/2022 on establishing a framework for the screening of foreign direct investment into the Union (“GEO 46/2022“) has been published in the Official Journal of Romania. The main purpose of this enactment is to implement the legal provisions set out in the Regulation (EU) 2019/452 on establishing a framework for the screening of foreign direct investments into the Union (“The Regulation“).
GEO 46/2022 sets out a new legal framework which aims to screen the foreign investments in relevant sensitive economic fields and investments that exceed the threshold of EURO 2.000.000. Mainly, the purpose of the Ordinance is to prevent any investment that could disturb or endanger the interest of national security and/or public order, as well as the European Union’s interests.
Before analyzing the main procedural aspects of the Ordinance, we would like to point out that the new legal framework provides us with clear definitions of the foreign investor, the foreign direct investment and the new foreign direct investment. A particular distinction is made between the concept of foreign direct investment and new foreign direct investment, as follows:
– As per the GEO 46/2022, the foreign direct investment is defined as an investment of any kind by a foreign investor with the aim of establishing or maintaining lasting and direct links between the foreign investor and the undertaking concerned or a separate organizational unit of an undertaking, to which these funds are made available or are to be made available for the conduct of an economic activity in Romania, and which allow the foreign investor to exercise control over the management of the enterprise;
– On a separate note, the GEO 46/2022 defines the new foreign direct investment as an initial investment in tangible and intangible assets located in the same sector, linked to the start-up of a new enterprise, the extension of the capacity of an existing enterprise, the diversification of the production of an enterprise by products not previously manufactured, or a fundamental change in the overall production process of an existing enterprise.
Regarding the investments that are subject to screening in front of the Commission for the Examination of Foreign Direct Investment (“CEFDI“), there are two main criteria for establishing the reporting obligation. Thus, the first criterion consists of involving the relevant fields set out in the Decision of the Supreme Council of National Defense (“SCND“) (i.e. the security of the citizens, borders, energy, critical infrastructure, information and communication systems, banking activities, agriculture, processes of privatization of state companies and others), and the second criterion is the threshold value of the investment in an amount exceeding EURO 2.000.000. In reference to the threshold value, the new legal framework provides an exception, stating that even if a certain foreign investment is below the EURO 2.000.000 threshold, if it is deemed it may still impact the national security or public order, such investments must also comply with the screening procedure.
The obligation to file for screening of the foreign investment must be met by the investor prior to any investment actions. Also, in case of foreign investment carried out through a merger, all undertakings concerned have the obligation to file for screening and subsequent authorization.
Failure to comply with both of the above-mentioned obligations are subject to a fine up to 10% of the investor’s worldwide turnover.
In examining the investment, the CEFDI can either (i) issue a decision of approval of the investment, (ii) conditional approval or (iii) rejection of the application. The approval decision is not subject to further assessment, meaning that the investment is allowed to be carried out, whilst the conditional approval and the rejection have a merely advisory character, as the CEFDI will send such decisions further to the Government in order to finally decide upon the conditional approval or the rejection of the investment.
At this stage, it is important to note that the screening procedure is also applicable to foreign direct investment currently in process, which meet the criteria set by GEO 46/2022.
The GEO 46/2022 has entered into force on 18 April 2022, the date of its publication in the Official Journal of Romania.
For any legal advice in relation to this new enactment and related procedures, we remain available and will gladly provide any required assistance.