Policies Towards Foreign Direct Investment

Romania actively seeks foreign direct investment, and offers a market of around 19 million consumers, a relatively well-educated workforce at competitive wages, a strategic location, and abundant natural resources.  To date, favored areas for U.S. investment include IT and telecommunications, energy, services, manufacturing – especially in the automotive sector, consumer products, and banking.  InvestRomania is the government’s lead agency for promoting and facilitating foreign investment in Romania.  InvestRomania offers assistance and advisory services free of charge to foreign investors and international companies for project implementation and opening new offices or manufacturing facilities.

Romania’s accession to the European Union (EU) on January 1, 2007 helped solidify institutional reform.  However, legislative and regulatory unpredictability as well as weak public administration continue to negatively impact the investment climate.  As in any foreign country, prospective U.S. investors should exercise careful due diligence, including consultation with competent legal counsel, when considering an investment in Romania.  Governments in Romania have repeatedly allowed political interests or budgetary imperatives to supersede accepted business practices in ways harmful to investor interests.

The energy sector has suffered from recent changes.  In 2018, offshore natural gas companies benefited from a streamlined permitting process but were hit with a windfall profit tax that previously applied only to onshore gas production.  Additionally, in February 2018, legislation changed the reference price for natural gas royalties from the Romanian market price to the Vienna Central European Gas Hub (CEGH) price, resulting in a significant increase in royalties.  The GOR has set July 1, 2020 as the deadline for natural gas market liberalization and January 1, 2021 as the deadline for electricity market liberalization.

Investments involving public authorities can be more complicated than investments or joint ventures with private Romanian companies.  Large deals involving the government – particularly public-private partnerships and privatizations of key state-owned enterprises (SOE) – can be stymied by vested political and economic interests or bogged down due to a lack of coordination between government ministries.

The government has repeatedly reviewed Public-Private Partnership (PPP) legislation, and there are no active PPP projects under implementation to date.  In December 2017, the GOR shifted the burden of mandatory payroll deductions for pensions, healthcare, and income taxes from employers to employees.  To avoid reductions in employee net pay and retain labor in a tight market, many companies increased salaries to offset employee losses.  Other companies, wary of further possible changes, offered monthly bonuses rather than formally amending employee contracts.

The government and foreign investors have ongoing disputes over tax matters such as the “claw back tax” on pharmaceuticals, which increased from 19 percent in Q4 2017 to 28 percent in Q4 2019.  A presidential decree capping the tax at its current levels was issued in March 2020 due to concerns that further increases would impact COVID-19 medication.  Additionally, Parliament passed concurrent legislation in April 2020 that, pending a presidential signature, would create classes of medication that are taxed at separate levels:  15% for medicine produced in Romania, 20% for generics, and 25% for innovative drugs.  Pharmaceutical companies pay the claw back tax on all sales of drugs reimbursed through the public health system.  The Ministry of Health (MOH) calculates the tax to recover the cost for reimbursed drug sales in the previous quarter that exceed its budget.  Since implementation in 2009, the pharmaceutical industry has suggested numerous solutions to increase predictability and transparency in the National Health Insurance House’s computations.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities are free to establish and own business enterprises, and to engage in all forms of remunerative activity.  Romanian legislation and regulation provide national treatment for foreign investors, guarantee free access to domestic markets, and allow foreign investors to participate in privatizations.  There is no limit on foreign participation in commercial enterprises.  Foreign investors are entitled to establish wholly foreign-owned enterprises in Romania (although joint ventures are more typical), and to convert and repatriate 100 percent of after-tax profits.

Romania has taken established legal parameters to resolve contract disputes expeditiously.  Mergers and acquisitions are subject to review by the Competition Council.  According to the Competition Law, the Competition Council notifies Romania’s Supreme Defense Council regarding any merger or acquisition of stocks or assets which could impact national security.  The Supreme Defense Council then reviews these referred mergers and acquisitions for potential threats to national security.  To date, the Supreme Defense Council has not blocked any merger or acquisition.  The Romanian capital account was fully liberalized in 2006, prior to gaining EU membership in 2007.  Foreign firms are allowed to participate in the management and administration of the investment, as well as to assign their contractual obligations and rights to other Romanian or foreign investors.

Other Investment Policy Reviews

Romania has not undergone any third-party investment policy reviews through multilateral organizations in over ten years.  The Heritage Foundation’s 2020 Economic Freedom Report indicates recognition of secured interests in private property, but that the property registry is inadequate and impedes investment.  The Report also notes that, for Romania to make the leap into the mostly free economic freedom category, the government must repair the weakest link in the country’s economic freedom chain: the low integrity of the government and its ineffective fight against corruption.  Inconsistency and a lack of predictability in the jurisprudence of the courts and the interpretation of the laws remain major concerns.  High levels of corruption, bribery, and abuse of power remain problems.  Legislative instability, unpredictable decision-making, and the low quality of institutions create an uphill battle for business owners.  Labor force participation is among the lowest in the EU and the labor market is heavily regulated.

According to the World Bank, economic growth rates have increased, but the benefits have not been felt by all Romanians.  Progress on implementing reforms and improving the business environment has been uneven.  The World Bank’s 2020 Doing Business Report and Doing Business in the European Union Report indicate that Romania ranks below the EU average in the ease of starting a business.

Business Facilitation

The National Trade Registry has an online service available in Romanian at https://portal.onrc.ro/ONRCPortalWeb/ONRCPortal.portal .  Romania has a foreign trade department and an investment promotion department within the Ministry of Economy, Energy, and Business Climate.  InvestRomania is the government’s lead agency for promoting and facilitating foreign investment in Romania.  InvestRomania offers assistance and advisory services free of charge to foreign investors and international companies for project implementation and opening new offices or manufacturing facilities.  More information is available at http://www.investromania.gov.ro/web/ .

According to the World Bank, it takes six procedures and 20 days to establish a foreign-owned limited liability company (LLC) in Romania, compared to the regional average for Europe and Central Asia of 5.2 procedures and 11.9 days.  In addition to the procedures required of a domestic company, a foreign parent company establishing a subsidiary in Romania must authenticate and translate its documents abroad.  Foreign companies do not need to seek an investment approval.  The Trade Registry judge must hold a public hearing on the company’s application for registration within five days of submission of the required documentation.  The registration documents can be submitted, and the status of the registration request monitored online.

Companies in Romania are free to open and maintain bank accounts in any foreign currency, although, in practice, Romanian banks offer services only in Romanian lei (RON) and certain hard currencies (Euros and U.S. dollars).  The minimum capital requirement for domestic and foreign LLCs is RON 200 (USD 47).  Areas for improvement include making all registration documents available to download online in English as currently only a portion are available online, and they are only in Romanian.

Romania defines microenterprises as having less than nine employees, small enterprises as having less than 50 employees, and medium-sized enterprises as having less than 250 employees.  Regardless of ownership, microenterprises and SMEs enjoy “de minimis” and other state aid schemes from EU funds or from the state budget.  Business facilitation mechanisms provide for equitable treatment of women in the economy.

Outward Investment

There are no restrictions or incentives on outward investment.

Transparency of the Regulatory System

Romanian law requires consultations with stakeholders, including the private sector, and a 30-day comment period on legislation or regulation affecting the business environment (the “Sunshine Law”).  Some draft pieces of legislation pending with the government are available in Romanian at http://www.sgg.ro/acte-normative/ .  Proposed items for cabinet meetings are not always publicized in advance or in full.  As a general rule, the agenda of cabinet meetings should include links to the draft pieces of legislation (government decisions, ordinances, emergency ordinances, or memoranda) slated for government decision, but this is not always the case.  Legislation pending with the parliament is available at http://www.cdep.ro/pls/proiecte/upl_pck.home for the Chamber of Deputies and at https://www.senat.ro/legis/lista.aspx  for the Senate.  The Chamber of Deputies is the decision-making body for economic legislation.  Regulatory impact assessments are often missing, and Romanian authorities do not publish the comments they receive as part of the public consultation process.

Foreign investors point to the excessive time required to secure necessary zoning permits, environmental approvals, property titles, licenses, and utility hook-ups.

Public comments received by regulators are not made public.  The Sunshine Law (Law 52/2003 on Transparency in Public Administration) requires public authorities to allow the public to comment on draft legislation and sets the general timeframe for stakeholders to provide input.  However, if the public authority does not follow the Sunshine Law’s public consultation timelines, no penalty or sanction applies.  In some cases, public authorities have set deadlines much shorter than the standards set forth in the law.

International Regulatory Considerations

As an EU member state, Romanian legislation is largely driven by the EU acquis, the body of EU legislation.  EC regulations are directly applicable, while implementation of directives at the national level is done through the national legislation.  Romania’s regulatory system incorporates European standards.  Romania has been a World Trade Organization (WTO) member since January 1995 and a member of the General Agreement on Tariffs and Trade (GATT) since November 1971.  Romania is a member of the EU since 2007.  Technical regulation notifications submitted by the EU are valid for all Member States.  The EU signed the Trade Facilitation Agreement (TFA) in October 2015.  Romania has implemented all TFA requirements.

Legal System and Judicial Independence

Romania recognizes property and contractual rights, but enforcement through the judicial process can be lengthy, costly, and difficult.  Foreign companies engaged in trade or investment in Romania often express concern about the Romanian courts’ lack of expertise in commercial issues.  There are no specialized commercial courts, but there are specialized civil courts.  Judges generally have limited experience in the functioning of a market economy, international business methods, intellectual property rights, or the application of Romanian commercial and competition laws.  As stipulated in the Constitution, the judicial system is independent from the executive branch and generally considered procedurally competent, fair, and reliable.  Affected parties can challenge regulations and enforcement actions in court.  Such challenges are adjudicated in the national court system.

Inconsistency and a lack of predictability in the jurisprudence of the courts or in the interpretation of the laws remains a major concern for foreign and domestic investors and for wider society.  Even when court judgments are favorable, enforcement of judgments is inconsistent and can lead to lengthy appeals.  Failure to implement court orders or cases where the public administration unjustifiably challenges court decisions constitute obstacles to the binding nature of court decisions.

Mediation as a tool to resolve disputes is gradually becoming more common in Romania, and a certifying body, the Mediation Council, sets standards and practices.  The professional association, the Union of Mediation Centers in Romania, is the umbrella organization for mediators throughout the county.  Court-sanctioned and private mediation is available at recognized mediation centers in every county seat.

There is no legal mechanism for court-ordered mediation in Romania, but judges can encourage litigants to use mediation to resolve their cases.  If litigants opt for mediation, they must present their proposed resolution to the judge upon completion of the mediation process.  The judge must then approve the agreement.

Laws and Regulations on Foreign Direct Investment

Romania became a member of the European Union on January 1, 2007.  The country has worked assiduously to create an EU-compatible legal framework consistent with a market economy and investment promotion.  At the same time, implementation of these laws and regulations frequently lags or is inconsistent, and lack of legislative predictability undermines Romania’s appeal as an investment destination.

Romania’s legal framework for foreign investment is encompassed within a substantial body of law largely enacted in the late 1990s.  It is subject to frequent revision.  Major changes to the Civil Code were enacted in October 2011 including replacing the Commercial Code, consolidating provisions applicable to companies and contracts into a single piece of legislation, and harmonizing Romanian legislation with international practices.  The Civil Procedure Code, which provides detailed procedural guidance for implementing the new Civil Code, came into force in February 2013.  Fiscal legislation is revised frequently, often without scientific or data-driven assessment of the impact the changes may have on the economy.

Given the state of flux of legal developments, investors are strongly encouraged to engage local counsel to navigate the various laws, decrees, and regulations, as several pieces of investor-relevant legislation have been challenged in both local courts and the Constitutional Court.  There have been few hostile takeover attempts reported in Romania.  Romanian law has not focused on limiting potential mergers or acquisitions.  There are no Romanian laws prohibiting or restricting private firms’ free association with foreign investors.

Competition and Anti-Trust Laws

Romania has extensively revised its competition legislation, bringing it closer to the EU Acquis Communautaire and best corporate practices.  A new law on unfair competition came into effect in August 2014.  Companies with a market share below 40 percent are no longer considered to have a dominant market position, thus avoiding a full investigation by the Romanian Competition Council (RCC) of new agreements, saving considerable time and money for all parties involved.  Resale price maintenance and market and client sharing are still prohibited, regardless of the size of either party’s market share.  The authorization fee for mergers or takeovers ranges between EUR 10,000 (USD 10,858) and EUR 50,000 (USD 54,291).  The Fiscal Procedure Code requires companies that challenge an RCC ruling to front a deposit while awaiting a court decision on the merits of the complaint.

Romania’s Public Procurement Directives outline general procurements of goods and equipment, utilities procurement (“sectorial procurement”), works and services concessions, and remedies and appeals.  An extensive body of secondary and tertiary legislation accompanies the four laws and has been subject to repeated revisions.  Separate legislation governs defense and security procurements.  In a positive move, this new body of legislation moved away from the previous approach of using lowest price as the only public procurement selection criterion.  Under the new laws, an authority can use price, cost, quality-price ratio, or quality-cost ratio.  The new laws also allow bidders to provide a simple form (the European Single Procurement Document) to participate in the award procedures.  Only the winner must later submit full documentation.

The public procurement laws stipulate that challenges regarding procedure or an award can be filed with the National Complaint Council (NCC) or the courts.  Disputes regarding execution, amendment, or termination of public procurement contracts can be subject to arbitration.  The new laws also stipulate that a bidder has to notify the contracting authority before challenging either the award or procedure.  Not fulfilling this notification requirement results in the NCC or court rejecting the challenge.

The EC’s 2020 European Semester Country Report for Romania notes that despite improved implementation, public procurement remains inefficient.  According to the report, 97% of businesses think corruption is widespread in Romania, and 87% say it is widespread in public procurement managed by national authorities.

Expropriation and Compensation

The law on direct investment includes a guarantee against nationalization and expropriation or other equivalent actions.  The law allows investors to select the court or arbitration body of their choice to settle disputes.  Several cases involving investment property nationalized during the Communist era remain unresolved.  In doing due diligence, prospective investors should ensure that a thorough title search is done to ensure there are no pending restitution claims against the land or assets.

Dispute Settlement

ICSID Convention and New York Convention

Romania is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.  Romania is also a party to the European Convention on International Commercial Arbitration concluded in Geneva in 1961 and is a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID).  Romania’s 1975 Decree 62 provides for legal enforcement of awards under the ICSID Convention.

Investor-State Dispute Settlement

Romania is a signatory to the New York Convention, the European Convention on International Commercial Arbitration (Geneva), and the Settlement of Investment Disputes between States and Nationals of Other States (ICSID).  There have been 15 ICSID cases in total against Romania.  Three of them involved U.S. investors.  The arbitral tribunal ruled in favor of Romania in two of them.  Six investor-state arbitration cases against Romania are currently pending with the International Center for Settlement of Investment Disputes (ICSID).  Local courts recognize and enforce foreign arbitral awards against the government.  There is no history of extrajudicial action against investors.

International Commercial Arbitration and Foreign Courts

Romania increasingly recognizes the importance of investor-state dispute settlement and has provided assurances that the rule of law will be enforced.  Many agreements involving international companies and Romanian counterparts provide for the resolution of disputes through third-party arbitration.  Local courts recognize and enforce foreign arbitral awards and judgments of foreign courts.  There are no statistics on the percentage of cases in which Romanian courts ruled against state-owned enterprises (SOEs).

Romanian law and practice recognize applications to other internationally known arbitration institutions, such as the International Chamber of Commerce (ICC) Paris Court of Arbitration and the United Nations Commission on International Trade Law (UNCITRAL).  Romania has an International Commerce Arbitration Court administered by the Chamber of Commerce and Industry of Romania.  Additionally, in November 2016, the American Chamber of Commerce in Romania (AmCham Romania) established the Bucharest International Arbitration Court (BIAC).  This new arbitration center focuses on business and commercial disputes involving foreign investors and multinationals active in Romania.

According to the World Bank 2020 Doing Business Report, it takes on average 512 days to enforce a contract, from the moment the plaintiff files the lawsuit until actual payment.  Associated costs can total around 27 percent of the claim.  Arbitration awards are enforceable through Romanian courts under circumstances similar to those in other Western countries, although legal proceedings can be protracted.

Bankruptcy Regulations

Romania’s bankruptcy law contains provisions for liquidation and reorganization that are generally consistent with Western legal standards.  These laws usually emphasize enterprise restructuring and job preservation.  To mitigate the time and financial cost of bankruptcies, Romanian legislation provides for administrative liquidation as an alternative to bankruptcy.  However, investors and creditors have complained that liquidators sometimes lack the incentive to expedite liquidation proceedings and that, in some cases, their decisions have served vested outside interests.  Both state-owned and private companies tend to opt for judicial reorganization to avoid bankruptcy.

In December 2009, the debt settlement mechanism Company Voluntary Agreements (CVAs) was introduced as a means for creditors and debtors to establish partial debt service schedules without resorting to bankruptcy proceedings.  The global economic crisis did, however, prompt Romania to shorten insolvency proceedings in 2011.

According to the World Bank’s Doing Business Report, resolving insolvency in Romania takes 3.3 years on average, compared to 2.3 years in Europe and Central Asia, and costs 10.5 percent of the debtor’s estate, with the most likely outcome being a piecemeal sale of the company.  The average recovery rate is 34.4 cents on the dollar.  Globally, Romania stands at 56 in the ranking of 190 economies on the ease of resolving insolvency.

Capital Markets and Portfolio Investment

Romania welcomes portfolio investment.  In September 2019, the Financial Times and the London Stock Exchange (FTSE) promoted the Bucharest Stock Exchange (BVB) to Emerging Secondary Capital Market status from Frontier Capital Market classification.  The decision comes into force beginning September 1, 2020, when the BVB will transfer from FTSE Frontier Index to FTSE Global Equity Index Series (GEIS).  The Financial Regulatory Agency (ASF) regulates the securities market.  The ASF implements the registration and licensing of brokers and financial intermediaries, the filing and approval of prospectuses, and the approval of market mechanisms.

The BVB resumed operations in 1995 after a hiatus of nearly 50 years.  The BVB operates a two-tier system with the main market consisting of 83 companies.  The official index, BET, is based on an index of the ten most active stocks.  BET-TR is the total return on market capitalization index, adjusted for the dividends distributed by the companies included in the index.  Since 2015, the BVB also has an alternative trading system (MTS-AeRO) with 297 listed companies – mostly small- and medium-sized enterprises (SMEs) – and features a relaxed listing criteria.  The BVB allows trade in corporate, municipal, and international bonds.  Investors can use gross basis trade settlements, and trades can be settled in two net settlement cycles.  The BVB’s integrated group includes trading, clearing, settlement, and registry systems.  The BVB’s Multilateral Trading System (MTS) allows trading in local currency of 15 foreign stocks listed on international capital markets.

Despite a diversified securities listing, international capital and financial markets have adversely affected the Romanian capital market and liquidity remains low.  Neither the government nor the Central Bank imposes restrictions on payments and transfers.  Country funds, hedge funds, private pension funds, and venture capital funds continue to participate in the capital markets.  Minority shareholders have the right to participate in any capital increase.  Romanian capital market regulation is now EU-consistent, with accounting regulations incorporating EC Directives IV and VII.

Money and Banking System

Thirty-four banks and credit cooperative national unions currently operate in Romania.  The largest is the privately-owned Transilvania Bank (17.7 percent market share), followed by Austrian-owned Romanian Commercial Bank (BCR-Erste, 14.4 percent); French-owned Romanian Bank for Development (BRD-Société Générale, 11.3 percent); Dutch-owned ING (9.01 percent); Italian-owned UniCredit ( 9.0 percent); and Austrian-owned Raiffeisen ( 8.7 percent).

The banking system is stable and well-provisioned relative to its European peers.  According to the National Bank of Romania, as of December 2019, non-performing loans accounted for 4.08 percent of total bank loans.  As of December 2019, the banking system’s solvency rate was 20.0 percent, which has remained steady over recent years.

The government has encouraged foreign investment in the banking sector, and mergers and acquisitions are not restricted.  The only remaining state-owned banks are the National Savings Bank (CEC Bank) and EximBank, comprising 8.1 percent of the market combined.

While the National Bank of Romania must authorize all new non-EU banking entities, banks and non-banking financial institutions already authorized in other EU countries need only notify the National Bank of Romania of plans to provide local services based on the EU passport.

The Romanian Association of Banks has promoted a dialogue with interested parties – institutions, representatives of consumers’ associations, businesses, and the media – to improve the legal framework to allow adoption of digital technologies in the financial and banking sectors.

Foreign Exchange and Remittances

Foreign Exchange

Romania does not restrict the conversion or transfer of funds associated with direct investment.  All profits made by foreign investors in Romania may be converted into another currency and transferred abroad at the market exchange rate after payment of taxes.

Romania’s national currency, the Leu, is freely convertible in current account transactions, in accordance with the International Monetary Fund’s (IMF) Article VII.

Remittance Policies

There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital gains, returns on intellectual property, or imported inputs.  Proceeds from the sales of shares, bonds, or other securities, as well as from the conclusion of an investment, can be repatriated.

Romania implemented regulations liberalizing foreign exchange markets in 1997.  The inter-bank electronic settlement system became fully operational in 2006, eliminating past procedural delays in processing capital outflows.  Commission fees for real-time electronic banking settlements have gradually been reduced.

Capital inflows are also free from restraint.  Romania concluded capital account liberalization in September 2006, with the decision to permit non-residents and residents abroad to purchase derivatives, treasury bills, and other monetary instruments.

Sovereign Wealth Funds

Plans to establish a Sovereign Development and Investment Fund (SDIF) were repealed by the current government in January 2020.

Romania adhered to the OECD Declaration on International Investment and Multinational Enterprise in 2004.  The government regularly sends representatives to the working sessions of the OECD Investment Committee and its Working Party on Responsible Business Conduct.  Romania established an OECD National Contact Point in 2005 to promote the OECD Guidelines for Multinational Enterprises.  Romania’s investment promotion agency InvestRomania currently serves as the contact point.

Several NGOs in Romania monitor, advocate, and raise concerns on RBC issues.  No high-profile cases of private sector impact on human rights were recorded in 2019.  However, the National Council for Combating Discrimination (CNCD), the government agency responsible for applying domestic and EU anti-discrimination laws, imposed several fines on companies for discrimination against their own staff or prospective employees.  The cases involved gender-based discrimination and harassment over labor union membership and childcare leave.  The government has not fully implemented a law which prohibits discrimination against persons with physical, sensory, intellectual, and mental disabilities in employment, education, transportation, and access to health care.

Romania does not participate in the Extractive Industries Transparency Initiative (EITI), but is an adherent to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas since 2012.

Romania’s fight against high- and medium-level corruption, a model in Southeastern Europe over the past decade suffered significant setbacks between 2016 and late 2019 due to a concerted campaign under the previous government to weaken anti-corruption efforts, the criminal and judicial legislative framework, and judicial independence.  Judicial institutions, NGOs, the EU, and NATO allied governments have all raised concerns about legislative initiatives that furthered this trend in that time period.  In Transparency International’s 2019 Corruption Perceptions Index, Romania’s score fell from 47 in 2018 to 44 out of 100.  This is among the lowest ranking of EU member states, tying with Hungary and ranking one position above Bulgaria.  The current government has begun rolling back the negative actions of the prior government, but this effort will take some time to have full effect.

Domestic and internal rule-of-law observers and law enforcement criticized the wide range of amendments that the former government introduced to the criminal and criminal procedure codes as weakening the investigative toolkits, including in fighting corruption between 2016 and 2019.  In July 2019, the Constitutional Court found these changes unconstitutional, and the current government plans to revise these codes.

The European Commission (EC) under the Cooperation and Verification Mechanism (CVM), and the Council of Europe’s (COE) Group of States Against Corruption (GRECO) prepared 2019 reports prior to the current National Liberal Party (PNL) government taking power in November 2019.  The October 2019 report, which covered actions taken through June 2019, confirmed the backtracking from the progress made in previous years and set out in the November 2018 report.  The report also emphasized that “The key institutions of Romania need to collectively demonstrate a strong commitment to judicial independence and the fight against corruption as indispensable cornerstones, and to ensure the capacity of national safeguards and checks and balances to act.”  GRECO’s July 2019 Interim Compliance Report warned that statutes enacted through emergency ordinances, or with insufficient transparency and public consultation, will weaken judicial independence.  A June 2019 Venice Commission report was also highly critical of the use of Emergency Ordinances.  The Constitutional Court found most of those changes unconstitutional.  A May 2019 non-binding referendum bans the use of Emergency Ordinances for issues related to the justice sector.

After a political and media campaign against the National Anti-Corruption Directorate (DNA) resulted in the dismissal of the Chief Prosecutor of the DNA in 2018, the position remained vacant until a new government took power in November 2019.  The government filled the position in March 2020.  Meanwhile the prosecutor’s office set up by the previous government to investigate and prosecute judges and prosecutors, which appeared to only be undertaking politically motivated cases, continues to operate.  The current government’s efforts to disband or reform it stalled during the COVID-19 crisis.  Successful court challenges of the High Court of Cassation and Justice’s procedures triggered the review of numerous high-level corruption cases.  Both the national cabinet and Parliament adopted codes of conduct, yet their overly general provisions have so far rendered them inconsequential.  Conflicts of interest, respect for standards of ethical conduct, and integrity in public office in general remained a concern for all three branches of government.  Individual executive agencies enforced sanctions slowly, and agencies’ own inspection bodies were generally inactive.

In June 2019, the previous government adopted a sizable Administrative Code by emergency ordinance.  The Code weakened the authority of the National Civil Service Agency to oversee civil service by merit-based selection, lowered the voting requirements for transferring management of properties by local councils, and limited local elected officials’ legal liability for official acts by shifting it to civil servants.  Implementation of the 2016-2020 national anticorruption strategy, which the previous government adopted in 2016, has been slow, especially with regard to prevention efforts.  The strategy focused on strengthening administrative review and transparency within public agencies, prevention of corruption, increased and improved financial disclosure, conflict of interest oversight, more aggressive investigation of money laundering, and passage of legislation to allow for more effective asset recovery.  The strategy includes education in civics and ethics for civil servants, a requirement for peer reviews of state institutions, stepped-up measures to strengthen integrity in the business environment, a significant decrease in public procurement fraud, and an increased role for ethics advisors and whistle-blowers.  There has been little action in these areas, especially on the prevention component.  Absent political support from the top, the new National Agency for Managing Seized Assets (ANABI) has only made limited progress.

Romania implemented the revised Public Procurement Directives with the passage in 2016 of new laws to improve and make public procurement more transparent.  The National Agency for Public Procurement has general oversight over procurements and can draft legislation, but procurement decisions remain with the procuring entities.  State entities, as well as public and private beneficiaries of EU funds, are required by law to follow public procurement legislation and use the e-procurement system.  Sectoral procurements, including private companies in energy and transportation, also have to follow the public procurement laws and tender via the e-procurement website.  The February 2020 EU Country Report for Romania points out that public-procurement remains inefficient.

In October 2016, the “Prevent” IT system, an initiative sponsored by the National Integrity Agency for ex-ante check of conflicts of interests in public procurement, was signed into law.  The mechanism aims to avoid conflicts of interest by automatically detecting conflict of interests in public procurement before the selection and contract award procedure.

The laws extend to politically exposed persons yet at the same time, politicians frequently criticize magistrates in the media and judicial decisions are often treated with a lack of respect.  Laws prohibit bribery, both domestically and for Romanian companies doing business abroad.  The judiciary remains paper-based and inefficient, and Romania loses a number of cases each year in the European Court of Human Rights (ECHR) due to excessive trial length.  Asset forfeiture laws exist, but a functioning regime remains under development.  Fully 80 percent of cases in the court system are property related.

While private joint stock companies use internal controls, ethics, and compliance programs to detect and prevent bribery, since 2017 the government has rolled back corporate governance rules for state-owned enterprises and has repeatedly resorted to profit and reserves distribution in dividends to bolster the budget.  U.S. investors have complained of both government and business corruption in Romania, with the customs service, municipal officials, and local financial authorities most frequently named.  According to the EC’s 2020 European Semester Country Report for Romania, since 2013, the share of companies that perceive corruption as a problem increased in Romania by 23 percentage points, the largest increase in the EU.  This result stands in stark contrast with the EU average, which continued to decrease (now at 37%).  Overall, 97% of businesses think that corruption is widespread in Romania, and 87% say it is widespread in public procurement managed by national authorities.  On a more positive note, 50% of respondents think that those engaged in corruption would be caught by police, and 43% think that those caught for bribing a senior official receive appropriate sanctions.  These results are both higher than the EU average.

Romania is a member of the Southeast European Law Enforcement Center (SELEC).  NGOs enjoy the same legal protections as any other organization, but NGOs involved in investigating corruption receive no additional protections.  Recent regulations have increased costs and administrative burdens for NGOs and reduced the pool of potential donors.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Romania is member of the UN Anticorruption Convention and the Council of Europe’s Group of States Against Corruption (GRECO).  Romania is not a member of the OECD Anti-Bribery Convention.

Romania expressed interest to join the new anti-corruption working group of the Open Government Partnership initiative.

Resources to Report Corruption

Contact at government agency responsible for combating corruption:

ORGANIZATION: National Anticorruption Directorate (DNA)
ADDRESS: Str. Stirbei Voda nr. 79-81, Bucuresti
TELEPHONE NUMBER: +40 21 312 73 99
EMAIL ADDRESS: anticoruptie@pna.ro
WEBSITE: http://www.pna.ro/sesizare.xhtml?jftfdi=&jffi=sesizare 

Contact at “watchdog” organizations:

ORGANIZATION: Expert Forum
ADDRESS:Strada Semilunei, apt 1, Sector 2, Bucuresti,
TELEPHONE NUMBER: +40 21 211 7400
EMAIL ADDRESS: office@expertforum.ro

ORGANIZATION: Freedom House Romania
ADDRESS: Bd. Ferdinand 125, Bucuresti
TELEPHONE NUMBER: +4021 253 28 38
EMAIL ADDRESS: guseth@freedomhouse.ro

ORGANIZATION: Funky Citizens
ADDRESS: Colivia, Pache Protopopescu 9
TELEPHONE NUMBER: +40 0723 627 448
EMAIL ADDRESS: elena@funkycitizens.org

Romania does not have a history of politically motivated damage to foreign investors’ projects or installations.  Major civil disturbances are rare though some have occurred in past years.  Anti-shale gas protestors invaded the site of a U.S. energy company’s exploratory well in 2013, damaging the perimeter fence and some equipment.

During the February 2017 anti-government protests, and intermittently during the previous government, some government leaders pointed to “multinationals” as among the orchestrators.  As of March 2019, the government has taken no adverse action against the multinational companies, and public attention has diminished.