FDI: Obligations and Impact under Emergency Ordinance No. 46/2022 | LegalFlash nr. 107

Considering the relatively new nature of the obligations under GEO no. 46/2022 regarding the implementation measures of Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union, and particularly the changes made to GEO no. 46/2022 by GEO no. 108/2023 and Law no. 231/2024, we hereby present a series of interesting aspects regarding the investments targeted by the normative acts:

• GEO no. 46/2022 aims to control investments from the perspective of national security, and not from competition perspective; 
• the investment concept: the investment must have the purpose of establishing or maintaining connections between the investor and the undertaking to which the investment is intended (for example, the acquisition of participations in companies regardless of the percentage, acquisitions that lead to change of control, etc.); therefore, the normative act applies to a wide range of investments; in practice, asset deals, share deals, share capital increases operations, mergers etc. are considered;
• types of investments: classic investments and new investments (greenfield investments, new investments such as those that imply diversification of production lines, increase of existing structures capacity etc.);
• scope: the normative act is applicable to investors from non-EU states (the foreign investor), investors from EU member states and Romanian investors;
• conditions: investments are subject to examination and approval if: a) they relate to the fields of activity provided for in Decision no. 73/2012 of Romanian CSAT (e.g., energy security, transport security, IT and communications systems security, financial, fiscal, banking and insurance activities security, industrial security, protection of agriculture, etc.) and b) their value exceeds the EUR 2,000,000 threshold; however, a foreign direct investment may be subject to authorization even if the threshold is not exceeded, if the investment may affect national security or public order (i.e., the investor was previously involved in criminal activities);
• the person who notifies and the institution competent to examine the transaction: the foreign investor / the EU investor / the Romanian investor notifies the transaction to the Commission for Examination of Foreign Direct Investments (also known as “CEISD” in Romania) within the Competition Council; notification must be made before implementing the transaction;
• from CEISD practice, the following can be considered:
  • in its analysis, CEISD will give particular importance to the qualification of the targeted field of activity as a strategic / sensitive one, among those provided by Decision no. 73/2012 of CSAT;
  • in establishing the applicability of GEO no. 46/2022, an investment that leads to change of control will be considered, although at a theoretical level this represents only one of the legally provided situations (i.e., an investment that does not involve the taking over / change of control, but which confers the right to effective participation in the management of a company active in a strategic / sensitive field of activity could represent an investment subject to the normative act).
• examination/notification contribution: EUR 10,000, which can be returned if the investment does not fall within the scope of the normative act; for example, the target company or the new investment (greenfield type) does not operate in a strategic field;
• sanctions:
  • the implementation of the considered transaction without the authorization of CEISD is prohibited; in case of non-compliance, the foreign investor / the EU investor / the Romanian investor can be sanctioned with a fine up to 10% of the total worldwide turnover from the financial year preceding the sanction;
  • commitments, agreements, or contractual clauses that directly or indirectly result in an investment are legally null and void if the respective investment has not been authorized in accordance with GEO 46/2022 and European regulations;
  • if CEISD determines that an investment has been implemented in violation of the provisions of the normative act and affects the security or public order of Romania, or is likely to affect projects or programs of interest to the EU, CEISD shall issue an opinion proposing to the Government to require the investor, by resolution, to take any structural or behavioral measure appropriate to restore the situation that existed prior to the unauthorized investment under the conditions of the normative act.
• exclusions: the provisions of GEO 46/2022 do not apply to portfolio investments;
• conclusions: 
  • the fields of activity in the CSAT Decision presented above are very generic / vague, which is why in practice a very large number of operations from various industries will appear to be subject to GEO 46/2022;
  • therefore, a thorough analysis is important, on a case-by-case basis, in order to establish the obligation to notify CEISD before implementing a transaction, given the sanctions and/or the consequences of not requesting authorization from CEISD for the investor, which can significantly affect the performance of their businesses.