ROMANIA: An Introduction to Dispute Resolution
Introduction
Romania continues to be one of the most dynamic markets when it comes to dispute resolution, confirmed by a rise in energy disputes and an ever-increasing tally of construction cases. In the era of technology, constant change and corresponding adaptation remain key words. In Romania, legal practitioners have rapidly adapted to make use of the progress brought by the latest technologies (including AI) by seeking to develop the best instruments to enhance efficiency. With the spill-over effects of the unceasing armed conflict taking place in Romania’s vicinity and the wide-ranging sanctions against Russia raising concerns about Europe’s energy resources and reserves, all eyes are on Romania. At the end of June 2023, in a significant move for Romania’s energy sector, OMV Petrom and Romgaz gave the green light to the development plan for two offshore gas fields in the Neptun Deep area – a project that, once operational, is projected to produce a staggering 100 billion cubic metres of natural gas, propelling Romania to become the EU’s largest gas producer.
Arbitration in Romania
The arbitral institutions and actors in Romania are in line with international arbitration practices and have adapted smoothly to what appears to be a new technology era with ease. Most ongoing proceedings have shifted online and virtual hearings and completely electronic submissions have become the norm, whereas in-person interactions and hard copies have become rare exceptions. The ability to avoid almost all disruption to existing arbitration cases demonstrates once again how different ADR is from domestic litigation. In addition, it has helped the business community to understand how national courts will not be able to adapt as rapidly to change and distress as they do now, thereby resulting in a greater interest among companies in including arbitration clauses in their commercial agreements or switching to arbitration. The most frequently used arbitral institutions based in Bucharest include the Court for International Commercial Arbitration (CICA). It operates using procedural rules aligned with those of the ICC and other similar institutions, and aims to enhance the flexibility and efficiency of arbitration in Romania while eliminating the formality of domestic courts at the same time. Apart from the CICA, there is a significant number of international arbitration cases involving Romanian actors (the ICC, the Vienna International Arbitral Centre, LCIA and the Stockholm Chamber of Commerce), in addition to German and Italian arbitration institutions (the German Arbitration Institute and the Court of Arbitration attached to the German-Romanian Chamber of Commerce and Industry, mainly used by German/Italian companies and investors). There are also currently nine pending ICSID cases involving Romania.
General Tendencies in Dispute Resolution
Dispute resolution follows the general trend: in recent years, the economy has returned to business as usual and the existing disputes now reflect the vitality resulting from normal business disputes. Increasingly, the post-pandemic political climate, the conflict in Ukraine and sanctions imposed on Russia have led to a rise in energy disputes and contractual disputes in general, putting further pressure on businesses.
However, investments continue in various sectors, including real estate development and infrastructure projects, which remain significant parts of Romania’s economy. In this context, public procurement disputes are a constant issue before the courts, but there are also continuous modifications to the applicable legislation that are aimed at improving the system.
Public Procurement Legislation
Public procurement legislation is constantly being changed in an attempt to help Romania further improve its public tendering system and make it more flexible so that future large investment projects – such as those financed by the National Resilience and Recovery Plan (NRRP) and economic development in general – can be better attracted. The existence of public procurement litigation has frequently been cited as a constant factor for delay in the implementation of EU-funded projects and this has caused the Romanian government to implement a series of strategic measures to ensure the observance of funding-related deadlines, such as eliminating certain formalities, shortening deadlines, etc.
Romania has also set up an accessible legal framework aimed at encouraging and facilitating Renewable Energy Source (RES) projects for a straightforward permitting process of renewable energy capacities. The latest modifications in 2023 aim towards a simplification of the necessary bureaucratic process for developing renewable electricity generation capacity by eliminating a mandatory step in the procedure – namely, the obtaining of a zoning plan (Planul Urbanistic Zonal, or PUZ). Also, modifications were adopted to simplify the procedure for obtaining a building permit for investments in the renewable energy field. This is in line with Romania’s ambitious targets to significantly increase renewable energy production by 2030.
The end of December 2023 has marked the adoption of new legislation on the conduct of representative actions for the protection of the collective interests of consumers, transposing the EU Directive 2020/1828. The newly regulated concept of representative actions will enable litigation to proceed more rapidly and cost-effectively, especially against large companies, which could potentially change business in Romania through its approach to consumer disputes. Up to this point, in the absence of class actions, the national courts frequently issued different rulings in similar disputes between businesses and customers.
Romanian FDI Screening Regime for Investments
The end of 2023 was marked by a significant shift in the FDI regime with the passing of new legislation formally designated to implement the ECN+ Directive (Directive (EU) 2019/1). With the latest changes to the FDI screening regime, Romania has reconfirmed its overly cautious approach in terms of assessing and reviewing investments with a local connection. The previous wording in the FDI law dealing with EU investors was quite ambiguous and led to many debates and uncertainty concerning the market. Now the scope of screening has been clarified: it is made clear that EU investors (including Romanian investors) fall under the scope of FDI screening. At the same time, and in line with the authorities’ position that screening would not come as too much of a burden for investors, the latest FDI amendment hints towards an expedited process for EU investors. In terms of sanctions, the government may decide to cancel an investment made in breach of the FDI legislation and restore the status quo before implementation.
Romania’s National Recovery and Resilience Plan
The NRRP includes an ambitious programme of reforms and investments currently organised under 17 thematic components.
Approved in November 2021, Romania’s recovery and resilience plan was revised in December 2023 also to introduce a REPowerEU chapter, consisting of two new reforms and seven investments to deliver on the REPowerEU objectives to make Europe independent from Russian fossil fuels well before 2030. These new measures focus on accelerating green energy production, promoting energy efficiency of buildings, and re- and up-skilling the workforce in the field of green energy production.
All measures must be implemented within a tight timeframe, with a completion date set for August 2026 for all milestones and targets within the national plans. This has put significant pressure on national authorities to tender and implement to the maximum extent possible all necessary investments funded by this facility, which is currently an important source of business in Romania.
End of Co-operation and Verification Mechanism
The Co-operation and Verification Mechanism (CVM) came to a formal end for Romania (and Bulgaria) on 15 September 2023, when all the benchmarks had been satisfactorily met following progress on the relevant reforms in Romania. The transitional mechanism had been introduced upon the accession of Romania and Bulgaria to the EU in 2007, in order to facilitate progress in the fields of judicial reform and anti-corruption. The European Commission has announced that it will continue to co-operate with Romania under the annual Rule of Law Cycle, as for all EU member states.
Recent Economic Developments
As reported by the World Bank, economic growth is estimated to have decelerated to 1.8% in 2023. There continues to be a boost in investment following increased public investment supported by EU funds. At the same time, the industry has continued to contract owing to elevated production costs, especially in energy-intensive sectors against the energy crisis backdrop. However, short-term indicators suggest that the economy regained some momentum in the final months of 2023, on the back of retail sales, services and robust construction.
Investment will remain the main contributor to GDP growth in 2024 as well. The forecast depends on multiple factors, including the extent and duration of Russia’s invasion of Ukraine and its repercussions on the European economy, alongside fluctuations in global prices and domestic inflation. Romania’s capacity to efficiently absorb EU funds will be critical for a sustainable, green and inclusive recovery, aiding private investment amid higher interest rates and uncertainty.
Critical Developments in International Arbitration – Bucharest Arbitration Days
Bucharest Arbitration Days (BARD) is an event organised by the CICA and dedicated to international arbitration and the necessary reforms in the field. The fifth BARD edition will take place on 6–7 June 2024 and plans to dive into the critical developments in international arbitration, as well as the recurrent concern about the legitimacy of international arbitration.
BARD 2024 will discuss:
• ethics and conflicts in international arbitration;
• the evolving relationship between arbitration and courts;
• the diversity in arbitration from the perspective of diversity of seats and arbitration institutions; and
• the ongoing discussion of evidence and the impact of technology on it.
With a focus on disputes involving foreign investments, BARD 2024 will tackle the critical issue of the regulatory space of states, particularly in the context of the transition to a clean energy and international commitments regarding climate change.
What the Future Holds
The year ahead will bring new challenges as well as opportunities, as the world continues to reinvent itself within the context of a new reality and – at the same – to be faced with historically fuelled conflicts. It is the responsibility of companies and their legal advisers alike to maximise their opportunities and utilise the most appropriate dispute resolution mechanisms to achieve this goal.