Country Law Assessment
Total Page:16
File Type:pdf, Size:1020Kb
COMMERCIAL LAWS OF ROMANIA March 2012 AN ASSESSMENT BY THE EBRD Office of the General Counsel CONTENTS 1. OVERALL ASSESSMENT ..................................................................................................................................... 2 2. THE LEGAL SYSTEM ........................................................................................................................................... 3 2.1 CONSTITUTION AND COURTS......................................................................................................3 2.2 RELATIONSHIP BETWEEN LEGAL TRANSITION AND ECONOMIC PROGRESS......................................3 2.3 RECENT DEVELOPMENTS IN THE INVESTMENT CLIMATE...............................................................4 2.4 FREEDOM OF INFORMATION......................................................................................................5 3. EVALUATION OF SELECTED COMMERCIAL LAWS.................................................................................. 5 3.1 CONCESSIONS ...........................................................................................................................5 3.2 CORPORATE GOVERNANCE ........................................................................................................8 3.3 INSOLVENCY ...........................................................................................................................10 3.4 JUDICIAL CAPACITY ................................................................................................................12 3.5 PUBLIC PROCUREMENT ...........................................................................................................13 3.6 SECURED TRANSACTIONS.........................................................................................................16 3.7 SECURITIES MARKETS..............................................................................................................18 3.8 TELECOMMUNICATIONS / ELECTRONIC COMMUNICATIONS .......................................................20 Basis of Assessment: This document draws on legal assessment work conducted by the Bank (see Hwww.ebrd.com/lawH) and was last updated during the preparation of the 2012 EBRD Strategy for Romania, reflecting the situation at that time. The assessment is also grounded on the experience of the Office of the General Counsel in working on legal reform and EBRD investment activities in Romania and does not constitute legal advice. For further information please contact [email protected] . 1. Overall Assessment After becoming a member of the European Union on 1 January 2007, Romania has amplified the process of harmonising its laws with the acquis communautaire. As a result, the country has made significant amendments to its commercial legislation and has substantially reformed the legal framework applicable to investments. Consequently, the business climate has improved, leading to an investor friendly environment. Nevertheless, several vital issues remain to be addressed in order to help Romania reach its full market potential. In particular, despite government’s efforts the problem of corruption remains visible and the laws need to be better enforced. The last few years have seen changes made to key commercial legislation. For example, a new law governing public-private partnerships (“PPP”) was enacted in 2010. A potential area of concern is a lack of clear definition between PPP Law and the ordinance regulating concessions. In addition, the practical outcomes of the law have yet to be tested. A Corporate Governance Code was issued in 2008 and companies are free to apply principles and recommendations set forth in the Code if they so decide. The latest EBRD assessment of the corporate governance legislation showed Romania being in “high compliance” with the OECD Principles of Corporate Governance and evidenced no major shortcomings in the relevant framework. Similar favourable results were found by the 2009 EBRD Insolvency Law Assessment and the latest EBRD Assessment of Securities Markets legislation. One of the areas that would benefit from further improvements is the judiciary. One of the main challenges in this area is to ensure a more transparent and efficient judicial process and eradicate corruption. The 2010 Public Procurement Assessment revealed that the legislation in force is in “medium compliance” with international procurement standards. Even though the assessment found that the public procurement law in Romania is based on sound principles of the EU public procurement directives, the enforcement mechanism is deemed to be complicated and inefficient. The legislation in the field of secured transactions is generally considered to be modern and market oriented and provides a number of features required for economic efficiency of the credit market. Moreover, Romania has achieved a well-functioning legal regime in the field of mortgages, which was updated when the new Civil Code came into force in 2011. The European Union regulatory framework for communications was transposed into national law in the telecommunications / electronic communications sector. Nevertheless, Romania is subject to the ongoing legal and regulatory development necessary to remain part of the evolving Europe-wide market for electronic communications. Overall, Romanian legislation is to a significant degree harmonised with EU standards and international best practices. The objective in the short term should be the effective implementation of laws and regulations and improvement of the enforcement process. There remains a noticeable gap between the quality of the laws “on the books” and the practical application (effectiveness) of such laws in a number of sectors. 2 2. The Legal System 2.1 Constitution and courts Romania adopted a democratic constitution in 1991 which was amended in 2003. The Constitution, inter alia, declares the separation of powers and establishes human rights and liberties. It also provides for a bicameral Parliament consisting of a Chamber of Deputies and Senate. Members to both are elected by proportional representation and the former also has a number of guaranteed seats for representatives of ethnic minorities. Parliament is elected for a four year term. The President is the Head of State, who is elected by a universal direct vote for a term of five years and can serve up to a maximum of two successive terms. The Prime Minister is usually the leader of the largest party, or the party leader able to form a coalition when no other, larger alliance exists and his appointment is subject to approval by the President. The Government is empowered to adopt decisions and ordinances with the aim of enabling the execution of laws. It also has the ability to introduce legislation by issuing emergency ordinances. Whilst these are subsequently presented before Parliament for approval, the frequency of application of these powers leads to confusion. The judiciary of Romania is composed of trial courts, tribunals (county courts), courts of appeal, the High Court of Cassation and Justice and the Constitutional Court. Other than the Constitutional Court, all courts deal with the entire range of disputes (civil, criminal and administrative) and their jurisdiction is determined by territory, importance of the subject matter and instance of review (first instance, appeal, recourse, etc). Romania also has its own International Commercial Arbitration Court, which is operated by the non-governmental Chamber of Commerce and Industry and has co- operation agreements with institutions in a number of countries. Further, there is an independent right of judicial review of administrative action. The Constitution proclaims the independent status of judges and they are appointed, promoted and disciplined by the Superior Council of Magistracy. Important judgements are published and accessible to practitioners. The Constitutional Court of Romania is a specialised court that acts as guarantor of the supremacy of the Constitution. Amongst others, the Court has the power to decide upon the constitutionality of laws and treaties (before or after adoption/ratification), to resolve disputes of a constitutional nature between public authorities and to oversee compliance with electoral procedures and referenda criteria. 2.2 Relationship between legal transition and economic progress Experience in the EBRD countries of operations suggests that legal transition and the pace of economic transition progress or regress hand in hand. Given the positive correlation throughout the Bank’s countries of operations between these two dimensions, i.e., legal transition, and overall economic progress, it is reasonable to expect that the future success of the transition process in Romania will be dependent in part on improvement of the process of legal implementation and strengthening the judiciary. Chart 1 below shows Romania’s position compared to other countries of operation in regard to the quality and enforcement of laws and advancement in the transition process. It is expected that further development of the legal framework and improvement of its enforcement process will contribute to the transition of the country and improve its conformity with EU legislation and other international standards. As shown in the chart Romania compares favourably with the other new EU member states. 3 Chart 1 – Rule of law and progress in transition in the EBRD countries of operations Slovak Rep Estonia 4 Hungary Poland Latvia FY R Lithuania Macedonia