Thought Articles

Reproduced with permission from Law Business Research. This article was first published in Getting the Deal Through - Labour & Employment 2010, (published in July 2010; contributing editors: Mark Dichter, Kenneth Turnbull and Matthew Howse). Romania is a civil law jurisdiction and the core employment regulation is the Labour Code. Besides the Labour Code, specific tailored legal enactments regulate other employment-related aspects, such as employment safety and health, insurance for work accidents and professional diseases, and employment conflicts and disputes. Collective bargaining agreements also provide binding rules and obligations to be complied with by the employers. Finally, considering Romania’s accession to the European Union, which took place on 1 January 2007, EU legislation and ECJ court decisions are also relevant.

The de facto insolvency of Romania’s budget pushes politicians to propose the reinstatement of progressive taxation on individuals’ income. Romania had until 2005 a system of progressive taxation on the income made by individuals, with rates ranging from 18% up to 40% of the net income (the intermediate rates being 23%, 28% and 34%). The income thresholds used in order to determine the application of the percentage of the income tax were in fact very low - for monthly income exceeding about 300 Euro – so it was actually very easy to reach the limit beyond which the tax would be of 40%. The introduction of the 16% flat tax in 2005 (which applied not only to individuals, but also to companies) revolutionized the whole system: not only that the budgetary revenues from the payment of the income tax increased at a fast pace (until Romania was hit by the economic crisis), but also the reduced taxation made Romania a more enticing destination for investment (and attracted criticism from Western Europe due to so-called “fiscal dumping”).

Reproduced with permission from Law Business Research. This article was first published in The Restructuring Review, (published in April 2010 – editor Richard Clark). Disputes in Romania are settled in court in the vast majority of cases, under procedures regulated mainly by the Civil Procedure Code (‘CPC’). The CPC is undergoing extensive revision, with the draft of a new Civil Procedure Code being approved by the government in March 2009 after public debate. The following commentary takes into consideration the procedures as currently in force. A brief outline of the main amendments proposed by the draft of the new Civil Procedure Code will be included in the last section.

Reproduced with permission from Law Business Research. This article was first published in Getting the Deal Through – Dominance 2010, (published in February 2010; consulting editors: Thomas Janssens and Thomas Wessely). The abusive behaviour of dominant firms is prohibited by article 6 of the Romanian Competition Law No. 21/1996 (RCL) and, since 1 January 2007, by article 82 of the EC Treaty (post Treaty of Lisbon, article 102 of the Treaty on the Functioning of the European Union (TFEU)). Article 6 expressly forbids the abusive use of a dominant position held by one or more undertakings on the Romanian market or on a substantial part of it, by resorting to anti-competitive practices that have as their object or may have as their effect the distortion of economic activities or the prejudice of consumers.

Reproduced with permission from Law Business Research Ltd. This article was first published in The Mergers & Acquisitions Review, 3rd Edition (published in September 2009 – editor Simon Robinson). 2008 was a substantially positive year for the Romanian economy, with virtually all indicators improving as compared to previous years. Last year marked stabilisation of the current account deficit. Moreover, the inflation rate continued its downward trend to 6.3 per cent as compared to 6.57 per cent in 2007, while the GDP registered a significant growth of 7.1 per cent. Such positive results are an integral part of a relatively long period of solid economic results that started back in 2000, which have been supported by major legislative reforms implemented with the view of harmonising the local laws with the acquis communautaire. Such measures significantly improved the Romanian business environment and generated increased confidence of both foreign and domestic investors in the local economy. Other strengths of the local market were the relatively low employment costs as compared to other EU Member States, as well as a fairly new real estate market.

The enforcement record of the Romanian Competition Council (RCC) has proved rather poor throughout the past year, no major “catch” being penalised since the drug distributors cartels on the insulin and dialyse markets were fined in the first quarter of 2008. The Romanian antitrust watchdog in 2008 opened investigations targeting potential cartels in the banking sector, the real estate market and the pharmaceutical distribution sector. Additionally, sector reviews in the food retail and pharmaceutical industry are on the authority’s plate at present given the concerns of high prices on such markets. Within the current economic context, when some industries are facing decreasing demand one could expect that the market players are more tempted to secretly collude or to exploit their strong market shares. Several practices such as termination of the existing contracts, renegotiations of contractual terms, increasing prices are particularly likely to occur given the circumstances of short demand or supply, input cost cutting policies, financial difficulties, and so on.