Daniele Iacona, Head of Italian Desk at Schoenherr Attorneys at Law: The uncertainty of legal certainty in Romania

First published on Nine O'Clock, 05.06.2019

Romania is still far from a predictable investment destination. Almost 30 years into democracy, the country’s legislative system continues to be volatile, with one government after another entering the race to change the laws at an ever-increasing pace. While some investors have found good reasons to come to Romania and do business here in spite of this uncertainty, others are spurning the country for more stable environments.

According to the principle of legal certainty, the behaviour of state officials should be as predictable as possible, allowing the parties governed by that country’s laws to regulate their conduct accordingly. The only legal certainty in Romania is that laws will be changed. Estimates place the country amongst the most active in the CEE region when it comes to passing laws.

Over the past three years, Romania has adopted on average some 300 new laws a year, with an increase of 44 % in the number of laws newly passed in 2018 compared to 2016. Italy, on the other hand, adopts on average around 40 new laws a year.

Moreover, Romania is adding to the level of uncertainty by passing new laws in extraordinary proceedings. While the use of expedited proceedings is an EU-wide trend, Romania is abusing it. A huge percentage of its laws were passed as emergency government ordinances. In this way the government is assuming a good share of legislative powers.

Given this volume of newly passed legislation, it is becoming increasingly difficult to ensure that a new legal change is promptly and correctly reflected into all laws to which it refers. This leaves room for parallel legal provisions that sometimes contradict each other or refer to laws that no longer exist, or even laws that need to be applied, but do not have application norms in place, making them impossible to put into practice.

It is estimated that approximatively 45 % of the laws passed in Romania each year have a direct impact on companies. This means that foreign investors, including Italian ones, are affected by almost half of these never-ending legal changes. In some areas, like energy production from renewable sources, the impact of this legislative hesitancy can translate into the downfall of an entire sector.

Things get even more complicated when companies go before the courts, which are well-known for their inconsistent practice across the country. No wonder, given that the laws do not stay the same long enough for judges to set a common ground for similar decisions.

The result of all this is that foreign investors may choose to avoid Romania. Even more damaging is that investors who are already present in the country are thinking about leaving for steadier ground.

To prevent this, officials must focus on the medium- and long-term consequences and impacts of new laws before adopting them.

Of course, this is easier said than done. First the legislative, executive and judiciary branches of state power need to be more clearly separated. Secondly, professional studies need to be conducted of each bill that the state aims to adopt before it becomes law. While this might slow down the legislative process, over the medium and long term it will allow Romania to regain investor trust. This way, the Romanian people would stand a better chance of leading better and more stable lives than they do today.