Trials and tribulations of FDI regulations in real estate: Implementation in Romania

Implementation

Romania introduced in 2022 a formal FDI screening process for investments potentially impacting national security, amended in December 2024. Reviews are coordinated by the newly formed Commission for the Examination of Foreign Direct Investments (CEISD), under the oversight of the Supreme Council of National Defence (CSAT).

FDIs made by a non-EU or EU investor acquiring a target company or an asset in key sectors, such as security of the population, borders, energetic, transport, supply with vital resources, critical infrastructure, information and communication systems, financial, banking, insurance and fiscal activities, guns, explosives and ammunition, industry, protection against natural disasters, agriculture and environment, or privatisation of former state-owned companies, are all subject to review by CEISD. 

In addition, a threshold is provided for transactions at EUR 2 million, making the screening applicable to a myriad of transactions. 

Sanction

The sanction for non-compliance can amount to 10% of the turnover of the investor worldwide in the previous year, and the nullification of the transaction.

Real estate in the spotlight

The mere listing of the key sectors without any additional clarification, leads to legal uncertainty. To rather be safe than sorry, investors submit a series of real estate transactions for approval, even if they do not raise national security concerns. CEISD adds to this vague framework by issuing a negation, after running the entire screening procedure, that the investment does not pose a security threat; instead of informing the investor that a particular transaction falls outside the scope of the FDI law and that no screening is required in the first place. 

This contributes to the legal uncertainty and leads to administrative delays of 6 to 12 months due to CEISD's limited capacity in relation to the overwhelming number of transactions submitted for approval.

Currently a project for additional instructions is in its last approval stages. However, instead of providing the awaited clarifications, it merely details the administrative procedure and method for calculating the EUR 2 million threshold.

Recommendation

Clear guidelines and definitions are still expected, so CEISD can be unburdened and transactions can secure foreseeable deadlines. In the meantime, investors streamline the transactional process by providing as condition precedent the approval by CEISD; however this leads to a considerable extension of the signing-to-closing interval.

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Alina Iozsa is Partner and leader of the Real Estate and PPP department with Hategan Attorneys. She has advised and provided innovative solutions on a wide range of complex real estate projects. Alina has also successfully advised projects in the industrial, public procurement, construction, agricultural, residential, and energy sectors, and is a recognised real estate specialist on the real estate market of western Romania.