Dobrinka Chankova (ed.) [609392]
Dobrinka Chankova (ed.)
Ivan Pankevych (ed.)
Dynamic Elements in the
Contemporary Business Law
Dynamic Elements in the Contemporary
Business Law
Editor s:
Dobrinka Chankova
Activity
Dobrinka Chankova, PhD, is Professor of Criminal Procedure Law at South -West
University, Blagoevgrad, Bulgaria. From 2004 until 2018 she lectured on Mediation
in Penal and Civil Matters at New Bulgarian University, Sofia. Guest -professor at
many foreign universities . She is the Chair of the Institute of Conflict Resolution in
Sofia and has served as an expert of the National Assembly and Ministry of Justice of
Bulgaria and of the Council of Europe Committees on Crime Problems and Media-
tion in Penal Matters . Mediator, f ounder and member of the Board of the National
Association of Mediators , Bulgaria. Member of the European Forum for Rest orative
Justice, World Society of Victimology, the Union of the Scientists in Bulgaria and the
Union of the Jurists in Bulgaria . Editor -in-chief of Law, Politics, Administration
Journal. Member of the Editorial Board of the European Journal of Policing Studies,
US-China Law Review and International Journal of Law and Society .
Publications
Editor of the Manual for the Local Elections Supervisor , Sofia, 2000 and Human
Rights and Their Protection (compendium), Sofia, 2001. Co-editor of A Century of
the Crimina l Code and Current Issues of Criminal Legislation 1896 -1996, Sofia,
1996 and Manual for Education of Pedagog ical Staff for School Violence Prevention
(V. 1, 2 a nd 3) Social Fund -Pazardjik, 2008 . Sole author of 3 books: Investigation of
Perjury , Sofia, 1995, Victim-Offender Mediation , Sofia, Feneya, 2002 and Restora-
tive Justice. A Comparative Analysis , Avangard Prima Publishing, 2011. Co -author
of Organization of Forensic Expert Investigations in Bulgaria, Sofia, 1994, the e –
book: School Bullying and Violence: Taking Action , 2006 and Mediation. Training
Manual , Sofia, 2013. More than 30 co ntributions to books published by Willan Pub-
lishing , Lynne Rienner Publishers, Verlag fur Polizeiwissenschaft, Sakkloulas Pub-
lications, Eleven Internation al Publishing, LexisNexis, etc. More than 60 articles
published in Tokiwa Journal of Human Sciences, LEX RUSSICA, Balkanistic Forum,
Juridical Tribune, Romanian Journal of School Psychology, Restorative Justice: An
International Jou rnal, Education and Science Without Borders, etc.
Prizes
Honorary Badge and Diploma for contribution to Victimology – Jindal Global Uni-
versity, India; Honorary Diploma of the National Association of Mediators – Bul-
garia, 2014; Honorary Diploma of the Union of the J urists in Bulgaria and the
European Association of Lawyers for Democracy and Human Rights, 2010; Cer-
tificate of Appreciation of the World Society of Victimology and Tokiwa Univer-
sity- Japan; Honorary Badge of the Union of t he Jurists in Bulgaria, Sofia, Bulgari a,
2008; Honorary Diploma of Research Institute of Forensic Sciences and Criminol-
ogy, Sofia, Bulgaria, 2007, etc.
Ivan Pankevych
Activity
Ivan Pankevych is lawyer, Doctor of Science of Law (Ivan Franko Lviv Na tional
University, Ukraine), Doctor habilitation of Legal Science (Polish Academy of
Science), professor of the Constitutional, European and International Public Law
Department at the University of Zielona Góra, Poland; professor of the Constitu-
tional Law and Sectoral Subjects Department at the National University of Water
and Environmental Engineering, Rivne, Ukraine; Member of International So-
ciety for H uman Rights – Ukrainian Section; Member of Society of East Summer
School Univers ity of Warsaw Graduat es; Member of Society of Researchers of
Max-Planck Institute of International an d Comparative Law in Heidelberg; Mem-
ber of German -Polish Legal Society (Berlin). Membership of Editorial Boards
of scientific journals, such us Human Rights Studies , Katowice ; Scientific series
‘Human Rights -Society -State ’ Adam Marszałek Publishing House in Toruń.
Member of Ukrainian Bar Association, judge of the Lviv Court of Arbitration at
the Chamber of Conciliation Courts of Ukraine.
Publications
Autor more than 130 publications in the Ukrainian, Polish, English, Ger man and
Russian languages (including 7 monographs), such as Tradition of Electivity of
the Authorities of Ukraine : monograph / Ivan Pankevych, Ivan Franko , Lviv Na-
tional University Publishing House, Lviv (Ukraine), 2015, 488 pp. (in Ukrainian);
Pankevych I ., Governmental System of Ukraine / Nóra Chronowski, Tímea
Drinóczi and Tamara Takács (eds.), Governmental Systems of Central and East-
ern European States , Oficyna, Wolters Kluwer Polska, Warsaw (Poland), 2011,
845 pp. (in English); Pankevych I. , Principles of Election Law of Ukraine , Inno-
vatio Press Publishing House, Lublin (Poland), 2008, 360 p. (in Polish).
Dobrinka Chankova (ed.)
Ivan Pankevych (ed.)
Dynamic Elements in the Contemporary
Business Law
Contributions to the 9th Interna tional Conference
Perspectives of Business Law in the Third Millennium ,
November 8, 2019 , Bucharest
Bucharest 2019
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Preface
Editor s
Professor Dobrinka Chankova
South -West University, Blagoevgrad, Bulgaria
Professor Ivan Pankevych
University of Zielona Góra, Poland
This volume contains the scientific papers presented at the Ninth Inter-
national Conference „Perspectives of Business Law in the Third Mi llennium” that
was held on 8 November 2019 at Bucharest University of Economic Studies, Ro-
mania. The conference is organized each year by the Department of Law at Bu-
charest University of Economic Studies together with the Society of Juridical and
Administrative Sciences . More information about the conference can be found on
the official website: www.businesslawconference.ro.
The scientific studies included in this volume are grouped into five chap-
ters:
Development of the market economy . The papers in this chapter refer to
the violation of minority shareholder rights – analysis on the mandatory
takeover bid; the contract of transportation according to Kosovo legisla-
tion; the a dministrator – representative or employee of the limited liability
company – aspects of comparative law; legal conditions of unusual terms
institution ; axiological basis for the tax system; characteristics of the dis-
solution of non -banking financial instit utions; legal regime of private
military companies.
International business l aw. This chapter includes papers on: Concept of
charterparty as an international contract for engagement of ship for trans-
portation of cargo and legal perspective on critical areas of charterparty
for avoidance of disputes; cross – border merger – analysis of comparative
law; guarantees, rights and obligations in international trade through
electronic media; cooperation -based approaches in competition law – the
whistleblower versus the prisoner’s dilemma.
Criminal law in business c ontext . The papers in this chapter refer to
crimes motivated by hate, differentiation and religious discussion in com-
pared criminal law (Romania and the Republic of Moldova); drawing to
the criminal liabili ty of the legal person; the offense of destroying at fault
in the Romanian law; some considerations regarding false testimony in
the Romanian law – critical opinions and de lege ferenda proposals;
measuring crime; new trends of international tax evasion – international
legal regulations and modern combating methods; improving efficiency
to combat VAT frauds at the European Union level.
Contemporary labor l aw. This chapter includes papers on: precar-
ious work – challenges of labour law in Europe; non -complian ce
of the law of the remuneration with non -discrimination rules; the
professional adequacy and the performance of the e mployee -dif-
ferences and s imilarities .
Public affairs and business law – constitutional developments . The papers
in this chapter refer to the constitutional guarantees for ownership rights
and the development of the market economy; parliamentary groups – in-
ternal structures of the Chamber of Deputies and the Senate – controver-
sial aspects on establishing parliamentary groups arising from th e parlia-
mentary practice.
This volume is aimed at practitioners, researchers, students and PhD can-
didates in juridical sciences, who are interested in recent developments and pro-
spects for development in the field of business law at international and natio nal
level.
We thank all contributors and partners, and are confident that this volume
will meet the needs for growing documentation and information of readers in the
context of globalization and the rise of dynamic elements in contemporary busi-
ness law.
Table of Contents
DEVELOPMENT OF THE MARKET ECONOMY ………………………….. … 11
Marius Cristian MILOȘ, Laura Raisa MILOȘ
Violation of Minority Shareholder Rights. Analysis on the Mandatory
Takeover Bid ………………………….. ………………………….. ………………………….. ….. 12
Majlinda BELEGU
The Contract of Transportation According to Kosovo Legislation ………………. 25
Olga -Andreea URDA
The Administrator – Representative or Employee of the Limited Liability
Company. Aspects of Comparative Law ………………………….. ……………………… 35
Eugen SÂRBU
Legal Conditions of Unusual Terms Institution ………………………….. ……………. 44
Valerijs JAKUŠEVS
Axiological Basis for the Tax System ………………………….. …………………………. 59
Claudiu -Daniel TELICENU
Characteristics o f the Dissolution of Non -Banking Financial Institutions …….. 71
Ovidiu Horia MAICAN
Legal Regime of Private Military Companies ………………………….. ………………. 81
INTERNA TIONAL BUSINESS LAW ………………………….. …………………….. 92
Harsh PATHAK
Concept of Charterparty as an International Contract for Engagement of
Ship for Transportation of Cargo and Legal Perspective on Critical
Areas of Charterparty for Avoidance of Disputes ………………………….. …………. 93
Silvia Lucia CRISTEA, Viorel BĂNULESCU
Cross – Border Merger. Analysis of Comparative Law ………………………….. … 110
Manole Decebal BOGDAN, Valeria Alisa TOMA
Guarantees, Rights and Obl igations in International Trade through
Electronic Media ………………………….. ………………………….. ……………………….. 119
Table of Content 9
Ana-Maria Iulia ȘANTA
Cooperation -Based Approaches in Competition Law – the Whistleblower
Versu s the Prisoner’s Dilemma ………………………….. ………………………….. ……. 126
CRIMINAL LAW IN BUSINESS CONTEXT ………………………….. ……….. 135
Aurel Octavian PASAT
Crimes Motivated by Hate, Differentiation and Religious Discussion in
Compared Criminal Law (Romania and the Republic of Moldova) …………… 136
Petruț CIOBANU
Drawing to the Criminal Liability of the Legal Person ………………………….. … 149
Ioana RUSU
The Offense of Destroying at Fault in the Romanian Law ………………………… 154
Bogdan BÎRZU
Some Considerations Regarding False Testimony in the Romanian
Law. Active Subjects of the Offense. Critical Opinions and
De Lege Ferenda Proposals ………………………….. ………………………….. …………. 162
Adriana Iuliana STANCU
Measuring Crime ………………………….. ………………………….. ……………………….. 173
Bogdan -Florian AMZUICĂ, Roxana -Adriana MITITELU
New Trends of International Tax Evasion – International Legal
Regulations and Modern Combating Methods ………………………….. ……………. 180
Nelu Dorinel POPA, Cezara P OPA
Improving Efficiency to Combat VAT Frauds at the European
Union Level ………………………….. ………………………….. ………………………….. ….. 200
CONTEMPORARY LABOR LAW ………………………….. ………………………. 211
Raluca ANDERCO
Precarious Work – Challenges of Labour Law in Europe.
Case Law: Uber ………………………….. ………………………….. …………………………. 212
Dragoș Lucian RĂDULESCU
Non-Compliance of the Law of the Remuneration with
Non-Discrimination Rules ………………………….. ………………………….. …………… 220
Table of Content 10
Ioana Cristina CRISTESCU
The Professional Adequacy and the Performance of the Employee.
Differences and Similarities ………………………….. ………………………….. ………… 230
PUBLIC AFFAIRS AND BUSINESS LAW – CONSTITUTIONAL
DEVELOPMENTS ………………………….. ………………………….. …………………… 251
Ivan PANKEVYCH
Constitutional Guarantees for Ownership Rights and the Development
of the Market Economy ………………………….. ………………………….. ………………. 252
Adrian ȚUȚUIANU, Florina -Ramona MUREȘAN
Parliamentary Groups – Internal Structures of the Chamber of Deputies
and the Senate. Controversial Aspects on Establishing Parliamentary
Groups Arising from the Parliamentary Practice ………………………….. …………. 267
DEVELOPMENT OF THE MARKET
ECONOMY
Violation of Minority Shareholder Rights.
Analysis on the Mandatory Takeove r Bid
Lecturer Marius Cristian MILOȘ1
Lecturer Laura Raisa MILOȘ2
Abstract
The mandatory takeover bid is seen by the legislator as a way of protection of
minority shareholders, by making the intention of the shareholder who exceeds a certain
holding threshold and wis hes to take control of the company more transparent, making
in this way possible for the minority shareholders to exit the company, if this is seen as
appropriate, and not remaining trapped in a company where they could no longer exer-
cise any influence. Th e objective of this paper is realizing a comparative analysis at the
European level regarding the mandatory takeover bid, by outlining the legal provisions
that apply, the similarities and differences between the EU member states. Not in the
least, on the basis of the Romanian jurisprudence, that is related with mandatory takeover
bids, there are being questioned the pronounced sentences. According to the comparative
study, we can observe the existence in the European national law (including Romania) of
the provision regarding the mandatory takeover bid that has positive consequences from
a legally point of view, by ensuring the protection of minority shareholders, contributing
to the overall growth of the European stock markets.
Keywords: minority share holder protection; European Union; mandatory take-
over bid; stock market.
JEL Classification: K20, K22, K42
1. Introduction
The protection of the minority shareholders is the backbone of any stock
market development. Investor protection is ensured by both quality of regulation,
and regulation enforcement. The commercial law, as well as the specific stock
market regulation that is governing the stock market provides several rights to the
minority shareholder: economic rights (rights related with divide nds and the dis-
tribution of assets, exit rights, rights related with the new issue or transfer of
shares); control rights (rights related to the management/ supervisory board of the
company, rights related to general meeting, right to block alterations of t he com-
1 Marius Crist ian Miloș – PhD student in Law, Faculty of Law, West University of Timisoara;
Faculty of Economics and Business Administration, West University of Timisoara, Romania,
marius.milos@e -uvt.ro.
2 Laura Raisa Milo ș – Faculty of Economics and Business Administra tion, West University of
Timisoara, Romania, laura.milos@e -uvt.ro.
Dynami c Ele ments in the Contemporary Business Law 13
pany's constitution ), information rights , rights related with enforcement mecha-
nisms , equal treatment rights3.
The right to sell the shares is the right of shareholders to exit the com-
pany, to close the relation with it4. The situations for which a minority shareholder
might want to withdraw are diverse, but in general are due to economic reasons.
The doctrine shows that, at the level of the European Union member states, the
minority shareholder is protected by the exit rights in the following situat ions:
buy-out, sell -out, squeeze -out, mandatory takeover bid, voluntary takeover bid.
In the last decades, it has been noticed a growth of the takeovers realized
on the European stock markets. The companies are facing stiffer competition and
fight harder for obtaining control of the market. One of the main reasons why
there are registered so many takeovers on the stock markets is represented by the
potential economic growth of the offeree companies. The bidder sees in the take-
over the possibility of develo pment, either horizontally or vertically, or a benefit
in the form of total cost reduction or R&D5.
The mandatory takeover bid, present in the legislation of each European
Union member state, following the transposition of Directive 2004/25/CE6, states
mainly that the person or the group of persons acting in concert which have as
objective the acquisition of the control of the offeree company, when reaching a
certain threshold from the total vote rights of the offeree company (which is dif-
ferent in accorda nce with the EU national law) are obliged to make a public offer
"to all the holders of that company's securities, for all their holdings, at an equi-
table price". This provision applies to companies whose securities are at least
partly traded on a regulate d stock exchange7, being of interest not only for the
individual investors, but also for the public authorities.
The reason for the existence of the mandatory takeover bid is represented
by the protection of minority shareholders, by making the intention of the share-
holder who exceeds a certain holding threshold and wishes to take control of the
company more transparent, making in this way possible for the minority share-
holders to exit the company, if this is seen as appropriate, and not remaining
3 See Marius Miloș, Laura Raisa Miloș, Investor protection and stock market development.
Empirical approach on the European Union case , „Juridical Tribune – Tribuna Juridica”, vol. 9,
issue 1, 2019, p. 114.
4 See Julian Velasco, The Fundamental Rights of the Shareholder , „U.C. Davis Law Review”, vol.
40, issue 2, 2006, p. 458.
5 See Eduardo Costa, Ana Marques, Corporate governance and takeovers: inside from past
research and suggestion for future research , „Corporate Ownership & Control”, vol. 6 (3), 2009,
p. 211 -218.
6 Directive 2004/25/EC of the European Parliament and of the Council from April 21, 2004 on
takeover bids, which represented the realization of a long -term project that had as its starting point
the Robert Pennington report “Report on takeover and other bids”, from 1974; Historically, there
were several failed attempts to adopt this directive at the level of the European Union member states
(in 2001, for instance, it was blocked by the European Parliament, Germany being one of the
countries that positioned itself against this directive).
7 Ibid., art. (3)
Dynami c Ele ments in the Contemporary Business Law 14
trapped in a company where they could no longer exercise any influence, or in
which they could feel disadvantaged due to the change of control.8
The rules that accompany the mandatory takeover bid diverge between
the EU member states, depending on the way in whi ch the members states trans-
posed the Directive in the national law9. There is a wide literature that examines
the manner in which the provisions regarding the mandatory takeover bid are ap-
plied in the European Union member states, the challenges and limits of this pro-
vision in what concerns the attainment of the regulation objective, which is en-
suring a higher minority shareholder protection. The paper is structured as fol-
lows: in the second part, we realize a comparative analysis regarding the manda-
tory ta keover bid characteristics and related rights granted to the minority share-
holders in the European Union member states. In the third part, we will debate on
the pronounced sentences in the Romanian cases that had to do with a violation
of a minority shareh older right in respect with a mandatory takeover bid. The last
part concludes.
2. Comparative analysis at the European Union level regarding the
mandatory takeover bid
Habersack10 resumes the economic reasons underlying the necessity of
regulation of the takeover bids, in order to ensure the protection of the company,
of its shareholders, but also the protection of the other stakeholders in the com-
pany, such as its employees. Through them, we can mention:
– the conflict of interest between the manage ment of the company and the
potential bidders;
– the conflict of interest between the minority shareholders and the con-
trolling shareholders;
– the conflict of interest between the minority shareholders and the em-
ployees of the offeree company.
The exist ence of an efficient regulatory framework for takeover bids cre-
ates a set of rules necessary in order to achieve the following two objectives:
creating an efficient stock market from the corporate control point of view (which
leads to optimal resourse allo cation and better management discipline), as well as
ensuring minority shareholder protection against the unlawful actions of the con-
trolling shareholder or of the company management. Certain authors claim the
fact that a poor regulation of the takeover bi ds leads to market inefficiency, by
increasing the trading costs or agency costs, which results from the competition
8 See Sebastian Bodu, Piața de capital. Legea nr. 24/2017 privind emitenții de instrumente
financiare și operațiuni de piață , Rosetti International, Bucharest, 2019.
9 Ibid.
10 See Mathias Habersack, Non-frustration rule and mandatory bid rule – cornerstones of European
takeover law? , „European Company and Financial Law Review”, vol. 15, issue 1, 2018, p.1 -40.
Dynami c Ele ments in the Contemporary Business Law 15
between bidders11, while others have this view, according to which regulation
leads to a zero -sum game, generated by the transfer of a part of the potential gain
of controlling shareholders towards minority shareholders12. The acquisition of
corporate control is seen by the latter as a way of sanctioning poor -performance
managers, encouraging corporate restructuring and value creation. The argu ment
is rather simple, in the case of a potential takeover, with no connection with the
management of the company, that could easily end with the low -performance
manage r's dismissal from the company, the manager is being incentived to act in
the best inter est of the shareholders, maintaining a relative unattractive market
price of the company for the potential bidders. On the other hand, in the literature
is outlined the quality of the current regulations regarding the takeover bids, being
debated the level at which should be left the decision regarding the opportunity
of a takeover bid, bringing arguments for a differentiation of this regulation in
function of the particular conditions of the company (like for example, the own-
ership structure, that could be dispersed or concentrated ownership). The idea
arises from the following question: who is able to make a better informed decision
regarding the opportunity of corporate control change, that could lead or not to
value creation in the company, the corporate management or the company's share-
holders? The authors reach the conclusion that shareholders should decide, on
the basis of specific internal conditions, the level at which should be taken the
decision of opportunity regarding the future takeover bid13.
Habersack14 supports the idea that the directive has lead to a certain har-
monization of the takeover bids at the level of European Union member states,
however he claims that the directive on takeover bids failed in what concerns the
original intention of t he legislator, that of balacing the management and share-
holder rights, given the prohibition of the management of realizing any actions
that could prejudice the takeover offer, provision that was transposed by the ma-
jority of the EU members states in their national law.
Under the mandatory bid rule15, if an entity takes control of a company,
it is obliged to make a public offer to purchase all the remaining voting shares at
11 See Hubert De La Bruslerie. Equal opportunity rule vs. market rule in transfer of control: How
can private benefits help to provide an answer? „Journal of Corporate Finan ce” no. 23, 2013, p.
88–107; Luca Enriques, The mandatory bid rule in the takeover directive: Harmonization without
foundation? , „European Company and Financial Law Review”, no. 1, 2004, p. 440 – 457.
12 See Marc Goergen, Marina Martynova, Luc Renneboog, Corporate governance convergence:
Evidence from takeover regulation reforms in Europe , „Oxford Review of Economic Policy”, no.
21, 2005, p. 1 –27; Joseph A. McCahery, Luc Renneboog, Peer Ritter, Sascha Haller, The economics
of the proposed European Takeover Di rective , in: G. Ferrarini, K. Hopt, J. Winter, and E.
Wymeersch (eds.), Modern Company and Takeover law in Europe , Oxford University Press,
Oxford, pp. 575 –646; Erik Berglöf, Mike Burkart, European takeover regulation , Economic Policy,
no. 18, 2003, p. 171 –213.
13 See Luca Enriques, Ronald J. Gilson, The case for an unbiased takeover law (with an application
to the European Union) , „Harvard Business Law Review”, vol. 4, issue 1, 2014, p. 85 -127.
14 Mathias Habersack, op. cit , 2018, p. 1 -40.
15 Art.5 of Direct ive 2004/25/EC on takeover bids.
Dynami c Ele ments in the Contemporary Business Law 16
an equitable price. On one hand, this provision protects the minority shareho lder,
by guaranteeing the exist right from the company, and on the other hand provides
the minority shareholder with a pecuniary advantage, given by the control pre-
mium. The threshold from which appears the obligation of making a takeover bid
depends on th e national law of each member state. The surveillance and control
stock market authorities could be authorised to adjust the equitable price in some
circumstances and in accordance to some pre -bid criteria, on condition that these
are made public16. In most cases, the equitable price is established taking into
consideration the highest price paid by the bidder in a pre -bid period, that is to be
established by the competent authorities, of minimum 6 months and maximum 1
year. A bidder that within this establi shed period, buys securities from the market
at a price above the one established by the competent authorities, is obliged to
increase the price from the takeover bid17.
An important area regarding the protection of minority investors as far as
concerns t he takeover bids, regardless of the type of the bid (mandatory or vol-
untary) has to do with the amount of time needed by the minority investor in order
to make an informed decision18. This implies even the aknowledgement of the
effects that the mandatory ta keover bid has on the economic activity of the offeree
company and on its employees.
We could say that the mandatory takeover bid mainly comprise three ar-
eas: the obligation of making a public takeover offer, once a certain threshold has
been reached, the level of the threshold, respectively the equitable price proposed
by the bid. While the first and third area are established according to the European
Directive 2004/25/EC, the second area is regulated by the national law of the EU
member states. In a sim ilar way, in some member states, in function of the way
the Directive was transposed into national law, there are laid down additional
rights and liabilities, as well as exemptions, that can eventually not lead to the
materialization of the mandatory takeo ver bid.
Regulations regarding the protection of the minority shareholders in case
of a mandatory takeover bid exist in every EU member state (excluding Sweden).
In most of the countries, in order to exercise these rights, the controlling share-
holder ho ldings should surpass 30 % of the voting rights, as a necessary condition
for a mandatory takeover bid to be required.
The rights of minority shareholders in the case of mandatory takeover
bids, as in squeeze -outs and sell -outs, derive from the EU Direct ive19 and are
further developed in the EU national law. The national legislation applicable in
16 Marccus Partners, Mazars' Group, CEPS. The takeover bids Directive Assessment Report ,
European Commission, 2013.
17 Stefano Cacchi Pessani, et al., Guide to public takeovers in Europe . June, 2016, available at:
https://www .debrauw.com/wp -content/uploads/2016/06/Guide -to-Public -Takeovers -in-Europe -20
16.pdf , consulted on 1.10.2019.
18 Art. 3 (1) letter b), Directive 2004/2 5/EC on takeover bids.
19 Directive 2004/25/EC on takeover bids
Dynami c Ele ments in the Contemporary Business Law 17
the European Union member states stipulates the existence of the following rights
for the minority shareholder, when a mandatory takeover bid is in question20:
– information rights on the mandatory takeover bid, that should be
granted as soon as possible; the documents accompanying the bid must be rele-
vant for an informed decision of the minority shareholder; the surveillance au-
thority must endorse the mandatory takeover bid, prior to getting public; an inde-
pendent report performed by an expert must be attached in order to confirm that
the bidder has the necessary resources for covering the takeover bid; the company
must also present a report regarding t he effect of the mandatory takeover bid on
the company's activity, employees and creditors;
– right of receiving and consulting related documents , at the company's
headquarters;
– right to demand fair market price/equitable p rice;
– other rights , which ensure additional protection to the minority share-
holders (suspension of voting rights for the controlling shareholders until the date
at which the bid is registered at the competent authority; the company manage-
ment cannot take any actions that could in any way worsen the financial health
of the company or the implementation in good conditions of the mandatory take-
over bid, unless the actions have been approved by the general meeting of the
shareholders; within t hose meetings the multiple votes shares will bear only one
vote).
We will analyse the type of rights granted to the minority shareholders
in all the European Union member states, based on the results of the questionnaire
applied by Bartkus et al.21 in the period January 2017 – October 2017.
The most frequent combination of rights within the European Union
member states is the information right, combined with the right to demand fair
market price. We can notice the concurrent existence of the first three t ype of
rights in less than half of the EU members states. In other states, just the right of
demanding a fair market price is ruled (Greece, Hungary, Latvia, Luxembourg,
Netherlands, UK). In the next figure (Fig.1), we present graphically the countries
where are granted each of the rights mentioned above (in relationship with the
mandatory takeover bid).
As we can notice from the below figure, the information right regarding
the mandatory takeover bid is encountered in the majority of European Union
member states, with the exception of Greece, Hungary, Latvia, Luxembourg,
Netherlands and UK, where this right is not necessarily associated with the man-
datory takeover bid. In Slovenia, for instance, this right assumes the notification
of minority shareholders i n regards to any change of the company's financial as-
sets, during the period between the transfer of shares and the date of the general
20 Gintautas Bartkus, Daina Belicka, Mindau gas Civilka, Pierre H. Conac, Christoph Teichmann,
Tineke Lambooy, Brenda Hannigan, Study on minority shareholders protection , Publication Office
of the European Union, 2018.
21 Ibid.
Dynami c Ele ments in the Contemporary Business Law 18
meeting of the shareholders. In Belgium, the bidder and the company (throughout
the report that must be realized regardi ng the opportunity of making the manda-
tory takeover bid) must ensure that information obtained by some investors has
been made available also for the minority shareholders, towards which the bid is
addressed. In case of any false information, the bidder is made responsible for
causing any prejudices to the minority shareholders related to the acceptance of
the bid.
The right of receiving and consulting relevant documents regarding to
the mandatory takeover bid (financial statements, audit reports, etc.) i s present
just in some EU countries (Austria, Bulgaria, Croatia, Cyprus, Czech Republic,
Denmark, Estonia, Germany), due to the fact that it does not usually appear inde-
pendent, but relate d with the information right.
Legend
Identi-
fier Rights of the minority share-
holder related with MTB Country
Right to demand fair market price
Greece, Hungary, Latvia, Luxem-
bourg, Netherlands, UK
Information right
Right to demand fair market price Belgium, Finland, France, Ir eland,
Italy, Malta, Poland, Spain
Dynami c Ele ments in the Contemporary Business Law 19
Information right
Right of receiving and consulting
related documents
Right to demand fair market price Croația, Cyprus, Czech Republic,
Denmark, Estonia, Germany, Por-
tugal, Slovakia, Slovenia
Information right
Right to demand fair market price
Other rights Lithuania, Romania
Information right
Right to demand fair market price
Right of receiving and consulting
related documents
Other rights Austria, Bulgaria
Figure 1. Characteristics regarding the rights granted to minority shareholders in the
case of a mandatory takeover bid within the European Union member state s
Note:the figure was realized with Phil Archer's software http://www.philarcher.org/
Source: realised by authors, data provided by Bartkus et al. (2018) and own ellabora-
tion
The right to demand a fair market price in the case of a mandatory
takeover bi d appears in all EU member states, although the methods of establish-
ing it are quite diverse among states. These are based on either the market price
of the securities from 3 up to 12 months prior to the bid, either on the highest/av-
erage price paid by the bidder in a period of maximum 6 months prior to the bid.
In some states, there is also used a combination of these methods.
Likewise, in the national law of some members states there are often
mentioned other rights that additionally enhance the protect ion of minority share-
holders. In Austria, for instance, legislation requires that the management of the
companies should not take any actions that could jeopardize the implementation
in good conditions of the mandatory takeover bid, once it has been announ ced as
an intention, without the decision of the general meeting of the shareholders, un-
less a better, competitive offer is sought.
In Romania and in Bulgaria the voting rights of the shares held by the
person who exceeds the legal threshold are suspended until the mandatory take-
over bid is carried out22. In Lithuania, it is prohibited by the law to the manage-
ment of the company or the supervisory board to take any actions that could
worsen the financial health of the company, or the implementation of the m anda-
tory takeover bid, unless these actions have been approved by the general meeting
of the shareholders. Within those meetings, the multiple votes shares will bear
only one vote.
As far as concerns the legal threshold from which the takeover bid be-
22 Art.37 (1), (2) from Law no. 24/2017; Art.75(3) from FSB Regulation no. 5/2018
Dynami c Ele ments in the Contemporary Business Law 20
comes mandatory, for a company whose shares are at least partly listed on a reg-
ulated market, this varies among EU member states, and shall be reported to the
voting rights, rather than to the social capital. The minimum threshold for which
appears the mandato ry takeover bid starts from 25% + 1 vote in Croatia, respec-
tively Hungary23, while for other countries it is of 30% (Austria, Belgia, Cyprus,
Czech republic, Finland, France, Germany, Italy, Spain, UK), 33% (Romania,
Bulgaria, Denmark, Greece, Hungary, Lith uania, Luxembourg, Poland, Portugal,
Slovakia, Slovenia) or even surpasses 50 % in the case of Latvia.
3. Violation of minority shareholder rights in Romania regarding
the mandatory takeover bid
In Romania, the mandatory takeover bid is provisioned by Law no.
24/201724, as well as by the Regulation no.5/2018 of Financial Supervisory
Board25, through the applicable special provisions, in the case of the companies
listed on the regulated market of Bucharest Stock Exchange. These stipulate that
"the natur al person or legal person, as a results of his/her own acquisition or the
acquisition by persons acting in concert with him/her, which holds securities of
an issuer which, added to any existing holdings of those securities of persons
acting in concert with him/her, directly or indirectly give him/her more than 33
% of the voting rights in that issuer, is required to make a bid at the earliest op-
portunity addressed to all the holders of those securities for all their holdings at
the equitable price, but not later than two months after that holding has been ac-
quired "26.
There are also stipulated in the law some exemptions, in the cases where
the threshold holding position (33 %) has been attained due to27:
– a privatization process;
– the acquisition of share s from public institutions, involved in budgetary
credit claims procedures;
– the transfer of shares between the parent company and its subsidiaries;
– a voluntary takeover bid, for all shareholders holdings, addressed to
them.
Furthermore, the legislato r offers a derogation from the obligation to
make a takeover bid for those cases wh en the holding threshold (of 33 % from the
voting rights) has been attained unintentionally, offering the following alternative
scenarios: implementing a mandatory takeover b id, according to the law, or al-
ienate the number of shares necessary in order to lose the unintentionally attained
23 In case there is no other shareholder with a holding of more than 10 % of the voting rights
24 Law no. 24/2017 on issuers of financial instruments and market operations
25 FSB Regulation no.5/2018 on issuers of financial instruments and market ope rations
26 Law no. 24/2017 on issuers of financial instruments and market operations, Art. 37
27 Ibidem , art.39
Dynami c Ele ments in the Contemporary Business Law 21
holding28.
Further we will take in discussion a recent case29 with the object of lim-
iting the right of the company to redeem its own shares f rom the existence of the
obligation arising from the concertation of certain shareholders, who have ex-
ceeded the holding threshold stipulated by the law and fulfill the conditions for a
mandatory takeover bid.
In the appeal, it was shown that a program fo r the redemption of the
shares cannot be approved, as there is this situation of the concerted shareholders,
who must first undergo the mandatory takeover bid procedure for the company
shares and only at a later time, the company can redeem its own shares. In the
analysis of the aforementioned, it was shown by the appellant that if the court
intervenes by ruling that the financial resources of the company may be used in a
certain way, in other words, it decides on whether the redemption program should
be ca rried out or not, the judge would substitute the manager of the company.
Further, a position in this regard would cause the courts to censure on the grounds
of opportunity and not of legality. The appellant argues that Law 31/199030 allows
the company to re deem its own shares and at the same time, argues that between
the obligation of the concerted shareholders to make a takeover bid for all shares
and the possibility of the company to redeem its own shares, cannot be any con-
nection. Further, the appellant a rgues that the right of the company to redeem its
own shares cannot be related to the obligations of the shareholders, because the
company has no power to determine the respective shareholders to carry out a
certain operation
The defendant of the plaintif f calls for a rejection of the appeal as un-
founded and the maintenance of the court ruling as legal and sound, with the order
of the party which opposes to pay the costs. From their point of view, the legal
obligation of the concerted shareholders of reali zing a takeover bid and the pos-
sibility of the company to redeem its own shares are connected. In this case, the
law enforcement was correct, because the legal obligation of the concerted share-
holders prevails, shareholders who, in this situation, were obl iged to make a take-
over bid 2 years earlier and who, in bad faith, avoided it, violating the legal pro-
visions of Law 31/199031. In the event that the concerted shareholders would cir-
cumvent the legal obligation to make a mandatory takeover bid, transmitting this
obligation to the company, that would basically mean a masked operation of in-
creasing the capital of the concerted shareholders. This is done by distributing
free shares to concerted shareholders, following the redemption of the shares re-
alized by th e company, the members of the management board being exactly the
28 Ibidem
29 Decision no.111/18.02.2019, Pitești Court of Appeal, action for annulment of de Decision of the
general meeting of shareholders (Litigations with professionals).
30 Company Law no.31/16.11.1990, as republished and subsequently amended.
31 art. 1361 which pr ovides that "the shareholders must exercise their rights in good faith, while
respecting the legitimate rights and interests of the company and of the other shareholders".
Dynami c Ele ments in the Contemporary Business Law 22
two companies that hold the majority of the share capital in the company in ques-
tion.
The Court rejects the appeal, relying on a number of considerations, in-
cluding the following:
• the cri ticism regarding the fact that the hypothesis according to which
the first instance would have analyzed the legality of the decision in terms of
reasons of opportunity is unfounded; In fact, the resolutions of the general meet-
ing of the shareholders that a re against the law can be challenged on the way of
the nullity action, by the shareholders who did not take part in the general meeting
of the shareholders or voted against in the general meeting;
• in case a part of the shareholders proves that the decis ion of the general
meeting of the shareholders violates the legitimate interest of the company or is
taken in bad faith, the court will pronounce the absolute nullity of the decision of
the general meeting, the requirements according to art. 132 paragraph 2 of Law
31/1990;
• the first instance states, rightly, that by adopting a decision of the gen-
eral meeting of shareholders to repurchase shares, the imperative obligations in-
cumbent on the concerted majority shareholders should not be circumvented;
• whe n adopting decisions at the general meeting of shareholders, the re-
quirements imposed by the special legislation on the capital market and the ap-
plicable Community legislation must also be respected32.
In the analyzed case, by adoption of the contested dec ision in the general
meeting of the shareholders, the social interest was not pursued, instead there
were pursued the interests of the concerted majority shareholders, who should
have been obliged to make the public takeover bid. In fact, the aim was to tr ansfer
this obligation to the company, by using the financial resources of the company
for another purpose than the company's object of activity.
Considering the legal provisions that oblige the concerted shareholders,
which exceed a certain holding thres hold, to realize a mandatory takeover bid, we
can revise the protection elements in this case for the minority shareholders. The
conflict of interests that has appeared between the management of the company
and the concerted shareholders would have determi ned, in the absence of a ruling
in favor of the plaintiff, the diminution of the legal obligations established ac-
cording to the law for the concerted shareholders, regarding the mandatory take-
over bid and moreover, their receipt of free shares, the concert ed shareholders
being also members of the management board of the company.
32 Regulation (EU) no. 596/2014 of the European Parliament and of the Councilon marke t abuse;
Directiva (EU) no. 1132/2017 of the European Parliament and of the Council relating to certain
aspects of company law.
Dynami c Ele ments in the Contemporary Business Law 23
4. Conclusions
The mandatory takeover bid was introduced in the law of the European
Union member states as a transposition of Directive 2004/25/EC, which estab-
lishes the obl igation for the person or group of persons acting in concert and ex-
ceeding a certain threshold of holding in the company listed on a regulated capital
market to make an offer for the rest of the shares for all minority shareholders
(based on the principle of equal treatment), in order to protect the minority share-
holders of that company at the time of change of control.
The mandatory takeover bids are increasingly present in the European
capital markets, as a result of the increased competition and the inc reasing im-
portance that the capital market has in the European economy. The existence of
an efficient regulatory framework for mandatory takeover bids is meant to ensure
the investors protection, the corporate governance of listed companies, by elimi-
nating illicit acquisitions, but also meant to increase the competitiveness of exist-
ing companies on the market, by stimulating the managers to act in the best in-
terest of shareholders and pursue the long -term growth of the market value of the
company.
In the l iterature, however, there are studies that put into question the ef-
ficiency of the regulation of takeover bids. While there is a consensus that man-
datory takeover bids ensure the protection of the minority shareholder by offering
them the possibility of se lling their shares at a fair market price in the case of
takeovers that lead to a decline in the value of the companies, the academic opin-
ions are divided when it comes to efficiency of these regulations in what concerns
the takeovers that lead to an incre ase of the value of the companies. The argu-
ments that are brought in this direction are usually related to the increase of the
trading cost (due to the fact that the bidder has to pay more than they would need
to gain control of the offeree company), which can lead to a discouragement of
the bidders in making those acquisitions in the first place, acquisitions that could
probably enhance more value for the companies.
We also brought into discussion the opportunity of the legal provision
regarding the manda tory takeover bid in the case of a Romanian company, listed
on the regulated market, using recent jurisprudence. We have shown that, in this
case, the existence of the regulation led to the protection of the minority share-
holder. Future studies could focus on a richer jurisprudence, at the level of several
EU Member States, or have as objective the impact that the applicability of man-
datory takeover bids has had on the development of capital markets at the Euro-
pean level, using in this purpose quantitative investigation methods.
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Dynami c Ele ments in the Contemporary Business Law 24
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Public -Takeovers -in-Europe -20 16.pdf , consulted on 1.10.2019.
The Contract of Transportation According to Kosovo Legislation
Assistant professor Majlinda BELEGU1
Abstract
The contract of transport is a contract based on which the transport of persons
or goods is done from a place to the other place. This contract is one of th e most important
contracts in economy and the field of law of a country. By transport two main functions
are realized: a) displacement of working objects for producing a new product and b)
displacement of finished from a field of production to the field of circulation. By this paper
the conditions for concluding of this contract subjects of this contract, its characteristics,
types of transport as well as the ways of termination of this contract, will be explained.
The methods of systemic and comparison ana lysis will be used. Efforts will be made for
analysis, comparison and interpretation of norms of transport generally as well as the
transport of goods, specifically. Transport of passengers is not included. Relations be-
tween contracting parts are not regul ated only with the Law on Obligation Relations and
they are also regulated with the other specific laws depending on the type of the transport.
In the contract of transport, the obligation of transporter is an obligation whose objective
is achievement of d etermined result what he concretely is obliged to send to persons,
undamaged or goods, passenger or the sender of goods. If the contract of transport is
concluded, then are other transports different. Here there appear various types of con-
tracting relation s. With the transport of passengers in one side there is the subject that
organizes journey (touristic agency) and the passenger, whereas with the contract of the
transport of goods as parties could appear seller of goods and transporter or the creator
of the item and the transporter.
Keywords: law, contract, transport, passenger, item, goods.
JEL Classification: K12, K22
1. Introduction
Transport of goods and passengers from a place to the other in the mod-
ern times is very frequent. Paper interprets the ways based on which transport is
done according to the Kosovo legislation comparing this with the countries of the
region. Within the paper the report between transporters and replacement of ob-
jects from a place to the other are described. Conditions o f concluding this con-
tract are key elements so it could be valuable contract. If the contract is considered
to have been concluded, then the obligation of transport is fulfilled if goods dur-
ing the transport were damaged without the fault of transporter.
The paper during the analysis and during the comparison of legal norms
1 Majlinda Belegu – AAB College, Prishtina, Kosovo, majlinda.belegu@universitetiaab.com.
Dynami c Ele ments in the Contemporary Business Law 26
manages to show who are subjects that conclude contract according to the posi-
tive law and if the characteristics of contracts determined by the positive law are
fulfilled.
Since transpor t contains one of the main duties of sender in the paper
there are described the ways of transport is done and conditions needed to be
fulfilled from the sender to transporter in order to realize this type of contract.
Paper in its content presents only th e transport of goods and not the
transport of persons from a place to the other place which by the law is foreseen
as a contract of specific type.
In the paper will be used methods of analysis, analyzing various theories
and legal norms for transfer of goo ds. Through the systemic method the proce-
dure up to the fulfillment of the obligation is analyzed. Method of comparison
helps us to compare various theories and through this method the comparison of
legislations of the countries from the region related to the contract of transport is
done.
2. Notion
The contract of transport is a contract by which transport of persons and
goods from a place to the other is made possible. Transporter is obliged to
transport the determined subject to the requested place, de termined goods to
transport to the contracted place, whereas passenger respectively the sender of
goods is obliged to pay the contracted price to him.2 This contract is one of the
most important economic contracts of a country. With the transport two funct ions
are realized: a) replacement of the working object for producing new product and
b) replacement of finished products from the field of production to the circula-
tion.3 This contract is regulated by the legal disposals. With the contract of
transport tr ansporter is obliged to transport to a determined place some persons
or goods, whereas passenger respectively sender is obliged to pay the determined
amount.4
Sender is the person that is called transporter. By the contract of transport
we would understand that contract by which the transport of goods and persons
is made possible from a place to the other place.5 Transport of people and
transport of goods is regulated with a special law which regulates specific types
of transport. Relations between parties are not regulated with the Law on Obliga-
tion Relations. Norms by which the transport of passengers and goods is regulated
derive from the law on transport, law on civil aviation, law on transport of dan-
gerous goods, law on roads, convention on internationa l transport of passengers
2 Riza Smaka, E Drejta Biznesore , Iliri a, Prishtinë, 2008, p. 415.
3 Mariana Tutulani -Semini, E Drejta e Detyrimeve dhe e Kontratave , Sanderbagbooks, Tiranë,
2006, p. 99.
4 Law on Obligational Relations, Gazzete, Kosovës, Prishtina. 2012, art. 662, par 1.
5 Ardian Nuni, Ilir Mustafaj & Asim Vok shi, E Drejta e Detyrimeve , II, Tiranë, 2008, p. 135.
Dynami c Ele ments in the Contemporary Business Law 27
and goods, convention on contracts related to international transport through
roads. In the contract of transport the obligation of transporter is an obligation
whose object is achievement of a determined result that he concretely is obliged
to transport undamaged persons or goods or goods damaged without the fault of
passenger or sender of goods.6
Albanian Civil Code also regulates the contract of transport. With the
contract of transport, transporter takes the responsibility to t ransport persons from
a place to the other place.7 Then, the contract of transport of goods is regulated
also with the article 880 of the Law on Obligation Relations. With the contract of
transport of goods, transporter takes the responsibility to transpor t goods from a
place to the other.8
Regulation of transport of goods and passengers is regulated with special
disposals because passengers and goods are different compared to each other.
Passengers are human beings whereas goods even though could be damage d, they
can be compensated while passengers, not. In the transport of passengers in one
side we have the subject who organizes journeys that is touristic agency and the
passenger, whereas the contract of transport of goods, as parties could appear are
seller of goods and transporter or the creator of the item and transporter. Based
on the territory in which the transport is developed, contract could be for interna-
tional transport, regional transport and domestic transport.9
With the contract of internationa l road transport, transporter is obliged to
for the determined amount of money, to transport goods from a place to the other
which belongs to the territory of different states.10 This means that transporter is
obliged to conduct transport also outside the c ountry where the law operates. Af-
ter the transporter goes from our country to the other the competent legal norms
that apply to this contract are those based on whom contract was concluded.
3. Conditions of concluding the contract
For concluding the cont ract of transport there should be fulfilled a series
of conditions which are separated into:
General conditions and
Specific conditions
As the general conditions there are mentioned: ability to act (working
ability), conciliation of will, object of the con tract and the basis of the contract.
As the special conditions there are: the form of contract, the given con-
sent of concluding contract and delivery of the item to be transported.
6 Ibid., p. 135.
7 Albanian Civil Code, Republic of Albania Official Gazzette, Tirana, 1994, art. 877.
8 Po aty, neni 880.
9 Armand Krasniqi, E Drejta Biznesore , Dukagjini, Pejë, 2014, p. 431.
10 Armand Krasniqi, E Drejta Kontraktore Biznesore , CSARA, 2015, p. 282.
Dynami c Ele ments in the Contemporary Business Law 28
4. Ability to act (working ability)
Working ability of contracting partie s is the general condition which is
required for concluding the contract.11 The ability to act of physic persons is
gained at the age of 18. It could be gained before the age of 18 and only after the
age of 16. But the ability to act after the age of 16 is gained only with the court
decision. This happens when somebody enters into the marriage before the age
of 18 and the court in such a case decides pro ability based on the expertise of
experts which is called emancipation. The ability to act could be remov ed and
this could be done with the final court decision.
Ability to act of legal persons is gained with the act of registration of
these subjects. The registration is done before the Kosovo Agency for Registra-
tion of Businesses (ARBK). Registration starts with the act of application. Ful-
fillment of conditions for registration of subjects is based on determined dispos-
als. Disposals emphasis that legal subjects should have their identity. Identity
contents: name, residence, nationality, statute and the budget .
5. Consent of will
For concluding the contract of transport and for carrying goods and pas-
sengers the consent of seller of goods, respectively passengers and the transporter
is needed. Regarding the fulfillment of contract, it is considered that part ies
should freely fulfil it.12 In order to have consensual will of parties, it should be
bilateral, serious, expressed clearly in that way that this general condition is ful-
filled from what as the result contract is concluded.13 Will should be clear, serious
and allowed. Both contracting parties should declare pro or contra contract con-
clusion. Contract should be signed by all contract parties. Parties shall sign with-
out being imposed, without frauds, threat or mislead.
6. Subject of the contract
Subject of the contract is transport of goods or passengers from a place
to the other and the realization of the obligation of transport without damaging
goods which need to be transported or by transporting passengers under the good
conditions as they were before t he transport began. With the transport of goods
transporter has the aim to achieve a result which is transfer of goods from a place
to the other. Whereas order for transport of goods or even passengers have to
reward transporter for organizing and transfer of goods from a place to the other.
11 Nerxhivane Dauti, E Drejta e Detyrimeve , Universiteti I Prishtinës, Prishtinë, 2001, p. 63.
12 Ibid, p. 60.
13 Mazllum Baraliu, E Drejta Biznesore , Universiteti I Prishtinës, Prishtinë, 2010, p . 473.
Dynami c Ele ments in the Contemporary Business Law 29
Payment is done as parties have agreed. The price of goods, time and the place of
payment for transport of goods is also determined with the contract. Price depends
on many factors, factors which have an impact are the length of road, the way of
transport, the type of goods, packaging, etc. Transporter has also to be prepared
with suitable means of transport and always making sure about the type of goods.
Example: meat cannot be transported if transporter doesn’t possess fridge in the
means of transport and the same for ice creams, eggs, etc. Depending on the ob-
ject of transport, transport is divided in: contracts of transport of passengers, and
contract for transport of goods.
7. Contract parties
Contract parties of th e transport contract are transporter and passenger,
respectively sender of goods. In most cases sender of goods is not the person who
should receive goods, third person is person who receives goods in which case
transporter has determined obligations to re ceiver of goods even though with the
contract of transport he is not a contracting party. Transporter is the other contract
party who takes the responsibility that with his means of transport to transport
goods in a determined determination within be deter mined deadline with the con-
tract.14
In this contract the third party appears and that is receiver of goods.
Receiver doesn’t take part in concluding the contract but however in the time of
delivery of goods he enters in the contract as the contracting party undertaking
determined rights and obligations.15 Transporter shall take goods, he shall be
equipped with needed documentation and to transport goods until reaching re-
ceiver.
8. Characteristics of contract of transport
Contract of transport is a contract by name because law foresees it with
the disposals.
Contract of transport is consensual contract. Both parties determine con-
ditions for concluding the contract from the negotiations, subject of contract,
ways and the place of payment, etc.
Regarding the fo rm this is a no formal which means that in concluding it
there is no need for special form unless in cases when law requires this specifi-
cally.
This contract shall be concluded in a written form so it proves that the
contract was concluded. This contract i s a contract with the reward. For transpor-
tation of goods and passengers, transporter should be paid for service of transport
14 Mariana Semini, E Drejta e Detyrimeve dhe e kontratave , Skanderbagbooks, Tiranë, 2006, p.
107.
15 Ibid, p. 104.
Dynami c Ele ments in the Contemporary Business Law 30
to the destined place. The payment for the service of transport has to be done by
sender of goods or by the passenger. Payment is done based on conditions deter-
mined by contract in the time and in the determined place.
Contract of transport is consensual contract. It is concluded between
sender and transporter who have rights and obligations which are determined by
the contract.
9. The obligations of contract parties
Both contracting parties have determined the obligations.
9.1. Obligations of transporter
Transporter shall put at the disposal the means of transportation at the
time and at the determined place for the sender of goo ds in order to get goods for
transportation.
In addition to cargo, transporter is obliged to be equipped with the ac-
companying documents with all data.
Transporter shall conduct transport of goods in the time and at the deter-
mined destination with the cont ract of transport. There are cases when goods are
not delivered according to the determined way by contract and with this case
transporter shall reimburse caused damage based on his fault.
Transporter is responsible for loses of goods or for damaged goods dur-
ing the transport from the moment he takes the goods up to the moment when
goods are received by receiver.
9.2. Obligations of sender
Obligations of sender are:
– sender shall make cargo which has to be transported along with the doc-
uments to accompa ny.
– sender is obliged to load means within determined time in its own ex-
penses unless differently regulated by the contract.
– sender is obliged to pay price for transport according to the contract as
agreed with the contract of transport.
9.3. Obligat ions of receiver
Receiver is obliged to make sure that his expenses before receiving goods
for the identity and for the physic stage of goods which were transported.16
Receiver is obliged to do the discharge of goods in the storehouse in his
16 Ibid, p. 115.
Dynami c Ele ments in the Contemporary Business Law 31
own expenses a nd this is not done only if with the contract is regulated differently.
10. Suppression of contract
The contract of transport is suppressed like all other obligations as are:
by fulfillment of the obligation, by the death, by the annuity, by bankruptcy, by
liquidation and by renovation of the contract.
11. Contract for transport of goods
Transporter has the duty to transport the received goods and to deliver at
the determined place by the sender or determined person (receiver).17
Object of this contract could be goods or persons therefore from the ob-
ject of the contract the contract for transfer of goods and the contract for transport
of passengers differ. Based on the object of contract the obligations and the rights
of contracting parties are determine d.
The main obligation of the transport of goods is the transportation of
goods, which are received and the received goods have to be transported from the
place goods were taken to the place of delivery. Item is transported from a place
to the other but a receiver is needed, because he is the person that shall receive
item.
The contract includes the transport deadline. Thus, item shall be received
and delivered according to the deadline determined by the contract.
Item (goods) which is given to the transp orter, has to be saved as it was
received. He shall care about the item and shall behave with the intensified care
for the item which has to be transported. Transporter is responsible for damaged
goods or loosed goods while being transported.
Goods that ar e transported within the deadline shall be delivered to the
person determined by the contract. Person who receives goods from transporter
could be person who has given goods for transport or to the third person.
11.1. Subjects of contract of transport of goods
As subjects of the contract of transport are: transporter, sender of goods
and the receiver. Sometime sender of goods could be person who receives goods.
But the receiver could be also the third person.
11.2. Conditions for concluding the contract of transport of goods
Conditions for concluding the contract of transport of goods are those
17 Law on Obligational Relations, Kosovo Official Gazette, 2012, art. 667.
Dynami c Ele ments in the Contemporary Business Law 32
needed to be fulfilled so the contract is considered valid. Absence of these con-
ditions brings to the annulment of the contract, so it is considered as the contra ct
was never concluded.
Contract for transport of goods shall have general and the specific condi-
tions. General conditions are: ability to act, the accordance of will, the subject of
the contract and the basis of the contract.
Specific conditions are: deli very of goods, the form of contract and con-
sent for the conclusion of the contract.
11.3. Characteristics of the contracts for transport of goods
Contract for the transport of goods is a contract by name because as such
it is regulated by the law. It is a consensual contract because both contracting
parties are those that determine their rights and duties. Contract for transport of
goods is a commutative contract because parties since its conclusion know their
goal and the object of this contract.
Contr act for transport of goods is contract with the reward because for
the transport transporter has to be compensated for the transportation of goods
from sender to the receiver.
This contract is mutual obligatory because both parties have duties to-
ward each other.
Transporter has to deliver the goods according to the contract in the place
and the time determined by the contract. Whereas sender (receiver) has to fulfil
the compensation. This contract is informal and the main contract.
11.4. The obligations of sender
As the main duty of sender is information for the transporter. Sender is
obliged to inform transporter for the type of shipment, for its content and the
quantity and to make it known regarding where has the shipment to be trans-
ported, name and the address as well as every needed element so the transporter
could fulfil its obligations without delays and payment.18
Sender is obliged to inform the transporter when the valuable goods are
to be transported as securities, also he is obliged to inform the transporter about
the value of goods.
When we talk about the transport of dangerous goods that condition spe-
cific conditions of transport, sender is obliged to inform transporter on time so he
undertakes necessary measures. If this information is not prov ided by the sender,
then he is responsible for damages if they appeared.
Sender is obliged to pack goods according to the foreseen way or prac-
ticed in a way so goods are not damaged and that the security of people is not put
18Law on Obligational Relations, Kosovo Officia l Gazette, 2012, art. 668.
Dynami c Ele ments in the Contemporary Business Law 33
in danger as well as goods.
Sender is obliged to pay the contracted price (reward) as well as the ex-
penses related to the transport.
11.5. The obligations of transporter
Transporter is obliged to do the transport in the contracted way. Trans-
porter is obliged to inform sender for all ci rcumstances which would have impact
in conducting transport and to act according to given guidelines. Transporter is
obliged to warn sender about shortcomings of packaging that could be noted.
Transporter is not obliged for damage of shipment if he has war ned about the
shortcomings and that he had to do the transport no matter of the shortcomings.
Transporter is obliged to refuse shipment if shortcomings in packaging
are such so the security of persons or goods is put in danger or a damage will be
caused.19
Transporter is obliged to act as a good economist respectively as a good
householder and for this to inform sender and to require further guidelines.
11.6. Extinction of the contract
Contract for transport of goods is extinction like most of contracts. T hey
after producing judicial effects are extinguished. Contract of transport is extin-
guished: with the agreement, when its subject is disappeared, when the contract-
ing party dies, by annulment and by non -execution of the contract.20
12. Conclusion
Contrac t of transport is a contract which in the modern times keeps an
important position in the legislation in the business law.
According to the analysis it is concluded that all countries of the region
regarding this contract act similarly. Especially they are similar on the rights and
the duties of transporter and the sender but also to the conditions for concluding
the contract.
Paper explains conditions for concluding contract of transport. They are
divided into the general and the specific conditions. Condi tions for concluding
the contract of transport are similar to those of the contract of passengers.
To the contract of transport as subjects for concluding contract and for
fulfilling the contract are: transporter, sender and receiver of goods. In most case s
ordered od transport is the receiver of goods, but not always receiver of goods is
the same person who ordered the transport of goods.
19 Ibid, art. 672, par. 1, 2, 3, 4.
20 Nerxhivane Dauti, Kontratat , Universiteti i Prishtinës, Prishtinë, 2012, p. 115.
Dynami c Ele ments in the Contemporary Business Law 34
To the contract of transport of goods, the condition of fulfilling the con-
tract is the transport of goods and deliveran ce of goods as they were taken. Goods
should be delivered as they were received by the transporter.
Contract for the transport of goods is considered as no fulfilled if goods
are damaged during the transport due to the fault of transporter. In this case trans-
porter is obliged to do the compensation where as compensation are covered
moral and material damages. But if goods are packed in a way that the orderer of
transport knew the goods would damage then transporter is not guilty and it is
considered that the contract has been fulfilled.
As a contract it has its characteristics, it is a contract by name, commuta-
tive, consensual obligatory and by reward. For concluding the contract of
transport there are no needs for some determined formalities ore ceremonia ls. It
is classified as the principal contract that is nod dependent on any other contract.
The contract of transport is extinguished in many ways. It is extinguished by ful-
fillment from both contract parties, by passing the deadliness, with the death of
any of contracting parties and with the annulment of the contract decided by the
court due to the nonfulfillment of the principal conditions for concluding the con-
tract. When the subjects that concluded contract are judicial persons then the con-
tract is ext inguished with: bankruptcy, liquidation or the bankruptcy of the legal
person.
Bibliography
1. Ardian Nuni, Ilir Mustafaj & Asim Vokshi, E Drejta e Detyrimeve , II, Tiranë,
2008.
2. Armand Krasniqi, E Drejta Biznesore , Dukagjini, Pejë, 2014.
3. Armand Krasniqi, E Drejta Kontraktore Biznesore , CSARA, 2015.
4. Mariana Semini, E Drejta e Detyrimeve dhe e kontratave , Skanderbagbooks, Ti-
ranë, 2006.
5. Mariana Tutulani -Semini, E Drejta e Detyrimeve dhe e Kontratave ,
Sanderbagbooks, Tiranë, 2006.
6. Mazllum Baraliu, E Drejta Bizne sore, Universiteti I Prishtinës, Prishtinë, 2010.
7. Nerxhivane Dauti, E Drejta e Detyrimeve , Universiteti I Prishtinës, Prishtinë,
2001.
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9. Riza Smaka, E Drejta Biznesore , Iliria, Prishtin ë, 2008.
The Administrator – Representative or Employee of the Limited Lia-
bility Company. Aspects of Comparative Law
Lecturer Olga -Andreea URDA1
Abstract
It has been frequently analyzed, in the doctrine and practice of commercial law,
whether it is opportune to conclude an individual employment contract between the ad-
ministrator and the limited liability company or a mandate contract. In the context of the
free movement of persons in the Member States of the European Union, we consider that
it is ne cessary to have a comparative analysis of company law, especially in the particular
matter of the administrator -society relationship. The present study proposes an analysis
of compared law between the provisions of Romanian law and those of French law re-
garding the management of contracts that may intervene between the administrator and
the company. Thus, the difficulties related to determining the possibility or not of the
administrator to conclude an individual employment contract with the limited liabili ty
company can find their solution through a mirror analysis of another legislative model.
Keywords : administrator, mandate contract, individual employment contract,
limited liability company
JEL Classification : K20, K22
1. Introduction
In the doctrin e and practice of corporate law, the question has frequently
been asked to what extent an administrator can conclude an individual employ-
ment contract with the company he administers.
In the case of the joint stock company, the answer is offered unequivo-
cally even by Law no. 31/1990, meaning in which art. 1371 para. (3) expressly
provides that "during the fulfillment of the mandate, the directors cannot conclude
with the company an employment contract. If the directors have been appointed
from the employees of the company, the individual employment contract is sus-
pended during the term of the mandate". But another is the situation of the limited
liability company, in which the silence of the law led to a series of polemics.
Obviously the problems that exist in the practice of commercial law, gen-
erated by the lack of an express provision of the law, demand, de lege ferenda ,
an intervention of the legislator that expresses its position clearly in the face of
this controversy.
We will thus observe in the analysi s of comparative law below, that the
1 Olga -Andreea Urda – „Alexandru Ioan Cuza” University of Iasi, Romania, olga.alexandru@
uaic.ro.
Dynami c Ele ments in the Contemporary Business Law 36
French company law clearly provides for the situation of the limited liability com-
pany a legislative solution, meaning that it has specifically the situations in which
the director of a limited liability company has the possibility of concluding an
individual employment contract with the company.
2. The legal nature of the relationship between the administrator and
the company
The legal nature of the relationship between the administrator of a com-
pany and the company i t manages is that of the mandate contract. In this regard,
we consider the express provisions of art. 72 of Law no. 31/1990, according to
which "the obligations and the responsibility of the administrators are regulated
by the provisions regarding the mand ate and those specifically provided for in
this law". The contractual character of the legal relationship between the admin-
istrator and the company is also supported by the provisions of art. 15312 which
conditions the legal validity of the appointment of an administrator by the express
acceptance by the named person. Thus, for the appointment of an administrator,
respectively a member of the board of directors or the supervisory board, to be
legally valid, the named person must expressly accept it2.
The fi nal thesis of art. 72 of Law no. 31/1990 accredits the opinion that
the content of the administrator's mandate is not an exclusive contractual one,
being supplemented with the legal provisions. Thus, we can conclude that the
legal nature of the relationshi p between the administrator and the company is on
the one hand a contractual one and on the other a legal one3.
3. Administrator – employee with an individual employment contract
in a limited liability company
In the doctrine there are different opinions regarding the possibility of the
administrator to conclude an individual employment contract with the company.
If, in the joint stock companies, as mentioned above, the prohibition of
the conclusion of an individual employment contract by the directors, d irectors,
members of the supervisory board, is express and unequivocal, in the case of the
limited liability company, the absence of an express provision gives rise to inter-
pretations.
The opinion that the administrator cannot have the status of employee of
2 Stanciu D. Cărpenaru, Tratat de drept comercial român , 4th edition, Ed. Universul Juridic,
Bucharest, 2014, p. 219.
3 I.L. Georgescu, Drept comercial român , vol. II, Ed. All. Beck, Bucharest, 2002, p. 387; Dragoș –
Mihail Daghie , Administratorul societății – privire re trospectiv -istorică, evoluție legislativă, repere
contemporane, in Dreptul românesc la 100 de ani de la Marea Unire. Dimensiuni și tendințe , 22-
23 November 2018, Ed. Universul Juridic, Bucharest, p. 175; St. S. Cărpenaru, Gh. Piperea, S.
David, Legea soci etăților. Comentarii pe articole, 5th edition, Ed. C.H. Beck, Bucharest, 2014, p.
254-255; Vasile Nemeș, Drept comercial , 3rd edition, Ed. Hamangiu, Bucharest, 2018, p. 160 -161.
Dynami c Ele ments in the Contemporary Business Law 37
the company he manages is supported by a series of arguments. Thus, the provi-
sions of art. 72 of the Companies Law, mentioned above, establishes that the ad-
ministrator -company relationship is governed by the provisions regarding the
mandate contract. I n this context, if we would agree with the possibility of the
administrator also having the quality of employee, then we would be in the pres-
ence of a clear conflict of interests, having on the one hand the mandate of the
company and on the other the quali ty of employee of the society whose interests
must protect them4.
Art. 1961 para. (3) of Law no. 31/1990 expressly provides for the possi-
bility of the sole associate, who may also have the capacity of director, to con-
clude an individual employment contract with the limited liability company5. This
provision is not capable of accrediting the idea that the directors of the limited
liability companies may conclude an individual employment contract with the
company, but it establishes an exception in favor of t he sole partner6. Moreover,
such a possibility granted to the sole shareholder is also justified by the fact that
in the case of companies with limited liability with several associates, the finan-
cial interests of the other associates could be affected by granting the employee
rights to the administrator, which aspect in the limited liability company with
only one partner is not possible7.
Another argument for the impossibility of combining the quality of ad-
ministrator with the one of the employee and in t he case of the limited liability
company, is justified by the provisions of art. 197 paragraph (4) of Law no.
31/1990 which stipulates that "the provisions regarding the management of joint
stock companies are not applicable to limited liability companies, whether or not
they are subject to the audit obligation". The interpretation of this article gives
the idea that the management of the limited liability company cannot take the
form of the unitary or dualistic system of managing the joint stock companies,
the rest of the provisions being applicable, including the prohibition of the cumu-
lating of the quality of employee with that of company administrator8.
4 Stanciu D. Cărpenaru, op.cit. , p. 212 -213.
5 It should be mentioned that prior to the adoption of the Government Emergency Ordinance no.
82/2007 O.U.G. for amending and supplementing Law no. 31/1990 regarding commercial
companies and other incidental acts, art. 1961 paragraph (3) of Law no. 31/1990, it had another
content: "th e sole partner may have the status of employee of the limited liability company whose
sole partner is, unless he has the capacity of sole director or member of the board of directors".
6 More in the doctrine is found even the opinion that art. 1961 of the Companies Law refers to the
possibility of concluding an individual employment contract with the company and not to the
cumulation of the quality of administrator with that of the employee – in this sense see Ștefan Vlad,
Cumulul calității de administrator cu cea de salariat , available online at
http://www.dailybusiness.ro/bloguri/stefan -vlad/altele/cumulul -calitatii -de-administrator -cu-cea-
de-salariat -353, consulted on 1.10.2019.
7 I. T. Ștefănescu, Ș. Beligrădeanu, Natura raportului juridic dintre societ ățile comerciale și
administratorii sau directorii acestora , „Dreptul” no. 8/2008, p. 57.
8 I. T. Ștefănescu, Ș. Beligrădeanu, op. cit , p. 56.
Dynami c Ele ments in the Contemporary Business Law 38
The solution of the conclusion of a work contract between the adminis-
trator and the limited liability company, appears, in another opinion, to be at least
a natural one, provided that in the frequent situations the administrator is chosen
from the associates of the company. Thus, it is appreciated that the provisions of
art. 1371 para. (3) of the Companies Law are of strict interpretation and are not
incidental also in the case of the limited liability company9.
In practice, the most relevant problem is that of dismissing the adminis-
trator from the position by decision of the general meeting of the associ ates with
the rigorous modification of the articles of incorporation and maintaining the
quality of the employee of the company.
The dismissal of the administrator from the position is made according
to the procedure provided by Law no. 31/1990, not being necessary to motivate
such a decision. However, although the company will modify the articles of in-
corporation and will have another director, the former administrator will retain
his status as an employee, in the absence of a situation in which his indivi dual
employment contract can be dissolved.
The reasons for the dismissal of the administrator of the position may be
due to a change in the company's management policy, reasons that cannot justify
termination of employment relationships. In this case, any dismissal decision
made without strictly observing the procedure for termination of the individual
employment contract will inevitably lead to the nullity of the dismissal decision
and to the reintegration of the employee, to the extent he or she so reques ts10.
The difficulties arising from such a situation are manifold and demand
special attention from the legislator.
Thus, we consider that it would be necessary to regulate a prohibition
similar to that of the joint stock company and in the case of the limi ted liability
company, given that the risks arising from a possible labor dispute can lead to a
blockage of the company.
4. The conclusion of a mandate contract between the limited liability
company and the director
The mandate received by the administra tor is, first and foremost, contrac-
tual in nature. The director is appointed according to the associates either by the
instrument of incorporation, at the time of setting up the company or, subse-
quently, by the decision of the meeting of the associates. Wi th the appointment
to the position of administrator the associates will also establish the extension of
9 Monica Novac, Calitatea de salariat si administrator al societății cu răspundere limitată,
available online at https://www.juridice.ro/202417/calitatea -de-salariat -si-administrator -al-
societatii -cu-raspundere -limitata.html, consulted on 1.10. 2019.
10 Florentina Munteanu, Daniela Sora, O controversă veche: administratorul salariat, „Cariere”
Journal, April/2010, ava ilable online at https://revistacariere.ro/antreprenor/legal/o -controversa –
veche -administratorul -salariat/, consulted on 1.10. 2019.
Dynami c Ele ments in the Contemporary Business Law 39
the mandate, which may be with representation or without representation.
Revocation of the mandate given to the administrators can intervene at
any time , according to the provisions of art. 1371 of the Companies Law, by de-
cision given by the meeting of the associates. Also relevant are the provisions of
art. 1914 para. (2) Civil code which establishes that the administrator "may be
revoked according to th e rules of the mandate contract, unless otherwise provided
in the company contract". Moreover, according to art. 132 of Law no. 31/1990
the administrators cannot appeal the decision of the general meeting regarding
their dismissal from office.
However, if the revocation occurs without just cause, the administrator is
entitled to payment of damages. We observe here a correlation with the provisions
of art. 2032 of the Civil code stipulating the obligation of the principal who re-
vokes the mandate, to remain o bliged to execute his obligations towards the agent
and to repair the damages suffered by the agent due to unjustified or unintentional
revocation.
The conclusion of a mandate contract with the administrator, and not of
an individual employment contract, p resents on the one hand a number of ad-
vantages for the company, and on the other hand it has the role to avoid a series
of significant incidents, generally circumscribed by the labor jurisdiction.
In this respect, the benefits of concluding a mandate cont ract with the
company and not an individual employment contract are of the nature of the rec-
ord. First of all, the problem generated by the situation of dismissal of the admin-
istrator creates far fewer practical problems, if the company has concluded a man-
date contract with it.
Another benefit for the company is generated by the existing risks if the
court considers that the mandate has been unjustifiably or inadvertently revoked.
Thus, in such a situation, the company owes to the administrator any damages
that may be added, in the case of the mandate with an onerous title, and the obli-
gation to pay the representative the remuneration established by the mandate con-
tract11.
In addition, the clause may include a clause in which the parties establish
a sum of mo ney, with compensation for the non -executed period of the contract,
which will be granted to the trustee in case the term is revoked inadvertently,
independent of a fault in the execution of its mandate. For society, this possibility
of limiting the risks is particularly favorable.
The solution is much milder compared to the situation generated by a
labor law dispute in which the company will be obliged to pay equal compensa-
tion with the indexed, increased and updated salaries and with the other rights the
employee would have benefited, until the final decision remains. court and pos-
sibly the reintegration of the employee. Moreover, the non -execution of the court
11 Gheorghe Piperea G., Contractul de mandat , in Baias F. A., Chelaru E., Constantinovici R.,
Macovei I. (coord.), Noul Cod civil: comentarii pe articole , Ed. C.H. Beck, Bucharest, 2012, p.
2037.
Dynami c Ele ments in the Contemporary Business Law 40
decision regarding the payment of salaries within 15 days from the date of the
enforcement reque st addressed to the employer by the interested party constitutes
the offense of non -observance of the court decisions provided and sanctioned by
the provisions of art. 287 of the Criminal Code.
The possibility of mentioning in the mandate contract a non -competition
clause is much easier compared to the similar possibility in the individual em-
ployment contract, in the context where, in the latter situation, the provisions of
art. 21 paragraph (1) of Law no. 53/2003 – The Labor Code imposes on the em-
ployer th e obligation to pay the monthly non -competition allowance for the entire
non-competition period.
Art. 197 para. (2) of the Companies Law stipulates the non -competition
obligation of the administrators of the limited liability companies. They "cannot
receiv e, without the authorization of the associates meeting, the mandate of ad-
ministrator in other competing companies or having the same object of activity,
nor do the same kind of trade or another competing on his own account or on the
account of another natu ral or legal person, under the sanction of revocation and
liability for damages". However, this obligation exists for the period during which
the administrator is in office, for the period after the termination of his mandate,
the principal may provide in the contract a non -competition clause that can pro-
duce its effects and for a period of time calculated from the date of termination
of the mandate contract. The possible costs for establishing such a clause will be
negotiated by the parties without the con straint of regulations specific to labor
law. It should be noted in this sense that art. 21 of the Labor Code establishes a
minimum limit for the monthly non -competition allowance due to the employee,
namely "at least 50% of the average gross salary income of the employee in the
last 6 months prior to the termination of the individual employment contract or,
if the duration of the contract individual work was less than 6 months, from the
average of the gross monthly salary income due to him during the contr act".
5. Aspects of comparative law – the legal regime of the administrator
in French company law
The legal nature of the relations between the administrator and the com-
pany is, in French commercial law, that of the social mandate, which goes beyond
the notion of mandate stricto sensu . Thus, the administrator is more than a trustee
of the company being considered a body of it12.
For the position of administrator of the limited liability company, in
French law we find the term "manager". Unlike our intern al law, in which the
legal nature of the relationship between the administrator and the company is a
contractual and a legal one, in French law the legal nature of the administrator –
12 Claudia Roșu, Natura juridică a funcției administratorilor societăților comerciale în dreptul
francez , „Revista de Drept Comercial”, no. 10/2002, p. 168.
Dynami c Ele ments in the Contemporary Business Law 41
company relationship is legal, the administrators applying the regulations of the
French Commercial Code, completed with the provisions of the constituent acts13.
The administrator of a limited liability company does not have the status
of a trader, exactly as in our national law, but has the capacity of social agent and
will be the legal representative of the company14.
The administration of the limited liability company can be performed ex-
clusively by a natural person. The administrator of the limited liability company
is appointed by the associates, according to art. 223 -18 of t he French Commercial
Code, either in statute at the establishment of the company, or subsequently, by
decision of the general meeting of the associates. The administrator may be re-
voked, with the majority required by law, and insofar as the revocation is m ade
without a just cause, he may claim damages (art. 223 -25 French Commercial
Code).
Regarding the liability of the administrator in French law, the adminis-
trator of the limited liability company is held liable to the company or to third
parties individu ally or jointly, depending on the situation15. We observe in this
respect a significant distinction from our legislation in which the administrator is
held liable only to the company and not to third parties, the only creditors of the
company having an acti on in attracting the administrator's responsibility, which
they will be able to exercise exceptionally only in the situation of the insolvency
procedure.
Regarding the possibility of the company to conclude an individual con-
tract of work with the director, the legislation provides this possibility both to the
joint stock company, in certain cases expressly regulated by the French Commer-
cial Code, and to the limited liability company.
The administrator of a limited liability company may, in accordance with
French law, conclude an individual employment contract with the company he
represents, if he is not a majority manager, by means of a majority manager,
meaning the manager who owns more than 50% of the social capital. Thus, he
can cumulate the function of a dministrator with the employee of the company if
he is a minority or egalitarian administrator, that is, if he holds less or exactly
50% of the share capital, or if he is not a partner of the company. In his employ-
ment contract, the administrator exercises technical functions, different from
those that he exercises as administrator16.
In this situation, the administrator will receive separate remuneration. On
13 Claudia Roșu, op. cit. , p. 162.
14 Annie Chamoulaud -Trapiers, Droit des affaires , 2nd edition, Ed. B real, Rosny -sous-Bois, 2007,
p. 43.
15 Nicole Ferry -Maccario, Jan Kleinheisterkamp, François Lenglart, Nicole Ferry -Maccario, Karim
Medjad, Nicole Stolowy, Gestion juridique de l'entreprise, Ed. Pearson Education, Paris, 2006 , p.
144.
16 Clara Ripault, Être gérant et salarié en SARL: est -ce possible?, available online at https://www.
legalstart.fr/fiches -pratiques/sarl/gerant -salarie -cumul/#ancre4, consulted on 1.10. 2019.
Dynami c Ele ments in the Contemporary Business Law 42
the one hand he has the right to receive the salary by virtue of his quality of em-
ployee and on the other hand he has the right to a remuneration according to his
activity as a company administrator.
We observe in French legislation a regulation diametrically opposed to
our domestic law. Thus, in the conditions where, in our domestic law, the only
associ ate who is also an administrator has the possibility of concluding a work
contract with the company, in French law precisely the one who owns more than
half of the share capital does not have the possibility to conclude an employment
contract with society.
We consider correct and effective the solution offered by the French leg-
islator, namely the granting of the possibility of the administrator to conclude a
work contract with the company, a contract that must correspond to technical
functions and distinct from those exercised as administrator of the company.
6. Conclusions
The problem raised in the Romanian doctrine regarding the possibility of
the administrator to conclude an individual employment contract with the com-
pany is a common one also in French law. Although, much clearer the regulation
in the French legislation, I could not fail to notice, in the research carried out, that
the stated problem, regarding the relationship manager – limited liability com-
pany, is the subject of a constant question – maybe the administrator of a limited
liability company does this function combine with that of the employee?
Indeed, I appreciate the solution offered by French law as a valuable and
capable of answering the problem raised in the first part of the present study,
namely what happens in the situation where the administrator dismissed from his
position retains his quality of employee. Thus, in French law, the employment
contract concluded by the administrator with the company does not concern his
function as r epresentative of the company but another function, which he can
continue to exercise, in case the revocation of his mandate occurs.
In the conditions of a still unclear regulation in this matter in our domes-
tic law, from the point of view of protecting the interests of the company, the
solution of the ab initio conclusion of a mandate contract with the company ad-
ministrator appears to be the most appropriate.
Bibliography
1. Annie Chamoulaud -Trapiers, Droit des affaires , 2nd edition, Ed. Breal, Rosny –
sous-Bois, 2007.
2. Clara Ripault, Être gérant et salarié en SARL: est -ce possible?, available online
at https://www.legalstart.fr/fiches -pratiques/sarl/gerant -salarie -cumul/# ancre4,
consulted on 1.10.2019.
3. Claudia Roșu, Natura juridică a funcției administratorilor societăților comer-
ciale în dreptul francez , „Revista de Drept Comercial”, no. 10/2002.
Dynami c Ele ments in the Contemporary Business Law 43
4. Dragoș -Mihail Daghie , Administratorul societății – privire retrospectiv -is-
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stantinovici R., Macovei I. (coord.), Noul Cod civil: comentarii pe articole , Ed.
C.H. Beck, Bucharest, 2012.
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9. Monica Nov ac, Calitatea de salariat si administrator al societății cu răspundere
limitată, available online at https://www.juridice.ro/202417/ calitatea -de-salar-
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10. Nicole Ferry -Maccario, Jan Kleinheisterkamp, François Lenglart, Nicole Ferry –
Maccario, Karim Medjad, Nicole Stolowy, Gestion juridique de l'entreprise, Ed.
Pearson Education, Paris, 2006.
11. St. S. Cărpenaru, Gh. Piperea, S. David, Legea societăților. Comentarii pe arti-
cole, 5th edition, Ed. C.H. Beck, Bucharest, 2014.
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sul Juridic, Bucharest, 2014.
13. Ștefan Vlad, Cumulul calității de administrator cu cea de salariat , available
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tatii-de-administrator -cu-cea-de-salariat -353, consulted on 1.10.2019.
14. Vasile Nemeș, Drept comercial , 3rd edition, Ed. Hamangiu, Bucharest, 2018.
Legal Conditions of Unusual Terms Institut ion
PhD. student Eugen SÂRBU1
Abstract
The institution of unusual clauses is a relatively new institution in the Romanian
civil law, which has generated different interpretations in practice and in doctrine and
which is aimed at preventing imbalances cau sed by the use of standard clauses. The
standard terms serve the interests of the proposing party, setting out important aspects in
the contractual relationship that is formed. They tend to change the contractual balance
toward which each type of contract regulated by the legislator is approaching. This arti-
cle analyses the legal conditions of unusual terms, which place one of the parties in a
dominant position, shall entail. In particular, we will analyze (I) where the Romanian
legislator was inspired to r egulate the non -common clauses, (II) the conditions for a
clause to be qualified as non -usual, (III) what penalty occurs in the event of non -compli-
ance with the legal provisions on uncommon clauses, (IV) how we can derogate from the
effect of the clauses, making them effective and holding the parties to perform that clause.
Keywords: standard clauses, unusual clauses, contractual imbalance, profes-
sional.
JEL Classification : K12
1. General presentation of unusual terms institution
The unusual terms inst itution derives from the abusive clauses regulated
in consumer law. Both notions result from the same idea: it is unfair for a party
to be bound by contractual provisions which it has not read and understood. „ The
purpose of a regulation based on the theor y of procedural fairness is to protect
the internal will. The legal provisions edited for this purpose emphasize, in par-
ticular, the procedure of forming the contract and less the content of the con-
tract. ”2 Both institutions are based on negotiation and in formation formal duties.
Both unfair and unusual terms regulate the imbalance between the par-
ties, by establishing mechanisms able to protect the weaker party (the consumer,
the weaker party in the negotiating process), setting aside terms on which there
is a suspicion of lack of consent. Their common feature is the lack of negotiations
and the contractual imbalance generated by them.
The Romanian legislator was inspired by the Italian Civil Code, namely
1 Eugen Sârbu – Faculty of Law, Bucharest University, Romania, eugen.sarbu@oglindalawy ers.ro.
2 B. Oglindă, Clauze neuzuale în reglementarea Noului Cod civil român – provocare pentru
jurisprudență și doctrină, “ Pandectele Române”, no. 3/2015.
Dynami c Ele ments in the Contemporary Business Law 45
Article 13413. The institution is met also in the UNI DROIT Principles4, which
defines them as „surprising terms”, in the Draft Common Frame of Reference and
also in the Principles of European Contract Law5 where they are named as „not
negotiated terms”.
According to the doctrine6 on unusual terms, „ Article 1 203 of the Roma-
nian Civil Code preserved the form of the Article 1341 from the Italian Civil Code
but instead of referring to "general conditions of the contract" as it is the original
provision, it refers only to "standard terms". The Romanian legislator also added
to the listing of unusual terms the „applicable law” (terms that provide in the
detriment of the other party the applicable law).”
The unusual terms are defined by the Article 1203 from the Civil Code
as being „standard clauses providing for the benefit of the party that is proposing
them the limitation of liability, the right to unilaterally terminate the contract, to
suspend the execution of obligations or standard clauses that provide in the det-
riment of the other party the preclusion of its rights or of the benefit of the term,
the limitation of the right to oppose exceptions, the restriction of freedom to con-
tract with other persons, the tacit renewal of the contract, the applicable law, the
arbitration clause or standard clauses that derog ate from the rules on jurisdic-
tion of courts shall not have effect unless they are expressly accepted in writing
by the other party.”
The premise for unusual terms is the existence of standard clauses. Only
if we are dealing with standard clauses and they include an unusual term, the
article 1203 of the Civil Code is applicable. Standard clauses are defined in the
article 12027 of the Civil Code as terms pre -established by a party, in order to be
3 Article 1341 Italian Civil Code: “ The general terms of the contract proposed by one of the co –
contractors shall have effect to the detriment of the other party if at the time of the conclusion of
the contract they knew or ought to have known them by taking due care.”
4 Article 2.1.20 (Surprising terms): “(1) No term contained in standard terms which i s of such a
character that the other party could not reasonably have expected it, is effective unless it has been
expressly accepted by that party. (2) In determining whether a term is of such a character regard
shall be had to its content, language and pr esentation.”
5 Article 2:104 (ex. art. 5.103 A) – Terms not individually negotiated: (1) Contract terms which
have not been individually negotiated may be invoked against a party who did not know of them
only if the party invoking them took reasonable step s to bring them to the other party's attention
before or when the contract was concluded. (2) Terms are not brought appropriately to a party's
attention by a mere reference to them in a contract document, even if that party signs the document.
6 I. F. Popa , Tirania'' clauzelor neuzuale , „Revista Română de Drept Privat”, no. 1/2016.
7 Article 1202, Civil Code – Standard terms: (1) Under the provisions of Article 1203 Civil Code,
the provisions of this section shall also apply when standard clauses are used at the conclusion of
the contract. (2) The standard clauses are the terms of the contract set out in advance by one of the
parties for general and repeated use and which are included in the contract without having been
negotiated with the other party. (3) The negotiated terms shall prevail over the standard terms. (4)
Where both parties use standard clauses and do not agree on them, the contract shall, however, be
concluded on the basis of the agreed terms and any common standard clauses in their substance,
unless one of the parties notifies the other party either before the conclusion of the contract, or
immediately thereafter, that it does not intend to be held by such a contract.
Dynami c Ele ments in the Contemporary Business Law 46
generally and repeatedly used and included in the contract w ithout being negoti-
ated.
Usually, standard clauses serve the interests of the proposing party, who
is elaborating a contract framework adapted to the economic area in which it op-
erates. Therefore, although it has the advantage of shortening the negotiatio n
time and covering a wide range of circumstances related to the specialized field
of the contract, the use of standard clauses may also give rise to certain risks by
giving a dominant position to the person proposing them and thus derogating
from the prin ciple of equality between the parties in the negotiation phase.
In order to prevent such risks, the Romanian law has regulated the insti-
tution of unusual clauses which alleviates the contractual imbalance created dur-
ing the contract conclusion phase by ins erting certain standard clauses.8
As examples of uncommon clauses encountered in practice, we present
the following: “ With regard to the clause in Article IX, point 91.1 which states
that, in the event of disputes, jurisdiction shall be assigned to the cou rt at the
purchaser's headquarters, the court shall find that it is subsumed to the system of
unusual clauses.(…) It is noted that this clause has not been expressly accepted
by the defendant and the court considers that only the signing of the full contra ct
does not cover this legal requirement. To this end, there was a need for a decla-
ration of express acceptance of the uncommonly agreed terms after the parties'
signatures, which would bear a separate set of signatures. Consequently, it is
noted that this term of jurisdiction is ineffective, as provided for by the Civil Code
(…)”9.
Another example10 in the practice of the Romanian courts is the follow-
ing: “ (…) In all transport orders issued by the complainant , it prohibited its col-
laborators from establish ing direct contractual relations with their customers,
with the retribution of a penalty of 20,000 euros (Article 11 of the orders), and
one of these costumers was PGS SOFA. The court considers that the clause re-
stricting the right of collaborators to esta blish contractual relations meets the
conditions for being an unusual clause.(…) This is also the case in the present
case, and the complainant has imposed this standard clause to all its collabora-
tors, clause which provides for limitations on their right to contract, without any
express, one -off agreement, with regard to this clause; it is inserted directly into
the transport orders (which ended quickly, by phone or by e -mail), but not into
the framework contract between the parties.”
8 B. Oglindă, op. cit. , 2015, p. 15.
9 Buzău District Court, Civil Decision no . 3704/2018, available online: www.sintact.ro, consulted
on 1.10.2019.
10 Oradea Court, Civil Decision no 4055/2017, available online: www.sintact.ro, consulted on
1.10.2019.
Dynami c Ele ments in the Contemporary Business Law 47
2. The legal condi tions of unusual terms institution
As indicated above, for a clause to be classified as unusual, it must fulfill
certain conditions. First, the clause must be a standard clause within the meaning
of Article 1202 Civil Code. It must then be examined whethe r the clause in ques-
tion falls within the list provided for in the Article 1203 Civil Code, and, finally,
it has to be considered whether that clause creates a contractual imbalance, giving
unfair benefits to the drafting party or by putting at a disadvant age the party ac-
cepting it.
2.1. In order to be unusual, it must be a standard clause
The conclusion of contracts is currently dominated by the use of prede-
fined clauses as a set of rules established in advance by one of the parties and
inserted into con tracts, thus adapting them to its interest. Standard clauses are
used in various areas, such as transport, banking or distribution of goods, and
have the advantage that they reduce the duration of negotiations or even make
them unnecessary.
Standard clause s are defined in Article 1202 Civil Code as terms pre –
defined by a party and used in a general and repeated manner, included in each
contract without further negotiation. They have been defined over time in the
doctrine11 as clauses outside the contract, wh ich are included without negotiation:
„The parties shall be bound, according to the principle of obligation, to respect
the contract between them, the content of which shall not be limited to what is
provided for in it. In addition to customary practice (t hey must therefore be com-
plied with if they are proven to be constantly used between the parties), the con-
tent of a contract also includes certain clauses not included in the contract signed
by the parties, but in another document with which the contract i s clearly linked.
We are therefore talking here about external clauses, as the new Romanian Civil
Code calls them, that is, those clauses which are not included in the contract
signed by the parties but to which the contract refers.”
On the other hand, a c lause can be a standard one even if it is inserted in
the contract draft, if it meets the condition stated in Article 1202 of the Romanian
Civil Code.
Therefore, in order for a clause to be considered a standard term, it has
to fulfill two conditions: to be established by one of the parties in order to be used
in a general and repeated manner and to not have been negotiated with the other
party.
11 G.I Tita – Nicolescu, Considerații generale privind principiul obligativității ef ectelor contractului
în reglementarea Noului Cod civil, „Pandectele Romane” no. 9/2012, p. 23.
Dynami c Ele ments in the Contemporary Business Law 48
i. With regard to the first condition, in the comments of Unidroit Princi-
ples12, it is assessed that it is not i mportant neither how the clauses are presented
(whether they have been incorporated in the contract or they are available in and
additional document), nor who drafted them, nor the number of standard terms
used by one of the parties.
What is important is the drafting of these clauses in advance for general
and repeated use. It was also considered that it is not important whether that
clause was actually used in relations with other persons or whether it had only the
purpose to be used in the future. Of cou rse, there remains the problem that the
party invoking the standard nature of a clause should prove that the purpose of
the clause is to be used repeatedly. This characteristic of the clause can be de-
duced from the way it is drafted, meaning that the claus e does not detail specific
features from the particular contract (for example, it does not detail specific fea-
tures of goods, services, works that are object of the contract), but they can be
included and can regulate, in general, a contract concluded by t he tenderer in its
area of activity.13
In the doctrine14, it was assessed that what is important when we look at
this condition is the intention of the author of the clause. A clause may be standard
since the first effective use, as the mere repetition of a clause in similar contracts
concluded by the same party does not necessarily lead to the clause being quali-
fied as standard. In relations between professionals, who frequently conclude a
particular type of contract, there is a simple presumption that they intend to use
generally and repeatedly a clause which frequently appears in the type of con-
tracts used in their area of activity.
ii. Looking at the second condition, namely, the lack of negotiations, we
consider that negotiations consist in a contradict ory discussion between two par-
ties, with the real possibility of amending certain clauses or proposing certain
provisions. The lack of negotiations is a fact that must be analyzed objectively.
Standardization is not removed by the existence of an opportuni ty to negotiate
the clause, but only by effective negotiations, by giving effect to the possibility
to negotiate that clause. At the same time, the lack of negotiations should be an-
alyzed in relation to each clause and not by looking at clauses globally.
In practice15, in relation to this condition, the institution of unusual terms
was applied in a highly critical manner from our perspective, misunderstanding
its purpose and with the effect of converting the institution of unusual terms into
an institution t hat is not applicable in any context: „ Thus, first, the Court notes
12 UNIDROIT, Principiile UNIDROIT 2010 , C.H. Beck, Bucharest, 2015, p. 70 -73.
13 E. Sârbu, Pot fi neuzuale clauzele standard specifice unui sector de business? , “Revista Romana
de Drept al Afacerilor” no. 1/2019, p. 37.
14 A. A. Moise, Comentariu art 1203, in F. A. Baias a.o, Noul Cod Civil. Comentariu pe articole,
C.H. Beck, 2nd ed., Bucharest, 2014, p. 1337 -1339.
15 Bucharest Court of Appeal, Civil Decision no. 465/ 2015 , available online: www.sintact.ro,
consulted on 1.10.2019.
Dynami c Ele ments in the Contemporary Business Law 49
that, since the parties have agreed on both the law applicable to the contract
(Spanish law) and the Spanish jurisdiction, the provisions of Article 1203 of the
Romanian Civil Code are not applicable, and therefore such support is un-
grounded in the light of the circumstances of the case.
On the other hand, the claimant itself invoked t he contract between her
and D_ in the form of the offer followed by the acceptance, a contract valid in its
entirety, concluded between absences, widely practiced between traders. How-
ever, since the applicant himself claims in support of his subjective rights the
contractual legal relationship entered into in this form, part of the clauses cannot
be removed fro m the contract itself, because some of them would be customary
and some would be uncommonly used, as it pleases, or as it is in the procedural
interest that the case may be judged in Romania or Spain. Thus emphasizing the
Court’s conclusion that the contra ct was valid in the form of the tender followed
by acceptance, including the clause on the applicable law and the Spanish juris-
diction, the Court will reject that criticism as being unfounded.”
This court decision is deeply criticized from three perspectiv es.
First, it establishes that an applicable law clause cannot be de plano an
unusual clause, when the chosen law does not regulate the institution of unusual
clauses. However, if the conclusion of the contract is governed by Romanian law,
irrespective of the provisions of the law chosen, the clause will be governed by
Romanian law in terms of its validity or its unusual character. Since article 1203
of the Civil Code regulates that a clause of applicable law can be an unusual term,
it follows that the reas oning of the court is in conflict with the provision of the
law which it infringes by limiting the scope of the institution.
Secondly, it is questionable how the condition of express and written ac-
ceptance is being treated. The court is assuming that, as long as the contract in
electronic form is widely accepted in all legal systems, then an electronic offer,
followed by an electronic acceptance, is worth the contract assumed as a whole,
including the applicable law clause and jurisdiction clause. However, the appli-
cation of the express and written conditions of acceptance is not excluded in the
case of an electronic contract. It remains the obligation to extract the two clauses
from the entire proposed contract and to draw the acceptant’s attention over th ese
clauses, and ask him to expressly accept them, event though it is an electronic
acceptance, by e -mail exchanges. The mere acceptance of the offer as a whole
cannot be assimilated to the achievement of the institution's aim, because it does
not achieve the desire to highlight the surprising terms.
Thirdly, the reprehensible interpretation of the institution of unusual
terms in the above case shows a structural misunderstanding of this institution,
revealed by the following reasoning: „ part of the clauses cannot be removed from
the contract itself, because some of them would be customary and some would be
uncommonly used, as it pleases, or as it is in the procedural interest that the case
may be judged in Romania or Spain.”
Dissociating between the notion of procedural law abuse, which the court
Dynami c Ele ments in the Contemporary Business Law 50
seems to be sanctioning, and the notion of unusual terms, we believe that the
application of unusual terms institution must have an effect contrary to the one
from the case -law cited above, because the purpose of un usual terms institution
is precisely the one denied by the court – to remove the unusual term from the
contract itself. The abuse of procedural law differs from unusual terms. The abuse
of procedural law concerns the conduct of the party during the trial, whereas the
examination of unusual terms is made referring to the time of conclusion of the
contract, on the basis of the conditions drawn up by Article 1203 of the Civil
Code. Nothing prevents the admission of both institutions in this case, both the
abuse of procedural law and unusual terms. But to reject the institution of unusual
clauses by analyzing the abuse of procedural law is a superficial approach, carried
out in breach of the principle of availability, because the court has in fact shown
a refusa l to judge the party's factual and legal reasons.
2.2. The clause shall fall within the list provided for in Article 1203
of the Civil Code
Looking at the second condition, we can classify the clauses into three
categories:
A. Standard clauses which are established for the benefit of the proposing
party and provides a limitation of liability, the right to unilaterally terminate
the contract or to suspend the performance of obligations;
B. Standard clauses providing against the other party the preclusi on of
time limit or its right, limitation of the right to oppose exceptions, restriction of
the freedom to contract with other persons, tacit renewal of the contract;
C. Clauses providing for applicable law, arbitration clauses or clauses
derogating from t he rules of jurisdiction of the courts.
In the comments made on UNIDROIT Principles16 it is specified that
“notwithstanding its acceptance of the standard terms as a whole, the adhering
party is not bound by those terms which by virtue of their content, lan guage or
presentation are of such a character that it could not reasonably have expected
them. The reason for this exception is the desire to avoid a party which uses
standard terms taking undue advantage of its position by surreptitiously attempt-
ing to im pose terms on the other party which that party would scarcely have ac-
cepted had it been aware of them”.
As in the case of unfair terms, the legislator has chosen to list the terms
in order to simplify the identification of those who may fall within the cat egory
of unusual terms. Even if there is a list, the law specialists insisted that it is not
enough that a clause is mentioned on that list to be qualified as an unusual clause:
“In both cases, the insertion in the contract of such a clause of the list doe s not
implicitly qualify it as non -usual or abusive. A contractual term listed on the list
16UNIDROIT, Principiile UNIDROIT 2010 , C.H. Beck, Bucharest, 2015, p. 70 -73.
Dynami c Ele ments in the Contemporary Business Law 51
of Law No 193/2000 will be unfair if it meets the criteria laid down by law. A
clause of those listed in Article 1.203 Civil Code shall also be classified as unu-
sual in so far as the conditions presented above for the application of Article 1203
Civil Code are fulfilled.”17
In practice, Article 1203 of the Civil Code has been interpreted differ-
ently. Some courts18 considered the list as a restrictive one. For example: “Spe-
cifically and restrictively, the standard clauses considered by the law to be un-
common are listed by the Civil Code, a list which, for ease, we define in three
categories.”
On the other hand, other courts19 have established that the legislator's
listing is one that helps to take of evidence and does not limit the examples of
clauses: “ The listing of these clauses shall result in the presumption of stipula-
tions which fall under one of the above categories as lacking transparency, lead-
ing to a simplificati on of the evidently effects.”
However, other authors believe that the list provided for in Article 1203
of the Civil Code should be interpreted restrictively: “ In our opinion, expressed
in another study on the uncommon clauses, the list of clauses in Arti cle 1203 of
the Civil Code is a limited one.”20
“Article 1203 of the Civil Code only affects certain standard clauses, re-
strictively provided by the text. In other words, each time we meet a prior provi-
sion laid down by one of the parties, for general and r epeated use and which is
included in the contract without having been negotiated with the other party, and
that provision is not on the list mentioned by Article 1203 of the Civil Code, the
standard clause shall be capable of being binding without the expr ess written
acceptance.”21
An important benchmark for balancing the two opinions set out above
could be how contractual coding projects deals with this dilemma. UNIDROIT
Principles22 do not list the clauses that could be considered surprising, but they
indic ate of the general criteria that will be used to qualify a clause as unusual.
The same flexible approach is found in the Principles of European Contract
Law23, Draft Common Frame of Goods and Contracts for the International of
17 B. Oglindă, op. cit ., 2015, p. 16.
18 Oradea Court, Civil decision no. 4807/2019 , available online: www.sintact.ro, consulted on
1.10.2019.
19 Bacău Tribunal, Civil Decision no. 1029/2018, available online: www.sintact.ro, consulted on
1.10.2019.
20 C. Tabir ta, Despre eroarea -viciu de consimțământ în noul Cod civil , “Revista Romana de Drept
al Afacerilor” no 6/2013, p. 65.
21 A. A. Moise , op. cit., 2014, p. 1337 -1339.
22 UNIDROIT, Principiile UNIDROIT 2010 , C.H. Beck, Bucharest, 2015, p. 70 -73.
23 Article 2:104 (ex. art. 5.103 A) – Terms not individually negotiated : (1) Contract terms which
have not been individually negotiated may be invoked against a party who did not know of them
only if the party invoking them took reasonable steps to bring them to the other party's attention
before or when the contract was concluded. (2) Terms are not brought appropriately to a party's
attention by a mere reference to them in a contract document, even if that party signs the document.
Dynami c Ele ments in the Contemporary Business Law 52
Goods.24
In our opinion, we sup port the extensive interpretation thesis, as we show
in a former study: “ The Italian doctrine argues that the list of oppressive clauses
is rigid, and the possibility of extending by analogy the scope of Article 1341 of
the Italian Civil Code to other cate gories of clauses is excluded. However, even
in the court’s practice, extensive interpretation is nevertheless claimed to be ad-
missible only at the level and within the limits of each of the categories of clauses
listed, to the extent that certain contract ual provisions may be framed in the mile-
stones outlined in Article 1341 Italian Civil Code. Thus, an extensive interpreta-
tion is allowed under each type of clause listed.” 25
2.3. The clause should create a contractual imbalance in the sense of
stipulating either for the benefit of one party or to the detriment of the other
party
Standard clauses limiting the liability of a party, providing the right to
terminate the contract unilaterally or to suspend performance of obligations are
uncommon clauses only i f those benefits are offered to the proposing party. If the
right is stipulated in favor of another person than the one proposing the clause, it
will not require express written acceptance to produce effects, leaving a standard
clause operable without the need to be accepted expressly and in writing. Stand-
ard clauses which provide the preclusion of the right or the benefit of the term,
the limitation of the right to oppose exceptions, the restriction of the freedom to
contract with other persons, the tacit renewal of the contract, the applicable law,
the arbitration clauses, derogations concerning the jurisdiction of courts will not
be considered unusual terms if they are stipulated to the detriment of the party
proposing them. In order that the provisions o f article 1203 to be applicable, they
must be stipulated to the disadvantage of the party who has not proposed them
and who must accept them on the proposal of the other co -contractor.
The doctrine26 considered that clauses limiting liability or giving the right
to unilaterally terminate the contract or to suspend the performance of obligations
would not be qualified as unusual if they set out those benefits in favor of the
opposing party or in favor of a third party: “ In the case of standard terms limiting
the liability of a party, or giving the right to terminate the contract unilaterally
or to suspend performance of obligations, article 1203 shall apply only if those
benefits are offered to the one proposing the clause. Consequently, if that right is
24 Art. II.—8:103: Interpretation against supplier of term or dominant party: “(1) Where there is
doubt about the meaning of a term not individually negotiated, an interpretation of the term against
the party who supplied it is to be preferred. (2) Where there is doubt about the meaning of any othe r
term, and that term has been established under the dominant influence of one party, an
interpretation of the term against that party is to be preferred.”
25 E. Sârbu , op. cit., 2019, p. 38.
26A. A. Moise, op. cit ., 2014, p. 1337 -1339.
Dynami c Ele ments in the Contemporary Business Law 53
stipu lated in favor of another person other than the one proposing the clause, the
clause may remain standard, but there will be no need to expressly accept it in
writing in order to be effective. In addition, the clauses providing for preclusion
of the benefit of the term, limitation of the right to oppose exceptions, restriction
of the freedom to contract with other persons, applicable law, tacit renewal of
the contract or arbitration clauses will only fall within the scope of article 1203
of the Civil Code if stipulated to the detriment of the other party. With regard to
the clauses derogating from the rules of jurisdiction, article 1203 of the Civil
Code shall apply irrespective of whether they are stipulated or not to the detri-
ment of the opposing party.”
As regards the clauses which derogate from the rules of jurisdiction or
the arbitration clauses, the literature27 was of the opinion that regardless of
whether the text does not fall into one of the two categories (in favor/to the detri-
ment) there is a simple presumption that the party proposing that clause will do
so for its benefit and not necessarily to the detriment of the other party: “ In the
case of clauses that regulates jurisdiction, we believe that article 1203 of the Civil
Code shall apply, irrespect ive of whether they are stipulated to the detriment of
the opposing party to the standard clause or not. In practice, the party using a
standard choice -of-court clause would be expected to stipulate the jurisdiction of
the court in his place of residence o r establishment, which would be an advantage
to the detriment of the opposing party. Whether it should be noted that a standard
choice -of-court clause must be unfavorable to the party adhering to the clause,
we consider that no evidence is necessary to est ablish the potentially unfavorable
character, which is the result of the circumstances of the case.”
3. Legal effects of unusual terms institution
The doctrine and the jurisprudence illustrated all the views on the matter:
absolute invalidity of the clau se, relative nullity, unenforceability or, more
simply, regarding the clause as unwritten.
Enforceability implies that the rights and obligations between the parties
are validly founded, and for various reasons they cannot be opposed to third par-
ties. This penalty cannot apply to unusual terms, since the legislator provides that
they will not have any effect if they are not expressly accepted in writing.
Seeking to differentiate the unwritten clauses from the null and void
clauses, the doctrine28 has conclud ed that the difference was a formal one – in the
case of unwritten clauses, the legislator expressly indicates them in the legislative
27 Gh.-L. Zidaru , Come ntariu art. 126 C.Proc.Civ, in V. M. Ciobanu a.o. Noul Cod de Procedură
Cvilă, comentariu pe articole , Universul Juridic, Bucharest, 2013, p. 371 -373.
28 M. Nicolae, Nulitatea parțială și clauzele considerate nescrise în lumina Noului Cod civil.
Aspecte de drept material și drept tranzitoriu, „Dreptul” no. 11/2012, p. 11.
Dynami c Ele ments in the Contemporary Business Law 54
text. “Substantially, both categories of clauses are subject to the same legal re-
gime and cause the same legal inefficien cy."29
The non -written clauses were then considered as partial null and void.30
With regard to what kind of nullity affects the unwritten clauses, special litera-
ture31 has said that we are talking about an absolute and partial nullity, since only
absolute nul lity could work ex officio , from the very moment of insertion of the
clause in contract.
In essence, the mechanism of unusual clauses is intended to lead to a
limitation of the contractual field to those clauses in respect of which it is certain
that they have been noticed and agreed by both parties, with the natural conse-
quence of the exclusion of the uncommon clauses.
The proper solution would be to consider the clause as unwritten. In fact,
the practical issue is reduced as long as the clause does not p roduce effects, as
expressed by the legislator itself in the final part of article 1203 Civil Code.
Since the unusual clause cannot refer to the main subject of the contract,
which is supposed to be always foreseen by contracting parties, the unusual claus e
will not lead to the termination of the contract. Furthermore, its removal from the
contractual field will result in its replacement with the applicable legal provisions.
If the intention of the parties was to attribute an essential character to the unu sual
clause, considering that they don’t have any effect if they are not expressly ac-
cepted, then the contract will be void in full. Nothing prevents the parties from
replacing clauses which are ineffective with new contractual provisions, negoti-
ated or at least accepted by the subscribing party.
Unanimously accepted in the doctrine32 was that in order to produce ef-
fects, the clause must be accepted in writing by the opposing party otherwise, the
clause will have no effect:” As long as it is expressly accep ted by the other party,
it will have effect as any other valid clause in a contract. If it is not accepted, an
unusual clause does not produce any effect and is considered unwritten. The leg-
islator by means of this enumeration only establishes informative formalism and
the penalty for not respecting it. The legislator, making this enumeration only
establishes an informative formalism and the penalty for not respecting it. Not
knowing or understanding such a clause, it will not have any effect and it should
be consider ed unwritten.”
29 Ibid.
30 G. Boroi, C. Anghelescu, Curs de Drept Civil. Parte general , Hamangiu, Bucharest, 2012, pp.
247-250.
31 Ibid.
32 B. Oglindă, Dreptul afacerilor – Teoria generală a contractului, Universul Juridic, Bucharest,
2012, p. 90.
Dynami c Ele ments in the Contemporary Business Law 55
4. Derogation from the effects of unusual clauses: express and writ-
ten agreement of the party affected by the contractual imbalance caused by
the unusual terms
According to the law, in order to produce effects, unusual clauses m ust
be expressly accepted in writing. In the doctrine33, it was said that acceptance of
the entire contract, in general terms, was not enough, because the inferior party
is no longer protected in the negotiation process.
Thus, in the case of an uncommon cl ause, proof of full understanding
must be provided by separate and express acceptance. In the absence of a valid
consent, the clause will be considered unwritten. In practice, only the serial num-
ber of the unusual contract terms and/or the headings of the unusual terms shall
be used, as appropriate, or placing the declaration of express acceptance of the
uncommon terms after the parties' signatures, and to bear a separate set of signa-
tures or expressly assuming them in a separate document.
The doctrine34 also considered that the mere signing of the contract does
not include the express agreement on unusual terms:” Although the law does not
expressly provide, we consider that the mere signing of the document establishing
the agreement which also contains stand ard clauses is not sufficient to prove that
those unusual clauses have been effectively agreed by the party. It is necessary
to draw the party's attention to the existence of certain special clauses and to
obtain his express consent regarding them. Evidenc e of such disclosure results
from formalities such as the graphic demonstration of those clauses (thickening,
writing in print characters of a certain size), followed either by a reference to
each clause or by a final clause providing, in an intelligible f orm, both graph-
ically and conceptually, that the party has become aware of the terms. We believe
that a written clause in small, unclear, printed in a non -ordinary manner does
not comply with the provisions of article 1203 of the Civil Code and should be
considered as unbinding. We do not rule out that the agreement is expressed in
an addendum, but only if it is concluded at the same time as the agreement con-
taining the standard clauses.”
However, there are also opinions that there is no need to sign after: “Any
written wording (distinct from the clauses in question) which indicates that the
party has accepted those clauses meets the legal requirements. It does not matter
whether the acceptance is followed by a signature of the party specifically made
for th at acceptance (distinct from the principal signature on the document) or
whether the acceptance itself is handwritten or not, it is sufficient that the docu-
ment establishing acceptance will give the express undertaking of the clause.
33 Gh.-L. Zidaru , op. cit., 2013, pp.371 -373.
34 Ibid.
Dynami c Ele ments in the Contemporary Business Law 56
Therefore, the documen t establishing acceptance may be the one establishing the
contract which contains the standard clauses, but also another document repre-
senting an addendum.”35
However, it was considered in the doctrine36 that there are also cases
where express acceptance of unusual clauses is not necessary, such as when the
clause is laid down in a regulatory act, when the contract is authentic, when the
clauses are drawn up by a third party who is not representing a party, or when the
clauses have been inserted as a result o f collective bargaining, as is the case in
collective labor agreements.
A similar situation is also regarding the terms that translate commercial
or regulatory usages. In this case, the requirement of express acceptance is re-
placed by the presumption of kn owing the practices in question.37
Thus, even if a standard clause is included in the contract by the party in
a dominant position, if that clause is the result of cooperation and negotiation
between the parties, express and written consent is no longer req uired for it to
have effect, since article 1203 of the Civil Code does not apply anymore. In this
situation, the conduct of the party invoking the application of Article 1203 NCC
in order to remove the applicability of the clause may be regarded as abusive .38
Not even the court practice has not been constant. There have been courts
that have taken the view that it is necessary to respect the formalism imposed by
the legislator and the parties must agree to each clause: “ only by signing the full
contract, the legal requirement laid down in article 1203 from the Civil Code is
not covered. To this end, there should be a declaration of express acceptance of
the unusual terms after the parties' signatures, which will bear a separate set of
signatures ”39 or “as stat ed in the literature40, express acceptance has the meaning
of a nominated acceptance of the non -usual clause, which is entitled to the word-
ing of the above legal text. This is also the situation in the present case, and the
complainant has imposed this stan dard clause to all its collaborators, clause
which provides for limitations on their right to contract, without any express
agreement with regard to this clause, it is inserted directly into the transport or-
ders (which ended quickly, by phone or by e -mail) , but not into the framework
contract between the parties.”41
We can also recall the following example: “ express acceptance implies
the nominalized acceptance of the clause, i.e. possibly the nominal indication of
35 A. A. Moise , op. cit., 2014, p. 1337 -1339 .
36 L. Pop, I.F. Popa, S.I. Vidu, Tratat elementar de drept civil – Obligațiile , Universul Juridic,
Bucharest, 2012, p. 126.
37 E. Sârbu , op. cit., 2019 , p. 38.
38 Ibid.
39 Buzău District Court, Civil Decision no. 3704/2018, available online: www.sintact.ro, consulted
on 1.10.2019.
40 L. Pop, I.F. Popa, S.I. Vidu, op. cit ., 2012, p. 126.
41 Oradea Court, Civil Decision no. 4055/ 2017, available online: www.sintact.ro, consulted on
1.10.2019.
Dynami c Ele ments in the Contemporary Business Law 57
the unusual clause that is the subject of a cceptance .” 42
However, there were courts that were not of the same opinion. For exam-
ple: “ if unusual standard clauses are incorporated in the document establishing
the contract which is endorsed by the signature of the parties, article 1203 is no
longer ap plicable, since it must be considered that the party has given his consent
in respect of the entire content of the contract. Indeed, it would be excessive if in
such a situation the party had to express his consent twice, both in terms of the
conclusion of the entire contract and regarding any unusual standard clauses in
the contract, on the one hand, and on the other, it would mean a disregard for
the mental capacity of persons, who cannot understand the legal consequences
of their acts, which is unaccepta ble.”43
In the comments made on UNDROIT Principles44, it was stated that: “A
particular term contained in standard terms may come as a surprise to the ad-
hering party first by reason of its content. The risk of the adhering party being
taken by surprise by th e kind of terms so far discussed clearly no longer exists if
in a given case the other party draws the adhering party’s attention to them and
the adhering party accepts them. This Article therefore provides that a party may
no longer rely on the “surprisin g” nature of a term in order to challenge its ef-
fectiveness, once it has expressly accepted the term.”
In the examples given above, we can appreciate that the use of unusual
clauses is not prohibited by law, but they must be made known to the parties
eithe r at the time of the negotiation of the contract or following subsequent
amendment of the contract which also occurred following the negotiation of the
parties. The clauses shall remain uncommon, creating an imbalance between the
contracting parties, but b y express acceptance, the party is accepting them and is
assuming them and the contract shall thus be validly concluded by the express
agreement of the parties.
5. Conclusions
The institution of unusual terms is a new institution in the Romanian con-
tract law and produces different interpretations in both doctrine and judicial prac-
tice. This new legal provision improves the situation of the weaker party in the
contract.
At this point in the Romanian case -law, it is highly questionable whether
the desire o f the legislator has been achieved in practice. We have analyzed above
court decisions showing a structural misunderstanding of the institution, as well
as decisions showing the correct and effective application of this institution in
42 Bacău Tribunal, Civil Decision no. 1029/2018, available online: www.sintact.ro, consulted on
1.10.2019.
43 Bucharest District Court 2, Civil Decision no. 5115/2016, available online: www.sint act.ro,
consulted on 1.10.2019.
44 UNIDROIT, Principiile UNIDROIT , 2010, C.H. Beck, Bucharest, 2015, pp. 70 -73.
Dynami c Ele ments in the Contemporary Business Law 58
balancing onerous con tracts for the vulnerable party in the negotiation phase.
We can only express the hope that this study will bring a contribution to
the unification of judicial practice and to the application of this institution in the
spirit and in the legal conditions in which the legislator has created it.
The dichotomy between the institution's restrictive or expansive scope
also remains topical, but as long as the clause creates a significant contractual
imbalance and unfairly links the weaker part to respect issues th at it has not
known and understood, we appreciate that the judge or arbitrator should interpret
the scope of the institution expansive and carefully check whether the clause
could fall within the typologies listed in article 1203 Civil Code, so that the so cial
and economic purpose of justice brings the restoration of contractual equity and
ensures a business environment where "small players" also have their chance to
survive and make profit.
Bibliography
1. A. A. Moise, Comentariu art 1203, in F. A. Baias a. o, Noul Cod Civil. Comen-
tariu pe articole, C.H. Beck, 2nd ed., Bucharest, 2014.
2. B. Oglindă, Clauze neuzuale în reglementarea Noului Cod civil român –
provocare pentru jurisprudență și doctrină, “ Pandectele Române”, no. 3/2015.
3. B. Oglindă, Dreptul afacerilo r – Teoria generală a contractului, Universul Ju-
ridic, Bucharest, 2012.
4. C. Tabirta , Despre eroarea -viciu de consimțământ în noul Cod civil , “Revista
Romana de Drept al Afacerilor” no 6/2013.
5. E. Sârbu, Pot fi neuzuale clauzele standard specifice unui sector de business? ,
“Revista Romana de Drept al Afacerilor” no. 1/2019.
6. G. Boroi, C. Anghelescu, Curs de Drept Civil. Parte general , Hamangiu, Bu-
charest, 2012.
7. G. I. Tita -Nicolescu, Considerații generale privind principiul obligativității
efectelor contractului în reglementarea Noului Cod civil, „Pandectele Romane”
no. 9/2012.
8. Gh.-L. Zidaru , Comentariu art. 126 C.Proc.Civ, in V. M. Ciobanu a.o. Noul Cod
de Procedură Cvilă, comentariu pe articole , Universul Juridic, Bucharest, 2013.
9. I. F. Popa , Tirania'' clauzelo r neuzuale , „Revista Română de Drept Privat”, no.
1/2016.
10. L. Pop, I.F. Popa, S.I. Vidu, Tratat elementar de drept civil – Obligațiile , Uni-
versul Juridic, Bucharest, 2012.
11. M. Nicolae, Nulitatea parțială și clauzele considerate nescrise în lumina Noului
Cod civil. Aspecte de drept material și drept tranzitoriu, „Dreptul” no. 11/2012.
12. UNIDROIT, Principiile UNIDROIT 2010 , C.H. Beck, Bucharest, 2015.
Axiological Basis for the Tax System
PhD. student Valerijs JAKUŠEVS1
Abstract
The study is carried out wi thin the boundaries of the research “Taxation policy
of the Republic of Latvia within the context of the principle of equity”. The subject of the
study is the creation of a theoretical basis for considering the principles of the tax system
in terms of the axiology of law. The work is based on the legislative practice of the Re-
public of Latvia, including with the increasing use of electronic systems for collecting and
processing information about the tax base. The study relies on legal literature, judicial
practice, state planning documents and the researches ordered by the government and
carried out by private contractors or scientists, as well as on statistics. The data collec-
tion does not confine itself to the research of phenomena and the systematization of the
new knowledge and the knowledge acquired before, but mostly uses the empiric scientific
method – observations, surveys. The study also employs the theoretical scientific method
by analyzing the aforementioned documents and literature and using these as a basis for
developing the theory and suggesting hypotheses, as well as through scientific (concep-
tual) modeling. Relying on the acquired data, the author verifies the forecasting power in
order to achi eve the objective of the study.
Keywords: taxatio n, system, axiology, law, electronic, data, tax, principle, living
wage, wealth.
JEL Classification: K34
1. Introductory considerations
Taxes play an important role in generating government revenue. With the
help of taxes, the state performs its econom ic, social and other functions. Taxes
are the main revenue source of the state, providing financing for its activities.
Funds collected by the state in the form of taxes go to the state budget and extra –
budgetary funds of the state. Further, distributed an d redistributed, these funds
are spent on the maintenance of public administration bodies, law enforcement
agencies, defense, financing of sectors of the national economy, payment of pub-
lic debt, financing of education, healthcare, social welfare and socia l protection
and other areas. Insufficiency of tax funds, inefficiency of the tax mechanism,
low tax collection, ill -conceived tax policy will negatively affect the state and its
citizens, the economy. The state can exist effectively when it has certain fi nancial
resources, it uses various ways to attract resources, but still the main ones are
taxes. An effective tax system is the basis of the life of any state. Thus, the issues
of taxes and taxation are relevant in any state.
1 Valerijs Jakuševs – Riga Stradins University, the Republic of Latvia, valerijs@lexbaltic.ee.
Dynami c Ele ments in the Contemporary Business Law 60
The purpose of this study is t o determine the significance of legal values
in the tax system. And also, whether modern electronic systems for collecting and
processing information can affect the harmonization of the tax system.
In order to achieve the goal of the study, it is necessa ry to conduct a the-
oretical study of the interaction between conclusions of the axiology of law and
formation of the tax system. In other words, to determine the place of taxes in the
system of legal values. And also to trace how modern electronic systems for col-
lecting and processing information can affect the culture of paying taxes. The
author adheres to the assumption that culture of tax payment, i.e. discipline of
citizens in relation to the fulfillment of tax obligations is the best indicator of
harmo niousness of tax system. The author considers a system of taxation a num-
ber of legislative acts, customs and traditions, aimed not only at establishing the
subjects of taxation and the tax base and rate, but also at tax accounting and tax
collection. The r esults of tax collection, processed in the state reporting and sta-
tistical data, shows how much the public relations evolving in connection with
the establishment and collection of taxes and duties are effectively (harmoni-
ously) regulated by legal norms. B y monitoring changes in tax laws and taxation
difficulties in the Republic of Latvia, author will be able clearly determine which
role modern electronic data collection and processing systems can play in im-
proving the efficiency of the tax system.
2. Axio logical basis for the tax system in Latvia
On July 22, 2014, the Law of the Republic of Latvia “Amendment to the
Constitution of the Republic of Latvia” entered into force. In the final reading,
the law was adopted at a meeting of the Seima of the Republi c of Latvia on June
19, 2014, and on July 8, 2014, the law was proclaimed by Andris Berzins. The
law:
To make the following amendment to the Constitution of the Republic of
Latvia:
To introduce the Constitution of the Republic of Latvia in the following
wording:
"The State of Latvia, proclaimed on 18 November 1918, has been estab-
lished by uniting historical Latvian lands and on the basis of the unwavering will
of the Latvian nation to have its own State and its inalienable right of self -deter-
mination in ord er to guarantee the existence and development of the Latvian na-
tion, its language and culture throughout the centuries, to ensure freedom and
promote welfare of the people of Latvia and each individual.
The people of Latvia won their State in the War of L iberation. They con-
solidated the system of government and adopted the Constitution in a freely
elected Constitutional Assembly.
The people of Latvia did not recognise the Occupation regimes, resisted
them and regained their freedom by restoring national i ndependence on 4 May
Dynami c Ele ments in the Contemporary Business Law 61
1990 on the basis of continuity of the State. They honour their freedom fighters,
commemorate victims of foreign powers, condemn the Communist and Nazi to-
talitarian regimes and their crimes.
Latvia as democratic, socially responsible and national state is based on
the rule of law and on respect for human dignity and freedom; it recognises and
protects fundamental human rights and respects ethnic minorities. The people of
Latvia protect their sovereignty, national independence, territor y territorial integ-
rity and democratic system of government of the State of Latvia.
Since ancient times, the identity of Latvia in the European cultural space
has been shaped by Latvian and Liv traditions, Latvian folk wisdom, the Latvian
language, univers al human and Christian values. Loyalty to Latvia, the Latvian
language as the only official language, freedom, equality, solidarity, justice, hon-
esty, work ethic and family are the foundations of a cohesive society. Each indi-
vidual takes care of oneself, o ne's relatives and the common good of society by
acting responsibly toward other people, future generations, the environment and
nature.
While acknowledging its equal status in the international com – munity,
Latvia protects its national interests and promo tes sustainable and democratic de-
velopment of a united Europe and the world.
God, bless Latvia! [19 June 2014]"2
In the annotation of the legal act in paragraph 1.1. – 1.3. recorded:
“1. Why is the law necessary?
1. The effective Constitution of the Republ ic of Latvia was adopted on
February 15, 1922, less than four years after the proclamation of the state and two
years after the fierce struggle for Freedom, in which an independent, democratic
Latvian nation as a result of the self -determination of the Lat vian state, it was
fought against networks of other countries and political forces. At that time, it
was clear to everyone why and for what purpose the Latvian state was founded
and fought. Therefore, although the Constitutional Assembly Commission, which
drafted the Satversme, was discussing it, at that time there was no obvious need
to disclose the meaning and essence of the Latvian state in a visible way in the
preamble or introduction of the Satversme. At the time, in other constitutions,
such an explan ation was not yet very widespread. Therefore, the present intro-
ductory part of the Satversme, while noting the important fact of the final consol-
idation of the constitutional order of the Latvian state, does not reflect the broader
foundations of the State .
2. Since then the situation has changed. First of all, Latvia has experi-
enced a long period of occupation, where the totalitarian occupation power tried
to eradicate the historical memory of the Latvian people about their country, its
meaning and essence , and at the same time to prevent a positive attitude towards
2 Law of the Republic of Latvia: June 19, 2014 Ame ndment to the Constitution of the Republic of
Latvia. The Latvian Journal 131, 08.07.2014. available: https://likumi.lv/doc.php?id=267428 , con-
sulted on 1.10.20919.
Dynami c Ele ments in the Contemporary Business Law 62
it in the future. It still partly influences public attitude towards the Latvian state.
Secondly, at that time, it was not yet mature enough to make the under-
standing of one's country, its meani ng and substance, its aims, values and guiding
principles desirable, in order to promote broad and constructive participation in
the political process.
This heightened requirement for the visibility of the foundations of the
state is reflected in the fac t that most democracies' constitutions adopted after
World War II, either in their preambles or in the body of the constitution, reflect
their foundations, their national and constitutional identities. This also applies to
the constitutions adopted in 1992 by our neighbors, Estonia and Lithuania. Of the
50 constituted democracies currently constituted, 37 have a preamble which sets
out the foundations of the State, and five have these foundations in the body of
the constitution, and only eight have such an extended preamble. The visibility
function of the introductory part, both in the constitution and in the law, is also
emphasized in modern good law theory.
3. For these two reasons, it would be desirable to supplement the Sat-
versme with a new Introduction appropriate to these findings. The state is a long –
lasting, indefinite formation, covering past, present and future generations. It
must therefore respect the achievements of previous generations in the struggle
and development of our country, meet the nee ds of the present, and mark the
responsibility for future generations to whom our country must be passed down
in the best possible order.
To be able to do this, you need to be aware of certain facts, values, and
principles that are outlined in this Introdu ction. ”3
In addition, in paragraph 1.6. – 1.8. indicated:
6. The third paragraph of the Introduction introduces the general princi-
ples of the Latvian state. They correspond to a modern Western -type democratic
state, also showing the specific features of L atvia.
Latvia is considered to be a democratic, legal, socially responsible and
national state. The political and legal content of these categories characterizing
the Latvian state system is further elaborated in the institutional and human rights
sections of the Satversme, laws adopted by the Saeima, the European Union legal
norms binding on Latvia, judgments of the Constitutional Court and other courts.
All state action is based on human dignity and freedom as the national
philosophical axiom of law and h uman rights as the external framework of state
action. Although this follows from the stated principle of respect for human
rights, minority rights are specifically mentioned.
The second sentence states that Latvia cannot be vulnerable. The people
of Latvi a are protecting their national foundations – they are protecting their sov-
ereignty, the independence of Latvia's state, territory and democratic state system.
3 State Chancellery: Annotation of the Draft Law “Amendment to the Constitution of the Repub lic
of Latvia”. Available: http://titania.saeima.lv/LIVS11/SaeimaLIVS11.nsf/0/64D394CCE1123A42
C2257C7D00523485?OpenDocument, consulted on 1.10.2019.
Dynami c Ele ments in the Contemporary Business Law 63
It is everyone's right and moral duty, but in statutory cases it can also be a legal
obligation (eg military service, criminal defense of these grounds). It is the duty
of the representatives of the Latvian people – state officials in particular.
7. The fourth paragraph of the introduction sets out the values on which
our society is based and the r eferences to the key factors that make up our identity.
By "we" we mean anyone who, on the basis of these values, feels his belonging
to Latvia. The list is, of course, not exhaustive, only the essential values and fac-
tors are listed. The individual is b y no means forced to join them, everyone can
create their own value system and identity, using some or all of the factors listed
here. It is fully guaranteed by human rights.
The first sentence outlines our geopolitical location – we are in the cul-
tural sp ace of Europe. The first sentence below points to the roots of our cultural
identity, rooted in both the original Latvian "branch" (traditions, life -style), the
universal human values, largely rooted in ideas of enlightenment, and the Chris-
tian values that have influenced European cultural space. against churches gov-
erned by the second sentence of Article 99 of the Satversme). The central com-
ponent of our identity is the Latvian language. The list is not exhaustive, only the
most important factors are lis ted here.
The second sentence, which corresponds to the Saeima statement of 2
February 2012 on the state role of the Latvian language, points to the Latvian
language as the basis for democratic participation and a cohesive society. The
Latvian language mus t be common to all who feel Latvian, regardless of their
origin and national identity. Without it, full democratic participation and a cohe-
sive society are not possible. Therefore, the state must promote it so that it truly
becomes our common language.
The third sentence refers to the most fundamental values of society – free-
dom, fairness, justice, solidarity, equality. These values are necessary for the
functioning of a democratic and rule -of-law state and its corresponding rights,
since any right is a lways based on axiomatic fundamental values. These core val-
ues are also reflected in the structure of the state. In turn off, references to family
and work mean that these forms of social life are morally and legally recognized
and encouraged.
The fourth sentence refers to the individual's place in society and its re-
lation to it. An individual must at least care about himself or herself, his or her
relatives, and the general good of society to the best of their ability. It is a moral
reminder against the unilateral use of society. The individual is thus required to
make a positive contribution. It is specifically determined by law, but the indi-
vidual is called upon to give to the public more than the law requires. What fol-
lows is the responsibility of the individual to behave responsibly towards others,
the country, the environment, nature, and future generations. Unlike the above,
what is required here is not a positive contribution but only responsible behavior,
i.e. not undermine these values.
8. The fif th paragraph of the introduction presents Latvia's place and role
Dynami c Ele ments in the Contemporary Business Law 64
in the international community. As a small country, Latvia must actively partici-
pate in world politics. In doing so, Latvia has two goals – first, to defend its inter-
ests and, second, to con tribute to the humane, sustainable and democratic devel-
opment of the world and a united Europe (especially the European Union). Alt-
hough these goals are defined in very broad terms, they are clear enough to de-
termine Latvia's positive role in the world and in Europe”4
The above bill and its annotation are clear examples of how legal values
are constitutionally enshrined. What values relate to the tax system, and what may
be their significance.
According to the founder of the French public figure, Pierre Joseph Prou-
dhon (1809 -1865), "in essence, the question of taxes is a question of the state."
B.A. Reisberg points out: “Taxes have been known to people since an-
cient times. Life is so arranged that part of our income has to be given to others.
Such a duty, duty has be en imposed and is still imposed on those who receive
something, have something. The first tax collectors were apparently the gods
themselves. According to pagan beliefs, it was necessary to make sacrifices to the
gods. These were taxes in their original fo rm, in the form of a sacrifice.”5
The first written sources of taxes dated back to the 18th century. BC,
when the Babylonian king Hammurabi (1792 -1750 BC) issued a series of laws,
known as the Hammurabi code, which have survived to our time.
The Pentateuch of Moses says: "… and every tithe on the earth from the
seed of the earth and the fruits of the tree belongs to the Lord." As the state de-
veloped, “secular” tithe arose, which was levied in favor of the sovereign princes
and sovereigns along with church tithe. This practice has existed in various coun-
tries for many centuries: from Ancient Babylon and Egypt to medieval Europe6.
The principles of taxation formulated in the fundamental work of the
Scottish economist Adam Smith (1723 -1790), "A Study on the Nature and Causes
of the Wealth of Nations" in the V book "On the Monarch's and Republic's In-
comes", published in 1776, gained historical fame. These principles were later
named "The Great Charter of the Taxpayer’s Liberties", or "Declaration of the
Rights of Taxpayers".
1. “Subjects of the state should, as far as possible, according to their abil-
ity and forces to participate in the content of the government, i.e. according to the
income they use under the auspices and protection of the state” (principle of jus-
tice).
4 Idem .
5 Райзберг Б.А. , Основы экономики , М.: Инфра -М, 2000. С. 187 -188 (Reisberg B.A. Fundamen-
tals of Ec onomics , Moscow : Infra -M, 2000, p. 187,188).
6 Теория и история налогообложения: учебник для академического бакалавриата / Д.Г.
Черник, Ю.Д. Шмелев; под ред. Д.Г. Черника. М.: Юрайт, 2014. 364 с. Серия «Бакалавр.
Академический курс» (Theory and history of taxation: a textbook for academic undergraduate /
D.G. Chernik, Yu.D. Shmelev; under the editorship of D.G. Blueberries, Moscow: Yurayt, 2014,
p. 364, Series “Bachelor. Academic Course ”).
Dynami c Ele ments in the Contemporary Business Law 65
2. “The tax that each individual is obligated to pay must be precisely de-
termined, and not arbitrary. Payment term, method of payment, payment amount
– all this should be clear and definite for the payer and each other person” (cer-
tainty princip le).
3. “Each tax should be levied at the time and in the way when and how it
should be most convenient for the payer to pay it” (convenience principle).
4. “Each tax should be conceived and designed so that it takes and holds
out of the pockets of the peo ple as little as possible beyond what it brings to the
state treasury (the principle of profitability).7
The listed principles of taxation have not lost their significance in modern
conditions. These principles are used as a kind of ideal that must be used in de-
veloping the principles of tax systems at various stages of development of the
state economy.
Much later than the theory developed by Adam Smith, the theory of taxes
and economic theory was studied by the English economist John Maynard
Keynes (1883 -1946). In his main work, The General Theory of Employment, In-
terest, and Money, published in 1936, he substantiated the tools of state regulation
of the economy. Along with other economic levers, he paid much attention to tax
regulation; emphasized that tax policy can have a powerful effect on economic
growth, increasing employment, and stimulating the propensity to consume8.
In turn off, J. Stiglitz in his works pays much attention to the problems
of optimal taxation. He emphasizes that the optimal tax stru cture is one that max-
imizes public welfare9.
This brief historical analysis shows the development of tax thought, as
well as the fact that theoretical studies on taxes, as well as tax systems themselves
are developed on the basis of taxation principles, wh ich, in turn off, depend on
the idea of values in a particular society in a specific time period.
The ignorance of the ruler (the author means the legislative system of the
state), i.e. taxation, contrary to the prevailing notions of state values among the
majority of the population, can lead to very sad consequences. Such conse-
quences can be expressed both in the economy of the country, for example, in-
sufficient fees to the treasury to ensure the effective functioning of the state ap-
paratus, which ca n lead to an economic recession, and in extreme cases in the
manifestation of public disobedience, for example, public unrest, protests, riots
and etc. The importance of a fair and well -thought -out tax policy in basic research
is shown by David F. Burg in his work “A World History of Tax Rebellions: An
Encyclopedia of Tax Rebels, Revolts, and Riots from Antiquity to the Present.”
7 Смит А. , Исследование о природе и причинах богатства народов . М., 1962. С. 588 -603
(Smith A., Research on the nature and causes of the wealth of peoples , Moscow, 1962, p. 588 -603).
8 Кейнс Дж.М. , Общая теория занятости, процента и денег . М., 1978 (Keynes J.M., General
theory of employment, interest and money , Moscow, 19 78).
9 Joseph E. Stiglitz , The Great Divide: Unequal Societies and What We Can Do About Them . W.
W. Norton Company, 2016. p. 206.
Dynami c Ele ments in the Contemporary Business Law 66
His work is an exhaustive reference source of information on more than 4,300
years of unrest, uprisings, protests and wars provok ed by inappropriate taxation
and tax collection systems around the world. Each of the chronologically ordered
records is devoted to a specific historical event, an analysis of its roots and a
socio -economic context10.
In order to better understand how the a xiology of law is connected with
the taxation system and why the idea of the values of law is important to under-
stand and to take into account when drawing up legislative acts on tax, the author
means it necessary to consider the basics of the axiologi cal (value) theory of law.
The anthropocentric, liberal, moral concept of law was developed by the
Russian jurist Sergei Sergeyevich Alekseev (1924 -2013), who was one of the au-
thors of the Constitution of the Russian Federation, adopted in 1993. The scient ist
carries out the value measurement of law from several positions: the value of law
consists, firstly, in its socio -political purpose; secondly, in its properties as a
highly effective and appropriate regulator of social relations, ensuring their or-
derliness, certainty, stability, dynamism and systematic character; thirdly, in the
ability to develop democratic principles, affirm and protect the rights and free-
doms of the individual; fourthly, in a means of expressing the spiritual, cultural
and moral valu es of society.11
Legal regulation in the taxation system of a modern democratic and legal
state is both the basis of the system and the guarantor of its effectiveness. The
effectiveness of the tax system is also the result of a tax culture. Therefore, gen-
eral legal principles cannot be neglected either when creating a legal act in the
field of taxes or when enforcing fees, since general legal principles are based on
the values embodied in law (in other words, the value of law).
The postmodern era require s a consistent response to many eternal ques-
tions of philosophy and theory of law, Nina Tsintsadze believes. It becomes ob-
vious that the classical types of legal thinking do not satisfy the post -industrial
needs described by I.L. Chistnov as the destructio n of the logocentrism of scien-
tific thinking. She believes that a fundamentally new type of legal understanding
must be sought in social philosophy (or theoretical sociology), because it is phil-
osophical concepts that can serve as the basis for a new type of legal understand-
ing that can respond to the challenge of postmodernism.
Of these philosophical trends that can offer a new approach to law, I.L.
Chistnov distinguishes phenomenology, hermeneutics, anthropology and syner-
getic. Due to the fact that modern legal reality is characterized by such qualities
as dynamism, variability, instability, dependence on subjective perception, as the
researcher believes, the most significant theories of legal understanding can be
developed on the basis of a synthesis of t hese philosophical directions.
10 David F. Burg , A World History of Tax Rebellions: An Encyclopedia of Tax Rebels, Revolts, and
Riots from Antiquity to the Pr esent , Routledge, 2003.
11 Алексеев С.С., Собрание сочинений: в 10 томах. М. 2010. Т.3. С.26 (Alekseev S.S., Collected
Works : in 10 volumes, Moscow, 2010, V.3., p. 26).
Dynami c Ele ments in the Contemporary Business Law 67
We share the opinion of IL Chistnov that special prospects in a compre-
hensive understanding of the essence of law are in synergetic, as the youngest
interdisciplinary direction of scientific research, containing a non -linear type of
thinking and a probabilistic picture of the world that studies the morality, insta-
bility and irreversibility of complex objects and processes. Any system does not
tolerate stagnation, but it is necessary to make changes basing on traditions.12
Under standing the value of law from the perspective of a synergistic ap-
proach will allow you to penetrate into its essence, taking into account the specific
historical conditions of its existence. The high heuristic and methodological po-
tential of the cooperati on of legal theory with philosophy and sociology is unde-
niable. The theoretical and methodological crisis of modern law, as it seems to
us, requires updating or rethinking the paradigm of legal awareness, cleansing it
of ideological ideology cluttering sci entific knowledge, developing a unified and
clear theoretical platform that combines various concepts of legal understanding
on the basis of methodological pluralism, including and the axiosphere of law.
With reference to M.I. Baitin13 about the need to dev elop a single concept of law,
without which the theory of law is threatened with erosion.
Legal regulation in the taxation system of a modern democratic legal state
is both its basis and the guarantor of efficiency. Therefore, ruler cannot neglect
social a nd legal values when creating a legal act or enforcing tax laws.
Modern taxpayers are gaining greater mobility and wider access to im-
proving technologies and services, which creates the need for tax authorities to
use a number of different methods to mat ch the level of modern society.
Effective tax administration in modern conditions should be able to offer
services and assistance based on the latest information technologies, build on the
respect and trust of taxpayers thanks to automated high -level servi ces, profes-
sionalism of employees and high standards of tax conduct14.
The value function of tax culture is expressed using a system of axiolog-
ical characteristics, which are a set of values in the field of taxation. Spiritual and
legal values are the basis of the tax culture, they become the regulator of the re-
lationship between people. The main objective of this function is to introduce the
12 Цицнадзе Н.С. Концептуальные аспекты аксиологической теории права , „Вестник
Тамбовского университета. Серия Гум манитарные науки ”. Тамбов. 2012. Вып.4 (108) С 351 –
354. [Tsitsnadze N.S., Conceptual aspects of the axiological theory of law , „Bulletin of the Tambov
University. Series Humanitarian sciences”, Tambov, 2012. Issue 4 (108), p. 351 -354].
13 Байтин М.И. О совр еменном нормативном понимании права, „Журнал российского
права ”, 1999, №1 (Baytin M.I., On the modern regulatory understanding of law , „Journal of
Russian Law”, 1999, No. 1).
14 Е.В.Надточий , Налоговая культура общества как основа развития налоговой системы ,
„Стратегия развития экономики ” 15 (204) – 2013 [E.V. Nadtochiy, The tax culture of society as
the basis for the development of the tax system , „Economic Development Strategy” 15 (204) –
2013].
Dynami c Ele ments in the Contemporary Business Law 68
subjects of tax relations into the system of value -semantic and regulatory -regula-
tory categories of the state tax sys tem.15
This is indicated in the second, third, fourth, fifth and sixth consolidated
report of the Republic of Latvia on the implementation of the international cove-
nant of 1966 on economic, social and cultural rights in 2008 -2017.
In the country, wages are regulated by the minimum monthly wage,
which is mandatory for the employer to provide workers with regular working
hours (40 hours a week). The minimum monthly wage is a tool for protecting
low-skilled workers and reducing social inequalities. Regulations of the Cabinet
of Ministers “Procedure for Determining and Revising the Minimum Monthly
Wage” have been elaborated for the improvement of the system of determination
and revision of the minimum monthly wage. Comparing the ratio of the minimum
monthly wage to the CSB calculated average monthly AMzin_08102018_
ICESCR_2008 -2017; Consolidated Second, Third, Fourth, Fifth, Sixth Regular
Reports of the Republic of Latvia on Implementation of the 1966 International
Covenant on Economic, Social and Cultural Rights in Latvia 2008 -2017 35 gross
wages and salaries for the previous year; The minimum monthly wage for the last
three years is decreasing as a percentage of the calculated average monthly gross
wage for the previous years.
3. Conclusions
Considering the rep orts of the previous period and the change in the min-
imum wage in the Republic of Latvia, we can conclude that the situation is im-
proving, as well as a positive trend in consolidating legal principles and values at
the legal level. However, one of the im portant indicators, as follows from news-
paper publications – the basket of a living wage, remains uncertain16. Thus, the
consolidation of principles at the legal level is still more formal in nature than it
gives the possibility of practical improvement of the tax culture, however, stable
work is shown in the implementation of long -term strategic plans for the devel-
opment of the state economy.
Today we have an effective tool – an electronic system for collecting and
processing information during taxation. Us ing this tool wisely, the state will be
able to achieve the highest efficiency in the processes of budget planning and tax
collection, thereby increasing the level of tax culture.
The author of the study tried to state the importance of the axiology of
law in understanding the legal theory and axiological basis for the state tax sys-
tem. The author also examined the basic principles of taxation. The author, on the
example of the development of the tax system in the Republic of Latvia, noted
15 Ibid.
16 The new size of the subsistence basket is planned t o be announced next year – https://www.diena.
lv/raksts/atvija/zinas/iztikas -minimuma -groza -jauno -apmeru -plano -nosaukt -nakamgad -14214966,
consulted on 1.10.2019.
Dynami c Ele ments in the Contemporary Business Law 69
positive trends i n the formalization of taxation principles, but still observes the
difficulties in applying the result of such formalization in practice. The author
emphasized the importance of increasing the tax culture, and how modern infor-
mation technologies can contri bute to this. To increase the tax culture, a thought-
ful definition of the tax base, as well as simplification and automation of the tax
collection system, is of considerable importance. Axiological values, including
those formally enshrined, contribute to the improvement of the tax culture, and at
the same time, increase the efficiency of the tax system. The core values should
increasingly be consistent with Pan -European policies and the state development
strategy, including with international documents o f fiscal discipline. Electronic
systems for collecting and processing information, and summary data from them,
should be more actively used in determining the tax base and rate. All the previ-
ously mentioned guidelines should be reflected not only in the do cuments of po-
litical planning, but also at the constitutional level, as well as in the system of
legal and by -laws, for more successful budget planning and budget revenues.
Bibliography
1. Райзберг Б.А., Основы экономики , М.: Инфра -М, 2000 (Reisberg B.A. Fun-
damentals of Economics , Moscow : Infra -M, 2000).
2. Д.Г. Черник, Ю.Д. Шмелев; под ред. Д.Г. Черника, Теория и история
налогообложения: учебник для академического бакалавриата , М.: Юрайт,
2014. Серия «Бакалавр. Академический курс» (D.G. Chernik, Yu.D.
Shmelev; under the editorship of D.G. Blueberries , Theory and history of taxa-
tion: a textbook for academic undergraduate , Moscow: Yurayt, 2014, Series
“Bachelor. Academic Course”).
3. Смит А., Иссле дование о природе и причинах богатства народов . М., 1962
(Smith A., Research on the nature and causes of the wealth of peoples , Moscow,
1962).
4. Кейнс Дж.М., Общая теория занятости, процента и денег . М., 1978
(Keynes J.M., General theory of employment, inter est and money , Moscow,
1978).
5. Joseph E. Stiglitz , The Great Divide: Unequal Societies and What We Can Do
About Them . W. W. Norton Company, 2016.
6. David F. Burg, A World History of Tax Rebellions: An Encyclopedia of Tax Re-
bels, Revolts, and Riots from Antiqu ity to the Present , Routledge, 2003.
7. Алексеев С.С., Собрание сочинений: в 10 томах. М. 2010. Т.3 (Alekseev S.S.,
Collected Works : in 10 volumes, Moscow, 2010, V.3).
8. Цицнадзе Н.С. Концептуальные аспекты аксиологической теории права ,
„Вестник Тамбовского университета. Серия Гумманитарные науки” .
Тамбов. 2012. Вып.4 (108). [Tsitsnadze N.S., Conceptual aspects of the axio-
logical theory of law , „Bulletin of the Tambov University. Series Humanitarian
sciences”, Tambov, 2012. Issue 4 (108)].
9. Байтин М.И. О современном нормативном понимании права, „Жур нал
российского права”, 1999, №1 (Baytin M.I., On the modern regulatory under-
standing of law , „Journal of Russian Law”, 1999, No. 1).
Dynami c Ele ments in the Contemporary Business Law 70
10. Е.В.Надточий, Налоговая культура общества как основа развития
налоговой системы , „Стратегия развития экономики” 15 (204), 2013 [E.V.
Nadtochiy, The tax culture of society as the basis for the development of the tax
system , „Economic Development Strategy” 15 (204), 2013].
Characteristics of the Dissolution of Non -Banking
Financial Institutions
PhD. student Claudiu -Daniel TELICENU1
Abstract
This paper deals with a fundamental aspect of the legal framework of compa-
nies, i.e. the end of the existence of companies, by dissolution and liquidation. We con-
sider that tackling such a topic is very current and fully justified theoretically and prac-
tically. Companies reflect the evolution of the society in which they coexist, being unde-
niably linked to the economic life of civil society. Similar to natural persons, legal persons
are born, they carry out their social life accordi ng to the purpose for which they were
created and disappear through dissolution and liquidation. The presentness of this paper
results, thus, not only from the fact that the existence of companies as "engines" of social
life affects the entire civil societ y, but also from the fact that, in the current economic
context, the study of companies’ operations of dissolution and liquidation is extremely
appropriate for legal practitioners and others2.
Keywords: dissolution, liquidation, nullity, company.
JEL Cla ssification: K10, K20, K22, K29
1. The notions of dissolution and liquidation of a company
The company is constituted on the basis of a constitutive act and by ful-
filling the formalities required by the law, and during its existence it performs the
activities specified in the object of its activity, as decided by the associates. As a
legal person, the company establishes legal relationships with both associates and
third parties. The process of terminating the legal personality of a company usu-
ally requ ires two mandatory steps, i.e. the dissolution and liquidation of the com-
pany.
The dissolution of companies has been defined by some authors as a start –
up phase of the process of ending a legal personality, along with liquidation,
which it precedes3. Accor ding to another opinion, the dissolution meant the abo-
lition of the company's legal personality, i.e. the termination of its existence.
Other theorists have found that dissolution is a legal way of ending the existence
1 Claudiu -Daniel Telicenu – Doctoral School of Law, „Titu Maiorescu” University, Bucharest, Ro-
mania, teliceanu_claudiu@yahoo.com.
2 Roș, V., Dizolvarea societăților comerciale. Particularități ale dizolvării pe cale judiciară. Li-
chidarea societăților comerciale. Momentul în care intervine rolul instanței de judecată în mersul
lichidării , „Revista de Drept Comercial”, no. 1/1996, p. 58 ; Cărpenaru, S. D., Tratat de drept
comercial roman , revised 5th edition, Universul Juridic Publishing House, Bucharest, 2016, p. 213.
3 Diaconu, R., Instituții financiare nebancare, C.H. Beck Publishing House, Bucharest, 2011, p. 75.
Dynami c Ele ments in the Contemporary Business Law 72
of a company4. Certain specialized pa pers identify dissolution with a fact that
determines the end of a company’s existence as an active organism, which aims
to achieve benefits from activities and liquidation of companies. According to
other authors, dissolution is a technical process which prepares the liquidation
phase.
Beyond the nuances of the definition in the specialized literature, we con-
sider that the dissolution of a company actually concerns those operations that
trigger the process of its termination, and which provide the premises for the liq-
uidation of the company’s patrimony. We think that these operations refer to the
decision to dissolve the company and to bring it to the attention of the stakehold-
ers. In accordance with the law on companies, the decision to dissolve the com-
pany is taken either by the assembly of the associates, or by the court, and only
as an exception the dissolution of the company occurs in compliance with the
law.
The dissolution does not affect the legal personality of the company, as
the operations taking place at this stage only have the role of triggering the pro-
cess of terminating the existence of a company. The termination of the existence
of a company requires performing operations that will result not only in the ter-
mination of the legal personality, but also in the liquidation of the company's
patrimony, by exercising rights and fulfilling social obligations.
Hereinafter, we want to carry out a brief analysis of the particular situa-
tions and causes of dissolution specific to non -banking financial inst itutions, legal
entities that present a series of characteristics regulated by a special legislation.
2. Declaring the nullity of a company and the impossibility of achiev-
ing the company's object of activity
The declaration of the company’s nullity and the impossibility of achiev-
ing the company's object of activity are causes of dissolution, which in the case
of non-banking financial institutions need a series of explanations.
According to the provisions of Law 93/2009 on non -banking financial
institution s and of the National Bank of Romania (BNR) Regulation no. 20 of
2009 on non -banking financial institutions, the constitutive act must be drafted
and acknowledged by a Civil Law Notary or bear a certified date. At the same
time, the nullity of a company re gistered in the Trade Registry may be declared
by the court when the constitutive act is missing or has not been drafted and
4 Hinescu, A., Fuziun ea si divizarea societatilor, Practica judiciara adnotata , Hamangiu
Publishing House, Bucharest, 2016, p. 123, Smarandache, L., Regimul juridic al instituțiilor de
credit, persoane juridice române, în context European , Hamangiu Publishing House, Bucharest,
2013, p. 97; Stanca, I. -A., Dizolvarea și lichidarea societăților comerciale in Practică judiciară ,
Hamangiu Publishing House, Bucharest, 2011, p. 185; Turcu, I., Teoria și practica dreptului
comercial roman , vol. I, Lumina Lex Publishing House, Bucharest , 1998, p. 401.
Dynami c Ele ments in the Contemporary Business Law 73
acknowledged by a Civil Law Notary5. We consider that in the absence of an
authenticated form of the constitutive act or a certifie d date the conditions pro-
vided by the law for the declaration of nullity of a company by the court of law,
in this case the court, are met.
Apart from the existence of a cause of nullity, the lack of the form re-
quired by the law for the constitutive act at tracts the refusal of the National Bank
of Romania to enroll the company in the Special Register, to issue its operating
permit, and, implicitly, the impossibility of carrying out the object of its activity.
The proof of the registration of the company wit h the Trade Register Of-
fice is a mandatory document for the issuance of the operating permit, the lack of
which attracts both the possibility of invoking a nullity cause and the refusal of
registration by the BNR.
There is, therefore, a double checking on the fulfillment of the conditions
stipulated by the legislation in force, i.e. the analysis of the fulfillment of the
conditions at the moment of the registration of the company with the Trade Reg-
ister, as well as their evaluation at the moment of requesti ng the registration with
the Special Register of the non -banking financial institutions.
The general causes of the declaration of a company’s nullity also subsist
in the case of non -banking financial institutions, but their analysis presents a num-
ber of si gnificant characteristics.
The impossibility of achieving the company’s object of activity is closely
related to the authorization of the National Bank of Romania.
We consider that in the absence of the authorization by the National Bank
of Romania the pre requisites for invoking the impossibility to achieve the com-
pany’s object of activity as the cause of dissolution are created.
The object of activity of the non -banking financial institutions is limited
to the activities provided by the provisions of art. 14 of Law 93/2009, the lending
activities permitted being the following:
a) credit granting, including, but not limited to: consumer loans, mort-
gage loans, real estate loans, microcredits, financing of commercial transactions,
factoring, discount credits, lump -sums;
b) financial leasing;
c) issuance of guarantees, guarantee commitments, financing commit-
ments;
d) granting credits with the receipt of mortgaged goods, respectively
pawn shops;
e) granting credits to members of non -patrimony associations organiz ed
on the basis of the free consent of employees/pensioners, in order to support their
members by financial loans from these entities, organized according to the mutual
aid funds’ legal form;
f) other forms of credit financing.
5 Law no. 31/1990 – art. 56.
Dynami c Ele ments in the Contemporary Business Law 74
It is worth mentioning that during the lending activity, non -banking fi-
nancial institutions can provide credit card issuance and administration services
for clients, other than those falling under the provisions of Government Emer-
gency Ordinance no. 113/2009 , approved with amendments by Law no.
197/2010 , with its subsequent amendments and completions, and may carry out
activities related to the processing of transactions with the above -mentioned, in
compliance with the regulations in the field.
Non-banking financial institutions may c onduct related and auxiliary ac-
tivities related to the performance of lending activities or the operation of the
entity. Insofar as the activities under consideration correspond to the lending ac-
tivities included in the activity object of the non -banking f inancial institution, it
may perform mandate operations and may provide consulting services.
The non -banking financial institutions registered in the General Register
may also perform foreign exchange operations related to the permitted activities,
subject to all the conditions laid down by the applicable regulations.
We must not overlook the fact that non -banking financial institutions can
administer public funds granted as microcredit funds by government agencies,
subject to the conditions specified in Government Ordinance no. 40/2000 regard-
ing the accreditation of credit agencies for the administration of funds for granting
microcredits, approved with amendments and completions by Law no. 376/2002 ,
with subsequent amendments and completions.
The non -banki ng financial institutions listed in the Register may also
carry out the activities required by the special legislation regulating their activity,
as well as the auxiliary activities related to their realization.
Non-banking financial institutions listed in the General Register may
carry out in relation to the entities in the group, non -financial mandate or com-
mission operations related to the activities necessary to support the operation of
the respective entities.
Furthermore, non -banking financial institu tions listed in the General
Register may provide payment services and may grant credits related to the pay-
ment activity in accordance with the provisions of Government Emergency Ordi-
nance no. 113/2009 , approved with amendments by Law no. 197/2010 , with sub-
sequent amendments and completions.
The law explicitly forbids non -banking financial institutions to include
in the main object of activity an activity that is not specified in Article 14 (1) on
the one hand, and on the other hand, the inclusion in the sec ondary object of ac-
tivity of any activity other than those stipulated in art. 14.
It is also unequivocally forbidden for non -banking financial institutions
to carry out the following activities:
a) attracting deposits or other repayable funds from the public;
b) issuance of bonds, except for the public offer addressed to qualified
investors, under the capital market law;
c) movable and immovable property transactions, with the exception of
Dynami c Ele ments in the Contemporary Business Law 75
those relating to the lending activity or those neces sary for the appropriate oper-
ation of the entity;
d) granting credits, conditional upon the sale or purchase of the shares of
the non -banking financial institution;
e) granting of credits, conditional upon the acceptance by the client of
services unrelated to the respective lending operation.
Regulation 20/2009 also regulates the time limits for the notification of
the National Bank of Romania, i.e. 30 days from the date of registration in the
Trade Register.
3. Non -banking financial institutions may carry out lending activities
only after registration with the General Register
Non-banking financial institutions are registered in the General Register
if, following notification, they prove compliance with the applicable legal re-
quirements. The Nat ional Bank of Romania shall transmit to the non -banking fi-
nancial institutions the document certifying the entry in the General Register
within 30 days from the date when the submitted documentation is complete and
appropriate.
Failure to comply with the a pplicable legal requirements results in the
rejection of the entity's request for registration with the General Register and,
implicitly, the failure to grant permission to carry out a lending activity.
Although the law does not expressly provide for the p ossibility of the
dissolution of a company, we consider that the situation is circumscribed to the
general causes provided by Law of Companies no. 31/1990.
The deletion of a non -banking financial institution is, in our opinion, an-
other cause of a company's dissolution. The deletion from the General Register
may be done in the following situations:
a) at the request of the non-banking financial institution;
b) following the application of the sanction in art. 59 para. (2) letter e) of
Regulation 20;
c) if the non-banking financial institution has been permanently and ir-
revocably prohibited from conducting lending activity;
d) if the non-banking financial institution ceases to exist as a result of a
merger, division or in other cases provided by the law.
The N ational Bank of Romania shall publish the deletion from the Gen-
eral Register in the Official Journal of Romania, Part I, and in two national news-
papers.
Dynami c Ele ments in the Contemporary Business Law 76
4. Lack of legal administrative authorization for setting up a com-
pany
According to the law, certain special permits are required prior to the
establishment of the company in certain fields of activity. In the absence of a
specific administrative authorization, the company will be annulled.
For the banking companies, as a prior special permit, the tempora ry au-
thorization is required from the National Bank of Romania, for the companies
participating in the capital market the in principle approval and the permit of the
National Securities Commission are necessary, and for the insurance companies
the authoriz ation of the Supervisory Insurance Commission is needed. In order
for the lack of legal administrative authorization to be a ground for nullity, it is
taken into account when founding a company. As a consequence, any subsequent
annulment of the authorizati on is not a ground for nullity. Such a subsequent an-
nulment of the authorization may, however, lead to the dissolution of the com-
pany.
As regards the non -banking financial institutions, Law 93/2009 provides
for the obligation to notify the National Bank of Romania, which implies a fol-
low-up action to the registration procedures in the Trade Registry. Authorization
is, therefore, a subsequent procedure for which the law stipulates a period of 60
days, i.e. about 30 days from registration to notify BNR and an other 30 days from
the notification for the National Bank to issue the authorization either in the con-
text of the fulfillment of the conditions or to transmit the refusal of the authoriza-
tion and, respectively, the registration with the General Register.
5. Breach of the legal provisions regarding minimum, subscribed and
paid up share capital
By mandatory provisions of the Companies’ Law, the minimum ceiling of
the share capital of the joint -stock company or the limited partnership company
cannot be less than 90,000 lei, the Government being able to modify, no sooner
than two years, the minimum amount of the share capital, so that this quantum
represents the RON equivalent of 25,000 EURO. The share capital of a limited
liability company cannot be less than 200 lei and is divided into equal shares,
which cannot be less than 10 lei.
As regards the joint stock company constituted by public subscription,
the company may be formed only if the entire share capital has been subscribed
and each acceptor has paid in cash half of the value of shares subscribed to CEC
or at a bank. The remainder of the subscribed share capital will have to be paid
within 12 months from the registration. In the case of a full and simultaneous
subscription of the share capital by all the signatories to the constitutive act, the
social capital paid at the establishment of the company may not be less than 30%
of the subscribed one, and the remainder of the share capital subscribed will be
Dynami c Ele ments in the Contemporary Business Law 77
paid: ~ for the shares issued for a cash contributio n within 12 months from the
date of the company’s registration; ~ for shares issued for a contribution in kind,
no later than 2 years from the date of registration, according to art. 9 of Law no.
31/1990.
As regards the unlimited company, the limited partn ership and the lim-
ited liability company, they are obliged, according to art. 9 of Law no. 31/1990,
to fully pay up the subscribed share capital at the establishment date. According
to art. 22 of Law no. 31/1990, if public subscriptions exceed or are lower than the
share capital stipulated in the prospectus, the founders are obliged to subject the
increase to the approval of the constitutive assembly or, as the case may be, to
the reduction of the share capital subscription level. Breach of any such legal
provision stating the minimum subscribed and paid -up share capital in relation to
the legal form of the company means the violation of imperative rules on this
essential element of the company and is sanctioned by the nullity of the com-
pany6.
The minimum sh are capital of non -banking financial institutions may not
be less than the equivalent in lei of EUR 200,000, respectively EUR 3,000,000 in
the case of non -banking financial institutions granting mortgage loans.
The National Bank of Romania may establish by regulation superior lev-
els of the minimum share capital, differentiated according to the type of activity
of the non -banking financial institution.
The share capital of non -banking financial institutions must be fully paid
up at the time of subscription, including in the case of an increase. Share capital
is constituted and increased by cash contributions, contributions in kind not being
allowed.
In order to determine the compliance with the minimum share capital re-
quirement, in euro equivalent, the foreig n exchange market rate communicated
by the National Bank of Romania shall be used for the date of the subscription
and its payment.
The reduction of the share capital below the values provided above is
naturally a cause for a company’s dissolution. We consider that, the National
Bank of Romania, in fulfilling its supervisory and monitoring duties, beside sanc-
tions, such as the withdr awal of the operating authorization, is an entity with ac-
tive procedural standing to ask the court or the National Trade Register Office to
dissolve a non -banking financial institution.
6. Non -compliance with the provisions of the law regarding associ-
ates and managers
The special legislation in the field regulates meticulously the conditions
for shareholders and managers of non-banking financial institutions. The shares
6 Roș, V., op. cit ., 1996, p. 58.
Dynami c Ele ments in the Contemporary Business Law 78
issued by non-banking financial institutions can only be nominal shares. Non-
banking financial institutions are obligated to provide the National Bank of Ro-
mania with information regarding the significant shareholders and the structure
of the groups to which they belong in accordance with the regulations issued for
the enforcement of the law.
Furthermore, the managers of non-banking financial institutions must
have adequate reputation and experience in order to exercise the responsibilities
entrusted to them, according to the criteria set by the National Bank of Romania.
In the enforcement of art. 16 of Law no. 93/2009, the National Bank of
Romania shall assess the shareholders on the basis of the documents provided in
art. 23 of the BNR Regulation no. 20/2009 and taking into consideration the avail-
able public information on them.
In assessin g the reputation of the managers, the National Bank of Roma-
nia takes into consideration at least the following aspects:
a) the existence of a conviction for corruption offenses, money launder-
ing, terrorism, patrimony crimes, abuse of office, bribe receivin g or giving, for-
gery and use of forgery, misappropriation of funds, tax evasion, receipt of undue
benefits, trafficking influence, false testimony, offenses provided by special leg-
islation in the financial -banking field, company legislation, insolvency or con-
sumer protection or any other relevant facts;
b) the manager is prosecuted or tried for any of the offenses referred to
in letter a);
c) pending and past investigations and/or measures applied to the man-
ager or the imposition of administrative sanctions for failure to comply with the
provisions governing the banking, financial, insurance activity or any other fi-
nancial services legislation;
d) ongoing or past investigations and/or measures and sanctions imposed
by any regulatory or professional body for non-compliance with any relevant reg-
ulations.
In assessing the reputation of the managers , the issues referred to in art.
14 are considered, on a case -by-case basis, depending on the severity of the cir-
cumstances of each situation, to the extent that they may cast doubt on the fulfill-
ment of the manager reputation criterion.
The National Bank of Romania may consider the reputation requirements
for the manager to be fulfilled, if he:
a) already is a person considered to have a good reputation in view of his
significant shareholder status in an entity regulated and monitored/ supervised by
the National Bank of Romania, the National Securities Commission, the Insur-
ance Supervisory Commission or the Supervisory Commission of the Private
Pension System or a super visory authority with similar responsibilities in another
Member State;
b) is a person who manages and/or administers the activity of an entity
Dynami c Ele ments in the Contemporary Business Law 79
regulated and monitored/supervised by the National Bank of Romania, the Na-
tional Securities Commission, the Insurance Supervisory Commission or the Su-
pervisory Commission of the Private Pension System or a supervisory authority
with similar responsibilities in another Member State;
In order to meet the requirement on professional experience, the appli-
cant must demonstrate that the persons designated as managers have adequate
theoretical and practical knowledge regarding the activities to be carried out by
the non-banking financial institution, as well as experience gained in a manage-
ment position.
Non-banking financial institutions must have an audit committee consist-
ing of at least 2 members appointed by the general assembly. The composition,
functioning and attributions of the audit committee are governed by Government
Emergency Ordinance no. 90/2008 on the statutory audit of annual balance sheets
and the consolidated balance sheets, approved with amendments by Law no.
278/2008, with its subsequent amendments and completions, by the present reg-
ulation and by the internal regulations of each non-banking financial institution.
The quality of the significant shareholders and the structure of the groups
they are a part of must ensure the stability and development of the non-banking
financial institution and allow the National Bank of Romania to carry out effec-
tive supervision. The managers, administrators and members of the supervisory
board must have a good reputation and an experience appropriate for the nature,
extent and complexity of the non-banking financial institution's activity and the
responsibilities entrust ed to them.
7. Conclusions
Article 237 of Law no. 31/1990 regulates the cases of dissolution -sanc-
tion, in which the court will be able to take action against non -operational com-
panies. The dissolution -sanction of the company shall be ruled by the court a t the
request of the National Trade Register Office or of any interested person. Situa-
tions regulated by the law in which dissolution can be applied as a sanction have
a judicial dissolution character.
In addition to the general requirements, non-banking financial institu-
tions registered in the Special Register must also meet other requirements set out
in the regulations issued by the National Bank of Romania. The National Bank
of Romania establishes by regulation the criteria for the registration of non-bank-
ing financial institutions in the Special Register. These criteria may refer to: turn-
over, loan volume, debt ratio, total assets, equity.
The National Bank of Romania shall be entitled to take, in relation to a
non-banking financial institution or to the administrators, as the case may be, the
members of the supervisory board, or the managers who violate the provisions of
this law, regulations or other acts issued pursuant to this law, the necessary
Dynami c Ele ments in the Contemporary Business Law 80
measures in order to remove deficiencies and their cause s, and/or to impose sanc-
tions.
Non-banking financial institutions which are no longer allowed to carry
out one or more lending activities under art. 14 may continue the maturity of
contracts related to these activities, without modifying them other than wi th the
extension of the repayment term.
The current regulation in the field does not explicitly foresee other spe-
cial causes of dissolution for non -banking financial institutions, which are cir-
cumscribed to general causes.
However, we consider that there a re situations that require a series of
explicit regulations regarding the dissolution of non -banking financial institutions
in the case of non -fulfillment of the special conditions provided by the Law
93/2009 or BNR Regulation no. 20/2009. We also feel tha t there is a need to
clarify possible transit situations between the emergence of the dissolution cause
and a possible amendment of the constituent acts in order to change the object of
activity so that the applicability of the derogation provisions ceases to be appli-
cable.
This material is part of the scientific research activity within the Doctoral
School, in the process of completing the doctoral thesis titled Judicial and eco-
nomic characteristics of the dissolution of non -banking financial institutions . We
also envision this work to be able to support students, young people, lawyers,
magistrates, jurists, and those interested in studying commercial law. Moreover,
when completed, we hope the doctoral thesis will be able not only to represent a
law enforce ment guide, but also a potential tool for correcting certain regulatory
deficiencies.
Bibliography
1. Cărpenaru, S. D., Tratat de drept comercial roman , revised 5th edition, Universul
Juridic Publishing House, Bucharest, 2016.
2. Diaconu, R., Instituții financ iare nebancare, C.H. Beck Publishing House, Bu-
charest, 2011.
3. Hinescu, A., Fuziunea si divizarea societatilor, Practica judiciara adnotata ,
Hamangiu Publishing House, Bucharest, 2016.
4. Roș, V., Dizolvarea societăților comerciale. Particularități ale dizolvăr ii pe
cale judiciară. Lichidarea societăților comerciale. Momentul în care intervine
rolul instanței de judecată în mersul lichidării , „Revista de Drept Comercial”,
no. 1/1996.
5. Smarandache, L., Regimul juridic al instituțiilor de credit, persoane juridice
române, în context European , Hamangiu Publishing House, Bucharest, 2013.
6. Stanca, I. -A., Dizolvarea și lichidarea societăților comerciale in Practică judi-
ciară , Hamangiu Publishing House, Bucharest, 2011.
7. Turcu, I., Teoria și practica dreptului comercial ro man, vol. I, Lumina Lex Pub-
lishing House, Bucharest, 1998.
Legal Regime of Private Military Companies
Lecturer Ovidiu Horia MAICAN1
Abstract
Private military companies are independent companies that offers military ser-
vices to national governments, inte rnational organizations, and substate actors. Private
military companies (PMCs) are an important and deeply controversial element of the pri-
vatized military industry . PMCs specialize in providi ng combat and protection forces.
Their work ranges from running small -scale training missions to providing combat units
composed of up to several hundred highly trained soldiers. The use of military force by
private -sector organizations is not new. It is p resent since Middle Ages. The most known
example in modern history is british East India Company private military units, present
in India until 1857.
Keywords: private military companies, mercenary, United Nations, European
Union.
JEL Classification: K21, K33
1. Introduction
The subject in making use of international humanitarian law depends on
exactly what the prison popularity of PMCs are. International humanitarian law
is reflected in the 1949 Geneva Conventions with the two accompanying 1977
Genev a Protocols, which makes best distinctions between rights, privileges and
immunities of combatants and non -combatants in armed conflict. Due to the blur-
ring difference between fighters and non-combatants, numerous issues are raised
for the operation of the Geneva Conventions and Protocols on an international
law level.2
2. International instruments
Armed civilians create issues for the application of the Geneva Conven-
tions and Protocols. In an worldwide armed struggle they ought to be classified
as both one of four categories.3
1 Ovidiu Horia Maican – Department of Law, Bucharest University of Economic Studies, Romania,
ovidium716@gmail.com.
2 Tung, H., Under International law, what is the legal status of Private Military Contractors during
military occupation and under , United Nations Peace Keeping Operations?, Peace Operations
Training Institute 2005. p. 7
3 Idem , p. 8.
Dynami c Ele ments in the Contemporary Business Law 82
Firstly, as noncombatants accompanying armed forces entitled to cer-
tain immunities if taken as POWs underneath Geneva III (Article 4) provided
they are only armed beneath self-defense.
Secondly, as privileged opponents who take up arms spontaneous to
withstand invading forces, respecting the laws and customs of war, are entitled to
immunities if taken as POWs underneath Geneva III.4
Thirdly, as non -privileged warring parties who meet neither of the excep-
tions stated above and conse quently will not be entitled to POW status if cap-
tured nor any combatant immunity and fourthly, as a mercenary who has
no proper to be a combatant or a POW (Protocol I, Article 47).5
Civilians that accompany an armed force will in most occasions be enti-
tled to claim protection under Geneva III Article 4, then again the concern arises
when the civilian contractors are not frequently attached to the navy forces who
are armed other than for purposes of private self defence and who take part in
some issue of ar med conflict. There is concern that as they are armed and are in
a warfare sector there is the risk that they will be classified as mercenaries and
thereby having no privileges beneath International humanitarian law.6
However, an essential difference is for the purposes of Protocol I, Article
47 whether such humans have been ‘specially recruited locally or abroad in order
to battle in an armed conflict. It seems that this provision would leave out many
categories of civilian contractors different than those specially contracted to sup-
ply protection offerings who will lift mild arms. The difficulty arises as to
whether recruitment to ‘fight’ in an armed hostilities and recruitment to grant
safety of a protection nature in an armed conflict . The distinctions a re tough to
make.
Secondly, it has to be an internal conflict with two states as a substitute
than a worldwide conflict. Hence once these prerequisites are cozy then merce-
naries utilized with the aid of one of the state events should be eligible as a ‘mi-
litia’ structure phase of the armed forces of the State [Article 4(A) (1)]. Other
State Contracted PMC personnel would possibly fall inside Article 4(A)(4) as ac-
companying the armed forces.7
The Geneva Conventions and Protocols clarify the duties of States to de-
fend civilians beneath global and no n-international armed conflict. The tasks of
State navy forces toward civilians in struggle zones are much less clear under In-
ternational law.8
Under Protocol I, Article 58 provides that parties to the combat shall to
the most extent feasible, without prejudice to Article forty -nine of the Fourth
Convention, endeavor to do away with the civilian population, character civilians
4 Ibid.
5 Ibid.
6 Ibid.
7 Ibid.
8 Idem , p. 9.
Dynami c Ele ments in the Contemporary Business Law 83
and civilian objects beneath their manipulate from the neighbourhood of army
objectives. Take the different necessary precautions to guard the civilian popula-
tion, individual civilians and civilian objects under their control against the dan-
gers ensuing from army operations.
The obstacle with this provision is that Article fifty-eight used to be
meant to tackle the responsibilities of a State Party in its own territory closer
to its very own nations, or in the case of territory below its control toward the ci-
vilian population. We need to question whether or not the terminology of Arti-
cle 58 is huge sufficient to prolong to situations where civilians accompany
army forces are inside warfare zones.9
The terms of ‘maximum extent feasible’ in Article fifty-eight is sizeable
and suggests that elements of military necessity can be factored in when se lec-
tions are taken involving the extent of the safety that civilians should be af-
forded. It is suggested that possibly a whole withdrawal of positive individual ci-
vilians who are regarded quintessential to the navy effort might also now not be
required in all instances.
A nation that is a Party to the Geneva Conventions, but has not ratified
the Additional Protocol, is no longer sure through the definition of mercenary in
Article 47. While the global community has agreed to the authentic Geneva Con-
ventions, not all countries have agreed to these Additional Protocols, in spite
of their e-book over thirty years ago. For example, the United States protested the
Article 47 provisions on mercenaries, refusing to apprehend the definition, or ac-
cept the Additional Protocols. Therefore Article forty seven is not a sturdy reflec-
tion of ordinary worldwide law, because even after thirty years, not all of the par-
ties to the Geneva Convention have accepted the Additional Protocol that con-
tains Article 47 ideas of common g lobal law (“CIL”) canal so be observed
through evaluating felony systems global and searching for indispensable
trends).10
The search for common international law now turns to worldwide assist
for the U.N. Convention. Only those international locations that sign the U.N.
Convention are bound by way of it, so that definition solely without delay applies
to activities in the signatory countries. However, the U.N. Convention has gar-
nered even much less help than Article 47: it has taken decades to come into ef-
fect, and some distance fewer states have signed the Convention than ratified Ar-
ticle 47.
The lack of world vast aid for Article 47 and the U.N. Convention
demonstrates that they do not mirror the generic international law of nations.
Therefore, it is misle ading to claim PMCs are not “mercenaries” certainly due to
9 Ibid.
10 Scheimer, M ., Separati ng Private Military Companies From Illegal Mercenaries in International
Law: Proposing an International Convention for Legitimate Military and Security Support the
Reflects Customary International Law , „American University International Law Review ”, vol. 24,
issue 3, 2009, p. 632 .
Dynami c Ele ments in the Contemporary Business Law 84
the fact they do no longer fall below the Article 47 and U.N. Convention defini-
tions, when these definitions are now not even typical by all countries as global
law.11
The limiting results of the re strictive definitions of Article 47 and the
U.N. Convention frustrates the view of the worldwide neighborhood that states
continue the authority to use PMCs for particular duties in the same way that aux-
iliary groups have been permissibly used for thousand s of years. Examining
worldwide practice, it is clear that many states hire PMCs, however at the equal
time profess to discourage or even outlaw mercenaries. States worldwide con-
tinue to searching for reputable navy help from PMCs, such as states that
strongly adversarial to mercenaries in the past.12
The distinguishing issue is that the mercenaries in the 1960s, that gave
upward jostle to the Article forty -seven and U.N. Convention definitions, have
been a from the “freebooter,” an worldwide criminal that d oes not obey the laws
of war, Geneva Conventions, and International Declaration of Human Rights and
Freedoms.
The everyday fashion of home laws across the world demonstrates that
states keep prison authority for the use of violence, and PMCs are only reput able
actors when licensed by a state. A quantity of states have laws proscribing
their residents from serving as mercenaries abroad, and prohibiting the recruit-
ment of mercenaries on their territory.13
The modem upward thrust of PMCs coincided with the quit of the Cold
War and the ensuing "surplus of pretty trained, expert soldiers in search of em-
ployment opportunities. As unemployed expert soldiers flooded the market, the
give way of Cold War alliances created an instability that led to extended regional
struggle and extra failed states, which also created an acceptable probability for
unemployed soldiers. A top notch instance of PMC involvement in a n im-
portant struggle earlier than September 11, 2001, was the function of the Ameri-
can PMC, Military Professio nal Resources, Inc. (MPRI), in the Balkans." Some
commentators accredit the successful Croat assault on Serb forces in 1995 to the
MPRI. The movements of the MPRI in the Balkans serve as an instance of how
a PMC's domestic nation might also tacitly aid PMC action overseas in order
to improve its overseas coverage objectives.14
3. Particular aspects
11 Idem , p. 633 .
12 Ibid.
13 Ibid.
14 Irvin G., Rething the role and regulation of private military companies. What the United States
and Unioted Kingdom can learn from shared experiences in thw war on terror , „University of
Georgia Journal of International and Comparative Law ”, vol. 39, no. 2, 2011 , p. 451 .
Dynami c Ele ments in the Contemporary Business Law 85
There are three motives a kingdom would possibly use a PMC to simi-
larly its foreign policy.
First, "the state's armed forces could be overstretched", two second, "the
[PMC] ought to be in a role to provide the protection offerings extra cost effi-
ciently than the state's armed forces" and finally, "the [PMC] can also have desir-
able contacts inside the retaining/deploying government". Although the motives
for the proliferation of PMCs are greater complicated than the three factors
stated above, some mixture of these factors probably explains the amplify in the
use of PMCs with the aid of both the United States and the United Kingdom in
Iraq and Afghanistan.15
Generally, there are two different categories of actors related with the
PMCs; particularly mercenaries and the private protection companies. However,
there is regularly confusion between the that means of every of these terms.
These categories are mention ed below16.
Mercenaries are man or woman warring parties’ warfare in overseas con-
flicts for financial gain. Most attention to mercenaries was drawn with the aid
of their use towards country wide liberation actions in the course of the early
post-colonial Afr ica period, and they are nevertheless conventional these days in
many conflicts. Hired for their apparent military supremacy, a relatively
small mercenary pressure could pose a serious threat to an emerging newly -inde-
pendent state.17
Private military compan ies are company entities imparting a range of
army offerings to clients. It is predominantly governments that use these services
to make a military impact on a given conflict. Examples consist of MPRI from
the US and Sandline International from the UK Serv ices encompass
fight and combat related functions.18
Private securitycompanies are similar to private army companies but su-
pply protective safety services to shield humans and property. Examples consist
of DSL (part of Armour Group) from the UK and Wackenh ut from the US. They
are used by using multinational agencies in the mining an d aid sector, and by
global and humanitarian agencies in combat and unstable areas. Private protec-
tion groups are in idea distinct from personal army companies in that they are
typically unarmed and are concerned with the protection of property and person-
nel, instead than having a n army affect on a conflict in a given situation.
However, this is a blurred line as some businesses display characteristics
of both kinds of organizati ons via being worried in each safety and PMC -related
activities19.
15 Ibid.
16 Gulam H., The rise and rise of Private Military Companies’ , Peace Operations Tr aining Institute
2002, p 8.
17 Ibid.
18 Ibid.
19 Ibid.
Dynami c Ele ments in the Contemporary Business Law 86
The next essential legal regime to deal with mercenaries used to be set
up via the 1949 Geneva Conventions. Its intent was once to trend prerequisites of
truthful therapy of prisoners of combat (PWs) and set up ideal activities in armed
conflict. As lengthy as mercenaries had been section of a legally described armed
force, they have been entitled to PW protection. PW protection furnished an es-
sential status, as it ascribed extraordinary safety and treatment, inclusive of im-
munity from prosecution for normal acts of war.20
In 1968, the U.N. surpassed a resolution condemning the use of merce-
naries towards movements of country wide liberation. The resolution was later
codified in the 1970 ‘Decl aration of Principles of International Law Concerning
Friendly Relations and Cooperation amongst States’.
The 1970 Declaration represented an essential transition in international
law, as mercenaries became ‘outlaws’. However, it nonetheless placed the bur-
den of enforcement completely on nation regimes, failing to take into account
that they have been regularly unwilling, unable, or simply bored to death in the
task.
The 1977 First Additional Protocol to the Geneva Conventions did no
longer legislate toward s mercenary activity, but instead stated the existence and
practice of such people within struggle and sought to define their criminal fame
and codify their standing within the context of worldwide humanitarian law.21
The Additional Protocol contained two precept paragraphs.
Paragraph 1: excluded the mercenary from the category and rights of rec-
ognised combatants and prisoners of war.
Paragraph 2: defined the cumulative and concurrent requirements that
should be met in order to decide who is a mercenary and who is not.
Article 47 described a mercenary as any one who: 22
a) is in particular recruited locally or abroad in order to fight in an armed
conflict;
b) does, in fact, take direct phase in the hostilities;
c) is influenced to take section in the war really by way of the want for
private obtain and, in fact, is promised, by means of or on behalf of a birthday
celebration to the conflict, fabric compensation drastically in extra of that prom-
ised or paid to fighters of comparable ranks and features in the arm ed forces of
that party;
d) is neither a country wide of a birthday celebration to the war nor a res-
ident of territory controlled by a party to the conflict;
e) is no longer a member of the armed forces of a birthday celebration to
the conflict; and
f) has now not been sent by a country which is now not a birthday cele-
bration to the battle on professional obligation as a member of the armed forces.
20 Ibid.
21 Idem , p. 9.
22 Ibid.
Dynami c Ele ments in the Contemporary Business Law 87
It must be cited that this definition is cumulative, i.e. a mercenary is described
as any one to whom all of t he above apply.
A range of governments along with the UK Government viewed this def-
inition as unw orkable for realistic purposes. In particular, it would be challenging
to prove the motivation of any person accused of mercenary activities. Con-
tracts could additionally be drafted so that these employed underneath them
fell backyard the definitions in the Protocol: for example, in its aborted contract
with Papua New Guinea (1997), Sandline International’s personnel were to be
termed ‘Special Constables’ and hence not have been classified as mercenar-
ies because (under (e) above) they would have been contributors of the armed
forces of a birthday party to the conflict. There are additionally cases of over-
seas nationals supplying navy services who have been grante d or have ap-
plied for nearby citizenship with the impact that they should no longer be de-
scribed as mercenaries.
As mentioned Article 47 defines a mercenary as any man or woman who
satisfies the cumulative and concurrent requirements. The explanatory re-
marks within the framework of the Additional Protocol highlight exceptions to
the necessities contained inside the subparagraphs.
These exceptions enable a broader interpretation of the cumulative re-
quirements but additionally a potential with which to legal ly nullify the applica-
bility of some of the obligatory requirements.
Subparagraph 2(a) excludes volunteers who enter service on a permanent
or longlasting groundwork in a foreign army, irrespective of whether as an in
simple terms man or woman enlistment (i.e. participants of the French Foreign
Legion) or on arrangement made by using countrywide authorities (i.e. Swiss
Guards of the Vatican and Nepalese Ghurkhas used by using India and the UK).
For example, some Islamic Fundamentalists lift out what they agree with to be
Allah's will by using travelling to useful resource struggling Islamic opponents in
differentâ nations, as was the case at some stage in the Soviet Union's occupation
of Afghanistan.
Subparagraph 2(b) excludes overseas advisors and navy technicians
even when their presence was motivated by means of economic gain. This big
difference was included to realise the very technical nature of contemporary
weapons and help systems that might also necessitate the presence of such per-
sons for their op eration and maintenance. ‘As long as these men and women do
no longer take any direct phase in hostilities, they are neither combatants nor
mercenaries, however civilians who do now not participate in combat.’
As the Cold War wound down, PMCs and private s afety businesses
(“PSCs”) arrived on the world scene.23
Commentators vicinity such agencies on a scale ranging from true armed
23 Idem, p. 10.
Dynami c Ele ments in the Contemporary Business Law 88
combat support to guide roles, security, and logistical support. PMCs are busi-
ness entities with a certainly described business shape and they overtly compete
on the international market to supply offerings to states, different multinational
corporations, global institutions, and even non -governmental organizations
(“NGOs”).
In 1976, the British government conducted an investigation into the po-
sition of British combatants in Angola, and concluded that present home legal
guidelines on mercenaries were ineffective. 35 Decades later, the British govern-
ment in addition examined the role of PMCs throughout a series of hearings be-
fore the H ouse of Commons Foreign Affairs Committee. Although the Hearings
Report proposed selections for regulating PMCs, none of them have come to
be law. South Africa is notable for being the solely state with a vast regula-
tion regulating foreign military help South Africa’s regulation on mercenaries
covers some distance greater things to do than the international definitions,
which center of attention solely on military conflict. The South African stat-
ute clearly outlaws mercenary endeavor and makes use of a more traditional,
simplified definition of a mercenary in lieu of the difficult Article forty -seven and
Convention language. At the identical time the South African regulation has
a huge “foreign army assistance” definition, which covers a range of activi-
ties that PMCs usually engage in, and requires government approval to engage in
such activities.24
The United States already has laws in vicinity for regulating army ser-
vices furnished to overseas entities. The United States currently revised the Uni-
form Code of Military Justice (“UCMJ”), which beforehand utilized only to in-
dividuals of the armed forces, to cowl civilians accompanying military forces.
Before this enlargement of the UCMJ’s jurisdiction, contractors working
for the U.S. army were solely guilty to the Military Extraterritorial Jurisdiction
Act (“MEJA”). Since the MEJA and the prolonged UCMJ nonetheless
solely practice to personnel working for the Department of Defense (“DoD”),
these laws fail to capture safety contractors working for different authorities’
agencies, like Blackwater and Unity Resources, who provide armed security for
the U.S. State Department. While the United States may additionally have the po-
tential to prosecute American citizens working for PMCs beneath the UCMJ and
MEJA, U.S. j urisdiction might also not constantly lengthen to overseas nationals
working in Iraq.25
If PMCs can keep away from the definitions of Article 47 and the U.N.
Convention, then it would appear that they are not mercenaries underneath global
law, which would depart their global repute in a battle unclear. However, that
is solely part of the analysis. In addition to treaties, worldwide law also consists
24 Scheimer, M ., op. cit., p. 619.
25 Idem , p. 621.
Dynami c Ele ments in the Contemporary Business Law 89
of the customs and practices arising between states. If regularly occurring world-
wide law covers PMCs, then PMCs cannot break out global accountability
purely due to the fact they do not meet the definitions of mercenaries in Arti-
cle 47 and the U.N. Convention.26
4. The situation in European Union
Since efforts to adjust the non-public army and security indus try center
of attention usually both on controlling the corporations or their services their
definition has caused a lot of discussion. Early research differentiated between
two sorts of companies which still inform the prevailing terminology: ‘private
army companies’ (PMCs) and ‘private security companies’ (PSCs).27
According to this distinction, PMCs denote included companies impart-
ing navy capabilities and aid services, whilst PSCs are businesses providing non –
public safety and danger management.
Since ma ny corporations oppose being conflated with PMCs such as
Sandline International, there have been a range of attempts to redefine these
terms. Most companies insist on labelling themselves PSCs even if they grant
army services, and the ordinary term ‘privat e contractor’ has end up pervasive in
Iraq and Afghanistan.
Despite the absence of a frequent regulatory framework for PMCs/PSCs,
the EU has performed a criticalrole in merchandising countrywide and regional
controls over the provision and export of a number of navy and security services.
It policies and rules fall into three categories. The first class consists of Council
‘Regulations’, such as the Council Regulation (EC) n o. 428 /2009 placing up a
Community regime for the control of exports, transfer, b rokering and transit of
dual-use items, which is immediately applicable to member states. The second
category pertains to Council ‘Common Positions’, binding criminal acts which
have to be applied into countrywide legal guidelines or practices.28
It include s the Council Common Position 2008/944/CFSP, which re-
placed the EU Code of Conduct on Arms Exports, Council Common Position
2003/468/CFSP on the manage of palms brokering, and numerous Common Po-
sitions setting up embargoes on the provision of technical hel p and navy services
to choose nations or individuals. The third class refers to Council ‘Joint Actions’,
i.e. felony acts defining frequent moves such as the Common Foreign and Secu-
rity Policies (CFSP) on two technical assistance associated to weapons of m ass
destruction (WMDs) and to embargoed destinations, and the export of small
hands and light weapons. In addition to these policies the EU Court of Justice has
affirmed EU competence over the legislation of interior safety services under the
26 Idem , p. 632
27 Krahmann, E., Abzhaparova, A., The Regulation of Private Military and Security Services in the
European Union:Current Policies and Future Options, European University Institute, 2010 , p. 10 .
28 Idem , p. 12 .
Dynami c Ele ments in the Contemporary Business Law 90
first pillar.29
In 2000, the EU first set up a Community regime for the export manage
of dual-use objects and technology, i.e. goods with civilian and navy applica-
tions. Since then, the regime has been amended a number of times.
The today's Council Regulation (EC) n o. 428/2009 extends the Commu-
nity regime from the control of exports and transfers to the brokering and transit
of dual -use gadgets listed in the Annex 29.
In rare circumstances the latter may be applicable for PMCs/PSCs due to
the fact the regime accommodat es the export, transfer and brokering of dual -use
goods listed in classes 1 to 9 of the Annex, such as telecommunications and rec-
ords security, sensors and lasers, navigation and avionics, marine technology, and
aerospace and propulsion systems, consisting of dual-use gadgets that might be
bought by using PMCs/PSCs as part of their offerings such as jamming equip-
ment, radio path finding equipment, cryptographic software program and radar
systems.30
5. Conclusions
States have to recognize that contracting PMCs to furnish sure services
does no longer carry their accountability for the consequences of these actions.
This is sincerely the case the place PMCs work as State agents,
There additionally wants to be a clear definition of the duty of States
when i t comes to making sure compliance with global humanitarian law, a pre-
ferred of due diligence. This is all the extra genuine as PMCs work in unstable
battle areas, performing tasks prone to increase in human rights abuses and hu-
manitarian law violations. Moreover, jurisdiction over acts committed by means
of PMCs has to be prolonged to both the exporting and receiving State. There can
be no lawful rules of PMCs if they gain immunity for their acts.
International law wants to take into account the advantages as nicely as
the dangers of using PMCs.
Bibliography
1. Gulam H., The rise and rise of Private Military Companies’, Peace Operations
Training Institute 2002 .
2. Irvin G., Rething the role and regulation of private military companies. What
the United States and Unioted Kingdom can learn from shared experiences in
thw war on terror, „University of Georgia Journal of International and Compar-
ative Law”, vol. 39, no. 2, 2011.
3. Krahmann E., Abzhaparova, A., The Regulation of Private Military and Security
29 Ibid.
30 Ibid.
Dynami c Ele ments in the Contemporary Business Law 91
Services in t he European Union: Current Policies and Future Options, Euro-
pean University Institute, 2010.
4. Scheimer M ., Separating Private Mil itary Companies f rom Illegal Mercenaries
in International Law: Proposing an International Convention for Legitimate
Military and Security Support the Reflects Customary International Law ,
„American University International Law Review”, vol. 24, issue 3, 2009.
5. Tung H., Under International law, what is the legal status of Private Military
Contractors during military occupation and un der, Unite d Nations Peace Keep-
ing Operations?, Peace Operations Training Institute 2005.
INTERNATIONAL BUSINESS LAW
Concept of Charterparty as an International Contract for Engage-
ment of Ship for Transportation of Cargo and Legal Perspective on
Critical Areas of Charterparty for
Avoidance of Disputes
Ph.D. Harsh PATHAK1
"Beware of little expenses; a small leak will sink a great ship.”
Benjamin Franklin
Abstract
In internation al business charterparty is a main legal contract of engaging a
vessel for transportation of cargo. It is a highly important document since it defines the
performance obligations as rights, duties, liabilities, risks, earnings, costs and profits
between th e contracted parties, i.e. the shipowner and the charterer. The proper incor-
poration, interpretation and understanding of charterparty terms is crucial for chartering
business. Therefore, this paper based on the observations of the various judicial author-
ities, emphasis on the main types of charter and deals with usual clauses qua distribution
of the liabilities and expenses between the ship -owner and the charterer. More specifi-
cally, type of the charter, important clauses in the charterparty for suitabilit y of the ves-
sel, its seaworthiness, the avoidance of unjustifiable deviations, the ship’s arrival at the
port, the loading and discharging operations, the delivery of cargo, liabilities, exceptions
to liabilities etc. The instant paper is based on shipping practices followed in accordance
with international and English common laws in pre -to-post fixture in execution of char-
tering process. As chartering is one of the most critical commercial operation under in-
ternational business contracts with significant o perational, financial and legal conse-
quences. The deliberations in this paper is from a contractual and legal perspective to
understand this special purpose contract for better execution and avoidance of disputes.
Keywords: charterparty, shipping, cargo, seaworthiness, voyage, perils.
JEL Classification: K22, K33
1. Introduction: charterparty a contract for vessel to transport cargo
The concept of charterparty is as old as the ter m ship for commercial
purpose. In maritime business the key players handling the cargo across water
bodies are namely, seller of cargo, buyer of cargo, shipper transporter of cargo,
ship owner whose ship is use for transportation of cargo and charterer a m iddle
man who hires the ship from ship -owner and use it for transportation of cargo. A
1 Harsh Pathak – Advocate, Supreme Court of India, dr.harshpathak@gmail.com.
Dynami c Ele ments in the Contemporary Business Law 94
charterparty (sometimes charter -party) is a maritime contract between a “ ship-
owner ” and a “charterer” for the hir e of either a ship for the carriage of passengers
or cargo, or a yacht for pleasure purposes. It means that the charterparty will
clearly and unambiguously set out the rights and responsibilities of the ship owner
and the charterer and any subsequent dispu te between them will be settled in the
court of law or any agreed forum with reference to the agreed terms and condi-
tions as embodied in the charterparty. The name "charterparty" is an anglicisatio n
the French charte partie, or "split paper", i.e. a document written in duplicate so
that each party retains half. Chisholm Hugh, ed.2. The Latin term charta partita is
a back -formation , and not a true etymological source .
A charterparty has been defined in Halsbury, Edn.3, as follows: "A con-
tract by charterparty is a contract by whi ch an entire ship or some principal part
thereof is let to a merchant, who is called the charterer, for the conveyance of
goods on a determined voyage to one or more place, or until the expiration of a
specified period". It will be noticed that an essentia l part of the definition is that
the contract must be for the hiring of an entire ship or some principal part thereof.
Then in the same volume in para. 481 at page 283 it is stated as follows: "It is
usual to specify the name of the ship which is to be cha rtered in the charterparty
and to give her description in detail. The description usually includes statements
as to the nature of the ship, her registered tonnage, her classification at Lloyd's,
her position at the date of the charterparty, and her fitness for the purposes of the
charterer; it may, in addition, specify her carrying capacity and the name of her
master."
It is clear from this passage that the name of the ship is usually specified,
and the importance of doing so is to be seen from the passa ge that follows in
Halsbury which is as follows (p. 284): "Of these statements, those relating to the
name and nature of the ship, to her position at the date of the charterparty, and to
her tarrying capacity are to be regarded as conditions precedent on t he non -fulfil-
ment of which the charterer may t reat the contract as repudiated ". Therefore, be-
fore parties can have a charterparty, there must be (a) the hiring of a ship or some
principal part of a ship, and (b) the ship must be specified. Reliance is, how ever,
placed on a footnote (o) at p. 284 where it is stated as follows: "There seems to
be no direct authority for the proposition that the statement as to the name of the
ship is a condition precedent. The proposition is retained from the previous edi-
tion. It is submitted that the proposition is in accordance with principle, subject
to the qualification that if the parties were agreed as to the identity of the ship an
incorrect statement of her name might be immaterial "4. Now, accepting the law
as stated i n this footnote to be correct, it amounts to this that if the identity of the
2 Chisholm Hugh (ed.), Encyclopedia Britannica 5, 11th ed., Cambridge University Press, 1911, p.
953.
3 Halsbury, Hardinge Stanley G iffard, Earl of, The laws of England, being a complete statement of
the whole law of England , vol. 30, London, Butterworth, 1917, para. 472, p. 273.
4 Idem , p. 284.
Dynami c Ele ments in the Contemporary Business Law 95
ship can be established as having been agreed upon between the parties, it would
not matter whether the name of the ship was given or not given in the char-
terparty5.
2. Classi fication of charterparty
Commonly charterparties can be broadly classified into two kinds,
namely, a) Voyage charter parties and b) Time charter parties. Time charterpar-
ties are also known as charterparties by demise because the ship is leased out to
the charterer for the time being. Whether a charter party is voyage charterparty of
time charterparty depends on the intension of the parties that will be shown in
their contract. There is yet another kind of charterparty known as Port, berth or
dock -charter p arty.
2.1. Voyage charterparty
A voyage charter is a charter under which the ship owner provides a ship
and crew, and places them at the disposal of the charterer for the carriage of cargo
to a designated port, according to Black's Law dictionary. Under a voyage charter
the vessel is let out to the charterer for a specific voyage. The voyage charterer
may lease the entire vessel for a voyage or a series of voyage or may lease only a
part of the vessel (by space charterparty).
The ship owner will be paid freight which will cover its costs, including
fuel and crew, as well as its profit. Legally, freight is a special type of payment,
as the usual ‘rule of set off’ will not apply to it. In voyage charter the set time and
lay time will also be provided for th e loading and discharging operations. If these
operations exceed the permitted lay time, the ship owner will be compensated by
demurrage at the rate set down in the charter. For its part, the ship owner owes
the charter the duty of proceeding with reasonab le dispatch on the charterparty
voyage or voyages, in the case of a consecutive voyage charter6.
A voyage charter differs from time charter in many respects, but primar-
ily in that it is a contract to carry specific goods on a defined voyage or voyages,
the remuneration of the ship owner being a freight calculated on the basis of the
quantity of cargo loaded or carried or sometimes a lump sum freight. A voyage
charterparty usually carries a cancellation clause that gives the charterer the right
to cancel the charter if the ship is not as his disposal at the port of loading at the
specified time. The charterer would have to fix a cancellation date before exer-
cising this right.
5 Sir Alan Abraham Mocatta and Sir Michael J. Mustill and Stewart C. Boyd, Scrutton on Char-
terparties and Bills of Lading , 19th edition, Sweet and Maxwell, 1984, p. 75.
6 Simon Baughen, Shipping Law , 3rd edition, Cavendish Publishing Ltd., 2004, p. 136.
Dynami c Ele ments in the Contemporary Business Law 96
2.2. Time charterparty
A time charterparty is also known as charterparty by dem ise. It is a con-
tract for the hire of a ship or charterparty for a specified period of time; the charter
pays for the bunker fuel, fresh water, port charges etc. in addition to the charter
hire. According to Black’s law dictionary, charter for a specified period, rather
than for a specific task or voyage; a charter under which the ship owner continues
to manage and control the vessel but the charter designates the ports of call and
the cargo carried. Each party bears the expenses related to its functions an d for
any damage it causes. Also termed as catch -time charter7.
A charter by demise operates as a lease of the ship itself, to which the
services of the master and the crew may or may not be superadded. The charterer8
becomes for the time being the owner o f the vessel; the master and crew become
his servants and through them the possession of the ship is in him. Under a charter
not by demise the ship owner agrees with the chartered to render services by his
master and crew to carry the goods that are put on board his ship by or on behalf
of the charterer. In this case it was held that the ownership and also the possession
of the ship remained with the original owner through the master and crew though
the charterer has the temporary right to have his goods lo aded and conveyed in
the vessel.
2.3. Port, berth or dock charterparty
A charterparty that simply states the port at which the ship shall be made
available is called port charterparty. Where the ship is to be made available at the
specified at the speci fied loading spot in a port or dock, it is called berth or dock
charter party. In such a case the obligation of the charterer is to bring the ship at
the specified berth or dock. If that place is not in a position to receive the ship
due to some congestion or some other cause, the waiting period would go to the
ship owners account. In the case of a port charter party, it is enough for the ship
owner to bring the ship to the area of the port where ships usually wait for berth
and from where it can be put at charterer. Such area is designated as the commer-
cial area of the port. There have been difficulties in identifying the commercial
areas of a port. But the house of lord in cation of cases held that the emphasis has
been not on distance from the loading pla ce but upon the fact that the ship should
be at the disposal of the charterer.
7 [(1905) 1 KB 697].
8 (1985) 2 Ll. Rep 325.
Dynami c Ele ments in the Contemporary Business Law 97
3. Common or usual clauses of charterparty
Like any other contract it is open to the parties to include in a charter
party or contract of affreightment any lawful terms. Ov er the period of time many
such terms have now become more or less stereotyped and are known as usual
clauses of a charter party. The use of these laws depends upon its relative im-
portance some of such terms are as under:
3.1. Seaworthiness clause
As pe r this clause as observed by Channell J in McFadden v Blue Star
Line5, that: “A vessel must have that degree of fitness which an ordinary careful
and prudent owner would require his vessel to have at the commencement of her
voyage having regard to all the probable circumstances of it…Would a prudent
owner have required that it (i.e. the defect) should be made good before sending
his ship to sea, had he known of it? If he would, the ship was not seaworthy…”
Accordingly, the essential standard of seaworthines s depends not only upon phys-
ical fit, but also to the nature and age of the ship, the type of the carried cargo,
the manner of voyage envisaged, and all other relative conditions.
It is worth noting that the following examples would amount to unsea-
worthin ess breach of duty9; a) An incompetent crew b) A crew which is insuffi-
ciently instructed or insufficient in numbers c) Out of date charts d) Insufficient
bunkers for the voyage (depends on the type of charterparty) e) Storage which
affects the safety of th e ship f) Deficient systems ashore or on board g) The ab-
sence of documents required by law (including local law) for the satisfactory
completion of the contemplated voyage h) Documents which are not required by
law may not render the ship unseaworthy.
3.2. Ready to load
Charterparty usually contains a statement as the position of the ship ready
to load. In certain circumstances such a statement may become the term of the
contract. Any breach of this term entitles the charter to repudiate the contract. F or
example, in Bentsen v. Taylor sons and Co10, a charterparty dated March 29 de-
scried the ship as now sailed or about to sale to the United Kingdom, and that the
ship after discharging homeward cargo, shall proceed to load. But in fact she
sailed to the Un ited Kingdom on April 23. The parties then entered into corre-
spondence. The ship arrived and the charterers refused to load. The court went on
to hold that the main substance of the contract was the description of the ship as
9 (1893) 2 QB 281.
10 (1893) 2 QB 281.
Dynami c Ele ments in the Contemporary Business Law 98
now sailed or about to sail. T he court then took a look into the subject and went
on to hold that the above said description is not a mere warranty and so the de-
fendants had the right to repudiate the contract. But their correspondence
amounted to waiver such right to repudiate and the y were liable for their freight
subject to their right to recover such damages as they could prove that they had
sustained by reason of the breach of the condition. The court then looked into the
clause that the ship is expected ready to load at a given da te. But the court went
on to hold that this does not mean that the ship must not be in such a position, it
only means that there must be an honest belief, founded on reasonable grounds,
that the ship will be load at that date. But the ship at that was not ready to load
until a long time after wards but a representation was made without any reasona-
ble grounds for making it and this was a breach of condition.
3.3. Fit for voyage
Charter parties usually provide that ship shall be tight, staunch and strong
and every way fitted for the voyage. The court of appeal has admitted in Hong
Kong for Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd11 that it is difficult to
distinguish whether such statements are conditions or mere warranty. In this case
a charterparty prov ided that the ship was in every way fitted for ordinary cargo
services. The experience of the voyage was different as the ship kept breaking
down time to time. Actually, this was due to incompetence and inadequacy of the
engine room staff. But it was held that the statement as to the seaworthiness of
the ship was not a condition and the charterers were restrained from repudiating
the contract.
In Diplock LJ in Bentsen v. Taylor sons & Co12 said that stipulation as to
the sea worthiness of a ship is of comple x nature13. He said that the ship owners
undertaking to tender a seaworthy ship has, a result for numerous decisions as to
what can amount to unseaworthiness, become one of the most complex of con-
tractual undertakings. It embraces obligations with respect t o every part of the
hull and machinery, stores and equipment and the crew itself. It can be broken by
the presence of trivial defects easily and rapidly remediable as well as by defects
which must inevitably result in total loss of the vessel.
3.4. Full a nd complete cargo
Full and complete cargo means that the charterer undertakes to supply
the agreed cargo lest the ship owner may suffer loss of freight. In Heathfield Co
Ltd v. Rodenacher14 the charterer refuses to load more than 2673 tones. But the
11 2 QB 26, EWCA Civ 7,1 All ER 474.
12 (1893) 2 QB 281.
13 (1896) 2 Com Cas 55, CA.
14 (1887) AC 518, at pages 526 -527.
Dynami c Ele ments in the Contemporary Business Law 99
full a nd complete cargo would have been 2950 tones. The court held that the
charterer ought to have loaded full complete cargo and freight was payable ac-
cordingly. In another case, the charterer agreed to load cargo not less than 6500
tones and not exceeding 70 00 tones. The court laid down that the words not less
than 6500 tones was a warranty given by the ship owner to the charterer that much
quantity can be loaded and the words not exceeding 7000 tones was a binding
condition preventing the ship owner from ask ing more quantity than 7000 tones.
In this case the ship owner asked for more than 7000 tones and the charterer were
forced to bring than quantity. He brought that under duress and protest. Now the
ship owner claimed extra freight for that extra quantity. But the ship owner was
not allowed to recover the extra freight for that extra quantity.
The ship owner is also bound to provide sufficient space on board for full
and complete cargo. In Darling v. Recburn15 the ship owner loaded large amount
of bunker coal than what was required for that voyage and this reduced the space
for full and complete cargo which resulted in reducing the cargo. The ship owner
was held liable for the expenses. A clause giving protection to “failure to load”
the cargo will apply only if the loading itself is prevented and not where the party
is unable to bring such goods to the port. Loading can be prevented by strikes,
frosts or other unavoidable accidents. In a decided case the goods could not be
brought to docks due to frost. The Ho use of Lords held the charterer responsible
for the delay in loading as the frost has not prevented the loading but the bringing
of the goods to the docks.
3.5. King’s enemies and restraints of princes
The charter parties usually provide that the ship ow ner would not be lia-
ble in certain events. For example, there would be no liability on events arising
out of act of god or because of national enemies. Such perils or dangers are known
as excepted perils. The words King's enemies mean the enemies of the co untry or
the sovereign of the person who made the bill of lading. All restraints or interrup-
tions made by any lawful authority are considered as Restraints of Princes16. The
dangers from the sea pirates are not included in this category. In a decided case a
ship owner was justified in the nonperformance of a contract which involved the
voyage through turkey. It was obvious that the ship would be seized because of
the war between Turkey and Greece. In this case the war has already been de-
clared but if there w as only a mere speculation that there would be a war, the
charterer cannot be justified if he repudiates the contract. A voyage, which in-
volved the risk of the ship being sunk by the German submarines, was held to be
one that involves the risk of seizure o r capture. If the intervention of the restraint
is due to the negligence of the ship owner, he cannot avail the exception of this
15 (1887) AC 518, at pages 526 -527.
16 (1887) AC 518, at pages 526 -527.
Dynami c Ele ments in the Contemporary Business Law 100
clause.
3.6. Perils of sea
Charter parties also contain an exception in favor of the dangers of the
sea i.e. if the goods ar e lost or damaged on account of a peril of the sea, the ship
owner would not be held liable. The term peril of the sea does not cover every
accident or causality which may occur to the goods in the ship. It must be a peril
of the sea. The natural action of winds and waves is not considered as perils of
sea. There must be some causality, some which could not be foreseen as one of
the incidences of the adventure. For example, the cargo in a ship was damaged
due to the collision of that ship with another ship which according to the House
of Lords was a peril of the sea.
In Hamilton, Fraser & Co v. Pandorf & Co17, rice was shipped under a
charter party which contained the exception for the dangers and accidents of the
seas. During the voyage some rats gnawed a ho le in a pipe on board the ship
which resulted in the seepage of sea water and damaged the rice. Here the rice
was damaged without the neglect of the ship owner or the crew. The court held
that damage was within the exception of perils of sea and the ship o wners were
not held responsible for the loss. In this case if rats directly damaged the rice then
it would have amounted to the neglect of the crew and they won't be getting this
exception because there is no direct relation between sea and this accident. But
here the sea water damaged the rice and this was not a foreseeable accident. Sim-
ilarly, a damage caused by the collision of two vessels due to the negligence of
either of the vessels will not be a peril of sea.
3.7. Bunker clause
A bunker clause stipulates that the charterer shall accept and pay for all
fuel oil in the vessel's bunkers at port of delivery and conversely, (owners) shall
pay for all fuel oil in the vessel's bunkers at port of re -delivery at current price at
the respective ports. It is customary to agree upon a certain minimum and maxi-
mum quantity in bunkers on re -delivery of the vessel. Since the OW Bunker test
case, ship operato rs need to take care to ensure that bunker supply terms are suit-
able.
3.8. Ship clause
Under this clause, the owner of the ship writes clearly that the ship would
be seaworthy at the start of the voyage in every respect, in other words, the ship
would be appropriate to travel to the country for which it is taken.
17 (1995) FJHC 136; Hbc0555d.94s (10 August 1995) .
Dynami c Ele ments in the Contemporary Business Law 101
3.9. Ice clause
An ice clause is inserted in a bill of lading or a charterparty when a vessel
is bound for a port or ports which may be closed to shipping by ice when the
vessel arrives or after the vessel's arrival.
3.10. Lighterage clause
A lighterage clause is inserted into charter -parties which show as port of
discharge any safe port in a certain range, e.g. Havre/Hamburg range.
3.11. Negligence clause
A negligence clause tends to exclude ship owner’s or carrier's liability
for loss or damage resulting from an act, default or neglect of the master, mariner,
pilot or the servants of the carrier in the navigation of maneuvering of a ship, not
resulting, however, from want of due diligence by the owners of the ship or any
of them or by the ship's husband or manager.
3.12. Ready berth clause
A ready berth clause is inserted in a charterparty, i.e. a stipulation to the
effect that lay days will begin to count as soon as the vessel has arrived at the port
of loading or discharge "whether in berth or not". It protects shipowner's interests
against delays which arise from ships having to wait for a berth .
4. Persons bound by the charterparty
Apart from the ship owner and charterer, the following persons are bound
by a charter party.
4.1. Part owner of shares in ship
Any part owner of a ship may object to its employment in any particular
way, though such employment is under a charter made by a managing owner. In
such a case that part owner will neither share the profits nor be liable for the losses
of such voyage.
4.2. P urchaser
The purchaser or assignee of a partial interest in a ship under charter is
Dynami c Ele ments in the Contemporary Business Law 102
bound by the charter in existence, but is not liable for expenses or losses on char-
ters that were completed before his purchase.
4.3. Mortgagor or mortgagee
A mortgager in possession has by statute the powers of an ordinary
owner, except that he must not materially impair the value of the mortgagee's
security. Any charter that does not impair his security therefore binds the mort-
gagee out of possession, and the burden of proving that a charter is of such a
nature is on him. But the mortgagee is not bound by a charter, entered into by the
mortgagor after the mortgagee, which does impair the mortgagee's security – e.g.
a charter to carry contraband of war to a port of a belli gerent power at a time
when insurance against the risk of capture is impossible.
4.4. Insurer or underwriter
An underwriter on a ship, by acceptance of notice of abandonment of a
ship, becomes entitled to freight earned by her subsequently but does not b ecome
entitled to the benefits or liable to the obligations of any pending contract of af-
freightment.
5. Leading cases on charterparty
5.1. On scope of injunctive relief for forfeiture of vessel in a dispute. In
Karim’s Ltd v Feeders Seafood Ltd18. That, the equitable injunctive relief against
forfeiture is narrow in scope. In the case of a charterparty the withdrawal of the
vessel is not truly a forfeiture because the charter transfers no interest in the vessel
to the charterer but is merely a contract of service.19
The plaintiff chartered a vessel from the defendant. There was a disagree-
ment on the contract and the defendant withdrew the vessel. The defendant sued
for breach of contract. Among other complaints, the defendant claimed that the
plaintiff had not insured the vessel and was behind in its monthly payments re-
quired by the charterparty. The plaintiff counter sued for damages and losses re-
sulting from the breach of contract and forfeiture of the vessel. The plaintiff (char-
terer) in this proceeding a pplied to the court for an injunction to restrain the de-
fendant from selling, leasing or chartering the vessel, or for an order for immedi-
ate return of the vessel to the plaintiff pending the hearing between the parties on
the breach of contract action.
The Hon ’ble court dismissed the application holding that the equitable
injunctive relief against forfeiture is narrow in scope. In the case of a charterparty
18 http://www.paclii.org/fj/cases/FJHC/1995/136.html, consulted on 1.10.2019.
19 (1965) PGSC 23; [1965 -66] PNGLR 213 (17 April 1966) .
Dynami c Ele ments in the Contemporary Business Law 103
the withdrawal of the vessel is not truly a forfeiture because the charter transfers
no interest in the vessel to the charterer but is merely a contract of service. As
such, the plaintiff has suffered only the loss of a contractual right and that alone
is not enough to raise an equity in the plaintiff’s favor. To grant an injunction
prohibiting withdraw al would be tantamount to an order for specific performance
which is generally refused in contract. The plaintiff had failed to ensure the vessel
as provided by the contract. That constituted a breach so serious that withdrawal
of the vessel was the only w ay that the defendant could protect its position from
substantial losses.
5.2. On damages in case of withdrawal of vessel. In Karlander v Eriama
Shipping Co. Ltd.20 it was held that withdrawal of vessel for breach of contract
by charterer -charterer’s defaul t- damages are difference between lost hire less
profits earned after withdrawal.
In this case the plaintiff vessel owner sought arrears under a charterparty
as well as damages for breach of the charter. The defendant charterer had failed
to make advance payments for hire as agreed in the charterparty. The plaintiff
withdrew the vessel from the service of the defendant. It attempted, but failed to
find alternate charters for the vessel but arranged voyages for the vessel until it
was sold. The plaintiff c laimed to be entitled to damages being the difference
between the hire as provided in the charterparty less the profits earned after its
withdrawal up until the sale of the vessel. The plaintiff’s claim was allowed, hold-
ing that the clause which entitles t he ship owner to withdraw the ship on default
by the charterer on the payment for hire cannot be treated as cutting down the
right of the owner to treat the contract at an end, and to recover damages based
on the charterer’s repudiation of the charter. The plaintiff had lost the benefit of
the hire for the remaining period of the charterparty and was therefore entitled to
the difference between hire less the profits earned after the withdrawal.
5.3. On implied warranty by ship owner for seaworthiness in National
Trading Corporation Ltd v Huggett21 held that implied warranty of seaworthiness
at the commencement of the voyage boat owner must indemnify charterer for
repairs.
In this case the first defendant, the charterer was held to be liable to the
plaintiff for the repairs to the boat engine. The first defendant was to be indemni-
fied by the 2d defendant, the owner of the vessel. The 2d defendant appealed the
findings. The vessel ’s engine had broken down and had to be towed in while on
the charter. While rejec ting the appeal the court held that the ordinary rule is that
there is an implied warranty that the ship is seaworthy at the commencement of
the voyage. There was nothing in the charter to exclude or limit this rule. The
fault in the engine which caused th e breakdown existed when the vessel started
and therefore the vessel was not seaworthy for the voyage22.
20 http://www.paclii.org/pg/cases/PGSC/1965/23.html, co nsulted on 1.10.2019.
21 http://www.paclii.org/fj/cases/FJHC/1999/6.html, consulted on 1.10.2019.
22 (1999) FJHC 6; Hba0011j.98s (19 February 1999) .
Dynami c Ele ments in the Contemporary Business Law 104
5.4. On withdrawal of vessel due to breach of charterparty in Premier
Makira/Ulawa Province v Un iversal Graphics & Designs Ltd23 held that with-
drawal of vessel for breach of contract non punctual payment of hire fees may be
excused where the charterer has a counterclaim against the owner of the vessel –
interlocutory withdrawal of vessel not granted until rights determined.
The plaintiff had filed a writ of summons claiming that the defendant was
in arrears of hire fees for the vessel for 2 ½ months accruing in a charterparty.
The plaintiff sought the fees owing and return of the vessel. The defendant coun-
ter claimed for money owed by the plaintiff to the de fendant for spare parts and
mechanical work done at the beginning of an earlier charter. The sum claimed by
the defendant exceeded the accrued arrears under the charterparty. Before the ac-
tion was heard, the plaintiff sought interlocutory relief in the for m of orders to
prevent the defendant from removing the vessel from Honiara, and the return of
the vessel.
In this matter interlocutory injunction refused holding that the primary
purpose of an interlocutory injunction is to preserve the status quo until r ights
have been determined in the case. The court must consider if monetary damages
will be adequate compensation in the event that the plaintiff’s interlocutory relief
is refused and the plaintiff succeeds in obtaining a final permanent injunction; or
if the interlocutory relief is granted and the defendant succeeds at final determi-
nation. The court found that the charterer has leeway to pay off the default arrears
before the owner withdraws the ship under the charterparty, and the defendant’s
counterclaim may qualify for the ‘special circumstances’ where the nonpunctual
payment of hire may be excused.24
5.5. On no onus of shipowner for illegal fishing by charterparty in State
v Hung Kuo Hui25, held that Charterer guilty of illegal fishing – vessel forfeited
with no requirement to name owner as party.
The defendant company was Fijian owned and operated. The defendant
company and captain were found guilty of illegal fishing in Fijian territorial wa-
ters. The state sought forfeiture of the vessel as part the pena lty. The vessel was
chartered from a company in Taiwan. In this case order for forfeiture granted,
holding that the court found that the illegal fishing was blatant and repeated in
spite of warnings. The penalties were meant to be harsh. It was not necessa ry to
add the owner of the vessel as a party. Owners and charterers should be aware of
the law and the penalties.
5.6. On court’s no jurisdiction on ship owner for pollution in bareboat
charter, in Yap v MV Cecilia26 I held that pollution offences alleged a gainst char-
terer and owner of vessel, court gains no personal jurisdiction over vessel owner
on basis of bareboat charter.
23 (1996) SBHC 18; HC -CC 107 of 1996 (15 April 1996) .
24 (2006) FJHC 113; HAC40.2004 (24 February 2006).
25 (2006) FJHC 113; HAC40.2004 (24 February 2006).
26 (2005) FMSC 41; 13 FSM Intrm. 403 (Yap 2005) (19 September 2005) .
Dynami c Ele ments in the Contemporary Business Law 105
In this case there were five causes of action all based on a central allega-
tion that the vessel had on numerous occasions discharged petroleum -based ef-
fluent. The vessel was under a bareboat charter between the defendant owner and
the defendant charterer. The defendant owner served a motion to dismiss for lack
of personal jurisdiction on the basis that he had no control over the vessel and he
lacked the minimum contacts with the forum sufficient to subject to the court’s
jurisdiction.
In this case motion was granted by the court holding that under a demise
or bareboat charter the charterer takes complete control of the vessel, mans it with
its own crew and is treated by law as its legal owner. The charterer is potentially
liable for collision, personal injury to master, crew and third parties, pollution
damages, and for the loss or damage to the chartered vessel. Vessel owners nor-
mally have no personal liability but the vessel may be liable in rem. As such, the
existence of the bareboat charter did not bring the owner into the court’s jurisdic-
tion either on the basis of ‘doing business’ provision of the long arm statute, or
under the pro vision based on the operation of the vessel within territorial waters.27
5.7. On supply of bunkers in RES COGITANS OW Bunker Group28,
Judgement Portal, where the Supreme Court upheld the decision of the court of
appeal that, despite its references to buyers and sellers, OW Bunker’s standard
contract was not a contract of sale, but a permit for the owners of the " RES COG-
ITANS" to consume bunkers, even if title had not passed to the OW Bunkers
company, and could not be transferred to the Shipowner. So, the owners of "RES
COGITANS" were found liable to pay the OW Bunkers company at English law,
even if they might also face a valid claim from the physical supplier of the bun-
kers in some other jurisdiction.
5.8. On ship arrest under time charter in NYK Bulkship (Atlantic) NV v
Cargill International SA (The “Global Santosh), NYK Bulkship Atlantic NV v.
Cargill International SA29, held that the "GLOBAL SANTOSH " had been time –
chartered by her owners to Cargill, with a series of further charterers beyond Car-
gill. The time charter, on NYPE form, held that the ship would be off -hire for
time lost by reason of an arrest, unless the arrest was “occasioned by any personal
act or omission or default of the charterers or their agents”. In December 2008,
the ship was arrested, apparently mistakenly, by one of the receivers of the cargo.
Owners argued that any sub -charterers and their agents were to be considered as
agents of the charterers for the purpose of this clause. The Supreme Court held
that the arresting party was not acting in the role of Cargill’s agents in making
the arrest, or acting on Cargill’s behalf in so doing, and that the ship was off -hire
for the time lost.
5.9. On the effect of a failure to make a hire payment under a time charter
in ASTRA Flaux J gave judgment in Kuwait Rocks Co v AMB Bulkcarriers Inc
27 The UK Supreme Court 2016.
28 SA(2016)UKSC 20.
29 (2013) EWHC 30 (Comm).
Dynami c Ele ments in the Contemporary Business Law 106
(The Astra)30 the Court of appeal resolved a recent controversy about the effect
of a failure to make a hire payment under a time charter. In a High Court decision
in 2013, the " ASTRA ", Fla ux J held that the obligation to make punctual payment
of each instalment of hire was a condition of the charterparty contract, and that
any failure to do this entitled to owners to withdraw from the time charter and to
claim damages. In a 2015 High Court case, Spar Shipping v Grand China Logis-
tics31, Popplewell J disagreed with this, and held that the timely payment of hire
in full was not a condition of the contract. Given the controversy over this point,
an appeal was allowed, and the court of appeal has now held that the ASTRA was
wrongly decided. The Court of Appeal went on to give useful guidance on when
an owner might consider that a charterparty has been repudiated by charterer’s
actions or failures to perform.32
5.10. On Time Charter Trips in WEHR TRA VE SBT Star Bulk & Tank-
ers (Germany) Gmbh & Co KG v Cosmotrade SA33 (The “Wehr Trave”) held that
Time Charter Trips are common in the commercial world, but there is little case
law about such contracts. In May, in the " WEHR TRAVE ", the High Court con-
sidered the question of when a “trip” is a trip, and decided that in this case the
charterers were entitled to make two cargo voyages as part of one trip.
5.11. On the e ffect of the Inter Club Agreement in a time charter YANG-
TZE XING HUA The Yangtze Xing Hua34, held in a dispute about the effect of the
Inter Club Agreement in a time charter, the " YANGTZE XING HUA ", the High
Court held that, where the ICA states that a cargo claim will be borne 100% by
one party to the charter, where “there is clear and irrefutable evidence that the
claim arose out of the act or neglect of the one or the other (including their serv-
ants or sub -contractors)” then the “act” of one party does not necessarily require
any fault of that party or their servant.
5.12. On demurrage accruing on containers trapped in a port in voyage
charters, in MSC v COTTONEX35, held that in a demurrage case, MSC v Cot-
tonex , actually involving demurrage accruing on containers trapped in a port, the
court of appeal seemed reluctant to allow that the c ontract, and the right to accrue
demurrage, could continue indefinitely, and decided that the contracts for carriage
of the containers had been repudiated by a delay which frustrated the commercial
purpose of the venture, such that the contracts, and the r ight to demurrage, auto-
matically came to an end.
5.13. On ship owner’s no obligation for mitigation in D’AMICO SHIP-
PING v ENDOFA, D’Amico Shipping Italia SPA v Endofa DMCC & Anor
30 (2013) EWHC 30 (Comm).
31 (2016) EWCA CIV 982.
32 (2016) CFI 043.
33 (2016) EWHC 583(Comm).
34 (2016) EWHC 3132 (Comm).
35 (2016) EWHC 3132 (Comm).
Dynami c Ele ments in the Contemporary Business Law 107
(2016)36, held that in D’Amico Shipping v Endofa, the High Court decided that
owners claim for an outstanding balance of freight was a claim for a debt owed,
not a claim for damages, so that the owners were not under any obligation to
mitigat e their loss.
5.14. On the issue of onus to prove in case of negligence of cargo in car-
riage of goods by sea matters. In the case Volcafe v CSAV37 held that the claims
by Volcafe and other coffee merchants against container line CSAV were for a
sum of only $62,500 and the legal costs involved have probably greatly exceeded
the sum in dispute. The case has brought some clarity to English law with respect
to the application of The Hague -Visby Rules. Bags of coffee, in containers, had
been shipped, clean on boa rd but arrived with condensation damage. The High
Court had held that the onus was on the carrier to prove that they had not been
negligent in the carriage, and the carrier could not do so. The Court of appeal held
that, once the carrier had established a prima facie case that the damage was due
to inherent vice (one of that Art. IV rule 2 exceptions), then the burden shifted to
the cargo claimant, who had to prove negligence of the carrier. On the facts of
this claim, the court held that the damage to the coffee was due to inherent vice,
and the carrier’s appeal against the High Court decision was allowed.
5.15. On the application of Hague Rules on limitation in the AQASIA38
matter in October 2016, the High Court decided that the package limitation of the
Hague Rules does not apply to bulk cargoes, although the Hague -Visby rules do
have a provision allowing for limitation per package or per kilogram of gross
weight, whichever is higher.
5.16. On application of Hague -Visby rules in place of Hague Rules in
case of disputes pertain to Bill Of Lading in Yemgas FZCO & Ors v Superior
Pescadores39. In the SUPERIOR PESCADORES , the Court of appeal held th at
parties to the carriage of goods covered by a conger bill of lading were subject to
the limitations of the Hague -Visby Rules, and not the Hague Rules.
5.17. On the issue of the ransom payment was allowed as a General Av-
erage expense in the " LONGCHAMP " was captured by pirates in the Gulf of
Aden, and after a period of negotiation a ransom of US $ 1.85 million was agreed
and paid to release the vessel and her crew. The ransom payment was allowed as
a General Average expense and cargo interests paid their share. However, cargo
interests did not agree that the Owner’s cost of crew wages, bonuses, maintenance
and the bunkers consumed during the detention were GA expenses. The High
Court agreed these costs were GA expenses under Rule F of YAR 1974 and had
“no doubt” that the expenditure was incurred in substitute for a higher ransom
payment. The Court of Appeal also agreed because there was no alt ernative
36 (2016) CFI 043.
37 (2016) EWCA Civ 1103. https://www.steamshipmutual.com/publications/Articles/burdenof
proof1116.htm , consulted on 1.10.2019.
38 (2016) CC UK.
39 (2016) EWCA Civ 101.
Dynami c Ele ments in the Contemporary Business Law 108
course of action open to Owners.40
5.18. The burden of proof in seeking to break limitation under The Con-
vention on Limitation of Liability for Maritime Claims 1976 (as amended by the
1996 Protocol) lies on the party in Kairos Shipping Limited and others v Enja &
Co LLC and others (The “Atlantik Confidence”) held that the burden of proof in
seeking to break limitation under The Convention on Limitation of Liability for
Maritime Claims 1976 (as amended by the 1996 Protocol) lies on the party seek-
ing to do so, and is a heavy one because of the nature of the conduct which must
be proved. In the " ATLANTIK CONFIDENCE ", the vessel sank in deep water
and could n ot be inspected with a view to determining the cause of the fire or the
cause of the sinking. The decision does not suggest any weakening of the test to
deny limitation.41
6. Conclusion
The term "charterparty" stands for the contract between the owner of a
vessel and the charterer, which is the one that takes over the vessel for a certain
amount of time or voyage. When there is an agreement or contract to carry some
goods or provide a ship for carrying the same, a document called charterparty
contains the contract of affreightment. By this document the ship owner lets the
ship for the purpose of carrying the cargo or undertakes to carry the full cargo on
the ship on voyage or time basis. The contract of affreightment may be either in
the form of bill of lad ing or charterparty. A bill of lading is a pure and simple
contract to carry the goods whereas a charterparty involves the complete hiring
of the ship itself. In simple terms, if a ship is booked by a shipper for his exclusive
use for a voyage or a for cer tain period of time, that is called a charterparty.
As defined in the Black's Law Dictionary, a charterparty means a contract
by which a ship or a principal part of it, is led by the owner especially to a mer-
chant for the conveyance of goods on a predeterm ined voyage to one or more
places; a special contract between the ship owner and charters, especially for the
carriage of goods etc. and this contract is governed by the various mutually agreed
upon clauses related to vessel, cargo capacity, seaworthiness, port , dock and
berth clauses, act of god, act of government, cost and damage calculation etc.
Therefore, considering the importance of transportation of goods by sea, char-
terparty is an essential document for the effective and efficacious movement of
goods by sea. Various judicial pronouncement over the period of time has given
sufficient explanation to the usual clauses of charterparty. Hence, it is essential
that the parties engaged in this business properly deliberate on the clauses of the
charter part y considering over all facts and circumstances along with international
laws and interpretation given by the judicial authorities before entering into it the
40 (2014) EWCA Civ 217.
41 (2014) EWCA Civ 217.
Dynami c Ele ments in the Contemporary Business Law 109
contract of Charterparty, so that ambiguity in the contract is avoided and hassle
free execution o f the chart party in the best interest of all the parties be achieved.
“It is not the going out of port, but the coming in, that determines the suc-
cess of a voyage. ”
Henry Ward Beecher
Bibliography
1. Chisholm Hugh (ed.), Encyclopedia Britannica 5, 11th ed., Cambridge Univer-
sity Press, 1911.
2. Halsbury, Hardinge Stanley Giffard, Earl of, The laws of England, being a com-
plete statement of the whole law of England , vol. 30, London, Butterworth, 1917.
3. Simon Baughen, Shipping Law , 3rd edition, Cavendish Publishing Ltd., 2004.
4. Sir Alan Abraham Mocatta and Sir Michael J. Mustill and Stewart C. Boyd,
Scrutton on Charterparties and Bills of Lading , 19th edition, Sweet and Maxwell,
1984.
Cross – Border Merger. Analysis of Comparative Law
Professor Silvia Lucia CRISTEA1
PhD. student Viorel BĂNULESCU2
Abstract
The study presents some considerations regarding the merger of companies
(section 1.1), then includes the union provisions in the matter of mergers (section 1.2),
the Romanian regulation in the matter (section 1.3) and the comparative analysis of the
Romanian regulation with the European Union one, with proposals de lege ferenda (sec-
tion .2).
Keywords: cross -border merger, European Directive, absorbing company, ab-
sorbed company, creditors.
JEL Classification: K22, K33
1. Introductory consideration s
Some of the most important changes to the internal regulations on mer-
gers took place as a result of the transposition of European norms, which aimed
to uniformize the European market and to create a favorable context for cross –
border mergers. Moreover, the European merger directives aimed to ensure the
protection of shareholders and third parties against the effects of the mergers,
with the European legislator initially focusing on the uniformization of internal
legal frameworks and subsequently on cross -border mergers.
1.1. Union provisions on the matter
The creation of a uniform legal framework in the national law of the
Member States for the realization of mergers between companies was achieved
by the introduction of the 3rd Directive no.78/855/C.E.E .3, in 1978. The third Di-
rective of the Council was applicable only in case of joint stock companies and
contained provisions regarding the organization of the merger, the procedure for
achieving the merger by absorption, the particular case of the merger by absorp-
tion, when the absorbing company holds more than 90% of the shares of the ab-
sorbed company, the procedure for the realization of the merger by establishing
1 Silvia Lucia Cristea – Department of Law, Bucharest University of Economic Studies, Romania,
silvia_drept@yahoo.com.
2 Viorel B ănulescu – Bucharest University of Economic Studies, Romania, viorel_banulescu@
yahoo.co.uk
3 Directive no. 78/855/C.E.E. regarding the merger of anonymous societies, JO L 295, 20.10.1978,
p. 36.
Dynami c Ele ments in the Contemporary Business Law 111
a new company and provisions regarding the operations assimilated to the mer-
ger. The Direct ive was repealed, but its content was taken over in Directive
2011/35/EU, the main regulatory framework for the merger of joint stock com-
panies.
The purpose of this directive is to protect the interests of associates and
third parties and imposes certain o bligations, including informing as appropriate
and as objective as possible the shareholders of the merging companies, so that
their rights are adequately protected.
Thus, Article 54 of Directive 2011/35/EU explicitly provides the mini-
mum content of the me rger project, while Article 75 regulates the conditions un-
der which the vote in the General Assembly may be exercised for such an opera-
tion, thus ensuring that a fair allocation of voting rights takes place, the allocation
established according to the cate gories of existing shareholders.
The Directive also contains provisions relating to the advertising condi-
tions for the merger project and requires the adoption of measures to protect cred-
itors. Directive 2011/35/EU6 is of particular importance also because it aims to
limit the cases of nullity of the merger operations. Thus, Article 22 provides the
possibility of covering the irregularities whenever possible and restricts the term
in which the invalidity can be invoked, to 6 months from the date when the me rger
is opposed to the person invoking the nullity or if the situation has been rectified.
The regulation provided in Directive 2011/35/EU is complemented by
4 According to which: “The administrative or management bodies of the merging companies shall
draw up a merger draft in writing.” (2) The merger project shall mention at least the following: (a)
the legal form, name and registered office of the merging companies; (b) the exchange rate of the
shares and the amou nt of any cash payments; (c) the conditions for the allocation of shares to the
absorbing company; (d) the date from which the holding of such shares confers on the shareholders
the right to participate in benefits, as well as any special conditions affect ing that right; EN
29.4.2011 Official Journal of the European Union L 110/3; (e) the date from which the transactions
of the absorbed company are considered from the accounting point of view as belonging to the
absorbing company; (f) the rights granted by the absorbing company to the holders of shares
conferring special rights and to the holders of securities other than shares or the measures proposed
in respect thereof; (g) any special advantage granted to the experts referred to in Article 10 (1) and
to the members of the administrative, management, supervisory and control bodies of the merging
companies."
5 According to which, “For a merger, at least the approval of the General Assembly of each of the
merging companies is required. The laws of the Member States provide that a majority of at least
two thirds of the votes for the shares or subscribed capital represented is required for the approval
decision in question. However, the laws of the Member States may provide that a simple majority
of the votes in dicated in the first paragraph is sufficient, if at least half of the share capital is
represented. In addition, if applicable, the rules regarding the change of status apply; (2) If there
are several categories of shares, the decision on the merger shall be subject to a separate vote at
least for each category of shareholders whose rights are affected by the transaction; (3) The decision
concerns both the approval of the merger project, as well as any modification of the statute,
necessary for the realizat ion of the merger.”
6 Directive 2011/35/EU of the European Parliament and of the Council of 5 April 2011 on mergers
of Companies by shares, OJ L 110/29.4.2011.
Dynami c Ele ments in the Contemporary Business Law 112
other directives, in particular by Directive 2011/23/C.E. on the protection of em-
ployees' rights7 and Directive 2009/109/C.E. on reporting obligations and the
drafting of the necessary documentation in the case of mergers8, which aim to
reduce the volume of activities relating to the information obligations of the com-
panies involved in the merger, so t hat these obligations do not represent a real
barrier to the realization of the merger. It is intended at the same time to ensure
that the interests of creditors, shareholders and other interested parties are pro-
tected.
In this regard, we specify that Dire ctive 2009/109/C.E. provides the pos-
sibility for participating companies to publish the required information on their
websites, so that the process is streamlined and the costs related to the information
activity are reduced.
Even if the EU focused its att ention on the merger operation early on, the
possibility for companies from different Member States to merge would be regu-
lated only from 2005. Previously, European Union law did not provide a clear
and structured framework for achieving cross -border merge rs, this possibility be-
ing provided only in the form of intra -union mergers regulated by the Regulation9
2157/2001.
According to the provisions contained in this Regulation, the merger
could be carried out between at least two companies registered in two d ifferent
Member States, in the form of setting up a European Company (E.S.). The crea-
tion of a European Society was possible either through a merger operation or by
transforming the absorbing society into a European Society. In 2005, after a long
process, the first directive regulating this matter appears, namely Directive
2005/5/E.C10. Creating a framework to regulate cross -border mergers was of par-
ticular importance, given the principle of free movement of labor and capital on
the Union market.
The merit o f this first directive was the establishment of a clear frame-
work and procedures for carrying out such a concentration operation outside the
borders of a state. The Directive has been amended by two subsequent normative
acts, Directive 2009/109/C.E., regar ding the obligations of reporting and drawing
up the documentation required in the case of mergers and divisions and Di-
rective11 2012/17/U.E.
7 Directive 2011/23/C.E. regarding the protection of the employees’ rights.
8 Directive No. 109/ 2009 amending Directives 77/91/C.E.E., 78/855/C.E.E. and 82/891/C. E. E. of
the Council and Directive 2005/56/C.E. regarding the reporting and drafting requirements of the
necessary documentation in the case of mergers and Divisions, OJ L 013, 16.1.2002.
9 Council regulation C. E. no. 2157/2001 of 8 October 2001 on the Statute of the European Company
(S.E.).
10 Directive 2005/56/C.E. of the European Parliament and of the Council of 26 October 2005 on
cross -border mergers of companies by shares; Text with relevance for S. E, JOL 310/1, 25.11.2005.
11 Directive 2012/17/U.E., relating to the interconnection of central, trade and company registers,
JOC 248, 25.08.2011.
Dynami c Ele ments in the Contemporary Business Law 113
According to Directive 2005/56/C.E.12, also known as Directive X, cross –
border merger has become possible between an y type of capital company. Such
an operation can be performed within the framework of national law, thus elimi-
nating the limitation of the merger only between the joint stock companies.
1.2. Romanian regulations of the matter
The provisions of Directi ve 2005/56/C.E. were transposed into Roma-
nian law through a series of amendments and completions of Law no. 31/1990,
made by E.O.G.13 no. 52/2008. Regarding the tax regime of mergers, it was es-
tablished by Directive 90/434/C.E.E.14 as amended by Directive 20 05/19/C.E.15
on the tax regime applicable to mergers, divisions, divestments of assets and ex-
changes of shares between companies in different Member States.
The cross -border merger may involve joint stock companies, limited
partnership companies, limited li ability companies, which are Romanian legal
entities, as well as European companies with their registered office in Romania.
They may merge with companies which have their registered office or, as the case
may be, the central administration or the main off ice in other Member States of
the European Union or in countries belonging to the European Economic Area.16
Exempt from applying these regulations are collective investment undertakings
in securities and closed -end investment funds, as well as any other ent ities whose
activity object is the collective placement of resources attracted from the public
and which operate on the principle of risk sharing and whose securities may be
redeemed, directly or indirectly, at the request of the owners, from the assets of
the entity concerned. Cross -border merger is the operation by which:
a) one or more companies, of which at least two are governed by the
12 Directive 2005/56/C.E. of the European Parliament and of the Council of 26 October 2005 on
cross-border mergers of companies by shares., JOL 310, 25.11.2005.
13 Emergency Ordinance no. 52/2008 for the modification and completion of Law no. 31/1990 on
companies and for the completion of Law no. 26/1990 on the Register of Commerce. Published in
the OM . no. 778/20.11.2008.
14 Directive 90/434/C.E.E. of 23 July 1990 on the common tax regime applicable to mergers,
divisions, transfer of assets and exchanges of shares between companies of different Member States,
JOL 225/20.08.1990.
15 Directive 2005/19/C. E . of 17 February 2005 amending Directive 90/434/C.E.E. on the common
tax regime applicable to mergers, divisions, transfer of assets and exchanges of shares between
companies of different Member States, JOL 58/19, 4.03.2005.
16 Cărpenaru St. D., David S., P iperea Gh., Company law. Comment on articles, 5th ed., Ed. CH.
Beck, Bucharest, 2014, p.844; cross -border merger can pose a number of theoretical and practical
problems to the participating companies including the change of the laws applicable to the compa ny
absorbed by a company based in another member state of the EU; in this respect, Cărpenaru St. D.,
Treaty of Romanian commercial law , Ed. Universul Juridic, Bucharest, 2012, p.257. In the sense
that the company legislator deviates from the provisions of the Directive no.205/56/C.E. and tries
to offer a broad definition of the cross -border merger – see Adam I., Savu C.N., The Law of
commercial companies. Comments and explanations , Ed. C.H. Beck, Bucharest, 2010, p. 928 and
Hinescu A., The merger of compani es, Ed. Hamangiu, Bucharest, 2016, p. 157.
Dynami c Ele ments in the Contemporary Business Law 114
legislation of two different Member States, are dissolved without liquidation and
transfer their assets to another alr eady existing company (the absorbing com-
pany), in exchange for the distribution to the shareholders/associates of the ab-
sorbed company shares/ shares and, possibly, a cash payment of up to 10% of the
nominal value of shares/shares so distributed;
b) severa l companies, of which at least two, are governed by the legisla-
tion of two different Member States, are dissolved without liquidation and trans-
fer their assets to a company they constitute (the absorbing company), in ex-
change for the distribution to their shareholders/social shares and, possibly, a cash
payment of up to 10% of the nominal value of the shares/social shares distributed;
c) a company is dissolved without entering into liquidation and transfers
its assets to another company, which owns all its shares/ shares or other titles
conferring voting rights in the General Assembly.
2. Comparative analysis. Proposals de lege ferenda
Analyzing the national and European regulations in the field of cross –
border merger, we observe that the internal norm has a broader regulatory object
by including the joint stock company, limited shareholding, and the European
companies (S.E.) based in Romania. Thus, companies in the member states of the
U.E. participants in the cross -border merger regulated by Law no. 31/19 90 can
wear any form of organization under the conditions in which the companies es-
tablished in Romania cannot be organized as a company in a collective name or
in a simple partnership.
Depending on its method, the merger has the following consequences17:
a) transfer to the absorbent/newly established company of all assets and
liabilities of the company absorbed;
b) shareholders or associations of the company acquired/participating in
the merger become shareholders and associates of the acquiring/newly estab-
lished company in accordance with the rules of allocation established in the draft
merger;
c) the company being absorbed, i.e. societies forming the new company
by merger, ceases to exist.
The rights and obligations of companies absorbed arising from emplo y-
ment relationships and which exist on the date of entry into force of the cross –
border merger shall be transferred to the acquiring or newly established company.
Art. 2516 paragraph (1) of Law 31/1990 stipulates that the joint merger
project, signed by th e representatives of the participating companies, accompa-
nied by a declaration on how the advertising is carried out, is submitted to the
Trade Register Office where the Romanian legal entities are registered and/ or
17 Cărpenaru St. D., David S., Piperea Gh., op. cit ., p. 844.
Dynami c Ele ments in the Contemporary Business Law 115
European companies based in Romania, pa rticipating in the merger18. The dele-
gated judge appoints one or more experts, natural or legal persons, to examine
the joint merger project and has drafted a written report to the shareholders/ as-
sociates19. Art. 2516 paragraph (2) of the Companies Law stip ulates that the del-
egated judge is the one who performs the legality control of the cross -border mer-
ger project, while art. 520 of the E.O. 116/2009 attributes this competence to the
director of O.R.C. We consider that, according to de lege ferenda , it is n ecessary
to agree to these contradictory legal provisions.
Moreover, comparing the provisions of art. 2516 paragraph (1)21 with
those of art. 24222 of the Companies Law, however, we observe that there is an-
other mismatch, this time in terms of content. Thu s, art. 2516 did not faithfully
take over the content of art. 242, which represents the common law in the matter,
regarding the filing of the declaration on how to extinguish the liability of the
company that ceases to exist. We consider that de lege feren da is necessary to
agree on the content of the two articles in order to avoid procedural difficulties.
The creditors of the companies, which take part in the merger, may op-
pose the merger under the conditions of art. 243 of the Companies Law. We also
point out that, besides the independent expert's report, there must also be a written
and detailed report of the governing bodies of the companies participating in the
merger, explaining and justifying the legal and economic aspects of the cross –
border merger a nd which details the implications of the cross -border merger for
18 If the benefit of the cross -border merger is a European company based in Romania, advertising
will be carried out in the Official Journal of the EU.
19 In the sense that the prerogative to design ate the expert who will carry out the report on the draft
merger rests with the Director of the Trade Register office or the person designated with that
competence, see Hinescu A., op. cit. , p. 160; of an exceptional nature according to article 5 of
G.P.O. 116/2009 The control of legality on the cross -border merger is carried out by the Director
of the Trade Register office or by the designated person.
20 In the case of cross -border merger, the tasks of verifying the legality of the procedure followed
by the companies participating in the merger – Romanian legal entities or European companies with
their registered office in Romania – and, if applicable, the newly established company – Romanian
legal person or European company with the registered office in Rom ania – belong to the director of
the trade register office next to the court and/or to the person or persons designated by the general
director of the National Trade Register Office, except for the attributions provided in art. 251^13 and
251^14 of Law no. 31/1990, republished, with the subsequent modifications and completions, which
will be exercised by the court, the commercial section. For the applications within the jurisdiction
of the court's resolution, art. 4 applies accordingly.
21 According to which : "the joint cross -border merger project, signed by the representatives of the
participating companies, is deposited at the Trade Register office where Romanian legal persons
and/or companies are registered. European Union based in Romania, participating i n the merger,
accompanied by a statement on how to publish the draft merger".
22 According to which: "the draft merger or division, signed by the representatives of the
participating companies, shall be lodged at the Trade Register office where each company is
registered, accompanied by a declaration of the company which ceases to exist Following the
merger or division of the manner in which he decided to put an end to his liability, as well as a
statement on how to publish the draft merger or division".
Dynami c Ele ments in the Contemporary Business Law 116
associates23, creditors and employees24. However, by a decision of all the share-
holders/associates of the companies participating in the merger, the merger pro-
ject examination and the report ma y be waived. If the report is made, it must be
made available to the associates and the employees' representatives at least 30
days before the date of the meeting in which the General Assembly is to decide
on the merger. If the company has its own website, the report is also published
on the website, for the free access of shareholders/associates and employees.
An issue requiring a special analysis of the legal regime for the invalidity
of the cross -border merger in Romanian law in relation to the European regulation
and the rules governing the internal merger.
Thus, in accordance with Articles 1725 and 1226 of Directive 2005/56/
C.E., The cross -border merger that becomes effective cannot be declared null and
void. The Romanian legislator regulates this aspect by the provisions of art. 251¹
of the Law of companies no. 31/199027. Analyzing the content of this article, we
observe that the provisions of Article 251 of the Companies Law28, which regu-
late the legal regime of internal merger, are largely taken over. Th us, art.251¹
paragraph (1)29 stipulates expressis verbis the judicial character of the nullity of
the merger, as well as the inadmissibility of introducing the action in finding the
23 Stoica C-F., Cristea S., Business law. Topics and contracts ., Ed. A.S.E., Bucharest, 2011, p. 157.
24 Gheorghe C., Romanian commercial law , Ed.C.H. Beck, Bucharest, 2013, p. 526; Stoica C -F.,
Cristea S. -L., op.cit. , p. 157; Cărpenaru St. D., op. cit ., 2012, p. 259. As stated, the competence to
control the legality of the cross -border merger rests with the Romanian court (where the companies
involved in the merger or the newly -created company have their seat) to see Nemeș V., Commercial
law, Ed. Universul Juri dic, Bucharest, 2011, p. 181, 182 and Stoica C. -F., Cristea S. -L., op.cit .,
2011, p.157.
25 According to which: "The cross -border merger which enters into force in accordance with article
12 cannot be declared null and void".
26 According to which: "The law of the Member State under which the company resulting from the
cross -border merger is established shall determine the date from which the cross -border merger
takes effect. That date shall be after the inspection referred to in article 11".
27 According to w hich: " (1) The nullity of a merger can be declared only by a court decision; (2)
The nullity of the merger cannot take place after the date on which it took effect, the date established
according to art. 25115 para. (2).; (3) The procedures for cancellati on and declaration of invalidity
cannot be initiated if the situation has been rectified. If the irregularity that may lead to the
declaration of the nullity of a merger can be remedied, the competent court grants the participating
companies a period for r ectifying it; (4) The final decision declaring the merger null and void shall
be submitted ex officio by the court of the trade register offices from the headquarters of the
companies involved in the merger".
28 According to which: "(1) The nullity of a mer ger or division may be declared only by a court
decision; (2) From the date of its realization, according to art. 249, the merger, respectively the
division, can be declared null only if it has not been subjected to judicial control in accordance with
the provisions of art. 37 or if the decision of one of the general assemblies that voted on the draft
of the merger or division is null or void.; (3) The procedures for cancellation and declaration of the
nullity of the merger or division cannot be initiated a fter the expiry of a period of 6 months from
the date on which the merger or division became effective, pursuant to art. 249, or if the situation
has been rectified".
29 The nullity of a merger may be declared only by a court decision.
Dynami c Ele ments in the Contemporary Business Law 117
nullity if the situation has been remedied. The differentiation aspect is d etermined
by the fact that, in the case of the internal merger, the action can be brought within
a maximum of 6 months from the effects of the merger according to article 249
of the Companies Law, while in the case of the cross -border merger, we can find
out that the action for annulment is admitted only before this moment, as stipu-
lated by art. 251¹ paragraph (2)30.
3. Conclusions
We consider that, given the production conditions and the effects of the
nullity of the cross -border merger, the wording of th is article is deficient. Thus,
we consider that only after the merger has produced its effects can it be consid-
ered a complete legal act, which can be challenged with an action, by which its
cancellation is requested. In view of these aspects, we propose t hat de lege
ferenda the text of art. 251¹ paragraph (2) should be modified in the sense that
the invalidity action may be introduced after the merger is finalized.
Another aspect that needs to be clarified concerns the phrase "the void of
law" used by the Union legislator in the content of art.1731 of the above -men-
tioned directive. Therefore:
– if we consider that the EU legislator takes into consideration only the
causes of absolute nullity, then on the contrary, after the moment when the cross –
border merge r becomes effective, it may be requested to cancel the merger in
question for reasons of relative nullity;
– if we consider that the same legislature also took into account the rea-
sons for relative nullity then, after the moment when the merger becomes eff ec-
tive, the action can no longer be annulled.
We consider that a literal analysis can lead to the conclusion that the Un-
ion legislature considered only the reasons for absolute nullity. By interpreting in
this way the provisions of Article 17 of Directive 2005/56/ C.E., t he existence in
Law 31/1990 on companies of articles dedicated to the regulation of the invalidity
of the cross -border merger is justified.
Bibliography
1. Adam I., Savu C.N., The Law of commercial companies. Comments and expla-
nations , Ed. C. H. Beck, Bucharest, 2010.
2. Cărpenaru St. D., David S., Piperea Gh., Company law. Comment on articles,
5th ed., Ed. CH. Beck, Bucharest, 2014.
3. Cărpenaru St. D., Treaty of Romanian commercial law , Ed. Universul Juridic,
30 The nullity of the merger may not intervene after the date on which it produced its effects, the
date established according to art. 25115 para. (2).
31 According to which: "The cross -border merger which enters into force in accordance with article
12 cannot be declared null and void".
Dynami c Ele ments in the Contemporary Business Law 118
Bucharest, 2012.
4. Gheorghe C., Romanian commercial law , Ed. C.H. Beck, Bucharest, 2013.
5. Hinescu A., The merger of companies , Ed. Hamangiu, Bucharest, 2016.
6. Nemeș V., Commercial law , Ed. Universul Juridic, Bucharest, 2011.
7. Stoica C-F., Cristea S., Business law. Topics and contracts ., Ed. A.S.E., Bucha-
rest, 2011.
Guarantees, Rights and Obligations in International Trade
through Electronic Media
Lecturer Manole Decebal BOGDAN1
Lecturer Valeria Alisa TOMA2
Abstract
The virtual world and artificial intelligence are a daily "reality". The electronic
environment def ined as On -Line has taken over a large amount of commercial transac-
tions from the classical environment. Classical trading allows you to meet your partners
and negotiate directly. In the international trade from On -Line the partners are not often
known and they act on a trust given by the community. Business guarantees no longer fall
within the attribute of the state (community of states) that confirms the verifiable existence
of the company by registering with the Trade Register and/or by fiscal registrati on. There
is no guarantee in e -commerce! The reliable guarantee of the partner's creditworthiness
is the system based on trust and the opinions of the other partners who have used trans-
actions before. There are situations in which the provider does not exi st in the form pre-
sented on the web page. There are situations in which the partner company only has an
Internet domain and in reality, it does not exist. Our paper opens a number of issues that
can be debated starting with the statute and the legal defini tion of companies that act
exclusively on -line as "legal persons of private law in the online environment". We assist
and participate in a new society that has no defined regulations. How, Who and When
will it be able to regulate it?
Keywords: cyber law, law and IT companies, law and smart society, artificial
law and intelligence.
JEL Classification: K10, K15, K24, K38
1. Introductory considerations
Over time, social relations have developed and transformed through the
impact of trade be tween different regions or even between continents. The silk
road was an artery through which goods, knowledge about science, art, literature,
etc. were transmitted, but also ideologies. Those stations where the caravans
stopped for food were centers where exchanges of ideas, cultural and new
knowledge about science brought progress to the area and created a smaller and
more interactive world. In time, technology based on artificial intelligence has
1 Manole Decebal Bogdan – University "1 December 1918" of Alba Iulia, Romania, decebal.bogdan
@gmail.com.
2 Valeria Alisa Toma – University "1 December 1918" of Alba Iulia, Romania, alisavaleria.toma
@yahoo.com.
Dynami c Ele ments in the Contemporary Business Law 120
created computer networks with stations (HUBs), through wh ose servers infor-
mation is stored and circulated. This is the premise from which e -commerce
starts. We can say that the Internet is a "silk road" of the future. E-commerce
started shy about 20 years ago. As the technologies have developed through the
proce ssing power of information in the electronic environment, through the
speeds of information circulation (upload or download) in and from the virtual
environment, society and economy, both state and global, fundamentally change.
International trade using el ectronic media is a certainty, also volumes and
efficiency can no longer be neglected by manufacturers, suppliers, distributors
and customers. An order placed on a virtual store is processed within minutes,
and the time the product or service is received t akes from a few minutes to a few
days, or at most weeks. When referring to a horizon of a few weeks, we know
that the product comes from thousands of kilometers away by boat or by land. We
specify that the halving of waiting times in online commerce is ach ieved by sup-
pliers or distributors through the creation of logistics centers – regional ware-
houses. In these centers merchandise with a certain marketability is located.
The mechanism described above, procedurally, is used by economic en-
tities or legal per sons and individuals of private law, who also act in the classical
system. They have legal attributes of civil law, with a company statute or consti-
tutive act, registered office and secondary offices or point of work, registered
capital at the Trade Regist er and at the tax authorities. These entities present fi-
nancial statements, have bank guarantees and are subject to the laws of a state or
of state unions. For greater productivity, they also act through the internet, and
virtual reality. The aim of our ap proach is not to investigate this market known
and under the authority of the states.
Our goal is to discuss parallel economic systems, which have no struc-
tures with real or public legal entities. These operators do not have identification
at fixed address es, do not pay taxes but provide services and products, entering
into direct competition with the classical business environment. Although they
operate without identifiable identity, they are accepted by society and the open
market. Operators who do not ha ve their identity defined in a certain region have
developed distribution networks of products of uncertain origin and quality, but
listing competitive prices to the c lassical market. These operators have
reached huge commercial volumes, the values competing with the gross domestic
product of many states.
2. International trade through electronic media
Low price made the consumer's attention to be transferred from the clas-
sical trade by physical shop to the virtual system, the users saying they risk paying
a stranger a small amount, even if they might lose it, but could save money from
that product and its utility. These operators have expanded their strength, makin g
contracts with certain suppliers of products and services, which have an important
Dynami c Ele ments in the Contemporary Business Law 121
technical value and a great interest for the market. The same operators have
started to establish their headquarters in certain offshore tax havens or in some
countries th at have a dumping policy, thus directly competing with companies
that are registered in countries with medium or high taxation.
The question arises: What authority regulates or should be established to
regulate this kind of business? Which operators should these laws be subject
to? And which is the suprastatal authority that checks the flows of goods and
financial fluxes?
At first glance, the problem can be summarized quite simply, but a larger
analysis makes us find that things are extremely complicated:
1. the operations are carried out intercontinental, so the laws are different,
and some logistics centers are in international territorial waters, even on ships. To
which legislation is that warehouse subject to the conditions under which the ship
is regist ered in certain flag countries?
2. financial flows often take place in a controllable area, after which they
pass to a cryptocurrency, meaning a banking system that is outside the interna-
tional and national monetary policy authorities. It is very difficult to see where
the money and profits go.
3. The human resource that contributes to realizing the surplus -value and
the profit cannot be identified, since, for the most part, these are freelancers who
are positioned in different states and work under the pro tection of anonymity. In
the whole of this mechanism, the consumer develops the power of this system,
because the system itself is based on trust, it does not have a state authority behind
it, it does not have an authority to guarantee the banking system, it does not have
an authority to protect the consumer, purely and simply the system generates
trust, and the consumer develops and increases the fiscal value.
We need to understand that these businesses are transnational affairs,
they are not limited to th e territory of a state. We must understand that these busi-
nesses bypass the protectionism of fiscality, bypass the protectionism of a state,
that of generating fiscal revenues out of their added value. We ask ourselves the
question: how will such a system be regulated and under what conditions the
known norms of law can be applied to these parallel systems based on virtual
reality and artificial intelligence?
We consider that these entities should be defined at international level,
these operators, as we ca lled them at the beginning, a definition that should be
something like "legal entity governed by private law in the electronic environ-
ment, acting on a certain domain (.com, .org, .ro, .fr etc.)".
Another problem may be that international entities should a gree on a reg-
ister in which operators must register with a minimum of information, in order to
grant creditworthiness. States , in turn, may block operations on their territory for
certain sites that are not registered in the e -commerce registers. This is a lso a
working hypothesis.
Dynami c Ele ments in the Contemporary Business Law 122
In addition to large volumes of onerous transactions through the elec-
tronic environment, many cases of fraud and deception manifest. Criminal law
registers many new cases in which unknown persons sell products that do not
exist, a nd buyers, credulous, pay the price before seeing the goods. There
are complaints that result in cases of non -compliant merchandise with presenta-
tion of the initial photographs. The use of the Internet allows the manipulation of
some people to pay a certai n tax in order to gain possession of so -called "inher-
ited" or "won" values in gambling. The range of crimes in the IT environment is
immense, and the possibilities of action of the law enforcement bodies in criminal
investigation are limited geographically and by jurisdiction.
In the Romanian judicial practice, we find both species dealing with de-
ception, as well as species dealing with computer fraud.
By deception, in the sense of the penal code we understand, according to
disp. art. 244, paragraph (1) " misleading a person by presenting as true a false
act or as a liar a true fact, in order to obtain for himself or another an unfair
patrimonial use and if a loss has been caused", or in aggravated form, according
to disp. art. 244, paragraph (2) ”the decepti on committed by the use of false names
or qualities or other fraudulent means .If the fraudulent means is itself a crime,
the rules of the crime contest apply. "
Thus, the Mediaș District Court, through the criminal sentence no.
88/2018, estab lished that the act of the CL defendant to post non -adverts on OLX,
and by an ad misleading the injured person IC from obtaining 100 euros from it,
meets the constituent elements of the crime of deception and not of computer
fraud, as mentioned in the indi ctment of the Prosecutor's Office attached to the
Mediaș District Court, the court changing the legal classification of the crime
offense, provided for and punished by art. 249 of the Criminal Code in the fraud-
ulent offense, provided by art.244, paragraph (2) of the same code.
In the case presented above, the parties reconciliation intervened, so that
the criminal proceedings against the defendant ceased.
By the crime of computer fraud, we mean, according to the provisions of
art. 249 of the Criminal Code "the introduction, modification or deletion of com-
puter data, restriction of access to this data or in any way impeding the function-
ing of a computer system, in order to obtain a material benefit for himself or for
another, if a loss has been caused to a pe rson".
At the same time, the international cooperation has caused two Roma-
nian citizens to be extradited to the USA for their trial for the crimes of computer
fraud, counterfeiting.
A. By the Criminal Sentence no. 29 of February 13, 2018 the Court of
Appeal of Bucharest, the criminal section I ordered: on the basis of art.52 para-
graph (1) letter c) of Law no. 302/2004 republished and art.2 and 8 of Law no.
111/2008 for the ratification of the extradition treaty between Romania and the
United S tates of America admitted the extradition request made by the American
Dynami c Ele ments in the Contemporary Business Law 123
judicial authorities regarding the extraditable person A. based on the arrest war-
rants issued on December 11, 2017 and January 30, 2018 by the District Court
for the District of Columbi a.
The court found in the sentencing considerations that the facts retained
by the extraditable persons are found correspondent in the Romanian criminal
law, realizing the constitutive content of the offenses of computer fraud and com-
plicity to the compute r fraud, fraudulently carrying out financial operations, ille-
gal access to a computer system, altering the integrity of the computer data and
disturbing the functioning of the information systems provided by art. 249 of the
Criminal Code, art. 48 related to art. 249 and art. 250 paragraph (3) of the Crim-
inal Code, art. 360 paragraphs (1) – (3), art. 362 and art. 363 of the Criminal Code .
Also, it is found that the substantive and form conditions of the extradition pro-
vided by art. 24, 26 and art.3 6 of the Law no. 302/2004 republished, art. 2 and
art. X of the Law no. 111/2008 for the ratification of the Extradition Treaty be-
tween Romania and the United States of America.
B. By the criminal sentence no. 288/F/2018 of the Bucharest Court of
Appeal, pursuant t o art. 52 paragraph 3 of Law no. 302/2004 and art. 1 of the
Extradition Treaty between Romania and the USA, ratified by Romania by Law
no. 111/2008 , the extradition request made by the United States was admitted and
in fact, it was held that the extraditable person, together with other persons ac-
cused by the US authorities, participated in a fraud scheme for victims in the
United States of America through executing a fraud with online auctions and
money laundering operations through the A… Online Auction Frau d. The AOAF
network has used online auctions and retail sites such as E -bay and Craigslist to
give fake ads for luxury items such as vehicles. The network convinced the vic-
tims to send money for the goods advertised, by convincing methods, claiming
that th e person who posted the ad is a military man who posted the ad because he
must sell the good before being posted to a military unit or to a family member
who he died. Members of the network also used invoices that contained counter-
feit trademarks of offici al online auctions, invoices that contained indications for
victims about how to make the payment, and inspired them with security. The
payments from the injured persons were often made in the form of rechargeable
prepaid cards, prepaid debit cards and gif t cards of various types, postal orders
made in the United States of America, bank guaranteed bank checks, money
transfers through MoneyGram and Western Union, deposits and bank transfers
.Subsequently, network members also collaborated in laundering the p roceeds of
fraudulent online auctions by changing victims' payments in Bitcoin currencies
in the US, transferring Bitcoin to Eastern Europe, and eventually changing
Bitcoin currencies back into national currencies. The extraditable person was a
mid-level m anager within the network of fraudulent auctions on the Internet.
On 05.07.2018 the District Court of the United States of America -Eastern
District of the State of Kentucky registered the indictment no. YY which consti-
tutes the indictment for the listed fa cts.
Dynami c Ele ments in the Contemporary Business Law 124
The court appreciated that the offenses for which the extraditable person
is accused have a correspondent in the Romanian criminal law, confining them-
selves to the offenses provided by art. 367 paragraph 1) of the Criminal Code, art.
48 related to art. 249 of the Criminal Code, art. 48 related to art. 250 of the
Criminal Code, art. 48 related to art. 29, paragraph 1) of the Law no. 656/2002
and being punished with imprisonment of more than one year.
The above cases open a new horizon in which those who manipulate in-
formation on the Internet do not always have the best intentions. The cases can
be solved through the cooperation between criminal investigation bodies and jus-
tice in several states. The perpetrators and the victims, most of the times are of
different nationalities, have different residences in jurisdictions with different
legislative systems.
3. Conclusions
Artificial intelligence and the informational highways of the Internet are
elements that facilitate the trade of products and services. In addition to honest
and hon est operators, a market is created for criminals who resort to frauds and
computer fraud. State authorities are not prepared for these sophisticated work
schemes whereby the end user is harmed and deceived.
Users/Consumers of products delivered via the Int ernet do not have any-
one's guarantee when buying different products. Naivety and good faith transform
people into secure victims of crime and fraud through the virtual environment.
In many situations, the state cannot offer guarantees regarding the good-
ness and seriousness of the market created by the Internet world. The state can
only check addresses that are registered in the.ro domain. Guarantees regarding
the protection of personal data strictly regulated in the classical information sys-
tems, on the Int ernet lose their efficiency. There are known situations regarding
the "right to be forgotten", whereby users who are dissatisfied that their personal
information is on the Internet, advertise the companies that have search engines
for information on the In ternet, requesting that personal data be ignored. The so-
lution for the moment is that these personal data are not indexed when the infor-
mation is searched on Internet domains from national spaces regulated by Euro-
pean Directive or national law. At the same time, search engines reveal personal
information on domains of countries that have not regulated the problem.
The rights of natural or legal persons are often affected by operations in
the online environment. There are also many transactions that respect the rights
of individuals when selling products and services over the Internet.
The obligations of those who resort to international trade by electronic
means are partially regulated.
The persons selling have the obligation to have a web page in which the
consumer identifies a minimum of information:
• the legal identity and location of the seller;
Dynami c Ele ments in the Contemporary Business Law 125
• the legislation governing the activity;
• procedures and guarantees regarding the use of personal data and bank
secrecy;
• the procedure for granting the guara ntee for the purchased product;
• contact and information;
People who want to buy products or services through the Internet have
the obligation to inform about the seller (supplier) and to verify a minimum of
information on its quality, history, reality.
The electronic environment is a system that will take over classical com-
merce, but will not replace it. The authorities will have to regulate the status of
those operating in the online environment. International cooperation agreements
will be required in o rder to identify the perpetrators, to hold them accountable
according to the facts committed. Also, procedures for pre -settling the scams are
required.
Bibliography
1. Law no. 365/2002 regarding electronic commerce, republished in the Official
Gazette, Part I no. 959 of November 29, 2006, as subsequently amended.
2. The Criminal Code published in the Official Gazette, Part I no. 510 of July 24,
2009, as subsequently amended.
3. Law no. 302/2004 regarding international judicial cooperation in criminal mat-
ters, repu blished in the Official Gazette, Part I no. 411 of May 27, 2019.
4. Law no. 111/2008 for the ratification of the Extradition Treaty between Romania
and the United States of America, signed in Bucharest on September 10, 2007,
published in the Official Gazette, Part I no. 387 of May 21, 2008.
5. Law no. 129/2019 for the prevention and combating of money laundering and
terrorist financing, as well as for the modification and completion of some nor-
mative acts, published in the Official Gazette, Part I no. 589 of July 18, 2019, as
amended.
Cooperation -Based Approaches in Competition Law – the Whistle-
blower Versus the Prisoner’s Dilemma
PhD. student Ana-Maria Iulia ȘANTA1
Abstract
Cooperation -based approaches have shaped the trends in European Union
Competition L aw and in United States Antitrust Law. The present article assesses the
latest developments in this area, emphasizing the positive effects of cooperation in com-
petition law issues and proposing solutions in terms of dealing with international compe-
tition l aw cases. Cartels are analyzed using the model of the Prisoner’s Dilemma and the
modern Game Theory. The Whistleblower, which gained increasing importance both in
European Union Competition Law and in United States Antitrust Law, is assessed taking
into co nsideration these models. A comparative view of European Union Competition
Law and United States Antitrust Law on the importance of the Whistleblower is presented.
The present article uses an interdisciplinary research method, appropriate to the debated
issue, combing aspects of business law, European Union Law and economics in an inter-
national perspective. Relevant case law illustrates the presented approaches, trying to
find an answer to the research question to what extent can cooperation be seen as a po s-
sible solution for competition law issues and to what extent can settlements be accepted
as a time -saving solution in competition law cases.
Keywords: cooperation, competition law, Whistleblower, Prisoner’s Dilemma,
Game Theory.
JEL Classification: D18, K21, K22, K33, L43, L51, M16
1. Introduction
Competition law is a field of business law which brings together aspects
of European Union Competition Law, business, economics, psychology, sociol-
ogy and even mathematics, when considering models for und erstanding the be-
havior of market participants. It is a multidisciplinary field showing us that busi-
ness issues are not separated in different subjects, they ae complex and a holistic
view is needed in order to deal with them.
Connectivity is a key factor for decisions in competition law. In order to
achieve an interconnected thinking paradigm, it is essential to reunite several ex-
perts of different fields, bringing their view and expertise on the debated issues.
Cooperation is thus a key element for deali ng with competition law cases. The
research objective of the present article is thus to bring a new, interdisciplinary
perspective on cooperation -based approaches in competition law.
1 Ana-Maria Iulia Șanta – Faculty of Law, University of Vienna, Austria, anamaria_iulia_santa@
yahoo.com.
Dynami c Ele ments in the Contemporary Business Law 127
The term of cooperation needs to be further analyzed and defined, in or-
der to have a common understanding of this term and a common accepted termi-
nology. Furthermore, the present article assesses the position towards cooperative
approaches in competition law in European Union Competition Law versus
Unites States Antitrust Law, presenting a comparative view of these approaches.
The acceptance towards cooperation -based approaches in competition law is as-
sessed in an international perspective, analyzing the position towards the Whis-
tleblower and towards leniency policies in Europea n Union Competition Law as
well as in the Unites States Antitrust Law. Advantages but as well possible limits
or challenges of leniency programs are taken into consideration for the evaluation
of these measures.
Theories and models such as the Game Theory and the Prisoner’s Di-
lemma are analyzed related to competition law measures. The Prisoner’s Di-
lemma is a concept used for business decisions, environmental issues, strategic
decisions at social and even at strategic war decisions. The reflection of this p ar-
adigm in Competition Law issues is analyzed in the present article in order to find
out how and to what extent this concept is applied in cartel related issues.
Cooperation is as well understood at international level, defining the col-
laboration between several institutions, such as competition law authorities at na-
tional and supranational level in order to achieve win -win situations when dealing
with international competition cases. Aspects of extraterritoriality in cartels with
international dimension are considered and evaluated, emphasizing the im-
portance of cooperation -based approaches in this context.
Relevant case law illustrates the theoretical aspects debated, the legal the-
ory, the legal principles and the legal provisions that are analyzed in th e present
paper.
The element of novelty and originality of the present research is given by
its multidisciplinary approach and by applying models and theories usually im-
plemented in the business environment in the specific field of competition law.
The Wh istleblower concept is assessed in the global context of compli-
ance and of related new measures in companies, defining new strategic views at
corporate level. The social impact of the whistleblower concept is as well taken
into consideration, showing its i mplications at corporate level but as well at gen-
eral level, in our society.
The research results of the present paper can be further developed, as it
is a field of great interest and of increasing importance for the globalized business
environment.
2. Research topic
In the globalized business environment nowadays, with multinational
companies as main actors of the market, competition law gains an increasing im-
Dynami c Ele ments in the Contemporary Business Law 128
portance, as it is in fact the law applicable to the behavior of multinational com-
panies. Such a behavior can include agreemenets between market participants,
cartels, other types of anticompetitive behavior such as the exchange of strategic
information or abuse of dominance on the market. As most of the markets are
oligopolistic markets, all these types af behaviour gain increasing importance.
Most of all the consequences on consumers but as well on other market partici-
pants, such as other competitors need to be considered. A type of behavior which
is permitted for small companies is forbidden for dominant actors of the market.
A dominant position on the market brings another type of responsibility for the
company with a dominant position on the market, responsibility which has not
only a business dimension but as well a social dimension.
Competiti on law is a field which reunites business, economics, psychol-
ogy, sociology, social psychology and even mathematics as a basis for modeling
market developments. An interdisciplinary perspective is thus needed in order to
understand this field and the way i t can develop.
Connectivity as a basis for understanding competition issues is a very
important element for assessing decisions related to competition law. The field of
competition law brings lawyers and economists together at the same table in order
to find common accepted solutions. This is not an easy task to deal with, as law-
yers and economists have divergent views on the debated subjects. Lawyers need
predictability of laws and a symmetrical approach of each case, while economists
need evaluations for each situation in particular and are not willing to draft gen-
eral principles applicable to all the situations. Detailed assessments of each situ-
ation are needed according to economists. Nevertheless, a common solution is
needed for competition law cases, which reunite aspects of business and business
law. As this situation is a very common one, research is needed in this field and
given the fact that European Union Competition Law is a recent field of law, there
is a research gap in this field.
The presen t paper addresses the research question of defining coopera-
tion in the context of competition law situations thus clarifying the used termi-
nology. Cooperation can be understood on the one hand as a behavior which oc-
curs between market participants. It can be as well a behavior defining the will-
ingsness of cartelist to collaborate with competition law authorities. Cooperation
based approaches in competition law may refer as well to what is permitted in
terms of competition law regarding cooperation between m arket participants.
This refers especially to the concept of legal exemption reflected in article 101
paragraph 3 of the Treaty on the Functioning of the European Union. These def-
initions of cooperation and their impact on business environment situations a re
analyzed in the present paper.
The acceptance of cooperation -based approaches in competition law is
different in European Union Competition Law and in United States Antitrust
Law. The differences are based on different legal cultures and on the complian ce
Dynami c Ele ments in the Contemporary Business Law 129
with different legal principles. These different legal views are assessed in a com-
parative manner in the present paper.
A concrete expression of cooperation is the leniency policy, which is a
key element of competition policy both in the European Union and in the United
States of America. The importance of leniency programs is analyzed in the pre-
sent paper, presenting advantages but as well challenges and limits of this instru-
ment.
The whistleblower as part of the leniency policy is analyzed in the int er-
national context of compliance and its strategic importance for companies.
The present paper presents results based on theories and models such as
the Prisoner’s Dilemma, analyzing to what extent this concept is applied in com-
petition law, for example i n cartels. Game Theory and Nash equilibrium are other
theoretical concept used in the present paper in order to emphasize the multidis-
ciplinary dimension of competition law issues.
Besides analyzing cooperation as an attitude or a behavior, cooperation –
based approaches in competition law refer as well to the cooperation at institu-
tional level, to the cooperation between competition authorities both at national
and supranational level. This aspect is as well evaluated in the present paper, for-
mulating resu lts regarding the importance of institutional cooperation for dealing
with international competition law issues, such as cross -border cartels.
Competition law aspects are very important in the context of corporate
compliance. The whistleblower is an instr ument used in companies, with an im-
pact at business level but as well at social level, aspects which are analyzed in the
present paper.
The present paper acts like a bridge between the existing literature and
practical issues of the business world. It is in line with the studied previous liter-
ature, further developing the ideas of previous research. As elements of original-
ity and novelty, the present paper brings a new, interdisciplinary view on compe-
tition law situations and of business law situations.
As such situations are developing in the globalized business environ-
ment, with multinational companies acting as main actors of the market with in-
creasing power, the research field is one of great interest, so that the research
results can be further used f or extended research.
As European Union Competition Law is a relativ young area of legal re-
search compared to its tradition in the United States of America, a research gap
is identified in this area.
3. Research structure
The research structure corresp onds to the research topic. The present re-
search defines terms like competition and cooperation. Furtheron, the dimensions
of cooperation are analyzed in the context of competition law situations. Cooper-
ation is assessed as an attitude defining a behaviour between market participants,
Dynami c Ele ments in the Contemporary Business Law 130
relying on legal provisions of European Union Competition Law (article 101 and
102 of the Treaty on the Functionng of the European Union). It is as well defined
as an attitude in the relation with competition authorities. Rela ted to this aspect,
different views in European Union Competition Law and United States Anitrust
Law are presented in a comparative manner.
The importance of institutional cooperation at national and supranational
or international level is highlighted in the present research.
The impact of cooperation -based approaches, such as the Whistleblower
on the business environment, at corporate level but as well at social level is as-
sessed.
The researched topics are illustrated by theoretical models, such as Game
Theory, the Prisoner’s Dilemma or the Nash equilibrium, concepts that can ex-
plain types of behaviour which are relevant for competition law, for example for
the behavior of cartelists.
On the other hand, the researched topics are illustrated by relevant c ase
law of the Court of Justice of the European Union, such as the case Dutch T –
Mobile, the case Irish Beef Industry and the Woodpulp case.
These cases reflect among other aspects the cross -border dimension of
competition law issues and their importance, w ith an impact at global level.
The research results point out the multidisciplinarity of competition law
issues and the need of a holistic view when dealing with competition law issues.
4. Research methodology
The present paper uses a multidisciplinar r esearch method which is ap-
propriate to the research topic and reunites aspects of business, economics, Euro-
pean Union Competition Law, sociology and psychology.
The relevant literature on the debated topic has been studied. For this
purpose, relevant books , monographies, scientific articles, European Union leg-
islation, jurisprudence of the European Court of Justice as well as websites have
been taken into consideration.
The provisions of European Union Competition Law, meaning primary
European Union Law, h ave been interpreted taking into account the research ob-
jectives. Article 101 and 102 of the Treaty on the Functioning of the European
Union are the basis for European Union Competition Law, which is used as well
in this research paper. Especially the prov isions of article 101 of the Treaty on
the Functioning of the European Union are interpreted in order to define the be-
havior of cartelists.
The teleological interpretation method has been used for interpreting the
provisions of article 101 paragraph 3 of the Treaty on the Functioning of the Eu-
ropean Union, taking into consideration the objective of consumer welfare and of
consumer protection.
The theoretical concepts used in business and strategy, such as Game
Dynami c Ele ments in the Contemporary Business Law 131
Theory, Nash equilibrium and the Prisoner’s D ilemma have been applied in the
specific field of European Competition Law.
The researched topics have been illustrated by the interpretation of case
law of the Court of Justice of the European Union, such as Case C -8/08 T-Mobile
Netherlands , Case C -209/07 Irish Beef Industry and the case “Wood Pulp” ,
Joined cases 89, 104, 114, 116, 117 and 125 to 129/85.
The case law points out an international dimension of competition law
issues, with a strong cross -border character and cross -border impact to be consid-
ered2.
5. Solutions
Competition law or antitrust law, as it appears in the United States of
America, is a business law field related to the global business environment, with
multinational companies acting as main actors with a high degree of power on
the ma rket. Competition law is the law applicable to the behavior of multinational
companies. The term competition itself has its roots in the theory of Adam Smith,
back to the year 1776 and was furtheron developed by David Ricardo and John
St. Mill3.
According to the primary European Union Law, as defined in article 101
of the Treaty on the Functioning of the European Union, agreements between
competitors constitute anti -competitive behavior by reducing competition in the
sector, which has a negative effect on t he market and on the consumer4.
A cartel can be described as a situation of applying the Prisoner’s Di-
lemma, a concept of Game Theory. In this case, if cartelist A cooperates with
cartelist B, they would get a lower sentence in years of jail. But due to t he indi-
vidualistic interests and to the irrational behavior, each of them has the tendency
to betray the other cartelist and to cooperate with the competition authority. This
example is a reflection of the Prisoner’s Dilemma and of Game Theory in com-
petiti on law5. The situation described corresponds to a Nash equilibrium situa-
tion, in which each of the cartelist does what is best for him individually, but not
what is best for the collective interest.
2 See Joined Cases “Wood Pulp” , Joined cases 89, 104, 114, 116, 117 and 125 to 129/85, A. Ahl-
ström Osakeyhtiö and others v Commission of the European C ommunities , Judgment of the Court
of 27 September 1988, European Court Reports 1988 -05193, European Court Reports 1988 –
05193.
3 See Schwintowski, Hans Peter, Wettbewerbs und Kartellrecht, C.H. Beck München, 4. Auflage,
2007, pp. 105 -113.
4 See Treaty on the Functioning of the European Union, Consolidated version of the Treaty on the
Functioning of the European Union, OJ C 326, 26.10.2012, art. 101 .
5 See Insko, Chester A.; Wildschut, Tim; Cohen, Taya R, Interindividual –intergroup discontinuity
in the prisoner’s dilemma game: How common fate, proximity, and similarity affect intergroup
competition , „Organizational Behavior and Human Decision Processes” , March 2013, Vol.120 (2),
pp.168 -180, DOI: 10.1016/j.obhdp.2012.07.004.
Dynami c Ele ments in the Contemporary Business Law 132
Not only explicit agreements are an anti -competitive beh aviour but as
well the exchange of strategic, confidential information is an anti -competitive
behavior6. As all markets are nowadays oligopolistic markets, such an exchange
of strategic information is an anti -competitive behavior, as it reduces market un-
certainty.
Not even in case of crisis cartels are price agreements or other types of
anti-competitive behaviors permitted, as it is reflected in the Irish Beef Industry
Case, so that such types of behavior are always forbidden7.
The only situation in which cooperation among competitors is permitted
is settled down in article 101 paragraph 3 of the Treaty on the Functioning of the
European Union, which functions as a legal exemption considering the Consumer
Welfare Standard8.
There are no legal exemptions for abuse of dominance, as it is described
in article 102 of the Treaty on the Functionnig of the European Union9.
Cooperation is an attitude reflected in the willingness of cartelist to work
together with competition authorities. A concrete expression of thi s cooperation
are leniency programs, which are a key element both in European Union Compe-
tition Law and in United States Antitrust Law. Although this instrument is used
in both competition law systems, the acceptance of cooperation -based approaches
in comp etition law is different in European Union Competition Law and in the
United States Antitrust Law. Due to legal principles and different legal cultures,
it is rather not acceptable in European Union Competition Law to put prosecutor
and cartelists at the s ame table for negotiating a settlement. This practice is com-
monly used in the United States Antitrust Law due to efficiency reasons and for
time saving, which is an important element in Unites States Antitrust Law. In the
European Union Law, principles are more important and have an important value,
thus, even it is time -consuming, authorities try to demonstrate that legal princi-
ples are in fact values of our society and that they count. They try to do justice
even if this approach is time consuming, meanin g investigations of several years.
Different legal cultures and legal backgrounds lead to such different views in the
United States Antitrust Law versus the European Union Competition Law.
Cooperation -based approaches in competition law refer as well to t he im-
portance of institutional cooperation between competition authorities at national
and supranational level. The practical expression of this institutional cooperation
6 See Case C -8/08 T-Mobile Nether lands and Others, Judgment of the Court (Third Chamber) of 4
June 2009, Reports of Cases 2009 I -04529, ECLI:EU:C:2009:343.
7 Case C -209/07 Competition Authority v Beef Industry Development Society Ltd and Barry Broth-
ers (Carrigmore) Meats Ltd. , Judgment of the Court (Third Chamber) of 20 November 2008, Eu-
ropean Court Reports 2008 I -08637, ECLI identifier: ECLI:EU:C:2008:643.
8 See van Doorn, Frederik, The Law and Economics of Buyer Power in EU Competition Policy ,
Eleven International Publishing, 2015, p. 14 4.
9 See Treaty on the Functioning of the European Union, Consolidated version of the Treaty on
the Functioning of the European Union, OJ C 326, 26.10.2012, art. 102 .
Dynami c Ele ments in the Contemporary Business Law 133
is the European Competition Network, dealing with cross -border competition is-
sues. Th e European Commission as supranational competition authority of the
European Union works together with national competition authorities in such
cross -border competition issues.
This cooperation is important especially in cross -border cartels, as the
Woodp ulp case demonstrated it, where extra -territoriality played a key role10,
pointing out that agreements concluded outside the European Union are subject
to European Union Competition Law, if they affect the European Union market.
A result of cooperation -based approaches in competition law is the Whis-
tleblower, an instrument created as a tool for the leniency policy in competition
law. Developing auch a tool had a major impact at corporate level, as it came
along with social responsibility. Nowadays, the Whist leblower is part of Compli-
ance policy of companies, having an impact on business strategies and having as
well social impact11.
Leniency programs are essential for competition authorities in order to
get evidence to incriminate cartels and they offer advant ages both to the compe-
tition authorities and to the cartelists, through granting immunity or fine reduc-
tions. Nevertheless, they are as well related to challenges, as it is not clear yet to
what extent they can collude with civil damages or with private en forcement. It
is possible that at some point in time, conflicts are generated between leniency
programs and the civil damages related to competition law cases12.
As it is a developing field, the solutions of this paper can be further im-
proved and they can b e used as a basis for further research.
6. Conclusions
Cooperation -based approaches are very important in the field of compe-
tition law. The Whistleblower as an instrument of compliance gains an increasing
importance at corporate level. Cartels can be see n as an application of Game The-
ory and of the Prisoner’s Dilemma in the field of competition law. These aspects
underline the multidisciplinarity of competition law issues, bringing together as-
pects of European Union Competition Law, business, economics, b ehavioral eco-
nomics, psychology, sociology and even mathematics.
Cooperation -based approaches are essential in order to deal with compe-
tition law issues, a view that is shared both by European Union Competition Law
and by United States Antitrust Law despi te some differences in the acceptance of
10 See Joined Cases “Wood Pulp” , Joined cases 89, 104, 114, 116, 117 and 125 to 129/85, A. Ahl-
ström Osakeyhtiö and others v Commission of the European Communities , Judgment of the Court
of 27 September 1988, European Court Reports 1988 -05193, European Court Reports 1988 –
05193.
11 See Mäger, Thorsten, Europäisches Kartellrecht , Nomos verlagsge sellschaft, Baden -Baden,
2006, pp. 34 -35.
12 See Nazzini, Renato, Concurrent Proceedings in Competition Law – Procedure, Evidence and
Remedies, Oxford University Press, 2004, p. 426.
Dynami c Ele ments in the Contemporary Business Law 134
these approaches.
The field is new and dynamic, so that further research will for sure be
needed and the results of the present paper can be further improved and extended,
thus representing a contribution to academi a.
Bibliography
1. Insko, Chester A.; Wildschut, Tim; Cohen, Taya R, Interindividual –intergroup
discontinuity in the prisoner’s dilemma game: How common fate, proximity, and
similarity affect intergroup competition , „Organizational Behavior and Human
Deci sion Processes” , March 2013, Vol.120 (2), DOI: 10.1016/j.obhdp.2012.
07.004.
2. Mäger, Thorsten, Europäisches Kartellrecht , Nomos verlagsgesellschaft, Ba-
den-Baden, 2006.
3. Nazzini, Renato, Concurrent Proceedings in Competition Law – Procedure, Ev-
idence and Reme dies, Oxford University Press, 2004.
4. Schwintowski, Hans Peter, Wettbewerbs und Kartellrecht, C.H. Beck München,
4. Auflage, 2007.
5. Van Doorn, Frederik, The Law and Economics of Buyer Power in EU Competi-
tion Policy , Eleven International Publishing, 2015.
6. Consolidated version of the Treaty on the Functioning of the European Union,
OJ C 326, 26.10.2012.
CRIMINAL LAW IN BUSINESS CONTEXT
Crimes Motivated by Hate, Differentiation and Religious Discussion
in Compared Criminal Law (Romania and the Republic of Moldova)
Associate professor Aurel Octavian PASAT1
Abstract
This scientific article is devoted to the legal -criminal analysis of offenses moti-
vated by hatred, differentiation and religious division in criminal law compared to the
model of the criminal law of Romania and of the Republic of Moldova. The purpose of
this study is to identify and analyze crimes motiv ated by hatred, differentiation and reli-
gious separation in the criminal law of Romania and the Republic of Moldova. Following
the study undertaken, certain legislative gaps were identified that can be easily overcome
by reviewing the incriminating framewo rk of offenses motivated by hatred, differentiation
and religious division. The conclusions of the broad law and the recommendations de
lege ferenda created under the empire of the latest legislative tendencies at European
level can be taken into account i n the legislative process.
Keywords: religious freedom; religious belief; the right to religious belief; crime
motivated by religious hatred; religious differentiation; religious separation; religious
discord; religious propaganda.
JEL Classification: K10, K14
1. Introductory considerations
Pursuant to the EU Guidelines on the promotion and protection of freedom
of religion or belief, Brussels, June 24, 20132, all persons have the right to express
their religion or belief, either individually or with o thers, both in public and in
public. in private, through worship, performing rites, practices and teaching,
without fear of intimidation, discrimination, violence or attacks. Persons who
change or renounce their religion or belief, as well as those who are adept at non –
theistic or atheistic beliefs, should equally be protected, as well as those who do
not profess a religion or belief.
In the spirit of this international document, the terms "belief" and "religion"
should be interpreted broadly, and the appli cation of Article 9 of the Convention
1 Aurel Octavian Pasat – “Bogdan Petriceicu Hașdeu” State University, Faculty of Law; Republic
of Moldova, “Dunarea de Jos” University, Cross -border Faculty, Galați, Romania, octa-
vian_passat@yahoo.com.
2 EU guidelines on the promotion and protection of freedom of religion or be lief, Brussels, 24 June
2013 (25.06), 10963/13 COHOM 117 COPS 231 CFSP 698 FREMP 83, http://data. consilium.eu-
ropa.eu/doc/document/ST -11491 -2013 -INIT/ro/pdf, consulted on 10.10.2019.
Dynami c Ele ments in the Contemporary Business Law 137
should not be limited to traditional religions or to religions or beliefs with insti-
tutional characteristics or practices analogous to those of traditional religions3.
2. Crimes motivated by hate, d ifferent iation and religious Discussion
in Romania and the Republic of Moldova
The norm provided in paragraph (2) of art.13 of the Law of Romania
no.489/2006 regarding the religious freedom and the general regime of the cults4,
in Romania are prohibited any forms, means, ac ts or actions of defamation and
religious prejudice, as well as the offense. public brought to religious symbols,
and according to paragraph (3) art.13 of this normative act, the hindrance or dis-
turbance of the freedom to exercise a religious activity, whi ch is carried out ac-
cording to the law, is punished according to the provisions of the criminal law.
Although, in Romania are prohibited any forms, means, acts or actions of
defamation and religious prejudice, as well as the public offense brought to reli-
gious symbols (paragraph (2) art.13 of the Law of Romania no. 489/2006 on re-
ligious freedom and the general regime of the cults), the Penal Code of Romania
did not foresee any norm that would sanction such acts. which, in the exercise of
the duties of servi ce, impedes the exercise of a person's right, or creates for it a
situation of inferiority on the basis of race, nationality, ethnic origin, language,
religion, sex, sexual orientation, political affiliation, wealth, age, disability,
chronic non -contagious disease or HIV/ AIDS infection [para. (2) art.297 of the
Penal Code (C.pen.)].
Generally, in the Special Part of the Romanian Penal Code we find an en-
tire Chapter dedicated to the offenses against religious freedom and the respect
due to the dead. It is a bout Chapter III of Title VIII of the Special Part (Offenses
which affect relations regarding social coexistence), which includes the following
articles: 1) preventing the exercise of religious freedom (art. 381 of the Penal
Code); 2) desecration of buildi ngs or objects of worship (art. 382 C.pen.); 3) des-
ecration of corpses or graves (art. 383 C.pen.); 4) illegal removal of tissues or
organs (art.384 C.pen.). We specify that Title XII "Crimes of genocide, against
humanity and war" contains three articles t hat incriminate crimes motivated by
religious hatred (art. 438 C.pen., art. 439 C.pen., art. 444 C.pen.).
Unlike the criminal law of Romania, the Criminal Code of the Republic of
Moldova (CP RM) contains a stand -alone legal -criminal norm that incriminates
the criminal offense provided for in art. 346 CP RM (Intentional actions aimed at
harassing the spell, differentiation or national, ethnic, racial or ethnic division.
religious) that consists of the intentional actions, the public exhortations, includ-
ing through the media, written and electronic, aimed at harassing the spell, dif-
3 Idem .
4 The Official Monitor of Romania. Part I, no. 11/08.01.2007.
Dynami c Ele ments in the Contemporary Business Law 138
ferentiating or dividing national, ethnic, racial or religious, towards the degrada-
tion of national honor and dignity, as well as limitation, direct or indirect, of the
rights or es tablishment of advantages, direct or indirect, to the citizens according
to their national, ethnic, racial or religious belonging.
The special legal object of the criminal offense provided for in art. 346 CP
RM is religious equality, religious dignity and freedom to profess any religion
based on personal beliefs5. According to art. 31 paragraphs (1) and (3), 32 para-
graphs (1) and (3) of the Constitution of the Republic of Moldova, freedom of
conscience is guaranteed, it must be manifested in the spirit of t olerance and mu-
tual respect. As a secondary legal object, the life and health of the person, the
interests of the family and of the minors, the social order, the health of the popu-
lation, the social morals, the patrimony of another person as well as their invio-
lability or sexual freedom can be recognized.
The immediate targets of the crimes motivated by the prejudice may be the
person, his life or physical integrity, as well as the property associated with the
victim. But the real target is the community wi th which the person is assimilated,
in real or presumed. The impact of the crime is not limited to the psychological
impact on the victim, but also the impact on the community to which the victim
belongs or with whom it is associated, and its intimidation.
The increased degree of danger and the distinct legal approach of the
crimes motivated by the prejudice is determined by the impact of these facts, not
only on the victim but also on the community, the way in which such manifesta-
tions of intolerance can c ause social, inter -ethnic or inter -religious disturbances6.
For example, the burning of a place of worship, an ethnic store, the headquarters
of a company that is associated with a particular community, is based on the same
prejudice -based mobile and inten ds to send a message of rejection to the commu-
nity associated with the particular building7.
In the relations between the religious cults any manifestation of prejudice
is forbidden. Every citizen is guaranteed freedom of thought, opinion, and free-
dom of e xpression in public by word, image or other possible means. The mech-
anism to stimulate religious discord is to humiliate the religious dignity of the
victim. In this sense, the arousal of religious discord implies a negative verbal
5 Бодобаев К.А ., Уголовная ответственность за возбуждение религиозной вражды.
Вестник Кыргызской государственной юридической академии, 2013, №3, с.88 -92. (Bodobaev
K.A., Criminal liability for inciting religious hatred , „Bulletin of the Kyrgyz State Law Acade my”,
2013, no. 3, pp. 88 -92).
6 Opinion on the draft law: hate crimes and denial of the existence of the Holocaust – amendment
and completion of acts (Prepared by Jeremy McBride, consultant of the Council of Europe): Final
project May 15, 2017, https://rm. coe.int/coe -moldova -hate-crime -law-opinion -ro/1680730246,
consulted on 10.10.2019.
7https://www.coe.int/t/dghl/monitoring/ecri/activities/GPR/EN/Recommendation_N7/REC7 -2003
-8-ROM.pdf, consulted on 10.10. 2019.
Dynami c Ele ments in the Contemporary Business Law 139
condemnation or an actio n against the person in relation to his religious affilia-
tion, or any negative expression referring to a religious group8. Religious dignity
is a category of personal or group consciousness.
To apply this qualifying sign, it is sufficient to file a complai nt from a per-
son or a group of persons who have suffered as a result of this criminal attack. In
questionable and uncertain times, it is recommended to carry out a historical –
cultural expertise that allows the determination of the circumstances whether or
not the religious feelings have been affected. An undoubted index of humiliation
of one's religious dignity is the use of non -normative lexicon; the use of offensive
names applied to this religious group; comparing followers of religious groups
with certai n material or animal objects; ridicule of saints or religious events that
represent significance for the followers of a religion. In any case, the main crite-
rion of humiliation is established at the discretion of the representatives of the
religious group that had suffered9.
The victim of this crime can be any person discriminated against on the
basis of a certain characteristic related to their identity, in particular, on the basis
of a religious characteristic. In committing this type of crime, a special signifi-
cance belongs not to the victim and her personal qualities, but to her belonging to
a religious confession. As demonstrated in the Opinion on the draft Law no. 301
for the modification and completion of some legislative acts, formulated by the
Cente r of legal resources of Moldova, the crimes motivated by the prejudice are
crimes determined by the identity of the person10. In the case of offenses, given
their seriousness, the special sign of prejudice should be included, in order to
mark their increase d danger if they are committed for prejudicial reasons11. The
impact of these crimes, when they are based on intolerance, is much greater, fo-
cusing on the individual victim, the group of which she is a member or with whom
she is associated, as well as on th e whole society.
The perpetrator regards the fundamental religious characteristic (belonging
to a religion or atheism) as a proof of inferiority or as unacceptable and commits
the crime by transmitting this message of humiliation. As correctly stated by th e
authors D. Ududec, L. Peltonen, D. Nita, hate crimes have the potential to cause
more serious post -victimization emotional and psychological traumas compared
to similar hate crimes. The cited authors point out that such particular and unique
reactions ha ppen because this category of criminal acts represents attacks on the
essence of the victim's identity – "crimes as message" transmitting to the victim
and to those who share the victim's identity that they are worthless, that they are
8 Jeflea A., Moraru V. Infracțiuni ce implică semne de extremism religios: aspecte de drept penal,
„Studia Universitatis”, 2016, no. 8(98), p. 170 -177, p. 171.
9 Idem , p.172.
10 Opinion on the draft law no. 301 for the modification and completion of some legislative acts
(the Jul y 2017 version, after merging with project no. 277). Legal Resource Center of Moldova,
https://crjm.org/wp -content/uploads/2017/09/2017 -09-05-Opinie -CRJM -Proiect -301-infr-de-preju
decata.pdf, consulted on 10.10.2019.
11 Idem .
Dynami c Ele ments in the Contemporary Business Law 140
rejected, that they are degraded, despised and even hated12.
Careful analysis of the objective side of the criminal offenses referred to in
paragraph (1) art.346 Penal Code of the Republic of Moldova13 allows us to high-
light eight components of the crimes committed out of relig ious hatred:
1) the deliberate actions aimed at harassing the religious spell (the chal-
lenge of the enemy – the author's note);
2) the intentional actions aimed at increasing religious differentiation;
3) the intentional actions aimed at increasing religio us separation;
4) public calls directed at the assassination of the religious spell;
5) public calls aimed at increasing religious differentiation;
6) public calls aimed at increasing religious division;
7) the limitation, directly or indirectly, of the ri ghts of the citizens accord-
ing to their religious affiliation;
8) establishing the advantages, direct or indirect, to the citizens according
to their religious affiliation.
The criminal law does not materialize in what the intentional actions enu-
merated by us in points 1, 2, 3 are manifested, but we can conclude that they are
directed to the spell, differentiation or religious separation.
Another group of harmful facts includes in itself the public calls that are
directed to the spell, differentiation or re ligious division. It should be mentioned
that in this case the criminal liability arises only if the indicated actions are com-
mitted by a certain method – in public, including through the media.
This fact will include, for example, propagating the exclusiv ity, superiority
or inferiority of the person depending on his religious affiliation or his attitude
towards religion. The concept of propaganda involves systematic actions aimed
at inserting certain ideas into the public consciousness or forming certain s ettings
and beliefs. The authors A. Jeflea and V. Moraru highlight some situations in
which the analyzed criminal composition will be missing:
1) one -time statements or reasonings or the formulation of theses in ideo-
logical or political debates, for exampl e, statements by participants of TV shows
in talk shows or on online forums;
2) expressions formulated by people with low cultural and educational
level that would not allow them to adequately argue their own opinion, participate
in a debate and raise awar eness of the social responsibility for the words spoken.
3) dissemination of opinions regarding the quality of electing the followers
of certain religions14.
12 Ududec D., Peltonen L., Niță D., Combaterea infracțiunilor motivate de ură: Ghid pentru
practicieni și decidenți. Bucharest, Center for Legal Resources, June 2015. Publication made within
the project "Monitoring of human rights through international mechanisms" implemented by the
Cent er of Legal Resources, financed through the SEE grants 2009 -2014, within the NGO Fund in
Romania: www.fondong.fdsc.ro, consulted on 10.10.2019.
13 The Penal Code of the Republic of Moldova, no. 985 -XV of April 18, 2002. In: Official Monitor
of the Republic of Moldova, 2002, no. 128 -129, 134.
14 Jeflea A., Moraru V., op. cit. , p.173 -176.
Dynami c Ele ments in the Contemporary Business Law 141
Such opinions and beliefs take place in almost all religions, but their prop-
agation will be recogni zed as extremist only if this declaration implies the re-
quirement to change the volume of the civil rights and obligations of the person
or to harm the personal dignity of a religious or ethnic group. religious. For ex-
ample, the statement that only the fol lowers of a certain religion know the Truth,
is not considered to be an extremist. At the same time, the statement about the
adherents of another religion or that the power of the State must belong exclu-
sively to the followers of a certain religion must be recognized as extremist.
The lexicon used by the subjects of this crime is always very emotional –
the subject proceeds to the conscious and special use of the objects of worship,
verbal touch brought to the religious objects, bringing serious offenses to the re-
ligious feelings of the people, provoking the religious discord, etc., being com-
bined with the propagation of one's own superiority or the imperfection of the
representatives of other religious denominations. Parallel to the above, in practice
the formation of settings regarding the incompatibility of some religious groups
is encountered (one proceeds with materials in which the deviation from the log-
ical laws is used, the use of drawings and caricatures in order to form an incorrect
and negative ima ge about certain religious confessions).
In our opinion, highlighting a criminal component that consists of "public
calls" along with "intentional actions" is required to be a correct step on the part
of the legislator. Thus, some forms of informational in fluence, such as in our case
public calls, are not always appreciated as a sufficient basis for criminal liability
on the basis of art. 346 CP RM, but the presence of this self -standing category
will allow the legislator to react promptly to this criminal offense and apply the
measures of criminal restraint.
In the legal -criminal literature (D. Ududec, L. Peltonen, D. Nita15) the def-
inition of hate crimes is encountered. The authors state that "hate crimes" is an
umbrella term that refers to all those crimes committed by the perpetrator on the
basis of a discriminatory motivation, and includes two elements: a) are facts that
the criminal law provides as offenses and b) in committing the crime, the perpe-
trator acts on the basis of prejudices16.
In Recommendatio n R(97)20 of the Committee of Ministers of the Council
of Europe, hate speech is defined as: “all forms of expression that propagate, in-
cite, promote or justify racial hatred, xenophobia, anti -Semitism or others hatred
based on intolerance, including intol erance expressed in the form of aggressive
nationalism and ethnocentrism, discrimination and hostility towards minorities,
immigrants and persons from immigration”17.
15 Ududec D., Peltonen L., Niță D., op. cit ., 2015.
16 Idem .
17 Recommendation no. R (97) 20 of the Committee Of Ministers To Member States On „Hate
Speech” (Adopted by the Committee of Ministers on 30 October 1997 at the 607th meeting of the
Ministers’ Deputie s), http://www.coe.int/t/dghl/standardsetting /hrpolicy/ other_committees/dh –
lgbt_docs/CM_Rec(97)20_en.pdf , consulted on 10.10.2019.
Dynami c Ele ments in the Contemporary Business Law 142
The hate speech when it is spoken in public may constitute the crime com-
ponent provided fo r in art. 346 CP RM (Spelling, differentiation or national, eth-
nic, racial or religious division)18, that is, intentional actions, public exhortations,
including through mass -media, written and electronic, aimed at harassing the
spell, differentiating or di viding national, ethnic, racial or religious, to diminish
national honor and dignity, as well as limiting, directly or indirectly, the rights or
establishing advantages, direct or indirect, to the citizens in function. by their
national, ethnic, racial or religious affiliation.
The purpose of criminal prosecution for provoking religious hatred is, first
and foremost, to protect the constitutional rights and freedoms of citizens who
can use and protect them regardless of their religious affiliation19.
The cha llenge of religious division involves the artificial creation of a
strong disgrace towards the representatives of different religious groups. In prin-
ciple, the attainment of the religious division (art. 346 CP RM) can be performed
by competition along with the attention to the person and the rights of citizens in
the form of preaching religious beliefs and performing religious rites (art. 185 CP
RM). As correctly mentioned by t he authors D. Obadă and A. Cazacicov, a group
for preaching religious beliefs and performing religious rites, as in the case of art.
185 CP RM (Attention to the person and to the rights of citizens in the form of
preaching religious beliefs and for perform ing religious rites), in accordance with
article 43 of the Criminal Code in force, constitutes one of four forms of criminal
participation [simple participation, complex participation, organized criminal
group, criminal organization (association)], in part icular, criminal group orga-
nized20.
Such behavior can be manifested in indecent expressions, texts and draw-
ings addressed to representatives of the religious group, movie demonstrations,
organizing shows, applying defamatory inscriptions, using materials th at express
the desecration of the traditions of the religious cult and which represent a special
value for its followers; cynical interpretation of the content of the holy scriptures;
committing other insulting actions against the follower21.
The actions in question must be of a public character and directed against
the religious group, therefore, this sign is considered to be irrelevant in the case
of interpersonal conflicts, when the parties of this conflict to offend and insult
each other resort to the us e of personal characteristics they relate to their private
18 The Penal Code of the Republic of Moldova no.855 -XV of April 18, 2002. In: The Official Ga-
zette of the Republic of Moldov a, 2002, no. 128 -129.
19 Бодобаев К.А ., (Bodobaev K.A.), op. cit. , pp. 88 -92.
20 Obadă D., Cazacicov A., Grupul infracțional organizat în contextul criminalității transnaționale,
„Revista Institutului Național de Justiție”, 2018, no. 2, p. 24 -31, p. 25 .
21 Шилин Д.В. , Уголовная и ад министративная ответственность за нарушение права на
свободу совести и вероисповедания: проблемы разграничения . В: Журнал российского права
№ 5, 2016, c.81 (Shilin D.V., Criminal and administrative liability for violation of the right to
freedom of conscie nce and religion: problems of differentiation , „Journal of Russian Law”, no. 5,
2016, p. 81).
Dynami c Ele ments in the Contemporary Business Law 143
lives, especially their attitude towards one religion or another22. The public char-
acter implies bringing this information to the knowledge of an indeterminate sky
of persons by different methods an d means, including and under conditions indi-
cated in art. 131 CP RM (The deed committed in public place). As an example,
they can serve: calls for committing a murder; applying blows or deporting per-
sons belonging to a religious group; organizing, committi ng or inciting to commit
such acts.
Therefore, by the act committed in the public is understood the deed com-
mitted:
a) in a place which, by its nature or destination, is always accessible to the
public, even if at the time of the deed there was no person p resent, but the perpe-
trator realized that the deed could reach the public's knowledge;
b) in any other place accessible to the public if two or more persons were
present at the time of the crime;
c) in a place inaccessible to the public, with the intention , however, that the
deed be heard or seen, if it occurred to two or more persons;
d) in a meeting or meeting of several persons, except for meetings that can
be considered family, due to the nature of the relationships between the partici-
pants;
e) by any m eans resorting to which the perpetrator realized that the deed
could reach the public's knowledge.
The criminal component is a formal one. For the occurrence of the criminal
liability, it is sufficient to commit the actions that may cause such an enmity,
division or differentiation, the occurrence of the prejudicial consequences is out-
side the limits of the criminal jurisdiction provided in art. 346 CP RM.
I do not fall under the scope of the criminal law to speak of ideas that have
a character of discussio n, controversy, because the externalized ideas are not di-
rected to provoke the feeling of disgrace and enmity towards the representatives
of another religious confession and do not contain calls to commit any violent
actions against the representatives of another. religious or atheist confessions.
The methods of communication through which hate speech can be trans-
mitted can be verbal, in the online environment, on paper or even through drawn
symbols. The criminal act manifests itself in the form of an inten tional verbal
presentation of thoughts through the medium of language, as well as through
other forms of information transmission (linguistic or graphic means).
In this context, hate speeches in the form of racist and xenophobic propa-
ganda promoted on soci al networks represent facts that the Council of Europe
condemns and considers serious enough to propose their sanction by criminal
penalties when they represent the following facts: 1) distribution of materials rac-
ist and xenophobic through computer system s; 2) the threat based on a racist and
xenophobic motivation; 3) denial, gross minimization, approval or justification
22 Jeflea A., Moraru V., op. cit ., 2016, p. 171.
Dynami c Ele ments in the Contemporary Business Law 144
of genocide or crimes against humanity.
As it is found in the contemporary criminal doctrine, as means and methods
of committing crimes o f an extremist nature can be recognized: the knife, the
hunting weapon, the car, etc. In rare cases criminal acts of an extremist nature can
be committed without any means, for example, applying the victim's blows. In
other cases the extremist manifestatio ns can be outsourced in the use of docu-
ments23.
The subjective side of the offense provided in art. 346 CP RM is charac-
terized by guilt in the form of direct intention. The perpetrator is aware of the
harmful nature of the crime and wants to commit it. The differentiation of this
criminal fact from other related facts is made on the basis of the subjective side.
Violation of the equality of citizens (art.176 CP RM) should not be aimed at har-
assing the religious spell, such a fact is committed because of pers onal hatred
towards the representative or representatives of a particular religion or atheists.
In case the violation of the equality of the rights and freedoms of the human and
the citizen is committed in public with the purpose of provoking the enemy, th e
separation or the differentiation, the act shall be qualified by competition with the
criminal offense provided in art. 346 CP RM.
The obligatory subjective sign of the criminal offense provided in art. 346
CP RM is the special purpose – the establishmen t of spell, differentiation or reli-
gious separation.
Although the content of the criminal offense analyzed appears to be a huli-
ganic and extremist one we consider, however, that at the time of this crime the
extremist and non -huliganic motive prevail. Offe nses of an extremist character of
religious origin involve committing violent acts for religious reasons. In the spe-
cialized literature (V.V. Revina, A. Jeflea, V. Moraru), "extremist hooliganism",
in comparison with hooliganism that attends to the social order, has a different
object of attention24. The essence of the extremist motive is not reduced to the
sublimation and accentuation of one's own Ego towards the concrete victim, and
the fundamental thesis of extremist hooliganism is the contradiction accor ding to
the principle "I, therefore we – they". Such a contradiction does not constitute a
23 Хлус А.М. Криминалистические возможности выявления фактов экстремизма при
расследовании преступлений . В: Актуаль ные проблемы правового противодействия
экстремизму: доктрина и практика : материалы Международной науч. -практ. конф. (19 -20
апреля 2012 г.) / отв. ред. Г.И. Цепляева. – Петрозаводск, 2012, с.89 -90. [Khlus A.M., Forensic
opportunities to identify facts of e xtremism in the investigation of crimes , Actual problems of the
legal counteraction to extremism: doctrine and practice: materials of the International scientific –
practical. conf. (April 19 -20, 2012)/rep. ed. G.I. Tseplyaeva. – Petrozavodsk, 2012, p. 89 -90].
24 Ревина В.В. Экстремизм в российском уголовном праве: Автореферат диссертации на
соискание ученой степени кандидата юридических наук. Специальность 12.00.08 –
уголовное право и криминология; уголовно -исполнительное право. Москва: Российский
университет друж бы народов, 2010, p.18 -19 (Revina V.V., Extremism in Russian criminal law :
Abstract of dissertation for the degree of candidate of legal sciences. Specialty 12.00.08 – criminal
law and criminology; penal law. Moscow: Peoples' Friendship University of Russi a, 2010, p. 18 –
19).
Dynami c Ele ments in the Contemporary Business Law 145
mere fact of differentiation as it is closely linked to the tendency to limit or in-
fringe the criminal rights and freedoms of other persons through the criminal act,
because "they are not like us"25.
It should be borne in mind that the criminal law of the Republic of Moldova
does not operate with the term "extremism", it does not contain any express rules
that would contain the prohibition of religious extremism or the practice of reli-
gious extremist activity. Although some of the extremist religious activities are
incriminated in the Special Part of the Criminal Code (art. 185 CP RM; art. 346
CP RM).
The essence of the extremist motive is expressed in the opposition "I , there-
fore we – they" against other people who are not part of this group. Extremist
motives are to be provided in a series of articles of the Criminal Code, which will
acquire the characteristic of the obligatory subjective sign and which will have to
be proved in each case of religious extremism. Although the purpose of these
offenses is not expressly indicated by the legislature, in most cases the religious
discord is pursued.
The perverse effect of over claiming religious ideas and values stemming
from religious identity generates fundamentalism and intolerant attitudes. In the
opinion of the Romanian author A. Jeflea, crimes motivated by religious hatred
constitute the proliferation of religious extremism26. The quoted author considers
that religious extremism as a criminological phenomenon constitutes the attitude
or doctrine of religious or pseudo -religious trends, which, based on extreme the-
ories, ideas or opinions, seek, by violent or radical measures, to impose their pro-
gram for the purpose of cha nge, through violence, the foundations of the consti-
tutional regime and the violation of state integrity; undermining state security;
the usurpation of state power or official qualities; creation of illegal armed for-
mations; conducting terrorist activity; provoking religious hatred; humiliation of
personal dignity; causing mass disorders; committing acts of hooliganism or van-
dalism on grounds of hatred or religious enmity; as well as the propagation of
exclusivity, superiority or inferiority of citizens acc ording to the criterion of their
attitude towards religion or according to the criterion of religion27.
It should be specified that the evaluation of the motives and the identifica-
tion of their extremist character require special knowledge, and the informat ional
materials containing the reflected extremist visions will be subject to judicial ex-
pertise in the criminal prosecution.
The reasons for these categories of offenses carry a religious connotation.
Committing the crime for reasons of spell, differentia tion or religious separation,
implies the intent of the perpetrator to demonstrate the presence of disgrace to a
25 Ibid., Jeflea A., Moraru V., op. cit. , 2016, p.171.
26 Jeflea A. Spre clarificarea conceptului terorismului religios în accepțiunea criminologică . „Bu-
letinul Științific al Universității de Stat `Bogdan Petriceicu Hasdeu` din Cahul”, 20 17, №1(5), 2017
(Social sciences), p. 136.
27 Idem , p. 136 -137.
Dynami c Ele ments in the Contemporary Business Law 146
certain religion and its representatives. As indicated in the foreign legal literature,
criminal acts of an extremist nature are the selective nature of their actions, the
temptation to demonstrate the negative attitude not towards the society as a
whole, but only towards part of it. The logic of the huliganic motive is simplistic
– "it is not ours, it does not belong to our team", in other words , anyone who is
not part of our group can become the target of the attack. The reason for commit-
ting such an offense may also be insignificant (for example, the lack of cigarettes
to the victim). According to the logic of extremism, the "stranger" (ie the victim)
is chosen according to the determined religious sign – not all persons, but only
those belonging to another religious group28.
Religious separation as the motive of the crime is a conscious impulse that
manifests the perpetrator's attitude of strong dislike towards the adherents of an-
other religion, atheist, or non -theist, and which determines the desire to commit
the crime, this motive being expressly provided as a sign of the subjective side in
the criminal law and having an impact in the process o f differentiation and indi-
vidualization of criminal responsibility and punishment.
Religious differentiation is a form of social differentiation, which involves
the dismemberment of an entire religious in the religious elements that appear in
the process o f evolution, transition, the formation of ideas, sects, religious and
philosophical trends, the modification of religious settings, etc. In other words,
the stratification of the society according to the religious beliefs takes place,
which, in the end, ca n lead to illegality, competition and conflict. Information is
considered to be challenging if it contains an emotional appreciation and forms
the negative setting towards a religious group or the followers of such a group,
instigates the limitation of rig hts and leads to violent actions against them29. Re-
ligious differentiation is opposed to syncretism, which means the gathering of
heterogeneous elements belonging to different philosophical doctrines or differ-
ent religions.
Religious spell (religious enmity ) is the open manifestation of displeasure
and disgrace based on the religious beliefs of the person. Enmity (spell) is only
the consequence of division. The religious spell is to be interpreted as a sign of
the objective side and, respectively, it cannot be treated as a content of the crim-
inal motive30. The rise of the religious spell signifies the artificial creation of the
religious conflict or the attempt to create such a conflict in the form of hostile
28 Минекаева А.Ф. Религиозная ненависть или вражда как мотив совершения преступления:
уголовно -правовой и криминологический аспекты. Автореферат диссертации на соискание
ученой степени кандидата юридических наук Специальность 12.00.08 – уголовное право и
криминология; уголовно -исполнительное право. Казань: Казанский государственный
университет им. В.И. Ульянова -Ленина -2005, 28 с. [Minekaeva A.F., Religious hatred or en-
mity as a motive for commit ting a crime: criminal law and criminological aspects . Abstract of
dissertation for the degree of candidate of legal sciences Specialty 12.00.08 – criminal law and
criminology; penal law. Kazan: Kazan State University V.I. Ulyanov -Lenin -2005, p. 28].
29 Бодобаев К.А . (Bodobaev K.A.), op. cit. , p. 88 -92.
30 Минекаева А.Ф. (Minekaeva A.F), op. cit ., p. 28; Шилин Д.В. (Shilin D.V.), op. cit ., p. 81.
Dynami c Ele ments in the Contemporary Business Law 147
relations in an open form between representatives o f different social groups, es-
pecially representatives of different religious denominations31.
The reasons for the crime can be deduced from the contents of the slogans
(either verbal or in written form) declared at the time of the crime committed.
Such slo gans must contain the signs of religious hatred and humiliation of per-
sonal dignity.
Spell, differentiation, or religious split can become the reason for commit-
ting the crime both against the follower of a religion and against an atheist, or a
non-theist32. Often the stated reasons compete with other criminal motives (polit-
ical reasons of ideological or religious connotation). In such cases, the perpetrator
tends not only to express his own contemptuous attitude and enmity towards other
believers, but strive s to reorganize the order of society according to certain reli-
gious doctrine33.
3. Conclusions
The problem of the legal -criminal qualification of the actions aimed at pro-
voking the spell, differentiation and religious division is related, first of all, to the
direction of the perpetrator's intention, to identify the reasons and the goals set. It
is often the case that the attack within the meaning of art. 346 CP RM, forms a
crime contest with the armed rebellion (art. 340 CP RM); mass disorders (art. 285
CP RM). At the same time, if in connection with the performance of the duties of
the person the person will be discriminated against on the grounds of religion, the
committed ones will be qualified by competition with art. 176 CP RM (Violation
of equality o f rights of citizens).
Both the criminal law in force of the Republic of Moldova and the national
case law do not provide for what kind of behavior constitutes religious hatred
from the perspective of the extremist motive. The identification and evaluation of
discriminatory and extremist motives requires certain special knowledge and the
materials that reflect extremist opinions are to be subjected to an expertise in
criminal prosecution. In our opinion, the extremist motives will be expressly pro-
vided for in several articles in the Special Part of the Criminal Code of the Re-
public of Moldova and in the Criminal Code of Romania.
Bibliography
1. Jeflea A., Moraru V., Infracțiuni ce implică semne de extremism religios: aspecte de
drept penal, „Studia Universitatis”, 2016, no. 8(98), p. 170 -177.
2. Jeflea A., Spre clarificarea conceptului terorismului religios în accepțiunea crimi-
nologică . „Buletinul Științific al Universit ății de Stat `Bogdan Petriceicu Hasdeu`
31 Бодобаев К.А . (Bodobaev K.A.), op. cit. , p. 88 -92.
32 Минекаева А.Ф. (Minekaeva A.F), op. cit ., p. 28.
33 Ibid.
Dynami c Ele ments in the Contemporary Business Law 148
din Cahul”, 2017, №1(5), 2017 (Social sciences), p. 133 -144.
3. Obadă D., Cazacicov A., Grupul infracțional organizat în contextul criminalității
transnaționale, „Revista Institutului Național de Justiție”, 2018, no. 2, p.24-31.
4. Ududec D., Peltonen L., Niță D., Combaterea infracțiunilor motivate de ură: Ghid
pentru practicieni și decidenți. Bucharest, Center for Legal Resources, June 2015.
Publication made within the project "Monitoring of human rights through interna-
tional mechanisms" implemented by the Center of Legal Resources, financed
through the SEE grants 2009 -2014, within the NGO Fund in Romania: www.fon-
dong.fdsc.ro, consulted on 10.10.2019.
5. Бодобаев К.А ., Уголовная ответственность за возбуждение религиозной
вражд ы, „Вестник Кыргызской государственной юридической академии”,
2013, №3, с.88 -92. (Bodobaev K.A., Criminal liability for inciting religious hatred ,
„Bulletin of the Kyrgyz State Law Academy”, 2013, No. 3, pp. 88 -92).
6. Минекаева А. Ф., Религиозная ненависть и ли вражда как мотив совершения
преступления: уголовно -правовой и криминологический аспекты. Автореферат
диссертации на соискание ученой степени кандидата юридических наук
Специальность 12.00.08 – уголовное право и криминология; уголовно –
исполнительное прав о. Казань: Казанский государственный университет им.
В.И. Ульянова -Ленина -2005 [Minekaeva A.F., Religious hatred or enmity as a
motive for committing a crime: criminal law and criminological aspects . Abstract of
dissertation for the degree of candidate of legal sciences Specialty 12.00.08 – crimi-
nal law and criminology; penal law. Kazan: Kazan State University V.I. Ulyanov –
Lenin, 2005].
7. Ревина В. В., Экстремизм в российском уголовном праве: Автореферат
диссертации на соискание ученой степени кандидата юрид ических наук.
Специальность 12.00.08 – уголовное право и криминология; уголовно –
исполнительное право. Москва: Российский университет дружбы народов,
2010 (Revina V.V., Extremism in Russian criminal law : Abstract of dissertation for
the degree of candidate of legal sciences. Specialty 12.00.08 – criminal law and crim-
inology; penal law. Moscow: Peoples' Friendship University of Russia, 2010).
8. Хлус А. М., Криминалистические возможности выявления фактов
экстремизма при расследовании преступлений . В: Актуальные проблемы
правового противодействия экстремизму: доктрина и практика: материалы
Международной науч. -практ. конф. (19 -20 апреля 2012 г.) / отв. ред. Г.И.
Цепляева. – Петрозаводск, 2012, с.89 -96. [Khlus A.M., Forensic opportunities to
identify facts of extrem ism in the investigation of crimes , Actual problems of the legal
counteraction to extremism: doctrine and practice: materials of the International sci-
entific -practical. conf. (April 19 -20, 2012)/rep. ed. G.I. Tseplyaeva. – Petrozavodsk,
2012, p. 89 -96].
9. Шилин Д. В., Уголовная и административная ответственность за нарушение
права на свободу совести и вероисповедания: проблемы разграничения . В:
Журнал российского права № 5, 2016, (Shilin D.V., Criminal and administrative
liability for violation of the right t o freedom of conscience and religion: problems of
differentiation , „Journal of Russian Law”, no. 5, 2016).
Drawing to the Criminal Liability of the Legal Person
Associate professor Petruț CIOBANU1
Abstract
Legal entities, other than those excepted, are criminally liable whether they are
public or private. The guilt of the legal person refers to the organs and its organization,
so that establishing the guilt of the natural persons who make up the bodies of the legal
person is equivalent to establishing th e guilt of the legal person concerned. The judicial
bodies must establish the rules and practices existing in the organization and functioning
of the respective legal person, and if it turns out that the bodies of the legal person have
decided, have known or have not prevented, based on the levers available, the commission
of crimes, the liability can be committed criminal of the legal person, if the form of guilt
required by law for the examined crime is fulfilled.
Keywords: criminal liability, legal pers on, criminal offense, criminal law.
JEL Classification: K14
1. Introductory considerations
The procedure regarding the taking to criminal liability of the legal per-
son is regulated in the Code of criminal procedure, the special part, special pro-
cedures, title IV, chapter II, art. 489 -503.
We appreciate the fact that a series of articles in Title IV, Chapter II do
not represent the special provisions, but demonstrate that certain institutions are
applicable to legal entities as well.
Thus, according to the provisions of art. 489 paragraph 1 of the Code of
Criminal Procedure entitled "General provisions", "the provisions of the code ap-
ply to legal persons who commit crimes, in carrying out the object of activity, in
the interest or on behalf of the leg al person".
We consider this statement to be superfluous or unnecessary, because ac-
cording to the criminal law, these are the conditions under which the liability of
the legal person can be incurred.
2. Drawing to the criminal liability of the legal perso n
By Decision no. 21/20162 pronounced by the Completion for the unrav-
eling of some questions of law in criminal matters within the High Court of Cas-
sation and Justice regarding the interpretation of the provisions of art. 90 letter c)
1 Petruț Ciobanu – Faculty of Law, University of Bucharest, Romania, petrut.ciobanu@
drept.unibuc.ro.
2 Published in the Official Gazette no. 884 of November 04, 2016.
Dynami c Ele ments in the Contemporary Business Law 150
from the Code of Cr iminal Procedure, it was established that "during the prelim-
inary chamber procedure and during the trial, in cases where the law provides for
the crime committed for life imprisonment or the sentence of imprisonment of
more than 5 years, legal assistance i s mandatory for the defendant legal entity, in
relation to the provisions of art. 187 of the Criminal Code".
Pursuant to the provisions of art. 187 of the Criminal Code, by "the pun-
ishment provided by the law" is meant the punishment provided in the law t ext
that incriminates the deed committed in consumed form, without considering the
causes of reduction or increase of the punishment.
The possibility of the accumulation of the qualities of civilly responsible
party and of the defendant in the same crimina l trial is of particular importance
for the judicial practice.
The criminal liability of the legal person is a direct liability, for their own
deed, they do not answer for the deed of another person, so that when he has the
capacity to be charged in the cr iminal case, the legal person is charged with his
own deed.
In any case, the natural persons always answer for their own deed, the
criminal responsibility being personal. For the same act, the natural persons who
contributed to the same crime can be prosec uted and convicted, as it concerns the
same violation brought to the social value protected by the law, regardless of the
legal classification that will receive this touch (instigators, accomplices, etc.).
Civil liability is a liability for one's own deed , just like the criminal lia-
bility, and within the civil side of the criminal process, the liability of the civilly
responsible party is a liability for the deed of another, and not for one's own crime,
being a criminal liability – art. 1372 -1373 of the Ci vil Code.
We considered that in the same criminal trial the quality of suspect or
defendant of a legal person with that of a civilly responsible party can be cumu-
lated, so that a legal person can be acquitted as an accused, but he can be held
responsible f or the act of the foreskin.
Regarding the same fact, in the same criminal trial, a legal person cannot
be held liable from a civil point of view in his capacity as a defendant, as well as
in that of a civilly responsible party.
The possibility of convictin g the legal person as an offender and civilly
responsible party has practical utility, considering that the liability for one's own
deed excludes liability for the deed of another person.
According to the provisions of art. 1382 of the Civil Code, when the
harmful act is attributable to several persons, they are held jointly for compensa-
tion.
In accordance with the provisions of art. 1443 of the Civil Code, the legal
person is liable for the entire amount with which the person injured by the crime
committed constituted a civil part, regardless of the fact that this amount is also
requested from the natural persons who have the procedural quality of the de-
fendants in question.
Dynami c Ele ments in the Contemporary Business Law 151
If the legal person pays the whole amount, he has a right of recourse
against the n atural person obliged in solidarity, and the right of recourse is based
on the legal act of the payment, according to art. 1384 of the Civil Code.
The territorial competence of the judicial bodies regarding the criminal
liability of the legal person is reg ulated by art. 41 of the Code of Criminal Proce-
dure entitled "jurisdiction for offenses committed on the territory of Romania" 3.
Competence by territory is determined, in order:
a) the place where the crime was committed – art. 41 (1) letter a) of the
Code of Criminal Procedure.
b) the headquarters of the defendant of the legal person, at the moment
when the deed committed – art. 41 (1) letter c) second thesis;
c) the headquarters of the injured person – art. 41 (1) letter d) second the-
sis.
We consider tha t the agreement for recognizing the guilt cannot be con-
cluded by a legal person who has the capacity to be charged in a criminal case, in
relation to the provisions of art. 482 of the Code of Criminal Procedure entitled
"Content of the agreement for the re cognition of guilt".
According to art. 482 paragraph 1, letter b) from the Code of Criminal
Procedure, the acknowledgment of guilt must contain the name, first name of the
defendant, the data provided in art. 107 paragraph 1 of the Code of Criminal Pro-
cedu re, respectively nickname, personal numeric code, parents' names and sur-
names, civil status, military situation, studies, profession or occupation, job, in-
terpreter, etc.
Decision no. 1/2016 of the High Court of Cassation and Justice, pro-
nounced by the Com plaint for the unraveling of some questions of law in criminal
matters, to establish that the individual enterprise, organized by the entrepreneur
natural person under the Government Emergency Ordinance no. 44/2008 does
not have legal personality and, ther efore, cannot answer criminally under the con-
ditions of art. 135 of the Criminal Code
The provisions regarding the preliminary chamber procedure are appli-
cable also to the legal person who has the capacity of defendant or civilly respon-
sible party, without any particularity.
The object of the criminal action is to bring to criminal liability the legal
persons who have committed crimes, according to art. 490 of the Code of Crimi-
nal Procedure entitled "The object of the criminal action".
If the legal person a nd his legal representative are criminally prosecuted
3 Gr. Theodoru, Tratat de drept procesual penal , 3rd edition, Ed. Hamangiu, Bucharest, 2 013, p.
263; I. Neagu, M. Damaschin, Tratat de procedura penala. Partea generala in lumina noului Cod
de procedura penala , Ed. Universul Juridic, Bucharest, 2014, p. 341; A. Crisu, Drept procesual
penal. Partea generala conform Noului Cod de Procedura Pena la, 3rd edition, Ed. Hamangiu,
Bucharest, 2018, p. 233.
Dynami c Ele ments in the Contemporary Business Law 152
for the same deed or related facts, having the capacity of defendants, the repre-
sentation is provided by a judicial representative4.
The appointment of the judicial representative by the legal person re pre-
sents a procedural right, but also a procedural obligation of the legal person.
The legal person has the right to appoint a trustee because the legislator
uses the phrase "names itself" and from the interpretation of the text of the law it
results that it is an imperative norm.
The sanction of the violation of the obligation to appoint a judicial repre-
sentative by the legal person, is the fact that the judicial representative will be
appointed by the judicial body according to art. 491 para. 3 of the Cod e of Crim-
inal Procedure.
We consider that the legal person must have a unique representative as a
judicial agent, throughout the criminal process, regardless of how he was ap-
pointed, by the legal person or by the judicial bodies.
We mentioned that the judi cial agent exercises all rights and fulfills all
the procedural and procedural obligations incumbent on the legal person, being
limited only to the representation of the legal person in the criminal process.
The administrator or the legal representative of the legal person may con-
tinue to make payments, may conclude legal documents, because the power of
the judicial agent is only to represent the legal person in the criminal process, and
not to intervene in the administration of the company5.
The rights and obligations of the judicial agent are not provided for in the
criminal procedural law, but the judicial agent is remunerated.
Regarding the place of citation of the legal person, the rule in this matter
is the fact that it is cited at its headquarters6.
If the headquarters of the legal person is fictitious or the legal person no
longer works at the declared headquarters, and the new headquarters is not
known, a notification is displayed at the headquarters of the judicial body, which
is different from the citation.
In the event that no person is presented for the communication of the
summons, the summons is considered communicated when the deadline stipu-
lated in the notification is fulfilled.
In the situation in which a judicial representative has been appo inted, the
legal person is summoned to his or her home or office.
During the criminal prosecution, in accordance with the provisions of art.
495 of the Code of Criminal Procedure, the prosecutor communicates to the body
4 A. Crisu, Drept procesual penal , 4th edition, Ed. Hamangiu, Bucharest, 2013, p. 664.
5 F. Streteanu, R. Chiriță, Răspunderea penală a persoanelor juridice , Ed. C.H. Beck, Bucharest,
2007, p. 384.
6 Gr. Theodoru, op. cit ., 2013, p. 417; I. Neagu, M. Damaschin, op. cit ., 2014, p. 673; A. Crisu, op.
cit., 2018, p. 565.
Dynami c Ele ments in the Contemporary Business Law 153
that authorized the establishment of the legal person and to the body that regis-
tered the legal person7, the initiation of the criminal action and the prosecution of
the legal person, in order to make the appropriate statements.
Bibliography
1. A. Crisu, Drept procesual penal , 4th edition, Ed . Hamangiu, Bucharest, 2013.
2. A. Crisu, Drept procesual penal. Partea generala conform Noului Cod de Pro-
cedura Penala , 3rd edition, Ed. Hamangiu, Bucharest, 2018.
3. F. Streteanu, R. Chiriță, Răspunderea penală a persoanelor juridice , Ed. C.H.
Beck, Bucharest, 2007.
4. Gr. Theodoru, Tratat de drept procesual penal , 3rd edition, Ed. Hamangiu, Bu-
charest, 2013.
5. I. Neagu, M. Damaschin, Tratat de procedura penala. Partea generala in lumina
noului Cod de procedura penala , Ed. Universul Juridic, Bucharest, 2014.
7 A. Crisu, op. cit ., 2013, p. 665.
The Offense of Destroying at Fault in the Romanian Law
Assistant professor Ioana RUSU1
Abstract
In the present work we have examined the destroying at fault offense provided
for in the provisions of art. 255 of Criminal Code. Also, given the transitio nal situation
we are in, the elements of similarity and differentiation between the previous and the cur-
rent regulations have been analysed, a useful examination regarding the application of
the more favorable criminal law. The examination carried out is p art of an extensive work
to be published in a nationally recognized publishing house. The paper can be useful to
students, master students and doctoral students of the country's faculties, as well as prac-
titioners.
Keywords: the objective side; the subjec tive side; the more favorable criminal
law; the subjects of the crime.
JEL Classification: K14
1. Introduction
The offense of destroying at fault is provided in the Romanian Criminal
Code and is part of Title II with the marginal title “ Offenses agains t patrimony ”,
Chapter V “ Destruction and disturbance of possession ”.
In an absolutely normative order, the offense we intend to examine
briefly, is mentioned after the crimes of destruction and qualified destruction.
Specifically, it is mentioned in the pr ovisions of art. 255 par. (1) of Crim-
inal Code, and it consists in the destruction, degradation or bringing into a state
of non -use, at fault, of a good, even if it belongs to the perpetrator, if the deed is
committed by arson, explosion or any other such means and if it is likely to en-
danger other persons or property.
In the par. (2) an aggravated way is provided, which will take into account
the situation in which the aforementioned facts have resulted in a disaster.
The term “ disaster ” means “ the destruc tion or degradation of immovable
property or of works, equipment, installations or components thereof and which
resulted in the death or personal injury of two or more persons ”.
2. The Criminal Code in force in relation to the previous law
The offense of destroying at fault was provided in a similar regulation
also in the Criminal Code of 1969, at art. 219, between the two regulations, there
1 Ioana Rusu – „Dimitrie Cantemir” Christian University of Bucharest, Romania, oanarusu_86@
yahoo.com.
Dynami c Ele ments in the Contemporary Business Law 155
are some common elements as well as some different ones.
As these similarities and differences are of particular in terest for both
doctrine and judicial practice, at least viewed in the light of the application of
more favorable criminal law, we will try to highlight them.
Thus, among the elements of resemblance we mention: the preservation
of the same marginal title, incriminating the act only if the act of destruction was
carried out by arson, explosion or by any other such means, it is applied the more
severe sanction of the act when a disaster occurred.
As elements of differentiation we point out: the renunciation o f the cur-
rent legislator to sanction the destruction at fault that caused very serious conse-
quences (this renunciation being replaced with the sanction of the act when it had
as a result a disaster); renouncing the distinct incrimination of the action of d e-
struction, degradation or bringing into disuse of an oil or gas pipeline, an electrical
network, telecommunications equipment and installations or by broadcasting ra-
dio and television programs or water supply systems of the water supply pipe-
lines; renounc ing the requirement that the deed in the simple way will be such as
to create a public danger and replacing it with the requirement that the deed will
likely to endanger other persons; the renunciation of the incrimination of the act
of leaving the post or of committing any act by the management personnel of a
means of public transport or by the personnel directly assuring the security of
such transports.
At the same time, we also highlight major differences in terms of the
sanctioning regime, which is much lower in the new law (imprisonment from 3
months to one year or fine compared to imprisonment from one month to 2 years
or fine in the case of the simple way, imprisonment from 5 to 12 years, compared
to prison from 5 to 15 years in the aggravated way).
Regarding the elements of differentiation and similarity between the two
regulations, in the recent doctrine it has been argued that “In the current regula-
tion, this crime has been considerably simplified, only retaining the type and ag-
gravation of a disast er. Thus, the destruction at fault in the version described in
art. 219, par. (4) of previous Criminal Code, as such an act constitutes firstly a
service offense because it is committed by a breach of a service attribution (leav-
ing the job or any other act by the management personnel of a means of transport
or by the personnel which directly ensures the security of such transports) and,
secondly, it is difficult to accept such an act to be committed at fault. Moreover,
the practice did not register cases of application of the respective text. Also, it has
been waved on the option of aggravating the destruction, degradation or bringing
into disuse of an oil or gas pipeline, a high voltage cable, telecommunication
equipment and installations, or for broadcasti ng radio and television programs or
water supply systems and water supply pipelines”2.
2 Vasile Dobrinoiu, in Vasile Dobrinoiu, Ilie Pascu, Mihai Adrian Hotca, Ioan Chiș, Mirela Gorun-
escu, Costică Păun, Maxim Dobrinoiu, Norel Ne agu, Mircea Constantin Sinescu, Noul Cod penal,
Dynami c Ele ments in the Contemporary Business Law 156
Another author states that “compared to the lack of a judicial practice in
this matter, the New Criminal Code no longer provides as aggravated variant the
destruction, d egradation or bringing into a non -use state, at fault, of an asset, even
if it belongs to the perpetrator, in the case it has had particularly serious conse-
quences or if it resulted in a disaster, when the repercussions occurred as a result
of leaving the job or committing any other act by the management personnel of a
means of public transport or by the directly insuring personnel the security of such
transports; in this case, a service offense (being committed by breach of a service
attribution) will be h eld in competition with the offense of aggravated miscon-
duct”3.
In another opinion it is stated that “Firstly, it needs to be observed that
the results of the deed from the old regulations relate to a concrete danger,
whereas in the current regulation the legislator reports this consequence to a po-
tential danger – a destruction that may (…). An essential change is the renunciation
of the notion of public danger , a concept that does not respect the requirements
of the principle of legality of the incrimina tion. In the current Criminal Code, the
results concern the danger to which other persons or goods are subjected. We do
not necessarily talk about narrowing the scope of the text of incrimination, be-
cause the potential danger in the new regulation has a wi der sphere than the con-
crete one, and the danger of other people or goods is subsumed by the idea of
public danger . It is difficult for us to imagine a hypothesis in which the achieve-
ment of a public danger is not taken into account by the current regulati ons”4.
3. The pre -existing elements
3.1. The legal object
The special legal object is formed by the social relations regarding the
protection of the patrimony against any action or inaction of destruction, degra-
dation or bringing into disuse status of any movable or immovable property.
3.2. The material object
The material object is represented by any movable or immovable prop-
erty belonging to the owner or to another natural or legal person.
According to the recent doctrine “it cannot be a material ob ject of the
comentat, Partea specială/ New Criminal Code, commented, Special part , 3rd ed. revised and added,
Ed. Universul Juridic, Bucharest, 2016, pp. 350 -351.
3 Mihail Udroiu, Drept penal, Partea special/Criminal Code . The Special Part, 6th ed., C.H. Beck,
Bucharest, 2019, p. 389.
4 Sergiu Bogdan (coord.), Doris Alina Șerban, George Zlati, Noul Cod penal, Partea specială, An-
alize, Explicații, Comentarii, Perspectiva Clujeană /The New Criminal Code, Special Part, Analy-
sis, Explanations, Comments, Cluj Perspective, Ed. Universul Juridic, Bucharest, 2014, pp. 297 –
298.
Dynami c Ele ments in the Contemporary Business Law 157
crime of destruction: the abandoned goods or those that belong to no one, goods
in an extremely advanced state of degradation or those that are of no significance
and without any use.”5
3.3. Subjects of the crime
The active subject of the cri me can be any natural or legal person who
proves to have the criminal capacity to be liable for his deed, including the owner
of the good.
The co -authorship “is possible in the case of detaining the common fault
of several persons in committing the typical act; improper criminal participation
is possible, the persons who determined, facilitated or helped in any way, with
intent, in committing the destruction of the guilt being sanctioned for instigating,
respectively complicity in the offense of destruction (art. 253 the New Criminal
Code)”6.
The passive subject of the crime may be any natural or legal person to
whom it belongs the destroyed, property degraded or brought into disuse status.
4. The legal structure and content of the crime
4.1. The premise s ituation
The premise situation consists in the existence of a susceptible good “to
suffer an alteration of its substance or a diminution of its qualities of use. It is not
relevant if the good is completely new or in perfect condition, it is sufficient to be
used. The existence of a thing without value cannot constitute a premise situation
for a possible offense of destruction”7.
4.2. The constitutive content
4.2.1. The objective side
The material element of the objective side consists in the action or inac-
tion that results in the destruction, degradation or bringing into disuse of a good,
even if it is of the perpetrator.
Destruction is understood as “ the abolition, the destruction, the suppres-
5 Mihail Udoiu, op. cit., p. 389.
6 Idem, p. 389.
7 Constantin Sima, in George Antoniu, Tudorel Toader (coord.), George Antoniu, Versavia Brutaru,
Constantin Duvac, Ion Ifrim, Ilie Pascu, Marieta Safta, Constantin Sima, Tudorel Toader, Ioana
Vasiu, Explicațiile Noului Cod penal, vol. III, Art. 188 -256/Explanations of the New Criminal
Code, vol. III, Art. 188 -256, Ed. Universul Juridic, Bucharest, 2015, p. 635.
Dynami c Ele ments in the Contemporary Business Law 158
sion, the crushing, the reduction to mere remains, which, ev en if they have a cer-
tain value, is well below the initial value of the asset ”8.
The degradation of a good “means its deterioration, its partial alteration,
i.e. a substantial change that causes the good to no longer have the qualities and
the potential of its previous use”9.
Bringing it into a state of non -use “means the good loses completely its
initial qualities that ensured the potential of use, thus becoming completely unus-
able.”10
Essential requirements . For the existence of the crime it is necessary t o
cumulatively fulfill two essential requirements, respectively: the act to be com-
mitted by arson, explosion or by any other such means and the act may endanger
other persons or property. In the absence of one of these two requirements, the
deed will not f ulfill the constituent elements of the crime from an objective point
of view and consequently will not constitute an offense11.
In this regard, in the judicial practice “it was decided that there is no crime
of destruction at fault, if the destruction or de gradation did not occur by arson,
explosion or other such means and if there was no public danger12 or, in the event
of a traffic accident, the driver only caused some damage to the property of a
natural person at his fault”13.
We emphasize the fact that the requirement to be a public danger has been
replaced in the new law with the requirement that the deed is likely to endanger
other persons or property.
The immediate consequence is the creation of a state of danger for other
persons or goods in the vicinit y of the place where the goods were destroyed by
arson, explosion or by any other such means.
Between the incriminated act or inaction and the immediate follow -up,
there must be a causality link .
4.2.2. The subjective side
The form of guilt with which th e crime is committed is the fault , with
both of its ways.
8 Ibid.
9 Ibid.
10 Ibid.
11 Supreme Court of Justice, Criminal Sentence no 2334/1997, in Cule gere de decizii pe anul 1997/
Decision collection for 1997, p. 329.
12 Supreme Court of Justice, Criminal Sentence no 4523/1972, in RRD no. 3/1973, p. 162.
13 Constantin Sima in George Antoniu, Tudorel Toader (coord.) et all., op. cit., p. 645; the author
refers to Sibiu Court, Criminal Sentence no. 428/1972, in RRD no. 4/1973, p. 165.
Dynami c Ele ments in the Contemporary Business Law 159
5. Forms, ways, sanctions
5.1. Forms
Since the examined offense can be committed only at fault, we have only
the consumed form, excluding the preparatory acts and the attempt.
5.2. Ways
The offense examined has a simple normative way (type) and an aggra-
vated normative way.
Provided in the provisions of art. 255, par. (1) of Criminal Code, the sim-
ple normative way consists in the destruction, degradation or bringing into disuse
of a good, eve n if it belongs to the perpetrator, even if the deed is committed by
arson, explosion or by any other such means and if it is likely to endanger other
persons or property.
The aggravated normative way is provided in the provisions of art. 255
par. (2) of C riminal Code and it will be held under the conditions where the acts
committed under the conditions of the simple normative way have resulted in a
disaster.
The factual ways are numerous depending on the concrete circumstances
of committing each deed.
5.3. Penalties
In the case of the simple normative way, the sanction provided by law is
the imprisonment from 3 months to one year or a fine, and in the case of the
aggravated normative way, the sanction provided is the imprisonment from 5 to
12 years.
6. Complementary explanations
6.1. The connection to other offenses
The offense examined has some direct links with the crime of destruction
and the crime of qualified destruction, between these incriminations and there are
fundamental differences which cons ist first of all in the guilt with which the active
subject acts and the consequence that occurs.
6.2. Some procedural aspects
The jurisdiction in the court of first instance belongs to the court in the
Dynami c Ele ments in the Contemporary Business Law 160
area in which the deed was committed, except the ca ses where the jurisdiction
according to the quality of the person belongs to the court, the court of appeal or
the High Court of Cassation and Justice.
As a rule, the competence of criminal prosecution belongs to the criminal
investigation bodies of the ju dicial police under the supervision of the prosecutor
from the prosecutor's office next to the territorial competent court. If the jurisdic-
tion of the court of first instance belongs to the High Court of Cassation and Jus-
tice, the criminal prosecution will be exercised by the prosecutor.
The criminal action is initiated ex officio .
7. Legislative Background and Transitional Situations
7.1. Previous Legislation
As mentioned above, the offense examined was provided for in the pro-
visions of art. 219 of the Criminal Code of 1969.
7.2. Transitional Situations. Applying the More Favorable Criminal
Law
As other offenses, given the fact that the sentence limits provided in the
two laws differ, as well as some different conditions of incrimination, in transient
situations, the problem of applying a more favorable criminal law will be raised.
Thus, in relation to the concrete circumstances of committing each act,
with the seriousness of the crime and the danger of the offender the more favor-
able criminal law can b e both the old law and the new law.
Assuming the existence of one or more mitigating circumstances is re-
tained, even if in the old law the penalties are higher, the more favorable criminal
law will most often be the old law. Under the conditions of existen ce and with-
holding of aggravating circumstances, the more favorable criminal law will be
the new law, because the maximum limits are lower, in relation to the old law.
8. Conclusions
Maintaining the incrimination of the destruction offense in the Crimina l
Code in the large group of offenses against patrimony in a separate chapter, is
justified at the present time, due to the evolution of crimes in this area and the
need to defend by criminal law rules of the property.
Although there may be other opinions, we consider that the current in-
crimination, in terms of its legal content, but also the limits of punishment corre-
spond to the current needs, which involve the prevention and combating of this
type of crime. We appreciate that the judicial practice in the field will foreshadow
both the necessity of maintaining it in the Criminal Code, as well as a possible
Dynami c Ele ments in the Contemporary Business Law 161
completion of the legal content.
Bibliography
1. Constantin Sima, in George Antoniu, Tudorel Toader (coord.), George Antoniu,
Versavia Brutaru, Constanti n Duvac, Ion Ifrim, Ilie Pascu, Marieta Safta, Con-
stantin Sima, Tudorel Toader, Ioana Vasiu, Explicațiile Noului Cod penal, vol.
III, Art. 188 -256/Explanations of the New Criminal Code, vol. III, Art. 188 -256,
Ed. Universul Juridic, Bucharest, 2015.
2. Mihail Udroiu, Drept penal, Partea special/Criminal Code. The Special Part,
6th ed., C.H. Beck, Buc harest, 2019.
3. Sergiu Bogdan (coord.), Doris Alina Șerban, George Zlati, Noul Cod penal, Par-
tea specială, Analize, Explicații, Comentarii, Perspectiva Clujeană /The New
Criminal Code, Special Part, Analysis, Explanations, Comments, Cluj Perspec-
tive, Ed. Univ ersul Juridic, Bucharest, 2014.
4. Vasile Dobrinoiu, in Vasile Dobrinoiu, Ilie Pascu, Mihai Adrian Hotca, Ioan
Chiș, Mirela Gorunescu, Costică Păun, Maxim Dobrinoiu, Norel Neagu, Mircea
Constantin Sinescu, Noul Cod penal, comentat, Partea specială/ New Crimina l
Code, commented, Special part , 3rd ed. revised and added, Ed. Universul Juridic,
Bucharest, 2016.
Some Considerations Regarding False Testimony
in the Romanian Law. Active Subjects of the Offense.
Critical Opinions and De Lege Ferenda Proposal s
Assistant professor Bogdan BÎRZU1
Abstract
In this paper we have examined some pre -existing conditions for the offense of
false testimony, respectively, of the active subjects of this offence. We also presented some
considerations regarding the element s of differentiation and similarity between the cur-
rent and existing regulations in the Criminal Code of 1969. The examination also con-
sidered the formulation of critical opinions, supplemented by de lege ferenda proposals
meant to contribute to the improv ement of the text in force. The paper can be useful to
students and masters of law faculties in the country, as well as to practitioners in the field
of criminal law.
Keywords: crime; witness with protected identity; witness protection program;
false test imony.
JEL Classification: K14
1. Introduction
Provided in the provisions of art. 273 par. (1) of the Romanian Criminal
Code in force, the crime of false testimony consists in the act of the witness who,
in a criminal, civil case or in any other proced ure in which witnesses are heard,
makes false statements or does not say everything he knows about the essential
facts or circumstances in which he is interrogated.
According to the provisions contained in par. (2) of the same article, the
crime is conside red to be more serious being sanctioned accordingly, under the
conditions in which the false testimony is committed by certain persons, such as:
the witness with protected identity or who is in the Witness Protection Program;
the undercover investigator or a person who draws up an expert report or an in-
terpreter, as well as when it is committed in connection with an act for which the
law provides for the sentence of life imprisonment or imprisonment of 10 years
or more.
In addition to the typical and aggrav ated modalities, the text of incrimi-
nation also provides for some special causes of non -punishment, respectively, in
the event that the active subject withdraws his testimony, in criminal cases before
the arrest, arrest or movement of the criminal action o r in other cases before a
1 Bogdan Bîrzu – „Titu Maiorescu” University of Bucharest, officer at the Ministry of Internal
Affairs, Romania, birzu_bogdan@yahoo.com.
Dynami c Ele ments in the Contemporary Business Law 163
judgment has been passed or another solution has been given, as a result of the
false testimony.
Referring to the reason of the incrimination and the social value protected
the recent doctrine the evidence that “This incrimination text provides criminal
protection to the credibility of the evidence with witnesses in a judicial procedure.
It is certain that the statements of witnesses or persons assimilated to them (inter-
preter, expert) are one of the most important means of proof b y which the truth
can be obtained, and they essentially contribute to the treatment of the most exact
correspondence between legal and material truth. From this point of view, it is
natural for the legislator to incriminate the obligation of the witnesses to contrib-
ute to the establishment of the “legal” truth, such conduct being able to prejudice
in an essential manner the act of justice. It would be difficult to imagine a system
in which the statements of the witnesses would be devoid of credibility and t here-
fore unnecessary from the perspective of the correct solution of the case in which
witnesses are heard”2.
It should be noted that the facts of the witness making false statements in
connection with circumstances not essential to the case or not declari ng circum-
stances essential to the cause, not being asked about them by the competent judi-
cial body, do not meet the typical conditions of this offense.
2. The Criminal Code in force in relation to the previous law
The mentioned offense was regulated in a similar formulation and in the
Criminal Code of 1969, in art. 260.
The comparative examination of the two incriminations allows us to iden-
tify elements of differentiation, as well as others of similarity.
The differentiating elements are:
– the inclusion of aggravated normative ways consisting of, the act com-
mitted by certain categories of persons, directly involved in the complex activity
of performing the act of justice, such as: the witness with protected identity or
who is in the Witness Protection Pro gram, the undercover investigator or a person
who draws up an expert report or an interpreter, or the false testimony committed
in connection with a fact for which the law provides for the sentence of life im-
prisonment or imprisonment of 10 years or more;
– waiving the cause of mitigation the sentence, when the withdrawal of
the false testimony intervened in the criminal cases after the arrest of the defend-
ant or in all the cases after a decision was passed or another solution was given
as a result of the f alse testimony;
– the special cause of non -punishment is more restrictive by imposing the
obligation to withdraw the false testimony before the moment of arrest, arrest or
2 Sergiu Bogdan (coord.), Doris Alina Șerban, George Zlati, Noul Cod penal, Partea specială,
Analize, explicații, comentarii, Perspectiva clujeană /New Criminal Code, Special Part, Analysis,
explanations, comments, Cluj perspective, Ed. Universul Juridic, Bu charest, 2014, p. 353.
Dynami c Ele ments in the Contemporary Business Law 164
movement of the criminal action or in other cases before a decision has been
given o r another decision has been given solution, as a result of the false testi-
mony; in the previous regulation the special cause of non -punishment consisted
of the witness's testimony that in criminal cases, before the arrest of the defendant
or in all the cas es before a decision was given or another solution was given as a
result of the testimony a liar, he withdraws his testimony;
– the renunciation of the current legislator to sanction the interpreter or
the expert in the standard way and to include their sa nction in the aggravated
normative way;
– in the type of normative mode, the sanction provided in the new law is
lower, being provided alternatively and with a fine (imprisonment from 6 months
to 3 years or a fine, compared to imprisonment from one to 5 ye ars.
As elements of resemblance we mention the marginal name, the legal
content of the standard modality of both laws, as well as minimum and maximum
penalty limits identical for the aggravated normative way of the new law and the
normative modality of the previous law.
The identification of the elements of similarity and distinction between
the two regulations is of major importance in the complex activity of identifying
and applying the more favorable criminal law in transitional situations.
3. Active su bjects of the crime
The active subject of the offense is qualified as it can only be a person
who has the status of a witness or one of the following qualities: a witness with a
protected identity, a witness in the Witness Protection Program, an undercove r
investigator, or a person who prepares a report of expertise or an interpreter.
According to DEX3, the witness is a person who “attends or witnesses an
incident, a discussion, an event, etc. (and who can tell or attest to how the facts
went)” or “the per son called to testify before a court or other investigative body
everything he knows about a fact he knows directly”.
According to the provisions of art. 34 Criminal Procedure Code the wit-
ness belongs to the category of procedural subjects.
According to th e doctrine “In order for the offense of false testimony to
be committed, the quality of a person's witness must be legally ascribed at the
time of his hearing. Therefore, persons who cannot be heard as witnesses, for any
reason, cannot be directly active s ubjects of the crime of false testimony”4.
3 Academia Română, Institutul de Lingvistică „Iorgu Iordan”, Dicționarul explicativ al limbii
române/ The Romanian Academy, the Iorgu Iordan Institute of Linguistics, The Explanatory
Dictionary of the Romanian Language , 2nd ed., Unive rs Enciclopedic, Bucharest, 1998, p. 601.
4 Nicoleta Iliescu in Vintilă Dongoroz, Siegfried Kahane, Ion Oancea, Iosif Fodor, Nicoleta Iliescu,
Constantin Bulai, Rodica Stănoiu, Victor Roșca, Explicații teoretice ale Codului penal român, vol.
IV, Partea spe cial/Theoretical explanations of the Romanian Criminal Code, vol. IV, Special part,
Publishing House of the Academy , Bucharest, 1972, p. 179.
Dynami c Ele ments in the Contemporary Business Law 165
In the provisions of art. 114 par. (1) of Criminal Procedure Code, it is
stipulated that “any person who is aware of facts or circumstances which consti-
tute evidence in the criminal case may be heard as a witness” .
Regarding the obligations of the witness, they are provided in the provi-
sions of art. 114 paragraph (2) Criminal Procedure Code, and consist of: present-
ing before the judicial body that cited it at the place, day and time provided in the
summons, taking the oath or solemn declaration and telling the truth.
Considering its importance in the criminal trial, the quality of a witness
takes precedence over the quality of an expert or lawyer, mediator or representa-
tive of one of the parties or of a main proced ural subject, regarding the facts and
the factual circumstances on which the person knew them before acquiring this
quality.5
Depending on the specific circumstances of the commission of the deed,
the persons referred to in art. 61 and 62 Criminal Procedur e Code are also in-
cluded.
Any person can be cited and heard as a witness, with the exception of the
parties (in the criminal case the parties are: the defendant, the civil party and the
civilly responsible party) and the main procedural subjects (the suspe ct and the
injured person).
According to the provisions of the law, persons in a situation that reason-
ably question the ability to witness can only be heard when the judicial body finds
that the person is able to consciously report facts and circumstances in fact com-
pliant with reality. In order to decide on the ability of a person to be a witness,
the judicial body has, upon request or ex officio, any necessary examination, by
means provided by the law.
Also, “he can be heard as a witness under the legal c onditions and the
minor, he can also commit the crime of false testimony, of course, when, accord-
ing to the law, he can be criminally liable. It may be the subject of the crime
mentioned and the witness listened by the oath, the spouse or close relative of the
accused or the accused.”6
In the criminal case, the hearing of the minor witness who did not reach
the age of 14 at the date of the hearing raised various problems, the legislator
instituting a special procedure, which takes into account a special pos ition in
which both the judicial bodies and the minor witness are.
In this regard, we make the specification that according to the law, it can
be heard only in the presence of one of the parents, the guardian, the person or
the representative of the instit ution to whom it is entrusted for growth and educa-
tion. The minor who has not attained the age of 14 years cannot be the author of
5 Art. 114 par. (3) Criminal Procedure Code.
6 Vasile Dobrinoiu in Vasile Dobrinoiu, Ilie Pascu, Mihai Adrian Hotc a, Ioan Chiș, Mirela
Gorunescu, Costică Păun, Maxim Dobrinoiu, Norel Neagu, Mircea Constantin Sinescu, Noul Cod
penal, comentat, Partea specială /The new Criminal Code, commented, Special Part, third edition,
revised and added, Ed. Universul Juridic, Buchar est, 2016, p. 431.
Dynami c Ele ments in the Contemporary Business Law 166
the crime of false testimony, unlike the minor who has reached this age who can
be an active subject of this offense.
If the above -mentioned persons cannot be present at the hearing for var-
ious reasons, they either have the capacity of suspect, defendant, injured person,
civil party, civilly responsible party or witness concerned or there is reasonable
suspicion that they may in fluence the statement of the minor, hearing the minor
takes place in the presence of a representative of the guardianship authority or a
relative with full exercise capacity, established by the judicial body.
If it is considered necessary, upon request or ex officio , the criminal in-
vestigation body or the court orders that a psychologist to be present at the hearing
of the minor witness.
Also from a procedural point of view, the judicial bodies that carry out
the hearing should avoid producing any negative effect on its mental state.
The minor witness who at the date of the hearing had not reached the age
of 14 years is not notified of the obligations provided in art. 120 paragraph (2)
letter d) Criminal Procedure Code and he does not take an oath, but he is advised
to tell the truth.
The injured person “who did not constitute a civil party can be the author
of the crime in the situation in which he gave up this quality in a criminal trial in
which the criminal action is exerted ex officio”7, the same quality can be at-
tributed to the finding body that can be heard as a witness and commits the crime
of false testimony.
According to the recent doctrine “they cannot be directly active subjects,
the persons according to art. 315 -317 Criminal Procedure Code accordi ng to art.
116-117 of Criminal Procedure Code, can refuse to give statements as a witness,
if there is such a refusal (for example, in criminal cases: the spouse, ascendants
and descendants in direct line, as well as the brothers and sisters of the suspect or
the defendant; persons who have been the spouse of the suspect or the defendant,
the person obliged to keep the secret or confidentiality regarding the facts and
circumstances of which he became aware in the exercise of the profession, with-
out the appr oval of the competent authority or of the person entitled to express
his agreement in this regard, or if there is a legal cause for removing the obligation
to keep the secret or confidentiality); if these persons give a statement, regardless
of whether the y have not exercised the right provided for by the law, or have not
been notified in advance that they can use this right (if the witness statement is
not excluded), their status as author may be retained; if the false statement by the
witness was administ ered illegally and is subsequently excluded (legal and mate-
rial), we do not believe that the existence of the crime can be retained, regardless
of the content of the statement”.8
Also, they cannot have the quality of authors of the offense the person for
7 Mihail Udroiu, Drept penal, Partea specială, Sinteze și grille/ Criminal Law, Special Part,
Synthesis and Grids , 6th edition, Ed. C.H. Beck, Bucharest, 2019, p. 484.
8 Ibid, p. 394.
Dynami c Ele ments in the Contemporary Business Law 167
whom there is a legal prohibition for the hearing as a witness in the review pro-
cedure, according to the provisions of art. 461 paragraph (5) Criminal Procedure
Code, the civil party and the civilly liable party.
By Decision no. 562/20179, the Constitution al Court admitted the excep-
tion of unconstitutionality and found that “the legislative solution contained in
art. 117 paragraph (1) letters a) and b) of the Code of Criminal Procedure, which
excludes from the right to refuse to be heard as a witness the pe rsons who have
established relations similar to those of spouses, is unconstitutional ”.
We specify that although up to this date the legislator has not operated
the modification imposed by the Court, we consider that in the category of per-
sons who have the right to refuse to give statements as a witness is included also
the person who has established relations similar to those of spouses (concubine).
By Decision no. 10/201910, High Court of Cassation and Justice – Com-
pletion for the unraveling of some questi ons of law in criminal matters admitted
the referral made by the Bucharest Court of Appeal, the Second Criminal Section,
and established that: “(…) the participant in the commission a crime that has been
tried separately from the other participants and s ubsequently heard as a witness,
in the disjunctive case, cannot have the active subject status of the crime of false
testimony provided by art. 273 of the Criminal Code ”.
In the event that one of these persons agrees to testify as a witness, and
at the hea ring makes false statements or does not say everything he knows about
the essential facts or circumstances about which he was asked, he will commit
the crime of false testimony.
By Decision no. 1/201911 High Court of Cassation and Justice – The RIL
Completi on admitted the appeal in the interest of the law declared by the Prose-
cutor General of the Prosecutor's Office attached to the High Court of Cassation
and Justice, and established that: “ The act of a person heard as a witness, to do
false statements or no t to say everything he knows about the essential facts or
circumstances on which he was asked, meets only the constituent elements of the
crime of false testimony, provided by art. 273 par. (1) of the Criminal Code ”.
Within the aggravated normative way pro vided in par. (2) in art. 273
Criminal Code, the active subject may have certain special qualities that imply
on his part increased responsibilities in the criminal process, respectively: witness
with protected identity or in the Protection of witnesses pr ogram, investigator
under cover, a person who draws up a report of expertise or an interpreter or
witness heard in connection with a fact for which the law provides for the sen-
tence of life imprisonment or imprisonment of 10 years or more.
The witness phra se with protected identity is not defined in the Romanian
law, but it results from the way of regulating the provisions contained in art. 125 –
129 of Criminal Procedure Code.
9 Published in the Official Monitor of Romania, Part I , no. 837 of October 23, 2017.
10 Published in the Official Monitor of Romania, Part I, no. 416 of May 28, 2019.
11 Published in the Official Monitor of Romania, Part I, no. 187 of March 8, 2019.
Dynami c Ele ments in the Contemporary Business Law 168
In this sense it is necessary to have in mind the phrase of witness threat-
ened by art. 125 Criminal Procedure Code.
In view of the above, we appreciate that through a witness with a pro-
tected identity, within the meaning of the provisions of art. 273 par. (2) letter a)
thesis I, Criminal Code is understood the witness who acquired the s tatus of
threatened witness in the phase of criminal prosecution or in the phase of trial,
against which one of the protective measures provided for in art. 126 letter c) and
d) or art. 127 letter d) and e) Criminal Procedure Code.
We specify that accordin g to the provisions of art. 126 par. (1) Criminal
Procedure Code, during the criminal prosecution, once it has been granted the
status of threatened witness, the prosecutor orders the application of one of the
following measures:
– the protection of identi ty data, by granting a pseudonym with which the
witness will sign his statement; and
– hearing the witness without him being present, by means of the audio –
visual means of transmission, with the distorted voice and image, when the other
measures are not su fficient.
In this situation, the witness statement will not include the actual address
or his identity data, these being recorded in a special register to which only the
criminal prosecution body, the judge of rights and freedoms, the preliminary
chamber j udge or the court, will have access to, under strict conditions of confi-
dentiality.
In the event that the danger status for the witness appeared during the
preliminary chamber procedure, the preliminary chamber judge, ex officio or at
the prosecutor's noti ce, disposes of the protection measures provided in art. 127
of Criminal Procedure Code.
The granting of the protected witness status can also be ordered in the
court phase by the court under the same conditions with the provision of the same
measures as d uring the criminal prosecution, mentioned above.
We consider that de lege ferenda the legislator should intervene and pro-
ceed to replace the phrase witness with protected identity , with the word threat-
ened witness , or to proceed with the preservation of th e word witness with pro-
tected identity , which will be followed by its legal interpretation.
However, we consider that it is necessary to correlate the provisions of
the Criminal Code with those of the Criminal Procedure Code in this matter.
The witness sta tement in the Witness Protection Program is provided in
the provisions of Law no. 682/2002 regarding the protection of witnesses, as sub-
sequently amended and supplemented, republished12.
Thus, in accordance with the provisions of art. 2 letter a) from the s pecial
law, the witness is the person who is in one of the following situations:
12 Published in the Official Monitor of Romania, Part I, no. 96 4 of 28.12.2002, republished in the
Official Monitor of Romania, Part I, no. 288 of 18.04.2014.
Dynami c Ele ments in the Contemporary Business Law 169
1. It has the capacity of witness, according to the Code of Criminal Pro-
cedure, and by its statements provides information and data of decisive feature in
finding out the trut h about serious crimes or contributing to the prevention of
production or to recover any special damages that could be caused by the com-
mission of such offenses;
2. without having a procedural quality in question, through decisive in-
formation and data, it contributes to finding the truth in cases concerning serious
crimes or to prevent the occurrence of special damages that could be caused by
committing such crimes or to recover them; in this category it is included the
person who has the quality of defenda nt in another case;
3. it is in the process of executing a sentence of deprivation of liberty and,
through the information and data of decisive character that they provide, contrib-
utes to finding out the truth in cases regarding serious crimes or to preven ting the
production or to recover any special damages that could be caused by committing
such crimes.
It is also worth mentioning that the serious crime is the crime that belongs
to one of the following categories:
– genocide and crimes against humanity;
– war crimes;
– offenses against national security;
– terrorism;
– killing;
– drug trafficking offenses;
– human trafficking;
– trafficking of minors;
– money laundering;
– counterfeiting currency or other values;
– offenses related to non -compliance with t he regime of weapons, ammu-
nition, explosives, nuclear or other radioactive materials;
– corruption offenses;
– any other offense for which the law provides for the punishment of im-
prisonment, whose special maximum is 10 years or more.
As regards the specia l prejudice referred to in the special law, it must
exceed the equivalent in lei of 50,000 euros (the damage caused by crime), ac-
cording to the provisions of art. 2 letter c) from the special law, the protected
witness is the witness, the members of his fa mily and the persons close to him
included in the witness protection program, according to the provisions of the
law.
The witness protection program represents the specific activities carried
out by the National Office for the Protection of Witnesses, with the support of the
central and local public administration, in order to defend the life, bodily integrity
and health of the persons who have acquired the quality of protected witnesses,
under the special law conditions.
Dynami c Ele ments in the Contemporary Business Law 170
The undercover investigator is the operative worker in the judicial police.
According to the provisions of the law, in case of investigation of crimes
against national security and terrorist offenses can be used as undercover inves-
tigators and operative workers within the state bodies that carry out, according to
the law, intelligence activities in order to ensure national security.
Regarding the provisions of art. 148 paragraph (4) Criminal Procedure
Code, mentioned above, we consider that they cannot produce legal consequences
within the m eaning of the provisions of the text, because it is incident with the
decision of the Constitutional Court no. 51/2016.13
We appreciate that the provisions of art. 148 par. (4) Criminal Procedure
Code, which confers the right to have the quality of undercov er investigator in
the case of crimes against state security and those of terrorism to the operative
workers of the state bodies that carry out intelligence activities in order to ensure
national security are at least questionable, if not really unconstitu tional.
De lege ferenda we propose to reformulate the text in question.
Undercover investigators can be heard as witnesses in criminal proceed-
ings under the same conditions as threatened witnesses.
The phrase person who draws up an expert report means the person who
actually formulates or writes the expert report. In this way, the legislator wanted
to sanction both the expert and the person who actually formulated or drafted the
expert report, often this person identifies with the expert.
From the interpret ation of this phrase it follows that the active subject of
the crime examined may be even the person typing an expert report who, with
intent, mentions in its contents or conclusions data that is not in line with the
reality that results from the expert's opinion.
Regarding the notion of expert, in DEX it is shown that this is a person
who has a solid knowledge in a certain field; a high -class specialist or competent
person in a specific field, appointed by a state body or by the interested parties
to do an expertise14.
The expertise is a technical research conducted by an expert, at the re-
quest of a court or criminal prosecution body or of the parties, on a situation,
problems, etc., whose clarity interests the solution of the case; report prepared by
an exp ert on the research carried out”15.
In his capacity as an active subject, the expert can commit this crime in
two ways, respectively: by mentioning situations that are not in conformity with
the reality in the expert report drawn up or by deposition not con forming to the
reality given before the judicial bodies, in both hypotheses it is necessary that the
false statements made or mentioned in the expert report or omissions regarding
essential facts or circumstances in which they were asked.
Regarding the int erpretation of the deed for which the law provides for
13 Published in the Official Monitor of Romania, Part I, no. 190 of March 14, 2016.
14 The Romanian Academy, the Iorgu Iordan Institute of Linguistics, op. cit ., 1998, p. 358.
15 Ibid., p. 358.
Dynami c Ele ments in the Contemporary Business Law 171
the sentence of life imprisonment or imprisonment of 10 years or more, we con-
sider that no other explanations are necessary, the cause being incidental in all
situations in which the witness commits th e deed mentioned in para. (1) in art.
273 Criminal Code. In cases where the maximum penalty provided by law for the
offense in question is life imprisonment or imprisonment of 10 years or more.
Criminal participation is possible both in the form of instiga tion and
complicity.
Being “an offense with an exclusive perpetrator, the co -authorship is not
possible when the deed is committed by a witness (regardless of whether or not
he is subject to a protective measure) by an undercover investigator, an expert
(who draws up the expert report alone or who is heard by the court) or an inter-
preter; the co -author will be withheld for the crime of false testimony and if sev-
eral experts are appointed to jointly produce an expert report and within it they
decide together to file false statements; a hypothesis of co -authoring can also be
retained when the false translation or interpretation is carried out by several in-
terpreters who decide together to present untrue facts or circumstances (for ex-
ample, they translate toget her a document in which they jointly decide to insert
false statements); it must be emphasized that these hypotheses of co -authoring
are purely theoretical, so far there is no case in the practice in which to be retained
the co -authorship”16.
The main passi ve subject is the state as the holder of the defended social
value, and the secondary passive subject is the natural or legal person who has
suffered as a result of committing the incriminated offense.
4. Conclusions
As it is clear from the title of the paper, the examination carried out took
into account the active subjects of the crime of false testimony, with direct refer-
ence to the recent Romanian doctrine in this matter.
Without claiming to have exhausted the whole issue related to this topic,
which will be resumed in a larger paper to be published later, collectively, the
subject is of particular interest for both doctrine and judicial practice.
It is noteworthy that, up to this date, the Romanian legislator has not made
the necessary changes to agre e the provisions of the law in force with those of the
Constitution.
On the other hand, the critical opinions formulated and scientifically ar-
gued, supplemented by the corresponding legal proposals are likely to lead to the
improvement of the legal norms concerned.
16 Mihail Udroiu, op. cit., pp. 484 -485.
Dynami c Ele ments in the Contemporary Business Law 172
Bibliography
1. Mihail Udroiu, Drept penal, Partea specială, Sinteze și grille/ Criminal Law,
Special Part, Synthesis and Grids , 6th edition, Ed. C.H. Beck, Bucharest, 2019.
2. Nicoleta Iliescu in Vintilă Dongoroz, Siegfried Kahane, Ion Oancea, Ios if Fodor,
Nicoleta Iliescu, Constantin Bulai, Rodica Stănoiu, Victor Roșca, Explicații te-
oretice ale Codului penal român, vol. IV, Partea special/Theoretical explana-
tions of the Romanian Criminal Code, vol. IV, Special part, Publishing House of
the Academy , Bucharest, 1972.
3. Sergiu Bogdan (coord.), Doris Alina Șerban, George Zlati, Noul Cod penal, Par-
tea specială, Analize, explicații, comentarii, Perspectiva clujeană /New Criminal
Code, Special Part, Analysis, explanations, comments, Cluj perspective, Ed.
Universul Juridic, Bucharest, 2014.
4. Vasile Dobrinoiu, Ilie Pascu, Mihai Adrian Hotca, Ioan Chiș, Mirela Gorunescu,
Costică Păun, Maxim Dobrinoiu, Norel Neagu, Mircea Constantin Sinescu, Noul
Cod penal, comentat, Partea specială /The new Criminal Code, commente d, Spe-
cial Part, third edition, revised and added, Ed. Universul Juridic, Bucharest,
2016.
5. The Romanian Academy, the „Iorgu Iordan” Institute of Linguistics, Dicționarul
explicativ al limbii române/The Explanatory Dictionary of the Romanian Lan-
guage , 2nd ed., Univers Enciclopedic, Bucharest, 1998.
Measuring Crime
Lecturer Adriana Iuliana STANCU1
Abstract
Questions about how crime is measured and what those measurements reveal
about the nature and extent of crime are among the most important is sues in contempo-
rary criminology. Researchers, theorists, and practitioners need information in order to
explain and prevent crime and to operate agencies that deal with the crime problem. It is
extremely difficult, however, to gather accurate information. Because of these difficulties,
it is necessary for students of criminology to understand how data are collected, what
they mean, and whether they are useful. After we look at the objectives and methods of
collecting information, we will consider the limit ations of the three information sources
criminologists most frequently use to estimate the nature and extent of crime. We then
explore measurement of the characteristics of crimes, criminals, and victims.
Keywords : crime, criminal law, contemporary crim inology, victim.
JEL Classification: K14
1. Introductory considerations
There are three major reasons for measuring characteristics of crimes,
criminals, and victims. First of all, researchers need to collect and analyze infor-
mation in order to test th eories about why people commit crime. One criminolo-
gist might record the kinds of offenses committed by people of different ages;
another might count the number of crimes committed at different times of the
year. But without ordering these observations in some purposeful way, without a
theory, a systematic set of principles that explain how two or more phenomena
are related, scientists would be limited in their ability to make predictions from
the data they collect.
The types of data that are collected and the way they are collected are
crucial to the research process. Criminologists analyze these data and use their
findings to support or refute theories.
We examine several theories (including the one outlined briefly here) that
explain why people commit c rime, and we will see how these theories have been
tested.
One theory of crime causation, for example, is that high crime rates result
from wide disparity between people's goals and the means available to them for
reaching those goals. Those who lack legit imate opportunities to achieve their
goals try to reach them through criminal means. To test this theory, researchers
1 Adriana Iuliana Stancu – Faculty of Judicial, Social and Political Sciences, “Dunarea de Jos”
University of Galati, Romania, adriana.tudorache@ugal.ro.
Dynami c Ele ments in the Contemporary Business Law 174
might begin with the hypothesis (a testable proposition that describes how two or
more factors are related) that lower – class individuals engage in more serious
crimes and do so more frequently than middle -class individuals. Next they would
collect facts, observations, and other pertinent information – called data -on the
criminal behavior of both lower -class and middle -class individuals. A finding that
lower -class persons commit more crimes would support the theory that people
commit crimes because they do not have legitimate means to reach their goals.
The second objective of measurement is to enhance our knowledge of the
characteristics of various types of offenses. Why are some more likely to be com-
mitted than others? What situational factors, such as time of day or type of place,
influence the commission of crime? Experts have argued that this information is
needed if we are to prevent cr ime and develop strategies to control it.
Measurement has a third major objective: criminal justice agencies de-
pend on certain kinds of information to facilitate daily operations and to anticipate
future needs. How many persons flow through county jails? How many will re-
ceive prison sentences? Besides the questions that deal with the day -to-day func-
tioning of the system (number of beds, distribution and hiring of personnel), other
questions affect legislative and policy decisions. For instance, what effec t does a
change in law have on the amount of crime committed? Consider legislation on
the death penalty. Some people claim that homicides decrease when a death pen-
alty is instituted. Others claim that capital punishment laws make no difference.
Does fear o f crime go down if we put more police officers in a neighborhood?
Does drug smuggling move to another entry point if old access routes are cut off?
These and other potential changes need to be evaluated – and evaluations require
measurement.
2. Methods of collecting data
Given the importance of data for research, policy making, and the daily
operation and planning of the criminal justice system, criminologists have been
working to perfect data collection techniques. Through the years these methods
have be come increasingly more sophisticated.
Depending on what questions they are asking, criminologists can and do
collect their data in a variety of ways: through survey research, experiments, ob-
servation, and case studies.
Data can be found in a wide variety o f sources, but the most frequently
used sources are statistics compiled by government agencies and private founda-
tions. Familiarity with the sources of data and the methods used to gather data
will help in understanding the studies we discuss throughout th is book. The facts
and observations researchers gather for the purpose of a particular study are called
primary data. Those they find in government sources, or data that were previously
collected for a different investigati on, are called secondary data.
Dynami c Ele ments in the Contemporary Business Law 175
3. Surveys
Most of us are familiar with surveys – in public opinion polls, marketing
research, and election -prediction studies. Criminologists use surveys to obtain
quantitative data. A survey is the systematic collection of respondents' answers
to quest ions asked in questionnaires or interviews; interviews may be conducted
face-to-face or by telephone. Generally, surveys are used to gather information
about the attitudes, characteristics, or behavior of a large group of persons who
are called the populat ion of the survey. Surveys conducted by criminologists
measure, for example, the amount of crime, attitudes toward police or toward the
sentencing of dangerous offenders, assessment of drug abuse, and fear of crimes.
Instead of interviewing the total popul ation under study, most researchers inter-
view a representative subset of that population – a sample. If a sample is carefully
drawn, researchers can generalize the results from the sample to the population.
A sample determined by random selection, whereby each person in the population
to be studied has an equal chance of being selected, is called a random sample;
Surveys are a cost -effective method, but they have limitations. If a study
of drug use by high school students was done one time only, the findin g of a
relationship between drug use and poor grades would not tell us whether drug use
caused bad grades, whether students with bad grades turned to drugs, or whether
bad grades. and drug taking result from some other factor, such as family ties.
4. Expe riments
The experiment is a technique used in the physical and biological sci-
ences, and in the social sciences as well. An investigator introduces a change into
a process and makes measurements or observations in order to evaluate the effects
of the chang e. Through experimentation, scientists test hypotheses about how two
or more variables (factors that may change) are related. The basic model for an
experiment involves changing one variable, keeping all other factors the same
(controlling them, or holding them constant), and observing the effect of that
change on another variable. If you change one variable while keeping all other
factors constant and then find that another variable changes as well, you may
safely assume that the change in the second varia ble was caused by the change in
the first.
Experiments in the real world are costly and difficult to carry out, but
they have the advantage of increasing scientists' ability to establish cause and
effect.
5. Participant and nonparticipant observation
Researchers who engage in participant and nonparticipant observation
Dynami c Ele ments in the Contemporary Business Law 176
have different goals. These methods provide detailed descriptions of life as it ac-
tually is lived in prisons, gangs, and other settings.
Observation is the most direct means of studying beha vior. Investigators
may play a variety of roles in observing social situations. When they engage in
nonparticipant observation, they do not join in the activities of the groups they
are studying; they simply observe the activities in everyday settings and record
what they see. Investigators who engage in participant observation take part in
many of the group's activities in order to gain acceptance, but they generally make
clear the purpose of their participation.
Observations of groups in their natural set ting afford the researcher in-
sights into behavior and attitudes that cannot be obtained through such techniques
as surveys and experiments.
6. Case studies
A case study is an analysis of all pertinent aspects of one unit of study,
such as an individual, an institution, a group, or a community. The sources of
information are documents like life histories, biographies, diaries, journals, let-
ters, and other records. A classic demonstration of criminologists' use of the case –
study method is found in Edwin Sut herland's The Professional Thief, which is
based on interviews with a professional thief.
Sutherland learned about the relationship between amateur and profes-
sional thieves, how thieves communicate, how they determine whether to trust
each other, and the process of networking. From discussions with the thief and an
analysis of his writings on topics selected by the researcher, Sutherland was able
to draw several conclusions that other techniques would not have yielded. For
instance, a person is not a "prof essional thief" unless he is recognized as such by
other professional thieves. Training by professional thieves is necessary for the
development of the skills, attitudes, and connections required in the "profession."2
One of the drawbacks of the case -study method is that the information given by
the subject may be biased or wrong and by its nature is limited. For these reasons
it is difficult to generalize from one person's story – in this instance, to all profes-
sional thieves.
7. Using available data in r esearch
To study the relationship between crime and sfich a variable as income
or a single -parent family, one might make use of the national police statistics.
Researchers who use available data can save a great deal of time and ex-
pense. However, they hav e to exercise caution in fitting data not collected for the
2 Edwin H. Sutherland, The Prof essional Thief, University of Chicago Press, Chicago, 1937, p. 15.
Dynami c Ele ments in the Contemporary Business Law 177
purpose of a particular study into their research. Many official records are incom-
plete or have been collected in such a way as to make them inadequate for the
research. It is also frequently diff icult to gain permission to use agency data that
are not available to the public because of a concern about confidentiality.
8. Ethics and the researcher
In the course of their research, criminologists encounter many ethical is-
sues. Chief among such issu es is confidentiality. Consider the dilemma faced by
a group of researchers in the late 1960s. In interviewing a sample of 9954 boys
born in 1945, the team collected extensive self -reported criminal histories of of-
fenses the boys had committed before and a fter they turned 18. Among the find-
ings were 4 unreported homicides and 75 rapes. The researchers were naturally
excited about capturing such interesting data: these findings supported the hy-
pothesis of "hidden" delinquency (discussed below). More importan t, the re-
searchers had feelings of grave concern. How should they handle their findings?
Should the results of these interviews be published?
Could the failure of the research staff to disclose names be considered the
crime of "obstructing justice"?
Does a n obligation to society as a whole to release the names of the of-
fenders transcend a researcher's obligation to safeguard a subject's confidential-
ity?
What is the best response to a demand by the police, a district attorney,
or a court for the researcher's files containing the subjects' names?
Should criminologists be immune to prosecution for their failure to dis-
close the names of their subjects?
Is it possible to develop a technique that can ensure against the identifi-
cation of a subject in a research fil e?3
Such questions have few clear -cut answers. When researchers encounter
these problems, however, they can rely on standards for ethical human experi-
mentation. Human -experimentation review committees at most universities and
government agencies check all proposals for research projects to ensure the pro-
tection of human subjects. In addition, researchers are required to inform their
subjects about the nature of the study and to obtain written and informed agree-
ment to participate.
Despite heightened awarene ss of the ethical issues involved in human
experimentation – particularly in correctional institutions, where coercion is dif-
ficult to avoid – the field of criminology has not yet adopted a formal code of
ethics. Some members of the discipline are arguing in favor of one. Frank Hagan,
3 Marvin E. Wolfgang, Ethics and Research , in A. F. Ellison and N. Bowie (ed.), Ethics, Public
Policy, and Criminal Justice, Cambridge, Mass.: Oelgeschlager, Gunn & Hain, 1982, p. 37.
Dynami c Ele ments in the Contemporary Business Law 178
for example, has suggested that the code include guidelines on honoring commit-
ments made to respondents, avoiding procedures that might harm subjects, exer-
cising integrity in the performance and reporting of research, and prot ecting con-
fidentiality.4 In the end, however, as Seth Bloomberg and Leslie Wilkins have
noted, "the responsibility for safeguarding human subjects ultimately rests with
the researcher. … A code of ethics may provide useful guidelines, but it will not
relieve the scientist of moral choice."5
9. The nature and extent of crime
As we have seen, criminologists gather their information in many ways.
The methods they choose depend on the questions they want to answer. To esti-
mate the nature and extent of crime they rely primarily on data compiled by the
police; on the National Crime Victimization Survey, which measures crime
through reports by victims; and on various self -report surveys, which ask indi-
viduals about criminal acts they have committed, whether or not these acts have
come to the attention of the authorities.
Official statistics gathered from law enforcement agencies provide infor-
mation available on the crimes actually investigated and reported by these agen-
cies. But not all crimes appear in police s tatistics. In order for a criminal act to be
"known to the police," the act first must be perceived by an individual (the car is
not in the garage where it was left). It must then be defined, or classified, as some-
thing that places it within the purview of the criminal justice system (a theft has
taken place), and it must be reported to the police. Once the police are notified,
they classify it and often redefine what may have taken place before recording
the act as a crime known to the police.
Information about criminal acts may be lost at any point along this pro-
cessing route, and many crimes are never discovered to begin with.
10. Review
Researchers have three main objectives in measuring crime and criminal
behavior patterns. They need to collect and an alyze data to test theories about
why people commit crime, to learn the situational characteristics of crimes in or-
der to develop prevention strategies, and to run the criminal justice system on a
daily basis. Data are collected by surveys, experiments, no nparticipant and par-
ticipant observation, and case studies. It is often cost -effective to use repositories
of information gathered by public and private organizations for their own pur-
poses
4 Frank E. Hagan, Research Methods in Criminal Justice and Criminology, Macmillan, New York
1989, p. 358.
5 Seth A. Bloomberg and Leslie Wilkins, Ethics of Research Involving Human Subjects in Criminal
Justice , „Crime and Delinquency”, 23 (4),1977, p. 435 -444.
Dynami c Ele ments in the Contemporary Business Law 179
By measuring the characteristics of crime, criminals, and victims , we can
identify crime trends, the places and times at which crimes are most likely to be
committed, and the public's evaluation of the seriousness of offenses.
Bibliography
1. Edwin H. Sutherland, The Professional Thief, University of Chicago Press, Chi-
cago, 1937.
2. Frank E. Hagan, Research Methods in Criminal Justice and Criminology, Mac-
millan, New York, 1989.
3. Marvin E. Wolfgang, Ethics and Research , in A. F. Ellison and N. Bowie (ed.),
Ethics, Public Policy, and Criminal Justice, Cambridge, Mass.: Oelgesch lager,
Gunn & Hain, 1982.
4. Seth A. Bloomberg and Leslie Wilkins, Ethics of Research Involving Human
Subjects in Criminal Justice , „Crime and Delinquency”, 23 (4), 1977.
New Trends of International Tax Evasion – International Legal
Regulations an d Modern Combating Methods
PhD. student Bogdan -Florian AMZUICĂ1
PhD. student Roxana -Adriana MITITELU2
Abstract
Within the contemporary market economy and the generalization of open type
economies, interdependent international economic rel ations have emerged based on an
open system of both economic and financial exchanges. They have contributed to the
emergence of new business relationships based on the international exchange of
outcrying type that did not involve, due to the dynamism as we ll as of the new economies
of the type of digital economies, and a quick adaptation of the customary normative
framework and of the legal framework to the new context. The objectives of this article
are represented by the identification of these new econom ic-social relations as well as of
the corresponding legal and normative framework and of the forms of circumvention of
the resulting taxation principles. The research methods used were qualitative methods
respectively descriptive methods as well as quantit ative methods respectively indices and
aggregate economic indicators and econometric relations of regressive and correlative
type. The results of the article aimed to identify new modern and self -contained methods
of combating international tax evasion, re spectively the exchange of information and the
adequacy of the legal normative framework to the new economic realities. The
implications are complex and represent the identification of some methods of preventing
unfair competition and of not distorting the mechanism of the international competition
market with implications on national budgets.
Keywords: international tax evasion, tax avoidance methods, money laundering,
offshore jurisdictions, cryptcurrencies.
JEL Classification: K14, K33, K34
1. Introd uction
In the last period and here we are talking about the post -crisis period of
the crisis of 2008, it was accredited the idea that international economic
interdependence led to the development and propagation of some mechanisms of
transmission of the f eedback of the economic -financial flows in the national
systems and that the mechanisms of self -regulation nationals cannot cope with
the resulting new dimensions.
As a result of the crisis, there have been several situations in which
1 Bogdan -Florian Amzuică – Bucharest University of Economic Studies, Romania, bogdanamzuica
@gmail.com.
2 Roxana -Adriana Mititelu – Bucharest University of Economic Studies, Romania, roxanamititelu
@gmail.com.
Dynami c Ele ments in the Contemporary Business Law 181
commercial economic e ntities have tried to hide the taxable sources of economic
activity within offshore jurisdictions.
Hiding the real beneficiary of the profits for various reasons: the real
beneficiary cannot have the legal status of associate and administrator in an
econ omic entity or there are prohibitions regarding the assets he can own
(measures for the confiscation of wealth, member of an organization criminal etc)
The profits obtained in another jurisdiction, the beneficiary does not want
to tax them in the national jurisdiction in order to circumvent the higher taxes and
to protect their own interests and accumulated assets. In particular, the countries
that undergo marked social and economic transformation processes, including
Romania, are facing multiple problems o f fraud, organized crime and corruption,
which reach an alarming level. Fiscal evasion, speculative acts with legal
temptation and deception, money laundering operations become more socially
dangerous, fueled by the economic difficulties of the crisis of 2 008, the lack of
procedural and legislative coherence or weakening of the coercive mechanisms
of governments, unable to provide the appropriate legal framework for a stable
society. The Romanian society for the last three decades has been characterized
by a major deficiency in the application of the rules of a coherent economy, but
also in a reversal of the value system, by which rudimentary capitalism has
determined the polarization of wealth. All these aspects have led to an escalation
of deviant behavior , as a "normal" phenomenon of adaptation to the state of
anomaly, within the meaning of the concept promoted by Durkheim3 or as an
"innovative" behavior4.
2. Trends in international tax evasion
The international tax evasion aims to hide the tax base or t o reduce it in
tax-favorable areas as well as transferring the funds anonymously in order to
protect them from the authorities in onshore or national areas. Thus, in order to
achieve this goal, tax subjects use certain legal or financial vehicles to concea l
the origin and purpose of the original transactions.
It is noteworthy in the last period the use of modern vehicles regarding
the international tax evasion which can be classified as follows:
1. Modern legal structures
2. Bitcoin and cryptocurrencies
3 Emile Durkheim, Diviziunea muncii sociale , Ed Antet, Bucharest, 2008, p. 32.
4 Robert K. Merton, The Unanticipated Consequence of Purposive Social Action, „American
Sociological Review” , 1(6), 1936, p. 894 -904.
Dynami c Ele ments in the Contemporary Business Law 182
2.1. Modern legal structures used in the tax evasion activity
2.1.1. International trading companies
The most used companies registered in low -tax jurisdictions include the
"International Trade Company" or IBC (International Business Company). Its
intelligent use in international trade generates to investors important economies
in the payment of direct taxes (corporate tax, dividends, income tax from the sale
of assets, etc.).
If the offshore company purchases certain goods from one state and then
sells them in another country, it will accumulate the profit related to the respective
transaction, avoiding its taxation in the source country. For transactions in the
European Union, the Isle of Man and Madeira have become very popular
locations for internat ional trade agreements. Both Isle of Man and Madeira are
capable of issuing the VAT registration number required for transactions with EU
states.
For example, if a company resident in the Isle of Man wants to import
from France and sell to Germany, it will inform the French company about the
registration number as a VAT payer, so it can invoice the sale with a 0. So the
French company won't have to to invoice VAT to the Isle of Man company.
After this, the Isle of Man company will obtain the VAT registratio n
number of the German company, so it will be able to invoice in a row with VAT
0. This type of transaction would not have been possible in other jurisdictions that
require the establishment of a representative or fiscal representative. In the
European Uni on, which would greatly complicate the tax scheme. Factoring the
commercial debts of a resident company in a high tax jurisdiction through a
company established in a low tax country allows the transfer of funds to the latter.
Another use of these offshore entities is the acquisition in large
quantities. Such a structure is usually established by a group of associated
companies that intend to benefit from the savings and reduced administrative
costs.
2.1.2. International investment companies
Both multinati onals and individuals with significant incomes use
offshore companies for optimum management of portfolio investments (cash,
shares, bonds or other specific instruments).
The cash held by offshore companies can be placed in mutual funds or it
can generate interest on deposits. Often, individuals use offshore companies as
holding companies, which manage their investments in different markets and in
different countries.
Dynami c Ele ments in the Contemporary Business Law 183
2.1.3. Real estate companies
Owning a real estate asset by an offshore company can oft en lead to tax
advantages. including the legal avoidance of taxation of capital income, property
transfer taxes or inheritance.
If, for example, an offshore company, owned by a non -resident in the
United Kingdom, buys a property in the United Kingdom for i nvestment purposes
and then sells it to a third party, the capital gain generated by the transaction is
not taxable. in Great Britain. In addition, by structuring the financing properly,
through a back -to-back loan, the offshore company can reduce the effe ct of any
tax on the income of non -residents related to the rents generated by the respective
property.
2.1.4. Employment companies
Many companies use offshore companies for the recruitment of
personnel in branches or subsidiaries abroad. This leads to a minimization of the
costs associated with payroll, bonus policy and transportation, and can sometimes
also provide social assistance to staff.
2.1.5. Companies holding intellectual property rights and
franchising
Intellectual property rights (trademarks , franchises, source codes,
software, technical know -how, patents and others) may be owned by offshore
companies. After the acquisition of these rights, the offshore company may
conclude licensing, transfer of ownership or franchise agreements with any
natural or legal persons interested in the exploitation of these rights worldwide.
Dynami c Ele ments in the Contemporary Business Law 184
2.1.6. Financial companies
Offshore financial companies are registered for the intra -group
management of treasury functions, so that the payment of interest for the group
companies may be subject to the income tax of non -residents, but in practice these
taxes are much lower than the state income tax. of residence of the respective
companies.
The interest paid will be a tax deductible expense, so that, by
consolidating the i nterest payment within the group, a major reduction of the
taxes paid by the group is shown. Many large companies have established the
structure of offshore companies so that the dividends due from their subsidiaries
are transferred with minimum tax paid.
2.1.7. Exempted companies
Exempted companies are companies exempted from the payment of
normal tax obligations, subject to the fulfillment of certain conditions. The
exemption from carrying out duties related to taxes and taxes is granted on the
basis of a statement of the directors/administrators of the company, who
undertakes that they will not carry on commercial activities with other companies
registered in the same jurisdiction.
2.1.8. Non -resident companies
They are the simplest, from the statutor y point of view, companies, being
used, in particular, in the Commonwealth area. Although a statutory non -resident
company will be registered in one jurisdiction, it will subsequently have fiscal
residence in another state. Generally, these companies are u sed when it comes to
filing a prestigious jurisdiction. For example, a non -resident company may be
incorporated in the United Kingdom (Scotland Partnership, for example), while
being registered in the Bahamas.
2.1.9. Limited liability associations
The co mpanies with several limited partnerships (Limited Partnership)
are a form of L.L.C. companies, through which the partners are directly involved
in the management of the business, answering unlimitedly, with their entire
personal assets, for social obligat ions and in front of the creditors. The other
associates respond only within the limit of the subscribed share capital. Due to
these aspects, these offshore entities may have a shadow of goodness and honor,
being even eligible for bank loans from their tra ditional credit institutions.
Dynami c Ele ments in the Contemporary Business Law 185
2.2. Cryptocurrencies, the new tax havens
For acryby, cryptocurrency is a virtual digital currency, which can be
used as a means of payment. The use of the prefix "crypto" demonstrates that this
means of payment uses crypto graphy, which makes its falsification techniques
almost impossible.
With the support of decentralized technologies, users can make secure
payments and, especially, anonymised, because there is no longer the obligation
to personally identify, at the counter (virtual or real) as in the case of using
traditional banking services. Each virtual currency runs on a public register called
"blockchain".
The cryptocurrencies were designed to be created by a process called
mining, which involves using the processor fr om a device to solve complicated
statistical and mathematical problems, resulting in coins.
They use protocols, proof -of-work "based on hashing algorithms (SHA –
256, invented by Bitcoin, and scrypt, the most used). Users can buy coins from
various brokers, after which they can store or The most widely used
cryptocurrencies are: Bitcoin, Ethereum, Stellar Lumens, Eos, Coinomies,
Litecoin or Ripple.
Virtual currency (cryptocurrency), according to the law, is not an
electronic currency. Thus, in Romania, Articl e 4 (f) of Law 127/2011 on the
activity of issuing electronic money, defines electronic currency as "an
electronically stored monetary value, including magnetically, representing a
claim on the issuer, issued upon receipt of funds for the purpose performin g
payment transactions and which is accepted by a person other than the electronic
money issuer ".
Authorities around the world5 fear that virtual currencies could become
the new tax havens. It's just that this is already happening. British Prime Minister
Theresa May and Indian Prime Minister Narendra Modi are among the world
leaders who have expressed concerns about the rise of virtual cash moving into
offshore structures.
The US Congress even held hearings in March 2018, and Treasury
Secretary Steven Mnuc hin urged the world's 20 largest economies to work
together to ensure that virtual currencies do not become "the next Swiss bank
account." The concern comes after a series of measures of international repression
against tax havens and the opaque banking se ctor.
The offenders were the first to feel the potential of virtual currencies, and
their involvement has grown steadily, according to a three -year study by the
Foundation for the Defense of Democracies, an American think tank. Therefore,
5 https://www.bloomberg.com/news/articles/2018 -01-29/crypto -as-next-swiss -bank -account -sends
-governments -scrambling, consulted on 01.11.2019.
Dynami c Ele ments in the Contemporary Business Law 186
better oversight of trading platforms would help to legitimize the industry.
On the other hand, the technology behind cryptocurrencies, including the
"blockchain", offers significant improvements that could help millions of
developing countries without bank accounts, and regulators can use cryptography
and artificial intelligence to improve digital security and identify transactions
with dirty money extremely quickly.
Before reaching there, however, the phenomenon must be analyzed in its
entirety. These digital offers are typically designed in a decentralized manner and
are therefore not supervised by any central bank. Like cash transactions,
cryptocurrency transactions are anonymous, which could result in a new money
laundering vehicle.
In today's world, there is a demand for new ways of hiding assets, after
the US and European authorities are constantly struggling with tax havens and
non-transparent banks. The implementation of the "know the client" and anti –
money laundering rules forced offshore financial institutions to disclose customer
information. The campaign prompted many large financial companies to limit
customers' access to Switzerland's secret banking system, which made it more
difficult to hide funds from the eyes of authorities, courts or life partners.
Virtua l currency exchanges are regulated by fairly lax rules, but their
application has not been consistent, especially outside the U.S. The use of virtual
money to store offshore assets is evolving rapidly, by introducing so -called
privacy coins, such as ZCash and Monero, which use methods such as encryption
to make them impossible to identify.
For the first time in history, it is possible for anyone to be able to store
their money privately, as if they had their own bank, because people are willing
to pay for the confidentiality of capital investments. Even if ZCash hinders the
impenetrability of its encryption technology, governmental oversight is still
Dynami c Ele ments in the Contemporary Business Law 187
needed.
Bitcoin, the most popular virtual currency, is anonymous, though it can
be tracked, using the electr onic public blockchain registry, which tracks each
transaction. Even though everything revealed by buyers and sellers are letters and
numbers, law enforcement agencies have developed a technology for tracking
and confiscating illicit Bitcoins.
Existing law s require banks to report suspicious activity, including
withdrawals of over $ 10,000 while digital currency exchanges are required to
keep customer records and take similar measures. Once a Bitcoin currency is
purchased, there is software that can detect and track the owner. The study of the
Foundation for the Defense of Democracies on money laundering recommends
to the authorities to monitor the criminal uses of virtual currencies, but to respect,
at the same time, financial innovation.
When credit cards appeared, there were abuses or scams, they still exist
today, but authorities around the world have developed and implemented
methods and means to deal with them.
The study looked at money laundering through Bitcoin ATMs,
exchanges, gambling sites and mixe rs – services that convert digital currency to
another – and found that illicit use increased steadily between 2013 and 2016. his
research.
It was also concluded that the conversion services in Europe had the
highest share of illicit Bitcoin, more than fi ve times more than the North
American services. Asia had a very small share in money laundering, even though
the services in this region had the most transactions.
Dynami c Ele ments in the Contemporary Business Law 188
The huge gains made by cryptocurrencies in 2017 captured the interest
of regular investors, but enthusiasm was dampened by volatility and concerns
about its usefulness as a currency. The regulatory authorities have carefully
followed the development of these currencies and have n ot yet elaborated a
definition.
It is worth mentioning that virtual currencies are not supported by core
assets and investors may have very large losses rather than good profits, the risks
being very similar to those associated with gambling, as there are signs that
current valuations of these currencies are enhanced by s peculative investment
flows.
3. International legal regulations
Accession to the European Community bloc has led to a deeper
integration of the economies of the member countries, registering a "boom" of
cross -border transactions, in conjunction with the reduction of the costs and risks
associated with these commercial operations. The integration has generated social
and economic privileges. special for European citizens and companies, but, on
the other hand, it has created a series of additional challenge s for national tax
authorities.
The practice has shown that the countries of the Old Continent can face
these challenges firmly only if they act in a coordinated manner, based on the
normative framework agreed at the level of the EU.
Within the single Comm unity market, the inconsistencies, the "legal
gates" and the gaps in the laws of each state are easily exploited by all those who
seek to circumvent the tax obligations imposed. The EU can boast of a solid
policy on good governance in the tax field, whose principles include
transparency, fairness of taxation, automatic exchange of information, neutrality
of measures in relation to the different categories of investors and capital and fair
fiscal competition.
Dynami c Ele ments in the Contemporary Business Law 189
It is no less true that the successive accessions of the member countries
to the Community Bloc gave rise to a conglomeration of regulations (directives,
regulations, decisions, recommendations, opinions). These norms are intended to
harmonize and unify the laws of the member countries, but, until a defi nitive
normative unit will be finalized, each state individually, will face its own practical
and legislative difficulties in the fight against fraud and tax evasion.
Although, to a large extent, it falls within the competence of the member
countries, com bating economic fraud is not a challenge that can be solved
exclusively at the level of each state.
The aim of a coherent strategy at the level of the U.E. to combat
economic -financial crime must be to minimize the losses generated by the various
types of tax fraud, by identifying the economic sectors in which rectifications can
be made both to the Community legislation, as well as to the criminal and
administrative cooperation between the states.
These are the arguments for which the European Union has in itiated a
fight plan to quell the fraudulent mechanisms undertaken by some taxpayers.
Given that the most widespread manifestations of tax fraud, at Community level,
were occurring in the field of value added tax, in 2003, Regulation (EC) No.
Dynami c Ele ments in the Contemporary Business Law 190
1798/2003 of administrative cooperation in the field of VAT6, which involves an
algorithm for automatic exchange of information between member countries,
with the stated purpose of controlling and applying in accordance with this
indirect tax.
In essence, Regulation (E C) no. 1798/2003, with direct and compulsory
applicability, implies the establishment in each Member State of a specialized
liaison department that provides information on the economic operators
registered for VAT purposes necessary to the other member cou ntries. Thus, an
attempt was made to control and record the existing taxpayers, as well as the
transactions carried out and recorded by them, in order to combat tax frauds.
The idea embraced by this Regulation is the need to protect the internal
community market, by combating the underground economy as efficiently as
possible. In support of achieving this ambitious objective, this normative act
stipulates the need for cooperation between the member countries by carrying out
the most complete information exc hanges and in a much faster way.
A brave step of this Regulation is represented by the provisions of art.
33, which regulates the establishment of an entity called "Eurofisc" – a single
control entity at Union level, with the purpose of gathering and centr alizing all
the information obtained from the member countries and coordinating the
collaboration between them, in order to mitigate tax frauds.
The system was also implemented in the Romanian fiscal circuit, in
which the centralization of taxpayers paying VAT and the operations undertaken
by them are administered through the data centralization mechanism, the
Recapitulative Statement 394, and their effective control is carried out by the
"National Agency for Fiscal Administration" (ANAF)7 through the "Dire ctorate
General for Fiscal Fraud".
Remaining within the sphere of administrative cooperation between the
tax authorities of the member countries, at Union level the VIES8 (VAT
Information Exchange System) system was set up, with the objective of checking
all transactions undertaken by taxpayers, with implication in the field of VAT9.
These checks are performed in an electronic system, in real time, the databases
being continuously updated by the tax authorities of each Member State.
The control is undertake n by the authorities of each European country,
mainly in the situations presumed to be fraudulent, but this verification obligation
is also incumbent on the economic agent, when contracting a good or service. By
entering that code in the indicated field, o nline, the economic agent will know if
that code provided by his contractual partner is valid.
Thus, any honest economic agent will refuse to sign the respective
6 http://europa.eu/legislation_summaries/taxation/131003_ro.htm, consulted on 31.10.2019.
7 Government Decision no. 520/2013 regarding the organization and functioning of ANAF.
8 http://ec.europa.eu/taxa tion_customs/vies/faq.html?locale=ro, consulted on 31.10.2019.
9 Aurelian Opre, Noi obligații priivnd taxa pe valoare adăugată impuse de legislația fiscal
comunitară, „Curierul Fiscal no. 7/2006” , p. 4.
Dynami c Ele ments in the Contemporary Business Law 191
transaction, avoiding fraudulent contracting. The ease of carrying out this control
by the tax payer will give rise to the negative presumption of bad faith in his
person, if he does not do all the necessary diligence in performing this simple
online verification.
As a result of the disappearance of customs barriers, which resulted in
the eliminatio n of the rudimentary customs controls between the member
countries, a system of records of the economic agents that carry out intra –
Community commercial transactions, hereinafter referred to as Intrastat10, has
been established.
The Intrastat value threshol ds set for 2018 are: for intra -community
introductions: 900,000 lei, and for intra -community shipments: 900,000 lei. The
taxpayers are thus obliged to complete an Intrastat declaration, specifying: the
identification data of the company, the quantity, the flow of the transaction, the
reference period, the state of destination/the state of dispatch, the mode of
transport, the freight code, the nature of the transaction, delivery terms and
invoiced value. If we were to draw a parallel between the Intrastat De claration
and Declaration 390 of the V.I.E.S. – which contains data only on the supplier,
the jurisdiction of origin of the goods and the amount paid – we can see that the
first declaration is much more elaborate and complex. Thus, the financial
administra tions can initiate a more elaborate scriptural verification on these
economic agents, obliged to prepare and submit Intrastat statements.
However, there is a connection between the two systems, considering that
both the centralized information in the Intra stat statistical system and the
information obtained in the V.I.E.S. are used for certain purposes, namely
obtaining data on the economic agents obliged to prepare Intrastat declarations.
Thus, these taxpayers will be monitored, monitoring whether they hav e prepared
and declared the act in full and complete.
The connection also resides in the fact that the economic agents obliged
to draw up the Intrastat declaration are nominated by the National Institute of
Statistics, by verifying the settlemen ts of VAT and the recapitulative statement
390, V.I.E.S.
Thus, according to the value found in the declaration V.I.E.S., the
National Institute of Statistics verifies that the respective economic agent has
exceeded the value threshold establishe d by the law in that year.
Another measure, adopted by the European Commission, with
applicability in the field of combating tax fraud and money laundering, is the
Directive no. 2013/42/EU, which implements measures of reverse charge, control
and rapid reaction against fraud in the field of VAT.
The measure consists of "the possibility of Member States to identify
solutions to cases of sudden and massive fraud with major financial impact", by
applying the reverse charge mechanism and by flexing the procedures in order to
10 http://www.intrastat.ro/di_cri.php, consulted on 1 0.10.2019.
Dynami c Ele ments in the Contemporary Business Law 192
carry out immediate controls and adequate information.
Following the application of this Directive, the Commission has
established that the measures taken by each member country concerned will be
analyzed, in or der to eliminate the fraudulent mechanisms, with the aim of
elaborating an action plan implemented throughout the Union.
The provision suggests member countries to implement a new system of
collection of VAT, because the current model, which is proving old, leads to
substantial fiscal losses to national budgets.
This fact was highlighted in the changes that took place in the market. In
Romania in 2015, for example, this legislative impetus had an overwhelming
influence in the bakery ind ustry, in which the tax rate for the delivery of bakery
products (bread and flour) was reduced from 24% to 9%. The strategy has been
very successful, drastically reducing the fiscal fraud at the level of VAT in the
field of bakery, because, due to the new quota, the temptation of fraud is low, the
benefit thus obtained being insignificant.
A new concept contained in this Report is found in point 53, from the
chapter "Tax evasion and aggressive tax planning", which requires the
establishment of a centralized database, globally, of all those who make cross –
border transactions.
This centralization will be coordinated by a community body, and to each
person – legal, but also physical – will be assigned an identification number -T.I.N
(Tax ldentification Number), like the registration code of the V.I.E .S system.
In this way, taxpayers who circumvent the tax obligations, as well as
those who do not pay certain taxes, in particular VAT.
Tax fraud and tax evasion are c reating global challenges and increasingly
complex issues. Although the national regulations have a well -defined role, these
provisions considered alone will not remove by far the irregularities in the
practical activity of the neon taxpayers. Therefore, t he European Union and its
member countries are constantly required to develop effective cooperation, taking
into account best practices11.
Several measures have been taken, except that, in practice, Member
States do not use all available legal instruments i n a coordinated manner. By
combating tax evasion and money laundering, the countries in the Community
Bloc can increase their budget revenues, which will allow them greater leeway to
restructure their tax systems in line with their own economic growth poli cies.
Reducing tax evasion and fraud also has the role of supporting the efforts
of European states whose objective is to alleviate the tax burden borne by low
income people and vulnerable social blankets. In the Annual Growth Analysis for
2017, the Europe an Commission has advocated the need for differentiated
budgetary consolidation, favorable to economic growth, as a priority for the fiscal
11http://ec.europa.eu/taxation_customs/taxation/tax_fraud_evasion/acting_together/index_en.html,
consulted on 01.11.2019.
Dynami c Ele ments in the Contemporary Business Law 193
policy of each state.
At the level of each Member State, it is necessary to implement the
suggestions and recommenda tions that have been made for each individual state,
in order to improve fiscal governance.
Member countries are also obliged to apply the European Commission's
recommendations on non -cooperative fiscal territories and aggressive tax
planning.
At least on a declarative level, the European Commission is providing
legal and technical assistance to any country, which is working to strengthen its
tax and tax collection system. In Greece, Potrugalia and Spain, for example, the
Cooperative Groups, together with e xperts from the member villages, actively
contributed, between 2008 and 2014, to the consolidation of fiscal systems, and
the positive results were not delayed.
U.E. initiated a comprehensive set of legal instruments needed to
improve member countries' abi lity to combat money laundering and tax evasion,
a set that includes not only legislative rules, but also actions recommended to
Member States (eg those targeting aggressive tax planning and tax havens) and
specific state specifics.
Through the Fiscalis 20 20 program, the U.E. will provide financial
support for cooperation between national tax authorities, especially as the U.E. it
is based on the principle of automatic exchange of information, and the Union is
a world leader in this regard.
The coordinated exchange of data between the member countries was
initiated in 2003 and was, with timid attempts, implemented in 2005, by the
Directive on the taxation of income from savings12. Thanks to this directive, the
member countries carry out a real exchange of inf ormation on the gross earnings
of the non -resident taxpayers, their amount exceeding annually the amount of 20
billion euros, at the level of the whole Community Bloc.
In addition, the Administrative Cooperation Directive13 stipulates the
automatic exchange of data on a wide range of revenues, providing the authorities
with important support in the fight against structures such as those highlighted by
the "Paradise Papers" investigation. Recently, the United States has introduced
this principle in the conven tions regarding the fiscal compliance applicable to the
foreign account Tax Compliance Act (FATCA)14.
The European Commission has also designed specific electronic formats
necessary for the automatic exchange of information, as well as secure
communication channels, permanently updated and extended to include other
types of revenue, according to the Directive on administrative cooperation.
12 Directive no. 2060/2015 repealing Directive 2003/48/EEC on taxation of savings income in the
form of interest payments (OJ L 301, 18.11.2015).
13 Ibid.
14 www.irs.gov/businesses/corporations/foreign -account -tax-compliance -act-fatca, consulted on
01.11.2019.
Dynami c Ele ments in the Contemporary Business Law 194
The Union's set of legal instruments for combating acts of fraud and tax
evasion also includes the following normative a cts:
1. "Directive U.E. regarding the taxation of gains from savings " (since
2005), which establishes the principle of automatic exchange of information.
2. The agreements concluded by the U.E., starting with 2005, with the
tax havens close to its borders: Switzerland, Andorra, Liechtenstein, Monaco and
San Marino, which aim to ensure a level playing field between the U.E. and its
neighbors.
3. "Directive on administrative cooperation in the field of direct taxation"
(in force since 2015) regulates the auto matic exchange of data in the following
fields: earnings of a nature, pensions, life insurance products that do not fall under
other Community instruments, fees members of boards of directors and real estate
income.
4. "Regulation on tax -administrative coo peration in the field of VAT" (in
force since 2012), which establishes the procedure by which the customs services
of a European country exchange information with other Member States,
regarding the deliveries of VAT -bearing goods
5. "The Directive on Mutua l Assistance for Tax and Tax Recovery" (in
force since 2010), which aims to improve the capacity of the countries in the
Community Bloc to efficiently collect and coordinate the related taxes.
The Commission has proposed a set of legislative rules to adapt the legal
framework regarding money laundering acts and funds transfers, in particular to
identify as accurately as possible the actual beneficiaries to whom the money
amounts.
The new U.E. regarding the capital conditions imposed on the banking
instituti ons will lead to a greater transparency of the operations carried out
between banks and multinational companies.
The legislative additions agreed at the level of the accounting norms of
the U.E. will introduce a specific reporting system for each state. Th ese will target
large private companies in the U.E. or the listed companies in the Union, whose
activity object is the exploitation of the forestry, extractive, oil and natural gas
sectors. Reporting the taxes paid, taxes, royalties and premiums by a
multi national company to the host country's budget is a promising start for
ensuring fiscal transparency, as well as for combating fraud, corruption and
money laundering.
Although already existing legal instruments have greatly improved the
exchange of data, Me mber States are not yet using them efficiently and
comprehensively, the potential of many of these tools being not fully exploited
by the tax administrations in the Member States.
Without real political will, the Union's legal instruments cannot be fully
applied. Although Member States benefit from the Commission's support, in their
efforts, including the provision of practical means and tools, the responsibility for
engaging in effective administrative cooperation rests solely with those states,
Dynami c Ele ments in the Contemporary Business Law 195
which alon e have full sovereignty over tax collection.
There is still much to be done not only at the level of each state, but also
in the bureaucratic context of Brussels. For example, the principle of automatic
information exchange in the EU. it should be expanded to cover all relevant types
of revenue. The Commission will have to submit a legislative draft to supplement
the U.E. Directive. regarding administrative cooperation, in order to increase the
scope of the automatic exchange of information at Community lev el, by including
the automatic exchange of data and information regarding the withdrawn
dividends, capital income and other gains.
As part of the Commission's 2012 action plan on strengthening the fight
against tax evasion and fraud. member countries are o bliged to give priority to
concrete activities and less to abstract principles. A timid step was made on
September 29, 2016, when EU Finance Ministers, meeting in Luxembourg,
adopted the ECOFIN Measure Package to Combat Tax Avoidance, agreeing on
the propo sed rules against fiscal "acrobatics" that are affecting the way. directly
functioning of the internal market.
This package of measures seeks a coordinated response at the level of the
U.E. on the issue of money laundering, tax evasion and aggressive fisca l practices
of multinationals. Thus, there is a minimum protection for the tax systems of
companies in the Member States. The new rules aim to eliminate loopholes that
some multinational companies use to avoid paying certain taxes.
The legislative package includes anti -abuse measures aimed at: interest
deductibility; taxing the transfer of assets; switching from tax exemption to
granting loans.
It is estimated that by 2022, all these measures will harmonize the laws
of the Member States with the Union, with out the need for an increase in tax rates,
especially given that the tendency of policies around the world is to reduce fiscal
burdens.
U.E. thus, it should take the lead role in promoting good governance and,
in particular, the automatic exchange of infor mation internationally, and the
Commission, at least on a declarative level, will focus primarily on efforts to
combat money laundering and tax evasion.
The future meetings of the leaders of the G8 and G20 states will provide
important opportunities in com bating tax fraud, evasion and money laundering.
O.C.D.E., supported by the G20 and G8 states, is also making efforts in this
regard. Based on the mechanisms of the U.E., a strong and coordinated position
of the European Union in the G8, G20 and O.C.D.E. wi ll be able to contribute to
guaranteeing the automatic exchange of tax data in the new global standard in
this area.
The crime of "white collars" has expanded exponentially throughout the
Globe, and therefore, any effective plan for combating fraud must be combined
Dynami c Ele ments in the Contemporary Business Law 196
beyond the borders of the Union15. The increasingly active involvement of the
European Union in order to mitigate these frauds can be seen in especially, in
constant attendance at meetings.
In recent years, a priority of the O.C.D.E. it was confin ed to the financial –
banking insecurity, the restoration of a sustainable economy, as well as the
working relationships under legal conditions.
In this context, the fight against fraud, tax evasion and money laundering
acts has been a prime objective of the Organization. As the fight against the dark
veil of tax fraud became the main objective of the Organization, the norms in the
field did not cease to appear: in 1980, it published its first vast report entitled
"Tax fraud and evasion"16.
Nowadays, the state s can implement the "Action Plan" of the BEPS
("Base Erosion and Profit Shifting" – "erosion of the tax base and transfer of
profits"), a norm that in Romania is also considered by the tax authorities in
establishing commercial transactions The BEPS projec t was elaborated and
approved by the OECD Secretariat, at the meeting of the finance ministers of the
G20 states, held from 27 to 28 February 2016, in Shanghai.
Among the major objectives of this plan are the neutralization of the
effects of inappropriate hybrid agreements, but also the establishment of fiscal
mechanisms in the new digital age. It also aims to implement coordinated
mechanisms for collecting indirect taxes, especially on V.A.T ., especially in
electronic and online transactions.
In order to a chieve this goal, the provisions of the basic Treaty of the
O.C.D.E., as well as the initiation of directives addressed to the member states,
regarding the implementation of legal texts to eliminate the aggressive fiscal
practices from the international ag reements that allow double deduction, are
considered17.
Another action concerns the adoption of effective means of combating
harmful fiscal practices, taking into account the principle of transparency of tax
information. Although Romania is not a member of the OECD, the
administrative -fiscal bodies and the courts often apply the directives and
recommendations of this organization in files and cases, considering them as
"doctrinal opinions". Also, our country applies the principles of BEPS, and this
was seen in the legislation through the amendments of the Fiscal Code, GEO
79/2017.
However, Romania has joined the states that collaborate with the
Organization and the G20 group in developing the standards of the B.E.P.S.
Project. (Base Erosion and Profit Shiftin g), on combating the erosion of tax bases
15 http://ec.europa.eu/taxation_customs/taxation/tax_fraud_evasion/acting_globally/index_en.htm,
consulted on 02.11.2019.
16 Dan Drosu Șaguna, Drept financiar si fiscal european , Ed. C.H. Beck, Bucharest, 2010, p. 257.
17 Mircea Ștefan Minea, C.F. Costaș, D.M. Ionescu, Legea evaziunii fiscale comentarii și explicații ,
Ed. C.H. Beck, Bucharest, 2006, p. 199.
Dynami c Ele ments in the Contemporary Business Law 197
and the transfer of profits. The Government of Romania, through a Memorandum,
adopted, on June 2, 2016, the accession of Romania, as an associate member, to
the Forum for the implementation of the B.E.P.S. Project, which will ensure the
implementation of the measures of this project in Romania.
How the B.E.P.S. it also involves suggestions for changes in the domestic
law, in order to prevent the cases of erosion of the tax base, this fact will cause to
make changes in the Standard Model of convention for avoiding double taxation
in the O.C.D.E., as well as in the fiscal procedures of each country. The objective
is to achieve the remediation of the mechanisms for solving double taxation
situations.
Another component o f the Action Plan is to expand and intensify the
automatic and immediate exchange of data and information to include cross –
border tax decisions, in line with the proposal to amend the U.E. Directive.
regarding the exchange of information.
Transfer pricing is another component of the attention of the B.E.P.S.
Plan, Romania assuming the provisions of the Guidelines established by
O.C.D.E. regarding transfer prices for transnational companies and tax
administrations, by taking over and adapting them to nationa l law. Although the
documentation elaborated in the debates initiated by this organization is
obligatory only for the O.C.D.E. member countries, the regulations in question
can also be adopted by the non -member countries, constituting a reporting point
for the future normative regulations.
4. Conclusions
The mechanisms of international tax evasion identified in this article
highlight as recent tax evasion mechanisms the use of legal vehicles registered in
offshore constituencies as well as th e use of alternative methods of transferring
funds and virtual currencies.
Bitcoin and cryptocurrencies are increasingly used in international tax
evasion as well as in the transfer of funds because, unlike traditional forms of
cross -border t ransfer, they do not have the purpose of regulating through KYC or
reporting financial -fiscal data in both jurisdictions, respectively the origin
jurisdiction. and the jurisdiction of destination.
Another form of tax evasion at international level is the e rosion of the tax
base through portrayals of transfer prices.
We make an explanation regarding the use of the term tax evasion in the
context of this material as being used both in the acceptance of legal tax evasion
and as fraudulent tax evasion.
Regardin g the activity described and identified above, we mention that it
can be from both invoices and that the distinction is given by the source and the
purpose pursued by the initiator. The border between the two is also interpretable.
Dynami c Ele ments in the Contemporary Business Law 198
As modern methods of c ombating the phenomenon described above, we
conclude that in our opinion the most effective are the exchange of information
and international regulation both within international bodies and as a form of
regional cooperation, in response to economic realiti es, but without stifling
innovation. technological and financial.
The exchange of information consists in creating databases accessible by
the members of the association as well as by identifying each tax subject at
international level through a unique number, the so -called TIN (tax identification
number).
The international legal regulations must follow the FATCA type
legislation regarding the mechanism for combating and disseminating people as
well as much stricter regulations based on international agr eements regarding
B.E.P.S. The central point of these regulations is the agreement, so that each
subject of the agreement does not undermine the set of objectives pursued.
The application of new technologies at the state institutional level will
undoubtedl y lead to financial -fiscal transparency as well as to a form of self –
regulation of competition on the free market: in this sense the new technologies
allow total transparency (blockchain) and the irreversibility of transact ions
without the consent of all to the parties involved as initial signatories.
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5. Robert K. Merton, The Unanticipated Consequence of Purposive Social Action,
„American Sociological Review” , 1(6), 1936.
6. Directive no. 2060/2015 repealing Directive 2003/48/EEC on taxation of
savings income in the form of interest payments (OJ L 301, 18.11.2015).
Improving Efficiency to Combat VAT Frauds at
the European Union Level
Assistant professor Nelu Dorinel POPA1
Student Cezara POPA2
Abstract
The value -added tax is an indirect tax that represents both an inherent resource
of the European Union budget and a resource of EU Member States budgets. Conse-
quently, frauds against national VAT affect both the national budget and the Member
States’ budget, which entail the activities for combatin g this type of fraud to be correlated
both at national and at the Community level. Therefore, the Romanian jurisprudence pro-
vides examples in which the national judicial authorities have identified a continuous
circulation, a "carousel" type, of VAT fraud, between several Member States of the Eu-
ropean Union, which has harmed each of the budgets of the states on whose territory it
has "transited" and implicitly, the Community budget. The investigation of these frauds
and the criminal prosecution of the perpe trators was carried out only at the national
level, in a fragmented way, but it also required the judicial cooperation of the Member
States in order to support the requesting states in carrying out the investigations. How-
ever, the national authorities are missing the cross -border dimension, which requires a
European Union authority to investigate such frauds, to correct the deficiencies of the
current regime regarding compliance with law, based exclusively on national efforts and
to increase their consisten cy and coordination.
Keywords: VAT frauds, European Union, case law, European cooperation.
JEL Classification: K33, K34
1. VAT and its weight in the budget of the European Union
The value -added tax is an indirect tax which represents both an inherent
resource of the European Union general budget and a resource of the Community
states’ budgets3.
For a perspective regarding the weight this tax has at the level of the
Community budget, we forward the Annual Report on the implementation of the
budget for 2 018, published in the Official Journal of the European Union, in
1 Nelu Dorinel Popa – Faculty of Economics and Law, University of Medicine, Pharmacy, Science
and Technology of Târgu Mureș, Romania, popaneludorinel@yahoo.com.
2 Cezara Popa – Faculty of International Business and Economics, Bucharest University of
Economic Studies, Romania , cezara.popa@yahoo.com.
3 See in this regard Mihaela Tofan, A View on the VAT Split Procedure: the Estimated Effects of
the Proposal for Regulationp , in Adriana M oțatu, Ioana Nely Militaru (eds.), Diversity and
Interdisciplinarity in Business Law , ADJURIS – International Academic Publisher, Bucharest,
2017, p. 205.
Dynami c Ele ments in the Contemporary Business Law 201
which it was highlighted that the VAT -based inherent resource represents 12%
of the European Union revenues. Contributions to this inherent resource are cal-
culated starting from a uniform rat e applied to harmonized bases for VAT assess-
ment at Member States level4.
As a consequence, and implicitly, frauds against national VAT currently
affect both the national budget and the budget of the European Communities,
which requires that the activities of fighting against this type of fraud to be cor-
related both on national and on the community level.
In a broader context, we point out that the general budget of the European
Union and the budgets administered by it or on its behalf comprise the revenue
and expenditure sections.
In an authentic interpretation given by the explanatory report of the Con-
vention on the protection of the financial interests of the European Communities
of 26 July 19955, the main revenues to the general budget of the European Un ion
consist of:
– a part of the national VAT of each European Union Member State;
– a share equal to a certain percentage of the gross national income and
the traditional own resources of each Member State (differentiated according to
its economic develo pment);
– customs duties levied on imports of products originating in third coun-
tries into the European Union;
– agricultural taxes levied on imports of agricultural products from third
countries (covering the difference between the world price of the pr oduct and the
price on the Community Market and the quotas provided for in the common mar-
ket);
– fines in the matter of competition.
The resources to which the income fraud referred to, at that time, were
considered only the customs duties levied on the i mport into the European Union
of products originating from third countries and the agricultural levies, respec-
tively the import of agricultural products from third countries. The involvement
of the other resources listed above did not fall within the scope of the facts regu-
lated in this survey.
According to the official interpretation initially given at that time, fraud
affecting national VAT was not included among those affecting the budget of the
European Communities in terms of revenue6.
4 Official Journal of European Union for 2018 , document available online on https://www.eca.
europa.eu/Lists/ECADocuments/annualreports -2017/annualreports -2017 -RO.pdf, consulted on
1.10.2019.
5 Convention on the protection of European Communities’ financial interests of 26 July 1995,
available online on https://eur -lex.europa.eu/legal -content/RO/TXT/?uri=CELEX%3A41995A11
27%2803%29, consulted on 1.10.2019.
6 Norel Neagu, Fraudarea bugetului Uni unii Europene și evaziunea fiscală în materie de TVA –
politică penală națională versus politică penală europeană [Fraud on the budget of the European
Union and tax evasion in what concerns VAT – national criminal policy versus European criminal
Dynami c Ele ments in the Contemporary Business Law 202
Gradually, howe ver, the reality proved that this type of fraud has had an
upward evolution, so that, currently, at the European Union level, the average of
the losses caused by committing VAT frauds was 9 -10 percent of the total taxes
owed to each of the national budgets . Countries such as Luxembourg, Malta, Cro-
atia, Sweden and Spain recorded the lowest percentages, while Romania occupies
a dishonourable first place, with losses of 36% of total revenues (which means
annual losses amounting 27,55 billion lei, the equivalen t of about 6 billion euros,
out of the total due revenues), followed by Greece, which registered losses of
almost 30%7.
2. Relevant Romanian case law regarding VAT fraud
For the purposes of the above, we mention two cases implemented by the
National Anti corruption Directorate – Târgu Mureș Territorial Service.
a) In the first case, through the indictment no. 75/P/2012 of 14.12.20168
the arraignment of the defendants was ordered
– S.S., for committing the offenses of:
setting up of an organized criminal g roup for the purpose of committing
tax evasion criminal offences , deed provided and punished by Article 7 paragraph
1 of Law 39/2003, with the application of Article 5, para. 1 Criminal Code,
continuous tax evasion , a deed provided and punished by Article 9, para.
(1), letter b) and para. (3) of Law no. 241/2005 (in force on 30.09.2012), with the
application of Article 41, paragraph (2) Criminal Code 1969 ( 474 material acts ),
all with the application of Article 5 Criminal Code,
continuous tax evasion , a deed provided and punished by Article 9, para.
(1), letter c) and para. (3) of Law no. 241/2005 (in force on 29.12.2014), with the
application of Article 41, paragraph (2) Criminal Code 1969 ( 2194 material acts ),
all with the application of Article 5 Criminal Code,
continuous money laundering , deed provided and punished by Article 29,
para. (1), letter b) and c) of Law no. 656/2002 (in force on 29.12.2014), w ith the
application of Article 41, para. (2) Criminal Code 1969 ( 29 material acts ), all
with the application of Article 5 Criminal Code,
with the application of Article 33 letter a) Criminal Code 1969 and the
application of Article 5 Criminal Code
– H.D., for committing the offences of:
policy], d ocument available online at https://lege5.ro/Gratuit/gmztcnbthe4q/fraudarea -bugetului –
uniunii -europene -si-evaziunea -fiscala -in-materie -de-tva-politica -penala -nationala -versus -politica –
penala -europeana#N15, document last accessed on 01.10.2019.
7 European C ommission Report „VAT Gap” , published at the end of 2018. Document available
online at https://www.fiscalitatea.ro/romania -tara-in-care-frauda -cu-tva-este-la-cele-mai-ridicate –
cote-din-ue-18811 /, document last accessed on 5.10.2019.
8 The case file was sub mitted by the indictment no. 75/P/2012 of 14.12.2016 – not published, at
Mureș County Court, for carrying out the procedure in the preliminary chamber and for trial; the
case is still ongoing.
Dynami c Ele ments in the Contemporary Business Law 203
participation in an organized criminal group for the purpose of commit-
ting tax evasion criminal offences , deed provided and punished by Article 7 para.
1 of Law 39/2003, with the application of Article 5 Criminal Code,
continuous tax evasion , deed provided and punished by Article 9, para.
(1), letter b) and para. (3) of Law no. 241/2005 (in force on 30.09.2012), with the
application of Article 41, para. (2) Criminal Code 1969 (352 material acts ), all
with the application of Article 5 Criminal Code,
continuous tax evasion , deed provided and punished by Article 9, para.
(1), letter c) and para. (3) of Law no. 241/2005 (in force on 29.12.2014), with the
application of Article 41, para. (2) Criminal Code 1969 ( 2064 material acts ), all
with the application of Article 5 Criminal Code,
continuous money laundering , deed provided and punished by Article 29,
para. (1), letter b) and c) of Law no. 656/2002, with the application of Article 41,
para. (2) Criminal Code 1969 ( 29 material act s), all with the application of Arti-
cle 5 Criminal Code,
with the application of Article 33 letter a) Criminal Code 1969 and the
application of Article 5 Criminal Code
– R.I., for committing the offences of:
participation to an organized criminal group for the purpose of commit-
ting tax evasion criminal offences , deed provided and punished by Article 7 para.
1 of Law 39/2003, with the application of Article 5 Criminal Code,
complicity in continuous tax evasion , deed provided and punished by Ar-
ticle 26 Crimin al Code 1969 related to Article 9, para. (1), letter b) and para. (3)
of Law no. 241/2005 (in force on 30.09.2012), with the application of Article 41,
para. (2) Criminal Code 1969 ( 348 material acts ), all with the application of Ar-
ticle 5 Criminal Code,
complicity in continuous tax evasion , deed provided and punished by Ar-
ticle 26 Criminal Code 1969 related to Article 9, para. (1), letter c) and para. (3)
of Law no. 241/2005 (in force on 29.12.2014), with the application of Article 41,
para. (2) Criminal C ode 1969 ( 1142 material acts ), all with the application of
Article 5 Criminal Code,
with the application of Article 33 letter a) Criminal Code 1969 and the
application of Article 5 Criminal Code;
– S.L., for committing the offences of:
participation to an organized criminal group for the purpose of commit-
ting tax evasion criminal offences , deed provided and punished by Article 7 para.
1 of Law 39/2003, with the application of Article 5 Criminal Code,
continuous tax evasion , deed provided and punished by Ar ticle 9, para.
(1), letter b) of Law no. 241/2005 (in force on 31.12.2011), with the application
of Article 41, para. (2) Criminal Code 1969 ( 4 material acts ), all with the appli-
cation of Article 5 Criminal Code,
continuous tax evasion , deed provided and p unished by Article 9, para.
(1), letter c) of Law no. 241/2005 (in force on 30.06.2011), with the application
Dynami c Ele ments in the Contemporary Business Law 204
of Article 41, para. (2) Criminal Code 1969 ( 922 material acts ), all with the ap-
plication of Article 5 Criminal Code,
complicity in continuous tax evasion , deed provided and punished by Ar-
ticle 26 Criminal Code 1969 related to Article 9, para. (1), letter b) and para. (3)
of Law no. 241/2005 (in force on 30.09.2012), with the application of Article 41,
paragraph (2) Criminal Code 1969 ( 348 material acts), all with the application of
Article 5 Criminal Code,
complicity in continuous tax evasion , deed provided and punished by Ar-
ticle 26 Criminal Code 1969 related to Article 9, para. (1), letter c) and para. (3)
of Law no. 241/2005 (in force on 29.12.20 14), with the application of Article 41,
para. (2) Criminal Code 1969 ( 1142 material acts ), all with the application of
Article 5 Criminal Code, with the application of Article 33 letter a) Criminal Code
1969 and the application of Article 5 Criminal Code.
– S.Su., for committing the offences of:
participation to an organized criminal group for the purpose of commit-
ting tax evasion criminal offences , deed provided and punished by Article 7 para.
1 of Law 39/2003, with the application of Article 5 Criminal C ode,
continuous tax evasion , deed provided and punished by Article 9, para.
(1), letter b) of Law no. 241/2005 (in force on 31.12.2011), with the application
of Article 41, para. (2) Criminal Code 1969 ( 4 material acts ), all with the appli-
cation of Article 5 Criminal Code,
continuous tax evasion , deed provided and punished by Article 9, para.
(1), letter c) of Law no. 241/2005 (in force on 30.06.2011), with the application
of Article 41, para. (2) Criminal Code 1969 ( 922 material acts ), all with the ap-
plica tion of Article 5 Criminal Code,
complicity in continuous tax evasion , deed provided and punished by Ar-
ticle 26 Criminal Code 1969 related to Article 9, para. (1), letter b) and para. (3)
of Law no. 241/2005 (in force on 30.09.2012), with the application o f Article 41,
paragraph (2) Criminal Code 1969 ( 348 material acts ), all with the application of
Article 5 Criminal Code,
complicity in continuous tax evasion , deed provided and punished by Ar-
ticle 26 Criminal Code 1969 related to Article 9, para. (1), lett er c) and para. (3)
of Law no. 241/2005 (in force on 29.12.2014), with the application of Article 41,
para. (2) Criminal Code 1969 ( 1142 material acts ), all with the application of
Article 5 Criminal Code, with the application of Article 33 letter a) Crimi nal Code
1969 and the application of Article 5 Criminal Code.
– G.R., for committing the offenses of:
participation to an organized criminal group for the purpose of commit-
ting tax evasion criminal offences , deed provided and punished by Article 7 par-
agraph 1 of Law 39/2003, with the application of Article 5 Criminal Code,
complicity in continuous tax evasion , deed provided and punished by Ar-
ticle 26 Criminal Code 1969 related to Article 9, para. (1), letter b) and para. (3)
of Law no. 241/2005 (in forc e on 23.09.2012), with the application of Article 41,
Dynami c Ele ments in the Contemporary Business Law 205
para. (2) Criminal Code 1969 ( 169 material acts ), all with the application of Ar-
ticle 5 Criminal Code, with the application of Article 33 letter a) Criminal Code
1969 and the application of Article 5 Cr iminal Code.
Of the criminal offences retained in the indictment, a number of 179 ma-
terial acts of:
tax evasion offenses in continuous form , deed provided and punished by
Article 9, para. (1), letter c) and para. (3) of Law no. 241/2005 (in force on
29.12 .2014), with the application of Article 41, para. (2) Criminal Code 1969, all
with the application of Article 5 Criminal Code, for which defendants S.S., H.D.,
were found guilty, respectively
complicity in continuous tax evasion , deed provided and punished by Ar-
ticle 26 Criminal Code 1969 related to Article 9, para. (1), letter c) and para. (3)
of Law no. 241/2005 (in force on 29.12.2014), with the application of Article 41,
para. (2) Criminal Code 1969, all with the application of Article 5 Criminal Code,
for which the defendants R.I., S.L. and S.SU. were found guilty,
consisting in disclosing/facilitating the disclosure in the accounting doc-
uments of SC S.F. SRL, between May 2012 and September 2012, of a number of
179 invoices issued and declared fictitiou s as intra -Community deliveries in Hun-
gary and Austria, given that the goods entered in the documents did not leave the
territory of the country, proceedings by which SC S.F. SRL has prejudiced the
state budget with the amount of 2,974,135 lei representing the value -added tax
owed by the company, resulting from the registration of the 179 mentioned in-
voices,
had as consequence the avoidance of taxes and fees payment to the state
budget with the amount of 2,974,135 lei as mentioned before, standing for the
value -added tax owed by the company ( 179 material acts ).
In such conditions, there was the suspicion that the VAT subsequently
applied to the fictitious goods allegedly delivered in Austria and Hungary would
have had a fiscal impact on the national budgets of the two countries, within the
meaning of reducing the tax base registered by the "beneficiary" companies of
the fictiously delivered goods by the Romanian company.
b) In another case, through the indictment no. 22/P/2012 of 22.07.20169,
was ordered:
I. the arraignment, in a state of preventive arrest of the defendant K.I., a
9 The file was submitted through the indictment no. 22/P/2012 f rom 14.12.2016 – not published, at
Harghita County Court, for carrying out the procedure in the preliminary chamber and for trial;
through the judgment no. 109/08 June 2017 of the Harghita County Court, not published and sub-
sequently, in the appeal, throug h the criminal decision no. 193/A/29 March 2018 -not published, of
the Court of Appeal Tg. Mureș, as a result of the changes of legal classification and the merger of
the penalties applied for each of the offenses, the conviction of the defendant K.I. was o rdered at
the sentence of 5.6 years’ imprisonment, the conviction of the defendant C.I. to the sentence of 3
years’ imprisonment, as well as the conviction of the defendant SC I. SRL O.S. to the penalty of a
fine amounting 450,000 lei.
Dynami c Ele ments in the Contemporary Business Law 206
Hungarian citizen, for committing the offences of
improper participation in continuous tax evasion (89 material acts ), pro-
vided by Article 31, para. 2 Criminal Code 1969 related to Article 9 paragraph 1
letter c) and para. 3 of Law no. 241/2005 (the form existing on 30.06.2011), with
the application of Article 41 para. 2 Criminal Code 1969 and Article 5 para. 1
Criminal Code,
improper participation in forgery of documents under priva te signature,
in continuous form (13 material acts ), provided by Article 31 para. 2 Criminal
Code (1969) related to Article 290 Criminal Code (1969), with the application of
Article 41 para. 2 of the Criminal Code (1969) and Article 5 para. 1 Criminal
Code ,
money laundering through the acquisition, possession or use of goods,
knowing that they come from the commission of offences, in a continuous form
deed provided and punished 29 paragraph 1 letter c of Law no. 656/2002 with the
application of Article 41 p ara. 2 Criminal Code ( 64 material acts ),
with the application of Article 33 letter a) Criminal Code 1969 and Arti-
cle 5 para. 1 Criminal Code.
II. the arraignment of the defendants:
– C. I. (at large), Romanian citizen, for committing offences of:
improper participation in continued tax evasion (89 material acts), pro-
vided by Article 31, para. 2 Criminal Code (1969) related to Article 9 para. 1
letter c) and para. 3 of Law no. 241/2005 (the form existing on 30.06.2011), with
the application of Article 41 par a. 2 Criminal Code (1969) and Article 5, para. 1
Criminal Code,
improper participation in forgery of documents under private signature,
in continuous form (14 material acts ), provided by Article 31, para. 2 Criminal
Code (1969) related to Article 290 Crimi nal Code (1969), with the application of
Article 41 para. 2 of the Criminal Code (1969) and Article 5, para. 1 Criminal
Code,
forgery of documents under private signature, in continuous form (61
material acts ), provided by Article 290 Criminal Code (1969), with the applica-
tion of Article 41 paragraph 2 Criminal Code (1969) and Article 5 paragraph 1
Criminal Code,
use of false documents (70 offences ), provided by Article 291 Criminal
Code (1969), with the application of Article 33 letter b) Criminal Code (1 969)
and Article 5 paragraph 1 Criminal Code,
all with the application of Article 33 letter a) of the Criminal Code (1969)
and Article 5, para. 1 Criminal Code
– S.C. I. S.R.L., for committing the offences of:
continuous tax evasion (89 material acts ) – (highlighting, in accounting
documents or other legal documents, the expenses that are not based on real op-
erations or highlighting other fictitious operations, in order to evade fiscal obli-
gations), provided by Article 9 para. 1 letter c) and para. 3 of Law no. 241/2005
Dynami c Ele ments in the Contemporary Business Law 207
(the form existing on 30.06.2011), with the application of Article 41 para. 2 Crim-
inal Code (1969) and Article 5, para. 1 Criminal Code,
forgery of documents under private signature, in continuous form (62
material acts ), provided by Article 290 Criminal Code (1969), with the applica-
tion of Article 41 para. 2 Criminal Code (1969) and Article 5, para. 1 Criminal
Code,
use of false documents (70 offences ), provided by Article 291 Criminal
Code (1969), with the application of Article 33 letter b) Crimina Code (1969) and
Article 5 para. 1 Criminal Code,
all with the application of Article 33 letter a of the Criminal Code (1969)
and Article 5, para. 1 Criminal Code.
The evidence used in the latter case file indicated that the commercial
transactions included in the 89 abovementioned invoices, which were the object
of the tax evasion offences retained in the indictment, are fictitious and are part
of a wider series of fictitious transactions unrolled scriptically at an intra -com-
munity level. Thus, the trading chain that was finally created, controlled and, at
the same time, proved in this case, included fictitious commercial relations run-
ning consecutively between companies in Hungary, Romania and Slovakia.
At the end of the billing chain, the defendan t SC I SRL benefited from
the VAT deduction in the amount of 13,847,087 lei, input tax not being paid and
the VAT exemption amounting to 13,410,843 lei for the subsequent intra -com-
munity deliveries declared towards two Slovak companies, P. 99. and P.X.
In this case, there was the suspicion that the VAT applied to the fictitious
goods allegedly purchased from Hungary and allegedly delivered to the two com-
panies in Slovakia would have generated a fiscal impact in the national budgets
of these two countries, i n the similar sense of reducing the tax base registered by
both the "supplier" company in Hungary of the fictitious goods, as well as by the
"beneficiary" companies in Slovakia of the fictitious goods delivered by the Ro-
manian company.
c) In each of the tw o cases, under the Criminal Procedure Code and Law
no. 302/2004 regarding the international judicial cooperation in criminal matters,
requests for judicial assistance were made to the other mentioned European coun-
tries, in which the state of fact ascertain ed in the respective cases was brought to
the attention of the judicial and fiscal authorities, showing at the same time their
availability in granting support for any investigation, in the idea that there were
suspicions of fraud in the territories of the other mentioned states.
These requests were indispensable for the judgment of the two cases,
meaning that it was necessary to prove the intracommunity context in which the
facts contained in the indictment were committed and implicitly, we consider,
they also represented acts of notification of the other national authorities about
possible suspicions of fraud committed also in the territories of their states in
relation to the facts charged by the Romanian authorities.
Moreover, the national member of Roma nia at Eurojust was notified
Dynami c Ele ments in the Contemporary Business Law 208
about the factual status retained in the criminal file no. 22/P/2012, who achieved
a way of communication with national members at this institution of the other
countries mentioned above.
3. European cooperation in the field o f combating VAT fraud
We will not insist on the legal instruments available at this time for the
prevention and combating of frauds at Community level, including those com-
mitted through VAT, as there is a wide range of specialized legal literature.
The cu rrent classical ways of international cooperation through mutual
legal assistance requests or through joint investigation teams often do not work
well enough to allow an effective investigation and prosecution of such criminal
offences, despite the efforts of European bodies such as Eurojust and Europol.
Responses to mutual legal assistance requests are often very slow, and
police and judicial authorities encounter practical difficulties in contacting and
cooperating with colleagues abroad due to language problems and differences
between legal systems. In some states, slow and inefficient international cooper-
ation has often led to the impossibility of investigating the case due to the expiry
of the limitation period. In addition, cases that are detrimental to the EU's finan-
cial interests are particularly complex.
As regards cooperation at Union level, mixed experiences have been re-
ported in what concerns the cooperation with Eurojust and Europol and between
Member States and OLAF.
However, we must highlight the need to involve in such measures a su-
prastatal, community authority, which should also take into account the fiscal
impact on both the national budgets of the countries transited by this "VAT car-
ousel" and on the community budget (taking into account t hat a certain percent-
age of the VAT collected from the national budgets is transferred to the consoli-
dated budget of the European Union).
From the aforementioned considerations, a proposal from the European
Commission issued since 201310 aims at establishin g an independent European
Prosecutor's Office responsible for the investigation, prosecution and arraignment
of offenders and their accomplices who harmed the financial interests of the EU,
proposal which has never been more actual than it is now, consider ing the evolu-
tion of offences in this sector.
10 Proposal for a Regulation of the Council to establish a European Public Prosecutor's Of-
fice/*COM/2 013/0534 final -2013/0255 (APP) *.The document is available online at https://eur –
lex.europa.eu/legal -content/RO/TXT/?uri=CELEX:52013PC0534, the document was last accessed
on 11.10.2019. There are numerous views expressed on this subject, therefore we bring forth several
online addresses where the documen ts can be viewed, respectively: https://blog.avocatoo.ro/ par-
chetul -european -investigarea -fraudelor -impotriva -bugetului -ue/, https://en.wikipedia.org/wiki/
European_Public_Prosecutor, http://ec.europa.eu/justice/criminal/judicial -cooperation/public -pro
secutor/index_en.htm, http://www.consilium.europa.eu/en/press/press -releases/2017/10/12/ep po –
20-ms-confirms/, consulted on 11. 10.2019.
Dynami c Ele ments in the Contemporary Business Law 209
4. Conclusions
In conclusion, the investigation of such frauds and the criminal prosecu-
tion of those responsible is carried out, at least as far as we know, only at national
level, in a fragmented way, being needed also a judicial cooperation of the Mem-
ber States to support the applicant states in conducting the investigations.
The reality has shown, however, that the national authorities are some-
times missing the cross -border dimension (as it also results fr om the two cases
illustrated above), aspect which requires an EU authority to investigate such
frauds, to correct the deficiencies of the current law enforcement regime based
exclusively on national efforts and to increase their consistency and coordina-
tion11.
Through the arguments presented in this article, we opt for the establish-
ment and operationalization of the European Public Prosecutor's Office, which
will exercise public action in relation to offenses that harm the financial interests
of the European Union before the competent courts of the Member States.
Also, according to the law, we suggest that cross -border VAT frauds re-
sulting in the avoidance of VAT payment to the national budget, and implicitly,
to the European Union budget, should be separatel y incriminated also as deeds
committed against financial interests of the European Union, considering that at
present they are incriminated only in Law no. 241/2005 for the prevention and
combating of tax evasion, which only considers the offences that res ult in harm-
ing the national budget.
Bibliography
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sity and Interdisciplinarity in Business Law , ADJURIS – International Aca-
demic Publisher, Bucharest, 2017.
2. Norel Neagu, Fraudarea bugetului Uniunii Europene și evaziunea fiscală în ma-
terie de TVA – politică penală națională versus politică penală europeană [Fraud
on the budget of the European Union and tax evasion in what concerns VAT –
national criminal policy versus European criminal policy], document available
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11 Ibid.
Dynami c Ele ments in the Contemporary Business Law 210
frauda -cu-tva-este-la-cele-mai-ridicate -cote-din-ue-18811/, document last ac-
cessed on 5.10.2019.
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LEX:52013PC0534, the document was last accessed on 11.10.2019.
CONTEMPORARY LABOR LAW
Precarious W ork – Challenges of Labour Law in Europe.
Case Law: Uber
PhD. student Raluca ANDERCO1
Abstract
The main purpose of this article is to analyse the issue of precarious work in
Europe, where the proliferation of the new types of employment without the whole spec-
trum of rights associated with the standard employment relationship has engendered con-
siderable labour market fragmentation and social polarization. Precarious work poses
unique challenges to the European social model of secure employment and decent s ocial
protection. To address these challenges, we seek to analyse the reasons for the spread of
precarious work in various countries in Europe to explain the different types of precari-
ous work and to make proposals to address the phenomenon though improved labour
regulation and practice.
Keywords: precarious work, worker, Uber, atypical form, risk.
JEL Classification : K31, K33
1. Introduction
Precarity of work is one of the core concerns of contemporary labour law
research. The need to examine closely the notion of precariousness is employ-
ment relationships emerged in the context of globalization and automation that
induced a breakdown of traditional modes of working in the first decade of the
twenty first century and made increasingly commonplace the practice of using
more flexible forms of employment without the whole spectrum of rights associ-
ated with the standard employment relationship of regular, full -time work.
The need to address precarious work through labour regulation has been
given new impet us by the worldwide shift to more insecure jobs since the global
financial crisis, as well as the ride of “gig economy” which has, through digitali-
zation, transferred the risk element in the employment relation from employer to
worker.
Since the 1970s, the discussion within academic and policy circles has
been largely centered on a key question: What constitutes precarious work?2
1 Raluca Anderco – Doctoral School, Bucharest University of Economic Studies; Lawyer at
Bucharest Bar Association, Romania, raluca.anderco@anderco.ro.
2 Sylos Labini, P., Precarious Employment in Sicily , „International Labour Review”, 89, 1964, p.
268 et seq.; Waite, L., A Place and Space for a Critical Geography of Precarity?, „Geography
Compass”, 311, 2009, pp. 412 –433; Olsthoorn, M., Measuring Precarious Employment: A Pro-
posal for Two Indicators of Precarious Employment Based on Set -Theo ry and Tested with Dutch
Labor Market -Data , „Social Indicators Research”, 119, 2014, p. 421 et seq.
Dynami c Ele ments in the Contemporary Business Law 213
Despite the persistent conceptual conundrum over the correlation be-
tween precarious work, atypical employment and contingent work , and the lack
of a universally acknowledged taxonomy of standard/nonstandard employment
in the literature, considered cumulatively the existing conceptions, superficially
at least, provide the fullest portrayal of complexity of the precarity of work phe-
nomenon, an understanding of which is vital for the proper legal articulation of
the protection machinery/framework required.
However, in the academic discourse, the question of what the impact of
precarious work should be on the labour market regulation wit hin EU and its
Member States, considering the recent process of remodeling of the transnational
component of the European social model, remains a contested terrain.
At this juncture, it is self -evident that the deepening proliferation of new
types of preca rious employment, such as that found in the “gig economy”, poses
unique challenges to the European social model of secure employment and decent
social protection as a result of its engendering considerable labour market frag-
mentation and social polarizatio n.
The prohibition of abuse of employment relationships leading to precar-
ious working conditions, including abuse of atypical contracts, incorporated in
the recently adopted European Pillar of Social Rights Chapter II: “Fair working
conditions” points beyo nd the current social acquis of the EU centered on the
guarantee of equal treatment with respect to workers working under nonstandard
employment relationship.
The inclusion of such a broadly conceived principle of fair and equal
treatment is undeniably a s tep forward in acknowledging the importance of the
issue for the preservation of the European social model and rises hopes for the
development of more adequate norms of protection for workers whose employ-
ment relationship lack certainly, such as zero hours ’ contract workers.
Yet, it may not per se suffice to counter precariousness and the resultant
poverty, social exclusion and inequity in Europe, since, without further regulation
at the EU level, each Member State may define the balance between security an d
flexibility in its labour market differently, which makes the risk of deregulatory
competition between national labour law regimes in Europe still tangible.
2. Uber drivers are “workers”: the expanding scope of the “worker”
concept in the UK’s gig econo my
According to Jeff Kenner, shortly before the 2012 Olympic Games, the
modern business phenomenon, known as Uber set out to “conquer” London’s taxi
market.
Rather like upstart mill owners of the early 1800s, who destroyed the
guild model in the English textile industry by introducing new machinery and
undermining long established practices of professional regulation, Uber disrupted
London’s century -old system of regulated private transportation by launching its
Dynami c Ele ments in the Contemporary Business Law 214
app to match passengers directly with logge d-on licensed owner drivers and, sim-
ultaneously control their journeys and fares for every ride.
Within three years, there were more Ubers that black cabs with metered
taxis.
In practice, Uber had created a “human supply chain”3 of drivers who
were free to decide when to seek work but under constant pressure to be logged
on and available or face penalties, as Uber strove to maximize productivity to
meet rising demand and undercut its competitors.
This article aims, first, to evaluate the importance of grant ing “worker”
status to self -employed gig workers and second, to address complex issues of
precarity that remain even when workers on digital platforms have some modi-
cum of employment protection.
Self-employment constitutes 15 per cent of workforce.4 Zero h ours con-
tracts, with no guaranteed minimum hours, have flourished as the ultimate form
of the legalized commoditization of labour, because they allow employers to
transfer the risk of fluctuations of demand to workers. This process of economic
burden shift ing, has reached its apogee in the digital age with the growth of task –
based gig work introduced by startup companies using apps as an intermediary
or platform to connect workers with customers who need labour to provide them
with a service. In the gig eco nomy, work is rebranded as entrepreneurship and
labour sold as technology, with humans as service for the needs of enterprise.
Self-employed gig wo rkers face multiple challenges. On average, in
2014 -2015, self -employed workers earned 10.800 Pounds per year , compared to
20.000 P per year earned by employees. Only 16% contributed to a pension. In
2017, a Parliament Committee heard from many contractors for whom the reality
of gig and self -employment did not live up to the flexible ideal… rather, we heard
of low pay, inflexible in working times, long hours, instability and difficulties in
taking time off.
While the committee noted that such employment is entrepreneurial and
promotes a culture of self reliance, it found that some companies use self -em-
ployment wo rkers as “cheap labour” and are “excusing themselves” not only from
responsibilities as “employers”, but also from liabilities then would have if their
workers were employees, such as social security contributions and automatic en-
rolment for pensions.
Self-employed workers contribute less towards social security but have
almost equal access to the support available through the welfare state.
Low pay provides an incentive for workers to opt for self employed status
but leads to a substantial loss of revenue to support public services and increases
the strain of welfare state.
Often such work is a stop gap to achieve a short term financial objective,
3 Jennifer Gordon, Regulating the Human Supply Chain , „Iowa Law Review”, vol. 102, Issue 2,
2017, p. 445 et seq.
4 House of Commons Work and pensions Commit tee, self -employment and the gig economy.
Dynami c Ele ments in the Contemporary Business Law 215
reflecting a culture of low pay and uncertain hours. Only those with in -demand
skills can afford to rely on gig work to make a decent living and it is this group
that is most satisfied.
It follows that one of the most difficult problems facing gig workers is
uncertainly about their employment status. First, there is the issue of “sham” con-
tract terms. Workers are t ypically labeled as “independent contractors” which is
part of a global phenomenon of misclassification. In reality, the more the worker
needs work – any work, any time – the more likely it is that they must “take it or
leave it” and accept the employers t erms. The prevalence of “sham” contracts
amounts to serial misrepresentation of the contractual relationship.
Second, intimately connected with the true agreement requirement, there
is the difficulty of establishing “employee” status, which provides a gate way to
rights such as protection against unfair dismissal and redundancy compensation.
The on demand gig model is based on is a presumption that “just in time” work-
force is available anytime, anywhere, to get the task done. In the gig economy
there is stro ng evidence of the degree of control by an employer that is associated
with a contract of employment, but the inherent flexibility of this type of work
means that the ultimate decision of availability for work is made by the worker,
and if one worker says no, other is ready and waiting to perform the task.
In UK law there must be an “irreducible minimum of obligations on each
side” to create a contract of employment. At its strictest, this requires mutuality
of obligations, for the employer to promise work and the employee to promise to
accept it.
Third, if each gig is a contract of employment, it is still necessary to fulfil
a period of continuous employment is required for an employee to bring a claim
for unfair dismissal.
Uber’s business model is essentia lly the same in cities throughout the
world. This has given rise to litigation across the globe as drivers seek to establish
employment rights and authorities attempt to regulate Ubers activities to protect
the public interest. Uber presents itself as an i nformation society service offering
a digital platform to people who need on demand transportation. An Uber driver
is depicted as “Everyone’s private driver”, to conjure up the image that each
driver is an entrepreneur directly serving millions of people.
In London, Uber hires qualified drivers online and requires them to attend
an introduction event.
Uber system works as follows: each driver decides when and where to
log on, but once logged on, he/she is available to be allocated rides. Passengers
use the Uber app to match them with nearest available driver.
Once selected, the driver has ten seconds to accept the trip using his/her
app. If there is no response another driver is selected. The driver who accepts the
ride is put in direct communication with t he passenger via smartphone and a fare
is indicated, but the destination is not given until the driver picks up the passen-
ger.
Dynami c Ele ments in the Contemporary Business Law 216
The driver is expected to follow GPS navigation via the app unless the
passenger stipulates another route. When trip is complete, Uber’s fare is charged
automatically to passengers credit/debit card.
In return for signing up to Uber, passengers must accept “Rider terms”
which create contractual relation between passengers and drivers. Drivers are de-
scribed as “independent third part y contractors who are not employed by Uber,
in this way, Uber presents itself as an intermediary and not a transportation ser-
vice.
Drivers are paid weekly under “Partner Terms”. Pay comprises the com-
bined fares earned by the drivers less a 25% service fee.
In a submission to the Greater London Authority Transport Committee,
Uber admitted that drivers are paid a commission.
Separately, a Service Agreement, issued unilaterally to drivers, contra-
dicts the “Partners Terms” by describing the costumer/passenger a s a User and
Uber, as Costumer and The Driver.
Despite this, Uber exercises ultimate control by reserving the “right to
deactivate” the driver app of hir/her average user rating falls bellow out of 5.
In the light of this confusing and often contradictory documentary evi-
dence, Judge Snelson had the task of determining whether, in all the circum-
stances of case, the drivers were “workers” and therefore entitled to pursue a
claim.
A worker is defined as an individual working under any contract whereby
the indi vidual undertakes to do or perform personally any work or services for
another party to the contract whose status is not by virtue of the contract that of a
client or costumer, or any profession or undertaking carried on by the individual.
This provision is intended to create an intermediate class of protected
worker, who is on the one hand not an employee, but on the other hand cannot in
some narrower sense be regarded as carrying on a business. This is hardly new 0
the intermediate category of “workman” was recognized as long ago, but the con-
cept of “dependent contractor” has evolved over time as Parliament has recog-
nized that some workers have “substantively and economically” the same “degree
of dependence” as employees, or at least are “semi -dependent” and should be
provided with limited employment protection.
The issue, therefore, was whether the drivers fell into the second category
of “kinds of people” who were “workers” for the purposes above mentioned.
In determining the dominant purpose of the cont ract, the judge had to
apply the law to the facts, distinguishing between situations when the drivers’ app
is turned on or off. Drivers can be “dormant” with no obligation to switch on the
app and, when is switched off, there is no obligation to provide se rvices.
It followed that the drivers did not have an overarching umbrella contract.
However, when the app is switched on, the position is different because “any
driver who (a) has the app on, (b) is within the territory in which he is authorized
to work, ( c) is able and willing to accept assignments, is for as long as those
Dynami c Ele ments in the Contemporary Business Law 217
conditions are satisfied, working for Uber under a “worker” contract.
Central to this conclusion was the finding that Uber is a transportation
service. At the heart of Uber’s enterprise is a licensed private hire vehicle busi-
ness serviced by drivers who are required to be loyal. It went against common
sense to deny this.
Next, the relationship between drivers and passengers had to be correctly
understood. The Riders Terms and Partner Term s, which purported to be a
driver/passenger contract, would, if interpreted literally, give drivers enforceable
rights against passengers to reclaim fares in the event of Ubers insolvency, and
passengers could be exposed to liability as the drivers’ employ er.
As there was no contract between driver and passenger it was inevitable
that the drivers had contracts to provide their work personally for Uber that fell
full square and related provisions concerning the entitlement of workers to the
minimum wage and paid annual leave.
Having established that the drivers were workers, the remaining issue
was when they were working.
The drivers were working when three conditions were satisfied: the app
was switched on; they were in the territory and they were ready and willing to
accept tips.
In his conclusion, the judge ruled that the drivers were workers who were
entitles to the minimum wage and paid annual leave relating to the hours when
they were available.
3. Conclusion
Recent case law illustrates the vibrancy of the common law and its ca-
pacity to recognize what the ILO has described as the “primary of fact” principle,
“whereby the determination of the existence of the employment relationship is to
be guided by the facts relating to the actual performance of work and not on the
basis of how the parties described the relationship.
Grating: “worker” status to self -employed, but dependent on demand, gig
workers provides a gateway to basic but important employment rights. It recog-
nizes that digital technology is used t o control the workforce and restrict its au-
tonomy but does the law go far enough to address the many problems of precar-
ity?
The purpose of labour law is to act as a corrective to the intrinsic problem
of asymmetric power of employment relation. In the gig economy, direction, sur-
veillance and monitoring of performance are, in many ways, stricter than in the
standard employment relationship and yet, in the absence of an ongoing obliga-
tion to perform work, workers in the UK may be denied employee status. Even if
they are “employees”, they may not benefit from rights reserved for protection
against unfair dismissal and minimum redundancy payment.
Should the right to refuse work or the option to provide a substitute –
Dynami c Ele ments in the Contemporary Business Law 218
even if unused – or payment gig by gig lead t o an outcome where precarious
workers can be dismissed at will?
The issue of “employee” status was untested in Uber, but Uber drivers
work for a wage, they are controlled and they personally perform work, main
features for employee status.
Mutuality of obl igation should be regarded as unnecessary if there is suf-
ficient evidence that work is required on demand, gig by gig, because the indi-
vidual in an employee within the wage – work bargain. On this basis, Uber drivers
are employees.
While the protective tre nd of the common law in recent years is welcome,
it may prove ephemeral.
An alternative starting point would be to consider ILO Recommendation
no 198 concerning the employment relationship as a basis for identifying factors
to establish a presumption to em ployee status.
The ILO indicators place emphasis on inter alia: the obligation to work
in accordance with the instructions under the control of another party, integration
in the organization of the enterprise, work performed solely for the benefit of
anoth er and work carried out personally by the worker.
Employment status is but one of many complex issues of precarity facing
gig economy workers. New technology can be liberating for consumers and
workers alike, but it does not provide a valid excuse to evade the law.
Legislative clarification is required to ensure that on demand workers re-
ceive the minimum wage for all periods when they are available for work. It is
important for those working in the gig economy to have opportunities to contrib-
ute to pension and make social security and tax contributions on a similar basis
to other dependent workers. It is improbable to find a “one size fits all” solution
to these issues.
Entities such as Uber are not merely digital platforms but employers with
a social functi on to guarantee rights for a fair standard living.
Widening and deepening the scope of employment protection, reforms to
tax and social security classification and imaginative approaches to licensing reg-
ulation can provide the freedom for platforms to oper ate in fair competition with
established providers while guaranteeing decent employment.
Bibliography
1. Gordon, J., Regulating the Human Supply Chain , „Iowa Law Review”, vol. 102,
Issue 2, 2017, p. 445 -503.
2. Olsthoorn, M., Measuring Precarious Employment: A Proposal for Two Indica-
tors of Precarious Employment Based on Set -Theory and Tested with Dutch La-
bor Market -Data , „Social Indicators Research”, 119, 2014, pp. 421 –441.
3. Sylos Labini, P., Precarious Employment in Sicily , „International Labour Re-
view”, 89, 1 964, p. 268 -285.
Dynami c Ele ments in the Contemporary Business Law 219
4. Waite, L., A Place and Space for a Critical Geography of Precarity?, „Geogra-
phy Compass”, 311, 2009, pp. 412 –433.
5. Law no. 53/2003 on the Labor Code, republished in the Official Gazette, Part I
no. 345 of 18 May 2011, as amended.
Non-Compliance of the Law of the Remuneration with
Non-Discrimination Rules
Lecturer Dragoș Lucian RĂDULESCU1
Abstract
Discrimination in the legal employment relations represents the enforcement of
differentiations regarding the rights of the employees, their non -acknowledgement result-
ing in a disuse of fundamental freedoms. The existence of discrimination is found to be a
circumvention of the provisions of the protected criteria contained in the internal and
international normative acts, in the sense of not recognizing the principle of equal treat-
ment, by inducing direct or apparently neu tral practices of restriction, by the removal of
the use or exercise of the employees’ rights in employment relations. The article details
the phenomenon of wage discrimination in the legal employment relations, with reference
to the application of the wag e law in the case of civil servants, especially from the point
of view of the contrary provisions regarding non -discrimination.
Keywords: discrimination, rights, remuneration, criteria, institutions.
JEL Classification: K31
1. Introduction
Discrimin ation acts can be carried out by both the employers and the em-
ployees, having in common the occurrence of an inequality situation, acknowl-
edged, as a rule, to take place between people who find themselves in comparable
situations, and which leads to a rest riction of their rights.
On the contrary, we can see that discrimination is found even in the case
of persons in non -comparable situations that would be subject to differentiated
treatment. It is also possible to occur when a different situation implies a similar
approach, by direct or indirect action.
As a result, a direct action2 that does not take into account the existence
of protected criteria such as gender, age, ethnicity, and race can be considered as
a form of discrimination, the same as an apparen tly neutral behavior, situations
related to the objective3 or subjective character of the authors' acts. In this respect,
the national or international4 normative acts contain specific rules for eliminating
the acts of discrimination, the protected criteri a being diverse and including the
1 Dragoș Lucian Rădulescu – Petroleum -Gas University of Ploiești, Romania, dragosradulescu
@hotmail.com.
2 Alexandru Țiclea, Tratat de dreptul muncii , Ed. Universul Juridic, Bucharest, 2005, p. 22.
3 Alexandru Țiclea, Codul muncii , Ed. Universul Juridic, Bu charest, 2015, p. 21.
4 Andrei Popescu, Dreptul internațional și european al muncii, 2nd ed., Ed. C.H. Beck, Bucharest,
2008, p. 340 -341.
Dynami c Elements in the Contemporary Business Law 221
right to equal remuneration for similar attributions, aspects that would interest the
legislator when issuing provisions in this field.
From the point of view of the protected criteria, discrimination was ini-
tially underst ood with reference to race, religion or gender, as a main core of
protective measures; subsequently, it was no longer being limitedly reported,
given that the rules of non -discrimination were provided with derogations or po-
tential exceptions. Thus, althoug h initially two universal protected criteria were
considered (nationality and gender), the application of the principle of equality
imposed to adoption of national laws incompatible with discrimination, an aspect
found in the Mangold case5.
Basically, the laws of the national states stipulated the non -discrimination
norms at constitutional level, generally regarding equal access to the legal em-
ployment relations. It was thus obvious the necessity of transferring such non –
discrimination rules to the field of organic laws, but also an extension of the anal-
ysis through the jurisprudence6.
Last but not least, we can see that the non -discrimination provisions were
more favorable to the employees in terms of acknowledging the principle of
equality, while respecti ng dignity as a basis of the protected criteria was more
limited. However, if the principle of equality has a general application, discrimi-
nation in employment relationships by referring to protected criteria also allows
exceptions. These exceptions, such as objective and justified cases, beget the rise
of the presumption of illegality, analyzing the purpose of the employers' illegal
conduct.
On the contrary, the recognition of the protected criteria was not general,
when, for example, in France, for histo rical reasons, race was not defined, accept-
ing instead the analysis of racism; and in other countries, the criterion of nation-
ality was reported when granting the right of residence and not discrimination.
2. Applicable law on remuneration
In European la w, the principle of equal treatment in terms of wages was
initially found in the provisions of Article 141, para. (1) of the EC Treaty, in
Article 157 TFEU, as well as in Article 21 of the Charter of Fundamental Rights
of the European Union7.
Later on, the equal treatment was taken over by art.14 para. (1) point a)
of the Directive 2009/50/EC regarding the conditions of entry and residence of
5 Werner Mangold against Rüdiger Helm , C-144/04, CJUE.
6 Attempts to limit or prohibit racism and sexism have started from reporting the concept of non –
discrimination extensively from the principle of equality to the appreciation of dignity.
7 On the Charter of Fundamental Rights of the European Union see Ioana -Nely Militaru, Protection
of fundamental rights in the Europe an Union , „Perspectives of Law and Public Administration”,
Volume 8, Issue 2, December 2019, p. 354, 355.
Dynami c Elements in the Contemporary Business Law 222
the third -country nationals for the employment of highly qualified jobs, regarding
working conditions, including rem uneration.
Directive 2006/54/EC8 taking over the provisions of Article 141 of the
Treaty, imposes in Article 4 the fact that for the same work or for work of equal
value, direct or indirect discrimination on the basis of gender must be eliminated
from the application of the payment terms. Also, the directive specifies that if a
professional classification system is used when determining the remuneration,
equal treatment and non -discrimination constitute the common criteria applica-
ble; according to art. 14 p aragraph (1) point c) any forms of direct or indirect
discrimination on the criterion of gender, both in the public and private sectors
are prohibited. In this respect, all parties involved in determining access to em-
ployment or vocational training are enc ouraged to eliminate any forms of dis-
crimination on the grounds of gender, in accordance with the provisions of Article
26 of the Directive.
As regards national laws, they contain specific rules aimed at non -dis-
crimination, retaining non -limiting protected criteria.
Basically, equal pay is enshrined in the Romanian Constitution through
the provisions of Article 41 paragraph (4) regarding equal pay, a measure subse-
quently adopted in Article 6 paragraph (3) of the Labor Code, with reference to
the prohibition of any discrimination on the grounds of gender for equal work or
equal work value, regarding the elements and conditions of remuneration. In the
same sense, according to article 159 paragraph (3) of the Labor Code, setting and
paying the salary must be ma de in the absence of any discrimination based on
gender, genetic criteria, or of social or family origin, race, color, ethnicity, age,
religion, nationality, political views or union membership and disability.
The right to get payment for the work submitte d is recognized by the
provisions of art. 39 paragraph (1) point a) of the Labor Code regarding the rights
and obligations of the employees, the salary representing the consideration for
the work submitted according to art.159 paragraphs (1) and (2); based on the in-
dividual employment contract, each employee has the right to a salary expressed
in money.
Regarding the method of establishing salary, the provisions of art. 41 par-
agraph (1) point e) of the Labor Code enforce the possibility to modify the indi-
vidual employment contract only through the agreement of the parties, and art.
160 paragraph (1) and (2) regulates the calculation of the basic salary with refer-
ence to factors related to the professional qualification, importance, training and
competence, a s well as to the complexity of the duties, aspects that concern both
the employee and the position they occupy, in relation to their expertise.
On the other hand, in the case of the remuneration of personnel from pub-
lic authorities and institutions finance d wholly or partially from the state budget,
8 Directive 2006/54/EC on the implementation of the principle of equal opportunities and equal
treatment between men and women in matters of employmen t and occupation.
Dynami c Elements in the Contemporary Business Law 223
art.162 paragraph (3) of the Labor Code requires salary to be set directly by law,
which implies that, although equality of treatment requires granting equal wages
for equal work, in the budgetary system there i s no real negotiation and agreement
of wills; the financial possibilities of the state are the priority. For this reason, the
comparison of the acts of employers in terms of discrimination against a public –
sector employee and a private sector employee is n ot valid, the systems being
based differently, the principle of equal pay for similar work being applicable
only in the same field or branch of activity, with reference only to aspects con-
cerning the graduated studies, the complexity of the work or the res ponsibilities
of the respective position.
The Government Ordinance no.137/2000 on the prevention and sanction-
ing of all forms of discrimination represents the framework regulation in the field
of discrimination, being based on the norms in the matter conta ined in the Di-
rective no. 2000/43/EC9 and in Directive 2000/78/EC10.
The Ordinance requires guaranteeing the fundamental rights and the prin-
ciple of equality, issues initially found in the International Labor Organization,
the Treaties on the European Union and on the functioning of the European Un-
ion, as well as the Charter of Fundamental Rights, with regard to the legal em-
ployment relations, regarding the acknowledgement of equal treatment in choos-
ing employment, of working conditions, fair remuneration, i n order to eliminate
inequality of opportunities.
3. Unconstitutionality or discrimination
As for the issues regarding the salaries of civil servants, we can appreci-
ate that the Law no. 153/2018 on the remuneration of the personnel paid from
public funds does not comply with the norms regarding the support that the public
authorities must give in respect of the principle of equal opportunities, as neces-
sary for the development of their career.
The inconsistency between the provisions of Laws no. 153/2018 and no.
188/1999 in this respect is also based on the provisions of Article 27 paragraph
(2) of the Government Decision no. 611/2008 on the approval of the norms re-
garding the organization and career development of the civil servants; these
norms prohibit any kind of discrimination, considering the process of motivating
them is absolutely necessary.
On the other hand, the question arises as to what extent a right earned,
for example the one to a fair remuneration, can be canceled or restricted only in
the case of the civil servants, by means of the possibility indicated in art. 162
paragraph (3) of the Labor Code that the remuneration of the personnel within
9 Directive no. 2000/43/EC regarding the equal treatment of persons, regardless of race or ethnic
origin.
10 Directive 2000/78/EC on the field of employment and labour.
Dynami c Elements in the Contemporary Business Law 224
the public authorities and institutions financed from the state budget should be
set directly by law , without admitting a real negotiation between parties. In this
case, although the financial possibilities of the state can be considered a priority,
however, in the sense of the legality principle specified in Law no. 153/2017, it
can be appreciated that there is a violation, including that of the provisions of
Romanian Constitution, provided that art. 15 contains the universality in granting
rights to citizens, and article 16 defines equality before the law and public insti-
tutions, the norms asserting the absence of privileges or discrimination.
In fact, we can see that by the imperative provisions of art. 38 paragraph
(3) of Law no.153/2017, there was introduced a reduction of the remuneration in
the budgetary sector, as compared to the previous wage lev els enforced by Law
no. 284/2010 on payroll. Thus, for example, the requirement that for January
2018 the basic salary be assimilated to the amount of December 2017 increased
by 25% led to an amount that exceeded the one set in the grid for the year 2022,
the subsequent application of art. 38 paragraph (6) producing a significant salary
reduction compared to the earnings prior to the issuance of Law no. 153/2017.
We can see that the constitutional provisions require that no person be
above the law, article 41 including equal work, considering that only in an excep-
tional and non -discriminatory manner such as the defense of national security can
a restriction of the exercise of certain rights or freedoms be admitted.
However, Law no.153/2017 regarding the re muneration of the personnel
paid from public funds evokes the fact that in the case of the personnel paid from
public funds, the basic salaries of the management positions should be established
by the head of the respective public institution. In this resp ect, the law indicates
certain criteria that will be taken into account in order to assess the amount of the
salary, respectively the responsibility, the complexity and the impact of the deci-
sions issued by a person, in relation to the position they occupy . On the other
hand, the law also contains details regarding the calculation of basic salaries in
the case of management positions, differentiating them by applying 1st or 2nd
grades, but without defining the modalities of application.
In conclusion, we c an specify that Law no. 153/2017 regarding the remu-
neration of the personnel paid from public funds stipulates at art. 19 paragraph
(1) and (2) that the basic salary for the management positions is established by
the head of the public institution, in rela tion to the responsibility, complexity and
impact of the decisions imposed by the attributions corresponding to the activity
performed, but also that in the basic salary for the management positions for both
the first and second grades, the grade for the r ange of seniority at work is in-
cluded, with grades I and II being indicated for all public budgetary institutions,
but without showing any objective criteria for classification.
Thus, we can appreciate that, although it must comply with the non -dis-
crimina tion criteria, Law no.153/2017 does not contain objective criteria related
to the way basic salaries are set, being based more on subjective criteria that will
Dynami c Elements in the Contemporary Business Law 225
be directly related to the assessment the manager of a public institution will make
about a cert ain employee. The possibility of discrimination in terms of wage is
thus obvious and unlimited by law, considering that the respective degrees can be
applied at the discretion of the head of the institution, who can assess the respon-
sibility, complexity or impact of the decisions of a subordinated civil servant.
Moreover, the situation is possible that the respective head of institution will ap-
preciate their own activity, from the point of view of its complexity, setting their
own salary to the highest grad e, although they are thus directly in a genuine con-
flict of interests.
In this regard, for example, we can see that Law no. 153/2017 becomes
deficient, for example in the case of public health departments, because in com-
parison with the former Law no. 284 /2010 on payroll, which stipulated that the
criteria for the classification by categories of health units will be set by order of
the Minister of Health, now the establishment of the basic salary on the gradations
no longer refers to an eventual order or t o the Order 1078/2010 already existent
before the enforcement to take effect.
Previously, Order no. 1078/2010 regarding the approval of the rules for
organization and operation and of the organizational structure of the County Pub-
lic Health Directorates s pecified the division of the public authorities’ personnel,
respectively in public officials and medical -sanitary and contractual health aids,
which Law no. 153/2017 no longer includes. Also, Law no. 153/2017 contains
opposite norms regarding the salary, t he medical -sanitary personnel being paid
according to Annex II, and of the civil servants and the contract staff, although
they carry out similar tasks, according to Annex VIII. Thus, we find a different
way of paying two categories of medical personnel wi th similar attributions, one
with the status of civil servant and one contracted by the same institution, which
leads to the occurrence of unjustified inequalities for similar positions and im-
plicitly to discrimination.
Such inequalities resulting from th e uninspired drafting of the law, as
well as from the non -correlation with other normative acts in the matter leads to
the situation in which, although the Law no. 153/2017 is grounded by the princi-
ple of non -discrimination, equal treatment is not to be fo und in the case of public
authority personnel who perform similar activities. We can see that although the
civil servants involved have the same seniority in work, the principle of equal pay
does not actually guarantee them equal pay for equal work. In add ition, the ap-
plication of requirements regarding the social importance of the work, the respon-
sibility, the complexity and the risks of the job, or the level of studies is not en-
sured; the principle of the vertical and horizontal hierarchy, provided for in art. 8
paragraph (1) of the law on the importance of the conducted activities, becomes
illusory at best.
Basically, ranking positions in order to establish the basic salaries ac-
Dynami c Elements in the Contemporary Business Law 226
cording to the provisions of art. 8 paragraph (1) applies both to the fields of ac-
tivity and within the same field, in parallel with the reference to aspects related
to professional knowledge and experience, judgment and impact of decisions,
complexity and responsibility, creativity and diversity of activities, as well as
working c onditions.
As I mentioned earlier, in the case of Public Health Departments the re-
lations between civil servants in management positions and the relevant Ministry
are covered by the provisions of the Order of the Ministry of Health (OMH) no.
1078/2010, co rroborated with art. 62 paragraphs (2) and (4) of Law no.188/1999
and art. 3 paragraph (3) of Law no. 153/2017.
In this respect, art. 2 paragraph (1) of the OMH no. 1078 of July 27, 2010
on the approval of the rules of organization and operation and of th e organiza-
tional structure of the County Public Health Directorates and of the municipality
of Bucharest, mentions the executive directors, and art. 4 paragraph (2) specifies
the quality of their secondary authorizing officer, the main authorizing officer
being the Ministry of Health itself. According to the provisions of art. 6 paragraph
(1) and (6) the executive directors are appointed or dismissed by the Minister of
Health.
According to the repealed provisions of art. 62 paragraph (2) and (4) of
Law no. 188/199911, norm found in article 618 paragraph (1) point b) of the Gov-
ernment Emergency Ordinance (GEO) no. 57/201912, the heads of public author-
ities are appointed in public management positions by administrative documents
in written form that must also i nclude the corresponding wage rights.
In corroborating these norms, we can find that the executive directors of
the Public Health Directorates are appointed by the Minister of Health by deci-
sion, the administrative document must also contain the basic sal ary related to the
respective function, along with the ranking in the 1st or 2nd grade of the salary
bracket, which would also indicate a calculation basis for any subordinated civil
servants, thus limiting a non -discriminatory application.
In the same s ense, art. 3 paragraph (3) of Law no. 153/2017 on the re-
muneration of the personnel paid from public funds requires that the management
of the remuneration system of personnel in the network of the Ministry of Health
and of the authorities of the local pub lic administration belong to the main au-
thorizing officers, or the provisions of the law regarding the way of setting sala-
ries violate the provisions of art. 5 and 6 from the Labor Code referring to equal
treatment, respectively the prohibition of discrimi nation on the protected criteria.
We can thus consider that any acts of exclusion, restriction or removal of the use
of a right, including wage matters, are the subject of discrimination, considering
11 Law no. 188/1999 on the Statute of civil servants.
12 Government Emer gency Ordinance no. 57/2019 regarding the Administrative Code.
Dynami c Elements in the Contemporary Business Law 227
that in the case of public institutions13 employees must benefit from the same
payment terms for equal work.
The norms of non -discrimination in salary matters are also found in art.
1 and 2 points e) and i) of the Government Ordinance no. 137/2000 on the pre-
vention and sanctioning of all forms of discrimination guaranteeing the right to
equal pay for equal work, respectively to fair pay, in transposing the provisions
of Council Directives 2000/43/EC implementing the principle of equal treatment
between persons, without distinction in race or ethnicity and 2000/7 8/EC creating
a general framework in favor of equal treatment, in terms of employment and
labor.
However, discrimination becomes possible if Law no. 153/2017 specifies
in art. 19 paragraph (1) and (2) the fact that the basic salaries for management
positi ons are set by the head of the public institution, in relation to the responsi-
bility, complexity and impact of the decisions imposed by the attributions corre-
sponding to the conducted activities, which represents an application of some
subjective criteria, given that no reference is made to any order of the minister
that classifies the sanitary units for the purpose of setting the level of pay per
grade, according to the annexes to the law.
On the other hand, the inclusion in the basic salary of the grade related to
the seniority bracket at the maximum level for the management positions leads to
a discrimination on the age criterion, because an employee who just got hired in
a management position obtains the same advantages to another who has a signif-
icant seniority in a similar position.
In conclusion, although the provisions of Law no. 153/2017 were en-
forced so as to aim at eliminating the inequities, in reality they caused the de-
crease of the basic salaries for management positions, the increase of the s alaries
of the contract staff and the reduction of the remuneration for the contracted civil
servants as compared to the amounts prior to its being enforced. All these ine-
qualities were allowed although the previous tasks, activities and responsibilities
were maintained, establishing various forms14 of differentiation, such as the situ-
ation in which an executive director had a calculated salary equivalent to that of
a civil servant under his subordination.
4. Conclusions
Non-discrimination in terms of sal ary is imposed by the provisions of art.
41 paragraph (4) of the Romanian Constitution, with reference to the fact that
13 Antonie Iorgovan , Tratat de drept administrativ , Ed. All Beck, vol. I, Bucharest, 2005, p. 589;
Cătălin -Silviu Săraru, Drept administrativ. Probleme fundamentale ale dreptului public , Ed. C.H.
Beck, Bucharest, 2016, p. 385.
14 Loredana Manuela Muscalu, Discriminarea în relațiile de muncă , Ed. Hamangiu, Bucharest,
2015 , p. 17.
Dynami c Elements in the Contemporary Business Law 228
women and men have equal pay for equal work, which means acknowledging the
principle of equality in legal employment relationships.
Prov isions of non -discrimination and respectively the enforcement of
equal treatment in employment relations are found in the provisions of articles 63
and 159 paragraph 3 of the Labor Code, but also in the framework law on the
matter, the Government Ordinance (G.O.) no.137/2000 on the prevention and
sanctioning of all forms of discrimination through the provisions of art.1 para-
graph (2) point i) and which require the guarantee of the principle of equality
between citizens, of the exclusion of privileges and di scrimination in the exercise
of the right to work, of the free choice of employment, on fair and satisfactory
working conditions, on protection against unemployment, on equal pay for equal
work, on fair and satisfactory remuneration.
As a result, guarantee ing the right to equal pay for equal work in domestic
law implies the need to provide fair and satisfactory salaries, otherwise creating
the possibility of imposing uneven conditions that limit the application of the
principle of undifferentiated treatment between the staff of public institutions,
civil servants and contractual staff.
Thus it can be seen that Law no. 153/2017 regarding the remuneration of
the personnel paid from public funds requires in art. 19 paragraph (1) and (2) that
the basic salary f or the management positions be established by the head of the
public institution, in relation to the responsibility, complexity and impact of the
decisions of the assessed person, but also the possibility of applying 1st or 2nd
grades in the payment grid, without indicating the objective classification criteria.
Basically, the law does not contain objective criteria for setting the basic salaries,
a greater applicability being granted to the subjective criteria that are at the dis-
cretion of the head of the respective institution; wage discrimination thus be-
comes possible.
Given that Law no. 153/2017 on the remuneration of the personnel paid
from public funds no longer covers objectively the way in which basic salaries
are set, in the case of the Public Healt h Directorates there is the impossibility to
refer to the criteria for the classification by categories as stipulated in an existing
Order of the Ministry, which leads implicitly to the possibility that the head of
the institution applies the conditions re garding the responsibility, complexity or
impact of the decisions of the assessed civil servant quite discretionary.
Similarly, the Law no. 153/2017 induces contrary aspects regarding the
wage provisions, given that, in the case of two categories of medica l personnel
with similar attributions, one with the quality of civil servant and one contracted
by the same institution, different norms are applied: some contained in Annex II
to the law, and others according to Annex VIII, although the two categories car ry
out similar tasks; this leads to the occurrence of inequalities that define discrimi-
nation.
Thus it can be seen that Law no. 153/2017 does not respect the principles
Dynami c Elements in the Contemporary Business Law 229
of non -discrimination, in the sense of establishing equal treatment regarding pay-
ment rights; the principles of equality, by not providing equal basic salaries for
work with equal value; the principles of the social importance of work in relation
to responsibility, the complexity, the risks of the position, as well as the principles
of rank ing, vertically and horizontally, within the same field, depending on the
complexity and importance of the activity carried out.
Bibliography
1. Iorgovan, Antonie , Tratat de drept administrativ , vol. I, Ed. All Beck, Bucharest,
2005.
2. Militaru, Ioana -Nely, Protection of fundamental rights in the European Union ,
„Perspectives of Law and Public Administration”, Volume 8, Issue 2, December
2019
3. Muscalu, Loredana Manuela, Discriminarea în relațiile de muncă , Ed.
Hamangiu, Bucharest, 2015.
4. Popescu, Andrei, Dreptul internațional și european al muncii, 2nd ed., Ed. C.H.
Beck, Bucharest, 2008.
5. Săraru, Cătălin -Silviu, Drept administrativ. Probleme fundamentale ale
dreptului publ ic, Ed. C.H. Beck, Bucharest, 2016.
6. Țiclea, Alexandru, Codul muncii , Ed. Universul Juridic, Bucharest, 2015.
7. Țiclea, Alexandru, Tratat de dreptul muncii , Ed. Universul Juridic, Bucharest,
2005.
8. Directive 2006/54/EC on the implementation of the principle of equal
opportunities and equal treatment between men and women in matters of
employment and occupation.
9. Directive no. 2000/43/EC regarding the equal treatment of persons, regardless
of race or ethnic origin.
10. Directive 2000/78/EC on the field of employment and labour.
11. Government Emergency Ordinance no. 57/2019 regarding the Administrative
Code.
The Professional Adequacy and the Performance of the Employee.
Differences and Similarities1
PhD. student Ioana Cristina CRISTESCU2
Abstract
The career path of the employee is complex and not without risks. Thus, achiev-
ing performance becomes the very reason for establishing individual employment rela-
tionships, as they determine the collective performance of the organization and determine
the success of t he business. Therefore, the concern for performance is present at all times
preceding the employment, during the probation period and during the execution of the
individual employment agreement and culminates with the solution of a supreme dilemma
when dis missing for professional inadequacy. The Labour Code itself requires various
interpretations and clarifications in order to be able to transpose the concepts regarding
employee performance. Therefore, the present study critically examines the doctrine in
the matter, compares the legal texts and interpretation solutions of the courts and applies
the common sense of human resources management to determine the way to be followed
where the legislator is silent. Thus, the conclusion is clear that at all stages o f the em-
ployment relationship the employer has in view the performance of the employee, but the
objectives, criteria, methods of assessment and measurement are different, depending on
the purpose of its evaluation and legal consequences and from the perspe ctive of human
resources management. The result of this study is a set of benchmarks regarding the eval-
uation of the performance and the evaluation of the professional adequacy, the interfer-
ences and delimitations between them and other related institution s, interpreted in a mul-
tidisciplinary context.
Keywords : performance, professional inadequacy, evaluation criteria, objec-
tives, dismissal.
JEL Classification : K31
1. Professional correspondence at key moments of the employment
relationship
It is unani mously recognized the right of the employer to assess the pro-
fessional adequacy of the employee during his worklife. This right naturally
arises from its own freedom to select the right personnel for the job by applying
available recruitment techniques, bu t also to continue to analyse his adaptation/
adequacy within the organization by using the probation period.
Referring to the framework in which the dismissal of the employee for
1 This paper was co -financed by the Bucharest University of Economic Studies during the PhD
program.
2 Ioana Cristina Cristescu – Doctoral School of Law, Bucharest University of Economic Studies,
Romania, ioanacostea2001@yahoo.com.
Dynami c Elements in the Contemporary Business Law 231
professional inadequacy can be decided, constantly, the judicial doctrine3 and
practice presents the professional inadequacy as circumstance of an objective or
subjective nature that leads or is capable of leading to lower professional perfor-
mances than those which, reasonably, the employer is entitled to expect from the
employee and which implies not knowing the rules specific to a function, profes-
sion or profession.
Thus we can say that the achievement of the performance is the very rea-
son for establishing the individual labour relations, since they determine the col-
lective perfo rmance of the organization and determine the success of the business.
The professional career of the employee is complex and not without dan-
gers, therefore it is appropriate to analyse all the moments when his performance
becomes relevant and is evaluated by the employer by specific means (appropri-
ate methods and tools) with different effects on the employment relationship.
What are the legal requirements in carrying out a procedure on professional ade-
quacy, as it can be delimited by other legal situations, which are the consequences
of not observing the procedure, are just some of the questions we ask ourselves
in this article.
1.1. Performance, professional correspondence and probationary pe-
riod
In contrast to the initial vision of the Labor Code4 on the professional
adequacy of the employee, the current legal provisions indicate the need to make
a noticeable difference between approaches towards eventual inadequacy during
probation period compared to one found after a long working period, in which
the em ployment relationship becomes stable.
At the beginning of the employment relationship, the appraisal of em-
ployee's adequacy leaves room for errors (especially since the employer does not
have the opportunity from the beginning to test the employee in a rea l working
environment, having only possibility to apply work sample). The errors of ap-
praisal that can occur during the recruitment process must, therefore, be corrected
with speed and minimum effort.
The evolution of the professional life implies a contin uous interest of ad-
aptation from employer’s side in taking over new, more efficient technologies, as
well as an effort to update the professional knowledge and of continuous learning
from employee’s side, called to use these technologies, that is why by ex ecuting
3 Alexandru Țiclea, quoted from Raluca Dimitriu, Employee dismissal . Romanian and Comparative
Law, Ed. Omnia UNI SAT, Brasov, 1999, p. 192.
4 The initial wording of art. 31 of the Labor Code regarding the probation period did not contain
references to the t ermination of the individual employment contract during or by the expiration of
the probation period based on a simple notification of either party, so that such termination was
treated at the time as a simplified procedure of professional adequacy apprais al.
Dynami c Elements in the Contemporary Business Law 232
the individual labor agreement, the parties commit to mutual efforts towards
achieving performance targets.
And for these reasons, the renunciation of the employment relationship
in the beginning periods of the employment relationship is subjected by the leg-
islator to minimal formalities. Thus, the lack of knowledge and skills when hiring
either causes the employer's option not to select candidate or, if he has been se-
lected and hired by an individual employment agreement, it may be a cause of
annul ment of the individual employment contract. After the employment, during
the probation period or at the termination thereof, this lack of professional
knowledge can be a reason for termination of the individual employment contract
by the mere notification issued by the employer, without other formalities, in ac-
cordance with the provisions of art. 31 paragraph (4) of the Labor Code. The
legislator leaves this possibility of terminating the employment relationship dur-
ing the probation period at the discretion of both parties and does not indicate the
need to motivate the decision within the written notification of them.
Thus, less formal, the evaluation of the adequacy during the probation
period may result in termination of the employment contract, without th e rigors
of form and merits, except for notifying in writing the employer's option to end
the labor relationship. The distinction between the evaluation of professional ad-
equacy during the probation period and the one performed after the consolidation
of the employment relationship by the expiration of the probation period must
thus be distinguished. The means of evaluation (the procedure) and the aspects to
be evaluated used in the two situations are qualitatively different and, why not,
also quantitative. Once the probation period has passed, the evaluation require-
ments change and become more rigorous. Thus, the objectives pursued in the
professional activity during the probation period must be different and adequate,
that is, to ensure a learning process and adaptation to the organization, while the
actual activity after the consolidation of the employment relationship at the expiry
of the probation will aim at concrete objectives in the life of organization, but
even these will be established in relation to the degree of integration of the em-
ployee in the company.
On the other hand, we consider the criteria for evaluating the employee's
performance as a constant throughout the entire period of the employment rela-
tionship, these being of general applicabili ty and arising from the internal regu-
lations, also, agreed by the parties when signing the individual employment con-
tract. The performance standards (the level of performance) specific to each pe-
riod, must be established, but in relation to the degree of a daptation of the em-
ployee to the organization, so different in the probation period, compared to the
normal activity period. Thus, it is known that the probation period is a period of
accommodation to the specific of the organization, in which a compatibil ity be-
tween the employee and the employer is established, the technical knowledge and
Dynami c Elements in the Contemporary Business Law 233
the winning behaviours being only a few coordinates that can lead to the mainte-
nance of the employee in the organization after the probation period .When em-
ployer denounc es the employment contract during the probation period, this fol-
lows a simplified procedure, in which the motivation in fact is not necessary. This
can be linked not only to circumstances related to the person of the employee (as
in the case of professiona l inadequacy, but also to objective aspects that may be
related to the evolution of the organization, such as giving up certain business
initiatives or difficulties of the employer may that recommend interrupting the
labour relationship during the probatio n period.
1.2. Professional adequacy during the execution of the individual
labour contract
The professional inadequacy manifested during the employment
relationship, due to its non -imputable character unanimously recognized by the
doctrine, as per the legislation is subject to control that limits the employer's
abuses and verifies the validity of such a conclusion.
The legislator has bound the employer to establish inadequacy: only if its
verification is done in relation to the job position; a special procedure for its
establishment is performed, a procedure that enjoys a special regulatory
framework provides to the employee certain guarantees (collective labor contract
or, in the absence of this, internal regulation); limitation of the right of the
employer to decide the dismissal is performed within 30 calendar days; by
imposing the employer to offer a vacant job, compatible with the vocational
training.
1.2.1. The verification of professional adequacy referes to that job
position
Professional adequ acy is not generic and does not refer abstractly to the
knowledge and skills that a professional must possess in a particular field, but is
established in relation to the particularities of the employer, its specific require-
ments and the good practices of the organization. Professional adequacy implies
the possession of technical knowledge, skills and psycho -behavioral characteris-
tics appropriate to the position, as it was designed within the organization. It is
evaluated in relation to the concrete require ments of the job description, depend-
ing on the nature of the activity, the place and role and importance of the job
within the functional hierarchy and, depending on them, both the complexity of
tasks and responsibilities, as well as the objectives, perfor mance standards and
criteria for appraisal of the employee's activity is established. For this reason, the
employer's dissatisfaction with the employee's performance leading to the subse-
Dynami c Elements in the Contemporary Business Law 234
quent finding of a professional inadequacy must have a high degree of concrete-
ness, so that the inadequacy can be supported by evidence, both from the current
activity (by non -fulfillment of some activities, by not performing tasks and re-
sponsibilities of the job description), as well as during the preliminary appraisal
procedure for establishing professional inadequacy. The termination of the indi-
vidual employment contract during the probation period generates low legal risks
also from the perspective of a court action, and the challenge of the written noti-
fication issued as per the law can be filed for procedural grounds. In the situation
of termination of the individual labor agreement during the probation period, the
formality required by law is that the employer issues a written notification indi-
cating the date of the act ual termination of the labor relationship. Since the noti-
fication issued by the employer does not contain the factual reasons, but merely
indicates the termination of the individual employment contract within or after
the probation period expires, in princ iple there are no issues that could be subject
to a court evaluation in the event of a legal complaint. However, the employee
could argue that the expiry of the probation period disqualifies the employer to
order the termination of the contract pursuant to art. 31 paragraph (3) of the Labor
Code. On the other hand, in the situation of finding the professional inadequacy,
the employer complies with the preliminary appraisal procedure and issues a dis-
missal decision, grounded on facts and on legal provisions which may be subject
to appeal. In this regard, see also the relevant legal practice5.
1.2.2. The development of poor performance. The professional inad-
equacy is induced by loss of professional skills
There must be a cause -and-effect link between the emp loyee's loss of
professional skills and obtaining poor results in the daily activity, so that the pro-
cedure on professional adequacy aims to identify precisely the prerequisite cause
of poor performance, whether or not there is a dissolution or inability t o update
those technical knowledge, skills and competencies necessary for the proper per-
formance of the tasks reasonably. These concrete requirements related to tasks
and responsibilities of the job description also provide the levers for the stability
of the employment relationship. To the extent that the organization changes the
complexity of the positions in relation to a changing business strategy, the con-
tractual terms of the position will be renegotiated by the parties, as well as the
performance requ irements. In this context, the legal practice constantly points out
the need to provide the employee with vocational training to ensure his adaptation
to the changing requirements of the employer. It is still to be considered to what
extent the concern for updating professional knowledge should be an obligation
5 Brasov Court of Appeal, Civil Judgment and for cases with minors and family, labor conflicts and
social insurance, Decision no. 303/2008, www.costelgilca.ro, consulted on 1.10.2019.
Dynami c Elements in the Contemporary Business Law 235
for the parties6. For the employee this would mean to identify appropriate training
modalities and attending it, for the employer would mean to provide time and
resources for employee to attend train ing programs. The doctrine7 recognizes that
"the errors in the performing job duties must also be analysed in relation to the
level of vocational education reached by the employee incumbent on the em-
ployer". But the legal practice is not fully in line with the doctrine opinions. Thus,
it is highlighted8 that the professional inadequacy of the employee cannot derive
from employer's failure to provide training or improvement programs, adapted to
new methods or technologies implemented.
2. The distinction bet ween performance (appraisal) and professional
adequacy (appraisal)
Both the doctrine and the legal practice clearly separate the notions of
performance evaluation within the performance management system (current ac-
tivity) from the appraisal of profession al adequacy.
The aspects that differentiate the two types of evaluations:
2.1. Regulatory framework for appraisal procedures
On the one hand, the performance evaluation procedure is regulated by
art. 242 letter i) of the Labour Code concerning the conten t of the internal regu-
lations of the employer. The internal regulation will contain "criteria and proce-
dures for the professional evaluation of employees". Moreover, the right of the
employer to evaluate the employee is an attribute that derives from the p reroga-
tive of guidance and control and is subsequent to the setting of the objectives,
respectively of the criteria for evaluating the individual performance. On the other
hand, the evaluation procedure regarding professional adequacy is a special pro-
cedur e that enjoys another regulatory framework – the collective labor contract –
and, in its absence, the internal regulation, as perv art. 63 paragraph (2) of the
Labor Code.
6 The French legislation stipulates that the employee may refuse tra ining only if it would result in
a modification of his employment contract. The employee must accept training regarding new
techniques, new tools or procedures that are introduced to perform the job duties. This obligation
also stems from the needs of the company and is a reflection of the employer's responsibility for
adapting the employee – Patricia Weinert, Michele Baukens, Patrick Bollerot, Marina Pineschi –
Gapenne, Ulrich Walwei, Employability: From Theory to Parctice , „International Social Security
Series”, volume 7, Transactions Publishers New Brunswick (USA) and London (UK), 2001, p. 70.
7Alexandru Țiclea, https://sintact.ro – Bucharest Court of Appeal, Section VII, for cases regarding
labor conflict and social insurance, Decision no. 1431/R/2011, con sulted on 1.10.2019; Daniela
Georgeta Enache, Maria Ceaușescu, Labor Litigation. Relevant case law of the Bucharest Court of
Appeal semester I/2011 , Ed. Hamangiu, Bucharest, 2011, pp. 72 -73.
8 Costel Gîlcă, Commented and annotated Labor Code , second editio n, 2015, Rosetti Publishing
House, Bucharest, 2015, p. 132.
Dynami c Elements in the Contemporary Business Law 236
2.2. Purpose and objectives of the appraisal
Substantially, performance appraisal provides a natural function of man-
agement with the main objective of increasing the efficiency of the organization
and reinforcing its favorable behaviors through various human resources pro-
cesses (reward, learning and only ultimately the termination of th e employment
relationship). In contrast to the professional inadequacy that derives from causes
linked to the the employee, the temporary lack of performance (either by the fail-
ure to achieve objectives, or by not manifesting the appropriate behaviors) may
appear without it being caused by the lack of knowledge or skills.
The lack of performance can be caused by external factors, distinct from
the employee himself, which may be due to the evolution of the business envi-
ronment, economic -financial difficulti es. In other words, the current performance
(measured during periodic evaluations) can be a result of internal factors (related
to the concrete actions and behaviors of the employee), but also of external ones
that are not always influenced in particular b y the employee's activity. From the
point of view of the object and purpose of the evaluation process regarding pro-
fessional adequacy, we believe that it tends to determine whether there is a ge-
neric, stable professional adequacy for a significant period o f time, that is, to de-
termine if the employee is generally in line with the requirements of the job (from
the Job descriptions) and the job rank in the organizational hierarchy. On the other
hand, the purpose of repetitive performance evaluation is to dete rmine whether
or not in the respective evaluation cycle the employee has achieved the objectives
assumed in relation to projects, works and operations that are quantifiable and
measurable over time, that is in relation to certain specific objectives, assum ed
briefly and temporarily by the parties.
Other authors9 state that "professional inadequacy cannot be related to a
single moment, but to a certain period performed under the individual employ-
ment contract" in relation to tasks set under the contract, the job description or
based on applicable work procedures. Therefore, it is necessary for the employer
to prove objective and repeated facts able to emphasize such professional defi-
ciencies, as to delineate from accidental, but guilty, breach of obligations (as in
the case of disciplinary liability10).
The specific role of this procedure is to establish the adequacy of the em-
ployee in terms of possessing the technical knowledge necessary to continue the
activity, of the practical skills, of the learning capac ity, in the context of the tech-
nological changes or of some procedures or regulations. Therefore, during the
9 M.C. Predut, Labor Code commented , Universul Juridic Publishing House, Bucharest, 2016, p.
94.
10 A. Țiclea, Bucharest Court of Appeal, Section VII, for cases regarding labor conflicts and soc ial
insurance, Decision no. 5660/R/2009 , „Revista Română de Dreptul Muncii” no. 8/2009, p. 18.
Dynami c Elements in the Contemporary Business Law 237
procedure of establishing the professional adequacy, the employer will not be
limited to using results of the regular appraisal, but will analyze t he causes of the
lack of performance, aiming to determine whether under special conditions and
in an active learning environment (by upgrading procedures) the employee is per-
sistent in the process of improving his knowledge and skills.
The opinions express ed in the doctrine11 show that “dismissal of the em-
ployee for professional inadequacy must have objective criteria based on the
quantity and quality of the work performed by the employee, criteria (…) known
and accepted by the employee when concluding the individual labour contract or
when acknowledging the internal regulations of the employer.
However, we consider that during the procedure on professional ade-
quacy, there will be an evaluation on specific objectives that can be achieved
during the period o f this special procedure; Criteria are already specific to the
employment relationship (agreed via individual labour contract) and are applied
to maintain the same relevant and consistent system for measuring performance;
implicitly, part of the objectives specific to this period will be learning objectives
and the evaluation thereof can be proved by verification tests, respectively by
appraisal of objectives set especially for this speciffic evaluation period. There-
fore, professional inadequacy appears as a situation that prevents the employee
from properly performing his job duties, not accidentally, but as the consequence
of a loss of professional skills and related to concrete requirements of the em-
ployer and despite the vocational training opportunitie s already offered to the am-
ployee.
In extremis, we could talk about a continuous behavior that illustrates the
professional inadequacy and it is essential to see the distinction between the fac-
tual elements – the poor results highlighted by performance ap praisal and their
cause – the professional inadequacy of the employee. At the same time, "in order
to ascertain the professional inadequacy of the employee, it is not required for the
employee to cause certain damage12". Professional adequacy is valued as n ormal-
ity, not as manifestation of excellence, all the more so as the objectives set by the
employer and assumed by the employee must be achievable.
Unfortunately, the management methods used in the retail industries in
Romania, in the conditions of market volatility, show a tendency to induce better
results by setting hard -to-reach performance objectives, combined with the im-
plementation of wage systems based on bonuses, rather than providing an im-
portant part of the income by granting consistent base salar ies. The current anal-
ysis does not concern, however, the efficiency and influence of such wage models
on organizational culture and health of the employees within competitive envi-
ronment. It should, though, be noted that the base salary must be set in line with
11 Ibid.
12 A. Athanasiu, M. Volonciu, L. Dima, O. Cazan, Labor Code, Articles Comment , Ed. C.H. Beck,
Bucharest, 2011, p. 337.
Dynami c Elements in the Contemporary Business Law 238
the complexity of the job position and its ranking in the hierarchy of the job po-
sitions (by references to required level of education), so that it would cover the
current needs the worker. The big share of volatile incomes within the wages
(bonuses and allowances) goes together with seting unattainable targets; this does
not only affect productivity on medium and long term, but can also cause demo-
tivation/non -performance while there is need for stable staff and good workers in
the labor markets.
The doctrine recognizes13 that errors in performing tasks must be ana-
lyzed in relation to the total workload (it is obvious that a very large amount of
work generates a higher percentage of errors and a poor quality of the work prod-
uct). Provided that “the obje ctive was attainable, but, despite these conditions,
the employee did not achieve it (not fulfilling his attributions at a certain qualita-
tive level)”14.
2.3. Subjects of evaluation. Assessors
The periodic evaluation procedure aims to evaluate all the emp loyees in
order to make the necessary measurements of the individual contribution to the
overall performance of the organization. Its results do not directly indicate a true
professional inadequacy of each employee, but provide a set of clues for an initia l
referral able to empower assessors within the special procedure on professional
adequacy to identify by specific methods (written, practical tests etc.) if skills and
abilities necessary to perform the tasks are present. So, depending on the type of
appraisal, its purpose and specific methods applied, as well as the effects gener-
ated by the performance of such procedure, certain actors need to be involved in
the appraisal process of the employee and his activity.
Although the law is not explicit, it is o bvious that the objectivity of the
appraisal of professional adequacy can only be achieved if one of the assessors is
the one who initiated professional adequacy procedure, respectively that specific
assessor who performed the performance evaluation that i ndicated the eventual
adequacy issue. If performance evaluation case, an essential role rests with the
line manager who best knows the activity and achievements of the employee.
In case of professional adequacy appraisal, the assessor role is usually
assigned to a commission that is called to analyze the professional capacity ob-
jectively, starting with the results of professional activity and by applying specific
and objective evaluation methods that may objectively challenge the line manag-
ers' findings so that a reasonable conclusion may result by reference to reasonable
requirements of the job description. It is frequently indicated in the doctrine and
also by the courts of law that it is best practice to appoint a commission for the
13 Costel Gîlcă, op. cit ., 2015, p. 133.
14 Ion Traian Ștefănescu, Theoretical and Practical Labor Law , Universul Juridic Publishing
House, 2017, p. 417.
Dynami c Elements in the Contemporary Business Law 239
evaluation of the emp loyee, since it is questionable15 and brings certain risk if
appraisal stays "usually with the strictly professional opinion of one person re-
garding another employee". The professional appraisal commission may include
the hierarchical head of the employee, the psychologist of the organization, a rep-
resentative of the union, a human resources responsible, that is a group that pro-
vides a complex and objective analysis. We believe that the employer can estab-
lish for the union representative the role of observer and guarantee the legality of
the procedure regarding professional correspondence.
Therefore, the law maker establishes a set of rights and guarantees de-
signed to ensure the protection of the employee against potential abuses of the
employer. Precisely th ese procedural guarantees, as well as the substantial ele-
ments that delineate different types of contract termination for grounds related to
employee's performance, constantly expose to failure employers' practice and,
thus, an important number of labor co ntract terminations based on art. 61 lit. d)
of the Labor Code are annulled by law courts. This is while "such dismissal" is
considered (or should be) the most common grounds for dismissal: as the em-
ployer is not satisfied with the work of his employee"16.
2.4. Methods of appraisal and measurement. Evaluation criteria
In the case of performance appraisal of the current activity, the legislation
talks about setting objectives and criteria for evaluating the professional activity
of the employee, both being subject to employee's agreement. In the case of con-
ducting a professional adequacy appraisal, the law is not explicit, leaving the em-
ployer's will to establish the transparency and predictability when setting objec-
tives and criteria for this special proced ure.
If, in performance evaluation case, the objectives and evaluation criteria
are related to the regular, normal activity, while performing duties specific to the
job, in professional adequacy procedure, we refer to objectives and criteria for
assessing technical skills, abilities, behaviors or learning and re -learning skills in
relation to the reasonable expectations of the employer towards any occupant of
such job. Best practices on evaluation prescribe that performance standards and
indicators be form ulated as to ensure objective measurement; those can be set
both by the performance appraisal procedure and by professional adequacy pro-
cedure.
The doctrine17 frequently highlights that performance appraisal precedes
15 Ion Traian Stefanescu, Ezer Marius, Gheorghe Monica, Sorica Irina, Teleoaca -Vartolomei
Brandusa, Uluitu Aurelian Gabriel, Voinescu Veroni ca, Labor Code , Universul Juridic, 2017, p.
210.
16 Raluca Dimitriu, Reflections on the termination of the individual contract is work from the
perspective of the new regulations , in „Revista Română de Dreptul Muncii” no. 3/2011, p. 64.
17 Gîlcă Costel, op. cit., 2015, p. 133.
Dynami c Elements in the Contemporary Business Law 240
the appraisal of professional adequacy. When talking about the initiation of a pro-
cedure on professional adequacy in the light of legal practice, an author states that
the employer "before dismissing the employee, the employer did not proceed to
the evaluation of performance goals set when indi vidual employment contract
was concluded, according to the procedure and the criteria listed within that an-
nex therein. Surprisingly, it is shown18 that neither before nor after the notifica-
tion of inadequacy an assessment was carried out to establish the p rofessional
performance in relation to the goals and criteria set out in the annex to the indi-
vidual employment contract.
Whether it is the performance goals set for the current activity (subject to
the annual performance appraisal) or the goals specific t o the period of profes-
sional adequacy appraisal, both of them are relevant for that specific time frame.
Therefore, the goals are not to be set when individual employment contract is
concluded, as it is subject to permanent update, depending on the busines s strat-
egy evolution.
Therefore, a distinction must also be made between the performance
goals and the performance criteria, which represent a constant, a scale with pre-
cise elements based on which the performance of the employee is being coher-
ently measur ed in time.
Depending on the type of job position, the performance of the employee
can be evaluated by taking into consideration some evaluation criteria19 such as:
technical competence; knowledge and compliance with regulations, manifesta-
tion of professio nal characteristics (attention, speed of reaction, accuracy of ma-
neuvers, self -control); such criteria may work in the case of positions that involve
the handling of installations or applications for safety (in traffic, in operation),
orientation towards e xcellence; concern for the general well being of the com-
pany, for resources; personality characteristics, aptitudes, behaviors.
Therefore, we highlight that both in performance appraisal and in profes-
sional adequacy appraisal, the elements and methods are different and specific to
each procedure and period (goals in regular activity/learning objectives). Thus,
the only constant during both procedures remains the application of common
evaluation criteria set in the individual employment contract, which are e stab-
lished via internal regulations and general applicable to all employ ees or catego-
ries of employees.
3. Distinction between professional inadequacy and disciplinary lia-
bility
18 Târgu -Mureș Court of Appeal, Decision no. 370/R of August 21, 2014.
19 Dodu M., Raboca H., Tripon C., Human resource management course support. Postgraduate
Program in Public Administration Management, p. 55, http://www.apubb.ro/wp -content/uploads/2
011/03/Managementul_resurselor_umane.pdf, consulted on 1.10.2019.
Dynami c Elements in the Contemporary Business Law 241
It is unanimously acknowledged by the doctrine that the factual element
for establishing the disciplinary liability, respectively for establishing the profes-
sional inadequacy is similar, therefor is almost impossible to separate the two
legal situations without considering also subjective aspects, such as employee's
guilt. Thus , if there is an omission to perform tasks this may come from the in-
sufficient knowledge of the technical rules and procedures, from the the lack of
professional skills and may be associated with the professional inadequacy. At
the same time, the same omis sion to perform tasks, their inappropriate fulfillment
associated with the subjective attitude of the employee (in the form of guilt or
intention) represents a failure to comply with legal obligations, which may lead
to the disciplinary liability of the em ployee.
Therefore, the distinction between the two types of conducts that may
lead to the termination of the individual employment contract for reasons pertain-
ing to the employee will be made by the courts based on the factual elements and
the concrete ev idence of these elements arising from the preliminary procedure.
Sometimes, investigations initiated for disciplinary grounds, may highlight some
specific elements of professional inadequacy, as the reciprocal may also occur.
De facto situation and the ass ociated evidence are essential for applying the re-
spective termination decision. The unclear facts, which may appear both in dis-
ciplinary cases and in professional inadequacy cases, corroborated with the legal
grounds for professional inadequacy – art. 61 lit. d) from the Labor Code, may
raise confusion with respect to reasons of the termination decided by the em-
ployer. Such confusion concerning the grounds is in fact inadmissible and may
be considered by court as reason for annulment of the employer's deci sion.
We therefore join the majority of the doctrine opinions, which recom-
mend for the employer to expressly indicate extensive references to the factual
elements and the evidence proving it, when documenting the circumstances of
the deed both in the stag e of preliminary investigation and within the content of
the termination decision. For the distinction of the two situations play "subjective
aspects" of the deed an important role, namely if there is or not an aspect of guilt
of the employee. Such clarity is all the more necessary, as both types of dismissals
require prior procedures to be performed by the employer and errors in setting
legal grounds for dimissals are often found by law courts rullings.
Moreover, the doctrine emphasizes that disciplinary l iability is often as-
sociated with the accidental failure to perform the duties and responsibilities spe-
cific to the job, while continuing the fail to fulfil the specific job responsibilities
may arise from professional gaps.
For a qualitative distinction between disciplinary aspects and those re-
lated to the professional inadequacy, the facts (objective elements) must be ana-
lyzed in relation to the employee's subjective attitude towards his obligations and
the expectations of the employer.
Dynami c Elements in the Contemporary Business Law 242
Thus, they are co nsidered disciplinary facts20, and not evidence of pro-
fessional inadequacy: "the delay in carrying out works, improper use of subordi-
nate staff, disregard of recommendations of the hierarchical chief, lack of respon-
sibility for delaying work, tensions among staff, the disruption of the orders of
the unit manager ". The mere and opposite professional opinion contrary to the
one expressed by colleagues or line manager which is not followed by employee's
actions to facilitate, block, or carrying out actions, ope rations or processes, agreed
procedures or good practices at the level of the employer, can neither be consid-
ered evidence for the professional unfitness nor for disciplinary liability. Under
such conditions, the confirmation or ruling out of some objectiv e and subjective
aspects are evaluated by the employer via preliminary procedures required to es-
tablish certain measures; these are distinct procedures from a legal perspective.
Apart from the factual aspects which delineate the two types of dismis-
sals, d elimitation can also be made by reference to: the preliminary procedures to
be applied, the "assessors" called to analyze the facts, methods and instruments
of assessment. Thus, in order to establish the disciplinary liability, the employer
issues the proc edure on the preliminary disciplinary investigation, according to
art. 63 paragraph (1) in conjunction with art. 242 of the Labor Code, while for the
appraisal of professional inadequacy he elaborates the procedure of prior evalua-
tion according to art. 63 paragraph (2) of the Labor Code. Specifically, any of the
two types of bodies (commissions) called to evaluate the employer's notice con-
cerning deeds of an employee, start from checking the fulfillment of tasks and
responsibilities of the said position, wh ile the particular circumstances in which
the deed is performed highlight his subjective attitude and, implicitly, the cause
of such non -compliance.
It should be noted that the two types of assessments (disciplinary, and pro-
fessional inadequacy) could not be applied by the same assessors, although there
is no legal restriction in this regard. Thus, the specific analysis under disciplinary
procedures and under procedure for professional adequacy is performed via spe-
cific methods.
The disciplinary procedure a ims to establish and prove the facts and the
subjective aspect of guilt, as well as the causal link between the deed and its con-
sequences. In the procedure on professional adequacy, it is necessary not only to
exclude any professional blame as to delineate it from disciplinary misconduct,
but also to establish the cause for not fulfilling or improperly fulfilling the tasks,
namely the gaps of professional expertise and inability to accomplish tasks. How-
ever, this requires a certain expertise of the assessor himself.
Under such conditions and, depending on the particularities of de facto
situation, during the verifications performed in the preliminary procedure the dis-
20 Alexandru Țiclea, Galați Court of Appeal, Decision no. 65/R/2007 , „Revista Română de Dreptul
Muncii”, no. 4/2007, p. 139 -146.
Dynami c Elements in the Contemporary Business Law 243
cipline assessors may even decline their "judgement" to assessors capable to per-
form profes sional adequacy appraisal (while the reciprocal is also valid in case a
deed is first investigated as inadequacy and proves to be in the and a disciplinary
misconduct). Each of the two types of commissions applies specific evaluation
methods and procedures to obtain viable conclusions likely to support the em-
ployer's decision. The disciplinary commission hears and provides evidence aris-
ing from the current activity of the employee, while the commission performing
evaluation for professional adequacy resorts to other specific methods, such as
professional tests, improvement programs, professional training, new work sam-
ples.
At the same time, the result of the two types assessments, as well as their
consequences may be different. If evidence indicate professi onal inadequacy, this
can lead to enrolling the employee in programs for improvement; also the em-
ployee may be offered a vacant job position compatible with the professional
training and, only finally, the dismissal decision may be applied according to art .
61 letter d) of the Labor Code. On the other hand, when disciplinary liability is
set, this may lead to the application of any the sanctions provided by art. 248 para.
(1) of the Labor Code or, to the disciplinary dismissal as per art. 61 letter a) of
the Labor Code.
4. The delimitation of professional adequacy with the psychical/ men-
tal fitness of the employee
It is known that modern systems recognize the dichotomy of performance,
considering on the one hand concrete goals to be achieved, on the other hand a
subjective element, manifestation of behaviors favorable to the performance in
line with the organizational culture supporting business strategy. When one con-
siders that particular the behavior of the employee is a factor that generates the
performa nce, finally one can also speak about a psychic attitude towards the
members of the organization and, with the purpose and objectives of the organi-
zation.
If appropriate behaviors are not manifested, this must be generally as-
sessed by reference to the val ues of the organization both by the line manager
under the performance appraisal and by the experts empowered to perform pro-
fessional adequacy appraisal. In this sense, there is also the relevant legal practice
which shows that "the psychological factor is an important component of the
evaluation process and evidence to this is the high scores associated to this ele-
ment (behaviors) in the final results of the evaluation21". Or such a general eval-
uation can be made by the line manager directly observing emplo yee's behaviors
or, by a specialist in organizational psychology. Thus it is noted that "through the
21 Civil Decision no. 900 from September 24, 201 4, pronounced by the Poiești Court of Appeal,
www.mcp -avocati.ro, consulted on 1.10.2019.
Dynami c Elements in the Contemporary Business Law 244
psychological evaluation performed it was not intended to investigate whether
the applicant is physically or mentally fit for work. Moreover, these aspects ex-
ceed the attributions of psychologists specialized in occupational medicine"22. To
the extent that, inappropriate behaviors may be caused by medical reasons, the
expertise and specialization required as per the law for assessing the employee's
behaviors belongs to physicians.
5. Some procedural aspects
5.1. The procedure of prior evaluation concerning professional ade-
quacy is mandatory for the dismissal under art. 61 letter d) of the Labor
Code
The above procedure is often mentioned in the doctrine as a procedure
for finding professional inadequacy. We do not embrace this doctrinal reference
for the following reasons: the terminology used by the Labor Code both in art. 63
paragraph (2), as well as at art. 242 letter i) is that of an evaluation procedur e,
where the law maker refrains to determine any purpose or target of such an eval-
uation. In other words, even the assessment is carried out to identify the causes
for which the employee has shown a poor performance during an evaluation cy-
cle, this cannot indicate the direction towards which the employer tends – namely
the establishment of professional inadequacy.
Thus, the special procedure mentioned in the aforementioned articles
should refer to various methods to identify the causes of employees under p erfor-
mance. Specific manifestations may need to be analyzed by the employer's rep-
resentatives in order to delineate a possible professional inadequacy with a disci-
plinary misconduct or a psychical/mental inability. Moreover, the procedure in-
dicated in art. 63 paragraph (2) of the Labor Code may reveal that the employee
is not a proper professional, being in a process of professional knowledge decay,
that can only be restored through improvement and mentoring activities or by
professional training.
We can e ven speak of degrees of professional adequacy, since this is nei-
ther abstract nor absolute by nature, but refers to a measurement against a scale
that may change over time (for example in the case of the re -technological up-
grades, where the company embrace s new technologies and asks for similar im-
provements from its employees); Thus, professional adequacy refers to the re-
quirements for a certain position and a particular employer; thus, what represents
inadequate for a complex employer, can be considered as adequate by another
employer with a less sophisticated business. On the other hand, an employer who
has had certain performance standards at one point, by evolving the business and
increasing the complexity of the business model and its implementation too ls, it
22 Ibid.
Dynami c Elements in the Contemporary Business Law 245
can increase the standards of assessing the activity and, implicitly, the demands
on the employees.
The rank of employee adequacy (under expectations, correspondingly,
inappropriately) can be established by applying objective criteria and measure-
ment algorithms, which avoids subjective indicators such as "loss of employer
confidence". The loss of the employer's confidence in his employee cannot, in
itself, be a cause for dismissal for professional inadequacy if the employer estab-
lishes ranks of profe ssional adequacy measured by indicators and measuring in-
struments that allow a correct calibration of the demands of the employer with
the activity and behaviors of the employee. "In the absence of a score grid for
evaluation, the applicant's assessment is arbitrary (…) if there was no possibility
to challenge the evaluation result at an appeal commission"23.
Therefore, the evaluation procedure regarding the adequacy (established
by the applicable collective labor contract or, by the internal regulation) must
indicate with transparency the evaluation methods, the evaluation instruments,
the way they are elaborated and applied, the subjects responsible for drafting it
and manage it, content elements that can ensure the objectivity of the results, as
well as the benchmarks according to which one can assess the correctness of the
evaluation. Thus, it was considered24 necessary to have a scoring grid, in order to
exclude the arbitrariness of an evaluation, given that the court does not have the
competence to ver ify the correctness of the evaluation. In cases where the court
cannot substitute the employer for his right to evaluate in substance professional
adequacy25, this will be limited to the assessment of the legality regarding the
procedural aspects, the trans parency and their objectivity.
For objectivity purposes, an evaluation of the behaviors performed by the
line manager in the procedure on professional adequacy is less appropriate, since
it also requires a degree of abstraction, while the line manager's ev aluation if jus-
tified in the annual evaluation procedure, because this appraisal directly concerns
the employee's activity.
In the context of professional adequacy, generic requirements for a job
and an ideal occupant of this job are considered. Therefore , an assessment of be-
haviors could be applied rather by a specialist in organizational psychology (in-
ternal or external expert). However, a psychological evaluation of an occupa-
tional physician (based on art. 61 letter c) of the Labor Code is not justified )
23 Alexandru Țiclea, Labor Code commented and annotated with related legislation and relevant
jurisprudence , Universul Juridic Publishing House, 2017, p. 145.
24 Craiova Court of Appeal, labor litigation and social insurance section, Decision no. 2774/2008,
https://sintact.ro/#/jurisprudence/52122598, consulted on 1.10.2019.
25 "The court does not have the competence to verify whether the applicant's answers to th e two
questions addressed to the evaluation commission were correct or not, as well as the correctness of
the rating and the score given by the evaluation commission." (Craiova Court of Appeal, labor
litigation and social insurance section, Decision no. 27 74/2008, loc.cit .).
Dynami c Elements in the Contemporary Business Law 246
whereas such an occupational expert would evaluate the employee psychologi-
cally in comparison with the requirements highlighted in the risks description,
thus establishing his ability to occupy the job as designed by the employer; in his
context manifest ation of the "winning" behaviors necessary to perform on that
position are nor actually considered. Even more, we have to delineate the behav-
ioral (psychological) adequacy with the work capacity (mental state) of the em-
ployee, relevant in the context of an evaluation made by a social insurance expert
for medical retirement.
The cause of such medical retirement as a result of the loss of work ca-
pacity may be the result of a mental illness due to which the employee cannot
perform any work activity, let alone one specific to a certain job designed by the
employer26.
5.2. Specific procedural deadlines
In case of professional inadequacy, the employer has the obligation to
issue the dismissal decision within 30 calendar days from the date of the finding
of the di smissal cause, respectively from the moment when the conclusions of the
analysis within the preliminary procedure are communicated to the unit manage-
ment. This requirement is a guarantee of stability of the employment relationship
and protection of the emp loyee in the face of abusive positioning of the employer.
"The principle of the protection of the employees in case of dismissal is also em-
bodied by establishing a term within which, (…) the employer can issue the deci-
sion of dismissal, (…) removing th e situation (…) of uncertainty and continuous
hasard of the employee"27.
5.2.1. The legal nature of the 30 days’ deadline
The term of 30 calendar days is a limitation period and, consequently, it
is possible to suspend and interrupt28. Therefore, in the event that during the 30 –
day period in which the employer is entitled to issue the dismissal decision for
professional inadequacy, a cause of suspension of the individual employment
contract intervenes, art. 49 paragraph (6) of the Labor Code is applied an d the
flow of this term is suspended. This will be resumed upon termination of the cause
of suspension. Thus, in the situation of the intervention of a long -term medical
leave, of a leave to raise the child, we could find ourselves in the situation where,
over time, there would arise a question if the situation that was the basis of the
dismissal – professional inadequacy still persists.
26 See the conceptual and substantive inconsistencies highlighted in Civil Decision no. 900 from
September 24, 2014, pronounced by the Ploiesti Court of Appeal.
27 A. Athanasiu, M. Volonciu, L. Dima, O. Cazan, op. cit ., p. 346.
28 Idem , p. 347.
Dynami c Elements in the Contemporary Business Law 247
Thus, an employee found in the uncertain period between the moment of
applying the evaluation for professional adequacy and issuing the dismissal deci-
sion, could argue that after the leave period for raising the child the de facto rea-
sons on which the dismissal decision was based (yet not communicated due to
the protection mentioned at art. 60 of the Labor Code) no longer e xists when she
returns to work, because a vocational training has provided her an update of her
professional knowledge. In this case, the employer, who could not issue in the
past the decision, or could not validly communicate the decision according to art .
61 letter d) from the Labor Code before that leave, in order to continue and apply
the dismissal he must invoke that the inadequacy still exist upon employee's re-
turn from the leave for raising a child. Considering this is a termination related to
the em ployee, such grounds can be hardly effective in front of courts.
Moreover, after the return of the employee from the suspension of the
individual labor agreement, the 6 months of protection will be taken into account
for the adaptation at the workplace, a period stipulated for protection in case of
arguments of loss of professional skills arising from the period of leave for the
child raise. Therefore, the term of 30 days from the moment of finding the pro-
fessional inadequacy, is the limits in time for the employer decide the dismissal;
thus an obligation to be diligent is set for the employer and also a protection sys-
tem for the employee, whose situation is required to be clarified in a reasonable
time.
5.3. Other procedural aspects. Content of the dismis sal decision
By referring to the provisions of art. 76 of the Labor Code, the dismissal
decision for professional inadequacy must contain the grounds for the dismissal
(in fact and per the law), the duration of the notice (at least 20 working days), the
list of all the available jobs in the unit and the deadline in which the employees
may opt for a vacant job, under the conditions of art. 64 of the Labor Code.
De facto grounds are a priority for the analysis carried out by the court,
while the legal groun ds of the measure may be secondary. The doctrine is not
unitary29 as to the effects of not indicating the factual details in the dismissal de-
cision. Some authors show that mentioning in the dismissal decision another doc-
ument (finding notes), indicating the reasons for dismissal, is also acceptable.
Others30 believe that grounds must be expressly indicated in the dismissal deci-
sion. Contrary to the situation of the motivation in fact, the indication of the legal
grounds in the decision is not an equally impor tant requirement. "The lack of the
legal grounds does not, eo ipso, trigger the absolute nullity of it, but it is the right
and the duty of the court to proceed during judgment to rectify the legal grounds
29 L. Uță, F. Rotaru, S. Cristescu quoted in comments made by Costel Gîlcă, op. cit ., 2015, p. 133.
30 A. Athanasiu, M. Volonciu, L. Dima, O. Cazan, op cit ., p. 349 -350.
Dynami c Elements in the Contemporary Business Law 248
of the termination of the individual employment co ntract by the dismissal deci-
sion issued by the employer".
On the other hand, the legal grounds must be illustrated by the factual
situation indicated therein. Faced with the wrong legal grounds, “the mere refer-
ence31 to the provisions of art. 61 l etter d) of the Labor Code (…) it is not possible
to determine the cause of the dismissal, since in the factual situation invoked by
the respondent include also reference to disciplinary aspects.
Last but not least, we must consider the obligation of the employer to
propose to the employee other vacancies, compatible with the vocational training
(art. 63 paragraph (1) of the Labor Code). The aforementioned rule of law has is
imperative, and the failure to comply with this obligation leads to the nullity of
the dis missal decision, "insofar as the employee was injured by employer failing
provide the list of all available jobs in the unit32".
On the other hand, the law maker refers only to the vacant positions, that
is to say those positions that exist in the organiz ational chart of the employer
(approved by the statutory bodies). It is also necessary that the vacancies be com-
patible with the professional training of the employee, and this condition is im-
precisely indicated by the law maker, especially in the context of establishing a
professional inadequacy of the said employee. As per the letter of the law, even
an employee who is proven unprofessional in the preliminary evaluation proce-
dure, fulfills certain studies conditions, which means the professional training of
the employee lato sensu.
However, the legal obligation mentioned must be interpreted stricto
sensu, also concerning the conditions that have to be fulfilled for the job by a
candidate (possessing those technical knowledge, practical and behavioral skil ls
to occupy the position), that is those practical aspects that are also established
within the framework the procedure for professional adequacy. However, under-
going preliminary procedures indicates the correspondence of the employee with
respect to a ce rtain position.
On the other hand, his reallocation to another position compatible with
his professional training logically means a new assessment, this time within an
internal recruitment process, which is achieved by taking into account a job pro-
file an d of a specific candidate profile for each position to be filled. Only in the
case of positions with similar candidate profile we could admit (similar to some
doctrinaires) that the employer must directly propose to the inadequate employee
the vacant posit ion, without applying a selection process together with other can-
didates. If the relocation obligation exists and is not fulfilled by the employer,
this leads to the loss of a potential job by the inadequate employee, which entitles
31 Șerban Beligrădeanu, Essential aspects regarding the form, content and nullity of the dismissal
decision in the light of labor law , Studies of Romanian labor law, Ed. C.H. Beck, Bucharest, 2007,
p. 153, 154.
32 M.C. Predut, op. cit ., p. 90.
Dynami c Elements in the Contemporary Business Law 249
him to challenge and an nul the dismissal decision, for not fulfilling the legal pro-
cedure for his dismissal, as provided art. 78 of the Labor Code.
If the employer does not have vacancies compatible with the professional
training of the employee, he has the obligation to request the support of the terri-
torial employment agency in order to redistribute the employee, according to the
professional training, according to art. 63 paragraph (2) of the Labor Code. Fail-
ure of the employer to fulfill this obligation is not likely to influ ence the evolution
of the employment relationship, even ceasing under the conditions of the redis-
tribution carried out by the employment authority. Therefore, the failure to fulfill
this obligation does not determine the nullity of the dismissal measure.
"The employee has a period of 3 working days from the communication
of the employer regarding the internal vacancy to express his/her consent in writ-
ing about the new job offered. In case the employee does not show his consent
within the legal deadline, as well as after the notification of the case to the terri-
torial employment agency, the employer may order the dismissal of the em-
ployee"33.
6. Conclusions
We propose to replace the phrase "the procedure of professional inade-
quacy" used in the doctrine with "the evaluation procedure aiming to clarify the
rank of professional adequacy of the employee" (or "the procedure regarding pro-
fessional adequacy"), based on the following arguments:
• the employer must initiate a special evaluation process, distinct from
the performance evaluation and following it;
• the two types of evaluation must be based on different measuring in-
struments; to determine the internal causes of the professional degradation, from
the perspective of the methods, it is necessary to consider the procedure on pro-
fessional adequacy as similar with the selection procedure used when hiring em-
ployees;
• the purpose of this subsequent procedure cannot be to reach an inevita-
ble result – the confirmation of the suspicion of professional inadequacy; t his
would mean prior judgement of a factual situation (inadequacy) based on non –
specific means used by the regular performance evaluation; If we admit that the
annual assessment directly indicates the inadequacy, this would be equivalent to
the existence o f an assumption of professional inadequacy arising from the regu-
lar, annual performance evaluation procedure;
• we can even speak of an evolution (ranking) of professional inadequacy,
jointly with the evolution of the organization; this does not have an ab stract and
absolute nature, but refers to a position, to an organization at a certain moment in
its development and which applies standards and a measurement scale that can
33 Art. 63 para. (3) and (4) of the Labor Code.
Dynami c Elements in the Contemporary Business Law 250
change over time depending on the complexity of the business; therefore, it does
not speak of a professional inadequacy of the employee in the abstract, but of one
related to a certain moment and to specific requirements.
Bibliography
1. A. Athanasiu, M. Volonciu, L. Dima, O. Cazan, Labor Code, Articles Comment ,
Ed. C.H. Beck, Bucharest, 2011.
2. Alexandru Țiclea, Labor Code commented and annotated with related legisla-
tion and relevant jurisprudence , Universul Juridic Publishing House, 2017.
3. Costel Gîlcă, Commented and annotated Labor Code , second edition, Rosetti
Publishing House, Bucharest, 2015.
4. Daniela Georgeta Enache, Maria Ceaușescu, Labor Litigation. Relevant case
law of the Bucharest Court of Appeal semester I/2011 , Ed. Hamangiu, Bucha-
rest, 2011.
5. Ion Traian Ștefănescu, Ezer Marius, Gheorghe Monica, Sorica Irina, Teleoaca –
Vartolomei Bra ndusa, Uluitu Aurelian Gabriel, Voinescu Veronica, Labor
Code , Universul Juridic, 2017.
6. Ion Traian Ștefănescu, Theoretical and Practical Labor Law , Universul Juridic
Publishing House, 2017.
7. M.C. Predut, Labor Code commented , Universul Juridic Publishing Ho use, Bu-
charest, 2016.
8. Patricia Weinert, Michele Baukens, Patrick Bollerot, Marina Pineschi -Gapenne,
Ulrich Walwei, Employability: From Theory to Parctice , „International Social
Security Series”, volume 7, Transactions Publishers New Brunswick (USA) and
London (UK), 2001.
9. Raluca Dimitriu, Employee dismissal . Romanian and Comparative Law , Ed.
Omnia UNI SAT, Brasov, 1999.
10. Raluca Dimitriu, Reflections on the termination of the individual contract is
work from the perspective of the new regulations , „Revista Rom ână de Dreptul
Muncii” no. 3/2011.
11. Șerban Beligrădeanu, Essential aspects regarding the form, content and nullity
of the dismissal decision in the light of labor law , Studies of Romanian labor
law, Ed. C.H. Beck, Bucharest, 2007.
PUBLIC AFFA IRS AND BUSINESS LAW –
CONSTITUTIONAL DEVELOPMENTS
Constitutional Guarantees for Ownership Rights
and the Development of the Market Economy
Professor Ivan PANKEVYCH1
Abstract
This paper presents an analysis of constitutional guarantees for owners hip
rights set in the key legislation of European states and their impact on the market econ-
omy growth. It focuses primarily on the evaluation of the guarantees set in the Constitu-
tion and other acting laws of Ukraine granting the ownership rights. In this study, the
author employed such research methods as logical, observation, comparative law analy-
sis, etc. The market economy is the opposite of planned economy since decisions are made
on production, distribution, pricing, or investments by the owners of p roduction means
guided by their interests. Therefore, the topic of constitutional guarantees for ownership
and the development of the market economy in post -Soviet and post -Socialist European
states can be considered exclusively upon their regained indepen dence (in case of former
Soviet Union republics) or upon the collapse of the Socialist system and the termination
of activities of the Council for Mutual Economic Assistance (in case of most European
post-socialist states). A state would always pursue to r estrict private ownership. The right
cannot be considered as absolute but it shall be reliably protected by the state against
any claims. Ownership rights, in line with such rights and freedoms as freedom of entre-
preneurial activity, freedom of contract, f reedom to choose the place of employment and
residence, establish the legal framework for the market. This article may be of value to
students of law and economics faculties, experts in the theory of law, constitutional law,
and civil law.
Keywords: const itutional guarantees, ownership, property rights, the market
economy, economic operations.
JEL Classification: K11, K15, K19, P14
1. Introduction
Over the centuries, the market economy has been expanding its impact
and is currently dominating in the mo dern world. It has become the basis for the
growth of welfare for millions of people. As regards post -Socialist states, the pro-
cess of market economy development started there as late as in the 1990s. Until
that time, they had functioned for quite a long t ime within the so -called planned
economy in which all decisions on production and consumption of products were
made by the state. The m arket economy, for which the decisions on production
1 Ivan Pankevych – doctor habilitation of Science, prof essor of the Constitutional, European and
International Public Law Department at the University of Zielona Góra, Poland; professor of the
Constitutional Law and Sectoral Subjects Department at the National University of Water and En-
vironmental Engineering, Ukraine, ipankevych@gmail.com.
Dynami c Elements in the Contemporary Business Law 253
technicalities, distribution, pricing, or investment are taken by th e owners of pro-
duction facilities guided by their interests, is an antipode of the planned economy.
Therefore, the constitutional guarantees for ownership rights or the market econ-
omy development in post -Soviet and post -Socialist European states can be con-
sidered exclusively upon their regained independence (in case with former Soviet
Union republics) or upon the collapse of the so -called Socialist system and the
termination of activities of the Council for Mutual Economic Assistance2 (in case
of most Europ ean post -Socialist states).
2. Development of the Institute of Ownership in Ukraine
In the Soviet Union and the Ukrainian Soviet Socialist Republic, as part
thereof, any state guarantee for immunity of ownership was out of the question.
A socialist stat e was considered as such that did not face any issues with the own-
ership guarantees since the state liquidated private property. On the other hand,
state property and state power were the same notion: power became an element
of the structure of state prope rty, while ownership became an element within the
structure of power. The Constitution of the Ukrainian SSR dated April 20, 1978,
in effect at that time, declared that property shall belong to the people, while the
state shall manage it on behalf of the pe ople3.
After Ukraine regained its independence, the institute of ownership has
undergone fundamental changes. As an economic category, property turned into
the stronghold of market relations, a form of expression of the will of a person
and their role in s ociety. As of today, Ukraine is going through a complex process
of modifying the role of a modern state to expand its social functions, as well as
to change the scope of activities in order to reach the balance between private
interests of individuals and the overall interests of the community. A decisive
factor in the modification of the role of the state is the institute of ownership and
a mechanism for dispute resolution between individual owners (between a private
owner and a state, among others), as we ll as the mechanism for control over the
exercise of owners’ rights. The market economy provides for various ownership
forms. Immediately upon the Declaration on the State Sovereignty of Ukraine
dated July 19, 19904, and long before the adoption of the Act of the Declaration
2 The Council for Mutual Economic Assistance was an inter -state organization of the Socialist block
countries established in January 1949 , for economic integration and mutual assistance. It ceased its
operations on June 28, 1991.
3 Конституція (Основний Закон) Української Радянської Соціалістичної Республіки від
20.04.1978 р. № 888 -IX (Constitution (Basic Law) of Ukrainian Soviet Socialist Republic dated
20.04.1978 №888 -IX).
4 Декларація про державний суверенітет України від 16.07.1 990 р. № 55 -XII (Declaration on
State Sovereignty of Ukraine dated 16.07.1990, No. 55 -XII).
Dynami c Elements in the Contemporary Business Law 254
of Independence of Ukraine dated August 24, 19915, a series of the first and most
important laws adopted in Ukraine (that was formally still part of the Soviet Un-
ion for the moment) included the Law of Ukraine “on Property” dated Februa ry
7, 19916. Article 2 of the Law stipulated that property rights are the legally regu-
lated social relations on ownership, use, and management of property . Ownership
in Ukraine shall be secured by the law. The state shall provide for consistency of
legal r elations of ownership. Each citizen in Ukraine shall be entitled to own, use,
and manage the property personally or sharing with others. Property in Ukraine
is available in such forms as private, collective, and state -owned. All forms of
property shall be equal7. The following Article 3 of the Law sets that subjects of
ownership in Ukraine shall be recognized as the following: the people of Ukraine,
citizens, legal entities, and the state8. However, although the scope of the law was
revolutionary evidence t o systemic change in Ukraine, it also contained several
‘flaws” that have been further regulated by the following laws on property rights.
The first to consider is the Constitution of Ukraine. Article 3 of the acting Con-
stitution of Ukraine dated June 28, 1996, stipulates that human rights and free-
doms, and guarantees thereof shall determine the essence and course of the activ-
ities of the State. The State shall be responsible to an individual for its activities.
Affirming and ensuring human rights and freed oms shall be the main duty of the
State9. Article 13 of the Fundamental law of Ukraine provides that “the land, its
subsoil, atmosphere, water and other natural resources within the territory of
Ukraine, natural resources of its continental shelf and of th e exclusive (maritime)
economic zone shall be the objects of property rights of the Ukrainian people.
State authorities and local self -government bodies shall exercise the ownership
rights on behalf of the Ukrainian people within the limits determined by t his Con-
stitution. Every citizen shall have the right to utilise the natural objects of the
people’s property rights in accordance with the law. Property entails responsibil-
ity. Property shall not be used to the detriment of an individual or society.”10 The
Constitution defines property rights so as not to infringe on the interest of an in-
dividual and society. In fact, a legislator undertakes double responsibility: firstly,
provisions of private law to protect the property have been established; secondly,
a legislator has to protect social interests, mostly by public law regulations.
The next important legal act setting fundamentals for the regulation of
5 Про проголошення незалежності України: Постанова Верховної Ради Української РСР від
24.08.1991 р. № 1427 -XII (on Declaring the Independence of Ukraine: Resolution of the Supreme
Council of the Ukrainian SSR dated 24.08.1991 № 1427 -XII).
6 Про власність: Закон України від 07.02.1991 р. № 697 -XII (Law of Ukraine “on Property”,
dated 07.02.1991 № 697 -XII).
7 Ibid.
8 Ibid.
9 Ibid.
10 Конституція України від 28.06.1996 р . № 254к/96 -ВР (Constitution of Ukraine dated
28.06.1996 №254к/96 -ВР).
Dynami c Elements in the Contemporary Business Law 255
property rights is the current Civil Code of Ukraine11 adopted by the Parliament
of Ukraine on January 16, 2003. Its adoption repelled the above mentioned law
“on Property” dated February 7, 1991, since the issue of ownership is regulated
in the Civil Code of Ukraine in a voluminous book ІІІ “Ownership Right and
Other Proprietary Rights” Article 316 of the Code covering the concept of own-
ership sets that ownership shall be the right of a person for an object (property)
exercised under the law at their free will, irrespective of other persons’ will. A
special kind of ownership rights is the right for trust owners hip arising due to the
law or trust agreement12. An important provision of the Civil Code is article 319
“Exercising Property Rights” that sets that when exercising their rights and ful-
filling obligations, an owner shall abide by moral principles in society ; an owner
shall not use the property right to infringe on other rights, freedoms, and dignity
of citizens, or interests of society, to harm the environment and degrade natural
properties of land; the owner’s activity can be restricted or terminated, or th e
owner can be obliged to enable access of other persons to utilization of his/her
property only in cases and under procedures provided by the law13. At the same
time, Article 321 of the Civil Code of Ukraine guarantees the integrity of property
rights and sets the possibility to exempt from it or restrict its exercise. In particu-
lar, forced alienation of property rights objects can be applied only as an excep-
tion, for social necessity, on the grounds and under procedures set by the law, and
upon prior and f ull reimbursement of their cost14. The Civil Code of Ukraine also
changed the catalogue of property right forms in Ukraine and excluded collective
property, stating that property shall function in the form of property rights of the
Ukrainian people, private property rights, right of state property and the right of
municipal property15.
Among the range of important legal acts on property rights, along with
the Civil Code of Ukraine, we find it essential to mention the Land Code of
Ukraine. Within several mont hs upon regaining independence in Ukraine, legal
relations on land ownership and land use were regulated by the provisions of the
Land Code of the Ukrainian SSR dated December 18, 199016. However, on March
13, 1992, the Ukrainian Parliament adopted the revi ewed version of the code. It
was the first time in the contemporary history of Ukrainian state that the law set
that citizens of Ukraine shall be entitled to receive the land plots into property17.
11 Цивільний кодекс України від 16.01.2003 р. № 435 -IV (Civil Code of Ukraine dated
16.01.2003 № 435 -IV).
12 Ibid.
13 Ibid.
14 Ibid.
15 Ibid.
16 Земельний кодекс Української РСР від 18.12.199 0 р. № 561 -ХІІ (Land Code of Ukrainian
SSR dated 18.12.1990 № 561 -XІІ).
17 Земельний кодекс України від 13.03.1992 р. № 2196 -ХІІ (Land Code of Ukraine dated
13.03.1992 № 2196 -XІІ).
Dynami c Elements in the Contemporary Business Law 256
In the past, Ukraine (the same as the entire Soviet Union) did not have any prop-
erty other than state -owned. An exceptional case was in Poland, among other So-
cialist European states, where they had the private property for land even during
the Polish People’s Republic. As regards USSR citizens, they were entitled to be
allocated with land plots to build their residential houses thereon, upon the deci-
sions of local Councils of people’s deputies. The houses belonged to them on the
grounds of the so -called personal property, while the land plots were granted for
perma nent use. Thus, provisions of the Land Code of Ukraine appeared to be a
litmus paper which proved radical political and economic changes in Ukraine.
Nevertheless, in terms of the political situation of the times, and the prevailing
political powers in the parliament18, part 2 of Article 17 of the Code stipulated
that the owners of land plots granted upon decisions of the Council of people’s
deputies shall not be entitled to sell them or alienate them in other ways before
six years upon receipt of the propert y rights. They were only allowed to pass them
down or to pass them over to the Council of People’s Deputies on the same con-
ditions they had been granted the land plot by the Council. In case of reasonable
circumstances, a court (upon a lawsuit from the lan d plot owner) could reduce the
stated period.19 Thus, we can see that a legislator had established the private prop-
erty rights for land plots for Ukrainian citizens but also simultaneously restricted
it. In addition, Article 6 of the Code stipulated that fo reign citizens and a stateless
person cannot be given land plots into ownership.20 Therefore, in this case, the
state granted its citizens a privileged status. It should be stated that such legisla-
tive practices go against international standards when prope rty rights for the land
shall not depend upon the citizenship of a prospective applicant. However, in our
opinion, the practice is the “flaw” of almost all post -Socialist states where imple-
mented economic reforms caused impoverishment of the major part of the popu-
lation. The ban on selling land to foreigners was a certain response to prevent the
possible acquisition of large areas by wealthy foreigners.
Based on the Land Code of Ukraine, on December 26, 1992, the Cabinet
of Ministers of Ukraine adopted a De cree no. 15 -92 “on Privatization of Land
Plots”. Paragraph 1 therein established that village, township, town and city
Councils of People’s Deputies shall provide for transfer into private property of
citizens the land plots allocated to them for private p lot activities, construction,
and maintenance of a residential house and household buildings (homestead
land), gardening, summer house and garage construction, within 1993, and under
18 The majority in the Ukrainian Parliament at the time consisted of members of the Communist
Party of Ukraine, currently banned .
19 Земельний кодекс України від 13.03.1992 р. № 2196 -ХІІ (Land Code of Ukraine dated
13.03.1992 № 2196 -XІІ).
20 Ibid.
Dynami c Elements in the Contemporary Business Law 257
provisions of the Land Code of Ukraine.21 At the same time, par. 4 of the Decree
provided that citizens of Ukraine shall be entitled to sell or in other ways alienate
the land plots allocated to them for purposes stated in Article 1 of the Decree,
without changing their designated use.22 Thus, it cancelled a legal provision that
used to set the six years ban to sell the land plots received into private property.
Later, Ukrainian legislators also introduced changes to the Land Code of Ukraine
and kept the restriction for sale of land only for agricultural lands. They also set
the p ossibility to assume ownership for land for foreign citizens, but it was only
related to the land plots for construction and maintenance of the residential house
and the household buildings (homestead land).
Another important aspect that requires scrutiny and analysis is the issue
of restricting owners’ rights for land plots for public or social interests. The anal-
ysis of this issue in the theory of the Ukrainian agrarian law prompts suggesting
that most experts deem it justified to have such restrictions imposed to create due
conditions for the legal regulation of the nationally prioritized growth areas. The
law of the European states with long experience in the field does not precondition
the private land ownership on an individual’s citizenship. Moreover , they set cer-
tain restrictions in the area of exercising private property rights for land plots. For
instance, Italian law is guided by intentions to rationally use the land and enhance
fair social relations, and thus restrict private land ownership by se tting its maxi-
mum area in different parts of the country. Therefore, they introduce amelioration
of land, restructure large agrarian businesses, and support the development of
small agricultural farms and mid -scale land owners . Article 88 of the Civil Code
of France also sets a series of legislative limits. They include, among others, a
possibility of a mandatory repurchase of the land plot from the owner who does
not undertake any agricultural activities thereon or if their agricultural methods
harm social interests23.
Article 41 of the Constitution of Ukraine stipulates that everyone shall
have the right to own, use, or dispose of his property and the results of his intel-
lectual or creative activities. The right for private property shall be acquired in
compliance with the procedure established by law. Citizens may use the objects
of state or communal property in accordance with the law to satisfy their needs.
No one shall be unlawfully deprived of the right for property. The right for private
property shall be inviolable. The expropriation of private property objects may
be applied only as an exception for the reasons of social necessity, on the grounds
of, and in the order established by law, and on the terms of advance and complete
21 Про приватизацію земельних ділянок: Декрет Кабінету Міністрів України від 26.12.199 2
р. № 1592 (on Privatization of Land Plots: Decree of the Cabinet of Ministers of Ukraine dated
26.12.1992 № 1592).
22 Ibid.
23 Земельное законодательство зарубежных стра н. Москва . 1982. С. 352 (Land Code of Foreign
States. Moscow. 1982, p. 352).
Dynami c Elements in the Contemporary Business Law 258
compensation of the valu e of such objects. The expropriation of such objects with
subsequent complete compensation of their value shall be permitted only under
conditions of martial law or a state of emergency24. The viability of Ukrainian
constitutional provisions depends on how compliant they will be with other
Ukrainian legal provisions or international and European human rights standards,
and whether they will guarantee due living conditions for citizens.
3. Restriction of ownership in European constitutions
The practice of constitutional restrictions of ownership is also available
in other European states. For instance, Article 33 of the Constitution of Spain
dated December 27, 1978, sets that no individual can be exempt of their property
and the rights thereon, except fo r the grounded cause related to social relevance
or social interests, provided there is due reimbursement under the law.25 Article
1714 of the Constitution of Greece dated June 9, 1975, declares that property is
protected by the state. At the same time, how ever, it establishes that the use of
property rights shall not go against public interests.26 Constitution of Italy dated
December 27, 1947, declares in Article 42 that private property shall be defined
and guaranteed by the law that defines the manners of assuming and exercising
it, and also its limits – in order to provide for its social function and accessibility
to all.27. Meanwhile, the following Article 43 of the Basic Law, Italian legislators
set the possibility to alienate private property by the stat e, public institutions, as-
sociations of employees, or consumers in the interests of common good28. The
Constitution of Belarus dated March 15, 1994, provides in Article 44 that exercise
of the property right shall not contradict any common good and public s ecurity,
harm environment, historical and cultural heritage, or infringe on the rights and
lawful interests of other persons.29 In addition, the article establishes a possibility
of forced alienation of property only for social need, and in line with the te rms
and procedures under the law, and with the timely full reimbursement of the cost
of the disposed property, as well as by decision of a court.30 The Constitution of
the Federative Republic of Germany dated May 23, 1949, proclaims in Article 14
the guaran teed property and inheritance rights, and also sets that property obliges.
24 Конститу ція України від 28.06.1996 р. № 254к/96 -ВР (Constitution of Ukraine dated
28.06.1996 № 254к/96 -ВР).
25 Constitucion Espanola. Madrid 1987 // Les Constitutions de l’Europedes Douze. Paris , 1994.
26 Konstytucja Grecji . Wyd. 2 zm. i uaktual. Tłum. Grażyna i Wł odzimierz Uliccy. Warszawa,
Wydawnictwo Sejmowe 2005.
27 Constituzione della Repubblica Italiana // Roma: Fondo Europeo perl’Integrazione di Cittadini
di Paesi Terzi, Progetto cofinanziato dall’Unione Europea, Ministero dell’Interno Dipartimento per
le Libe rtà Civili el’Immigrazione, 2012, 258 p.
28 Ibid.
29 Constitution of the Republic of Belarus // Constitutions of the countries of the world. Gisbert H.
Flanz ed., Patricie H. Warf assoc. ed., Vol. 2: Bahrain – Bolivias. New York: Oceana Publ., 2003.
30 Ibid.
Dynami c Elements in the Contemporary Business Law 259
The use of property shall serve the common good, while its alienation can only
be possible for public convenience.31 Article 41 of the Constitution of Romania
dated November 21, 1991 , on the protection of property rights provides the pos-
sibility for the expropriation of property for public convenience established by
the law, with fair and prior reimbursement.32 Article 64 of the Constitution of
Poland dated April 2, 1 997, stipulates th at each individual shall have the right for
property, other property rights, right of inheritance, as well as legal protection
equal for all. Simultaneously, it also anchors that property can be restricted only
under the law and in the scope that does not contradict the essence of ownership.33
It shall be noted that constitutional restrictions for property rights are typ-
ical not only for European states but are common also in other parts of the world.
For instance, Article 29 of the Constitution of Japan da ted November 3, 1946,
sets the inviolability of ownership, while providing for the possibility to alienate
private property for public convenience, with fair reimbursement.34
As we can see, the state regulates legal framework not only for public
property, b ut also for private property, thus directly impacting its development
and functioning. Therefore, there is a problem in setting limits for the interference
of the state into social relations related to property rights. Under this setting, it
does not make much difference whether the economy in the country is of a market
type or state -regulated, such as in Belarus. In other words, in case of having other
than public kind of property (private property in the first place), the state shall
always have its veste d interest and can interfere with the exercise of property
rights by other property rights subjects.
It has been stated above that the constitutions and the laws of European
countries set some grounds to restrict or even forcefully alienate private propert y
rights. For example, the Constitution of Hungary shall guarantee the property
right in Article 13 but also sets the possibility to alienate it for public convenience
in the manner stipulated by the law and with complete and unconditional prompt
reimburse ment.35 A similar enforcement practice is also found in other European
states, including Ukraine.
31 Grundgesetz für die Bundesrepublik Deutschland, Deutscher Bundestag und Bundesarchiv (Hg.),
Der Parlamentarische Rat 1948 -1949. Akten und Protokolle, 13 Bde., Boppard u.a. 1975 –2002.
32 Конституция Румынии от 21 ноября 1991 г. (Constitutions of Romania dated November, 21,
1991) – https://legalns.com/download/books/cons/romania.pdf , consulted on 1.10.2019.
33 Konstytucja Rzecz ypospolitej Polskiej , Dziennik Ustaw, 1997, Nr, 78, poz. 483 (Con stitution of
the Republic of Poland, Journal of Laws, 1997, no. 78, item 483).
34 Konstytucja Japonii. Tłumaczenie z języka japońskiego Teruji Suzuki . Wstęp Teruji Suzuki ,
Wydawnictwo Sejmowe. W arszawa , 2014 (Japanese Constitution. Translated from Japanes e by
Teruji Suzuki. Introduction by Teruji Suzuki, Sejm Publishing House. Warsaw, 2014).
35 Ustawa Zasadnicza Węgier. T łumaczenie: Jerzy Snopek . W stęp: Witold Brodziński ,
Wydawnictwo Sejmowe . Warszawa, 2012 (Basic Law of Hungary. Translation: Jerzy Snopek.
Introduction: Witold Brodziński, Sejm Publishing House. Warsaw, 2012).
Dynami c Elements in the Contemporary Business Law 260
4. Principles for restrictions of ownership
The analysis of the acting law and court practices in Ukraine and other
European states highlights the followi ng principles to restrict ownership:
– possibility to restrict private property in the interests of the “common
good” or “public interests”;
– fair reimbursement by the state of the loss of property to owners;
– setting restrictions strictly under the law ;
– court protection of private property rights.
Analysis of the grounds for restricting private property rights in the Con-
stitution of Ukraine and the constitutions of some other European countries shows
that all the legal regulatory acts use such grounds for restricting rights as “social
interests” or the “common good.” It seems that in that case, we might conclude
that these terms are used as synonyms. In the acting Ukrainian law, we only found
one law that offers a definition for the concept of the “com mon good”. In partic-
ular, Article 1 of the Law of Ukraine “On General Safety of Non -Food Products”
dated December 2, 2010,36 with the definitions of terms, defines social interest as
health and life safety of persons, safe working conditions, consumer (cust omer)
protection, environment protection.37 The concept of social interest is also par-
tially explained in the Law of Ukraine “On Information” dated October 2, 1992.38
Article 29 of the law includes a list of information that presents social interest
and thus is socially necessary. The list is not exhaustive and contains information
that has signs of a threat to national sovereignty and territorial integrity of
Ukraine. In addition, it the information that provides for the exercise of Consti-
tutional rights and freedoms and implies the possibility of infringement on human
rights, may mislead the public and cause environmental and other negative con-
sequences of acts (inaction) of natural or legal persons.39 In our estimation, the
list can be applied with reference to the institute of private property rights, when
adjusted for certain specificities.
Let us analyze some definitions suggested by various researchers for the
concept of public interest. Researcher Zavadskaya contends that social interest is
something whi ch society and its social groups believe to be an asset whose value
36 Про загальну безпечність нехарчової продукції: Закон України від 02.12.2010 р. № 2736 –
VI (Law of Ukraine “ On general safety of non -food products ”, dated 02.12.2010 № 2736 -VІ).
37 Ibid.
38 Про інформацію: З акон України від 02.10.1992 р. № 2657 -ХІI (Law of Ukraine “about infor-
mation”, dated 02.10.1992 № 2657 -XII).
39 Ibid.
Dynami c Elements in the Contemporary Business Law 261
satisfies material, spiritual, aesthetic, and other needs, and therefore shall be pro-
tected under the law.40 Tikhomirov considers social interest to be formally recog-
nized by the state and secured by the law interest of a social community whose
satisfaction serves a priority condition and a guarantee for its existence and de-
velopment.41 He identifies several conditions to provide for social interest,
namely inviolability of the principles of constitutional order; protection of na-
tional borders, defense of country, public security; sustainability of power and its
institutions; legal distinction between authorities of different levels; political au-
tonomy and activity of citizens, priority of nat ional interests in certain areas of
economy and culture.42 In our view, Tikhomirov equates national and social in-
terests since he lists among the means of legal support for social interest a priority
national interests. The statement seems erroneous since t he state shall always
have its specific interests which could either fail to match or even go against so-
cial interests.
We can also suggest a definition for the notion of social good suggested
by a US researcher Ostrom who interprets the phenomenon as a k ind of activity
that yields benefits to the entire country or a certain social group.43 Ostrom states
that it is hard to establish social good in quantitative terms, and claims that it does
not imply it would be impossible to evaluate the tangible cost it t akes to reach it.
In his opinion, the best option to reach social good is a certain optimal level of
activity where benefits exceed the cost.44 In that case, Ostrom’s opinion is similar
to an idea suggested by Maritz. She believes that general features of s ocial interest
include social necessity; legitimacy; relevance; benefit; and prevalence of social
interest over possible harm from its spread.45 Definition for social interests of-
fered by Morozova is rather opportune. She describes social interest as public
interests. However, they are not the interests of the state. They are the interests
that yield benefit for the whole society or are meaningful for a certain social com-
munity. They are not short -term in their effect but rather serve as a precondition
40 Завадская Л., Теория права : новые идеи. Выпуск 2. Москва . 1992. C. 45. (Zavadskaya L.,
Theory of Law : New Ideas. Iss ue 2. Moscow . 1992. p. 45).
41 Тихомиров Ю., Публичное право: падения и взлеты , „Государство и право ”, 1996, № 1. C.
5. (Tikhomirov Yu., Public law: failures and successes , „State and the Law”, 1996, no. 1, p. 5).
42 Ibid.
43 Остром В., Смысл американско го федерализма. Что такое самоуправляющееся общество.
Перевод с английского. Москва . 1993. C. 165. (Ostrom V., The meaning of US federalism. What
is a self -regulated society . Translation from English. Moscow, 1993, p. 165).
44 Ibid.
45 Маріц Д., Поняття сус пільний інтерес в інформаційних правовідносинах ,
„Підприємництво, господарство і право ”. № 11, 2018, С. 169. (Marits D., The concept of public
convenience in informational legal arrangement , „Entrepreneurship, Economy, and Law”, No. 11,
2018, p. 169).
Dynami c Elements in the Contemporary Business Law 262
for the functioning and development of society at large (individual social com-
munities) and are oriented at fundamental constitutional values.46 As regards in-
terests of the state, Morozova believes that under the conditions of self -regulation
of economy, the int erference of the state into the economy has certain limits. It is
typical in the context of the market economy. As a rule, it is reduced to: a) pro-
ducing of economic policy; b) managing state -owned companies (with strict re-
striction of their number by most important industries of the national signifi-
cance); c) to set legal principles of the market, such as incentives with public
means of entrepreneurship, providing for equality of ownership forms, taking
measures to prevent monopoly and unfair competition; d) to regulate foreign
trade relations.47
The analysis of the above -mentioned definitions of the concept of social
interest leads to the conclusion that their interpretation depends on specific his-
torical circumstances. In a totalitarian state, social inte rests would be different
than in a democratic society. “Interests of society” and the “common good” are
judgment -based. As duly mentioned by Kosovych, legislators of each country use
them in legal acts in different senses, in terms of their contextualized interpreta-
tions based on their understanding of socially relevant aspects of social relations,
social values of society, needs, interests, value paradigms, baselines, and prefer-
ences.48 For example, the Constitution of the Russian Federation dated December,
12, 1993,49 sets fewer grounds for restriction of human rights than the current
Constitution of Ukraine. Moreover, Russian legislators used such restriction of
rights as “public needs”, “public interests”, but not social interests, as it is found
in the Co nstitution of Ukraine.50 There is a good reason for that situation. In Rus-
sia, public interests prevail over social interests, as a result of a long period of
functioning of the Russian state under totalitarian rule.
5. Guarantees for non -violation of property rights in Ukraine
46 Морозова Л.А., Государство, собственность и права человека , Права человека в условиях
становления гражданского общества. Материалы международной научно -практической
конференции, Курск. 1997, С. 23. ( Morozova L.A., State , Property , and Human Rights , Human
Rights Under Establishment of Civil Society . Materials of International Research and Practical
Conference , Kursk . 1997, p. 23).
47 Морозова Л.А., Функции российского государства на современном этапе , „Государство и
право ”, 1993, № 6, С. 103. (Morozova L .A., Functions of the Russian State in Contemporary
World , „State and the Law”, 1993, no. 6, p. 103).
48 Косович В ., Оціночні поняття як засіб юридичної техніки: монографія, В. М. Косович. –
Львів. : Тріада -плюс, 2010, 211 с. ( Kosovych V., Value Judgements as a Means of Legal Tech-
nique: Monograph, V.M. Kosovych, Lviv. Triada -plus, 2010, p. 211 ).
49 Конституция Российской Федерации, Российская газета, № 237, 25.12.1993 (Constitution of
Russia n Federation dated 12.12.1993, Russian Newspaper № 237, 25.12.1993).
50 Конституція України від 28.06.1996 р. № 254к/96 -ВР (Constitution of Ukraine dated
28.06.1996 №254к/96 -ВР).
Dynami c Elements in the Contemporary Business Law 263
An important aspect that has an impact on the state’s guarantee for im-
munity of ownership lies in due and transparent procedure of its registration. Over
the several recent years, Ukraine has implemented a number of significant re-
forms. They include, among others, the reform for the procedure of registration
of immovable property. Pursuant to Article 182 of the Civil Code of Ukraine,
ownership and other property rights for immovable objects, restrictions of the
rights, their acc rual, transfer, and termination shall undergo state registration.51
On July, 1, 2004, Ukrainian Parliament adopted the Law “on State Registration
of Corporeal Rights on Property and Their Encumbrances,”52 After several years,
it was replaced by the Law of Uk raine “On Introducing Changes into the Law of
Ukraine “on State Registration of Corporeal Rights on Property and Their En-
cumbrances” and Other Legal Acts” dated February, 11, 2010.53 However, it was
only upon introducing the following changes to the above m entioned law, such
as upon the Parliament’s approval of the Law of Ukraine “on Introducing
Changes to the Law of Ukraine “on State Registration of Corporeal Rights for
Immovable Property and Their Encumbrances”: dated November, 26, 2015,54 that
one can spea k of liberalization of the process of registering property rights, and
also of transparency thereof. In other words, as of today, there is a single nation-
wide register of immovable property. At the same time, it was liquidated the mo-
nopoly of state in the area of registering property rights. Subsequently, presently,
notaries (both private and public) shall be entitled to register corporeal rights and
their encumbrances, in addition to state registrars. It does not imply that all chal-
lenges have been overcom e. Challenges still persist in transparency of state’s re-
demption of privately owned land plots for the common good. The concept of
public convenience is underregulated on the national level, and is still cause to
many conflicts between owners of the land plots and the state. Another pertinent
issue is the moratorium on sale of agricultural land plots. It has been extended
51 Цивільний кодекс України від 16.01.2003 р. № 435 -IV (Civil Code of Ukraine dated
16.01.2003 № 435 -IV).
52 Про державну реєс трацію речових прав на нерухоме майно та їх обтяжень: Закон України
від 01.07.2004 р. № 1952 -IV (“on State Registration of Corporeal Rights on Immovable Property
and Their Encumbrances” dated July, 01, 2004 No.1952 -IV).
53 Про внесення змін до закону Україн и «Про державну реєстрацію речових прав на
нерухоме майно та їх обтяжень»: Закон України від 11.02.2010 р. № 1878 -VІ (on Introducing
Changes to the Law of Ukraine “on State Registration of Corporeal Rights on Immovable Property
and Their Encumbrances”: the Law of Ukraine dated February, 11, 2010 No.1878 -VI).
54 Про внесення змін до закону України «Про державну реєстрацію речових прав на
нерухоме майно та їх обтяжень» та деяких інших законодавчих актів України щодо
децентралізації повноважень з державної реєс трації речових прав на нерухоме майно та їх
обтяжень: Закон України від 25.11.2015 р. № 834 -VІІІ (on Introducing Changes to the Law of
Ukraine “on State Registration of Corporeal Rights on Immovable Property and Their Encum-
brances” and some other legal ac ts of Ukraine on decentralization of powers for state registration
of corporeal rights on immovable property and their encumbrances: the Law of Ukraine dated
25.11.2015 No. 834 -VІІІ).
Dynami c Elements in the Contemporary Business Law 264
again by the Supreme Council of Ukraine to last until January, 1, 2020. Introduc-
tion of the full -fledged land market has long been a req uirement for Ukraine com-
ing from international creditors to grant their loans. The requirement is still in-
cluded in the list from the International Monetary Fund. However, it is not only
about lack of legal regulation, but also the current situation. Accor ding to recent
surveys run by the “Rating” polling group as commissioned by the International
Republican Institute in the end of June, 2019, 68% of Ukrainian citizens did not
support lifting of the moratorium for sale of agricultural land. At the same time ,
only 20% of respondents would vote in favour in case of the referendum. 12% of
respondents were undecided about the choice.55 However, Volodymyr Zelenskyi
elected to be the President of Ukraine on April, 21, 2019, during the recent offi-
cial visit to Turke y on August, 8, 2019, state that the moratorium on the sale of
agricultural land shall have been lifted by the end of 2019.56 Another promise to
take the next step on the way of land reform was given by Oleksiy Honcharuk,
the Prime Minister of Ukraine, in h is statement on September, 14, 2019, at the
YES forum57 in Kyiv. He suggested the land market be introduced in the coun-
try58. In our view, since public opinions on that matter differ from statements of
top public officials, the issue of introducing a new sta ge of land reform and free
land market in Ukraine is going to be difficult and excessively politized to tackle.
6. Conclusions
When adopting the relevant laws and other legal acts related to economic
aspects, the state would try to restrict private own ership. It can not be treated as
absolute. However, it shall be reliably protected by the state from any infringe-
ments. After all, property rights, along with such rights and freedoms as the free-
55 Лише 20% українців підтримують вільний продаж землі (Only 20% of Ukrai nians support
free sale of land), https://www.ukrinform.ua/rubric -economy/2737624 -lise-20-ukrainciv -pidtri
muut -vilnij -prodaz -zemli.html, consulted on 1.10.2019.
56 Зеленський: Мораторій на продаж землі в Україні буде знято до кінця року ( Zelenskyi :
suspens ion on the sale of land in Ukraine shall be lifted by the end of the year ), https://agropolit.
com/news/13090 -zelenskiy -moratoriy -na-prodaj -zemli -v-ukrayini -bude -znyatiy -do-kintsya -roku,
consulted on 1.10.2019.
57 YES (Yalta European Strategy ) – annual conv entions of politicians , diplomats , public and civic
activists , journalists , analysts , and business community from over fifty countries worldwide where
they discuss new ideas and perspectives on the trends for development of Europe, Ukraine, and the
entire globe . Since the moment of its establishment in 2003, they have taken place in Yalta , but
after annexation of the territory of the Autonomous Republic of Crimea in 2014 by the Russian
Federation, they have been held in Kyiv .
58 Нові правила для працюючих і продаж землі: що пообіцяв прем'єр Гончарук на YES ( New
regulations for the employed population and the sale of land: what Prime Minister Honcharuk
Promises at the YES ), https://www.obozrevatel.com/ukr/economics/economy/sprostyat -zvilnen
nya-dozvolyat -proda vati-zemlyu -i-zdivuyut -reformami -scho-poobitsyav -premer -goncharuk -na-y
es.htm , consulted on 1.10.2019.
Dynami c Elements in the Contemporary Business Law 265
dom of entrepreneurial activities, the freedom of contract, t he choice of employ-
ment and residence, make a framework for legal infrastructure of the market. The
peculiarity of Ukraine that differentiates it from other post -Socialist European
states is both in large delay and in banal imitation of market reform in th e country.
In Ukraine, we still have political and economic authority of Soviet political elite.
It disabled equal access to economic resources to other economically active citi-
zens of Ukraine. Privatization of public property and land reform have long im-
peded economic growth in Ukraine. They intended to transform Ukrainian citi-
zens into owners. However, lack of capital market, incapacity to search for an
efficient owner, and uncompleted reform (land reform, in the first place) hindered
the delivery of econ omic or social outcome from privatization and land reform.
Engaging Ukrainian citizens into privatization acted as an imitation of market
reform which signs ae still visible today.
Despite the guarantees fixed in the Constitution of Ukraine and other act-
ing laws for the exercise of property rights, it can be stated that, unfortunately,
Ukraine is not a model of efficient development of market economy. After all, it
is important not only to have the reforming law in line with the Zeitgeist but also
the poli tical will to implement unpopular but much needed market reform, such
as, for example, in Poland some time ago. Today, we can confirm that with a
much better starting point in terms of economic capacity, as compared to many
other European Post -Socialist st ates, Ukraine was ruled by the “color -changed”
Soviet party economic elite. Thus, it ended up with currently being one of the
poorest European countries.
Bibliography
1. Завадская Л., Теория права : новые идеи. Выпуск 2. Москва. 1992. (Zavadskaya
L., Theory of Law : New Ideas. Issue 2. Moscow. 1992).
2. Косович В ., Оціночні поняття як засіб юридичної техніки: монографія, В. М.
Косович. – Львів: Тріада -плюс, 2010 (Kosovych V., Value Judgements as a Means
of Legal Technique: Monograph, V.M. Kosovych, Lviv. Triada -plus, 2010).
3. Маріц Д., Поняття суспільний інтерес в інформаційних правовідносинах ,
„Підприємництво, господарство і право”. № 11, 2018 (Marits D., The concept of
public convenience in informational legal arrangement , „Entrepreneurship, Econ-
omy, and Law”, No . 11, 2018).
4. Морозова Л.А., Государство, собственность и права человека , Права
человека в условиях становления гражданского общества. Материалы
международной научно -практич еской конференции, Курск, 1997 (Morozova
L.A., State, Property, and Human Rights , Human Rights Under Establishment of
Civil Society. Materials of International Research and Practical Conference, Kursk ,
1997).
5. Морозова Л.А., Функции российского государства на современном этапе ,
„Государство и право”, 1993, № 6 (Morozova L.A., Functio ns of the Russian State
in Contemporary World , „State and the Law”, 1993, no. 6).
6. Остром В., Смысл американского федерализма. Что такое самоуправляющееся
Dynami c Elements in the Contemporary Business Law 266
общество. Перевод с английского. Москва. 1993 (Ostrom V., The meaning of US
federalism. What is a self -regulated society . Translation from English. Moscow,
1993).
7. Тихомиров Ю., Публичное право: падения и взлеты , „Государство и право”,
1996, № 1 (Tikhomirov Yu., Public law: failures and successes , „State and the
Law”, 1996, no. 1).
Parliamentary Group s – Internal Structures of the Chamber of
Deputies and the Senate. Controversial Aspects on Establishing
Parliamentary Groups Arising from the Parliamentary Practice
Associate professor Adrian ȚUȚUIANU1
PhD. student Florina -Ramona MUREȘAN2
Abstract
The p olitical configuration of the Parliament Chambers is determined by the
citizens’ vote and expresses the representative nature of the legislative chamber. The sen-
ators and the deputies are organized in parliamentary groups, according to regulations
of each Chamber. Creating parliamentary groups represents a constitutional right and
not an obligation; all and any imperative term is null. The activity of the political parties
and other the political groups engaged in the election campaign continues within the
Parliament, by forming “parliamentary groups” or “political groups”, usually made of
members of the Parliament under the same political group or who subscribe to the same
program or are followers of the same idea. In the parliamentary practice, establishin g
parliamentary groups by the deputies and senators who become unaffiliated as a result
of leaving the party under which they were elected is still a controversial aspect. The
Constitutional Court of Romania has repeatedly ruled on the possibility to const itute such
groups, of which establishment was blocked by the parliamentary majority existing at a
given time.
Keywords : parliamentary party, parliamentary group, independent Member of
Parliament (MP), unaffiliated MP, decisions of the Constitutional Court .
JEL Classification : K10, K23
1. Introductory considerations
As representative body, the Parliament is formed after the legislative
elections, and the MPs express the political will of the electoral corpus, propor-
tional to the number of votes obtained by each and every parliamentary political
party. Consequently, the legislative Chambers acquire a new political configura-
tion arising from the spectrum of the political parties which have obtained parlia-
mentary mandates and from the number of such mandate s, configuration which
shall be maintained throughout the entire length of the legislature and will be
reflected in the entire organization and functioning of each Chamber of the Par-
liament. Therefore, the political configuration shall correspond to the el ectoral
1 Adrian Țuțuianu – „Valahia” University of Târgoviște, Romania, adrian.tutuianu65@ yahoo.com.
2 Florina -Ramona Mureșan – „Nicolae Titulescu” University of Bucharest, Romania,
av.muresanflorina@yahoo.com.
Dynami c Elements in the Contemporary Business Law 268
will of the population expressed by the votes granted. In principle, the configura-
tion of the Chambers of the Parliament may be changed only after new legislative
elections.
The criterion of the political configuration used in organizing the struc-
tures of the Chambers of the Parliament was laid down in article 64 (5) of the
Constitution according to which “Permanent offices and parliamentary commis-
sions are formed in line with the political configuration of each Chamber ”. The
political configuration is the result of the votes granted by the voters to the can-
didates proposed by the political parties which registered to be part of the election
campaign and also a fundamental requirement of the representative democracy.
In addition, the political config uration of the Chambers of the Parliament ex-
presses the representative nature of the legislative chamber. In a pluralistic polit-
ical system, the more diverse the political configuration is, the higher the degree
of representativeness is.
The Constitution o f Romania3, Law no. 96/2006 regarding the Status of
the Deputies and Senators4, the Regulations of the two Chambers clearly set forth
how the Parliament should be organized and should function. The internal struc-
tures of the two Chambers of the Parliament are similar, consisting of a president,
a permanent office, a committee of the leaders of the parliamentary groups, par-
liamentary groups, parliamentary commissions .
Considering that the Constitution defines in article 8 (2) the role of the
political partie s, i.e. to contribute “ to defining and expressing the political will of
the citizens…”, constituting the parliamentary groups is an imperative require-
ment, whereas every group has to be the result of the political will of the electors
of a certain segmen t of the electoral corpus. Nonetheless, the parliamentary
groups are not mandatory structures of the Parliament; they result from the vol-
untary association of the deputies and senators ; creating parliamentary groups
represents a constitutional right and no t an obligation, as the deputies and the
senators are independent and any imperative mandate is null. In direct relation to
3The Constitution of Romania, as amended and completed by Law for the revision of the Constitu-
tion of Romania no. 429/2003, published in the Official Gazette of Romania, Part I, no. 758 of 29
October 2003 , republished by the Legislative Council, in accordance with article 152 of the Con-
stitution, with update of the names and a new numbering of the texts (following republication, ar-
ticle 152 became article156). The law for the revision of the Constitution o f Romania no. 429/2003
was approved by national referendum on 18 -19 October 2003 and came into force on 29 October
2003, date of publication in the Official Gazette of Romania, Part I, no. 758 of 29 October 2003 of
the Decision of the Constitutional Court no. 3 of 22 October 2003 for confirmation of the result of
the national referendum of 18 -19 October 2003 for the law for the revision of the Constitution of
Romania . In its initial form, the Constitution of Romania was adopted in the meeting of the Con-
stituent Assembly of 21 November 1991, was published in the Official Gazette of Romania, Part I,
no. 233 of 21 November 1991 and came into force following its approval by national referendum
on 8 December 1991.
4Republication of Law no. 96/2006 regarding the S tatus of the Deputies and Senators was published
in the Official Gazette of Romania, Part I no. 49 of 22 January 2016.
Dynami c Elements in the Contemporary Business Law 269
the vote granted by the electors, the parliamentary groups include a higher or,
where appropriate, a lower number of members.
After 1990 there were controversies in respect of establishing parliamen-
tary groups by the MPs who became independent by leaving the political parties
on the lists of which they were elected or by being excluded from these parties.
The normative acts, i.e. Law n o. 96/2006 regarding the Status of Deputies and
Senators and the Regulations of the Chamber of Deputies and the Regulations of
the Senate, even though amended, failed to make references to the creation of the
parliamentary groups, as the interest of the ma jority parties was to hinder the es-
tablishment of parliamentary groups by MPs who became independent.
The provisions of the Law no. 96/2006 regarding the Status of the two
Chambers and the Regulations of the two Chambers regulating the creation of
parliam entary groups, in particular by MPs who became independent or unaffili-
ated, were the subject matter of some referrals to the Constitutional Court of Ro-
mania. In this respect, between 1993 and 2018, the Constitutional Court of Ro-
mania ruled in several Decis ions5, the general opinion being that the Regulations
do not forbid creation of parliamentary groups by MPs who changed their parlia-
mentary group, the MPs’ possibility to affiliate to a parliamentary group or to
establish a group made of MPs who became ind ependent/ unaffiliated .
Although the general opinion expressed by the Constitutional Court is the
same as expressed previously, the parliamentary practice, determined by the will
of the parties forming the parliamentary majority, is controversial. The creat ion
of parliamentary groups by independent MPs was denied in several parliamentary
sessions6/unaffiliated .
The blockage of establishing parliamentary groups by unaffiliated MPs
is still an element of dispute between the parties forming the parliamentary ma-
jority and such MPs, as the latter’s rights, as recognized by the Constitution of
Romania, Law no. 96/2006 and the Regulations of the two Chambers, are there-
fore violated.
On the other hand, there is also a practical side to organizing deputies and
senator s in parliamentary groups, side highlighted by the unitary work, with the
possibility to express and achieve more efficiently the political and social objec-
tives to the best interest of the citizens. This is the reasons why the Permanent
Offices of the Cha mbers of the Parliament should not prevent, based on contrary
political reasons or interests, the will of the unaffiliated MPS to renounce their
5 For details see Chapter III, Section III Controversial Aspects on Establishing Parliamentary
Groups. Practice of the Constitutional Cou rt of Romania regarding parliamentary groups.
6 By way of example, see request to establish in the Senate the parliamentary groups UNIREA,
DEMOCRAȚIA, which were denied as it was considered that they fail to meet the regulatory re-
quirements, even though, u nder the same legal and regulatory requirements, the creation of the
parliamentary group PRO EUROPA was acknowledged in the Chamber of Deputies, based on the
decision of the Constitutional Court 85/2018.
Dynami c Elements in the Contemporary Business Law 270
capacity and affiliate to other political groups or reunite in groups without a dis-
tinct ideology or program, b eing animated only by their desire to fulfill some
social objectives to the best interest of the citizens. The consequences of the es-
tablishment or the recognition of a parliamentary group arise from the provisions
of the Regulations of the two Chambers. W e enumerate below some of these con-
sequences:
1. They may submit proposals to the president of the Chamber according
to article 23 of the Regulations of the Senate and article 22 of the Regulations of
the Chamber of Deputies;
2. They may propose representa tives in the Permanent Offices, commis-
sions of the Chamber and offices of the Chamber commissions, special commis-
sions, commissions of inquiry or common commissions of the two Chambers ac-
cording to article 18 of the Regulations of the Senate, article 15 (3 ) of the Regu-
lations of the Chamber of Deputies.
3. They may propose candidates for positions in Permanent Offices ac-
cording to article 18 in the Regulations of the Senate, article 15 (3) in the Regu-
lations of the Chamber of Deputies;
4. They may propose c andidates for the management of the Permanent
Commissions (president, vice -president, secretary);
5. They may propose members in the Central Electoral Office, County
Electoral Offices, Electoral Offices of the Polling Stations7;
6. The may request resubmis sion of a bill to the commission already no-
tified in substance, by virtue of article 15 (3) in the Regulations of the Chamber
of Deputies;
7. They may contest the result of the vote expressed in the plenary, ac-
cording to article 18 in the Regulations of t he Senate, article 15 (3) in the Regu-
lations of the Chamber of Deputies;
8. They may request, through the leader of the group, the revocation of
the members of the Permanent Office or the members of the offices of the com-
missions proposed by the groups the y represent, according to article 18 in the
Regulations of the Senate, article 15 (3) in the Regulations of the Chamber of
Deputies.
Another controversy which should be analyzed regards the differences
between “political parties represented in the Parliame nt”, “parliamentary polit-
ical parties” or “political parties and other political groups with a parliamentary
group in minimum one of the Chambers of the Parliament ”.
Therefore, in the context of the presidential elections in November 2019,
7 Law no. 115/2015 for election of the local public administration authorities, Law no. 393/2004
regarding the Status of the local elected representatives, Law no. 370/2004 regarding election of
the president of Romania, Law no. 208 of 20 July 2015 regarding election of the Senate and the
Chamber of Deputie s, as well as organization and functioning of the Permanent Electoral Author-
ity).
Dynami c Elements in the Contemporary Business Law 271
the Ombudsman ma de a request to the Constitutional Court on 25 August 20198,
considering that:
(1) article 2 (2) letter e) of Law no. 370/2004 for the election of the Pres-
ident of Romania, republished, stating that “parliamentary parties are political
parties which have their own parliamentary groups in minimum one of the Par-
liament Chambers and which received, following the latest general elections for
the Parliament of Romania, mandates of senators and deputies for the candidates
registered on their lists or the lists o f a political or electoral alliance to which
such parties or political groups belonged” contravene article 2 (1), article 62
(1) as well as article 103 (1) of the Constitution as it assigns the syntagm “par-
liamentary political parties” the meaning of “par ties and other political groups
which have they own parliamentary group in minimum one of the Parliament
Chambers, instead of “parties represented in the Parliament ”. In support of this
request, the Ombudsman considers that the constitutional texts impose fulfillment
of two cumulative conditions: (1) the party should have their own parliamentary
group in minimum one of the two chambers of the Parliament, and (2) the party
has received mandates of senators and deputies in the latest general elections for
the Parliament of Romania . Consequently, this definition of the syntagm “parlia-
mentary political party” institutes limitations of the procedural rights within the
electoral process associated to the right of being elected. By way of example, it
mentions : the right to be represented within the Central Electoral Office, the right
to participate to the first stage of the drawing lots to establish the order of the
names registered on the ballot papers, the right to be represented within county
electoral offices/el ectoral offices of the sectors of Bucharest Municipality or the
right to participate to the first stage of the completion of the electoral offices of
the polling stations. The Ombudsman considers that a political party acquires the
capacity of parliamentar y party by virtue of the fact that it received mandates in
the Parliament of Romania by popular ballot cast in the election process, having
members in both Chambers of the Parliament elected by universal, equal, direct
and secret vote, in accordance with p rovisions of article 62 (1) of the Constitution.
The nature of the parliament party depends on the popular vote, and not on cre-
ating or not creating a parliamentary group, which may be, at a given time, pre-
vented by administrative, procedural or circumstan tial means used by the other
electoral competitors.
(2) article 118 (2) of Law no. 208/2015 regarding election of the Senate
and Chamber of Deputies, as well as organizing and functioning of the Permanent
Electoral Authority , as amended, which mentions tha t “Within the meaning of the
present law, parliamentary political parties mean the parties or other political
groups which have their own parliamentary group in minimum one of the Cham-
bers of the Parliament and which have received, following the latest ele ctions for
8 The case was registered at the Constitutional Court of Romania under no. 8219/10.25.2019. The
case has no court term, to be put in the Court's debate in the next period.
Dynami c Elements in the Contemporary Business Law 272
the Parliament of Romania, mandates of deputies and senators for the candidates
registered on their lists or the lists of a political or electoral alliance to which
such parties or political groups belonged, as well as political and electoral al li-
ances which include such parties or political groups” is contrary to article 2 (1),
article 62 (1), as well as article 103 (1) of the Constitution as it assigns the syn-
tagm “parliamentary political parties” the meaning of “parties and other political
groups which have they own parliamentary group in minimum one of the Parlia-
ment Chambers, instead of “parties represented in the Parliament ”.
2. Principles, role and internal organization of the Parliament of Ro-
mania
2.1. Principles and rules of parliamenta ry conduct
It is essential for our study to analyze the principles and the rules of the
parliamentary conduct. The normative acts regulating the matter are: the Consti-
tution of Romania, Law no. 96/2006 regarding the Status of the Deputies and
Senators, th e Code of conduct for Deputies and Senators9.
The principles underlying the parliamentary activity are:
1. Principle of national interest. The principle is defined in article 10 of
Law no. 96/2006 providing that “The deputies and senators shall act in the best
interest of the whole nation and the inhabitants of the electoral constituency that
they represent, respectively the citizens of the national minorities whom they rep-
resent.”
2. Principle of the representative mandate. The representative role of
the P arliament was instituted in the Constitution of Romania in 186610 and taken
over by all other Constitutions. Therefore, this regulation is found even today in
article 69 (1) according to which “In exercising their mandate, the deputies and
the senators serv e the people.”
Specific to democracy, this principle excludes the possibility of an im-
perative mandate for deputies and senators as they serve only the people. Further-
more, the same article 69 (2) sets forth the nullity of the imperative mandate11.
Although we may be tempted to consider that the most representative au-
thority is the President of Romania12, the Parliament is the supreme representative
9Adopted by Decision of the Romanian Parliament no. 77/2017, published in the Official Gazette
of Romania, Part I no. 805 of 11.10.2017.
10Article 8 stated “The members of both Assemblies represent the Nation, and not only the county
or the locality which app ointed them” .
11See Decisions of the Constitutional Court of Romania no. 44/1993, 45/1994, 46/1994.
12The President of Romania represents the Romanian state and guarantees the national independ-
ence, unity and territorial integrity of the country. The Preside nt of Romania shall see to the respect
for the Constitution and the good functioning of the public authorities. To this end, the President
Dynami c Elements in the Contemporary Business Law 273
body of the Romanian people and the only legislative authority of the country13. It
represents all relevant opti ons of the society, the president being only the expres-
sion of an electoral majority.
3. Principle of legality. The principle is defined by Law no. 96/2006 in
article 11 (1) which sets forth that “In their capacity of elected representatives of
the Romania n people, the deputies and the senators fulfill their tasks and exercise
their rights in accordance with the Constitution, the country laws and the regu-
lations of the Chamber of Deputies and the Senate, throughout the entire length
of their office.” Conseq uently, in relation to all and any activity carried out as
representatives of the people, the MPs shall conduct in line with the provisions
of the Constitution, the law and the regulations, as well as the requirements im-
posed by the Code of conduct for dep uties and senators.
4. Principle of good faith. The principle of good faith is defined by Law
no. 96/2006 in article 11 (2) which provides that “The deputies and the senators
are forbidden to assume in relation to natural or legal persons financial obliga-
tions or obligations of any other nature intended to influence the exercise of their
mandate in good faith and conscientiously.”
In the Code of conduct for deputies and senators this principle is found
under the name of “Independence”. Therefore, article 2 takes over the provision
on nullity of the imperative mandate and also imposes the deputies and senators
the conduct of not conditioning the exercise of one’s voting rights on gaining
some financial advantages.
In support of this principle, the deputies an d the senators are imposed the
obligation to publicize all and any personal interest which may influence their
public actions (article 5 – Probity in the Code of conduct for deputies and sena-
tors).
5. Principle of transparency. This is one of the principle s with the high-
est impact on the citizens represented by the deputies and senators. Defined in
article 12 of Law no. 96/2006 as being the obligation of the deputies and senators
to show transparency in their parliamentary activity, to maintain a permanent di-
alogue with the citizens on issues of interest for the latter and which results from
assuming and exercising their mandate of MP, this principle was also taken over
by the Code of Conduct in article 4 “The deputies and senators shall participate
to parli amentary activities, shall maintain contact with the citizens and shall ex-
ercise their mandate in a transparent manner”.
6. Principle of loyalty. The definition of this principle may be found in
article 13 of Law no. 96/2006 “Throughout their mandate, the deputies and the
senators shall be loyal to Romania, the people and the respect to citizens.”
acts as a mediator between the state powers as well as the state and the society (Article 80 – Con-
stitution of Romani a).
13Article 61 (1) of the Constitution of Romania. For details, see Chapter II, Section II, 2.2.1 Role
of the Parliament.
Dynami c Elements in the Contemporary Business Law 274
7. Principle of MPs’ election by universal, equal, direct, secret and
freely expressed vote. This principle is found in provisions of article 62 (1) of
the Consti tution of Romania according to which electing the Chamber of Depu-
ties and the Senate by universal, equal, direct, secret and freely expressed vote is
the essence of democracy.
The specificity of our constitutional regime consists in the right of the
organi zations which belong to national minorities to be represented in the Parlia-
ment. The representativeness is ensured by the organization which appoints a
deputy providing that they received in the general elections throughout the coun-
try the number of votes corresponding to a specific representation rate. This is a
positive discrimination as it is in favor of the respective minority and is justified
by the right to identity as set forth in article 6 (1)14.
8. Principle of parliamentary sovereignty. Consecrated by article 64 of
the Constitution of Romania, this principle is the essence of parliamentarism. It
implies regulatory autonomy, financial autonomy and institutional autonomy.
In terms of regulatory autonomy, it legally means that each Chamber
should be or ganized and should function in line with their own set of rules and
regulations. The scope of the two sets of rules and regulations – one for the Cham-
ber of Deputies and one for the Senate – also includes the regulations on joint
meetings, according to pro cedure regulated by article 65 (2) letter k) of the Con-
stitution of Romania.
The organization and functioning of each Chamber imply creation of
their own permanent office, appointment of the president, organizing of the dep-
uties and senators in parliamenta ry groups, establishing permanent and temporary
commissions of inquiry, which are special and yet common to both Chambers. In
political terms, establishing such structures shall comply with the political con-
figuration.
The financial autonomy is ensured by the budget of each Chamber ap-
proved by the latter, as a component of the state budget .
The institutional autonomy implies creation of the organizational struc-
tures mentioned above, on the one side, and creation of the working apparatus
made of parliamenta ry clerks under a separate administrative structure, on the
other side.
2.2. Role and internal organization of the Parliament of Romania
2.2.1. Role of the Parliament
The Parliament of Romania is the supreme representative body and the
14Article 6 (1) of the Constitution of Romania provides: “The state recognizes and guarantees na-
tional minorities the right to maintai n, develop and express their ethnic, cultural, linguistic and
religious identity”.
Dynami c Elements in the Contemporary Business Law 275
single legislati ve authority of Romania. It has a bicameral structure and is made
of the Senate and the Chamber of Deputies15. The general material competency
granted to the Parliament means that all and any issue of public interest is part of
its scope. This is why, in it s capacity of supreme body, the Parliament may engage
the responsibility of the President of Romania, even though the latter benefits
from a legitimacy similar to the Parliament and is elected, similarly to the MPs,
through a universal, equal, direct, secr et and freely expressed vote. The primacy
of the two Chambers of the Parliament, the Chamber of Deputies and the Senate,
confer the constitutional political regime its nature of parliamentary regime, de-
spite the fact that, following election of the Preside nt by the electoral corpus, the
former has also, from this point of view, a mixed character. In addition, as it is
natural in such a political regime, the Government is politically accountable to
the Parliament, which may dismiss them by adopting a motion of censure16.
We may conclude that, in our constitutional regime, the Parliament has a
central place; the efficiency of the entire state and implicitly, the socio -economic
efficiency depend, in the final analysis, on how the Parliament functions. Further-
more, the MPs are accountable to their electors and this is what makes the Parlia-
ment a central institution of the development of democracy.
2.2.2. Internal organization of the Parliament of Romania
As already mentioned in relation to the structure of the Parliament, this
is structured on two Chambers: Senate and Chamber of Deputies. Each of these
two Chambers has their own internal structures, respectively: President, Perma-
nent Office, Committee of the leaders of the parliamentary groups, Specialist
Commis sions, Joint Commissions, Special Commissions and Commissions of in-
quiry.
A. Validation of mandates. The newly -elected Chambers are convened
by the President of Romania. This convening has a double legal meaning: on the
one side, according to article 70 ( 2) of Constitution, this is the date when the
capacity of the MPs of the previous Parliament ceases; on the other side, the pre-
liminary procedure on establishing leadership bodies and working bodies of the
Parliament is launched and, therefore, the newly -elected MPs take over their of-
fice. No debates may be organized before the validation of the mandates, except
the debate intended for validation. The validation seeks to check the electoral files
of the elected MPs in order to detect any failures to comply with the constitutional
15 On the principle of bicameralism in Romanian law and in comparative law see Cătălin -Silviu
Săraru, Drept administrativ. Probleme fundamentale ale dreptului public , C.H. Be ck Publishing
House, Bucharest, 2016, p. 7 -21.
16Mihai Constantinescu, Antonie Iorgovan, Ioan Muraru, Elena Simina Tănăescu, Constitution of
Romania, Revised, Comments and Explanations , ALL Beck Publishing House, Bucharest, 2004, p.
119.
Dynami c Elements in the Contemporary Business Law 276
and legal provisions regarding the election as well as any potential fraud. 17 The
mandates are validated or invalidated by the vote of the majority of the depu-
ties/senators present. The validation commission has the status of a parl iamentary
commission.
Following validation of minimum two thirds of the number of the mem-
bers of each Commission, it is considered that they are duly constituted and the
deputies and senators whose mandates were validated shall pronounce the oath
of allegi ance provided in Law no. 96/2006 regarding the Status of Deputies and
Senators. This is the moment when the members of the Parliament are entitled to
fully exercise their mandate
After due establishment, the mandate of the President (the oldest member
of the group) shall also cease as his/her prerogative was to chair the validation
meetings.
B. Formation of the parliamentary groups. The system of the parlia-
mentary groups is compatible with the principle of political pluralism, which
means several parties a nd their right to submit candidacies in order to form the
Parliament. The deputies and the senators elected shall present in the Parliament
the program and the objectives of the party which proposed them as candidates
and also supported them throughout the election process. This is therefore a basic
condition that the deputies and senators should work in a unitary and organized
manner, or, this involves conducting parliamentary activities inside the parlia-
mentary groups and also a strict party discipline18.
The deputies and the senators reunite in parliamentary groups which are
structures of the two Chamber of the Romanian Parliament .
A parliamentary group should have minimum 10 members, in case of
deputies, and minimum 7 members, in case of senators. The pa rliamentary groups
provide an indication as to the political structure of the Chamber of Deputies and
Senate .
The creation of the parliamentary group, as a form of political organiza-
tion of the Parliament, takes place just after the elections and condition s the entire
weight in the economy of its functioning. The Parliament is “organized” after the
parliamentary elections so that the votes expressed by the citizens of the country
and the parliamentary configuration should be proportional and symmetric. The
same applies when forming the Permanent Office and the Parliamentary commis-
sions as well as when deciding on the leadership positions corresponding to such
structures. The structure of the Permanent Office of the Chamber of Deputies is
established dependin g on the time of the parliamentary elections and not on the
formation of a new circumstantial political majority in the Parliament. Following
the elections, the Parliament appoints their leadership structures and the parlia-
mentary commissions, which create d the so called “political algorithm”. In the
17Marian Enache, Parliamentary Procedures , Universul Juridic Publishing House, 2013, p. 21.
18 Ibid.
Dynami c Elements in the Contemporary Business Law 277
light thereof, at the beginning of each parliamentary legislature, within the frame-
work of some political negotiations, a decision is made on the parliamentary
group who may appoint the president of the Chamber and also the positions
within the Permanent Office which are to be distributed to each parliamentary
group. This distribution is consolidated by the will of the electoral corpus, ex-
pressed on the occasion of the parliamentary elections, and may not be amended
by political migrations of a potential reformation of the parliamentary majority.
Therefore, a new parliamentary majority constituted during the exercise of one’s
mandate may not trigger alteration of the political structures of the permanent
offices or adding new members to the parliamentary commissions19.
C. Appointing presidents of each Chamber and other members of the
Permanent Offices. Pursuant to article 64 (2) of the Constitution, the president
of the Chamber of Deputies and the president of the Senate are elected for the
entire length of the mandate of the Chambers. Therefore, they are elected to fulfill
a mandate of which content is to achieve the tasks provided by the Constitution
and the Regulations for their positions. The Constitution expre ssly sets forth in
article 66 (3), article 89 (1), article 98 (1) and article 146 letters a), b), c) and e),
the duties of the presidents of the two Chambers of the Parliament. Article 34 of
the Regulations of the Chamber of Deputies also sets forth the du ties of the pres-
ident by which the latter ensures functioning of the Chamber for its entire dura-
tion. Therefore, the position of the president of the Chamber is extremely im-
portant in constitutional terms, importance rendered by its complexity and its role
of authority stated in title III of the Constitution. The president of the Chamber
of Deputies is appointed for the entire duration of the Chamber, whereas the other
members of the permanent offices are appointed at the beginning of each session.
This dis tinction underlines the necessity to ensure the permanency of the position
of president of the Chamber. The president is elected by the majority of the dep-
uties20 present, whereas the vice -presidents, secretaries and quaestors forming the
Permanent Office a re elected upon the proposals of the parliamentary groups, in
line with their weight according to the political configuration of the Chamber of
Deputies and the negotiations of the leaders of the parliamentary groups21. Con-
sequently, the president of the Ch amber, in consideration of the majority required
for his/her election, represents the Chamber, as a whole, both in relations to other
authorities, ensuring thus the liaison with the executive power, and at external
level, with the MPs of other states. Thes e are aspects distinguishing between the
19In this respect, see the Decision of the Constitutional Court no . 602/200519 – in relation to provi-
sions of article 64 (5) of the Constitution, both for the Permanent Office and for the commissions,
their structure is determined by the political configuration of the Parliament emerged from elec-
tions.
20See article 22 (2) of the Regulations of the Chamber of Deputies.
21See article 24 (1) of the Regulations of the Chamber of Deputi es.
Dynami c Elements in the Contemporary Business Law 278
president of the Chamber as an institution and the other members of the Cham-
ber.22
In respect of the election of the president of the Senate, according to the
Regulations of the Senate23, after legal creation of the S enate, election is con-
ducted to elect the president of the Senate , by secret ballot, for the entire length
of the mandate, and the other members of the Permanent Office to which they
belong: president of the Senate, 4 vice -presidents, 4 secretaries and 4 q uaestors.
The President of the Senate is also the president of the Permanent Office. The
political affiliation of the members of the Permanent Office, in which the presi-
dent of the Senate is also included, should reflect the political configuration aris-
ing from the elections. The candidate who received in the first round of elections
the vote of the majority of the senators present is declared to be the president
elected. In the event that no candidate received the number of votes required, new
rounds of el ections will be conducted to which competitors will be the first two
candidates who received the highest number of votes or, where appropriate, all
candidates who came first with the same number of votes, or the first and all
candidates who came second, wi th the same number of votes. The candidate who
received the vote of the majority of the senators present is declared to the presi-
dent.
D. Specialist commissions, joint commissions, special commissions and
commissions of inquiry. The co mmissions of the Chamber of Deputies24 are
working bodies of this Chamber created in order to fulfill tasks provided by the
law and the regulations . The commissions of the Chamber of Deputies prepare
the working documents for the plenary meetings of the Cha mber and exercise the
parliamentary control. The Chamber of Deputies constitutes permanent commis-
sions and may constitute special commissions and commissions of inquiry. The
permanent commissions of the Chamber of Deputies are made of 11 to 41 depu-
ties, ex cept the Regulatory Commission which is made of a representative of each
parliamentary group. The number of permanent commissions is set, for individual
case, in the plenary of the Chamber of Deputies, upon the proposal of the Com-
mittee of the leaders of t he parliamentary groups. The objectives, the number of
members, the nominal structure and the leadership of the special commissions
22DECISION No. 312 of 20 May 2019 regarding the referral on unconstitutionality submitted by
the Liberal Party of the provisions of article 35 (1) – (3) of the Regulations of the Chamber of
Deputies, republished, by which provisions of article 35 (l) to (3) of the Regulations of the Chamber
of Deputies are deemed to be unconstitutional, as, by lack of limitation of the delegation of duties
of the President of the Chamber of Deputies toward vice -presidents, they violate requirements of
article 1 (5) of th e Constitution, in its structure referring to the status of the legal norms and article
146 letters a), b), c) and e) of the Constitution, with regard to the President’s own, exclusive re-
sponsibility to refer certain matters to the Constitutional Court.
23Articles 22 to 24 of the Regulations of the Senate.
24Provisions regarding the Commissions of the Chamber of Deputies may be found at articles 40 to
83 of the Regulations of the Chamber of Deputies.
Dynami c Elements in the Contemporary Business Law 279
and commissions of inquiry of the Chamber of Deputies are approved in its ple-
nary upon their establishment. A deputy shall b e part of a single parliamentary
commission, except the members of the Regulatory Commission, Validation
Commission, Commission for information technology and communication, Com-
mission for equal chances for men and women, Commission for communities of
the Romanians abroad, Commission for investigation of abuse, corruption and for
petitions and Commission for European affairs, who may also be members of
other permanent commissions. Throughout their mandate, the members of the
Permanent Office of the Chamber of Deputies may opt for one of the permanent
commissions and for one of the commissions set as exceptions in the present par-
agraph. The deputies may also be members of the joint commissions with the
Senate.
Only one parliamentary committee may belong: (1) the deputies and the
senators who are members in the permanent joint committee of the Chamber of
Deputies and the Senate for exercising parliamentary control over the Foreign
Intelligence Service25; (2) the deputies and the senators who are members in the
permanent joint committee of the Chamber of Deputies and the Senate for exer-
cising parliamentary control over the Romanian Intelligence Service26.
In case of the Senate27, the Commissions are internal working structures
of the Senate, constituted to prepare t he legislating activity and to exercise par-
liamentary control. The Senate constitutes their own permanent commissions and
may institute commissions of inquiry, special commissions, including joint me-
diation commissions, and joint commissions with the Chamb er of Deputies. The
number of the commissions for inquiry, special or common commissions, the
name and the structure of each and every commission as well as the number of
such commissions are set by the Senate, upon the proposal of the Permanent Of-
fice or the Committee of the leaders, where appropriate. The number of seats in
the commissions which is to be distributed to each parliamentary group is set by
the Committee of the leaders, within the timeline set by the Permanent Office, so
that the political co nfiguration of the Senate at the beginning of each parliamen-
tary session should be complied with.
In the event that one of the members of the commission resigns or is ex-
cluded from the parliamentary group which proposed him/her, the parliamentary
group may propose another representative. The proposal is subjected to vote in
25 Parliament's decision on the organization and functioning of the Standing Joint Committee of the
Chamber of Deputies and the Senate for exercising parliamentary control over the Foreign
Intelligence Service.
26 Art. 6 of the Parliament Decision no. 3/1993 regarding the organization and functioning of the
permanen t Joint Commission of the Chamber of Deputies and the Senate for the exercise of
parliamentary control over the Romanian Information Service – republished, published in the
Official Gazette of Romania, Part I, no. 168 / 08.22.2018.
27Provisions regarding th e commissions of the Senate may be found in articles 45 to 82 of the Reg-
ulations of the Senate.
Dynami c Elements in the Contemporary Business Law 280
the plenary of the Senate. The nominal proposals are announced by the leaders of
the parliamentary groups within the timeline set by the Permanent Office. All
senators, except the presid ent of the Senate, shall be members of minimum one
permanent commission. A senator may not be a member of more than two per-
manent commissions, except the Regulatory Commission. The Senate approves
the nominal structure of each commission by open vote of th e majority of the
senators present. The commissions are led by an office made of: a president, a
vice-president and a secretary. A senator may be a member of the leadership of-
fice of only one permanent commission.
At the level of the Parliament, there are permanent joint commissions28
of the two Chambers, parliamentary friendship groups with other parliaments and
permanent delegations to international parliamentary organizations. In addition
to permanent joint commissions, the two Chambers may create special commis-
sions and commissions for parliamentary inquiry. The leaders of the parliamen-
tary groups in the Chamber of Deputies and Senate negotiate the numerical struc-
ture and make proposals on the nominal configuration of the joint structures and
their leader ship in order to ensure compliance with the political structure of the
two Chambers and the ratio between the number of deputies and the number of
senators.
3. Regulating the formation of the Parliamentary Groups. Function-
ing of the Parliamentary Groups
3.1. Evolution of legal regulation
The creation of the parliamentary group, as a form of political organiza-
tion of the Parliament, takes place just after the elections and conditions the entire
weight in the economy of its functioning. The Parliament is “organized” after the
parliamentary elections so that the votes expressed by the citizens of the country
and the parliamentary configuration should be proportional and symmetric. The
same applies when forming the Permanent Office and the Parliamentary commi s-
sions as well as when deciding on the leadership positions corresponding to such
structures. At the beginning of each parliamentary legislature, within the frame-
work of some political negotiations, a decision is made on the parliamentary
group who may appoint the president of the Chamber and also the positions
within the Permanent Office which are to be distributed to each parliamentary
group. This distribution is consolidated by the will of the electoral corpus, ex-
pressed on the occasion of the parliament ary elections, and may not be amended
by political migrations of a potential reformation of the parliamentary majority.
28Provisions regarding joint commissions of the Chamber of Deputies and Senate may be found in
article 4 of the Regulations of the joint activities of the Chambe r of Deputies and Senate, repub-
lished in the Official Gazette of Romania, Part I no. 110 of 05 February 2018.
Dynami c Elements in the Contemporary Business Law 281
Therefore, a new parliamentary majority constituted during the exercise of one’s
mandate may not trigger alteration of the political structures of the permanent
offices or adding new members to the parliamentary commissions.
The requirement regarding formation of the parliamentary groups in the
legislative Chambers is primarily a need of organizational nature: the parliamen-
tary group reun iting in principle the senators and deputies who ran and were po-
litically, financially, logistically, electorally supported by the same party or inde-
pendent MPs, will be more efficient in parliamentary terms providing that they
act as a united team, in lin e with a strict party discipline toward meeting their
political objectives. From this perspective, the political groups are organizational
forms by which the parliamentary parties participate to the governing act, they do
politics, or politics is done depe nding on the interest of a certain party.
Opinions were expressed29 according to which doing politics contradicts
article 2 (2) of the Constitution which sets forth that “ no group or person may
exercise sovereignty on their own behalf” . The constitutional interdiction also
refers to the creation of some parliamentary groups outside political parties which
received mandates of senator or deputy. The connection between the principle of
sovereignty and the political action of the parliamentary parties resides in the fact
that the sovereignty expresses the will of the people and all and any political de-
cision adopted by the Parliament, based on the senators’ and deputies’ vote, is an
act of national sovereignty and is implemented as a sovereign will, which is ge n-
erally mandatory. Under such circumstances, it is nonsensical to create a parlia-
mentary group outside a party and without their support; it is an undertaking out-
side the logic and the philosophy of the parliamentary law.
3.1.1. Constitutional provisions
The starting point in our study concerning the creation of parliamentary
groups is represented by provisions of the Constitution of Romania. We see that
provisions of article 61 (3) of Constitution of Romania of 199130 stating that
“Deputies and senators may establish parliamentary groups according to regu-
lations of each Chamber” were taken over by the present Constitution of Roma-
nia in article 64 (3).
Pursuant to constitutional provisions, organizing and functioning of each
Chamber involves creating a pe rmanent office, appointing the president, organ-
29 Cristian Ionescu, Corina Adriana Dumitrescu, Constitution of Romania, Comments and Expla-
nations , C.H. Beck Publishing House, Bucharest, 2017, p. 723; Ion Deleanu, Institutions and Con-
stitutional Procedures in Romanian Law and in Compared Law , C.H. Beck Publishing House, Bu-
charest, 2006 , p. 268.
30Constitution of Romania of 1991 was adopted in the meeting of the Constituent Assembly of 21
November 1 991, was published in the Official Gazette of Romania, Part I, no. 233 of 21 November
1991 and came into force following its approval by national referendum of December 8, 1991.
Dynami c Elements in the Contemporary Business Law 282
izing in parliamentary groups by the members of each Chamber, constituting per-
manent commissions and temporary commissions which are special, inquiry and
also common commissions of both Chambers. In political terms, establishing all
these structures has to observe the political configuration.
Considering that the Constitution defines in article 8 (2) the role of the
political parties, i.e. contributing to defining and expressing the political will of
the citiz ens, the creation of parliamentary groups is a key requirement. The es-
sential element in establishing a parliamentary group is the manifestation of the
desire to affiliate or reunite in a parliamentary group of a certain number of dep-
uties or senators. The method used to create parliamentary groups results in how
the Chamber of Deputies or the Senate are politically configured. In this sense,
the Constitutional Court ruled31”political configuration of each Chamber means
its formation in harmony with the vote s expressed in the election process, in line
with the proportion received by the parliamentary groups compared to the total
number of each Chamber” . Therefore, the political configuration of the Cham-
bers of the Parliament is the result of the will expresse d by the electoral corpus.
Consequently, the regulatory provisions on establishment of parliamentary
groups are underlined by the principle of freedom of association, as the senators
and deputies are constitutionally entitled to associate in these structur es, and not
the interdiction of creating groups, except when, by creating such groups, the
electoral life of the citizens is disregarded32.
Taking into account that electing the Chambers involves participation of
the candidates proposed by the political pa rties, and, where appropriate, by polit-
ical or electoral alliances, it is natural that the Parliament elected should have a
certain political hue or configuration. This results from the spectrum of all polit-
ical parties whose elected representatives – depu ties and senators – are members
of each Chamber. It is extremely important to know the political configuration of
the Chamber of Deputies and the Senate, as the entire parliamentary activity ex-
presses the confrontation or the collaboration among the politi cal parties33.
Some authors34 consider that it is an organizational choice instead of a
political obligation, even though the parliamentary groups associate in line with
political criteria. The Constitution could not have provided the deputies and sen-
ators’ obligation to create parliamentary groups, even in the context of the role of
political parties becoming constitutional, as this is a characteristic of the parlia-
mentary mandate which should be exercised by the person who was elected
freely, any imperativ e mandate being null35.
31Decision no. 601 of 14 November 2005, published in the Official Gazette of Ro mania no. 1022
of 17 November 2005.
32In this respect, see article 16 (7) of the Regulations of Senate.
33Cristian Ionescu, Corina Adriana Dumitrescu, op. cit ., 2017, p. 722.
34 Ibid.
35Article 69 (2) of Constitution of Romania.
Dynami c Elements in the Contemporary Business Law 283
3.1.2. Provisions comprised in Law no. 96/2006 regarding the Status
of deputies and senators
The MPs’ right to establish parliamentary groups is mentioned in Law
no. 96/2006 regarding the Status of deputies and senators. Therefore , according
to article 33, they may create parliamentary groups in compliance with the regu-
lations of each Chamber (par 1).
The second paragraph lays down who may belong to parliamentary
groups: “deputies, respectively senators, who ran in the elections as representa-
tives of the same political party, political group or political/electoral alliance or
deputies or senators who ran as independent and were elected”.
Law no.96/2006 does not contain special provisions on the hypothesis of
a parliamentary group dissolving due to failure to meet the rules provided for
minimum numerical structure (7 senators – in case of parliamentary groups
within the Senate, and 10 deputies – in case of parliamentary groups within the
Chamber of Deputies). Article 33 (4) of Law s ets forth only the legislative solu-
tion in case of an MP leaving the parliamentary group, case in which the MPs
who have this parliamentary approach become unaffiliated unless they affiliate
to another group. The legislator omitted to regulate an objective situation : disso-
lution of the parliamentary group as a consequence of the reduction in the number
imposed by the regulations of the Chamber . In such case, the legislator offers
them the alternative to become unaffiliated or join an existing group . Practic ally,
we witness a quasi -imperative mandate sanctioned by the constitutional text as
null.
Furthermore, the final thesis of article 33(4) Law no. 96/2006 stipulates
that the deputies or senators leaving their parliamentary group and becoming un-
affiliated M Ps may not create their own parliamentary groups36. De lege ferenda ,
the Parliament should modify this legislative provision and bring it in harmony
with the constitutional provisions. It is obvious that the parties which received a
parliamentary majority d id not want the independent MPs, the MPs who became
independent or the unaffiliated MPs to create their own parliamentary groups,
with all consequences arising from the capacity of an MP member of a parlia-
mentary group. Another way to intervene on this nor m would be a notice referred
to the Constitutional Court of Romania by the Ombudsman, and, in the event that
36Regulations of the Chambers c ompletes the legal provision as it follows, for senators the situation
is regulated by article 16 (6) corroborated with (5) “Senators who are members of parties or or-
ganizations of citizens belonging to national minorities who do not have the number requir ed to
form a parliamentary group may affiliate to other parliamentary groups or may constitute mixed
parliamentary groups” , while for deputies the situation is regulated by article 13 (5) “The deputies
of the political parties, political groups, political or electoral alliances as well as independent
deputies who do not have the required number to form a parliamentary group may reunite in mixed
parliamentary groups or may affiliate to other parliamentary groups.”
Dynami c Elements in the Contemporary Business Law 284
the Court admits such notice, the Parliament should be forced to amend article
33 (4) 37.
3.1.3. Provisions comprised in the regulations of the two Chambers
The regulations of the two Chambers have set that the deputies, respec-
tively the senators of a party or political/electoral alliance, may constitute only
one parliamentary group. Some authors38, with whose opinion we concur, con-
sider that “the ti me of constituting a group is not important. The parliamentary
group are certainly formed at the beginning of the legislature; yet, neither the
Constitution nor the regulations forbid the MPs of a certain political party repre-
sented in the Chamber of Deput ies or the Senate, who were initially members of
another parliamentary group and, in the event they reach the number of members
provided by the regulations, to establish a separate parliamentary group through-
out the legislature. Should the requirement on t he number of members necessary
not be met, it may be fulfilled by attracting other MPs who previously left the
political group to which they initially belonged, being therefore in the position to
constitute a stand -alone parliamentary group.”
The Establis hment of the parliamentary groups within the Senate is reg-
ulated by the Regulations of the Senate39, in Chapter I – Organization of the Sen-
ate, Section 2 – Parliamentary groups, articles 16 to 21 .
Analyzing the initial form of the Regulations of the Senate, adopted by
Decision no. 16 of 30 June 199340, articles 13 to 14, we may find the same inter-
dictions: the senators elected on the lists of the same political party or the same
political group may constitute only one parliamentary group, the interdiction for
the senators to change parliamentary groups or to affiliate to another parliamen-
tary group if they left the group to which they belonged or the interdiction of the
independent senators to constitute a parliamentary group. Even though the provi-
sions of the two articles mentioned were deemed to be unconstitutional41 they
may be also found in the current form the Regulations of the Senate.
37 Article 147 of Constitution of Romania – (1) The provisions in the laws and the ordinances in
force, as well as the provisions in the regulations, cease to take legal effect within 45 days of pub-
lication of the Decision of the Constitutional Court in the event that, within this timeframe, the
Parliament or the Government, where appropriate, fails to bring into harmony the unconstitutional
provisions with the provisions of the Constitution. In this timeframe, the provisions declared un-
constitutional are rightfully suspended.
38Cristian Ionescu, Corin a Adriana Dumitrescu , op. cit , p. 724
39Published by virtue of article II of Decision of the Senate no. 163/2018 regarding amendment and
completion of the Regulations of the Senate, approved by Decision of the Senate no. 28/2005, pub-
lished in the Official G azette of Romania, Part I, no. 919 of 31 October 2018, the texts being re-
numbered.
40Published in the Official Gazette of Romania, Part I, no. 178 of 27 June 1993.
41Decision of the Constitutional Court of Romania no. 46 of 17 May 1994, published in the Offi cial
Gazette of Romania no. 131 of 27 May 1994.
Dynami c Elements in the Contemporary Business Law 285
The senators create parliamentary groups which are internal structures of
the Senate. A senator may belong to only one pa rliamentary group.
A parliamentary group may be constituted and may function providing
that it comprises minimum 7 senators who were elected on the lists of the same
party, organization of citizens under national minorities, political alliance42 or
electora l alliance43.
The senators of a political party or organization of citizens under national
minorities may constitute only one parliamentary group.
The senators who were elected on the lists of an electoral or political al-
liance or the independent senators m ay create either parliamentary groups of the
parties or organizations of citizens under national minorities or only one parlia-
mentary group of the alliance or, in the event that they do not reach the number
of members required to form parliamentary group, they may affiliate to other par-
liamentary groups or may establish a mixed parliamentary group.
The establishment of the parliamentary groups within the Chamber of
Deputies is regulated by the Regulations of the Chamber of Deputies44, in Chapter
I – Organiza tion of the Chamber of Deputies , Section 2 – Parliamentary group,
articles 13 to 20 .
Although the provisions in the initial form of the Regulations of the
Chamber of Deputies was the subject matter of some amendments subjected to
control of constitutionali ty, similarly to the parliamentary groups within the Sen-
ate, there are no interdictions, limitations of freedom of association, etc with re-
gard to parliamentary groups within the Chamber of Deputies.
The parliamentary groups as structures of the Chamber of Deputies may
be constituted by deputies who ran in the elections on the list of the same political
party, the same political alliance, on the lists of a political or electoral alliance
and by deputies who ran as independent.
The deputies who ran on the li sts of a political or electoral alliance and
are members of different political parties may create parliamentary groups of the
parties to which they belong.
The parliamentary group within the Chamber of Deputies has to have
minimum 10 members. In the even t that the deputies do not have the number
required to form a parliamentary group, as well as the independent deputies, may
reunite in mixed parliamentary groups or may affiliate to other parliamentary
42Definition of the political alliance may be found in article 28 (1) of Law 14/2003, law of political
parties: “The political parties may associate based on an association protocol, constituting therefore
a political alliance.”
43Electoral alliance – association between parties and/or political alliances with a view to partici-
pating to elections, registered with the competent electoral body.
44Republished by virtue of article II of Decision of the Chamber of Dep uties no. 48/2016 regarding
amendment and completion of the Regulations of the Chamber of Deputies, published in the Offi-
cial Gazette of Romania no. 432 of 9 June 2016.
Dynami c Elements in the Contemporary Business Law 286
groups already established. The deputies who represent the organizations of citi-
zens under national minorities, other than the Hungarian minority, may constitute
only one parliamentary group.
According to regulatory provisions45, the deputies of a party or a political
group may constitute only one parliamenta ry group. This thesis, which we also
found in the Regulations of the Senate, in article16 (3), lays down the obligation
to create only one parliamentary group by the political parties, taking therefore
account of the political configuration obtained follow ing the elections.
Contrary to the provisions of the Regulations of the Senate and Law no.
96/2006, the Regulations of the Chamber of Deputies provide in article 13 (4)
that „ The parliamentary groups of some political parties which merged through-
out a leg islature establish only one parliamentary group under the name of the
new party established by merger, effective the date on which the court decision
regarding establishment of the new party remained final”.
The deputies of the political parties, political groups, political or electoral
alliances as well as independent deputies who do not reach the number of mem-
bers required to form a parliamentary group may reunite in mixed parliamentary
groups or may affiliate to other parliamentary groups already establi shed.
3.2. Structure of the parliamentary groups, leadership and technical
secretariat
3.2.1. Structure of the parliamentary groups
Corroborating the constitutional, legal and regulatory provisions, we may
conclude in reference to the structure of the p arliamentary groups, that they are
formed as follows:
– MPs of the same political party, political or electoral alliance;
– independent MPs, MPs who became independent or unaffiliated ones;
– MPs of a political party who associated with independent or unaf filiated
MPs – mixed parliamentary group;
– MPs of the parties or organizations of the citizens under national minor-
ities.
It was considered in the doctrine46 that the essential matters relating to
parliamentary groups concern maintenance of their integrity , and “the parliamen-
tary practice proves that the migration of the MPs from one party to another rep-
resents an uncontrollable phenomenon (…). In principle, the political migration is
accepted at European and international level, starting from the freedom of politi-
45Article 13 (2) of the Regulations of the Chamber of Deputies.
46Ioan Muraru, E.S. Tănă sescu, Constitution of Romania. Commentary by Articles , C.H. Beck Pub-
lishing House, Bucharest, 2008, p. 631.
Dynami c Elements in the Contemporary Business Law 287
cal association, freedom which may not be stationed to one party. This rule ap-
plies to both MPs and any political party. The legal formalities do not usually
avert MPs from leaving one party and joining another one, irrespective of their
position in the hierarchy of the party which they decided to leave.”
3.2.2. Leadership of parliamentary groups
Each parliamentary group has management bodies, consisting of leaders,
vice-leaders and secretaries; however, we see a difference between the provision s
of the Regulations of the two Chambers. With regard to the Senate, there is an
express mention on the number of vice -leaders, i.e. 2 to 4 vice -leaders, whereas
the number is not specified for the Chamber of Deputies.
All and any amendment occurred in th e leadership or the structure of a
parliamentary group shall be brought to the attention of the president of the Sen-
ate, in writing, and shall be signed by the leader of the group.
The chairman of the meeting informs the MPs in the first public meeting
on the amendments brought to the structure or the leadership of the parliamentary
groups.
Group leaders. The duties of the leader of the parliamentary group within
the Senate are enumerated in article 18 (1):
a) he/she presents the Senate, at the beginning o f each parliamentary ses-
sion, the name of the group and its numerical structure;
b) he/she introduces to the Senate the representatives of the group who
will be involved in the negotiations regarding the structure of the Permanent Of-
fice as well as the neg otiations for the structure of the Senate commissions and
the offices of the Senate commissions;
c) he/she introduces to the Senate the candidates of the group for the po-
sitions in the Permanent Office;
d) he/she participates to the meetings of the Permane nt Office, with no
right to cast a ballot;
e) he/she may demand continuation, interruption or closure of the de-
bates, in compliance with the provisions of the present regulations;
f) he/she may request the nominal list of the votes expressed on the oc-
casio n of the debates in the plenary of the Senate;
g) he/she may contest the result of the vote expressed in the plenary of
the Senate;
h) he/she may request a pause for consultations within the parliamentary
group of which leader he/she is or, where appropria te, with the other leaders of
the parliamentary groups;
i) he/she may propose the method for casting the vote;
j) he/she may propose, on behalf of the parliamentary group, resubmis-
sion of a bill to the commission referred to in substance;
Dynami c Elements in the Contemporary Business Law 288
l) he/she present s the amendments regarding the participation of the
members of the parliamentary group to the Senate commissions;
m) he/she demands, on behalf of the parliamentary group, revocation of
the members of the Permanent Office or the members of the offices of th e com-
missions proposed by the group which he/she represents;
n) he/she informs the members of the group on the activities of the Senate
and of the Senate commissions;
o) he/she represents the group, whenever necessary, in the activities of
the Senate;
p) he/she carries out all and any tasks laid down in the regulations of the
group or decided based on the vote of the group.
The tasks of the leader of the parliamentary group within the Chamber of
Deputies are regulated by article 15 (3) of the Regulations:
a) he/she presents the Chamber of Deputies the name of the parliamentary
group, its numerical and nominal structure, the leadership as well as all amend-
ments occurring throughout the mandate;
b) he/she proposes the Chamber of Deputies the representatives of the
parliamentary group in the Validation Commission;
c) he/she represents the parliamentary group and negotiates on their be-
half;
d) he/she nominates the representatives of the parliamentary group in the
permanent commissions of the Chamber of Deputies, in the special commissions
or commissions of inquiry of the Chamber or in the joint commissions of the
Chamber of Deputies and the Senate;
e) nominates the representatives of the parliamentary group in the public
institutions or authorities under the subor dination of the Parliament of Romania,
in the parliamentary friendship groups with other parliaments, in the international
parliamentary structures to which Romania is part;
f) he/she makes proposals and presents the candidates of the parliamen-
tary group f or the leadership positions and the representatives in various struc-
tures of the Chamber of Deputies, positions to which the parliamentary group is
lawfully entitled, in line with the weight of the parliamentary group in the politi-
cal configuration of the Chamber of Deputies and the negotiations between the
groups leaders;
g) he/she requests revocation or replacement of the representatives of
his/her parliamentary group in the structures of the Chamber of Deputies;
h) he/she participates to the meetings of the Permanent Office of the
Chamber of Deputies and to the debates, with no right to cast a vote;
i) he/she may demand the plenary of the Chamber of Deputies: a pause
for consultations, verification of the quorum, holding some meetings in the ple-
nary behin d closed doors, closure of debates in the Chamber of Deputies and
change of the work schedule;
Dynami c Elements in the Contemporary Business Law 289
j) he/she informs the members of his/her parliamentary group on the ac-
tivities of the Chamber of Deputies and its structures;
k) he/she nominates the representat ives of his/her parliamentary group
who are to participate to the debates;
l) he/she presents the amendments of his/her parliamentary group to the
bills and the legislative proposals under debate of the commissions of the Cham-
ber of Deputies;
m) he/she mak es proposals on resubmission to the commission of a bill
or a legislative proposal, in compliance with the present regulations;
n) he/she makes proposals to the plenary of the Chamber of Deputies on
the method for casting the vote;
o) he/she may present in the plenary of the Chamber of Deputies the
standpoint of his/her parliamentary group with regard to the request for retention,
arrest or search or approval for bringing criminal proceedings against, where ap-
propriate, one of the members of his/her own par liamentary group;
p) he/she may delegate his responsibilities to one of the members of the
leadership of his/her group; in case these members are not present, delegation is
possible to any member of the group.
Vice-leaders . One of the vice -leaders of the p arliamentary group replaces
the leader when absent or whenever necessary, on the basis of a mandate granted
by the latter.
Secretary of the parliamentary group . The secretary of the parliamentary
group ensures the preparation of the documents that the parl iamentary group
needs.
3.2.3. Technical secretariat and logistics
The parliamentary groups create their own technical secretariat of which
size and structure are set by the Permanent Office, depending on the size of the
parliamentary groups. The persons forming the technical secretariats of the par-
liamentary groups are employed in accordance with the law and may be public
servants or contract staff. The parliamentary public servants appointed within the
specialist structures of the Chamber of Deputies an d the Senate have a special
status, conferred by their tasks and responsibilities undertaken with a view to ful-
filling the constitutional prerogatives of the Parliament. According to article 6 of
Law 7/2006 regarding the status of the parliamentary public servant47(1) “The
parliamentary public positions are classified in relation to the level of the tasks of
the person holding such parliamentary public position, as follows: a) parliamen-
tary public positions under the category of high -ranking officials; b) ma nagement
parliamentary public positions; c) operating parliamentary public positions.” The
contract staff serving the Parliament operates based on individual employment
47Republished in the Official Gazette of Romania, no . 345 of 25 May 2009.
Dynami c Elements in the Contemporary Business Law 290
contract and complies with the provisions of the work legislation in force.
The staff w orking in the technical secretariat of the parliamentary groups
are appointed and dismissed by order of the Secretary General of the Senate, upon
the proposal of the respective parliamentary group, through their leader.
The parliamentary groups are entitle d to means of transport and to the
logistics required to carry out their activity as set by the Permanent Office, de-
pending on the size of the parliamentary groups.
Wherever possible, the Permanent Office also provides the unaffiliated
senators with the lo gistics required.
3.2.4. Parliamentary offices
In order to exercise their mandates in the electoral constituency the dep-
uties and the senators are granted on a monthly basis a lump sum from the budget
of the Chamber of Deputies, respective the Senate, f or expenses required to or-
ganize and make their parliamentary offices functional. The staff of the parlia-
mentary offices of the deputies and senators is employed based on an employment
contract or legal agreement, both concluded for a definite duration. In case of
employment contracts, the staff is employed upon the proposal of the deputy or
senator concerned, while the legal agreements are concluded between the deputy
or the senator concerned and the natural person48.
3.3. Controversial aspects regarding e stablishment of parliamentary
groups. Practice of the Constitutional Court of Romania
3.3.1. Establishing parliamentary groups of the independent/ unaffil-
iated MPs, mixed parliamentary groups
In order to conduct an accurate analysis of the legal norms a nd decisions
of the Constitutional Court with regard to the possibility to create parliamentary
groups, one must make a clear -cut distinction between the two categories of in-
dependent MPs:
– the MPs who were elected as independent , in compliance with the re-
quirements stipulated in the electoral law;
– the MPs who became independent by their withdrawal from the parlia-
mentary groups to which they belonged . The senators and the deputies who leave
their political group throughout the legislature and do not as sociate or affiliate to
another group, become unaffiliated senators or deputies .
The MPs who “became independent” but who ran and were elected based
on the program of some political parties which, following their election as depu-
ties or senators, they lef t, did not run and were not elected on the basis of their
48Article 38 of Law 96/2006 regarding Status of deputies and senators.
Dynami c Elements in the Contemporary Business Law 291
own program, but the program of the parties which supported them. Therefore,
they do not acquire the same status of independent as that status necessarily in-
volved a position of independence in the process of the electoral consultation.
The Constitutional Court constantly and exclusively referred to the “in-
dependent” MPs who ran in the elections under this status, and not to those who
“became independent throughout a legislature”, respectively to the right of the
independent MPs to create a parliamentary group . Once validated and following
their pronunciation of the oath of allegiance, the senators have a full independ-
ence status. This independence relates to the party which proposed and supported
their candidacy as well as to the electors .
Nonetheless, they maintain in relation to their own political groups an
ideological affiliation and a community of political interests. The MPs are the
supporters of their own parties in the legislative Chambers and their vote is polit-
ical, cast both on behalf of the entire nation and on behalf of the party to which
they belong. In other words, the MPs are politically independent, as defined by
article 64 (3) in the Constitution, and affiliated to their own party, wh ich they
support in their parliamentary activity. Article 16 (5) of the Regulation of the
Senate, which refers to “senators who became independent” does not contradict
the Constitution, which confers a status of full independence to all MPs (article
69 pro vides that the senators and deputies are in the service of the people and that
any imperative mandate is null), the electoral law no. 208/201549, and the Law
no.96/2006. However, we see that the two special laws do not use the term inde-
pendent deputy or sen ator, within the meaning of article 16 (6) of the Regulations
of the Senate.
The right of the “elected senators or the senators who became independ-
ent” stipulated in article 16 (6), relating to (5) of the same article, refers to a
mixed parliamentary grou p, namely to a group which includes, in addition to
“senators who became independent ”, senators who maintained their membership
within a certain political party.
It is true that article 16 (6) of the Regulations of the Senate improperly
uses the syntagm senators “who became independent”. In this text, the Regula-
tions refer to those senators who, due to various reasons, leave the parliamentary
group which they had previously joined. In reality, according to article 69 (l) of
the Constitution, all deputies and senators are independent, each of them being in
the service of the people. The constitutional status of independence of the MPs is
enhanced by article 69 (2) of the Constitution, which states that “ Any imperative
mandate is null”.
This means that the Regulations of the Senate enables the establishment
of mixed parliamentary groups, formed of senators who no longer meet the nu-
merical criterion to activate in a group, to which other senators are added by join-
ing/affiliation, who are improperly considere d senators who became independent,
49Published in the Official Gazette of Romania, no. 553 of 24 July 2015.
Dynami c Elements in the Contemporary Business Law 292
as stipulated in article 16 (6) of the Regulations of this Chamber.
In our opinion, the senators of a group which ceased its activity due to
the fact that the minimum number of members, i.e. 7, is not longer reached, re turn
to their initial position at the beginning of their legislature, which allowed estab-
lishment of the respective parliamentary group. They are entitled to affiliate to a
parliamentary group already established, carry out their activity outside the
group s as unaffiliated senators, with the consequence of their representative man-
date being affected, or reunite with other unaffiliated senators in order to create a
new group . The regulations of the Senate do not institute any restriction for this
last option . The present reality in the Romanian Senate is that the request for
establishing the group of the unaffiliated senators “UNIREA” was denied50.
The Constitutional Court stated in its jurisprudence51 that the interdiction
to leave the parliamentary groups a nd the banning of changing the groups by the
deputies and the senators contravene article 64 (3) and article 69 of Constitution,
as it stands for limitation of the representative mandate of the deputies and the
senators, sanctioning when noted the regulato ry norms which limited this right,
norms which, in essence, were deemed to come in contradiction with the provi-
sions of article 69 (2) of the Constitution of Romania which rejects all and any
form of imperative mandate.
Analyzing the exception of unconst itutionality of article 16 of the Regu-
lations of the Senate, the Constitutional Court considers, in Decision no.
229/200752, that this article contains only one interdiction with regard to creation
of parliamentary group s, respectively the one stipulated in par (7), according to
which “it is forbidden to establish a parliamentary group which should represent
or bear the name of a party, an organization of the citizens under national mi-
norities, an electoral or political alliance which failed to receive manda tes of
senator in the election process”. We consider that this interdiction is in line with
the constitutional principle according to which in the Chambers of the Parliament
may be represented only those political forces which obtained mandates of deputy
or senator, and the formation of all working structures of the Chambers should
reflect their political configuration, as arising from the elections.
The creation of a parliamentary group of the independent senators,
throughout the legislature, pursuant to p rovisions set by the Senate in their own
regulations, may not remain without consequences in terms of political and or-
ganizational relations. One of the essential aspects of the role of parliamentary
groups in these relations is their involvement in establ ishing the other structures
of the Chambers of the Parliament, by submitting proposals for the election of the
permanent offices and the parliamentary commissions.
50See Section 1 above – Introductory Considerations.
51Decision no. 45 of 17 May 1994, published in the Official Gazette of Romania, Part I, no. 131 of
27 May 1994 and Decision no.229/2007, published in the Official Gazette no. 236 of 5 April 2007.
52Published in the Official Gazette of Romania, Part I, no. 236 of 5 April 2007.
Dynami c Elements in the Contemporary Business Law 293
Under these circumstances, the renegotiation of the structure of the Per-
manent Office of th e Chamber of the Parliament, relating to formation of a group
of independent deputies/senators effective the following session, is intended to
reconcile the effects of this organizational restructuring occurred in the Parlia-
ment, and which, as a consequenc e of the rule concerning the representative man-
date, as well as the optional character of forming a parliamentary groups, may not
be sanctioned in line with the requirements arising from the imperative norm of
complying with the political configuration in forming the Permanent Office and
the parliamentary commissions. In addition, article 22 of the Regulations of the
Senate retains the obligation relating to maintaining the number of seats in the
Permanent Office, with a view to setting some rules which sho uld enlarge on the
phenomenon of parliamentary migration, the political configuration further being
in harmony with the constitutional provisions, namely the political configuration
emerged from the elections”. Consequently, the structure of the Perman ent Of-
fice, as a result of re-negotiation, may be potentially amended “effective the fol-
lowing session”.
Nevertheless, there has been another point of view, which excludes the
creation of parliamentary groups from senators who became independent
throughout th e mandate granted by the electoral corpus53. It was considered that
the creation of such groups would change the political configuration of the Cham-
bers, the first result being the change of the ratios between the majority and the
opposition, beyond the wil l of the electors, which would cause disruptions in im-
plementing the legislative program of the Government, accepted by the Parlia-
ment which granted the vote of investiture, with a first consequence of nature to
paralyze the activity of the legislative Cha mber and even more seriously, creation
of a precedent – future formation of other parliamentary groups.
As a result, the change of the political configuration of the Senate
throughout a legislature, by creating new parliamentary groups, would affect its
representativeness, as these groups will not have a distinct group of voters. This
is the reason why the Regulations of the Senate forbids in article 16 (7) the for-
mation of a parliamentary group which should represent or bear the name of a
party, or elector al alliance or political alliance which failed to obtain mandates of
senator in the election process.
The conclusions of this analysis, to which we line up, are best presented
in the Decision of the Constitutional Court no. 44 of 8 July 199354 when the Con-
stitutional Court ruled as follows: “Article 66 [at present article 69] (…) should
represent the starting point in explaining the constitutional relations between the
deputy/senator and their voters, the political party which propelled him/her, the
Chambe r to which he/she belongs. The interpretation of this constitutional article
53Standpoint of the Commission for Constitutionality regarding creation of the Parliamentary Group
UNIREA – Senate of Romania.
54Published in the Official Gazette of Romania, Part I, no. 190 of 10 August 1993.
Dynami c Elements in the Contemporary Business Law 294
may only be in the sense that, in legal terms, the deputy/senator is no longer le-
gally accountable to his/her voters in the constituency which elected him/her or
to the party on t he list of which he/she ran in the elections. His/her relations to
the voters and the party are of moral and political nature, and not juridical. He/she
is no longer forced to fulfill any obligation in relation to the latter, his/her obliga-
tions are only i n relation to the people. In the Romanian constitutional context
that exploits the representative mandate without limits, the only possibility for
the party or the electors who are not satisfied with the deputy’s/senator’s activity
is not to reelect him/hi m. […] Consequently , the deputy/senator has the constitu-
tional faculty to join one parliamentary group or another, depending on his/her
options, to get transferred to one parliamentary group or another, or declare that
he/she wants to be independent in r elation to all parliamentary groups . No other
juridical, legal or regulatory norm may contravene these constitutional provi-
sions.”
3.3.2. Practice of Constitutional Court of Romania regarding parlia-
mentary groups
1. The liberal group addressed the Consti tutional Court on 30 June 1993
with regards to unconstitutionality of article 2 of the Regulations of the Chamber
of Deputies according to which the Permanent Office of the Chamber of Deputies
decided to forbid deputies to leave their parliamentary and joi n to another one.
The Constitutional Court of Romania ruled by Decision no . 44/199355 that article
2 of the same Chamber, adopted in the Assembly of Deputies by Resolution no.
12 of 27 June 1990, published in the Official Gazette of Romania no. 87/28 June
1990, does not forbid a deputy to leave one parliamentary group and join another
and therefore does not contradict the Constitution.
2. The Constitutional Court was requested by the pr esident of the Cham-
ber of Deputies to rule on the constitutionality of the Regulation of the Chamber
of Deputies, approved by Decision no. 8 of 24 February 1994, published in the
Official Gazette of Romania, Part I, no. 50 of 25 February 1994. By Decision no.
45 of 17 May 199456, article 18 of the Regulations regarding leaving a parliamen-
tary group and interdiction to go to another one, was declared unconstitutional,
as it contradicts article 61 (3) and article 66 of the Constitution, being considered
to be a limitation of the representative mandate.
3. The parliamentary group of the Democratic Alliance of Hungarians in
Romania (D.A.H.R) within the Senate referred to the Constitutional Court on the
interdiction of the independent senators to constitute a par liamentary group, set
forth in article 14 last paragraph of the Regulations, considered to be unconstitu-
tional as it violates their freedom to choose and forces them, in the event they
55Published in the Official Gazette of Romania, Part I, no. 190 of 10 August 1993
56Published in the Official Gazette of Romania, Part I, no.131 of 27 May 1994.
Dynami c Elements in the Contemporary Business Law 295
decide to exercise their constitutional right to establish a parliament ary group, to
have exclusive recourse to the possibility of affiliating to an existing parliamen-
tary group, as per article 14 (1). By Decision of the Constitutional Court no. 46
of 17 May 199457, the Court notes that article 7; article 13 last paragraph, pr ovid-
ing that it is forbidden to establish a parliamentary group by political kinship, in
the event that the senators of a political party or group fail to receive the number
required to constitute a distinct group; article 14 (2) and (3) with regards to in ter-
dicting the senators to change their initial parliamentary group or affiliate to a
parliamentary group if they left their initial group; article 14 last paragraph with
regards to interdicting the independent senators to constitute a parliamentary
group, are unconstitutional due to the fact that “they violate their freedom to
choose and forces them, in the event that they decide to exercise their constitu-
tional right to establish a parliamentary group, to have exclusive recourse to the
possibility of affi liating to an existing parliamentary group”; additionally, article
22 on the possibility of any parliamentary group to demand revocation of a mem-
ber of the permanent office is also unconstitutional .
4. The parliamentary group of the National Liberal Party officially re-
quested the Constitutional Court to rule on the constitutionality of some provi-
sions of article 15 and 16 of the Regulations of the Senate, approved by Decision
no. 16/19 93, as amended and supplemented by decisions no. 5/2001 and no
20/2003. The parliamentary group of the National Liberal Party considers that the
regulatory provisions of article 16 (2) and (3), regulating the interdiction provided
for the senators to chan ge their initial parliamentary group or to affiliate to an-
other parliamentary group after they left their initial group, stand for some sanc-
tions applied for leaving a parliamentary group, violate provisions of article 64
(3) of the Constitution, republish ed, and article 15 (1) of the Regulation of the
Senate. In addition, the parliamentary group of the National Liberal Party indi-
cates that the Permanent Office demanded the Judicial Commission for appoint-
ments, discipline, immunities and validations a repor t on the status of the parlia-
mentary group of the Democrat Party, and the author of the referral claims that
“The refusal of the Permanent Office of the Senate and the plenary to re-establish
the Group of the Democrat Party is unconstitutional […]”. By D ecision of the
Constitutional Court no. 196 of 28 April 200458 the Court, invoking the consid-
erations and the solution of the Decision of the Constitutional Court no. 46 of 17
May 1994, ruled, among others, that the provisions of article 16 (4), according t o
which “ The senators elected as independent or who became independent as a
result of their leaving the parliamentary groups may not associate toward con-
stituting a parliamentary group ”, are unconstitutional, due to violation of provi-
sions of article 64 (3 ) of the Constitution.
57Published in the Official Gazette of Romania, Part I, no.131 of 27 May 1994.
58Published in the Official Gazette of Romania, Part I, no.417 of 11 May 2004.
Dynami c Elements in the Contemporary Business Law 296
5. Following referral submitted by 42 senators with regards to unconsti-
tutionality of some provisions of the Regulations of the Senate, relating to estab-
lishing parliamentary groups, by Decision of the Constitutional Court no. 317 of
13 April 200659, the Constitutional Court noted that the referral is groundless, as
“the apparent unconstitutionality of provisions of article 16 (2) of the Regula-
tions is removed by statements in paragraphs (5) and (6) of the same article,
which allow aff iliation to other parliamentary groups and establishment of mixed
groups, including groups for independent senators." Therefore, paragraph (5) of
article 16 of the Regulations provides the right of the senators belonging to parties
or to organizations of t he citizens of national minorities who do not receive the
number required to set up a parliamentary group to affiliate to other parliamentary
groups or to constitute a mixed parliamentary group, and paragraph (6) of the
same article states that the provisi ons of paragraph (5) apply duly to senators
elected or senators who became independent.
We mention that in the current text, article 16 of the Regulations of the
Senate contains only one interdiction with regard to constituting parliamentary
groups, the on e provided in paragraph (7), according to which “Constituting a
parliamentary group representing or bearing the name of a party, an organiza-
tion of the citizens belonging to national minorities, an electoral alliance or po-
litical alliance which failed to r eceive senator mandates following the elections
is forbidden “.
6. In the year 2010 the Constitutional Court receives the referral of 74
deputies of the parliamentary group of the political alliance SDP+CP regarding
the unconstitutionality of the Decision of the Chamber of Deputies no. 26/2010
regarding amendment and completion of article 12 of the Regulations of the
Chamber of Deputies60 and the Decision of the Chamber of Deputies no. 27/2010
59Published in the Official Gazette of Romania, Part I, no. 446 of 23 May 2006.
60Article 12 of the Regulat ions of the Chamber of Deputies, approved by Decision of the Chamber
of Deputies no. 8/1994, published in the Official Gazette of Romania, Part I, no. 50 of 25 February
1994, as amended, is amended and completed as follows: 1. Paragraphs (1) and (4) are am ended
and shall have the following content: «(1) Parliamentary groups are structures of the Chamber of
Deputies. They may be made of deputies who ran in the elections on the list of the same political
party, the same political group, on the lists of a poli tical alliance or an electoral alliance and
independent deputies or deputies who became independent. The deputies who represent organiza-
tions of citizens belonging to national minorities, who have received the mandate of deputy in ac-
cordance with article article 62 (2) of the Constitution of Romania, republished, may constitute
only one parliamentary group.[…] (4) The deputies of the politic al parties, political groups, politi-
cal alliances and electoral alliances who have not received the number required to form a parlia-
mentary group as well as the independent deputies or the deputies who have become independent
during a legislature, may get together in mixed parliamentary groups or may affiliate to other par-
liamentary groups constituted in line with paragraph (1) or in a group of the independent deputies,
where appropriate.» 2. Paragraph (5) is amended and shall have the following content: «(5) The
deputies who have become independent during a legislature may constitute only one parliamentary
group, in compliance with paragraph (6).» 3. After paragraph (5) two new paragraphs are intro-
duced – (6) and (7) – , with the following content: «(6) A parliamentary group is made of minimum
Dynami c Elements in the Contemporary Business Law 297
regarding amendment of the Regulations of the Chamber of Deputies . By Deci-
sion no. 1490 of 17 November 201061, the Constitutional Court considers that the
provisions of the article 12 do not contradict article 64 (3) of the Constitution,
according to which “The senators and the deputies may organize themselves in
parliam entary groups, in line with the regulations of each chamber”. Creating
the parliamentary groups is a right, not an obligation of the MPs, and the Consti-
tution sets forth no restriction with regard to the time of exercising this right.
7. Also in 2010 the Constitutional Court was referred to by 56 deputies
of the Parliamentary Group of the Political Alliance SDP+CP on the unconstitu-
tionality of the same article 12 of the Regulations of the Chamber of Deputies.
On this occasion, by Decision no. 1611 of 15 De cember 201062, the Court, which
also analyzes the consequences of the political migration, considers that the mu-
tations occurred in the structures of the existing parliamentary groups, as a con-
sequence of the scission which may emerge within the parties rep resented by each
group or the migration of the MPs from one group to another or leaving one group
and not affiliating to others, possible mutations given that the Constitution sets
expressly that all and any imperative mandate is null, may not remain witho ut
consequences on the representation of the parliamentary groups within the per-
manent offices. In addition, as opposed to the presidents of the Chambers, elected
for the entire length of the mandate of the Chambers, the other members of the
permanent offi ces are elected, according to article 64 (2) Second thesis of the
Constitution, at the beginning of each session, in line with the structure of the
parliamentary groups at that given time. In line with the text of article 69 (2), the
constitutional text me ntioned ensures representation, in the leadership structures
of the Chambers of the Parliament, of the political restructures of the Parliament,
which, similar to the political evolutions in the society, may not be stopped. On
this occasion, the Court rule d that, due to the uninominal voting system, the po-
tential migration of the MPs “from a party to another or leaving a political group
leading to acquisition of the status of independent, is not of nature to seriously
affect the interests of the electors re presented by such members…”63.
8. In December 2018 and February 2019 unaffiliated senators requested
establishment of the parliamentary group “Union” within the Senate; however,
the Commission for constitutionality considered that there was an express reg u-
latory interdiction for establishing a new parliamentary group within the Senate
consisting of senators who became independent . The right “of the senators
elected or who became independent” provided in article 16 (6), relating to para-
graph (5) of the same article, refers to a mixed parliamentary group, that is to a
10 deputies. (7) In the event that new parliamentary groups are constituted, they shall be presented
to the plenary by they leaders, at the beginning of the parliamentary session»".
61Published in the Official Gazette o f Romania, Part I, no. 861 of 22 December 2010.
62Published in the Official Gazette of Romania, Part I, no. 866 of 23 December 2010.
63 Decision of the Constitutional Court of Romania no. 1611 of 15 December 2010.
Dynami c Elements in the Contemporary Business Law 298
group of which structure includes, in addition to “senators who became inde-
pendent”, also senators who maintained their capacity of members of a certain
political party. Nevertheless, as shown f rom the two letters remitted to the Per-
manent Office of the Senate, all seven members mentioned as members of the
parliamentary group "Union" are no longer members of a political party, therefore
they may not form a mixed parliamentary group within the mea ning of article 16
a (5) of the Regulations of the Senate, which implies membership of a political
party.64
9. In the year 2019, in the Chamber of Deputies, following a notice on
unconstitutionality of article 13 (1), (6), (7), article 19 (1) relating to ar ticle
40 (1) and article 69 of Constitution65 submitted by 63 deputies, who were former
members of the Social Democratic Party, and members of the Pro Romania Party
upon the time of the notice, the parliamentary group Pro E uropa was created66.
Following analysis of the notice, the Court considers, by Decision no. 85/201967,
that the articles mentioned above are constitutional and state that the interdiction
to form a parliamentary group by unaffiliated deputies applies after t hese deputies
freely expressed their option in the sense of not becoming members of some par-
liamentary groups or affiliating to some parliamentary groups or creating a group
of independent deputies, case in which they become unaffiliated. In the solution
awarded, the Court considered that the articles invoked are constitutional, “ are in
line with the provisions of article of Constitution, which underlie the interpreta-
tion of the constitutional relations between the member of the parliament, on the
one side, and their voters, the parties or the political groups which supported the
candidacy of such member and the Chamber to which the member of the parlia-
ment belongs, on the other side. Or, pursuant to this constitutional article, the
responsibility for a cert ain political option, manifested by the decision of the MP
to leave the political party under which he/she was elected or by joining another
political party, may only be a political choice, a moral one at most, and under no
circumstances a juridical choice ”.
Summarizing the practice of the Constitutional Court of Romania, we
may see that it has expressed opinions in line with the majority :
64 Standpoint of the Commission for constitut ionality within the Senate remitted to the Permanent
Office on 26.02.2019.
65Article13 (6) “The deputies leaving their parliamentary group become unaffiliated unless they
affiliate to another parliamentary group. The unaffiliated deputies may not create the ir own par-
liamentary group.”; article 13 (7) “In the event of creating new parliamentary groups, such groups
shall be presented to the plenary by their leaders, at the beginning of the parliamentary session.;
article 19 (1) “Creating parliamentary groups o f some political parties which received mandates
as a consequence of the elections is forbidden”.
66The group was created on 29 May 2019. At present, the parliamentary group is made of 29 mem-
bers, under the leadership of Leader – Victor Viorel Ponta, Vice -leaders – Dobre Mircea Titus,
Nechifor Cătălin Ioan, Petric Octavian, Podașcă Gabriela Maria, Stancu Florinel, Vlăducă Oana
Silvia, Secretary – Văcaru Alin Vasile.
67Published in the Official Gazette of Romania, Part I, no. 326 of 25 April 2019.
Dynami c Elements in the Contemporary Business Law 299
a) the unlimited interdiction of the MPs to migrate from one parliamen-
tary group to another, to affiliate to a parliame ntary group or to create a group
made of independent MPs, sanctioning every time when noted, the regulatory
norms which limited this right, norms which, in essence, were deemed to come
in contradiction with the provisions of article 69 (2) of the Constitut ion, which
rejects all and any form of imperative mandate:
– Decision no. 44 of 8 July 1993, published in the Official Gazette of Ro-
mania, Part I, nr. 190 of 10 August 1993;
– Decision no. 45 of 17 May 1994, published in the Official Gazette of
Romania, Part I, no. 131 of 27 May 1994;
– Decision no. 46 of 17 May 1994, published in the Offi cial Gazette of
Romania, Part I, no. 131 of 27 May 1994;
– Decision no. 196 of 28 April 2004, published in the Official Gazette of
Romania, Part I, no. 417 of 11 May 2004;
– Decision no. 229 of 14 March 2007, published in the Official Gazette
of Romania, P art I, no. 236 of 5 April 2007;
– Decision no. 1490 of 17 November 2010, published in the Official Ga-
zette of Romania, Part I, no. 861 of 22 December 2010;
– Decision no. 1611 of 15 December 2010, published in the Official Ga-
zette of Romania, Part I, no. 8 66 of 23 December 2010.
b) the lack of juridical regulation of the possibilities and the conditions
required to organize parliamentary groups by deputies who resign from other par-
liamentary groups does not constitute a violation of any constitutional provi sions,
but an omission which may not be substituted by decisions of the Constitutional
Court:
– Decision no. 47 of 15 March 2000, published in the Official Gazette of
Romania, Part I, no. 153 of 13 April 2000;
– Decision no. 44 of 8 July 1993, published in the Official Gazette of Ro-
mania, Part I, no. 190 of 10 August 1993.
c) the use in the Regulations of the syntagm ”political conf iguration”,
which means its formation in harmony with the votes expressed in the election
process, in line with the proportion received by the parliamentary groups com-
pared to the total number of each Chamber, and the imposition of the possibility
to elect a new president of another parliamentary group, would have as conse-
quence that the sanction enforced on the president of the Chamber of Deputies or
the Senate, revoked from his/her position, should extend to the parliamentary
group which proposed his/her election:
– Decision no. 601/2005 , published in the Official Gazette of Romania,
Part I, no. 1.022 of 17 November 2005;
– Decision no. 602/2005 , published in the Official Gazette of Romania,
Part I, no. 1.027 of 18 N ovember 2005.
There were also contrary opinions to the Decisions of the Constitutional
Dynami c Elements in the Contemporary Business Law 300
Court enumerated above. By Decision no. 85/2019, published in the Official Ga-
zette of Romania, Part I, no. 326 of 25 April 2019, the Court considers that the
articles re gulating the formation of the parliamentary group by the unaffiliated
deputies intervenes after the respective deputies expressed their option, freely,
toward not becoming members of any parliamentary groups or affiliating to any
parliamentary groups or co nstituting a group of the independent deputies, case in
which they become unaffiliated deputies are constitutional .
4. Aspects of compared law regarding establishment of parliamen-
tary groups
In a compared analysis of the legislation applicable in other s tates with
regard to creation of parliamentary groups, we enumerate the following exam-
ples:
In Austria68, the Regulation of the National Council69 set forth in article
7 that, at the beginning of each legislature, and no later than a month of the first
meeti ng of the National Council, the members of the same political party may
establish one parliamentary group. A parliamentary group may be constituted and
may function providing that it has minimum 5 members. The creation of a parlia-
mentary group and any othe r amendment occurred in its structure shall be brought
to the attention of the president of the National Council.
The Regulations of the Federal Council70 provides in article 14 that the
members of the Federal Council, elected on the basis of the proposals made by
the political party, may form a parliamentary group. A parliamentary group may
be constituted and may function providing that it has minimum 5 members, and
the ones who do not meet the requirements may establish the group with the con-
sent of the Fe deral Council. The creation of a parliamentary group and any
amendment occurred in its structure shall be brought to the attention of the pres-
ident of the Federal Council, in writing, and shall be signed by the leader of the
group.
In Belgium71, the Regula tions of the Senate72 lay down that the senators
who ran in the elections on the lists of the same political party may establish
political groups. All and any amendment occurred in the structure of a parliamen-
tary group shall be brought to the attention of the president of the Senate, in writ-
ing, and shall be signed by the leader of the group.
The Regulations of the Chamber of the Representatives73 stipulates that
68Bicameral p arliamentary system: National Council – Nationalrat and Federal Council – Bundestrat
69http://www.parlament.gv.at, consulted on 1.10.2019.
70 Ibid.
71Bicameral parliamentary system: Senate and Chamber of Representatives of Belgium.
72http://www.senate.be/doc/ reglement.fr, consulted on 1.10.2019.
73 http://www.dekamer.be/kvvcr/publications/reglement.uk , consulted on 1.10.2019.
Dynami c Elements in the Contemporary Business Law 301
a political group may be constituted and may function providing that it has mini-
mum 5 members. A n MP may belong to only one political group. The creation of
a parliamentary group and any amendment occurred in its structure shall be
brought to the attention of the president of the Chamber by the leader of the group.
In Cyprus74, the Constitution provid es in article 73 (12) that all political
party which is represented by minimum 12% of the total number of the members
in the Chamber of the Representatives may form and is entitled to be recognized
as a political group.
In France75, the Constitution provid es that the parties and the political
groups are constituted and conduct their activities freely. The Regulations of the
National Assembly76 provides that the MPs may form groups of minimum 15
members. All and Any amendment occurred shall be brought to the attention of
the president of the Assembly, in writing, by the leader of the group.
The Regulations of the Senate77 state that the senators may create groups
of minimum 15 members. The political groups constituted of minimum 10 mem-
bers may reunite for admin istrative purposes, in a group they choose themselves,
with the consent of the respective group. The senators who are neither formal
members of a group nor affiliated to a group may reunite to elect a delegate, with
a view to representing their interests, who will have the same rights as the leader
of the group.
In Hungary78, the Resolution 10/2014 regarding certain provisions in the
Procedure Regulations of the National Assembly79 sets forth that all and any MP
who joined a parliamentary political group is d eemed to be an independent MP.
The MP who resigned/was excluded from the political group is deemed to be an
independent MP. The number of the independents increases at the end of the man-
date as a consequence of the exclusions or resignations from the parli amentary
political groups. Any member who left the political group or was excluded shall
be deemed as an independent MP; the member who became independent in this
manner may join another political group within 6 months of exclusion from or
leaving the grou p. This regulatory provision is intended to consolidate the parlia-
mentary political stability and to reduce the phe nomenon of political migration.
In Italy80, the Regulations of the Chamber of Deputies81 set forth that the
parliamentary groups are formed by minimum 20 deputies. A group of fewer than
20 deputies may be constituted providing that they represent a party recognized
at national level, which presented their own list of candidates in minimum twenty
74Unicameral parliamentary system: Chamber of Representatives.
75Bicameral parliamentary system: Senate and National Assembly of France.
76http://www2.assemblee -nationale.fr, consulted on 1.10.2019.
77 http://www.senat.fr, consulted on 1.10.2019.
78 Unicameral parliamentary system: National Assembly of Hungary.
79 http://www.parlament.hu, consulted on 1.10.2019.
80 Bicameral parliamentary system .
81 http://www.e.camera.it, consulted on 1.10.2019.
Dynami c Elements in the Contemporary Business Law 302
electoral constituencies and received minimum one p ercent in a constituency, to-
taling a number of 300,000 votes duly expressed for their list of candidates.
Within two days of the first meeting, the deputies shall inform the Secretary Gen-
eral of the Chamber with regard to the group to which they belong. Th e deputies
who fail to do so or belong to no parliamentary group may reunite in a mixed
parliamentary group. The deputies who belong to the mixed group may request
the president of the Chamber to form political groups, providing that each group
has at leas t 10 deputies.
The Regulations of the Senate82 lay down that a parliamentary group may
be formed of minimum 10 senators who ran in the elections on the lists of the
same political party, the same political group or political alliance. In the event
that the number of the group members decrease to under the number required for
the senators to establish a group, this group is dissolved and all and any senator
of this group, unless they joined another group, will be registered in the group of
the unaffiliated m embers, within three days of dissolution.
In the Netherlands83, the Regulation of the Chamber of the Representa-
tives84 stipulate that the deputies who ran in the elections on the lists of the same
political party may create only one parliamentary group. In the event that only
one deputy on the list of candidates was elected, this deputy shall be considered
as a parliamentary group. All amendments made to the structure of a parliamen-
tary group shall be brought to the attention of the president of the Chamber, by
the political group concerned. No other parliamentary groups except the ones
mentioned above may be established throughout a legislature, excepting the mer-
ger of two or several existing parliamentary groups or the dissolution. In the event
that one or several deputies left the group, but not a consequence of the dissolu-
tion, they shall be considered as a separate group, providing that they notify the
president of the Chamber thereon.
In Portugal85, the Constitution states that the MPs elected for each pa rty
or coalition of parties may form a parliamentary group. The Regulations of the
Assembly of the Republic86 lay down that the parliamentary groups may be
formed by the MPs who ran in the elections on the lists of a political party or
alliance. The creatio n of the parliamentary group and all amendments occurred
in relation to the leadership or the structure of a parliamentary group shall be
brought to the attention of the president of the Assembly, in writing, and shall be
signed by each member of the parli amentary group. The members of the Assem-
bly of the Republic who do not belong to a parliamentary group shall inform the
82 http://www.senato.it, consulted on 1.10.2019.
83 Bicameral parliamentary system: Senate and Chamber of Representatives.
84 http://www.government.nl, consulted on 1.10.2019.
85 Unicameral parliamentary sys tem: The Assembly of Republic of Portugal.
86 http://www.en.parlamento.pt, consulted on 1.10.2019.
Dynami c Elements in the Contemporary Business Law 303
president of the Assembly of the Republic thereon and shall exercise their man-
date as an unaffiliated member.
In Poland87, the Regulatio ns of the Sejm88 provide that the deputies may
create clubs of deputies, providing that such clubs have minimum 15 members,
and groups of deputies, providing that such groups have minimum 3 members. A
deputy may belong to only one club of deputies or only o ne group of deputies.
The leaders of the clubs, groups and alliances shall inform the Marshall of the
Sejm in respect of their structure and internal regulations.
The Regulations of the Senate89 set forth that the senators may create
clubs of senators, pro viding that such groups have minimum 7 members, or
groups of senators, providing that such groups have minimum 3 members. A sen-
ator may be part of only one club or group of senators. The leaders of the clubs,
groups and alliances shall inform the Presidium (made of the Marshall of the
Senate and his/her deputies) in respect of their structure and internal regulations
(status).
5. Conclusions
Analyzing the constitutional, legal and regulatory provisions and also the
decisions of the Constitutional Court, w e may conclude that, since accession to a
parliamentary group is not an obligation but the manifestation of a subjective
right of affiliation to a group already established, in line with an ideological af-
finity, it is the duty of each Chamber, through its permanent office, to create the
framework necessary to exercise this right and not to set artificial restrictions, in
the interest of the parliamentary majority, which would prevent the decision of
the unaffiliated MPs to form a group. Being a right recogn ized by the fundamental
Law, it should be enjoyed without exception by the MPs whose group was dis-
solved or the MPs who became independent by resigning from the party under
which ideology they ran in the elections or were excluded from this party . They
are fully entitled to reunite with other MPs who are in the same position, as well
as with MPs unaffiliated to a group, with a view to establishing another group .
Forbidding them to create their own group means to limit their constitutional
framework to exerc ise their representative mandate.
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7. Constitution of Romania of 1991 was adopted in the meeting of the Constituent
Assembly of 21 November 1991, was published in the Official Gazette of Ro-
mania, Part I, no. 233 of 21 November 1991 and came into force following its
approval by national referendum on 8 December 1991.
8. Law no. 429/2003 on the revision of the Constitution of Romania, published in
the Official Gazette of Romania, Part I, no. 758 of 29 Octob er 2003.
9. Law no. 96/2006 regarding the Status of deputies and senators, published in the
Official Gazette of Romania, Part I, no. 49 of 22 January 2016.
10. Regulations of the Chamber of Deputies, republished in accordance with article
II of the Decision of th e Chamber of Deputies no. 48/2016 regarding amendment
and completion of the Regulations of the Chamber of Deputies, published in the
Official Gazette of Romania, no. 432 of 9 June 2016.
11. Regulations of the Senate, republished in accordance with article II of the Deci-
sion of the Senate no. 163/2018 regarding amendment and completion of the
Regulations of the Senate, approved by Decision of the Senate no. 28/2005, pub-
lished in the Official Gazette of Romania, Part I, no. 919 of 31 October 2018.
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