Cătălin -Silviu Săraru (ed.) [609395]
Cătălin -Silviu Săraru (ed.)
Contemporary Challenges in
the Business Law
Contemporary Challenges in the Business Law
The Editor: Cătălin -Silviu Săraru
Activity: Cătălin -Silviu Săraru, PhD, is Associate Professor at the Law Depart-
ment of Bucharest University of Economic Studies, where he specializes in Eu-
ropean business law and Comparative administrative law. He is Arbitrator at the
Court of International Commercia l Arbitration (Romania); Lawyer i n the Bucha-
rest Bar Association; Editor in Chief of the Juridical Tribune – Tribuna Juridica
Journal (indexed in Thomson Reuters) and Perspectives of Business Law Journal;
member in the Editorial Board of several scientific journals : International Law
Research (ILR) – Toronto, Canada, „Dreptul” , „Acta Universitatis Danubius.
Juridica” , „Reflecții Academice” ; President of the Society of Juridi cal and Ad-
ministrative Sciences and member in Société de législation comparée , Union of
Jurists of Romania , Institute of Administrative Sciences "Paul Negulescu" .
Publications: editor of the book „ Studies of Business Law – Recent Developments
and Perspectives ” published by Peter Lang International Academic Publishers in
2013; 8 books as sole author among which: „Drept administrativ. Probleme
fundamentale ale dreptului public” („Administrative law. Fundamental issues of
public law”) , C.H. Beck Publishing House, Bucharest, 2016, „Legea
contenciosului administrativ nr. 554/2004. Examen critic al Deciziilor Curtii
Constitutionale ”(„Administrative Litigation Law no. 554/2004. Critical
examination of the Constitutional Court Decisions”) , C.H. Beck Publishing
House, Bu charest , 2015, „Contractele administrative. Reglementare, doctrină,
jurisprudență” („Administrative agreements. Regulatory, doctrine,
jurisprudence”) , C.H. Beck Publishing House, Bucharest , 2009; 2 books as co –
author among which: „Drept administrativ europ ean” ( "European
Administrative Law" ), Lumina Lex Publishing House , Bucharest, 2005; author of
over 100 articles published in journals: Juridical Tribune – Tribuna Juridica,
Transylvanian Review of Administrative Sciences, Acta Juridica Hungarica,
Dreptul, Juridical Current , Acta Universitatis Danubius. Juridica, Revista de
Drept Public, Pandectele române, Curierul Judiciar, Notebooks of international
law, Tribuna Economică, Economie și Administrație locală etc.
Prizes: "Anibal Teodorescu" Prize awarded by the Union of Jurists of Romania
in 2014 for the work „Cartea de contracte administrative – modele, comentarii,
explicații” („The Book of administrative contracts – models, comments,
explanations ”), C.H. Beck Publishing House, Bucharest, 2013 .
Cătălin -Silviu Săraru (ed.)
Contemporary Challenges in the Busi-
ness Law
Contributions to the 6th International Conference
Perspectives of Business Law in the Third Millennium ,
November 25 -26, 2016, Bucharest
Bucharest 2017
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Preface
Editor
Associate Professor C ătălin -Silviu SĂRARU, PhD.
Law Department, Bucharest University of Economic Studies
This volume contains the scientific papers presented at the Sixth Interna-
tional Conference „Perspectives of Business Law in the Third Millennium” that
was held on 25 -26 November 2016 at Bucharest University of Economic Studies,
Romania. The conference is o rganized each year by the Department of Law at
Bucharest 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.businesslawconferenc e.ro.
The scientific studies included in this volume are grouped into two chap-
ters:
Contemporary challenges in the regulation of international business law .
The papers in this chapter refer to the evolution and challenges of d irec-
tors' duty of l oyalty , the administrative contracts in the European Union
law, the improvement of legal framework of the limited liability c om-
pany provided by international uniform l aw, the international air
transport of passengers and luggage from t ourist industry perspective and
the rights of t ourists and considerations regarding the c ompetence of the
European Union external trade p olicy .
Contemporary challeng es in the regulation of national business law. This
chapter includes papers on: new elements in the regulation of c ompetiti on
in Romania ; the complexity of the litigations in the energy regulated field
of activity and the necessity of the specialization of the judge p anels ; on
the de facto director of a Romanian limited liability c ompany ; some as-
pects concerning the setting up of companies regulated in Romania by
the Law no. 31/1990 r epublished ; excise d uties in European Union and
relevant national case -law; the lease contract under insolvency l aw; con-
siderations regarding the contract a ssignment in the Romanian Civil
Code ; consultation between social partners.
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 national
level.
6 Preface
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
CONTEMPORARY CHALLENGES IN THE REGULATION OF IN-
TERNATIONAL BUSINESS LAW
Adina PONTA
The Evolution and Challenges of Directors ' Duty of Loyalty… ………………11
Cătălin -Silviu SĂRARU
Administrative Contracts in the European Union Law……… …………………33
Charlotte ENE, Ileana VOICA
The Improvement of Legal Framework of the Limited Liability Company
Provided by International Uniform Law ………………………… …………… .43
Ilie DUMTRU
International Air Transport of Passengers and Luggage from Tourist
Industry Perspective and the Rights of Touris ts…………………………… ……49
Ioana Nely MILITARU
Considerations Regarding the Competence of the European Union
Externa l Trade Policy…………………………… …………………………….. 67
CONTEMPORARY CHALLENGES IN THE REGULATION OF NA-
TIONAL BUSINESS LAW
Ana-Maria UDRIȘTE
New Elements in the Regulation of Competition in Romania……… …………77
Andreea STOICAN
The Complexity of the Litigations in the Energy Regulated Field of
Activity. The Necessity of the Specializati on of the Judge Panels……… …….99
Cristina COJOCARU
On the de Facto Director of a Romanian Limited Liability Company …………113
Ana-Maria LUPULESCU
Some Aspects Concerning the Setting up of Companies Regulated in
Romania by the Law no. 31/1990 Republished …………………… ……… ….123
8 Table of Contents
Mihaela TOFAN
Excise Duties in European Union. Rel evant National Case -Law…… ………. .133
Raluca Antoanetta TOMESCU
The Lease Contrac t under Insolvency Law…… …………………………….. 147
Tudor Vlad RĂDULESCU
Considerations Regarding the Contract Assignment in the
Romanian Civil Code ……………………………………………………….. .157
Magda VOLONCIU
Consultation between Social Partners. From a General View
to a Particular One……………… ……………………………………………173
CONTEMPORARY CHALLENGES IN THE
REGULATION OF INTERNATIONAL BUSI-
NESS LAW
The Evolution and Challenges of Directors ' Duty of Loyalty
PhD. student Adina PONTA1
Abstract
The duty of loyalty is the core of the fiduciary relationship between ownership
and effective control of a company. This paper aims at identifying the contours of this
heterogeneous fiduciary duty in corporate law, absent of clearly established legal limit s.
The objective is to highlight the pattern of this duty based on evolutionary case law, from
the beginning of confluences between legal and microeconomic elements, by emphasizing
the shades of current social and moral norms. The article renders both expo sures of this
duty, from the minimalist conception, "lack of betrayal", to the broad dimension of "active
commitment". Various case law examples contribute to the identification of overlaps be-
tween loyalty and good faith, and of conflicts between applicabi lity of the duty of care
and duty of loyalty. The paper exposes a comparative analysis of the duty of loyalty
among the jurisdictions of the European Union and Romania, emphasizing the influences
of agency rules and traditional fiduciary values within ci vil law. The expansion of the
duty is reflected by addressing the notions of conflict of interest and corporate oppor-
tunity doctrine. The findings reveal case law substantiated factors which facilitate the
identification of duty of loyalty violations and d ifferentiate them from good faith situa-
tions, where jurisprudence mainly facilitates the exclusion of this fiduciary duty.
Keywords: duty of loyalty, good faith, conflict of interest, corporate opportunity
doctrine, fiduciary duties, agency.
JEL Class ification: K22
1. Introduction
Modern business law inherited concepts with deep morality meanings,
which show however substantial risks in their practical interpretation. The funda-
mental notions of duty of care, i.e. diligence and prudence, and duty of loyalty
bear a profound social, philosophical and literary content, outside the corporate
governance context, enriched with traditional values of fiduciary relationships of
civil law essence. Despite the vastness of "loyalty", the content of this fiducia ry
duty is often filled or even defined by case law, which may either limit or enrich
its application and scope. Recent corporate governance case law demonstrates a
slight deviation from the classical meaning of this civil law concept and from
common langu age, this duty is often overlapped or mistaken for the duty of good
faith.
1 Adina Ponta – Faculty of Law, Babeș -Bolyai University, Cluj -Napoca, Romania, E -mail:
ponta.adina@gmail.com.
12 Adina Ponta
In the last decade of the 20th century, the duty of loyalty enjoyed special
attention in common law doctrine and jurisprudence due to its dynamism and to
the downturn of interest in the duty of care, which monopolized doctrine and ju-
risprudence in the first part of the 20th century, particularly in the context of ex-
haustive analysis of the Business judgment rule.
This paper aims at highlighting the importance of the fiduciary duty of
loyalty, which we regard as the core of directors’ fiduciary duties and its magni-
tude by identifying and studying the composing elements. The duty of loyalty
was initially viewed in respect to its meaning in everyday language, afterwards
the perception sh ifted to the interflow of legal and micro -economical elements
and acquired strong nuances of civic and social norms2, which are internalized in
the model conduct of corporate governance.
Further, the paper contains a review of the outline of the fiduciary duty
of loyalty, in the absence of clearly established legal limits in any legal system.
We will show that the pattern of this duty clearly evolves from the last half cen-
tury case law and from the disparate philosophical views, from the minimalist
vision of loyalty, namely the "lack of betrayal" towards the ampler extend of "ac-
tive commitment"3.
Overlaps of the duty of loyalty and duty of care are inevitable in current
corporate governance practice4. The devotion element of the duty of loyalty in-
tersects t he element of diligence within the duty of care5, complicating the efforts
of doctrine and jurisprudence to differentiate these fundamental concepts. This
hereditary interleaving of traditional fiduciary duties raises the question of neces-
sity or actuality of the triad of fiduciary duties6 enshrined by Delaware case law
and successfully exported to continental legal systems. The importance of this
triad lies in the special significance of each of the recognized fiduciary duties, in
2 Eisenberg, Melvin A.: Corpor ate Law and Social Norms , Columbia Law Review no. 99, New
York, 1999, p. 1252 and Ellickson, Robert, Law and Economics Discovers Social Norms , Journal
of Legal Studies no. 27, Chicago, 1998, p. 537.
3 Johnson, Lyman: After Enron : Remembering Loyalty Discourse in Corporate Law, Delaware
Journal of Corporate Law no. 28, Delaware, 2003.
4 Due to the vastness of the topic, the overlaps of the duty of loyalty and the duty of good faith and
the differences between their features and elements in corporate governance are not covered by this
paper.
5 The duty of care in continental law jurisdic tions is an export of Delaware business law jurispru-
dence. Delaware courts are internationally recognized as the most prominent forum for corporate
governance disputes, due to their unique efficiency, their predictable judgements and their contin-
uous expos ure to business law litigation. Delaware Court of Chancery is an equity court and a
benchmark of professionalism, which determined great forum shopping . Following the reform of
the Companies Act in 2006, the duty of care was first analyzed in Romanian doct rine by Prof.
Catană, R.N., Dreptul Societăților Comerciale, Probleme actuale pri vind societățile pe acțiuni.
Democrația acționarială , Ed. Sfera, Cluj -Napoca, 2007, p. 160, and he was the first to suggest the
translation of the term duty of care in „obligația de diligență și prudență”.
6 The directors of a company owe what the Delaware Supreme Court called the " triad of fiduciary
duties ", duty of care (due diligence and prudence), good faith and duty of loyalty.
The Evolution and Challenges of Directors ' Duty of Loyalty 13
the moral values characte ristic to business law and in the manner of regarding
directors7 as mature actors with flawless morality and not as one -dimensional
economic officers8.
Further, the paper aims at presenting a comparative analysis of the duty
of loyalty within the European Union jurisdictions, of their regulations or juris-
prudential application in absence of codification and at highlighting the traits of
the duty of loyalty from the Romanian law perspective.
2. The importance of encompassing improper conduct and of determin-
ing the fiduciary duty violated by directors
In common law doctrine and jurisprudence, directors of a company owe
what the Delaware Supreme Court called the " triad of fiduciary duties ": duty of
care (due diligence and prudence), good faith and duty of loy alty9. These duties
are almost uniformly recognized by doctrine and jurisprudence as being the
standard fiduciary duties identified and analyzed by shareholders and by courts
when assessing corporate directors’ conduct10. In most common law jurisdictions,
consequences of fiduciary duties violations differ due to the particularities of each
of them. For example, the Business judgment rule applies in situations of breach
of the duty of care. Some jurisdictions allow the inclusion of statutory clauses
that prev ent directors’ personal patrimonial liability11 for breaching fiduciary du-
ties, but only for the damage the company suffered as an effect of duty of care
violations.
7 The use of the term "director" in the paper at hand is understood to be extended to the members
of the directorate of joint stock companies that adopt the dualist management system.
8 Supra 3, p. 5.
9 For broader explanations of the triad of the fiduciary duties, see Ponta, A. The Bus iness Judgement
Rule. Approach and application , „Juridical Tribune – Tribuna Juridica”, vol. 5, issue 1, 2015, p.
25-44.
10 One of the first express mentions of the triad of fiduciary duties in the manner it is viewed by the
majority doctrine and jurisprude nce nowadays is reflected in the justifications of the Case Aronson
vs. Lewis , 473 A.2d 805, 812 (Delaware, 1984), at 805. The description of fiduciary duties given
by the court in this case is famous because it is one of the first clear expressions to enu merate the
fiduciary duties in a concentrated formulation:” directors are presumed to act reasonably, in good
faith and in the honest belief that the action they undertook was in the best interest of the company ”.
11 Following the judgement in the case Smith v. Van Gorkom (488 A.2d, Delaware Supreme Court,
1985), where a few directors had to bear exaggerated financially consequences for the simultaneous
breach of the duty of care and the duty of loyalty, Delaware legislature permitted corporations to
include in their acts of incorporation statutory clauses to limit or eliminate directors' personal lia-
bility for material damages caused by violations of fiduciary duties. Up to the present date, more
than 30 USA states adopted similar rules. A very important issue is the fact that these exculpatory
clauses, included for the first time in Title 8, par. 102(b) 7 Delaware Code, are only applicable in
situations of an alleged breach of the duty of care and not in cases of duty of loyalty violations or
if the dire ctor acted in bad faith.
14 Adina Ponta
The result of this development is the so -called conflict between the ap-
plicability of the duty of care and the duty of loyalty, the plaintiffs being inter-
ested to prove the breach of more than one fiduciary duty by the same directorial
misbehavior. At the same time, directors defend themselves by invoking honest
and good faith behavior and they try to narrow the scope of the duty of loyalty
and the expansion of the meaning of diligence and prudence to reap the benefits
attached to this latter fiduciary duty12.
The risk of such situations is potential subsuming of a large number of
subsidiary obli gations of the duty of care in the category of loyalty and even in-
cluding diligence and prudence within the duty of loyalty, under the guise of the
impossibility of a truly loyal director’s conduct without compliance with the duty
of care. In our view, the se challenging philosophical approaches concerning the
concept of diligence and prudence (duty of care) as an integral part of the doctrine
of loyalty should remain in a rhetoric state. Furthermore, practitioners and courts
should pay particular attention to analyzing the limits of loyalty in order to be
able to draw a clear line between the scope of due diligence and loyalty, without
losing sight of the intervention of the Business judgment rule13.
Substantiating the meaning of "loyalty" in contemporary bus iness law by
assimilating social and normative influences14 with consideration of historical as-
pects will eventually lead to the full assessment of the potential of the duty of
loyalty.
2.1. The meaning of “loyalty”
The word "loyalty" is derived from the French term "loi" which means
law. Loyal behavior is due according to the law, to morals or conscience. Loyalty
is "what is supposed to be the right thing in a certain context”15, a specific need,
but it is consistent with the purely theoretical standard of the expected conduct.
The juridical – philosophical doctrine assesses morality as situated "from a his-
torical point of view in the collective memory and common aspirations, from a
12 In Emerald Partners v. Berlin (787 A.2d, Delaware, 2001), the court specified that any clause
adopted on the grounds of the provision in art. 102(b)(7) Delaware Code „prevents the recovery of
material damages from directors in c ase of shareholders’ claims, if it is exclusively based on breach
of the duty of care”.
13 Currently, the Business judgement rule is provided for by Romanian law under art. 144 ind. 1 of
the Law no. 31/1990. Expanding the duty of care and the Business judg ement rule lies outside the
paper at hand. For a comparative view of the Business judgement rule within the European Union,
see Prof. Dr. Catană, R. N, Ponta, A., The Business Judgement Rule and its reception in European
Countries, The Macrotheme Review 4(7), Austin, Texas, 2015.
14 Supra 3, p. 13
15 The Delaware Supreme Court recognizes that the duty of loyalty is context related. In the case
McMullin v. Beran (765 A.2d, Delaware Supreme Court, 2000), the court considers that „the fidu-
ciary responsibilities of a corporate director based on his mandate depend upon the specific con-
text”.
The Evolution and Challenges of Directors ' Duty of Loyalty 15
social point of view, in distinct co mmunities and from a cultural perspective in
specific moral structures of reasoning and custom”16. In everyday language, the
term "loyalty" is often associated with honest and fair, even affectionate conduct.
Challenges arise when courts are faced with conc rete determination of loyalty in
a concrete case. The duty of loyalty took shape in the wake of various referential
judgements and their grounds rendered by Delaware courts.
The essence of claim regarding a duty of loyalty violation is the firm be-
lief th at the director has misused the power he was conferred, the assets or current
affairs of the company to secure a benefit for himself instead of putting a premium
on the goals of the company17. The duty of loyalty is the imperative of directors’
abstention f rom pursuing transactions in their own interest or between themselves
as individuals and on behalf of the company18, from bad faith actions, fraud and
from taking advantage of corporate opportunities. In addition, a fair conduct re-
quires corporate directors to refrain from concluding transactions in conflict of
interest19. These substantiated characteristics of loyalty led many theorists to
identify clear distinctions between the duty of care and the duty of loyalty. How-
ever, a significant part of doctrine co nsiders that, in absence of clear boundaries
between the applicability of the two fiduciary duties and in absence of personal
or financial disadvantageous interests of directors, unless the issue of lack of good
faith and diligence is raised, a certain sit uation will only involve the duty of care
and not the duty of loyalty20. Both a negligent and an unfair director choose in
these situations the achievement of their own goals instead of the interest of an-
other party, the first director chooses to simplify t he performance of his or her
duties and the second one opts for tangible benefits21. Although the duties are
similar in this respect, we consider that each of the two fiduciary duties has a
much stronger structure than merely the verification of the conditi on of obtaining
a personal benefit or the existence of a conflict of interest.
Although premises of the fiduciary duty of loyalty are not clearly defined
or differentiated from the duty of care, some already in case law substantiated
factors automatically lead to identification of duty of loyalty violations. Lack of
16 Hunter, James Davison: The death of character , Oxford University Pre ss, Oxford, 2000, p. 11.
17 This definition was offered in Steiner v. Meyerson , 857, Delaware Chancery Court, July 1995.
This wording is dominant in common law doctrine and was exported to European business law
doctrine as well.
18McCarthy, Brian J., Wong, Wallace M. Advising the Board: Issues for Boards of Directors , Prac-
tising Law Institute, no. 1183, New York, 2000, p. 659.
19 Ruder, David S.: Duty of Loyalty —A Law Professor's Status Report , Business Law Review no.
40, 1984, p. 1383.
20 Easterbrook, Frank H. Fischel, Daniel R: The Economic structure of Corporate Law , Harvard
University Press, 1991, p. 103 and Branson, Douglas M. Assault On another citadel: Attempts to
curtail the fiduciary standard of loyalty applicable to corporate directors , Fordham Law Review
no. 57, New York, 1988, p. 375.
21 Anderson, Alison, Conflicts of Interest: Efficiency, Fairness and Corporate Structure , University
of California Law Review no. 59, 1978, p. 738.
16 Adina Ponta
loyalty evidence includes, without being limited to, grounds of treason, lying,
fraud to the detriment of the company or to the board of directors, abdicating from
the own duties or selling -off the own vote22. The duty of loyalty has an open and
flexible content and courts usually avoid the assertion that a simple avoidance of
conflict of interest shall exclude directors’ liability only based on breach of this
duty.
2.2. Conditions for implementatio n ascertainment of the duty of loy-
alty
The established legal literature distinguishes between "the minimum" and
"maximum conditions" for the existence of the duty of loyalty23. The minimum
condition requires a loyal actor to refuse temptations and not to b etray the subject
of his loyalty. Examples of the minimum condition of loyalty include social and
philosophical elements that demonstrate a basic commitment not to covet the
goods of others and to subordinate the private interest to the served one24. This
minimum requirement may be treated as a basic element of human character,
namely moral discipline, "the core aspect of a person’s interior ability to refrain
from something, an ability to inhibit desires and habits within the limits of moral
order”25. The m aximum condition of the duty of loyalty involves elements of de-
votion, affirmative duties, an attitude of continuous voluntary practical drive26.
This verification of the existence of loyalty is not a mere checking of the
abstention from perfecting self -interest, but attaches great importance to the ben-
eficiary of the fiduciary relationship, to the moral attachment towards him, as a
necessary ingredient for affirmatively defining loyalty and not only negatively
describing it by excluding inapplicable situat ions.
Doctrine and jurisprudence emphasize that a material gain to the direc-
tor’s benefit is the grounds of the duty of loyalty breach, namely his refrain from
conflict of interest transactions27 in order to insure he meets this obligation. This
narrow vie w, meaning the absence of betrayal is useful for differentiating be-
tween the duty of loyalty and the duty of care. According to this view, the duty
of loyalty is an expression of directors financially interested in certain business,
to trade correctly28. The wording accurately expresses the minimum requirement
22 Judgement of the case Cede & Co. v. Technicolor, Inc ., 634 A.2d, D elaware Supreme Court,
1993.
23 Fletcher, G.: Loyalty : An Essay on the morality of relationships , Oxford University Press, vol.
91, New York, 1993, p.33 .
24 Idem, p 40.
25 Hunter, Supra n.s. 15, p. 16.
26 Supra 21, p. 24.
27 Eisenberg, Melvin A.: Corporate Law and Social Norms , Columbia Law Review no. 99, New
York, 1999, p. 1271
28 Idem, p. 1272.
The Evolution and Challenges of Directors ' Duty of Loyalty 17
of loyalty, but suggests that this duty would be solely expected in situations where
specific temptations exist.
Current case law tends to include in the concept of loyalty situations
where there is no risk of financial benefits obtained by a director, and it includes
in the breach of this duty the failures to demonstrate a positive commitment to
the well -being of the beneficiary of this fiduciary duty.
The reference case Guth v. Loft, Inc29 captures t he duty of loyalty in the
context of the corporate opportunity doctrine, which we shall develop in a later
section. The court considers that the duty owed by a director based on the duty of
loyalty is twofold, i.e. not solely to actively protect the intere sts of the company
he or she was entrusted with, but also to refrain from any act that would harm the
company or that would deprive it of profit or advantages, which the company
could benefit "due to the director’s skills to obtain them". Highlighting the min-
imum requirement of loyalty was achieved by emphasizing the interdiction of
treason, namely "suppressing the impulses to serve the own interests is not in
itself a loyal act". Duality of the dimension of the duty of loyalty is also under-
lined by the co ncept of fairness and equity and by emphasizing the fairness stand-
ard, expressed by an attitude of advancing the company's activities30.
In other words, in situations of actual or potential conflicts of interest, a
simple examination of substantive and proc edural fairness is not sufficient. To
fulfill the duty of loyalty, a director must not only display healthy and faithful
interests, but he is also mandated to promote and stimulate the interests of the
company31. The fiduciary duty of loyalty requires a par ty to completely subordi-
nate his or her own interests and solely to act for the benefit of the other party32.
In the context of this affirmative devotion, it is obvious that drawing clear
boundaries between the duty of loyalty and the duty of care is imposs ible. The
identification of the dual nature of loyalty, of its linguistic, social and philosoph-
ical meaning does not clarify the delimitation of the two fiduciary duties, but it
rather reveals their intersections given the competing protected moral values . We
consider, however, that an elaborated analysis of each particular situation is heady
necessary, in order to avoid creating a discretionary nature of the duty of loyalty
and depriving directors from the exculpatory effects attached to the duty of care .
29 Guth v. Loft, Inc ., 5 A.2d, Delaware Supreme Court, 1939.
30 Fill Bldgs. Inc. v. Alexander Hamilton Life Ins. C o., 241 N.W.2d, Michigan Supreme Court,
1976.
31 The same idea is highlighted by the Principles of Corporate Governance, issued by the American
Law Institute –, part VII, Remedies, Cap. 1, first edition in June 1985.
32 Alexander, G.S.: A Cognitive Theory of Fiduciary Relationships , Cornell Law Review no . 85,
New York, 2000, p. 767.
18 Adina Ponta
3. The corporate opportunity doctrine
This theory covers situations where a director trenches upon a business
opportunity that would legitimately inhere in the beneficiary of the fiduciary re-
lationship, by exploiting the opportunity in his or her own benefit. Although this
theory does not have a stable and predictable character, case law orientates direc-
tors for the purpose of deciding whether to hold back a business opportunity or
to offer it to the company33.
The most famous case capturing this doctrine is Meinhard vs. Salmon34,
where the two had formed a joint venture to rent office spaces. Shortly before the
expiration of the lease, Salmon began secret negotiations with the owner and ex-
tended in his own name the lease for the same space and for additional offices.
Meinhard found out about the transaction only after the conclusion of the new
lease agreements and required that they are interpreted in the sense of being con-
cluded in the name of the joint venture between the two business men, which
Salmon obviously refused.
If concealing information or new business opportunities is allowed be-
tween business partners, these will be tempted to eliminate the other party in order
to benefit from all the advantages of the received information35. The reaso ning in
this case outlined a standard of recognition of this phenomenon: "partners owe to
one another, during performance of business, the duty of the finest loyalty. Many
expressions of behavior, allowed in daily life to those who act on the basis of
arm's length principle, are prohibited to those bound by a fiduciary relationship.
The trustee is bound by stricter duties than public moral. It is not just about hon-
esty, but the standard of behavior is the pedantic accuracy of the most sensitive
honor"36. The court emphasized the importance of analyzing the context -specific
external and internal circumstances, which lead the director to make that particu-
lar decision. Salmon was not a simple "adventurer" but an "adventurer with con-
trol of exclusive powers […] who accepted the proposal without warning his part-
ners engaged, a cunning misconduct, lacking candor. "
The second classic case for highlighting the corporate opportunity doc-
trine is Guth vs. Loft Inc37, Loft was a producer and distributor of confectione ry
33 Bainbridge, Stephen M.: Rethinking Delaware's Corporate Opportunity Doctrine, University of
California, Los Angeles (UCLA) – School of Law, Law-Econ Research Paper No. 08 -17, 2009.
34 Meinhard v. Salmon , 249 New York Supreme Court, N.E., 1928.
35 Supra, n.s.33, the author suggests the adoption of rules that grant the company the intellectual
property rights on the obtained information, a view which we do not embrace. The author considers
that this approach would be more efficie nt than drafting arrangements to inform various aspects or
than reciprocal monitoring. Even though this rule would not discourage the production of new
pieces of information, because directors would still be encouraged to acquire new opportunities
which en hance the value of the company, we consider that lack of excessive codification and liberty
of action based on personal belief are the essence of corporate governance.
36 Supra n.s. 34.
37 Supra, n.s. 29.
The Evolution and Challenges of Directors ' Duty of Loyalty 19
and beverages, which although didn’t produce Coca -Cola drinks, distributed sim-
ilar sodas in its stores. Charles Guth, the general manager of Loft, obtained the
effective control of the company Pepsi Cola Corporation, which was at that time
in financial difficulty. Guth began to develop a clandestine program to mobilize
Pepsi, by using funds, facilities and employees of Loft. The company Loft sued
the director Guth for violating the duty to grant the company Loft an “informed
chance to acquire Pepsi befor e doing this for himself”, namely "the right of first
refusal to purchase Pepsi".
In this case, the court outlined for the first time several questions that
should be considered to determine the nature of the violated duty and the scope
of the corporate opportunity doctrine38. The analysis largely concentrated on what
is known as the " line of business test ", namely if the concerned business involving
many risks is closely linked to the current or future business of the corporation.
In this regard, the cour t held that Pepsi is directly related to the commercial ac-
tivity of the company Loft, which was both producer and distributor of soft
drinks. Although the company did not have at that time the core business of pro-
ducing soft drinks, the Court considered th at the line of business test should also
encompass possible developments or expansions of the company in the future.
Loft possessed the necessary knowledge, experience and resources to exploit the
”Pepsi opportunity”, and the combination of need and abilit y integrates this op-
portunity in the line of business of the company Loft39.
Secondly, the question was whether the company Loft had a prior interest
or any expectations of this opportunity, any business needs or the possibility to
identify an alternativ e source of refreshments, in order to demonstrate that Loft
did not have any legitimate interests in the opportunity to acquire Pepsi.
Another base line case for analyzing the corporate opportunity doctrine
is Broz vs. Cellular Information Systems Inc40. Robert Broz was the sole share-
holder and president of RFB Cellular Inc ., but also a member of the board of
Cellular Information Systems Inc. (CIS) , a competitor mobile services provider.
Following a tip received from the brokerage company he was working wi th, Broz
purchased a license for mobile telephony, Michigan 2 for RFB, even though he
38 This explanation is often repeated in American doctrine, due to the clarity of approach: " If a
director is presented with a business opportunity that the company is financially capable of under-
taking, which is in its nature on the line of business of the company and which represents a prac-
tical advantage for which the company has an interest or a reasonable expectation and if by em-
bracing this opportunity, the director’s own interest would be in conflict with the interest of the
corporation, the law will not allow him to seize the opportunity for himself. "
39 Guth used his position to terminate the distribution agreement between Loft and Coca -Cola and
to conclude a similar contract with Pepsi. While such conduct may be classified as fraudulent, be-
cause a director shouldn’t compete with the business of the represented company, this aspect is not
covered by this chapter. It is clear however, that by having the power to control the company Loft,
the director Guth managed to impose an exclusive distribution c ontract with Pepsi and to determine
the contractual terms according to his own interests .
40 Broz vs. Cellular Information Systems Inc., 673 A.2d 148, Delaware Supreme Court, 1996.
20 Adina Ponta
already owned a similar license, called Michigan 4. Although Broz did not for-
mally offer the opportunity to the company CIS, he mentioned this aspect to its
CEO and to se veral board members, who showed lack of interest on behalf of
CIS in acquiring the license for mobile services 2, due to the financial difficulties
of the company and the difficult negotiations that should have been carried out
with other phone service pro viders. Following the acquisition, the third party who
lost the auction to Broz, accused him of breach of fiduciary duties towards CIS
because he used the opportunity to acquire Michigan 2 in his own interest.
The Delaware Supreme Court held that Broz di d not breach his fiduciary
duties by failing to present the offer to CIS, because Michigan 2 did not represent
a suitable business opportunity for CIS and it was more appropriate for Broz than
for CIS. Furthermore, the court identified the most long -lastin g test to determine
if a new business prospect represents a corporate opportunity. This is based on
the question whether the company has a commercial interest or expectancy, a real
ability to seize the opportunity, namely „the interest -or-expectancy ” test41. The
main component of commercial interest usually refers to projects for which the
company has an existing contractual right42. The „e xpectation” element includes
projects which are not already owned by company through existing contracts, but
which are li kely to materialize in view of current assets and rights.
A final approach of corporate opportunities is the fairness test , i.e. the
test of fairness and equity. Under this approach, a business perspective can be
classified as a corporate opportunity if its acquisition by the fiduciary would not
meet the ethical or fair standards for the wellbeing of the company. The lack of
success of applying this test lies in the impossibility of substantially articulating
the contour of fairness and equity. The doctri nal formulation of a theory of fair-
ness and equity, as fundamental premise of fiduciary duties is fragile, but the
majority opinion tends to emphasize the procedural significance of this concept43.
We can see the difference between Guth, who showed clear e vidence of
bad faith, and Broz, whose interest for the opportunity to purchase the license did
not create a conflict of interest, because he only competed with a third party.
However, Broz failed to formally present the opportunity to the company and the
company did not expressly refuse the offer before Broz exploited it on his own
account. We assert that formal procedures, although not mandatory in all cases,
are able to create in these situations an anchor of safety. Recent common law
41 Talley, Eric and Harshmall, Mira , The corporate opportunity doctrine, University of Southern
California Law School – Center for Law, Economics and Organization Law Journal, 2011.
42 In the case Lagarde vs. Anniston Lime& Stone Co , 28. So, Alabama Supreme Court, 1999, the
court considered that the fiduciaries who acquired 2/3 of the exploitation rights of a quarry seized
a corporate opportunity, due to a written offer if the seller of that quarry addressed to the company.
The court fund that the opportunity should be “necessary” and “existential” or at least extremely
important for the company to be able to address the existence of the component of the interest.
43 Mitchell, Lawrence E.: Fairness and trust in corporation law , Duke Law Journal nr. 43, Durham,
USA, 1993, p. 470.
The Evolution and Challenges of Directors ' Duty of Loyalty 21
jurisprudence create s a presumption that the director usually received information
about business opportunities in his capacity as representative of the company,
which has the effect of reversing the burden of proof. The fiduciary is therefore
required to prove that the oppor tunity was brought into his notice in his individual
capacity.
Another relevant aspect is the financial factor, that would have prevented
the company to take advantage of the business opportunity. However, given the
interdependence between fiduciary duti es, the question of directors' extended due
diligence arises. Based on their position, directors owe the duty to contribute to
the financial success of the company and to obtain the necessary financial re-
sources for it, including the acquisition of phone l icenses, if these would increase
the company's future profit and accelerate its financial return. In other words, if
the director could make capital out of the opportunity on his own behalf, why
should we assume a priori that the company could not have bee n able to achieve
the same performance? A similar question was raised in Meinhard vs. Salmon,
the court holding that "the one who committed to a fiduciary relationship should
not think of himself".
To contribute to the predictability of the scope of the corporate oppor-
tunity doctrine, literature has grouped these premises for liability44, but practice
proved the imperative to also analyze the concrete manner how directors exploit
the opportunity to the detriment of the company45.
4. Duty of loyalty in contin ental law jurisdiction
Continental law faithfully imported Delaware duty of loyalty, with its
broad meaning and scope for situations of real or potential conflicts of interest
between a director and the company. Despite the homogeneous character of the
duty of care implementation within the member states of the European Union and
the similarity of wordings regarding the expected corporate directors’ conduct,
the procedures governing conflicts of interest are manifestly different46. The fi-
duciary duty of lo yalty in common law terminology is a compilation of compara-
ble legal instruments, which even if not homogeneous, tend towards the same
objective of protecting moral and equitable values and the importance of the so-
cial component drastically increased in recent years. Contine ntal corporate law
contains a dispersed variety of fiduciary standards and normative approaches.
Although the superiority of one approach over the others cannot be certified, it
44 Supra, n.s. 3.
45 Supra, n.s. 41 .
46 Gerner -Beuerle, C., Paech, Philipp, Schuster, Edmund P.: Study on Directors’ Duties and Liabil-
ity, prepared for the European Commission , Department of Law, London School of Economics,
London, April 2013, LSE Enterprise, p. 148.
22 Adina Ponta
seems that the effectiveness of regulations depends on the flexibility of inte rpre-
tation of the fiduciary duty of loyalty and that certain concepts allow more accu-
rate application in cases with more sensitive features.
Most member states adopted explicit norms on transactions between di-
rectors and companies, by addressing corporat e opportunities and prohibiting
anti-competitive conduct47. However, comprehensive standardization of conflict
of interests is not predominant, which does not necessarily indicate shortcomings
in the business law systems, because most jurisdictions are fami liar with fiduciary
principles derived from ordinary civil law48 and agency law.
The jurisdictions that regulate management of companies in the dualist
system, often use this structure for distribution of authority between the various
corporate bodies as a mechanism for moderating conflicts of interests, which ex-
plains the absence of certain regulatory norms in the field. Two interesting exam-
ples are found in the case of The Netherlands and Finland, both countries having
fragmented regulations of the duty of loyalty, whose judicial interpretation grand-
fathered in customary law of both states. The case law constructions on the gen-
eral wording of directors’ positions are joined with elements of the duty of care.
The Netherlands requires directors to act in ac cordance with the "standards of
reasonableness and fairness"49, they are responsible for "proper performance of
the duties with which they were charged"50. We assess that this approach is indeed
able to capture the values protected by the duty of loyalty, without creating con-
fusion between the duty of loyalty and the duty of care. Finland requires directors
to act with care and to promote unconditionally the interests of the company51.
This wording proved to be very useful for case law determinations of the duty of
loyalty, either in its individuality or in overlaps with the duty of care. Similarly,
Swedish law is sufficiently flexible to address conflicts of interests where legis-
lative gaps don’t cover specific situations.
Given the options of legislatures in most member states, we consider that
the prevailing approach was the avoidance of dogmatic fundamentals and com-
prehensive regulations, which are not decisive for the correct interpretation of
conflicts of interests. Corporate governance practice shows t hat less exhaustive
rules prove more effective for preventing violations and for ensuring the predict-
ability of the law.
Most jurisdictions regulate corporate opportunities, even if they do not
use this particular terminology, and some states which are he avily influenced by
47 The most comprehensive rules can be found in the Spanish Corporation Act (2010) and in the
UK Companies Act (2006).
48 Not only common law states like Cyprus and Ireland, but also civil law jurisdictions like France,
Germany, Hungary, Latvia and Poland dra w the fiduciary rules to the conflict of interest from the
ordinary civil law.
49 Section 2.8 (1) from the Dutch Civil Code.
50 Section 2.9 (1) from the Dutch Civil Code.
51 Cap. 1, art. 8 of the Finnish Company Act.
The Evolution and Challenges of Directors ' Duty of Loyalty 23
British common law , such as Ireland, Cyprus and Malta, but also Lithuania pro-
vide for the corporate opportunity doctrine. The most developed version is found
in the United Kingdom, strongly shaped by extensive case law. it is irrelevant if
the director in the British corporate system became aware of the corporate oppor-
tunity in his managerial position or in his private capacity or whether the oppor-
tunity is circumscribed to the line of business of the company, as long as the
company can adjust and refocus its operations to become financially interested in
that respective opportunity. Current financial or legal obstacles of the company
to exploit the opportunity, which are able to be eliminated through reasonable
measures, become irrelevan t52.
Three jurisdictions from the same family law, Austria, Germany and Slo-
venia influenced each other in the formulation of provisions that distinguish con-
flicts of interest between a director who operates a competing business and the
conclusion of certa in transactions53. Operating a competing business is expressly
prohibited, regardless of the relevant market of the competing company, in order
to ensure the devotion of directors’ absolute attention to the represented company.
The interdiction to conclude parallel transactions in the director’s name applies
only if he or she is actively engaged in the line of business of the represented
company and these cases go back to the classical conflict of interest rules.
Malta, Spain and Italy expressly regulate the corporate opportunity doc-
trine and the duty not to compete with the company, the first being provided in
the Companies Act of each state, and the second in the ordinary civil law. In
jurisdictions which didn’t adopt imperative rules on corporate opportuni ties, such
as France, Belgium, Luxembourg, the Netherlands and Scandinavian states, prac-
tice shows that most contracts concluded between the company and a director
include express non -competing clauses, with the consequence of contractual lia-
bility of dire ctors who breach the duty of loyalty or who engage in anticompeti-
tive behavior.
In French law, the existence of a general duty of loyalty is undisputed,
but its legal basis remains unclear. Recent French doctrine regards the exploita-
tion of a corporate opp ortunity by a director similar to a corporate crime, such an
abuse is called l’abus des biens sociaux54. Belgium55 and Luxembourg derive fi-
duciary liability for management mistakes or lack of proper exercise of mandate
from ordinary civil law. Other countrie s which do not regulate corporate oppor-
tunities are The Netherlands, Romania and the Nordic countries, in particular due
52 Davies, P., Worthington, Sarah: Gower and Davies’ Principles of Modern Company Law, Sweet
& Maxwell, 9th edition, London, 2012, p. 164.
53 Art. 79(1) of the Austrian Joint Stock Corporations Act, art. 88(1) of the German Joint Stock
Corporations Act, art. 41 of the Slovenian Company Act.
54 Cozian, M., Droit des sociétés, Lexis Nexis, 20th edition, Paris, 2007, p. 617.
55 art. 527 Code des Societies: „ Les administrateurs . . . sont responsables, conformément au droit
commun, de l’exécution du mandat qu’ils ont reçu et des fautes commises dans leur gestion ”.
24 Adina Ponta
to the lack of jurisprudence in this domain, but Romanian law tangentially men-
tions corporate opportunities in art. 153 ind. 15 of the Companies Act.
The lack of substantive rules for sanctioning infringements of fiduciary
duties and structural weaknesses of enforcement are common in most member
states. Although we consider that regulatory intervention in content and applica-
tion of fiduci ary duties is not desirable, creating a structure for judicial evaluation
and for sanctioning breaches of fiduciary duties would be an important stepping
stone for the efficiency of fiduciary relationships in continental law jurisdictions.
A significant n umber of countries, including Bulgaria, Greece, Latvia,
Romania, Slovakia and Slovenia provide in their corporate governance laws spe-
cific references to the agency contract to complement directors’ liability. In ad-
dition, in cases where the legal provision s prove insufficient, courts and business
law doctrine have resorted to general principles of law to assert the fiduciary re-
lationships between a company and directors. Examples of interactions between
legal provisions and jurisprudential influences are co mmon in France, Germany
and in several Nordic and Baltic countries, such as Denmark, Finland, Latvia and
Sweden. The French Commerce Code expressly mentions legal consequences for
violations of the law or of statutory provisions, but also for management mi stakes,
faute de gestion56, without explicitly mentioning the duty of loyalty, which was
exclusively developed by case law. Similarly, the German Stock Corporation Act
contains a single provision on directors’ liability, structured within the provision
of the duty of care57 and a number of provisions modeled for situations when the
duty of loyalty applies, such as the duty not to compete with the company or the
duty of confidentiality58. However, there is an enshrined jurisprudential principle
in Germany, according to which directors owe a general duty of loyalty. This
principle is developed by courts and derived from the principles of good faith in
contract law. It covers situations whic h are not explicitly regulated by the articles
of association.
5. The duty of loyalty under Romanian law
The Romanian Civil Code59 expressly mentiones that its provisions rep-
resent the ordinary, common provisions60 for companies, applicable to all organ-
izational forms61. The usefulness of the Civil Code proves to be higher for limited
56 Code de Commerce, L225 -251.
57 Art. 93 German Joint Stock Corporations Act.
58 Art. 93, 88, 93 (1) 2nd thesis, German Joint Stock Corporations Act.
59 The legal references of the Civil Code in the present paper refer to the New Romanian Civil
Code, Law no. 287/2009.
60 The Civil Code regulates the partnership agreement (art. 1881 ff.) and the agency contract (art.
2009 ff.).
61 art. 1887 Civil Code, art. 139 alin.1 Law no. 71/2011 for implementation of Law no. 287/2009.
The Evolution and Challenges of Directors ' Duty of Loyalty 25
liability companies, given that the sui generis legislation of joint stock companies
contains specific and sufficiently exhaustive pro visions62.
Unlike common law , the Romanian corporate law system lines up with
the German approach and tries to reach a balance between creditors’ and share-
holders’ rights of fulfillment of business purpose by providing directors with in-
creased trust. They a re regarded as actors whom the market expects to react as
rational players63. Through various legislative changes, the tendency to increase
decision -making flexibility materialized by enlarging the rights of executives64
and by expanding representativeness p owers of directors. Inspired by the US
model of the Business judgment rule, the legislature enriched references of fidu-
ciary duties, both in ordinary (common) law and in the special legislation.
Traditionally, the director’s position is prevailingly filled with legal or
statutory obligations. Statutory obligations are inherent to the management func-
tion and determines this from an organic point of view. By successive amend-
ments, the legislature tried to regulate the concrete exercise of these theoretical
duties by defining their fiduciary character.
The expanded trust which directors were granted by regulating the duty
of care is doubled by the duty of loyalty. Under current legal provisions, directors
cannot be incompatible65 and they are not allowed to oper ate competitive business
without the consent of shareholders, neither on their own account, nor for other
persons.
In addition, at the time of their appointment, the absence of any doubt
concerning a possible conflict of interest will be verified. The dut y comprised in
art. 79 and art. 144 ind. 3 of the Companies Act requires directors who are directly
or indirectly interested in a given transaction to refrain not only from exercising
their voting rights on that operation, but also to participate in delibe rations, in
order to exclude any doubt of influencing towards a decision which is contrary to
the purpose for the company. By law, there is conflict of interests also if the di-
rector is aware of interests of his spouse, his relatives or other related perso ns up
to the 4th degree of kinship.
The prohibition of using business opportunities for personal benefits, laid
down in art. 144 ind. 3 par. 1 and 2 of the Companies Act also applies to members
of the Supervisory Board and of the Executive Board of compan ies managed in
62 Title III of Law no. 31/1990, Funcționarea societăților (The functioning of companies) Chapter
I contains common rules for all types of companies.
63 M. Siems, Die Konvergenz der Rechtss ysteme im Recht der Aktionäre: ein Beitrag zur verglei-
chenden Corporate Governance in Zeiten der Globalisierung , Mohr Siebeck, Tübingen, 2005, p.
331.
64 The use of the term "director" in this paper is understood to be extended to members of the
directorate in joint stock companies that adopt the dualist management system.
65 art. 17 of the Ordinance no. 82/2007 modifies art. 138 ind. 2 of Law no. 31/199 0.
26 Adina Ponta
the dualist system and to directors of joint stock companies managed in the uni-
tary system, according to art. 152, art. 153 ind. 2 par. 6 and art. 153 ind. 8 par. 3,
which provide for the appropriate application of art. 144 ind. 3.
Under na tional law, l oyalty reflects the British business concept of per-
sonal subjective duties, which includes the performance of everything that the
director reasonably believes to be in the best interests of the company, this idea
being fully attached to the br oad concept of good faith66. The fiduciary duty of
loyalty, provided for in art. 144 ind. 1 par. 4 of the Companies Act is called in
national doctrine as the "liaison between the director’s office and the interests of
the company"67. Even though there is no legal definition of the notion of the com-
pany’s best interests , Romanian doctrine and jurisprudence does not lack a codi-
fied determination of this term. Prof. Gh. Piperea displays the magnitude of this
concept in the context of lo yalty, as the " collective interest of associates, share-
holders and indirect shareholders [… n.s. who] by their irreversible investment
in the company became dependent, even partially, on the business of that com-
pany and, therefore, this interest is keepi ng them together, with or without them
being aware of this 'solidarity' […] This collective interest […] transcends the
individual or group interests of associates, shareholders and indirect sharehold-
ers, making them revolve around the business ran by the company"68. Thus, dou-
bling the legal provisions of the duty of loyalty with the interdiction of perpetrat-
ing competitive acts does not only represent an interdiction of conflicts of interest
in the classical sense, but also of anticompetitive actions ag ainst the commercial
purpose of the company.
In addition to the express provision of the duty of loyalty, Romanian leg-
islature doubles the prohibition of all kinds of usurpation of business opportuni-
ties with the duty not to compete with the company. Accor ding to art. 153 ind. 15
of the Companies Act, directors of a joint stock company in the unitary system
and members of the directorate in the dualistic system may not fill positions of
directors, managers, members of the Board or of the Supervisory Board, auditors,
internal auditors or associates with unlimited liability in other competing compa-
nies or in companies with the same core business, neither in their own name, nor
for other persons, without prior authorization of the Management Board or of the
Supervisory Board. The same prohibition is outlined in art. 197 par. 2 of Law
31/1990, adapted to managers of limited liability companies.
66 Supra n.s. 5, p. 173
67 Todică, Carmen: Răspunderea juridică civilă a administratorului societății comerciale. Studiu
de doctrină și jurisprudență, Ed. Universitară, Bucharest, 2012, p. 174 4
68http://www.juridice.ro/297547/principiile -dreptului -societat ilor-la-cinci -ani-dupa -instalarea –
crizei -economice -in-romania -ii.html (accessed on 11.08.2016)
The Evolution and Challenges of Directors ' Duty of Loyalty 27
5.1. The agency contract in the Civil Code – relevant issues of direc-
tors’ mandate
In the Civil Code approach, the prevailing idea is the contractual charac-
ter of directors’ office and mandate, and according to national doctrine and case
law, the legal nature of a director’s role is that of an agent69. According to the
agency theory , created by US economic -legal doctrine in the early 70s, owners
and managers of a company conclude a contract which implies the representation
of the first by the latter.
In the same manner, representation becomes an intrinsic element of ad-
ministration u nder the agency contract, under the express provision of art. 2012
Civil Code. Under the 1864 Civil Code, the juridical mechanism of representation
was explained on the doctrinal basis of effects of classic agency, which was by
nature a contract that assum ed representation. Among other aspects, the empha-
size of representation deriving from agency law is evidenced by the fact that
members of the directorate or directors of a joint stock company cannot be sim-
ultaneously employees of the same company during th e performance of their
mandate, the office being incompatible with the institution of mandate which,
conferred “intuitu personae”70.
The content of agency is regulated by Civil Code, both by imperative and
by suppleness rules, the chosen legal formula aims at creating a horizontal legal
relationship, mainly bolstered by fiduciary duties and encouraged by the intuitu
personae nature of the relationship. Complementing the legal and statutory duties
which the agent cannot depart from, the concrete performance o f the mandate
acquires flexibility and the purpose is to grant as much credit to the director’s
business judgment and to his decision -making capacity.
The structures of Romanian companies provide shareholders and associ-
ates sufficient possibilities to cont rol directors, the most important leverage being
the almost discretionary appointment and removal of directors from office71. The
principle of ad nutum revocation of the mandate is maintained from the Civil
Code 1864, but the discretionary manner of revocat ion is nuanced by art. 2031
Civil Code, which provides that revocation can occur " at any time […] regardless
of the form in which the agency agreement was concluded and even if it was de-
clared irrevocable". Therefore, if trust disappears from legal relat ionships that
originate from the agency, whose essential feature is the intuitu personae charac-
ter, revocation retains its discretionary nature.
69 Supra n.s. 49, p. 95. The report draws the conclusion that the Czech Republic, Poland and Ro-
mania present similarities, since the principles of the duty of loyalty drawn off from ordinary civil
law were not amplified or adjusted to the specific circumstances of fiduciary duties in business law
and do not seem to play a big role in jurisprudence .
70 art.137 ind. 1 par. 3 of Law no.441/2006 in conjunction with Ordinance no. 82/2007.
71 art. 137 ind.1 par. 4 of Law no. 31/1990
28 Adina Ponta
5.2. Directors’ duty of loyalty in the Civil Code and in the Companies
Act
The legal fiduciary relationship is def ined by British literature72 as the
relationship in which one party acts in the name and on behalf of the other party,
the foundation of this relationship is the concept of trust. Following the same
rationale, the Romanian legislature chose to regulate fidu ciary duties as institu-
tions deriving from the agency contract and from the i nstitution of „ managing the
assets of another person”.
The doctrinal and jurisprudential interpretation of the duty of loyalty in
Romania drifts from the general duty of good fai th in the execution of mandate
in art. 970 Civil Code, in conjunction with th e duty to „ manage an asset of another
person”, provided for in the Companies Act. Romanian doctrine regards the duty
of loyalty as „ the heart of the general duty of good faith” and as its active com-
ponent, which enhances the legal value of this general civil law institution73.
In the same manner, the legislature regulates the duty to duly inform and
the duty of transparency, which are in an interdependent relationship with the
duty of loyalty, i.e. the duty to avoid or declare conflicts of interest between di-
rectors and the company. The general duty is included in art. 2018 par. 2 Civil
Code (the former art. 378 Commercial Code) and is supplemented by provisions
of the special law.74
While the Companies Act does not contain any express provisions on the
performance of directors’ office in good faith, the Civil Code provisions applica-
ble to the agency contract are used to fill these gaps. Art. 803 par. 2 Civil Code,
regarding the part nership agreement, provides for a general duty of loyalty and
duty of the trustee to act with honesty and loyalty in order to achieve the best
interests of the beneficiary or the intended purpose. In addition, art. 72 of Law
no. 31/1990 states that " direct ors’ duties and responsibilities are regulated by the
provisions of the agency contract and by the present law ”. Given the remunerated
nature of the corporate mandate according to the wording of the amended legal
norm, directors’ liability is assessed by the abstract type of fault, namely, culpa
levis in abstracto .
Similarly, the duty of care provided for in art. 144 ind. 1 of Law no.
31/1990 was introduced in 2006. By formulation of this standard of conduct,
namely, " board members will exercise their mand ate with prudence and diligence
of a good manager ", the legislator maintained the essence of this fiduciary duty
from common law . However, the legal text remains loyal to the nature and essence
of the institution of „ managing the assets of another person” in art. 1330 Civil
72 Hood., P., Director's Duties under the Companies Act 2006: Clarity or Confusion? , „The Journal
of Corporate Law Studies ”, Hart Publishing Vol. 13, London, 2013, p. 1 -49.
73 Supra n.s. 4, p. 172.
74 Art. 1172, art. 131 par. 5, art. 1539 of the Law no. 31/1990, art. 224 of the Law no. 297/2004 of
the Stock Market.
The Evolution and Challenges of Directors ' Duty of Loyalty 29
Code. According to the legal norm, these provisions are not applicable to limited
liability companies or to joint stock companies. In the same manner, par. 2 of art.
144 ind. 1 adopts the Business judgment rule by including classical com ponents,
such as the duty to be aware of relevant information on the evolution of corporate
life while supervising it.
A reference Decision is Decision no. 2907/19.05.2011 pronounced by the
Administrative and Tax Law Division of the Supreme Court, when the Supreme
Court maintained the legality of the decision of the boards of directors of Roma-
nia’s National Bank, ordering the withdrawal of the authorization granted to a
person who was holding the position as member of the board of a commercial
bank. The Cou rt determined violations of the duty of care because the director
voted in favor of granting advantageous credits to a company that owned 49% of
the share capital of another company, where he was a member of the board as
well.
The Supreme Court rejected the director 's appeal by applying the provi-
sions for both fiduciary duties provided in the Companies Act, the duty of care
and the duty of loyalty75. According to the status quo retained by the court and to
the reasoning of the Decision, motivation, we cons ider that the marking of the
duty of loyalty would have been more appropriate than the acknowledgement of
the violation of the duty of care. The court acknowledged the applicability of art.
144 ind.1 of the Companies Act, but observed the conflict of inter ests covered by
art. 144 ind. 3, which is in our view a typical breach of the duty of loyalty and not
of the duty of care. As detailed in the previous section, good faith is a character-
istic of due diligence and prudence, but in essence, the concept of goo d faith is
the core of the duty of loyalty76. Furthermore, according to doctrinal and juris-
prudential establishment of the notion of “loyalty in business law, directors’ per-
sonal financial interest is a classical situation of breach of the duty of loyalty. The
court considers that " the lack of objectivity and impartiality by a person having
powers / qualities, both within the company and within the credit institution is
obvious, because the two don’t converge to a common interest ." Although the
claimant 's lack of good faith as a former director is obvious, we consider that the
court makes a confusion between the two fiduciary duties, which according to the
current legal regulation only has theoretical importance, since the effects of pen-
alty are the same in c ases of violations of either fiduciary duty.
The wording chosen by the Romanian legislature remains faithful to the
classic concept of loyalty, namely in the absence of contradiction of interest, the
legal text does not apply. Referential doctrine reflects directors’ duty of loyalty
75 For more details, see Ponta, A.: The Evolution and Complexity of Directors' Duty of Care, „Per-
spectives of Business Law Journal” , Vol. 4, Issue 1, November 2015, p. 38 -51.
76 Supra n.s. 49, p. 69. The report draws the conclusion that, according to Romanian doctrine and
jurisprudence, the general duty of good faith in art. 14 Civil Code represents the essence of the duty
of loyalty.
30 Adina Ponta
towards the company as being " essentially the duty to treat the company's busi-
ness with fairness and honesty, only pursuing the interests of the company and
refraining from prevailing personal interests while in office and from entering in
conflict of interests with the company "77. As manager of another person’s inter-
ests, the director must promote exclusively corporate interests, without being
tempted by the distortion of the delegated powers or by mismanaging the ultimate
goal of the company.
6. Conclusion
Business law, having a distinct vocabulary, practices and applicability in
specific communities, implements ordinary law rules through their institutionali-
zation with particularities of this legal discipline. Due to its hetero geneity, the
duty of loyalty was not conferred the chance of articulation of specific rules that
exhaustively list the circumstances for breaching this fiduciary duty, but case law
customized the expressions of loyalty from the common language of the term.
Loyalty remains a social and moral norm and a legal standard that cannot be re-
duced to one single rule.
Through the amplitude of the concept outside the business law literature
and by the unfortunate limiting of the duty of care in this context, the conce pt of
"loyalty" can provide courts and corporate governance actors the answer to the
requirement of the expansion of this duty. The expansion of the duty of loyalty in
recent case law is expressed by the overcome of the negative condition of lack of
betray al and by including active elements of attention and devotion. The doctri-
nal, jurisprudential and customary trend in corporate governance is maintenance
of the duty of loyalty as the focus of fiduciary duties and of morality of business
law. Although confl icts of interests ceased to be associated with duty of care vi-
olations, the overlap of the fundamental fiduciary duties cannot be avoided. The
confluence of legal and economic elements in the past three decades has begun
to lose ground to the emergent theo ries which activate moral norms and enrich
the understanding of the relationship between social norms and business law. We
consider that removing these theories from the context of inter -networking of law
with social norms would not be appropriate for the clarification of fiduciary duties
and would harm the potential of business law to enrich the content of the generous
notion of loyalty. The wider context of public morals enables literature to gain
linguistic access and the gives courts the possibility of expressing and imposing
social norms in business law practice.
Similarly, in continental business law, directors’ duties to promote the
highest interests of the company is broadly interpreted as being the legal basis of
the often unwritten duty of loyalty. Directors who take advantage of corporate
77 Supra n.s. 5, p. 173.
The Evolution and Challenges of Directors ' Duty of Loyalty 31
opportunities are viewed as manifesting a conduct that does not promote the high-
est interest of the company.
Under Romanian national law, loyalty reflects the personal subjective
business concept of directors, who are required to do everything that they reason-
ably believe to be in the best interests of the company, the duty of loyalty being
closely attached to the institution of good faith and reflecting the intuituu perso-
nae nature of agency law. The notion of tru st is central to the concept of loyalty
in business law, but by lacking rich jurisprudence in this domain, the development
of this concept is currently a mission of the doctrine.
Bibliography
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ung, Mohr Siebeck, Tübingen, 2005.
7. Todică, Carmen: Răspunderea juridică civilă a ad ministratorului societății
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Econ Research Paper” no. 08 -17, 2009.
3. Branson, Douglas M ., Assault On another citadel: Attempts to curtail the fidu-
ciary standard of loyalty applicable to corporate directors , „Fordham Law Re-
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ropean Countries, „The Macrotheme Review” 4(7), Austin, Texas, 2015.
5. Cooter, Robert, Freedman, Bradley J.: The fiduciary relationship: its economic
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no. 99, New York, 1999.
32 Adina Ponta
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Studies” no. 27, Chicago, 1998
8. Fletcher, George P: Loyalty : An Essay on the morality of relationships , New
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10. Hood, Paul, Director's Duties under the Companies Act 2006, „Journal of Cor-
porate Law” vol. 13, 2013.
11. Johnson, Lyman: After Enron : Remembering Loyalty Discourse in Corporate
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Durham, USA, 1993.
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Tribune –Tribuna Juridica”, vol. 5, issue 2, Bucharest, 2015.
15. Ponta, A: The Evolution and Complexity of Directors' Duty of Care, „Perspec-
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16. Ruder, D. S.: Duty of Loyalty —A Law Professor's Status Report , „Business Law
Review” no. 40, 1984.
17. Talley, Eric : The corporate opportunity doctrine, „Economics and Organization
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Other
1. Study on Directors’ Duties and Liability, prepared for the European Commis-
sion, by Carsten Gerner -Beuerle, Philipp Paech and Edmund Philipp Schuster
(Department of Law, London School of Economics), London, April 2013, LSE
Enterprise.
Administrative Contracts in the European Union Law
Associate professor Cătălin -Silviu SĂRARU1
Abstract
The administrative contracts of procurement and concessions involving substan-
tial funds, one of the main sources that feed the ongoing process of economic and social
development of Member States. The article analyzes developments in European legisla-
tion on public contracts and concessions, purpose and action directions of these regula-
tions. The article p oints out the role of EU regulations in the field of public contracts. It
stresses that freedom of exchange and application of competition rules of the common
law can not be sufficient to ensure a genuine internal market for public contracts in the
Europea n Union. To these must be added the harmonization of procedures in Member
States through EU directives regulating: to choose the form of adjudication, advertising,
conditions for participation of undertakings, conditions for awarding contracts, ways of
contesting the proceedings.
Keywords: administrative contracts, public procurement, concessions, Euro-
pean Union law, the Single Market.
JEL Classification: K23, K33
1. Evolution of EU legislation on of public procurement contracts and
concessions
The logic of the European Communities was right, since their creation,
the economy, the single market, promoting fair competition between markets and
services2.
The administrative contracts of procurement and concessions involving
substantial funds, one of the main sources that feed the ongoing process of eco-
nomic and social development of Member States. The lack of open and effective
competition in public contracts was long one of the most obvious obstacles to
completing the internal market in the European communiti es.
First Community law which regulated this field was Directive 70/32 EEC
of 17 December 1969 on public procurement. This directive only wanted to ob-
tain a coordination of national rules not provide for the removal of inequalities in
1 Cătălin Silviu Săraru – Law Department, Bucharest University of Economic Studies, Romania,
E-mail: catalinsararu@yahoo.com.
2 See Geo rges Vlachos, Droit public économique français et européen , 2e édition, Dalloz, Paris,
2001 , p. 222.
34 Cătălin -Silviu Săraru
national laws and has not implemented at the level of public contracts, the Com-
munity principles on the free circulation of goods, works and services3.
A step forward was made by Directive 71/305 of 26 July 1971 concerning
the award of public works contracts and Directive 77/6 2 of 21 December 1976
concerning the award of public contracts. These laws have imposed certain obli-
gations towards the establishment of a common market:
– Announcing the public invitation competitions between entrepreneurs
by limiting direct agreement pro cedures;
– Publication in an official journal of the European public procurement
contract notices;
– Inclusion in documents accompanying technical specifications of the
contract, which may refer to national or European standards.
This regulation, however, was insufficient, leaving many unresolved is-
sues4:
– The existence of thresholds for application of the Directives excessively
high;
– Non-coercive character of the selection of procurement procedures,
technical specifications and criteria for awarding con tracts;
– The narrow confines for auctioning, which was detrimental to foreign
bidders;
– Limitation to a specific area, given that the regulations did not include
service contracts; and defense equipment contracts; public service contracts in
the water, e nergy, transport and telecommunications;
– Contain no appeal procedure, although appeals in national systems are
often inadequate and differs significantly specifics law.
Community legislation has evolved further in the following directions5:
a) impr oving existing directives:
– Directive 77/62 of 21 December 1976 was supplemented by Directive
88/255 of 5 March 1988 concerning the award of public contracts;
– Directive 71/305 of 26 July 1971 Directive 89/440 was completed July
18 1989 on the awarding o f public works;
b) regulation of sectors that were not previously covered:
– It was approved Directive 92/50 of 18 June 1992 on the coordination of
procedures for the award of public service contracts;
– Directive 90/531 was adopted on 17 September 1 990 on the procure-
ment procedures of establishments operating in the water, energy, transport and
telecommunications.
3 Dumitru Cernei, Studiu comparativ privind achizițiile publice , Chișinău, 2002, under the auspices
TACIS, p. 3.
4 Idem.
5 Ibidem, op. cit. , p. 4.
Administrative Contracts in the European Union Law 35
At June 14, 1993 were approved three basic directives for the three sec-
tors of government procurement:
– Directive 93/36 / EEC of 14 June 1993 on the coordination of proce-
dures for the award of public supply contracts;
– Directive 93/37 / EEC of 14 June 1993 on the coordination of proce-
dures for the award of public works contracts;
– Directive 93/38 / EEC of 14 June 1993 on the procurement p rocedures
of establishments operating in the water, energy, transport and telecommunica-
tions.
These directives have been amended subsequently by other laws.
Review procedures have been regulated by Directive 89/665 / EEC of 21
December 1989 on the coordina tion of laws, regulations and administrative pro-
visions relating to enforcement proceedings for the appeal against the award of
public supply contracts and public works6 and Directive 92/13/EEC of 25 Febru-
ary 1992 coordinating the laws, regulations and adm inistrative provisions relat-
ing to the application of Community rules on the procurement procedures of en-
tities operating in the water, energy, transport and telecommunications7. Alt-
hough they have undergone many changes, Directives 89/665 / EEC and 92/13 /
EEC are in effect today.
In 2004 EU legislation on public contracts has been revised and simpli-
fied. Thus the whole field of public procurement has been synthesized in two
directives:
– Directive 18 / EC / 2004 of the European Parliament and of the Counc il
of 31 March 2004 on the coordination of procedures for the award of public works
contracts, goods and services8 takes over and completes the provisions of Direc-
tives 93/36 / EEC, 93/37 / EEC and 92/50 / EEC, the directives being repealed.
– Directive 17 / EC / 2004 of the European Parliament and the European
Council of 31 March 2004 coordinating the procurement procedures of entities
operating in the water, energy, transport and postal services9 which repeals Di-
rective 93/38 / EEC.
The purpose of this re view it was to modernize and simplify the Direc-
tives, aiming to:
– Unification and consolidation classic directives on supplies, services
and works into one with identical rules and procedures for all three sectors;
– Adapting directives to existing practi ces in Member States and the Eu-
ropean Court of Justice;
6 Published in the Official Journal of the European Communities, series L, no. 395 of December
30, 1989, as amended and supplemented.
7 Published in the Official Journal of the European Communities, series L, no. 76 of 23 March 1992
with subsequent amendmen ts.
8 Published in J.O. L 134 of 30 April 2004.
9 Published in J.O. L 134/1 of 30 April 2004.
36 Cătălin -Silviu Săraru
– Allow the use of electronic communication, electronic procurement of
new technologies and procedures more flexible.
In 2014 the European Union appeared November 3 directive on public
contracts:
– Directive 2014/23 / EU of the European Parliament and of the Council
of 26 February 2014 on the award of concession contracts10;
– Directive 2014/24 / EU of the European Parliament and of the Council
of 26 February 2014 on public procurement and repealing Dir ective 2004/18 /
EC11;
– Directive 2014/25 / EU of the European Parliament and of the Council
of 26 February 2014 on procurement by entities operating in the water, energy,
transport and postal services and repealing Directive 2004/17 / EC12.
Member States have had a period of 24 months to transpose the Directive
into national laws.
The new directive redefines the concept of contracting authority, refer-
ring to authorities sub -central (regional or local) which will benefit thresholds,
rules of advertising and deadlines more flexible, determine the conditions under
which it can change public procurement contract, shortening minimum public
tender procedure and organization first established general principles to be ob-
served in the award, performance and terminat ion of concessions.
2. Considerations about the purpose of EU regulations in the field of
administrative contracts
With regard to, EU regulations in the field of public contracts and con-
cessions we make the following remarks13:
– European directives on public contracts establish general principles to
give unity of economically European construction14: the prohibition provisions
and discriminatory practices with respect to foreigners, especially in order to ben-
efit from the concessions or aut horizations concession issued State or other public
law (general programs adopted by EEC December 18, 1961); providing guaran-
tees for fair competition through transparent tender procedures and award (Di-
rective 93/37 / EEC); respect for the election procedu re of the contractor, the
10 Published in the Official Journal of the European Union L 94 of 28.3.2014.
11 Published in the Official Journal of the European Union L 94 of 28.3.2014.
12 Published in the Official Journal of the European Union L 94 of 28.3.2014.
13 See Cătălin -Silviu Săraru, Contractele administrative. Reglementare. Doctrină. Jurisprudență ,
C.H. Beck Publishing House, Bucharest, 2009 , p. 425 -432.
14 For details see Cătălin -Silviu Săraru, Contractele publice, in Ioan Alexandru (coord.), Dreptul
administrativ în Uniunea Europeană , Lumina Lex Publishing House, Bucharest, 2007, p. 308 -314;
Martin Trybus, Public contracts in European Union internal market law: foundations and require-
ments , in Rozen Noguellou, Ulrich Stelkens (coord.), „Comparative Law on Public Contracts”,
Bruylant, Bruxelles, 2010, p. 81 -119.
Administrative Contracts in the European Union Law 37
principles15 of non -discrimination, equal treatment, transparency, proportional-
ity16 and conclusion of the contract intuitu personae17.
– European legislation in this area aims at opening to competition of
procedures for awarding public contracts for all enterprises across the Euro-
pean Union18. The role of EU regulation from economic desire is to overcome
national boundaries giving freedom of movement and economic operators, on the
other hand, to prohibit discrimination between publ ic and private operators19. Ac-
cording to the mutual recognition principle , the Member States must accept the
products and services provided by operators in other EU countries, where prod-
ucts and services are standards set by the law of the Member State of o rigin20.
Transparency of procedures for awarding contracts is an underlying principle
of the rules prohibiting discriminations between operators21. Then, of the EU reg-
ulations on public contracts are outlined clearly the principle of equal treatment
of publi c and private operators22, under which EU rules apply to public and
15 According to para. (2) of the preamble to Directive no. 2004/18 / EC award of contracts conclud ed
in the Member States of the Union on behalf of the State, local authorities and other bodies governed
by public law must respect the principles of the EC Treaty and in particular the free movement of
goods, freedom of establishment and the principle of freedom to provide services and the principles
deriving therefrom, such as equal treatment, non -discrimination, mutual recognition, proportional-
ity and transparency.
16 See Dumitru -Daniel Șerban, Principiul proporționalității în domeniul achizițiilor publice , „Drep-
tul” no. 9/2007, p. 77 -99 where the author analyzes the concept of proportionality in Community
law and public procurement law in Romania.
17 See Communication interpretation of Commission on concessions under Community law, pub-
lished in OJ C 121 of 04.29.2000.
18 See also Pierre Mathijsen, Compediu de drept european , 7th edition, Bucharest, Club Europa
Publishing House, 2002, p. 448 -451.
19 On EU policy on competition and state aid incompatible with EU internal market see Cătălin –
Silviu Săraru, State Aids that are Incompatible with the Internal Market in European Court of Jus-
tice Case Law , p. 39 -48 in Cătălin -Silviu Săraru, Studies of Business Law – Recent Developments
and Perspectives , Peter Lang, Frankfurt am Main, 2013; on the application of th e principles of non –
discrimination and equal treatment in the award of public procurement contracts in the EU and the
EU Court of Justice to see Martin Trybus, op. cit. , 2010, p. 98 -102.
20 For a study on the principle of mutual recognition to see Mădălin I rinel Niculeasa, Legislația
achizițiilor publice. Comentarii și explicații , C.H. Beck Publishing House, Bucharest, 2007, p. 55 –
80. Applying this principle in public procurement means that the Member State where the service
is provided or the goods delivere d must accept the technical specifications, certificates and qualifi-
cations obtained in another Member State. Thus, for example, the Member State where the service
is provided must accept the equivalent qualifications already acquired by the service provid er in
another Member State, qualification attesting professional capacities, technical and financial (p. 55,
56).
21 Martin Trybus, op. cit. , 2010, p. 103 -109.
22 Under the influence of this principle we are witnessing today an evolution marked consisting of
the progressive abandonment of markets protected operating in traditionally some public enter-
prises managing public services (mainly in the sectors of air transport and rail, telecommunications
and energy) in favor of a effective competition between publi c and private operators – see in this
regard Jean -Philippe Colson, Droit public économique , 3e édition, L.G.D.J., Paris, 2001 , p. 333,
334.
38 Cătălin -Silviu Săraru
private enterprises the same conditions. EU law therefore acts as a unifying factor
of public and private law. We find that the model public -private partition French
legal system is not in EU law23. Interests and ideals that Europe serves nowadays
it seems no longer compatible with the "royalty" of administrative law, the
frenchman P. Legendre24 was talking about.
Unlike the French model, EU law has its source in an opposite -sharing
social rol es, the promotion of private enterprise and market principles implies a
significant reduction in administrative functions and public law that underpins
them. French doctrine is estimated that no sector is more difficult to reconcile
with freedom of movemen t or provision of services in the European Union as the
administrative contracts, because those contracts are, by their nature, discrimina-
tory, one of the contractors is a public authority acting in pursuit of public inter-
est25. The European Community has t herefore undertaken a sustained effort to
progressively towards liberalization of public contracts. This liberalization was
applied successively of public works, supplies, services; concessions; certain cat-
egories of purchases in particular sectors (water, energy, transport, telecommuni-
cations);
– EU law focused on the development of the single market gave rise to
living disputes at national level where he often put the question of delimitation
of borders between market logic and common mode internal public of any
State , or in other words, border demarcation between EU interests and interests
national26. So-called conflict between the logic of the single market private and
public logic which was in the national sovereignty of each state was mostly solved
judicially. In French jurisprudence for example emphasized that not every con-
cession enters the field of reference of the EEC Treaty – „this being an operation
for a national activity on which the hand over, and a public authority, his regime
keep right intern al. There will be no interference with Community law than when
concession creates relationships likely to question the rules of the Common Mar-
ket”27, particularly competitive conditions for environmental protection in the
Union. Likewise ruled the European Court of Justice judgment of 18 June 1991
on the concession of exclusive rights in broadcasting – "Community law does not
preclude the award of a monopoly on television for reasons of public interest,
non-economic. However, the organizational arrangements and to exercise such a
monopoly must not create any damage Treaty provisions on the free movement
23 See also Ioan Alexandru, Mihaela Cărăușan, Sorin Bucur, Drept administrativ , Lumina Lex Pub-
lishing House, Bucharest, 2005 , p. 399 -401.
24 P. Legendre, Trésor historique de l’État en France , Fayard, 1992.
25 See L. Cartou, J. -L. Clergerie, A. Gruber, P. Rambaud, L’Union européenne , Dalloz, 2000, 3e
éd., p. 306.
26 See Iulian Avram, Contractele de concesiune , Rosetti Publishing House, Bucharest, 2003 , p. 222,
223.
27 C. Brechon -Moulenes, F. Lorens, M. Bazex; G. Guisolphe, J. -B. Auby, P. Delvolve, La conces-
sion de service public face au droit communautaire , Sirey, Paris, 1992, p. 59.
Administrative Contracts in the European Union Law 39
of goods and services, as competition rules". We have some reservations about
the idea boundary between EU law and national law based primarily on Kelsen's
view, widely accepted today that the Roman -Germanic law system is subordi-
nated to the principle of hierarchy of laws and there can not be two parallel sys-
tems of law into a country. In jurisprudence and doctrine often meet reflexes of
national sovereignty. T hus, we find that although the EC Treaty and ECJ case law
[causes Costa v. ENEL (1964) and Case Simmenthal II (1977) ] have stressed the
principle of priority of Community law over national regulations in many Mem-
ber States law has placed Community law in a position intermediate between the
Constitution and other internal regulations, thus consecrating the strong imprint
of national sovereignty28. In this regard remained benchmark German Federal
Constitutional Court ruling of May 29, 1974 Handelsgesellschaft mbH for Inter-
national against Einfuhr , known as Solange I (repeated and amplified in deci-
sions Solange II – 1983 and Maastricht Decision – 1993). The Court stated in that
judgment that as long as (solange in German) Community did not eliminate the
possible conflict of rules between Community law and national constitutional
rights of the German, Constitutional Court could ensure that the latter have pri-
ority. The doctrine speaks today about Solange spirit in all those decisions falling
European constitutiona l courts, in accordance with the provisions of national con-
stitutions express or implied, limits imposed partial or absolute precedence of
Community law to national constitutional provisions. The limits aimed at politi-
cal and legal values of national ident ity established by constitutional provisions
which are not accepted to be reviewed if their inconsistency with Community
law. The Member States meet in two typologies of great spirit Solange . In a first
typology is found the group of countries (Italy, Germ any, Denmark, Belgium,
Spain, Sweden, Ireland, UK) who have limited partly precedence of Community
law to the Constitution own, assuming the right to check the courts their consti-
tutional constitutionality of Community law only in connection with certain f un-
damental constitutional values related to cultural identity and political -juridical
respective nations. The second typology enter states (France, Greece) have not
agreed, in principle, any precedence of EU law over national constitution. But
beyond these legal types, reality showed that it would be very difficult to use in
a particular state standards and practices for implementing various EU and na-
tional legislation29. Increasingly, national institutions have applied the same
standards and the same practi ces used for both. This leads to the idea of a right of
public administration jointly developed EU member states. This kind of "contam-
ination" of national legislation to EU law principles contribute to establishing a
European Administrative Space.
28 See Manuel Guțan, Forme pe un alt fond: transplantul juridic comunitar și cultura juridică ro-
mânească , „Pandectele Române” no. 5/2008 , p. 28, 29.
29 Jürgen Schwarze, European Administrative Law, Office for official publications of the European
communities , Sweet and Maxwell, 1992.
40 Cătălin -Silviu Săraru
3. Conclusions
We believe that the opening made by EU law and common principles
developed by the European Court of Justice, operates in favor of the use of con-
tractual techniques and dissipation gradations between public and private. Euro-
pean legislation in this area aims at opening to competition of procedures for
awarding public contracts for all enterprises across the European Union30.
The rules on public contracts were often subject to official interpretation
made by the European Commission. Such interpret ation can be referred to Com-
mission Communication on concessions under Community law of 04/29/2000
(200 / C121 / 02). Management of the deployment of these contracts involving
EU funds is controlled by the European Court of Auditors conducting some re-
ports such as for example „ Special Report No 10/2000 on the public contracts
awarded by the Joint Research Centre, together with the Commission’s replies ”
(2000/C172/01).
Gradually it became clear that freedom of exchange and application of
competition rules o f the common law can not be sufficient to ensure a genuine
internal market for public contracts in the European Union. To these must be
added the harmonization of procedures across Member States by means of direc-
tives governing: choose the form of adjudica tion, advertising, conditions for par-
ticipation of undertakings, conditions for awarding contracts, ways of contesting
the proceedings31.
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loz, Paris, 2001 .
2. Dumitru Cernei, Studiu comparativ privind achizițiile publice , TACIS,
Chișinău, 2002.
3. Cătălin -Silviu Săraru, Contractele administrative. Reglementare. Doctrină. Ju-
risprudență , C.H. Beck Publishing House, Bucharest, 2009 .
4. Cătălin -Silviu Săraru, Contractele publice, in Ioan Alexandru (coord.), Dreptul
administrativ în Uniunea Europeană , Lumina Lex Publishing House, Bucharest,
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dations and requirements , in Rozen Noguellou, Ulrich Stelkens (coord.), „Com-
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6. Dumitru -Daniel Șerban, Principiul proporționalității în domeniul achizițiilor
publice , „Dreptul” no. 9/2007, p. 77 -99.
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30 For details, see Pierre Mathijsen, op. cit , 2002, p. 448 -451.
31 L. Cartou, J. -L. Clergerie, A. Gruber, P. Rambaud, op. cit. , 2000, p. 308.
Administrative Contracts in the European Union Law 41
8. Cătălin -Silviu Săraru, State Aids that are Incompatible with the Internal Market
in European Court of Justice Case Law , p. 39 -48 in Cătălin -Silviu Săraru, Stud-
ies of Business Law – Recent Developments and Perspectives , Peter Lang, Frank-
furt am Main, 2013.
9. Mădălin Irinel Niculeasa, Legislația achizițiilor publice. Comentarii și expli-
cații, C.H. Beck Publishing House, Bucharest, 2007.
10. Jean-Philippe Colson, Droit public économique , 3e édition, L.G.D.J., Paris,
2001 .
11. Ioan Alexandru, Mihaela Cărăușan, Sorin Bucur, Drept administrativ , Lumina
Lex Publishing House, Bucharest, 2005 .
12. P. Legendre, Trésor historique de l’État en France , Fayard, 1992.
13. L. Cartou, J. -L. Clergerie, A. Gruber, P. R ambaud, L’Union européenne , 3e éd.,
Dalloz, 2000.
14. Iulian Avram, Contractele de concesiune , Rosetti Publishing House, Bucharest,
2003 .
15. C. Brechon -Moulenes, F. Lorens, M. Bazex; G. Guisolphe, J. -B. Auby, P.
Delvolve, La concession de service public face au droit communautaire , Sirey,
Paris, 1992.
16. Manuel Guțan, Forme pe un alt fond: transplantul juridic comunitar și cultura
juridică românească , „Pandectele Române” no. 5/2008 .
17. Jürgen Schwarze, European Administrative Law, Office for official publications
of the European communities , Sweet and Maxwell, 1992.
The Improvement of Legal Framework of the Limited Liability
Company Provided by International Uniform Law
Associate professor Charlotte ENE1
Lecturer Ileana VOICA2
Abstract
One of the tasks assumed by the European Commission is to create a suitable
legal framework for companies in order to facilitate the cross -border cooperation and to
consolidate the European internal market. This article examines mainly the legal frame-
work of Societas Privata Europaea, a supranational private limited liability company
designated especially for small and medium enterprises, as one of the dimension o f the
harmonization process of the corporate law in the EU. In this regard, it starts by outlining
the evolution of the European Private Company, and then presents the proposal for the
Statute of this company. In the end, this article are analyzed other pr ovisions regarding
similar supranational structure drafted by international law -makings in order to draw
the future developments. In conclusion, this form of supranational company will improve
the legal framework of Limited Liability Company by eliminating a great amount of un-
certainties in doing trans -border businesses into internal market, and allowing to set up
the same European legal entity across the Member States.
Keywords : European company law, European Private Company, Societas Pri-
vata Europaea, cross -border activities, articles of association.
JEL Classification : K22, K33
1. Introduction
In order to facilitate the cross -border activities of those SMEs engaged in
integrated European market, it had been developed the European Private Com-
pany (as it is known the Societas Privata Europea ), a new supranational form of
business organization.
Thus, on June 2008, the European Commission submitted a proposal for
a Council Regulation (hereina fter Regulation) on the Statute for a European Pri-
vate Company (EPC), „adapted to the specific needs of SMEs.”3 One year later,
the European Parliament approved the proposed Regulation and it added the rec-
ommendation for the commission to amend it, stressi ng that this type of company
1 Charlotte Ene – Law Department, Bucharest University of Economic Studies, Romania, E -mail:
enecharlotte@gmail.com.
2 Ileana Voica – Law Department, Bucharest University of Economic Studies, Romania, E -mail:
ileana_voica@yahoo.com.
3 Proposal for a Council Regulation on the Statute for a European Private Company, published
under COM (2008) 396/3.
44 Charlotte E ne, Ileana V oica
should have a cross -border dimension. This amendment was confirmed by the
Council in the Revised Presidency Compromise Proposal. So, from 20114 a re-
vised version of the proposal of the regulation of the Council regarding Europe an
Private Company has expected to be approved by all Member States in accord-
ance with Art.352 of TFUE.
This paper intends to analyse the specific characteristics of the European
Private Company (hereinafter EPC) and to underline the extent to which this su-
pranational form of business organization respond to Single Market needs.
2. The main provision of the Statute of European Private Company
(EPC)
From the beginning, we must emphasize that EPC is „genuinely Euro-
pean company,”5 it is governed mainly by the Council Regulation, ensuring uni-
formity of this company in the European Union.6 However, where a specific issue
is not covered by the Regulation or by its Article of Association, shall be applied
the law governing private limi ted liability companies of the Member State in
which SPE sets its registered headquarter, its central administration or principal
place of business, which.7
SPE is a closed limited liability company, subject of law from the date of
its registration with th e specific register according to the applicable national law.
8 Moreover, at the moment of its formation SPE has to have a cross -border di-
mension, such as: intention to operate abroad; setting -up a subsidiary in different
Member Statesm; or foreign associa tes.9
a. Formation
The Regulation provides two ways of the setting -up of SPE: ex nihilo , or
by restructuring of the allready existing companies (by transforming, by dividing,
or by the merger) under national law. Therefore, a SPE may be setting -up by one
or more natural of legal persons, belonging to a Member State, including another
SPE.
The founding shareholder shall draw up and sign the Article of Associa-
tion, according to the Annex I of the Regulation. The name of the SPE has to
specify the type of th e company by including the abbreviation „SPE.”10
4 Council’s decision DRS 84 SOC 432 from May 23, 2011.
5 Miroslawa Myszke -Novakowska, The European private company -dream big but cautiously? ,
“Intereulaweast”, Vol.II (1) 2015, p.31
6 Explanatory Memorandum of the Proposal for a Council Regulation on the St atute for a European
Private Company, point 7 – “Explanation of the Proposal”.
7 Art.4, (1) of Regulation.
8 Luminita Tuleasca, Societas Privata Europaea versus Societas Europaea , “Challenges of the
Knowledge Society. Legal sciences”, 2012, p. 268.
9 Idem , 271.
10 Art.6, first paragraph of Regulation.
The Improvement of Legal Framework of the Limited Liability Company 45
Taking into account that the Regulation does not contain a distinctive
registration procedure, shall be applied the provisions of the First EU Directive
on Company Law,11 setting out some formalities of the re gistration, such as to
file specific documents of the SPE by paper means of by electronic means, in
order that third parties may be able to ascertain their contents. Aiming at ensuring
an easier and cheaper procedure, Regulation provides for a single autho rity able
to control the leglity of registration of the SPE.
b. Shareholders and shares
According to the Art.2, paragraph (a) of the Regulation „shareholder
means the founding shareholder and any other person whose name is entered in
the list of shareholde rs.” Shareholders are those persons who own shares issued
by SPE, in exchange or their consideration (contributions) in cash or/and in kind
to the capital of that company, and are entitled to receive the distribution from
the assets of the company. Shareho lders shall decide upon SPE by the resolution
of the shareholders adopted with majority of their votes. All the shareholders of
the SPE shall be registered in the list of the shareholders drawn up and kept by
the management body of the company. That list r epresents an evidence of share-
holders and their shares, and it may be inspected by any interested person. Also,
the Regulation provides both the expulsion and the withdrawal of the sharehold-
ers under well determined circumstances. Each shareholder shall no t be liable for
more than the amount of his/her contribution to the registered (share) capital of
SPE.
The both ordinary or priority shares issued by SPE shall not be offered to
the public or publicly traded. However, each class of share confers specific r ights
and obligations to their owners, decided by the resolution of the shareholder
adopting with a majority of not less than two -third of the voting rights attached
to each class of shares.12 Also, the procedure of the transfer of the shares shall be
speci fied in the Article of Association in accordance with the provision of the
Art.16 of the Regulation. Under specific conditions, SPE may acquire its own
shares in order to protect its assets, based on the balance -sheet test and, a solvency
certificate, if i t is required by the Article of Association.
c. The share capital
Taking into account that nowadays the amount of the registered capital
of the company does not reflect its solvency anymore, the Regulation provides a
minimum capital requirement at one euro , which shall be fully subscribed.13
Shareholder must pay the consideration in cash or in kind as they stipulated in
11 Directive 2009/101/EC of the European Parliament and of the Council of 16 September 2009 on
coordination of safeguards which, for the protection of the interests of members and third parties,
are required by Member States of companies within the meaning o f the second paragraph of Article
48 of the Treaty, with a view to making such safeguards equivalent, OJ L258, 1.10.2009.
12 Art.14 of the Regulation.
13 Art.19 of the Regulation.
46 Charlotte E ne, Ileana V oica
Article of Association. They are liable for the fullfilment of the obligation of con-
tribution according the applicable national law. On the basis of the proposal of
the directors, SPE shall make a distribution to shareholders from assets of the
SPE, according to the Article of Association. The same procedure shall be fol-
lowed in case of the reduction of the share capital of the SPE.
d. Interna l organization of SPE
The organization of the SPE is established by shareholders who exercise
the decizional powers inside SPE through resolutions of the shareholders adopted
by a majority specified in the Article of Association. It is not necessary to hel d a
general meeting, in this regard, the management body shall provide all sharehold-
ers with the proposal for resolutions and all information needed. Resolution shall
be recorded in writing, and disclosed. Article 27 of Regulation provides the deci-
sional d uties of the shareholders.
The management body is responsible for running the company. The Ar-
ticle of Association must set out the terms and condition of the mandates of the
directors, members of the management body of the SPE. The Regulation speci-
fied th e general standard and skill reasonably required from directors in the con-
duct of business, in acting in the best interest of the SPE. Directors must avoid
any actal or potential conflicts of interests. Also, Regulation provides the liability
of the direct or for breach of their duties.
e. Restructuring, dissolution and nullity
The Regulation contains provisions regarging the dissolution of the SPE,
when the period for which it was established has expired, or the shareholder have
decided it, etc. The transfo rmation SPE to a national company, or the restructur-
ing, winding -up, liquidation, suspension of payments and nullity of the SPE shall
be governed in accordance with applicable national law.14
3. Concluding remarks
Base on the above analysis, it can be stated that the Proposal of the Stat-
ute of SPE drafted by the Commission offers an uniform and liberal legal frame-
work for SPE, in line with the Lisbon Strategy and recent developments of the
national laws of the Member States. It is drafted taken into considera tion the spe-
cific needs of SMEs, encouraging flexibility and cross border mobility inside Sin-
gle Market as well as cutting operating costs.
Bibliography
1. Karnak, D., The European Private Company – Entering the Scene or Lost in
Discussion ?, “German Law Journal”, Vol.10, No.08, 2009.
14 Art.39 and Art.40 of Regulation.
The Improvement of Legal Framework of the Limited Liability Company 47
2. Luminita Tuleasca, Societas Privata Europaea versus Societas Europaea ,
“Challenges of the Knowledge Society. Legal sciences”, 2012.
3. Miroslawa Myszke -Novakowska, The European private company -dream big
but cautiously? , “Intereu laweast”, Vol.II (1) 2015.
4. Directive 2009/101/EC of the European Parliament and of the Council of 16
September 2009 on coordination of safeguards which, for the protection of the
interests of members and third parties, are required by Member States of com-
panies within the meaning of the second paragraph of Article 48 of the Treaty,
with a view to making such safeguards equivalent, OJ L258, 1.10.2009.
5. Proposal for a Council Regulation on the Statute for a European Private Com-
pany, published under COM (2008) 396/3
6. Implementing the Community Lisbon Programme – Modern SME policy for
Growth and Employment, COM (2005) 551
International Air Transport of Passengers and Luggage from Tour-
ist Industry Perspective and the Rights of Tourists
PhD student Ilie DUM ITRU1
Abstract
The tourism sector represents for many countries one of the engines of economic
growth and the interdependence between tourism and transport branch, especially that
of the transport of passengers and luggage, is more than obvious. For this reason, at
international level a greater need to develop more uniform legal regulations was felt in
recent decades, along with the exponential growth of the number o f tourists. Although by
the adoption of the Montreal Convention in 1999 an important step was made in this
direction, backed then by its taking over by the European Union law, it still remain many
countries which are of great interest to tourists where thi s international convention or
EU regulations are not applicable. Therefore, we believe that an analysis of the provi-
sions of regulations applicable at an international, European and national level, as well
as of the international jurisprudence and doctrine regarding the protection of passengers'
rights, the compensation due to them in case of damages and the limitations of damages
can be nothing but useful.
Keywords: air transport, tourists, damages, the Montreal Convention, European
Union law.
JEL Classi fication: K10, K23, K33.
1. Introduction
Air passenger transport is one of the means of transport with the greatest
development and for the tourism industry is paramount.
The extraordinary growth of international tourism over the last few dec-
ades is largely due to the development of air transport.
According to World Tourism Organization statistics, in 2012 more than
half of all international tourists2 arrived at destination by air.
Similarly, the increase in air transport – which is the main component of
civil aviation – is intrinsically linked to the expansion of tourism. The vast major-
ity of international air passengers travel either for tourism or recreational or pro-
fessional purposes, and in many countries \aviation plays a vital role for the de-
velopment of domestic tourism.
1 Ilie Dumitru – Lawyer, Bucharest Bar, Rom ania, E -mail: ilie.dumitru@gmail.com.
2 2012 was the year in which the total number of international tourists has exceeded 1 billion (1.035
billion). See the Annual Report of the World Tourism Organisation 2012. The document is available
online at http://c f.cdn.unwto.org/sites/all/files/pdf/annual_report_2012.pdf (accessed on 20.10.
2016).
50 Ilie Dumitru
Although it could be argued that tourism activity acts as a catalyst for air
transport, rather than vice versa, it is recognized that air transport and tourism are
in a relationship of interdependence.
But, the World Tourism Orga nization notes that despite this interdepend-
ence and the multiplier effect for both fields, many countries3 have separated sec-
toral policies on air transport and tourism, and this leads to fundamental malfunc-
tion and to the loss of an opportunity to maximi ze the potential that both areas
have for economic and social development. 4
Tourism is developing in a fulminant manner on account of air transport
and air transport owes much of its development to tourism. Only from September
2014 to September 2015 the g lobal passenger traffic grew by more than 6.5% as
compared to the same period last year.
IATA forecasts5 for the year 2034 are of 7 billion passengers transported
annually, which correspond to a doubling of the number as compared to 2015 and
to an annual increase of 3.5%.
Therefore, for tourism, the relationship with the transport field, with the
legal provi sions applicable to this segment of the economy and with its peculiar-
ities is particularly important.
In this context we propose through this paper an analysis of the provi-
sions of regulations applicable at an international, European and national level,
as well as an insight into international case law and doctrine, in order to highlight
each of these three regulatory levels of the arrangements that ensure protection of
passengers' rights, of the compensation due to them in case of damages and of the
limits of such damage claims6.
2. International regulations
We begin the analysis of legal regulations specific to passenger air
transport with the international ones, which have a legal force superior to the re-
gional and national ones, so whenever European and domestic law is contrary to
international law, the provisions of the latter shall prevail.
3 Unfortunately this is the case of Romania, and to the extent that there will be a real political
decision of development of the tourism sector in Romania, it is inconce ivable to set up national
strategies in this sector without integrating in them the transport field and without ensuring a
coordinated development of the two sectors of the national economy.
4 See for these conclusions the report "Tourism and Air Transpor t Policies" presented at the 20th
session of the General Assembly of the World Tourism Organization, Madrid, 2013. The document
is available online at http://cf.cdn.unwto.org/sites/all/files/pdf/backgrou nd_paper_tourism_ air_
transport_policies_unwto_ga20_rev1.pdf (accessed on 05.09.2016).
5 The International Air Transport Association (IATA).
6 This analysis will be integrated and developed into a book on which we work and where we will
analyze in full the issue of legal rules applicable in tourism.
International Air Transport of Passengers and Luggage 51
Given the extremely complex issue from a legal perspective in disputes
covering various forms of liability arising from international air transport of per-
sons (appli cable law/the court competent in terms of citizenship/nationality of
passenger/carrier, the place of embarkation and disembarkation, place of conclu-
sion of the contract, etc.) they tried since the beginning of civil aviation a unifi-
cation of the provisions and the adoption of international rules.
In this context Warsaw Convention on the Unification of Certain Rules
Relating to International Carriage by Air7, was signed on October 12, 1929, con-
vention which, structured into 5 chapters and 41 articles, covers air transport doc-
uments, combined transports and contractual civil liability of the carrier for the
damages suffered by passengers, luggage and the cargo carried.
Since the signing of the Warsaw Convention, and so far, several amend-
ments appeared which, a ll together, form what is called in air transport the "War-
saw System".
The most important amendments of the Warsaw Convention are:
– Rome Convention of 19338;
– Hague Protocol of 19559;
– 1961 Guadalajara Convention10;
– Guatemala City Protocol of 197111;
– Montreal Protocols of 197512;
After this moment, the world's countries with a developed civil aviation
realized that air transport can no longer develop significantly under the auspices
and control of national authorities.
In Europe, the situation at that time assumed as a general rule, national
carriers who held the monopoly in that State and airports owned by the states and
which depended on them.
Even if the bilateral agreements between states multiplied, international
air transport did not yet have the desired development level, especially because
7 Warsaw Convention of 1929 was ratified (along with other 151 countries) by Romania as well by
Law no. 1213/1931 published in the Official Gazette no. 83 of April 9, 1931 .
8 Ratified by Romania and published in the Official Gazett e no. 45 of February 22, 1935.
9 Ratifies by Romania and published in the Official Gazette no. 33 of August 21, 1958.
10 Ratified by Romania and published in the Official Gazette no. 21 of December 22, 1964.
11 Not ratified by Romania.
12 Protocols 1 and 2 h ave changed the currency of reference of the Warsaw Convention, introducing
the Special Drawing Right (SDR) instead of the gold franc. There was also an Additional Protocol
no. 3, with the purpose to take over all provisions of Protocol at Guatemala City, but it has not
entered into force due to the lack of the minimum number of 30 ratifications. None of these
protocols has been ratified by Romania. The Special Drawing Right (SDR or in the international
codification, XDR) is a virtual currency of the Intern ational Monetary Fund, conceived as a
replacement for the gold standard. Its value is calculated based on the US dollar (44%), Euro (34%),
Japanese yen (11%) and British pound sterling (11%), according to the quotations on the London
Stock Exchange.
52 Ilie Dumitru
of the strict control of the access to the market, and because of the property sys-
tems of carriers. The growing demand for air transport could not be met under
conditions of fragmentation in national markets an d of the absence of an effective
competition.
In this context, in the mid -70s it was clear that civil aviation must move
from a state -controlled economy to a market economy. US was the country that
started this process in 1978 by adopting a law on deregula tion of airlines, a that
law fully liberalized the civil air transport market of the US.
Even the European Union took over this process, especially after the
adoption of the Single European Act of 1986 and the completion of the internal
market. Regulations that have gradually transformed the national airline protected
markets in a competitive single market were adopted. Following this process, air
travel became the first mode of transport – and, to a large extent still the only one
– which benefits from a f ully integrated single market13.
Given this international situation, a new international convention able to
update the harmonization of the rules applicable to air transport became almost
naturally necessary.
Montreal Convention for the Unification of Certa in Rules Relating to
International Carriage by Air14 adopted in Montreal on May 28, 1999, is one of
the key international agreements for air transport of passengers.
Not all signatory states of the Warsaw Convention 1929 signed / ratified
the Montreal Convention 1999, so that the two continue to produce its effects in
parallel, the Warsaw Convention governing the international air transport be-
tween countries that have signed the Montreal Convention and those that have
not signed it, but which are signat ories to the Warsaw one.
Therefore, a flight between France and the US will be covered by the
Montreal Convention provisions since both countries are signatories to this Con-
vention. The same is true for flights to other countries, such as Spain, Greece,
Turkey, Italy etc.
The situation is different if the tourist destination is a country like Thai-
land which, although in recent years it is becoming increasingly involved in world
13 The first two "packages" of regulations (1987 and 1990) began to liberalize the rules governing
fares and capacities. The third "package" adopted in 1992 (consisting of Regulations (EEC) no.
2407/92, 2408/92 and 2409/92 Council, now replaced by Regulation (EC) no. 1008/2008 of the
European Parliament and of the Council) eliminated the other trade restrictions remaining after
previous reforms and thus creating the "single European aviation market," market which was later
extended to the EEA countries (Norway, Ic eland and Switzerland).
14 The Convention for the Unification of Certain Rules for International Carriage by Air adopted in
Montreal on May 28, 1999 was ratified by Romania by Government Ordinance no. 107/2000,
approved by Law no. 14/2001, published in the Official Gazette no. 97 of February 26, 2001. The
Convention was published in the Official Gazette of the European Union L194, 2001, p.39 -49. The
Convention entered into force on November 4, 2003 for signatory States and on June 28, 2004 for
those that hav e ratified it later.
International Air Transport of Passengers and Luggage 53
tourism and attracts a considerable number of tourists, has not ratified the Mon-
treal Convention.
Ticketing agencies, travel agencies and tour operators need to know that
this circumstance has legal releva nce if the air ticket purchased/ provided to the
tourist is for a one -way travel (one way and/or just back) to/ from Thailand or
other countries non -signatory of the Montreal Convention because in such a sit-
uation this Convention is inapplicable. Tourists (air transport passengers) will
benefit from the protection offered by the Convention only if they benefit from a
round -trip ticket a nd the place of departure or destination is the territory of a
Member State signatory to the Convention15.
So, the 1999 Montreal Convention applies to international shipments in
the following two assumptions:
– When the departure point and the destination p oint, whether or not there
is a break in the carriage or a transhipment, are situated in the territory of two
States Parties to this Convention;
– When the departure point and the destination point are located within
the territory of a single State Party t o the Convention, where there is an agreed
point of call in another State, even if that State is not a State Party to the Conven-
tion16.
Therefore, the 1929 Warsaw Convention still applies when:
– The air transport is achieved between two non -signatory state s of the
Montreal Convention, and the place of departure and the destination are within
the territory of member states to the Warsaw Convention;
– The air transport is achieved between a State signatory to the Montreal
Convention and a non -signatory one to this convention, if the latter is a signatory
of the Warsaw Convention.
Taking into account the fact that most states signatories to the Warsaw
Convention also signed the Montreal Convention, we will analyze in this paper
only the latter convention, espec ially because it essentially strengthens the system
adopted in Warsaw in 1929 and puts it in line with economic realities and with
the technological development at the beginning of the 3rd millennium17.
On the other hand, we point out again that tourists an d travel agencies
should be alert to the legal regime applicable to air transport with which they have
tickets or make a booking. The provisions of these conventions on liability of the
carrier in various situations are particularly important: passenger’s injury, delays
in case of taking off or landing, damage or loss of luggage etc.
15 See for details on this issue David Grant, Stephen Mason, Holiday law: the law relating to travel
and tourism , 5th edition, Ed, Sweet & Maxwell, London, 2012 p.352 -353.
16 See Article 1 of the Montreal Convention, quoted above.
17 For an analysis of the two Conventions on air travel, see Cristian Bogaru, Simona Marginean,
Airline liability for personal injury or death of passengers under the Montreal Convention , in
Revista Romana de Drept Privat, no.2 / 2011.
54 Ilie Dumitru
On the transport of passengers and luggage, Montreal Convention es-
tablishes the following rules18:
1. The carrier shall issue a transport document19 individually or collec-
tively, which will contain:
a) an indication of the points of departure and destination;
b) if the places of departure and of destination are within the territory of
a single State Party, and if one or more points of call are within the territory of
another State , an indication of at least one of these points of call.
2. For each piece of checked luggage (cargo luggage) the carrier will de-
liver to the passenger an identification tag.
3. The passenger must be informed that if the air transport is subject to
the Mon treal Convention, the carrier's liability for the death or injury of passen-
gers in case of destruction, loss or damage to baggage, and for delay, can be lim-
ited20.
Regarding the liability of the carrier and the extent of compensation for
damage , the same convention has the following provisions:
1. The carrier is liable for the damage resulted in case of death or bodily
injury of a passenger only if the accident which caused the injury or death oc-
curred on board the aircraft or during the embarking or landi ng operations.
The carrier cannot exclude or limit its liability to less than 113,100
SDR/passenger21.
For damages exceeding 113,100 SDR/passenger22, the carrier may be
free from liability if it proves either that the damage was not caused by its negli-
gence or other wrongful act or omission or of its servants or agents, whether such
damage was solely due to the negligence or other wrongful act or omission of a
third party.
18 See Article 3 of the Convention.
19 According to section 2 of Article 3 of the Convention, the carrier is allowed to use any other
means by which to record the information indicated in paragraph 1, provided they issue the
passenger a written statement of the information so reco rded.
20 Even in the absence of such notice, or of previous ones, the validity of the transport contract is
not affected, as it will be subject to the rules of the Convention, including to those relating to
limitation of liability. See section 5 of Article 3 of the Convention.
21 On 18/10/2016, 1 SDR was worth 5.65 lei.
22 The limit established by the Convention original form was of 100,000 SDR / passenger. But the
Montreal Convention included in its provisions and a mechanism for adapting these value limit s
based on inflation. This mechanism establishes that every 5 years if there is an inflation factor of
over 10% the limits may be adjusted. In 2009, when the rate of inflation increased by 13.1% and
an adjustment to these limits has been made, all amounts stated in this paper consider the values
resulting from such adjustments. We also point out that for establishing the inflation rate Article 24
of the Convention provides that to this end one will calculate the weighted average of annual rates
of increas e or decrease in consumer price indices in countries the currencies of which influence
special drawing rights.
International Air Transport of Passengers and Luggage 55
2. Also, the carrier is liable for the damage due to the destruction, loss or
damage to the checked luggage, provided that the event which caused the destruc-
tion, loss or damage occurred in the aircraft or during the period in which the
carrier was in the charge with the checked luggage23.
3. For unchecked luggage, including personal items ca rried by passen-
gers, the carrier is liable only if the damage resulted from its fault, of its servants
or of its agents.
4. If the carrier admits the loss of a checked luggage, or if a checked
baggage has not arrived at its destination within 21 days of th e date on which it
ought to have arrived, the passenger is entitled to enforce against the carrier the
rights arising from transport contract.
The carrier’s liability in case of destruction, loss, damage or delay of lug-
gage arrival is limited to the amount of 1,131 SDR/passenger. If the passenger
has made to the carrier, when handing the checked luggage, a special declaration
regarding the interest in delivery at destination and has paid, if necessary, an ad-
ditional amount, the carrier will be liable to pay a sum not exceeding the declared
sum, unless it proves that the sum is greater than the passenger's actual interest in
delivery at destination.
5. The air carrier is also responsible for the damage due to delay, unless
he proves that it, its servants and agents took all necessary measures reasonably
in order to avoid the damage or that it was impossible for them to take such
measures.
For the damage due to the delay in the carriage of persons, the air carrier
answers up to 4,694 SDR/passenger.
6. The air c arrier shall be relieved wholly or partially from liability if he
proves that the damage was caused or favoured by the negligence, by a wrongful
act or omission of the person seeking such compensation or of the person from
whom its rights derives.
To the c ompensation limits specified above we may add court costs and
other expenses incurred by the plaintiff as a result of possible litigation, including
interest.
The carrier may stipulate in the transport contract limits of liability higher
than those provide d in this Convention or no limits of liability, and on the other
hand any provision tending to relieve the carrier of liability or to fix a limit lower
than that fixed by convention is null and void24.
Under the Montreal Convention, air carriers will respon d in an absolute
(unlimited) manner for the damage caused to the life and health of passengers.
23 The carrier's liability is excluded when damage has occurred due to a defect in the luggage,
quality or vice thereof .
24See Articles 25 and 26 of the Montreal Convention.
56 Ilie Dumitru
As regards the term and the procedure of complaints registration , the
Convention has few clear provisions, which must be observed in order to have
the premises for a favourable settlement of the complaint25.
First, passengers (tourists) should know that the receipt (lifting) of
checked luggage (cargo) at the destination or anywhere on an intermediate airport
(point of call) without making a complaint is, save wher e it appears the contrary,
the proof that it has been delivered in good condition and in accordance with the
transport document. The passenger must submit to the carrier a complaint imme-
diately after discovery of damage to the luggage, but for checked lugg age, not
later than 7 days of receipt date. In case the luggage arrives late at the destination,
the complaint must be made not later than the 21st day after the date on which the
luggage was placed at its disposal.
Any complaint must be made in writing an d remitted or dispatched within
the above deadline.
Failure to lodge the complaint within the deadlines mentioned above is
punishable by forfeiture, as no action can be taken against the carrier unless in
cases of fraud on its part.
3. Regional (European) re gulations
The rules set by the Montreal Convention were taken over in European
Union law.
First directly by Decision 2001/539/EC of the Council from April 5, 2001
on the conclusion by the European Community of the Convention for the Unifi-
cation of Certain Rules for International Carriage by Air (Montreal Convention)
26. Then, the European Union adopted Regulation (EC) no. 889/2002 amending
Council Regulation (EC) no. 2027/97 on air carrier liability in case of accidents27,
in order to put it eventually in ac cordance with the provisions of the Montreal
Convention and thus create a uniform system of liability for international air
transport28.
25 See Article 31 of the Convention.
26 Decision 2001/539 / EC of the Council of April 5, 2001 on the conclusion by the European
Community of the Convention for the Unification of Certain Rules for International Carriage by
Air ( Montreal Convention) was published in the Official Gazette no. C 337 E of 28/11/2000.
27 Regulation (EC) no. 889/2002 of the European Parliament and of the Council of May 13, 2002
amending Council Regulation (EC) no. 2027/97 on air carrier liability in case of accidents has been
published in the Official Gazette no. L 140 of 30/05/2002.
28 Sections 12 -13 in the preamble of Regulation 889/2002 noted that the uniform limits of liability
in case of loss, damage or destruction of luggage and damage occasioned by delay, which applies
to all transport operations carried out by Community carriers ensures simple and clear rules and it
would be impractical for the Community air carriers and it would be confusing for their passengers
if they were to apply different liab ility regimes on different routes across their networks.
International Air Transport of Passengers and Luggage 57
Article 3 paragraph 1 stipulates that "the liability of a Community air
carrier in respect of passengers and their lugga ge shall be governed by all the
provisions of the Montreal Convention relevant to such liability."
It is no less true that Regulation 889/2002/EC added some additional
rules to the Montreal Convention, including setting the fact that it also applies to
air transport performed on the territory of one Member State (domestic flights).
Therefore, the Regulation applies to national air transport, to the international
ones with a departure or destination in the European Union when they are oper-
ated by airlines re gistered in one Member State.
All air carriers (not just those in the EU) are required, when selling air
transport services in the Community, to ensure that a summary of the main pro-
visions governing liability for passengers and their luggage, the deadline s for reg-
istration of a complaint or of a damage claim and the possibility of making a
special declaration for their luggage, is made available to passengers at all points
of sale including in case of sales by telephone or internet.
This information notice29 contains information on the liability applied by
Community air carriers as required by Community legislation and the Montreal
Convention, and refers to the following:
– Compensation in case of death or injury30
– Prepayments
– Passenger delays
– Luggage delays
– Destruction, loss or damage to luggage
– Conditions for the increase of the liability limits for luggage
– Complaints on luggage
– Liability of contractual carriers and of actual carriers
– The limitation of the right of action.
Another regulation relevant for air transport of persons and luggage is
Regulation (EC) no. 261/200431 establishing common rules in the field of com-
pensation and assistance to passengers in the event of denied boarding and of
cancellation or long delay of flights, and repealing Regulation (EEC) no. 295/91.
29 The content of the information notice was introduced by point 10 of Regulation no. 889/2002 /EC.
30 The limit value of this compensation, as well as of all others mentioned in Regulation
889/2002/EC, are those that the Montreal Convention provide for them at that time, namely those
prior to their indexation based on the inflation rate.
31 Regulation (EC) no. 261/2004 of the European Parliament and of the Council of February 11,
2004 establishing common rules on compensation and assistance to passengers in the event of
denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) no.
295/91 was published in the Official Gazette no. L 46 of 17/02/2004.
58 Ilie Dumitru
This Regulation lays down the conditions under which passengers may
exercise minimum rights when they are denied boarding against their will32, when
their flight is cancelled or if the flight is delayed33.
The Regul ation applies, on the one hand, to passengers departing from
an airport situated in the territory of a Member State and, on the other hand, to
passengers departing from an airport located in a third country to an airport situ-
ated in the territory of a Memb er State, unless the latter have received benefits or
compensation and were granted assistance in that third country, where the air
carrier of the flight is a community carrier.
To enjoy the rights stipulated in the Regulation, passengers must be in
one of the following situations:
– They have a confirmed booking for the flight in relation to which they
invoke rights provided by regulation and unless the cancellation of the flight oc-
curred, they came personally for check -in;
– They have been transferred by an air carrier or tour operator from the
flight for which they held a booking to another flight, for whatever reason.
The Regulation applies including to charter flights contracted by one or
more tour operators, given the provisions of Article 3 paragraph 5 which includes
in the scope of the Regulation the situations where an air carrier has no transport
contract signed directly with the passenger. It is considered that in such a situa-
tion, the carrier acts on behalf of the person having a contract with tha t passenger.
The Court of Justice of the European Union has contributed by the judg-
ments ruled, especially in the cases that were intended for a preliminary ruling
for the interpretation of certain provisions of EU rules, to the clearing of the pro-
visions of this Regulation and to its uniform application by the courts of the Mem-
ber States34.
In summary, the rights of the passengers under this regulation are:
a) In the event of denied boarding
Assuming that it refuses the boarding of a/some passengers35 for re asons
that exceed their fault (ex. for overbooking), the air carrier must first use the help
32 According to Article 2 letter j), "denied boarding" means a refusal to carry passengers on a certain
flight, although they have presented themselves for boarding under the conditions laid down, unless
there are reasonable grounds to deny boarding, such as health condition, sa fety or security or
inadequate travel documentation.
33 See Article 1 of this Regulation .
34 For a summary of this jurisprudence, see Andrei Pap, Transportul aerian și drepturile pasagerilor
în legislația Uniunii Europene (Air transport and passenger rights in EU law), Universul Juridic ,
Bucharest, 2016.
35 In Case Case C -321/11 (Germán Rodríguez Cachafeiro and María de los Reyes Martínez –
Reboredo Varela -Villamor against Iberia, Líneas Aéreas de España SA), the Court of Jus tice of the
European Union, analyzing Article 2 (j) in conjunction with Article 3 (2) of Regulation no.
261/2004 establishing common rules on compensation and assistance to passengers in the event of
denied boarding and of cancellation or long delay of fli ghts, and repealing Regulation no. 295/91,
decided that these texts should be interpreted as meaning that the notion of "denied boarding"
International Air Transport of Passengers and Luggage 59
of volunteers, namely of persons who voluntarily give up taking the travel, in
exchange for a compensation freely negotiated and for one of the following op-
tions:
– Refunds of the paid amount within seven days (and if necessary, free
flight to the initial point of departure), or
– Rerouting or onward journey in a shortest time or at a later date agreed.
Passengers who are denied boarding against their will should receive im-
mediately from the air carrier, cumulatively the following:
– Assistance (meals, possibility of telephone and accommodation if nec-
essary)
– One of the following options: either the refund of the price paid within
seven days (and if necessary, fre e flight to the initial point of departure) or for-
warding or onward journey in the shortest time or at a later date agreed and
– Immediate compensation determined as follows:
o For flights under 1500 km, 250 Euro (the amount is reduced by
half if the carrier has offered and the passenger has accepted a
rerouting, but which leads to a delay of less than two hours upon
arrival, as compared to the time of arrival of the original flight);
o For all intra -Community flights longer than 1500 km and for all
other fligh ts between 1500 and 3500 kilometres , 400 Euro (200
Euro if the rerouting results in a delay of less than three hours
upon arrival);
o For flights longer than 3,500 km, 600 Euro (300 Euro if rerout-
ing results in a delay of less than four hours upon arrival).
b) In the event of flight cancellation
In such a case36, the compensation to which passengers are entitled is
identical to that offered when one is denied boarding, unless:
includes the situation where, under a single transport contract and which includes several bookings
on immediate succe ssive flights and recorded simultaneously, an air carrier denies the boarding of
some passengers on the grounds that the first flight contained in their booking had a delay
attributable to the carrier comcerned, and it provided wrongly that the mentioned p assengers would
not arrive in time for the second flight boarding. Thus, the legislature extended the scope of notion
beyond the simple case of denied boarding for overbooking, previously referred to in Article 1 of
Regulation No. 295/91 establishing commo n rules on compensation scheme for denied boarding in
scheduled air transport, and conferred it a broad meaning on the ensemble of the assumptions in
which an air carrier refuses to carry a passenger. In addition, the limitation of the notion of "denied
boarding" only to overbooking cases would have, in practice, the effect of a significant decrease in
passenger protection granted pursuant to Regulation no. 261/2004 and therefore, it would be
contrary to its objective of ensuring a high level of protection of passengers, so that the broad
interpretation of the rights recognized made by the Court's judgment is justified. However, it is
necessary to ascertain whether such a refusal is not justified by reasonable grounds "such as health,
safety or security or i nadequate travel documentation."
36 In Case C -83/10, the Court of Justice of the European Union has settled a request for a
preliminary ruling formulated in the dispute between Aurora Sousa Rodríguez and Others v Air
France SA. The applicants requested in the dispute filed against the airline franchises to a Spanish
60 Ilie Dumitru
– Passengers were informed of the cancellation with at least 14 days in
advance;
– They were informed of the cancellation within a period of between two
weeks and seven days before the scheduled time of departure and they are offered
re-routing enabling them to leave more than two hours before the scheduled de-
parture time and reach the fi nal destination in less than four hours after the sched-
uled arrival time;
– They were informed less than seven days before the scheduled departure
time and they were granted a rerouting allowing them to depart no later than one
hour before the scheduled ti me of departure and to reach their final destination in
less than two hours after the scheduled arrival time.
The carrier will not pay compensation in accordance with Article 7 of the
Regulation when it proves that the cancellation is caused by extraordina ry cir-
cumstances37 which could not have been avoided even if all reasonable measures
were taken.
court the latter to be ordered to pay compensation under Article 7 of Regulation no. 261/2004,
considering that they had concluded an air transport contract with Air France to be transported fro m
Paris (France) to Vigo (Spain) on September 25, 2008. A few minutes after the take -off of the
aircraft at the scheduled time, the pilot decided to return to the starting point, namely Paris -Charles
de Gaulle airport, due to technical faults of the aircra ft. The referral Court, asked to rule whether
the flight in question can be classified as “canceled” within the meaning of Article 2 (l) of
Regulation no. 261/2004, required the European court to establish whether the term “cancellation”
refers only to the assumption of a lack of any takeoff of the aircraft in question or whether it includes
the situation where the aircraft in question, although it took off, had to return to the departure airport
after a technical failure of the aircraft. In its judgment, t he Court held that under Article 2 letter (l)
of Regulation no. 261/2004, the term "cancellation" must be interpreted as meaning that in a
situation such as that at issue in the main proceedings, is not only assuming the absence of any
takeoff of the aircr aft in question, but also includes the situation where this aircraft took off, but it
was subsequently forced, for whatever reason, to return to the departure airport and the passengers
of that aircraft were transferred to other flights. The Court also hel d that the reason why the aircraft
was forced to return to the departure airport and therefore did not reach the destination does not
affect the classification as “cancellation”. Thus, this ground is relevant only to determine, within
the compensation for the damage suffered by passengers following the cancellation of their flight,
if possibly that cancellation "is caused by extraordinary circumstances which could not have been
avoided despite adopting all reasonable measures" under Article 5 (3) of Regulat ion no. 261/2004,
in which case no compensation is due. However, it was also revealed in the judgment that the notion
of “further compensation” mentioned in Article 12 of Regulation no. 261/2004 must be interpreted
as allowing national courts to compensate , under the terms of the Montreal Convention or national
law, the damage, including the moral damage resulting from the failure to perform the air transport
contract. Instead, the term “further compensation” cannot serve the national court as a legal basis
to order the air carrier to refund to passengers whose flight has been delayed or canceled, the costs
which they had to incur due to the failure by that carrier to observe the obligations of assistance and
service provided for in Articles 8 and 9 of this Regulation.
37 On the scope and meaning of the concept of “extraordinary circumstances” within the meaning
of Regulation EC no 261/2004, ruled the Court of Justice of the European Union in Case C -549/07,
which dealt with an application for a preliminary rul ing formulated under Article 234 EC by
Handelsgericht Wien (Austria), by decision of October 30, 2007, received by the Court on
December 11, 2007, in Friederike Wallentin -Hermann proceedings against Alitalia – Linee Aeree
International Air Transport of Passengers and Luggage 61
In addition, passengers whose flight has been cancelled have the right to
receive from the airline, of their choice:
– The refund of your ticket within seven da ys;
– The rerouting as quickly as possible in comparable transport conditions,
towards the final destination38.
– Re-routing, under comparable transport conditions, towards the final
destination at a later date chosen by the passenger, subject to availability of seats.
Also, they have the right to telephone, refreshments, food, accommoda-
tion and transport to accommodation.
c) In case of flight delay
When the delay is of at least two hours39 for flights up to 1500 km, of at
least three hours for flig hts between 1500 and 3500 km and for the flights of the
Italiane SpA. By the decision rule d on 22/12/2008, the European Court ruled that Article 5
paragraph (3) of Regulation no. 261/2004 must be interpreted as meaning that a technical problem
occurred in an aircraft which leads to the cancellation of a flight is not covered by the concept of
“extraordinary circumstances” within the meaning of that provision, unless that problem stems from
events which, by their nature or origin, are not inherent to the normal exercise of the activity of the
air carrier concerned and are beyond its actual contro l. The Montreal Convention is not decisive for
the interpretation of the grounds of exemption provided under Article 5 (3) of Regulation no.
261/2004. However, it cannot be ruled out that certain technical problems can be included among
these exceptional c ircumstances to the extent that they stem from events which are not inherent to
the normal exercise of the activity of the air carrier concerned and which are beyond its actual
control. This would be the case, for example, if the manufacturer of the aircra ft that form the fleet
of the air carrier concerned or a competent authority communicated when these devices are already
in use, that they are affected by a hidden manufacturing defect affecting flight safety. The same
would hold true in case of the damage caused by acts of sabotage or terrorism. But the simple
solving of a technical problem caused by a failure to maintain an aircraft must be regarded as
inherent to the normal exercise of the activity of the air carrier and therefore, such an event cannot
be considered "exceptional" within the meaning of Article 5 (3) of Regulation no. 261/2004.
38According to Article 8, paragraph 3 of the Regulation, "where a city, an urban agglomeration or
region is served by several airports, the air carrier offers the pas senger a flight to an airport other
than that for which the initial booking was made, the air carrier shall bear the cost of transferring
of the passenger from that alternative airport either to the original one or to another close -by
destination agreed wi th the passenger."
39 The Court of Justice of the European Union was asked by means of the request which was the
object of Case C -452/13 brought by an Austrian court in the dispute between Germanwings GmbH
and Mr. Henning , to determine which is the relevant time for determining the "arrival time" of the
aircraft, according to Article 2, 5 and 7 of Regulation no. 261/2004. More specifically, the referral
court asked the European one to determine whether those articles must be interpreted either as
meaning tha t the "arrival time" used to set the duration of the delay suffered by the passengers on
a flight, means the time at which the wheels of the aircraft touch the runway of the airport of
destination or in the sense that that this term means the time the airc raft reached the parking lot and
the parking brakes were coupled, brake shoes were attached respectively, either in the sense that
this notion means the time when the aircraft door opens or in the sense that the same notion means
a moment defined by the pa rties by mutual agreement. The court ruled that the term 'arrival time',
used for determining the duration of the delay suffered by passengers on a flight, means the time at
which at least one of the doors of the aircraft opens, provided that, in this mome nt, passengers are
allowed to leave the machine.
62 Ilie Dumitru
community space of over 1500 km and at least four hours for flights longer than
3500 km, the carrier must provide passengers the following:
– In any of the above situations, meals, the possibility of telephone and
accommodation, if necessary, and transport to the place of accommodation;
– If the delay is longer than five hours or more, the passengers shall be
offered a refund within seven days (and if necessary, free flight to the initial point
of depa rture), and compensation, as in case of cancellation.
Passengers whose flights are delayed are entitled to compensation under
this Regulation in case they suffer as a result of such flights, a loss of time equal
to or greater than three hours, more accurat ely when they reach their final desti-
nation three hours or more after the arrival time originally scheduled by the air
carrier. In addition, the granting of this obligation of compensation cannot be an
impediment to passengers affected, if the same delay c aused them individual
damage conferring entitlement to compensation, to formulate separately an action
by means of which to require, by way of individualized reparation, compensation
under the terms of the Montreal Convention40.
d) In the situation of upgra ding or downgrading
40 On October 23, 2012, the ECJ ruled in Joined Cases C -581/10 and C -629/10, a relevant decision
on the interpretation and application of Articles 5 -7 of Regulation (EC) no. 261/2004 in conjunction
with Artic les 19 and 29 of the Montreal Convention. The referral court asked essentially to establish
wheather, and if so, in which conditions, the passengers whose flights are delayed are entitled to
compensation under Regulation no. 261/2004. In the judgment ruled , the ECJ after it said that
neither Article 7 of the regulation nor any provision thereof expressly provide such a right, pointed
out that it follows from Article 5 (1) (c) (iii) of Regulation no. 261/2004 that, under the terms of
that provision, are enti tled to a lump sum compensation the passengers whose flight is canceled
without being forewarded or those who are informed within less than seven days before the
scheduled departure time and to whom the air carrier has not proposed to be redirected by mean s
of a flight which departs no more than one hour earlier than the scheduled time of departure and
reaches their final destination with less than two hours after the scheduled arrival time. Or, the
principle of equal treatment requires that comparable situ ations must not be treated differently and
that different situations must not be treated in the same way, unless such treatment is objectively
justified. This means that passengers whose flights are delayed and those whose flights are canceled
should be co nsidered as being in a comparable situation as regards the compensation provided for
by Regulation no. 261/2004, as these passenger go through a similar inconvenience, namely, a loss
of time equal to or more than three hours of the original flight planning . In those circumstances,
and bearing in mind that the purpose of Regulation no. 261/2004 is to increase protection for all air
passengers, passengers whose flights have delays of three hours or more cannot be treated
differently from those receiving compe nsation under Article 5 (1) (c) (iii) of this Regulation.
Consequently, Articles 5 -7 of Regulation no. 261/2004 must be interpreted as meaning that the
passengers whose flights are delayed are entitled to compensation under this Regulation in case
they suf fer as a result of such flights, a loss of time equal to or longer than three hours, more
precisely when they reach their final destination three hours or more after the arrival time originally
scheduled by the air carrier. However, such a delay does not c onfer the right to compensation for
passengers if the air carrier can prove that the long delay is caused by extraordinary circumstances
which could not have been avoided even if all reasonable measures were taken, namely
circumstances beyond the actual co ntrol of the air carrier.
International Air Transport of Passengers and Luggage 63
The air carrier cannot ask for any extra payment when it upgrades (carries
to a travel class superior to the purchase price of the ticket) a passenger.
When assuming a downgrading, the carrier reimburses within seven days:
– 30% of the ticket price for flights up to 1500 km;
– 50% for flights between 1500 and 3500 km and flights within the EU
of more than 1500 km
– 75% for flights longer than 3500 km.
e) Passengers with reduced mobility
Airlines are required to give priority to carrying persons with reduced
mobility and accompanying persons or certified accompanying service dogs and
unaccompanied children.
Special rules for the protection and granting of assistance to disabled per-
sons and to persons with reduced mobility travelling by air , both to protect them
against discrimination and to guarantee assistance for them, are laid down in Reg-
ulation (EC) no. 1107/2006 concerning the rights of disabled persons and persons
with reduced mobility when travelling by air41.
According to it, the air carrier or its agent or tour operator is obliged not
to refuse on the grounds of a disability of a passenger or of its reduced mobility
a booking made by/for him/her on a flight departing from or arriving at an airport
situated in the territory of an EU M ember State and not to refuse or to embark a
disabled person or a person with reduced mobility at such an airport, if that person
holds a valid ticket and booking.
Exceptionally, refusal is allowed, on grounds of disability or reduced mo-
bility, in the foll owing situations:
– When the air carrier, its agent or tour operator must comply with appli-
cable safety requirements established by international, Community or national
law or to comply with the safety requirements established by the authority that
issued the certificate of operation in air transport to the air carrier concerned;
– If the size of the aircraft or of its doors make the embarkation or the
carriage of that disabled person or person with reduced mobility physically im-
possible.
However, when refu sing such a booking, the air carrier or its agent or
tour operator have the duty to endeavour to provide the person with disability or
reduced mobility an acceptable alternative.
As regards the limitation of the action for damages against an air carrier
for damage caused by denied boarding, the cancellation or delay of a flight EC
Regulation no. 261/2004 provides no such term. Therefore, as the Court of Justice
41 Regulation (EC) no. 1107/2006 of the European Parliament and of the Council of July 5, 2006
concerning the rights of disabled persons and of persons with reduced mobility when traveling by
air, published in the Official Gazette no. L 204 of 26/07/2006.
64 Ilie Dumitru
of the European Union decided42, the deadline when the actions seeking th e com-
pensation provided for in Articles 5 and 7 of this Regulation must be introduced
shall be determined in accordance with the rules of each Member State in the
matter of limitation of actions.
4. National regulations in Romania
Given the status of Romani a of Member State of the EU since January 1,
2007 the air transport of passengers is subject to EU regulations in this area.
As developed in the previous section, at EU level a number of regulations
that constitute the legal framework for air transport seg ment are in force and di-
rectly applicable in all Member States.
But, in Romania there were originally domestic laws that regulated this
field. For example, on the liability of air carriers and operators of civil aircraft
performing civil air operations in the national airspace there is Law no.
355/200343.
This law, together with other regulations44, was expressly repealed by
Law no. 234/200745, following the direct application of EU rules mentioned
above into national law.
As a general law in the field the R omanian Air Code46 continues to apply,
which in Chapter VII, Section II contains rules on public air transport operations.
42 See Court judgment of November 22, 2012 in Case C -139/11 concerning a request for a
preliminary ruling under Article 267 TFEU by Audiencia Provincial de Barcelona (Spain), by
decision of February 14, 2011 received by the Court on March 21, 2011, in the proceedings Joan
Cuadrench Moré against Koninklijke Maatschappij NV (KLM). In the action for seeking damages
against it in the Spanish court, KLM defended itself arguing that the two -year deadline provided
for in Article 29 by the W arsaw Convention, during which the actions for seeking damages against
air carriers must be filed, had expired. The Spanish court rejected that plea of defense, considering
that either the limitation period provided for in Article 29 of the Warsaw Conven tion, or the one set
out in Article 35 of the Montreal Convention applied in question, since Regulation No. 261/2004
was applicable. Given the absence of an express provision of this regulation able to determine the
period within which actions should be in troduced in relation to it, the court considered that the
Spanish legislation was applicable.
43 Law no. 355/2003 on the liability of air carriers and operators of civil aircraft performing civil
air operations in the national airspace, published in the Off icial Gazette no. 524 of July 21, 2003.
44 Law 491/2004 on public service obligation on domestic air routes and the Government Ordinance
no. 52/2002 on the establishment of a compensation scheme by air carriers for passengers who have
been refused boarding on regular air flights were repealed.
45 Law no. 234/2007, for the repeal of Law no. 355/2003 on the liability of air carriers and operators
of civil aircraft performing civil air operations in the national airspace, of Law no. 491/2004 on
public service ob ligation on domestic air routes and of the Government Ordinance no. 52/2002 on
the establishment of a compensation scheme by air carriers for passengers who have been refused
boarding on regular air flights, published in the Official Gazette no. 490 of Jul y 23, 2007.
46 Government Ordinance no. 29/1997 on the Civil Aviation Code, republished in the Official
Gazette no. 45 of January 26, 2001 and then again amended.
International Air Transport of Passengers and Luggage 65
According to Article 47 of this Code, the air carrier is liable for any dam-
age caused by the death or injury to passengers’ health or damage or loss of lug-
gage. And as a general rule, it is provided that the liability regime of the air carrier
that makes international public transport is the one regulated in accordance with
international treaties to which Romania is a party, and for inte rnal public air
transport, in accordance with the common law, as far as not determined otherwise
by a special law or by an international treaty to which Romania is a party.
5. Conclusions
From all the above, we can conclude that in the field of air transpor t of
passengers and luggage there are no international regulations directly applicable
to Romania, either in its capacity as a state party to a treaty or to an international
convention or as Member State of the European Union.
Knowing all this legislation is needed not only in lawsuits caused by var-
ious events occurring during or in connection with air transport, but also in the
legislative process and of drafting of the national legislative and administrative
instruments, which must be linked with those of higher legal value and which,
including under the provisions of the Romanian Constitution, apply preferentially
when there is contradiction or regulatory differences.
A clear Romanian legislation in line with international regulations can
only be auspicious for the development of both industries including: transport of
passengers and luggage and tourism.
Bibliography
1. David Grant, Stephen Mason, Holiday law: the law relating to travel and tour-
ism, 5th edition, Sweet & Maxwell, London, 2012 ;
2. Andrei Pap, Transportul aerian și drepturile pasagerilor în legislația Uniunii
Europene , Universul Juridic , Bucharest, 2016;
3. Cristian Bogaru, Simona Marginean, Airline liability for personal injury or
death of passengers under the Montreal Convention , „Revista Roman a de Drept
Privat”, no. 2/ 2011;
4. The Convention for the Unification of Certain Rules for International Carriage
by Air adopted in Montreal on May 28, 1999 , published in the Official Gazette
of the European Union L194, 2001.
Considerations Regarding the Competence of the European Union
External Trade Policy
Associate professor Ioana Nely MILITARU1
Abstract
A significant component of international trade and foreign direct investment is
the service. International trade has been an evolution of its rules from objects of basic
characteristic of the sixties – the goods – so far, within its scope corresponds to the scope
– more broadly – the World Trade Organization Agreement. This development is reflected
equally in the Treaty that established the European Community in the Treaties its subse-
quent and now, in the Treaty of Lisbon, and not least, the Court of Justice of the European
Union by jurisprudence to which he has made a considerable contribution in this regard.
Keywords : freight, services, intellectual property, GATS, TRIPS.
JEL Classification: K33
1. Considerations regarding the competence of the EU external trade
policy
A significant component of international trade and foreign direct invest-
ment is the service. International trade currently includes, in addition to goods –
basic object of the sixties of this activity – and services, investment, intellectual
property, public procurement, competition rules. However the common commer-
cial policy, as laid down in the Treaty that established the European Community,
covered, in most of its provisions, goods, and only certain aspects referencing
services and intellectual property – cross – border services without moving people
and goods imposed ban on the border and put into free circulation of counterfeit
goods2.
This explains why only trade agreements relating to trade in goods could
be concluded on the basis of art. 133 TEC. The Treaty of Nice has brought
changes in the regulation of external competence of the European Community in
the trade but complicated decision procedure by too many safeguards.
The procedure has been simplified by the Lisbon Treaty through art. 207
TFEU, as follows:
– The Commission shall conduct negotiations to conclude the agreement
by consulting a special committee appointed by the Council; Council decides by
qualifie d majority;
1 Ioana Nely Militaru – Law Department, Bucharest University of Economic Studies, Romania, E –
mail: ioananelimilitaru@yahoo.com.
2 See Opinion 1/94 WTO on November 15, 1994, Rec. p. I -5267; Sean Van Raepenbusch, The EU
institutional Law , Rosetti Publishing House, Bucharest, 2014, p. 337 -343.
68 Ioana Nely Militaru
– The negotiation and conclusion of agreements in the fields of trade in
services and the commercial aspects of intellectual property, and foreign direct
investment, the Council decides unanimously (if the agreement includes provi-
sions fo r which unanimity is required for adopting internal rules);
– Also to the negotiation and conclusion of agreements on trade in ser-
vices and audiovisual services, the situation is similar when harm to their cultural
and linguistic diversity of the Union, or trade in local services, educational and
health services, when these agreements risk seriously disturbing the national or-
ganization of such services and to affect the responsibility of Member States for
providing these services;
– In the negotiation a nd conclusion of agreements in the transport sector
remain subject to the special provisions of the common transport policy;
– On the exercise of the common external trade policy will not affect the
delimitation of competences between the Un ion and the Member States or may
not lead to a harmonization of national laws, whether such harmonization is ex-
cluded from being treated.
2. Nature exclusive external competence of the European Union.
Exclusive nature of the external competence of the Union may follow
either the Treaties or secondary law of evolution.
a. The exclusive external competence of the Union deriving from the
Treaties. Article 3, paragraph 1 TFEU governing this character, especially in the
following areas: customs un ion, establishment of competition rules necessary for
its operation, conservation of marine biological resources under the common fish-
eries3 policy, the common commercial policy4.
> It should also be noted the Court's opinion no. WTO 1/945 altho ugh it
was surpassed by the Treaty of Nice and the Lisbon Treaty has introduced ser-
vices, commercial aspects of intellectual property and foreign direct investment
in defining common commercial policy (in art. 207 par. 1 TFEU). Requesting the
opinion in qu estion was asked as to whether the conclusion of GATS6 (annexed
to the Agreement establishing the WTO) held the exclusive Community compe-
tence in matters of common commercial policy (according to Art. 133 TEC).
Court in the above opinion7 includes trade in services under art. 133 TEC when
3 Case 804/72 Commission v. The United Kingdom (of Grea t Britain and Northern Ireland), Rec.
paragraphs 17 and 18.
4 Regarding trade in goods, see Opinion 1/75, p. 1363 -1364; and Case 41/76, because Doncker-
wolcke and Schou, Rec. paragraph 32.
5 November 15, 1994, Rec. p. I -5267.
6 General Agreement on Trade in Services began to exert effects on the liberalization of services
markets since its establishment on 1 January 1995 both nationally and internationally. Compared
to the original provisions of the original agreement, GATS has added new multilateral agreeme nt
aimed at opening global market for telecommunications services and the financial services.
7 November 15, 1994, Rec. p. I -5267.
Considerations Regarding the Competence of the European Union 69
it comes to providing a cross -border nature without moving the provider or recip-
ient of services (ex. telecommunications), supply is treated as a commodity ex-
change8. While the other three modes of supply of services cover ed by GATS
(consumption abroad, commercial presence – as a subsidiary or a branch in the
country in which you have rendered service – and the presence of natural persons
– thanks to which a provider of a State A) providing a state B) are not, in the
Court' s view, covered by the common commercial policy, according to art. 133
TEC, as there is in the Treaty, specific chapters on free movement of persons,
both physical and legal entities. Since this represented special services of
transport, the Court stated, in the same sense that they fall under the effect of a
particular chapter of the Treaty (Title V), Title X, which is different from the
common commercial policy.
> The issue of delimitation of the concept of common commercial policy,
was made by the Court in relation with intellectual property. The question was
whether exclusive Community competence, under Art. 133 TEC, covering rules
on intellectual property rights contained in TRIPS9. The Commission answer to
the question by invoking the close link betwee n those rules and trade in goods
and services covered by these rules. The Court rejected the Commission's posi-
tion, estimating that only Section 4 of Part III of TRIPs, which contains provi-
sions relating to border measures applying the ban and release for free circulation
of counterfeit goods can substantiate the art. 133 TEC. The Court also added that
intellectual property rights, trade effects, if they do not refer specifically to inter-
nationa l trade where ,,affect equally, if not more, domestic trade and international
trade”. The primary objective of TRIPs being to consolidate and harmonize ,,pro-
tection of intellectual property worldwide”. The Court stated that, to this end, the
intellectual p roperty, the Community has ,,competence to harmonize national
laws (according to Art. 95 and 308 become art. 114, 115 and 352 TFEU), which
include rules voting procedure different from those applicable under art. 133. If
one community would have been recognized exclusive competence in order to
conclude arrangements wi th third countries in order to harmonize intellectual
property protection and in order to obtain the same time, the harmonization at
Community level, the Community institutions should be able to evade the con-
straints imposed upon them internally regarding voting procedure and manner”.
8 Hot on 7 March 1996 in Case Parlement v. Council, C -360/93 Rec. p. I -1195, paragraph 29.
9 TRIPS is an agreement multilater al World Trade Organisation. The agreement establishes general
standards in relation to each of the main areas of intellectual property accepted. Through this agree-
ment are secured minimum standards of protection to be provided by each member. Therefore,
TRIPs was defined as a minimum standards agreement, which allows Members to provide greater
protection of intellectual property if they so desire. Member States are free to determine the most
appropriate method of implementing the provisions, under its own legal system and its own policy
on the matter (The World Bank Group, 1999); see Oana -Maria Florescu, The TRIPs Agreement,
important multilateral WTO agreement , http://store.ectap.ro/articole/112.pdf (accessed on October
1, 2016).
70 Ioana Nely Militaru
b. The exclusive external competence of the Union arising from devel-
opments in the law derived , respectively, from the large number of acts adopted
by the Union's institutions to implement treaties , thereby removin g the Member
States that had previously transitional basis10. In this case the powers of the Union
are in competition, while Member States retain the power to legislate or to inter-
national commitments as long as and to the extent that Union authorities ,,la nd
not occupied yet”11.
The Court stated in this regard that, while at Union settled rules for achiev-
ing the objectives of the Treaty, Member States may not, outside the institutions,
to commit conventional able to affect those rules or alter the ir significance12. In
context to what Member States can not discretionary ,,decide whether to resort to
the path of intergovernmental or Community”. Therefore the Court's jurispru-
dence is not limited to a situation where the Union has established Community
rules under a common policy, given all areas corresponding to the objectives of
the Treaty13. Checking whether the rules of European Union law or the provisions
of the Treaties are not affected by conventional ended commitment of Member
States, individually or collectively, can not be reduced to a strict analysis of the
compatibility of the relevant commitment and Union law.
These rules and legal force, not a right, pursuant to the Court, the adoption
by countries ,,outside the framework of joint institutions” of international com-
mitments ,,related to the field” these rules. In its case the Court stated that Com-
munity law is the system ,,which interfere when the Union decides to exercise
concurrent jurisdiction, subscribing to a conventional intern ational obligation
necessary to fulfill a goal of the treaty, so that Member States can, with the EU,
subscribe to the same obligation when the action the Member States would have
adverse action taken by the Union”14. If you would maintain a parallel compe-
tence of the Member States would increase the risk of contradiction with EU law
and would compromise the objectives assigned to them.
According considerations raised by the Court TFEU art. 3 par. 2 ,,Union
has ratified its case law also has exclusive competence in respect of an interna-
tional agreement when that conclusion is contained in a legislative act of the Un-
ion or is necessary to enable it to exercise internal power, or to the extent that it
is capable of affecting common rules or alter their me anings”.
> Another example is the opinion of 1/94 WTO on implied powers,
which even though it was surpassed by extending the scope of the common com-
mercial policy, according to art. 207 par. 1 TFEU scientific interest, even being
covered by the provisio ns of subsequent article. In this regard the Commission
argued that in the alternative, implicit an exclusive Community competence to
10 Opinion 2/91, ERTA Hot, Hot because Kramer.
11 See Sean Van Raepenbusch, op. cit ., p. 340.
12 Opinion 2/91, ERTA Hot, Hot because Kramer.
13 Idem, paragraphs 10 and 11.
14 Opinion 1/76, point 4.
Considerations Regarding the Competence of the European Union 71
conclude GATS and TRIPS, both of even the EC Treaty which established its
internal competence and the existence of acts of secondary legislation that com-
plements this by implementing there , or even the need to take international com-
mitments to fulfill a goal set for the Community internally.
• On GATS Court stated, referring to the exclusive external competence
of the Comm unity , it is not apparent from power ,,Community to publish internal
rules”. Member States, whether acting individually or collectively, do not lose
the right to contract obligations with regard to third countries but as we have been
introducing common rul es which could be affected by these obligations. Com-
munity external competence becomes exclusive only if common rules were es-
tablished internally15.
• And on TRIPs Court rejected the existence of exclusive competence of
the Community to contract international commitments, namely16:
– harmonization carried out in the field in Community framework
was only partly so he could claim that acts of secondary Community were not
likely to be affected (in the judgment ERTA) the participation of Membe r signing
TRIPs;
– on the other hand ,,unification or harmonization of intellectual
property in the EU must be accompanied not necessarily to be effective, agree-
ments with third countries”.
Another application of the aforementioned opinion i s, new Lugano Con-
vention, on jurisdiction and the recognition and enforcement of judgments in civil
and commercial matters (Opinion of 7 February 200617). On the new Lugano
Convention the Court stated that signing it held the exclusive competence of the
European Community.
3. The power of the EU common foreign to that of Member States
In a number of areas, the Union and the Member States have joint com-
petence to conclude international agreements with third countries or international
organizations. As an ex ample we mention the following areas: education (art. 165
par. 3 TFEU and art. 207 par. 4 para. 3 subpar. B TFEU), culture (art. 167 par. 3
and art. 207 par. 4 para. 3 subpar. A TFEU), public health (art. 168 par. 3 and 4
and a rt. 207 par. 4 para. 3 subpar . C TFEU), environmental protection (art. 191
par. 4 T FEU), development cooperation ( art. 211 par. 2 TFEU) and technical as-
sistance (art. 212 par. 3 TFEU).
15 AETR judgment, because Hot Kramer, paragraph 77.
16 See Sean Van Raepenbusch, op. cit ., p. 342, 343.
17 Rec. p. I -1145.
72 Ioana Nely Militaru
4. Special provisions relating to the signing of agreements on common
commercial policy introduced by the Treaty of Lisbon.
Lisbon Treaty in Article 207 TFEU regulated mainly elements of evolu-
tion – which outlined, in fact, by the Court in its judgments – on coverage of in-
ternational trade whose rules were extended from of trade in goods, specifical ly
sixties, currently covering equally and services, investment, intellectual property,
public procurement, competition rules. These rules correspond to the scope of the
WTO Agreement and its annexes.
In summary remember:
– negotiations are co nducted by the Commission in consultation with a
special committee appointed by the Council (para. 3); Council decides by quali-
fied majority (par. 4);
– the negotiation and conclusion of agreements in the fields of trade in
services and trade -relate d aspects of intellectual property, as well as in foreign
direct investment, the Council shall act unanimously (par. 4 para. 2). The Council
shall act unanimously for the negotiation and conclusion of agreements in the
field: trade in cultural and audiovis ual services (if such action would affect the
cultural and linguistic diversity Union) trade in social, educational and health ser-
vices (if they are unlikely to disturb seriously organization of such services at
national level and affect the responsibility of Member States concerning the pro-
vision of such services (par . 4 para. 3);
– the negotiation and conclusion of agreements in the transport sector re-
main subject to the special provisions of the common transport policy (para. 5);
– exercising commo n external trade policy can not affect the delimitation
of competences between the Union and the Member States or to lead to a harmo-
nization of national legislation that such harmonization is ruled by treaties (para.
6).
However, according to the Vienn a Convention of 1969 on the Law of
Treaties in art. 12 is a procedure for rapid conclusion of an agreement the conclu-
sion signature has value in itself, in which case the Council approves the Agree-
ment by decision and designate the person empowered to sign the Agreement
may engage Union. In the present case, consultations must precede the signing of
the European Parliament.
5. Conclusions
The underlying rules of international trade are reflected in a first step, the
external competence of the Euro pean Community, and in the second phase – pre-
sent – that of the European Union to conclude an international agreement in the
field of trade policy. European Union foreign jurisdiction in this matter may be
exclusive or shared with Member States. Exclusive external competence of the
EU arising either from the Treaty or from acts of its institutions (secondary law).
Considerations Regarding the Competence of the European Union 73
Although the common commercial policy provided for in the original
Treaty that established the European Community, covering goods, and only cer-
tain aspects referencing services and intellectual property – namely, services (…),
the Lisbon Treaty has not only included within the scope of regulatory scope of
the WTO agreement but has simplified the procedure of negotiation and conclu-
sion of interna tional agreements in this field.
Bibliography
1. Sean Van Raepenbusch, The EU institutional Law , Rosetti Publishing
House, Bucharest, 2014.
2. Oana -Maria Florescu, The TRIPs Agreement, important multilateral WTO
agreement , http://store.ectap.ro/articole/112.pdf (accessed on October 1,
2016).
3. Case 804/72 Commission v. The United Kingdom (of Great Britain and
Northern Ireland), www.curia.eu (accessed on October 1, 2016).
4. Case 41/76, because Donckerwolcke and Schou, www.curia.e u (accessed
on October 1, 2016).
5. Case Parlement v. Council, C -360/93 Rec. p. I -1195, www.curia.eu (ac-
cessed on October 1, 2016).
6. GATS – the General Agreement on Trade in Services from 1 January 1995,
https://www.wto.org/english/tratop_e/serv_e/gatsqa_e.htm (accessed on
October 1, 2016).
CONTEMPORARY CHALLENGES IN THE
REGULATION OF NATIONAL BUSINESS LAW
New Elements in the Regulation of Competition in Romania
Ph.D. student Ana-Maria UDRIȘTE1
Abstract
Taking into consideration the increased activity of the competition authority
over the past few years, it was expected that the main framework in this area will suffer
substantial amendments in order accurately outline the objectives and fundaments that
are the basis of Competition Council. Consequently, during the last couple of years, Com-
petition Act no. 21/1996 suffered important amendments, in order to align its provisions
with the economic reality, as well as the tendencies at the European level. The p resent
paper, using comparative analysis and text interpretation as methods, has as purpose to
outline the main amendments brought to the Competition Act no. 21/1996 over the past
two years, as well as their impact in the day -to-day activity of the individ ual and compa-
nies in relation to the competition authority. In order to facilitate reading this paper, the
conclusions have been introduced at the end of each chapter where that amendment is
analyzed, whereas at the end of the paper we can find the most im portant changes
stressed, as well as the path the competition authority should embrace in the near future,
in order to give efficiency to these amendments.
Keywords: competition, anticompetitive deeds, dawn raids, sanctions, mergers,
access to file, reco gnition.
JEL Classification: K21, K23
1. Introduction
The competition authority has become a very active player in the last
decade on the Romanian market, pursuing investigations in various field of in-
dustry, which target both the big players in the busin ess market, as well as small
local entrepreneurs. Given the atypical sanctions that can be applied by this au-
thority (i.e. up to 10% from the turnover registered by the company in the previ-
ous year to sanctioning), the interest for the competition regulati ons has been
constantly increasing.
The last two years represented probably the most dynamic period with
respect to competition regulation and as a result the main framework was repub-
lished for two times due to the amendments which were mainly focused on a lign-
ing the national framework with the European one.
The competition policy of the European Union is:
1 Ana-Maria Udriște – Faculty of Law, University of Bucharest, Romania, E -mail:
ana.m.udriste@gmail.com.
78 Ana-Maria Udriște
– to prevent intervention by member governments that can distort the free
market by discriminating in favour of State companies or granting other aid to
certain companies in the public sector/private sector (State aids)2;
– to prevent and punish anti -competitive agreements between firms or
abuse of dominant market position (the EU policy on antitrust). It may be men-
tioned in this category3: trade agreements collected solely between domestic pro-
ducers and purchasers, agreements adjusting import prices to the price level, na-
tional agreements to share markets and sources of supply, reduction practices col-
lective turnover of producers in the state, sim ultaneously increasing prices, re-
strictions on imports, bans or restrictions on exports, price rebates, promises not
to challenge the validity of patents etc.
The present article aims to systematically analyze the most important
amendments brought to the C ompetition Act no. 21/1996 in Romania , through a
comparative approach with the old regulation, while also emphasizing the impact
of these amendments and, in the final part, their consequences.
2. Amendments brought by Government Ordinance no. 12/2014
As we can see from the provisions set out in the Government Ordinance’s
no. 12 of 31st July, 2014 (“GO no. 12/2014”)4, those set out in Law no. 117/2015
(“Law no. 117/2015”)5 for the approval of the abovementioned Ordinance, as
well as from the statement of rea sons of the latter normative act6, the new amend-
ments brought to the Competition Act no. 21/1996 (“Competition Act”)7, had as
objective: (a) an operational efficiency of the basic Competition Council’s activ-
ities by improving the management of the resource s allocated to the investigation
and sanctioning, as well as (b) maintenance of an optimal competitive environ-
ment.
2 See Cătălin -Silviu Săraru, State Aids that are Incompatible with the Internal Market in European
Court of Justice Cas e Law , in Cătălin -Silviu Săraru (ed.), Studies of Business Law – Recent
Developments and Perspectives , Peter Lang, Frankfurt am Main, 2013, p. 47.
3 See Ovidiu -Horia Maican, Anticompetitive Practices , „Perspectives of Business Law Journal ”,
Volume 4, Issue 1, November 2015, p. 180 .
4 The Government Ordinance no. 12 of 31st July, 2014 amending and supplementing Law no.
11/1991 against unfair competition and other normative act in the field of competition protection,
published in the Romanian Official Gazette no. 586 of 6th August, 2014.
5 Law no. 117 of 21st May, 2015 for the approval of the Government Ordinance no. 12/2014 amend-
ing and supplementing Law no. 11/1991 against unfair competition and other normative act in the
field of competition protection, pub lished in the Romanian Official Gazette no. 355 of 22nd May,
2015.
6 As it can be consulted on the Deputies’ Chamber at http://www.cdep.ro/proiecte/2014/500/40/9
/em768.pdf , accessed on 14.11.2016.
7 Law no. 21 of 10th April, 1996 of competition, further amended and supplemented, republished in
the Romanian Official Gazette no. 153 of 29th February, 2016.
New Elements in the Regulation of Competition in Romania 79
One of the most important amendments brought to the Competition Act
after its republishing in 20148 targets the way the Competition Council works.
Thus, in the version before the amendment, according to art. 19 of the Competi-
tion Act, the Competition Council’s Plenum was valid gathered in the presence
of at least 5 of its members and the decisions to be adopted with majority.
After the amendm ents brought by GO no. 12/2014, the Competition
Council’s Plenum was considered to be valid gathered in the presence of the ma-
jority of its members and the decisions were as well to be adopted with majority.
Afterwards, through the amendments brought by th e Government Emergency Or-
dinance no. 77/2014 (“GEO no. 77/2014”)9, the Competition Council’s Plenum
will work valid in the presence of the members in function, but no less than 3,
adopting decisions with majority as well. Furthermore, the GEO no. 77/2014
waives the condition of minimum 3 members for the Commissions activities,
these being able to adopt decisions with the majority of their members, irrespec-
tive of the number of the people present. Finally, Law no. 117/2015 amends once
more this art. 19 of th e Competition Act, indicating that there are minimum 3
members in function necessary in order to have a valid gathering of the Compe-
tition Council’s Plenum; the decisions will be valid if they are adopted with the
majority of the votes of the present membe rs.
As it can be easily observed, the main idea when amending the procedure
regarding the valid gathering of the Competition Council’s Plenum was to facili-
tate its gathering by reducing the number of the members required from 5 to 3
members. For clarity an d elimination of any interpretation possibilities, Law no.
117/2015 introduced the phrase “ in the presence of the majority of the members
in function, but no less than 3” . However, for future reference, we consider that
there ought to be a return to the initial system, that were a minimum number of 5
members was required for a valid gathering of the Plenum, in order to ensure a
bigger safety net over the impartiality while adopting decisions.
Another amendment brought by GO no. 12/2014 aims the assimilati on of
certain positions in the Competition Council with the ones of minister, state sec-
retary, and under state secretary. If in the first republished form of the Competi-
tion Act the Competition Council’s President position was assimilated with the
minister ’s one, the vice -president’s position with the state secretary’s one and the
8 The Competition Act was republished in 2014 in the Romanian Official Gazette no. 240 of 3rd
April, 2014. Afterward s, it was republished in the Romanian Official Gazette no. 153 of 29th Feb-
ruary, 2016 as a consequence of art. III of the Law no. 347/2015 for the approval of the Government
Emergency Ordinance no. 31/2015 amending and supplementing Competition Act no. 21/ 1996 and
amending art. 1 of the Government Emergency Ordinance no. 83/2014 regarding the wages of the
staff paid from public funds, as well as other measures for public spending, published in the Roma-
nian Official Gazette no. 973 of 29th December, 2015, th us giving the articles a new numbering.
9 The Government Emergency Ordinance no. 77 of 3rd December, 2014, regarding the national
procedures in the state aid field, as well as for amending and supplementing Competition Act no.
21/1996, published in the Rom anian Official Gazette no. 893 of 9th December, 2014.
80 Ana-Maria Udriște
completion counsel’s position with the under state secretary’s one, after the en-
actment of GO no. 12/2014, the competition counsels will be assimilated with
state secretaries and not under state secretaries.10
At the same time, GO no. 12/2014, amended by Law no. 117/2015, in-
troduces a very important principle din the competition legislation, “ the prioriti-
zation principle” . Thus, after art. 33 par. (1) of the Competition Act, a new p ara-
graph is introduced, “ (2) For the rational utilization of the resources for trigger-
ing and conducting the investigation, the Competition Council may prioritize the
cases according to the potential impact on the effective competition, consumers’
general interest or the strategic importance of the economic sector aimed”. Even
though at first glance this principle comes to make more efficient the Competition
Council’s activity, the amendments brought by Law no. 117/2015 (which men-
tions that the prioritizati on principle applies for both the triggering as well as for
conducting the investigation – before that the prioritization applied only for the
latter), it remains to be seen if problems will occur in the way that the Competition
Council will decide that ce rtain complaints are not relevant at that moment for
triggering an investigation, taking into consideration the industries target at the
time by the competition authority, even though the complaint shows serious clues
for a potential anticompetitive agreem ent.
Moreover, the prioritization principle, as it is written, is general and
vague and does not have any express conditions, nor implies a concrete prelimi-
nary analysis by which a certain case shows interest or not at a certain moment.
In this manner, one of the amendments of the competition legislation in the near
future should target a clear and unambiguous method of sorting the cases, so that
the prioritization principle can be applied in an ade quately and transparent man-
ner.
Another amendment brought t o the Competition Act aims the cases in
which, after the investigation was triggered, the competition authority finds that
it did not discover sufficient evidence for breaking the law in order to justify the
imposing of measures or sanctions by the Competi tion Council.
Until the enactment of GO no. 12/2014, the Competition Council’s Pres-
ident had the possibility to close, by order, that investigation. After this normative
act, if not enough evidence is discovered for a breach of competition legislation,
the Competition Council’s President is forced to close the investigation.11
At the first read, we may say that we are in the presence of a pure textual
amendment of the normative act, without any major implications in the institu-
tion’s current activity. Going further into detail, we may observe that, before the
amendment brought b y Law no. 12/2014, the President has the possibility either
to close the investigation, by order, or ( per a contrario ) to decide to continue the
investigation in order to discover new evidence related to a breach in Competition
10 See art. 22 of the Competition Act.
11 See art. 43 (1) of the Competition Act.
New Elements in the Regulation of Competition in Romania 81
Act. This amendment establis hes the President’s obligation to close the investi-
gation if there is not enough evidence of breach of competition legislation without
leaving the opportunity to further decide to continue the investigation and possi-
bly discovering ne w evidence.
The GO no. 12/2014 eliminates the fees charged by the Competition
Council to consult the file and obtain copies of the documents of the investiga-
tion; the authority will provide electronically, at parties to the investigation’ re-
quest, copies and extracts of the inv estigation file (most common on DVD). The
explanation lies in the explanatory memorandum to Law no. 117/2015 according
to which " the revenues from the fees charged for the copies or extracts of the
investigation files are insignificant, both in absolute an d relative amount to total
income from fees and charges in the institution ".12
Before the enactment of GO no. 12/2014, the Competition Council’s
President’s order of refusing the access to the investigation file could be chal-
lenged separately, in front of t he Bucharest Court of Appeal, in 15 days from the
communication, the court’s decision also being able to be challenged with appeal
in 5 days from the communication.
Challenging this order meant that the investigation was suspended until
the second appeal w as rendered, which hindered the entire procedure, as there
were situations where the investigations were extended even with more than a
year.
Therefore, the amendment brought by GO no. 12/2014 came to simplify
the procedure for carrying out investigations at the level of the competition au-
thority The President of Competition by which the parties are denied (total or
partial) access to certain documents, data and information found in the case file,
can be attacked only with the decision that completed invest igation by the same
application for summons, not to intervene in this case suspension of production
before the competition authority (the term 'same application of summons "was
introduced by Law no. 117/2015 for further clarification of the appeal proce-
dure).13
3. Amendments brought by Government Emergency Ordinance no.
31/2015
By far, the most spectacular and important amendments regarding Com-
petition Act were brought by GEO no. 31/2015.14
12 See footnote 4 above.
13 See art. 45 par. (1) of the Competition Act.
14 Government Emergency Ordinance no. 31/2015 amending and supplementing Competition Act
no. 21/1996 and amending art. 1 of the Government Emergency Ordinance no. 83/2014 regarding
the wages of the staff paid from public funds, as well as other measures for public spending, pub-
lished in the Romanian Official Gazette no. 474 of 30th June, 2015.
82 Ana-Maria Udriște
Before the enactment of this Government Emergency Ordinance, the
Compe tition Council published on its website, for public debate, the normative
act’s draft for amending and supplementing the Competition Act15. Even though
GEO no. 31/2015 seriously amends Competition Act, it may be observed that
many provisions from the draft project, were not adopted in the manner they were
open for debate, and we will point out the differenc es where we consider neces-
sary.
On a general note, most amendments target procedural aspects. One of
the most important amendments aims to align the inter nal legislation with the
European one. Thus, art. 5 (which refers to anticompetitive agreements at national
level) and art. 6 (which refers to abuse of dominant position at national level) of
the Competition Act have been adjusted to correspond to the stru cture of art. 101
(which refers to anticompetitive agreements at European level) and art. 102
(which refers to abuse of dominant position at European level) from the Treaty
on the Functioning of the European Union.16
Thus, from the old art. 5 of the Competi tion Act letters e) and f) on bid –
rigging and eliminating customers off the market are eliminated. With respect to
art. 6 of the Competition Act, also letter e) and f) have been eliminated which
were generically target on refusal to deal with certain suppl iers or beneficiaries,
practicing excessive prices or, on the contrary, ruining ones, both aimed to elim-
inate competition and exploit the dependency status.
The elimination of such examples from our legislation is not equal to a
decriminalization of them, but will allow the Competition Council to include
them in the other categories from art. 5 par. (1) and art. 6 of the Competition Act,
under the illegal deeds mentioned above.
Therefore, from the entrance into force of this amendments ( n.n. 30th
June, 201517), the investigations triggered based on art. 5 par. (1) let. f) and g) of
the Competition Act are considered to have been triggered based on the general
provisions of art. 5 par. (1) and the investigations triggered based on art. 6 par.
(1) let. e) and f ) of the same act will be considered to have been triggered based
on the general provisions of art. 6 par. (1).
It remains to be seen in the future whether this literal alignment of the
national provisions with the European ones will also be doubled by a f actual one
in this manner and if so the Competition Council will embrace from the Commis-
sion’s, First Court’s and European Cour t of Justice’s recent case law.
15 Which may be consulted at http://www.consiliulconcurentei.ro/uploads/docs/items/id10107/site
_consultare_lege1v2.pdf , accessed on 14.11.2016 .
16 Treaty on the Function ing of the European Union (consolidated version), published in OJ
C326/47 on 26.10.2012.
17 According to art. 12 of Law no. 24/2000 regarding technical legislative norms for elaborating
normative act “ Government Emergency Ordinances enter into force on the day they are published
in the Romanian Official Gazette”.
New Elements in the Regulation of Competition in Romania 83
With respect to merger control, GEO no. 31/2015 allows the Competition
Council to modify the Comp etition Act’s thresholds ( i.e. the aggregate turnover
of the companies involved to be bigger than 10 mil l. euro and at least two of the
companies involved to have a turnover bigger than 4 mil l. euro in Romanian ter-
ritory), by Plenum’s decision. The new thr esholds will be approved by the Com-
petition Council’s President’s order, after the clearance from the Ministry of
Economy, Trade and Tourism is obtained and will come into force in 6 months’
time after they are published in the Romanian Official Gazette.
The reason for such changes lies most likely in a procedure for a legisla-
tive simplification, making it easier for the Competition Council to obtain a clear-
ance from the Ministry of Economy, Trade and Tourism to amend these values,
rather than to make use o f to the classical procedure of modifying the legal frame-
work ( i.e. modification of the Competition Act through a new law, ordinance or
emergency ordinance, which involves lengthy procedures of adoption).
Another novelty concerns the possibility that an investigation into a par-
ticular sector can be finalized by identifying market dysfunctionalities affecting
the competitive process. In this regard, the Competition Council will adopt one
of the following mea sures: (a) issue recommendations to business environment,
public authorities and consumers to facilitate market development and competi-
tion, (b) promotion of specific regulations, if it is discovered that the market’s
malfunctions were generated by normati ve acts and (c) impose, by decision, the
necessary, appropriate and proportionate measures to remedy market dysfunc-
tionalities. The novelty also comes from the fact that the measures in paragraph
(c) are subject to public consultation before they are to be taken by the C ompeti-
tion Council by decision.
Another important change aims the extension of the inspection’s powers.
Thus, the new regulation allows unannounced inspections at any premises in
which businesses operate (we refer to any premises, land and m eans of transpor-
tation that the company legally owns or where it operates). The reason for this
measure comes as a solution to limit the attempts to obstruct the unannounced
inspection by using the argument that the space in which the company operates
is not legally owned by it.
Also, the deadline for appealing the authorization served by the President
of the Court of Appeal or a delegated judge regarding the application for author-
ization of an inspection is extended. Following the coming into force of the New
Code of Criminal Procedure18 in 2014, the provisions relating to conditions to
initiate and perform unannounced inspections by inspectors appointed by the
Competition Council in this respect (except junior inspectors) were amended.
18 Law no. 135/2010 on the New Code of Criminal Procedure, published in the Romanian Official
Gazette no. 486 of 15th July, 2010 and enforced by Law no. 255/2013, published in the Romanian
Official G azette no. 515 of 14th August, 2013.
84 Ana-Maria Udriște
Thus, as of 02.01.20 14, the Competition Council cannot conduct unan-
nounced inspections only based on the order of the President of the Competition
Council (as previously stipulated), a judicial authorization given by the President
of the Court of Appeal or by a delegated judg e being mandatory. This authoriza-
tion can be challenged (both the Competition Council and by the person who is
subject to inspection) within 48 hours, which starts from the moment of its com-
munication. After the entry into force of GEO no. 31/2015, the dea dline in which
that decision may be challenged was increased to 72 hours, enabling parties to
better analyze and prepare pertinent observations on it.
In addition, still talking on inspections, new ways of communicating the
inspection order and judicial authorization are introduced. Thus, if the communi-
cation cannot be physically transmitted to the legal representative of the company
or, in his absence, to any other employee of that company, the communication
will be performed by: (a) fax, (b) mail or (c) any other text transmission methods
ensuring the transmittance of the order and judicial authorization and also the
confirmation of dispatch (but not confirmation of its receipt by the investigated
party).
In these situations, the communication of the ins pection order and its re-
lated documents will be considered to have been made at the date and time listed
on the printed copy of the confirmation of transmission. In such cases, the party
subject to inspection remains to prove – by any means – that the docu ments did
not come in the possession of the legal representative or employee of the com-
pany. In the exceptional case where communication cannot be achieved by any
of the means set out above, the competition inspectors will proceed to display:
(a) the order of the inspection, (b) the judicial authorization and (c) the order
triggering the investigation all at the premises for inspection. Communication
will be considered to be made at the date and time from the report prepared by
the competition inspectors in this respect and displayed.
GEO no. 31/2015 brings new limitations regarding access to the file. Af-
ter the entry into force of GO no. 12/2014 by which, as we mentioned in the pre-
vious section, the order of the President of the Competition Council refusin g (to-
tally or partially) the access to information and documents from the case file can
be challenged only with the final decision, GEO no. 31/2015 comes and limits
file access requests.
The confidential documents, data and information from the Competition
Council’s file may be required, usually once, after the communication of the in-
vestigation report. In the absence of new element, there cannot be made succes-
sive access requests to confidential documents, data and information. Basically,
in such case, if the party was not granted access on the first request, they are no
longer able to make a new request for access. The only way remaining is to wait
the finalization of the investigation in order to challenge the order along with the
application for summons by which the decision is appealed.
New Elements in the Regulation of Competition in Romania 85
Although the intention of the legislator by introducing these changes was
to make more efficient the work of the investigation team and to defend them
from possible abuses by some companies (which could make repeated requ ests
for access to the file, thus making investigation procedure harder and time con-
suming) it remains to be seen how practical this amendment will be, if it will lead
or not to abuse, only this time from the competition authority.
Regarding the complaints submitted by a person to the Competition
Council on possible anticompetitive actions, the deadline for communicating a
decision rejecting a complaint regarding an anticompetitive practice, where no
sufficient grounds and facts are presented in order to op en investigation is ex-
tended from 60 calendar days to 60 working days from the date on which the
complainant confirmed that his complaint is complete and meets a ll the require-
ments of the law.
GEO no. 31/2015 makes important changes in terms of acknowledgm ent
procedure. Before the changes, the acknowledgment could be done after receiv-
ing the investigation report and by the time the hearings took place. The new reg-
ulation extends the period during which the undertakings under investigation can
apply for the acknowledgment procedure, for the entire period of in vestiga-
tion. The reduction in the fine imposed remains the same as in the previous reg-
ulation, namely between 10% and 30% of the fine imposed, without taking into
consideration mitigating circumstance on acknowledgment.
In order to qualify for such a fine reduction, the company must submit a
specific application in this regard, which includes: (a) clearly and unequivocal
acknowledging the responsibility for the infringement and (b) a statement of ac-
ceptance of the maximum amount of fine that the company wil l pay.
What is very interesting is that, according to the new regulation, if the
company that chose the mitigating circumstance of acknowledging decides to
challenge in court the decision issued by the Competition Council, with regard to
the facts subject to acknowledgment, the company will not benefit from the re-
duced fine paid as a results of the acknowledgment, and the Competition Council
is free to use that acknowledgment and any other evidence supplied by that un-
dertaking.
When adopting the GEO no. 31/2015, the procedure for applying fines if
the company that acknowledges decides to challenge the Competition Council's
decision in courts was unclear and therefore there were two possibilities that
might give efficiency to that provision.
First, whether th e decision issued by the Competition Council were to
have calculated two thresholds fines, namely: (a) a threshold retaining mitigating
circumstance of the acknowledgment, under the conditions of not challenging the
decision in court and (b) a threshold wi thout retaining the circumstance mitigat-
ing, in case the company decides to challenge that decision in court.
Secondly, there is the possibility, less likely, for the competition author-
ity to issue a decision to retain the mitigating circumstance of acknow ledgment,
86 Ana-Maria Udriște
and if the company decides to challenge in court that decision, the Competition
Council will reconsider the decision and partially revoke it for that undertaking,
and thus issuing a new decision with the new amount of the fine (without a de-
ductio n of the mitigating circumstance of acknowledgment).
On these dilemmas, the legislator considered it appropriate to respond
with a further amendment of the Competition Act at the end of 2015, which we
will detail in the following sections.
However, given that the rules GEO no. 31/2015 shall be applicable forth-
with, we can legitimately question: what will happen with the decisions issued by
the Competition Council on 30 June and up to the approval of the new instruc-
tions ?
In addition, regarding the leniency policy and upholding the mitigating
circumstance of acknowledgment, the new regulation stipulates that companies
which benefited from the leniency policy will also be able to apply for the ac-
knowledgment procedure, in which case the reduction of fine as a result of ac-
knowledgment will be further added to the reduction applied for leniency. How-
ever, even by summing these two procedures of punishment individualization,
their level may not exceed 60% of the level determined in accordance with the
instructions on the individualization of sanctions.
Another novelty concerns the motivation and communication of the de-
cisions issued by the Competition Council when applying sanctions. Thus, ac-
cording to the new provisions, when applying sanctions, the Competition C ouncil
has the obligation to motivate and communicate to the parties the decisions in
maximum 120 days after the deliberation took place. Up to this moment, the only
provisions with respect to adopting decisions were found in the Regulation on
hearing proc edures in the Competition Council and adopting decisions19 in which
it was stated that the deadline for deliberation can be postponed with 15 working
days after the closing of the debates, and is serious justified cases ( i.e. the out-
standing complexity of t he case or other causes related to institution’s activity),
this deadline can be prolonged by another 15 working days. Subsequently, the
decision will be communicated to the parties in a maximum period of 30 days
from the day the deliberation took place, r esulting in a maximum period of time
of 72 days (by corroborating those two period of time stated by the Regulation)
from the moment the deliberations took place until the communication of the de-
cision adopted by the Competition Council.
Some clarification s upon this aspect are still required: in the project for
the amendment of the Competition Act, as it was published on the authority’s
website, the provision was set out like this: “ The decisions adopted by the Com-
petition Council based on art. 8, 13, 44 a nd 45 will be communicated to the par-
ties, usually, in maximum 120 days after the deliberation” . As it may be observed,
19 Regulation on hearing procedures in the Competition Council and adopting decisions, published
in the Romanian Official Gazette no. 792 of 8th November, 2011.
New Elements in the Regulation of Competition in Romania 87
the text from the project allowed a bigger margin of discretion on behalf of the
Competition Council with respect to this deadline, as i n justified cases the author-
ity might have exceed these 120 days. GEO no. 31/2015 thus states the obligation
of to motivate and communicated the decision to the party in 120 days after the
deliberation took place, but without specifying the sanction to be applied in case.
However, we consider that even if there is no sanction expressly mentioned by
the act, the parties are entitled to ask for damages in court if such a deadline has
not been respected, provided they pr ove an injury under common law.
Regardin g the penalties imposed by the Competition Council, the com-
pany which is sanctioned did not achieve in the previous financial year sanction
a turnover, or where this turnover cannot be determined, the Competition Council
will take into account the turnover for the financial year in which the company
registered a turnover, year that is immediately preceding the year of reference for
the calculation of turnover in order to apply the fine.
Prior to the amendment, this mechanism was provided only if the under-
taking's turnover in the financial year previous to sanctioning could not be deter-
mined. Currently, according to the new provisions, if neither in year previous to
the reference year for calculating the turnover the company did not register a
turnover, the l ast turnover registered by the company will be taken into account.
The draft project to the Competition Act the legislator intended to intro-
duce a much tougher sanctioning regime than currently exists. Thus, for the com-
panies who are part of the same econo mic unit and form a single undertaking in
the purposes of the Competition Act, the Competition Council recommended that
the determination of the turnover in the financial year prior to sanctioning should
be based on the worldwide turnover for all companies considered part of the same
economic unit.
Such a principle would have resulted in the existence of a more severe
sanctioning regime than the pattern laid down in law and practiced in the Euro-
pean Union and other countries with a long tradition in the app lication of compe-
tition rules. Moreover, it would have even led to a breach of the principle of state
sovereignty as it would have allowed a fine to be based on the turnover outside
Romania. The fact that several companies belong to the same group, which h as
operations in several countries, does not mean that we should lose sight of the
fact that the anticompetitive deed established by a decision of the Competition
Council took place in one state, respectively Romania. Imposing a fine on the
worldwide turno ver of all companies in the group would have meant that we have
to consider that an act anticompetitive deed sanctioned on Romanian territory
occurred in other states.
88 Ana-Maria Udriște
4. Novelty amendments brought by Law no. 347/2015
After in 2015 the competition legislation was substantially amended, the
final of the year booked huge surprises for us, the enactment of Law no.
347/201520 bringing significant amendments starting of 1st January, 2016.
The Competition Act states that, starting this year, the following deci-
sions are considered enforceable titles: (a) Competition Council’s decisions for
applying sanctions and (b) the authorization taxes in merger control. Before this
amendment, the secondary regulation21 only mentioned that the sanctioning de-
cision issued by the Competition Council are enforceable titles, without expressly
mentioning the time for this enforceability, excluding tax authorizations above
mentioned.
Currently, these become enforceable titles without any other procedure,
in 30 days -time from the communication to the interested parties.
Thus, if after the tax authorization decision in case of merger control is
issued by the Competition Council and the amount is not paid, the competition
authority will be able to proceed to the enforceability of t his amount, without
needing to conduct any other procedures.
Very interesting in this case is the Report sent by the Commission for
industry and services with respect to the explanatory memorandum to Law no.
347/2015 on 15.12.2015.22 This provides, in relat ion to this newly introduced ar-
ticle 24 par. 31, the following reasoning: " In most cases sanctioned companies
requests in court the suspension of the fine. Even if the parties are not successful
on suspending the fine, locally, tax administrations are ofte n not demand payment
of the fine on the grounds that there is an action for annulment of the decision
pending. "
Therefore, the reason to include this new article was to set an effective
way of means to the tax administrations so that they can proceed with the en-
forcement of fines and authorization fees that the company did not pay, whether
or not an action for annulment of the decision was brought before the courts. Most
likely, tax administrations showed a more relaxed regime regarding enforcement
of the f ines established by decision of the Competition Council, precisely because
there are many cases where the fine set by the competition authority was signifi-
cantly diminished by the courts.
20 Law no. 347/2015 for the approval of the Government Emerg ency Ordinance no. 31/2015 amend-
ing and supplementing Competition Act no. 21/1996 and amending art. 1 of the Government Emer-
gency Ordinance no. 83/2014 regarding the wages of the staff paid from public funds, as well as
other measures for public spending, published in the Romanian Official Gazette no. 973 of 29th
December, 2015.
21 Art. 17 of the Regulation from 19 August 2011 on discovering contraventions and applying sanc-
tions by the Competition Council, published in the Romanian Official Gazette no. 631 o f 5th Sep-
tember 2011, as further amended.
22 Which may be consulted at http://www.cdep.ro/comisii/munca/pdf/2015/rp741.pdf , accessed on
14.11.2016 .
New Elements in the Regulation of Competition in Romania 89
In such a situation, the procedure for recovering the amounts alread y paid
to the tax administrations would have been extremely difficult, and therefore tax
authorities preferred to wait for the moment when the fine remained permanently
settled by the courts in order to proceed with the execution of a clear and deter-
mined amount, which could no longer be subject of change.
Before the amendments brought by Law no. 347/2015, the Competition
Act mentioned, in art. 26 par. (4) that the authority’s decisions by which: (a) there
is stated a breach of the law and appropriate sanct ions are applied, (b) necessary
measures to restore the competitive environment are applied, (c) is granted access
to confidential information, (d) complaints are settled as well as the requests and
notifications on merger control are unilateral administra tive acts with individual
character.
With the implementation of new regulations, granting access to confi-
dential information is no longer made by decision, but by order of the President
of the Competition Council and, although it preserves the character of unilateral
administrative acts with an individual character, it cannot be challenged sepa-
rately in an administrative court, but just among with the final decision. The ra-
tionale for this provision is that the investigation time will be reduced – such an
action could have extended the investigation procedure for over a year, which
considerably complicated the work of the institution.
The legislator’s intention was to fix a existing legislative mismatch23, art.
45 par. (4)24 of the Competition Act expressly me ntioning that the access to file
is granted only by order of the Competition Council’s President (and not by de-
cision!), which may be challenged only with the decision through which the in-
vestigation is finalized and through the same statements of claims.
In case of a merger control, there are two kind of fees that need to be paid
by the companies involved:
(a) a fixed fee, which is the tariff from the notification of a merger con-
trol and consists of RON 4.77525 which needs to be paid before ad-
dressing the not ification to the competition authority and
(b) a variable fee for authorizing the merger control, paid after the anal-
ysis made by the competition authority in that notification.
Before 1st of January, 2016 the authorization tax for merger control was
between EUR 10.000 and EUR 25.000, taking into consideration the value of the
turnover of the company involved26, irrespective if the clearance decision was
23 See footnote 4 above.
24 Art. 43 par. (4) prior to the republishing of 2016.
25 According to the schedule of the Regulation from 4th March, 2011 on establishing and charging
the taxes for the procedures settled out in Competition Act no. 21/1996 and the regulations issues
for applying it, published in the Romanian Official Gazette no . 186 as of 17th March, 2011, as
further amended.
26 The method of calculation can be found in the Schedule to the Instructions from 11 August, 2010
for the application of art. 32 of the Competition Act no. 21/1996, republished, as further amended
90 Ana-Maria Udriște
issued in Phase I (without a deep ana lysis) or in Phase II (after a deep analysis of
the notification, when the operations presents serious doubts regarding the com-
patibility with a normal competitive environment.
Starting this year, the authorization fees will be as following:
(a) between EUR 10.000 and EUR 25.000 when the clearance decision
is issued based on art. 47 par. (2)27 of the Competition Act – when
there are no serious doubts regarding the compatibility with a normal
competitive environment or when the doubts where eliminat ed by the
commitments proposed by the parties and accepted by the Competi-
tion Council;
(b) between EUR 25.001 and EUR 50.000 when the clearance decision
is issued based on art. 47 par. (4) let. b) and c)28 of the Competition
Act – when, during Phase II, the com petition authority authorizes the
mentioned notification as follows:
i. Unconditional , because, after the analysis, it results that the
merger control operation does not raise significant barriers
in competition or
ii. Conditional, establishing the obligations an d/or conditions
that the parties need to respect so that they do not alter the
competition.
In July 2016, the Competition Council adopted the Instructions on calcu-
lating the authorization taxes in merger control operations29, in which is stated
that the tax will be related to the company’s turnover, as it was before, split ac-
cording to the Phases mentioned above.
At the same time, compared to the previous provisions, the taxes to which
we referred to above (both the fix one as well as the variable one) will no longer
go to the state budget, but to the Competition Council’s one30. Art. 31 par. (5) of
the Competition Act shows that these revenues will be used by the competition
authority for personnel training, consulting and expertise, performance bonus
granted to the personnel with outstanding results, editing and printing the Roma-
nian Competition Magazine etc.
Having more resources at hand now than before, this can only mean one
thing: that the competition authority will increase in independence and will inves t
in the development and training of the personnel in various industry’s fields,
and suppl emented, with respect to the method of calculation of the authorization tax in case of
merger control, published in the Romanian Official Gazette no. 591 as of 20th August, 2010.
27 Art. 45 par. (2) prior to the republishing of 2016.
28 Art. 45 par. (4) let . b) and c) prior to the republishing of 2016.
29 Instructions from 21st June, 2016 on calculating the authorization taxes in merger control opera-
tions, approved by the order of the Competition Council’s President no. 439 from 21st June, 2016
for the approv al of the Instructions on calculating the authorization taxes in merger control opera-
tions, published in the Romanian Official Gazette no. 529 as of 14th July, 2016.
30 Art. 31 par. (3) of the Competition Act.
New Elements in the Regulation of Competition in Romania 91
which will lead to an intensification of the activities performed by this institution,
as well as to a implementation of a higher degree of professionalism, thus making
the co mpetition authority an attractive work place for professionals, who are re-
warded according to their performance.
Under a critical point of view, it remains to be seen whether this amend-
ment may lead to abuses on behalf of the competition inspector who, und er the
stimulation of performance bonuses, will try to cover a bigger number of inves-
tigations that will end with sanctioning proposal (more especially without retain-
ing any mitigating circumstan ces).
Art. 34 par. (3)31 comes and regulates the possibility o f the competition
authority to use, according to the law, the information and documents collected
by other authorities and public institutions while carrying out their specific activ-
ities.
The argument for this text aims at those situations in which ther e is the
possibility that certain documents or information collected by other authorities
and public institutions while carrying out their specific activities to be destroyed
before the competition authority can proceed to dawn raids. In such case, there
might exist the impossibility of the Competition Council to restore those docu-
ments from other sources, and as a result, the legislator introduced the possibility
to use the documents and information that other authorities had access to.
The problem which a rises is that this amendment also takes into account
documents and information that were collected during criminal proceedings. In
the criminal law area, the parties’ rights and guarantees and more restrictive than
the ones from the Competition Act (we are referring here specially to warrants
for premises, which are total absent from the competition legislation). Therefore,
there exist the possibility that, through this cooperation, the competition authority
will have access to documents and information tha t otherwise it would not have
access to, thus existing the possibility to harm the right of defense of the investi-
gated persons.
Starting with 2015, the Competition Council launched the whistle-
blower’s website32, where the employees or ex -employees can info rm the Com-
petition Council regarding a possible anticompetitive deed of the company. By
implementing this platform, the competition authority wished to encourage per-
sons who have knowledge about anticompetitive deeds to bring them in the at-
tention on the c ompetition authority. The Competition Council’s President, Mr.
Bogdan Chiritoiu declared that this platform was a real success ever since it was
launched, 50 complaints regarding possible anticompetitive deeds being regis-
tered in the first two months.33
31 Art. 34 par. (21) prior to the republishing o f 2016.
32 Which can be accessed at https://secure.secway.info/ro/start.php , accessed on 14.11.2016 .
33 For further details, see article “How much you win in Romania if you “blame” your competition”,
published on 24.03.2015 at http://www.gandul.info/gandul -live/cat -castigi -in-romania -daca-iti-
92 Ana-Maria Udriște
How ever, until 2016, there was no legal definition of the “whistle-
blower”. Law no. 347/2015 takes a step forward and defines the whistleblower
as being those “ individuals that provide the Competition Council, on their own
initiative, information regarding pos sible breaches of Competition Law” . 34
It is also mentioned that the identity of the whistleblower is protected and
that submitting such information is not considered a breach of Work Code or the
labour agreement between the employee and the employer. This measures comes
to serve as a protection for the employee, the employer having no right to consider
such actions a breach of the confidentiality agreement taken by the employee to-
wards the company and whose breach might have led to a contract termination.
According to art. 3635 of the Competition Act, "the Competition Council
may take statements from any natural or legal representative of the legal person
who consents to give such statements ."
Art. 37 para. (1)36 comes to detail this procedure, the persons who can
interview people mentioned above being the competition inspectors, with the ex-
ception of junior inspectors.
Thus, to achieve this interview procedure, the Competition Council sends
a written request to the person concerned, indicating the legal basis, purpose, date
and place the interview shall take place, and the sanctions provided by law; the
interview can be done by any means, including electronic ones and may be rec-
orded audiovisual and written in a report signed by all participants.
It also introd uced a new offense in this case, as the individuals or legal
representatives of the company are liable of a fine between 0.1 and 1% of the
company’s total turnover of the in the previous financial year when providing
inaccurate or misleading information.37
In 2011 it was introduced a new paragraph in the Competition Act at the
time by which, in essence, in situations where an operation to take control of
undertakings or assets poses a risk to national security, the Government, at the
proposal of the Supreme Council of National Defense (SCND) will issue a deci-
sion by which that operation is prohibited. It is also established an obligation for
the Competition Council to inform the Supreme Council of National Defense
with respect to economic concentrations which are notified thereof, which may
be analyzed from the national security’s point of view38.
torni -concurenta -bogdan -chiritoiu -in-doua -luni-avem -deja-50-de-sesizari -de-la-persoanele -fizice –
14049452 , accessed on 14.11.2016.
34 Art. 35 par. (1) of the Compe tition Act.
35 Art. 35 prior to the republishing of 2016.
36 Art. 351 prior to the republishing of 2016.
37 Art. 53 let. c) of the Competition Act.
38 For further details, see Iustin Captariu, The operation of taking control subject to SCND’s notifi-
cation and the applicable procedure , published in „the Notes and Juridical Studies’ Magazine ” on
17th September, 2013 which can be accessed at http://www.juridice.ro/282823/operatiunile -de-
preluare -a-controlului -supuse -notificarii -csat-si-procedura -aplicabila.html , accessed on 14.11.
2016 .
New Elements in the Regulation of Competition in Romania 93
By Law no. 347/2015 it is provided that, if the SCND notifies the Com-
petition Council that an operation of merger control is likely to present a risk to
national secu rity, the deadlines set out in the Competition Act in the authorization
procedure of a merger are suspended from the moment the SCND informs the
Competition Council on this issue.
The suspension of these deadlines will cease in the following cases: (a)
where the SCND notifies the Competition Council that the operation is prohibited
or (b) where the SCND notifies the competition authority that the transaction pre-
sents no risk to national security.
This change is very important because there was a risk that, after the
analysis of the economic operation by SCND, the deadlines laid down by the
Competition Act to adopt a decision in the case of concentrations would have
been exceeded and thus the economic concentration operation can take place (art.
45 pa r. (5) of the Competition Act).
Under the new regulations, the Competition Council may, in case of a
dawn raid, lift and use as evidence the preparatory documents prepared by the
investigated company for the sole purpose of exercising its right of defense.
The restriction to lift documents is maintained regarding the communi-
cations between the company and its lawyer (client -attorney privilege), drafted in
and for the sole purpose of exercising the company’s right of defense after the
opening of the administra tive procedure under the Competition Act or even be-
fore it provided that it is related to the investigation.
It remains to be seen if this articles will be the subject of a complaint of
unconstitutionality or not – basically, in such a case, the competitio n authority
could use the preparatory documents of the company against it, which is contrary
to protecting the rights of defense.
According to the new provisions, the mandate of the Competition Coun-
cil’s member of the Plenum is 5 years, subject to a one -time renewal, irrespective
of the previous duration.39
This amendment must be analyzed in accordance to art. 15 par. (11) of
the Competition Act with regulated the procedure in case a place in the Compe-
tition Council’s Plenum is vacant, other than by fulfilli ng the deadline. Therefore,
in case a position becomes vacant, a new member will be chosen and named, but
this time for a 5 -year period, and not until the expiration of the term the person
before was entitled to.
Until now, if the person whose term was ce ased has 3 more years until
the expiration of the 5 -year period, the persons that will have taken its place
would have been appointment only for that 3 -year period and not for an entire 5 –
year term.
Therefore, the one -time mandate renewal, irrespective o f the previous
period, covers both of the following situations: (a) when, according to the old
39 Art. 15 par. (2) of the Competition Act.
94 Ana-Maria Udriște
regulation, the new member will have been appointment only for the remaining
period of time of the previous persons and (b) when that previous person had a
full 5-year term.
Art. 7040 of the Competition Act, newly introduced, states that: “ the per-
son who had exercised a public dignity function or a specialized public function
in the Competition Council, wishing to pursue a professional activity in the pri-
vate secto r, whether paid or not, within three years of terminating the work rela-
tions, will notify the Competition Council about it, requiring a prior favorable
approval of the competition authority, in case the work to be done in the private
sector is related to t he economic activity pursued at the Competition Council dur-
ing the last three years and may be incompatible with the authority’s legitimate
interests”.
Based on the interested party’s request, the Competition Council may
deliver the following types of appr ovals:
(a) A positive approval or
(b) A positive approval that also includes the condition ought to be re-
spected by the interested party.
In case the interested party does not request such approval or, in case it
does, the person does not respect the obligations s et thereof, the Competition
Council may address the court and claim:
(a) To obligate that person to respect the approval;
(b) To stop the activities that are incompatible with the legitimate inter-
est of the competition authority;
(c) To obligate that persons to pay fo r the damages caused by not request
or not respecting the approval.
The procedural competence in this case in granted exclusively in the fa-
vor of Bucharest’ 2nd degree court, Administrative Section, as the first court.
This new provisions comes as a result of the last years’ significant per-
sonnel migration from the public sector in the private one, shaped especially in
collaboration agreements with competition lawyers who represent clients in front
of the Competition Council or with private companies invest igated by the com-
petition authority.
Taking into consideration that the Competition Council’s staff has access
to confidential and sensitive information, a regulation for the protection of the
authority’s interests was necessary. This amendment also takes into account that
competition inspector and other members of the Competition Council have ac-
cess, in their daily activity, to documents and information that may offer an un-
justified advantage to some individual or companies in the private sector ( i.e.
docu ments and information from the file, the activity plan of the competition au-
thority, investigatio n that will be triggered etc.).
40 Art. 68 prior to the republishing of 2016.
New Elements in the Regulation of Competition in Romania 95
The most important amendment brought to the Competition Act targets
the institution of the acknowledgment of the anticompetitiv e deed by the investi-
gated party. This amendment is the natural result of the politics the Competition
Council adopted a years ago, which is, on one hand, focusing of the prevention
principle and remedies proposal in order to eliminate the harm done to the com-
petition environment and, on the other hand, to shorten the investigations and to
strain court’s activities for the annulment of sanctioning decisions issued by the
competition authority. Next, we will analyze, punctually, the most important
amendments brought to this institution.
A new timeline for the acknowledgment procedure. Starting with 1st Jan-
uary 2016, the acknowledgment procedure can be done only prior to hearings.
Before that, the undertaking could have recognized the anticompetitive deed at
the most during the hearings.
Fine amount . In case the company also benefits from the mitigating cir-
cumstance of acknowledgment (for which a reduction between 10% and 30%
from the basic amount is applied), the fine amount can be diminished including
in thos e situations where it is settled to the minimum provided by law, without
the fine being less than 0.2% of the turnover achieved by the company in the
previous year.
The acknowledgment benefit can be granted only after a specific request
on behalf of the co mpany, that needs to include:
i. a clear and unequivocal acknowledgment of the liability for the
infringement and
ii. a statement of the maximum fine that the company is willing to
pay,
In the decision the Competition Council will adopt it will be specified:
i. the amount of fine without taking into consideration the ac-
knowledgment and
ii. the amount of fine without taking into consideration the mitigat-
ing circumstance of acknowledgment.
Action for the annulment in case the mitigating circumstance of acknowl-
edgment is ap plied. Before the amendment brought by Law no. 375/2015 it was
only mentioned that, if the company decides to challenge in court the sanctioning
decisions issued by the Competition Council, it will no longer benefit from the
fine reduction as a result of t he applying the mitigating circumstance of acknowl-
edgment, without detailing the procedure in such case.
The new provisions come to regulate these shortages; therefore, in case
the company decides to challenge in court the competition authority’s decision
with respect to aspects that were subject to acknowledgment , the company will
lose the benefit granted as a result of applying the mitigating circumstance of
acknowledgment.
Such modification can only please us, as it allows the companies to chal-
lenge the Competition Council’s decision in court with respect to other aspects
96 Ana-Maria Udriște
that were not part of the acknowledgment procedure, like, for example, an incor-
rect fine individualization, not withholding certain mitigating circumstances etc.
Moreover, the removal of the benefit granted regarding fine reduction
will not be automatically, but, at the competition authority’s request, the court
will analyze the annulment action and will remove this benefit, establishing the
fine accordingly.
Another very important bene fit towards this amendment brought by
OUG no. 31/2015 is that, when the company which decided to acknowledge the
anticompetitive deed challenges the decisions in court, the competition authority
can no longer use that recognition towards other companies th at did not resort to
such procedure.
In case there are companies that benefit from the leniency procedure, but
that are not acquitted from the pecuniary liability, the reduction as a result of
acknowledgment will be added to the reduction as a result of le niency procedure,
without exceeding 60% of the level determined according to the individualization
instructions.
With respect to the enforcement of the new individualization regulations,
meant to detail this framework, the Competition Council adopted on 3rd Novem-
ber, 2016 the new Instructions, aligned with the provisions set out in Competition
Act41.
5. Conclusions
As we may observe, the competition legislation faced significant amend-
ments in the last couple of years, meant to align the national provisions with the
European ones and to adapt the legislative text to the existing reality. The fact
that the Competition Council intends to implement a clearer procedure for its
daily activities can only bring us joy, as in the end this will reduce the duration
of the investigations.
The fact that the deadline for challenging the judicial authorization rises
from 48 hours to 72 hours is meant to settle the almost “pure formal” control of
the courts in emitting these authorizations and therefore in the future the obj ec-
tives of the dawn raids will be more clearly set out, given that at the present time
these objectives are still general.
Moreover, the lobby carried out by the Competition Council lately and
the subsequent amendment of legislation on the acknowledgment r ules open the
road to success of the acknowledgment procedure started by the Competition
41 Instructions from 2016 regarding the individualization of the sanctions set out in art. 55 of the
Competition Act no. 21/1996, published in the Romanian Official Gazette no. 882 as of 3rd Novem-
ber, 2016.
New Elements in the Regulation of Competition in Romania 97
Council a few years ago. Thus, the final scope pursued by the Competition Coun-
cil on one hand, to prevent and, when this is no longer possible, to reestablish as
soon as possible a normal competitive environment.
Lastly, the possibility of the competition authority to use the revenues
obtained from the tax authorizations in merger control in order to develop activ-
ities fully financed by own funds will lead, on one hand , to a bigger independence
of the Competition Council, in line with the request that came from the European
Commission and World Bank, and, on the other hand, to attract qualified person-
nel in this field of expertise.
In such conditions, is it most likely that the Competition Council’s activ-
ity in the next year to become more diversified, with an accent on the sophistica-
tion of the used methods, all these pursuing to align this authority with the colla-
tive institutions from other state members of the Europe an Union. Therefore, the
presence of the Competition Council will be more and more stressed in the com-
panies’ current activities, which will lead to a bigger opening of the persons in-
volved in this area and, eventually, to a harmonization with the European provi-
sions in order to implement a normal competitive environment.
Bibliography
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and the applicable procedure , published in the „Notes and Juridical Studies’
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zette no. 893 of 9th Decem ber, 2014;
98 Ana-Maria Udriște
8. Government Emergency Ordinance no. 31/2015 amending and supplementing
Competition Act no. 21/1996 and amending art. 1 of the Government Emergency
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art. 55 of the Competition Act no. 21/1996, published in the Romanian Offi cial
Gazette no. 882 as of 3rd November, 2016.
The Complexity of the Litigations in the Energy Regulated Field of
Activity. The Necessity of the Specialization of the Judge Panels
Assistant professor Andreea STOICAN1
Abstract
In Romania, a whole series of scopes of business are currently regulated, and
the level of detail, technicality and high number of specific normative acts related thereto
make it extremely difficult to understand and ap ply them, both for technical experts, and
particularly for jurists. Such a business scope is the regulated field of electrical power
(energy). Primarily regulated by the Parliament, though the laws outlining the general
implementation framework, the tradin g activities in the field of electrical power are
mainly performed through the provisions stipulated by the secondary regulations, namely
by the ones elaborated, approved, implemented and supervised by the National
Regulatory Authority for Energy (Autorita tea Națională de Reglementare în Domeniul
Energiei – ANRE). The legal professions which are currently most often confronted with
issues arising from the wrongful implementation of the provisions mentioned hereinabove
are the ones of attorney -at-law and mag istrate. Therefore, this paper aims at analysing
the necessity of training certain categories of professionals in the legal field specialising
in this activity sector, so that they may have a basic training level offering them the
opportunity to represent or assist the players on the regulated market, namely to correctly
settle the litigations occurring between such players or between the players and the
Regulatory Authority.
Keywords: regulated field, regulatory authority, renewable sources, specialised
panels
JEL Classification: K49, K23
1. Introduction
In Romania, a whole series of scopes of business are currently regulated,
and the level of detail, technicality and high number of specific normative acts
related thereto make it extremely difficult to understand and apply them, both for
technical experts, and particularly for jurists.
Such a business scope is the regulated field of electrical power (energy).
Primarily regulated by t he Parliament, though the laws outlining the
general implementation framework, the trading activities in the field of electrical
power are mainly performed through the provisions stipulated by the secondary
regulations, namely by the ones elaborated, appro ved, implemented and
1 Andreea Stoican – Law Department, Bucharest University of Economic Studies, Romania, E –
mail: andreeastoican@yahoo.co.uk.
100 Andreea Stoican
supervised by the National Regulatory Authority for Energy ( Autoritatea
Națională de Reglementare în Domeniul Energiei – ANRE).
The legal professions which are currently most often confronted with
issues arising from the wrongful imp lementation of the provisions mentioned
hereinabove are the ones of attorney -at-law and magistrate. Therefore, this paper
aims at analysing the necessity of training certain categories of professionals in
the legal field specialising in this activity secto r, so that they may have a basic
training level offering them the opportunity to represent or assist the players on
the regulated market, namely to correctly settle the litigations occurring between
such players or between the players and the Regulatory Au thority.
For better understanding the need to have certain panels at the level of
the Courts -of-Law, as well as the profession of attorney -at-law specialised, this
paper was structured into three parts, namely: 1) The European Tendency in the
field of ener gy; 2) The technicity and specificity of the regulations adopted in the
field of electrical power at national and European level; 3) Conclusions.
2. The European tendency in the field of energy
The electricity sector is essential and holds a paramount impor tance to
the economy of a state, which is why it was particularly regulated both at
European, and national level.
Energy efficiency, increased collaboration in the field of energy and
strong energy markets have been described as essential factors to achieve sustain-
able development and economic growth2.
The current tendency in the field subject to analysis in this study is that
of analysing the importance of having a European Energy Union tending to put
first the electrical power consumers, in their capacity of representatives of the
electricity market en gine.
However, the main participants on the market are multiple, each of them
attempting to perform their activity fairly and in compliance with the rules
imposed by the relevant legislation. Amongst them, mention can be made of the
electricity producers , distribution operators, transport and system operators, as
well as suppliers.
In this respect, by focusing on the main image of the end -customers, so
of any natural or legal persons purchasing electricity for their own consumption3,
one of the main pill ars of the energy union is the fully integrated European energy
2 Iuliana -Gabriela Iacob , Ramona -Elisabeta Cirlig, The Energy Charter Treaty and settlement of
disputes – current challenges , „Juridical Tribune – Tribuna Juridica”, vol. 6, issu e 1, June 2016, p.
71.
3 Definition given by the provisions of article 3 item 13 of the Law no. 123/2012 on electricity and
natural gas, as published in the Official Journal, Part I, no. 485/16.07.2012, in force as of July 19,
2012. According to the legal provisions, the notions of “end customer” and “consumer” are equiv-
alent in it.
The Complexity of the Litigations in the Energy Regulated Field of Activity 101
market, absolutely necessary to create more competition, allowing for a more
effective use of resources at European level and, at the same time, offering
affordable prices to the end -customers .
A major advantage of the integrated market is the fact that the energy
produced in any of the European Union states can be provided to the consumers
in any other EU Member State. Or, for this to happen, common rules and
regulations shall be required, nam ely, an infrastructure appropriate for the
network inter -connection, all the more so that the 28 heterogeneous and
unsynchronised national regulatory frameworks are currently considered to be
ineffective.
The European Union thus proposes to fundamentally c hange the energy
field, although it faces extremely high -importance challenges, particularly in
terms of security, as well as of climate change.4
Therefore, the European Union currently proposes to fundamentally
change the electricity market. This decis ion arises as a result of an excessive
burdening of an economy sector – energy – which should actually be an industry
engine for every Member State.
From the energy point of view, Romania should capitalise on its country
advantage, since it is essential t hat it focus on the export to the areas with energy
shortages in the region. In this respect, the National Regulatory Authority for
Energy has generally constantly supported the development of the energy market
in Romania, concentrating on mainly three dir ections, namely: the updating and
harmonisation of the national regulations with the ones elaborated and entered
into force at European level, the study of the need for legislative interconnections
and how the existing one’s work, as well as the electricit y production structuring.
3. The technicity and specificity of the regulations adopted in the field
of electrical power at national and European level
The regulations adopted at national level in the energy field must fully
comply with the European provisi ons in the matter or with their indications;
otherwise, the Romanian state would be severely sanctioned for failure to
implement the EU legislation.5
4 In this sense, for instance, the latest legislative document of high commitment was published in
the Official Journal, Part I, no. 837 as on November 10, 2015, namely the Agreement between the
European Union and its Member States therein, of the one part, and Iceland, of the other part, con-
cerning Iceland’s participation in the joint fulfilment of the commitments of the European Union,
its Member States and Iceland for the second commitment period of the Kyoto Protocol to the
United Nations Framework Conven tion on Climate Change as on April 01, 2015. According to
article 2 letter a) in this normative act, the Kyoto Protocol refers to the Kyoto Protocol to the United
Nations Framework Convention on Climate Change (UNFCCC), as amended by the Doha Amend-
ment, as agreed upon on December 8, 2012 in Doha.
5 This was the case of Slovakia, which was brought to court to justify its position on the noncom-
pliance with the its obligations based on Directive 2003/54/EC of the European Parliament and of
102 Andreea Stoican
The main normative acts adopted at the European Union level in the field
include:
Commission Implementing Regulation (EU) No. 1348/2014 of 17
December 2014 on data reporting implementing Article 8(2) and Article 8(6) of
Regulation (EU) no. 1227/2011 of the European Parliament and of the Council
on wholesale energy market integrity and t ransparency;
Commission Regulation (EU) no. 543/2013 of 14 June 2013 on
submission and publication of data in electricity markets and amending Annex I
to Regulation (EC) no. 714/2009 of the European Parliament and of the Council;
Commission Regulation (EU ) no. 838/2010 of 23 September 2010 on
laying down guidelines relating to the inter -transmission system operator
compensation mechanism and a common regulatory approach to transmission
charging;
Commission Regulation (EU) no. 774/2010 of 2 September 2010 on
laying down guidelines relating to inter -transmission system operator
compensation and a common regulatory approach to transmission charging;
Regulation (EC) no. 714/2009 of the European Parli ament and of the
Council of 13 July 2009 on conditions for access to the network for cross -border
exchanges in electricity and repealing Regulation (EC) no. 1228/2003;
Regulation (EC) no. 713/2009 of the European Parliament and of the
Council of 13 July 2 009 establishing an Agency for the Cooperation of Energy
Regulators;
Directive 2009/72/EC of the European Parliament and of the Council of
13 July 2009 concerning common rules for the internal market in electricity and
repealing Directive 2003/54/EC;
the Council of 26 Ju ne 2003 concerning common rules for the internal market in electricity and
repealing Directive 96/92/EC . The Court action filed by the European Commission before the Court
of Justice concerned the failure of Slovakia to fulfil its obligation to ensure non -discriminatory
access to the energy transport network, whereas “the preferential right of transmission granted by
Aare -Tessin AG fur Elektrizitat (“ATEL”, a Swiss company) to Slovenska elektrizacna prenosova
sustava (“SEPS”, the Administrator of the Slovak transport network) until September 30, 2014
placed ATEL in a privileged position in relation to other users of the system”. However, despite the
arguments brought forth by the Commission, the Court considered that the preferential access
granted to the Sw iss company could be perceived as “an investment protected by agreement”. Thus,
the established rule was that the Member States had the freedom to choose the measures they want
to adopt for removing the incompatibilities existing between a community conven tion and the pro-
visions of the EC Treaty, except for the case when a Member State encountered difficulties leading
to the impossibility to amend a bilateral agreement concluded prior to the accession of the respec-
tive state to the EU. For further details, see Judgement of the Court (First Chamber) of September
15, 2011, Case C -264/09, European Commission vs. Slovak Republic , Failure of a Member State
to fulfill obligations. Energy. Internal market in electricity. Directive 2003/54/EC. Investment con-
tract. B ilateral agreement on the protection of investments concluded prior to accession to the Eu-
ropean Union. Article 307 EC. in “Revista Română de Drept European” no. 5/2012, p. 116 -118.
The Complexity of the Litigations in the Energy Regulated Field of Activity 103
Com mission Decision 2006/770/EC of 9 November 2006 amending the
Annex to Regulation (EC) no. 1228/2003 on conditions for access to the network
for cross -border exchanges in electricity;
Directive 2005/89/EC of the European Parliament and of the Council of
18 January 2006 concerning measures to safeguard security of electricity supply
and infrastructure investment;
Directive 2009/28/EC of the European Parliament and of the Council of
23 April 2009 on the promotion of the use of energy from renewable sources a nd
amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC;
Regulation (EU) no. 1227/2011 of the European Parliament and of the
Council of 25 October 2011 on wholesale energy market integrity and
transparency (REMIT).
Thus, the main prob lem regarding the existing regulations at national
level consists of both their failure to comply with the European directions, and
the understanding and interpretation given to the documents in the current
application by the market players, and, not least of all, the consequences of the
failure to comply with such provisions.
The problems in applying the national energy regulated law can be
multiple, generated by various causes, starting from the way transactions are
concluded only on the centralised plat forms, up to aspects related to the green
certificate market or even to the financial clauses provided for in the internal
procedures of the system operators.
Thus, according to the provisions of article 23 paragraphs 1 and 2 of the
Law no. 123/2012, “the electricity transactions are made on the competitive
market in a transparent, public, centralised and non -discriminatory way. On the
competitive market, the commercial transactions are made wholesale or retail,
according to the regulations of the National Regulatory Authority for Energy, and
the pricing is created based on the demand and offer, as a result of competitive
mechanisms.”
Therefore, in compliance with the provisions of the law, the participants
on the electricity market can only conclude transa ctions through the centralised
platforms organised by OPCOM S.A. (the operator of the electrical power and
natural gas market in Romania). The role of the latter is to manage the electricity
market, ensuring an organised and effective framework for the com mercial
transactions to be performed within the wholesale electricity market, in
compliance with the principles of independence, transparency and non –
discrimination. Furthermore, it also performs management activities for the
centralised markets in the nat ural gas sector.
A highly complex topic in the energy sector is that of the green certificate
market. Given the general tendency towards encouraging the production of
electricity from renewable energy sources, Law no. 220/2008 on establishing the
104 Andreea Stoican
system fo r the promotion of energy production from renewable energy sources
entered into force in 2008.6
The Romanian state has strongly supported the renewable energy
production during the past years, by attracting major investments in this direction.
Thus, Romani a set forth that 24% of the end energy consumption should result
from renewable energy by the end of 2020.7 In this sense, Romania has
conformed the provisions of Directive 2009/28/EC of the European Parliament
and of the Council of 23 April 2009 on the pr omotion of the use of energy from
renewable sources, encouraging the continuous development of renewable
energy producing technologies of any kind (wind; solar; aerothermal;8
geothermal;9 hydrothermal10 and ocean energy; hydroelectric energy;11 biomass,
waste fermentation gas, gas coming from the waste water treatment installations
and biogas12).13
The system of renewable energy promotion through green certificates
aimed at providing the investors in such units of energy production from
renewable sources with the possibility to recover their investments. Thus, the
green certificates are granted for the energy produced from renewable energy
sources which was delivered to the consumers. This way, the investors shall
recover the money they invested both by selling the energy, and by trading the
green certificates on the market, the suppliers being bound to buy green
certificates according to the regulated annual quotas. The green certificates are
6 Entered into force on November 06, 2008, as republished in the Official Journal, Part I, no.
577/13.08.2010 (r1).
7 According to the provisions of article 5 of the Law no. 220/2008, providing that “the level of the
national objective regarding the weight of the energy produced from renewable sources in the final
gross consump tion of energy of 2020 amounts to 24%”.
8 The energy stored in the form of heat in the ambient air.
9 The geothermal energy is the “capture of the heat stored in the rocks and fluids located inside the
Earth crust in order to produce heat or electricity”. For further details, see: Ilie Adrian -Barbu, Con-
siderații generale privind statutul energiilor regenerabile în Uniunea Europeană și România (Gen-
eral Considerations regarding the renewable energy status in the European Union and Romania) ,
in “Pandectele Ro mâne” no. 11/2012, p. 79 -80.
10 The energy stored in the form of heat in the surface waters.
11 The energy production using the water motive power.
12 All these resources, namely: biomass, waste fermentation gas, gas coming from the waste water
treatment inst allations and biogas must be regarded and analysed together. According to the provi-
sions of article 2 letter e) in Directive 2009/28/EC, the biomass is the biodegradable fraction of the
products, wastes and residues of biological origin from agriculture (i ncluding vegetal and animal
substances), forestry and related industries, including fishery and aquaculture, as well as the biode-
gradable fraction of the industrial and municipal wastes.
13 The listing is compliant with the provisions of article 2 letter a ) of Directive 2009/28/EC on the
promotion of the use of energy from renewable sources.
The Complexity of the Litigations in the Energy Regulated Field of Activity 105
also traded separately from the renewable energy quantity they repres ent, on a
specially organised and regulated market.14
The law -maker's will to improve and amend Law no. 220/2008 is
currently manifested in the form of a Draft Government Emergency Ordinance
amending the Law on establishing the system for the promotion of energy
production from renewable energy sources, which is now undergoing public
debate. The initiated draft bill proposes to postpone the green certificate trading
until December 31, 2017, for the wind and micro -hydro -generation technologies
and to extend the postponing period, until December 31, 2024, for the solar –
generation technologies.
Or, from the producers' point of view, yet another postponing cannot be
necessarily beneficial for them. This way, in 2025 there will be a surplus of
certificates on t he green certificate market, so the price shall be set at their
minimum level. As a consequence of this reality, the purpose of promoting the
green energies shall no longer subsist, since it can no longer be reached.
Nevertheless, despite the tendency Romania has to regulate this sector,
Germany, in 2013, and the UK, in 2011, faced similar problems. While Germany,
as a result of a thorough analysis on the effects of such regulation, gave up on the
draft bill, in the UK, the companies whose main scope of business was solar
power sued the British state. They won both the first -level court legal action, and
the appeal by supporting their point of view and proving that the measures
imposed by the state would lead to losses to the patrimonies of such companie s,
thus causing serious damages to them.15
Another constant problem worth mentioning in the field, amongst all the
other specific regulated matters, which can affect any one of us -citizens, is the
application to the letter of the rules and procedures in the Order no. 121/201516
approving the Procedure regarding the determination of the electricity
consumption in case of incorrect meter readings and of registration on a flat -rate
basis and amending article 80 of the Regulation on the supply to the end –
customers, as approved by th e Order of the President of the National Regulatory
Authority for Energy no. 64/2014. The consequences of applying the provisions
of this order can be complex and of various degrees of gravity. All the acquired
information and findings resulting from the c orrect application of the provisions
in the said normative act can be used as evidence and help in finding the reason
for the incorrect meter reading, be it technical or otherwise. Thus, by applying
14 Bogaru Cristian, Sandu Mariana, Protecția investițiilor în domeniul surselor regenerabile de
energie (Protecting investments in the fields of the energy renewable sources) , in “Revista de Drept
Comercial” no. 7 -8/2013, p. 34 -37.
15 Dobrev Dumitru, Piața energiei regenerabile în România. Diferența dintre socoteala de acasă
și cea din târg (The Romanian Ren ewable Energy Market. Difference between the egg count and
the hatched chicken) , in “Revista româna de drept al afacerilor” no. 5/2013, p. 11.
16 In force as on February 27, 2015, as published in the Official Journal, Part I no. 148 as on Feb-
ruary 27, 2015.
106 Andreea Stoican
the procedure consecrated through the said Order, in case the consumer intended
to steal electricity the case can be brought before the Criminal Sections of the
Courts -of-Law.17
4. The magnitude of investments in electrical power production from
renewable sources
As mentioned hereinabove, one of the major object ives of the national
energy strategy is the promotion of the electricity production from renewable
energy sources, as it results from the provisions of article 2 letter i) of the Law
no. 123/2012, as well as from the entire legislative framework in the fie ld.
The main normative act adopted as primary legislation in the matter of
electricity production from renewable energy sources is the Law no. 220/2008 on
establishing the system for the promotion of energy production from renewable
energy sources.
The pu rpose of the regulation, according to the provisions of article 1
therein, is to establish the system for the promotion of energy production from
renewable energy sources, as well as to create the necessary legal framework for
extending the use of the rene wable energy sources by:
– “attracting into the national energy balance the renewable energy
resources necessary for increasing the energy supply security and reducing the
imports of primary energy resources;
– stimulating the sustainable development at local and regional level and
creating new jobs in relation to the processes of renewable energy source
capitalization;
– reducing the environment pollution by cutting the production of
pollutant emissions and greenhouse gases;
– ensuring the necessary co -funding for attracting external financial
sources aimed at promoting the renewable energy sources, within the limits of
the annually set sources by the State Budget Law and exclusively in favour of the
local public authorities;
– defining the norm s concerni ng the origin warranties , the applicable
administrative procedures and the connection to the electrical network as regards
the energy produce d from renewable sources;
– establishing the sustainability criteria for bio -fuels and bio -liquids.”18
In our count ry, the energy produce d from renewable sources involves ,
most commonly: photo -voltaic sources , wind -mills or hydrology sources , all of
them involving a production characterized by an atypical profile, completely
17 For further details, see: Corlatean Sorin, Iuga Calin, Furtul de energie electrică (Electricity
Theft) , in “Revista de drept penal” no. 3/2005, p. 64 -66.
18 Article 1 paragraph 1 of the Law no. 220/2008 for the establishment of the system promoting the
energy production from renewable energy sources.
The Complexity of the Litigations in the Energy Regulated Field of Activity 107
dependent on factor s which cannot be control led by the producer (solar light,
wind or water debit). Therefore, due to technical , objective reasons , these
produc ers do not have the possibility to produce electrica l power at a constant
hourly rate, which does not give them the possibility to control their producti on,
and they are also limited by certain provisions of the regulations currently in
force , starting from the possibility to conclude certain types of specific
agreements on the market .19
It is of paramount importance to understand the regulat ion methods in the
electricity activity sector both for a proper and fair settlement of the litigations by
the Courts -of-Law, and for the interpreta tion and application of the norms
regarding the provision of legal assistance in business law. The energ y sector is
extrem ely vast and highly technical. Its expansion into various aspect s of the
economic and social life of a state is unquestionable . Thus , although it may seem
paradoxical, given the level of speciali sation of the ones choosing to perform their
activit y in such a field , the regulations in force and especially their consequences
regard us all .
For instance , the installation of photo -voltaic panels on the roofs of
people's houses is becoming increasingly popular in our country. In such
conditi ons, everyone who chooses such a technique implicit ly becomes an
electricity produc er who will have to comply with certain technical standards.
Thus , although Romania does not yet benefit of a clear regulation
regarding the electricity produc tion in such wa ys (in the matter of personal photo –
voltaic units , and particularly of roof -mounted panels ), the importance of
correctly adapting the fixed tariff for the power injection into the network cannot
be overlooked , since it will impact both the suppliers , and the distributi on
operator, in case more and more citizens will opt for producing their own
electricity through the described method .
Therefore , we consider that t he National Regulatory Authority for Energy
will have to elabor ate a very clear methodology , in the near future, imposing a
tariff for such a producer, as well .20
The practic e of other states21 showed that , on the long run , such an
activit y by which the citizens mount their own photovoltaic panel producti on
units has negative results . The c onclu sion reached was that the ones enjoying a
prosperous material situation who install such photo -voltaic panels cease to buy
electricity from the network and thus to pay the network tariff; consequently, this
cost is cascaded to the poorer populati on segment who, by taking more electricity
from the network , end up by paying more , leading to a cost imbalance .
19 See, for example, Order no. 78/2014 for the approval of the Regulation on the manners of con-
cluding the bilateral electricity agreements by extended call -for-tenders, and continuous negotiation
and by Proc essing contracts, in force as of January 01, 2015, as published in the Official Journal,
Part I no. 621 as of August 25, 2014 .
20 For example, in Spain, the tariff amounts to Euro10/MWh for the ones mounting such panels.
21 Austria, Germany, Spain or Norway.
108 Andreea Stoican
However , the electricity production from photo -voltaic sources by the
large renewable energy producers does not lack problem s either . In this case, if
the photo -voltaic system fails to provide enough energy, the power needed to
ensure the normal operation of the connected electric al devices is taken from the
public distributi on network . On the other hand , if additional energ y is produced ,
it is injected directly into the network , thus becoming available for other
consumers . Consequently , in accordance with the national regulations , the
produ ced power can be sold to the distributi on network or saved for future
consum ption , thus determin ing financia l savings .
Through the provided examples, we intended to highlight the importance
of training legal specialists in the electricity regulated sector since, given its
degree of technicality and specificity, it plays an important role not only regarding
the players on the market – state-owned or private -owned companies, but
especially regarding the citizens.
While the attorneys -at-law have welcomed into their ranks professionals
specialised in various branches of the regulated fields, both as a result of their
participa tion in specialised training courses , and e special ly due to their direct
activity with their client s, consisting mainly of companies whose person nel is
made of specialist s and technicians in the respective fields , not the same can be
stated about the staff of the Courts -of-Law.
Therefore , the litigations in the field of electric ity are extrem ely complex,
with a high degree of technicity , which required a high level of legal and niche
knowledge , for a proper understanding of the de facto situati on in relation to the
market operation .
The existing case law has revealed that even the provision of the legal
technical expertise evidence can cause problem s, given the very few existing
expert witnesses in the field . Thus , most of the times , based on the provisions of
article 330 paragraph 3 of the Civil P rocedural Code , we get to the situations
when the expert s reports are made by notable professionals or specialist s in the
respectiv e fields .22 It is therefore required that the judges hold an average level of
knowledge in the field in order to have the capacity to accurately understand the
litigations they are called upon to settle.
5. Conclusions
As concerns the currently existing legal professions, it is well -known
how highly burdened the Courts -of-Law are with numerous various litigations
from a number of fields . It is therefore too much to ask one single person to be
22 Article 330 paragraph 3 in the Civil Procedural Code provides as follows: “In the strictly special-
ised fields, where no authorised experts are registered, the Judge can request, ex officio or upon the
request of either Party, to receive the point of vie w of one or several notable persons or specialists
in the respective field”.
The Complexity of the Litigations in the Energy Regulated Field of Activity 109
knowledgeable in all aspect s of the economic and social life, especial ly when
some of these activities are of high national, economic, and international interest .
Consequently , these rules on the electricity regulated field are extremely
vast and technical . The m ultitud e of normative acts entering into force on an
annual basis , and especially the way the market is un derstood and the economic
aspect s such acts involve at state level , unmistakably requires that the people
called -upon to issue judgments on the lawfulness of a normativ e act , the
compliance with the basic principles imposed by the Law no. 123/2012, the
compliance with the non-discriminator y character and the activit y performance
on a competitive market should have the ability to understand the case -files they
were called -upon to issue judgments and, more particularly, the consequences of
such judgments on all the market participant s, should such judgments be
erroneous .
The role the jurist s (particularly attorneys -at-law and magistrat es) can
play, and should play in the field of energ y is extrem ely important, and the
matters they can provide solutions to are as variate and diverse as they get ,
starting from the uncertainty regarding the recovery of invest ments made in
producing electric ity from renewable sources, up to the identifica tion, together
with other specialist s, of steps Romania, as well as other European states should
take in order to have an operational interior market .
Romania currently has approximately 8 million end-consumers of
electric ity and approximately 4 million end -consumers of natural gas. It is
therefore essential to ensure a harmonised regulatory framework compliant with
the European energy norms. This being a sector al approach , the main objectives
in the new energy policies must be defined by securit y, solidarit y and confidence .
Therefo re, as stated in the beginning of this study, the European goal is
to have a union of the investment forces in the field, continuously having the
consumer in its centre, as the key player on the new market. The absence of a
priority order in regulating and granting the possibility to finance large
infrastructure projects23 given the lack of cooperation of the authorities with both
the specialists in the field, and the jurists, will render the achievement of this
European idea impossible. Romania, as a participant on the single energy market,
must come up with regional infra structure projects funded from European Union
sources, thus taking advantage of its high energy potential. Romania must try to
better capitalise on the renewable resources, biomass, biogas and natural gas.
Thus, an easy mechanism can be created to obtain f unding and invest the
European Union funds in the Eastern and South -Eastern European region.
In conclusion, the electricity regulated field is very complex, and
extremely technical, but at the same time essential for the national economy of a
state. Its im pact on the economic strength of a state should not be minimised
23 For example, the Iberian area remains isolated, and the Baltic region is not concretely supported
through a unique funding.
110 Andreea Stoican
under any circumstance, and the support provided to every market participant
should certainly not be ignored for it to properly operate. Since, in Romania, the
transactions are made on centra lised platforms organised by OPCOM, the cases
brought for settlement before the Courts -of-Law have a highly complex technical
level exceeding the normal level of legal knowledge, both of the magistrates, and
of the attorneys -at-law, for the latter ones to provide their clients with appropriate
counselling.
While for the attorneys -at-law, representatives of a liberal profession, it
is easier to specialise in a certain field alone, in the Courts -of-Law the changes
imply certain reforms to be made in the judi cial system. Therefore, given the case –
file complexity level, as well as the increasing number of litigations related to the
energy framework, a thorough analysis should be performed at central level and
decisions should be taken regarding the interna l reorgani sation of the Courts -of-
Law, in the near future .
Thus , not only would the creation of a special section or panel speciali sed
in the energ y field ease the magistrates' burden regarding certain extremely
difficult and highly technical cases , but this w ould also lead to the creation of
specialis ed magistrates in a very ample and continuously developing field , which
would be nothing but beneficial to the judicial field , by increasing the efficiency
and correctness of the given judgments.
Bibliography
1. Bogaru Cristian, Sandu Mariana, Protecția investițiilor în domeniul surselor
regenerabile de energie , in “Revista de Drept Comercial” no. 7 -8/2013, p. 28 –
41;
2. Corlatean Sorin, Iuga Calin, Furtul de energie electrică , in “Revista de drept
penal” no. 3/2005, p. 64 -66;
3. Dobrev Dumitru, Piața energiei regenerabile în România. Diferența dintre
socoteala de acasa și cea din târg , in “Revista română de drept al afacerilor” no.
5/2013, p. 9 -11;
4. Iacob Iuliana -Gabriela, Cirlig Ramona -Elisabeta, The Energy Charter Trea ty
and settlement of disputes – current challenges , „Juridical Tribune – Tribuna
Juridica”, vol. 6, issue 1, June 2016, p. 71 -83;
5. Ilie Adrian -Barbu, Considerații generale privind statutul energiilor
regenerabile in Uniunea Europeană și în România , in “Pandectele Române” no.
11/2012, p. 74 -91;
6. Law no. 123/2012 on electricity and natural gas, in force as of July 19, 2012, as
published in the Official Journal of Romania, Part I, no. 485/16.07.2012;
7. Law no. 220/2008 for establishing the system for promotin g the energy
production from renewable energy sources, in force as of November 06, 2008,
as republished in the Official Journal of Romania, Part I, no. 577/13.08.2010
(r1).
8. Romanian Civil Procedural Code, entered into force on February 15, 2013, as
republished in the Official Journal, Part I no. 247 as on April 10, 2015 (r2);
The Complexity of the Litigations in the Energy Regulated Field of Activity 111
9. Directive 2009/28/EC of the European Parliament and of the Council of 23 April
2009 on the promotion of the use of energy from renewable sources and
amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC;
10. Judgement of the Court, First Chamber, Decision on September 15, 2011, Case
C-264/09, European Commission vs. Sl ovak Republic, Failure of a Member
State to fulfill obligations – Energy – Internal market in electricity – Directive
2003/54/EC – Investment contract – Bilateral agreement on the protection of
investments concluded prior to accession to the European Union – Article 307
EC, in “Revista Română de Drept European” no. 5/2012, p. 116 -118.
On the de Facto Director of a Romanian Limited Liability Company
Lecturer Cristina COJOCARU1
Abstract
The study is focused on the existence of the de facto director of a limited liability
company. The matter is analysed starting from a case from the recent judiciary practice,
in which the courts of law issued different decisions on the lack of capacity to stand trial
invoked by the shareholder who, at the time, exercised only in fact the management of the
company. In order to establish the consequences of the existence of a de facto director
for the company and for third parties, the article provides an ove rview on the appointment
of the director, his duties and on the implications related to his responsibility.
Keywords: director, de facto director, limited liability company, management
body.
JEL Classification: K22
1. Introduction
The article brings for ward a problem frequently encountered among
companies, namely the de facto director of a company. Regardless of the type of
the company, the existence of such a director constantly brings before the courts
of law a series of situations that requires settlement. The court is often required
to analyse any detail that may lead to a de facto activity of a person as director,
the will of the shareholders and, last but not least, the person responsible for the
prejudice created as a result of carrying out an activity that involves strategy, the
execution of a contract, obtaining a bank loan, etc.
The matter is of interest particularly from a practical standpoint, consid-
ering the numerous and extended relationships identified in the business environ-
ment. Without claiming to analyse exhaustively this subject matter, the article
proposes to underline the significance of understanding these concepts and their
correct application and in good faith in practice, in the performance of business
relationships.
A recent case2 from the judicial practice raises the issue of identifying
the de facto director of a limited liability company. Starting from the matter of
the admissibility or inadmissibility of the lack of capacity to stand trial of the
person who carried out only in fact administrative acts, the courts of law have
1 Cristina Cojocaru – Law Department, Bucharest University of Economic Studies, Romania, E –
mail: cristina.cojocaru@cig.ase.ro.
2 See Decision No. 46/2016 of the High Court of Cassation and Justice, Second Civil Section.
114 Cristina Cojocaru
different views on the capacity of a person who is not a statutory director but who
carried out administrative acts.
It is therefore required to correctly classify the director as management
body of the company, to identify the duties of a director and the consequences of
the ex istence of a de facto director and, implicitly, of the responsibility thereof.
2. The director, management body of the company
Companies ’ Law No. 31/19903(hereinafter referred to as the “Law”) pro-
vides for the existence of the director in all types of compa nies provided by this
law4.
The law does not give a definition of the director, but the doctrine pro-
vides that “the will of any company, expressed by the general shareholders meet-
ing is fulfilled by the acts of the persons or bodies authorised in this res pect, who
carry out the administration and management of the company”5.The characteri-
sation is exhaustive because it underlines both the significance of authorising
such a body, and the activity carried out.
A first aspect is that of establishing the pers on having the capacity as
director. The law provides that the director may be a natural person, as well as a
legal person – only in the case of joint stock companies6. The legal person ap-
pointed as director shall appoint an individual representative who, i n his turn,
must meet the same conditions as the natural person director, and his liability is
joint with that of the legal person he represents.
As regards the appointment of the director, he is appointed either upon
the establishment of the company, by the articles of incorporation, or subse-
quently, by the general shareholders’ meeting – as the supreme management body
of the company, in accordance with the rules applicable to each type of company.
In the case of a limited liability company, the Law provides that the di-
rector is chosen by the general shareholders’ meeting, with the vote of the share-
holders representing the majority of shareholders and of the shares. The law also
3 Published in the Official Journal N o. 1066 of 17.11.2004, republished.
4 We remind you that the types of companies provided by the Law are general partnerships, limited
partnerships, joint -stock companies (SA), partnership limited by shares and limited liability com-
panies (SRL).
5 St. Cărpe naru, Tratat de drept comercial român , Universul Juridic Publishing House, Bucharest,
2012, p. 205.
6 Art. 15313 para. (2) of the Law provides that “A legal person may be appointed as director or
member of the supervisory board of a joint -stock company. At the time of such appointment, the
legal person has the obligation to appoint a natural person permanent represen tative. He shall be
subject to the same conditions and obligations and shall have the same civil and criminal liability
as a natural person director or member of the supervisory board, acting in his own name; however,
the legal person he represents will no t be exonerated from liability and its joint liability will not be
reduced. When the person revokes its representative, it has the obligation to appoint, at the same
time, a replacement.”
On the de Facto Director of a Romanian Limited Liability Company 115
provides that the director may be appointed from among the company’s share-
holders7.
In the case of this type of company, when the company has a sole share-
holder, the capacity of director may be held by the sole shareholder; he may also
be an employee of the company whose sole shareholder he is or even the director
or he may hold another position.8
An extremely important aspect regarding the director is that of the pub-
licity related to his/her appointment, formalities9 which a im at informing third
parties of the person or persons managing, administering and, last but not least,
representing the company.
Thus, even the registration of the company depends on the publication of
the director and of the powers conferred to him/her. Also, the director vested with
the power of the company has the obligation to submit to the Trade Registry Of-
fice the signature specimen, either together with the submission of the application
for registration if he was appointed through the articles of i ncorporation, or within
15 days from being elected, if he was elected during the operation of the com-
pany10.
The fulfilment of the publicity requirements prevents the company from
invoking to third parties any irregularity with the appointment of the director,
unless it is proved that the third party was aware of the irregularity11.
While the de jure director of the company is legally authorised and made
known to third parties, the de facto director carries out administration acts without
being appointe d or in excess of the limits of the mandate.
7 Art. 197 para. (1) of the Law provides that “The company shall be administered by one or more
directors, who may or may not be shareholders, appointed by the constitutive act or by the general
meeting.” See also Fl. C. Stoica, C. Ene, Business Law: business organisations , A.S.E. Publishing
House, Bucharest, 2012, p. 102 .
8 See I.T.Ștefănescu, S. Beligrădeanu, Natura raportului juridic dintre societățile comerciale și
administratorii sau directorii acestora , in „Dreptul”, Issue No. 8/2008, p. 57.
9Law No. 26/1990 on the trade registry and the formalities to be fulfilled for the authorisation of
the registration and for the registration of specifications in the Trade Registry Office.
10 Art. 45 of the Law.
11 Art. 54 provides that: “(1) After the fulfilment of the publicity formalities in connection with the
persons who, as management bodies of the company, are authorised to represent it, the company
may not invoke to third parties any irregularity regarding their appointment, unless the company
proves that such third parties were aware of the irregularity. (2) The company ma y not invoke before
third parties the appointments in the positions referred to in para. (1) or the termination of such
positions if they were not published in accordance with law.”
116 Cristina Cojocaru
3. The duties of the statutory director
As management body of the company, the director is permitted, by law12,
to carry out any act of administration in the interest of the company. Thus, he has
the right a nd the obligation13to carry out the operations necessary to achieve the
object of activity of the company and the decisions of the shareholders, within
the limits of the Law and of the company’s articles of incorporation. Also, he
represents the company in the relationship with third parties, if this right of rep-
resentation was conferred by the shareholders. In this case, the director is the legal
representative of the company14.
The law allows for the operation of the company while having several
directors, if the shareholders decide so.
In the case of limited liability companies if, however, the articles of in-
corporation does not establish which director has the power to represent the com-
pany, in accordance with Art. 197 para. (3) and Art. 75 of the Law, “th e right to
represent the company lies with each director15, unless as otherwise provided by
the articles of incorporation”. Please note that third parties become aware of the
person of the director by the fulfilment of the publicity formalities mentioned
above.
If several directors are appointed, the shareholders shall decide if they
work together or individually. The Law provides that “if the articles of incorpo-
ration provides that the directors work jointly, the decision must be unanimous;
in case of a dispute among the directors, the shareholders representing the abso-
lute majority of the share capital shall decide.”16
The law also lays down a series of obligations regarding the director’s
activity, such as the obligation to fulfil the formalities necess ary for the establish-
ment of the company – Art. 36 of the Law, the obligation to monitor the payment
12Art. 1914 of the Civil Code provides that: “(1) Unless the shareholders o ppose it, the director may
perform any act of administration in the interest of the company. (2) The director may be revoked
in accordance with the rules of the mandate contract, unless the articles of association provide oth-
erwise. (3) The clauses limitin g the administration powers conferred by law are not binding ag ainst
good faith third parties ”.
13 Art. 70 of the Law.
14We must specify that the director benefitting from such a right cannot transfer it unless he has the
express consent of the shareholders. If there is no such consent, the company may redress against
the director to obtain the benefits resulting from the operation. Also, the director shall be jointly
liable with this person for the damages caused to the company. (Art. 71 of the Law).
15 Art. 197 para. (2) provides that “The directors cannot receive, without the authorisation of the
shareholders’ meeting, the mandate of director in other competing companies or in companies hav-
ing the same object of activity, or to carry out the same type of tra de or a competing trade on its
own account or on account of another natural or legal person, on penalty of revocation and being
held liable for the damages.”
16Art. 76 para. (1) of the Law. The same article provides, at para. (2): “For urgent acts, whose fa ilure
to carry out would cause significant prejudice to the company, only one director may decide in the
absence of the others, who are unable, even momentarily, of taking part in the administration act.”
On the de Facto Director of a Romanian Limited Liability Company 117
by the shareholders of the amounts owed – Art. 70 of the Law, or the obligation
to prepare the annual financial statements, to comply with the law in the d istribu-
tion of the profit and dividends – Art. 73of the Law17 – obligations whose fulfil-
ment incurs the liability of the director.
With regard to the limited liability company, the Law establishes an ob-
ligation for the directors, namely to keep the shareho lders’ registry18.
4. The director’s liability
As a general rule, the Romanian Civil Code establishes, in Art. 1915, that
the director is personally liable before the company for the prejudice produced by
the breach of the law, of the mandate entrusted or by default in the administration
of the company.
According to the special legal provisions, the liability of the director is
regulated by the provisions regarding the mandate and by those specifically pro-
vided by the Law19.
Thus, the director is liable b efore the company first based on the mandate
received. As it is based on a mandate contract, the liability for the failure to com-
ply with the obligations arising from such contract is a civil contractual liability.
As regards the failure to comply with th e obligations provided by law,
depending on the legal provision, the director’s liability shall be a civil or even
criminal tort liability.
In addition, the legal provisions20 provide that the director is liable before
the company – jointly if there are sev eral directors – for the reality of the payments
made by the shareholders, the actual existence of the dividends paid, the existence
of the registries required by law and their correct keeping, the due fulfilment of
the decisions of the general shareholder s’ meeting and the strict fulfilment of the
duties imposed by the law and the articles of incorporation. Also, the action to
incur the liability of the directors may also be filed by the company’s creditors,
but they benefit from this right only if the ins olvency proceedings were initiated
against the company.
17 St. Cărpenaru, Tratat de drept comercial român , Universul Juridic Publishing House, Bucharest,
2012, p. 215.
18 Art. 198 of the Law provides that: “(1) The company must keep, by the diligence of the directors,
a shareholders’ registry which shall include, as the case may be, the name and surname, the desig-
nation, the domicile or the headquarters of each shareholder , its share in the share capital, the trans-
fer of shares or any other change regarding the shares. (2) The directors are personally and jointly
liable for any prejudice caused by their failure to comply with the provisions of para. (1). (3) The
registry ma y be reviewed by the shareholders and by the creditors.”
19 Art. 72 of the Law.
20 Art. 73 of the Law.
118 Cristina Cojocaru
Thus, the de facto director has the same civil liability as the de jure di-
rector and, moreover, even before third parties for covering the debts of the com-
pany whose insolvency and, implicitly whose assets’ insolvency, he caused21.
In the case referred to above, the dispute was initiated between plaintiff
A. and defendants the company B. SRL and C. The court found that the plaintiff
was constantly recorded as a director in the Trade Registry Office. The defendant
acquired the capacity as shareholder of company B. SRL on 9 December 2009,
by acquiring 10000 shares, representing 50% of the company’s share capital. Ac-
cording to the revised articles of incorporation of 9 December 2009, after defend-
ant C be came a shareholder of the company, plaintiff A. was appointed sole di-
rector until 31 December 2010, on the condition “unless expressly revoked by the
decision of the general shareholders’ meeting”.
By the decision of the Extraordinary General Shareholders’ Meeting of
18 February 2010, the two shareholders of B. SRL agreed that, starting from 1
January 2011, they shall administer the company jointly. It was noted however,
that by this decision, shareholder C. acquired certain duties similar to those of a
director: he received an access key to the room where the fiscal archives of the
company and of Hotel E. were stored; both shareholders agreed on the establish-
ment of the instalments for the loan granted by C. to the company, any bank loan
contract or non -bank loan contract, from the shareholders or from third parties
shall only be concluded with the consent of both of them. The plaintiff did not
invoke specific breaches of these duties entrusted with the defendant. After 31
December 2010, when the plaintiff’s director mandate expired, the two share-
holders did not reach an agreement on the appointment of the new director, the
plaintiff requesting either for his mandate to be extended or for both shareholders
to be appointed as director, while the defendant only agreed for him to be ap-
pointed as sole director.
Therefore, it was found that the defendant never fulfilled the capacity as
director of the company based on the decision of the general meeting, that, on the
contrary, the capacity as statutory director was held by plaintiff A. until 31 De-
cember 2010, and subsequently neither shareholder held such capacity, as there
were disagreements and even persisting disputes.
By Judgment No. 225 of 14 June 2012, Prahova Tribunal admitted the
exception of the lack of cap acity to stand trial of defendant C. and rejected the
action filed by plaintiff A. as filed against a person without the capacity to stand
trial.
By Decision No. 16 of 27 February 2013, Ploiesti Court of Appeal ad-
mitted the appeal filed by the plaintiff an d sent the case bank to be re -judged by
the same first instance court.
21Gh. Piperea, Drept comercial. Întreprinderea în NCC , C.H. Beck Publishing House, Bucharest,
2012 p. 232.
On the de Facto Director of a Romanian Limited Liability Company 119
The judicial control court of law acknowledged, in essence, that respond-
ent defendant C., does not have the capacity as director of the company but he
cannot invoke this fact in order t o invoke the lack of capacity to stand trial in the
case at hand, so long as it was proved that he performed acts of administration,
even though he did not have the right to do so.
By the response to the cross examination, the respondent defendant ad-
mitted that he carried out acts of administration of the company, although he does
not have the capacity as director established by the statutes.
Thus, the first instance court admitted the exception of the lack of capac-
ity to stand trial of defendant C. and rejected the action filed by plaintiff A. as
filed against e person without the legal capacity to stand trial, thus considering
the provisions of the articles of incorporation and the records of the Trade Regis-
try Office.
The judicial control court, h owever, draws the attention on the existence
of a de facto director in this company, which has a series of consequences, among
which his liability for his deeds. Thus, the court establishes that a de facto director
has the legal capacity to stand trial. Co nsequently, he is liable or he may be held
liable for his acts, just like a statutory director.
In another decision issued in a case22, the court highlights that the de facto
director is liable as a de jure director and under the commercial law, their liability
is actually joint (according to Art. 73of the Law). Also, since Art.137 of the for-
mer Law No. 64/1995 on the reorganisation proceedings and bankruptcy23 refers
to the liability of all persons who contributed to the insolvency of the debtor, the
de facto director does in fact have legal capacity to stand trial.
5. Conclusion
The identification of a de facto director and the analysis of the duties
carried out by him are done starting from the concept of statutory director. In fact,
it cannot be differ ent since, without having a mandate from the shareholders or,
even while having a mandate, by exceeding the limits of such mandate, the de
facto director assumes the duties of a statutory director. In this respect, there are
several final decisions of the Supreme Court, among which the case analysed
above.
Also, in another case, the court highlights that, as regards the capacity of
de facto director, it is not presumed, it is proved by analysing the conduct, the
22The High Court of Cassation and Justice, the Cri minal Section, Decision No. 196/2014; for other
reasons, see also Decision No. 935/2013 of the High Court of Cassation and Justice, Second Civil
Section.
23Repealed by Law No. 85/2006 on the insolvency proceedings, currently also repealed by Law No.
85/2014 on the insolvency and the prevention thereof, published in the Official Journal No. 466 of
25.06.2014.
120 Cristina Cojocaru
behaviour of the de jure director and of tha t assumed to have led in fact the com-
pany. The capacity of de facto director is characterised by the immixture in the
duties conferred to the legal representative24. Although he was not appointed by
the shareholders – the company’s supreme management body, by his deeds, the
de facto director acts as if he were appointed by the shareholders. Therefore, his
liability must be analysed under the same terms as the de jure director.
Moreover, the existence of the de facto director is also analysed by the
court in the field of economic criminal offences.
Thus, in the case of the criminal offence of fiscal evasion provided by
Art. 9 para. (1) letter c) of Law No. 241/2005, consisting in registering, in the
accounting records or in other legal documents, of expenses that are not based on
real operations or registering other fictitious operations, in order to avoid ful-
filling the fiscal obligations, the supreme court decided that an active subject may
be the de jure director of the company, as well as the de facto dir ector or any other
person within the company – a director, an accountant, seller – if, by their actions
and/or lack of action, they intend to avoid the payment by the company of the
taxes and duties owed. The law does not condition this criminal offence on the
existence of an express authorisation for the person in charge of organising and
keeping of the accounting records having the capacity as director, or of a legal or
contractual obligation to manage the company’s activity, if the evidence submit-
ted rev eal that, in fact, the perpetrator exercised the actual management of the
company’s accounting activity25.
Also, the Guideline for Investigating the Criminal Offences of Fiscal
Evasion, prepared by the Supreme Council of Magistracy in 201526, provides that
the criminal liability for deeds of fiscal evasion may lie with the person who has
no legal capacity in the company but who manages the company, namely the de
facto director either individually or together with the de jure director of the com-
pany.
In conclusion, as proved by practice, the existence of a de facto director
does not exclude the liability of the de jure director, and the excess of his duties
does not exempt the de facto director from his liability – before the company,
before third part ies, either under civil or under criminal law. Therefore, the as-
sumption of duties in the management of a company must be made in full aware-
ness, with the intention to comply with the legal provisions and having a well –
24Cluj Court of Appeal, Second Civil Section, of administrative and fiscal disputes, Decision No.
388 of 17 January 2014, http://taxnews.ro/wp/2014/09/01 /procedura -insolventei -angajarea -raspun-
derii-patrimoniale -director -de-fapt-deturnarea -activului/ , consulted on October 5, 2016 .
25The High Court of Cassation and Justice, Criminal Section, Decision No. 272/2013, http://www.
juridice.ro/286888/iccj -director -de-drept -vs-director -de-fapt.html consulted on October 5, 2016 ;
http://codfiscal.net/38772/iccj -infractiunea -de-evaziune -fiscala -reducerea -pedepsei -de-la-6-ani-in
chisoare -la-4-ani-inchisoare , consulted on October 5, 2016.
26http://www.inm -lex.ro/fisiere/d_ 1443/Ghid%20investigare%20infractiuni%20de%20evaziune
%20fiscala.pdf, p. 14, consulted on October 5, 2016.
On the de Facto Director of a Romanian Limited Liability Company 121
established and determined framework of duties and liabilities, both to protect the
company and third parties, and to protect the person carrying out administration
operations.
Bibliography
1. Fl. C. Stoica, C. Ene, Business Law: business organisations , A.S.E. Publishing
House, Bucharest, 2012 ;
2. Gh. Piperea, Drept comercial. Întreprinderea în NCC , C.H. Beck Publishing
House, Bucharest, 2012;
3. I.T. Ștefănescu, S. Beligrădeanu, Natura raportului juridic dintre societățile
comerciale și administratorii sau directorii acestora , in „Dreptul” Issue No.
8/2008;
4. St. Cărpenaru, Tratat de drept comercial român , Universul Juridic Publishing
House, Bucharest, 2012;
5. The High Court of Cassation and Justice, Second Civil Section, Decision No.
46/2016;
6. Cluj Court of Appeal, Second Civil Section, of administrat ive and fiscal dis-
putes, Decision No. 388/2014;
7. The High Court of Cassation and Justice, Criminal Section, Decision No.
196/2014;
8. The High Court of Cassation and Justice, Criminal Section, Decision No.
272/2013;
9. The High Court of Cassation and Justice, Second Civil Section, Decision No.
935/2013;
10. The Romanian Civil Code;
11. Companies’ Law No. 31/1990;
12. Guideline for Investigating the Criminal Offences of Fiscal Evasion, prepared
by the Supreme Council of Magistracy i n 2015.
Some Aspects Concerning the Setting up of Companies Regulated in
Romania by the Law no. 31/1990 Republished
Lecturer Ana-Maria LUPULESCU1
Abstract
The setting up of a company regulated by Law no. 31/1990 republished does not
imply only the mere conclusion of a company contract as an expression of the agreement
reached between associates, but in every situation requires a period of time, of variable
length, for completing the steps and formalities imposed by the law in order to obtain the
legal personality. Moreover, during the setting up period, until the incorporation in the
Register of Trade, the company has a specifi c legal regime, because, although it does not
have legal personality yet, it must conclude certain juridical preparatory acts, precisely
for the purpose of its valid setting up as a distinct subject of law. In these circumstances,
we consider that an analy sis of the legal regulation on the setting up of companies with
legal personality, contained mainly in the Law no. 31/1990 republished, but also in the
Civil Code, may appear particularly useful, both for analysts in law and practitioners,
especially since this analysis highlights certain aspects that present a particular im-
portance in this process.
Keywords: setting up, legal personality, constitutive act, incorporation, the com-
pany under setting up.
JEL Classification: K22
1. Introduction
The Civil Code presents primarily the company as a contract, granting
therefore prevalence to the contractual approach in order to define its legal nature
(art. 1881 paragraph 1 of the Civil Code). Nevertheless, the companies regulated
by Law no. 31/19902 are equally legal persons, having thus a more complex ju-
ridical nature, which exceeds the contractual approach, especially due to their
institutional dimension. This quality of distinct subject of law of the companies
with legal personality does not resul t solely from the will of the associates ex-
pressed in the contract, but also from the provisions of the law.
As a consequence, the setting up of a company regulated by Law no.
31/1990 republished does not imply only the mere conclusion of a company con-
tract as an expression of the agreement reached between associates, but in every
situation requires a period of time, of variable length, for completing the steps
1Ana-Maria Lupulescu – Law Department, Bucharest University of Economic Studies, Romania,
E-mail: anamarialupulescu@yahoo.com
2 Republished in the Official Journal of Romania, Part I, no. 1066 of 17 November 2004.
124 Ana-Maria Lupulescu
and formalities imposed by the law in order to obtain the legal personality. More-
over, during the setting up period, until the incorporation in the Register of Trade,
the company has a specific legal regime, because, although it does not have legal
personality yet, it must conclude certain juridical preparatory acts, precisely for
the purpose of its v alid setting up as a distinct subject of law.
In these circumstances, we consider that an analysis of the legal regula-
tion on the setting up of companies with legal personality, contained mainly in
the Law no. 31/1990 republished, but also in the Civil Cod e, may appear partic-
ularly useful, both for analysts in law and practitioners, especially since this anal-
ysis highlights certain aspects that present a particular importance in this process.
2. The conclusion of the constitutive act
The starting moment of t he process of setting up a company regulated by
Law no. 31/1990 republished is the conclusion, by the associates, of its constitu-
tive act3.
Although the Civil Code regulates, in a general manner, the company
contract as an instrument that creates a company , with or without legal personal-
ity, the special legislation, namely the Law no. 31/1990 republished, refers quasi –
permanently to its constitutive act, which may generate a certain terminological
confusion. Actually, the inconsistency between the two regul ations is only appar-
ent, because every company, except the company having sole associate, is the
result of the conclusion of the company contract, juridical act governing essen-
tially the relations between the associates, parties to it4. Moreover, in the ca se of
companies of persons, having less complex and less formalized functioning rules,
the associates conclude only the company contract which, pursuant to the provi-
sions of Law no. 31/1990 republished, will be designated as its constitutive act.
Instead, in case of companies of capitals, as well as the limited liability
company, the legislator has considered as necessary, justifiably, that at the mo-
ment of setting up the company, in addition to clauses concerning the relations
between parties, contained in the company contract, the associates also reach an
agreement on the rules concerning the organization and functioning of the future
legal person, which constitute its memorandum of association. This approach,
which gives expression to the institutional di mension, more obvious for the
above -mentioned legal forms of company, is perfectly justified by the complexity
3 In French jurisprudence, a much more nuanced opinion has even been adopted, meaning that it is
considered as indicating the beginning of the setting up of a company ha ving legal personality any
concrete act that is concluded for the purpose of creating or incorporating it, such as the beginning
of negotiations between the associates or the common acquisition of goods, in order to exploit them
in the same manner – see P. Le Cannu, B. Dondero, Droit des sociétés , 6ème édition, LGDJ, Paris,
2014, p. 210 and the jurisprudence cited therein.
4 In this regard are the provisions of art. 5 paragraphs 1 and 2 of Law no. 31/1990 republished.
Some Aspects Concerning the Setting up of Companies 125
of social activity carried out within them, as well as the formalism of their func-
tioning, with better designed rules of organization and bodies having specific
powers, those rules being imposed by law in order to protect third parties, but
also the associates themselves. Therefore, for the setting up of these legal forms
of company, the law requires the conclusion of the company contract and the
memorandum of association, two separate juridical acts – negotium, designated
together as the constitutive act, either within a single instrument or as two sepa-
rate instruments.
Finally, in case of the limited liability company with sole associate that
results from the expression of the will of a single person, the contractual approach
is not possible, and therefore at the setting up of this form of company the sole
associate draws up only the memorandum of association, which represents its
constitutive act.
2.1. The company contract
Concerning its juridical characters, the company contract is a bilateral or
multilateral contract, made by onerous title and commutative, with successive
performance and formal.
The formal character results clearly from the provisi ons of art. 1884 par-
agraph 2 Civil Code, which prescribes that, for setting up a company having legal
personality, the written form of the company contract is required by law for its
validity, under the sanction of absolute nullity. In addition, within the meaning of
the provisions of Law no. 31/1990 republished (art. 5 paragraph 6), to the extent
that the requirement of written form is observed, the associates may choose,
freely as a principle, to conclude the company contract as a document under pri-
vate s ignature, signed by all the associates, or in authentic form. As an exception,
the authentic form is compulsory for the setting up of companies of persons, of
companies by shares by public subscription and in case of contributions having
as object immovabl e goods.
Equally, in the case of companies of persons, the company contract is a
contract concluded intuituu personae, as the personal qualities and the confidence
between partners are essential to its conclusion. Concerning the limited liability
company, it also has an intuituu personae character, similar to companies of per-
sons, its setting up being based on the trust b etween associates, and this character
is emphasized by the legal limitation of the number of associates to a maximum
of 50 (art. 12 of Law no. 31/1990 republished).
Concerning its valid conclusion, the company contract must fulfill the
general conditions o f validity required by law for any contract, namely the full
concrete capacity of the associates, a genuine consent, a determined and lawful
object and a legal and moral consideration. From the point of view of the formal
126 Ana-Maria Lupulescu
conditions, as mentioned above, th e written form is required by law for the valid-
ity of the contract whenever a company with legal personality is set up.
In addition to the general conditions of validity applicable to any juridical
act, the company contract must also fulfill the specific c onditions of validity ap-
plicable to all companies, respectively affectio societatis , the existence of contri-
butions of the associates at the setting up of the company, sharing the profits and
the losses arising from the common activity. Although these spec ific elements of
validity of the company contract are essential, since the juridical nature of the
contract and of the form of association provided by it depend on them5, the pre-
sent approach does not propose a detailed analysis in this respect, which woul d
exceed the purpose taken into account when preparing this paper.
Regarding the content of the company contract, both article 1884 para-
graph 2 Civil Code and articles 7 and 8 of Law no. 31/1990 republished6 require
the existence of several compulsory ment ions, which refer to distinctive elements
of the company that is set up and which must be provided at the moment of in-
corporation in the Register of Trade7 in order to be mentioned in this register,
namely the associates, the contributions, the registered capital, the juridical form,
the duration, the object of activity, the denomination and headquarters of the com-
pany. Depending on the legal form of the company concerned, the law imposes
certain specific references, such as a separate indication of the act ive partners, in
the case of the limited partnership, the number and nominal value of social parts
and the number of social parts allocated to each associate in exchange of his con-
tribution, in case of the limited liability company and so on. In this conte xt, it
should be mentioned that the general provision contained in the Civil Code, alt-
hough referring to companies with legal personality, does not address aspects
concerning the organization and functioning of the company, its duration or its
registered c apital. However, the mandatory provision of these elements in the
constitutive act unquestionably results from the legal regulation contained in Law
no. 31/1990 republished, including in the case of companies of persons, when the
constitutive act coincides with the company contract.
5 Actually, the fulfillment of these sp ecific conditions, and especially affectio societatis , determines
a specific position of the associates within the company contract, based on the idea of cooperation
in order to reach a common objective, and which is distinct from the opposing interests of contrac-
tual parties that generally characterize bilateral contracts. See, for more details on the conditions of
validity of the company contract, St. D. Cărpenaru, Tratat de drept comercial român , Universul
Juridic Publishing House, Bucharest , 2009, p. 19 6 and the following .
6 The legal provisions contained in Law no. 31/1990 republished refer to the constitutive act, and
therefore some mentions, related to its organization and functioning, reflect the content of the mem-
orandum of association and not of the company contract, especially in case of companies of capitals
and limited liability company.
7 In accordance with art. 7 paragraph 2 of the Methodological Rules concerning the manner of
keeping the registers of trade, making records and release of info rmation, approved by the Order of
the Minister of Justice no. 2594/2008, published in the Official Journal, Part I, no. 704 of 16 October
2008.
Some Aspects Concerning the Setting up of Companies 127
2.2. The founders of the company
The concept of founder is particularly important in the setting up of com-
panies with legal personality. In this respect, art. 6 paragraph 1 of Law no.
31/1990 republished provides: „The signatories of the constitutive act, as well as
the persons who play a decisive role in the formation of the company are consid-
ered founders“. Also, paragraph 2 of the same article contains the legal require-
ments in order for a person to participate in setting up a c ompany as a founder,
namely the full concrete capacity and lack of criminal convictions for criminal
offenses related to economic activity, such as corruption, forgery, tax evasion etc.
Equally, the law provides a particular liability of the founders, when ever
damages are caused to third parties by not fulfilling the formalities required by
law or failure to comply with the legal provisions during the setting up of the
company (article 49 of Law no. 31/1990 republished). The founders are also lia-
ble towards third parties for the juridical acts concluded with them during the
setting up of the company and in its behalf, to the extent that the company has not
assumed these acts, after obtaining the legal personality (art. 53 paragraph 1 of
Law no. 31/1990 repub lished). These aspects, regarding the liability of the found-
ers for the activity performed during the setting up of the company, in conjunction
with the absence of a legal definition similar to that contained in the Romanian
law, have determined most autho rs from French doctrine, along with the French
jurisprudence, to consider that the founders are only those persons who partici-
pate, actively, in the setting up of the company and in its incorporation, express-
ing a personal interest and a particular will in this respect8. Conceived in this way,
the notion of founder does not necessarily coincide with that of the first associates
of the company. We believe that this approach of the concept of founder is cor-
rect, especially if only some of the first associates of the company, signatories of
the constitutive act, have an active and personal involvement in the setting up of
the company and its incorporation in the Register of Trade. In this way, it would
also be possible to achieve the correlation between the qua lity of founder and the
liability for irregularities of the setting up of the company or acts concluded in its
behalf before obtaining the legal personality. However, the legal definition con-
tained in art. 6 paragraph 1 of Law no. 31/1990 republished precl ude such an
interpretation, meaning that it would require the intervention of the legislator to
eliminate the first part of the said legal text.
3. The legal regime of the company during its setting up
As mentioned before, the setting up of companies having legal personal-
ity, under the conditions provided by Law no. 31/1990 republished, is a multiple –
8 See P. Le Cannu, B. Dondero, op. cit. , p. 215 -216 and the jurisprudence cited therein .
128 Ana-Maria Lupulescu
stage process achieved through the effects of the juridical acts required by law,
process that ends with the formality of incorporation in the Register of Trade. For
the purposes of art. 41 paragraph 1 of Law no. 31/1990 republished, the fulfill-
ment of this formality has constitutive effect because only from the date of incor-
poration in the Register of Trade the company becomes a subject of law.
Therefore, during the period between the conclusion of the constitutive
act and the incorporation in the Register of Trade, the company has no legal per-
sonality, it has not yet acquired the status of a distinct subject of law. However,
its legal regime during this period is not fully comparable to that of companies
without legal personality, which are created solely as a result of the conclusion
of the company contract, precisely due to the legal personality that will b e ob-
tained by fulfilling all necessary steps for its setting up, culminating with the for-
mality of incorporation in the Register of Trade. In this respect, a renowned au-
thor within the French doctrine has legitimately remarked: „a company during its
settin g up lacks legal personality, but it hopes to obtain it. A joint venture and a
company of fact also lack legal personality, but they did not want it“9.
Thus, as an exception to the provisions of article 205 paragraph 1 Civil
Code, corroborated with article 1889 paragraph 3 Civil Code, according to which
companies with legal personality acquire the legal personality and therefore the
abstract capacity from the date of their incorporation in the Register of Trade,
article 205 paragraph 3 Civil Code states tha t „legal persons mentioned in para-
graph 1 are allowed, from the date of conclusion of the constitutive act, to acquire
rights and assume obligations, but only to the extent that is necessary for the legal
person to be validly set up‟. Also known in the jur idical literature as the antici-
pated abstract capacity, the recognition of this capacity was determined by the
need to allow the legal person to acquire rights and obligations, as well as to take
any other steps necessary to its valid setting up. However, this capacity is limited
because, as expressly provided by the law, rights and obligations may be acquired
or assumed „only to the extent necessary for the legal person to be validly set up‟.
The specific legal regime of the company during its setting up refers to
the relations between the associates, as well as the relations with third parties.
Regarding the relations between the associates during the setting up pe-
riod, after the conclusion of the constitutive act, according to art. 1889 paragraph
4 Civil Code, until the moment of obtaining legal personality, these relations are
governed by the rules applicable to the simple company. We believe however that
this legislative solution is not totally accurate, since it cannot be applicable in all
cases10.
9 P. Le Cannu, B. Donde ro, op. cit. , p. 210 -211.
10 Perhaps the intervention of the legislator would be necessary in order to circumstantiate this
solution, at least in order to apply it unless the constitutive act or the law provide otherwise, as we
will emphasize further.
Some Aspects Concerning the Setting up of Companies 129
Thus , firstly, the concrete application of the rule contained in art. 1889
paragraph 4 Civil Code seems to disregard, in some cases, the will of the associ-
ates expressed in the constitutive act of the company, already concluded11, which
regulates precisely, in a specific manner, the relations between the associates, the
organization and functioning of the company, in accordance with the rules appli-
cable to the juridical form of company concerned. Nevertheless, even the provi-
sions of the Civil Code governing the simple company (articles 1890 to 1948
Civil Code) make reference repeatedly to the will expressed by the associates in
the company contract, the legal rules governing the matter having a disposal char-
acter12. It is true however that art. 1889 paragraph 4 Ci vil Code has a particular
utility and applicability in situations of adopting decisions by the associates re-
garding the functioning of the company – less frequent in practice – or the amend-
ment of the constitutive act itself. In these situations, we consid er that the specific
rules to each juridical form of company cannot be applicable to decision -making,
as they may become applicable after the incorporation in the Register of Trade.
As a consequence, according to the art. 1889 paragraph 4 Civil Code, the p rovi-
sions contained in the Civil Code on making decisions within the simple company
will be applicable13.
On the other hand, regarding the contributions at the setting up of the
company it is not necessary to apply the legal rules provided in relation to th e
simple company14, because the company, during its setting up, has an anticipated
abstract capacity to the extent necessary to its valid creation. For this reason, the
contributions of the associates can belong to the company being set up, even
though they are paid before its incorporation in the Register of Trade, more so as,
in case of certain legal forms of company (such as the companies of persons and
11 In this respect, it should be noted that, within French law, according to art. 1842 paragraph 2 of
the French Civil Code, until the incorporation of the company, the relations between the associates
are governed by the company contract and the general princip les of law applicable to contracts and
obligations. This solution may also be criticized, as pointed out in the French literature – see in this
respect, for more details, P. Le Cannu, B. Dondero, op. cit. , p. 219 -220.
12 Thus, for example, art. 1911 paragra ph 1 Civil Code states: „The decisions are taken by the
associates in the general meeting. The contract may stipulate the way of convening and holding it,
and in the absence of such provisions, the decision may also be adopted by their written consulta-
tion“.
13 In this regard, according to article 1910 paragraph 2 Civil Code, „The decisions concerning the
company are taken by the majority of the associates, unless the contract or the law provides other-
wise‟, while the decisions on the amendment of the compan y contract or the appointment of a sole
administrator require a unanimous vote of all the associates (paragraph 3 of article 1910 of the Civil
Code).
14 In case of the simple company, taking into account the absence of legal personality, the contri-
butions c annot be transferred to the company and cannot become its property. For this reason , the
legislator has provided, in article 1883 paragraph 1 Civil Code, the solution according to which the
contributed goods are to be subject to the common ownership right of the associates, and upon the
dissolution and liquidation of the company, the part ition will occur, leading thus to the termination
of the co -ownership status.
130 Ana-Maria Lupulescu
the limited liability company), the special law requires full payment of the sub-
scribed capital at the time of setting u p (art. 91 of Law no. 31/1990 republished).
Certainly the transfer of goods to the company will be definitively consolidated
by the incorporation in the Register of Trade and the acquisition of legal person-
ality15.
The inapplicability of the rules on the si mple company in relation to the
contributions is also underlined by article 65 paragraph 1 of Law no. 31/1990
republished, according to which the goods contributed by the associates become
the property of the company at the moment of incorporation, unless agreed oth-
erwise within the constitutive act. It follows therefore that the associates may
agree in the constitutive act that the contributed goods are transferred to the com-
pany before or after its incorporation, with the restrictions provided by law, and
the company may acquire them even prior to incorporation, due to its anticipated
abstract capacity. In the absence of clauses to this effect, the contributions be-
come the property of the company at the date of incorporation, and until this date
they remai n the property of the associate who has made the contribution.
Concerning the relations of the company during its setting up with third
parties, they are mainly determined by the legal recognition of the anticipated
abstract capacity. Therefore, due to thi s capacity, despite the absence of legal
personality, the company under setting up may validly conclude all juridical acts
required for its creation under the conditions of the law. Moreover, these acts are
the acts of the company from the moment of their conclusion, and therefore they
are not subject to confirmation by it, after obtaining legal personality, in accord-
ance with article 205 paragraph 4 Civil Code and article 53 paragraph 1 of Law
no. 31/1990 republished. The conclusion is expressly provided b y article 205 par-
agraph 4 of the Civil Code16, but it does not result with the same clarity from the
similar provision contained in the special law (namely article 53 paragraph 1 of
Law no. 31/1990 republished).
However, corroborating all the above -mentione d legal provisions, it can
be concluded that other juridical acts pertaining to its object of activity may also
be concluded in behalf of the company during its setting up, and not only those
required for its valid creation. The regime of these juridical a cts that are not con-
cluded in the exercise of the anticipated abstract capacity depends on their con-
firmation by the company, after the incorporation in the Register of Trade and
thus the acquisition of the legal personality. If the company confirms and as sumes
these acts, they are considered retroactively as concluded by it and produce the
legal effects envisaged by the parties from the moment of their conclusion. Oth-
erwise, in order to protect the interests of third parties who have contracted under
15 We believe that this is the sense envisaged by the legislator in the article 1883 paragraph 3 of the
Civil Code, although that text seems to refer only to goods subject to ce rtain forms of publicity, for
constitutive reasons or enforceability against third parties.
16 In this respect, the text refers expressly to juridical acts concluded in violation of the provisions
on the anticipated abstract capacity, contained in article 2 05 paragraph 3 of the Civil Code.
Some Aspects Concerning the Setting up of Companies 131
such circumstances, the law provides the unlimited and joint liability towards
third parties of the founders, associates, representatives and any other persons
who had acted in behalf of the legal person during its setting up and who had
concluded those juridic al acts in its account (art. 205 paragraph 4 of the Civil
Code and article 53 paragraph 1 of Law no. 31/1990 republished). Although the
law does not expressly provide it, we consider that the confirmation of the jurid-
ical acts concluded in behalf of the co mpany during the setting up period should
be done explicitly and in any case, by a unanimous decision of the associates. The
proposed solution results to some extent from the provisions of article 1911 par-
agraph 2 of the Civil Code and is imposed by the fa ct that the confirmation of
some juridical acts cannot be left solely to the discretion of those who will be
liable, according to the law, in the absence of the expression of will, namely those
who have concluded the acts in question – the founders, some a ssociates or the
legal representative17.
4. Conclusions
Finally, we consider it necessary to add some clarifications of a termino-
logical nature, in the context of certain inconsistencies of the legislator. Thus, in
a narrow sense, the setting up of companie s with legal personality is accom-
plished through the conclusion, by the associates, of their constitutive act. In this
sense are the provisions of article 5 paragraph 1 of Law no. 31/1990 republished,
according to which „The general partnership or the limi ted partnership is set up
by the company contract, and the company by shares, the limited partnership by
shares or the limited liability company is set up by company contract and memo-
randum of association‟ or those of article 46 paragraph 1 of the same law , which
stipulate that the incorporation application will be rejected if the legal require-
ments of the setting up of the company were not complied with.
On the contrary, the expression „company under setting up‟, also used
by the legislator, leads to the idea that companies with legal personality are not
completely set up until the incorporation in the Register of Trade and therefore
the acquisition of the legal personality. The same conclusion can be drawn from
the text of article 202 paragraph 1 Civil Co de, which states „If the registration of
the legal person has constitutive character, it is not considered legally set up while
the registration has not been made‟. However, the special law in the field of com-
panies having legal personality, Law no. 31/199 0 republished, regulates this as-
pect within Title II, entitled Setting up of companies, which contains several
chapters dedicated to the conclusion of the constitutive act (Chapter I), specific
17 For a presentation of different methods of conforming and assuming the juridical acts concluded
in behalf of the company during its setting up provided by French law, under some more explicit
legal regulations, see also G. Ripert, R. Roblot (sous la direction de M. Germain) Traité de droit
commercial, tome 1 – volume 2, Les sociétés commerciales , LGDJ, Paris, 2002, p. 48 -50.
132 Ana-Maria Lupulescu
formalities for the setting up of a company by shares through public subscription
(Chapter II), incorporation of the company (Chapter III) etc., and the structure of
this legal regulation supports the same conclusion, according to which the setting
up of companies having legal personality necessarily includes their i ncorporation
in the Register of Trade.
Therefore, as it appears from the entire approach which is the object of
this paper, we consider that in cases of companies with legal personality, their
setting up should be addressed in a broader sense, as comprisi ng not only the
conclusion of the constitutive act by the associates, but also all the formalities
required by law for the valid creation of the legal person, including its incorpora-
tion in the Register of Trade.
Bibliography
1. A. M. Lupulescu, Some aspects concerning the simple company under the
regulation of the new Civil Code , „9th edition of the International Confer-
ence on Accounting and Management Information Systems (AMIS 2014)”,
the Faculty of Accounting and Management Information Systems, Univer-
sity of Economic Studies, Proceedings of 9th edition of AMIS 2014, ASE
Publishing House, Bucharest, p. 313 -321;
2. G. Ripert, R. Roblot (sous la direction de M. Germain) Traité de droit com-
mercial, tome 1 – volume 2 , Les sociétés commerciales , LGDJ, Par is, 2002;
3. P. Le Cannu, B. Dondero, Droit des sociétés , 6ème édition, LGDJ, Paris,
2014;
4. P. Merle, A. Fauchon, Droit commercial. Sociétés commerciales, 18ème édi-
tion, Dalloz, Paris, 2014;
5. St. D. Cărpenaru, Tratat de drept comercial român , Universul Juridic Pu-
blishing House, Bucharest, 2009.
Excise Duties in European Union. Relevant National Case -Law
Associate professor Mihaela TOFAN1
Abstract
Excise duty is an indirect tax category, particularly important due to the
economic impact it has on the public budget. EU harmonized excise duties represent
special consumption fees that are due to the state budget for certain products, derived
from domestic production or imported. In the area of regulation concerning substantive
law on excise duties, EU law contai ns harmonized rules, mainly through directives.
Accordingly to the transposition right into national law, each Member State has its own
regulations in the field, resulting a very diverse legal framework. Especially in the rules
of procedure, we notice cons iderable differences on the perception and payment of these
tax liabilities, as demonstrated by the consistent jurisprudence. This paper shows the
influence of the jurisprudence of the EUCJ on the interpretation of the rules of law
applicable in the field.
Keywords: excise duty, harmonized rules, national case -law, EUCJ influence .
JEL Classification: K34, K41
1. The notion of excise duty in the European Union
Excises are special consumption fees that are due to the state budget for
the production, importation or sale of certain product categories.2 Typically,
amounts collected during the procedure of collecting excise duty constitute reve-
nue to the state budget, situations likewise regulated by the Fiscal Code in Roma-
nia.
The adoption of uniform rules on excise duties and excise goods in the
EU is made relatively difficult. The impediments came from the significant dif-
ferences that exist among the regulation of these indirect taxes in the Member
States and because of the particular positi on that those taxes hold in the domestic
taxation. In general, the government program of each state includes the view of
the central administration on the amount of excise duty and the excise goods, a
claim that partly motivates the vote of confidence of t he electorate. When regu-
lating a uniform tax, the legislative must consider and meet the needs related to
the program of measures of the government and the short term interest of the
leading local and central public administration.
1 Mihaela Tofan – „Alexandru Ioan Cuza” University of Iasi, Romania, E -mail: mtofan@uaic.ro .
2 D. Drosu Șaguna, M. Tofan, Drept financiar și fiscal european , Ed. C.H. Beck, Bucharest, 2010,
p. 203 ff.
134 Mihaela Tofan
The greatest progress is being made on the tobacco and tobacco products
tax, the compromise that must be made by accepting the uniform rules of Euro-
pean Union member states being justified by reasons of public health.
The following categories of excise benefit of regulators at EU level:
excise duty on al-
coholic beverages excise on beer
excise on wine
excise on fermented
beverages other than
wine or beer
excise on intermedi-
ate products
excise on alcohol Directive 92/83/EEC of 19 Octo-
ber 1992 on the harmonization of
excise duties s tructures on alcohol
and alcoholic beverages
Directive 92/84/EEC on the ap-
proximation of excise duty on al-
cohol and alcoholic beverages
excise duty on en-
ergy products and
electricity excise tax on gasoline
excise on natural gas
for housing heater
excise on electricity Directive 2003/96/EC of 27 Octo-
ber 2003 restructuring the Com-
munity framework for the taxation
of energy products and electricity
European Council (December
2009) decided to considerably re-
duce carbon emissions across the
economy of each Mem ber State3.
excise duty for
manufactured to-
bacco The level of such duty
was negotiated sepa-
rately by each state
(especially for ciga-
rettes), and minimum
level varies by type
(cigarette, cigars,
other tobacco prod-
ucts etc.) from 14 to
60 euro / kg or piec es. Directive 95/59/EC, as amended
by:
– Directive 1999/81 / EC of 29 July
1999 (OJ L 211 of 11 August
1999, p. 39 -41)
– Directive 2002/10 / EC of 12
February 2002 (OJ L 46 of 16 Feb-
ruary 2002, p. 78 -80) and
– Directive 2010/12 / EU of 16
February 2010 (OJ L 50 of 27 Feb-
ruary 2010, p. 1 -7)
excise duy on pe-
troleum products Directive 95/60 / EC of 27 No-
vember 1995 on fiscal marking of
gas and kerosene, as amended by
EU Commission Decision
2006/428 / EC of 22 June 2006
establishing a common fiscal
marker fo r gas oils and kerosene
Table. 1 Harmonized excise in EU
3 The document is available on –line at http://www.consilium.europa.eu/uedocs/cmsUpload/st00
006.en09.pdf , retrieved in 02.11.2016.
Excise Duties in European Union. Relevant National Case -Law 135
Some Member States may establish national excise products in the same
category:
excise tax (special tax) for energy products and elec-
tricity Belgium, Germany,
Netherlands, Finland,
Sweden
additional fee for mixed drinks (alcoholic beverages
mixed with soft drinks) France
additional charge for alcoholic beverage sold in
packaging that can not be reused Belgium
special excise duty on mineral oils, coffee, natural
fur apparel, crystal items, gold jewelery, perfumery Romania
2. Settlement, calculation and imputation of excise duty
Excise duties were traditionally considered indirect taxation, due – in
principle – for selling certain consumer goods, usually considered luxury. Now,
excise duties are applied on a limited number of products and/or services, and
most of them are considered consumer products duties, ie for those commonly
used by final consumers. Excise duty may be established on the manufactured
products under the monopo ly regulation and also on some of the imported goods.4
Economic theory recommends excise duties on goods with inelastic de-
mand. In these circumstances, taxes price increases on excise goods does not
cause significant reductions in the consumption of these goods, so budget reve-
nues from excise duties are relatively stable. The scope of these special charges
of consumption is particularly vast and it varies from country to country and in-
cludes mainly: alcohol and soft drinks, wine, tobacco products, gasoline, diesel,
tea, coffee, soft drinks, cars, furs, jewelry, cosmetics etc.5
Due to the particularities of the Single European Market, the harmoniza-
tion of excise duties is imperative, although states tend to preserve their means to
influence the economy and co mmerce. These taxes have a dual purpose: tax rev-
enue collection and targeting consumption. Even if these two intertwined inter-
ests of the state are not always harmonious and complementary, they provide a
guarantee to achieve the pursued amounts of tax reve nue.6
The products mentioned are excisable when they arise within the EU or
their importation into that territory. Excise duty becomes chargeable at the time
of release for consumption or when there are losses or shortages of excisable
products. The releas e for consumption shall be considered:
4 M.Ș. Minea, L.T. Chiriac, C.F. Costaș, Dreptul finanțelor publice , Ed. Accent, Cluj -Napoca, 2005,
p. 366.
5 5L. Țâțu, C. Șerbănescu, D. Ștefan, D. Cataramă, A. Nica, Fiscalitate. De la lege la practică, Ed.
All Beck, Bucharest, 2005, p. 51.
6 M.Ș. Minea, L.T. Chiriac, C.F. Costaș , op. cit., p. 374.
136 Mihaela Tofan
a) the departure of excise goods, including irregular departure, from a
duty suspension arrangement;
b) holding of excise goods outside a duty suspension arrangement where
excise duty has not been levied in accordance with this the law in force;
c) production of excise goods, including irregular production, outside a
duty suspension arrangement;
d) importation of excise goods, including irregular importation, unless
the excise goods are placed, immediately upon importa tion, under a duty suspen-
sion arrangement;
e) use of excisable products within a fiscal warehouse other than as feed-
stock.
Release for consumption are considered the possession for profit by a
person of excise goods which have been released for consumption in another
Member State and for which duty has not been levied in Romania.7
The time of release for consumption shall be written:
a) receipt of excise goods by the registered consignee;
b) upon receipt by the beneficiary of the exemption of excise goods;
c) receipt of excise goods at the place of direct delivery.
If an excisable product entitled to exempt or exempt from excise duty is
used for any purpose that is not in accordance with the exemption procedure, the
excise duty is attract. An energy product, for which duty had not been previously
due, shall be considered released for consumption when energy product is offered
for sale or used as motor fuel or heating fuel.
An excisable product, for which the excise duty was not previously
chargeable, is consi dered a release for consumption when the product is held in
an excise tax warehouse for which the authorization was revoked or cancelled.
Excise tax becomes payable on the day the decision to revoke the authorization
of tax warehouse was issued or the date of issuing the decision to cancel the au-
thorization of tax warehouse for excise goods that may be released for consump-
tion.
If an excisable product for which the excise duty was not previously
chargeable, it is considered a release for consumption when th e product is held in
an excise tax warehouse for which the authorization has expired and there was
not issued a new permit. It is not considered a release for consumption the move-
ment of excise goods from the tax warehouse to another tax warehouse in Roma-
nia or in another Member State; a registered consignee in another Member State;
a territory outside the European Union.
The total destruction or irretrievable loss of excise goods under duty sus-
pension arrangement, including a pertaining to the nature of th e product or as a
result of unforeseeable circumstances or force majeure, or as a consequence of
7 M. Tofan, Drept fiscal, Ed. CH Beck, Bucharest, 2016, p. 305.
Excise Duties in European Union. Relevant National Case -Law 137
authorization by the competent authority is not considered released for consump-
tion. Products are considered totally destroyed or irretrievably lost when they are
rendered unusable as excise goods. The total destruction or irretrievable loss of
excise goods must be proven to the fiscal competent authority. It is not considered
moving energy products released for consumption in the tax warehouse for the
supply of ships or aircraft bound for a territory outside the European Union, being
assimilated to an export operation. Also supply energy products operation of
ships or aircraft bound for a territory outside the European Union is treated as an
export operation.
The persons obliged to paying excise duty are:8
in relation to the departure
of excise goods from a duty
suspension warehouse authorized warehouse keeper, registered con-
signee or any other person releasing the excise
goods out off the duty suspension regym e or on
whose behalf it performs this release and in the
case of irregular departure from the tax ware-
house, any other person involved in that departure
in case of an irregularity during movement of ex-
cise goods under suspension of excise duty: the
autho rized ware housekeeper, the registered con-
signor or any other person who guaranteed the
payment and any person who participated in the
irregular departure and who was aware or should
be aware of the irregular nature of the departure
in relation to holding of ex-
cise goods the person holding the excise goods and any other
person involved in their possession;
regarding the production of
excise goods the person producing the excise goods and, in the
case of irregular production, any other person in-
volved in t heir production
regarding the import of ex-
cise goods the person who declares the excise goods or on
whose behalf they are declared upon importation
or, in the case of irregular importation, any other
person involved in their import
When more people are required to pay the same excise duty debt, they
shall be jointly liable for such debts, each of these persons can be held liable for
the entire debt.
The excise duty is set out in Annexes of the Romanian Tax Code, sepa-
rately for the year 2016 and 2017. The excise duty shall be updated annually with
the consumer price increase in the last 12 months, calculated in September of the
year preceding the application, compared to the period October – September, of-
ficially communicated by the National Statistics Ins titute until 15 October. Excise
8 Art. 341 Fiscal Code.
138 Mihaela Tofan
payers are required to register with the competent authority. Any excise respon-
sible for the correct calculation and payment of the legal term of excise duty to
the state budget and for respecting the legal deadline to fill the statements of ex-
cise duty to the competent authority. The deadline for paying the excise duty is
up to 25th of the month following that in which the duty becomes payable, except
where expressly provided for another term of payment.9
Current legislation includes rules for the authorization of economic op-
erators carrying out activities with excise goods under suspension of excise duty.
Authorization of tax warehouse, the registered consignees, consignors and regis-
tered importers authorized by the competen t authority shall be made by the Com-
mission to authorize operators with excisable products, instituted by the Ministry
of Finance. As an exception, authorization of fiscal warehouses for exclusive pro-
duction of wines made by taxpayers, other than large and medium taxpayers es-
tablished according to regulations, small distilleries, and small independent brew-
eries, can be done by committees constituted in the territorial structures of Na-
tional Authority of Fiscal Administration, called regional committees.
3. The analyze of the excise duty jurisprudence of the Romanian na-
tional courts
In the field of jurisprudence, the analyze of the most recent case solutions
did not show any relevant case law in the field of excise duties in which the cur-
rent provi sions of the Tax Code are incident. However, based on harmonized EU
regulations and respecting the priority of norms of European Union law, we have
retained to discuss the following solutions:
Romanian Consti-
tutional Court Decision no. 34/24 June
1993 art. 20 para. 2 and art. 22 para. 2 of the
law regarding the excise for imported
and domestic products and the excise
for oil and natural gas
Decision no. 189/31
March 2005 title VII concerning the excise duties
in the Law no. 6571/2003 –Fiscal
Code and art. 190 from the Govern
Ordinance no. 92/2003 regarding the
Fiscal Procedure Code
Decision 39/2013 unconstitutionality of art. 3 ind. 1 of
GEO 77/2011 on the application of
clawback tax on the price of medi-
cines (including VAT)
The competent panel
for interpreting the rule Decision no 11/2015 – the hypothesis
of smuggling, the offender will have
9 Art. 345 Fiscal Code.
Excise Duties in European Union. Relevant National Case -Law 139
The High Court of
Cassat ion and Jus-
tice of law in criminal mat-
ters both the seizure of goods, and compel-
ling of customs duties, excise tax and
VAT related.
The appeal for uni-
formization of inter-
preting the law Decision no. 17/18 November 2013 to
criminalize the situation of possession
of excisable products out of ware-
house, knowing that they come from
smuggling
The section for admin-
istrative and tax litiga-
tion Decision no. 108/2015, the cancella-
tion of the decision establishing the
obligation to pay the excise duty on al-
cohol and accessory products
Decision no. 412/2015, annulment of
the decision establishing additional
corporate tax due to deductible ex-
penses fit into the excise paid for
leases for cars
Decision no. 780/2015, annulment of
the decision which established main
duties and accessories excise duty on
diesel and biodiesel;
Decision no. 839/2015, annulment of
the decision to impose the obligation
to pay additional excise duty for alco-
hol;
Decision no. 1603/2015; the revoca-
tion of the tax warehouse authoriza-
tion
Decision no. 1877/2015, annulment of
the tax decision establishing corp orate
tax of unrealized gains accounting for
the difference in price
Relevant jurispru-
dence of the na-
tional regional
courts Decision no. 2484/30.
09.2011 of the Court of
Appeal Alba the annulment of the imposing deci-
sion on the establishment of additiona l
amounts due as excise duty for prod-
ucts classified in alcoholic category
and not in the spirits intermediate cat-
egory
Brasov Court – civil
sentence no. 1634 / CA
from March 12, 2013 the annulment of the imposing deci-
sion on the accessories calculated for
unpaid excise duty on ethyl alcohol
found in the possession on the grounds
that, in fact, the excise duty was paid
as soon as the tax authority issued an
imposing decision on setting sums due
in respect of excise duty.
140 Mihaela Tofan
Suceava Court the annulment of the decision to im-
pose excise duty on alcohol on the
grounds that the 2 conditions are not
fulfilled (alcohol concentration above
1.2% and compliance with the Com-
bined Nomenclature).
Decision no. 4502/2014
of Court of Appeal Alba the annulment of the imp osing deci-
sion establishing the obligation to pay
additional excise for oils used as fuel
for heating.
Table. 4 Synthesis of the national analyzed jurisprudence
In the spirit of the field analyzed, three decisions of the Constitutional
Court stands, namely:
– Decision no. 34/24 June 1993 on the unconstitutionality of art. 20 para.
2 and art. 22 para. 2 of the Law on excise taxes on imported products and the
country, as well as tax on crude oil and natural gas from domestic production. 10
In this case, the Court was invested to decide the unconstitutionality of
the statute of limitation of five years set for establishing excise duties and their
forced execution, as opposed to the general term of 3 years in common law, con-
sidering that this provision contravenes Article. 41 para. 2 of the Constitution
which provides equal protection to property by law, irrespective of its owner. The
Constitutional Court held as the establishment of the limitation period of 5 years,
in synthesis for these argu ments: the 3 years’ term does not benefit of regulation
in constitutional order and according the art. 137 par. 1 state budget revenues is
not the private property of the state. According to art. 138 of the constitution,
taxes and fees are be set only by l aw and the establishment of a limitation period
greater than in common law is not against the constitution.
– Decision no. 189/31 March 2005 on the unconstitutionality of the pro-
visions of Title VII of Law excise duties. 571/2003 regarding the Fiscal Code and
Art. 190 of Ordinance no. 92/2003 regarding the Fiscal Procedure Code11.
The exception invoked the unconstitutionality of the provisions of the
Tax Code aimed at targeting the criminalization of offenses related to failure of
harmonization of excise dut ies, because, in essence, in the Romanian systems of
law criminalizing acts is the competence of organic laws and tax code is an ordi-
nary law. The request was rejected as inadmissible, the court identifying incidents
of procedural who stopped to go further with the investigation on the precise mat-
ter of the investiture.
10 The document is available on -line at http://lege5.ro/Gratuit/gu3timzw/decizia -nr-34-1993 -cu-
privire -la-constitutionalitatea -art-20-alin-2-si-art-22-alin-2-din-legea -privind -accizele -la-produse
le-din-import -si-din-tara-precum -si-impozitul -la-titeiul -din-productia -interna?pid=&d=2016 -11-
19, retrieved on the 25.10.2016.
11 The document is available on -line at http://www.legex.ro/Decizia -189-31.03.2005 -50326.aspx ,
retrieved on the 25.10.2016.
Excise Duties in European Union. Relevant National Case -Law 141
– Decision 39/2013 regarding the unconstitutionality of art. 3 ind. 1 of
GEO 77/2011 on the application of clawback tax on the price of medicines, which
include VAT12
The Court held that, und er the general principle applicable in fiscal field,
taxes and fees apply over taxable income matter or assets and not on other taxes,
which is why the application of clawback tax on another tax is unconstitutional;
mutatis mutandis , the same solution will be applied regarding the calculation of
excise duty.
4. The analysis of recent HCCJ jurisprudence on excise duties
In Decision No 11/2015, 13 the competent panel for interpreting the rule
of law in criminal matters was invested to unravel the question whether, in the
hypothesis of smuggling, the authors will have both the seizure of goods and the
payment of customs duties, excises and VAT related. The Court gave priority to
relevant EU jurisprudence in this matter, namely two de cisions of the ECJ
C459/07 Veli Elshani v Hauptzollamt Linz and C230/08, Dansk Transport og
Logistik against Skatteministeriet . HCCJ admitted the request and determined
that, in case of smuggling, the seizure will be accompanied by compelling the
authors t o pay taxes owed, including the excise duties.
Settling the appeal on uniforming the interpretation of the law by Deci-
sion No. 17/18 November 201314, ICCJ decided to criminalize the possession of
products off tax warehouse, if these produscts are subject to excise marking and
knowing that they come from smuggling.
ICCJ recent decisions rendered by the The section for administrative and
tax litigation, which holds the material competence to rule in disputes related to
the subject of the analysis, we note: 15
Decision no. 108/2015 – the annulment of the decision establishing the
obligation to pay the excise duty on alcohol products and accessories,
with accessories (increases); The appeal court found that, although it was
not introduced in the case, the sentence was pronounced by the court of
first instance in contradiction with the author of the act, so the case was
sent for retrial for informing the emitent about the litigation; in law, art.
129 CPC and art. 16 ind. 1 Law no. 554/2004 were invoked.
12 The document is available on -line at http://www.juridice.ro/475454/piata -farmaceutica -si-taxa-
de-clawbac k-argumente -din-jurisprudenta -recenta -evolutiva.html , retrieved on the 25.10.2016.
13 The document is available on -line at http://www.cdep.ro/pls/legis/legis_pck.lista_anuala?an=20
15&emi=240&tip=17&rep=0 , retrieved on the 30.10.2016.
14 The document is avai lable on -line at http://www.scj.ro/1093/Detalii -jurisprudenta?customQuery
%5B0%5D.Key =id&customQuery %5B0%5D.Value=86231 , retrieved on the 30.10.2016.
15 The documents are available on -line at http://www.scj.ro/736/Cautare -jurisprudenta?customQu
ery%5B0%5D .Key=Department&customQuery%5B0%5D.Value=158 , retrieved on the 30.10.
2016.
142 Mihaela Tofan
Decision no. 412/2015 – the annulment of the decision establishing addi-
tional corporate tax due to deductible expenses fit into the excise paid for
leases of cars; the fiscal authority considered that excise duties were not
included in the sale price of the goods in q uestion, they do not represent
expenditures in order to achieve income and thus they are not deductible
tax. The court held that the duty could not have been register in account-
ing earlier than the closing date of import operations, respectively at the
end of the lease. As the cars were imported in order to sell them, the
expenses incurred in order to do the selling, including excise duty, shall
be deemed tax deductible.
Decision no. 780/2015 – the annulment of the decision which established
main duties and accessories excise duty on diesel and biodiesel; first
court removed the conclusions of accounting expertise concerned, retain-
ing as relevant to the existence of the obligation to pay excise the date of
releasing the goods for consumption, understanding h ere any output from
a suspension regime, including occasional or any possession of excisable
goods, except inside the tax warehouse. HCCJ upheld the court of first
instance, considering art. 178 para 4 of the Fiscal Code, according to
which the holding of excise goods outside the tax warehouse, for which
no proof of payment of excise duty exists, can attract the obligation to
pay the excise. The appellant must be diligent when a commercial circuit
of energy products engages in tax warehouses, especially in light of art.
2.2.1 of Govern decision no 44/2004, according to which the consump-
tion of energy products in release of tax warehouses is made only when
the buyer shows payment document stating transferring to the State the
value of the excise duties amount to be billed. The company recurrenced,
as consumers finally had to ask the invoice issued by companies provid-
ing warehouse, the payment bill, confirmed by the bank with stamp and
signature for the payer's account debited. Regarding the obligation to pay
excise duty, the accounting expertise in the case attesting the reality of
accounting records of operations with the 6 suppliers of excise goods was
not relevant.
Decision no. 839/2015 – the annulment of the imposing decision on the
obligation to pay additi onal excise duty for alcohol. The appeal court or-
dered the case to be sent for retrial, showing that, under Art. 129 and Art.
261 pt. 5 CPC, the judge must find the truth and he has to insist to reveal
the reasons of fact and to explain the law under which the conviction of
the solution was formed. In this case, the calculation of losses considered
acceptable from a stock of excise goods placed under suspension was
discussed the court is bound to rekindle the correct way to calculate these
losses. After a n ew trial, the court presented the legality of the calculation
methods used by the parties for establishing losses, supplementing the
rules of evidence.
Excise Duties in European Union. Relevant National Case -Law 143
Decision no. 1603/2015; the court of appeal concluded that the revoca-
tion of the authorization for tax warehouse is possible when only one
incidence is proven out of the situation provided by law for this sanction;
the company has not complied with the terms provided in the authoriza-
tion to notify the fiscal authority about the change in the technology for
manufacturing the products, by including diesel in the recipe of produc-
tion, an excisable product which was not included among the raw mate-
rials used for finished products before.
Decision no. 1877/2015 – the annulment of the imposing decision on the
estab lishment of corporate tax for unrealized gains which represent the
difference in price between the price of contracts concluded with coun-
terparties and price established by Order of the National Agency for Min-
eral Resources. Also, this case raised the issu e of an amount paid as ex-
cise duty, by a procedure of enforcement of the final beneficiary, and the
taxpayer may be liable to pay a new excise duty, as a double payment.
HCCJ appreciated that it must pay the excise duties for the difference in
price, as lo ng as the beneficiary of a concession activity of exploitation.
5. Relevant jurisprudence in other national regional courts
Analysis of the practice of the panel of the HCCJ proved to be so diverse
but still it may not provide an accurate representation of jurisprudential direction
in the field of excise duties in our country, unless they are complemented by a
review of the jurisprudence of regional courts.
Thus, we documented and analyze these solutions recently pronounced
by the domestic competent cour ts:
Decision no. 2485/30.09.2011 pronounced by the Court of Appeal Alba; 16
the annulment of the imposing decision on the establishment of additional
amounts due for products classified in a different category than intermediate
drink spirits. The applicant submitted to the tax authorities the list of products
that are realized in the tax warehouse and recipes for preparing these prod-
ucts, but no response was received from the fiscal authority. A year and a half
later, the applicant received a very complicate d answer that could not be de-
ciphered by staff with no specialist training. According to art. 172 para. 1 Tax
Code, intermediate products must meet certain conditions. The court of ap-
peal has revealed however that it is relevant that the applicant made no fram-
ing modules for its products and had requested time to bring it up in tariff
categories, by the competent authority in terms of taxation. Checking the le-
gal applicable provisions, the court of appeal concluded that the applicant can
not be required to pay further excise duty for mission -critical period that was
16 The document is available on -line at http://infodosar.ro/speta.php?id=736 , retrieved on
10.11.2016.
144 Mihaela Tofan
still within the period to seek tariff classification under the rules in force to
the particular products, but after the expiry of the legal term.
Brasov Court pronounced the civil senten ce no. 1 634/CA of 12 March 201317,
expressing a unique point of view in the matter of interest due to excise duty
calculated by the tax authority. In essence, the applicants sought annulment
of the decision imposing the accessories calculated for unpaid excise dut y on
ethyl alcohol found in their possession on the grounds that, in fact, the excise
duty has been paid as soon as the tax authority issued a decision imposing the
amounts due as the excise duty. Art. 192 par. 1 and 2 of the Fiscal Code refer
to the time of chargeability of excise duty, and art. 166 par. 1, letter e refers
to the time of release for consumption. Art. 120 para 1 of GEO 92/2003 pro-
vides that the additional interest is calculated from the day following the pay-
ment deadline until the date of s ettlement of the debt. Instead, the court finds
culpable the attitude of the control bodies which compiled the assessment
decision after 4 years and 2 months from the start of fiscal control, which
determined the calculation of interest for a long period. According to the pro-
portionality principle in EU law, the court held that the measure taken by a
public authority affecting the rights of individuals must be appropriate and
necessary to achieve that legitimate aim and, at the same time, reasonable.
The pr oportionality principle is generally invoked in European case law in
legal proceedings in which the question of the prevalence of the legal claims
against any law or in dispute when the prevalence of a private law is opposing
the public interest. The follo wing cases are invoked C210/91 Commission v
Greece , C 286/82 and 26/83 Luisi and Carbone Ministry against del Tesoro ,
C203/80 Casati . Thus, administrative measures or penalties must not go be-
yond what is strictly necessary, so that monitoring procedures should not im-
pede the freedoms that Treaty protects and should not be accompanied by a
penalty disproportionate to the gravity of the infringement, because that be-
comes an obstacle to the exercise of that freedom. Case C188/09 Profaktor
Kulesza, Frankowski, Jóźwiak Orlowski argues that in the absence of harmo-
nization of legislation about the communication of penalties applicable to in-
fringements of the conditions stipulated by a regime established by legisla-
tion, Member States are free to choose the penalties they consider relevant.
They are however obliged to exercise their powers in compliance with EU
law and its general principles, thu s respecting the principle of proportionality.
In the case, the tax authority’s right to establish the obligation to pay excise
duty is undeniable, but also the right of the person to be protected against
abuse of rights of the authorities. This conflict b etween the protection of pri-
vate law and the public interest is under the direct impact of the principle of
17 The document is available on -line at http://legeaz.net/spete -civil-2/inlatur are-dobanzi -pentru –
accize -calculate -1634 -2013 , retrieved on 10.11.2016.
Excise Duties in European Union. Relevant National Case -Law 145
proportionality, which is why interest on arrears for payment in this case has
been removed.
Suceava Court pronounced sentence no. 1954/3 June 201018 on the annul-
ment of the decision to impose excise duty on alcohol, on the grounds that
the two legal conditions are met: alcohol concentration above 1.2% and com-
pliance with the Combined Nomenclature. The applicant possession of a
quantity of industrial e thyl alcohol is not, in the court opinion, subject to duty.
From the audit report in the file, the alcohol used was a technical product, nor
alcohol ethyl. First the court agreed to the applicant but, on appeal, the sen-
tence was quashed and referred back w ith an order from the superior court to
take account of objections to the expert report submitted to the case after
closing the debate, in consideration of the rights of defense of the tax author-
ity. The court granted applicant exclusively on expert decisi ve role, but it was
its duty to respect equally the right to defence on both parties. The case was
again before the court of first instance, which dismissed the applicant's action,
saying that all the alcohol is an excisable product. On appeal, the case re-
ceived a large settlement in favor of the obligation to pay excise duty.
By Decision no. 4502/2014,19 Alba Court of Appeal held on the cancellation
of the tax decision establishing the obligation to pay additional excise due to
situation of using oils as fu el for heating. The legislature provided a prelimi-
nary procedure for changing the tax regime for goods returned to the eco-
nomic cycle, when oils are used as fuel for heating. Thus, the court of appeal
explained that, as long as the destination of waste oil as fuel is not denied,
excise duty is imperative.
6. Conclusions
Scope of excise duties generates litigation both in relation to specific na-
tional regulations, and in the field of harmonization. EUCJ case law is faithful to
the fundamental prin ciples which characterize the European Union legal order,
of which the principle of proportionality is invoked and used mainly in motivating
handed solutions.
At the national legal system, the relevant case law on excise duties is not
as consistent as in c ase of other taxes, such as VAT and income tax. In national
court jurisprudence, the EUCJ case law influence is present and tends to stand-
ardize the interpretation of the rules of law rather than the central courts. The tax
authorities of the Member States opt for the procedure of request for EUCJ pre-
liminary ruling, but not the national courts in our country.
18 The document is available on -line at http://legeaz.net/spete -contencios/contestatie -act-
administrativ -fiscal -produs -supus -3598 -2011 , retrieved on 10.11.2016.
19 The document is availa ble on -line at http://www.jurisprudenta.com/jurisprudenta/speta -zv8c14d ,
retrieved on 10.11.2016.
146 Mihaela Tofan
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cent, Cluj -Napoca, 2005;
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9. www.legez.ro , retrieved on 10.11.2016.
The Lease Contract under Insolvency Law
PhD. student Raluca Antoanetta TOMESCU1
Abstract
The reason for the promulgation of the current insolvency law, Law 85/2014,
was that of creating a legal framework effective and proper for the collective enforcement
of debtors who are insolvent to ensure the recovery of claims that they owed and implicitly
to protect business environment by saving viable enter prises and eliminating those that
no longer have any chance of recovery. Starting from the different opinions drawn from
the doctrine, and from the examples given by the inconsistent judicial practice, in case of
the lease contract, when the debtor user en ters insolvency proceedings, serious practical
problems have been raised both in terms of the fate of this contract after the date of de-
claring the insolvency procedure open, but especially in terms of the registration of the
claim arising from this contra ct on the list of creditors. Thus, the completion of the legis-
lation with specific regulations for these operations was imposed. Through the institu-
tional arrangements that aimed at enhancing the doctrinal and jurisprudential opinions,
they managed to codi fy the status of the lease contract subject to insolvency proceedings,
the situation of this contract being treated especially by the current Code of Insolvency,
the new legislative framework offering principles that certainly will lead to the substan-
tiation of a predictable and fair jurisprudence.
Keywords: lease; insolvency; financier; user; financial leasing
JEL Classification: K12, K22
1. Preliminary issues
Representing a complex juridical institution of commercial law, the cen-
tral element of the insolvency proceeding is the debtor, that subject of law that,
by assuming the risk of a business, failed, so if the business is an adventure, the
insolvency is the consequence of the adventure that ended badly2.
Without being considered a c reation of the modern world, the insolvency
proceeding, by the evolution of the legislative policies that have influenced the
legal regime, perpetuated in time, the same common feature, namely of reconcil-
ing the interests of the debtor with that of its cre ditors.
The origins of this procedure are found in Roman law, but being re-
stricted only to bankruptcy proceedings which sought to liquidate debtor's prop-
erty in order to pay off the debts accumulated by it. It is noteworthy that Roman
1 Raluca Antoanetta Tomescu – „Nicolae Titulescu” University of Bucharest, Romania, E -mail:
ratomescu@gmail.com.
2 Gheorghe Piperea, Drept comercial (Commercial Law) , C.H. Beck Publishing House, Bucharest,
2009, p. 177.
148 Raluca Antoanetta Tomescu
law did not make any distinction between traders and non -traders in terms of ap-
plying this procedure, of enforcement, directed against the person of the debtor.
In the initial phase of mission in bona , the creditor became the holder of
the entire property of the debtor, by ord er of the magistrate, so it is assumed that
the debtor was not dispossessed, but was only supervised by the creditor in order
to avoid increasing insolvency, the debtor still remaining the owner and keeper
of its whole fortune. Subsequently, if the debt wa s not paid by the debtor, the
second phase followed, the venditio bonorum itself, which consists in the forced
execution of its assets3. By order of the prosecutor, where there were several cred-
itors, he called a magister bonorum4 (master of goods), who a fter the fulfilment
of the formalities started to sale the debtor's assets in bulk ( per universitatem ).
The buyer of goods, bonorum emptor , replaced the debtor, cashing its receiva-
bles, and later moved to the process of recognition or disproof of the alleg ed
debts. After establishing the founded receivables, the fulfilment of the claims of
the acknowledged creditors was achieved, within the limits of the amounts pro-
vided by bonorum emptor . After attaining the insolvency proceedings purpose by
venditio bonor um, the debtor remained dishonoured5.
If the insolvent debtor was a personality part of a senate6, a minor aged
under 14 or a person lacking discernment, then the procedure for the sale of assets
was replaced with distractio bonorum , which represented a re tail sale destined to
satisfy the claims of all creditors. After applying this form of execution of assets,
the infamy on the debtor was no longer attracted7.
The bankruptcy procedure was regulated for the first time in 1673 in
France by the Trade Order pr omulgated by Louis XIV, having been inspired by
the Italian law at that time. The same source of inspiration underlies the concepts
found in the Romanian Commercial Code of 1887, which by moving away from
the origins of the actual Roman law distinguishes between traders and non -trad-
ers, the procedure being applied exclusively only to people who developed com-
mercial activities8.
The evolution of the commercial relations was influenced, over time by
various events (wars, global economic crisis, etc.) that ca used insolvency, freed
from the disreputable character connotation, to be seen from a different perspec-
tive. So, in the context of current economic realities, they try as much as possible
to remove the stigma of failure of the business, giving the insolven t debtor the
3 Teodor Sâmbrian, The sale -purchase procedure applied to the debtors' goods in the Roman An-
tiquity , „Revista de Științe Juridice” no.1/2009, p. 9,10.
4 Ulpian, libro (abreviat lib.) 59 ad Edictum; Digests of Justinian (abbreviated Dig.), 42, 4, 5; Code
of Justinian (abbreviated Code.), 7, 72.
5 W.W. Buckland, Manual of Roman Private Law , Cambridge University Press, 1954, p. 387.
6 Idem , p. 387.
7 George Mousourakis, A Legal History of R ome, Routledge Taylor&Francis Group, 2007, p. 74.
8 Book III of the Code., Article 695 provides that it is bankrupt the " trader who ceases payments
for its commercial debts ".
The Lease Contract under Insolvency Law 149
chance of recovery by establishing the principle of priority of judicial reorgani-
zation, reintegration and continuation of its activity and not least by keeping the
business relationships between the parties involved in the procedure. In the n ew
conception, the insolvency proceeding appears as a procedure that allows the en-
trepreneur in difficulty to fail in an organized manner9.
2. The lease contract under insolvency law
The insolvency procedure is based on social and economic justification
assumed by its function of recovery of the activity of insolvent debtors who can
be saved and by eliminating those whose rescue is no longer possible.
In the congruence with international rules in the matter, the reason of
promulgati on of the current insolvency Law no. 85/2014 is apodictically empha-
sized, which tries to create an effective and proper legal framework for the col-
lective enforcement of debtors who are insolvent so as to ensure concurrently the
recovery of debts that they owed and therefore the protection of the economic
environment, by saving viable enterprises and eliminating those that no longer
have any chance of recovery, because the negative influence that such companies
have in the business environment by not paying obligati ons on maturity, causing
difficulty to co -participants in economic activity based on the domino principle
is certain.
The doctrine stated as a main substantive condition for the declaration of
the state of insolvency, the cessation of payments of the debto r resulting from the
inability to pay certain, liquid and exigible debts, due to the rupture of the balance
between the assets and liabilities, which would enable its creditors to ask it to
declare a state of bankruptcy10.
The opening of the insolvency proc edure will generate significant effects,
patrimonial or non -patrimonial, with major consequences reflected in the debtor's
activity, but also with specific implications on third parties. In French legal liter-
ature they support the view that the effects of the opening of the proceedings
would include all the consequences that the new situation of the debtor would
produce11.
The moment of opening the insolvency proceedings will produce specific
effects on the contracts concluded by the debtor and still in prog ress on the open-
ing date of the proceedings, as these are subject to special regulations. Taking
inspiration from the French legislation12, the notion of contract in progress was
9 Gheorghe Piperea, op. cit. , 2009, p.181.
10 Csaba Bela Nasz, Declansarea procedurii insolventei (Triggering the insolvency procedure) ,
Hamangiu Publishi ng House, Bucharest, 2014, p. 5; Angela Miff, Jurisprudential aspects
regarding the action in annulment of the debtor’s patrimonial transfers, the debtor being in
insolvency pro cedure , „Juridical Tribune – Tribuna Juridica”, vol. 5, issue 1, June 2015, p. 24 -27.
11 M.Jeantin, P. le Cannu, Entreprises en difficulte , Dalloz, Paris, 2006, p. 210.
12 The concept of contract in progress is used in the French Commercial Code, Article L62 2-13.
150 Raluca Antoanetta Tomescu
first introduced in insolvency law in Romania by Law no. 277/ 2009, and the
importance of maintaining it, as it was expressed in the doctrine " is necessary for
economic reasons, the termination of contracts being likely to jeopardize any
chance of reorganization of the debtor "13.
In terms of the term contract in progress we bear in m ind that the insol-
vency law does not provide a definition of this notion, but only outlines its limits.
The identification of the scope of the concept of contracts in progress is achieved,
however, by interpreting and correlating legal terms, which undoubt edly shows
that this is assimilated to the acts in the course of execution, such as non -expired
leases or other long -term contracts, not executed entirely or substantially by the
co-contractors (Article 123, Paragraph 1).
In the doctrine, the contract in p rogress was defined as "the contract con-
cluded before the opening of the procedure and which is not exhausted before this
date"14, so it is the contract with successive execution or enforcement uno ictu ,
which was concluded before the opening of the proceed ings, but which up to the
date of its declaration it was not executed wholly or substantially by its parties15.
Under the provisions of the current regulation16, by exception to the norm
of common law (namely Article 1417 Civil Code17) for contracts in progress on
the opening date of the proceedings, the legislature has provided imperatively that
these, if they are beneficial to the interest of the debtor, are to be maintained.
This concept intends that by ensuring the continuation of the insolvent
enter prise activity, to achieve the main objective of the current regulation, namely
to protect the debtor's assets18 and also they consider the exploitation of all the
chances of recovery19 and the reintegration into the economic circuit. The legis-
13 L. Retegan, S. Târnoveanu, Termination by convencience of the contracts within the procedure –
assumptions and effects, advantages and disadvantages in calling for the institution of termination
by convenience of contracts , „Phoenix Magazine” no. 3 0, October -December 2009, p. 14.
14 Ion Turcu, Legea procedurii insolvenței (Insolvency proceedings law). Comment on articles , 2nd
edition, C.H. Beck Publishing House, Bucharest 2009, p.467.
15 Florin Motiu, Some considerations regarding contracts in progres s regime in the insolvency
proceedings , „The Annals of Universitatea de Vest Timisoara. Law series” no. 2/2014, p.120.
16 The governing rules: Law no. 85/2014 on the procedures to prevent insolvency and of insolvency,
published in the Official Gazette of Ro mania, Part I, no. 466/06.25.2014, Title II, Insolvency
procedure Chapter I, Common provisions, Section 5, The situation of certain legal acts of the debtor,
subsection Situation of contracts in progress, respectively Articles 123 -131.
17 Under the common law rule the debtor commits a failure to meet deadlines (acceleration of
maturity) if it is in a state of insolvency or declared insolvent under legal regulations. (Article1417
paragraph1 Civil Code) Failure to meet deadlines "(1) The deb tor fails to meet deadlines if it is
insolvent or, where appropriate, the insolvency declared under the law, and when, with intent or
due to a serious misconduct, diminishes by its action the securities established in favour of the
creditor or fails to con stitute the promised securities ”.
18 Stanciu Carpenaru, Tratat de drept comercial roman (Treaty of Romanian Commercial Law) ,
Universul Juridic Publishing House, Bucharest, 2016, p.761.
19 Radu Bufan, Florin Motiu, Andreea Deli Diaconescu (coord.), Tratat pr actic de insolventa
(Practical Treaty of Insolvency) , Hamangiu Publishing House, 2014, p. 553.
The Lease Contract under Insolvency Law 151
lature has exp ressly provided that any contractual clause that would lead to can-
cellation of contracts in progress, of failure to meet deadline or of declaration of
the anticipated eligibility due to the opening of the insolvency procedure, shall be
considered void20.
As a novelty, the Insolvency Code regulates, in this matter, a number of
conceptual clarifications achieved by using certain doctrinal and jurisprudential
opinions expressed on the legal regime applicable to certain categories of con-
tracts in progress at the time of opening the proceedings21.
Under the empire of the Principle of World Bank, of the Legislative
Guide UNCITRAL, and of the provisions of the Civil Code, through institutional
steps likely to contribute to the uniformity of interpretation in order to implement
consistently and effectively the legislation in the field, new regulations had been
introduced, such as and those relating to the management and registration of re-
ceivables resulting from a lease contract in progress on the opening date of the
insolvency procedure.
The user/lessee is that party of the leasing transaction, which receives the
right to use the property in exchange for performing periodic payments to the
financier/lessor and according to the ordinance regulating leasing operations, t he
capacity of user/lessee is not in any way limited " Article 3. (2) Any natural or
legal person, Romanian or foreign, can have the capacity of lessee/user, under
Romanian law22". So, as a beneficiary of leasing operations, we can find both
natural persons, public or private institutions, professionals under various forms
of registration, autonomous administrations or national companies.
Under the consideration that in general, leasing represents an opportunity
to finance the technological advances of the in dustrial enterprises, the insolvency
law limits the application of the norm strictly to categories of professionals (as
they are defined by the Civil Code) their scope including this time, autonomous
administrations as well, exempting from its application professionals who exer-
cise free professions, schools, universities and entities listed in Article 7 of Ordi-
nance no. 57/2002.
20 Article 123 "(1) Contracts in progress are deemed maintained on the opening date of the
proceedings, Article 1.417 of the Civil Code not being applicable. Any contractual clauses for the
dissolution of contracts in progress, of failure to meet deadlines or of declaring early exigibility for
the reason of opening of proceedings are void."
21 See Stanciu Carpenaru, op. cit. , 2016, p.783.
22 Government Ordinance no . 51/1997 on leasing operations and companies, published in the
Official Gazette no. 9 of January 12, 2000 updated by Law 383/2009 – to amend Article 6 paragraph
(1) letter c) of GO 51/1997 on leasing operations and leasing companies Official Gazette 870/2 009,
Law 93/2009 – on NFIs Official Gazette 259/2009; Law 241/2007 – for the repeal of regulations by
means of which partial or total exemption from customs duties of certain goods are granted Official
Gazette 496/2007; Law 287/2006 – amending and suppleme nting GO 51/1997 on leasing operations
and leasing companies Official Gazette 606/2006; v Law 533/2004 – amending and supplementing
G.O.51/1997 on leasing operations and leasing companies Official Gazette 1135/2004; Law
571/2003 – on the Tax Code Official Gazette 927/2003.
152 Raluca Antoanetta Tomescu
It follows from Article 1 paragraph (2) of Law 85/2014, that some cate-
gories, which include professionals, individuals acting indi vidually or through
family associations can have the capacity of debtors only in the simplified proce-
dure.
Insofar as at maturity, the debtor fails to fulfil its obligation incumbent
upon it, namely the leasing rate assumed by contract, the creditor shall have more
legal ways to use and fulfil the right of claim. Of course it is necessary to specify
the disapplication of certain and liquid debts that became due, the debtor's obli-
gations having a nature other than money debts because to these, common law
rules shall be applied and not the insolvency proceedings23.
The new regulation has succeeded coding the status of the lease contract
subject to insolvency proceedings, by individualizing the treatment applicable to
this contract, thus putting an end to previo us differences of opinion. It remains to
note in the current regulation, as a novelty, through the provisions inserted in
Article 123, paragraph 11 correlated with Article 105, the importance that the
legislature attaches to the registration in the stateme nt of assets and liabilities of
the claims resulting from the termination or cancellation of the lease contracts,
simultaneously instituting the special regime of termination thereof. So, in case
of the lease contract in progress on the date of initiation of the insolvency pro-
ceedings, by exception to the rule established by Article 123 paragraph 1, thesis
1, in this case, if the financier does not clearly agree to maintain the contract
within a period of 3 months from the opening date of the proceedings, i t shall be
deemed terminated by convenience from the date when the term expires (Article
123, paragraph 12, L85/2014).
Current regulations stipulate the situation in which the financier/lessor,
however, will transmit in the interval provided as imperative by the legal norm,
namely 3 months from the opening date of the proceedings, a notice on its express
intention to terminate the contract by convenience to the official receiver24. In
this case the contract is considered legally cancelled after the expiratio n of a 30 –
day legal term from the receipt by the official receiver of the financier’s notifica-
tion.
Also, the insolvency practitioner may require the termination by conven-
ience of any financial lease contract with the aim of maximizing the debtor's prop-
erty, being empowered to evaluate from an economic perspective the profitability
of the contract. But it will also have to perform a legal assessment of the contract
and of the effects of its termination, in terms of the perspective damage claims
that can sub sequently intervene, following the request of the co -contractor whose
23 Stanciu Carpenaru, op. cit., 2016, p. 632.
24 "The notice of termination by convenience given to the co -contractor to the official receiver must
be unequivocal within the meaning to request termination by convenience of the contract, bei ng
unable to give the extinctive effect provided by law for such notification only on the grounds that
from its content the intention of the co -contracting party to terminate the contract can be inferred"
(Bucharest Court of Appeal, Civil VI Department, Ci vil decision no. 1657/ 11.09. 2012).
The Lease Contract under Insolvency Law 153
contract was terminated by convenience and who, by termination of the contract
by convenience, may suffer damage25. The decision of the practitioner will be
oriented towards the version t hat brings along added value to the debtor's assets
and will also have to consider the real possibility of the debtor to perform or not
the obligations under the contracts. The date of termination of the contract by
convenience shall be deemed to be the da te of notification of the termination by
convenience from the official receiver/judicial liquidator.
In accordance with paragraph 12 of Article 123, it is showed that the ter-
mination by convenience of a lease contract in progress on the date of initiation
of the insolvency proceedings, can intervene:
• if the financier does not agree expressly on maintaining the lease con-
tract within a period of 3 months from the opening date of the proceedings it will
be considered abolished as of right;
• prior to the exp iration of 3 -month term stipulated by law, following the
notification of the financier asking the official receiver to terminate the contract,
being considered terminated at the expiration of a 30 -day term from the date of
receipt of the notification;
• at the initiative of the insolvency practitioner under the privilege of ter-
mination of any contract in progress26, the date of the termination being the date
of the notification coming from the official receiver/liquidator.
In the event of termination, the fi nancier is entitled to introduce a legal
action, which will be under the jurisdiction of the syndic judge (Article 123, par-
agraph 4)27. The rights acquired by the creditor, following such request shall be
paid, in case of bankruptcy, according to the order stated by Article 161 of the
Insolvency Act.
But according to the doctrine, it is necessary to highlight the difference
between the situation of termination for convenience of the lease contract and the
situation of termination of the lease contract.
Thus, we notice that in the event of termination for convenience one shall
not apply the rules of registration of the claim in the statement of assets and lia-
bilities, expressly provided for the case of termination of the contract (in which
case there must be de plano a fault of the debtor, born after the opening of the
proceedings). When the termination of the lease contract occurs under the current
legal regulation we bear in mind that it offers to the financier/lessor the option to
choose between:
25 Ștefan Ioana Roxana, The debtor in the involvency proceedings – PhD thesis – PhD coordinator:
PhD Univ. Prof. Ion Turcu, 2011, p. 28.
26 Godîncă -Herlea Vasile, Contractele de leasing conform Legii nr. 85/2014 – proble me teoretice
și practice (Lease contracts according to Law no. 85/2014 – theoretical and practical issues) ,
„Revista Romana de Drept al Afacerilor” no. 7/2015, p. 79 -94.
27 Radu Bufan, Florin Motiu, Andreea Deli Diaconescu, op. cit. , 2014, p. 576.
154 Raluca Antoanetta Tomescu
• the transfer of ownership of the asset that is the object of the lease con-
tract. In this case the financier/lessor will acquire a legal mortgage on that prop-
erty, of equal rank with the leasing operation, being registered in the statement of
assets and liabili ties according to the order established by Article 159, Paragraph
1 item 3 of the Act. The amount of the claim that will be registered in the list of
debts, consists of the equivalent of outstanding rates and accessories invoiced and
unpaid on the opening date of the procedure, plus the remaining amount owed by
the insolvent debtor under the lease contract, but without exceeding the market
value of the asset, which will be determined by an independent valuator. In this
situation, the debtor will continue to make regular payments until the full pay-
ment of the value of the lease contract.
• the recovery of the asset subject to the lease contract, offering the cred-
itor in this situation the opportunity to register in the statement of assets and lia-
bilities acco rding to Article 161, section 8 of the Insolvency Code, with the equiv-
alent of rates and accessories invoiced and unpaid at the opening date of the pro-
ceedings, plus the remaining amounts owed by the debtor under the lease con-
tract, their cumulation decrea sing by the market value of the asset recovered, de-
termined by an independent valuator.
So, although in the light of the law as we have shown in the present study
in the event of termination, the financier will benefit from a mortgage equal in
rank with the leasing operation or of registration to the statement of assets and
liabilities with the equivalent rates and accessories invoiced and paid on the open-
ing date of the proceedings, plus the remaining amounts owed by the debtor under
the lease contract, their cumulation diminishing by the market value of the prop-
erty recovered they failed to make a clear distinction between the financed
amount and the value of the property, namely the value of the leasing operation.
In this regard, I believe it would be a ppropriate to underline that the financed
amount in most cases is not equivalent to the value of the lease contract because
by means of the payments that the user makes by way of advance it virtually self –
finances its investment. It is known from the pract ice of leasing companies that
on the date of the conclusion of the lease contract they charge the user an advance
between 20 -50% of the property value.
Article 6, paragraph 2, letter c), GO 51/1997, requires mandatorily, in
case of the financial lease co ntract to specify in the wording of clauses, the
amount of the advance that the user will pay to the financier in order to purchase
the asset, the object of the lease contract. This confirms the ground of collection
of certain amounts in advance, contrary to the concept of leasing which is essen-
tially the full funding of an investment. By its cashing, the responsibility of the
financier is to subsidize only the difference between the total cost of the asset and
the advance collected. So, the user will not o nly be a poor regulator of the prop-
erty acquired under leasing, but also co -owner of a share equivalent to the per-
centage covered by the advance paid to the financier to purchase the asset.
The Lease Contract under Insolvency Law 155
So, I think that regarding this aspect we will have to make a clea r distinc-
tion between the financed amount and the value of the lease contract because in
the event of termination the transfer of ownership will operate, and the financier
will have reason to acquire a mortgage only for the financed amount, which ac-
tually represents the value of the leasing operation less the amount of the advance
paid initially by the user.
If the asset is recovered by the financier, it will owe to the insolvent user,
the return of the advance paid when starting leasing operations, because con-
cretely the advance is the co -participation of the latter in the purchase of the asset.
If the property is repossessed by the financer, and it does not operate the return
of the advance paid by the user, we are witnessing a change of roles in the lease
contract, thus leading to the absurd situation in which the financier, the owner of
the property, will benefit from user’s financing through the advance that it paid
at the conclusion of the lease contract, in order to purchase the asset.
Of course, the p ossibility of maintaining the lease contract after the date
of declaring the insolvency procedure open is not excluded, and if the insolvent
debtor in a position of user/lessee does pay at the due deadlines the claims arising
under the lease contract in pr ogress, then the completion of the contract will be
considered successful and will be subordinated to the provisions of Government
Ordinance 51/1997, namely it will be completed by the user’s option to operate
the transfer of ownership, to return the asset or continue the lease contract.
For assets acquired prior to the date of declaring the imposition of the
insolvency procedure, and registered on the list of creditors, these will follow the
legal regime of secured debts.
3. Conclusion
Although this version of the new regulations has not escaped the criticism
of specialists in the field, it remains to appreciate the initiative of the legislature
to create a secure and predictable environment in the so controversial field of
registration of recei vables arising from a lease contract in progress on the date of
declaring the opening of the insolvency procedures.
"The law of collective procedures has become over the years increasingly
more complex, without ever reaching satisfactory results, as in the case of bank-
ruptcy everybody loses, so that in this area there are no good laws, but laws less
worse than others." (Y.Guyon) 28.
It remains at the discretion of the courts, and of the insolvency practition-
ers to succeed to value these new conceptual regula tions as actus interpretandus
est potius ut valeat, quam ut pereat.
28 Nasz C. B, Motica R., Declansarea procedurii insolventei (Triggering the involvency
proceedings) , Hamangiu Publishing House, Bucharest, 2014, p. 22.
156 Raluca Antoanetta Tomescu
Bibliography
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patrimonial transfers, the debtor being in insolvency procedure , „Juridical Tribune –
Tribuna Juridica”, vol. 5, issue 1, June 2015, p. 24 -48.
2. Csaba Bela Nasz, Declansarea procedurii insolventei (Triggering the insolvency
procedure) , Hamangiu Publishing House, Bucharest, 2014.
3. Florin Motiu, Some considerations regarding contracts in progress regime in
the insolvency proceedings , „The Annals of Universitatea de Vest Timisoara.
Law series” 2 (2014): 119 -130.
4. George Mousourakis, A Legal History of Rome , Routledge Taylor&Francis
Group, 2007.
5. Gheorghe Piperea, Drept comercial (Commercia l Law) , C.H. Beck Publishing
House, Bucharest, 2009.
6. Godîncă -Herlea Vasile, Contractele de leasing conform Legii nr. 85/2014 –
probleme teoretice și practice (Lease contracts according to Law no. 85/2014 –
theoretical and practical issues) , „Revista Romana de Drept al Afacerilor” 7
(2015): 79 -94.
7. Ion Turcu, Legea procedurii insolvenței (Insolvency proceedings law). Comment
on articles , 2nd edition, C.H. Beck Publishing House, Bucharest 2009.
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the procedure – assumptions and effects, advantages and disadvantages in call-
ing for the institution of termination by convenience of contracts , „Phoenix Mag-
azine” no. 30, October -December 2009.
9. M. Jeantin, P. le Cannu, Entreprises en difficul te, Dalloz, Paris, 2006.
10. Nasz C.B, Motica R., Declansarea procedurii insolventei (Triggering the in-
volvency proceedings) , Hamangiu Publishing House, Bucharest, 2014.
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insolventa ( Practical Treaty of Insolvency) , Hamangiu Publishing House, Bu-
charest, 2014.
12. Stanciu Carpenaru, Tratat de drept comercial roman (Treaty of Romanian Com-
mercial Law) , Universul Juridic Publishing House, Bucharest, 2016.
13. Teodor Sâmbrian, The sale -purchase pro cedure applied to the debtors' goods in
the Roman Antiquity , „Revista de Științe Juridice” 1 (2009): 7 -16.
14. W.W. Buckland, Manual of Roman Private Law , Cambridge University Press,
1954.
Considerations Regarding the Contract Assignment in the
Romanian Civil Code
PhD. Student Tudor Vlad RĂDULESCU1
Abstract
This article aims to give an overview of an institution that has not benefited from
general rules in Romanian legislation before 2011 (the year that the actual Civil Code
has entered into force) respectively the assignment of contract. The paper starts with a
brief review of some aspects of comparative law regarding the assignment contract, mov-
ing thro ugh the few applications of this operation that were present in the Civil Code of
1864, to end with the actual regulation of the contract assignment, with its particular
applications.
Keywords: obligations, assignment of contract, relativity of contract, Romanian
civil code,
JEL Classification: K12
1. Introductory aspects
The contract assignment is a legal principle newly introduced into the
Romanian civil law with the entry into force of the current Civil Code, although
the legal operation i tself was not new to the legal environment in our country,
finding its applications even under the rule of the Civil Code of 1864 (for exam-
ple, in the matter of the lease contract, in the case of the lessor’s alienation of the
leased asset, in which case t he new owner took over all rights and obligations of
the person succeeded).
The inspiration source of the Romanian legislature of 2009 was, on the
one hand, the Italian Civil Code (art. 1406 to 1410 of the Italian Civil Code), and
on the other hand, the UN IDROIT Principles, which allocate to the contract as-
signment a number of 7 articles (from 9.3.1. to 9.3.7.).
2. Contract assignment – aspects of comparative law
From the point of view of comparative law, we note that some European
legislations expressly acknowledge the existence of the contract assignment (Ital-
ian law, Lithuanian law, Portuguese law, Dutch law) as other systems of law in
the absence of legal texts , admit this type of assignment, either as a substitution
1 Tudor Vlad Rădulescu – „Nicolae Titulescu” University of Bucharest, Romania, E -mail:
tradulescu@yahoo.com.
158 Tudor Vlad Rădulescu
of person, or as a total transmission of rights and obligations arising from a con-
tract to a third party (French law, German law, Austria n law, Belgian law, Span-
ish law etc.). But what they have in common, all the national legislations, is the
need for the consent of the assigned, either for the effectiveness of the operation,
or for its validity.
Italian Civil Code recognizes the right of any party to substitute a third
party in relation arising out of a contract with mutual services, if the services have
not yet been executed and the other party hereto consents (art. 1406 Italian Civil
Code). We are talking therefore about a trilateral contract, where the consent of
the assigned is essential, either it is given in advance, or concurrently with the
consent of the other participants in the legal operation, namely the consent of the
assignee and assignor of (art. 1407 in the Italian Civil Code). As soon as the con-
tract assignment becomes effective, the assignor is released from all his obliga-
tions to the assigned contractor, excepted when the latter does not agree to his
release (art. 1408 Italian Civil Code). Finally, art. 1409 in the Italian Civil Code
recognizes to the original party to the contract t he right to oppose the assignee all
defenses arising from the contract, except those arising from other relationships
with the assignor, excepting the case where he reserved this right when he con-
sented to the substitution.
Portuguese Civil Code allows the contract assignment on the same terms,
approximately as the Italian one, in the four articles devoted to this type of con-
vention (art. 424 -427 of the Port. Civil Code). The consent of the assigned party
is necessary, either before or concurrently with the assignment (art. 424 of the
Port. Civil Code), while the form, the ability to dispose of and receive, the vices
of consent or lack thereof at the time of the assignment is assessed according to
the assigned contract (art. 425 of the Port. Civil Code). Lik e the Italian law, the
assignor guarantees the existence of the contractual position transmitted, but the
enforcement of the obligations of the other party shall be expressly provided for
in the assignment contract (art. 426 of the Port. Civil Code). In ad dition, accord-
ing to art. 427 Port. Civil Code, the assigned contractor may oppose the assignee
all defenses he could have raised also to the assignor, except the compensation,
as was stated in the Portuguese literature2.
Also the Lithuanian law of obligat ions act (LOA)3 is speaking about the
contract assignment, stating that a party to a contract can transfer to a third party
all rights and obligations arising from a contract, having, of course, the assigned
contractor’s consent (Art. 179 para. 1 LOA). The deal is seen as a transfer of
2 Antunes Varela, Obrigações em geral , vol. II cited în Principles, Definitions and Model Rules of
European Private Law. Draft Common Frame of Reference (DCFR) , found on the website
http://ec.europa.eu/justice/contract/files/european -private -law_en.pdf , p. 1125, consulted on 10.09.
2016.
3 Law of Obligations Act, entered into force on 01.07.2002, found on the website https://www.rig
iteataja.ee/en/eli/506112013011/consolide consulted on 10.09.2016.
Considerations Regarding the Contract Assignment 159
contractual position, focusing on the effects of debt takeover, as a key element of
the entire operation.
The same conditions also rule the transfer of contractual position in the
Netherlands Civil Code (art. 6: 159), in acco rdance with the provisions of which,
one party may transfer the rights and obligations arising from a contract to a third
party, with the consent of his contractor, by deed under private signature or by
notarized document. As a result of this agreement, al l rights and obligations will
be transferred to the third party assignee, except those whose performance has
already occurred or that became payable or those on which the parties have agreed
otherwise.
On a closer examination of the provisions of the Italian Civil Code, we
note that in reality they were little more than an inspiration, the articles concern-
ing the contract assignment in the Italian code being taken over word -for-word in
our code civil. For this reason, we will not comment further at thi s time concern-
ing the services taken over, stressing however, where will be the case when we
analyze the contract assignment in our law, the corresponding articles in the Ital-
ian code.
But the UNIDROIT principles, unlike the legislations referred to above,
offers a definition of the contract assignment, which it treates as being the trans-
mission a conventionally performed by a person (“the assignor”) to another per-
son (“the assignee”) of the assignor’s rights and obligations arising from a con-
tract conclud ed with another person (“the other party”)4 – art. 9.3.1. As stated
in legal doctrine, the UNIDROIT Principles reduce the contract, by this defini-
tion, to its effects , proposing a normative vision of the contract assignment5, un-
like the Italian codificati on (and also the Romanian one) that reduces this opera-
tion to substitution of person rather than an actual transfer of rights and obliga-
tions that make up a whole.
Thus, according to the UNIDROIT principles, the contract assignment
finally constitutes a tr ansfer of rights and obligations, the corresponding provi-
sions being properly completed with the ones in the credit assignment (for exam-
ple, art. 9.3.6, paragraph 1 referring to the provisions of art. 9.1.13) and the as-
signment of debt (for example, art. 9 .3.6 para. 2 referring to the provisions of art.
9.2.7.).
However, as shown above, not all European laws have established a sep-
arate legal regime to the contract assignment, although most admit the validity of
such an operation, either by doctrinal or judi cial way.
4 Romanian translation of the UNIDROIT Principles can be fo und on the Internet, at
http://www.unidroit.org/english/principles/ contracts/principles2010/translations/blackletter2010 –
romanian.pdf, consulted on 10.09.2016.
5 P. Vasilescu, Cesiunea de contract – între nominalism și realism juridic , in the paper P. Vas ilescu
(coordinator), Cesiunea de contract. Repere pentru o teorie generală a formării progresive a con-
tractelor , Sfera Juridică, Cluj -Napoca, 2007, p. 22.
160 Tudor Vlad Rădulescu
French law as well as the Romanian one, before the entry into force of
the current Civil Code does not contain express provisions outlining a general
legal status of the contract assignment, but the literature of Hexagon was full of
theories tha t have sought to substantiate the contract assignment as a stand -alone
operation, given especially that the debt assignment was not allowed. Such were
developed two theories: the dualist (analytical) theory and the monistic theory6.
According to analytica l (dualistic) theory, the contract assignment con-
tract is seen not only of a contract assignment, seen as a whole, but as an assign-
ment of its constituents, namely the rights and obligations and their accessories.
From this perspective, the contract assign ment is split into two distinct legal op-
erations: a debt assignment and a debt assumption; this split has the drawback of
making the validity of the contract assignment depend on the validity of each
transaction separately7. In addition, traditionally, was analyzed the contract as-
signment following the kind of the submitted contract; thus, if it was a unilateral
contract, the contract assignment was reduced either to a credit assignment, or to
a debt assignment, and if what was assigned was a mutually bindi ng contract, the
credit assignment was added to a remission of debt8.
Monistic theory, which now tends to affirm at the doctrinal level, starts
from an objective view on the contract, according to which this is an intangible
good susceptible to circulate ; in this vision, the contract assignment should not
be regarded as a mere addition of two distinct legal operations, but as a transmis-
sion of the contract in its entirety9. The assignment deed does nothing else but to
provide the continuity of the contrac t, thus maintaining its binding force, repre-
senting a remedy for termination and a stability factor of the contract, thus be ing
provided its binding force10.
From the point of view of the conditions, French doctrine held that, in
principle, any contract is assignable, being though necessary the consent of the
assigned party, given either upon assignment, or previously by a provision in-
cluded in the contract that will be the object of the assignment. There is, however,
no legitimate reason that the assigned party oppose the assignment, as long as the
cause and the object of the contract remain; otherwise, it would defeat, by his
attitude, the principle of the contract’s binding force11.
6 For a detailed analysis of both theories, see A.I. Dănilă, Cesiunea de contract , Hamangiu, Bucha-
rest, 2010, p. 5 -15; L. Retegan, Cesiunea de creanță în raport cu alte operațiuni juridice triunghiu-
lare, in „Studia Universitatis Babeș -Bolyai Iurisprudentia ”, no. 3/2009, consulted on the website
http://studia.law.ubbcluj.ro, on 10.09.2016, p. 56.
7 A.I. Dănilă, op.cit., p. 6.
8 P.Malaurie, L.Aynes, P. Stoffel -Munck, Drept civil. Obligațiile , Wolters Kluwer, Bucharest,
2009, p. 509.
9 A.I. Dănilă, op.cit , p. 14.
10 L.Retegan, op.cit ., p. 57 .
11 P.Malaurie, L.Aynes, P.Stoffel -Munck, op.cit , p. 510.
Considerations Regarding the Contract Assignment 161
In French doctrine, as in the Romanian on, the contract assignments are
classified in: assignments that have a legal regime (assignment of lease, assign-
ment of a travel sale, etc.) and assignments related to the freedom of contract
(assignment of promise of sale, assignment of supply agreement, etc.); assign-
ments required by law , mandatory (e.g. the assignment of lease in case of aliena-
tion of the leased property, assignment of employment contracts for transfer of
the undertaking, etc.) and assignments related to the initiative of the parties or by
a decision of a court in case o f bankruptcy, for example12.
German law, also, does not know any express provision of the contract
assignment, despite the legal regime of the debt and credit assignments; however,
applications of this operation are encountered with the transfer of a proper ty
leased or in the service contract.
The same applies to the Swiss code of obligations, which contains provi-
sions relating to the credit assignment (art. 164 – 174) and the debt assignment
(art. 175 – 183), but without speaking of the contract assignment as stand -alone
operation.
3. The contract assignment under the rule of the 1864 Romanian Civil
Code
Neither the previous Romanian Civil Code was a supporter of this con-
tract assignment or contractual position, especially considering the vision on the
debt assignment, whose validity was denied vehemently. However, under the in-
fluence of French doctrine in particular, some authors13 brought forward argu-
ments for the admission of the contract assignment, citing in support of their as-
sertion the princi ple according to which what is not expressly forbidden is al-
lowed, as long as it does not derogate from the public order and morals, but also
the case in which, sometimes the law expressly prohibited the contract assign-
ment, the conclusion that can be extr acted here from being that, per a contrario ,
usuall y this operation is permissible14.
12 Idem , p.504 -505.
13 See in this regard, among others, I. Deleanu, Părțile și terții. Relativitatea și opozabilitatea
efectelor juridice , Rosetti, Bucharest, 2002, p. 56; P. Vasilescu, Cesiunea de contract – între
nominalism și realism juridic , and J. Goicov ici, Utilitarism juridic – contractul înțeles ca valoare
patrimonială cesibilă , in the volume Cesiunea de contract. Repere pentru o teorie generală a
formării progresive a contractelor , Sfera Juridică, Cluj -Napoca, 2007, p.5 -55; L. Pop, Tratat de
drept civi l. Obligațiile. Volumul I: Regimul juridic general , C.H. Beck, Bucharest, 2006, p.289 –
294; Fl. A. Steopan, Considerații privind cesiunea convențională de contract in „Studia
Universitatis Babes -Bolyai Iurisprudenția” no. 2/2003, pp. 96 -117.
14 However, we believe that based on this claim, the example offered in its support is not a particu-
larly happy one, the author referring to the provisions of art. 22 of Law no. 16/1994, as amended,
under which any act of sublease total or partial, is void. For differences between contract assignment
and subcontract, see J. Goicovici, Cesiunea contractului în reglementarea art. 1315 -1320 din Noul
Cod civil , „Curierul Judiciar” no. 5/2010, p. 265.
162 Tudor Vlad Rădulescu
In this context, it was stated that by the contract assignment is performed
the active and passive transmission of rights and obligations arising under the
contract to a third person, the extension of the binding effects of the contracts15,
without prejudicing, however, the principle of relativity, the effects occurring
now between the assignor and assignor, as part resulted in the contract.
Under the previous Civil Code em pire, there distinguished two major
forms of the contract assignment, classification whose criterion was the source of
the assignment: the statutory assignment and the conventional one.16 However,
was not denied either the existence, rarely encountered it’s true, of the contract
assignments resulting either from a unilateral manifestation of will, the example
given for this type of transfer being the one given in the French law, respectively
the case in which the law allows to a third party the right to subs titute any of the
parties to the contract by its unilateral manifestation of will, or from a court de-
cision, such as in the case of the judicial reorganization17.
As concerns the conditions for the validity or enforceability of the con-
tract assignment, it was stated that they are different, as it is in the case of a legal
assignment or a conventional contract assignment. Thus, in the case of legal as-
signment, is required an express provision of the law, but also the fulfillment of
the special formalities pr ovided by the law.18 As can be seen, in the opinion of
this author, the assigned contractor’s consent is not necessary, either ad validi-
tatem , or for the operation efficiency in the case of statutory contract assignment.
However, taking over an under -classi fication of the legal contract assign-
ments in French doctrine, it was shown19 that they can be divided into four cate-
gories, depending on the conditions imposed by the legislature to achieve them,
in particular depending on the requirement to obtain the as signed cocontractor’s
consent. There, there would be 1) assignments prohibited by law, even despite
the expressed consent of the assigned contractor (the case of the lease contract,
whose assignment is prohibited, except as required by art. 211 of Law no.1 6 /
1994); 2) assignments permitted by law only in the presence of the assigned
party’s consent (such as, for example, the case of the lease and editing contracts);
3) permitted assignments, even without the agreement of the assigned contractor,
without be ing required (for example, in matters of leasing agreements – art. 1418
Civil Code 1864); and 4) assignments occurring as accessory and imperative ef-
fect upon the conclusion of certain contracts (applicable to certain property in-
surance contracts, alienati on of property forming the subject of the lease contract,
according to art. 1441 Civil Code 1864 etc. ).
15 I. Deleanu, op.cit., p. 58.
16 See A.I. Dănilă, op.cit, p. 19.
17 I. Deleanu, op.cit, p. 57, footnote no.2.
18 Idem , p.57.
19 The classification is to be found in J. Ghestin, C. Jamin, M. Billiau, Traite de droit civil. Les
effets du contrat , LGDJ, Paris, 2001, p. 1149 -1153, apud A. I. Dănilă, op.cit., p. 21 a.f.
Considerations Regarding the Contract Assignment 163
As for the conventional contract assignment, the conditions that must be
met are: a) are contracts with successive performance, or with uno ictu execut ion,
but whose provisions have not yet been performed 20; b) is not a non -assignable
contract; c) there is the assigned contractor’s consent, as well as that of the other
two participants in the operation (assignor and assignee).
In respect of the second co ndition, have been identified three situations
in which a contract could not be the subject of an assignment: contract concluded
intuitu personae , the contract declared non -assignable by the will of the legisla-
ture and the contract declared non -assignable by the will of the originating par-
ties. However, the ban on the assignability of the intuitu personae contracts is not
absolute, in this matter being necessary to distinguish according to the way the
contract is concluded in consideration of subjective or objective qualities of the
contractor. Thus, it was argued that the concept of intuitu personae splits into two
distinct concepts, depending on which element is based, being able to talk about
a subjective intuitu personae , focused on a feeling and an obje ctive intuitu per-
sonae , whose base is taking into account of the qualities and skills of a person. In
other words, it's a subjective intuitu personae when, upon contracting, the part-
ner's human qualities are those that count, and an objective intuitu perso nae when
the contract was concluded in consideration of qualities appreciated as objective
(technical capacity, experience, competency).21 As regards these two categories
of intuitu personae deeds, it was argued that non -assignability is absolute in the
case of the first species, the contract assignment being unimaginable, given the
lack of repeatability of the person in consideration of whom was signed the initial
contract.22
The assigned contractor’s consent has been accepted by most authors23
as being a pr erequisite for assignment; what was and continues to be a cause of
controversy is the value of such consent: condition of validity of the assignment,
or only of its efficacy, enforceability? Or, in other words, the contract assignment
is a trilateral trans action, requiring the consent of all parties involved, or a bilat-
eral agreement in which essential for validity is just the expression of the as-
signor’s and assignee’s consent, the assigned party’s will having only role for the
enforcement against him of t he deed to which he is a third party.
Supporters of the idea of the assigned party’s consent – condition of va-
lidity believe it would be difficult or even impossible to imagine that a contracting
20 It was accepted, even before the entry into force of the current Romanian Civil Code, that could
be assigned both unilateral and bilateral contracts. For the opinion according to which the contract
assignment concerns only the bilateral contracts, see I.P opa, Cesiunea contractului , in „Dreptul”
no.10/2006, p.124.
21 J. Goicovici, Utilitarism juridic – contractul înțeles ca valoare patrimonială cesibilă, in the vol-
ume Cesiunea de contract. Repere pentru o teorie generală a formării progresive a contractulu i,
Sfera Juridică, Cluj -Napoca, 2007, p. 112.
22 Ibidem.
23 For the opinion according to which the assigned party’s consent is not necessary, it only serves
to release the assignor, see Fl. A. Steopan, op.cit. , p. 96 a. f.
164 Tudor Vlad Rădulescu
party be simply thrown out of the contractual relationship w ithout its consent, to
be replaced by a third party, the requirement of the triangular agreement resulting
from the unity of the contractual relation and from the unity of the contract as-
signment24.
On the other hand, based on a series of rulings in the Fr ench jurispru-
dence25, Romanian authors rallied most doctrinarians in the Hexagon, embracing
the idea of the assigned party’s consent – efficacy conditions, seen as an entitle-
ment, which is why it can be given and anticipated, the unreasonable refusal to
consent can be defeated by a judgment of the court, which will decide upon the
interests of the case.26
4. Contract assignment in the current Romanian Civil Code
In the current civil code, the conventional contract assignment received
own regulation, the Romanian legislator joining other European legislation in this
regard, inspiring in the shaping of its legal status, as mentioned above, from the
Italian Civil Code. Along with the conventional contract assignment, we also
meet legal assign ment applications, some also existing in the previous legislation,
others representing a novelty in the matter.
The conventional contract assignment shall be devoted six articles (from
1315 -1320), located in Book V (About obligations), Title II (Sources of obliga-
tions), Chapter I (The contract), characterizing this operation by the possibility it
has, in the absence of legal prohibitions, to substitute a third party in the relations
arising out of a contract, but only if the services have not yet been fully executed
and the other party consents hereto (art. 1315 Civil Code).
Despite the opinion expressed in the literature, according to which the
contract assignment of is not much a translated convention, but more a person
substitution contract, which provi des the continuity of the old contract, but with
new parties27, we believe that the Romanian legislator, although did not admit the
idea of a total patrimonialization of the obligation relation nor the free assigna-
bility thereof, sees the contract assignmen t as a way of transferring the contractual
rights and obligations over and against the initial contractor and which has the
effect of both of the transmission of such rights and obligations, and the release
of the assigned the contractor to this operation28.
24 I. Deleanu, op. cit., p. 58.
25 Cass. Fr.com., 6 May 1997, no.95 -10.252 și nr. 94 -16.335, in L.Pop, I.F. Popa, S. I. Vidu, Tratat
elementar de drept civil. Obligațiile , Universul Juridic, Bucharest, 2012, p. 678, footnote no.3.
26 P.Malaurie, L.Aynes, P.Stoffel -Munck, op.cit., p. 510.
27 P. Vasilescu, Drept civil. Obligații , Hamangiu, Bucharest, 2012, p. 44 -45.
28 L.Pop, I.F.Popa, S.I.Vidu, op. cit., p. 676.
Considerations Regarding the Contract Assignment 165
From the definition29 provided by the legislature, stem out some specific
elements of the conventional contract assignment: firstly, we note that this oper-
ation is seen more as an assignment of contractual position than as a separate
contract assignment, as it is conceived by the supporters of the objective theory30,
fact that yet, we think, has no influence on the legal regime and utility of the
assignment.
Then, from the legal text can be extracted the conditions for the existence
of the contract assign ment: 1) there is no legal prohibition on the contract assign-
ment; 2) it is a contract whose services have not been fully executed and 3) there
is the consent of the assigned party.
Compared to the above before proceeding to analyze those three condi-
tions, we shall however define the conventional contract assignment, as being the
Convention by which a Contracting party (the assignor contractor) transmits to a
third party (the assignee contractor) his rights and obligations in a contract whose
services have not yet been executed, subject to its acceptance by the other party
(the assigned contractor)31.
1) Regarding the first condition, we mention only the provisions of art.
1846 Civil Code, which, although does not expressly upheld the non -assignability
of the lease agreement, establishes the conditions under which can operate the
assignment, namely there has to exist the written consent of the lessor and the
contract be assigned only to the lessee’s spouse, who participates in the exploi-
tation of the rented g oods or to his/her major descendants, and those of art. 2258
Civil Code, that rule on the non -assignable nature of the maintenance.
Although art. 1315, paragraph 2 of the Civil Code speaks only of the legal
assignment prohibitions, we consider that also in the case in which the contract
is declared non -assignable by the will of the parties, will not operate an assign-
ment of contractual position, in the conditions of art. 1315 -1320 Civil Code, un-
less the parties return on their initial agreement.
2) The seco nd condition of credit assignment requires that services aris-
ing from the contract have not yet been fully executed. As can be seen, the law
limits the scope of the contract assignment only from the perspective effects of
the contract32, without making assi gnability conditional upon certain types of
contracts. Thus, the assignment is possible both on successive performance con-
tracts (which in reality is the norm) and on those with uno ictu execution, as long
as the services have not been fully executed. A contract already executed cannot
29 In reality, we do not consider that the provisions of art. 1315 Civil Code constitute a definition
of the contract assignment, despit e the marginal name of "Notion", but rather a presentation of the
conditions that the assignment has to fulfill in order to produce legal effects.
30 See in this regard P.Malaurie, L.Aynes, P.Stoffel -Munck, op.cit. , p. 501.
31 G. Boroi, M.M.Pivniceru (coord. ), Fișe de drept civil. Partea generală. Persoane. Drepturi reale
principale. Obligații. Contracte. Succesiuni. Familie , Hamangiu, Bucharest, 2016, p. 144.
32 H. Dumitrescu, în F.A.Baias, E.Chelaru, R. Constantinovici, I. Macovei, Noul Cod civil. Comen-
tariu pe articole , 2nd ed., C.H. Beck, Bucharest 2014, p. 1496.
166 Tudor Vlad Rădulescu
maintain the quality to be transmitted, but if the performance of the main ser-
vice/services was postponed (act affected by a standstill period), or if its very
existence is contingent (act affected by a suspensive condition ), then assignability
is not affected.
In addition, the contract assignment covers both bilateral and unilateral
conventions, the civil code not distinguishing in this regard, and in what concerns
the contracts concluded intuitu personae , we consider that remains current the
distinction made under the old civil code, between subjective intuitu personae
and objective intuitu personae contracts.
3) Finally, the third condition, relating to the consent of the assigned con-
tractor is the one that sparked the li veliest disputes, as there is currently no unan-
imous opinion on the role that this consent plays in the construction of the con-
tract assignment.
According to an opinion33, the consent of the assigned contractor is a
condition of validity of the contract as signment of, in contrast to the credit as-
signment, where the will of the assigned third party is not an ad validitatem re-
quirement. It is claimed that the will of the assigned party is in fact a consent
giving birth to a deed, namely an agreement consent, a case of progressive con-
stitution of the contract34. As argument, it is shown that the effects of the contract
are not but the cause of the act, expressed, brought to light, objectified; or, the
main effect of the contract assignment contract is transmitti ng the contractual po-
sition of the assignor to the assignee’s patrimony, and this cannot occur (as it
would defeat the principle of binding force of the contract), without the ad valid-
itatem consent of the assigned party35.
In antinomy with the vision expre ssed above, most Romanian doctrinar-
ians advocate the idea of a consent with role of enforceability of the contract as-
signment to the assigned party, with repercussions on the effects of the contract
assignment, similar to the debt takeover .
Moreover, it is also supported the idea of a contract affected by a suspen-
sive condition, in the circumstance where the assigned party’s consent is required
after the conclusion of the assignment contract between the assignor and the as-
signee36.
We also adhere to this latter view, especially if we consider the effects of
the assignment (thereafter, we can talk about a perfect assignment and an imper-
fect assignment), but also the legal status of the debt takeover in the current Ro-
manian Civil Code .
33 Supported, among others, by P. Vasilescu, op. cit. (Obligații…) , p. 48.
34 On the varieties of consent – forming consent (with its categories) and the effective consent, see
J. Goicovici, op. cit. (Utilitarism juridic), p. 114 -116.
35 Idem , p.116.
36 G. Boroi, C.A. Anghelescu, Curs de drept civil. Partea generală , 2nd ed., Hamangiu, Bucharest,
2012, p. 100. In the same way, also see L. Pop, I.G. Popa, S.I. Vidu, op. cit ., p. 67 9; L. Retegan,
op.cit. , p. 58.
Considerations Regarding the Contract Assignment 167
In addition to the sp ecial substantive conditions to which law expressly
refers to in art. 1315 Civil Code, contract assignment must also meet the general
substantive conditions, as set out in art. 1179 Civil Code, respectively capacity,
consent (of the assignor and assignee), object and cause .
As for the formal conditions, art. 1316 Civil Code provides that the con-
tract assignment and its acceptance by the assigned contractor shall be concluded
in the form required by law for the validity of the assigned contract . Failure to
observe the formal condition of the contract assignment will attract the absolute
nullity of the entire operation, according to art. 1242 paragraph 1 Civil Code.
However, from the formal requirement imposed by art. 1316 Civil Code there are
also exceptions prescribed by law: a) the lease contract is not by its nature a sol-
emn act, but acceptance by the lessor of the assignment of lease of a movable
good must be in writing (art. 1805, paragraph 1 last sentence); b) acceptance of
the lease contract assignment must be in writing (art. 1833 Civil Code.); c) for
the insurance contract, law does not stipulate the ad validitatem written form (but
only ad probationem , art. 2200 Civil Code), but it is required in case the insured
accepts the contract assignment (art. 2212 para. 1 Civil Code )37.
Before proceeding to analyze the effects of the conventional contract as-
signment, a review of the legal contract assignment is required to be made, the
type of assignment that differs by way of regulation from the general legal provi-
sions in the matter of the conventional contract assignment.
Cases of legal contract assignment we meet: a) in the matter of the lease
contract, according to the alienation of the leased asset, in which case, if the con-
ditions provided for by a rt.1811 Civil Code are complied with, the purchaser shall
be subrogated in all rights and obligations of the lessor that stem out from the
lease (art. 1813 para. 1 Civil Code )38; b) also in case of sale of the good regarding
which there is a preemption righ t, legal or conventional, the concluded contract
is affected by a suspensive condition, namely that of non -exercise of the preemp-
tion right by the preemptor (art. 1731 Civil Code.). If the buyer who has priority
exercises its right, the sales contract is d eemed concluded between the buyer who
has priority and the vendor under the conditions contained in the contract con-
cluded with the third party, the latter contract being terminated retroactively (art.
1733 paragraph 1 Civil Code.); c) in case of the insur ed property alienation, in
the absence of stipulation to the contrary, the property insurance contract does
not cease, but it will still take effect between the insurer and the purchaser (art.
2220 paragraph 1 Civil Code ).
When analyzing the effects of the conventional contract assignment,
should be considered first, temporal criteria, and then, interpersonal criteria.
37 G. Boroi, M.M. Pivniceru (coord.), Fișe de drept civil. Partea generală. Persoane. Drepturi reale
principale. Obligații. Contracte. Succesiuni. Familie , Hamangiu, Bucharest, 2016, p. 145.
38 For an analysis that is still valid, regarding this legal case of contract assignment, see M. David,
Cesiunea legală de contract – mijloc de protecție a locatarului , in the volume Paul Vasilescu
(coord), op. cit. (Cesiunea de contract) , p. 277 -309.
168 Tudor Vlad Rădulescu
Thus, the effects of the contract assignment will vary as we talk about A) period
between the conclusion of the assignment between assignor and assignee and the
moment of the assigned party expressing its consent, or about the period after this
moment, on the one hand, B) and on the other hand, how stand the relationships
between assignor and assignee, between assigned party and assignee, betw een
assignor and assigned party, and also to third parties.
In addition, the assignor’s situation will be different as it is released (per-
fect contract assignment) or held further as fideiusor, in the relation arising from
the contract it has assigned (imp erfect contract assignment ).
A) The effects of the contract assignment prior to the express consent of
the assigned contractor
Between the parties (assignor and assignee), the assignment will produce
specific effects, according to the principle of binding force of the contract, ex-
pressed in art. 1270 Civil Code, depending on whether the contract is for a con-
sideration or free of charge. Thus, for example, if the assignment involves a price
or other additional obligations resulting from the convention, the services as-
sumed shall be executed accordingly by the assignor and the assignee, given the
character of distinct contract of the understanding between them.39. In addition,
as specific effect, under the law, according to art. 1320 paragraph 1 Civil Code,
the assignor guarantees the validity of the contract assigned, but can also guaran-
tee the enforcement of the contract, in which case it will be kept as fideiusor for
the assigned contractor's obligations (art. 1320, paragraph 2 of the Civil Code ).
With resp ect to the assignor, in this period, the assignment contract is a
res inter alios acta , not being bound to meet its obligations to the assignee, as can
neither request from the latter the execution of its own services. It was argued,
however, in the litera ture that in the period prior to the assigned party’s express
consent, may occur in reality either a credit assignment or a subrogation con-
sented by the creditor, if the contractor assignee makes an actual payment directly
to the assigned contractor, thus taking place the transmission of the active part of
the legal obligation relationship40.
The same will be the effects in case the assigned contractor refuses to
give consent to the assignment. In connection with this circumstance, the question
is whether this refusal may be treated as an abuse of law and whether the court
can replace the assigned party’s agreement, making the contract assignment op-
posable to it, too. Taking on the view expressed in the French doctrine41, it was
stated, rightly, that the rig ht of the assigned party to refuse the assignment is a
potestative right, not being though, at the same time, a discretionary right42. In
39 L. Pop, I. F. Popa, S.I. Vidu, op. cit. , p. 680, footnote no.1.
40 Idem , p. 681.
41 P. Malaurie, L. Aynes, P. Stoffel -Munck, op.cit , p. 510.
42 For a discussion on the difference between potestative and discretionary rights, see J. Goicovici,
op. cit. (Utilitarism juridic) , p. 131 -139 as examples of discretionary rights are given the right of
Considerations Regarding the Contract Assignment 169
respect to this qualification, it is alleged that court intervention in order to replace
the assigned contractor’s agr eement to the assignment between assignee and as-
signor is possible, if the refusal to consent has a teasing purpose, being exercised
in bad faith .
B) The effects of the contract assignment after the assigned contractor’s
express consent
First, it needs t o recall the moment this consent must, and can be given
so that the contract assignment produces its effects also on the assigned party.
According to art. 1317 based on art. 1318 Civil Code, in order to produce
effects, the contract assignment must be acce pted by the assigned contractor, the
latter having the possibility to choose whether to order or not the release of the
contractor assignor of its obligations, the acceptance can occur either prior to or
concurrently or subsequently to the assignment betwe en assignor and assignee.
Prior acceptance can be either a clause inserted in the original contract,
which makes this contract be, by the express will of the parties, assignable, or an
agreement subsequent to the conclusion of the contract, accessory to it , but situ-
ated previously the conclusion of the assignment contract43. It is also possible that
the anticipated agreement to the assignment be deducted from standardized pro-
visions – such as the clause "to order" or another equivalent mention that allow
concluding that the contract transmission may occur by the simple effect of en-
dorsement (art. 1317, paragraph 2 of the Civil Code )44, without having to notify
the assigned contractor .
Co-acceptance involves, as shown before, the conclusion of a tripartite
agreement, involving all stakeholders: the assignor, the assignee and the assigned
party.
Finally, subsequent acceptance can take the form of unilateral declaration
of acceptance of the assignment by the assigned contractor .
In line with an opinion expressed in the literature45, we believe that the
agreement of the assigned part y can be silent too, for as long as it is unambigu-
ously clear from its action or inaction that it has accepted the translation of the
contract to which it is part, to a person, who becomes, following the assignment,
contractor .
Once the assigned party expr essed his consent, the contract assignment
shall take effect between the latter and the assignor, but also between the assignee
and the assigned party.
the donor spouse to revoke the donation during marriage, the right to demand the severance of the
joint tenancy, the testator's right to exheredate its heirs etc.
43 We express reservations about the view according to which prior acceptance, contained in a con-
vention accessory to the initial contract may occur at the latest simultaneously to the conclusion of
the contract assignment since, in our opinion, in this case, it is not about previous acceptance, but
about co -acceptance, the operation becoming a tripartite one – G. Boroi, M.M. Pivniceru (coord.),
op. cit. (Fișe de drept civil), p. 145.
44 L. Pop, I.F. Popa, S.I. Vidu, op. cit., p. 682.
45 Idem, p. 682.
170 Tudor Vlad Rădulescu
Thus, in the absence of a rule to the contrary, the assigned party’s consent
to the assignment expresses the assignor’s discharge of its obligations under the
contract (art. 1318 paragraph 1 Civil Code), this meaning thus that the assigned
party will not be able to claim anymore the enforcement of obligations from the
assignor, nor the latter will have deman ds concerning the execution of the obli-
gations not due yet by the assigned contractor. Otherwise, i.e. if the assigned party
declares that it does not discharge the assignor (imperfect assignment), it may
turn against it when the assignee fails to perform its obligations (the assignor
seems to be a guarantor of fulfillment of the obligations by the contractor as-
signee), but if it notified about this issue, within 15 days from the date on which
the contractor assignee had to perform its obligations or the da te on which it be-
came aware of the non -performance (art. 1318, paragraph 2 of the Civil Code).
The penalty for failing to comply with this deadline consists precisely in the loss
of the right of recourse, reason for which it can fall into the category of l imitations
of substantive law .
Between assignee and assignor, the contract will continue to have effect
(the assignment not having retroactive effects) as if it had occurred a contract
assignment, the assigned party may oppose the assignee all the except ions result-
ing from the assigned contract (e.g. the absolute nullity of the contract, the ex-
tinctive prescription, forfeiture, exception of non -performance)46, except those
relating to the vices of consent, and any exceptions or defenses or exceptions
arising from the relationship with the assignor (e.g. compensation) (art. 1319
Civil Code) .
The contract assignment takes effect to third parties too, represented in
particular by the creditors of the parties involved. Thus, where by the contract
assignment wa s trying to fraud the interests of creditors, they have available to
them the revocatory action (Paulian), under the conditions of art. 1562 -1656 Civil
Code, as may require the declaration of unenforceability against them, by the
same means, and possible d eclaration of acceptance of the contract assignment,
made by the assigned party.
The assigned contractor’s creditors may request, by means of the oblique
action, the assignee and assignor liability, when the latter has not been released
from its obligation s.
As regards third parties who have personally guaranteed the obligations
of parties to the original contract, should be made the following distinctions: the
guarantees agreed in order to guarantee fulfillment of the obligations of the as-
signed contractor will be maintained for the benefit of the assignee, but those
accorded to guarantee fulfillment of the obligations of the assignor will not be
maintained (if it is released), unless the settlor has consented expressly on keep-
ing them and in the event of assignment of the case where we are talking about
legal guarantees (legal privileges and mortgages) imposed on the assets of the
46 G. Boroi, M.M. Pivniceru (coord.), op. cit. (Fișe de drept civil) , p. 146.
Considerations Regarding the Contract Assignment 171
assignor or if the guarantors expressly assumed keeping the guarantees in case of
assignment47.
Bibliography
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2. F.A. Baias, E. Chelaru, R. Constantinovici, I. Macovei, Noul Cod civil. Comen-
tariu pe articole , 2nd ed., C.H. Beck, Bucharest, 2014.
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Studia Universitatis Babes -Bolyai, seria Iurisprudenția no. 2/2003.
4. G. Boroi, C.A. Anghelescu, Curs de drept civil. Partea generală , 2nd ed.,
Hamangiu, Bucharest, 2012.
5. G. Boroi, M.M. Pivniceru (coord.), Fișe de drept civil. Partea generală.
Persoane. Drepturi reale principale. Obligații. Contracte. Succesiuni. Familie ,
Hamangiu, Bucharest, 2016.
6. I. Deleanu, Părțile și terții. Relativitatea și opozabilitatea efectelor juridice ,
Rosetti, Bucharest, 2002.
7. I. Popa, Cesiunea contractului , „Dreptul” no. 10/ 2006.
8. J. Goicovici, Cesiunea contractului în reglementarea art. 1315 -1320 din Noul
Cod civil , „Curierul Judiciar” no. 5/2010.
9. L. Pop, Tratat de drept civil. Obligațiile. Volumul I: Regimul juridic general ,
C.H. Beck, Bucharest, 2006.
10. L. Retegan, Cesiunea d e creanță în raport cu alte operațiuni juridice
triunghiulare, Studia Universitatis Babeș -Bolyai Iurisprudentia, no. 3/2009.
11. L. Pop, I.F. Popa, S. I. Vidu, Tratat elementar de drept civil. Obligațiile , Uni-
versul Juridic, Bucharest, 2012.
12. P. Vasilescu (coord.), Cesiunea de contract. Repere pentru o teorie generală a
formării progresive a contractelor , Sfera juridică, Cluj -Napoca, 2007.
13. P. Vasilescu, Drept civil. Obligații , Hamangiu, Bucharest, 2012.
14. P. Malaurie, L. Aynes, P. Stoffel -Munck, Drept civil. Obligațiile , Wolters
Kluwer, Bucharest, 2009.
47 Idem , p. 146 -147.
Consultation between Social Partners. From a General View to a
Particular One
Professor Magda VOLONCIU1
Abstract
The paper was based on an analysis that focuses on the following aspects: Can
the social partnership be the same thing as social dialogue? What is the place of the
social dialogue in the consultation and information procedures among partners? Is the
Law. 62/2011 an obstacle to a real social partnership? Also, it refers to the advantages
and disadvantages for close dialogue from the baseline – the unit (including discussions
on the concept of unity, accord ing to the latest practices of European law) but also the
employee`s right to be informed and the transition from the individual to the collective.
For a thorough research of the problem it addresses the following: The general frame-
work of information and consultation procedure established by Law no. 467/2006, the
specific information and consultation procedures established on normative aspects but
also the specific information and consultation procedures established by convention but
also the strengthening of the social partnership. Last but not least, we analyze the social
intervention in economic and managerial decision with their limits and risks.
Keywords: social partnership, social dialogue, labor law, collective labor
agreement, individual employment contract.
JEL Classification: K31
1. The correlation between social partnership and social dialogue
In an ABC of basic concepts at the base of industrial relations, the con-
cept of social dialogue and partnership is primordial. It’s the reason why these
concepts find themselves within article 1 from Law 62/2011 as being the first
concepts for which a legal definition was made. Art 1 a) establishes that socia l
partners are all those that interact in social dialogue, referring to unions, employ-
ers’ associations, as well as representatives from the public sector.
We mention that this definition is not the most indicated for this concept,
taking into account a rticle 221 and the following from the Labour Code; in social
dialogue we must representatives from the employees, these having an active role
as social dialogue representatives of the employees for any problems they may
have as well as when the law states it. (for example: see art 241 Labor Code,
which states that the internal regulation is done by the employer, while consulting
with the union representatives or employee representatives, depending on the
1 Magda Volonciu – „Titu Maiorescu” University Bucharest, Faculty of Law, Romania, E -mail:
magdavolonciu@volonciu.ro .
174 Magda Volonciu
case) art 69 par 1 preamble in case the employer inte nds to conduct collective
firing he has the obligation to conduct in due time, as stated by law, consultation
meetings with the union or employee representatives.
Furthermore, the representatives of the employees can have decision
making powers in the con ditions outlined by art 135 from Law 62/2011 in com-
panies which do not have Representative Unions g et representation from Em-
ployee Representatives, either alone, together or along with the representatives of
the Union`s Federation representatives in the ca se in which at the level at com-
pany there are unrepresentative unions which are a part of the Union Federation
that is representative at the sector level.
In conclusion, from the mechanism of Social Partnership/Dialogue the
representatives of the employ ees cannot be excluded interacting directly in the
process of social dialogue. On the other hand, there is a problem of in what meas-
ure the representatives from the Public Administration find their place in this sit-
uation. These representatives intervene w henever the mechanism of tripartism is
put under question (mechanism which is required for the functioning of the Inter-
national Labor Organization)
In industrial relations, dialogue partners (active partners) are the ones
that represent the interests of employees on the hand (and as such representing
social interests) and the representatives of the employers on the other (monetary
interests). The authorities are called to ensure a balance in this dialogue, to medi-
ate certain grievances which might arise b etween the two partners and to look
with for the most correct solution to maintain social peace.
Regarding the concept of social dialogue, this represents different defi-
nitions to the lawmaker, on the one hand wishing to expand upon social dialogue
in general and on the other hand expanding in particular to bipartisan and tripar-
tisan social dialogue. Thus, social dialogue in general is considered a voluntary
process which goes between social partners and which assumes collective infor-
mation, consultation and negotiation. The purpose for this dialogue is obtaining
a common accord. This purpose requires the diligence of the social partners and
initiating the procedures outlined above (collective information, consultation and
negotiation) with good faith. Fu rthermore, the Romanian jurist defines within the
same regulation that art 1 Law 62/2011 and the procedures specific to social dia-
logue consider information as the transmission of data from the employer to the
union representatives or employee representati ves2 such that they can familiarize
themselves in time.
According to Law 62/2011 consultations means „an exchange of opin-
ions within social dialogue” as in the voluntary process in which the social part-
ners participate, as the concept of social partner is outlined in art. 1 a) from Law
62/2011 does not include the representatives of employees which are regulated
2Although the chosen representatives of the employees are not signaled as social partners, they must
be informed nonetheless .
Consultation between Social Partners 175
by art. 221 and the following from the Labor Code. The fact of not including these
representatives is a mistake on the behalf of the Romanian lawmaker also stems
from aligning to art.1 b) thesis II from e) from the Labor Code which mentions
on of the main obligations of the employer as consulting with the union or repre-
sentatives from the employees regarding the decisions susceptible to substantially
affect their rights and interests3. Art. 1 b) thesis II establishes that an exchange of
opinion specific to consultations occurs within social dialogue, to which main
actors are union or employee representatives on the one hand and the employer
on the other, recognizing the intervention of representatives from the authorities.
Through this formula, the specifics of the consultation within the Labor Code
widens significantly to include the concept of any other exchange of opinions to
which the central or local authorities intervene.4
In social dialogue the Ro manian lawmaker introduces the concept of
collective negotiations. Unlike informing or consulting, negotiating clearly in-
volves only two parts, the representatives of the employer or group of employers
and those of the unions or employees. Also, the jurist intends to provide a clear
definition of bipartisan social dialogue which clearly intervenes in the case of
collective negotiating but also can intervene in the information and consultation
procedures and in the tripartisan social dialogue when the author ities intervene,
such a dialogue being added in the information and consultation procedures.
2. General framework of the procedure of informing and consulting es-
tablished by Law no. 467 of 2006
Social dialogue represents an ever present component within the main
needs which form the basis of labor relations in general and special industrial
relations. As outlined in point I social dialogue represents a form of objectifying
3 It could be considered that the rules from art 40 par 2 e) Labor Code make reference to specific
consultations, as in those consultations which intervene in collective firing procedures or transfer
of enterprise. Both internal law and EU directives (Directive 2001/23/CE 12 March 2001 regarding
bringing together the legislation of member states regarding maintaining workers’ rights in the case
of a transfer of enterprise, units, or parts of these, respectively Directive 98/59/CE 20 July 1998
regarding bringing together the legislations of member states regarding collective firings) want the
smooth operation of procedures with workers representatives, as in those who look after the
interest s of the workers as outlined in law and custom of member states. Furthermore art 2 par 2
EU Directive 98/59/CE establishes the minimal prerequisites for consultations. The fact that art 40
par 2 e) Labor Code imposes as main obligation of the employer the consultation only in the event
of adopting decision liable to substantively effect the rights and interests of the employees does not
limit the general obligation of consulting as shown in art 62 par 1 c) thesis II Law 62/2011 as even
the legal framework r egarding informing and consulting with employees, Law 467/2006 refers to
consulting in the broad term, as in, exchanging idea and establishing a dialogue between the
employer and the representatives of the employees
4 For example, the social dialogue comm issions at the local level, from the prefectures or specific
tripartite organisms in which there are general procedures of consultations.
176 Magda Volonciu
the actions of social partners (evidently, an objective voluntary aspect). Exactly
because social dialogue represents in equal measure action and purpose has there
been a need to form a general ensemble of regulation for procedures which acti-
vate social dialogue. In this context at the EU level Directive 2002/14/CE from
11 March 2002 ha s been adopted in Romanian Law through Law 467/2006 re-
garding establishing the general framework for informing and consulting with
employees5.
Law 467/2006 establishes a minimal framework for these procedures,
nothing being against the parties adopting sp ecific rules regarding the procedure
for informing and consulting6.
Law 467/2006 establishes concrete elements regarding aspects to which
the employer has the obligation to inform as well as rules regarding consultation.
We underline the fact that the rig ht to being informed from which the right to
consultation stems from is not an absolute right so that the employer may impose
on the unionized worker’s representatives or not the maintaining of confidential-
ity regarding the information they receive as in w hich case the information may
lead to the jeopardizing of the enterprise or lead to monetary loss to the employer.
It is justified to refuse communication on the condition to justify this to employ-
ees. The right of the employer to impose confidentiality or refuse transmitting
information is up to the courts of law7. Furthermore, art. 7 par (1) final thesis Law
467 establishes that the type of information subject to confidentiality clauses is
established by the parties in the collective agreements or in anot her form agreed
upon by the parties and has the form of a confidentiality clause.
Beyond the fact that making express reference to the concept of collec-
tive bargaining is today, after the ratification of Law 62/2011, inappropriate, may
notice that the text is totally useless when companies in which there was not con-
cluded a collective a greement. As a consequence, when a unit has no collective
agreement, the employer is not entitled to request contract confidentiality on the
transmission of information, which is inadmissible. However, could the employer
oppose employees' representatives, unionized or not, confidentiality of infor-
mation even if there is a collective agreement? There could be two hypotheses:
either the employer would exercise the right to claim confidentiality exercise of
this right impossible to be controlled by the court b ut only to the extent that would
5 Law no. 467/2006 was published in the Official Gazette No. 1006 from 18 D ecember 2006 and
began its force from the 1st of January 2007 .
6 Most often in social practice social partners negotiate collective agreements and agree that
information and con sultation procedures to be more dense or involve wider issues than those
specified by law. Besides a law that aims to esta blish a general frame cannot penetrate all the
mechanisms necessary for developing a procedure of consultation and information. Such
procedures are often developed in the collect ive labor contracts or other agreements that runs
between employer / employees organizations and employees through their representatives.
7 In a situation of this case the court held that the union can not claim the list of all employees and
their salaries by invoking the general right to information as it is recognized by Law 467/2 006.
Consultation between Social Partners 177
call into question the abuse of rights when between social partners bipartite dia-
logue would question the smooth transmission of information to consultations
and negotiations as the case of the parties would agree on specif ic rules for infor-
mation sharing and maintaining their confidentiality between parties, intervening
practically a convention strictly on those aspects. If the first hypothesis could be
questionable given the fact that there is a general right to informatio n whose lim-
its are functional only through the law and the legislature which requires parties'
agreement regarding the content of confidential information, that the second hy-
pothesis is perfectly functional if it is necessary to grant the provisions that a re
found in the last sentence of Article 7(1) of Law 467/2006 as a broad interpreta-
tion.8
Regarding consulting, the most important aspect is that usually, any con-
sultation’s purpose is reaching a consensus among those involved. Art. 5 par. 3
e) Law 467/20 06 is very clear in pointing out that a consultation takes place: „to
reach an accord regarding which decisions fall to the employer”. So we could
say that any negotiates needs a consultation, but not every consultation leads to
a negotiation. During the c onsultation procedures the parties seek consensus, but
if that is failed to be reach, for a negotiation that is considered a failure, but a
consultation could still be completed without the consensus of the parties. To-
wards these aspects, to note is the em ployer’s responsibility for not satisfying the
obligation to initiate consultations, in the case the employer makes a purely for-
mal consultations, without seeking to reach an accord9. But when the employer
seeks consensus in consultations but the demands o f the worker’s representatives
cannot be validated for legal reasons, then it would not be considered a violation
8 Article 6 of Directive 2002/14 / EC has a wider regulatory than art. 7 of law 467/2006, which
establishes that if certain information was supplied by the employer expressly in confidence, then
the workers' representatives are not authorized to divul ge such information even if exceptionally
such information would allow to be sent to the representatives or third party confidentiality, which
implies that the principle would extend to them. The guaranty of privacy is the social partner which
has received information from the employer in question. Such expansion of the confidentiality
formula is provided by Article 7 of Romanian law. Moreover, analyzing the social practice is
observed that usually those who receive information in the procedure of consultat ion or negotiation
are assuming confidentiality on grounds that their role at the table is to represent the interests of
their members, accordingly they can not convey their information received as long as they have the
quality of legal representative. On the other hand they can not guarantee maintaining the
confidentiality of information as long as the number of employees representatives in a unit is very
high. Against such assertions ask ourselves if we should note that a body grouping an existing
union, prerogatives and competences totally detached from their own members when acting in
procedures such as information, consultation and negotiation. If under the provisions of article 28
para. 3 out Law 62/2011 recognizes the procedural quality even when they act invoking the rights
of their members, why not recognize the fact that a union is the entity in information and
consultation procedures and therefore may assume the responsibilities of confidentiality.
9 See Curtea de Apel Alba Iulia, labor conflicts a nd social insurance section , Civil Decision no.
338/A/2014 .
178 Magda Volonciu
of the employer’s obligations. This does not mean that the obligation to consult
is a diligent one. The employer needs to consult with the soc ial partner, inform
him, as the law states. Such as a negotiation can or cannot lead to establishing
and agreement (be it a collective accord or hiring agreement, as outlined by art.
153 Law 62/2011), so can the procedures of consultation. A larger and sma ller
meaning can be seen in the concept of consultation. In the large sense, consulta-
tion would contain all the concrete procedures relevant to it regulated by law or
conventionally, as well as any negotiation. In the smaller sense, consultations
would con tain only concrete procedures. Information should be the premise of
any consultation or negotiation. Furthermore, information, as a procedure, could
have its own existence.
3. Individual and collective informing
Art. 39 par (1) h) Labor Code enu merates among its fundamental work-
ers’ rights the right to consultation and information. As such we should admit that
consultation and information have an individual connotation. If we analyze the
employer obligations as outlined in art. 40 par (2) Labor Code, we can see there
are two obligations which could be analyzed as individual obligations, both of
them referring to information.
Art. 40 par (2) Labor Code states: „The employer has the following obli-
gations: a) to inform the employees regarding the working conditions and the
elements which form their work and b) to periodically inform the employees of
the financial status of their unit, apart from sensitive or secret information which
might bring liability to the units activity. How periodic this information comes is
decided in the collective labor contract applicable.”
Art. 40 par (2) Labor code also exclusively mentions collective labor
agreements it being the only measure that can establish how periodic certa in in-
formation is given to the employees. What happens if there is no collective labor
agreement at the unit? The employer would not have the same obligation to com-
municate the financial situation of the unit to his employees? Obviously the an-
swer is that the employer has to communicate within the law the information to
the employees. Even though aspects regarding how often this information is given
could be missing from a collective agreement, it is imposed by the social partners
in the bipartisan dialogue s. If they do not reach a consensus regarding infor-
mation, it could be said that the employer is absolved of his obligation. He must
give this information in good thought and reasonable intervals. However, if the
employees ask for this information, even if in the collective labor agreements
there is no regulation on how often, should the employer give it to them? We
believe that for the most part the answer is yes, for the following reason: Labor
Law has protective clauses for the employee. As a consequence , whenever there
is a question of interpretation, it fall in the employees favor. If there are no regu-
lations regarding how often information is given to employees as outlined in art.
Consultation between Social Partners 179
40 par. (2) d) Labor Code, it would result that the employees respective right must
be fully functional, except when the employers right is exercised in an abusive
manner. On the other hand, the Romanian Lawmaker left how often financial
information is given to the accord of the parties involved. As a consequence, this
decisio n is not up to the employer, but also to the employees. As most of the times
in a collective trade agreement the employer cannot demand, but may merely
agree or not with the rights demanded by the workers, when an obligation is in-
volved (that to inform), t he employer must rely on the employees also. If there is
no institutional framework for determining how often information is given, the
employer can cannot do what he wishes. The obligation is there is information is
expressly asked for by employees.
It’s worth noting that the obligation to inform, as regulated in art. 40 par
(2) d) Labor Code is a conditional obligation. If the information given can lead to
liability to the interests of the unit, the employer may refuse to give them.10
Art. 40 Par (2) a ) contains regulation for individual employee or future
employee information, going together with regulation present in art. 17 and some-
times, art. 18 Labor Code, while the information to which art. 40 par (1) lit. d)
Labor Code, makes reference to tend to be about collective procedures. Usually,
soliciting financial information of the unit occurs in collective negotiations. Ac-
cording to art. 130 par (4) Labor Code: ” The information the employer will give
to union or employee representatives will at least c ontain information on: a) the
financial situation and b) the unit’s employment situation ” In this situation, the
individual right of each employee is exercised by their representatives, union rep-
resentatives, or employee representatives selected under art. 221 Labor Code.11 .
10 To observe that at least partially, regulation in art. 40 par (2) d) Labor Code are in accord with
those found in art. 7 par (2) Law 467/2006. Within the framework of the law, information and
consultation is conditioned more strictly, the lawmaker making reference not only to the liability to
the interests of the firm, but also the fact that divulging such information can lead to grave
repercussions to the work of that enterprise. Art. 6 par (2) EU Directiv e 2002/14/CE, establishes
that „ The employer is no t obligated to communicate information or initiate consultation if that
information can objectively lead to liability to the enterprise ”. So, the possibility to refuse giving
information must be analyzed by objective criteria and by the whim of the employe r. We add the
fact that in the case of art. 7 par (2) Law 467/2006, and art. 6 par (2) EU Directive 2002/14/CE all
information is considered, whereas art. 40 par (2) d) Labor Code only looks at the financial
information of the employer.
11 Regarding who rep resents the interests of the employees in collective negotiations, entry into
force of Law no. 1/2016 it can be noticed a discrepancy between the provisions of art. 134 și 135
of Law no . 62/2011. In this sense, it’s worth noting firstly that the Romanian Lawmaker, for the
first time, did not underline the fact that employees are party to collective employment agreements,
and that they negotiate through their representatives but underlines that employees cannot
themselves be part to collective employment ag reements, only through Union representatives. We
consider such wording dangerous, at least by the principle of freedom of association, the negative
meaning of it. As anybody can freely associate with a Union, then nobody is obligated to associate
with a Un ion. As such, it appears that participating in a collective labor agreement is impossible
without being member of a Union. If at the unit level, Unions are not that big (we do not talk about
180 Magda Volonciu
Giving such information and keeping confidentiality is regulated by mak-
ing Negotiating Rules, especially since art. 130 par (5) Law 62/2011 establishes
the aspects which need to be addressed at the first meeting. Regarding the rules
of information confidentiality, art. 130 Law 62/2011 makes reference to rules es-
tablished in Law 467/2006.
If the right for information regarding the economical -financial situation
of the company in the collective bargaining is ovdious, the employees wil l have
it through their reprezetantives, any and every employee being covered, regarding
the exercise of the right, through their legal reprezentatives because, in the col-
lective bargaining, those who negotiate for the employees, represent every em-
ployee i n the company. Thus the questions: a single employee is entitled to solicit
the communication of some information about the economical – financial situation
of the company, and the employer, in this situation has the obligation to transmit
the information a sked?
We consider that the answer is yes, at least when looking at the regula-
tions in art. 40 par (2) d) Labor Code. Obviously an abusive exercise of right is
more likely to happen in this situation. That is why an employee can ask for in-
formation regard ing the financial situation of the enterprise only for justifiable
reasons. We believe that the text in art. 40 par (2) d) Labor Code is badly written,
and that reference should be made to the obligation of information for the em-
ployee representatives.
Practically, regulation of the type found in art. 40 par (2) e) din Labor
Code would be imposed, which give the employer the obligation to consult with
the union or employee representatives, whenever decisions are made which might
substantially affect the wor kers’ rights and interests.
representation here, which as regulated by art. 51 Labor Code ass umes half plus one total number
of employees), most employees trusting their representatives, they cannot conduct a collective
agreement under the current text. Furthermore, art. 134 pct. 2 a) Law no. 62/2011 establishes that
at the unit level employees ca n be represented by a Union representative at the sector level should
they lack one at the unit level. Only where there are no Unions can employees be represented by
elected one, outlined in art. 221 Labor Code. Such a solution goes against the regulation present in
art. 135 Labor Code which establish that the negotiation of the collective labor agreement (and not
it’s fulfilment) is done by the employee representatives even if the unit has a Union, but it is not
representative, in which case members of the representative Union at the sector level of the
unrepresentative unit level Union will be present. If we read into the current law, the collective
labor agreement at the unit level would be negotiated by a certain category, but finalized by the
sector lev el representative Union. Which is nonsense! It also goes against the principle of
represe ntation and majority, on which L aw no. 62/2011 was built. Last but not least, the
modification brought by Law no. 1/2016 are against the regulations in art. 146 par (2 ) Law no.
62/2011, which state ” At the unit level, the collective labor agreement will be registered without
the signatures of all parties involved only if more than half of the employees sign.” If only the sector
level Union representatives could finalize a contract, then this contract would not represent the
collective will of more than half the employees, the minority deciding for all employees (this has
functioned in the previous legislation as well, art. 18 of Law no. 130/1996). Beyond these injustices,
there remains massive discord in the text in Law no. 62/2011 regarding representation at the unit
level and art. 134 and 135 Law, discord which needs to be removed.
Consultation between Social Partners 181
Because, in the case of the information, we can analyze to what extent
this would include an individual beneficiary, in the case of the consultations, the
beneficiary of the obligation regulated by art. 40 para. (2) e) of the La bour Code
will always be a subject of the collective right, whether union (any union and not
only the representative), or, where applicable, employee representatives elected
under Art. 221 et seq. the Labour Code. As such, if information would manifest
in an individual procedure, consultations lato sensu (consultations which involve
collective negotiations) or stricto sensu (consultation) would always assume col-
lective procedures.
Bibliography
1. Labor Code, republished in the Official Gazette, Part I no. 345 of 18 May 2011,
as amended;
2. Law 62/2011 as even the legal framework regarding informing and consulting
with employee s;
3. Social Dialogue Law no. 62/2011, republished in the Official Gazette, Part I no.
625 of 31 August 2012 as amended;
4. Law no. 467/2006 on establishing a general framework for informing and con-
sulting employees, published in the Official Gazette, Part I no. 1006 of 18 De-
cember 2006;
5. Directive 2002/14/EC of the European Parliament and of the Council of 11
March 2002 establishing a general f ramework for informing and consulting em-
ployees in the European Community, OJ L 80, 23.3.2002;
6. Council Directive 2001/23/EC of 12 March 2001 on the approximation of the
laws of the Member States relating to the safeguarding of employees' rights in
the event of transfers of undertakings, businesses or parts of undertakings or
businesses, OJ L 82, 22.3.2001;
7. Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws
of the Member States relating to collective redundancies, OJ L 225, 12.8.1998.
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