Category: Issue 11.5

The National Authority for Consumer Protection (ANPC) recently organized thematic controls of real estate developers of residential projects to verify their compliance with the legal provisions on consumer protection.

The ANPC incorrectly assessed that developers do not comply with certain legal provisions on consumer protection. Consequently, it requested the implementation of measures that, in addition to being imposed in relation to breaches of law that have no legal basis, are likely to cause substantial damage to developers. They’ll also lead to additional costs that were not and could not have been taken into account when establishing the budgets of the residential projects.

One of the issues raised by the ANPC is related to developers’ alleged non-compliance with the minimum areas of the apartments, as regulated in Housing Law no. 114/1996 (Housing Law). The ANPC requested developers to (a) stipulate in the sales promises/contracts that clients have been informed about such non-compliance and (b) provide fair compensation to their clients covering the alleged damage caused thereto.

However, the control of apartments’ minimum requirements takes place at the issuance of the building permits. According to the methodological norms for the implementation of the Housing Law (as approved by GD no. 1275/2000), the issuance of building permits must be made with observance of the minimum requirements regarding the areas and the equipment level of the rooms of apartments contained in Annex 1 of the Housing Law. Also, according to the Housing Law, the municipalities (the issuers of building permits), and not the ANPC, verify compliance with the minimum areas contained in Annex 1 of the Housing Law.

Therefore, if (i) construction works were carried out in compliance with the building permit and the technical project, (ii) the apartments’ areas comply exactly with the areas from the technical project; (iii) the municipality issued a building permit for the construction of the residential project; and (iv) the building permit has been in force throughout its validity term, has never been challenged, suspended, or annulled (according to the law, the building permit is presumed to be legal), it means that the municipality considered that the mandatory requirements for apartments contained in the Housing Law are met with respect to the authorized project.

Failure to comply with the minimum areas required by the Housing Law could be the subject of an offense punishable by the ANPC only if it has influenced or is likely to influence in an essential way the clients’ decision to purchase the apartments. Given that, by means of sales promises/sales contracts, developers inform clients with respect to apartment areas, and it cannot be held that developers have used unfair commercial practices with the goal of distorting their clients’ economic behavior.

At the same time, the ANPC requires developers to include in sales promises/contracts provisions on the guarantee for hidden defects granted by contractors to developers under the terms of Law no. 10/1995 on quality in construction (Law 10/1995) despite this obligation not being provided by law for developers but only for their contractors.

There already is a three-year guarantee in place for buildings classified in the category of importance C (the category in which residential buildings are included), a guarantee of 10 years for hidden defects, and a guarantee for the entire life span of the construction of the structure. The law (Civil Code) expressly regulates a guarantee for hidden defects which is indeed related to the legal relationship between developers and their clients arising from the conclusion of sales promises/contracts. This is the guarantee of three years from the date of handover or final acceptance of the construction, except if the defect was discovered earlier, in which case the guarantee period will begin to run from the discovery date of the defect.

It seems that ANPC representatives are abusively forcing developers to grant their clients the guarantee periods regulated by Law 10/1995, although these do not concern the legal relationship between developers and their clients but the legal relationship between contractors and developers. It is absurd to require a developer to grant their clients a 10-year guarantee period for hidden defects when, according to the Civil Code, the guarantee period they are obliged to grant is of a maximum of three years. Such an obligation undertaken in addition to the obligation provided by law is likely to bring additional costs to developers compared to the budget prepared for the residential project and, therefore, unforeseen losses.

By Oana Albota, Partner, and Ana-Maria Mincu, Senior Associate, Albota Law

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Workplace harassment is a global issue that undermines the dignity of people and the productivity of employers. Recognizing the need for firm legislative measures, Romania has legislated significant changes to create a safer and more equitable work environment. A key development is the 2023 Methodology for Preventing and Combating Gender-Based and Moral Harassment at Work (Methodology), approved by Government Decision No. 970 on October 12, 2023. This article examines the content of this methodology, its integration with international legal instruments such as the ratification of the 2019 ILO Convention No. 190, and the recent adoption of the EU Whistleblowers’ Directive.

The 2023 Methodology

The Methodology establishes a detailed framework for addressing and combating workplace harassment in both public and private sectors. It defines terms, outlines measures, and sets procedures for complaints.

Preventive Measures

The Methodology mandates that all Romania-based employers integrate clear anti-harassment policies into their internal codes of conduct, internal regulations, employee handbooks, etc. These policies play a critical role in setting the standard for workplace behavior and outline the legal ramifications of harassment.

Definition of Harassment: Policies must provide clear definitions of harassment, including gender-based and moral harassment, to help employees understand acceptable behavior.

Potential Sanctions: Listing the consequences of harassment deters potential harassers through the threat of disciplinary actions, from formal warnings to termination.

Rights and Obligations: Detailed descriptions of the rights of victims and the obligations of all parties involved are crucial, including the right to report incidents without fear of retaliation and the duty of supervisors to act promptly.

Training and Awareness: Education and training are game-changers for the successful implementation of anti-harassment policies. The Methodology requires regular training sessions to ensure all employees understand their responsibilities under these rules.

Comprehensive Coverage: Training programs should cover legal definitions of harassment, examples of unacceptable behavior, and the consequences of harassment.

Cultural Change: Beyond legal compliance, training aims to cultivate a culture of respect and dignity, facilitated by interactive sessions that encourage discussion.

Continuous Education: Regular training sessions keep employees updated on evolving legal standards and societal norms, addressing new challenges in the workplace.

Complaint Mechanisms

Effective complaint mechanisms are essential for empowering victims of harassment. These mechanisms must be accessible, ensure confidentiality, and protect individuals from retaliation.

Accessibility: Clear information on reporting harassment should be available through multiple channels, such as intranet sites and employee handbooks.

Confidentiality: The process for handling complaints must safeguard the privacy of all parties involved, encouraging victims to report incidents without fear of exposure.

Protection Against Retaliation: Employers must implement measures to prevent retaliation against individuals who report harassment, including monitoring the treatment of complainants post-complaint.

International Legal Integration

The Methodology is complemented by Romania’s ratification of the 2019 ILO Convention No. 190, which calls for the global elimination of workplace harassment. This convention provides a broader context for understanding and implementing the Methodology, emphasizing the importance of international standards in shaping national policies.

Whistleblowers’ Directive

The recent ratification of the EU Whistleblowers’ Directive significantly enhances the Methodology by protecting those who report harassment as well. This directive integrates with national policies, ensuring whistleblowers are shielded from retaliation, thus strengthening the enforcement mechanisms of the Methodology.

Protected Disclosure: The directive ensures legal protection and support for employees who report harassment, encouraging them to speak out.

Employer Responsibilities: It underscores the obligation of employers to establish a safe reporting environment, reinforcing the Methodology’s proactive approach to handling harassment cases.

Conclusion

Romania’s legal landscape regarding workplace harassment is becoming increasingly robust, informed by both international conventions and regional directives. The Methodology, enhanced by the integration of the whistleblowers’ directive and the principles of the ILO Convention No. 190, represents a significant advancement in creating a safe, respectful, and inclusive working environment. This cohesive approach aligns Romania with international standards and sets a proactive path toward substantial cultural change within workplaces across the nation.

By Alexandru Teodorescu, Managing Partner, Teodorescu & Partners

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Life sciences in Romania, encompassing pharmaceuticals, biotechnology, and medical devices, is a sector marked by both significant challenges and promising opportunities. As the country continues to integrate into the European Union’s regulatory and economic frameworks and as those frameworks evolve and become more complex, Romania faces the constant task of aligning its local industry with European and international standards. This alignment is crucial for fostering innovation, ensuring public health, and attracting foreign investment. The industry’s growth is influenced by many factors, such as financing, pricing and reimbursement, regulatory compliance and product liability, and sustainable public procurement tools and processes.

Funding, Pricing, and Reimbursement

Funding is a constant challenge for the life sciences industry in Romania. Research and development in this sector are capital-intensive, and securing adequate returns proves to be too difficult at times. The Romanian healthcare system is under financial pressure, which often leads to cost-containment measures that can affect the pricing and reimbursement of pharmaceuticals and medical devices. Companies find it challenging to navigate these pricing pressures while ensuring that they can still invest in R&D and innovation, which, in turn, leads to a reduced appetite for market entry. When market entry is sought, there are still significant delays, and critically important medicines and innovative therapies are left outside patients’ reach for long periods of time. Changes in the tax legislation, and particularly its application, add to the already full plate of the industry players. Notwithstanding the above, the industry is constantly considering and designing new, value-based ways to provide Romanian patients with access to modern therapies.

R&D

Venture capital and EU funding programs are useful tools for ensuring the necessary capital for innovation and more companies are making use of available funds. While Romania is in its early stages of supporting startups and SMEs in life sciences and healthcare, enthusiastic steps are being taken, with technology being the main driver at this point. Further opportunities lie ahead as more companies understand not only the financials behind the health business but also the responsibility to ensure access to quality healthcare for patients.

Regulatory Compliance and Product Liability

Regulatory compliance is a critical challenge for life sciences in Romania. The European Union’s stringent regulations on pharmaceuticals and medical devices require companies to navigate a complex web of rules and standards.

New health assessment legislation at the EU level will raise new complexities, while the EU medical devices legislation is still in its early years of application and not entirely understood or appropriately and consistently applied. Product liability is a constant concern. The life sciences industry is particularly sensitive to issues of liability due to the direct impact that pharmaceuticals and medical devices have on patients’ health. Companies must stay vigilant in monitoring the safety and efficacy of their products to avoid legal repercussions and damage to their reputation. The implementation of a new directive on product liability is expected in the near future and the industry will again have to adapt to stricter rules.

However, this challenge also presents an opportunity for companies to differentiate themselves through excellence in product safety. By investing in robust quality control systems and post-market surveillance, companies can minimize the risk of liability and position themselves as trustworthy partners in healthcare. Despite the challenges, the opportunity in relation to wider regulatory compliance lies in the potential for companies to become leaders in quality and safety. By carefully observing EU regulations, companies can improve their reputation and build trust with consumers and healthcare professionals.

Procurement

Public procurement is a critical process in the life sciences industry as many products are purchased by public healthcare providers. The Romanian government has been working to improve the transparency and efficiency of procurement processes. However, companies often face bureaucratic hurdles and delays, a lack of appropriate specifications in procurement documents, and competition from non-compliant products.The modernization of the public procurement system and the slow but sure progress in educating contracting authorities as well as applicants ensure the premises for further positive developments of the sector.

What Is Coming

New challenges are coming from the EU level with new legislation coming into force in the near future such as the new HTA regulation and the new product liability directive. These new rules pose complexities – both on their own and in the aggregate. Adding to the already strict environment, Romania has recently implemented class action legislation, which may mean that we may see class actions in the life sciences sector in the future, initiated locally or spilled over from other jurisdictions.

By Alexandra Radulescu, Partner, Dentons

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The European Public Prosecutor’s Office (EPPO) is an independent body of the European Union (EU) tasked with investigating criminal cases infringing the financial interests of the EU. The EPPO was formally established in 2017 and started operations in 2021. The first and current head of the European Chief Prosecutor is Laura Codruta Kovesi, former Chief Prosecutor of the National Anticorruption Directorate (Directia Nationala Anticoruptie; DNA), the Romanian agency tasked with investigating corruption cases.

Romania has witnessed an increase in the number of cases of fraud involving EU public funds, with approximately 260 ongoing cases involving almost EUR 2 billion. The gist of these investigations concerns fraudulent public procurement operations, followed by VAT and non-VAT fraud, and corruption (including that of public officials). Spread throughout various sectors, the majority of cases concern fraud of EU public funds intended for regional and urban development programs, agricultural and rural development funds, employment, social cohesion and inclusivity funds, and other categories. As of March 2024, 29 individuals from Romania have been charged by the EPPO, seven of which have so far been convicted.

It is expected that this wave of investigations will only increase in the context of the elections in Romania. Such investigations can be launched by both the EPPO and DNA, and, depending on the context and scale, they might significantly affect private companies too. For example, there have been several investigations in Romania in the public procurement sector where large multinationals delivered goods and services to the Romanian government. The DNA claimed that the tender process had been rigged through various methods, such as restricting the characteristics of the products and services so much that the tender process favored only one competitor. The DNA can investigate the public officials involved in a tender process, but it could also claim that the offeror was also involved in the fraudulent scheme. In either case, damages will still be suffered by the private party, at least reputational damages for having its name mentioned in a corruption investigation.

Protection Against Cyber Fraud Should Be a Top Priority for Companies

Another topic that is and seems to remain current is related to cases of cyber fraud. An increase in cyber fraud cases brings again to the forefront the need for companies to invest in protective measures against this type of cyber risk. Cyber fraud can take various forms, but most often involves impersonating decision-makers in a company with the goal of obtaining sensitive information or executing fraudulent transactions.

While cyber risks are an important consideration globally, only 27% of companies from Central and Eastern Europe (CEE), including Romania, consider them a priority. Taking into account the high costs involved with a cyber fraud event, companies would benefit from implementing preventive and protective measures in advance. Once cyber fraud is committed in an EU member state, the money can theoretically be seized at the national level by the respective member state’s anti-money laundering agency. However, not all payments are flagged as suspicious within this system and may therefore pass unchecked, in which case the recovery of the sums lost must then be made through a judicial order. In Romania at least, this is a complex process that can take a long time for a final decision. Companies must create a system of prevention and protection against cyber risks, which should, at minimum, include the following elements: (a) reporting of the incident; (b) gathering and storage of evidence; (c) isolation of the incident; (d) recovery following the incident; (e) gathering of feedback following the incident for the strengthening of the preventive and protection measures already in place.

By Liviu Togan, Partner, Dentons

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In The Debrief, our Practice Leaders across CEE share updates on recent and upcoming legislation, consider the impact of recent court decisions, showcase landmark projects, and keep our readers apprised of the latest developments impacting their respective practice areas.

This House – Implemented Legislation

Drakopoulos Senior Associate Sofia Angelakou reports that Law 5100/2024 entered into force on April 5, 2024, in Greece, inter alia transposing the EU Minimum Tax Directive. The law “introduces two interlocking rules, collectively referred to as the ‘GloBE rules’ through which an additional amount of tax (a ‘top-up tax’) shall be collected each time that the effective tax rate of a multinational enterprise group (MNE) in a given jurisdiction is below 15%,” Angelakou points out. “Greece opted to apply a qualified domestic top-up tax to entities or permanent establishments that are members of an MNE or of a large-scale domestic group and are located in Greece, to joint ventures and affiliates located in Greece, as well as to minority-owned constituent entities located in Greece and certain other entities, as these are further determined in the law.”   

“The law applies to constituent entities located in Greece that are members of an MNE or of a large-scale domestic group which has an annual revenue of EUR 750 million or more in its ultimate parent entity’s consolidated financial statements in at least two of the four fiscal years immediately preceding the tested fiscal year,” Angelakou explains. “It should be noted that the law does not apply to governmental entities, international organizations, non-profit organizations, pension funds, and certain investment entities, as these are defined in Article 3 of the law. All entities falling within the scope of the law are obliged to comply with its provisions as well as with the reporting obligations provided therein, including the obligation to file a top-up tax information return and a top-up tax return with the Greek tax authorities.”

This House – Reached an Accord

Guleryuz Partners Partner Zahide Altunbas Sancak points to a new amendment related to unlicensed electricity production in Turkiye. “On May 14, 2024, Turkiye enacted new amendments to the Regulation on Unlicensed Electricity Generation in the Electricity Market, published in the Official Gazette No. 32546,” Altunbas Sancak reports. “These changes aim to update the regulation in unlicensed electricity production, particularly for small businesses and individual consumers employing smaller-scale systems like solar panels.”

Among the key novelties, Altunbas Sancak highlights that the “update allows consumers under temporary subscriptions to offset their electricity consumption with production from all of their facilities rather than calculating the offset for each facility separately. This change is particularly beneficial for small-scale producers, as it enables more flexible energy management and billing.” She adds that “the regulation also introduces greater flexibility for wind energy projects. If an application is initially rejected due to technical reasons, the applicant is now granted a 60-day period to request a site change or revision. This can be done as long as the connection remains within the same transformer station for the distribution level or the same transmission region for transmission-level connections.” Additionally, “the period to apply for a connection agreement has been extended from 180 days to one year. This extension allows producers more time to align their project timelines with regulatory requirements, ensuring they can meet necessary conditions without rushing.” On the other hand, Altunbas Sancak notes that “the regulation also places new limits on the increase in installed mechanical capacity for production facilities. For those with connection agreement invitations before May 12, 2019, the increase cannot exceed 20% of the installed electrical capacity. For invitations obtained after this date, the mechanical capacity cannot exceed twice the electrical installed capacity, limiting the hardware capability that could potentially be used for electricity production.” Overall, Altunbas Sancak believes that while the original intention was “to encourage renewable energy use by reducing bureaucratic hurdles, the frequent modifications to these regulations are now proving challenging for the public to navigate, even if the changes themselves are not particularly anti-user.”

This House – The Latest Draft

Wolf Theiss Associate Paulina Urbanska draws attention to proposed amendments to the Labor Code regarding the length of service in Poland, planned for the third quarter of 2024: “The draft assumes that the period of employment will include periods of work on the basis of an agency contract, contract of mandate, or other contract for the provision of services, or the performance of work under a contract for the provision of services by students up to the age of 26.”

“According to the justification for the planned changes, in the opinion of the Ministry of Family, Labor and Social Policy, which is responsible for the project, the Polish Labor Code does not provide for unified rules for determining the length of service for the purpose of granting all employee entitlements arising from the employment relationship and access to certain jobs,” Urbanska explains. “Meanwhile, labor law provisions – both the Labor Code, professional pragmatics, and autonomous sources of labor law – provide for a number of employee rights, the acquisition of which depends on the employee having a certain length of service (e.g., the right to a jubilee award or seniority bonus). The lack of unified rules for determining the length of service leads to considerable uncertainty in practice, and in many cases, employers determine the length of service solely on the basis of periods of employment resulting from employment and service relationships.”

The Verdict

According to Jalsovszky Partner Tamas Feher, the Hungarian litigation community has been talking about “a decision of the Hungarian highest court (Kuria) concerning the reimbursement of the opponent’s legal costs.” Hungarian judges “have long been famous for significantly reducing the costs awarded to the winning party by detaching these from the lawyer’s fees which were incurred during the proceedings,” Feher notes. “This has sometimes led to bizarre reasonings. For instance, some judges have gone to great lengths to describe how poor the work of the attorney was, despite winning the case. Or, in some cases, the awarded costs have been severely reduced based on the number of arguments of the winning party which did not catch on with the judge.”

“This recent judgment is now hoped to put an end to this unfortunate practice,” Feher says. “In its decision, the Kuria stated that the hourly rate can only be reduced if it is ‘manifestly contrary to market conditions and common sense.’ The Kuria also explained that the work done by a lawyer cannot be judged by the number of pages of pleadings and the number of hours spent in court and neither should the (perceived) quality of the work of the lawyer representing the winning party be a reason for a reduction of costs.”

“If this new practice now really seeps down to the everyday practice of the lower courts – as should be the case – it could bring about seismic changes in how people litigate in Hungary,” Feher argues. “On the one hand, it should improve the benefit-to-cost ratio of litigating smaller claims. It should also incentivize parties to settle in more complex cases, as the financial risk to the losing party increases. Moreover, it discourages litigation initiated in bad faith, or with respect to highly dubious claims.”

In the Works

A notable development in Serbia in April, according to JPM & Partners Senior Partner Jelena Gazivoda, was an “agreement signed in Budapest to merge the Hungarian electricity exchange HUPX with ADEX – the first regional electricity exchange for Central and Southeast Europe.” Gazivoda explains that “ADEX was established in 2022 by the Serbian and Slovenian transmission system operators and the European electricity exchange EPEX SPOT. This merger, part of a project initiated in 2018, aims to create a unified trading platform that enhances operational synergy and accessibility while providing a single trading and clearing service for Serbia, Slovenia, and Hungary.” Gazivoda says “the merger is expected to bolster energy stability and supply security and represents a significant step toward integrating with the single European electricity market. The agreement also fosters closer cooperation between the Serbian transmission system operator EMS and the Hungarian transmission system operator MAVIR, particularly in merging day-ahead markets with the European market. This collaboration is crucial for Serbia, as it advances the country’s green transition by supporting the integration of renewable energy sources. The joint exchange of Serbia, Slovenia, and Hungary is anticipated to begin operations by the end of 2024.”

Regulators Weigh In

Nestor Nestor Diculescu Kingston Petersen Partner and Head of the Competition Anca Diaconu says that “very recently, the Romanian Competition Council (RCC) has expressed its willingness to initiate the process of drafting guidelines concerning the Romanian Foreign Direct Investment (FDI) screening regime.” Diaconu explains that “the current FDI regime was enacted in Romania in April 2022, providing for the examination, from a national security perspective, of certain investments exceeding EUR 2 million. The regime experienced several rounds of amendments, seeking an ever-wider scope of application.” She highlights that “in its intention to catch as many transactions as possible in the net, the law has left several open points, generating practical difficulties and, in essence, leading to an influx of notifications. Practitioners now hope that the RCC will seek to bring more certainty into the arena of FDI screening.” According to her, addressing issues such as foreign-to-foreign transactions, internal restructurings, and investments undertaken in several steps would be more than welcome. “Hopefully, the authority will take the opportunity to put an end to some pressing debates in the field,” Diaconu concludes.

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.