Sponsors

Sponsors in Romanian project finance transactions are typically private companies active in the relevant industry, most commonly renewable energy developers, infrastructure operators and other corporate investors. The renewable energy space in particular has seen a steady influx of independent power producers (IPPs), ranging from established pan-European platforms to newer entrants building out greenfield solar, wind and battery storage pipelines, alongside utilities and industrial groups pursuing generation assets to hedge their own consumption. Local developers also remain active, often partnering with or exiting to larger international IPPs once projects reach a bankable stage. Sponsors typically structure their investment through a special purpose vehicle.

Lenders

On the lending side, the market is dominated by commercial banks – both international banks active in Romania and local banks, which together provide the bulk of senior debt financing, most commonly through club deals or syndicates led by one or more mandated lead arrangers. International financial institutions (including multilateral development banks) are equally prominent, often anchoring a financing alongside commercial lenders. Alternative providers of debt capital, including institutional and infrastructure debt funds, have also become increasingly active in the market, particularly where sponsors seek more flexible structuring beyond what traditional bank syndicates are prepared to underwrite, although commercial banks and international financial institutions (IFIs) remain the primary source of senior debt financing for Romanian projects, particularly in the renewable energy and infrastructure sectors.

Public-private partnerships (PPP) in Romania are governed by Government Emergency Ordinance No 39/2018 (GEO 39/2018), which replaced Law No 233/2016 (itself a replacement of Law No 178/2010) and regulates the conclusion, performance and termination of PPP contracts. It recognises:

• contractual PPP, implemented through a project company wholly owned by the private partner; and
• institutional PPP, implemented through a jointly owned project company.

A PPP may only be used where more than half of the project company’s revenues are expected to come from the public partner, and the award follows the applicable procurement or concessions legislation. The PPP Law is broadly aligned with the EU legal framework, and its adoption in 2018 was a welcome step for the Romanian PPP market, although its interaction with sector-specific legislation – such as the rules applicable to public procurement, concessions and regulated sectors, including healthcare – is not always fully settled and can require bespoke legal analysis and, at times, complementary secondary legislation for a given project.

Romania’s PPP market is best described as still finding its footing: despite a dedicated legal framework in one form or another for nearly two decades, and sustained government interest in using PPPs for motorways, hospitals and other strategic infrastructure, no major PPP project has yet reached financial close and long-term operation. This reflects the practical realities of structuring, financing and sustaining complex, long-term partnerships, rather than any fundamental flaw in the legislation itself. The Comarnic-Brasov highway is the best-known illustration of these challenges: successive attempts to deliver this stretch of motorway through a PPP or concession structure since 2004 have not yet reached financial close, most recently under GEO 39/2018, with similar delays affecting various regional hospital and other strategic infrastructure projects periodically placed on the government’s PPP pipeline.

The key lesson from this experience is less about the legislation and more about the conditions needed for a bankable PPP in Romania: a robust risk allocation and revenue structure that lenders can underwrite, sustained institutional ownership of the project through to completion, and realistic budgeting that holds up over a multi-year procurement and construction timeline. On the legislative side, certain features of the PPP Law are routinely scrutinised by sponsors and lenders during structuring, including the cap on public sector and EU funds contribution during the investment phase, and the mechanics for calculating termination compensation payable to the private partner, both of which can influence how a project is financed. The public partner must first obtain government or local authority approval of a substantiation study addressing affordability, risk allocation, impact on public debt and deficit, bankability and economic efficiency. Security over the private partner’s receivables or project company shares may only be granted to the project’s financiers, and share transfers require the public partner’s consent. Romania remains, for now, in a preparatory rather than an execution phase for PPPs, with the groundwork being laid for the first major PPPs to come to market.

Structuring Issues

The starting point for structuring any Romanian project finance transaction is bankability. Each counterparty and each project document, from the EPC contract and O&M agreement to any offtake or concession arrangement, must be capable of being financed on a limited-recourse basis, with lenders able to take security over the project company’s rights, exercise step-in rights in the event of contractor or operator default, and rely on direct agreements with key counterparties. Achieving this requires the early engagement of lenders, well in advance of finalising project documentation, so that bankability requirements are reflected in the project agreements from the outset rather than renegotiated once terms have already been settled with contractors and offtakers.

Close co-ordination between the project documents and the finance documents is equally critical, as they are negotiated in parallel: the project company’s exposure to payment or performance obligations under the EPC contract and financing being secured tend to move together, just as a transaction cannot reach financial close without the key project agreements that lenders regard as bankable being in place. Further structuring considerations include:

• the choice of special-purpose vehicle;
• the allocation of construction and operational risk through the underlying project agreements;
• the security package granted over the project company’s assets; and
• the role of the agent and security agent where multiple finance parties are involved.

Minimum equity contribution requirements, financial covenants such as debt service cover ratios, and conditions precedent relating to permitting, land rights and regulatory approvals are also central to how a facility is structured and disbursed, and should be sequenced realistically against the project’s construction and procurement timeline.

Funding Techniques

Syndicated senior debt provided by commercial banks remains the backbone of the Romanian market, typically structured as term or revolving facilities divided into tranches carrying different margins, grace periods and maturities to reflect the construction and operational phases of the project, with one or more banks acting as mandated lead arranger, agent and security agent on behalf of the syndicate.

International financial institutions are frequently brought into the capital structure alongside commercial lenders, whether as direct co-financiers or through parallel facilities (under an A/B loan or similar structure, which can extend tenor and improve pricing beyond what the commercial market would offer on a standalone basis). Mini-perm structures are also seen on occasion, under which the facility is sized on a long-term amortisation profile but matures well before full repayment. Loan note instruments remain a further funding technique, with noteholders benefiting from security granted across the issuer, parent and project holding companies and a dedicated security and monitoring agent structure.

The domestic capital markets and green or sustainability-linked financing instruments have yet to play a material role in funding Romanian projects, but their use is expected to grow. Shareholder loans and other forms of subordinated or mezzanine debt commonly supplement senior financing, particularly to bridge equity contributions during the construction phase.

In the coming year, renewable energy, energy storage and large-scale infrastructure are expected to remain the most active sectors in Romanian project finance. Solar, onshore wind and storage are expected to remain the dominant asset classes, underpinned by Romania’s binding renewable energy targets. As the market matures, bankability is increasingly determined less by the availability of capital than by a project’s ability to demonstrate a realistic grid connection pathway, a mature permitting position and credible revenue visibility, particularly as reforms to the grid connection and capacity allocation regime take effect. Battery energy storage systems (BESS) are expected to see continued growth, having moved beyond grant-funded pilots to projects attracting commercial and development bank debt in their own right, as grid-balancing needs increase alongside growing intermittent renewable capacity.

Collateral Package

In a standard single-asset, non-recourse financing, the collateral package is comprehensive: lenders take security over substantially all of the project company’s assets, including its shares, receivables (under intra-group and project agreements), bank accounts, movable assets and real estate (land, plants and related installations). In portfolio financings, the position is assessed on a case-by-case basis: lenders in the Romanian market will consider taking security at HoldCo level rather than mortgaging each OpCo’s assets individually, in line with international portfolio financing practice, although this is not always the approach adopted.

Perfection Requirements

Perfection requirements differ by asset class, but the following generally applies:

• movable assets, shares, receivables and bank accounts are secured by a movable mortgage under the Romanian Civil Code, perfected by registration with the National Register for Publicity in Movable Property (NRMP), with share mortgages also recorded in the company’s shareholders’ register and account security additionally requiring notification of, and control arrangements with, the account bank; and
• real estate is secured by a notarised mortgage registered with the Land Register.

A movable mortgage becomes effective only once the secured obligation has arisen and the mortgagor has acquired rights over the relevant asset, so security documents are typically drafted to cover future assets and are supplemented by updated filings as new assets are acquired. NRMP registrations are valid for five years from registration and must be renewed to preserve ranking. Perfection is generally quick: NRMP registration takes effect immediately upon filing, and Land Register registration is typically completed within a few business days to a few weeks, depending on the relevant local register. Associated costs are modest relative to deal size and are addressed in more detail in 2.3 Registering Collateral Security Interests.

Security Agency

Romanian law expressly permits security to be created and held in favour of a security agent acting for a syndicate of lenders or noteholders, which allows the secured parties to appoint a security agent as titleholder for their collective benefit, but only for mortgages over movable assets; all secured parties must be party to a real estate mortgage. This structure is commonly used in syndicated facilities and loan note financings, allowing a single security agent to take, perfect, hold and enforce security on behalf of all secured parties.

Romanian law has no direct equivalent to the English floating charge: security is asset-specific, not a single charge over a company’s entire undertaking. The closest analogue is a mortgage over a universality of movable assets, combined as needed with mortgages over individually identified movable and immovable assets, shares and receivables – a composite package that in practice delivers much of a floating charge’s commercial coverage, including extension to after-acquired assets within the secured category. A mortgage over an individually identified asset outranks a universality mortgage that merely incorporates it, unless the latter identifies that asset with sufficient precision.

Registration costs fall into two categories, split along the real estate/movable asset divide that runs through the Romanian security regime generally.

Authentication Costs

Real estate mortgages require notarial authentication and Land Register registration. For facilities of the size typically seen in project finance, the notary’s fee, inclusive of VAT, works out at approximately 0.1%–0.15% of the secured amount, and the Land Register stamp duty is a flat 0.1% of the secured amount, plus a nominal fee per Land Book folio registered.

National Register Costs

Movable mortgages are registered with the NRMP for a fixed fee, unrelated to the facility or secured amount, making this route markedly cheaper than real estate registration on larger financings.

Under the Romanian Civil Code, a mortgage is valid only where the mortgaged asset is described with sufficient precision, though individual identification of each asset is not required: a listing, a defined category, a quantity or a determination formula will each suffice, provided the asset can reasonably be identified from it.

A mortgage over a universality of assets must describe its nature and content; a bare stipulation covering “all of the debtor’s assets” or “all present and future assets” will not meet this standard. Bank account mortgages must individualise the specific account, and a universality of receivables does not extend to insurance proceeds. In practice, Romanian security documents combine a defined category of mortgaged property, such as shares, receivables or equipment, with illustrative, non-exhaustive lists and determination formulas covering present and future assets within that category. After-acquired assets within the category are captured automatically, without further registration, except where an asset is converted into a different type of product, in which case the mortgage retains its ranking only if the registration is updated to reflect this within the statutory time limit.

Beyond the formalities already discussed, a number of further restrictions apply whenever a Romanian company grants security or a guarantee for obligations other than its own.

Corporate Benefit

A Romanian company granting security or a guarantee for another company’s obligations needs a corporate benefit for doing so. Legal cause is presumed, placing the burden on a challenger to prove its absence, but security granted with no discernible benefit to the grantor (most commonly an upstream or cross-stream guarantee with no clear benefit flowing back to it) remains exposed to challenge.

Financial Assistance

Financial assistance rules restrict a joint stock company from granting security to fund the subscription or acquisition of its own shares by a third party, and separately prohibit it from securing or guaranteeing loans taken by its own directors or executive officers, or by related companies and individuals. Breach exposes the security or guarantee to challenge, although the prevailing view is that the prohibition on directors’ loans does not extend to a limited liability company, which is the vehicle of choice for most Romanian project companies.

Shareholder Approval

Shareholder approval is generally required for a company to validly grant security, and security granted without it is exposed to challenge.

Insolvency Challenge

Security or guarantees granted by an insolvent or near-insolvent company can be challenged under the Civil Code, which requires a creditor to show, cumulatively, that:

• the transaction was intended to defraud its rights;
• it created or increased the grantor’s state of insolvency;
• for transactions involving mutual obligations, the counterparty knew this would be the effect;
• the challenging creditor’s claim was certain at the time the action was brought; and
• the one-year limitation period has not expired.

Lenders satisfy themselves as to the absence of prior or competing security primarily by searching the relevant public database.

Movable Assets

For movable assets, an NRMP search discloses registered movable mortgages and conditional assignments by debtor name and asset description. Such search is available online, and can be obtained in certified form through a licensed NRMP operator for greater evidential weight.

Real Estate

For real estate, an excerpt from the Land Register (Land Book), obtained from the competent Land Book Office, discloses all registered encumbrances, prohibitions and other rights over the property.

Corporate and Insolvency Status

For corporate status and insolvency, lenders search the Trade Registry, which records constitutional documents, shareholders, directors and any registered insolvency or liquidation proceedings, and the Insolvency Proceedings Bulletin, which publishes procedural acts in insolvency cases.

These searches are typically updated as close as possible to signing and confirmed by the borrower through representations and warranties and a closing certificate. Lenders and their counsel should nonetheless bear in mind that none of these registers is infallible: the NRMP, Trade Registry and Insolvency Proceedings Bulletin are not always updated in real time.

Release

A mortgage terminates and the mortgaged property is discharged upon the full, irrevocable and final satisfaction of all secured obligations. In practice, the finance documents will specify the conditions for release, including confirmation from the agent that no further amounts are outstanding and that no further financial accommodation will be made available, and the borrower typically bears the costs of the release formalities. Where a security agency structure is in place, release is effected by the agent acting on required lender instructions.

Deregistration

Security over movable assets is released by filing a cancellation notice with the NRMP, removing the registered interest from the public record. Security over real estate is released by filing a cancellation request with the competent Land Book Office, accompanied by the mortgagee’s consent. In case of security over shares, the company’s shareholders’ register also requires updating to remove the mortgage notation.

Enforcement Trigger

The trigger for enforcement is a matter of negotiation rather than a fixed rule of law: finance documents typically condition enforcement on the occurrence of an event of default, a continuing event of default, or acceleration of the secured obligations. As for the enforcement route itself, Article 2,431 of the Civil Code treats a mortgage agreement as a writ of enforcement, so the mortgagee can proceed directly to enforcement without a court judgment on the merits, provided the secured obligation is certain, liquid and payable, an enforcement formula has been obtained, and the security is registered with the NRMP and/or the Land Register.

Enforcement Methods

For movable security, the mortgagee has a range of enforcement methods, exercisable at its discretion and in combination:

• taking possession of the mortgaged assets and selling them by public auction or direct negotiation;
• appropriating the assets against the secured obligations;
• taking over the assets for administration;
• instructing debtors under mortgaged receivables, or insurers under mortgaged policies, to pay the mortgagee directly;
• setting off mortgaged bank account balances against the secured obligations; and
• where it controls the account, instructing the account bank to freeze and release the balance in its favour.

The mortgagee may also use enforcement officers to take possession of the assets. Real estate enforcement proceeds by court-supervised public auction under the Code of Civil Procedure.

Priority

Priority among competing secured creditors follows the date and time of NRMP registration for movable assets and the date of Land Register registration for real estate, subject to statutory exceptions (see 5.4 Competing Security Interests).

Security Agent Enforcement

A security agent appointed under Romanian law may enforce movable security directly in its own name for all secured parties, without each lender being individually named in the proceedings – the standard structure in syndicated Romanian project finance transactions.

Governing Law

Romanian courts will generally give effect to a contractual choice of foreign law, under the Rome I Regulation, which is the primary source of Romanian conflict-of-laws rules for contractual obligations. Rome I applies regardless of whether or not the parties are domiciled in the EU, or whether the chosen law is that of a member state. Courts may nonetheless refuse to apply a foreign law provision if it is:

• not specifically pleaded and proved;
• procedural, fiscal or penal in nature; or
• contrary to Romanian public policy.

The parties’ choice of foreign law does not override mandatory provisions of Romanian law; where all elements of the situation connect only to Romania, that choice will not prejudice non-derogable Romanian rules.

Jurisdiction

Submission to a foreign court’s jurisdiction is likewise generally recognised. Within the EU, recognition follows the Brussels I Regulation. For the United Kingdom, Singapore, Montenegro or Mexico, recognition follows the Hague Convention on Choice of Court Agreements, provided the clause is exclusive and Convention-compliant. For Iceland, Norway or Switzerland, the 2007 Lugano Convention applies. For other states, the Romanian Code of Civil Procedure governs and requires reciprocity between Romania and that state, among other things.

Romanian courts may nonetheless accept jurisdiction despite an exclusive foreign jurisdiction clause, particularly in proceedings brought by the Romanian obligor. Finance documents in the Romanian market commonly use one-sided jurisdiction clauses, under which the obligor submits exclusively to a named foreign court while lenders may sue anywhere competent; the enforceability of such clauses has been debated since the French Cour de cassation’s 2012 decision on Article 23 of the Brussels I Regulation – a risk worth considering when structuring cross-border transactions.

Whether a foreign judgment or arbitral award can be enforced in Romania without a retrial on the merits depends on the court of origin and the applicable instrument.

EU Judgments

EU member state judgments are recognised and enforced under the Brussels I Regulation, without re-examination of the merits, subject to limited grounds of refusal such as manifest incompatibility with Romanian public policy, irreconcilability with a prior Romanian judgment, or default of appearance without proper service.

Hague Choice of Court Convention

Judgments from the United Kingdom, Singapore, Montenegro or Mexico under an exclusive, Convention-compliant jurisdiction clause are recognised under the Hague Convention on Choice of Court Agreements, without re-examination of the merits, subject to the Article 9 grounds of refusal.

Other Hague Convention and Lugano Convention States

Judgments from England, Ukraine or Uruguay under a non-exclusive jurisdiction clause are subject to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (2019), subject to the Article 7 grounds of refusal.

Judgments from Iceland, Norway or Switzerland fall under the 2007 Lugano Convention, on terms broadly equivalent to the Brussels I Regulation (recast).

Other Courts

Judgments from courts not covered by any of the above instruments are recognised and enforced under the Romanian Code of Civil Procedure by way of an exequatur procedure. Recognition requires, among other conditions, that:

• the judgment is final where made;
• the rendering court had jurisdiction;
• reciprocity exists between Romania and that state;
• the defendant was properly served and able to defend itself;
• the judgment was not obtained by fraud or contrary to Romanian public policy; and
• no substantially similar proceedings are pending before, or have been decided by, the Romanian courts.

Arbitral Awards

Foreign arbitral awards are recognised and enforced under the New York Convention, to which Romania is a party, and under the Romanian Civil Procedure Code, without re-examination of the merits, provided the dispute is arbitrable in Romania and the award does not breach Romanian public policy.

Procedural Requirements

All documents submitted to Romanian courts or enforcement authorities must carry a legalised Romanian translation. Romanian courts apply Romanian procedural rules, and recognition, enforcement or direct enforcement of a finance document requires the payment of applicable court taxes and any enforcement officers’ fees.

Exequatur Limitations

Enforcement of a judgment from a court outside the Brussels I Regulation, the Hague Conventions or the Lugano Convention proceeds under Articles 1103 to 1110 of the Romanian Civil Procedure Code, largely mirroring the recognition conditions outlined in 3.3 Judgments of Foreign Courts and additionally requiring proof the judgment is enforceable in its state of origin. Article 1098 bars a Romanian court from reviewing or modifying a foreign judgment’s substance, so exequatur never amounts to a retrial of the merits.

Other Considerations

Finally, an obligation to be performed outside Romania may not be enforceable here if performance would be illegal or contrary to public policy where performed. Where security is enforced over assets located outside Romania, the law of that jurisdiction governs its validity and effectiveness, rather than Romanian law.

Lending Restrictions

There is no general prohibition or licensing requirement under Romanian law preventing a foreign (non-Romanian) lender from granting a loan to a Romanian borrower. It is not necessary for a foreign lender to be licensed, authorised or otherwise entitled to carry on business in Romania solely by reason of executing, delivering, performing or enforcing its rights under finance documents.

Exchange Controls

There are currently no exchange control restrictions in Romania on cross-border lending; however, the National Bank of Romania has reserved the right under Regulation No 4/2005 to activate temporary safeguard measures if massive short-term foreign currency inflows create significant pressure on the foreign exchange market, which could include a fee on foreign exchange transactions or temporary withholding of incoming or outgoing amounts, among other measures. Any such measures must be notified to the European Commission, must apply without discrimination against any particular transaction or entity, and cannot last longer than six months.

Reporting Requirements

In addition, facilities granted by foreign financial institutions with a term exceeding one year constitute long-term private external debt under National Bank of Romania Regulation No 4/2021 on the reporting of statistical data and information to the National Bank of Romania, and must be notified to the National Bank of Romania’s Statistics Department for statistical purposes. The Romanian resident borrower must submit several forms within 30 calendar days of signing the facility agreement, setting out the schedule of drawdowns, principal repayments and interest and fee payments, and subsequent changes to the facility agreement, amongst other matters.

General Position

Generally, there are no restrictions under Romanian law on granting security or guarantees to foreign lenders; the restrictions outlined in 2.5 Restrictions on the Grant of Security or Guarantees apply equally regardless of whether the beneficiary is Romanian or foreign.

Governing Law of Security

One point specific to cross-border financings is the governing law of the security documents. While the parties are generally free to choose a foreign law for the facility agreement and guarantees, a mortgage over assets located in Romania must be governed by Romanian law, which is mandatory for the creation, perfection and enforcement of security over Romanian assets.

Foreign Lender Eligibility

Beyond this, foreign lenders benefiting from Romanian law security are not required to be licensed, authorised or registered to do business in Romania solely by reason of taking, holding or enforcing that security, and security may be granted and perfected, including through a security agent, in favour of a syndicate that includes foreign lenders in the same way as for Romanian lenders.

Romania screens foreign direct investment under Government Emergency Ordinance No 46/2022, as approved and amended by Law No 164/2023, which implements Regulation (EU) 2019/452 and amends the Competition Law (Law No 21/1996). Screening is carried out by the Commission for the Examination of Foreign Direct Investments (CEISD), operating within the Competition Council, which reviews qualifying investments by reference to national security and public order criteria, and issues a binding or consultative opinion depending on the proposed outcome, with the government being empowered to conditionally authorise, reject or order the unwinding of a notified investment. Since the 2023 amendments, the regime distinguishes between non-EU investors and EU investors, and certain notifications made under the Competition Law’s merger control regime are also subject to CEISD review where the relevant thresholds are met.

There are currently no exchange control restrictions in Romania. Foreign investors may freely repatriate capital, dividends, profits and loan repayments, with no requirement for prior approval of cross-border transfers under Romania’s fully liberalised, EU-aligned capital movement regime. However, the National Bank of Romania has reserved the right to activate temporary safeguard measures in certain circumstances, as described in 4.1 Restrictions on Foreign Lenders Granting Loans.

Romanian law does not prohibit a project company from opening and maintaining foreign currency accounts abroad; Romania has no general exchange control regime, and resident companies may hold and use foreign currency accounts both domestically and abroad without prior authorisation from the National Bank of Romania. In practice, however, lenders generally require the project company’s principal operating, revenue and reserve accounts to be maintained onshore with a Romanian account bank, so that the account security package (a movable mortgage over the accounts, combined with notification of the account bank to establish control) can be created and perfected under Romanian law.

Financing Agreements and Project Agreements

Financing agreements such as facility agreements, intercreditor agreements and guarantee agreements do not generally need to be registered, filed with a Romanian public authority or notarised in order to be valid and enforceable between the parties; the absence of such formalities has no bearing on validity, as distinct from the separate perfection requirements applicable to security documents.

The same is generally true of project agreements, including EPC, O&M and offtake arrangements, which are valid and enforceable as a matter of contract law without registration or notarisation. The main exception concerns project agreements that involve real estate, which must be registered with the Land Register.

Reporting Obligation

Where a facility is provided by a non-resident lender and qualifies as long-term private external debt, the Romanian resident borrower must notify the financing to the National Bank of Romania for statistical purposes, as further described in 4.1 Restrictions on Foreign Lenders Granting Loans. This is a reporting obligation, not a condition to the facility agreement’s validity or enforceability.

Land Ownership

Land ownership itself does not require a licence; the real constraint is eligibility to own, not authorisation to do so. Under Article 44(2) of the Constitution, non-EU citizens, stateless persons and legal entities may acquire private land only under EU accession arrangements or a reciprocity treaty, or by inheritance, and no reciprocity treaty is currently in force. EU/EEA entities acquire and hold land on the same footing as Romanian nationals; non-EU investors typically work around the restriction by holding land through a Romanian subsidiary or by taking a superficies right over a building on the land, neither of which requires a specific licence beyond standard notarisation and Land Register formalities.

Natural Resources

Natural resources sit on the other side of the line. Under Articles 136(3) and (4) of the Constitution, mineral wealth of public interest within the subsoil is inalienable public property that may only be concessioned or leased under organic law, never privately owned. Undertaking the business of exploring for or extracting natural resources therefore requires a licence or concession, granted by the state rather than acquired by ownership.

Mining and Petroleum Licences

Mining is licensed under Mining Law No 85/2003 and its implementing rules, which govern prospecting permits, exploration licences, mining licences and mining permits, together with applicable fees, royalties and environmental guarantees, generally awarded by public auction or competitive procedure.

Petroleum follows a comparable concession regime, with the added protection of a stability principle: the terms of a petroleum concession remain governed by the conditions prevailing at the time it was entered into, unless subsequent legislation is more favourable to the titleholder, and the agreement can only otherwise be amended by a government-approved additional act.

Eligibility of Foreign Entities

Such licences can be held by foreign entities. Neither the Mining Law nor the Petroleum Law restricts eligibility to Romanian entities, and foreign investment is permitted on a national-treatment basis across the economy, so the relevant question in practice is not nationality but satisfying the specific award criteria under the applicable competitive procedure.

Agency

Romanian law recognises agency, so a facility agent may be appointed to administer a loan facility on behalf of a lender syndicate, which is a standard structure in Romanian syndicated transactions.

Trusts

The common law trust concept has no equivalent in Romanian civil law, and Romania is not a party to the 1986 Hague Convention on Trusts. A Romanian court is therefore likely to treat a purported security trustee as acting on its own account rather than as fiduciary for the beneficiaries, which is a structural challenge for common law security trust arrangements seeking recognition in Romania.

Security Agency

The principal, and most commonly used, alternative is a security agent structure: secured parties appoint a security agent as sole titleholder of movable security for their collective benefit, without each lender being individually named. This does not extend to real estate, where all secured parties must be named as mortgagees in the notarised deed.

Parallel Debt

Parallel debt is not used to support Romanian-law security. Where a cross-border financing is structured with a parallel debt clause at the level of the overarching facility, typically governed by English law, Romanian counsel will generally advise that the Romanian-law security be structured through the security agency mechanism described above instead.

Movable Asset Priority

Priority among competing security interests over movable assets is determined by the time of registration with the NRMP, subject to certain statutory exceptions. A perfected movable mortgage always takes priority over an unperfected one. Where the same asset is subject to both a movable and an immovable mortgage, the creditor whose mortgage was made public first in the relevant registry takes priority; if both are registered on the same day, the immovable mortgage prevails.

A mortgage over an individually identified movable asset takes priority over a mortgage over a universality of movable assets that incorporates that asset, unless the universality mortgage describes the asset with sufficient detail to identify it.

A creditor who has control over a mortgaged bank account takes priority over a creditor who does not, provided the controlling creditor has also registered its mortgage with the NRMP.

Real Estate Priority

For real estate, priority is determined by the date of registration with the Land Book.

Contractual Subordination

Contractual subordination, typically documented in an intercreditor or subordination agreement, is the principal method used in Romanian project finance to regulate the relative ranking of senior debt, mezzanine debt and shareholder loans, and to restrict junior creditors from receiving payments or enforcing rights while senior debt is outstanding. Priority can be contractually varied, including a higher ranking secured creditor consenting to lower ranking security or agreeing a different priority arrangement with another secured creditor.

However, contractual subordination may not survive a Romanian borrower’s insolvency in its full contractual form, since insolvency administrators and courts apply the statutory order of payment rather than the parties’ contractual ranking; it therefore operates mainly as an obligation between the creditors inter se and may not bind the insolvency estate or third-party creditors.

Romanian law does not generally require a project company to be incorporated in Romania solely because the project is located there, but in practice they almost invariably are, since Romanian law governs the ownership and operation of Romanian assets, the grant of permits and licences, project agreements with Romanian counterparties, and the creation and perfection of security over Romanian assets.

The limited liability company is the most common legal form, offering governance flexibility, lower minimum share capital and simpler formalities, and is the standard vehicle for single-asset or single-project financings, including renewable energy projects. A joint stock company may be used instead where the company will access capital markets, issue publicly traded securities, or have a larger number of shareholders. In either case, the project company is typically a special-purpose vehicle with constitutional documents tailored to the finance documents and agreed security package.

Romanian law provides two broad categories of procedure for companies in financial difficulty, both governed by Law No 85/2014 (the Insolvency Law):

• insolvency prevention procedures; and
• insolvency procedures.

Prevention Procedures

The law offers two insolvency prevention procedures for debtors that are in difficulty but are not yet insolvent. Under the restructuring agreement procedure, a debtor negotiates a restructuring agreement with affected creditors (assisted by a licensed restructuring administrator), voted on by creditor categories and confirmed by the syndic judge, including a comparative analysis of recoveries versus the next best alternative (including bankruptcy).

The preventative concordat is a judicial procedure whose opening suspends individual enforcement actions, under which the debtor restructures and pays creditors under a plan voted on by creditors and approved by the syndic judge.

In both, the debtor retains the right to administer its business, and new or interim restructuring financing benefits from statutory priority over its unencumbered assets.

General Insolvency Procedure

Where a debtor is insolvent (unable to pay certain, liquid and payable debts, presumed after 60 days’ non-payment), the Insolvency Law’s general insolvency procedure may include judicial reorganisation, followed, if necessary, by bankruptcy. Following an observation period, the debtor or other eligible parties may propose a reorganisation plan with a creditor payment schedule, voted on by creditor categories and confirmed by the syndic judge. Debtors not meeting the reorganisation conditions enter a simplified procedure leading directly to bankruptcy. The insolvency threshold is RON50,000 for non-salary claims and six average gross salaries per employee for salary claims.

Judicial reorganisation is uncommon for single-purpose project companies, given their limited operational flexibility and reliance on the project and its contractual rights; insolvency more often leads to a going-concern sale under a reorganisation plan, or bankruptcy with a sale of project assets. Lenders therefore focus on their security package and step-in rights to take control of, or sell, the project before or during insolvency, rather than relying on reorganisation.

Insolvency proceedings against a Romanian borrower, security provider or guarantor significantly constrain a lender’s ability to enforce its rights.

Automatic Stay

An automatic stay on opening suspends all individual enforcement against the debtor and its assets. Lenders cannot enforce movable, real estate or share mortgages without the syndic judge’s authorisation throughout the observation and any reorganisation period, and authorisation may be refused if it would prejudice reorganisation prospects.

Ipso Facto Clauses

Clauses terminating, accelerating or adversely modifying the debtor’s rights solely because insolvency has opened are void. Insolvency-triggered events of default may therefore be unenforceable, so lenders instead draft defaults around the underlying financial deterioration or conduct.

Administration and Distribution

During the observation period, the debtor operates under a judicial administrator, who may continue or terminate contracts (including project agreements) with the syndic judge’s approval, and may resist enforcement. In bankruptcy, the liquidator distributes proceeds under the statutory order of priority, with secured creditors paid from their collateral ahead of unsecured creditors, net of costs.

Avoidance of Transactions

The insolvency practitioner may annul transactions carried out during the suspect period, including security for pre-existing unsecured obligations, reverting an avoided security interest to unsecured status. Contractual subordination may likewise be disregarded, as the practitioner and court apply the statutory priority order instead.

Under the Insolvency Law, creditors’ claims are paid in bankruptcy in the following statutory order of priority.

• Current claims, arising after proceedings open, are paid as they fall due ahead of all pre-opening claims.
• Pre-opening claims may then be ranked by creditor category:
1. the state and the insolvency estate (taxes, duties and proceeding expenses);
2. essential business counterparties and post-opening financiers;
3. employees;
4. other budgetary creditors;
5. secured creditors, to the extent of their collateral’s value net of preservation and sale costs;
6. unsecured creditors; and
7. subordinated creditors, including shareholders/members and closely connected persons (see 6.4 Risk Areas for Lenders). Creditors of equal rank are paid pari passu if funds are insufficient.
• Secured creditors are paid from their specific collateral’s proceeds, up to its value, ahead of unsecured creditors, net of preservation and sale costs; any shortfall ranks as chirographic.

A lender’s recovery therefore depends on the value and ranking of its collateral package: lenders with comprehensive security over the project company’s real estate, movable assets, receivables and bank accounts recover ahead of unsecured creditors from those proceeds, net of costs, while contractual subordination remains subject to the statutory order rather than the parties’ ranking.

The principal risk areas for lenders if the borrower, security provider or guarantor becomes insolvent are as follows.

Avoidance Risk

The insolvency practitioner may annul transactions carried out during the suspect period, including undervalue transfers, early payment of debts, security for pre-existing unsecured obligations, and transactions with closely connected persons. Avoided security reverts the lender’s claim to unsecured status, so lenders should grant security contemporaneously with the credit extension and at arm’s length.

Connected Persons

Persons closely connected to the debtor – including affiliates, management/supervisory body members, related entities, insiders, close relatives of directors, and the ultimate beneficial owner – face heightened scrutiny during the suspect period, and their claims are subordinated under the priority order set out in 6.3 Priority of Creditors.

Stay and Cramdown

As described in 6.2 Impact of Insolvency Process, the automatic stay bars enforcement without the syndic judge’s authorisation once insolvency opens, and clauses triggering default solely on that opening are void. A reorganisation plan may also be confirmed over dissenting creditor categories’ objections under the statutory cross-class cramdown, restructuring a lender’s claim (eg, reduced amount, extended maturities, or debt-to-equity conversion) without its consent.

Collateral Erosion and Director Liability

Collateral value may erode during the observation and reorganisation periods despite the practitioner’s duty to provide adequate protection to secured creditors. Directors – and in some cases shareholders – may face personal liability for contributing to the debtor’s insolvency through mismanagement, fraud or late filing, although enforcement is typically slow and uncertain. Finally, claims of shareholders, members and other closely connected persons, including sponsor shareholder loans, rank behind all other creditor categories.

The Insolvency Law applies to professionals as defined by the Romanian Civil Code, which broadly covers all persons who operate an enterprise, including commercial companies, sole traders and other business entities. However, several categories of entities are expressly excluded from the scope of the insolvency procedures under the Insolvency Law.

The following entities are excluded from the general insolvency procedures under Title I of the Insolvency Law:

• credit institutions, investment firms and other financial institutions and entities subject to the Bank Recovery and Resolution Law (Law No 312/2015), which are instead subject to the dedicated recovery and resolution framework administered by the National Bank of Romania;
• collective investment undertakings in transferable securities and alternative investment funds, which are subject to their own regulatory frameworks;
• insurers and reinsurers subject to the Insurance Law (Law No 237/2015) and the Insurer Recovery and Resolution Law (Law No 246/2015), which are subject to a separate insolvency and resolution regime;
• central counterparties as defined by Regulation (EU) No 648/2012 (EMIR); and
• central securities depositories as defined by Regulation (EU) No 909/2014 (CSDR).

In addition, the Insolvency Law does not apply to pre-university and university educational institutions, nor to certain research and development entities.

For entities subject to special insolvency or resolution regimes, such as credit institutions and insurers, the applicable legislation provides for dedicated procedures that consider the systemic importance and regulatory requirements of those entities, and the general insolvency procedures under the Insolvency Law do not apply.

Entities exercising liberal professions are subject to the Insolvency Law in respect of their enterprise, but their professional status is not affected by the insolvency proceedings.

In the context of project finance, the exclusion of credit institutions and investment firms from the general insolvency regime means that the insolvency of a lender is governed by the bank resolution framework rather than the Insolvency Law, which may affect the treatment of the lender’s commitments and security rights in a cross-border financing.

Romanian law does not impose general restrictions on the types of insurance that may be taken out over project assets. Project companies are free to place insurance with Romanian or foreign insurers, subject to the requirements described below.

Regulatory Framework

Insurance activities in Romania are regulated by Law No 237/2015 on insurance and reinsurance activity, and are supervised by the Financial Supervisory Authority (ASF). Insurers operating in Romania must be authorised by ASF or, in the case of EU-passported insurers, must comply with the applicable notification requirements. There is no restriction on placing insurance with foreign insurers, provided they are duly authorised or passported to operate in Romania or the insurance is placed on a cross-border services basis.

Rating Requirements

Finance documents in Romanian project finance transactions typically require insurers to hold a minimum credit rating (commonly A- from S&P or Fitch, or A3 from Moody’s) and be of sound financial standing and international repute. These requirements are contractual rather than statutory, but they reflect market practice and the expectations of lenders and their insurance advisers.

Insurance Premium Tax

Insurance premiums paid in Romania are subject to insurance premium tax at rates that vary depending on the class of insurance.

Assignment of Proceeds

Security is routinely taken over insurance proceeds in Romanian project financings, with the form it takes following the governing law of the underlying insurance policies:

• where policies are governed by English law, security is commonly taken by way of an English law assignment of proceeds in favour of the security agent;
• where they are governed by Romanian law, security is instead taken by way of a Romanian law movable mortgage over the borrower’s rights under the policies.

In either case, lenders will require the insurers to acknowledge the assignment or mortgage and to endorse the relevant policies in the lenders’ favour, addressing loss payee provisions, non-vitiation, waiver of subrogation and advance notice of cancellation or material change.

There are no restrictions under Romanian law on insurance policies over project assets being payable to foreign creditors. Insurance proceeds may be paid directly to a foreign lender or security agent acting as loss payee, provided the relevant assignment or loss payee arrangements have been properly documented and notified to the insurer.

In practice, finance documents in Romanian transactions require the borrower to ensure that the insurers include a lenders’ endorsement in each insurance policy, naming the security agent (which may be a foreign entity) as first loss payee in respect of claims above a specified threshold, and acknowledging the assignment of the borrower’s rights under the insurance policies to the security agent. The endorsement typically also provides for the insurer to give advance notice to the security agent of any cancellation, suspension or material change to the policy, and to waive rights of subrogation against the lenders and the security agent.

Where insurance proceeds are paid to the security agent as loss payee, the finance documents will specify how those proceeds are to be applied, typically either towards reinstatement of the damaged assets (if the conditions for reinstatement are met) or as a mandatory prepayment of the outstanding loans. There are no exchange control restrictions on the transfer of insurance proceeds to a foreign security agent or lender, and no withholding tax applies to insurance proceeds paid to non-residents.

Interest

Interest payable on loans granted to Romanian residents by non-resident lenders is generally subject to Romanian withholding tax at a domestic rate of 16%, subject to any more favourable treatment under an applicable double tax treaty or EU directive. Where a double tax treaty is in force between Romania and the lender’s country of residence, the treaty rate applies in lieu of the domestic rate, provided the lender can demonstrate its tax residency in the relevant treaty country.

Fees and Commissions

Payments of fees and commissions by a Romanian borrower to a non-resident lender pursuant to the finance documents may also be subject to withholding tax, subject again to any more favourable treatment under an applicable double tax treaty.

Principal and Gross-Up

Repayments of principal are not subject to withholding tax. Finance documents in the Romanian market typically include gross-up provisions requiring the borrower to increase payments so that the lender receives the full contractual amount net of any applicable withholding, together with tax indemnity provisions and obligations on the borrower to provide evidence of payment of the withheld amounts to the relevant tax authorities.

Beyond withholding tax on interest and fees, several other tax considerations are relevant to lenders making loans to Romanian entities.

VAT

Financial services are generally exempt from VAT in Romania, including the granting of loans and the provision of guarantees. However, certain ancillary services provided by lenders or agents in connection with a financing, such as advisory, management or administration services, may be subject to VAT at the standard rate of 19%. Finance documents in the Romanian market typically include VAT gross-up provisions requiring the borrower to pay any VAT chargeable on supplies made by the finance parties under the finance documents, in addition to the contractual consideration.

Registration Costs

The execution and registration of security documents in Romania gives rise to notarial fees (for real estate mortgages) and registration fees with the NRMP and the Land Register. These costs are typically borne by the borrower under the finance documents. There is no stamp duty on the execution of facility agreements or other finance documents in Romania.

Increased Costs

Finance documents in the Romanian market typically include increased costs provisions requiring the borrower to compensate lenders for any additional costs or reduction in return resulting from changes in law or regulation after the date of the facility agreement, including changes in reserve requirements, capital adequacy rules or other regulatory requirements applicable to the lenders.

Romanian law does not impose usury rules or statutory caps on the rate of interest that may be charged in commercial lending transactions. Parties are therefore generally free to agree the applicable interest rate in the finance documents, including the margin and any default rate.

However, Romanian law does impose a significant limitation on default interest and contractual penalties. A Romanian court may reduce a contractual penalty, including default interest, if the principal obligation was partly performed and that partial performance benefited the creditor, or if the penalty is manifestly excessive compared with the prejudice that the parties could reasonably have foreseen at the time of entering into the agreement. Any contractual clause purporting to exclude this judicial power of reduction is deemed unwritten by force of law. In practice, this means that a Romanian court retains discretion to reduce default interest rates that it considers disproportionate, even where the parties have expressly agreed to them.

The choice of governing law for Romanian project agreements turns on the counterparty and the asset involved, not on convention alone. Land agreements, grid connection agreements with the transmission or distribution operator, concessions and other arrangements with Romanian public authorities are either expressly administrative in nature or concern Romanian real estate and regulated infrastructure, and are accordingly governed by Romanian law. Lenders, for their part, generally favour Romanian law for the core domestic project agreements in any event, since this keeps the documents directly enforceable before the Romanian courts without a conflict-of-laws or recognition analysis at the point security needs to be enforced.

EPC and equipment supply contracts are a different matter, and here the position is more nuanced than a straightforward choice between Romanian and English law. Even where an international contractor is involved, Romanian EPC contracts are typically bespoke instruments governed by Romanian law, drawing heavily on the FIDIC Silver Book as a drafting template.

A genuinely foreign law election, most commonly English law, tends to be reserved for equipment supply agreements and other arrangements sitting one step removed from the Romanian project company’s core regulatory and real estate relationships, where the counterparty’s own standard terms and international dispute resolution preferences carry more weight.

Bilateral facilities extended by a Romanian bank are typically governed by Romanian law. For syndicated facilities and LMA-based documentation, the choice lies between English and Romanian law, with English law prevailing more often over the past year, generally with exclusive English jurisdiction. IFIs and development banks generally insist on English law as a matter of house policy. Security is determined asset by asset. Shares in a Romanian company and Romanian real estate must be mortgaged under Romanian law. Receivables generally follow the governing law of the underlying receivable. Bank accounts and other movables are generally secured under Romanian law.

Regardless of the governing law chosen for the facility agreement or other finance documents, a number of matters in Romanian project finance transactions are necessarily governed by Romanian law, including:

• the creation, perfection, priority and enforcement of security over assets located in Romania, which must comply with the Romanian Civil Code and the applicable registration requirements;
• the corporate capacity and authority of Romanian obligors to enter into and perform their obligations under the finance documents;
• the validity and enforceability of guarantees granted by Romanian entities; and
• the insolvency and reorganisation of Romanian companies, which is governed exclusively by Romanian insolvency legislation.

Romanian law also governs:

• the ownership and transfer of real estate and other assets located in Romania;
• the grant and maintenance of permits, licences and regulatory approvals required for the operation of the project; and
• the conclusion of project agreements with Romanian public authorities.