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Romania: Criminal Code intensifies sanctions

Adrian Roseti
As of February 1 2014, both Criminal and Criminal Procedure Codes were implemented, replacing regulations that have been in force since 1968, drafted at a time when the political status quo in Romania not only discouraged but even forbade private initiative.

Although the previous codes have been subject to several adjustments and substantial case law may have cleared several grey areas, in order to adjust to the realities of the modern economy (for instance, properly defining energy theft, telecommunication resources and internet access and data), the need for new explicit regulation has superseded the conservative approach. Despite the fact that the new provisions were initially announced as imposing milder sanctions, it appears that whereas in specific cases some sanctions have decreased, any multiple offence is now sanctioned in a more drastic manner and in some cases sanctions have even increased (for example in competition law crimes).

For companies, although criminal corporate liability was briefly introduced a couple of years ago, the new Codes explicitly widen the range of crimes applicable to companies and stipulate dedicated sanctions for offenders, such as: dissolution of the company; fines (up to €600,000, or approximately $829,000); suspension of activity; ban from participating in public tenders; and, closing of branches or publication of the conviction decision. Moreover, it should be noted that these sanctions also involve mechanisms which – until now – have been applicable solely to natural persons, such as the sanctioning system for repeat offenders or legal rehabilitation.

One can therefore safely conclude that companies are now subject to a wide array of criminal sanctions; such considerations should be part of the legal due diligence of M&A targets and should be taken into account before entering into partnerships.

One example of the new provisions is related to the notion of abuse of confidence, which is now defined as the action of a debtor who sells, hides, damages or destroys assets, or claims false debts towards third parties, aiming to defraud creditors. This is subject to criminal sanctions (imprisonment for the company's representative and fines or other sanctions for the company itself); the same sanctions are applicable where a debtor purchases goods or renders services knowing that they will not be able to pay for them (a very imprecise wording, admittedly).

Insurance fraud is also redefined under the new Criminal Code, however the wording of the new provisions leaves room for interpretation, which could have adverse consequences even for companies acting in good faith, should they not have access to proper legal support.

Another example is the latest special provisions for public procurement, imposing sanctions of up to five years imprisonment in case there is a bidding arrangement, or a participant is forced or coerced into not participating in a tender.

It is case law that will clarify in time the issues of the new provisions that are open to interpretation and oftentimes are left to the State's discretion; businesses should therefore ensure that their legal counsel is equipped with adequate criminal law expertise in order to be on the safe side in their dealings and avoid unpleasant surprises.

Adrian Roseti

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