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Romania - Country Guide

Market Overview

Romania is the second largest consumer market in Central and Eastern Europe. Since EU accession, there has been increasing interest in Romania from UK business. The UK is Romania’s 10th largest inward investor with over EUR4 billion of investment and more than 4,000 UK companies. Bilateral trade accounted for over EUR1.6 billion in 2009.

Romania is a market with tremendous potential, a strategic location, and a business environment that offers opportunities amidst some risks. Reducing those risks and realizing the opportunities require patience and a careful sifting of market information. After several years of strong growth, Romania slumped into a deep recession in 2009 with GDP contracting by more than 7%. The contraction moderated in 2010 to minus 2% of GDP and most forecasts see a gradual return to growth of 0.5% to 1.5% in 2011, positive but still lagging behind most of the European Union. Forecasts for succeeding years are more encouraging, as most predict the rate of economic growth to accelerate further.

Stabilization of the economy has been due largely to a EUR20 billion rescue package led by the International Monetary Fund (IMF). Romania has shown commitment to meeting the terms of the agreement with IMF, implementing a tough austerity program to reduce its budget deficit to 4.4% of GDP in 2011 and to 3% of GDP in 2012. Several of these measures, including an increase from 19% to 24% in the value added tax (VAT), and a cut of 25% in public sector salaries, depressed consumer demand and spending predictably. This increase in VAT also contributed to inflation of about 8% in 2010, the highest rate in the EU, with a notable jump in food and energy prices. However, inflation is widely expected to decrease in 2011, even as economic conditions improve led by relatively strong export performance and a gradual rebound in demand.

Despite the weak economic conditions, there are opportunities in areas such as energy, agricultural equipment, environmental technologies, infrastructure, and ICT. As the economy recovers, additional opportunities will emerge in areas such as franchising, hotel and restaurant equipment, automotive parts, packaging, and other industrial equipment.

Successful entry into the Romanian market requires solid preparation, and market research is an important part of any business strategy. The balance of this report is intended to aid American companies in developing and executing new and increased sales to this important new EU member state.

Market Challenges

Romania removed its communist dictator more than twenty years ago, and yet the Romanian government still plays an outsized role in the economy in terms of employment, ownership of assets, and influence on the business environment. The public sector includes thousands of entities authorized to spend public funds, and consequently most sizable businesses rely on public sector demand. The question of whether this has crowded out private investment is somewhat academic; private demand has been extremely weak domestically, with growth in orders coming mainly from other European trading partners. As a practical consideration, exporters should be aware that conflicts of interest, questionable procurement practices, and problems of payment are not infrequent issues when selling to the public sector.

The public sector is administered by a deep and inefficient bureaucracy, where few decisions can be made without several layers of approval. Even when fully authorized by their mandates, many Romanian government agencies seek a higher level of political approval, even informally, before making decisions. When such intervention is necessary to overcome this inertia, it creates an environment in which fraud and corruption can occur. The Romanian government has sought to reduce these opportunities by moving some government processes to on-line platforms, replacing the human interaction with “e-Government.” However, this transition remains in process. Regulations and government decisions that affect business are often made with very little, if any, consultation of stakeholders. As a result, regulation and government directives sometimes appear internally contradictory, or produce unintended negative consequences. A lack of stability and bureaucracy prevent some of the measures meant to encourage business, such as a Public-Private Partnerships law and a program of investment incentives or “state aid,” from working as they should. The legal system does not provide the same predictable recourse nor enforceable sanctions against corruption as are found among older EU members.

The oversight of the IMF has brought greater accountability and discipline to public spending. This discipline includes some settling of arrears owed by the Romanian Government, which has demonstrated commitment to meeting the conditions of the IMF. The poor condition of Romania’s physical infrastructure including roads, rail, airports, and water and wastewater systems – affects business costs, productivity, public safety, and the country’s success in attracting foreign investment. In many cases the national government owns the infrastructure (rail, some airports), and in other cases (water utilities) county councils own the assets. The country’s connections to the rest of the EU transportation infrastructure are underdeveloped, keeping Romania from realizing its full potential for new investment, trade and tourism.

In the current economic environment, American exporters should be attuned to heightened commercial risks and consider their terms of trade carefully. Selecting the proper partner – whether as a distributor, licensee, or franchisee – is extremely important. Adequate due diligence can make the difference between a successful investment or distribution agreement, and a costly mistake.

Romania has not yet entered the “Euro zone,” and so most income is paid in the local currency, the leu. At the same time, many companies and consumers have debt denominated in euro, and most big-ticket consumer items (real estate, cars, and major appliances) are priced in euro. In the last two years most Romanian borrowers have been on the losing side of this exchange rate risk, with direct effects on their purchases and debt service.

Market Opportunities

Despite these challenges, several underlying attributes of the economy allow it to keep forward momentum. These attributes also produce the medium term business opportunities for companies who have experience and expertise in the areas demanded by Romania’s stage of development.

Romania’s membership in the European Union is one of its most persuasive advantages. As a relatively new (2007) member, Romania offers a sizable domestic market and a comparatively low-cost foothold for accessing the EU market. Much of the foreign investment in retail and some manufacturing have been based on these two elements. In addition to this larger market, Romania’s membership makes it eligible for billions of euro in EU grant funding. The set of financial supports known as Structural Funds are available to support investment in physical infrastructure and many other types of projects, and require a co-financing component from the recipient, in addition to the national government.

In addition, Romania’s location in Southeast Europe shortens the distance for export sales to Turkey, the Balkans, the Middle East and markets such as Ukraine and Russia. Several foreign manufacturers have moved into Romania, despite its economic recession, for this reason. Romania’s powerful concentration of high-end software development and services is almost entirely export driven, serving regional or global markets.

Romania’s stage of development and its requirement to conform to the standards of the EU drive many of the business opportunities. In response to directives from Brussels, to simply “catch up” to the rest of Europe, Romanian market provides for the best prospects for sales in the following sectors:

• Agricultural Machinery and Equipment
• Automotive Market
• Energy
• Environmental Technologies
• Healthcare
• Information Technology Market
• Packaging And Packaging Waste Market

EU Funding

The EU has allocated approximately EUR27.5 billion to Romania for projects in areas ranging from transport and rural development, to energy and environment. However, Romania has a dismal record of availing itself of these funds. The rate at which it has been able to apply for, receive and contract for the use of these funds – or the “absorption rate” – is the lowest of all the 10 newest EU members, four years after Romania attained membership. Access to these funds expires in 2015. At the end of 2009, Romania had absorbed only 16% of the EU funds available to it.

The problem is a combination of money and administrative capacity. Romanian authorities must improve their ability to design worthwhile projects meeting stringent EU guidelines as well as provide required co-financing. On some infrastructure projects, for example, expenses ineligible for EU funds (such as land acquisition) may equal up to half of the total project cost. The continuing challenge has been a lack of adequate administrative capacity and project management skills to plan, budget, obligate and spend these funds in an efficient, transparent and effective manner. Internal project review and approval procedures implemented by Romanian authorities are also multilayered and cumbersome.

There are always more needs and projects than available funding in Romania. It is important to examine the reliability of a buyer’s financing arrangements. One method for identifying business opportunities is to find where one of the best prospect sectors (e.g. environment) intersects with a buyer’s ability to access EU funding and arrange co-financing.

Market Entry Strategy

A local business presence is essential to success in the Romanian market, and this can take the form of a distributor agreement, subsidiary, joint venture or acquisition.

Regardless of the form of investment or entry strategy, American businesses considering the Romanian market should research their specific prospects thoroughly, perform due diligence, and be prepared to adapt their business models as necessary. Retaining legal counsel with solid knowledge of Romanian law is extremely important, and relationships with other service providers such as banks and accountants can provide excellent value as well. Selling through a local Romanian partner is a standard element of most entry strategies. Therefore, a success can hinge on identifying, qualifying and selecting a partner with the resources and expertise to help accomplish its objectives.

Using an Agent or Distributor

Local agents, distributors and joint venture partners can contribute significantly by bringing knowledge of the market, industry experience, access to key contacts, and other resources. Selecting a distributor is a serious strategic decision, with long-term business and legal implications. When establishing a contract with a distributor or joint venture partner, companies are advised to seek legal advice to draft a distribution agreement that is compliant with local regulations and standard business practices.

Establishing an Office

Opening a local office in Romania involves several steps.

1. Choose the type of company

General Partnership (SNC): A general partnership can involve two or more partners. The partnership relationship is based upon a contract, and any person who is able to enter into a binding contract may enter into a partnership. The parties must register their partnership with the National Trade Registry Office in the Ministry of Justice.

Limited Partnership (SCS): As with other jurisdictions, a limited partnership consists of one or more general partners, who manage the business of the partnership, and one or more limited partners who contribute capital (money or other property) to the partnership, but do not participate in its management. Generally, limited partners are not liable for the debts and obligations of the partnership beyond their contributions to the registered capital.

Joint-Stock Company (SA): A joint stock company is a limited liability corporation with registered capital of at least $960 and at least five shareholders. Shares can be nominative shares or bearer shares, and can be freely traded or pledged. A joint stock company may be set up privately or by public subscription. A privately held company is required to have a Memorandum of Association. At the time of the company’s registration, each shareholder must pay at least 30% of his/her portion of the registered share capital, with the remaining 70% paid within a maximum of 12 months.

Limited Partnership by Share (SCA): The capital is divided into shares and the obligations are guaranteed by the capital and by the unlimited and joint liability of the general partners. The limited partners are liable only for the payment of their shares.

Limited Liability Company (SRL): A limited liability company is a company formed by a limited number of partners (no more than 50). The registered share capital of an SRL is normally divided into shares with a registered value of not less than 10 RON each. Shares cannot be freely traded, making limited liability companies similar to what are known as private companies in other legal systems. Shares of these companies cannot be pledged as collateral for loans.

Representative Offices: Foreign companies may open representative offices in Romania following registration with the Department of Foreign Trade in the Ministry of Economy. Representative offices cannot carry out commercial activities on their own behalf, but are entitled to promote and supervise the business of their parent organizations.

Branches: Foreign companies may establish branches in Romania. They must be registered with the appropriate trade registry, relative to the location of their office.

2. Determine location of headquarters

Foreign companies are required to have as a headquarters a physical location (not a postal address) that is the property of or in use by one or more partners or shareholders.

3. Register the name of the company

The company’s name is registered with the Trade Registry in the jurisdiction where the company is to be located.

4. Authenticate constitutive documents

General partnerships and limited liability partnerships are set up through a contract of company. Joint-stock companies, limited partnerships with shares and limited liability companies are set up through a contract of company and articles of incorporation. The signatories to the articles of incorporation are considered founders. The company must have a "Constitutive Document," (Articles of incorporation) which sets the rights and obligations of the shareholders, the object of activity of the company, the quorum required for the adoption of different resolutions, the dissolution procedure, and so forth.

5. Company’s account

A company account is opened in the registered name of the company in order to deposit the share capital. The amounts depend on the form of business organization, but as an example, a limited liability company has a minimum starting capital of RON200 (approximately GBP40).

6. Other required legal documents

Other documents are required, such as fiscal records.

7. Submission to the complete dossier of the One Stop Office

Once the application, or dossier, is complete, it is submitted to the One Stop Office in the proper jurisdiction. The One Stop Office falls under the National Trade Register Office of the Ministry of Justice.

he forms of business most commonly used by foreign investors are limited liability company (SRL), the joint stock company (SA) and the branch of a foreign parent company. Representative offices are often used as a market entry tactic, allowing a company to assess opportunities before making a more substantial investment.

Franchising

Franchising regulations in Romania are much the same as in other countries, granting the franchisee the right to operate or develop a business, product, technology or service.

The contract, or Franchising Agreement, reflects the interests of the members of the franchise network, and protects the franchiser’s industrial or intellectual property rights by maintaining the common identity and reputation of the franchise network. The franchising agreement must define clearly the obligations and liabilities of all parties, and must contain the following elements: object of the contract, rights and obligations of the parties involved, financial clauses, contract duration, clauses related to modification, extension, and cancellation of the agreement.

Between 2008 and 2010, the perception of Romania by international franchises moved from “emerging market” to “Balkan transition economy.” While not flattering, the reputation reflects the close ties of Romania’s franchise industry with other Southeast European markets, such as Greece. Franchise companies are often based in markets such as Greece, and aggregate the Balkan area to reach the market size necessary for their franchise models. This region has been gravely affected by various economic crises, and these difficulties have been passed through to the local market. The Romanian franchise market contracted 20% in 2010, but is expected to have a weak rebound in 2011.

American franchises represent a large number of brands and strong market share, accounting for more than 20% of international brands on the Romanian market, with European brands growing swiftly. European concepts prevail in retail franchises, while American brands are most evident in food concepts, such as: Quiznos, Burger King, and Starbucks.

A success in the Romanian market usually requires the franchise to modify its “standard” franchise agreement to reflect local market conditions. Timetables, minimum numbers of units, and fees and royalties should all be evaluated against local market data. Even more important is finding the right local partner who understands the business concept and can execute it well. Finding local entrepreneurs with the capital to pay a franchisee fee is not as difficult as identifying those with the expertise and acumen to introduce and grow a new franchise successfully.

Direct Marketing

The Romanian Direct Marketing Association (ARMAD) is a member of the Federation of European Direct Marketing (FEDMA) and the European E-commerce and Mail Order Trade Association (EMOTA).

There are more than 30 direct marketing companies who are also members of ARMAD. The direct marketing industry is just developing, but has been growing among Romanian companies for whom the methods offer a business marketing solution. Romania does not have a national "do-not-call list", but in 2007 a “do not mail” list was implemented by the Romanian Direct Marketing Association.

There is a wide range of EU legislation relevant to the direct marketing sector. Compliance requirements are most rigorous for marketing and sales to private consumers, and place an emphasis on the clarity and completeness of the information marketers provide consumers prior to purchase, and on their collection and use of customer data.

Joint Ventures/Licensing

Companies may enter the Romanian market as partners with Romanian counterparts or may operate 100% foreign-owned companies. Many foreign companies involved in local manufacturing do so under joint-venture agreements. The main advantages offered by joint ventures include quick market access through the knowledge, relationships, and existing capacities of the local partner. The potential disadvantages of joint ventures include the loss of complete control, the failure of anticipated synergies, the costs and difficulties of integration, and the difficulty of pursuing effective legal remedies in the event of malfeasance by the partner.

Selling to the Government

The Romanian Government adopted public procurement law, Emergency Ordinance 34/2006, in order to align its legislation with EU standards. This ordinance was amended in 2009 and 2010. The most recent update shortened the deadlines and changed the process for contesting procurement procedures and awards. The Government maintains an electronic system for public acquisitions in an effort to provide a fully transparent procurement process. A government decision passed in March 2010 requires public authorities to use the e-procurement system for at least 40% of their procurements.

The EU public procurement market, including EU institutions and Member States, is regulated by two Directives: Directive 2004/18 on Coordination of procedures for the award of public works, services and supplies contracts Directive 2004/17 on Coordination of procedures of entities operating in the Utilities sector, which covers the following sectors: water, energy, transport and postal services.

There are directives regarding remedies for companies who face discriminatory public procurement practices. These directives are implemented in the national procurement legislation of the 27 EU Member States.

Distribution and Sales Channels

Distribution of goods and services in Romania is similar to other European countries. Wholesale and retail tiers, and support services such as packaging, warehousing and merchandising, are fully developed in Romania. Retail outlets, franchisees, and value-added resellers serve as channels for the provision of services ranging from mobile phone service, consulting or software and IT.

Romania’s range of retail outlets is likewise European and includes specialty shops, supermarkets, hypermarkets, cash and carry, department stores, gas station convenience stores, and do-it yourself shops, kiosks, street vendors, open-air markets and wholesale centres. Despite the rapid growth of shopping malls and hypermarkets, many urban consumers still rely on small shops and markets for daily shopping. Romania is one of the top targets in Eastern Europe for retailers like Metro, Carrefour and Selgros, whose local large-format stores provide the biggest sales increases for their chains. For several years the local market has been dominated by Carrefour and Cora on the hypermarket (or Big Box) segment, while Metro and Selgros have competed on the cash and carry market. Several of these have plans to continue their expansion, but on a scale tempered by the economic downturn.

Other foreign supermarkets also have a good share of the Romanian market. These include Billa, Gima, Auchan, Kaufland, Mega Image (Delhaize Group), and Artima.

Selling Factors/Techniques

Price, payment terms, value and quality are critical factors for success in Romania's business and consumer markets. In almost any business domain, European competitors exist and enjoy the advantages of tariff free status within the EU. American firms may not always compete on price but need to demonstrate a clear value proposition. Proven products or services with benefits that emphasize cost-savings, efficiencies or – for distributors – profitability and reliability, will stand the best chances of market success.

Romania has seen income growth in recent years, and an expansion in consumer credit, but average incomes remain relatively low. Comparing Romania to other nations on the basis of GDP per capita adjusted for Purchasing Power Parity (PPP) ranks the nation above countries like Brazil, South Africa, and neighbouring Ukraine, but below Bulgaria, Turkey and Mexico. A small but relatively affluent segment of the population has driven retail development, real estate, and the sale of luxury or “premium brand” goods.

Electronic Commerce

After a slow start, Romanian electronic commerce is growing faster than the economy in general. Romcard, a leading processor of online transactions, reports that 2010 recorded 2.26 million transactions representing a value of EUR127 million, a 38% increase compared to 2009. Numerous local retail stores with a successful physical presence are now adding a website to boost sales in a difficult economy, while others are improving the functionality of their sites. Statistics from Romanian integrator GECAD ePayment indicate that the main industries processing online transactions are telecom, tourism, utilities, services, retail and entertainment.

As in other countries, e-commerce solutions that rely on existing payment relationships have been successful in Romania. The country’s large number of mobile phone subscribers provides a ready base of shoppers for telecom providers such as Orange, Vodafone, and Cosmote. Each provide the ability to check bank balances, pay bills and purchase calling credit online.

According to a study by Gemius in partnership with telecom carrier Orange (October 2009), fifty percent of Romanian internet users have shopped online, an apparent increase of 22% over the last 3 years. However, 50% of Romanian internet users remain suspicious about buying anything online. It is hard to determine whether the country’s internet users are evenly split among shoppers and non-shoppers, or whether some users shop despite their misgivings about security.

A second study, the European Commission’s “Europe’s Digital Competitiveness Report” published at the end of 2010, gives Romania an internet penetration rate of 42%, and describes a country of shopping enthusiasts. According to the EC study, more than two thirds of Romanian internet users have a positive attitude toward shopping online, while only 6% dislike it. This result distinguishes Romania from such countries as Lithuania and Poland, where the survey indicated one in five internet users are decidedly against online shopping.

Nearly half of Romanian internet users who responded (47%) shop online several times a year. One third of those users do not plan to reduce their activity, while another third report they plan to shop online more frequently. Despite the enthusiasm these studies revealed, two obstacles continue to retard the growth of e-commerce infrastructure and deployment: a relatively low rate of credit card ownership, and the prevalence of online fraud and cyber crime.

In 2011 there are two major factors that will have a large impact on the Romanian ecommerce scene. The Ministry of Communications and Information Society (MCIS) will launch the National Electronic System for paying taxes online (SNEP), adopted by Governmental Decision. SNEP will allow all citizens to pay their taxes online in every corner of the country. The second factor is represented by a Call for Projects that MCIS will open for e-commerce. With this action, substantial funding will be available for the ecommerce business in Romania.

Trade Promotion and Advertising

The variety and quality of Romanian advertising is similar to that of other European countries. As in the rest of Europe, the industry has suffered from decreased spending in the recent recession. Total advertising expenditures were approximately EUR339 million in 2009, with EUR222 million (65%), spent on television advertising, according to estimates by Initiative Media Romania’s Media Fact Book 2010. The same source stated that in 2010, advertising spending in the local media market decreased to approximately EUR308 million.

Multinational companies represent a large share of spending. New media and combinations of media continue to develop to respond to audience segmentation using several forms: internet and social networking, digital TV, mobile telephony, radio, and print, etc.

Television

By the end of 2009 the number of the measured TV channels increased to 52 (from 44 in 2008). In 2009 and the first quarter of 2010 there were over 600 radio licenses issued, a decline versus 2008 when there were more than 700.

Among Romanian television stations, ProTV marginally increased its number of viewers in 2010 by 2,000 individuals, reaching an average of 339,000. The main public station (TVR 1) maintained its fifth place position while as a complete novelty, a child and youth TV station reached the Top 10 TV stations with an average of 65,000 viewers in 2010, pushing OTV to the 11th position.

Press

The best-known English-language business publications are:

• Quarterly Bulletin (economic, financing, monetary and credit trend information and statistics), published by the National Bank;
• Statistic Bulletins (on various topics), published by the National Institute of Statistics;
• Romanian Insights (monthly), published by the Romanian Chamber of Commerce and Industry;
• The Diplomat (monthly), published by Diplomat Media Group
• Business Review (weekly), published by Business Media Group SRL;
• Nine O'Clock (daily), published by Nine O’Clock Publications;
• Romanian Business Journal (weekly), published by Penta;
• Ziarul Financiar (daily) published by MediaPro. (only one page in English)

The three leading newspapers accounted for 57% of total sales in the 3rd quarter of 2010. Except for increases by two relatively small papers, Financiarul (financial newspaper) and Ziarul Lumina, owned by the Romanian Orthodox Church, sales of all other newspapers decreased compared to the same period in 2009. Three of the five top-selling newspapers in Romania are tabloids.

Magazine sales to men are strongly oriented to TV guides and automotive themes; while Romanian females consume weekly mass-market magazines targeting women (many of them brand extensions of already established newspapers).

A number of international glossy magazines are present in Romanian both for women (Elle, Cosmopolitan, Harper’s Bazaar, Marie Claire, and Glamour) and men (FHM, Men’s Health, GQ, Esquire). Budget limitations meant advertisers decreased their media expenditures or reallocated them to other media types. The traffic figures for the top ten print publications with online versions show an increase in the average number of page impressions and visits per month in the first quarter of 2010 compared to 2009. This suggests that readers may be substituting online for printed forms.

Clients consolidated their advertising expenditures in established titles with nationwide distribution. This produced market share increases for those publishers with a large and integrated portfolio.

The Romanian media market also contains some important daily “free sheets” (free newspapers) among which the most important are Adevarul de Seara and Ring. The decrease in advertising spending is likely to limit the launch or breadth of circulation of free newspapers. Several free magazines are distributed, both free city-guides (24-FUN, Sapte Seri, Zile si Nopti ) offering localized content, as well as those of pharmacy chains and major real-estate companies.

The system of procurement for outdoor advertising is somewhat opaque, but forms include billboards, backlit and dynamic models (such a street-TV). The future of large mesh format advertising is uncertain, as these have been the subject of restrictive ordinances by the City of Bucharest and the national government. Advertising inside public transportation (subway, tram and buses) and its stations is common, if not consistent, and is similarly an area of questionable tendering practices.

Radio

Most major multinational advertising and public relations agencies are represented in Romania, including Ogilvy & Mather, McCann-Erickson, Lowe & Partners (IPG member), Tempo Advertising, Graffiti/BBDO, Saatchi and Saatchi, Young and Rubicam, Leo Burnett and Publicis.

Pricing

Pricing structures in Romania are similar to those used in most other countries: prices are increased by wholesale and retail mark-ups as well as by taxes, especially the Value Added Tax (VAT) that climbed from 19% to 24% as of July 2010. Product pricing is influenced primarily by existing competition in the Romanian market, as well as by the liquidity of the market. Common consumer goods are price-sensitive, and competition can be fierce, as local producers compete with products from China, Southeast Asia and Turkey. In the case of higher quality goods, the reputation of a brand, as well as technical specifications or length of warranties, can command a price premium in the market.

Sales Service/Customer Support

The concepts of after-sales customer service and support are still developing among Romanian businesses, but large multinationals are providing leadership in this area. As a consequence, Romanian consumers are increasingly sensitive to the quality of after sales services in making their buying decisions. American firms generally hold an advantage in this area, but local partners may prove the weak link that damages brand perception. Suppliers should be prepared to work closely with local partners (distributors, value-added resellers) to help them develop their service and support capabilities.

Protecting Your Intellectual Property

Romania has implemented relevant EU directives related to intellectual property and is a founding member of the World Intellectual Property Organization (“WIPO”). Further, the country has adhered to almost all enactments on intellectual property binding the World Trade Organization member states. The competent authorities are the Romanian Office for Patents and Trademarks (“OSIM”) and the Romanian Copyright Office (“ORDA”).

Patents

OSIM handles patent applications, and the European Patent Convention lays down the procedural rules for a European patent application to confer protection in Romania. Pursuant to the Patents Law, the subject matter of an invention may be a product or process in any technological field. In order to be patentable, it must be novel, imply an inventive activity and have an industrial application. The protection period of a patent is 20 years from the accepted filing date of a complete application. Upon expiry of protection, the invention is considered in the public domain. The patent confers upon its holder exclusive rights over the invention for the entire duration of the patent. Patent holders can obtain a supplementary protection certificate for medical products and plants for a maximum period of 5 years, under the relevant EC Regulations directly applicable in Romania.

Trademarks

Trademark protection in Romania is obtained by filing a national application to OSIM. The trademark granted then confers protection in Romania. Also, a community trademark application may be filed either directly at OHIM, or via OSIM. The community trademark granted confers rights in all EU Member States. The law also protects well-known trademarks even if they are not registered with OSIM, OHIM or WIPO (the latter having Romania as designated country). However, the burden of proof as to whether a trademark is well-known always lies with the trademark holder.

The registration certificate is granted following the filing of an application and the examination by the competent authority to determine whether there are any absolute for rejection. If there are no grounds for rejection, OSIM, OHIM or WIPO (depending on which of the three abovementioned authorities receive the application) will register the trademark in the relevant Trademark Registry and grant the trademark certificate, valid for ten years and renewable for equal periods subject to the payment of the applicable fees.

Copyright

Romanian Law # 8/1996 on copyright and neighbouring rights (“Copyright Act”) provides the national regulatory framework for these issues, and Romania is a signatory to the Berne Convention for the Protection of Literary and Artistic Works and the WIPO Copyright Treaty.

Organizations which help manage copyrights, for example representing the interest of composers, writers and producers, and which negotiate the copyright licenses with users are important partners in maintaining an effective business environment for rights holders.

Subsequent amendments strengthening the Copyright Act, as well as promoting better efficiency on the part of the national police, and the heightened attention of the General Prosecutor's Office to IPR enforcement have helped combat counterfeiting and piracy. However, enforcement still remains a problem and accordingly Romania remained on the USTR’s “lower level” Special 301 Watch List in 2010.

The EU legislative framework for copyright protection consists of a series of Directives covering areas such as the legal protection of computer programs, the duration of protection of authors’ rights and neighbouring rights, and the legal protection of databases. Almost all Member States have fully implemented the rules into national law; and the Commission is now focusing on ensuring that the framework is enforced accurately and consistently across the EU.

The on-line copyright Directive (2001/29/EC) addresses the problem of protecting rights holders in the online environment while protecting the interests of users, ISPs and hardware manufacturers. It guarantees authors’ exclusive reproduction rights with a single mandatory exception for technical copies (to allow caching), and an exhaustive list of other exceptions that individual Member States can select and include in national legislation. This list is meant to reflect different cultural and legal traditions, and includes private copying "on condition right holders receive fair compensation."

A company’s IPR strategy should be founded on a positive relationship with its local partner, who is an important ally in protecting its IPR. A distribution agreement or other contract should include non-competition, confidentiality and non-disclosure clauses, but just as importantly provide clear incentives to honour the contract. Cost structures and margins should reinforce these incentives.

Due Diligence

Romania offers attractive opportunities for investment, acquisition, and business partnerships ranging from joint ventures and licensing agreements to distributorships and franchises. However, with these new opportunities come new risks. There are few activities more important in Romania than conducting due diligence on potential investments or business partners.

The Romanian justice system continues to be slow and bureaucratic, and despite some progress the best strategy is to avoid commercial litigation if at all possible. When possible, contracts should provide for international arbitration.

Even though due diligence is substantially based on the analysis of documents provided by the investor’s counterpart, information from public sources should not be underestimated. There is a wide range of public sources such as the Trade Registry, the Land Book, the Electronic Archive for Pledge Agreements, and the Credit Bureau.

Leading Sectors for Export and Investment

• Agricultural Machinery and Equipment
• Automotive Market
• Energy
• Environmental Technologies
• Healthcare
• Information Technology Market
• Packaging And Packaging Waste Market
• Food and Agriculture