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CCR: The law that exempted SOE from corporate governance, unconstitutional

The Constitutional Court of Romania (CCR) has found on Tuesday that the law amending Article 1 (3) of Government Emergency Ordinance no. 109/2011 on Corporate Governance of Public Enterprises is unconstitutional.

In December, the Parliament passed a law approving about 100 state-owned enterprises (SOE) to be exempt from corporate governance.

In other words, their managers could have been selected according to political criteria.

The decision was criticized very harshly by The Foreign Investors’ Council and the Proprietatea Fund. In fact, Fondul Proprietatea considered it the darkest day in the history of corporate governance in Romania.

A FIC release at the time read that “the members of the Foreign Investors Council have noticed recently a significant increase in distrust in public institutions, both from the business environment and citizens, due to the numerous legislative changes that affect the economy and the rule of law in Romania. (…) These decisions, taken without consultation and without proper information to the public and the business environment, will provide further arguments for deepening the mistrust in institutions. Moreover, without corporate governance rules for state owned companies, Romania will not fulfil the criteria for joining the Organisation of Economic Cooperation and Development (OECD) an objective included in the foreign policy chapter of the governing programme. Romania’s long-term potential, including that of becoming one of the most important EU economies, can be achieved by channelling all energies towards such a major objective and by observing the principles of transparency, stability and predictability,” the release concluded.

In its turn, Fondul Proprietatea released a statement on December 21, appalled by the adoption by the Chamber of Deputies of amendments to GEO 109/2011 on corporate governance.

“If 2017 was a difficult year, marked by blatant disregard, attacks and systematic abuses of corporate governance, yesterday we witnessed the darkest day in the history of corporate governance in Romania. The changes adopted are a huge step back in time for SOEs and the country, while the risks to integrity via corruption and value destruction in these companies are growing dramatically. It is extremely sad to see that initiatives, which had a proven positive impact, such as the corporate governance legislation, are practically demolished by the Parliamentary majority at an accelerated pace, thus sending an extremely negative signal to investors,” Greg Konieczny, CEO and Portfolio Manager of Fondul Proprietatea commented in a press statement.

The Liberals filed in late December notifications of unconstitutionality to the Constitutional Court (CCR) regarding the amendments to the Law 317/2004 on the activity of the Superior Council of Magistracy (CSM), on the law on corporate governance of public enterprises and on the law regarding over-taxation of gas.

Regarding the amendments to the Government Emergency Ordinance 109/2011 on Corporate Governance of Public Enterprises, the PNL Deputies reported numerous violations of the legal procedure in the process of drafting and adopting the draft law, as well as the establishment of an extraordinary legal regime, conferring to the Government attributions exceeding the constitutional framework.

About Valeriu Lazar