One of the greatest difficulties we have as an international law firm operating in Romania is to explain the clients and potential clients the differences in the Romanian legal system and the system which they may be used to. They seem to think that the law should be the same as in their home country and do not take into account that they are in Romania where different laws apply. The clients are not necessarily sophisticated businessmen but can be private individuals.
One well-known advisor to foreign investors often tells the foreign investors not to leave their business brains at the airport when they come to Romania but think as they would in their home countries. This is as true today as it was over twenty years ago.
Romania has moved on since the early 1990’s but still many of the business and legal risks that were in Romania then still exist now. These are not questions of personal safety, but more a way of understanding how business is done and how Romanian society operates.
In the last month I have received at least four enquiries from foreign gentlemen who have become involved with Romanian ladies. The original intention of both parties may have been honourable and I do not intend to impugn anyone’s intentions. Usually what has happened is that the parties have agreed to get married or live together and have come to Romania; then the man, it usually is, buys a business or makes an investment in the lady’s name; they buy a flat in her name and then – she calls everything off.
The man then has two issues one of the heart, and I cannot write about that here, and the other is the financial and legal consequences. The business and assets have been purchased using his money but are in her name as it was “easier”. Sometimes she will try and hold on to the assets even though they were bought for a different purpose and when times were different. He can go to court and may obtain an order for the return of some of the properties but this cannot guarantee. She has used the Romanian law of which she has knowledge and which is advantageous to her, as Romanian law is. There is nothing wrong in that, and she probably assumed he knew the Romanian law, or was aware of it. He on the other hand did not take advice and assumed everything would be all right although he was working with a legal system of which he knew nothing about.
The Romanian legal system has developed over many centuries for Romania, just as the English legal system or US legal system has developed to cope with the situation England or the United States.
The client in all these cases above knew the system at home and thought it would work the same way in Romania. The client’s questions and comments are often prefixed with the words but this is not how it happens in …….. to which we reply that this is Romania and that is what the legal system provides here.
The same applies to companies as well. I have written previously about this but I do not think it hurts to remind foreign companies who are investing in Romania that the laws here in Romania can sometimes operate in a way which would be seen as bizarre and certainly do not follow rules in other jurisdictions. The Romanian rules are different and this creates a different business environment. Decisions can take longer – there is a corporate style of decision making rather than individual entrepreneurship. The lack of initiative by employees can sometimes be very frustrating.
This applies not only in the area of law but also accounting. The accounting system in Romania in many instances is not yet aligned with those more common accounting codes. Expenses and costs and income are treated differently. It is no use trying to apply US or English accounting standards as they do not apply in Romania. The cry that this is not right is in fact wrong. It is right because you are doing business in Romania and their rules and codes do apply. They have their own historical reasons for applying the facts their way and there is no reason why it should be adapted to another system. One calls to mind the saying “When in Rome do as the Romans do”.
All the above can lead to what I describe as a “Romania day”. In such a case one has to keep cool – keep calm and remember why you are in Romania. The Romanian legal system does work. It works in favour of those who know the law and apply it correctly as it does in any legal system. It may be an imperfect system but it works and provides an environment where business can be done and profits made. The accounting system allows companies to prepare accounts according to Romanian law and Norms. They can be re-written under IAS or any other Standards if the company wants although they will not necessarily apply in Romania.
None of this should discourage anyone from doing business in Romania. The only advice that we can give is, do not do anything in Romania that has a legal effect unless you know exactly what that effect is. If you do not know ask, and even then if you are not sure get a further opinion. The delay of a few days and the paying for such advice will save money time and heart ache in the end.