International standards and best practices: benefits and risks The Romanian legal angle Andrei Burz Pinzaru Partner

International standards and best practices: benefits and risksThe Romanian legal angle

Andrei Burz Pinzaru

Partner

We are supporters of transposing international best practices at local level as a basis for increasing effectiveness in business

© 2012 Reff & Asociatii

Best practices as the starting point

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More time to focus on the stringent commercial aspects

Less time spent on technicalities

Increased efficiency

3

Benefits of standardization


Size and complexity

Turning a “template” into a “bible”

Pragmatic approach and specific tailoring required

Improper dealing by local laws with foreign concepts

The “security agent” concept incompletely covered by law no. 71/2011

Mandatory applicable local law principles

Voting rights to the agent in case of default vs. revocable mandate under Romanian law

4

Risks: downsides of “importing” best practices

Properly consider the use of the new LMA recommended form of facility agreement for real estate finance in Romania

© 2012 Reff & Asociatii6

Mandatory applicable local law?


Real estate financing vs. Creditul ipotecar pentru investitii imobiliare

Lenders and their counsel to consider:

Applicability of the Romanian mortgage lending law no. 190/1999

Mandatory provisions of the Romanian mortgage lending law

Costs of funding for the borrower

Rules in case of variable interest

Contract termination and procedure – depending on type of default occurred

Enforceability towards insurer

7


Applicable law


Freedom of choice is the rule

When there is a conflict of laws

9

English law vs. Romanian law


Enforceability


Recent case law

Alternative solutions

11


Transferability


Transferability of the claim

Regulated by the law governing the claim

English law or Romanian law specific aspects to consider

New instrument for transfer under the New Civil Code:

assignment of contract

Impact on the security

If English law governed facility agreement, impact depends on solution

chosen for security structure

Romanian law specifics

Notarized form mandatory to ensure publicity for transfer of Mortgage

receivables

Incomplete regulation of the security agent’s mandate

13

Bespoke, not ready made: LMA recommended version should be tailored to suit the commercial specifics of each transaction


LMA response to highly negotiated clauses in commercial real estate finance –

not “one size fits all”

Operations of accounts “The Security Agent has sole signing rights in relation to the Rent Account.”

Lease covenants“No Borrower may without the consent of the [Agent/Majority Lenders]:-Enter into any Agreement for Lease-Agree to any amendment, supplement, extension, waiver, surrender or release in respect of any Lease Document-Exercise any right to break, determine or extend any Lease Document”

Negotiable character

Commercial sense and negotiation positions

15

Customizing the standard


Reff & Associates is the correspondent law firm of Deloitte Romania, integrated with the global Deloitte multi-disciplinary advisory practice. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/ro/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Documents

International standards and best practices: benefits and risks The Romanian legal angle Andrei Burz Pinzaru Partner