On 18 March 2016, the Romanian government published Governmental Emergency Ordinance No. 7/2016 (“GEO 7”) in the Romanian Official Journal. GEO 7 applies to the trans-European railway, road, maritime and air transport infrastructure projects in Romania (“TETI Projects”), and sets out emergency measures aimed at overcoming the existing obstacles related to the implementation of these projects.
According to GEO 7, such emergency measures are needed to:
- facilitate Romania’s obligation to finance and complete the TETI Projects, part of the TEN-T Core network and TEN-T Comprehensive network provided for in the Europe 2020 Strategy;
- prevent damaging consequences to the state and structural funds budgets caused by constant bars to implementing TETI Projects; and
- avoid delays in the implementation of TETI Projects caused by: (i) complex and time-consuming procedures related to administrative authorizations; (ii) the lack of regulations on justifying advance payments to contractors; and (iii) non-payment of amounts awarded through Dispute Adjudication Board (“DAB”) decisions.
One of the key objectives of GEO 7 is to ensure the speedy enforcement of DAB decisions awarding monetary relief in disputes related to TETI Projects. Under GEO 7, contracting authorities carrying out TETI Projects financed by the state budget or structural funds may proceed to enforce DAB decisions awarding monetary relief, based on an addendum to the existing public procurement contract.
An addendum to the public procurement contract may be concluded only under the following conditions:
- the TETI Project was carried out based on a public procurement contract concluded in accordance with Government Emergency Ordinance No. 34/2006 regarding the award of public procurement contracts, public works concession contracts and services concession contracts;
- the public procurement contract refers to the execution of works or provision of services, incorporates a FIDIC contract and establishes a DAB mechanism for dispute settlement;
- both the contractor and the contracting authority agree to enter into an addendum to the contract for the execution of works/provision of services by observing the public procurement statutory requirements;
- the contractor agrees, through the addendum, to waive its rights to claim payment of interest related to the dispute(s); and
- the contractor provides the contracting authority with a bank letter of guarantee issued in accordance with the requirements of GEO 7, as detailed below.
The bank letter of guarantee must secure an amount up to the amount awarded through the DAB decision, including related interest. The bank letter of guarantee must be valid for a period of at least three years and must be extended until an enforceable title is made on the particular dispute.
The bank letter of guarantee shall be released to the contractor if the enforceable title is in favour of the contractor. Where the enforceable title is in favour of the contracting authority and the contractor refuses to voluntarily execute its obligation thereunder, the contracting authority may enforce the bank letter of guarantee.
Before making any payments to the contractor based on the DAB ruling, the contracting authority must draft an explanatory note, detailing the circumstances that triggered the parties’ dispute and clarifying the consequences of non-fulfilment of the DAB decision on the project’s timeline. The explanatory note must be approved by the chief credit officer.
The contracting authority shall effectively pay the awarded amount to the contractor by charging such amount as an expenditure to the project’s budget, observing, the approved technical and financial indicators and without exceeding the annual budget approved for the particular project in that particular year.
In addition, GEO 7 specifically requires the contracting authority to exhaust all the dispute resolution procedural phases provided in the contract, until the contracting authority obtains an enforceable title, either ordering the contracting authority to pay the contractor the amounts awarded through the DAB decision or through which the contracting authority is exonerated from paying such amounts.
However, in some cases, upon the contracting authority’s request, the chief credit officer may exempt the contracting authority from going through all the procedural phases for settlement of disputes, required under the contract for obtaining an enforceable title. In this case, the bank letter of guarantee shall be released to the contractor.
Finally, GEO 7 states that the contracting authorities are allowed to make payments pursuant to DAB decisions only up to a maximum of 35% of the overall annual budget for TETI Projects, approved from the state budget. For amounts over the 35% threshold, the Minister of Transport may issue an order establishing the criteria for prioritizing payments awarded through DAB decisions.
Hopefully, speeding up the enforcement of DAB decisions will represent an important step towards tackling the obstacles to the implementation of TETI Projects in Romania.