Europe’s fastest growing economy is an excellent place to seek refuge from Britain’s wintery economy. So, here’s a quick guide to the legal landscape
My father was born in Cimpina. My grandparents reflected the different nationalities of the Austro-Hungarian Empire, one grandfather being of Germanic stock and a grandmother born in Budapest. Cimpina lies in the beautiful Prahova Valley that slices its way through the Carpathians on the way to Brasov, the gateway to Transylvania and some of the wildest terrain in Europe. Bears roam the mountains, occasionally paying visits to towns during harsh winters.
It is the sheer wildness and beauty of this Carpathian landscape that will act as a brake to development – especially infrastructure development – in Romania. There are many towns and cities there that have preserved their 17th-century heritage of cobbled streets and thatched, timbered properties. These places survived Ceausescu’s attempt in the eighties to replace them with grandiose building schemes. The challenge for developers now is to marry the new with the old. This has proved extremely successful in cities such as Sibiu (now also referred to by its Germanic name of Hermannstadt) in central Romania.
There are two little-known things about Romania. First, it has one of the highest growth rates in Europe. It’s almost 8.5% at the moment, although this is likely to be affected by the global slowdown. Second, it has one of the best educated workforces in Europe with construction skills such as engineering and architecture at the fore.
Unfortunately, because of poor salaries at home, many professionals have emigrated to find work elsewhere and I am aware that there are a number of German firms that have had to bring in their own engineers to supplement local skills.
One way of establishing a business presence in Romania is to buy into a local firm. However, there are pitfalls here, especially if you are acquiring a manufacturing facility. The likelihood is that the asset may have been state property that was then privatised. The privatisation agreements included strict requirements on, for example, levels of investment to be made into the business and the numbers of people to be employed and trained. It will be necessary to do due diligence to establish that the business you are acquiring has fully discharged its obligations under any privatisation agreement.
Privatisation agreements included requirements on levels of investment and the numbers of people to be employed and trained
The greatest growth in Romanian construction has been, not surprisingly, in infrastructure. I was in Sibiu at the beginning of the year and travelled on the local railway. Nothing had changed from the time that I used to travel on Romanian railways during the communist period. Railways, roads, airports and ports all need upgrading, and EU money is flowing into the country to do this job. The international trunk route that links central Europe to Turkey and beyond travels diagonally through Romania from north-west to south-east. Travelling by car on this route is still slow but now the route is improved between Bucharest and Brasov.
Construction activity is hectic, with the building of office blocks, malls and residential apartment blocks proceeding apace. Buildings housing banks have gone up everywhere. I counted almost a dozen new banks in one square kilometre of Sibiu.
What about contracts? The government has decreed that the FIDIC form is to be used on public sector works. A government decree has less force than primary legislation; it comes close to delegated legislation here. A consequence of adopting this contract is that the industry in Romania has had to familiarise itself with dispute boards which may use the option of adjudication. However, FIDIC adjudication over there is rather longer than here, lasting 84 days.
Finally, the procurement process in Romania is fairly traditional with the engineer or architect occupying the driving seat. The architects’ lobby in Romania is powerful. Recently it has kicked up a great deal of fuss over a new code that is equivalent to the Building Regulations. The architects were concerned that it would reduce their status and authority. Some professionals such as building services engineers have still to organise themselves into professional bodies.
Romania is in a process of rapid transformation. Problems over uncertainty of title to land and corruption – the legacies of the communist era – are gradually being resolved. Over the next few years the demand for construction is unlikely to slacken.
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group