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Did Arbitration become the new rule in Public Procurement in Romania?

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#Article 5 Series 5 Must-Reads on the National Contract in Public Tenders in Romania

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In our fifth and last article of our series 5 Must-Reads on the National Contract in Public Tenders in Romania we are analyzing the rules established for claims and dispute resolution/arbitration.

You can also learn more on the structure of the National Contract in comparison with FIDIC standards here , as well as on the main improvements and risks brought by the National Contract.

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CONTENT:

In the first part of the article we are embarking into a brief analysis on the outcomes of the new arbitration rule set by the National Contract.

Following this, we will summarize the rich steps prescribed the National Contract from the formulation of a claim up until the parties may resort to arbitration.

As we will observe below, the procedure set by the National Contract is detailed and strict. Important consequences are set for cases when the terms are not observed. When one of the steps of the procedure is not followed, then the parties will no longer be entitled to resolve the dispute in arbitration.
Each step and term should be observed with attention and in detail.
Nonetheless, in comparison with the limitations imposed by the previous practice where mostly national courts had jurisdiction, the claims and dispute resolution rules brought by the National Contract represent a welcomed update in public procurement in Romania.

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I.  Is the Arbitration rule a positive outcome?

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The National Contract establishes within articles 69 and 70 a new procedure for the formulation of claims and their resolution through decisions of the Supervisor. This can eventually lead to an arbitration carried out by the rules of the International Commercial Arbitration Court of the Chamber of Commerce and Industry of Romania.

The procedure put in place by the National Contract includes a multitude of details. Very limiting deadlines must be met each step of the way prior to arbitration.

Failure to submit a notice or details- within the time frame- represents a reason for dismissal of the claim.

Prior to the enforcement of the National Contract, the conditions of contracts applicable in tenders in Romania established that all litigation in connection with or resulting from the contract are to be resolved by national competent court.
A very limited number of tenders established arbitration for dispute resolution.

Now, the National Contract put in place a procedure which maintains certain FIDIC related rules and foresees arbitration for dispute resolution. This increases the role of the Supervisors decisions and establishes particular and limited steps to follow, as we will see below.

For most parties involved in public procurement tenders in Romania, the provisions of the National Contract on dispute resolution and the new rule of arbitration are perceived as a positive outcome.
Nonetheless, it is remains to be established the functionality of the strict rules and timeframes prescribed, as well as resolutions that will emerge in our practice.

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II.  Required steps for a claim & arbitration in a nutshell

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The main steps established by the National Contract for the formulation of a claim are comprised in the picture below and described in what follows.

  1. Notice of Claim

 The National Contract indicates the rules applicable in cases of claims formulated by the Contractor and by the Beneficiary.

a. Claim by the Contractor

– For the claims initiated by the Contractors: A notification must be sent within 30 days of the occurrence of the event or situation (and NOT FROM THE DATE OF HAVING KNOWLEDGE OF such event or situation).

Debates in the interpretations of the consequences of not observing the 30 days’ term have already emerged among practitioners in the field. Among these consequences, if the notification is not sent within 30 days from the occurrence of the event or situation, the Contractor risks that the extension of time is not granted and Additional Cost until the date 30 days prior to the date of notification.

– Within 30 days of the Notice of Claim, the Contractor must present details of the Claim based on daily records, prove the claim and clearly mention the provision on which the claim is based on. 

– If the Supervisor does not approve or agree with the reasons presented or does not answer within 5 days, the Contractor may issue a disagreement notice within 10 days and the provisions regarding Disputes and Arbitration shall apply. Otherwise, the right to receive an extension and / or financial compensation for the event is lost.

b. Claim by the Beneficiary

When it comes to claims by the Beneficiary, similar provisions are established as for claims by the Contractor.

As a difference, it is indicated that the Beneficiary’s notification will be sent within 30 days from the occurrence of the event, except when it can be demonstrated that the Beneficiary had no knowledge of the event or situation.

  1. Decision of the Supervisor

Following the Notice of Claim, the second stage is a Decision of the Supervisor which implies:

– Admission in principle of the notification of Claim.

– Consultation period.

– Decision of the Supervisor. The elements for which the Parties have not reached an agreement within 15 days from the closure of the Consultation Period, the Supervisor will issue their decision. If the decision is not issued within the aforementioned period, the notice of disagreement can be submitted.

  1. Execution of the Decision of the Supervisor

 Following the Decision of the Supervisor, an implementation phase follows.

Differences emerge in between the implementation of a decision for the Contractors claim and the Beneficiary claim.

a. For the Contractor Claim – against the Beneficiary no delay damages apply until an arbitration decision in cases of extension of time. Specific rules apply on decisions regarding financial compensation, entitling the Contractor to submit a disagreement notification in case the payment established is not received in a period of 90 days and only the costs established by the Supervisor may be claimed in arbitration.

b. For the Beneficiary Claim – against the Contractor the Decision of the Supervisor represents a contractual obligation for each Party until the moment of a review through an amicable solution or arbitration.

  1. Disagreement notice

In order to continue the procedure, a disagreement notice should be submitted indicating the description of the circumstances and elements of disagreement, the motives and the clause based on which is issued. In case the notice of disagreement does not include the required elements, it is null and will not have effects.

After the issuance of a disagreement notice, the provisions regarding Dispute and arbitration comprised in article 70 of the National Contract shall apply.

  1. Dispute 

According to the National Contract, only following the previously mentioned steps within the prescribed time frames, if one Party has sent a disagreement notice to the other, it will be considered that a Dispute has appeared between the Parties.

The parties must try to resolve the dispute amicably either directly or by means of a mediator. Certain periods of time -between 30 to 90 days calculated from the Decision of the Supervisor or after the parties reject the amicable solution/ the date of closure of the amicable settlement procedure –  are established before any party may resort to arbitration.

  1. Arbitration

Finally, after parties may resort to arbitration which shall be carried out according to the rules of the International Commercial Arbitration Court of the Chamber of Commerce and Industry of Romania.

The arbitrators shall have full authority to access, analyze and review any certificate, decision, and instruction of the Supervisor for the settlement of the dispute.

The Supervisor may be a witness and offer evidence on any matter.

In our practice, the Contractual Agreements for each tender included indications regarding the number of arbitrators, place of arbitration and the language of arbitration. Generally, the place of arbitration was set as Bucharest and the language Romanian, meanwhile a number of 3 arbitrators was set.

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Conclusions

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The rules set by the National Contract on claims and dispute resolution represent a step forward in public procurement in Romania.  Arbitration is now set as the applicable rule.

Nonetheless, as we have analyzed, the steps established starting with the Notice of claim and continuing with the Decision of the Supervisor and its implementation, the Notice of Disagreement, the emerging of the Dispute and, finally, Arbitration are detailed and strictly regulated with short time frames to be observed.

As such, the positive outcomes brought by the new rules on claims and dispute resolution brought by the National Contract should be analyzed and implemented with attention in order to avoid negative impacts.

We conclude our last article of our series 5 Must-Reads on the National Contract in Public Tenders in Romania by inviting you to visit our previous articles from the series here .

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***
AUTHOR

 

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Georgiana Sîrbu

Partner SIRBU LAW

E: georgiana.sirbu@gsirbu.com | www.gsirbu.com

T: +40 724 875 503 | T: +34 672 238 070

Offices: Bucharest    | Barcelona

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* National Contract refers to the public procurement conditions of contract, as enacted by Government Decision no. 1/2018.

** Words in majuscule have the meaning attributed to them by the conditions of contract, as enacted by Government Decision no. 1/2018.

*** This article is for information purposes only. It is not intended to be used as or substitute legal advice.

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Razvan Delibasa is a young, enthusiastic lawyer whose primary focus is public procurement, construction law, and real estate. He holds a Bachelor's Degree from Faculty of Law, University of Bucharest.

Razvan has qualified with the Bucharest Bar and has shown abilities to approach each case with meticulous attention to detail and an unwavering dedication to delivering pragmatic and effective legal solutions.

Octavian specializes in civil, commercial, and administrative disputes, which are addressed both within the Romanian court system and before arbitral tribunals.

He possesses a discerning ability to identify potential weaknesses in each procedural path that could be pursued, ultimately guiding the selection of the most appropriate strategy for each specific dispute, all while keeping a sharp focus on achieving the client's ultimate objectives.

Before joining S&V, Octavian practiced law at one of the first full service law firms to be established in Bucharest and Romania, representing a wide-range of clients, from midsize to large corporations, as well ass private high net worth individuals.

Recent cases in which Octavian was has been engaged in comprise:

▪ representing a major domestic outdoor advertising company in multiple disputes concerning (i) illegal removal of billboards by Bucharest public authorities and (ii) suspending and annulling a public domain rental agreements;

▪ acting on behalf of a notorious offshore company, purportedly associated with a prominent Romanian political and business figure, in enforcement proceedings against the Romanian State and in addressing challenges to enforcement;

▪ serving as a member team representing the Ministry of Environment, Water and Forests in two ICC Paris disputes, valued at EUR 50M and seated in Paris, arising from the privatisation of PETROM S.A.

▪ representing one of Romania's largest fashion retailers in disputes arising from the repercutions of the COVID-19 pandemic on rental agreements associated with mall spaces;

Cristina possesses expertise in the domains of public procurement, construction law, and real estate. Since becoming a part of our team, her contributions have been pivotal to major public procurement and energy ventures.

Cristina's educational background includes graduating from the Faculty of Law at the esteemed University of Bucharest. Currently, she is pursuing a master's degree in International Arbitration, further enhancing her legal acumen.

Driven by an unwavering passion for her field, Cristina is perpetually committed to broadening her knowledge and refining her skills. This fervor for continuous learning, coupled with her resolute dedication to professional advancement, positions her as an exceptionally valuable legal practitioner.

Alexandra is an alumna of the University of Bucharest, Faculty of Law, and currently contributes her expertise to the dispute resolution and arbitration department at Sirbu & Vornicu Law. Her primary specializations encompass public procurement, construction law, and administrative law.

Alexandra excels in collaborative environments, readily engaging with her colleagues to foster the exchange of opinions and ideas. This approach consistently leads to the identification of the most efficient and advantageous working methods.

Fuelled by a fervent aspiration to translate her accumulated knowledge into practical outcomes, Alexandra is characterized by her unwavering dedication. Her commitment manifests in her wholehearted support of our clients, ensuring the provision of optimal solutions.

Andreea has been involved in a broad range of urbanism and construction disputes including arbitration proceedings, regarding matters such as the execution of FIDIC and public procurement contracts. Her experience also covers energy market issues, such as the energy market liberalization and reactive energy regulations.

Moreover, Andreea has been directly involved in disputes regarding major infrastructure and construction projects and has assisted clients in all stages of litigation. Her litigation and arbitration practices are completed by her advisory work on procurement contracts with a focus on construction contracts.

In addition to her experience in construction and energy law, Andreea is keenly interested in business law and different commercial matters, being involved in several projects initiated by the Romanian Institute of Commercial Law.

Outside of the courtroom, Andreea has been involved in the organizations of several academic events, including international conferences and mock trials competition for law students.

She is a very hard working and enthusiastic individual whose aspiration is to continuously broaden her theoretical and practical knowledge. Her eagerness to constantly learn new matters along with her devotion to grow on a professional level make her highly valuable.

Andreea has graduated Law School as a valedictorian and has a master’s degree in International Arbitration from the University of Bucharest.

Stefan Dudas has over ten years of experience in international dispute settlement and has practiced law in several European jurisdictions, including France, Germany, Austria and Romania while working for world-renowned international law firms, such as Shearman & Sterling LLP and Derains & Gharavi International, and other market leading law firms in Romania, such as NNDKP and Musat & Associates.

He focuses his practice on investor-State disputes, as well as complex commercial arbitrations in the energy, infrastructure, insurance, and oil and gas sectors.  He has acted as counsel in arbitrations before ICSID, ICC and UNCITRAL under a variety of substantive laws. Recent cases in which Stefan acted include:

An ICC arbitration seated in Paris between a Middle Eastern State and an Asian company in relation to a dispute arising out of a contract for the construction and exploitation of a solid waste management facility valued at over USD 500 million;

An ICC arbitration seated in Paris between a Qatari company and the largest car manufacturers in the world over the termination of a distribution agreement, with an amount in dispute over USD 150 million;

A dispute under the SCC Arbitration Rules concerning the construction of a power plant in Libya valued at over USD 400 million;

Two ICC arbitrations seated in Paris between one of the largest Italian power company and a State-owned company in relation to a privatization agreement entailing the modernization of the national power grid in Romania. The total amount in dispute was over EUR 1.5 billion;

A series of ICC arbitrations seated in Paris between one of the largest French companies specialized in construction and maintenance of transport infrastructure and a State-owned company, valued at over EUR 125 million concerning some of the largest infrastructure projects in Romania;

An investment treaty dispute initiated by a Dutch investor under the ICSID Convention against Romania in relation to bankruptcy of one of the largest insurance companies in the CEE region valued at EUR 350 million;

An investment treaty dispute between an Iranian investor and South Korea under the UNCITRAL Arbitration Rules in relation to the privatization of a State-owned company valued at over USD 500 million.

Stefan holds a Master of Laws in international arbitration from Stockholm University and is currently finalizing a Ph.D. in international law at the University of Vienna.

He has authored numerous articles and is a frequent lecturer in international arbitration. Stefan’s recent publications include:

“Energy Charter Treaty, the Protection of Renewable Energy Investments post Achmea”, in The future of Investment Treaty Arbitration in the EU. Energy Charter Treaty, Intra-EU BITs and Multilateral Investment Court, co-author, Kluwer International, (upcoming in May 2020);

“Treaty Counterclaims under the ICSID Convention” in ICSID Convention after 50 years: unsettled issues, Kluwer International 2017;

“A Sovereign’s Broken Promise: the Golden Ticket to a Billion-Dollar Award?”, Kluwer Arbitration Blog, June 21, 2016;

“Annulment of awards in Arbitration in Romania”, C. Leaua and F. A. Baias eds. Kluwer International, 2016;

“Construction law in Romania”, Co-author in Construction Law in Europe, European Society of Construction Law (ESCL) 2016;

“A story about broken promises and legitimate expectations: Bilcon of Delaware et al. v. Canada”, Kluwer Arbitration Blog, 11 September 2015.

Roxana Vornicu is recognized nationally and internationally for her public procurement, construction law and EU law expertise and she combines academic excellence with legal practice for almost a decade. As a practitioner, Roxana specializes in procurement, construction and administrative law. She has worked for one of the biggest law firm in the country (NNDKP) for over 7 years, managing and working in some of the highest profile administrative disputes of Romania. She handles complex strategies for procurement and administrative disputes and holds comprehensive knowledge and thorough understanding of EU procurement law.
Her academic accomplishments are stellar. She holds a Magna Cum Laudae PhD in procurement remedies and is regularly invited as a speaker to elite universities and conferences in Europe. Roxana is also a researcher at the King´s College London Centre of Construction law and Dispute Resolution in London.
At King´s, Roxana has been involved in several research programs, including one that looked into procurement strategies for incentivising collaborative delivery to optimise whole-life outcomes. She contributed to the drafting of the White Paper: 'Procurement Strategies for incentivising collaborative delivery to optimize whole-life outcomes’ developed by King’s Centre of Construction Law and the University of Cambridge Laing O'Rourke Centre for Construction Engineering and Technology and published by the Centre for Digital Built Britain (CDBB).

She worked on the report: 'Procuring Net Zero Construction' which was published by the Society of Construction Law and endorsed by the UK Government in the September 2022 ´Construction Playbook´ and ´Guidance on Promoting Net Zero Carbon and Sustainability in Construction.'
Since 2020, Roxana has been also a lecturer at Saïd Business School, Oxford University, teaching about international treaties and their impact on construction contracts. She has also taught at Stuttgart University, the International Construction: Practice and Law (MBE) course, lecturing on collaborative construction contracts.
Selective list of Publications:
• Vornicu R., P. Gianna, ´Pursuing Zero Carbon Targets Through Collaborative Construction Procurement and Contracting ´, International Construction Law Review, Part 4, 2020.

• Vornicu R., ´Special Issue on the Legal Remedies and Implications from the Fosen-Linjen Case ∙ Procurement Damages in the UK and France – Why So Different? ´, European Procurement & Public Private Partnership Law Review, Volume 14 (2019), Issue 4, Page 222 – 229

• Vornicu, R., The sufficiently serious breach test in Action for Damages in Public Procurement Law and a tale of three courts: The CJEU, The UK Supreme Court and the EFTA court, in press, European Public Law Journal, 2019.

• Vornicu, R., ‘The implementation of the Concession Directive in Romania’, published with Munus Rivista giuridica dei servizi pubblici, vol. 3/2018.

• Vornicu, R., Public Procurement below thresholds in the European Union: EU law Principles and national responses, EPPPL, (European Procurement and Public Private Partnership Law Review), 187, 2015, Co-authored with Dacian Dragos

• Vornicu, R., (2016), The rules on Performance of the Concession Contracts under the 2014 Concession Directive and the Triangle of Rights. A brief Dialectic, EPPPL 2/2016 (Vol. 11)

• Vornicu, R., Public liability in Romania, chapter in Tort Liability of Public Authorities in European Laws, Giacinto della Cananea and Roberto Caranta (eds), Oxford University Press, March 2021

• Vornicu, R., Commentary of Article 58 of Directive 2014/24/EU in European Public Procurement, A. Sanchez Graells & R. Caranta (eds), Edward Elgar Publishing, 2021

• Vornicu, R., Commentary of Article 63 of Directive 2014/24/EU in European Public Procurement, A. Sanchez Graells & R. Caranta (eds), Edward Elgar Publishing, 2021

• Vornicu, R., M. Andhov, ´A comparative view of the use of procurement techniques and electronic instruments by central purchasing bodies´, in Central Purchasing Bodies, M. Comba & C. Risvig (eds) Edward Elgar Publishing, 2021.

• Vornicu, R., , Central Purchasing Bodies in Romania, Central Purchasing Bodies, M. Comba & C. Risvig (eds) Edward Elgar Publishing, 2021, co-authored with Dacian C. Dragos.

• Roxana VORNICU, Tendencies and Developments in Romanian Administrative Law, in Jean-Bernard Auby (ed) LE FUTUR DU DROIT ADMINISTRATIF / THE FUTURE OF ADMINISTRATIVE LAW, Lexis Nexis 2019, pp. 151-158, co-authored with Dacian C. Dragos

• BIM and sustainability, chapter in Sustainability Through Public Procurement: The Way Forward – Reform Proposals, Sustainability Through Public Procurement: The Way Forward – Reform Proposals University of Oslo Faculty of Law Research Paper No. 2020-09 SMART Project Report

• R Vornicu, ´Legea 98/2016 privind achizițiile publice comentata´ Wolters Kluwer Online, Co-author Dacian Dragos.

• R Vornicu ´Concessions and PPP in Romania´, in Piotr Bogdanowicz, Roberto Caranta, Pedro Telles (eds), Public-Private Partnerships and Concessions in the EU, Edward Elgar 2020, Co-author Dacian Dragos.
nia´, in a collective volume published with Oxford University Press edited by Giacinto della Cananea & Roberto Caranta (in press).

Georgiana Sirbu practiced law at one of the biggest law firms in Bucharest, NNDKP. Following this, she was at the helm of the legal department of international energy giant AstroEnergy, part of the Chint Group with a presence in over 140 countries with more than 30,000 employees. As Head of Legal in Spain, she was in driving seat for the legal management of more than 15 offices in Spain, Romania, Chile, Mexico and Brazil.

Georgiana holds degrees in law and economics and a master’s degree in business law. She has taught at Pompeu Fabra University in Barcelona – a world-leading university ranked amongst the best universities in Spain where she has been involved in internationally renowned legal research groups.

She is valued for her ability to truly understand and empathize with her clients’ business interests and for her results-driven legal strategies and knowledge of public procurement, real estate and energy.