​Disputes with former heads of state-owned companies, which end in international arbitration courts, cost the state too much, says the memorandum, which will be discussed by the government on Wednesday under the signatures of Justice Minister Alina Gorgiu and Mircha Abrudyan, the secretary general of the government. The document also mentions the disputes Transelectrica lost on the conveyor at the Arbitration Center in Vienna with the former executives of the company, for which they must also pay arbitration costs.

According to the document, the costs associated with the settlement of disputes abroad are high and have significant negative consequences for the state budget. That is why, through the memorandum, it is proposed to finalize the legislation on corporate governance so that the financial aspects of disputes abroad are taken into account when concluding mandate contracts with the heads of state-owned companies.

The government drew attention to articles in the press: There is a tendency to indicate international courts in the mandate contracts of directors

From the information appearing in the mass media, there is a tendency to include in the mandate contracts of administrators/directors of companies provisions regarding the resolution of possible disputes in the international arbitration jurisdictions of Vienna, Paris, London, etc. (arbitration clauses), which creates high costs (taxes, arbitration, fees to arbitrators, lawyers’ fees, travel expenses, accommodation, translation of documents, etc.), which affects the budget of these companies/autonomous governments and, implicitly, the state budget, the government document says.

The memorandum shows that the press reported how Transelectrica lost numerous disputes at the Arbitration Center in Vienna, opened by former members of the Supervisory Board and the Directorate, on the grounds that they had been replaced before the end of their term of office.

• Transelectrica loses on the conveyor belt disputes with dismissed former managers / The company must pay millions of lei in compensation
• How Transelectrica pays millions of lei in compensation due to political dismissals / The company lost another lawsuit with a former executive

According to him, when negotiating with managers about the provisions, they should take into account “the high costs associated with the settlement of disputes abroad, with significant negative consequences for the state budget, and, on the other hand, the fact that this contractual option can have negative consequences also regarding the perception of the Romanian judicial system and the Romanian institutionalized arbitration”.

“The national mechanism is more flexible and faster”

“As for the impact on the budget, it should also be noted the constant practice of the European Court of Human Rights, including in the cases of Romania, according to which the state can be held liable for the obligations of the company if it does not have institutional and operational independence from of the state,” the document also states.

It also states that “the arbitral award shall be recognized and enforceable in Romania if the dispute which is its subject can be settled by arbitration in

of Romania and if the decision does not contain provisions contrary to the public order of private international law of Romania.”

The government believes that these are aspects that indicate that the introduction of foreign arbitrations in the provision “is a more complex and complex mechanism in relation to the national one, the latter is more flexible and faster in resolving disputes.”

The Ministry of Justice and the SGG want to finalize the corporate governance legislation

During the negotiations on the mandate contracts, it will be necessary to pursue goals regarding the efficiency of budget expenditures, this idea emerges from the Memorandum. Therefore, the Ministry of Justice and the General Secretariat of the Government propose:

• Development by each body controlling state-owned companies of separate generalizing materials regarding the disputed situation with those with whom mandate contracts have been concluded. The results will be submitted to the Agency for Monitoring and Evaluation of State Enterprises (AMEPIP).
• Implementation of the AMEPIP centralized situation and, based on it, assessment and display of aspects related to the agreement of contractual clauses regarding ways of resolving possible disputes.
• Completion, at the proposal of AMEPIP and SGG, Government Resolution No. 639/2023 on the approval of methodological rules for the application of the extraordinary Government Resolution No. 109/2011 in the sense of including the goal of optimizing the budget of expenses among those carried out during the selection and appointment of members of the board of directors or, depending from the circumstances, the supervisory board and the directorate, as well as during negotiations regarding mandate contracts, observing the principle of contractual freedom.

Photo source: Andriy Popov / Panthermedia / Profimedia