International standards and best practices benefits and risks

International standards and best practices: benefits and risks The 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

Benefits of standardization Best practices as the starting point = ü More time to focus on the stringent commercial aspects ü Less time spent on technicalities Increased efficiency 3 © 2012 Reff & Asociatii

Risks: downsides of “importing” best practices q Size and complexity q Turning a “template” into a “bible” § Pragmatic approach and specific tailoring required q Improper dealing by local laws with foreign concepts § The “security agent” concept incompletely covered by law no. 71/2011 q Mandatory applicable local law principles § 4 Voting rights to the agent in case of default vs. revocable mandate under Romanian law © 2012 Reff & Asociatii

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

Mandatory applicable local law? 6 © 2012 Reff & Asociatii

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 © 2012 Reff & Asociatii

Applicable law 8 © 2012 Reff & Asociatii

English law vs. Romanian law Freedom of choice is the rule When there is

Enforceability 10 © 2012 Reff & Asociatii

§ Recent case law § Alternative solutions 11 © 2012 Reff & Asociatii

Transferability 12 © 2012 Reff & Asociatii

§ Transferability of the claim q Regulated by the law governing the claim ü English law or Romanian law specific aspects to consider ü New instrument for transfer under the New Civil Code: assignment of contract § Impact on the security q If English law governed facility agreement, impact depends on solution chosen for security structure q Romanian law specifics ü Notarized form mandatory to ensure publicity for transfer of Mortgage receivables ü 13 Incomplete regulation of the security agent’s mandate © 2012 Reff & Asociatii

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

Customizing the standard 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” Ø Negotiable character Ø Commercial sense and negotiation positions 15 © 2012 Reff & Asociatii

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. © 2012 Reff & Asociatii