CMS Expert Guide on rising raw material prices in Romania

No specific legislative or regulatory provisions have been adopted by the Romanian Government.

However, in August 2021 the National Authority for Public Procurement in Romania (“ANAP”) published guidance on changes to contracts brought about by the increase in the price of raw materials (the “Guidance”). The authority reiterated the rules and principles to be observed based on the laws in force on how to address performance of public procurement works contracts when dealing with price rises for raw materials. Although the Guidance refers to public procurement works contracts in particular, the clarifications are also relevant for mixed contracts (including supply and services), both in the context of classic public procurement contracts, as well as public procurement contracts in the utilities sector.

The Guidance does not amount to binding law but is rather a form of clarification provided to Romanian contracting authorities facing requests for changes to contracts brought about by contractors faced with soaring price increase in raw materials.

In this context, the Guidance addresses the following issues:

• the circumstances in which public contracts may be amended due to the current increase in prices of raw materials in accordance with the previous ANAP Instruction no. 1/2021 on changes to contracts (“ANAP Instruction”);
• the insertion of a price revision clause in future contracts;
• the amendment of contracts due to circumstances that a diligent authority could not foresee, provided that the amendment is limited to a maximum of 50% of the contract price and does not affect the overall nature of the contract;
• the amendment of contracts brought about by legislative amendments or administrative acts issued by local authorities that concern local taxes and result in the increase or decrease of the costs on which the contract price was formed;
• non-material amendments (as defined under Article 297 (1) letter e) and Article 297 (7) of Law no. 98/2016 on public procurement).    

The Guidance is expected to make Romanian contracting authorities aware of these issues and also clarify the limits within which any changes to contracts can be effected in accordance with the law. ANAP clarified, amongst other things, that:

• the decision to amend the public procurement contract belongs only to the contracting authority (not the contractor);
• when taking such decisions, contracting authorities (through designated specialised personnel) must assess and evaluate thoroughly the circumstances on which the request for amendments is raised by the contractor;
• the contract price must be adjusted only to the extent necessary to cover the costs on which the price was grounded and without resulting in the change of the result of the procedure, by cancelling or minimising the competitive advantage on which the contract was awarded;
• the change would be reflected in a written agreement of the parties (as detailed under the ANAP Instruction).

Shortage of raw materials and the increase in prices of supplies may impact the technical conditions of the performance of public contracts. Although these may make it necessary to amend the specifications of public contracts, for example by replacing materials now unavailable or too expensive, by amending quantities or the scope of services to be carried out, or by adapting the conditions and deadlines in order to remedy the difficulties resulting from this situation, the ANAP Guidance does not expressly confirm whether the legal provisions detailed in the Guidance or the ANAP Instructions automatically justify the changes to contracts in such circumstances.

The implied conclusion is, however, that each case would need to be assessed individually in light of the particular circumstances triggering the need to amend the contract and that the rules and principles stated in the ANAP Guidance should be evaluated for each case in turn. As a general remark, the ANAP Guidance implies that it would be possible to resort to different cases of amendments to ongoing public contracts provided for by the Romanian public procurement law, particularly where the need for modification has been brought about by circumstances that a diligent contracting authority could not have foreseen. This latter amendment may be resorted to as long as it does not alter the overall nature of the contract and that any increase in value does not exceed 50% of the value of the original contract.

Clauses for revision of the contract (particularly the price) may be resorted to only if initially provided in the contract and subject to the express formula and/or rules specified in the initial contract and documentation of the award procedure (if this is not provided in the initial contract, it cannot be added to the contract during its performance).

Pursuant to the imprévision theory (originating from the Romanian Civil Code and not part of the Romanian public procurement law), the parties are bound to perform their obligations, even if their performance has become more onerous, either because of the increased cost of performing their obligation or because of the decreased value of the consideration.

However, if the performance of the contract has become excessively onerous because of an exceptional change in circumstances that would make it manifestly unfair to require the debtor to perform, the court may order:

1. the adaptation of the contract in order to distribute fairly between the parties the losses and benefits resulting from the changed circumstances;
2. the termination of the contract at such time and under such conditions as it may determine.

Under the Romanian Civil Code, the imprévision theory is possible only if (cumulatively):

1. the change of circumstances occurred after the conclusion of the contract;
2. the change of circumstances and its extent were not and could not reasonably have been foreseen by the debtor at the time of the conclusion of the contract;
3. the debtor did not assume the risk of the changed circumstances and could not reasonably be expected to have assumed that risk;
4. the debtor has attempted, within a reasonable time and in good faith, to negotiate a reasonable and fair adjustment of the contract.

Neither the ANAP Guidance nor the ANAP Instruction refer to the possibility of a contractor or contracting authority relying on the imprévision theory and there is inconsistent court practice on this topic. Although there is previous case-law indicating that the imprévision theory could not apply in the context of a public procurement contract (which is subject to the special public procurement laws, rather than the general civil law), more recent case-law of the National Council for Solving Complaints (CNSC) suggests that the imprévision theory may also apply in the context of a public procurement contract.

Since the implementation of the imprévision theory in the context of a public procurement contract is open to debate (and so may trigger the risk of a legal challenge), the recommended avenues for changes to public procurement contracts would be those regulated under the special public procurement laws (rather than the general civil code rules).

Since neither the ANAP Guidance nor the ANAP Instruction addresses the issue of penalties for delays or breach of contract in this context, unless the unforeseen circumstances also qualify as force majeure (or fortuitous case), or unless otherwise stated under the public procurement contract, the contractor will be liable for the delay in performance or breach of contract and, consequently, subject to penalties unless the contracting authority decides not to apply the contractual penalties.

Yes, the Guidance provides that any amendments to the contract must be reflected in writing by mutual agreement between the parties. The Guidance details the circumstances in which a formal addendum to the contract would not be mandatory (e.g. when the initial contract provides that certain amendments may be performed by written instructions ordered by the contracting authority).

Neither the Guidance nor the ANAP Instruction refers to the applicability of private law to public procurement contracts.

However, Romanian public procurement law (e.g. Law no. 98/2016 on public procurement) qualifies the public procurement contract as an administrative contract, and also stipulates that the performance of the contract is subject to the Romanian Civil Code (private law). As clarified by CNSC, this means that although the contract is public, after its conclusion it also becomes subject to certain provisions of private law insofar as performance and termination of the contract is concerned. In this context, CNSC admits that the imprévision theory may apply also in the context of public procurement contracts.