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Constitutional Court of Romania: Comprehensive Analysis of Decision No. 752/14.12.2023

December 18, 2024

Executive Summary

This analysis reviews the Constitutional Court of Romania’s Decision No. 752 dated December 14, 2023, addressing challenges to specific provisions in Laws No. 77/2016 and 52/2020 concerning debt discharge through transfer in lieu payment (Rom.“darea în plată”). The Court evaluated claims of unconstitutionality raised primarily by financial institutions, focusing on procedural and substantive compliance with constitutional principles. While the Court upheld the majority of the legal framework, it underscored critical elements concerning legislative clarity and economic equity.

Key Points from the Decision

Scope and Legal Framework

  • The case consolidated several constitutional challenges across multiple jurisdictions. The contested provisions pertain to the transfer in lieu payment (Rom. “darea în plată”) mechanism under Law No. 77/2016, amended by Law No. 52/2020, a legal relief allowing property transfers to settle debts.

Key Provisions Challenged

  • Article 4 (1¹)—(1³), (3), and (4):Introduces presumptions of unforeseen circumstances based on economic parameters (e.g., currency exchange rate increases above 52.6%).
  • Articles 5–7 and 8: Address creditor-debtor interactions during the notification and litigation phases, including suspensions of payments and foreclosure actions.
  • The retroactivity of Law No. 52/2020: Critics argue this undermines creditor rights and economic freedom.

Main Criticisms

  • Legal Predictability: Petitioners argued that the provisions lack clarity, particularly regarding thresholds for unforeseen circumstances’ definition (Rom. “impreviziune”).
  • Economic Freedom: Financial institutions alleged the law interferes with contract sacredness and disrupts the economic equilibrium.
  • Procedural Issues: The absence of a consultative process with the National Bank of Romania and a lack of impact studies were criticized.

Court’s Analysis and Rulings

The Court upheld the constitutionality of most provisions, emphasizing the legislature’s discretion in balancing public interest and private rights.

Provisions deemed valid include:

  • The use of presumptions for unforeseen circumstances (impreviziune) based on objective criteria like exchange rate fluctuations and debt servicing increases.
  • Suspension of foreclosure actions during the legal proceedings to protect debtor rights.
  • Retroactivity claims were dismissed, with the Court stating that the measures align with constitutional principles given their intent to address systemic financial instability.
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Impact on Stakeholders

For Consumers: The decision reinforces protections for individuals under economic distress, offering avenues for relief and debt restructuring.

For Financial Institutions: The ruling signals stricter compliance with legislative intent but allows room for contesting claims of debtor bad faith.

Implications for Stakeholders

Legal Sector

  • Clearer application of unforeseen circumstances principles aids in standardizing judicial practices.
  • Strengthened focus on legislative drafting quality and consultation processes.

Banking and Financial Sector

  • Enhanced risk assessment mechanisms for credit issuance.
  • Reevaluation of contract structures to mitigate long-term exposure to legislative changes.

Consumers

  • Expanded relief options strengthen debtor protections but underscore the importance of adhering to legal thresholds for eligibility.

Recommendations

Policy Advocacy: Financial institutions may engage policymakers to address concerns about economic implications while respecting judicial boundaries.

Public Awareness: Education campaigns for consumers on the implications and requirements of “darea în plată” laws.

Author: Mag. Raluca Marinescu
For further information on this aspect and any other questions please feel free to contact: Mag. Raluca Marinescu L.L.M. raluca.marinescu@nhp.ro.