The story of Emergency Situation Certificates. Who and how to apply.

Overview

During the State of Emergency, the authorities are granted discretionary powers to enact any measures in view of limiting the negative effects of COVID-19 with an emphasis on  measures aimed at having an immediate effect for business environment in order to avoid an irreversible collapse. The main purpose is to keep the economic activity afloat until the health crisis is over.

It is worth pointing out the ever-changing framework in which the society is now. The laws are constantly changing and this speed of transit leads to the adoption of normative acts whose provisions raise questions about enforcement procedures.

In the context of the crisis generated by COVID-19, the Minister of Economy, Energy and Business Environment issued the Order no. 791 regarding granting of emergency situation certificates to economic operators whose activity is affected in the context of SARS-Cov-2 pandemic.

The Emergency Situation Certificate (the “ESC”) is a novel creation of the Government in view of supporting businesses in the context of COVID-19. Following the example of other countries, the state created a type of certification tailored for business affected by the economic downfall and by the measures undertaken by the authorities, aimed at safeguarding the business continuity. Simply put, the ESC certifies that a certain business was affected by the COVID-19 outbreak. 

Who may apply for an ESC and what types of ESC exist?

Any company (regardless of the industry) may apply for an ESC if some criteria are fulfilled. Certificates are either blue or yellow, depending on the criteria met by the company filing for it. One can apply only for one type of certificate, if the below criteria is met:

• their activity was ceased entirely or partially following of measures taken by the competent authorities considering the state of emergency – for the type 1 (blue) certificate
• it incurred an income decrease in March 2020 of at least 25% as opposed to the average income or earnings between January and February 2020 – for the type 2 (yellow) certificate.

Of course, there are some questions that arise. For example, a company falling within the scope of Government measures related to the mandatory closure of business (total or partial) is entitled to obtain the blue ESC (e.g. retail in commercial spaces, gym, beauty salons, HORECA etc.), but where the activity indirectly ceased as a result of isolation measures, may a company still apply for such an ESC? Specifically, on this issue, the Government has explicitly stated the fact that the economic operators who do not fall under the military ordinances, but who have their activity affected due to the fact that it depends on the activity of other companies that fall under their scope may request the ESC. Also, if a company is envisaged by both conditions and is entitled to request any certificate, which ESC should it request?
Given that both ESC have the same effects, it seems that the good answer is that any of them may be requested without affecting how it will be used. Moreover, does the dismissal of an application trigger the impossibility to request the other ESC, provided the conditions are met for both cases? Well, in this case the answer is probably not, especially because, as a rule, the issuance of an ESC is rejected because of procedural elements (i.e. signature) and not based on a background analysis.

When may an ESC be used and what are their legal effects?

As a rule, a company can benefit of ESC in respect to the situations expressly provided by the law: in dealings with public authorities in order to receive relief or support and in business relations (e.g. as basis for renegotiating specific contracts).

More specifically, the effects of the ESCs are expressly provided by the law. It is very important to be noticed that there is no general effect and the authorities awarded different force to the ESC depending on the relief sought.

The measures are mostly related to the small and medium enterprises (the “SME”), viewed as the most vulnerable to the economic disruptions caused by COVID-19. The trend to safeguard the SME is of interest to the global economy, as International Chamber of Commerce issued a statement to the governments requesting to ensure policy response in support thereof.

Apart from the tax benefits or other facilities in relation to the authorities, pursuant to the legislative measures enacted up to date, there are some situations within which a company can deploy the ESC: a SME holding an ESC is entitled, ope legis, to the postponement of the payment of utilities and or rent for the headquarters or its branches; legal entities may request the postponement of credit instalments, together with interest and commissions in credit and leasing contracts; in other ongoing contracts, a SME may rely on ESC to seek relief within the force majeure mechanism and the measures taken by the authority.

It is very important to notice that the legal effect refers in all cases to the merely postponement of the obligation and/or the prolongation of the agreement term (the debtor will be held to make the payments afterwards, retroactively) and so, in light of the current legal provisions, the effects of the ESCs are assimilated to a moratorium. So far, there are no legal provisions that explain the method in which the postpone payments will be paid (i.e. at the end of the state of emergency the entire amount of money shall be paid or it will be paid in installments). The lack of such provisions presumes that the negotiaition between the parties will establish the payment mechanism. In this point of view, could it be interpreted that the party who obtained an ESC may have a favorable position during the negotiation?

How to apply for an ESC?

Economic operators that wish to obtain an ESC shall have to file an electronic application via http://prevenire.gov.ro/. The Ministry of Economy, Energy and Business Environment issues the ESC only during the emergency period, electronically and automatically, after the system validates the request and is valid without signature and stamp. The ESC verification can be done on the platform http://prevenire.gov.ro/, using the series and number of the issued ESC.

Conclusion

ESC should be considered as exceptional documents, adopted with the particular purpose of supporting actors affected by the COVID-19 crisis, and so for any exceptional fact the law involves special, express provisions. Thus, ESCs are not assimilated with force majeure certificates, nor do they have the same effects, in the absence of any special legal provisions. ESCs can be requested and used under the conditions of the law, and in the absence of a different mechanism recognized by the authorities through a normative act, their effects cannot be extended to other unregulated situations.