I was recently reading about negotiations in China and how you need to have great patience and understanding. I brought to mind the situation in Romania when I first came here in 1990. The situation was not very different then to the Chinese experience. But what has changed, or has indeed anything changed since those early days.
For persons doing business in Romania for the first time, it is even now an interesting experience. The experience is divided into two depending upon with whom you are negotiating and also the subject matter of the negotiation. Back in the 1990’s most transactions were with the state companies and there were very few privately owned and managed companies. The position has now changed although there are still many state companies involved in the economy at all levels.
The current crackdown on corruption and influence peddling has also had a major impact on the style of negotiations and their outcome.
Negotiating with a private Romanian company can be a very different experience from negotiating with a Romanian State company but there are still signs of the previous mentality and past business practices. The majority of private companies are now run by entrepreneurs and business persons who are finally beginning to understand the workings of a free-market economy and the rights and responsibilities of the parties. This means that in many cases the objectives of the two parties to the negotiation are the same, namely to arrive at a position whereby both parties can benefit from a properly understood and drafted contract. The result is that the negotiations can be more balanced and thought through, all though there are still cases where the Romanian party is concerned that the foreign negotiators are there to totally destroy the Romanian position.
Before face to face negotiations on the contract are conducted it is important that the objectives of the contract are identified and that both parties are clear on the subject matter. From our experience when dealing with either a state company or a private company the presentation of a “standard” contract can produce major problems.
This is especially true for state companies. What is seen by non-Romanian investors as boilerplate agreements clauses come as a major surprise to the Romanian party? If the intention of a clause has not been discussed with the other side beforehand the inclusion of a written clause in a contract can produce an adverse effect. It is still seen in many instances as a bullying tactic and can make the ongoing negotiations difficult. When to present a written draft contract is a judgment call and is often done at the wrong moment. It is also important that all clauses required are included in the first draft.
The presentation of the written draft contract can be misunderstood. The document may contain many clauses which the parties had not addressed in discussions but which the non-Romanian party does not see as particularly difficult.
For many Romanian companies, the idea of negotiating each clause in the contract contained in a written agreement can seem un-natural and unusual. As Romania is a code law country many terms included in a “western” or “common law” country are unusual. The Romanian party will wonder why it is included and what is the reason? Careful contract drafting is very important. The idea of negotiating each clause is not seen as important.
We have in many cases sent a draft contract and in many cases, it is not read and can sometimes be signed as is. This can be very disconcerting where a contract negotiation is anticipated. Afterwards, if there is a dispute only then are the terms really read and understood. We have often sent a contract to the lawyers representing the other side and received no response. We write to them and ask what is going on, and do they wish to discuss the contract. They usually reply it is with their client who will review it and discuss the terms with us direct, not through the lawyer. When we ask for a meeting to discuss any points they say it is not necessary.
However, when it then comes to signing of the contract they are not ready and the contract then, in reality, to be negotiated. This can be very frustrating when the client has sent over a senior team to sign the contract. They can see time wasted and in all probability will return home without the signed contract.
All this occurs even when negotiating with a private company. These are merely pointers as to what can happen. Next week I will write about negotiating with a state company or institution. Although similar the results can be very different and not necessarily for the good.
