COMMISSION IMPLEMENTING DECISION on the partial suspension of the disbursement of the third instalment of the non-repayable support and the third instalment of the loan support for Romania 

ment of the payment request relying on the relevant documentary evidence submitted by Romania. Therefore, the Commission maintains the conclusion that, notwithstanding the fact that Romania used a different procedure to that required by the milestone, by publishing in SEAP changes concerning the minimum requirements to be demonstrated by the winning bidder that had not been published in the OJEU, and by not extending the deadline to submit tenders after the modification of the tender specifications, Romania did not fulfil the requirements of milestone 72 that ‘the tender process shall be carried out in accordance with L98/2016 and its subsequent amendments, which transposed the relevant European Directive 2014/24/EU’. (30) On the basis of the information provided, the Commission concludes that milestone 72 cannot be considered satisfactorily fulfilled as the tender process was not ‘carried out in accordance with L98/2016 and its subsequent amendments, which transposed the relevant European Directive 2014/24/EU’. This is without prejudice to the assessment of other requirements of this milestone. EN 8 EN  (31) Regarding milestone 79, measure C4.R2. is entitled “Performance-based quality management in transport - Improving institutional capacity and corporate governance” and its description requires that: “The objective of this reform is to develop the quality of transport investments and services by improving the corporate governance and the performance of the State- Owned Enterprises operating in the transport sector, notably for those in charge of roads, railways and metro. A new entity C.N.I.R. S.A. (National Company for Road Infrastructure) has been created by legislation entered into force in April 2021 to manage the investments in road sector, with the responsibility to ensure the implementation of the projects from the technical and economic documentation phase, tendering procedures, effective construction to reception. It is expected that this shall allow to focus a specific entity (C.N.I.R.) on the efficient management and prioritization of the new road investments, while the other entity (C.N.A.I.R) shall focus on the management and maintenance of the existing road network. There shall be a transitional period of 3 years during which C.N.A.I.R. (National Company for Road Infrastructure Administration) and C.N.I.R. shall run investment projects in parallel, until the full operationalisation of C.N.I.R. The selection and appointment of the members of the board of directors of the state- owned enterprises in the transport sector shall be improved with transparent and competitive procedures, and remuneration shall be in line with Key Performance Indicators (KPIs). Based on an independent assessment of financial and operational performance in line with OECD (Organisation for Economic Cooperation and Development) standards, recommendations for improving the performance of C.N.A.I.R., C.N.I.R., C.F.R. (Compania Naţională de Căi Ferate), C.F.R. Călători and Metrorex shall be implemented. In order to carry out the independent evaluation, the Ministry of Transport and Infrastructure shall contract/select through competitive public procurement an International Financing Institution or an international auditing company, recognised for the competence and expertise in state-owned enterprises performance. The recommendations from this independent assessment shall be implemented by 30 June 2023. This reform shall ensure a balanced representation of women in all reform processes and in the organisational structures specific to its implementation. It shall also aim to improve the representation of women in decision-making positions of companies undergoing this reform. The implementation of the reform shall be completed by 30 June 2023.” (32) Milestone 79 of the Council Implementing Decision, which pertains to C4.R2, requires that: “The selection and appointment of members of the Board of Directors of State-Owned Enterprises in the transport sector (C.N.A.I.R., C.N.I.R, C.F.R., Metrorex, C.F.R. Călători) shall be made: – on the basis of a transparent and competitive procedure; EN 9 EN  – with a duration of the mandate of 4 years to ensure that medium and long-term efficiency plans are implemented; – with remuneration of Board members based on performance indicators (KPIs) linked to long-term financial sustainability (KPI relevant to the profile of each company) and performance of the service provided (e.g. on the basis of a customer satisfaction survey) by each company; – in compliance with good governance principles in line with the reform on State- Owned-Enterprises amending Law 111/2016.” The fulfilment of the milestone is subject to “Mandates validated by General stakeholder assembly.” (33) Romania has not provided the Commission with due justification that this milestone has been satisfactorily fulfilled. (34) On 25 January 2024 Romania provided evidence demonstrating that it completed the recruitment procedures for the five state-owned enterprises (SOEs) in the transport sector in February 2023, when the General Assembly of the companies formally appointed the new board members. The key performance indicators (KPIs) for the newly appointed boards were approved in September 2023 for C.N.A.I.R. and C.F.R., in February 2024 for Metrorex and in March 2024 for C.F.R. Călători. Romania has not provided the Commission with evidence that the KPIs for the board of C.N.I.R. have been approved. (35) First, the Commission identified instances of conflict of interest in the selection procedure for certain candidates appointed to the boards of C.N.I.R. and Metrorex. (36) In particular, based on the evidence provided by Romania on 19 July 2024, the Secretary General of the Ministry of Transport and Infrastructure, who was appointed to the board of C.N.I.R., was at the time of their appointment overseeing the Human Resources Unit, which nominated one of the seven members of the selection committee for the road SOEs (C.N.A.I.R. and C.N.I.R.). (37) Given the hierarchical link between the MTI Secretary General and one member of the selection committee appointed to carry out the final phase of the selection procedure, the Commission could not conclude that the procedure leading to the appointment of the Secretary General to the board of C.N.I.R. was transparent and competitive, as required by the milestone.13 (38) In addition, as confirmed by Romania on 9 July 2024 in reply to the Commission services’ observations letter of 28 June 2024, one of the new members of the board of Metrorex was at the time of their appointment the President of the nomination and remuneration committee (hereinafter referred to as “NRC”). According to the then Statutes of Metrorex14, the NRC was a consultative committee set up at the level of the board of directors, composed of three of the five board members. (39) The Commission noted that, in line with the legislation on corporate governance in force at that time, the Statutes of Metrorex and relevant recruitment documents, the NRC cooperated with the public authority in drawing up the letter of expectations15 and is 13 On 26 September 2024, Romania informed the Commission of the board member’s intention to resign from C.N.I.R.’s board as from 1 November 2024. 14 Available at https://www.metrorex.ro/organizare. 15 As specified by the approved selection plan for the Metrorex board recruitment procedure. In line with Government Decision No. 722/2016 on implementing GEO No. 109/2011, the letter of expectations lays EN 10 EN  consulted by the independent expert on the preparation of the initial16 and final17 selection plan. The Commission further noted that, throughout the recruitment procedure for the board, the NRC consulted closely with the selection committee appointed to carry out the final selection phase.18 (40) Based on the above, the Commission concluded that the NRC was closely associated with the procedure, in particular by being involved in the preparation of key recruitment documents at the initial selection phase and closely consulted by the selection committee at the final selection phase. That overlap in functions may have conferred an unfair advantage upon its President, who was also a candidate in the recruitment procedure, thereby potentially undermining the equality of opportunity and the impartiality of the selection process.19 (41) Second, the Commission noted that, by decision of the General Assembly of C.N.A.I.R. of 10 February 2023, six board members were appointed for a period of four years, while the board member representing the Ministry of Finance at the time was re-appointed for a period of four months. Romania therefore only submitted to the Commission six of the seven mandates of the new board members. On 31 May 2024, Romania confirmed that the mandate of the representative of the Ministry of Finance was not extended and that, as a result, the new board had been carrying out its functions with only six members. (42) In the case of C.F.R. Călători, all seven board members were appointed in February 2023 for a four-year term. However, one of the newly appointed members resigned in March 2024 and a second one in May 2024. Therefore, in its preliminary assessment, the Commission noted that as of May 2024, the board of C.F.R. Călători had been carrying out its functions with only five members. The Commission also noted that, according to GEO No. 109/2011 in force at that time of the Commission’s preliminary assessment, required that the board of directors for a company of the size of C.N.A.I.R. and C.F.R. Călători had five to nine members. However, Article 137(1) of Company Law No. 31/1990 provided that the number of board members should be uneven. Moreover, the Commission noted that the Statutes of C.N.A.I.R. and C.F.R. Călători required that the companies’ boards of directors have seven members. At the time of adoption of the Commission’s preliminary assessment, Romania had not provided down the expected performance of the management bodies and the shareholder policy on the management of the public undertaking. Based on the letter of expectations, shortlisted candidates draw up a declaration of intent. The short-, medium and long-term objectives of the public undertaking contained in the letter of expectations form the basis for the definition of the criteria for the selection of shortlisted candidates. 16 As laid down by Article 5 of Government Decision No. 722/2016 on implementing GEO No. 109/2011. The initial selection plan is drawn up at the beginning of the selection procedure and covers the key aspects of the procedure, identifying the starting date, the documents to be submitted, the requirements for the selection of the independent expert, the date of completion of the final selection plan. 17 As laid down by Article 14 of Government Decision No. 722/2016 on implementing GEO No. 109/2011. The final selection plan includes the elements of the initial selection plan, supplemented by other relevant elements between the start of the selection procedure and the signature of the mandates, including the proposal for nominating the successful candidates to the board. According to Article 17 of Government Decision No. 722/2016, the selection plan includes inter alia the interview plan, the candidate and board profiles, the criteria for the evaluation of shortlisted candidates, the nomination proposal. 18 Article 2(3) of Ministerial Order 1346 of 28.07.2022 on the appointment of the selection committee for rail (Metrorex, C.F.R. and C.F.R. Călători). See also Article 4(1)(c) of the Rules of functioning of selection committees for recruitment of board members of transport SOEs, approved by Ministerial Order No. 1181 of 6 September 2021. 19 On 18 September 2024, Romania informed the Commission of the board member’s intention to resign from Metrorex’ board as from 1 November 2024. EN 11 EN  evidence that the procedures for the selection and appointment of new members to fill the vacant board positions at C.N.A.I.R. and C.F.R. Călători had been launched. (43) Third, the Commission noted in its preliminary assessment that Romania submitted the signed addenda to the mandates of the new board members, which set out the KPIs, for four of the five transport SOEs. Romania confirmed that, contrary to the milestone’s requirement that the remuneration of board members be based on KPIs linked to long- term financial sustainability and performance of the service provided, the addenda setting out the KPIs had not yet been signed by the newly appointed members of the board of C.N.I.R., more than 18 months after their appointment to the board. (44) Fourth, the Commission noted that the description of the milestone required the recruitment procedures to be based on good governance principles in line with the reform on state-owned-enterprises amending GEO No. 109/2011, as approved with amendments by Law No. 111/2016. However, the new legislation on corporate governance of SOEs, namely Law No. 187/2023 amending GEO No. 109/2011, entered into force at the end of June 2023, while the selection procedures for the boards started in August 2022 with the publication of the vacancy notices and were completed in February 2023 when the new boards were formally appointed. Therefore, the recruitment procedures were carried out in line with GEO No. 109/2011, as approved with amendments by Law No. 111/2016, in force at the time the recruitment procedures were launched. The Romanian authorities nonetheless stated that the recruitment process complied with the OECD Guidelines on Corporate Governance at the basis of the reform of the SOEs legislation, as required by the description of the milestone. The Commission therefore, accordingly, assessed compliance of the selection and appointment procedures with the OECD corporate governance principles. (45) The description of this reform in the Council Implementing Decision (C14.R9 – Improve the procedural framework for the implementation of corporate governance principles in state-owned enterprises) states that its objective is “to improve the corporate governance of all state-owned enterprises in Romania by enforcing OECD standards.” (46) Based on the information and evidence provided by Romania on 9 and 19 July 2024, one of the Secretaries of State at MTI was appointed to the board of C.N.I.R., despite them having ranked eighth on the shortlist at the final phase of the procedure and not having been proposed for nomination by the selection committee.20 However, the OECD guidelines provide that political appointments to the boards of SOEs should be avoided, to prevent political interference on board processes. In its observations of 15 November 2024 regarding the requirement that ‘The selection and appointment of members of the Board of Directors of State-Owned Enterprises in the transport sector (C.N.A.I.R., C.N.I.R, C.F.R., Metrorex, C.F.R. Călători) shall be made: - on the basis of a transparent and competitive procedure;- with a duration of the mandate of 4 years to ensure that medium and long-term efficiency plans are implemented; - with remuneration of board members based on KPI