Arbitration in Greece

21 May 2007

Ioanna Thoma, Sophie Lamb, Kostas Karagiannis (Kallimopoulos, Loukopoulos & Chiotellis Law Firm)

Introduction

Alternative dispute resolution in general and arbitration in particular appear in the very origins of Greek legal history.[1] In modern times, the Greek constitution confined to the institution of arbitration an ancillary and subordinate role in the adjudication of disputes when compared to the role attributed to the judiciary. Greece has nevertheless kept pace with international developments in the field of arbitration. Greece is a signatory to the 1981 New York Convention on the recognition and enforcement of foreign arbitral awards and, in 1999, transposed the UNCITRAL Model Law into Greek law. Greece is also a member of the InternationalCenter for the Settlement of Investment Disputes. This article aims to give a brief insight into the practice of arbitration in Greece and to identify certain interesting features of Greek arbitration law.

I) The increase in arbitration activity related to Greece

Greece’s economy has stabilised and grown over the past six years. Greece enjoys currency stability thanks to the introduction of the euro and its infrastructure has improved by virtue of the 2004 Athens Olympic Games. The liberalisation of the energy and telecommunication markets is steady and offers new investment opportunities. An increase in both foreign and local investment, together with investment from Greek companies operating in Southeast Europe, has contributed to the growth of the country’s economy.[2] These factors, in combination with the increasingly time-consuming nature of Greek legal proceedings, have contributed to an increase in international commercial arbitration activity, notably in privatisation, infrastructure, energy, construction, and joint venture disputes involving a Greek element (parties, applicable law, seat of the arbitration). Additionally, the Greek Arbitration Association has entered into cooperation agreements with several arbitration institutions based in different jurisdictions with a view to benefiting the users of international arbitration in cases where the arbitration agreement makes a clear reference to the relevant cooperation agreement.

When Greek parties choose to resolve their disputes through international institutional arbitration it seems that their first choice is the ICC in Paris. ICC’s statistical data over the last five years reveals that, on average, 13% of arbitrations involving European states include a Greek party. In a small number of these arbitrations, the seat of the arbitral tribunal is in Greece and Greek law is applicable. The LCIA, on the other hand, administers a lesser, but stable, number of arbitrations involving a Greek element each year.

With regard to domestic practice, Greek arbitrations take place both ad hoc and institutionally. A stable and improving trend in the number of domestic arbitrations in Greece (an annual average of 45 in Athens since 2000) demonstrates the preference of sophisticated commercial parties for the resolution of disputes by independent tribunals, rather than by the courts.

The most eminent arbitration bodies in Greece include the Chamber of Technical Companies (ΤΕΕ), the Commercial and Industrial Chamber of Greece (ΕΒΕΑ) and the Hellenic Chamber of Shipping which has its own procedural rules that supplement and/or deviate from the provisions of Greek Code of Civil Procedure as appropriate. Although no official statistical data is available, it is estimated that as far as domestic institutional arbitration in Greece is concerned, 70 to 80 applications have been administered by the Chamber of Technical Companies and approximately 20 by the ΕΒΕΑ (Commercial and Industrial Chamber of Greece) in the past ten years. Further, in the context ofGreece’s attempt to liberalise the energy and telecommunications markets since 2001, an amicable resolution of disputes and arbitration procedure administered by the Regulatory Authority of Energy (RAE) has been introduced by force of law.[3] In fact standard form contracts (awarded through public tendering) between HTSO (Hellenic Electricity Transmission System Authority) or RAE and investors contain dispute resolution clauses with the above procedure. More recently, the new law on Public Private Partnerships[4] regulating partnerships between public agencies and the private sector specifies the minimum contents of the Partnerships’ Agreements made pursuant to this law. Among others, it is provided that alldisputes associated with PPPs must be referred to arbitration. The arbitration rules, the seat and the language of the arbitration as well as the selection of the arbitrators and the fees thereof are determined by the parties in their PPP agreement. Arbitral awards made thereupon are final and enforceable in Greece.

II) A selective presentation of certain interesting features of Greek arbitration law

a) Compulsory submission to arbitration and its conformity to the Greek Constitution

Compulsory arbitration, i.e. arbitration not agreed between the parties but stipulated by law, as provided for example in the law on Public Private Partnerships mentioned above, has raised questions regarding its conformity to the Greek Constitution. The Greek Court of Cassation has considered the issue of compulsory arbitration[5] in the context of a similar provision included in law 1876/1990 regarding labour disputes. Upholding the compatibility of the provision with the Greek Constitution, the Court’s reasoning focused principally on article 22 (2) of the Greek Constitution which expressly contemplates the arbitral resolution of labour disputes. The Court did not draw any distinction between compulsory and non-compulsory arbitration and, as a result, its narrow reasoning leaves open the possibility of a different decision being reached in fields other than labour law.

b) Authorisation for the making of arbitration agreements

Two different legal regimes govern arbitration in Greece: the Greek Code of Civil Procedure applying to domestic arbitrations and law 2735/1999 governing international arbitrations. According to both instruments, arbitration agreements need to be made in writing. The formal requirement of “in writing” also applies to the authorisation given to a representative who signs the arbitration agreement on behalf of another person or a legal entity. Lack of specific authorisation in writing can be “cured” in domestic arbitrations by the mere appearance and participation of the parties in the arbitration.[6] In international arbitrations, the legal consequences arising from a lack of specific authorisation in writing will be determined by either the law governing the powers and/or the capacity of the natural person or legal entity giving the authorisation, or by the law applicable to the arbitration clause.

The Greek Code of Civil Procedure includes a provision (article 65 (2)) according to which “the settlement, recognition or withdrawal from the rights claimed under the action and the agreement to arbitrate are invalid if there is no authorisation for their making.” According to some courts and the prevailing view of Greek scholars and practitioners, this provision does not apply to international commercial arbitrations. Most importantly, it does not apply to the organs representing a corporate entity when they sign arbitration clauses in international contracts. However, parties to arbitrations have on several occasions tried to raise this argument in order to invalidate arbitration agreements included in international contracts.

In the past, first instance decisions dealing with domestic arbitrations have held that the power conferred on the manager or representative of a legal entity to enter into contractual agreements on its behalf did not, in the absence of an explicit reference to arbitration agreements, also constitute authority to conclude an arbitration agreement [7] The Greek Court of Cassation finally decided[8] that company directors act as “substitute organs” for the Board of Directors (according to article 22 of law 2190/1920) and can validly sign arbitration agreements without any such specific authorisation. The Court still drew a distinction between those instances where the manager/member of the board is acting as an organ of the company as opposed to those where it is acting as a mere agent or proxy of the company.[9]

Even if this distinction were acceptable in the context of domestic arbitration, it would nevertheless be very problematic to sustain in the international arena. International business practice suggests that directors of companies have the power to represent and bind their companies as long as they do not exceed the scope of the company’s purposes. In this respect, it cannot validly be argued in an international context that the directors of a Greek company act as a mere proxy and not as an organ of the company when they sign arbitration agreements.[10]

This view is also supported by article II (2) of the New York Convention, which does not impose any additional formal requirements on international arbitration agreements. It does not require anything more than that the agreement to arbitrate be made in writing.[11] Second, article V (1) (a) provides that if the parties have not chosen the law governing their arbitration agreement, it is the law of the place of the arbitration that defines the validity of their agreement. If the existence of a specific authorisation for the making of an arbitration agreement is regarded as a matter pertaining to the validity of the arbitration clause, then it is the law of the place of arbitration that will determine the effect of the lack of specific authorisation given to the members of the board of directors. As already mentioned, the international trend is not to require such an authorisation from board members.

c) Selection of arbitrators and awards on costs in domestic arbitrations – Enforcement of international cost awards in Greece

In Greek practice, most domestic arbitration clauses require that an arbitrator should be a former or current member of the judiciary. Arbitrators, usually university professors or well-educated and experienced lawyers, seldom agree on the person to be nominated as umpire, so that the procedure of the Greek Code of Civil Procedure applies.[12] The arbitrator is nominated from an official catalogue kept at the Court of First Instance according to a procedure set out in the decrees of the Minister of Justice. The parties can also agree to appoint a member of the judiciary as an arbitrator. In such an instance, the arbitrator is selected on the basis of the seniority of the court selected by the parties. In high-caliber transactions, it is common practice to stipulate in an arbitration clause that the arbitrator should be either one of the judges of the Appeal Court or one of the vice-presidents of the Greek Court of Cassation or even retired presidents or vice-presidents of the same court. Such arrangements are not mandatory law and parties can agree to opt out of them.

Arbitration costs in domestic arbitrations consist of the fees of the arbitrators[13] as well as all other procedural costs (e.g. secretarial support, recording of the procedure, cost of experts appointed by the arbitral tribunal, travel and accommodation expenses) including the fees of the legal counsel. Arbitrators’ fees in domestic arbitrations are calculated at a scale percentage of the value of the dispute (e.g. 2% for value of €29.000,01 – €147.000 and 1% for value above €147.000), but limited to €44.000 for each of the arbitrators. In international arbitrations whose seat is in Greece, the fees of the members of the judiciary acting as arbitrators are limited to €59.000. All procedural costs and the fees of the arbitral tribunal are partially or totally paid by the party losing the arbitration depending on its partial or total defeat. However, costs tend to be split between the parties if the subject matter of the dispute involves difficult legal issues.

As far as the costs of legal counsel are concerned, domestic arbitral tribunals tend to be cautious in accepting claims for legal expenses so that they do not contradict the provisions of the Greek Lawyer’s Code on the calculation of lawyers’ fees.

International awards on arbitration costs submitted for recognition and enforcement before the Greek courts may potentially face the public policy objection, especially when they are disproportionately high considering the actual value of the dispute. In the context of litigation taking place abroad, the Athens Court of Appeal has decided that[14] an excessively high costs award rendered by an English Court (Legal Costs: 87.000 English pounds – Value of the dispute including interest: 82.000 English pounds) was not proportionate to the value of the dispute and therefore contradicted Greek public policy (art. 33 of Greek Civil Code). Enforcement was therefore refused.

d) Domestic and International arbitration clauses concluded by the Greek State

According to article 49 (1) of the Introductory Law of the Greek Code of Civil Procedure, the State can enter into an arbitration agreement in writing only further to the previous opinion of the plenary session of the Law Council of the State (Nomiko Symvoulio tou Kratous) and a decree issued by the Minister of Finance and the competent Minister. The stipulation of article 49 (1) of the Introductory Law of the Greek Code of Civil Procedure is a substantive requirement for the validity of an arbitration agreement concluded by the GreekState.

A general exception to the requirement of article 49 (1) is stipulated in article 8 (1) of the Legislative Decree 736/1970.[15] The latter provision excludes the application of article 49 (1) from the scope of arbitration clauses concluded between the State and foreign persons or foreign legal entities. It also applies in cases where the GreekState derives rights and incurs obligations as a third party from an international transaction made with a foreign legal entity. The underlying objectives of this exception are simplicity and promptness as a means for the facilitation of commercial transactions on an international level.[16] Finally, specific exceptions to the requirement of article 49 (1) can be found in special laws such as that concerning the procurement of goods and services for the Greek Armed Forces.[17]

e) Public policy as ground for the annulment of domestic awards and as a ground for refusal of recognition and enforcement of foreign awards

As in most legal systems, in Greece public policy is one of the grounds most often pleaded by parties losing wishing either to set aside an arbitral award rendered in Greece or to refuse the request for the recognition and enforcement of a foreign award before the Greek courts. Greek law distinguishes between two kinds of public policy. First, awards rendered in Greece can be set aside if they contradict “national provisions of public policy” (article 897 (6) Greek Code of Civil Procedure). These are the jus cogens provisions of Greek law, ie, all mandatory Greek law provisions whose application cannot be suspended by the opposite will of private parties. On the other hand, “public policy” as a ground for the refusal of the recognition and enforcement of foreign arbitral awards has a different, far more restrictive meaning. In this context, public policy is the “truly international public policy” as it is defined by the Greek rules of private international law.[18] This kind of public policy is triggered when the potential recognition and enforcement of the foreign arbitral award “contradicts the fundamental principles of the moral, economic, legal and institutional order of the Greek state.”[19] The boundaries between these two kinds of public policy have been questioned both by the courts and by practitioners/scholars in the field with regard to awards made in Greece in a dispute arising from an international transaction. In such cases, the view has been expressed and partly supported by Greek case law that the standards of international public policy should apply for the setting aside of the arbitral award rendered in Greece since the dispute pertains to an international and not to a domestic arbitration.

Greek courts are very reluctant to acknowledge that foreign arbitral awards violate international public policy. A non-exhaustive list of procedural and substantive law matters that have been found contrary to the international public policy in Greece includes: a party-appointed arbitrator raising the arguments on behalf of the party appointing him and/or submitting evidence for this purpose even if this provided by the procedural rules governing the arbitration; violation of fundamental principles of a fair hearing; anti-suit injunctions protecting or facilitating the arbitration process; excess insurance claims; punitive damages to the extent that they are disproportionately excessive and therefore fulfil a “penalising” function.[20] In the great majority of cases Greek courts have rejected allegations that foreign arbitral awards contradict public policy. For instance the omission of giving reasons for the award, the lack of impartiality and independence of the arbitrators, other irregularities pertaining to the constitution of the tribunal can substantiate other grounds for the refusal of the recognition and enforcement of an arbitral award but not the ground of public policy.

III) Conclusions

All in all, Greece is a friendly and hospitable environment for both domestic and international arbitrations. Foreign arbitral awards are easily enforceable and international arbitrations taking place in Greece fall under a regime that complies with the UNCITRAL Model law, unless otherwise agreed by the parties. The arbitration expertise of the local legal market – including arbitrators - is of high calibre and quality. As a result, foreign investors and undertakings should feel confident to include arbitration clauses in contractual agreements concluded with Greek counterparties.





 


[1] J Velissaropoulos-Karakostas, L’arbitrage dans la Grèce antique – Epoques archaïque et classique (2000) Revue de l’arbitrage 9-26.



[2] http://www.state.gov/e/eb/ifd/2005/43029.htm.



[3] Article 8 Law 2773/1999 and article 24 presidential decree 139/2001.



[4] Law 3389/2005.



[5] Court of Cassation 25/2004, [NOMOS DATABASE: 348167].



[6]S Kousoulis, Fundamental problems of arbitration – Theory (1st ed Sakkoulas Athens 1996) 78-79.



[7] 2437/1980 Athens Court of First Instance, 11 Dike 177 seq; 5276 and 7987/1980 Court of Appeal, Harmenopoulos (1980) 978.



[8] 586/1983 Court of Cassation, Diaithsia 298 (1992); 563/1989 Court of Cassation, Diaithsia 269 (1992).



[9] A Mantakou, The conclusion of arbitration agreements in international transactions (1st ed Sakkoulas Athens 1998) 191.



[10] A Foustoucos, The validity of arbitration agreements and its control in Arbitration: Studies, Articles, Contributions (1st ed Sakkoulas Athens 2000) 26-33.



[11] A J van den Berg, The New YorkConvention of 1958 (1st edn Kluwer Deventer 1981), pages 173-178, 226-227.



[12] Articles 871A, 878, 879 of the Greek Code of Civil Procedure.



[13] Articles 882 and 882A of the Greek Code of Civil Procedure.



[14]Athens Appeal Court 6115/2005, [NOMOS DATABASE: 394865].



[15] Court of Cassation 1668/1986, [NOMOS Database: 62281]; Court of Cassation 8/1996, Epitheorisi Ellinon Nomikon 1052 (1996); Court of Cassation 1436/1998, [NOMOS Database: 268173]; Court of Cassation 545/2004, [NOMOS Database: 365832].

[16] Court of Cassation 8/1996, Epitheorisi Ellinon Nomikon 1052 (1996).



[17] Article 69 (7) of the presidential decree no 284/1989.



[18] 219/1973 Court of Cassation, Nomiko Vima 1140 (1973); 272/1983 Court of Cassation, Nomiko Vima 1565 (1983).



[19] 1559/1979 Court of Cassation, Nomiko Vima 1094 (1980).



[20]17/1999 Court of Cassation, [NOMOS Database: 279760].