New businesses set up in H1 2019
Capital needed to set up an IKE company
Categories of courts that exist in Greece
Double taxation treaties on income, and on capital, that Greece has entered into as of March 2019
Countering the effects of a decade-long economic crisis and prior missteps, Greece has pushed through important reforms that streamline the operation of its legal framework for doing business.
In the last few years the state has cut red tape, reduced the time needed to set up a company to an average of a few days and has allowed for the creation of a new type of private capital company, known as IKE, that addresses market needs and requires a minimum capital of just one euro.
The government has also replaced outdated disclosure procedures with quicker processes in the Government Gazette.
A faster registration process for the approval of both large and small investments has also made for smoother sailing. This has involved revamping a law, fast-tracking significant strategic investments of national interest, in a move that has had some solid initial results.
The establishment of an ombudsman, set up to specifically unblock the implementation of investment projects, has also helped boost licensing procedures.
The changing legal framework is helping boost the number of new businesses being set up in the country despite the still challenging environment. Data from Greece’s business registry shows that 18,714 new businesses were set up in the first half of 2019 versus 8,649 that shut down in the same period.
Experts note that the Greek legal system, part of the European continental legal family, has undergone significant changes to adjust its once-outdated legislation to new market and societal needs. And more investor-friendly changes are still in the pipeline.
“As part of its commitment to past European Commission, International Monetary Fund, European Central Bank, and European Stability Mechanism bailout packages, the Greek government has long committed to reforms, making for a more business-friendly climate such as when it sped up the processing of commercial and other cases through the courts to deal with years of backlog,” says John Papaioannou, Managing Partner at Papaioannou & Associates.
“Cases now have to be filed within 100 days and the court has the obligation to proceed to trial within the following 45 days,” adds Papaioannou, who stresses that more still needs to be done.
Key changes to the legal system include a new restructuring and insolvency law, enacted in 2016 amid the country’s financial crunch.
The World Bank’s Doing Business Index also identifies other key changes that lend favourably to doing business in the country today compared to a decade ago, such as allowing for easier enforcement of contracts with the introduction of an electronic filing system for court users.
“Despite its slow pace, the legal system in Greece favourably measures up in other ways,” says Papaioannou.
“Greek courts will go along with the parties’ choice of law in a commercial contract unless there is some public policy issue against it. Despite the use of foreign law, national law may well apply in some areas, as in mandatory legal provisions concerning patents, consumer protection, competition law, and employee rights,” Papaioannou explains.
The language of a domestic contract is Greek, adds Papaioannou, but if both parties agree to it, then any other language – such as English or French – can be used.
In order to speed up processes, especially for large, significant investments, the state body Enterprise Greece has been tasked with facilitating investors and guiding them through the necessary procedures in several strategic areas, such as energy and tourism.
Investors can also strike up Public-Private Partnerships for large-scale projects in strategic areas.
Enterprise Greece helps strategic investments fast track through the permission framework, including getting through some hoops under partial control of the state, such as the Central Archaeological Council (KAS), forestry services, and environmental bodies.
“Greece has moved towards a reform period in order to facilitate and improve its business environment,” says Kyriakos Andreou, Advisory Leader at PwC Greece. “Several reforms have been applied, [which] aim to improve flexibility in the labour and product market and to reduce unnecessary barriers and impediments.” Despite the reform push, “licensing remains one of the thorniest issues concerning investments in Greece,” notes Andreou, adding that previous years saw investment projects held up by extensive red tape. Today the government is trying to address this through the “simplification and acceleration of licensing procedures. By lowering the minimum threshold, as well as restructuring and insolvency laws, insolvency proceedings are more effective and allow indebted firms to be restructured, avoiding closure.”
Another area in need of reform, notes Andreou, is “the constantly changing tax regime, which leaves no room for long-term planning by companies.” He also notes the “slow public administration, as well as the multiplicity and the large legislative framework of the Greek state, [which] delay foreign investments in Greece. However, the government supports investment initiatives through law acts and amendments that will minimise all associated legal barriers and accelerate licensing processes.”
Nicholas Papapolitis, Managing Partner of Papapolitis & Papapolitis, agrees that the new government, signalling its business-friendly platform, is charging ahead by removing legal and other obstacles to investment. “The obstacles are well known to everyone as they have been there for years and include Greek red tape, the ever- changing Greek tax framework, and one of the slowest court systems in Europe. Nevertheless, we witnessed significant reforms in the latter half of 2019 that tackled the above obstacles, and a very big willingness from the state to enable foreign direct investment into the country,” notes Papapolitis.
“The government has already demonstrated that commitment by reducing taxes in 2019 and unblocking landmark projects in Piraeus and Hellinikon,” says Georgios Filiopoulos, CEO of Enterprise Greece, adding, “up until a few years ago, the most important hurdle to investors was the fear of Greece exiting the eurozone. But that is no longer an issue and Greece has clearly regained the confidence of international investors and creditors.”
Conditions in the financial and capital markets are also vastly improving, giving investors needed support.
“The good news is that the remaining capital controls were abolished completely as of September 2019,” says Papaioannou.
Today, “Greece is mostly aligned with international and European financial market regulations, having developed a legal framework that facilitates the use of all the capital-raising techniques commonly found in Europe and the rest of the world,” he adds.
“Greece has adopted a number of EU laws, and reformed domestic laws, to bring the Greek asset-backed security (ABS) market in line with other civil law European jurisdictions,” adds Papaioannou.
After the recapitalisation of Greek banks in December 2015, Greece introduced a new law governing non-performing loans (NPLs), the so-called NPL Law.
“Shortly after its introduction, the NPL legal framework was drastically revised to incorporate provisions similar to [a previously enacted] securitisation law, in respect to loan transfer mechanisms, tax exemptions, etc.,” notes Panagiotis Sardelas, Partner at Sardelas Petsa Law Firm, in the Greek Law Digest published by Nomiki Bibliothikiki.
“An important feature of the NPL Law is that it provides for the management and acquisition of loans, or credits, granted by credit or financial institutions not only of non-performing, but also for performing loans, or credits, without restriction,” he adds.
Greece is also forging ahead with a digital transformation that cuts bureaucracy, simplifies and speeds up procedures, and helps the country converge with the digital advances in the EU, says Digital Policy Minister Kyriakos Pierrakakis.
“We’re very proud of our work in one of the administration’s major legislative initiatives, the Invest in Greece law,” Pierrakakis notes. This, among other things, “improves, simplifies, and digitises cell tower licensing – a major project that will have a tremendous impact on deploying a 5G network in the near future,” he adds “Our objective is for Greece to have a comprehensive, modern and efficient network infrastructure which, in turn, will assist in the digital transformation of the country.”
The law also introduces some other key measures, says Enterprise Greece – it “accelerates slow judicial proceedings through the adoption of new technologies, provides incentives for business parks and strategic investments, creates a unified digital archive for investors, and speeds up investment approvals through the use of outside auditors.” And it does away with antiquated decrees constraining manufacturing, among other key initiatives.
Alternative dispute resolution (ADR) processes are not commonly used in Greece. In a bid to promote mediation, Law 4512 was enacted to further align Greek legislation to the provisions of an EU Directive. This law has made resorting to mediation, in some cases, mandatory.
According to Bernitsas Law Firm, mediation proceedings are mandatory for certain types of disputes including disagreements involving landlords, administrators of condominiums and of similar types of properties in connection with neighbouring properties, alongside other types of disputes.
The law also relates to disputes concerning compensation claims arising from road accidents, as well as claims arising from vehicle insurance contracts between the insurance companies and the insured (unless the harmful event resulted in death or physical injury).
Greece also has a ‘no win, no fee’ arrangement whereby conditional fee arrangements are agreed upon between lawyers and clients in Greece. The agreed fee cannot exceed 20% of the value of the dispute and, if more than one lawyer is involved, this ceiling rises to 30%.
So long as Greece is a contracting state to various conventions, reciprocal agreements for the recognition and enforcement of judgements exist between Greece and the following countries:
As a full member of the European Union since 1981, EU rules that relate to taxation are applicable in Greece, such as the uniform application of VAT rules, the abolition of import duties, and the non-discrimination between individuals and corporations because of their country of origin.
“The superiority of international treaties over national Greek laws is clearly set out in the Greek Constitution, which provides that international treaties since their ratification by law and their coming into effect, are an integral part of the internal legal order, and supersede any contrary legal provision,” notes Lason Skouzos & Partners Law firm in the Greek Law Digest, published in May 2019 by Nomiki Bibliothiki.
“This rule applies equally in relation to tax laws, to the extent that they may be contradictory with an international treaty that Greece has signed with another country or countries.”
Nicholas Papapolitis, Managing Partner of Papapolitis & Papapolitis, says their international law firm offers strategic advice so clients can effectively navigate Greece’s evolving, and at times complex, legal landscape.
