A Q&A with Advisory Board member Panayotis Bernitsas at Bernitsas Law.
How have the economic crisis and austerity policies to meet IMF’s targets affected competition law and dispute resolution in Greece?
It’s not only IMF’s targets, it is also the targets of the European Union and the European Central Bank. You’re right, there has been an effect on both competition law and dispute resolution. With regards to competition law, what has happened is that since 2012, the local banking sector has undergone significant structural changes through a variety of transactions (mergers, creation of good and bad banks, resolutions, etc.) that resulted in currently having four systemic banks and a limited number of less significant credit institutions and banking cooperatives. A number of these transactions gave a lot of work to both, firms like ours and to the Hellenic Competition Commission.
In addition to these transactions, the systemic banks’ restructuring obligation to divest of non-core banking activities has created and will continue to create a lot of activity in other sectors and industries, such as the insurance market, real estate, hotel and leisure, supermarkets, car leasing, and others
There are other activities that were with the Competition Commission, which was not competition law but was also important. This had to do with the large-scale privatization project. One was the Piraeus Port Authority and the other more recent one was Fraport, which acquired two batches of 14 in total (seven and seven, if I recall correctly) regional airports in Greece. And again, these privatizations were approved. So this is about the activities of the Competition Authority from a merger control stand point.
There are two more points that are important. One is the settlement procedure in regards to cartel issues under investigation. There are new regulations that have to do with the settlement procedure, and this has proven to be very important in an ongoing case, which has to do with the construction company’s cartel investigation, and also eventually with the cosmetic sector’s investigation.
In 2017, we’re expecting the transposition of these new regulations, which should increase the level of damage actions in competition cases, especially in regards to cartels. This is a horizontal development that has to be implemented in all member states. So, from the regulatory point of view, what we see are actions for direct damages and also the enactment of the settlement procedures.
Then, of course, there are many indirect and direct consequences with regards to the dispute resolutions issues in Greece. A number of laws have been enacted to protect financially distressed individuals that meet certain criteria. There are also opportunities that are being given to specific individuals and viable businesses in order to restructure or reduce the amount of the indebtedness. There has been an enhancement of the powers of the banks to receive more as privileged creditors in the case of enforcement of security rights, which is important with regards to the banks. In general, there have been several amendments with regards to the bankruptcy and general insolvency laws that make the completion of the procedure much faster and much more efficient.
Has the political climate in the EU (upcoming 2017 elections, Brexit, etc.) affected International arbitration cases?
Well with regards to investment arbitration, there is a general trend internationally to resolve disputes between governments and investors by means of arbitrary proceedings, governed either by established arbitration rules, for instance, the ICC or LCIA rules, or by ad hoc rules, depending on the agreement of the parties. Now, we’ve observed certain efforts on behalf of the EU to replace the bilateral investment treaties that exist amongst the various states, with EU agreements. Political changes have raised two issues there. One is the Comprehensive and Economic Trade Agreement (CETA) between the EU and Canada, which needs the approval of the EU national parliaments before it can take full effect, but there are certain reactions from various EU states. The results of the 2017 elections in the EU member states will be determinant on the predicaments CETA will face through the process of its ratification by national parliaments, since Social Democratic Parties in many EU states are strongly opposed to this agreement. So eventually, until CETA is approved by all national parliaments, we will not be sure whether CETA will be applied. Then we have the other issue, which is well-known and has to do with the Trump election in the U.S. I am referring to the Transatlantic Trade and Investment Partnership (TTIP), the negotiations of which were suspended by the European Commission, following the election. I think these are the current political developments that seem to reserve changes for investor–state arbitration.
Of course, another proximate large-scale political change is Brexit, for which we don’t know what impact it is going to have on international arbitration. There are two conflicting views. One is that London will continue to attract arbitration, perhaps even more eagerly than before, for various specifics that involve the ability of the U.K. to differentiate itself from the EU policy as well as to abstain from following CJEU’s case law and the concept of EU public policy in the context of Article V of the New York Convention, which apply to other member states. So according to this view, of which I am in favor, the role of the U.K. in the domain of arbitration will be enhanced. The opposing view is that, since the U.K. is not going to be part of the EU anymore, the attractiveness of London as the seat of arbitration and English law as governing law in arbitration agreements will be reduced. I don’t share this view because I think that, on the one hand, England's 1996 Arbitration Act and English law in general, as well as the New York Convention are insulated from EU law, and on the other hand, the expertise of arbitrators in London in both the shipping industry and various industries flourishing in the U.K. is so important that Brexit is rather unlikely to negatively affect London's position in arbitration.
With the struggling economy and higher scrutiny on bank lending and mergers, how has that impacted those respective legal markets?
Since the onset of the economic crisis in Greece, local banks have experienced significant deposit outflows, primarily due to the reduction of the depositors’ available income as a result of the austerity measures and the concerns expressed regarding the prospectus of the country’s economy and its participation in the Eurozone. These and other factors, such as the delayed completion of the various reviews of Greece’s financial support programs from time to time, the recapitalization of the domestic systemic banks and their dependence on the costly Emergency Liquidity Assistance mechanism, the enactment of new capital adequacy rules in 2014, the imposition of capital controls in June 2015, and the increased level of non-performing exposures have adversely affected local lenders’ ability to access their customary funding sources and finance the Greek economy. Equally, domestic borrowers were effectively prevented from raising funds through the international markets, with the exception of very few prominent issuers, such as Hellenic Petroleum, Motor Oil, OTE and Titan, which managed to refinance and re-profile their existing indebtedness. However, in recent months, certain local issuers that are leaders in their respective industries, such as OPAP, Mytilineos Group, and Sunlight, have successfully raised substantial funds from the Greek capital market, and this trend is expected to continue and create more legal work and investment opportunities.
As a result of the constraints explained above, other, less traditional sources of funding, such as private equity and other types of funds, gained a competitive advantage compared to the Greek banking system. Also their more flexible approach in their decision-making and risk appetite processes placed them in a leading position to structure, finance, and execute mergers, acquisitions and other transactions.
The most pressing legal issue is to move forward with the procedures regarding the implementation of structural measures that will allow the Greek economy to get off the ground. It is important to convince the markets that there is stability in Greece. Political and legal stability are important. Foreign investors must be convinced that the rule of law prevails and that no handicaps will be raised against them. I think it is a matter of giving good signs. What we've seen, in fact, makes us very optimistic—unlike the Greek population who is rather pessimistic after what has happened during the last six or seven years—is that foreign clients are much more positive about the future of the Greek economy, which is a very encouraging sign. We also see that those who have invested in Greece once continue to invest. Recently, for instance, there has been an acquisition of a private hospital, an acquisition of a financial institution that was sold by a leading bank, and various projects in the tourist industry that are in the pipeline. We see that these are all driven by equity funds, which continue with new investments once they have made their first one. This means that once past the shock of entering this market they always find that there are more opportunities. I think the basic issue is that we need to give a strong signal that this country has returned to normalcy.
How did you initially become interested in law?
When I was in school, I had a father and a mother who were both practicing lawyers. When I was at my parents’ office, they had a library at the time and of course all the books were not that important. But what attracted my attention were certain books with regards to the most famous international criminal lawyers and how they defended their clients and what they said in court. That inspired me a lot, to be honest, when I was 12 or 13 years old. I felt that this is what I should become. I was always attracted to penal law and criminal law, which have a very good theoretical and philosophical background relative also with freedom of action. But I was finally attracted by private international law, international law, international business finance, and all the more commercial, down-to-earth issues.