DIMITRIS HADJIMICHALIS
LAWYER
MEMBER OF THE BOARD OF ATHENS BAR ASSOCIATION
LEGAL ADVISER MINISTRY OF COMMERCE
ATHENS UNIVERSITY, MBA UNIVERSITY OF MARYLAND
DPL EUROPA INSTITUTE - UNIVERSITY OF AMSTERDAM
FOREIGN INVESTMENTS IN GREECE
A survey of the Greek Legislation
MAY 1995
CONFERENCE OF LAWYERS IN ECONOMY
OF THE FEDERAL PEPUBLIC OF YUGOSLAVIA
INTRODUCTORY NOTES
The question of the foreign investments in a developing
economy is a very interesting one in the circles of
economists, sociologists and lawyers.
This is because there is a great influence of the
foreign investments in the economic and social life of
the host country.
Depending on the point of view, the foreign
investments can be regarded either as panacea (the
medicine that cures all illnesses) or as catastrophe.
What we know for sure is that regardless their possible
negative consequences in the various sectors of the
economy, in politics and in social life, the foreign
investments, especially those of high technological
level, are absolutely necessary for the economic
development.
We should see under this perspective the effort of the
Greek legislation to attract foreign investments.
This effort begins in 1952 with the provision of art.112
of the 1952 Constitution. According to this provision a
legislative decree will be issued once and will
regulate the investment and protection of foreign
capital in Greece. This decree no.2687 was issued in
1953 and retains its validity till today after the
provision or art.107 of the Constitution of 1975.
According to this article, LD 2687/53 "retains its
former validity further strengthened applicable also to
capital imported hence forth".
We must nevertheless point out that the philosophy and
structure of LD 2687/53 is similar to the investments
codes that apply in developing countries such as:
Protection of the foreign investment and property, lower
taxes and even exemption from duties and dues of any
kind, freedom of the capital movement, clauses of
arbitration for resolving the possible disputes between
investor and the State, bookkeeping in foreign currency,
employment of foreigners etc.
In general we could say that the tax exemptions granted
to the foreign investments in Greece were not in scale
that could name Greece as "tax heaven".
The problem was not the legislation itself but the
implementation and materialization of the various
provisions.
The Greek Courts were rather unfriendly to the foreign
investors.
It is not very common to have a constitutional provision
regulating the protection of foreign investments.
Article 112 of the 1952 constitution is probably a
unique case. This practice was condemned as
subordination to foreigners. Its reasoning is found in
the begining of the century when the Greek State in
order to attract foreign investments was signing special
agreements that were ratified by law. That was because
the State wanted to reinsure the investrors that the
agreements were valid and respected.
Nevertheless after the Balcan Wars when Greece needed
desparately foreign currency, Laws 987/1915 and
1414/1917 were issued and modified the relative laws and
agreements the Greek State had signed with foreign
investors imposing new taxes.
The Supreme Court-Cour de Cassation in the begining
ruled that this new laws were not lawfull and the terms
of the agreements could not be altered.
After a sort time the Supreme Court change its view and
ruled that the legislator has the Imperium to legislate.
THE CONSTITUTION OF 1952 ART.112
The Greek State due to the above practices concerning
the foreign investments had lost all its credibility
internationaly. There were no more foreign investments
in Greece after that or there were very few.
After the second world war and the civil war, Greece
was in ruins and it needed foreign capital for its
development.
In order to find its lost credibility there was only one
way. To include in the new Constitution a provision for
the protection of foreign investment and capital.
This provision was included in article 112 of 1952
Constitution which povided that a special law regulating
the protection of foreign capital would be issued.
LEGISLATIVE DECREE 2687/1953
Legislative decree 2687/1953 was issued in the execution
of art.112 and was harmonized with the contemporary
principles of State intervention for the assistance and
acceleration of the economic development. It undoubtedly
helped the economic development of Greece.
Par.1 of art.3 provided that for the approval of the
request for the investment of foreign capital in Greece
an administrative decree should be issued. Par.2
provided that the terms of the investment are approved
depending on the importance of the investment by decree
or common Ministerial Act, that is published in the
official Gazette. With par.3 the approval is regarded as
revocable and is reaffirmed that this is under the
guarantee of the Greek State to the investor. Change of
the terms is permitted under the investors consent.
Art.4 provided that the terms are indicative and there
is wide discretion to change the with under mutual
consent.
According art.8 tax facilities may be granted to
manufacturing and mining enterprises primarily enagaged
in export activities and also to enterprises for the
first time established in Greece, through their
activities of which, substantial amounts of foreigh
exchanges are annually saved.
Shipping companies were included in the special tax
exemptions regime, if they register under the Greek flag
vessels over 1.500 tons.
The tax facilities may stoped in the case the
enterprises cease to fulfill the above conditions and
requirements.
Exporting enterprises are regarded those which are
exporting more than 50% of their production.
These tax facilities are:
The tax rate may be lower than the tax rate currently in
effect.
It is possible lowering of or exemption from
custom duties or charges of imports of machinery etc.,
for a period not exceeding 10 years.
Lowering of or exemption from customs duties, levies, or
any other taxes and charges imposed on imports of
machinery, accessories, spare parts and tools by the
government or port authorities for a period not
exceeding 10 years.
Lowering of or exemption from any charges and dues of
any kind in connection with registering mortgage or
creating a pledge as security for imported capital or
contract relating thereto.
The above tax facilities shall be extended to similar
enterprises now existing or to be established or
originally instituted.
No export restrictions or taxes , unless in case that
reason of national security obey this.
The retroactive imposition of taxes shall be prohibited
on enterprises established in accordance with
Legislative Decree 2687/1953.
Article 10 established the principal of equal treatment
of the enterprises their competitiveness and awarding of
new beneficiary terms.
Article 12 provided the resolution of disputes by
arbitration.
Art.13 provided that vessels more than 1.500 tons
registered under the Greek flag are deemed foreign
capital.
LD 2687/53 was quite general and did not regulate all
possible cases. For that reason another legislative
decree was issued, LD 2928/1954 which among others
regulated foreign investments in ships.
LD 4526/1962 that was issued eight years later regulated
the export and repatriation of foreign capital invested
in Greece as well as loans.
The basic characteristic of this decree was that the
Government had absolute power and discretion to bargain
and accept the investment of foreign capital in Greece.
In this case there was an obligation not to change
unilaterally the terms of the agreement.
THE CONSTITUTION OF 1975 ART.107
The new Constitution of 1975 was issued after the seven
year long military regime. During this period laws
89/1967 and 378/1968 were issued regulating the
establishment in Greece of foreign Commercial and
Industrial Companies.
Par.1 of art.107 made a distinction between laws
which were issued before 21-4-1967 when the military
regime was established and laws that were passed during
the seven year period. It regarded as valid all laws
before 21-4-1967.
Art.107 par.2 provided that a new law will revise LD
2687/53 and specify the validity of the other
regulations.
There was a grate distrust to the legislation of the
military regime and to the investments of the same
period.
Law 141/1975 was issued and regulated the reevaluation
of the foreign investments which were approved during
the military regime.
The approvals of foreign investments could be revoked if
were unconstitutional, against public interest, bona
mores, and damaging the national economy.
LEGISLATION AFTER 21-4-1967
Law 89/1967 for the establishment in Greece of foreign
Commercial and Industrial Companies was the most
important and wellknown regulation during this era.
It coincided with the Arab-Israeli War of 1967 and the
influx in Greece of Libanese Companies.
This law was amended and supplemented by law 378/1968.
Article 1 of law 89/1967 regulated the establishment of
foreign commercial and industrial companies of any type
or form dealing exclusively with commercial business
whose object lies outside Greece.
Article 2 referres to the facilities which these
companies were entitled concerning customs duties,
taxation and other matters. It also provided for the
employment of foreign personnel of any kind by the said
companies.
The aforesaid companies were exempt from income tax, as
well as any other tax, charge or contribution in favour
of the State or any third party, existing or imposed in
the future, on income derived from activities whose
objects lie outside the Greek territory.
LEGISLATION AFTER THE ACCESSION OF GREECE TO THE EEC.
After its accession to the EEC Greece should comply to
art.67 of the Rome Treaty.
This article provided for the free movement of capital
in the EEC.
With the issue of Presidential decree 170/1986 which
regulates the capital movement between Greece and the
other member States of the European Economic Community,
now European Union and the Decision of the Governor of
the Bank of Greece no.825/1986 which regulates direct
investments in Greece of residents of non member States
of the European Community, LD 2687/53 has primarily
theoretical value.
Presidential decree 170/1986 which was substituted by PD
207/87, liberalised the movement of capital between
Greece and the other member States of the EEC, according
to the provisions of art.67 of the Rome Treaty.
Governors Act 825/86 gave the same privileges to direct
investments in Greece of residents of non member States
of EEC.
Private investments in Greece are regulated by law
1262/1982 supplemented by laws 1360/1983, 1479/1984,
1563/1985, 1682/1987.
Law 4171/1982 with laws 89/1967 and 378/1968, mentioned
above, regulate the establishment of foreign companies
in Greece.
The European Union is financing numerous development
programs and gives subsidies for the investments in
various sectors of the economy.
It is very well known the Delor package for the
coherence of European Union.
FINAL CONCLUSION
The problem in Greece was not the efficient legislation
regulating the foreign investments and the incentives
for the attraction of foreign capital that could help
the economic development, but the modern and efficient
public administration which most of the times acted as
repellent force creating problems to the foreign
investors. We should not forget the Greek Courts that
were unfriendly to the foreigners.
What is very conforting is the positive influence of the
European Organizations such as the European Commission
and the European Court of Justice on Greek public
administration and on Greek economy in general.
MAY 1995
CONFERENCE OF LAWYERS IN ECONOMY
OF THE FEDERAL PEPUBLIC OF YUGOSLAVIA
BIBLIOGRAPHY
1) MAVRIAS K.: Le regime juridique des investissements
etrangers en Grece, Paris, Pedone 1975, pp.146-150.
2) OBESSI Ph.: Aspects juridiques du
developpement economique en Grece : Investissements
etrangers et investissements locaux, Strasbourg 1986,
pp.382-410.
3) LAMBADARIOS C.: "Protection accordee par le decret -
loi 2687/1953 aux investissements a longue echeance de
capitaux venant de l'etranger", R.H.D.I. 1954.
4) EVRIGENIS D., NESTOR S., IOANNOY K.: "Some aspects of
the legal protection of foreign investments in Greece",
R.H.D.I. 1963.
5) OBESSI Ph.: Commentaire d'un texte de la legislation
hellenique concernant les investissements etrangers a
long terme, Strasbourg 1983.
6) H.KEFALAS: Protection of foreign investments in
Greece 1981.
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