Arbitration Developments in Greece: 2016 at a glance w/r/t decisions of the Greek Supreme Court

By Epameinondas Stylopoulos, Attorney-at-Law, LL.M., ACIArb, ep.styl@slo.gr And Erini Chorti, Attorney-at-Law

(Feb. 2017′)

The purpose of this report is to highlight recent developments in Greece concerning arbitration. In this context, reference is made to recent (2016’) arbitration-related decisions of the Supreme Court of Greece (the Areios Pagos) – (available by reference to the decision number and year in the original Greek version at www.areiospagos.gr/en/  under “court rulings”) reviewing the possible annulment of arbitral awards under various grounds.

1. A national court may not re-decide on the merits of a case for which an arbitral award has been issued

According to the facts, in 2002 the Greek Government decided to proceed with an international contest regarding the security systems of the 2004 Athens Olympic Games (hereinafter “the Systems”). After struggling negotiations, the company formerly named as ‘SCIENCE APPLICATIONS INTERNATIONAL CORPORATION (SAIC)’ and yet named as ‘LEIDOS HOLDINGS, INC’ (hereinafter ‘the Company’) bided successfully with a Euros 254,999,000 offer. In May, 19th 2003 the Greek Government and the Company signed a contract which had as an object the supply, development and support of the Systems. The contract provided explicitly that these Systems will be delivered fully operational within a year’s time in order to meet with the 2004 Athens Olympic Games requirements. Moreover, the contract included a provision that a security system named as ‘TETRA’ will be licensed to the Greek Government for a 10 years period. At the same date (19.5.2003) another contract was signed between the Company and SIEMENS (Hellas) SA under which the latter one undertook to act as the main subcontractor of the Company as regards the supply, development and support of the Systems with a Euros 182,181,234 fee, namely 71% of the Company’s bid. However, the contract between the Greek Government and the Company did not evolve properly. The Systems had been delivered partially on 29.10.2008, namely after four years following the 2004 Athens Olympic Games. The Greek Government initially approved the partial delivery of the agreed security services with the exception of ‘TETRA’ subsystem which it had not been found to be delivered as fully operational. Therefore, the Company terminated partially the contract with the Greek Government and subsequently claimed the forfeiture of the relevant letters of guarantee of sum Euros 18,877,375.29 amount. Then, the Company initiated arbitration proceedings before ICC, which accordingly issued the dated 2.7.2013 award ordering the Greek Government to pay the Company in sum Euros 39,818,595 as non-paid costs, damages and VAT. For this award, the Greek Government filed an application for annulment and suspension of its enforcement before the competent Athens court as the enforcement place. The Athens Court of Appeals in decision no. 3690/2014 noted that the five years delay in the delivery of the agreed Systems illustrates the fact that the Company had never been in the position to deliver on-time the agreed Systems and the fact that the Company actually acted in favor of her main sub-contractor SIEMENS (Hellas) SA. The latter one is being fully owned by the mother company SIEMENS (Germany) AG, which is confessed that bribed members of the Greek Government during the negotiations period, namely 2002-2007 (https://en.wikipedia.org/wiki/Siemens_Greek_bribery_scandal). For these reasons, the Court of Appeals in decision no. 3690/2014 concluded that the agreed contract between the Company and the Greek Government had been the outcome of the corruption techniques used by SIEMENS companies against Greek interests. Therefore, the Court of Appeals decided that the ICC award dated 2.7.2013 in favor of the Company should be annulled as contradicting to the national public policy rules. However, the Supreme Court concluded that the Court of Appeals with its decision no. 3690/2014 by reviewing and accepting the above-mentioned facts actually did re-decide on the merits of the case which is beyond its powers and therefore its decision no. 3690/2014 should be upheld [Supreme Court Decisions n.517/2016].

2. The Greek State may waive in advance only explicitly its right to challenge an arbitral award

The Greek State may waive in advance its right to challenge an arbitral award by virtue of a contractual term that has been legally ratified. For it to be valid and rise to legal effects, this relinquishment is required by the law to be explicitly stated, while it cannot be implicitly concluded. According to the facts, the parties had entered into an agreement including an arbitration clause covering any dispute arising out of a construction contract between the Greek State and the contractor, before the ICC, where Greek law would be applicable. Additionally with their agreement, the parties waived in advance their right to challenge in any way the arbitral award, while their agreement has been legally ratified having acquired preceding typical validity. However, this contractual term was not specific as it constituted to a priori general waiver for the parties’ right to challenge an arbitral award. Especially, the parties agreed that “the arbitral award is final and irrevocable and shall be not subject to legal remedies (ordinary or exceptional), as it shall constitute an enforceable title without the need for a Court’s order and both parties shall be obliged to adhere to”. The Supreme Court, though, held that in accordance with the Greek Law, a party may not waive in advance its right to file a remedy against an arbitral award. However, the action for annulment provided by the Greek Code of Civil Procedure is a legal action and not a remedy; therefore the respective clause in order to have validity ought to mention explicitly that the Greek state shall waive in advance its right to file a legal action [Supreme Court Decisions n. 62/2016, 64/2016, 65/2016, 66/2016, 67/2016]

3. An arbitral award is null if issued out of the time limit provided by the arbitration clause

An arbitral award is null when it is issued out of the time limit provided by the arbitration clause and hence the arbitration agreement ceases to be valid. According to the facts, two parties had agreed to subject any dispute that may arise out of their agreement before a national ad hoc single-membered arbitral tribunal, which issued an arbitral award after the expiry of the time limit provided by the parties’ arbitration agreement. The Supreme Court found that there had been no extension of the time limits that both parties had agreed to regarding the arbitration proceedings; the latter could be extended in a simple way, namely with a unilateral written declaration οf each party before the arbitral tribunal. However, in this case the appellant – before the Supreme Court – party did not proceed with this declaration, which according to the Court’s finding led to the arbitral award’s annulment on the grounds of arbitrators’ lack of power. By taking into account the previous argument, combined with the facts that there was no explicitly stated objection by the other party and no request for extension of the issuing time of the arbitral award, the Supreme Court concluded that the arbitrator – by the time he acted so – had lacked his power to issue the arbitral award [Supreme Court Decision n. 270/2016].

4. The prohibition of abuse of a right may not be treated as a public order provision

The decision no. 366/2016 of the Greek Supreme Court is considering the possible annulment of an arbitral award on public policy grounds. More specifically, an arbitral award may be annulled in total or partially if it violates the public order or public morality (public order provisions). Public order provisions, the infringement of which may lead to the annulment of an arbitral award – either international or domestic – are considered as jus cogens. Public order provisions are interpreted as rules of law that serve the public interest and include the fundamental constitutional civil, cultural, social and economic values of a state. Therefore, the possible infringement of jus cogens law – serving only the private interest – falls outside the judicial review of an award at his stage. Moreover, when an arbitral award has defectively interpreted and implemented the law or suffers only from insufficient reasoning, this does not mean that it violates per se the national public order provisions. In the present case, the two parties had agreed to subject any dispute that may arise out of their agreement before a national ad hoc three-membered arbitral tribunal. One of parties objected before the arbitral tribunal that the other party had abused its rights. However, this objection had been declined by the tribunal. The Greek Supreme Court in its findings concluded that the prohibition of abuse of a right while it includes ius cogens provision of the Greek legal order, it is not though a public order provision sufficient for an award to be annulled; “abuse of right” does not constitute a fundamental constitutional civil, cultural, social and economic rule of the state and it is not a rule of public order as it serves not the public benefit but the private interests [Supreme Court Decision n. 366/2016].

5. If the arbitration agreement had not been executed by the proper authorized persons, it is void

The decision no. 472/2016 of the Greek Supreme Court is considering the possible annulment of an arbitral award when the arbitration agreement is null. Such nullity exists in case a condition which was set in the agreement has not been fulfilled; including the case that the agreement had been composed contrary to the article 65 par. 2 of the Greek Code of Civil Procedure, which defines that in cases of legal entities a special authorization is needed for this action. In the present case, the two parties had agreed to subject any dispute arise out of their agreement before a national ad hoc three-membered arbitral tribunal. The one party had signed the agreement with his representatives who did not have a special authorization to sign also the arbitration agreement. The latter even though included in the contractual agreement of parties preserves its independence with reference to the rest of the agreement. For this reason, the Supreme Court held that no legal effects had arisen from the arbitration agreement and it had not been valid [Supreme Court Decision n. 472/2016].