Transparency of the Regulatory System
As an EU member, Greece is required to have transparent policies and laws for fostering competition. Foreign companies consider the complexity of government regulations and procedures and their inconsistent implementation to be a significant impediment to investing and operating in Greece. Occasionally, foreign companies report cases where there are multiple laws governing the same issue, resulting in confusion over which law is applicable. Under its bailout programs, the Greek government committed to widespread reforms to simplify the legal framework for investment, including eliminating bureaucratic obstacles, redundancies, and undue regulations. The fast track law, passed in December 2010, aimed to simplify the licensing and approval process for “strategic” investments, i.e. large scale investments that will have a significant impact on the national economy (see paragraph 1.3, Laws/Regulations of FDI). In 2013, Investment Law 4146/2013 was passed in Parliament to simplify the regulatory system and stimulate investment. This law provides additional incentives, beyond those in the fast track law, available to domestic and foreign investors, dependent on the sector and the location of the investment.
Greece’s tax regime lacks stability, predictability, and transparency, presenting additional obstacles to investment. Foreign firms are not subject to outright discrimination in taxation, but numerous changes to tax laws and regulations since the beginning of the economic crisis have led to even greater unpredictability for many companies, both foreign and domestic. As part of Greece’s August 2015 bailout agreement, the government converted the Ministry of Finance’s Directorate-General for Public Revenue into a fully independent tax agency, effective January 2017, with a broad mandate to increase collection and develop further reforms to the tax code aimed at reducing evasion and increasing the coverage of the Greek tax regime.
Generally, foreign investment is not legally prohibited or otherwise restricted. Proposed laws and regulations are published in draft form for public comment before Parliament takes up consideration of the legislation. The International Financial Reporting Standards for listed companies were introduced in 2005, in accordance with EU directives. These accounting standards have improved the transparency and accountability of publicly traded companies.
International Regulatory Considerations
Trade policy falls within the competence and jurisdiction of the European Commission Directorate General for Trade and is generally not subject to regulation by member state national authorities. On November 5, 2012, China requested WTO consultations with the EU, Greece, and Italy regarding certain measures, including domestic content restrictions that affect the renewable energy generation sector, relating to feed-in tariff programs of EU member states, including but not limited to Italy and Greece.
Greece has been a World Trade Organization (WTO) member since 1995, and a member of the General Agreement on Tariffs and Trade (GATT) since 1950. Greece has not enacted measures that are inconsistent with WTO Trade-Related Investment Measures (TRIMs) requirements, and the Embassy is not aware of any measures alleged to violate Greece’s TRIMs obligations. There are no performance requirements for establishing, maintaining, or expanding an investment. Performance requirements may come into play, however, when an investor wants to take advantage of certain investment incentives offered by the government.
Citizens of other EU member state countries may work freely in Greece. Citizens of non-EU countries may work in Greece after receiving residence and work permits. There are no discriminatory or preferential export/import policies affecting foreign investors, as EU regulations govern import and export policy, and increasingly, many other aspects of investment policy in Greece.
Legal System and Judicial Independence
Although Greece has an independent judiciary, the court system is an extremely time-consuming and unwieldy means for enforcing property and contractual rights. According to the “Enforcing Contracts Indicator” of the World Bank’s ‘Doing Business” index, Greece is the lowest-ranking EU member state (and fourth from the bottom among 190 countries) in terms of the speed of delivery of justice. It requires 1,580 days (more than four years) on average to resolve a dispute, compared to the European average of 486 days and the OECD average of 553 days.
The government has committed, as part of its three bailout packages, to reforms intended to expedite the processing of commercial cases through the court system. In July 2015, the government adopted a significant set of reforms to the code of civil procedure (law 4335/2015). These reforms aim to accelerate judicial proceedings in support of contract enforcement and investment climate stability, and entered into force in January 2016. Foreign companies report, however, that Greek courts do not consistently provide unbiased and effective recourse. Problems with judicial corruption still exist. Commercial and contractual laws generally accord with international norms.
Laws and Regulations on Foreign Direct Investment
Prior to January 2015, some progress had been made in adopting laws aimed at fostering growth, reducing bureaucratic hurdles, and attracting foreign investment. Towards this end, the previous government established in 2014 (via Law 4242) Enterprise Greece, merging the previous Invest in Greece investment promotion agency with the Hellenic Foreign Trade Board to create a primary point of contact for investors. The agency reports to the Ministry of Economy, acting as an information source for investors and as an interface with other agencies of the Greek government on behalf of investors.
Investments in Greece operate under two main laws: the new Investment Law (4399/2016) that addresses small-scale investments and Law 4146/2013 that addresses strategic investments. In particular;
– Law 4399/2016, entitled “Statutory framework to the establishment of Private Investments Aid Schemes for the regional and economic development of the country” was passed in June 2016. Its key objectives include the creation of new jobs, the increase of exports, the reindustrialization of the country, and the attraction of FDI. The law provides aids (as incentives) for companies that invest from €50,000 (Social Cooperative Companies) up to €500,000 (large sized companies) as well as tax breaks. The Greek government provides funds to cover part of the eligible expenses of the investment plan; the amount of the subsidy is determined based on the region and the business size. Qualified companies are exempt from paying income tax on their pre-tax profits for all their activities. There is a fixed corporate income tax rate and fast licensing procedures. Eligible economic activities are manufacturing, shipbuilding, transportation/ infrastructure, tourism, and energy.
– Law 4146/2013, entitled the “Creation of a Business-Friendly Environment for Strategic and Private Investments” is the other primary investment incentive law currently in force. The law aims to modernize and improve the institutional framework for private investments, raise liquidity, accelerate investment procedures, and increase transparency. It seeks to provide an efficient institutional framework for all investors and speed the approval processes for pending and approved investment projects. The law created a general directorate for private investments within the Ministry of Economy (formerly the Ministry of Development) and reduced the value of investments needed to be considered strategic. The law also provides tax exemptions and incentives to investors and allows foreign nationals from non-EU countries who buy property in Greece worth over €250,000 ($285,000) to obtain five-year renewable residence permits for themselves and their families. The law further foresees the creation of a central licensing authority aimed at establishing a one-stop-shop service to accelerate implementation of major investments. More about this law can be found online at http://www.enterprisegreece.gov.gr/en/doing-business/investment-incentives-law and at http://www.enterprisegreece.gov.gr/files/investment_law/EN_INTERNET.PDF
- Law 3908/2011 is gradually being phased out by law 4146 (above).
- Law 3919/2011 aims to liberalize more than 150 currently regulated or closed-shop professions. The implementation of this law continued in 2013 and 2014.
- Law 3982/2011 reduced the complexity of the licensing system for manufacturing activities and technical professions and also modernized certain qualification and certification requirements to lower barriers to entry.
- Law 4014/2011 simplified the environmental licensing process.
- Law 3894/2010 (also known as fast track) allows Enterprise Greece to expedite licensing procedures for qualifying investments in the following sectors: industry, energy, tourism, transportation, telecommunications, health services, waste management, or high-end technology/innovation. To qualify, investments must meet one of the following conditions:
- exceed €100 million;
- exceed €15 million in the industrial sector, operating in industrial zones;
- exceed €40 million and concurrently create at least 120 new jobs; or
- create 150 new jobs, regardless of the monetary value of the investment.
More about fast track licensing of strategic investments can be found online at http://www.enterprisegreece.gov.gr/en/strategic-investments/legal-framework
Other investment laws include:
- Law 3389/2005 introduced the use of public-private partnerships (PPP). This law aimed to facilitate PPPs in the service and construction sectors by creating a market-friendly regulatory environment.
- Law 3426/2005 completed Greece’s harmonization with EU Directive 2003/54/EC and provided for the gradual deregulation of the electricity market. Law 3175/2003 harmonized Greek legislation with the requirements of EU Directive 2003/54/EC on common rules for the internal electricity market. Law 2773/99 initially opened up 34% of the Greek energy market, in compliance with EU Directive 96/92 concerning regulation of the internal electricity market.
- Law 3427/2005, which amended Law 89/67, provides special tax treatment for offshore operations of foreign companies established in Greece. Special tax treatment is offered only to operations in countries that comply with OECD internationally-agreed tax standards. The most up-to-date list of countries in compliance can be found at http://www.oecd.org/dataoecd/50/0/43606256.pdf
- Law 2364/95 and supporting amendments governs investment in the natural gas market in Greece.
- Law 2289/95, which amended Law 468/76, allows private (both foreign and domestic) participation in oil exploration and development.
- Law 2246/94 and supporting amendments opened Greece’s telecommunications market to foreign investment.
- Legislative Decree 2687 of 1953, in conjunction with Article 112 of the Constitution, gives approved foreign “productive investments” (primarily manufacturing and tourism enterprises) property rights, preferential tax treatment, and work permits for foreign managerial and technical staff. The Decree also provides a constitutional guarantee against unilateral changes in the terms of a foreign investor’s agreement with the government, but the guarantee does not cover changes in the tax regime.
Competition and Anti-Trust Laws
Under Articles 101-109 of the Treaty on the Functioning of the EU, the European Commission (EC), together with member state national competition authorities, directly enforces EU competition rules. The EC Directorate-General for Competition carries out this mandate in member states, including Greece. Greece’s competition policy authority rests with the Hellenic Competition Commission, in consultation with the Ministry of Economy. The Hellenic Competition Commission protects the proper functioning of the market and ensures the enforcement of the rules on competition. It acts as an independent authority and has administrative and financial autonomy.
Expropriation and Compensation
Private property may be expropriated for public purposes, but the law requires this be done in a nondiscriminatory manner and with prompt, adequate, and effective compensation. Due process and transparency are mandatory, and investors and lenders receive compensation in accordance with international norms. There have been no expropriation actions involving the real property of foreign investors in recent history, although legal proceedings over expropriation claims initiated, in one instance, over a decade ago, continue to work through the judicial system.
ICSID Convention and New York Convention
Greece is a member of both the International Center for the Settlement of Investment Disputes (ICSID; Washington Convention) and the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York convention).
Investor-State Dispute Settlement
Greece accepts binding international arbitration of investment disputes between foreign investors and the Greek government, and foreign firms generally have found satisfaction through arbitration. International arbitration and European Court of Justice Judgments supersede local court decisions.
The Embassy is aware of a few ongoing investment disputes dating from more than ten years ago. Greece accepts binding international arbitration of investment disputes between foreign investors and the Greek government, and foreign firms have found satisfaction through arbitration. International arbitration and European Court of Justice Judgments supersede local court decisions. The judicial system provides for civil court arbitration proceedings for investment and trade disputes. Although an investment agreement could be made subject to a foreign legal jurisdiction, this is not common, particularly if one of the contracting parties is the Greek government. Foreign court judgments are accepted and enforced, albeit extremely slowly, by the local courts.
In an effort to create a more investor-friendly environment, the government has established an Investor’s Ombudsman service. The Ombudsman is authorized to mediate disputes that arise between investors and the government during a licensing procedure. The Ombudsman, housed within Enterprise Greece, can be employed by investors with projects exceeding €2 million in value. More info on the Ombudsman service can be found here: http://www.enterprisegreece.gov.gr/en/ombudsman/investor-ombudsman .
International Commercial Arbitration and Foreign Courts
As noted above, Greece’s independent judiciary is both time-consuming and unwieldy as a means for enforcing property and contractual rights. The government has committed to implementing significant reforms to the judicial system, aimed at speeding up adjudications and improving dispute resolution for investors.
Bankruptcy laws in Greece meet international norms. Under Greek bankruptcy law 3588/2007, private creditors receive compensation after claims from the government and insurance funds have been satisfied. Monetary judgments are usually made in euros unless explicitly stipulated otherwise. Greece has a reliable system of recording security interests in property. According to the World Bank’s 2017 Doing Business Index, resolving insolvency in Greece takes 3.5 years on average and costs 9% of the debtor’s estate, with the most likely outcome that the company will be sold piecemeal. Greece ranks 52 of 190 economies surveyed for ease of resolving insolvency in the Doing Business Index.