Special feature: Greece

Interview with Mr Panayiotis Bernitsas, Managing Partner of Bernitsas Law Office

March, 2018

The need for a boost in investment to jump-start the economy and reach sustainable, high growth rate was brought up consistently at the Delphi Forum as a requirement for Greece. Much of this capital will be coming from abroad, and for investors to choose Greece over other investment destinations, investors need confidence in the country’s economy. Confidence builds when perceptions change. In the many conversations you have had over the course of the last 2 years with foreign investors and business people, have you detected a noticeable change in perception?

Mr Panayiotis Bernitsas: I would say yes. But in order to be consistent I will say that for at least two years the international community has always been more positive about Greece’s future than the Greeks, who have a more pessimistic view. I have seen a constant and noticeable improvement in the way Greece is viewed from abroad. New opportunities attract new investors and this is something very important for the country. What we are seeing now, apart from the individual investors who are buying properties in Athens or the islands, is mostly funds, including distressed and private equity funds, seeking opportunities in Greece. They feel that there is more stability in Greece, a change from the past where a political problem or even a hiccup in the political scene, led to most investors being discouraged. Now investors are here to stay; they persevere and they conclude transactions, which is very important for our country. The number of transactions is not as big as one could expect or one would hope, but it is still a very significant change from two years ago.

During the different discussions surrounding Greece, its reforms and the future of its economy, there were several questions raised about the strength and quality of institutions, with the Judiciary constantly being singled out as one that needs deep reform. What can you tell our readers in the UK about strides made during the economic adjustment program to make Greece a more business-friendly environment? One of the main worries of foreign investors is how lengthy certain court-related processes are in Greece.

Mr Panayiotis Bernitsas: There has been a lot of restructuring; I would say more legislative changes than one could digest under normal circumstances, which for a while were considered as paying only lip service to reforms. But with the lapse of time I think that the restructuring became much more substantial, meaning that laws have been enacted and their implementation is consistently progressing. It is not always easy because one has to deal with the mentality of the public administration and face tax issues. But the conclusion is that there has been substantial progress made.

With regard to the restructuring of businesses and pre-bankruptcy procedures, again much progress has been made. The legal instruments that we now have are much more advanced than we used to have in the past. For instance, I remember some 15 years ago foreign advisors who were advising the Greek government on the acquisition of Olympic Airways were very enthusiastic about the pre-packaged insolvency restructuring, quite a novelty at the time. Now the pre-packaged solutions are one of the important instruments used by the banking community and the judiciary. One might say that we are lagging behind in terms of the efficiency of the tax system and that there are some imbalances in the social security framework, despite the fact that the Minister of Social Welfare has said the new system will restore the equilibrium. However, I believe that a major restructuring of the Social Insurance Law is going to become inevitable, although for the time being things seem to be under control.

The current social security framework includes various disincentives and significant bureaucracy for start-ups and new businesses. The government is making sincere efforts to simplify the procedures and the respective ministries are also asking the views of the private sector. This simplification is a very important step in making it easier for foreign investors and removing the constraints they face, especially if they want to develop land projects. This is particularly true for greenfield projects in view of the reaction from local communities who often seek to impede the approvals which allow these projects to go ahead being granted.

What type of assurance could you, as the Managing Partner of Greece’s leading law firm, give to foreign investors about Greece’s legal system (ie. certain processes that are very lengthy)?

Mr Panayiotis Bernitsas: Yes, legal processes in Greece can be very lengthy. However, one of the restructuring reforms that has been initiated and implemented is the change to the Code of Civil Procedure, aimed at making the process of civil and commercial law cases much quicker by doing away with much of the oral debate and replacing it with written pleadings subject to shorter deadlines. We will see whether this is efficient or whether further restructuring of the Code of Civil Procedure is needed, but for the moment, it appears that the time it takes for a case to be heard is much shorter than before. There is of course still a back-log in the Courts and eventually, those who wish to delay legal procedures have the ways and means to do so, but in general things are getting better.

There is one point that is of major interest to investors, irrespective of the EU law that prevails over Greek law. I am referring to a constitutional provision which allows for the protection of foreign investors, and which can be made use of in the event that they are still wary of the potential political risk involved in investing in Greece. It provides that the proceeds of any future liquidation can be exported, therefore effectively guaranteeing investments. So, even with the prevailing capital controls, investors can expatriate their capital and continue with the liquidation of assets. This is very important, and although this provision of our constitution is not being widely relied upon, some investors are making use of it, such as the German companies who have invested in the airports of Greece.

Now, with regard to certain other fears, I think that they can be allayed by the fact that in most international transactions you have clauses which provide for international arbitral proceedings to take place in the case of any dispute. Disputes which relate to the implementation or interpretation of contracts involving foreign investors are normally settled in arbitral proceedings, either by ad hoc or institutional arbitration, the latter being the ICC, the LCIA and UNCITRAL etc., the outcome of which is enforceable in Greece.

Privatisations are one of your areas of expertise, where you have played a key role advising some of the most significant privatisation deals that have taken place or that are still currently under negotiations. How would you characterize the progress Greece has made in its ongoing privatisation programme? Are there any specific, landmark deals that you would like to highlight and that could help build confidence to foreign investors about other opportunities?

Mr Panayiotis Bernitsas: I think that there have been certain landmark deals. For instance, the one that we recently were involved in which had to do with the investment of the Astir Palace resort in Vouliagmeni. Before we were instructed, the initial investment had been brought before the Council of State, our supreme administrative court which is modeled on the French Conseil d’Etat, which had rejected the project as not meeting the environmental requirements and not being in accordance with the Constitution. We managed to revive this project. The head of the Privatisation Fund at that time, who is now Deputy Minister of the Economy and Development, Mr Pitsiorlas, and the chair of the National Bank of Greece, Ms Louka Katseli, were instrumental in bringing this project to fruition. I should mention Mr Pitsiorlas and his team at the Fund are great proponents of private investments and privatisations. The hotels have already been refurbished and the villas are on the market. This is a very prestigious and important transaction because the Astir Palace and the location of Vouliagmeni are considered landmarks of Athens. So, this was one of the projects that we can say was efficiently executed with the help of those people mentioned above.

Another project that I would like to mention is the privatization of the railways, specifically the operating company TRAINOSE which has been sold to Italian investors Ferrovie dello Stato. The transfer of TRAINOSE has already been concluded. A further project that we have been involved in is the development of certain plots of land destined for leisure, hospitality, hotels, villas and so on, which are very important and belong to the Privatisation Fund, in relation to which there have been various hiccups and reactions from the local communities.

There is another ongoing project which was stalled in a previous phase, the sale of DESFA, the gas transmission system. We were involved in the first tender process whereby the European Union did not allow for DESFA to be handed over to the Azeri state gas company. We are now involved with one of the two current bidders and we are preparing for the final offer. We hope that this is going to be concluded. We also are acting for one of the four bidders working on the privatization of an aquaculture/fish farm company and are jointly advising with Papadimitriou Law Firm. There are a lot of projects in the pipeline with regard to privatisations. As you know the Public Power Corporation (PPC) is one of them and in order for the sale of certain assets and production units, mainly of lignite, to be made, there is a lot of ongoing discussion.

Hellenic Petroleum is doing a great job in the hydrocarbons sector, with potential discoveries in the deep waters southwest of Crete and also the Ionian Sea. The energy sector is becoming very important because of the exploration of hydrocarbons. Other projects that we are involved in include the TAP, or Trans Adriatic Pipeline Project, where we are working for the financiers, and the IGB Pipeline between Greece and Bulgaria. We are also involved in a very interesting project which is the Alexandroupoli floating LNG Terminal, where we are legal advisors to Gastrade.

If we look at Greece’s banking sector, where 4 systemic banks after 3 rounds of recapitalizations are now profitable and on the road to recovery and being able to finance the real economy again. They are currently undergoing the EBA’s stress tests, which many suggest will have positive outcomes. What can you tell us about the new regulatory framework put in place last year to help Banks deal with their NPE and NPL reductions? Such as the service providers, electronic auctions and out-of-court settlements?

Mr Panayiotis Bernitsas: I think that this new legislative framework as we discussed has proved to be something very positive in the market. We have been involved on the side of various applicants in the Greek market and I believe that this is a very positive step forward. It enables the banks to dispose of or transfer the management of the Non-Performing Loans (NPLs) portfolios. Very positive measures have been taken and I think that the 3rd party service providers have started doing a great job. So, there are packages of Non Performing Loans which are being tendered out by the various systemic banks and this is also another interesting sector of business. I think that those funds are going to be very efficient in the market and hopefully the Non Performing Loans which are currently at 47% are going to be sold. We seem to now be on target after a very considerable delay and are moving forward in this sector.

I would like to ask you about another of your areas of concentration and expertise, Real Estate. We have met with the main REITs in Greece and have learned that there is very positive momentum in the commercial real estate segment, including hospitality, healthcare and logistics. Tell us more about the types of opportunities you see, both for institutional investors and corporations, in Greece’s real estate sector? What about residential real estate? Do you see a rebound any time soon?

Mr Panayiotis Bernitsas: I think that real estate prices are still depressed, so it is the right time for people to invest in this sector. There are two types of investors here. You have the ones that want to take advantage of the Golden Visa opportunity where you can make an investment of 250,000 Euros, purchase a property or small house and obtain a visa. The second type of investors are those who have shown interest in the large assets, in particular hotels and hospitality assets, which are owned by banks, in relation to which we see a lot of movement, although this has not yet reached the stage of execution of contracts. There are also various funds which are trying to sort out the complicated issues with regard to hospitality conglomerates, many of which are over-indebted, although, despite the fact that you have this growing demand, significant obstacles must still be surmounted. What is probably going to happen is that most of them are going to be sold to international or local investors. There are a lot of opportunities but this also has to proceed in cooperation with the banks.

There certain companies which are in very good shape and focus internationally. For example you have exclusive private villas which have been sold at premium at the Astir Palace and the Astir complex here in Vouliagmeni. There are also examples in Pilos and Kalamata in the Peloponnese. The way that these operators can make money is through the sale of the asset. There is also activity happening in the healthcare sector, with the US private equity fund CVC acquiring two hospitals in Athens, the Metropolitan Hospital and IASO General. This shows there is appetite in this sector too.

Regarding the UK and its future with Brexit, this will certainly open a new can of worms in terms of international arbitration. Now, we know that the UK vows to continue building its partnership with Greece, irrespective of the outcome of Brexit. But perhaps investors need some reassurance. Is Bernitsas already making the necessary moves to advise clients from the UK or Greece with views to the post-Brexit area?

Mr Panayiotis Bernitsas: You are right. It has caused a lot of concern and as I understand it, it seems that nobody in the City of London was expecting for Brexit to happen. I think that London may think a little bit differently to the rest of the country. But I believe the British are very resilient and what we are hearing is that there is going to be growing business for the legal players for at least the next 5 years. For the last 30 years, London and the international London firms have been very active and have expanded all over the world. They have created these hugely efficient international law firms and we at Bernitsas Law Firm work extensively with their London and correspondent offices. I think that this will continue to be the case and that London firms will continue to play a key role internationally. I also believe that due to the specificities of the British legal system, they are always going to be on top of things irrespective of whether they are a member of the EU or not. Many international firms also have a strong base in Germany or France and I do not anticipate them collapsing due to Brexit.

Through this interview, you have the attention of Britain's business and investor community, these are the readers of The Times, so on behalf of Bernitsas law firm as its Managing Partner, this is your opportunity to share a confidence-building and powerful message with our readers in the UK.

Mr Panayiotis Bernitsas: During the last 40 years, my experience of the British investors and law firms we have been working with is that they have always been on top of things. We have been in the position to explore opportunities and strike good deals that are balanced and protect the interests of the client. For instance when you have a French company and they invest in Greece, they tend to select English law firms to work with because I think that the British have this international presence worldwide, and are in a position to offer solutions based on their expertise. Where a regional law firm works alongside a prominent English law firm, the fact that you have a legal opinion signed and sealed by them, gives you access to financing and to the international banking system. So, I think that the British have very extensive experience in investing in foreign countries, in encountering difficult environments and in finding the right solutions while doing so. We hope that we will continue to be part of this alongside them and continue to work with them. We also hope to continue to fare well during the Greek crisis, which we have done to a large extent because of our cooperation with foreign law firms and banks.