Openness to Foreign InvestmentThe Greek government encourages private foreign investment as a matter of policy. Investments are screened only when the investor wants to take advantage of government provided tax and investment incentives. In such cases, foreign and domestic investors face the same screening criteria.
Greece restricts foreign and domestic private investment in public utilities (with the exception of cellular telephony and energy from renewable sources). There are also restrictions on land purchases in border regions and on certain islands (on national security grounds). U.S. and other non-EU investors receive less advantageous treatment than domestic or EU investors in the banking, mining, broadcasting, maritime, and air transport sectors.
Major investment laws are:
Legislative Decree 2687 of 1953 which, in conjunction with Article 112 of the Constitution, gives approved foreign "productive investments" (basically manufacturing and tourism enterprises) property rights, preferential tax treatment, work permits for foreign managerial and technical staff, and permission for the export of capital, dividends, interest, and other current payments.
The Decree also provides a constitutional guarantee against unilateral changes in the terms of a foreign investor's agreement with the Greek government. (This does not include taxation regime changes).
- Law 2601/98 revised the investment incentives regime replacing Law 1892/90 and its subsequent amendment 2234/94. Under the new law, new businesses (with less than five years of operation) may choose any of the following combinations of incentives: a) grants and interest subsidies as well as subsidies for leasing equipment, b) tax exemptions and interest subsidies. The emphasis of the new law is on assistance for large projects, mergers of small and medium size manufacturing companies and on the development of new products.
- Laws 89/67, 378/68, 27/75 and 814/78 provide special benefits (such as tax and import duty exemptions) for offshore operations of foreign companies established in Greece.
- Law 468/76 governs oil exploration and development in Greece. Law 2289/95, amending this legislation, allows private participation in oil exploration and development.
Greece's privatization plans are limited to the sale or partial flotation of 12 state corporations, the sale of three banks and the sale of the three remaining companies under the supervision of the state Industrial Reconstruction Organization (IRO).
The Greek Government's plans include the sale of minority holdings of the Public Power Corporation, the Telecommunications Organization (OTE), and Olympic Airways Catering. The state banks also plan to rid their portfolios of shares of companies that are not in the financial services sector. The stage at which foreign or domestic investors participate in privatization programs is not restricted.
Conversion and Transfer Policies
Receipts from productive investments can be repatriated freely at market exchange rates. Remittance of investment returns is made without delays or limitations. Most of the remaining capital controls were abolished in August 1997.
On March 16, 1998, the Greek currency was included in the European Union's Exchange Rate Mechanism (ERM). This was preceded by a drachma devaluation of 12.3 percent. The government plans to maintain drachma/ECU parity throughout 1998 and 1999.
Expropriation and Compensation
Private property may be expropriated for public purposes, but only 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 expropriatory actions involving the real property of foreign investments in recent history. However, a 1996 government decision to revoke a casino license for Athens has generated lawsuits in Greece and the United States, seeking compensation for the loss of the lucrative license.
Dispute Settlement
Investment disputes involving U.S. companies have been related to the Greek government's proclivity to change the terms of negotiated contracts (e.g., casino licenses).
Greece has an independent judiciary. The court system is a highly time-consuming means for enforcing property and contractual rights. Foreign companies report their experience that Greek courts do not always provide unbiased and effective recourse.
This is clearly the case regarding U.S. copyright holders. Although an investment agreement could be drafted subject to foreign legal jurisdiction, this is highly unlikely, particularly if one of the contracting parties is the Greek state. Foreign court judgments are accepted and enforced by the local courts.
Greece accepts binding international arbitration of investment disputes between foreign investors and the Greek state. Both these arbitrations and European Court of Justice judgments supersede local court decisions. Commercial and bankruptcy laws in Greece are in accordance with international norms.
Under Greek bankruptcy law, private creditors receive compensation after claims from the state and insurance funds have been satisfied. Monetary judgments are usually made in local currency unless explicitly stipulated otherwise. Greece has a reliable system of recording security interests in property.
Greece is a member of the International Center for the Settlement of Investment Disputes, but no new cases have been forwarded to the Center for settlement since 1982. Greece is also a member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Performance Requirements/Incentives
Investment incentives are available on an equal basis for foreign and domestic investors in productive enterprises. The monetary value of an incentive is inversely proportional to the level of development of a given region; in other words, the less developed the region where the investment will occur, the more generous the incentive. Under the new investment incentives law 2601/98, new businesses (with less than five years of operation) may choose any of the following combinations of incentives:
-- Grants and interest subsidies, as well as subsidies for leasing equipment.
-- Tax exemptions and interest subsidies.
Businesses with more than five years of operation qualify only for interest subsidies and tax exemptions. Additional tax incentives are extended to foreign investors if they establish export-oriented businesses, or if they save foreign exchange through import substitution (Law 2687/53).
The Hellenic Center for Investment (ELKE) or "One-Stop Shop" is responsible for reviewing projects valued over 3 billion drachmas ($10 million), or 1.5 billion drachmas ($5 million) if there is foreign participation, for which government incentives are sought.
There are no performance requirements imposed as conditions for establishing, maintaining, or expanding an investment. However, performance requirements do exist when an investor wants to take advantage of tax and/or investment incentives.
Local content, import substitution, export orientation, and technology transfers are taken into consideration by the Greek authorities in evaluating applications for investment incentives. Companies that fail to meet the specified performance requirements may be forced to give up the incentives they were initially granted. All information transmitted to the government for the approval process is treated confidentially.
U.S. and other foreign firms may participate in government-financed and/or subsidized research and development programs. Foreign investors do not face discriminatory or other de jure inhibiting requirements.
However, many potential and actual foreign investors assert that the complexity of Greek regulations, the need to deal with many layers of bureaucracy, and the involvement of various government agencies discourage investment.
There are no restrictions on the entry of foreigners into Greece. Foreigners from EU countries may freely work in Greece. Foreigners from non-EU countries may work in Greece after receiving a residence and work permit.
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 in Greece.
Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to establish and own business enterprises. They may engage in all forms of remunerative activity, including the right to establish, acquire, and dispose of interests in businesses. Greece restricts foreign as well as domestic private investment in public utilities. Recent privatization plans are limited to the sale of minority holdings in public utilities (e.g., Telecommunications Organization, Athens and Thessaloniki Water and Sewage Companies).
Private power production for sale to the national grid is currently limited to "non-traditional" energy sources (e.g., wind and solar).
There are also restrictions on land purchases in border regions and certain islands (on national security grounds). Some restrictions exist for U.S. and other non-EU investors in: (1) mining, (2) banking, (3) maritime and air transport, and (4) broadcasting.
Private enterprises enjoy the same treatment as public enterprises with respect to access to markets and other business operations, such as licenses and supplies. Access to credit has traditionally been easier for public enterprises, which could borrow easily from state-controlled banks.
Liberalization of the banking system and increased compliance with EU norms, however, have gradually forced state banks to operate in a more market-oriented manner, making it easier for the private sector to obtain credit.
