Insolvency Law as a Main Pillar of Market Economy—A Critical Assessment of the Greek Insolvency Law

• Author: Stathis Potamitis,Alexandros Rokas,Ignacio Tirado,Christoph G. Paulus
• Date: 01 March 2015
• Published date: 01 March 2015
• DOI: http://doi.org/10.1002/iir.1229

Insolvency Law as a Main Pillar of Market

Economy—A Critical Assessment of the

Greek Insolvency Law

Christoph G. Paulus

1

*, Stathis Potamitis

2

,

Alexandros Rokas

2

and Ignacio Tirado

3

1

Humboldt-Universität zu Berlin, Juristische Fakultät, Berlin, Germany

2

POTAMITISVEKRIS Law Partnership, Athens, Greece

3

Universidad Autónoma de Madrid, Faculty of Laws, Madrid, Spain

Abstract

In this article, we use the Greek insolvency law and its present status as a raw

model for the demonstration of the central role insolvency law generally plays

within a given economy. The Greek example amplifies in a particularly instructive

way the interrelationship between the functionality of a legal restructuring and liq-

uidation regime, on the one side, and the recovery of a state’s overall economic af-

fairs, on the other. We present our thoughts in a way that leads from general

deliberations (A and B) to a description of the present Greek insolvency law (C)

and finally its critical assessment (D), before we conclude (E). Thereby, we hope

to make sufficiently clear that this type of approach to insolvency law is educative

for many more jurisdictions than just the example that we have chosen. Copyright

© 2015 INSOL International and John Wiley & Sons, Ltd

I. Purpose of Insolvency Law

A. Terminology

Insolvency law has undergone dramatic changes within the last decades, very likely

more than any other field of law—including tax, constitutional, or commercial

law. After literally millennia of sole concentration on refining the liquidation

mechanism, it has brought forward in recent times the alternative solution of res-

cuing the debtor—be it as an avoiding mechanism in the forefront of upcoming

difficulties (such as the English Company Voluntary Agreement or the French Pro-

cédure de Sauvegarde) or be it in a court-driven proceeding as a direct alternative

*E-mail: christoph.paulus@rewi.hu-berlin.de

Copyright © 2015 INSOL International and John Wiley & Sons, Ltd Int. Insolv. Rev., Vol. 24: 1–27 (2015)

Published online 10 February 2015 in Wiley Online Library

(wileyonlinelibrary.com). DOI: 10.1002/iir.1229

to the liquidation option. At first sight, this looks like the dawning of a true human-

istic era: Instead of selling the debtor’s assets, it empowers now the creditors to help

him to come back to business. A closer look, however, reveals that this “human-

ism”is based on fundamental selfish creditor interests because the rescue option

might be the only realistic alternative for the creditors to receive at least part of

what is owed to them.

In order to understand this, a historical perspective allows a better understand-

ing. When raising the question which changes might have occurred during the last

decades that have universally influenced legislators literally all over the world to

amend their insolvency laws with that rescue option, one is likely to find the follow-

ing answer: The global economy in the last 50 years or so has shifted away from the

previous absolute predominance of production of goods to the provision of ser-

vices; this new era is commonly called tertiary economic sector or alternatively

the service society as contrasted with the second economic sector or industrial

sector.

1

When examining what the dominating assets are within that secondary sector,

one recognizes quickly the ancient Roman law tripartition of “mobilia, immobilia,

and nomina,”that is, mobiles, real estate, and receivables. All three types of assets

are marketable ever since ancient Roman times. That is, in order to get satisfied—

at least partially—the creditors need not do more than to sell those assets. In con-

trast, when examining the service sector, the dominant assets differ entirely: What

is seen here are assets such as know-how, goodwill, charisma, clients, and so on.

They are characterized by a much closer interdependence with the owner than

the traditional assets: Know-how has much more to do with the one who has this

knowledge than his mobile or immobile assets; the relationship with the clients is

much more dependent on the particular service provider than with a creditor

and so on.

Given this evolution of an additional economic sector, it becomes explicable if

not inevitable that sooner or later, insolvency law would have to readjust to the

new economic situation and to provide appropriate tools for creditors that help

them to receive (again: at least partial) satisfaction. This is carried out by means

of rescuing so that the debtor is enabled to produce new income needed for the

creditors’satisfaction. From this insight, it is just one step further that insolvency

prevention is seen as preferable to the commencement of a court proceeding.

At this point the term “insolvency”gains a much broader meaning than it for-

merly used to have. Whereas it used to cover the sales process—be it in a piecemeal

way or as going concern—under special circumstances, it is now additionally (and

emphatically) also encompassing the entrepreneurial effort of bringing the debtor

back to business. Accordingly, insolvency law in its modern sense is not any longer

a separate stage at the end of an enterprise’s life cycle; it is nowadays rather closely

connected if not intertwined with a whole bunch of other areas of traditional

1. See Paulus, Die Insolvenz als Sanierungschance - ein

Plädoyer, Zeitschrift für Unternehmens- und Gesellschaftsrecht

(ZGR) 2005, pp. 309–311.

International Insolvency Review2

Copyright © 2015 INSOL International and John Wiley & Sons, Ltd Int. Insolv. Rev., Vol. 24: 1–27 (2015)

DOI: 10.1002/iir