Decision 1116/2014 of the Greek Council of State, addressing some of the petitions for the annulment of the PSI, upheld the legality of the programme.

Decision 1116/2014 of the Greek Council of State, addressing some of the petitions for the annulment of the PSI, upheld the legality of the programme. It came with a strong minority judgment by seven out of the twenty eight judges of the court, who (the minority judges) found the Act as being contrary to the Greek constitution and the ECHR, in essence accepting the arguments projected by the claimants and their counsels. Among other peripheral judgments, the decision in its almost one hundred pages reaches a number of conclusions in support of the programme, which, are the following:
a) An investment in sovereign debt by means of acquisition of government issued bond titles shall not be seen as different from any other investment in third parties’ risk since, above all, it constitutes a legal relationship founded on the provision of credit. In light of the financial tsunami threatening the Greek economy prior to the application of the PSI and within the frame of the above mentioned arguments the Greek Bondholders Act, and the PSI specifically cannot, be found as contravening articles 5 and 25 par. 1 of the Greek Constitution (free development of one’s personality and proportionality principle respectively) or generally the legal principles deriving from the Greek Constitution, the EU Law and the ECHR as the claimants have argued.
b) The decision of the Greek Council of State also deals in an obiter dictum with the fact that the Bank of Greece Central Securities Depository is an indirect securities’ holding system where only the participant financial institutions are registered and not the end-investors. The decision assesses the legal relationship between the end-investors and the issuer of the securities (i.e. the Greek State) as regards the rights attributed through the GGBs as intermediated dematerialised securities to the bondholders and it denies a breach of overarching rights, caused by the ministerial decisions and the Greek Bondholders Act.
c) The decision states that according to the Creek Constitution and to the first additional protocol of the ECHR, in case of imperative public interest any limitation of contractual property rights is permissible provided that it is deemed necessary under specific circumstances, adequate for the public interest the satisfaction of which is to be served and in agreement with the principle of proportionality. In the PSI case reasons of public interest justified public intervention and decrease of private property since such intervention was not contrary to the principle of proportionality. The cancellation of the GGBS and their substitution for new securities, although severe and harsh in nature, cannot be deemed inadequate or disproportionate as, in their absence, the most likely result would be the Greek default and the total collapse of the Greek economy, which in its turn would have unpredictable repercussions and undoubtedly would put under risk the satisfaction of the rights of all investors in the Greek public debt.
d) In accordance with the principle of equality (article 4 par. of the Greek Constitution) natural persons are not entitled to any privileged treatment vis a vis the rest of the creditors of the Greek State no matter how small the amount of the GGBs they hold.