Contributed By Sardelas Petsa Law Firm
The main types of lenders under Greek law are credit institutions, which are regulated by the provisions of Greek Law No 4261/2014 and are authorised and supervised by the Bank of Greece. In addition, there are:
Sponsors vary – in the energy and real estate finance sectors they typically operate in large corporate group structures, providing equity injections or intra-group loans to subsidiaries or special purpose vehicles (SPVs), which undertake to carry out the energy or real estate project, as the case may be.
Public-private partnerships (PPPs) are contracts concluded between a private entity and the public sector to carry out a project or to provide services. The legal framework governing PPPs is Greek Law No 3389/2005, as amended and in force.
There are four conceptual elements to a PPP under Greek Law 3389/2005:
Nevertheless, Greek Law 3389/2005 provides that, in exceptional cases, it is possible to subject partnerships to its provisions – even if one or more of the prerequisites in the last three points above does not apply to the partnership in question – by virtue of a unanimous resolution of the Ιnterministerial Committee of PPPs.
A peculiarity of a PPP in relation to other contracts concluded between public and private entities is that the contracting authority of the public sector enters into a direct partnership not with the selected contractor of the private sector but rather with an SPV established by the contractor in the form of a société anonyme for the sole purpose and in the framework of the implementation of the PPP.
The benefits and advantages of PPPs include:
Obstacles include:
Broadly speaking, the main issues that have to be tackled when structuring the deal are as follows.
Risk Assessment
A carefully considered and detailed business plan with substantiated projections of the project’s cash flow is of utmost importance, as it enables the lender to complete its risk-assessment procedures. Legal due diligence on the project documents (licensing, agreements with major contractors, land rights, etc) is also key for assessing any risk factors regarding the completion and proper operation of the project. This will enable the lender to timely include customised provisions (ie, undertakings and/or events of default clauses) in the finance documents of the transaction that address any worrisome issues deriving from the conducted due diligence, in order to optimally secure the position of the lender and minimise its risk.
Source of Funds and Debt-to-Equity Ratio
Regarding project equity (injected into the borrower in the form of a share capital increase or by virtue of intra-group loans), the lender should ensure that the borrower provides sufficient evidence that the sponsors have the ability and funds available to finance the project, as well as evidence of the origin of such funds (“proof of funds”).
Security Package
The lender should ensure that the deal involves sufficient security to guarantee the full repayment of any debt arising from the financing under negotiation. The nature of the security to be provided varies depending on the type of financing. In project finance, it usually includes a pledge on all receivables deriving from the project documents as well as the creation of security interests on all assets of the borrower.
Essential Financial Ratios
The most essential financial ratio that lenders request to be tested (on either a six-month or annual basis) is the Debt Service Cover Ratio. In real estate project finance, Loan to Value covenants are tested regularly.
The renewable energy market in Greece has been developing rapidly in recent years. According to “The Green Tank”, renewable energy source (RES) production set a record during January 2024. Specifically, renewables had the second highest historical monthly production in January 2024, compared to the absolute record of August 2023. According to such analysis, production reached 2,207 gigawatt hours (GWh), when in August 2023 it stood at 2,254 GWh. In the same tenor, RES production reached 47.7% of demand coverage within the first two months of 2024; together with hydroelectric plants, it exceeded 55%.
Greece is ranked seventh on the global scale for use of renewable energy in its gross final energy consumption, with considerable prospects of further penetration of RES energy in the total energy mixture. The funding of RES projects though the EU’s Recovery and Resilience Facility has proved to be a crucial instrument in the financing of utility-scale RES projects (one of the pillars of the National Recovery and Resilience Plan adopted and implemented by the Greek State is the green transition, which is realised through the development and operation of RES plants).
In the coming years, interest in the development of energy storage plants is also expected to increase, as many financial and regulatory incentives have been made available for promoting energy storage, by virtue of recently passed legislation (eg, Greek Law No 4920/2022). In particular, investment aid or annual operating aid will be granted to storage units connected to and operating in the Hellenic Electricity Transmission System, and to storage units installed in countries within the European Economic Area. This aid scheme has an estimated budget of EUR341 million and was approved by the European Commission. The measure will be partly funded by the Recovery and Resilience Facility.
Accordingly, a ministerial decision was issued in May 2023, specifying the competitive tendering procedure for the granting of investment aid or annual operating aid. The ministerial decision provides for the carrying out of three tendering procedures in relation to a total energy storage capacity of 1,000 MW.
The first one was completed in August 2023, in relation to a total energy storage capacity of 400 MW, and the second one was completed in February 2024, in relation to a total energy storage capacity of approximately 300 MW. The announcement of the exact date of the third competitive tendering procedure is anticipated.
Under Greek law, lending obligations are secured by securities in personam and/or by securities in rem.
Securities in personam include personal and corporate guarantees, while securities in rem include mortgages or prenotation of mortgages over real estate assets and pledges over movable assets, shares, debt instruments, rights and claims of the pledgor against third parties.
Security over real estate assets is created by mortgage (by virtue of a notarial mortgage deed) or by mortgage prenotation (by virtue of a county court decision), and is perfected by registration in the public books of the competent cadastre where the real estate asset is located. Prenotation of a mortgage gives its beneficiary the pre-emptive right to obtain a mortgage perfected as of the date of registration of the prenotation of the mortgage, once its claim becomes final. Such security extends to all component parts and accessories of the real estate (ie, machinery and equipment).
Law 5123/2024 (the New Security Law) was published in July 2024, aiming to create a unified and modern legal framework around collateral security in order for the Greek market to adapt to new technological and economic standards based on European and international best practices, and to address ongoing issues in relation to the establishment and enforcement of pledges over rights. By virtue of the New Security Law, the current applicable legal framework is amended and partly abolished.
The New Security Law introduces a modern legal tool, the Unified Central Electronic Register of Pledges, which falls under the scope of Hellenic Cadastre management and administration. The Unified Central Electronic Register of Pledges will operate as an online public service and record, through the website gov.gr. In principle, all pledge agreements (including amendments and releases thereof) will be registered with the Unified Central Electronic Register of Pledges, enhancing the safety of transactions and transparency, since the Unified Central Electronic Register of Pledges will operate as a database and right of access/search will be granted to legal professionals such as lawyers, notaries, court bailiffs and legal entities or persons acting in their capacity as pledgors, pledgees or obligors.
The specifics in relation to the Unified Central Electronic Register of Pledges will be decided by the Hellenic Cadastre’s Board of Directors, including the procedure for submitting the pledge agreements for registration, the applicable fees and all other relevant formalities.
A security over rights and claims is created and perfected upon the execution of an agreement between the parties (by virtue of a private agreement, which must receive a certain date, or an electronic document, executed either by electronic signatures or though the website gov.gr.), registration with the Unified Central Electronic Register of Pledges and notification being provided to the debtor. The pledge becomes valid against the debtor upon its notification, and against third parties upon registration with the Unified Central Electronic Register of Pledges.
The registration of the relevant pledge with the Unified Central Electronic Register of Pledges is not required for collateral security over cash deposited in bank accounts and the pledgee is the bank in which such accounts are held. Standard practice provides for such collateral in cash to also be governed by Law 3301/2004 on financial collateral agreements. The notification of the security/pledge agreement to the debtor of the pledged claims may take place by service of process via court bailiff, as per the current applicable legal framework, or by any electronic form that constitutes a “durable medium”, such as an e-mail, as per the provisions of the New Security Law.
No notification to the debtor is required if the debtor is also the pledgee or the pledgor or, alternatively, a party to the pledge agreement.
As per the provisions of the New Security Law, the parties may agree that the pledge created by the pledgor over its claims against third parties/debtors results in the assignment of claims in favour of the pledgee (assignment by way of pledge). In this case, Article 39 of Legislative Decree 17.7.1923 shall apply and the relevant claims are assigned by pledge to the pledgee, with the latter becoming the sole beneficiary thereof, and are re-assigned/released back to the pledgor ipso jure once the secured liabilities are fully paid and discharged. Before the introduction of the New Security Law, the scope of Legislative Decree 17.7.1923 was limited to credit institutions, but has now been extended to all entities acting as pledgees.
The creation of collateral security (pledge) over registered shares has similar requirements to those described above. The pledge over the registered shares should also be annotated to the shareholders’ registry and the share certificates, to the extent issued in physical form. The registration of the pledge with the shareholders’ registry and the share certificates’ annotation does not affect the validity of the pledge; they serve only evidentiary purposes. The current provisions remain applicable to dematerialised shares listed on the Athens Stock Exchange or held in book-entry form.
By virtue of the New Security Law and by derogation of the current legal framework, the pledgor may keep the share certificates in its possession and not deliver them to the pledgee. Specifically, the new legal framework provides that the pledgor must deliver the share certificates to the pledgee only upon demand. For dematerialised shares, a certificate from the issuer of the shares confirming the pledgor’s ownership over such dematerialised shares shall be attached to the pledge agreement.
Finally, in relation to the pledge over registered shares, the New Security Law provides that, unless otherwise agreed in the relevant security document, the pledgor shall continue to exercise the voting rights (and all other non-pecuniary rights) attached to the shares.
As far as machinery, equipment and floating charges are concerned, security/non possessory pledges can be created and perfected by fulfilment of the requirements described above in relation to the pledges over rights and claims. Either the pledgor or the pledgee may take the initiative to register such pledge with the Unified Central Electronic Register of Pledges.
The New Security Law will come into force on the date of publication of the Hellenic Cadastre’s Board of Directors decision or on 31 December 2024, whichever comes first. However, such date may be extended pursuant to a ministerial decision.
Please see 2.1 Assets Available as Collateral to Lenders regarding floating charges and the New Security Law. Security over future assets and/or claims is permitted, provided that they are defined or definable at the time.
Mortgages and prenotation of a mortgage over real estate are subject to registration in the public books of the competent land registry and/or cadastre. The registration of a pledge over claims and rights, shares, machinery, equipment and floating charges are registered with the Unified Central Electronic Register of Pledges, as described in 2.1 Assets Available as Collateral to Lenders.
Registration fees for the land registry amount to 0.775% of the secured amount, and registration fees for the cadastre amount to 0.875% of the secured amount. In the case of mortgages, notarial fees range from 0.2% to 1% of the secured amount; for the prenotation of mortgages, court fees do not exceed EUR300.
Under the legal framework for bond loans, registration fees are fixed at EUR100 per registration, which minimises the costs of security granted under bond loans.
In order to create a valid security interest, the item over which security is granted should be adequately defined. Security over future items may be created/granted to the extent that they are defined or definable. Finally, the items over which a floating charge is created may be described in general to the extent they have distinctive characteristics.
Pursuant to the provisions of Article 51 of Greek Law No 4548/2018 (the “Société Anonyme Company Law”), a company (other than a credit institution) is not allowed to make down payments nor provide guarantees and/or loans to support borrowings incurred to finance the direct or indirect acquisition of its shares by third parties, unless the following conditions are met.
Pursuant to the provisions of Article 51 of the Société Anonyme Company Law, the restrictions mentioned in the first point above also apply to down payments, guarantees and/or loans provided by subsidiaries for the acquisition of the parent company’s shares by third parties.
In the case of real property assets, in order to confirm that there no other liens, the lenders can conduct research in the public books kept by the competent land registry/cadastre office. In the case of rights and claims, shares, equipment, machinery, movable assets, etc, lenders will be able to conduct research in the Unified Central Electronic Register of Pledges introduced by the New Security Law.
Τhe most common way to release security is by either a private agreement or a notarial deed, depending on how the security was created. The release of the security must also be registered (with the competent land registry/cadastre for real estate assets, and with the Unified Central Electronic Register of Pledges in all other cases). In the case of physical delivery of the encumbered asset, said asset must be redelivered to the pledgor. Notification to third parties/debtors may also be required.
Provided there is an event of default under any finance document (and the lender notifies the borrower of such event of default), the secured lender may enforce its collateral in accordance with the specific relevant provisions included in the financing agreement(s).
The stages and respective timeframes of enforcement proceedings are described in detail in the provisions of the Greek Code of Civil Procedure, which is the main applicable law governing enforcement in Greece.
As a general rule, it is a prerequisite for the commencement of the enforcement procedure that the secured creditor, who wishes to enforce its collateral, must obtain an enforceable title (mainly through non-appealable judgments, arbitral awards, payment orders, notarial deeds, etc).
The enforcement procedure for monetary claims involves four main stages:
In principle, the proceeds are distributed to all the creditors who participated in the liquidation process. When the auction proceeds are less than the total claims of the creditors who participated in the procedure, they are distributed proportionally among the participating creditors. However, certain categories of creditors have priority over the proportional distribution – eg, claims of the State, other public entities and social security authorities, and claims for wages have a minimum priority of 25% of the total proceeds, whereas secured claims (ie, collateral security on the specific asset on which enforcement takes place) have a minimum priority of 65% of the total proceeds.
Apart from the enforcement procedure provided for in the Greek Code of Civil Procedure and briefly summarised above, the New Security Law provides that, in the case of a pledge over claims and rights, the pledgee is entitled to proceed with the collection of the pledged claims on its own account without any procedure after the expiry of ten business days from the day on which the claim against the pledgor became due, in whole or in part.
Enforcement over shares is regulated by the Greek Code of Civil Procedure. Provisions in relation to the liquidation of pledged movable assets apply, so the general rule applies (issuance of an enforceable title).
The enforcement of a notional pledge or floating charge may be subject to the provisions of Legislative Decree 17.7.1923 if the parties to the security agreement have explicitly agreed that said agreement should be. In such case, the pledgee may serve an order for payment directly to the pledgor (ie, without having to resort to court proceedings), provided that both parties qualify as businesses or professionals at the time of perfection of the pledge, and the pledge is provided in order to facilitate the needs of the pledgor's business or profession.
Furthermore, Greek Law No 3301/2004 on financial collateral agreements provides that the satisfaction of the pledgee-creditor is effectuated through the sale, set-off or application of the financial instruments and/or cash in discharge of the relevant obligations.
Concerning the possibility of the enforcement being taken directly by a security agent, it should be noted that the role of the agent/trustee is not generally recognised in the Greek legal system. The only exception to such general rule is provided for by the bond loan legal framework (Greek Law No 4548/2018), under which any security granted by the borrower is granted in the name of the bondholders’ agent, for the benefit of the bondholders. The bondholders’ agent is responsible for enforcing any collateral security securing the bond loan and for applying the proceeds from the collateral to the claims of the bondholders pro rata, unless otherwise agreed by the bondholders. In the context of a syndicated credit facility, the lenders may also enter into a contractual agreement (intercreditor agreement), provided that the collateral security is granted in the name of the security agent/trustee, who is also a joint and several creditor with the other secured lenders. However, lenders are then not protected in the insolvency of the security agent.
The applicable law on the choice of a foreign law as the governing law of a contract, and on the submission to a foreign jurisdiction, is as follows:
Based on the aforementioned, in principle the parties to a contract are free to choose the governing law of the contract. However, it must be noted that there are certain restrictions on this freedom of choice, which are imposed by Greek public order and any other overriding mandatory provisions – ie, provisions of public interest (eg, relating to the constitutional, political, social or economic organisation of the Greek State), which are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract. Therefore, subject to the aforementioned limitations, the choice of a foreign law as the governing law of a contract would be upheld by Greek courts, which would recognise and enforce contracts that are subject to the foreign governing law.
Submission to a foreign jurisdiction by the parties to a contract is, in principle, legally binding and enforceable under Greek law.
Regarding judgments given by a foreign court, the following provisions (applicable law) will be taken into account, depending on the case:
As such, although in principle Greek courts will recognise and enforce a foreign judgment without re-examination of the case, such recognition and enforcement may be denied if any of the following applies:
For arbitral awards, the following provisions (applicable law) will be taken into account, depending on the case:
As such, in principle Greek courts will recognise and enforce an arbitral award without re-examination of the case, subject to certain limitations, including that:
If the loan or security agreement is governed by Greek law, there are generally no issues that might impact a foreign lender’s ability to enforce its rights thereunder.
EU banks intending to provide banking services in Greece must notify the competent supervisory authorities, whereas non-EU banks must fulfil licensing requirements. More specifically, Greek Law No 4261/2014 (ie, the law regulating credit institutions) provides that non-EU credit institutions require a special authorisation from the Bank of Greece.
In general, there are no restrictions on the granting of security or guarantees to foreign lenders.
Attracting foreign investments is a fundamental goal of every government, so no material restrictions are imposed on foreign investors in Greece. Each type of foreign investment – depending on the industry in which each investor operates – may have specific legislative requirements (in most cases, special permissions from the competent Greek authorities and other licensing requirements).
It should also be noted that efforts have been made in recent years to simplify the general investment licensing procedures in Greece. One of the most important legal frameworks tackling this issue is Greek Law No 4635/2019, which aims at the rapid and decisive improvement of business environments (especially in areas critical to productive investments) and, inter alia, provides fast-track audit procedures and certifications for the commencement and completion of investment projects.
As discussed in 8.1 Withholding Tax, interest payments to foreign lenders are, in principle, subject to Greek withholding tax (currently at the rate of 15%) if not otherwise provided for in the tax treaty (if any) between Greece and the jurisdiction in which the foreign lender is tax-resident.
On another note, undistributed income (dividends, interest, etc) of foreign legal entities participating 50% or more in the share capital of a project entity in Greece, and being tax residents in a non-co-operative jurisdiction or with a beneficial tax regime outside the EU, is considered taxable income. There is also a 5% withholding tax on dividends paid out to non-Greek parent companies of Greek project companies (unless otherwise provided for by a double taxation treaty or where the EU Parent-Subsidiary Directive applies).
It is permissible for a project company established under Greek law to maintain foreign currency accounts in and outside Greece.
In general, there are no formal registration or filing requirements in relation to financing or project agreements, except for registration with the land/registry cadastre in relation to the prenotation of mortgages and registration with the Unified Central Electronic Register of Pledges in relation to pledges (see 2.1 Assets Available as Collateral to Lenders), and licensing documentation related to the project.
In general, ownership of land does not require a licence. However, ownership of natural resources may be subject to a licensing system (depending on the time of acquisition). In any case, the operation and development of projects related to the exploitation of, or construction on, such land requires certain permits, authorisations and licences granted by national or regional authorities, depending on the location, size and nature of the relevant industry/project and its environmental impact.
As mentioned in 3.1 Enforcement of Collateral by Secured Lender, the concepts of agent and trustee are not generally recognised in the Greek legal system. The only exception to this general rule is provided for by the bond loan legal framework (Greek Law No 4548/2018), under which any security granted by the borrower is granted in the name of the bondholders’ agent, for the benefit of the bondholders.
The bondholders’ agent is responsible for enforcing any collateral security securing the bond loan and for applying the proceeds from the collateral to the claims of the bondholders pro rata, unless otherwise agreed by the bondholders. Greek Law No 4548/2018 provides that, when a bond loan is governed by foreign law, collateral security and guarantees are granted in the name of the person who, under the law governing the bond loan, may hold security and guarantees on its account on behalf of the bondholders.
Since the Greek legal system does not recognise the trust structure, an alternative structure appears in the context of syndicated credit facilities, where the lenders may enter into a contractual agreement (intercreditor agreement) which provides that the collateral security is granted in the name of the security agent/trustee, who is also a joint and several creditor with the other secured lenders. However, lenders are then not protected in the insolvency of the security agent.
The priority of real security depends on the priority of perfection of that security compared to any other in rem security established over the same asset. Any prior ranking security interests will be satisfied before any subsequent ranking security interests. In addition, the satisfaction of secured creditors is subject to the provisions of the Greek Code of Civil Procedure, which regulates the liquidation process in the context of enforcement proceedings. The enforcement proceeds finally attributable to each secured or unsecured creditor depend on whether there are any generally privileged creditors and/or any prior ranking secured creditors (please see 3.1 Enforcement of Collateral by Secured Lender and 6.3 Priority of Creditors).
Contractual subordination arrangements by private agreement, including provisions regarding the priority with which creditors’ claims are satisfied, are common in the Greek market. A standard undertaking included in such agreements is that a junior lender may not enforce nor collect the junior claim before the enforcement or full repayment, respectively, of the senior claim. A common variation of a contractual subordination arrangement by private agreement is an intercreditor arrangement, which normally distinguishes between junior debt and senior debt, and provides for payments to be made to an intercreditor agent (normally a bank), regulating the way in which payments can be made to each class of creditor both before and after enforcement. Such agreements also include the conditions on which each class of creditor can enforce its claims.
In the insolvency of the borrower, contractual subordination arrangements still apply and govern the priority between secured creditors as well as the subordination of the unsecured creditors to the secured ones. However, contractual subordination arrangements do not affect creditors whose claims have a general privilege for satisfaction from the whole of the debtor’s estate (such as the Greek State or the Social Security Authorities).
In general, the Greek legal framework does not require the project company to be organised under Greek law. However, the most used and preferred method of financing in the Greek market is currently financing in the form of bond loans under Greek Law No 4548/2018, which provides that the issuer of the bond loan can only be in the legal form of a société anonyme and have its registered seat in Greece.
According to the provisions of Greek Law No 4738/2020, at the pre-insolvency stage, a restructuring agreement can be concluded between the debtor and a certain percentage of its creditors (ie, at least 50% of the debtors’ total secured liabilities, as well as creditors representing at least 50% of the debtors’ other liabilities). Such agreement is ratified by court decision.
From the filing of said restructuring agreement for ratification by the court until the issuance of the relevant court decision, all individual and collective enforcement action is automatically suspended. This moratorium may not normally exceed four months. The restructuring agreement may include more specific provisions in relation to such moratorium. However, the aforementioned restructuring agreement does not affect the rights of the secured creditor under a financial collateral arrangement (under Greek Law No 3301/2004).
According to the provisions of Greek Law No 4738/2020, a company being declared insolvent results in the suspension of all individual enforcement actions against it by all unsecured creditors and/or all creditors whose claims have a general privilege for satisfaction from the whole of the debtor’s estate (the State, other public entities, social security authorities, etc). However, the suspension of individual enforcement actions does not apply to secured creditors (ie, creditors whose claims are secured by special privilege or real security on a specific asset of the debtor’s estate), for a period of nine months after the declaration of insolvency.
The claims of the secured creditors are satisfied by the liquidation of the asset on which the relevant special privilege or real security exists in their favour. If the amount collected from the liquidation of such asset is not sufficient for the full repayment of the claim of the secured creditor, said creditor may satisfy the remaining amount of its claim from the whole bankruptcy estate.
Nevertheless, the suspension of the individual enforcement actions applies to the secured creditors in the following cases:
On another note, after the filing of an application for a debtor to be declared insolvent, interim measures may be ordered by the competent court in order to prevent a reduction of the value of the bankruptcy estate and any material adverse effect that may jeopardise the interests of the creditors. Such interim measures do not apply to the secured creditors and do not affect the rights of a creditor under a financial collateral arrangement (under Greek Law No 3301/2004) nor the rights of the assignee under an assignment security agreement. The interim measures ordered by the court automatically cease on the date the court decision for the declaration of insolvency is published.
Regarding the procedure for liquidation of the bankrupt debtor’s estate, it should be noted that liquidation proceeds in the context of the bankruptcy proceedings are distributed in accordance with the provisions of the Greek Code of Civil Procedure, which regulates the liquidation process concerning the enforcement proceedings in general. The same system of privileges also applies.
More specifically, as mentioned in 3.1 Enforcement of Collateral by Secured Lender, in principle the proceeds are distributed to all the creditors who participated in the liquidation process. When the liquidation proceeds are less than the total claims of the creditors who participated in the procedure, they are distributed proportionally among the participating creditors. However, certain categories of creditors have priority over the proportional distribution, as follows:
Please also refer to 6.2 Impact of Insolvency Process.
As mentioned in 6.2 Impact of Insolvency Process, in the case of insolvency, the claims of the secured creditors are satisfied by the liquidation of the asset over which the security in rem exists in their favour. If the amount collected from the liquidation of such asset is not sufficient for the full repayment of the claim of the secured creditor, said creditor may be satisfied in relation to the remaining amount of its claim from the whole bankruptcy estate. In view of this, there is a risk that the proceeds from the liquidation of the asset (over which the borrower has granted an in rem security) or the proceeds from the liquidation of the whole bankruptcy estate will not be sufficient for the full repayment of the claim of the secured creditor.
According to the provisions of Greek Law No 4738/2020, every person (regardless of whether or not they have a commercial status) and legal person pursuing an economic purpose is subject to bankruptcy proceedings. Legal entities governed by public law, public authorities in general and local authorities are not subject to bankruptcy proceedings and cannot be declared bankrupt.
There are separate laws providing for and regulating special liquidation processes for certain categories of legal entities, in the context of the Greek legal framework, as follows:
There are no restrictions on insurance policies over project assets provided or guaranteed by insurance companies.
Insurance policies over project assets may be payable to foreign (secured) creditors.
The current rate for withholding tax on interest is 15%. In particular, interest payments to foreign lenders (ie, tax residents outside Greece and without a permanent establishment in Greece) are subject to Greek withholding tax if not otherwise provided for in the tax treaty (if any) between Greece and the jurisdiction in which the foreign lender is tax-resident. Interest payable on credit facilities concerning either domestic or foreign lenders is not subject to withholding tax.
Regarding bank loans and credit (other than bond loans) granted to a Greek resident, an annual contribution of 0.6% is imposed on the average outstanding monthly balance of such loan/credit. It has been clarified that loans between banks, loans to the Greek State and loans funded by the European Investment Bank or the European Bank for Reconstruction and Development are exempt from said contribution. It should also be noted that it is standard practice in the Greek banking system for loan and credit agreements to provide that, where the aforementioned contribution applies, the borrower will bear the relevant cost and will reimburse the lending bank for that cost (in an amount payable over and above interest).
Non-bank interest rates are subject to a legal maximum (for both the normal and the default rate). It is permitted to compound non-bank interest only if interest remains overdue for at least one year in accordance with the general provisions of the Greek Civil Code.
Bank interest rates are not subject to a legal maximum, although floating interest rates are adjusted by reference to a clear and transparent base rate (such as EURIBOR). However, the default interest rate charged by banking and credit institutions cannot exceed 2.5% per annum over and above the contractual interest rate. It is permitted to compound bank interest only at the end of a six-month interest period (or any longer contractually agreed interest period), and interest can only be compounded if the loan agreement explicitly allows for such.
Project agreements are typically governed by Greek law. However, project agreements are often governed by foreign law (mainly English or German law), subject to compliance with private international rules of the countries related to the contracting parties and/or the project.
Financing agreements are generally governed by Greek law, especially when financing is provided by Greek banks. However, in international financing projects, the facility agreements are often governed by English or German law.
In all cases, security documentation regarding assets located in Greece, mortgages and registration matters shall be governed by Greek law.
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