Affiliated arrest the Greek way

THE courts in Greece have tended to take a negative view of the corporate veil issue in cases of ship arrest. Their judgments were originally motivated by moral considerations, and were designed to block attempts by principals to unfairly avoid or evade liability.

The current position of the Piraeus courts, with certain minor exceptions, is that piercing of the corporate veil is mandatory if the legal entity is used as an intermediary covering the principal shareholder, or if there exists one principal shareholder behind the company or an abuse of the company structure.

Such abuse exists when the principal shareholder uses the legal personality of the company for the purpose of prescribing the law, or causing damage to a third party, or avoiding the performance of his or her obligations.

One judgment of the Piraeus Court of Appeal (No 606/2001) goes further than any other issued by the Greek courts on this issue to date. In contrast, the judgment of the Piraeus Multimember Court of First Instance (No 1742/2001) is more restricted in setting out the criteria under which the setting-aside of the company's legal personality may be proclaimed.
The latter judgment is evidently more favourable for the shipping community, and is consistent with a minority judgment of the Supreme Court of Greece (No 5/1996) which is due to go to the Piraeus Court of Appeal.

The judgment of the Court of Appeal poses a risk to Greek shipping which can only be averted if Greek shipping realises that it should now abide in every respect by all applicable rules in relation to corporate operation.
So far, no judgment is thought to have imposed affiliated arrests in the context of sistership liability. This requires the lifting of the corporate veil covering other companies within the group, which can be done if the requirements for such lifting concur.

Yet superficial consideration by the courts of the issue of setting aside the corporate legal personality should be avoided and should be limited to cases warranting such treatment, namely those where the abuse of the corporate structure is obvious.