Information Note on the Court’s case-law 198

July 2016

Mamatas and Others v. Greece - 63066/14, 64297/14 and 66106/14

Judgment 21.7.2016 [Section I]

Article 1 of Protocol No. 1

Article 1 para. 1 of Protocol No. 1

Peaceful enjoyment of possessions

Rescheduling of national debt entailing decrease in nominal value of bonds without consent of private investors: no violation

Facts – In June 2011, when the Greek debt crisis was at its peak, the international institutional investors who had lent Greece amounts well beyond its reimbursement capabilities acknowledged their share of responsibility in the problem. They waived their right to full reimbursement and negotiated a consensual reduction in their claims against the Greek State. At the time, the authorities declared that this procedure would not concern individual bondholders. However, when a new legislation came into force, the individual bondholders, including the applicants, were subjected, against their will and without prior participation in the negotiations between the State and the institutional investors, to a procedure involving exchanging their bonds for other less valuable securities issued by the State with a view to reducing the Greek public debt.

Law – Article 1 of Protocol No. 1: In accordance with the law, Greek State bondholders had had, on expiry of their securities, a pecuniary claim on the State of an amount equivalent to the nominal value of their bonds. They could therefore assert a “legitimate expectation” to have their claims met in accordance with the law and accordingly had “property” covered by the safeguards set out in Article 1 of Protocol No. 1.

The new legislation had led to the conclusion of an agreement, which included activating collective action clauses, between the State and the bondholders, under which decisions were to be taken on an enhanced majority. This agreement altered the conditions governing the bonds, including a cut in their nominal value, and was also binding on the minority bondholders, such as the applicants.

The applicants’ mandatory participation in this procedure and the modification of the selected securities amounted to an interference with their right to the enjoyment of their property, which interference was prescribed by legislation which was accessible, the consequences of any refusal on the applicants’ part also being foreseeable.

During the serious political, economic and social crisis in Greece the respondent State was justified in taking steps to achieve the goals of maintaining economic stability and restructuring the debt, in the best interests of the community. Therefore, since the exchange operation had resulted in a reduction of the Greek debt, the impugned interference pursued an aim in the public interest.

The applicants’ bonds were cancelled and replaced with new securities, entailing a 53.5% capital loss. This loss, which on the face of it was substantial, was nonetheless not large enough to amount to a statutory measure ensuring the cancellation of or an insignificant return on the applicants’ investment in the State bonds.

The amount which the applicants expected to receive when their bonds matured could not serve as the reference point for assessing the extent of the loss they had suffered. The nominal value of a bond was not the actual market value at the time of enactment by the State of the impugned legislation. That value had probably already been diminished by declining State solvency, which suggested that by August 2015 the State would not have been able to honour its obligations under the contractual clauses of the old bonds, that is to say before the new legislation was introduced.

At the time the old securities held by the applicants were issued, neither those instruments nor Greek law provided for the possibility of implementing collective action clauses. Such clauses were, however, common practice on the international money markets and had been included in all new euro-area government securities with a maturity date exceeding one year. Furthermore, if a consensus had had to be reached among all the bondholders on the plan to restructure the Greek debt, or if the operation had been confined exclusively to those having consented, the whole plan would almost certainly have collapsed.

Collective action clauses were an appropriate and necessary means of reducing the Greek public debt and saving the respondent State from bankruptcy. Investing in bonds could never be risk-free. Furthermore, the General Court of the European Union had dismissed an appeal against the European Central Bank by 200 Italian nationals holding Greek State bonds.

Therefore, by taking the impugned action Greece had neither upset the fair balance between the public interest and the protection of the applicants’ property nor inflicted an individual and excessive burden on them.

Having regard to those considerations and to the wide margin of appreciation afforded the Contracting States in this sphere, the impugned measures could not be considered disproportionate to their legitimate aim.

Conclusion : no violation (unanimously).

The Court also found, unanimously, that there had been no violation of Article 14 of the Convention taken in conjunction with Article 1 of Protocol No. 1 because the exchange procedure applied to the applicants’ securities had not infringed their right to non-discrimination in the enjoyment of their right under Article 1 of Protocol No. 1.

(See also Malysh and Others v. Russia, 30280/03 , 11 February 2010; Lobanov v. Russia , 15578/03 , 2 December 2010; and Broniowski v. Poland [GC], 31443/96, 22 June 20040, Information Note 65 )

© Council of Europe/European Court of Human Rights This summary by the Registry does not bind the Court.

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