Arbitration News – Authority to enter into an arbitration agreement
(Article by Dr. A. Tsavdaridis, published in the Arbitration & ADR Newsletter of the ILO on June 15, 2017)
A person acting as a legal representative of a legal entity must be specifically authorised in order to
validly conclude an arbitration agreement. This precondition is not required where the arbitration
agreement is entered into by the competent organ of the legal entity, although the valid conclusion
of an arbitration agreement can be made conditional on additional requirements being met, such as
the approval of the entity’s general assembly.
Facts
Following the participation of a Greek bank (Hellenic Postbank) in the share capital of another Greek
commercial company, a shareholders’ agreement was entered into between the parties, which
contained an arbitration clause. Hellenic Postbank was later taken over by another Greek bank
(Eurobank), which took up the former’s claims and liabilities (apart from a series of non–performing
loans that were transferred to a ‘bad’ bank). After some time, both parties terminated the
shareholders’ agreement and brought claims and counterclaims in arbitration and an award was
rendered.
Eurobank sought to set aside the arbitral award on grounds of invalidity of the arbitration agreement
and, in particular, by invoking that Hellenic Postbank’s then–chief executive officer (CEO) was not
specifically authorised to validly conclude the arbitration agreement and that the latter’s validity
was conditional on the approval of Hellenic Postbank’s general assembly, which was never given.
The Athens Court of Appeal dismissed Eurobank’s application.Eurobank appealed before the
Supreme Court.
Decision
The Supreme Court dismissed the assertion regarding the lack of specific authorisation by the bank’s
CEO. The court held that the requirement that specific authorisation be obtained for the person
acting as a legal representative for the valid conclusion of an arbitration agreement refers only to a
person acting as a proxy or an agent of the legal entity and does not refer to an organ of the legal
entity – the very function of which is to represent the entity, such as the board of directors or its
substitute (eg, the CEO).
The assertion regarding the lack of the general assembly’s approval was upheld by the court, as it was
found that the Court of Appeal dismissed it without proper consideration of the evidence presented
by Eurobank.
Comment
The problem of whether an organ of a legal entity must be specifically authorised in order to validly
conclude an arbitration agreement has been a matter of concern in Greek case law for some time. It
owes its existence to the abusive effort of some entities to evade arbitration agreements which they
have previously concluded. In earlier case law, Greek courts have acceptedthat a specific
authorisation is also required for persons that serve as substitute organs of legal entities, based on a
provision in the Code of Civil Procedure which requires a specific authorisation for the conclusion of
arbitration and settlement agreements and the recognition and waiver of writs. However, the
Supreme Court quickly rejected this approach on the premise that an organ of a legal entity is a
reflection of the will of the entity itself, which is equally true even if another person (eg, the CEO)
has been substituted to perform the functions of the organ. The Supreme Court’s recent decision is
a confirmation that its previous case law stands firm.
Irrespective of the above, the court acknowledged that the validity of an arbitration agreement can
be made conditional on additional requirements being met, such as the approval of the entity’s
general assembly. Although this matter has been referred back to the Court of Appeal for further
consideration, it results from the Supreme Court’s decision that such an impediment for the validity
of the arbitration agreement can be remedied on grounds of the legal entity’s conduct, either through
the unreserved participation of the entity in the arbitration proceedings or on the basis of the
abusive nature of any subsequent contesting of the valid conclusion of the arbitration agreement
despite such unreserved participation by the entity.
Download: 