Greece: Private lee

Privatisations could provide Greek firms with some respite during the country’s crisis, but lawyers insist that reforms will be key to recovery

Embattled Greece has been at the centre of the eurozone crisis, with its debt soaring out of control and politicians at loggerheads.

Its citizens have found themselves caught in the middle, as unemployment rises and austerity measures bite. While corporate and commercial law firms in other struggling eurozone countries, such as Ireland and Portugal, have largely managed to ride out the storm, there is evidence that the Greek crisis is beginning to hit its legal market. The prospect of privatisation work is a bright spot, albeit only a small one amid the gloom.

In deep

“The crisis in Greece is so deep that all sectors are feeling the pinch, including those that are countercyclical,” says Stathis Potamitis, managing partner at Potamitisverkris. “Lawyers are suffering substantially,”

Potamitis notes that things are busier in bankruptcy and restructuring than in transactional work, ­although even in insolvency life is tough. Employment is also providing volume, but fees are becoming harder to pull in and profitability is being hit.

Potamitis reveals that, while he is expecting a dip in revenue of ­between 5 and 10 per cent for 2011-12, profits are likely to be down by as much as 30 per cent. “I estimate ourselves to be fortunate,” he says. “The real story’s cashflow. We have long delays in payments. The headache’s getting the money in the bank.”

This, he believes, is forcing Greek firms to be more prudent in their financial management as banks clamp down on working capital financing. He predicts that this could lead to further divisions in the legal market and perhaps consolidation.

Dryllerakis & Associates managing senior partner John Dryllerakis agrees that the legal market has been squeezed. “Yes, there was a higher consumption of goods and services before the eurozone crisis and the legal situation has suffered,” he says. “But the crisis has also brought some opportunities. While some lawyers may have fewer cases to handle, the privatisation of state assets has balanced the results. The state is having to sell some of its property, bringing in new work for the profession.”

The privatisation process began last July with a new law and the establishment of the Hellenic Republic Asset Development Fund (HRADF). The fund is set up as a ’société anonyme’, with the Hellenic Republic as the sole shareholder and a share capital of ™30m (£25m). A number of shares, voting rights and properties have been transferred to the fund’s control and the new law states that all such assets must be sold and cannot be transferred back to the state.

Most of the country’s privatisations are ongoing (see box). The legal advisers involved are a mixture of local and international firms. In an indication of the fragmentation of the legal market, none of the firms named by the HRADF at this point are on more than one transaction. The international players that have won roles include Allen & Overy, ­Clifford Chance, Dewey & LeBoeuf and Freshfields Bruckhaus Deringer.

Dryllerakis & Associates has ­benefitted, winning a role on the sale of the wholly state-owned Hellenic Horse Racing Company.
A spokesperson for government agency Invest In Greece admits that the fiscal woes have highlighted the necessity of reforms. The spokesperson said the reforms and privatisations also needed a “coordinated plan for the modernisation of all administrative and judicial procedures associated with large investments”.

Public nuisance

Legal reforms are also underway and liberalisation of the legal sector is on the cards. Potamitis believes the ­reforms will help Greece recover.

“From the Greek perspective, our major problem is lack of competitiveness,” he says. “That’s clearly due, to a substantial extent, to a ­malfunctioning public sector. All the structural changes being put in place are likely to have a terrifically beneficial effect, whether or not the treatment of the debt is successful.”

The coming months should prove whether or not Potamitis is right; but with Greece continuing to dominate the news headlines, uncertainty still reigns supreme.

Additional reporting by Lucy Burton

Key figures

GDP (2010)
€223.5bn

Annual inflation (2011)
2.4%

Population (2010)
11.32m

Life expectancy at birth
80

Unemployment rate (Q1 2011)
15.9%

Source: World Bank, National Statistical Service of Greece

The great Greek sell-off

Completed:

Mobile telephony licences. Hellenic Organisation of l Football Prognostics videolottery licences – partial privatisation. Advisers: Freshfields Bruckhaus Deringer, Karatza & Partners Law Firm.

In progress:

International Broadcasting Centre. Kassiopi – 121-acre site in Corfu is up for development.Former Hellinikon airport
area. Advisers: Several local law firms, Dewey & LeBoeuf.

Athens International Airport – extension of 30-year concession for the operation of the airport and partial sale. Advisers: Clifford Chance, M&P Bernitsas Law Offices.

Hellenic Motorways – construction of five intercity motorways.

Hellenic Defence Systems.

Adviser: Rokas Law Firm.

Public Gas Corporation.
Advisers: Clifford Chance, Koutalidis Law Firm.

State Lottery Tickets – exclusive licence for management of Hellenic Lotteries. Advisers: Allen & Overy, Karatza & Partners Law Firm.

Rolling ahead:

A number of other state-owned companies, including ports, regional airports and Hellenic Petroleum, are set to be privatised in the near future.