Diamantis v. Dimosio (Greek State)

Greek Law 1386/1983 (Law 1386) established a scheme for assisting undertakings facing serious financial difficulties. This scheme included the creation of the Organismos Ikonomikis Anasinkrotisis Epikhiriseon AE (OAE) (defendant), which was empowered to administer and operate troubled undertakings. In December 1983, at the request of shareholders of Plastika Kavalas AE (PK), including Dionisios Diamantis (plaintiff), the Greek government (defendant) placed PK under the OAE’s provisional administration. In May 1986, the OAE increased PK’s capital by issuing new shares. PK’s shareholders were given preemptive rights, which no shareholder exercised. As a result of the increase, the OAE owned 67 percent of PK. In December 1986, PK’s shareholders reduced the company’s capital. In January 1987, PK’s capital was increased by the conversion of certain debt to shares and the OAE’s cash contribution. The OAE then ceased administering PK. In 1991, Plastika Makedonias AE (PM) acquired a majority stake in PK. Also in 1991, Diamantis sued the Greek government and the OAE in Greece, seeking a declaration that the PK’s share-capital changes were invalid because they violated Article 25(1) of the European Council’s Second Directive 77/91 (directive) due to the lack of proper shareholder approval. The government and the OAE sought dismissal of Diamantis’s complaint pursuant to Article 281 of the Greek Civil Code on the ground that Diamantis was abusing his rights because (1) Diamantis requested that PK be placed under the Law 1386 scheme; (2) Diamantis did not exercise his preemptive rights; and (3) four or five years had elapsed between the challenged actions and Diamantis’s suit, during which time substantial and irreversible actions regarding PK’s capital were taken. The Greek court (1) recognized that under European Court of Justice (ECJ) precedent, the relevant provisions of Law 1386 contravened Article 25(1) but (2) concluded that Diamantis was abusing his rights in violation of Article 281. Accordingly, the Greek court requested a preliminary ruling from the ECJ as to whether Article 281 could lawfully be used to deny relief to an otherwise valid Article 25(1) claim.