Greece - Market Insights

Breach of trust as a white-collar crime in the Greek legal order

Background

As in most western European countries, breach of trust (or disloyalty) is considered a criminal offence by the Greek legal order, in Article 390 of the Penal Code. It is committed when a person, in violation of the rules of diligent management, knowingly causes damage to the property of another (the principal), of which he or she has custody or management. Breach of trust is upgraded to a felony (punished with imprisonment of up to 10 years), when the damage caused by careless management exceeds the sum of EUR 120,000 (Article 390 paragraph 1). In the event of harmful management of property belonging to the state or to entities of the public sector the sentence lies between 10 and 15 years.

Breach of trust is distinguished from other crimes against property (i.e. fraud, blackmail) by the fact that the offender does not intend to derive any personal profit or to appropriate the entrusted assets. The reason why breach of trust is formulated as a distinct and standalone offence lies in the need to address the specific problems that arise from the agent–principal relationship. More specifically, the entrusted property is disposed of not by the victim of the offence (i.e. the principal), but by the offender (agent) who is authorised to act for the benefit of the principal and on his or her behalf. Hence, in essence the offender is in a privileged position to harm the entrusted property and it is substantially more difficult for the victim to recognise the harm caused by the trustee.

Breach of trust has been in recent years — not only in Greece but also worldwide — at the forefront of so-called white-collar criminality. In Greek judicial practice, the offence of breach of trust has been frequently invoked by prosecutors in cases concerning inter alia bank loans, business acquisitions, investments in securities or public procurements with prominent actors. However, raised charges for breach of trust in such renowned cases, although initially surrounded by a lot of negative publicity, have been for the most part eventually dropped. Against this background are justified the frequently raised concerns about widespread instrumentalisation of Article 390 for the punishment of merely wrongful business decisions or even unethical misconduct. As aptly remarked by German scholars, “Disloyalty always fits” (Ransiek, Risiko, Pflichtwidrigkeit und Vermögensnachteil bei der Untreue, ZStW 2004, 634); or in the same vein, “there is a deep confusion between law and morality” (Matt, Missverstädnisse zur Untreue – Eine Betrachtung auch zum Verhältnis von Strafrecht und Moral, NJW 2005, 389). As far as the vagueness of Article 390 favours overcriminalisation or abusive initiation of criminal proceedings, it is imperative to limit criminal liability to serious and really harmful violations of the duty of loyalty in order to counteract the expansive tendency of breach of trust, especially in the field of business management.

Actus reus

Violation of duty of loyalty

The essential element of the offence of actus reus is the breach of a fiduciary duty. This kind of duty, which exists when a natural person or entity transacts the property management for the beneficiaries’ benefit, stems from civil and corporate law or from companies’ statutes.

The violation of fiduciary duties consist either in any action contrary to the terms of trust or in the wrongful omission of any act prescribed by law or by the terms of trust; for instance, failing to deposit assets in an interest-bearing account.

Failure to comply with the duty of loyalty appears in two alternatives. The first is described as “abuse of power”; this requires an external legal act concluded between the offender (acting on behalf of the principal) and a third party, which is legally permitted but exceeds the granted authority. In a nutshell, the special feature of this offence is that the harm is caused from inside (by the agent) and not from outside (by a third person).

The second alternative is broader and includes any violation of the duty to safeguard any property interest (duty of care). This alternative consists in particular of internal actions void of outside effects (e.g. the trustee extracts client data or destroys assets belonging to the principal). In Greek jurisprudence and scholarship it is commonly accepted that breach of trust should be confined to the first alternative of “abuse of power”, although this strict interpretation is not supported by the wording of Article 390.

A further restriction of the field of application of Article 390 is the Business Judgment Rule, according to which business decisions made by a director in good faith, on a well-informed basis and driven by rational business interest do not trigger civil liability, even if they turn out to the detriment of the enterprise. The Business Judgment Rule, laid down in Article 102, paragraph 2 of Law 4548/2018, strikes the balance between the need to prompt directors to exercise their wide margin of appreciation in the effort to maximize the profit of the enterprise on the one hand, and the competing necessity of preventing directors’ evidently irrational or opportunistic self-interested misconduct on the other. The absence of personal civil liability for rational business decisions that comply to the standards of the Business Judgment Rule should also be converted into an immunity ground from criminal liability for “breach of trust”.

Actual and certain harm

The violation of the duty of loyalty is a necessary but insufficient condition for the criminal liability of dishonest trustees. It is additionally required that the violation results in actual and certain harm to the principal. The two elements of Article 390 should not overlap; thus, inferring the damage from the violation of trust and vice versa is prohibited.

While actual harm does not extend to potential future losses, exceptionally, lost profits are equated to actual harm under the condition that they are surrounded by stability and expected with high probability. Consequently, vague perspectives to conclude a favourable deal cannot be regarded as harmful profit losses.

On the other side, even the risk of harm is treated as equal to real damage under certain circumstances. According to settled case law the actual damage may also consist in the real risk of loss, provided that it amounts to a reduction of the current value of the entrusted property. This conclusion relies on the finding that the present value of an endangered property asset is inferior compared to a safe property asset. Yet, the so-called “property jeopardy” should be treated restrictively, in order to safeguard the distinction between completed and attempted crime. The provision of Article 390 that damage should be “certain” gave new impetus to the debate on whether “property jeopardy” meets the threshold of actual harm, with the prevailing opinion giving an affirmative answer to this question.

The equivalence between “property jeopardy” and actual harm is highly significant in risky or speculative deals associated with the future, but where earnings are uncertain (a typical example thereof are bank loans). In this context Greek scholars support the view that unsecured bank loans can be held as harmful on the basis of an ex ante existing default risk, which reduces the value of the Bank’s loan repayment claim. On the contrary, Greek jurisprudence opts mostly for an ex post perspective, upon which the outstanding loan balance is decisive irrespective of the initial default risk. The latter approach seems sounder, insofar as damage is founded on the solid and reliable basis of subsequent and tangible property losses. The reason behind the ex post view is the dynamic dimension of damage in the context of Article 390. In this respect, it is not possible to establish whether the management was harmful or profitable insofar as the final financial outcome thereof remains unclear. Otherwise, the result of the breach of trust (damage) is premised on speculations linked with early and uncertain risk assumptions, which incorrectly expand the scope of application of Article 390 in fields where the entrusted property did not suffer any economic loss and which run counter to the certain and precise determination of the inflicted damage postulated in Article 390.

Causal link

A third required condition is a proximate causal link between violation of duty and actual harm. This condition has been widely acknowledged in recent years by the jurisprudence of the Greek Supreme Court (Areios Pagos), which claims that damage should realise the precise risk that has been enabled by the violation of the duty of care, otherwise the offence of Article 390 is not constituted (Areios Pagos 797/2023, Areios Pagos 523/2022). It follows that the damage cannot be attributed to the violation of duty if the same result would have almost certainly occurred, had the perpetrator complied with the requirements of diligent management. For instance, breach of trust is not committed when the trustee opted to invest money in stocks of an unprofitable company, instead in those of an alleged prosperous company, if it transpires that in reality the latter faced similar financial difficulties.

Mens rea

Article 390 requires that the perpetrator acted knowingly. It follows from this provision that it is irrelevant whether the trustee acted wilfully with the intention to harm the principal; it is sufficient that the trustee knew that his or her conduct would cause a reasonably foreseeable harm to the trusted property. On the other hand, the elements of the offence are not met when the trustee merely foresees that his or her act or omission might cause harm to the principal and nonetheless accepts this probability.