COE: The "haircut" of bonds is legitimate

In two decisions (numb.1116 and 1117/2014) the plenary session of the Council of State and by votes (31 in favor and 7 or 8 against, depending on the legal issue was to vote) was admitted that the loss of property of bondholders were "very serious" but "not that it was inappropriate or unnecessary or excessive," so that "to be judged banned" from articles 17 and 25 of the Constitution and the European Convention on Human Rights.

According to the judicial decision, the act of the cabinet (5/2012), which did set the terms of the exchange of bonds, was issued due to the urgent and immediate need to reduce the debt and restore the path to sustainability; in other words, to avoid stopping payments.

Thus, it appeared that the haircut of bonds, is not contrary to Article 25 paragraph 1 of the Constitution, which enshrines the principle of the rule of law, meaning of which includes the legal certainty in financial transactions, but neither in Article 5 of the Constitutional Charter which guarantees the right of citizens to participate freely in economic and social life of the country. Moreover, the haircut of bonds, according to the Council of State, does not impinge on the constitutional principle of equality (Article 4), because the arrangement that was made was general, while the state has granted to all investors new titles with the same year of expire (up to 2042), without taking into account the life expectancy. Additionally, the haircut of the bonds, according to the Assembly of the CoS, does not be averse to the First Additional Protocol to the ECHR, or to Article 17 of the Constitution that protects property.

For the above reasons the CoS rejected all claims of approximately 7,000 bondholders.

The bondholders argued that the PSI had capital loss of 53.5%. In addition, according to court decisions, bondholders are required to pay costs amounting to 1,380 Euros.