March 2024 – Judicial Recognition of the Nullity of Loan Agreement Terminations with a Total Alleged Debt of €3,800,000.00

March 2024 – Judicial Recognition of the Nullity of Loan Agreement Terminations with a Total Alleged Debt of €3,800,000.00

Or, how the legal battle within the courtrooms effectively paves the way for the signing of a sustainable settlement of excessive debts.

Alexandra Giaki, Managing Partner

Stavros Theodoropoulos, Partner

Anastasia Kolokytha, Attorney-at-Law

SummaryWith the Temporary Injunctions issued by the Athens Court of First Instance on March 8, 2024, the nullity of the termination notices of loan agreements, with a total alleged debt of €3,800,000.00, was recognized. These orders come as a direct and necessary support to the interests of the client/enterprise, resulting in the rebalancing of the negotiating power between the lender and the debtor.

Specifically, the client/active enterprise had entered into loan agreements with a Banking Institution during the 2000s. The loans were repaid with difficulties during the crisis decade, while the debtor consistently sought a sustainable settlement. These efforts intensified in 2020, with the payment of a significant amount as an initiation fee for negotiations towards a final settlement and the drafting of a relevant Business Plan. However, the inaction of the Servicer Company was characteristic. Although the alleged debtor responded to every request of the alleged representative of the lending party, provided financial information, developed new business plans, and submitted improved proposals, it never received a specific settlement proposal and repayment of the debt. On the contrary, the debtor submitted proposals based on the information and results it communicated with the Servicer.

At the beginning of the current year, while the debtor had secured a lump sum loan for the settlement of the debt (following the proposed settlement incorporated into a new Business Plan, the third in line since 2020, issued by a prominent financial consulting company), and pending substantive discussions, the Servicer Company served termination notices on the same loan agreements, for which there was an active effort towards settlement.

This unilateral action would fundamentally lead to the failure of joint efforts to find solutions and would place the enterprise in an unfavorable position, firstly because the lender was actively preparing for enforcement measures (and consequently claiming the entire alleged debt), and secondly because the termination notice would be disclosed to the market, tarnishing the creditworthiness of the alleged debtor (with a major risk of closing active lines of banking and institutional financing). This last remark also indicates the real risk to the enterprise, namely, to become highly detrimental and one step away from bankruptcy.

Concurrently with the extrajudicial settlement efforts, the enterprise had to act promptly before the judiciary to suspend or annul the unilateral actions of the lender and be “forced” to return essentially to the negotiation table. Immediate extrajudicial rejection of termination notices was served, and interim measures were filed requesting the recognition of the nullity of the served termination notices. A hearing for a temporary injunction was scheduled for March 7, 2024. However, in a supplementary action to render the said hearing essentially irrelevant, the Servicer Company served new termination notices on March 5, 2024. With prompt action, we managed to file new applications for judicial protection on March 6, 2024, seeking the recognition of the nullity of the second set of termination notices. The hearing for the initially scheduled injunction was also set for March 7, 2024.

During the hearing on March 7, 2024, we succinctly presented to the Judge, on the one hand, the legal deficiencies of the termination notices (especially regarding authorization) and, on the other hand, the rich history of negotiations, which substantiates the abusive nature of the termination notices by the opposing party and thus their nullity. Our representation was accompanied by a pertinent demonstration of the appropriate evidence directly supporting our claims.

On March 8, 2024, the Temporary Injunction was issued, accepting our demands. In reality, however, this victory does not only concern the specific unilateral acts (terminations) of the Servicer Company. It constitutes the direct and effective action of the debtor to defend its legal interests. A barrier is placed on the unilateral actions of the lender, with which the latter attempted to unilaterally claim what it asserted was owed, simultaneously making years of communication and negotiations without substance for the debtor (but particularly profitable for itself, as interest was calculated and added to the alleged debt). The only remaining course of action for the lender is now to return to the negotiation table.