Author: Petros Tarnatoros

Commercial Agents and the Greek export businesses’ growth
Commercial Agents, influencers, brand ambassadors: their contribution to the Greek export businesses’ growth

1. Greece today, after the last Economic Adjustment Program

2019 seemed to not only be the start of a new beginning for the Greek economy, but also a year full of challenges. The conclusion of the last three-year economic adjustment program, as well as the disambiguation of Greece’s advanced surveillance regime for the period following the program, are both factors that could lead the Greek economy into a new statutory framework.

Nonetheless, whereas, in 2018, the consistent achievement of a 1,8% rate of growth of the Gross Domestic Product aided the recovery of the Greek economy, a hamper is expected in 2019. Internal political developments along with, on the one hand, the uncertainty regarding the persistence on the structural reforms and, on the other, the consecutive elections, are among the contributing factors.

Furthermore, the external economic environment is also negatively affecting the country’s economic growth potential. Indeed, since the strengthening of the outward-looking Greek economy has been a major factor attributing to the recovery of the Greek economy, the hampering of the economic growth on an international level and, more precisely, in the eurozone, and the consequent restrictions of world trade, because of the tightening of the protectionist practices, are most likely to act as retarding agents to the growth of Greek economy.

2. The outward-looking Greek economy as a foundation for a sustainable growth model

In any case, and regardless of the country’s economic growth rate in 2019, the Greek economy has to transit to a viable growth model, based on knowledge, entrepreneurship and investments. In order to achieve that, it is necessary, among others, to continually improve the country’s exporting performance. It is not coincidental that what drives the growth of the Greek economy is the dynamic turn of Greek businesses towards foreign markets. In this context, it would not be an exaggeration to highlight that, during the years of the economic crisis, the increase of exports is probably the only noteworthy positive element of the Greek economy.

Conversations regarding the further development of the outward-looking Greek economy are usually focusing on matters regarding the competitiveness of Greek businesses, as well as the requirements to, on the one hand, incorporate new technologies in the corporate bodies and, on the other, significantly invest in knowledge (education, research, innovation). None of those conversations refer to the significant attribution a proper specialization of exports per product or service and region could have towards boosting the exporting activity of Greek businesses, a phenomenon which is the stimulus of the present memorandum.

3. The, yet, insufficient improvement of Greek companies’ exporting activity

When studying the country’s exporting performance and assessing the development of the market shares of exporting Greek goods (and services), it is generally accepted that Greek exporting companies usually offer products and services of exceptional quality to the international markets. That very exceptional quality is their main advantage in an environment of global competition.

Nonetheless, these products (and services) have a cost disadvantage, as:
- foreign competitors are bigger and better organized – the small (size-wise) Greek labor, the small internal market and the inability to achieve scale economies render Greek products (and services) -at least those that are offered by labor-intensive businesses -insignificant in quantity when compared to global competitors,
(b) Greek businesses are fighting against extremely high tax and social insurance obligations, as well as a significantly high labor cost (despite the adjustments forced since 2010),

(c) Greek businesses do not have access to bank lending or at least to cheap bank lending.

Furthermore, Greek entrepreneurship has not yet incorporated in its everyday practice the culture of cooperation, resulting in its inability to counterbalance its cost disadvantages.

Concluding, the following paradox often appears: despite that Greek entrepreneurs or producers are solely interested in the production of a specific, qualitatively exceptional product (and service), they are completely disinterested in the essence of entrepreneurship and trade. This means that they have no interest in whether and in what way their product (or service) can become known to the end consumer, distributed to the market for which it is intended and, in the end, get sold.

For these reasons, it is found that the current improvement of the outward-looking Greek economy is far inferior to the exceptional quality of Greek goods (and services) exported. Furthermore, the question on how Greek exporting businesses can augment their shares in the global market with the limitations on internal funding and the long-term investment in knowledge in place still remains.

4. The contribution of commercial agents to the distribution of products (and services) in a specific region

According to the abovementioned, the conversation regarding the improvement of the outward-looking Greek economy has not focused, among others, on the need to properly specialize exports per product (and service) and region, meaning on the need to properly match them. Consequently, all conversations around the topic of the improvement of the exporting activity of Greek businesses disregard the decisive influence a specific person could have on distributing a product (and a service) to the targeted markets and, eventually, get it sold. This means that all relevant conversations disregard the key contribution of a commercial agent.

In a nutshell, a commercial agent could be described as the person that takes on, as an intermediary and on a permanent basis:

(a) negotiations on behalf of other persons (natural or legal), persons that are called principals (the present memorandum only focuses on Greek exporting businesses), the sale or purchase of goods or services and

(b) depending on the context of the agency agreement, the conclusion of those transactions in the name of the principal.

In this regard, it could be stated that in an agency agreement Greek exporting business acting as principals entrust, in exchange for a fee, on a permanent basis to an independent businessman, the commercial agent, the administration of all their cases with the abovementioned content, (usually) taking place in a specific region.

Thus, it can be deducted, from the (abovementioned) general content of an agency agreement, that a commercial agent can place the products (and services) offered by Greek exporting businesses for the first time in the region the commercial agent operates, or strengthen a business’s market share in said region. This way commercial agents decisively contribute to the improvement of the outward-looking Greek economy.

5. Greek exporting businesses perspective – what is required from an up-to-date commercial agent

In this regard, in order for Greek exporting businesses to place their products (and services) in a specific region or to increase their market share in it, the contribution of a modern-day and competent commercial agent is deemed necessary. The latter has to adequately respond to the, mentioned above in great detail, business and exporting environment, as well as to the needs and requirements of Greek businesses.

To be more precise, Greek exporting businesses require from a modern-day commercial agent to promote and protect their interests and to act according to good faith. Specifically, all Greek exporting companies need a commercial agent who:

(a) consistently monitors the market of the region they have taken on (monitoring) and adequately tracks all of the product’s (and service’s) distribution channels, which they have taken on (tracking) -nowadays only addressing “friendly” distribution channels is considered as inadequate,

(b) to adopt the vision, strategy and goals of their principal

(c) to understand that they are an integral part of the structure of the sales department of their principal and to collaborate closely with all persons working in that department,

(d) to protect, promote and improve the principal’s image, not only the one the distributing channels of the region have, but also the one the end consumer-the general public of the region they operate in have as well. In other words, fostering good personal relations with the persons that constitute the distributing channels is not enough, since nowadays the systematic use of social media and direct influence of the end consumer is necessary,

(e) to care for the cultivation of long-term business relations between the principal and with the ones the latter transacts (wholesale dealers, distributing channels, retail dealers and end consumers) and add value to the principal,

(f) make the needs, demands and wishes of all parties involved in the business explicitly and clearly known,

(g) make all information they have and which relates to the principal, to the latter’s products (and services) and to the region known to the principal and

(h) not represent other products or services that are directly competing to the ones offered by the principal in the region.

6. Influencers, brand ambassadors and promoting awareness of a brand, a product and a service.

In addition to the abovementioned, it is more than clear that a necessary precondition for the distribution of a product (and a service) to the market and for its sale to the end consumer is the business’s high brand awareness. That is why businesses have developed organized marketing departments and programs.

Nevertheless, the rapid growth of social media during the last decade seems to have reformed marketing methods, as it highlighted the importance of influence marketing. This type of marketing, which limits and content are both rapidly and, along with social media, evolving, is focusing on specific people. Those people, who are in a place to influence the end consumers, fall into the following categories:

(a) Influencers, who are the people that are in a place to influence the behavior, views and decisions of other people, because of their power, knowledge, place or relationship with the people they address. The influence they have is mainly built online and through social media, and their relations with businesses is relatively loose. They promote the products or services offered by the business they collaborate with, but they are not part of the business structure, since, most of the times, their services are used for short periods of time. It is obvious that they neither negotiate nor enter into agreements in the name of the principal.

(b) The brand ambassadors, who in a way are both influencers and commercial agents. They increase the principal’s brand awareness and sales, but do not negotiate or conclude agreements on their behalf. They use the internet and social media, but do not overlook physical social presence, interaction and influence. They may be part of the business entity, or an independent associate. In any case, their commitment to the business is stronger than the one influencers have and their commitment comes with longer lasting contractual relations.

7. The commercial agent as an influencer and brand ambassador

From all the above, it is clear that in the age of social media, internet, technology and speed, commercial agents, in order to promote the Greek exporting companies with which they collaborate, have to, simultaneously, be influencers and brand ambassadors for these companies and the products (and services) they are assigned with.

Modern day commercial agents have to systematically use social media and to influence the end consumers. At the same time, as already mentioned, they have to have physical social presence, interaction and influence. This is the only way they will be able to maintain, promote and improve their principal’s image before the distribution channels of the region in which they operate, and, also, before the public. At the end, this is the only way modern-day commercial agents will be able to place the products (and the services) of Greek exporting businesses in a certain region or increase their market share in in.

8. Conclusion – the role of the legal advisor in signing an agency agreement

In any case, introducing and extensively using influence marketing in commercial and business practices give the modern-day commercial agent new and diversified abilities for the representing of Greek exporting businesses – beyond and above the traditional practice of their activity. As a result, the services (of such a diverse range) offered to the principal, require the conclusion of a clear and explicit written agreement that will satisfy the needs, expectations and goals of the agent as well as the principal. In other words, the services of a qualified legal advisor are required.

Petros Tarnatoros
Senior Associate

P.S.: A brief version of this article has been published in Greek in MAKEDONIA Newspaper (July 21st, 2019).
July 21, 2019
The insurance of the liability of the Members of the BoD and of the Executives of the S.A.

1.Introductory

The liability insurance of the members of the board of directors of the Société Anonyme and of its executives is referred to in the international practice as “Directors’ and Officers’ liability insurance” or “D & Os liability insurance”. This insurance covers the damages of such persons:

(a) arising from claims against them raised by third parties (lenders, employees, shareholders) or by the company itself for injurious and negligent acts or omissions in the performance of their duties,

(b) for the risks incurred by the insurer.

In Greek legal terminology, as well as in the context of private insurance law, it is commonly referred to as insurance of the civil liability of members of the board of directors of Société Anonyme. However, the scope of the relevant insurance contract goes beyond civil liability, since its coverage extends to both the criminal and the pecuniary costs incurred in administrative courts or authorities, as will be set out below. Moreover, the relevant insurance cover is not limited to the persons who form the board of directors of the Société Anonyme but also extends to the members of the executive committee, to the substitute members as well as to the executives who carry out management duties. In fact, it is often agreed also the insurance cover of the external directors, even of the spouses, heirs or administrators of inheritance, in respect of the claims against them concerning breaches of the duties of the insured persons.

Consequently, legally more correct and more compatible with the content of the relevant insurance contract is to refer to liability insurance of the members of the management of the Sociétés Anonymes.

2.The robust growth of this insurance product

The cover of the liability of the members of the management of the Société Anonyme is a relatively new insurance product, which has strong growth in the international business community. This growth is, among other things, due to:

(a) the judicial and legislative strengthening of the liability of the members of the management over the company itself but also vis-à-vis third parties,

(b) the adoption of international corporate governance rules and the gradual imposition of a single corporate regulatory framework through Union law of the European Union,

(c) the increase in corporate insolvency as caused by the international financial crisis of 2007-2008, which has grown into an international corporate financial crisis as well as,

(d) the tendency of corporate creditors to turn against either the managers of the corporate entity or solely against them.

3.The economic and business benefits of the relevant insurance

Insuring the liability of management members of the Société Anonyme has a number of advantages that make it an attractive insurance product. It would not be an exaggeration if we described it as a necessary action and expense for individual legal entities. Indicatively, some of the reasons for confirming the need to conclude the relevant insurance contract are mentioned:

(a) such insurance cover constitutes an alternative form of financing both of the company and of the third parties in respect of the damages they have suffered under the liability of those who manage the entity,

(b) the terms and sizes of the relevant insurance contract make it easier for third parties and, in particular, for the shareholders of the recipient company to assess the risk profile of the latter,

(c) the conclusion of this insurance contract ensures control and oversight (monitoring) of the company and contributes to prudent risk management,

(d) offering this insurance cover is a fairly important reason to attract competent management executives, while

(e) the conclusion of the specific insurance contract protects the company’s reputation and credibility.

4.The nature of this insurance contract

4.1. In the context of private insurance law, liability insurance for members of the Société Anonyme is part of third party liability insurance, although, as mentioned above, it has a broader scope. This insurance is in principle general in character and is not legally required. It is included in the non-life insurance and not in the insurance of persons, as the particular damage caused to the insured’s property is restored from the realization of the insured risk. In addition, it is classified as liability insurance, as it safeguards the risk of the creation or increase of liabilities in the assets of the insured.

4.2. The liability insurance of the members of the management of the Société Anonyme usually takes the form of a genuine third-party contract, as three (3) different persons are involved:

(a) the Société Anonyme in its capacity as recipient, which concludes the relevant contract as the policyholder of the insurer and, at the same time, on behalf of third parties (that is to say, members of its management),

(b) an insurance company in its capacity as an insurer, which assumes the above-mentioned obligation to recover the damage to property not from the policyholder company but from third parties (ie members of its management) from the realization of the insured risk; and

(c) the members of the company’s management in their capacity as insured persons as well as the beneficiaries of the insurance, as their right to expect the insurance indemnity is born directly and directly incurred .

4.3. The aforementioned legal construction has the legal consequence that the Société Anonyme becomes liable for the fulfillment of the obligations arising from the relevant insurance contract due to its bearing capacity as a recipient of the insurance. In addition, the Société Anonyme is also the entity in which the rights to terminate and amend the insurance contract, as well as the right to withdraw or oppose it, are granted. On the contrary, the main obligation of the members of the management of the Société Anonyme is the non-infringement of the insurance obligations, i.e. compliance with the rules of conduct laid down by the law or the relevant insurance contract, in order to fulfill the insurer’s performance and, in particular, the payment of the insurance by the latter.

5.The insurance cover

5.1. In accordance with the aforementioned, the scope of the relevant insurance contract exceeds the civil liability of the members of the management of the Société Anonyme. However, as the basic scope of the relevant insurance cover refers to civil claims, its main basis is the damaging act which includes any actual or presumed breach of the duties of the members of the management over the company. Also, this insurance cover includes any unjust and injurious third party act or omission, error or negligence in the performance of the duties of the members of the management of the entity. That is, any individual responsibility of a director of a corporate body is enforced, whether he issued severally or jointly or independently. In this context, it is clear that the relevant insurance cover extends to the breach of substantive rules of private law which entail liability for the directors of the company. However, damages claims based on special agreements or conditions introduced by provisions of a subordinate law that exacerbate the liability of the legal entity beyond the legal provision are not covered.

5.2. In any case, however, the cover of the relevant insurance contract does not extend to activities which are contrary to public policy, which is unfair and immoral and directly oppose prohibitive legislation. For this reason, criminal penalties, fines, and other financial penalties are also excluded from cover. The fines include those imposed by the competent supervisory authorities. Nevertheless, the legal costs of prosecuting the insured person are valid. In some insurance policies, it is agreed that the costs of the criminal proceedings should be covered only if the managing director is found innocent.

5.3. Furthermore, apart from breaches of private law rules, the relevant insurance cover may extend to infringements of public law rules. Criterion for the relevant insurance cover is the nature of the compensation resulting from compensation under public law provisions. That is, if the indemnity is reparable, it falls within the liability of the members of the management of the Société Anonyme. On the other hand, if the nature of the compensation is valid, it is not covered by the relevant insurance contract. Consequently, subject to compliance with the relevant criterion, it is possible to cover pecuniary claims filed before administrative courts or administrative supervisors and the costs of the investigation by any competent authority.

5.4. Finally, the exemptions introduced in the relevant insurance contracts fall into multiple categories, depending on the practice of the insurance companies and the criteria adopted by them. In order to avoid long and unnecessary developments in the present analysis, the following clarifications are considered appropriate:

(a) the relevant insurance cover excludes claims covered by other policies, including but not limited to claims covered by professional liability insurance policies,

(b) in addition, such acts are excluded from such cover, which involve a high risk for the insurer, which usually includes the liability of the members of the management of a Société Anonyme for defamation and personal injury, the claims related to the bankruptcy of the company and damages associated with transformations of companies,

(c) furthermore, claims arising out of the liability insurance of members of the management of a Société Anonyme are excluded from claims arising in courts outside the European Union or from breach of legislation of States outside the European Union,

(d) finally, the cases of fraudulent provocation of the insurance case are reasonably excluded from this insurance cover. In particular, the claims for third-party claims or the insurance of a Société Anonyme arising out of a fraudulent breach of the management duties or the provisions of the law by the management of the corporate entity are excluded.

6.Insurance Clauses

Apart from the above-mentioned exceptions, the relevant insurance contract applies special clauses, which refer only to the specific insurance contract or have been formulated on the basis of the development of the relevant insurance and which substantially restrict the liability of the insurer. In particular, the insurance policy may include:

(a) the group clause, which allows for the uniform identification and treatment of the insurance risk and, moreover, charges the group with less expense by covering, with a group insurance policy, all the corporate entities of a group,

(b) the own contribution clause of the insured, which entails the taking over by the insured member of the management of the Société Anonyme of a part of it and, in particular, of a certain amount or percentage of the indemnity in general or per insurance case,

(c) the clause of the serial damage (otherwise chain damage) which limits more claims arising from the same unlawful act to the same amount of insurance and the same insurance period as they are treated as a single claim,

(d) the dismissal clause of the particular member of the management of the Société Anonyme, which requires the entity to have previously denounced the relationship with that person as a necessary condition for the activation of the insurance cover,

(e) the policyholder’s insured clause, which does not allow the claims of an insured member of the management of the entity to be covered by another insured person either directly or by way of redemption. This clause appears in a variant of the clause as a non-coverage clause, which limits or prevents the relevant insurance cover. This limitation takes place according to the degree and extent of the involvement of the insured persons involved in the management of the recipient’s insurance and includes claims by persons directly or indirectly linked to one of the insured persons. Because of its introduction, it is recommended not to create situations of conflict of interest, collusion and abusive behavior, but also to avoid enrichment.

7.Epilogue

7.1. The adoption of Law 4548/2018 on the reform of the law of Sociétés Anonymes has brought about a number of changes, sometimes sweeping, in the operation of corporate entities. Regarding the responsibility of the members of their management, a previous article from the blog of this web site has provided a detailed explanation of their intra-company and criminal liabilities, as they are now formed under the new legislative status (read the first part of the article for the liability of the Members of the Board). It is easy to see the intensification of the criminalization of entrepreneurship and it is equally easy to distinguish the discretion of the corporate managers in achieving the corporate purpose.

7.2. Furthermore, in another article of the same blog, the administrative and criminal responsibilities of corporate managers vis-à-vis the State and the Insurance Organizations, as derived from the tax, insurance and customs legislation, as well as the liabilities attributed to them by specific provisions of the Civil, the Bankruptcy and Penal Code (read the second part of the article for the liability of the Members of the Board). It is clear that the exposure of the members of the Société Anonyme’s management to extremely serious risks.

7.3. It is obvious, therefore, that the liability insurance of corporate managing directors is an effective means of defending and safeguarding them against the risks stemming from corporate governance and the tightening of the legislative environment. The conclusion of the relevant insurance contract, according to the above mentioned, is characterized by strong economic and business advantages: better corporate organization, higher status and corporate solvency, clearer business image and the ability to attract competent executives. Let us not close our eyes on international business practices and international corporate governance rules: the dissemination and establishment of these policies also into the Greek business community is the only appropriate choice.

7.4. Finally, the role of the legal counsel of the company proves to be decisive in the management of the issues related to the liability insurance of the members of the management of the Société Anonyme. In this context, the legal adviser is responsible for working closely with the insurance broker, with whom the corporate entity works, to evaluate the (more) insurance options and products offered and to assist in choosing the best solution. Additionally, the duty of the legal counsel is to ensure maximum insurance of the insurance of a Société Anonyme and the insured corporate managing directors by checking the legality of the conclusion and the valid content of the relevant insurance contract. Finally, in the event of the insured risk occurring, the legal counsel must make a substantiated claim for the fulfillment of the insurer’s obligations and, in particular, for the payment of the insurance.

It should be perfectly clear:

At any stage (out of the above mentioned) the appropriate legal advice is not received, it is highly probable that the potential cost of the business will prove to be infrequently high.

Petros Tarnatoros
Senior Associate

P.S.: The article has been published in Greek in MAKEDONIA Newspaper (March 17, 2019).

March 17, 2019
Cyber and Internet Risk Insurance

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Cyber and Internet Risk Insurance: The Importance of every Company and the Role of the Legal Advisor

Coverage of the risks arising from the implementation of e-services and from the use of the internet constitutes a new insurance product. This product is expected to show strong growth in the coming years due to the continued development of technology. Further use of the internet and of social media, as well as the development of cloud computing, are parameters that highlight the importance of this new product. In addition, its aid factor is the very low – in proportion to the use and dissemination of Internet services – the number of companies and businesses that currently have insurance against this particular category of risks.

The Necessity of Cyber and Internet Risk Insurance

It has now been accepted that the development of technology as well as the wide use of the internet, form the ground for the development of criminal behavior, either through negligence or fraudulent one. Such criminal behavior is found both in the professional field and in the context of the privacy of citizens. Indeed, they are growing daily, as they are favored by the loopholes in the regulation of internet use. They are also favored by the corporate entities’ low insurance coverage of cyber and internet risks.

In this context, it should also be borne in mind that today:

(a) the protection of personal data and privacy is a fundamental human right, while

(b) a rigorous legislative environment is built both in the European Union and particularly in Greece on the use of the Internet and cyberspace and, more specifically, on the protection of the personal data of persons and users of electronic services.

However, it is generally recognized that the gap between e-reality and its legislative/ regulatory environment constitutes an additional risk for businesses. E-reality is changing, evolving and growing rapidly, while legislative initiatives attempt to follow cyber developments late and often incomplete.

Consequently, there is no doubt that insurance against cyber and internet risks is now a necessity. This necessity concerns large companies, which are major targets for malicious actions. It also concerns smaller companies, which are more vulnerable to malicious actions and more vulnerable in dealing with the damage that can be caused by such.

Choosing the Right Insurance Product

In this corporate environment of the constantly evolving and changing e-reality, it is crucial to choose the appropriate insurance product against the specific category of risks.

This choice can no longer be made based on the less expensive premium. Instead, this option should be part of an integrated corporate policy. This policy should aim to tackle offending/criminal behavior that have to do with the use of the internet and e-services. The concern for both the planning of an integrated corporate response and of the choice of the appropriate insurance product can only be the responsibility of the legal entity’s legal advisor.

However, generally speaking, each company has to plan its reaction to cyber and internet risks and consequently to choose the appropriate insurance product, taking into account its object, the degree of penetration of electronic services in its operation and the type and the range of personal data it processes.

The Insurance Market in Greece

While checking the insurance programs offered by the insurance companies operating in Greece, one shall find wide variations and discrepancies in the coverage against cyber and internet risks. Specifically, it is noted that the largest insurance companies in Greece:

(a) either do not provide insurance plans for such risks,

(b) either includes coverage against specific risks within the framework of the electronic equipment insurance and as an optional and supplementary coverage of business insurance, i.e. not providing a specialized insurance program,

(c) or have introduced specialized and innovative insurance programs, which combine insurance against these insurable risks with the provision of legal, technical and advisory services, forming a single package.

It is therefore clear that, as far as tackling the dangers arising from the deployment of e-services and the use of the internet, the tools do exist.

The company’s responsibility towards its entity, its partners or shareholders, its employees, and third parties is to choose the most appropriate tools. Additionally, the company is required to incorporate these tools into its Cyber Risk Management plan to address these breaches. Accordingly, the responsibility of the lawyer – legal counsel of the company is the evaluation of the offered insurance products and the assistance in choosing the optimal solution. In addition, the duty of the lawyer – legal counsel is also the maximum possible safeguard of the company through the control of the insurance contract. Finally, in the event of the insured risk occurring, the duty of the lawyer – legal counsel extends to the formation of a substantiated claim of the insured company for the fulfillment of the obligations of the insurance company.

Petros Tarnatoros
Senior Associate

Υ.Γ. The article has been published in Greek in MAKEDONIA Newspaper (October 27, 2018).

November 1, 2018

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