Supreme Court of Greece (Arios Pagos), 4th Division, decision No 1025/2015: The Provisions on the Limitation of Moral Damages Payable by the Auxiliary Fund are Unenforceable

The Supreme Court of Greece (Arios Pagos) issued recently a long expected in the legal circles decision, of high importance and interest, both at national and European level, given the fact that it refers to the implementation of the Motor Insurance Directives on the mandatory civil liability insurance of vehicles.

The decision has been issued with regards to a fatal road traffic accident involving a collision of two cars. The insurance company covering the civil liability of the liable vehicle under the national legislation which implements the Directive 84/5/EEC, went bankrupt pending the litigation, and the Auxiliary Fund was by law substituted as a party in the proceedings.

According to Presidential Decree 237/1986, implementing Directive 84/5/EEC and in force until its amendment in 2012, the Greek Auxiliary Fund (Epikouriko Kefaleo) was obliged to compensate the persons who sustained damage due to personal injury or death in a road traffic accident, in case the damage was caused by an uninsured vehicle or by an unidentified vehicle or by a vehicle insured with an insurer that has gone bankrupt or the operation license of whom has been recalled. The payable compensation by the Auxiliary Fund was determined by a Ministerial Decision to the minimum insurance obligation provided for every insurable risk, whilst for the case where the insurer became insolvent or lost his license, to the insured amount of the specific insurance contract.

The provisions of the Presidential Decree 237/1986 were replaced by Law 4092/2012, whereby restrictions have been set for the Auxiliary Fund’s liability towards secondary victims for non-pecuniary (moral) damages in case of death of a relative, providing that these cannot exceed the sum of 6.000€ for each entitled claimant. The limitation to the compensation has been extended by this law to claims already born at the time the Law was enacted. Furthermore, the payable interest by the Auxiliary Fund remained at 6% per annum (when the usual interest rate for other parties is higher).

The 4th Division of the Supreme Court, by a majority of 4 to 1 judges, held by its decision 1025/2015, that the above provisions of Law 4092/2013 are not enforceable because they are not consistent with Directive 84/5/EEC, with article 1 of the First Protocol of the European Convention on Human Rights (ratified by Law 53/1974) and with art. 25 para 1 of the Constitution of the Hellenic Republic. Specifically:

  1. Concerning the limitation of non-pecuniary (moral) damages to a maximum of 6.000€ per secondary victim, it has been held that the amending provisions of Law 4092/2012:
    1. Are in direct contradiction with par. 4 of the second Directive 84/5/EEC, according to which “Each Member State shall set up or authorize a body with the task of providing compensation, at least up to the limits of the insurance obligation for damage to property or personal injuries caused by an unidentified vehicle or a vehicle for which the insurance obligation provided for in par.1 has not been satisfied”. This provision extends to non-pecuniary damages (moral damages), as per the ECJ jurisprudence (ECJ, c-277/12 of 24.10.2013).
    2. Are also contrary to the principle of proportionality, as this is set by art. 25 para 1 of the Constitution of the Hellenic Republic, because this intervention by the legislator is not appropriate for the purpose of achieving sustainability of the Auxiliary Fund, neither necessary, since this could have been achieved by milder measures, such as exceptional funding from the State Budget or by obliging the Auxiliary Fund to ameliorate its financial status through reduction of its expenses and increase of its income.
  1. Concerning the retrospective extension of the new provisions to already born claims:
    1. It is contrary to art. 1 of the First Protocol of the European Convention on Human Rights and in particular to the right of “property/ownership”. According to art.1 “No one shall be deprived of his possessions except in the public interest…”. The notion of property (ownership) includes pecuniary rights and in particular property rights and demands that are recognized by judgement or can be legally pursued (Supreme Court of Greece Dec. No. 6/2007, 40/1998). Accordingly, the above provisions on radical limitation of the compensation for non-pecuniary (moral) damages, violate the right to property. The financial viability of the Auxiliary Fund does not constitute a public interest excuse.
    2. It is in direct contradiction to the principle of equality, as this is set by art. 4 par. 1 of the Constitution of the Hellenic Republic.
  1. Concerning the reduced interest rate of 6% per annum on the damages to be paid by the Auxiliary Fund:
    1. It is in direct contradiction to the principle of equality, as this is set by art. 4 par. 1 of the Constitution of the Hellenic Republic, because the Auxiliary Fund is granted a preferential treatment over other defendants and debtors.
    2. It is contrary to art. 1 of the First Protocol of the European Convention on Human Rights, since it consists violation of the victim’s right to property, although no public interest reason is present.

Dissenting/Minority opinion: Directive 84/5/EEC does not mandatorily provide for substitution of the Auxiliary Fund in cases of insolvency or recall of the operation license of the insurer. This is left to the discretion of the national legislators, who are entitled to rule differently in case of public interest, such as, in this instance, the survival of the Greek public Auxiliary Fund.

Concerning the lower interest rate obligation of the Fund of 6% per annum on the payable compensation, this is also justified for reasons of public interest, i.e. for the survival of the Auxiliary Fund. It is not imposed by cash flow reasons and therefore it is a legitimate limitation according to art.25 par.1 of the Constitution of Hellenic Republic and art.1 of the First Protocol of the European Convention on Human Rights.

The 4th Division of the Supreme Court referred the case to the Plenary Session of the Supreme Court, according to the national legislation. The decision of the Plenary is awaited with great interest.