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Limitation of liability of law firm partners (amendment of Article 54 of the Code of Advocates)

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Limitation of liability of law firm partners (amendment of Article 54 of the Code of Advocates)

In a breakthrough development for Greek law practice, article 187 of new law 4820/2021 replaced Article 54(5) of the Lawyers’ Code (Law 4194/2013, Government Gazette, Series A, Issue 208), essentially converting all existing Greek law firms into Limited Liability Partnerships.

The new provision provides the following:

Only the legal entity of the law firm, on the basis of its own assets, is liable for all the law firm’s debts. Articles 759, 783 of the Civil Code and Article 270(1) of Law 4072/2012 (Government Gazette, Series A, Issue 86) do not apply to the relations of the law firm and its partners with its principals or third parties.

More specifically:

  1. For debts to the State and social security institutions incurred after the entry into force hereof, the provisions on personal, joint and several liability apply mutatis mutandis, regarding the persons referred to in Article 50 of Law 4174/2013 (Government Gazette, Series A, Issue 170) and of Article 31 of Law 4321/2015 (Government Gazette, Series A, Issue 32), which retain the right of recourse against the other members of the law firm pro rata with their participation in the law firm, in accordance with paragraph 3,
  2. the law firm is liable to its principals in accordance with the provisions on the liability of lawyers (Articles 160 hereof and 73 of the Law Introducing the Code of Civil Procedure (Presidential Decree 503/1985, Government Gazette, Series A, Issue 182), for acts or omissions of partners or associate lawyers, if these were done during the handling of a case of the law firm’s principal and it retains the right of recourse against the liable partner, for the amount with which the law firm pays in satisfaction to the third party.

If the law firm has professional liability insurance, it has a right of recourse against the liable partner only for the amount not covered by the insurance company and the insurance payment.

 

Since law firms are a special form of civil partnership with legal personality, up until now partners were jointly and severally liable with the law firm for the debts of the latter (see article 270(1) read in conjunction with 249( 1) Law 4072/2012, whose provisions being newer and more specific take precedence over Articles 759 and 783 of the Civil Code which provides for the several liability of the partners pro rata with their holdings).

 

Making partners personally liable was particularly unfair, especially since almost all other self-employed professionals (physicians, accountants, engineers, etc.) can establish limited liability professional companies and avoid being exposed to personal liability. Moreover, as law firms grow, it becomes more difficult for each partner to know the risks to which the law firm is exposed.

 

The text in the draft law on the Court of Audit that was enacted a few days ago, which introduces the limitation of liability for partners of law firms (Article 187) can be found at the following link: «Περιορισμός ευθύνης εταίρων δικηγορικών εταιρειών»

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