Whenever interrelated contracts apply, different laws, issues and defences may arise owing to the discrepancies between the applicable legal systems. In HSBC Bank PLC v. Pearl Corporation SA and Ors, the High Court had to consider Greek law defences to a personal guarantee, governed by Greek law, in the context of a loan agreement governed by English law. It was held that on the particular facts the defences under Greek law failed. Nevertheless, such defences may be available in a future similar case in the context of different circumstances.

Personal guarantees in the Greek shipping market

It is not uncommon in the Greek shipping market, for personal bank guarantees to be governed by Greek law in the context of loan agreements governed by another legal system, usually English law. Why, one may ask, would someone do this? There are several reasons put forward for such an arrangement. First, as a matter of Greek law, consideration is not a prerequisite for contracts. A valid guarantee may be issued without referring to actual or ‘iconic’ consideration. Secondly, in the context of the Greek shipping market, the guarantors are usually domiciled in Greece, with personal assets there. Thirdly, Greek banks and the Greek branches of international banks are usually more familiar with Greek guarantees. Therefore, for various largely practical and historical reasons, such a practice prevails in the Greek shipping market. However, such an arrangement gives rise to potential issues and arguments that would not have arisen if the guarantee was governed by the same law as that of the loan agreement.

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