The ongoing Greek Bonds saga is by no means an original. A similar saga unfolded more than 50 years ago as two English cases that reached the House of Lords demonstrate. What we can learn from those decisions, as the current saga continues to be played out, is that English judges will seek to protect a contract governed by English law from interventions by foreign legislatures and uphold the original bargain the parties have made.

The Facts

In 1927 the National Mortgage Bank of Greece (NMBG) issued sterling bearer bonds (the Bonds) which were guaranteed by the National Bank of Greece (NBG). In 1949 the Greek Government declared a moratorium, which had the effect of suspending all payment obligations on bonds payable in a foreign currency. In 1953 the Greek Government passed Law No. 2292, which authorised the amalgamation of banks and provided that any company which absorbed another company by merger, or any new company formed by amalgamation, became the universal successor to the assets and liabilities of the old company(ies).

By a decree made under Law 2292 NBG amalgamated with another bank, the Bank of Athens (BA), to form the National Bank of Greece and Athens SA (NBGA) and it was decreed that NBGA should become the universal successor to all rights and obligations of both NBG and BA.

In 1955 one of the bondholders, Mr. Metliss, commenced proceedings against NBGA under the guarantee issued by NBG in respect of the interest arrears on the Bonds. On 12 July 1956 it was held at first instance that the proper law of the Bonds and the guarantee was English law and that NBGA was liable under the guarantee.

Four days later on 16 July 1956 the Greek Government passed Law No. 3504 which amended Law No. 2992 so as to provide that NBGA became the universal successor to the rights and obligations of the amalgamated companies “except for the obligation to which such companies were liable whether as principal or guarantor…under bonds payable…in gold or foreign currency.” As a matter of Greek law the effect of this proviso was retrospectively to exclude from universal succession the obligations in respect of which NBGA had been held liable to Mr. Metliss.

After Law No. 3504 had been passed, various other bondholders commenced proceedings against NBGA under the guarantee. NBGA naturally sought to rely on Law No. 3504 as a defence to liability.

In both sets of proceedings there were appeals to the House of Lords in which NBGA was found liable to the bondholders. It is instructive to look back at the reasoning of the House of Lords in the two decisions and the underlying factors.

The House of Lords’ judgments

The contract of guarantee of the Bonds was governed by English law. It is trite law that the discharge of a contractual debt is governed by the proper law of the contract. One might therefore have expected that the question of liability under the guarantee would have been governed by English law.

Both Messrs. Metliss and Adams therefore had to find an argument as to why an English Court should render NBGA liable under the guarantee, notwithstanding that NBGA was not a party to the guarantee and did not come into existence until after the guarantee. Viscount Simonds said:

“If a corporation exists for no other purpose than to assume the assets, liabilities and powers of another company, what sense is there in recognizing its existence if we do not also recognize the purposes of its existence and give effect to them accordingly.”

and in the words of Lord Tucker:

“It is contended, however, that the transfer of liabilities from the old bank to the new is no part of its status. It is said that “status” is confined to the existence, powers and dissolution of the new corporation…It is of the very essence of the transaction that the liabilities and assets of the former should attach to the latter, and to recognize the existence of the new entity but to ignore an essential incident of its creation would appear to me illogical…In my view, the fact that this liability was attached to it at birth by its creator can properly be regarded as a matter pertaining to the status of the appellant company and accordingly governed by the law of its domicile.”

In the Adams case, their Lordships looked at the substance of Law No. 3504, which was framed so as to imply that the liabilities had never existed, and held that it was in substance and effect a law which sought to discharge NBGA from its existing liabilities. They therefore held that this law was ineffective to discharge the liabilities of NBGA as a matter of English law.

In Metliss there was also some consideration of the effect of the moratorium and whether it prevented the claim being pursued in England. It was held that NBGA succeeded to the rights and liabilities of NBG and was to be in just the same position as NBG would have been had it been sued in England. NBG could not have relied on a moratorium to amend the rights under the English law contract and neither could NBGA. Greek law would have prevented a claim against NBGA in Greece but it could not prevent a claim in England in respect of English law rights.

The issues before the House of Lords (in Metliss at least) were novel i.e. not determined by precedent. Perhaps more so than usual it was therefore possible to get a sense of what factors drove their Lordships to reach the decisions they did.

First, their Lordships were driven by considerations of justice. This guiding factor was voiced expressly in Metliss by Viscount Simonds, who did not consider concepts of universal succession to be helpful but asked what justice demanded.

Secondly, they were keen to protect the respective domains of English law and of the foreign law i.e. Greek law in these cases. This can be seen from the distinction drawn between the status of a company and its discharge from liabilities.

Thirdly, and most importantly, they were at pains to defend contracts governed by English law from subsequent amendment by foreign legislation. Law No. 3504 appears to have been a deliberate attempt to overcome the decisions in Metliss and their Lordships were unimpressed. This can be seen from the decision in Adams.

Their Lordships looked at the substance of what Law No. 3504 was trying to achieve and held that the existing English law liabilities created as a result of Law No. 2292 could not be discharged by Law No. 3504, even though that law was framed so as to provide that the liabilities had never existed in the first place.

Lord Denning considered that the exclusion of liabilities on bonds payable in gold or foreign currency was such an “unusual provision in an amalgamation, and is so inconsistent with the essence of the transaction, that there is no comity of nations which requires the English courts to recognise it.”

As Lord Radcliffe said, “I do not think that, once they had become so liable, they could be discharged from liability by any subsequent legislative act of the Greek Government, such as decree 3504.”


In Metliss and Adams the House of Lords demonstrated powerfully that English law does not take kindly to attempts by foreign legislatures to usurp contracts governed by English law and deprive parties to those contracts of their English law rights. This is rightly regarded as unjust. Judgments such as those of the House of Lords in Metliss and Adams demonstrate that English judges are guardians of contractual certainty and seek to give effect to what the parties have agreed.