By Angelos Anastasiou
A group of Greek investors filed a notice of dispute against Cyprus on Monday over losses arising from the Cyprus financial crisis and the March 2013 bailout of Cyprus.
The group of nearly 100 investors, including individuals and institutions, is comprised of depositors and bondholders of the Bank of Cyprus and now-defunct Laiki Bank whose funds were confiscated by the Cyprus government following the country’s €10 billion bailout.
Leading financial litigation law firms Grant & Eisenhofer, Kessler Topaz Meltzer & Check and Kyros Law, along with public international law firm Volterra Fietta, have filed the notice of dispute as a class claim on behalf of the Greek investors to recover their losses, estimated to be well over €50 million.
The notice has been submitted under a 1992 bilateral investment treaty between Greece and Cyprus, which provides that the parties must first attempt to settle their dispute amicably for at least six months.
If the parties do not reach a settlement in that timeframe, the claim would then be submitted for resolution by binding arbitration at the International Centre for Settlement of Investment Disputes (ICSID).
“This is the first time that the bilateral treaty will be tested as a class action for investors who have suffered losses stemming from the European financial crisis, which gripped Greece and Cyprus particularly hard,” said Grant & Eisenhofer co-managing director Jay Eisenhofer. “We believe strongly in the merits of the aggrieved investors’ claims as a class, and will be working closely with Kyros Law and Volterra Fietta to recover their lost funds.”
The investor claimants, who are all Greek citizens or are based in Greece, seek recovery of the value of their deposits or bonds lost as a result of the Cyprus bailout.
Their claims arose out of Cyprus’ response to its financial crisis, following Greece’s default on its own bonds in 2012.
This development caused a banking meltdown in Cyprus and prompted the negotiation of a bailout loan by international institutions, comprised of the European Commission, the European Central Bank and the International Monetary Fund – collectively known as the Troika.
Bondholders were also negatively affected. In July 2013, the Bank of Cyprus announced that holders of convertible bonds and various types of securities would be reduced to 1/100th of their original value.
“The unfair terms of the revised bailout agreed between Cyprus and the Troika targeted and discriminated against Greek investors who placed their money and trust in Bank of Cyprus and Laiki Bank,” Eisenhofer said. “Notably, foreign investors made up the bulk of depositors in these two banks. Considering how Cyprus long marketed itself as a tax haven, and had attracted many international investors, the government’s abrupt U-turn and inequitable conduct toward investor funds takes on an even more egregious pall.”
Eisenhofer further pointed out that while Greek depositors were subject to extreme bailout measures, many Cypriot public institutions were made exempt. The decree specifically excluded, among others, credit institutions, insurance companies, general government entities and domestic financial auxiliaries.
John Kyriakopoulos, managing partner of Kyros Law, said that “the Cyprus government wrongfully deprived many Greek investors of their property and treated them unfairly as a result of the 2012-2013 crisis.”
“Not only that, none of the bailout funds will be used to assist the recapitalization of the Bank of Cyprus,” he added.
“Instead, shareholders — many of them former Laiki Bank depositors — as well as bondholders and depositors are bearing the entire burden of recapitalization.”
Eisenhofer argued that “in the event our clients cannot come to an agreement with the government of Cyprus, our clients are prepared to commence binding arbitration before ICSID.”