Cyprus Mail
Business Cyprus

Top court backs away from haircut lawsuits

By Stefanos Evripidou

THE SUPREME Court yesterday ruled it had no jurisdiction over appeals lodged by people who lost their money in the so-called haircut on bank deposits.

The appeals should be examined instead in the framework of private lawsuits filed at district courts against banks, possibly the state and even European institutions, said the top court.

Depositors yesterday vowed to fight simultaneous legal battles on the home front, with civil lawsuits, and in European courts in Luxembourg and Strasbourg until their money was returned to them.

More than 3,000 appeals were filed against the ‘haircut’ or bail-in by depositors of former Laiki Bank and Bank of Cyprus (BoC), the deadline for which ended today.

The applicants and their lawyers are calling the haircut theft of property.

They were appealing two decrees (R.A.D. 103/2013 and 104/2013), issued on March 29 by the Central Bank in its capacity as the Resolution Authority for credit institutions.

The applications were filed by depositors who decided to take legal action after their assets were frozen as a result of the Eurogroup’s decision in March to restructure Cyprus’ two main banks, through the resolution of Laiki and the recapitalisation of BoC, resulting in a massive write-off of Cypriot and foreign bank deposits.
Uninsured deposits of over €100,000 in both banks have been frozen to resolve Laiki’s debts and recapitalise the BoC.

The Supreme Court was asked to examine whether the freezing of uninsured deposits for the purposes of a haircut was an administrative act or political decision.

Had it regarded the decision as an administrative one, the court could then have determined it has jurisdiction to consider appeals against the act.

However, in a majority vote (seven out of nine judges), the Court yesterday delivered the long-awaited verdict, rejecting the appeals against the haircut.

The Court ruled that the haircut does not constitute a public act but a private act involving the contractual obligations of the bank to the depositor, and as such can be examined in civil lawsuits.

“The nature of the relation between depositors in the Bank of Cyprus is the same as the one between depositors in the Cyprus Laiki (Popular) Bank. Neither have a lawful interest to lodge an appeal and the case lies in the context of private and not public law,” the Supreme Court said, noting it has no jurisdiction to examine the appeals.

Interestingly, the Court said not only could civil lawsuits be directed against the banks, but possibly also the state, since the latter’s actions impacted upon the bank’s contractual obligations to the depositor.

The argument goes that since a decree of the state affected the banks’ capacity to repay its depositors, civil lawsuits launched against banks in the district courts, may be extended against the Republic.

“The legitimacy of any infringement could be examined within this context,” the Court said.

In a further elaboration on the context in question, the Court noted that one could also spread the net wider when examining possible legal violations and look at the involvement of other stakeholders, including European institutions and others (possibly a reference to the IMF), within the framework of constitutional and European law.

Commenting on the decision, both Attorney-general Petros Clerides and Alecos Evaggelou, the Central Bank’s legal advisor, said the ruling provided guidelines on the rights of applicants which need to be examined carefully.

“The ruling has many guidelines as to how things may evolve in the future. We will examine it very carefully to weigh our position in accordance with the positions of the applicants’ lawyers,” said Clerides.

The AG said it was too early to tell how matters would develop.

Asked whether applicants would now seek redress at the Strasbourg-based European Court of Human Rights (ECHR), Clerides said the applicants would have to exhaust all domestic remedies first, adding that if such remedies existed, it would take some time to do so.

For his part, Evangelou said the ruling was interesting and “gives many guidelines regarding the rights of everyone” which must be examined carefully “to determine the way with which we will deal with cases in the future”.

Head of the Laiki Bank Depositors Association, known by its Greek acronym SYKALA, Adonis Papaconstantinou yesterday said the decision was expected, warning that depositors would now appeal on three fronts in parallel: district courts, the ECHR and the European Court of Justice (ECJ) in Luxembourg.

He expressed confidence that depositors would win in the end and get their money back.

“Our legal advisers are already in touch with European law offices,” he said, adding that their lawyers were already looking into recourse to the ECJ and ECHR at the same time.

“In other words, we won’t wait for the decisions of the district courts. They will run in parallel, because most probably, we will move against various institutions in Europe and in Cyprus, several jointly.”

Papaconstantinou clarified that since the Eurogroup could not be considered a European institution or legal entity, and therefore cannot be legally pursued, “what’s left in essence, is the European Central Bank”.

He added: “As long as we struggle, what’s certain is that at some stage, we will win. The only thing I can’t tell you is when.”


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