The European Court of Justice on Tuesday upheld a previous judgement that dismissed actions calling for the annulment of a March 2013 decision to seize bank deposits as part of Cyprus’ bailout agreement.
The ECJ set aside the orders of November 10, 2014 concerning the actions for compensation, but decided, on the merits, not to uphold those actions.
The case before the ECJ concerned a challenge brought by a number of Greek Cypriot depositors against the decisions leading to the March 2013 bail-in.
The individuals and a company brought actions before the General Court, asking for an order requiring the Commission and the ECB to pay them compensation equivalent to the reduction in value of their deposits allegedly suffered on account of the adoption of the bailout memorandum of understanding and for the annulment of the relevant paragraphs of that memorandum.
Also, seven Cypriot individuals brought actions before the General Court for annulment of the Eurogroup statement of March 25, 2013 concerning the restructuring of the Cypriot banking sector.
The measures saw the shuttering of Laiki Bank, the island’s second biggest, and the seizure of 47 per cent of deposits over €100,000 at the Bank of Cyprus for recapitalisation purposes.
On October 16, 2014, the General Court dismissed the actions for annulment of the March 25 statement as inadmissible.
It held that the European Stability Mechanism (ESM) could not be regarded as forming part of the institutions of the European Union and that the Eurogroup statement could not be imputed to the Commission or the ECB, nor was the statement capable of producing legal effects with respect to third parties.
On November 10, 2014, the court also dismissed the actions for annulment and for compensation that were connected with the adoption of the memorandum of understanding, holding that they were in part inadmissible and in part unfounded.
The General Court said the Commission signed the memorandum merely on behalf of the ESM and that the activities pursued by the Commission and the ECB in the context of the ESM concerned the ESM alone.
It also held that the persons bringing the actions had failed to establish with certainty that the damage they claimed to have suffered had in fact been caused by the inaction of the Commission.
The individuals and the company then appealed to the ECJ seeking to have the orders of the General Court set aside.
The ECJ upheld the General Court’s decisions and it set aside the orders of November 10, 2014 concerning the actions for compensation.
However, the ECJ decided, on the merits, not to uphold those actions.
According to the ECJ, “the General Court erred in law by holding that it did not have jurisdiction to consider the actions for compensation based on the illegality of certain provisions of the memorandum of understanding. It therefore sets aside the orders of November 10, 2014.”
The court said the EU may incur non-contractual liability only if a number of conditions are fulfilled, namely: the unlawfulness of the conduct alleged against the EU institution, the fact of damage, and the existence of a causal link between the conduct of the institution and the damage.
The ECJ said adoption of the MoU aimed at ensuring the stability of the banking system of the euro area as a whole.
“In view of that objective and of the nature of the measures under examination, and having regard to the imminent risk of financial losses to which depositors would have been exposed if the two banks concerned had failed, those measures do not constitute a disproportionate and intolerable interference impairing the very substance of the depositors’ right to property guaranteed by Article 17(1) of the Charter,” the ECJ said.
“Consequently, they cannot be regarded as unjustified restrictions on that right. The Commission therefore did not contribute to a breach of the right to property of the persons bringing the actions. As the first condition for establishing non-contractual liability of the European Union is not satisfied, the Court dismisses the actions for compensation.”