By Christos Panayiotides
Over the past few weeks, I have been watching, breathless, the crisis plaguing our judiciary. Thus far, I have consciously avoided taking a stand on the issue. When the subject matter of a debate forms a cornerstone of our society (as in this particular case), taking a public position should be preceded by careful thought and by an in-depth evaluation of all the issues surrounding the problem.
Given that the members of the judiciary themselves have expressed the view that justice in Cyprus has been adversely affected by the misrepresentation of pertinent facts or the presentation of the facts in a discriminatory manner (resulting in derisory and embarrassing comments being made), I consider it necessary to summarise the substance of these facts, which none of the parties involved disputes.
First, when the Bank of Cyprus (BoC) encountered problems from the massive withdrawal of deposits, due to the gradual loss of confidence on the part of its depositors, it resorted to offering exorbitant interest rates (of the order of 7 per cent per annum) as an inducement for not transferring deposits to other banks abroad. The resulting increased risk assumed by the depositors of the bank was reflected in the higher interest rate offered for converting ordinary deposits into bonds. Among those who chose this scheme was the sister of the current president of the supreme court of Cyprus, Myron Nikolatos and Mr Nikolatos himself (acting on behalf of his then underage daughter).
As a result of the subsequent effective bankruptcy of the BoC in 2013, all the bondholders of the bank lost the entire amount they had invested in the bank’s bonds (in contrast to the ordinary depositors of the bank, who lost half of their deposits over €100 thousand). Some of the injured bondholders resorted to justice, claiming compensation from the BoC for the damage suffered, on the grounds that they had been misled by the bank’s salespeople, who failed to disclose the increased credit risk embodied in the bonds. Some of these actions were settled out-of-court, with BoC agreeing to pay part of the claimed damages in return for an undertaking to forgo all other claims the claimants may have had. The settlements made, with the knowledge of the court, included the claims of the daughter of Mr Myron Nikolatos and that of his sister. The lawyers acting for the BoC were Chrysafinis & Polyviou llc.
Second, sometime after this extra-judicial arrangement, the supreme court heard the appeal of the BoC’s long-serving CEO and director, Andreas Eliades, and of the bank itself, against their criminal court conviction which had found them guilty of market manipulation. Of the three judges sitting on the bench, one upheld the conviction while the other judge was in favour of acquitting the appellants. As a consequence, the outcome of the appeal was determined by the supreme court president, Myron Nikolatos, who sided with the second judge. The reasoning of the acquittal was that, although there was no room for doubt that the defendants misled the bank’s shareholders by giving them false financial information, the offence of market manipulation had not been committed, given that the intention of the defendants was not the manipulation of the market but merely “the appeasement of the shareholders”, who saw their property evaporating. The lawyers who assumed the bank’s defence were, again, the law firm of Chrysafinis & Polyviou llc, the company that has long handled the BoC’s legal matters.
These facts are not disputed by anyone. Likewise, the relationship between the law firm and close relatives of certain judges serving on the supreme court has not been substantively challenged.
On the basis of these undisputed facts, it transpires that Myron Nikolatos had an impediment preventing him from hearing Mr Eliades’ appeal. Without indulging in legal technicalities, I would merely mention the setting aside by the supreme court of England (the House of Lords) of its previous judgement on extraditing General Pinochet of Chile following his arrest in the UK in 1998 (taken in the capacity of an appellate court), on the grounds that one of the judges who participated in the composition of the appellate court participated (without any remuneration or other benefit) in the administration of a non-for-profit charitable organisation linked to Amnesty International (which was one of the parties involved in the litigation process). Although no one claimed that the implicated judge was in any way influenced, the English supreme court ruled that the decision previously taken had to be set aside because “of the risk of shaking public confidence in the process of administering justice” (House of Lords Judgement in Re Pinochet).
The Cyprus supreme court, itself, has set a precedent of setting aside an earlier decision in the case of Poullis (1060/2001), where the court, in full session, ruled that “a predefined course of action or an explicitly defined procedure are not necessary for mobilising the court to discharge its obligation to justice to set aside an invalid decision previously taken. Once the relevant facts, which expose the decision previously taken to annulment, become known, the court itself may raise the issue and act accordingly, after hearing the views of all interested parties. Any other approach in resolving such a problem would be in conflict with the principles of natural justice.”
As regards the interpretation of the term “market manipulation”, the view taken by the criminal court in the original Eliades’ case and which was fully endorsed at the appeal level by the dissenting judge, Mrs T Psara-Miltiadou, fully coincides with my opinion as an experienced certified public accountant.
In its decision, the criminal court states: “In fact, the defendant disseminated information that was transmitting misleading messages, which, in terms of substance, were clearly linked to the value of the shares of the Bank of Cyprus. No justification of the reasons prompting such a disclosure could be identified other than the desire, at that point in time, to avoid giving a true picture of the financial position of the bank and to evade the disclosure of the financial difficulties confronting the bank. In fact, at that stage, the defendant was aiming at pacifying all concerns and, in particular, those of the shareholders, thus averting their adverse reactions and market movements.” Mrs Psara-Miltiadou then adds: “This summing up by the criminal court leads, in my opinion without any further ado, to a ‘market manipulation’, which was carried out through a statement that was knowingly and intentionally misleading. … I believe the position taken that the statement was made to pacify the concerns of the shareholders, strengthens rather than annuls the conclusion that it constituted an attempt to manipulate the market. Indeed, because the statement made under the conditions elaborated on, was intentionally incorrect and misleading, the so called ‘pacification of the shareholders’ was precisely aiming at the manipulation of the market, by projecting unreal and untrue facts, which, nonetheless, were presented as true and correct.”
As the president of the supreme court himself confessed, the uproar which followed Mr Eliades’ acquittal has inflicted damage on the prestige of Cyprus justice. It follows that there is a pressing and urgent need to take all those healing actions that will lead to a full recovery. In my opinion, these action steps cannot be other than the following:
First, the immediate resignation of Myron Nikolatos from his judicial office. The strengthening of the prestige of justice constitutes the ultimate objective, which stands above all other goals. The practice Mr Nikolatos has followed so far of judging himself and of attempting to defend his position was inappropriate. Once he resigns his position and finds himself outside the system, he will be free to defend himself, if he so chooses. If he refuses to resign, he should be compelled to do so.
Second, the supreme court ruling on Andreas Eliades and the BoC should be set aside on the basis of the impediment of Myron Nicolatos to serve as the president of the appeal court. In my opinion, the competence of the supreme court to function as a “third level” court, in those cases that procedural shortcomings are identified at the appeal level, is unquestionable (House of Lords: Re Pinochet as well as the Cyprus supreme court itself: Poullis Case)
Third, a re-examination of the appeal judgement, solely and exclusively in respect of the legal issue concerning the correct interpretation of the term “market manipulation”. Ideally, the hearing should be conducted by the supreme court in full session, after the self-recusal of those judges that have an impediment to participate in the process. The fairness of the hearing on the issue of what constitutes “market manipulation” could be secured by the court seeking the guidance of the Court of Justice of the European Union (CJEU), through the filing of a request for a preliminary ruling, under Article 267 of the Treaty of the Functioning of the European Union (TFEU). Indeed, one of the important functions of the CJEU is to secure the correct and uniform interpretation of national law that emanates from EU directives (as in this particular case).
Fourth, the codification, without further delay, of the procedural rules for the administration of justice (addressing issues of conflict of interest, evaluation of and expulsion from the judiciary, etc.) in a clear, specific and effectively monitored manner.
Fifth, within the overall framework of the “self-cleansing” of the judicial system, identification and prompt application by the supreme court of all the steps that must be taken to substantially shorten the unacceptable delays noted in administering justice. The causes of the unacceptable delays currently experienced are known to the judiciary and, therefore, the problem should be addressed on an urgent and drastic basis.
Sixth, beyond the criticism, in good faith, of judicial judgements, which is both legitimate and necessary, avoidance of public statements, quarrels and conflicts, at a personal level, and acknowledgement and respect of the principle that the standing and the reputation of justice should always be placed above self-interest and personal status.
PS:Without attaching any significance to it, I mention the fact that my father-in-law was a brother of the late mother of Nicos and Costas Clerides
Christos Panayiotides is a regular columnist writing in the Cyprus Mail, Sunday Mail and Alithia