The president of the Nicosia district court has rejected a lawsuit against the government, the Central Bank and the Bank of Cyprus, which, among other things, sought the declaration of decisions taken under the 2013 law on the resolution of credit institutions as unconstitutional and illegal.

According to the state Law Office, the court acknowledged that the decrees for the resolution of the Bank of Cyprus and Laiki Bank in 2013 “was absolutely necessary for reasons of public interest and public benefit, in order to prevent the collapse of the entire financial system sector with catastrophic consequences for the country’s economy and society.”

It also noted that due to the Eurogroup decision of March 25, 2013, which ruled out the recapitalisation of Bank of Cyprus and Laiki Bank from the Republic of Cyprus’ EU/IMF financing programme and the immediate risk of complete destabilisation of the country’s financial system, the Republic’s options in relation to restructuring measures were limited to those for which no funding was required.

“The resolution measures taken were imperative, and were aimed at signing a memorandum, while at the essential time there were no alternatives,” the court ruled, awarding costs in favour of the defendants.

It was not immediately available who filed the lawsuit.

The Eurogroup decided in March 2013 to close down Laiki Bank and seize deposits over €100,000 to recapitalise the Bank of Cyprus. The lender has used 47.5 per cent of the deposits, which were replaced by new shares.

Many people are seeking compensation for losses suffered because of the Eurogroup decision, as well as depreciation – in both value and number – of their shares.

Depositors whose money was seized received equity in return creating a new group of shareholders and, subsequently, board of directors, while old shareholders saw their stakes diluted to less than one per cent.

Under the terms of the so-called haircut, the nominal value of all ordinary BoC shares was reduced from €1.00 each to ordinary shares of nominal value of €0.01 each.