Court rejects compensation claims by ex-Laiki depositors

Limassol district court on Wednesday rejected a lawsuit filed by depositors in the former Laiki Bank against the state in relation to the haircut on deposits in 2013.

The attorney general’s office stated that the depositors had filed a case against the state, the Central Bank of Cyprus and former Laiki Bank claiming compensation for the loss of money as a result of the consolidation measures taken in 2013.

Since Laiki Bank was put into liquidation and no order was secured to continue the proceedings before the court on July 20, 2022, the court rejected the action against Laiki Bank and the hearing continued against the Republic of Cyprus and the Central Bank of Cyprus.

“It was necessary to take consolidation measures, especially the specific ones taken pursuant to the Consolidation of Credit and Other Institutions Law of 2013,” the office stated, quoting a recent, multi-page decision of the District Court of Limassol, rejecting a lawsuit filed by depositors of Laiki Bank for the impairment of deposits in 2013.

The court, after analysing the claims of the plaintiffs, rejected them in their entirety, judging them as arbitrary and unsubstantiated, noting, through the testimony that has been brought before it, it is established that the Republic of Cyprus made rescue efforts of Laiki Bank from May 2012.

The court also noted the finding that the finance ministry, in cooperation with the Central Bank of Cyprus and the preliminary consent of the European Commission, proceeded to issue decrees for the assumption of the rights of pre-emption of Laiki Bank at the amount of €1.8 billion, with the participation of the public amounting to 0.16 per cent of the total amount and as a result the remaining share capital would be taken over by the Republic of Cyprus.

With reference to the necessity of taking consolidation measures, the court stated that “based on the Eurogroup agreement, the consolidation measures of Laiki Bank were necessary since they were a condition for signing the agreement of the Republic of Cyprus with its creditors and without this agreement, the state would be driven into bankruptcy. It was also a condition for the signing of the agreement and the sale of Laiki Bank’s operations in Greece.

“Therefore, the measures taken were necessary to prevent the collapse of the entire financial sector with disastrous consequences for the country’s economy and the destabilisation of the entire financial sector and with the consequences as stated above, and therefore with these data the Law of Necessity could be invoked,” the court said.

The court also decided that the state of Cyprus had not acted out of line in the events that followed the haircut of deposits of Laiki depositors in 2013.