No responsibility can be attributed to the Republic of Cyprus for the impairment of deposits suffered by customers of Cyprus Popular Bank Co Ltd (Laiki Bank) as a result of the measures and decisions taken under the Resolution of Credit and Other Institutions Law of 2013, nor is there any link between the fiscal debt of the Republic and the collapse of the banking system. These are the findings of a multi-page judgment of the Larnaca District Court dated 19 April 2022, which dismissed an action brought, inter alia, against the Republic of Cyprus on the basis that the measures and decisions taken at the material time violated the plaintiff's constitutional and property rights.
In the judgment of the Court - which had previously examined, inter alia, the obligations of the Republic of Cyprus as well as the facts and how they led to the decisions taken at European level - the decisions taken to address the economic situation of the country affecting the banking system and vice versa ultimately resulted in the impairment of deposits, but at the same time ensured the financial stability of the Cypriot banking system as a whole, direct access to insured deposits and the stability of the banking system.
In addition, the Court described as general and vague the position put forward by the applicant that the Republic of Cyprus had delayed in making a timely request for financial support to the European Support Mechanism, to note that in its judgment "it has not been established, to the extent necessary, that there is a causal link between the damage suffered by the applicant and the failure of the Republic of Cyprus to make a timely request to the European Support Mechanism". The Court also expressly noted that the Republic of Cyprus made many efforts to rescue both Laiki Bank and Bank of Cyprus.
As to the issue of a breach of the Claimant's property rights due to the resolution, the Court acknowledged that the banking contract constituted a property right of the Claimant and there was a restriction on the right of contribution. However, as the Court noted, that restriction was not contrary to the Constitution or the European Convention on Human Rights, since it served both public interest objectives, since the disorderly failure of the banking institutions was avoided, and the interests of the plaintiff himself, since the measures taken ensured the payment of the insured deposits.
By extension, the Court dismissed the action against the Republic of Cyprus and against the Central Bank and held that the plaintiff's claim against Laiki Bank had been established. As indicated in the judgment, "It is the conclusion of the Court that the Resolution of Credit and Other Institutions Law of 2013 and now the Resolution of Credit Institutions and Investment Companies Law of 2016 and the C.I.P.s relating to Laiki Bank have not operated to relieve Laiki Bank of its contractual obligations to its depositors, including the Claimant. Accordingly, People's Bank owes Plaintiff the remaining portion of his deposit. The fact that it is unable to repay him because its assets, title and rights were transferred to the Bank of Cyprus does not invalidate the right."
The Claimant's claim amounted to EUR 975,916.97 plus interest and costs.
The case was handled on behalf of the Attorney General of the Republic by Ms Elli Florentzou, Attorney at Law of the Republic A.
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