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- Ελληνικά
On Tuesday, 20 February 2024, the Limassol District Court dismissed six consolidated actions filed by numerous companies in relation to the impairment of deposits under the "Resolution of Credit and Other Institutions Law of 2013" and the resolution measures adopted in 2013. The actions were brought against the Bank of Cyprus, the Central Bank of Cyprus and the Republic of Cyprus (defendants).
In their actions, the six companies sought, inter alia, damages for allegedly negligent acts and/or omissions of the Bank of Cyprus, the Central Bank of Cyprus and the Republic of Cyprus, which led to the impairment of their bank deposits, additionally challenging the constitutionality of the resolution measures taken by the State, alleging a violation of their rights.
In rejecting the defendant companies' claims, the Court held that the adoption of the reorganisation measures did not ultimately place the depositors of the Bank of Cyprus, including the defendant companies, in a less favourable position than they would have been in had the Bank of Cyprus been placed in liquidation, with the Court accepting that the own resources rescue measure applied to the Bank of Cyprus was the most correct and appropriate in the circumstances.
The Court's reference is illustrative: "The adoption of the above resolution measures has achieved the preservation and continuation of the supply of core and critical banking activities, thereby ensuring the financial stability of the Cypriot banking system as a whole. Moreover, depositors who would have been compensated by the Deposit Protection Fund in the event of its activation have been fully protected, ensuring depositors' immediate access to insured deposits, and the cost of bank resolution has not been passed on to taxpayers. It also avoided the possibility of thousands of employees of the Bank of Cyprus and Laiki Bank finding themselves unemployed, as this would have been the result of the collapse of these banking institutions."
It was also the Court's finding that if the resolution measures were not taken and the Bank of Cyprus was put into liquidation "the Republic of Cyprus would be placed in an insurmountable, dire financial situation with catastrophic consequences for depositors and creditors of the banks, for financial stability and for society as a whole."
On the issue of the alleged violation of the defendant companies' rights, the Court, referring to previous case law, held that there had not been any violation, noting that "the reason for excluding certain categories of deposits, such as those of charitable institutions, schools and educational institutions, was to promote the public benefit and serve the public interest, to promote education and charitable work. It is therefore clear that the reason for excluding the above categories of deposits from the provisions of the orders issued under the Act was fully justified. By extension, there is no question of unequal treatment of the respondent companies so as to violate the principle of equality or equal burden sharing.'
With regard to the defendants' allegations of undue delay by the Republic of Cyprus in applying to the European Support Mechanism, the Court concluded that there was no undue delay in making the request and that 'the request to borrow from the European Support Mechanism, as well as the timing of its submission, was a political decision of the then Government and such decisions are beyond the control of the Court and do not fall within the acts or omissions for which the Republic of Cyprus may be liable for compensation'.
Finally, the Court did not prove any negligence and/or fraud on the part of the Republic of Cyprus and dismissed the six joined actions in their entirety, awarding costs in favour of the Republic.
On behalf of the Attorney General of the Republic, the case was handled by Ms Zakelina Erotokritou, Attorney at Law of the Republic and Mr Angelos Panagi, Attorney at Law.
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