Court of Justice of EU rejects lawsuit against 2013 bail-in

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By Stelios Orphanides

The Court of Justice of the European Union (CJEU) rejected lawsuits filed by depositors at Bank of Cyprus and Cyprus Popular bank for impairments suffered in 2013.

“The Court concludes that the individuals and companies which initiated the actions have not succeeded in demonstrating an infringement of the right to property, of the principle of protection of legitimate expectations, or of the principle of equal treatment,” the CJEU said on its website on Friday. “Since the first condition for establishing the non-contractual liability of the European Union –namely unlawful conduct alleged against an EU institution– has not been satisfied, the court rejects the claims for compensation”.

The court ruled on lawsuits filed against the Council of the European Union by two groups of plaintiffs, individuals and companies, which were at the time depositors, bondholders or shareholders of the two banks and included the Nicosia-based Kypros Chrysostomides & Co. law firm. As a result of measures taken to stabilise the financial sector in Cyprus, depositors at Cyprus Popular Bank, also known as Laiki, lost all their deposits in excess of €100,000 while those at Bank of Cyprus saw almost half of their uninsured savings converted into equity. Depositors lost €8bn and bondholders €1.5bn.

“In order for the European Union to incur non-contractual liability, a number of conditions must be satisfied,” the CJEU said. These conditions include the unlawfulness of the conduct complained of the EU institution, the reality of the damage and the existence of a causal link between the conduct of the institution and the harm invoked.

The court ruled that the property rights of affected depositors, bondholders and shareholders had not been violated as the result of the measures applied in accordance to the memorandum of understanding (MoU) signed by Cyprus with its international creditors. Apart from losses for depositors, it also included the sale of the operations of Cypriot banks in Greece, the conversion of contingent convertible bonds into equity and a temporary freeze of deposits.

All the above measures “did not constitute an infringement of the right to property,” the CJEU said and added that the individuals and companies could not derive a legitimate expectation from of the acts and conduct invoked in their actions.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • A is B

    Theft has just been legalised.

    • Wanderer

      It’s been legalized since the “tax” euphemism was made up. Now they just expanded (again) the scope of legalized theft.

      • A is B

        Its always Mr and Mrs average that gets ripped off though, thats what sickens me the most.

  • Douglas

    Is there any wonder the UK voted to get out of the EU ,this is a travesty of justice for people who had their money stolen from their Bank Accounts,the EU have a duty of care for EU Citizens,they have clearly failed in their responsibility and it appears supported and protected by their own Courts.

  • Stuart Muir

    “The court ruled that the property rights of affected depositors, bondholders and shareholders had not been violated as the result of the measures applied” there you have it in a sentence we have the right to confiscate your savings from any European bank when and where we like. What a parcel of rogues!

  • Luke Coolhand

    I have never fully understood the UK’s opposition to the The Court of Justice of the European Union until I read the report of this verdict. Does this mean that it is lawful for any EU Government to take possession of anyone’s money if their policies have cocked up their economy? “The court ruled that the property rights of affected depositors, bondholders and shareholders had not been violated”. How could they reach such a conclusion? Surely if I have entrusted my money to the Bank and it is no longer there when I demand it, then my property rights (money is property) have indeed been violated, or not? This is indeed very weak reporting on, what for many is a crucial hearing. Some people have become very ill (some have died, either through suicide or heart attacks) brought on by stress caused by this malfeasance by the Anastadiades Government). How did these 28 judges vote? Unanimous or were they split? Mind you with €9.5bn at stake, there’s a lot of scope for “brown envelopes”.

    • Cemal Kasapoglu

      If the verdict was other way around, Cyprus would of declare bankrupt. Then naturally EU it’s mean Franco German, coalition Mafiosas must give money to Cyp government, Would they???

    • Kevin Ingham

      In answer to your question “Does this mean that it is lawful for any EU Government to take possession of anyone’s money if their policies have cocked up their economy?” the answer is yes.

      The bail in process has become the standard way of treating insolvent banks and this potential process is all that keeps many of them technically “solvent”

      The problem is that applying bail ins to banks in larger economies (such as Italy) would destroy faith in the banking system and the EU therefore they cannot actually go ahead and enact the required solution. In a ludicrous scenario the prescribed treatment to solve the problems has become a proscribed treatment that would destroy the Euro

      Cyprus never had the legal, technical, financial or economic framework to join the Euro.

      Failure to establish a common set of rules for banking within the EU and Cyprus’s lax laws on all sorts of issues (especially money laundering) meant Cyprus developed a banking system way beyond the capacity of it’s economy to underwrite or sustain

      Having Christophias as President when Cyprus joined the Euro was an ill-starred coincidence,but the EU and the Euro do shoulder a lot of the blame for what happened in Cyprus 6 years ago, and the country will be paying the heavy price of that for the next 20 years (although the EU are obviously never going to admit that )

  • Bob Ellis

    People assume that banks have an obligation to look after customers money. The least questioned assumptions are usually the most questionable. Banks only exist to generate stake holder return, allow the tarcking of wealth for taxation and bail out governments; this is why governments collude in the myth of the purpose of banks.

    • Wanderer

      These days banks primarily exist to facilitate control over people’s financial affairs. They do not seem to do much else lately.

      • Bob Ellis

        When have they ever done any thing else.

  • Samting

    State robbery with the collusion of the EU and corrupt EU Courts – it’s a political decision that everyone should be worried about. Your rights and freedoms are not guaranteed, and are threatened every day.

    • Cemal Kasapoglu

      That how it’s work’s Franco/German coalition DEMOCRACY. We the Cypriot’s was asking some thing else from the supposed DEMOCRATIC EU, we GOT some thing else, if you can work it out, you’ll know what I meant.!!!

  • Kevin Ingham

    The ECJ works under the mantra of ” une certaine idée de l’Europe” in which political considerations promoting ever increasing integration of the EU take precedent over existing legal principles.

    It is a hugely politicised court and is unlikely to deliver a verdict that could harm the prospects of any EU project (and deeming the bail in illegal would have nightmarish consequences for the EU banking system and the Euro)

  • Wanderer

    “The right to property?” —- does anyone really believe that that’s a priority for the high court of the socialist EUSSR?

  • konstabo

    this is what i was saying a long time ago , that bail in was a onetime thing apply able only to Cyprus and to no one else just wait and see how it will never be used again , mark my words…..

  • Banjo

    Sequence of events.
    The people of Cyprus deposit their money in the Cypriot banks.
    The Cypriot banks lend that money to Greece.
    The EU void those loans €4.5 billions worth and make repayment unnecessary.
    The people of Cyprus are told their money has disappeared.
    The EU court says tough.