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.