Law Office to appeal Court decision to compensate depositor over 2013 haircut
13:40 - 09 November 2023
The Law Office of the Republic has said it will appeal a Limassol District Court decision to compensate a foreign depositor of the defunct Laiki Bank over the haircut imposed on uninsured deposits of over €100,000 in 2013, as part of the bailout in Cyprus.
The decision to appeal was announced in a press release on 9 November.
“The state was faced with an impasse and the measures taken were both for public interest purposes and to ensure, to the maximum extent possible, the deposits, including the plaintiff’s deposits,” the court stated in its July 20 decision which was released on 8 November.
In its announcement, the Attorney General’s office stated that the lawsuit sought the issuance of declaratory judgments and the payment of compensation for the alleged damages that the plaintiff suffered from the impairment of her deposits.
The decision stated that “The Bank of Cyprus was placed under reorganisation when it became impossible to secure the minimum necessary funds and while facing very serious liquidity issues. […] The above measures were taken to avoid the liquidation of the bank which would have disastrous effects on the creditors of the Bank of Cyprus and on the economy of the state.”
This had been the first Court decision that vindicates a depositor over the haircut imposed by the Euro area finance ministers (Eurogroup) decisions in March 2013 as part of the Cypriot €10 billion bailout.
Sources told CNA that the Central Bank of Cyprus will also submit an appeal against the Court ruling.
Amid the financial crisis, Cyprus received a €10 billion bailout from the European Stability Mechanism and the IMF. As part of the decision, a haircut on uninsured depositors was imposed on the Bank of Cyprus, while Laiki Bank was to be liquidated. According to IMF estimates, the haircut of uninsured deposits amounted to close to €8 billion, of which €3.7 billion was in Laiki.
In its ruling issued on 8 November, the Limassol Court said, among other things, that "the impairment of the plaintiff's deposits was due to the negligent acts of the Republic of Cyprus and the gross negligence of the CBC and not to reasons related to the rules of the market."
So far, courts in Cyprus have exonerated the Republic in numerous appeals by depositors or companies against the haircut decision.
“The court decision is the first one which vindicates a plaintiff in a similar case and is diverging from all previous rulings issued so far,” the Law Office said in a statement.
After examining the court ruling, the Law Office deemed that this should be appealed and a group of the Law Office’s experts are preparing the appeal, the press release added.