Claim for PSI compensation is rejected

The General Court of the European Union has rejected a compensation claim by owners of Greek debt who participated in the 2012 restructuring, according to a decision released on Wednesday.

The reasoning for the above verdict was that the losses the claimants suffered corresponded to the risks that commercial activities in the credit sector entail, and that they were not treated unfairly compared to other holders of debt. It also said it does not have the competence to rule on any liability of the Eurogroup, given the informal character of the latter.

The 2012 haircut on the Greek debt held by private investors, known as private sector involvement (PSI), concerned the bondholders’ agreement to take a 53.5% cut in the face value of the debt that they held. Based on the collective action clauses (CAC), the swap became mandatory even for the private investors who had rejected the voluntary arrangement, including those who resorted to the EU court.

The claim asked for compensation toward debtholders’ losses as a result of the forced exchange of government debt, following the decisions by the Eurogroup, the European Commission and the heads of states and governments.