Court verdict sends shockwaves to Nicosia
In a potentially precedent-setting decision in Cyprus, the Limassol District Court has upheld its initial ruling in favor of a Russian depositor at now-defunct Laiki Bank, potentially exposing the state to financial implications of up to 2-3 billion euros. The court’s decision, which awarded €780,000 in compensation to the depositor, could have far-reaching consequences for Cyprus.
The verdict has sparked concerns about the state’s financial burden if the Court of Appeal upholds the District Court’s decision. The fear is that this move could open the floodgates to billions in lawsuits from other depositors affected by the 2013 haircut, not only from Laiki Bank but potentially extending to Bank of Cyprus, the island’s largest as well.
The attorney general of the Republic of Cyprus is set to appeal the Limassol District Court’s decision, emphasizing the significant financial repercussions the state could face if it honors the compensation awarded to the Russian depositor. The court’s decision raises questions about a potential domino effect, with other depositors seeking similar compensation.
George Panteli, the director general of the Ministry of Finance, expressed confidence in the republic’s chances of vindication based on previous decisions of district courts. However, the implications of the Limassol District Court’s ruling, if upheld, would undoubtedly set a precedent with far-reaching consequences.
Adonis Papaconstantinou, president of the association of Laiki depositors (SYKALA), commended the Limassol District Court for deviating from the Central Bank’s narrative. He highlighted the court’s scrutiny of the government and Central Bank’s actions in mishandling the 2013 deposit haircut issues.
The court’s written decision, dated November 8, detailed the negligence of the Central Bank in protecting the rights of depositors. It outlined the failure to explore European borrowing mechanisms in a timely manner and the lack of a backup plan, leading to the enactment of a 2013 law. The court held the Central Bank responsible for the loss of deposits, citing its negligence and gross negligence in handling the financial crisis.
The decision further asserted that the Central Bank’s actions violated the claimant’s right to property and failed to achieve a reasonable balance between conflicting interests.
