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Government wins landmark international arbitration case against Laiki, Bank of Cyprus depositors

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Government wins landmark international arbitration case against Laiki, Bank of Cyprus depositors

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In a landmark decision, the World Bank’s International Center for Settlement of Investment Disputes (ICSID) tribunal unanimously rejected a USD 600 million claim by depositors and bondholders of Laiki Bank and the Bank of Cyprus.

The arbitration case, Theodoros Adamakopoulos and Others v. Republic of Cyprus included 968 natural persons, primarily Greek nationals, and six entities (one based in Luxembourg).

The claimants argued that the 2013 bail-in measures implemented during the financial crisis amounted to unlawful expropriation.

The arbitration was based on the bilateral investment agreements of the Republic of Cyprus with Greece and Luxembourg.

Their position was that the Republic should be held responsible for the losses they suffered in connection with the bail-in measures, arguing that it caused the banks’ financial problems, failed to adopt available alternative measures that would have prevented or significantly mitigated their losses, and applied the bail-in measures in a discriminatory manner amounting to expropriation.

However, the tribunal ruled in favor of Cyprus , finding the measures a “legitimate exercise of the State’s regulatory power” and not discriminatory.

The decision vindicates the government’s position, which emphasized the necessity of the bail-in to prevent a wider economic collapse.

“The Arbitral Tribunal confirmed that the decision to impose the bail-in measures was taken after first assessing that there were no other available options,” a Cypriot government statement said.

The tribunal did find a violation in the case of one claimant due to “exceptional circumstances” related to the subsequent handling by the state, but not regarding the legality of the bail-in itself.

The Republic of Cyprus was represented before the ICSID by the law firm Curtis, Mallet-Prevost, Colt & Mosle LLP, along with the Attorney General of the Republic, a team of lawyers from the Law Office, and officials from the Central Bank and the Ministry of Finance.

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