The decision of the District Court of Limassol, which concerns a Russian depositor of Laiki, could be characterized as historic.
With the present action, the plaintiff claims, among other things, compensations amounting to €780,832.90 as damages that he allegedly suffered, due to the fact that he lost his deposited money in the Popular Bank, Cyprus Popular Bank Public Co Ltd, which in 2013 were brought , based on relevant legislation, in a reorganization regime, in which case there was an impairment of his bank accounts. Among other things, the plaintiff alleges negligence and/or breach of duty and/or false and/or misleading representations and/or fraud on the defendants, the Central Bank and the Republic of Cyprus.
Among other things, in the multi-page decision of the Court it is stated “…in this regard, it is judged that the CBC should have operated in the above context, regardless of the choices and actions of the government, which it failed to do, on the contrary, it seems, despite the fact that there were disagreements from the then its commander, in practice, by inaction in taking drastic measures, went along with the choices of the government, which ignored the suggestions of the experts, fearing the political cost.
The technocrats of the Ministry of Finance have been recommending recourse to the EMFS for the needs of the banking sector since May 2011, but neither the PtD listened to them nor the CBC took measures for Laiki. Assessments by the IMF and the European Commission for taking measures have existed since the period 2009-2010, but they were not listened to by the government and the CBC “passed by” contenting itself with suggestions only”.
In the same chapter, the decision states that “…the position of the defense that it was not so easy to take “extreme” measures, as characterized by the CBC, was also not overlooked. The position is remarkable, however, no study was presented that with stricter measures the economy of Cyprus would collapse, which was the similar dilemma when the two systemic banks were left on the verge of collapse, so consolidation was chosen. Obviously, there would be some consequences, among them reasonable and political costs to the government, since, among other things, Laiki employees would be fired, but things would certainly not be led to where they were led in March 2013.
The reasonable question that remained is what was avoided and what was achieved by the above options. In addition, in cooperation or in consultation with the Ministry of Finance, the CBC could freeze a disorderly outflow of deposits, as it did on 15.03.2013 until 29.03.2013, informing about the reasons why this would be done, with an immediate and simultaneous obligation of Laiki to increase of liquidity, and recapitalization, as requested until 30.06.2012, following the recommendation of the ETA, with resources from within, but this would be done on time and at a time stage when Laiki Bank's debt was much smaller and there were assets much of greater value.
The CBC was aware of the risks and accepted it regardless of the result which was the failure to secure the interests of the depositors, including them and the plaintiff, relying only on the fact that a loan would be secured by the CBC and the problem of the banks would be solved”.
Assessment of liability or non-liability of the CC
In this chapter, the Court states that “…the SC took responsibility through the positions of its representatives, and in particular the PtD, that it was not going to allow “cutting” of deposits, which worked, justifiably, so that the plaintiff did not withdraw his deposits earlier , with the result that he suffers real damage through their loss. The responsibility for the protection of depositors was assumed by the KD earlier by paying €1.8 billion for the purchase of the Preemptive Rights issued by Laiki Bank in June 2012.
The position of Defendant 2's counsel (KD) was not ignored, that the PtD sincerely believed when he made the relevant statement that he would succeed in avoiding the “haircut” of the depositions, however, even with this version, it is judged that the Court's conclusion is strengthened that the KD assumed the responsibility of protecting the depositors and their rights, but due to its earlier negligence, as explained above, it ultimately caused damage to the plaintiff's interests as a depositor.
The conclusion of the Court is that the impairment of the plaintiff's deposits was due to the negligent acts of the CD and the serious negligence of the CBC and not for reasons related to the rules of the market. The economic crisis that hit Cyprus in 2009 was not dealt with properly by the government, as the institution responsible for the planning, development and protection of the economy, but also by the CBC as an institutional body – supervisor, which was the protector of the financial system and the proper functioning of the banks, as well as the control of the banking system in general, and the protection of depositors, between them and the plaintiff. As a consequence of all the violation of the right of the plaintiff's property.
In view of all the above with the deduction, from the amount of the deposits, i.e. €1,629,556.81, the amount of €748,723.91 and the €100,000.00 remains the amount of €780,832.90. This is the financial damage and loss of the plaintiff in the aggregate on the day of the conclusion of his action and in the ordinary course of things”.
SigmaLive contacted Andreas Theophilou, whose office handled the case in question. Mr. Theophilou said that “we believe that we will be vindicated both in the first instance and in the appeals court”.
The lawyer characterized the decision of the District Court of Limassol as historic for two reasons:
1. It is the first of those issued, which vindicates depositors
2. The decision is directed against acts of omission that led to the haircut, it is the only one that has studied it.