Greek in­vestors to sue govern­ment for € 50 mln

Financial Mirror (Cyprus) - - FRONT PAGE -

The govern­ment could be fac­ing a law­suit with a claim for “at least” 50 mln eu­ros from Greek in­vestors who lost their de­posits and hold­ings as a re­sult of the coun­try’s fi­nan­cial cri­sis and last year’s bailout.

The group of nearly 100 in­vestors, which in­cludes in­di­vid­u­als and in­sti­tu­tions, is com­prised of de­pos­i­tors and bond­hold­ers of Laiki Bank and the Bank of Cyprus. The claimants, who are all Greek cit­i­zens or are based in Greece, seek re­cov­ery of the value of their de­posits or bonds lost as a re­sult of the bailout — es­ti­mated to be well over 50 mln eu­ros. A no­tice of dis­pute as a class claim was filed on Mon­day on be­half of the in­vestors by the fi­nan­cial lit­i­ga­tion law firm Grant & Eisen­hofer, as well as Kessler Topaz Meltzer & Check and Ky­ros Law, and also pub­lic in­ter­na­tional law firm Volterra Fi­etta.

The no­tice of dis­pute has been sub­mit­ted un­der a 1992 bi­lat­eral in­vest­ment treaty be­tween Greece and Cyprus, which pro­vides that the par­ties must first at­tempt to set­tle their dis­pute am­i­ca­bly for at least six months, the claimants’ lawyers said in a state­ment. If the par­ties do not reach a set­tle­ment in that time frame, the claim would then be sub­mit­ted for res­o­lu­tion by way of bind­ing ar­bi­tra­tion at the In­ter­na­tional Cen­tre for Set­tle­ment of In­vest­ment Dis­putes, or ICSID.

The an­tic­i­pated date Jan­uary 2015.

“This is the first time that the bi­lat­eral treaty will be tested as a class ac­tion for in­vestors who have suf­fered losses stem­ming from the Euro­pean fi­nan­cial cri­sis, which gripped Greece and Cyprus par­tic­u­larly hard,” said Grant & Eisen­hofer co-man­ag­ing di­rec­tor Jay Eisen­hofer.

“We be­lieve strongly in the mer­its of the ag­grieved in­vestors’ claims as a class, and will be work­ing closely with Ky­ros Law and Volterra Fi­etta to re­cover their lost funds.”

Grant & Eisen­hofer is work­ing with Ky­ros Law on the Cyprus in­vestor dis­pute, as part of G&E’s on­go­ing col­lab­o­ra­tion with the Bos­ton-based firm. Last year Ky­ros Law launched an of­fice in Athens for the joint ven­ture, and the two firms work to­gether on in­vestor-driven lit­i­ga­tion com­ing in and out of Greece, in­clud­ing mat­ters stem­ming from the coun­try’s re­cent eco­nomic melt­down.

The in­vestors’ claims arose out of Cyprus’ re­sponse to its fi­nan­cial cri­sis, fol­low­ing Greece’s de­fault on its own bonds in 2012. Laiki Bank and the Bank of Cyprus had pur­chased huge amounts of Greek bonds and lost bil­lions of eu­ros once Greece de­faulted; as a re­sult of these losses, it be­came clear that at least Laiki Bank might be in­sol­vent.

of such an ac­tion would be mid-

Bond­hold­ers were also neg­a­tively af­fected. In July 2013, the Bank of Cyprus an­nounced that hold­ers of con­vert­ible bonds and var­i­ous types of se­cu­ri­ties would be con­verted to Class D shares of the bank at a con­ver­sion rate of 1 euro nom­i­nal amount for each 1 euro in prin­ci­pal amount of such sub­or­di­nated debt claims. Fur­ther­more, the nom­i­nal value of Class D shares would be re­duced to 1/100th of their orig­i­nal value.

“The un­fair terms of the re­vised bailout agreed be­tween Cyprus and the Troika tar­geted and dis­crim­i­nated against Greek in­vestors who placed their money and trust in Bank of Cyprus and Laiki Bank,” Eisen­hofer stated. “No­tably, for­eign in­vestors made up the bulk of de­pos­i­tors in these two banks. Con­sid­er­ing how Cyprus long mar­keted it­self as a tax haven, and had at­tracted many in­ter­na­tional in­vestors, the govern­ment’s abrupt U-turn and in­equitable con­duct to­ward in­vestor funds takes on an even more egre­gious pall.”

Eisen­hofer fur­ther pointed out that while Greek de­pos­i­tors were sub­ject to ex­treme bailout mea­sures, many Cypriot pub­lic in­sti­tu­tions were made ex­empt. The de­cree specif­i­cally ex­cluded, among oth­ers, credit in­sti­tu­tions, in­sur­ance com­pa­nies, gen­eral govern­ment en­ti­ties and do­mes­tic fi­nan­cial aux­il­iaries.

John Kyr­i­akopou­los, Athens-based man­ag­ing part­ner of Ky­ros Law, stated: “The Cyprus govern­ment wrong­fully de­prived many Greek in­vestors of their property and treated them un­fairly as a re­sult of the 2012-2013 cri­sis. Not only that, none of the bailout funds will be used to as­sist the re­cap­i­tal­i­sa­tion of the Bank of Cyprus. In­stead, share­hold­ers - many of them for­mer Laiki Bank de­pos­i­tors - as well as bond­hold­ers and de­pos­i­tors are bear­ing the en­tire bur­den of re­cap­i­tal­i­sa­tion.”

Eisen­hofer added, “In the event our clients can­not come to an agree­ment with the govern­ment of Cyprus, our clients are pre­pared to com­mence bind­ing ar­bi­tra­tion be­fore ICSID.” Most com­monly in the ICSID fo­rum, one ar­bi­tra­tor would be ap­pointed by the Greek in­vestors, one by Cyprus, and the third would be ap­pointed by agree­ment (or by ICSID it­self).

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