Arbitration Court rejects 1.05 bln compensation suit over Laiki’s demise

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An International Arbitration Court has ruled in favour of the Republic of Cyprus in a lawsuit brought by former Laiki Bank strongman, the late Andreas Vgenopoulos, demanding compensation worth EUR 1.05 bln.

The Paris International Arbitration Court, with a 364-page ruling, found that Vgenopoulos’ arguments were unfounded and as such ruled in favour of the Republic, while awarding EUR 5 mln to the Republic for the costs of the trial. The decision is final and cannot be appealed, thus binding the parties.

The lawsuit was brought before the court in September 2013 with the claimants demanding EUR 1.05 bln in compensations.

The claimants, Vgenopoulos’ company MIG and 18 other persons, accused the Republic of Cyprus of causing the demise of Laiki Bank through wrong doings and omissions.

According to the Attorney General Costas Clerides, who handled the case personally, the international court has rejected the claimants’ argument that the government was seeking to obtain the majority of Laiki Bank’s shares with the recapitalisation in 2012, thus being responsible for the future of the bank.

With regards to the recapitalisation of Laiki, Clerides said: “The International Court ruled that the relative legal framework and the decree issued, was well within the regulatory powers of the state. The recapitalisation of the bank was necessary for its survival”.

Clerides said: “The Court has rejected the allegations of unfavorable discrimination on behalf of the Republic, in favour of Bank of Cyprus shareholders and at the expense of the of Laiki’s shareholders. It considered that the difference in treatment between Laiki Bank and Bank of Cyprus in March 2013 was reasonably permissible”.

Vgenopoulos is widely considered responsible for the collapse of Laiki as he steered the bank in 2006 to 2011.

In 2012 the government helped to recapitalised Laiki with EUR 1.8 bln, which was not enough to prevent it from going out of business the following year.

In the aftermath of the closure, its depositors lost all their savings in excess of EUR 100,000, with the Bank of Cyprus taking over Laiki’s operations in 2013.

The events are perceived as the most tragic episode of the banking crisis in Cyprus that were a consequence of an international bailout to save the banking sector.

Meanwhile, an ongoing trial at Nicosia Criminal Court against three former Laiki executives has been delayed as the court is studying the defendants’ claims that they could benefit from a lighter penalty following a change in the law after the events of 2013.