Cyprus: To Litigate or Not to Litigate?


Harneys’ Cyprus Banking Group is closely monitoring a legal challenge to the bail-out legislation which is currently before the Cyprus courts.

Following the agreement between the Eurogroup and the Republic of Cyprus the two largest banks on the island, namely the Bank of Cyprus and Cyprus Popular Bank (part of the Laiki Bank Group), are under certain resolution measures which include the bail-in (often referred to as the ‘haircut’ on accounts over Euro 100,000) and Laiki’s “good bank” assets being folded into Bank of Cyprus. In addition restrictive measures on capital transfers have been imposed.

The passing of laws and other relevant measures to enact the above have caused many clients to consider a possible legal challenge against the banks, the government, and/or EU bodies on the basis of violation of fundamental rights under the constitution of Cyprus; possible violation of the European Convention of Human Rights; or even action against the management of the banks.

The courts have granted injunctions which have raised hopes for claimants and interested parties, although the injunctions were subsequently lifted. This shows that each injunction application can be very fact specific. As the Court has now decided to hear the challenges on an expedited basis it seems unlikely that the Court will grant further injunctions. Each client should consider on a case-by-case basis if it should now join other claimants in the proceedings and what other options might be available.

For further details of the claims and advice in a specific situation please contact Pavlos Aristodemou or Emily Yiolitis.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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