Background

The Cyprus Action

The law firms Grant & Eisenhofer PA (based in New York City) and Kyros Law (based in Athens), together with other counsel, are prosecuting claims against the Cypriot government in an international arbitration proceeding before the World Bank's International Centre for the Settlement of Investment Disputes.

This arbitration proceeding was brought on behalf of over 950 Greek citizens who lost funds as a result of their deposits in Laiki Bank (also known as Cyprus Popular Bank, Marfin Popular Bank or Marfin Egnatia Bank) or the Bank of Cyprus, or as a result of bonds they purchased that were issued by the Banks.  We now seek to file a new ICSID arbitration, based on the same evidence and claims, on behalf of the thousands of other Greek citizens who lost funds in the Bail-In.

On December 15, 2017, the Firms filed a Memorial on the Merits, setting forth in nearly 200 pages, supported by almost 2,300 exhibits as well as first-hand eye-witness testimony, the evidence that counsel for Claimants gathered during the course of years of investigation.  We believe this evidence provides strong support for Claimants’ position that the Cypriot government’s involvement in the expropriation violated the rights of Greek citizens under the Cyprus-Greece Bilateral Investment Treaty.

The Arbitration alleges that Cyprus violated the BIT’s expropriation provisions because the Bail-In was intentionally designed to discriminate against non-Cypriots while ensuring that its own people would pay far less than their proportionate share. In particular:

  • Cyprus knew that most depositors with more than €100.000 in the Banks were foreign, and rejected viable alternatives to the Bail-In that would have spread the burden evenly across foreigners and Cypriots;
  • the Cypriot government ensured that loans it had made to the Banks were repaid in full;
  • the Bail-In measures exempted “charities” and other institutions that benefited only Cypriot entities and citizens.

The effect of these discriminatory provisions was that Greeks were made to shoulder more than double their share of the burden of the financial troubles in Cyprus. 

In addition to being discriminatory, the expropriation was also unlawful for the following reasons:

  • investors were not given any effective means to challenge the taking of their funds;
  • the Bail-In was grossly disproportional to the financial needs of the Banks (indeed, the Bank of Cyprus did not need to be placed into resolution at all); and
  • as you are acutely aware, adequate compensation was never provided to the victims of the expropriation.

The Arbitration also alleges that Cyprus violated the BIT’s guarantee of “fair and equitable treatment” to Greek investors, which essentially requires the Cypriot government to act in “good faith.”  The Cypriot government’s lack of good faith is demonstrated by the facts that:

  • the Bail-In measures violated Cyprus’s own laws, including the Cypriot Constitution, that had been in place when Greeks decided to invest in Cyprus;
  • Cypriot officials publicly assured the world that no Bail-In would be necessary even as they knew that plans were in place behind the scenes to force foreigners to pay for the fiscal needs of Cyprus; and
  • the Cypriot government relied on a financial analysis of the Banks (the “PIMCO Report”) to argue that the Bail-In was necessary, but an additional, secret study (the “Blackrock Report”) determined that the PIMCO Report lacked sufficient transparency to determine whether its conclusions were reasonable. Further, the Cypriot government never made the Blackrock Report publicly available. 

Today, Cyprus is thriving. Indeed, it did not even require all of the €10 billion in loans that Cyprus obtained from the Eurogroup as part of the Bail-In, and it has fully repaid the funds that it did use.  The day is long overdue for Cyprus to pay back the funds it took from Greek depositors and bondholders.