Cypriot firm launches legal action against EU over ‘bail-in’

Cypriot firm Dr K Chrysotomides & Co has filed a lawsuit against the EU on behalf of 51 claimants seeking compensation for losses suffered when Cyprus agreed to a ‘bail-in’ on two Cypriot banks.

The case, filed before the General Court of the EU against the Eurogroup, the European Central Bank, the European Commission and the EU Council, challenges the Eurogroup’s March 2013 decision to impose a ‘bail-in’ on the Bank of Cyprus and the former Laiki Bank, which saw thousands of bank customers lose savings. 

The haircut was imposed by the EU, which originally proposed that all depositors in Cypriot banks would lose 10 per cent of their savings in return for a bailout of the country’s economy. The Cypriot government eventually negotiated a compromise, which meant those with savings of less than €100,000 (£85,000) had their deposits transferred to the Bank of Cyprus as the country’s second-largest bank, Laiki, was wound down. Those with savings of more than €100,000 lost a substantial chunk of their money.

Cases have already been filed in Cyprus challenging the legality of the move, but the Chrysotomides case is the first to seek redress from the EU.

It is believed to be the first time that the EU court has been asked to decide whether the acts of the Eurogroup – an informal forum of the Eurozone’s finance ministers – are attributable to the EU.

In a statement announcing the case, K Chrysotomides & Co said the applicants were challenging the decision to impose a bail-in on the two banks, “as well as the acts of the European Central Bank, the Commission and the Council in endorsing and implementing that decision. They claim that these decisions have violated their right to property and the principles of non-discrimination, protection of legitimate expectations and the principle of proportionality, as prescribed by EU law.”

The General Court has asked the EU institutions to file a defence within two months.

The application is supported by legal advice from Matrix Chambers’ tenant Takis Trimidas, chair of European Law at King’s College London.

For more on the bail-in, see last year’s special report, Blood of the sun.