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Cypriot lawyers say lawsuits are likely following bailout cash grab
It ain’t over yet - that’s the message from lawyers in Cyprus, the latest poster boy for those forecasting the demise of the eurozone.
A last-minute bailout deal may have averted the country’s bankruptcy and temporarily calmed markets, but local lawyers anticipate a wave of lawsuits from those forced to cough up to cover the ill-advised investments of at least two banks. Indeed, those with deposits of more than €100,000 (£85,000) in the now-defunct Laiki Bank could lose everything.
“There are strong arguments in favour of legal action,” says Michalis Kyriakides, a partner at local law firm Harris Kyriakides. “There’s certainly an actionable case for affected people to contest decisions taken by the government or the central bank. Each depositor with dealings with a financial institution is protected by the terms of the personal agreement and the principles of contract law.”
So eurozone leaders should not heave too heavy a sigh of relief. Lawyers maintain that scope exists for a range of legal challenges, depending on the type of accounts held in Laiki or the Bank of Cyprus.
Questions are also swirling around compensation plans vaguely mooted by the Nicosia government.
“They’re talking about issuing shares in lieu of cash,” explains Kyriakides, “but we don’t know the value of those shares and whether that value will increase.”
Cypriot law firms may have issues themselves in addition to acting for potential litigants. Pavlos Aristedemo, a partner in the local office of offshore firm Harneys, points out that legal practice exposure is a factor.
“Many will be affected by having their deposit or current accounts in one of those banks,” he says.
But ultimately, Aristedemo remains guardedly confident about the island’s future.
“We believe in the importance of the jurisdiction,” he says. “We’ll have to work hard to bring it back up again, but look at what happened in Ireland - they had a banking crisis but the law firms weren’t that badly affected. We will fix our banking sector and we still have our services sector.”