Cyprus’s Supreme Court has unanimously rejected a Polish depositor’s claim for approximately 430,071 euros in compensation over the 2013 Laiki Bank haircut, ruling that EU law overrides bilateral investment treaties between member states.
The Polish national had deposited 454,579 euros in a fixed-term account at Laiki Bank before March 2013. Following the resolution measures taken during the 2013 banking crisis, her deposits were reduced to 24,508 euros. She sought compensation for the difference, arguing that Cyprus was obliged to pay under Article 4 of the 1992 bilateral investment treaty between Cyprus and Poland, which provided that neither contracting state would take measures depriving investors of their investments without paying prompt, adequate and effective compensation. She argued the 2013 measures amounted to indirect expropriation of her investment.
The first-instance court had rejected the claim, finding the bilateral treaty unenforceable after both Cyprus and Poland joined the European Union. The Supreme Court, sitting on appeal under judges Malachtos, Ioannides and David, upheld that decision.
On appeal, the court examined the relationship between EU law and bilateral investment treaties between member states. It noted that Cyprus and Poland signed an agreement in 2020 terminating such treaties, subsequently published in the Official Gazette, though the original 1992 agreement formally remained in force at the time of the disputed events and the 2017 first-instance ruling.
The court referred extensively to EU Court of Justice case law, including the Achmea ruling (C-284/16), which established that arbitration clauses or provisions in investment treaties between member states cannot bypass the EU’s judicial review system and EU law.
It found that applying the Cyprus-Poland bilateral treaty in a way that treated investors differently based on nationality would violate Article 18 of the Treaty on the Functioning of the European Union, which prohibits discrimination on grounds of nationality within the scope of EU law. Accepting the claim, the court said, would create two categories of depositors: citizens of member states able to claim compensation under bilateral treaties, and other citizens without such rights, a distinction it found constituted prohibited discrimination.
The appeal was dismissed in its entirety and the court awarded costs of 3,500 euros to the Republic of Cyprus.
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