Analysis Group Client Republic of Cyprus Prevails in Mass Claims Arbitration

August 15, 2024

Analysis Group was retained on behalf of the Republic of Cyprus, the respondent in a mass claims arbitration brought in connection with an alleged $600 million in losses resulting from the failure and resolution of the Bank of Cyprus and Cyprus Popular Bank (Laiki Bank), the republic’s two largest banks. The claimants, uninsured depositors and investors in the banks’ subordinated debt, argued that Cyprus should be held liable for the claimants’ losses because Cypriot authorities were responsible for the banks’ financial problems, failed to adopt alternative measures that would have limited their losses, and applied the resolution measures in an expropriatory and discriminatory manner. They brought their claims in an International Centre for Settlement of Investment Disputes (ICSID) arbitration, alleging a breach of Cyprus’s bilateral investment treaties with Luxembourg and Greece.

An Analysis Group team led by Vice Presidents Steve Saeger, Ann Murray, and Andrew Ungerer, and including Managers Hunter Lent and Juan Carvajal, supported two experts on banking and financial regulation, both of whom testified on behalf of Cyprus: academic affiliate Jean-Pierre Landau and Jonathan Fiechter. Professor Landau and Mr. Fiechter assessed the reasonableness of the resolution measures that the Cypriot authorities adopted in the context of the banks’ financial condition, the available policy options, and international practice.

The ICSID tribunal found in Cyprus’s favor, concluding that the resolution measures did not breach Cyprus’s treaty obligations and were a legitimate exercise of the regulatory power of authorities acting in the public interest. The tribunal’s decision also confirmed that the claimants would not have been better off if the banks had instead been allowed to collapse and enter liquidation.