South Cyprus Supreme Court is hearing applications by bank depositors who are taking legal action because their assets have been frozen and a large portion of their deposits will be written off under the conditions of the EU bailout.
Part of the bailout plan includes restructuring South Cyprus’ two main banks – Laiki and Central bank which includes a huge haircut or write off for larger bank depositors.
Uninsured deposits in Laiki and Central bank (over 100,000 euro) have been frozen in order to resolve Laiki’s debts and to recapitalise the Bank of Cyprus.
Lawyers representing the applicants say that the decision to freeze assets has had a drastic effect on their property rights; therefore they were appealing against Central bank’s decree in regard to Laiki bank.
Petros Clerides, the Attorney General said that the decree had come out of a political decision by the Eurogroup to prevent South Cyprus becoming bankrupt.
He further argued that the decision regarding the two banks was a precondition of the Memorandum of Understanding and a Loan Agreement for South Cyprus; these he said were “international agreements.”
Thus, he claimed that the Eurogroup’s decision is taken to be an extension of an act of government and does not fall within the jurisdiction of the Supreme Court.