Summary

Central Bank of Cyprus and Reorganization Committee v FBME Bank Ltd, District Court of Nicosia, Civil Case No. 905/2015

It has been filed on December 22, 2015 by the Central Bank of Cyprus ('CBC') and the Reorganization Committee ('RC') against FBME Bank Ltd ('FBME'). Plaintiffs sought to wind up FBME, a bank incorporated in Tanzania, and appoint a special administrator.

Three of the decisions that have been issued, are publicly available: the fifth interim order of March 16, 2016; the interim order of July 15, 2016; and the final judgment of May 10, 2017.

(March 16, 2016) Plaintiffs filed two applications, one by summons and one ex parte. FBME requested the rejection of the "First" Application because: (a) it was not accompanied by a retainer; (b) the law does not foresee filing an application by summons for the winding up of a company and appointing a special administrator; (c) two plaintiffs legally may not seek at the same time two orders; and (d) the application was filed in violation of the Cyprus banking legislation. The Court rejected the first objection, as no such requirement was set out in the applicable law. It further dismissed the second objection, as the ex parte application had been transformed into an application by summons, due to its service to the opposite party. Nonetheless, the Court dismissed the application by summons. The Court equally rejected the objection regarding the two plaintiffs, as it found that the applications were in essence submitted by CBC and that the winding up was not requested twice, because the applications were submitted at the same time and by the same attorneys, while being based on the same facts. Finally, it decided to examine the allegations on law violation at the merits of the case. [Document]

(May 10, 2017) At the merits of the case, the Court first addressed the question of whether FBME was a Tanzanian or a Cyprus bank. CBC had argued that, since 90% of its deposits lay in Cyprus, it is a Cypriot bank. This argument was implausible and the Court affirmed that FBME is a Tanzanian bank. Then, the Court refrained from examining whether FBME actually conducted money laundering, as CBC's actions were based on the impact of FinCEN's announcement. It equally refrained from examining FBME's assertions that its deposits with CBC had been mismanaged.

Similarly, it refused to examine the legality of the order revoking the operation license of FBME's branch in Cyprus ('the Branch'). However, the Court clarified that the present application requested the winding up of FBME, which continued to operate under the license issued in Tanzania, and not its Branch.

It found that CBC had no authority over a Tanzanian bank, whereas the applied provision of Cyprus banking law, provides the revocation of operation license of a bank (and not of a branch) as a condition for the requested winding up. Finally, the Court underlined that a further condition for the requested winding up was public interest. CBC's assertions, according to which in the present case it included repatriation of capital, fostering trust in the Cyprus Banking System and saving the reputation and credibility of Cyprus, did not convince the Court. Thus, the application was denied. [Document]

Note: Document(s) and English introduction(s) kindly provided by Natalia Charalampidou.