The ultimate owners of FBME Bank are seeking in excess of $500 mln in damages from the Cyprus government through an arbitration process that has been filed with Paris-based International Chamber of Commerce, over a decision to place the bank under administration and proceed with a forced sale of the operations.
In July, the Central Bank of Cyprus issued a resolution order and placed the Cyprus branch of Tanzania-owned FBME Ltd. under administration after the US Treasury Dept. claimed that the bank was being used for illicit transaction by groups on the U.S. and international wanted list, allegations that the bank’s shareholders have refuted through documents prepared by external auditors and advisory firms.
The ICC, that may even reward a higher amount in final damages, served notice on the Republic on November 4 and the Cyprus government is expected to provide an initial response by December 5.
Arbitration papers filed at the ICC by the owners of FBME Ltd. suggest that the bank has invoked the bilateral agreement between Cyprus and Lebanon that entered into force in 2003, which protects investor rights in each other’s country. They claim that this treaty was ignored by the Central Bank of Cyprus when it issued a resolution order against the Cyprus branch of FBME Bank on July 21 this year.
The ultimate owners have extensive investments in Lebanon from where their international banking operations started several decades ago, after which they expanded to Cyprus and Tanzania.
They also claim that the arbitration papers detail what harm has been caused by the Central Bank’s “hasty, ill conceived and potentially sinister actions” and the “continuing damage caused to the bank and its depositors by the actions of the Administrator, Mr Dinos Christofides. This has included the effective closure of the branch from 22 July to 2 September, its restrictions on transactions since early September and his attempt to … siphon the liquidities of the Branch to the benefit of the CBC (Central Bank of Cyprus)”.
They also claim that Christofides “refused to take any steps necessary to allow FBME Bank to resume certain activities in non-US$ currencies,” and has also “actively sought to obstruct the ability of the Bank to do so itself.”
The Financial Mirror has received several complaints by U.S., European Union and other national who describe how their businesses have been destroyed by the freezing of their accounts within FBME’s Cyprus branch by the administrator without having given reason and without offering any other reasonable remedy.
The bank’s shareholders say they are taking the Republic of Cyprus to arbitration first and foremost to protect the bank’s employees and depositors, but also Cypriot taxpayers “who would ultimately have to foot the bill for the damages awarded to the shareholders following the irresponsible and illegal actions by the CBC.”
In another development, the District Court of Nicosia is scheduled to hear the shareholders’ interim application to stop the sale of the bank's Cyprus branch on Monday.
