HOW TO GET A COMPENSATION FROM CYPRUS

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Published on Tuesday, 09 April 2013 11:40

Traditionally Cyprus was a "safe haven" for the Ukrainian and Russian capital, calm and safe place to store money, where it is then invested in Ukraine. However, recent events related to the crisis of the financial system of Cyprus, have raised serious concerns among depositors-investors of Cypriot banks.

At this stage, when the investment protection is seen at a high political level, the hot question remains about the possibility of investors to protect themselves in this situation. 

Within the international investment generally accepted that any investment in another country is protected - even if the money invested in the economy of another country is taken away from the investor, he should receive for it appropriate compensation. Therefore, Ukrainian companies have the right to apply for compensation for the lost Cyprus capital, whether it’s written off with deposit percentage or a missed opportunity to withdraw funds from the country. A prerequisite of compensation receipt will be thorough careful documentation of all transactions: the size of the deposits in Cypriot banks, as well as the attempts to withdraw funds. It’s necessary to carefully analyze all the business connections of company with the Cypriot banking system: the existence and content of contracts, bank deposits, credit lines and current accounts. The important point is to prove the negative effects caused by the crisis in Cyprus for the company, as well as the presentation of the subsequent claims to Cypriot banks: what financial or other losses the crisis will entail.

Based on these data, it will be possible to decide in what order to claim compensation for the losses.

Company "Vasyukov Ostapyuk & Partners' sees various mechanisms for obtaining compensation: the trial in Cyprus, in other countries, or investment arbitration against the state.

1. The trial in Cyprus assumes lodge a formal complaint - claim – to Cyprus bank of its location. The basis for such claim may serve as a contract of the bank deposit or service, or the laws of Cyprus, guaranteeing investments and deposits. However, there is a great risk that the Court of Cyprus considers the measures taken by the Cypriot government as "force majeure".

2. The trial against the Cypriot banks in other countries. This mechanism is based on the special rules contained in the various international treaties with Cyprus. For example, a bilateral agreement between Ukraine and Cyprus on legal aid in civil cases or the Lugano Convention, acting for the countries of the European Union. According to these documents, in case of damage, a claim against the guilty party may be served at the place of occurrence of damages. Thus, if the actions of the Cyprus government has caused losses to business in Ukraine or any other country, then the claim may be served and considered by the court of that state.

3. Investment arbitration, or claim to Cyprus as a state, can be based on the violation of the depositors’ rights as foreign investors. This method to obtain compensation involves the filing of the claim on the basis of bilateral or multilateral agreements on investment protection, as well as the presence of an investor that has the origin of the partner country of Cyprus to the relevant agreement. Ukraine hasn’t such agreement with Cyprus, in contrast to Russia (but it is not in force yet). Cyprus has similar agreements with 16 countries, including Belgium, Luxembourg, Israel, Czech Republic, etc. If the company's Cypriot investments are structured in one of these countries or beneficiary of that investment has the nationality of the partner country of Cyprus (under the contract), the filing of a claim is possible and legitimate.

Company "Vasyukov Ostapyuk and Partners" is ready to implement any of the options for obtaining compensation.

For additional questions and consultations, please contact the office of "Vasyukov Ostapyuk and partners."