French Supreme Court rejects $1.4b claim against CBC in FBME resolution case

France’s Supreme Court (Cour de Cassation) has vindicated the Central Bank of Cyprus (CBC) and rejected a claim of $1.4 billion, ruling that CBC's action to place FBME bank under resolution was a prudent action that had not violated any obligations stemming from the bilateral investment convention between Cyprus and Lebanon, ending a legal battle since the bank’s 2014 resolution.

The CBC, in its capacity as Resolution Authority, placed FBME under resolution in July 2014, following a decision by the US Treasury to name the bank “a foreign financial institution of primary money laundering concern”.

According to a press release issued by the Law Office of the Republic, the French Cour de Cassation ratified a decision taken in an arbitration of January 15 2019 between A.F.M.S. and F.M.S. v. Republic of Cyprus (ICC Case no. 20588/ZF//AYZ).

The French Supreme Court’s decision puts an end in the claim of the claimants of the arbitration A.F.M.S. and F.M.S. v. Republic of Cyprus, who sought compensation amounting to $1.4 billion from the Republic of Cyprus, the Law Office added.

Following the Cour de Cassation’s decision, which is the highest court in France, claimants have no legal means at their disposal to appeal against the arbitration’s decision.

Essentially, the Cour de Cassation confirmed the decision issued on March 22 2022 by the Paris Court of Appeal to reject the claim placed by the claimants as well as the decision by the International Court of Arbitration in the case A.F.M.S. and F.M.S. v. Republic of Cyprus.

The claimants, who indirectly held the FMBE bank’s share capital, initiated an international arbitration against Cyprus invoking the bilateral convention for the mutual promotion and protection of investments between Cyprus and Lebanon.

They also claimed that the Republic had to be considered as liable because it did not obstruct the classification of FBME as “a foreign financial institution of primary money laundering concern” and to continue operating in spite of the classification.