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First court victory for haircut Greek bondholders

26 July 2015 / 18:07:41  GRReporter
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The recent court decision in favour of bondholders, who were harmed by cuts in government bonds in 2012, ordered the defending bank to compensate the investor for material damages (53.5% initially), as well as for moral ones.

According to the law, the Greek state cannot be sued for depreciating the bonds' value. Only banks and investment firms can.

The case refers to the famous exchange of Greek bonds held by private creditors, which became known by the acronym PSI (Private Sector Involvement) and affected over 15,000 small investors, over 2,500 former employees of Olympic Airways (who were made redundant and given bonds instead of lump sum compensations), pharmaceutical companies, which received bonds as payment of what the state owed them, and public entities.

It should be noted that most parties promised laws in favour of those who lost money (New Democracy and PASOK before the 2012 election, and SYRIZA before the January election), but none of them have delivered.

According to Yannis Kyriakopoulos (an attorney from Kyros Law Offices), who took over the case, the court "ruled that the bank was obliged to advise of the risk of bankruptcy – not only prior to concluding the contract, but thereafter as well, especially after the credit assessment of government bonds was reduced within six months (December 2009 - April 2010) by all credit rating agencies (Moody's, Fitch, S&P)".

The well-known lawyer maintains that "this is the first decision that opens the way for compensating all those affected by PSI. We are certain that regardless of the time this decision will take (we believe it will be shorter after the recent amendments to the Civil Law Code), the likelihood of a positive solution is fairly high. And this is the case because, based on the decisions of the supreme courts in Greece and overseas, it is the only consistent legal outcome."

For the website's, Kyriakopoulos made a reference to relevant court decisions abroad, which are in favour of foreign holders: "The point, in which all of these rulings intersect, is legally undisputable, and leads to the only successful path: the one followed by Austrian and German owners of Greek bonds. They addressed the banks, where they purchased the bonds, quoted provisions protecting investors and were supported by the incumbent courts."

Another lawyer, who requested anonymity, told "I think the decision is a positive step, but unfortunately I am not sure that the arguments are strong enough and won't be revoked by the Court of Appeal."

Tags: PSI treasury bills cuts compensation court decision
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