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European Union: Court Rejects Compensation of Commercial Banks over Greek Debt

(Feb. 8, 2017) In a decision issued on January 24, 2017, the General Court of the European Union determined that the European Central Bank (ECB) is not obligated to compensate commercial banks for losses they incurred in 2012 from the restructuring of Greek debt. The Court said that the ECB had not broken the law by implementing its plan for the exchange of Greek debt instruments.  (Press Release, Judgment in Case T-749/15 Nausicaa Anadyomène SAS and Banque d’escompte v ECB  (Jan. 24, 2017), CURIA; Judgment of the Court of First Instance (Third Chamber) (Jan. 24, 2017), CURIA (in French).)

A French company and a private sector French bank that had held Greek debt instruments filed the case with the General Court. They sought to have the ECB compensate them for their losses in the debt exchange deal, amounting to €11 million (about US$11.8 million).  (Id.)  The French businesses alleged that the ECB had infringed the principle of legal certainty and equal treatment of private creditors. By its January 24 decision, the General Court affirmed a holding in a prior ruling regarding natural persons who held Greek debt, and stated that the ECB had no liability for losses resulting from the restructuring.  (Id.)

The General Court is one of the two major components of the Court of Justice of the European Union, the other component being the Court of Justice. It deals primarily with competition law, state aid, trade, agriculture, and trademarks.  (Court of Justice of the European Union (CJEU), EUROPA (last updated Jan. 24, 2017).)

Background on Handling of the Greek Debt

On February 15, 2012, the ECB and national central banks of EU Members within the euro area concluded an agreement with Greece for the exchange of the Greek debt instruments held by those banks for new securities.  This was accomplished following the adoption by Greece of legislation on the subject of resolving its debt problems.  (Press Release, supra; Approval of the Facility for Procurement Plans Between the European Financial Stability Facility (E.F.S.F.), the Greek Republic, and the Bank of Greece, of the Draft Memorandum of Understanding Between the Greek Republic, the European Commission, and the Bank of Greece, and Other Urgent Measures to Reduce the Public Debt and Rescue the National Economy (Feb. 14, 2012), OFFICIAL GAZETTE OF THE HELLENIC REPUBLIC  (click on link for pdf, Doc. No. 4046) (in Greek); Jenny Gesley, FALQ: The Greek Debt Crisis – Part I, IN CUSTODIA LEGIS (July 16, 2015) & Jenny Gesley, FALQ: The Greek Debt Crisis – Part II, IN CUSTODIA LEGIS (July 17, 2015).)

The new securities for debt held by the ECB and the national banks, as set up under this agreement, had different serial numbers but matched the original instruments in nominal values, interest rates, and interest payment and repayment dates. (Press Release, supra.) At the same time, however, Greece and private sector institutions, including commercial banks, agreed to an exchange of debt instruments on a voluntary basis that involved a 53.5% reduction in the value of the instruments held by the private creditors. (Id.)