Court of Justice of the European Communities (including Court of First Instance Decisions)

ORDER OF THE GENERAL COURT (First Chamber)

21 July 2022 (*)

(Action for damages – Economic and monetary policy – Stability support programme for Cyprus – Memorandum of Understanding of 26 April 2013 on Specific Economic Policy Conditionality concluded between Cyprus and the European Stability Mechanism – Jurisdiction of the General Court – Sufficiently serious breach of a rule of law conferring rights on individuals – Equal treatment – Principle of proportionality – Action manifestly lacking any foundation in law)

In Case T‑200/18,

Fersher Developments LTD, established in Nicosia (Cyprus),

Vladimir Lisin, residing in Lipetsk (Russia),

represented by R. Nowinski, lawyer,

applicants,

v

European Commission, represented by L. Flynn, T. Materne and S. Delaude, acting as Agents,

and

European Central Bank (ECB), represented by O. Heinz, P. Papapaschalis, G. Várhelyi and M. Szablewska, acting as Agents, and by H.-G. Kamann, lawyer,

defendants,

THE GENERAL COURT (First Chamber),

composed of H. Kanninen (Rapporteur), President, M. Jaeger and N. Półtorak, Judges,

Registrar: E. Coulon,

having regard to the written part of the procedure, inter alia:

–        the application lodged at the Court Registry on 20 March 2018,

–        the decision of 28 June 2018 to stay the proceedings until the decision of the General Court closing the proceedings in the cases giving rise to the judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others (T‑680/13, EU:T:2018:486), and Bourdouvali and Others v Council and Others (T‑786/14, not published, EU:T:2018:487),

–        the measures of organisation of procedure of 4 September 2018,

–        the decision of 19 November 2018 to stay the proceedings until the decision of the Court of Justice closing the proceedings in the cases giving rise to the judgment of 16 December 2020, Council and Others v K. Chrysostomides & Co. and Others (C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P, EU:C:2020:1028),

–        the change in the composition of the Chambers of the General Court and the reassignment of the case to the First Chamber,

–        the measures of organisation of procedure of 20 January 2021,

–        the decision of 23 April 2021 rejecting the applicants’ request for a stay of proceedings,

–        the decision of 8 December 2021 rejecting the application to join Cases T‑161/15 and T‑200/18,

makes the following

Order

1        By their action under Article 268 TFEU, the applicants, Fersher Developments LTD and Mr Vladimir Lisin, seek compensation for the damage they claim to have suffered as a result of the decision of the Commission and the European Central Bank (ECB) to make the grant of a financial assistance facility to the Republic of Cyprus subject to certain conditions.

 Background to the dispute

2        On 2 February 2012, the Treaty establishing the European Stability Mechanism between the Kingdom of Belgium, the Federal Republic of Germany, the Republic of Estonia, Ireland, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Italian Republic, the Republic of Cyprus, the Grand Duchy of Luxembourg, the Republic of Malta, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Slovenia, the Slovak Republic and the Republic of Finland (‘the ESM Treaty’) was concluded in Brussels (Belgium). That treaty entered into force on 27 September 2012.

3        At the beginning of 2012, Cyprus Popular Bank Public Co Ltd (‘Laïki’) and Trapeza Kyprou Dimosia Etaireia Ltd (Bank of Cyprus; ‘BoC’) faced significant difficulties.

4        The Republic of Cyprus itself faced serious financial difficulties in the course of 2012.

5        On 25 June 2012, the Republic of Cyprus made a request to the President of the Eurogroup for financial assistance from the European Stability Mechanism (ESM) or from the European Financial Stability Facility (EFSF).

6        By a statement of 27 June 2012, the Eurogroup indicated that the financial assistance requested would be provided by either the EFSF or the ESM in the framework of a macroeconomic adjustment programme to be defined in a memorandum of understanding the negotiation of which would be led by the European Commission jointly with the ECB and the International Monetary Fund (IMF), on the one hand, and by the Cypriot authorities, on the other.

7        In March 2013, the Republic of Cyprus and the other Member States whose currency is the euro (‘MSCEs’) reached a political agreement on a draft memorandum of understanding.

8        By a statement of 16 March 2013, the Eurogroup welcomed that agreement and referred to certain adjustment measures which the Cypriot authorities undertook to take, including the creation of a levy on bank deposits and the restructuring and recapitalisation of Cypriot banks.

9        On 19 March 2013, the Cypriot Parliament rejected a Cypriot Government bill relating to the creation of a levy on all bank deposits in Cyprus. The Cypriot Government then prepared a new bill providing for the restructuring of BoC and Laïki (‘the banks concerned’).

10      On 22 March 2013, the Cypriot Parliament adopted O peri exiyiansis pistotikon kai allon idrimaton nomos (No 17(I)/2013) (Law on the resolution of credit and other institutions, EE, Annex I (I), No 4379, 22.3.2013, p. 117; ‘the Law of 22 March 2013’). Under Article 3(1) and Article 5(1) of that law, the Kentriki Trapeza tis Kyprou (Central Bank of Cyprus; ‘the CBC’) was entrusted, jointly with the Cypriot Ministry of Finance, with the resolution of the institutions covered by that law. To that end, first of all, Article 12(1) of the Law of 22 March 2013 provides that the CBC may, by decree, restructure the debts and obligations of an institution under resolution, including by means of the reduction, modification, rescheduling or novation of the nominal capital or of the outstanding amount of any type of claim, actual or future, against the institution, or by the conversion of debt instruments or obligations into equity capital. Next, that article excludes from those measures insured deposits, within the meaning of the fifth paragraph of Article 2 of the Law of 22 March 2013, that is to say deposits of EUR 100 000 or less.

11      By a statement of 25 March 2013, the Eurogroup indicated that it had reached an agreement with the Cypriot authorities on the key elements necessary for a future macroeconomic adjustment programme with the support of all of the MSCEs and of the Commission, the ECB and the IMF.

12      In that statement, inter alia the following is set out:

‘The Eurogroup welcomes the plans for restructuring the financial sector as specified in the annex. These measures will form the basis for restoring the viability of the financial sector. In particular, they safeguard all deposits below EUR 100.000 in accordance with EU principles.

The programme will contain a decisive approach to addressing financial sector imbalances. There will be an appropriate downsizing of the financial sector …

…

The Eurogroup urges the immediate implementation of the agreement between [the Republic of Cyprus] and [the Hellenic Republic] on the Greek branches of the Cypriot banks, which protects the stability of both the Greek and Cypriot banking systems.’

13      The annex to that statement is worded as follows:

‘Following the presentation by the [Republic of] Cyprus authorities of their policy plans, which were broadly welcomed by the Eurogroup, the following was agreed:

1. [Laïki] will be resolved immediately – with full contribution of equity shareholders, bond holders and uninsured depositors – based on a decision by [the CBC], using the newly adopted Bank Resolution Framework.

2. [Laïki] will be split into a good bank and a bad bank. The bad bank will be run down over time.

3. The good bank will be folded into [BoC], using the Bank Resolution Framework, after having heard the Boards of Directors of BoC and [Laïki]. It will take EUR 9 [billion] of ELA [(Emergency Liquidity Assistance)] with it. Only uninsured deposits in BoC will remain frozen until recapitalisation has been effected, and may subsequently be subject to appropriate conditions.

4. The Governing Council of the ECB will provide liquidity to … BoC in line with applicable rules.

5. BoC will be recapitalised through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders.

6. The conversion will be such that a capital ratio of 9% is secured by the end of the programme.

7. All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation.

8. The programme money (up to [EUR 10 billion]) will not be used to recapitalise [Laïki] and [BoC].’

14      On 25 March 2013, the Governor of the CBC placed the banks concerned into resolution. On 29 March 2013, two CBC decrees were published to that end (‘the decrees of 29 March 2013’).

15      Kanonistiki Dioikitiki Praxi 103/2013, peri diasosis me idia mesa tis Trapezas Kyprou Dimosias Etaireias LTD (Decree 103/2013 on the bailing-in of Trapeza Kyprou Dimosia Etaireia LTD) of 29 March 2013 (EE, Annex III (I), No 4645, 29.3.2013, p. 769) provides for the recapitalisation of BoC – at the expense, in particular, of its uninsured depositors, its shareholders and its bondholders – in order to enable it to continue to provide banking services. Accordingly, uninsured deposits were converted into BoC shares (37.5% of each uninsured deposit), into securities which were convertible by BoC either into shares or into deposits (22.5% of each uninsured deposit), and into securities which were convertible into deposits by the CBC (40% of each uninsured deposit). Article 6(5) of Decree 103/2013 states that, if the contributions of uninsured depositors exceed what is necessary in order to restore the equity capital of BoC, the resolution authority will determine the amount corresponding to overcapitalisation and will treat it as if the conversion had never taken place.

16      The combined provisions of Articles 2 and 5 of Kanonistiki Dioikitiki Praxi 104/2013, peri tis polisis orismenon ergasion tis Cyprus Popular Bank Public Co. Ltd (Decree 104/2013 on the sale of certain operations of Cyprus Popular Bank Public Co. Ltd) of 29 March 2013 (EE, Annex III (I), No 4645, 29.3.2013, p. 781) provide for the transfer, at 6.10 a.m. on 29 March 2013, of certain assets and liabilities from Laïki to BoC, including deposits of less than EUR 100 000. Deposits of more than EUR 100 000 remained with Laïki, pending its liquidation.

17      On 26 April 2013, a memorandum of understanding (‘the MoU of 26 April 2013’) was signed by the Vice-President of the Commission on behalf of the ESM, by the Cypriot Minister for Finance and by the Governor of the CBC.

18      Under the heading ‘Restructuring and resolution of [the banks concerned]’, paragraphs 1.23 to 1.28 of that memorandum of understanding state:

‘1.23. The accounting and economic value assessment already mentioned revealed that the two largest banks of Cyprus were insolvent. To address this situation the government has implemented a far-reaching resolution and restructuring plan. In order to prevent the build-up of future imbalances and to restore the viability of the sector, while preserving competition, a fourfold strategy was adopted, which does not involve the use of taxpayer money …

1.24. First, all Greek-related assets (including shipping loans) and liabilities were carved-out, estimated in the adverse scenario at EUR 16.4 and 15.0 billion, respectively. The Greek assets and liabilities were acquired by Piraeus Bank, the restructuring of which will be dealt with by the Greek authorities. The carve-out was based on an agreement signed on 26 March 2013. With the book value of the assets at EUR 19.2 billion, the carve-out has substantially reduced the cross exposures between Greece and Cyprus.

1.25. With respect to the UK [United Kingdom] branch of [Laïki], all the deposits were transferred to the UK subsidiary of [BoC]. The associated assets were folded into [BoC].

1.26. Second, [BoC] is taking over – via a purchase and assumption procedure – almost the entire Cypriot assets of [Laïki] at fair value, as well as the latter’s insured deposits and [ELA] exposure at nominal value. The uninsured deposits of [Laïki] will remain in the legacy entity. The aim is for the value of the transferred assets to be higher than the transferred liabilities with the difference corresponding to the recapitalisation of [BoC] by [Laïki] amounting to 9% of the risk-weighted assets transferred. [BoC] is being recapitalised to reach a core tier one ratio of 9% under the adverse scenario of the stress test by the end of the programme, which should help to restore confidence and normalise funding conditions. The conversion of 37.5% of the uninsured deposits in [BoC] into class A shares with full voting and dividend rights provides the largest part of the capital needs with additional equity contributions from the legacy entity of [Laïki]. Part of the remaining uninsured deposits of [BoC] will be frozen temporarily …

1.27. Third, to ensure that the capitalisation targets are met, a more detailed and updated independent valuation of the assets of [the banks concerned] will be completed, as required by the bank resolution framework, by end June 2013. To this end, no later than mid-April 2013, the terms of reference of the independent valuation exercise will be agreed in consultation with the [Commission], the ECB, and the IMF. Following that valuation, and if required, an additional conversion of uninsured deposits into class A shares will be undertaken to ensure that the core tier one capital target of 9% under stress by end-programme can be met. Should [BoC] be found to be overcapitalised relative to the target, a share-reversal process will be undertaken to refund depositors by the amount of over-capitalisation.

1.28. Finally given the systemic importance of [BoC], it is important that the operations of [Laïki] are quickly integrated, operational efficiency is improved, the recovery of non-performing loans is optimised with the work-out implemented by the going concern entity and the funding conditions are progressively normalised. In order to achieve these goals and to ensure that [BoC] can operate with maximum safeguards to preserve stability and continued viability during a transition period, the CBC, following consultation with the Ministry of Finance, will appoint a new Board of Directors and an acting Chief Executive Officer until [BoC’s] new shareholders are organised in a general meeting. The CBC will require the Board of Directors to prepare a restructuring plan defining the bank’s business objectives and credit policies by end-September 2013. To ensure that normal business activities are not affected, institutional arrangements will be designed by end-June 2013 in accordance with Cypriot law to insulate [BoC] from reputational and governance risks.’

19      On 8 May 2013, the ESM board of directors approved the agreement granting stability support to the Republic of Cyprus in the form of a financial assistance facility (‘FAF’).

 Forms of order sought

20      The applicants claim that the Court should:

–        order the defendants to pay them the amounts indicated in the application or such amounts as the Court deems appropriate;

–        order the defendants to pay the costs.

21      The ECB contends that the Court should:

–        dismiss the action as manifestly inadmissible or as manifestly unfounded;

–        order the applicants to pay the costs.

22      The Commission contends that the Court should:

–        dismiss the action;

–        order the applicants to pay the costs.

 Law

23      Under Article 126 of the Rules of Procedure of the General Court, where it is clear that the Court has no jurisdiction to hear and determine an action or where the action is manifestly inadmissible or manifestly lacking any foundation in law, the Court may, on a proposal from the Judge-Rapporteur, at any time decide to give a decision by reasoned order without taking further steps in the proceedings.

24      In the present case, the Court considers that it has sufficient information from the documents in the file and has decided, pursuant to that provision, to give a decision without taking further steps in the proceedings.

25      As a preliminary point, it should be noted that, in their request of 4 November 2021 to join the case Brinkmann (Steel Trading) Ltd and Others, T‑161/15 and the present case, the applicants, in response to certain arguments put forward by the defendants, submit as an annex a document which they describe as the application and ask whether it is the same as the application lodged by the Registry.

26      It must be pointed out that the document annexed to the applicants’ request of 4 November 2021 is not the same as the application which, after being put in order, was lodged by the Registry on 17 May 2018 and then served on the defendants on 25 May 2021.

27      It is therefore in the light of the application and not of the document annexed to the applicants’ request of 4 November 2021 that the Court will examine the present action.

 Jurisdiction of the Court and admissibility

28      Without formally raising an objection of inadmissibility or lack of competence, the ECB and the Commission contest the admissibility of the action and the jurisdiction of the Court to hear and determine it. In order to rule on jurisdiction, it is first necessary, in the circumstances of the present case, to examine whether the action complies with the formal requirements.

 Compliance with the formal requirements

29      The ECB submits that the application is inadmissible since it does not comply with the formal requirements laid down in Article 76(d) of the Rules of Procedure. First of all, it claims that the applicants have not identified the specific conduct of the defendants that could incur liability on the part of the European Union, but have merely provided vague references to various actions. Next, the application contains a quantification of the losses incurred not by the applicants, but by third parties. Last, as regards the causal link, the applicants do not explain how the defendants imposed conditions on the Republic of Cyprus, leading to the adoption of the measures taken by the latter, which themselves caused the losses suffered by the applicants.

30      In the reply, the applicants maintain that they have identified with sufficient precision the conduct of the defendants of which they complain.

31      Pursuant to the first paragraph of Article 21 of the Statute of the Court of Justice of the European Union, applicable to proceedings before the General Court in accordance with the first paragraph of Article 53 of the same statute, and pursuant to Article 76(d) of the Rules of Procedure, the application must contain the subject matter of the proceedings, the pleas in law and arguments relied on and a summary of those pleas in law. Those particulars must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the action, if necessary without further information (see order of 13 May 2020, Lucaccioni v Commission, T‑308/19, not published, EU:T:2020:207, paragraph 34 and the case-law cited).

32      In the present case, the applicants, at the time of the entry into force of the decrees of 29 March 2013, were depositors with Laïki, as is apparent from the bank statements annexed to the application.

33      First, it is true that the applicants have not been entirely consistent in the choice of the terms used to describe the unlawful conduct of which they complain in the application. However, it is possible to interpret their arguments as criticising the defendants for having contributed, during the negotiations conducted in the context of the ESM Treaty with the Cypriot authorities from 27 June 2012 to 12 April 2013, to making the FAF conditional on the implementation of the restructuring measures for the banks concerned, as is apparent from the MoU of 26 April 2013, even though those measures appeared to be contrary to EU law. In addition, the applicants argue that the application of the restructuring measures caused a loss due to the substantial reduction in the value of their deposits.

34      Those particulars are sufficiently clear and precise to permit an understanding of the harmful conduct and causal link alleged.

35      Second, it is true that the first column of the table set out in the application, relating to the quantification of the loss for which the European Union is allegedly liable, contains the names of third parties and not those of the applicants. However, having regard, in particular, to the bank statements annexed to the application, this is clearly a clerical error which does not render unintelligible that quantification or, therefore, the applicants’ line of argument relating to the damage.

36      It follows that, as regards the formal requirements, the Court is in a position to rule on the action, whereas it is apparent from the written pleadings of the ECB that it has been able to prepare its defence.

37      Accordingly, the ECB’s arguments alleging breach of the formal requirements laid down in Article 76(d) of the Rules of Procedure must be rejected.

 Jurisdiction of the General Court

38      The ECB argues, first of all, that it is apparent from the judgment of 16 December 2020, Council and Others v K. Chrysostomides & Co. and Others (C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P, EU:C:2020:1028), that the measures taken by the Commission and the ECB in the context of the ESM Treaty commit the ESM alone. Next, according to the judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others (T‑680/13, EU:T:2018:486), and Bourdouvali and Others v Council and Others (T‑786/14, not published, EU:T:2018:487), only certain measures taken by it or by the Commission in the framework of the grant of the FAF to the Republic of Cyprus are capable of incurring liability on the part of the European Union. If the Court were to find that the conduct at issue in the present case does not correspond to one of those measures, the action would have to be dismissed as inadmissible. Last, the damage for which compensation is sought stems from sovereign decisions of the Cypriot authorities that were not imposed by the defendants.

39      The Commission, while acknowledging that it must ensure that the memoranda of understanding which it signs on behalf of the ESM comply with EU law and that the Court may consider an action in that regard, makes two observations. First, it submits that, if the action had to be regarded as seeking compensation for the damage caused by the Republic of Cyprus during the restructuring of the banks concerned, only the courts of that Member State would have jurisdiction to hear it. Second, the applicants also complain about the participation of Commission officials in technical discussions with the Cypriot authorities in connection with the adoption of the MoU of 26 April 2013. However, the measures taken by the national authorities on the basis of the non-binding technical advice of an EU institution cannot engage the responsibility of that institution. Moreover, the restructuring measures were not part of the conditions negotiated by the Commission, since they were not included in the draft memorandum of understanding agreed at staff level and were not negotiated with a view to their inclusion in the final memorandum of understanding.

40      The applicants, first of all, argue that it is apparent from the judgments of 16 December 2020, Council and Others v K. Chrysostomides & Co. and Others (C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P, EU:C:2020:1028) and of 13 July 2018, Bourdouvali and Others v Council and Others (T‑786/14, not published, EU:T:2018:487) that the Court has jurisdiction to take cognisance of the unlawful conduct of the Commission and the ECB at the time of the negotiation and signing of a memorandum of understanding in the context of the ESM Treaty.

41      Next, the conduct of which the applicants complain is neither the measures adopted by the Cypriot authorities nor the fact that the Commission and the ECB required the adoption or maintenance of those measures. It lies in the fact that the Commission and the ECB, in the negotiation in which they participated pursuant to Article 13(2) to (4) of the ESM Treaty, either required the FAF to be made conditional on the adoption of the restructuring measures or did not object to such a condition.

42      Last, it is to prove the involvement of the Commission and the ECB in the decisions taken in the negotiation of the MoU of 26 April 2013 and the conditions then imposed on the Republic of Cyprus that the applicants rely on that memorandum of understanding and on statements relating to it. Furthermore, the applicants state that the liability of the European Union may be incurred on account of the adoption of an act which produces legal effects without that act being required to have binding force.

43      It is apparent from the case-law that the tasks conferred on the Commission and the ECB by the ESM Treaty do not alter the essential character of the powers conferred on those institutions by the EU Treaty and the FEU Treaty. As regards, in particular, the Commission, Article 13(3) and (4) of the ESM Treaty imposes on it the obligation to ensure compliance with EU law of the memoranda of understanding concluded by the ESM, so that it retains, in the context of the ESM Treaty, its role as guardian of the Treaties, as follows from Article 17(1) TEU, according to which it ‘shall promote the general interest of the Union’ and ‘shall oversee the application of Union law’ (see judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 201 and the case-law cited, and of 13 July 2018, Bourdouvali and Others v Council and Others, T‑786/14, not published, EU:T:2018:487, paragraph 200 and the case-law cited).

44      Consequently, an applicant is entitled to rely as against the Commission on unlawful conduct related to the adoption of the MoU of 26 April 2013 on behalf of the ESM in the context of an action for damages (see judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 202 and the case-law cited, and of 13 July 2018, Bourdouvali and Others v Council and Others, T‑786/14, not published, EU:T:2018:487, paragraph 201 and the case-law cited).

45      Furthermore, it cannot be inferred from the judgment of 20 September 2016, Ledra Advertising and Others v Commission and ECB (C‑8/15 P to C‑10/15 P, EU:C:2016:701) that the Commission’s unlawful conduct linked to the adoption of an MoU is the only unlawful conduct of an EU institution in the context of the ESM Treaty which is capable of incurring non-contractual liability on the part of the European Union. The Court of Justice held in that judgment that the legal nature of acts of the ESM, which commit the ESM alone and fall outside the EU legal order, could not prevent unlawful conduct linked, as the case may be, to the adoption of a memorandum of understanding on behalf of the ESM from being raised against the Commission and the ECB in an action for non-contractual liability (see judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 203 and the case-law cited, and of 13 July 2018, Bourdouvali and Others v Council and Others, T‑786/14, not published, EU:T:2018:487, paragraph 202 and the case-law cited).

46      In the present case, as has been noted in paragraph 33 above, the arguments set out in the application may be interpreted as criticising the defendants for having contributed, during the negotiations conducted in the context of the ESM Treaty with the Cypriot authorities from 27 June 2012 to 12 April 2013, to making the FAF conditional on the implementation of the restructuring measures for the banks concerned, as is apparent from the MoU of 26 April 2013, even though those measures appeared to be contrary to EU law.

47      In the reply, the applicants explain that the sole complaint made against the Commission and the ECB is that they either required the FAF to be conditional on the adoption of the restructuring measures or did not oppose such a condition, and that their claim is not based on the assumption that the measures taken by the Cypriot authorities are attributable to the defendants.

48      Such a line of argument consists in alleging unlawful conduct against the defendants linked to the adoption of the memorandum of understanding relating to the FAF in the context of the ESM Treaty.

49      It follows that the Court has, to that extent, jurisdiction to hear and determine the present action for damages, in accordance with the case‑law cited in paragraphs 43 to 45 above.

50      As for the Commission’s argument that its contribution to the negotiations on the FAF did not relate to the restructuring measures, it must be stated that it is not substantiated in any way. In any event, that argument goes to the substance of the conduct at issue, and therefore to the merits of the claim for damages, and not to the jurisdiction of the Court to examine that claim.

51      It follows from all of the foregoing that the Court has jurisdiction to hear and determine the present action and that the action is admissible.

 Substance

52      It is apparent from settled case-law, applicable mutatis mutandis to the non-contractual liability of the ECB provided for in the third paragraph of Article 340 TFEU, that, in order for the European Union to incur non-contractual liability under the second paragraph of Article 340 TFEU a number of conditions must be satisfied, namely the unlawfulness of the conduct alleged against the EU institution, actual harm suffered, and the existence of a causal link between the institution’s conduct and the damage alleged. In so far as those three conditions must be cumulatively satisfied, the fact that one of them is not satisfied is sufficient for an action for damages to be dismissed (see judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 245 and the case-law cited, and of 13 July 2018, Bourdouvali and Others v Council and Others, T‑786/14, not published, EU:T:2018:487, paragraph 244 and the case-law cited).

53      In the present case, it is necessary to examine at the outset whether the first of those conditions, relating to the unlawfulness of the conduct alleged against the defendants, is satisfied.

54      In that regard, the Court of Justice has already pointed out on many occasions that the incurring of non-contractual liability by the European Union requires the establishment of a sufficiently serious breach of a rule of law intending to confer rights on individuals (see judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 247 and the case-law cited, and of 13 July 2018, Bourdouvali and Others v Council and Others, T‑786/14, not published, EU:T:2018:487, paragraph 246 and the case-law cited).

55      In their application, the applicants claim, in essence, that, during the negotiations conducted in the context of the ESM Treaty with the Cypriot authorities, the defendants contributed to making the FAF conditional on the implementation of the restructuring measures for the banks concerned even though those measures breached in a sufficiently serious manner three rules of EU law, namely the principle of equal treatment, the right to property and the principle of proportionality.

56      In their observations on the consequences which they drew for the present dispute from the judgment of 16 December 2020, Council and Others v K. Chrysostomides & Co. and Others (C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P, EU:C:2020:1028), and, in so far as necessary and in so far as they had not been set aside by the Court of Justice, from the judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others (T‑680/13, EU:T:2018:486), and Bourdouvali and Others v Council and Others (T‑786/14, not published, EU:T:2018:487), the applicants state that they withdraw the plea alleging infringement of the right to property.

57      Consequently, it is necessary to examine only the applicants’ pleas alleging infringement, first, of the principle of equal treatment and, second, of the principle of proportionality.

 Plea alleging infringement of the principle of equal treatment

58      It is apparent from settled case-law that the principle of equal treatment requires that comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified. The elements which characterise various situations, and hence their comparability, must be determined and assessed, in particular, in the light of the subject matter of the acts at issue, and of the aim they pursue, whilst account must be taken for that purpose of the principles and objectives of the field to which those acts relate (see judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 441 and the case-law cited, and of 13 July 2018, Bourdouvali and Others v Council and Others, T‑786/14, not published, EU:T:2018:487, paragraph 440 and the case-law cited).

59      In the present case, as a preliminary point, the applicants claim that none of the MSCEs which requested financial assistance in the context of the financial crisis was subjected to measures involving the contribution of depositors to the restructuring of banking institutions, such that, in comparison, the singular treatment imposed on the Republic of Cyprus appears to be punitive and unjustified. They refer, in that regard, to the case of the Hellenic Republic in 2011 and 2012, on which occasion an ‘approach by the Union’ was defined by the ECB and the Commission, of the Portuguese Republic in 2011 and of the Kingdom of Spain in 2012. The applicants also refer to Iceland, a third country which, in 2008, received financial assistance from the IMF.

60      First, the applicants complain of discrimination on grounds of nationality. They submit that although the banks concerned, established in Cyprus, were in a situation comparable, in particular, to banks established in Greece when the Hellenic Republic sought financial assistance, they were not treated in the same way as those latter banks.

61      Second, the applicants claim that they were victims of ‘discrimination by association’ on account of the fact that they held deposits in Cypriot banks, since they would not have suffered the consequences of the restructuring measures had they made deposits in banks established in other States that had requested a financial assistance measure.

62      However, before the negotiation of the MoU of 26 April 2013, the economic situation of the Republic of Cyprus was at no point depicted as presenting specificities compared to the economic situation of the other MSCEs. On the contrary, the banking and public finances crisis in that Member State was closely linked to the Greek bond haircut and, therefore, to the economic situation of the Hellenic Republic in 2011.

63      According to the applicants, the difference in treatment is explained by economic reasons, such as the comparatively small size of the Cypriot economy, ‘monetary fatigue’ or ‘experimentation’, none of which amounts to a sufficient economic justification, since it would have been easy to support the Cypriot economy in the same way as support was given to other MSCEs. For the same reasons, the restructuring measures are, in addition, disproportionate. Furthermore, that discriminatory treatment cannot be justified by the objective of financial stability or the public interest of the Republic of Cyprus and the euro area, since measures other than those consisting in rendering inaccessible bank deposits above EUR 100 000 would have made it possible to preserve financial stability.

64      In the observations on the consequences which they drew, for the present dispute, from the judgment of 16 December 2020, Council and Others v K. Chrysostomides & Co. and Others (C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P, EU:C:2020:1028) and, in so far as necessary and in so far as they had not been set aside by the Court of Justice, from the judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others (T‑680/13, EU:T:2018:486), and Bourdouvali and Others v Council and Others (T‑786/14, not published, EU:T:2018:487), first, the applicants submit that, in the abovementioned judgments, the General Court and the Court of Justice have confused the demonstration of the comparability of the situations of persons in respect of whom discrimination is alleged and the objective justification of such discrimination, by reversing the evidential burden. In the present case, the General Court must, first of all, find that the applicants were discriminated against vis-à-vis depositors of banks of other Member States and then require the Commission and the ECB to demonstrate that the restructuring measures were justified having regard to the economic circumstances.

65      Second, they argue that the measures for restructuring the banks concerned ought not to be justified on the ground that they were adopted to prevent any contagion from the Cypriot banking system to the Greek financial system, since the Greek bond haircut, which was carried out in 2012, was itself liable to cause contagion to Cyprus. It is contrary to the principle of equal treatment that the EU institutions allow economic damage to be transferred from a larger Member State to a smaller Member State.

66      In the reply, the applicants submit that the defendants have not proved that the situations of the various MSCEs that received financial assistance were not comparable, whereas, in particular, the situations of the Hellenic Republic and the Republic of Cyprus have many similarities. In that regard, the ECB’s claims relating to the excessive size of the Cypriot financial sector do not constitute a valid explanation. Furthermore, the defendants have not provided any justification for the difference in treatment at issue.

67      The defendants contest that line of argument.

68      As a preliminary point, it should be observed that both the arguments alleging discrimination based on nationality and those alleging discrimination ‘by association’ amount, in essence, to claiming that the applicants suffered discrimination on account of the fact that they had made deposits in banks established in the Republic of Cyprus and that that Member State, unlike other MSCEs or Iceland, had its request for financial assistance made subject to measures involving a contribution by depositors to the restructuring of the banks concerned.

69      The applicants’ line of argument must therefore be examined as pleading discrimination with regard to depositors of banks of other States that received financial assistance.

70      First, as regards the discrimination against the applicants as compared with depositors of Icelandic banks, it is sufficient to note that the applicants themselves submit that only the IMF participated in the negotiations relating to the financial assistance granted to Iceland in 2008. Consequently, the applicants are manifestly not justified in criticising the Commission and the ECB for having, in the context of the negotiations relating to the FAF, imposed on depositors of Cypriot banks a treatment different from that of depositors of Icelandic banks, since the Commission and the ECB were not involved in defining the latter treatment.

71      Second, as regards the alleged discrimination against the applicants as compared with depositors of the banks of other MSCEs, it is apparent from the case-law that since the applicants have invoked an infringement of the principle of equal treatment, it is for them to identify precisely the comparable situations which they consider to have been treated differently, or the different situations which they consider to have been treated identically (see judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 442 and the case-law cited, and of 13 July 2018, Bourdouvali and Others v Council and Others, T‑786/14, not published, EU:T:2018:487, paragraph 441 and the case-law cited).

72      In that respect, it should be borne in mind, inter alia, that the measures to which the grant of financial assistance by the ESM (or by other international organisations, bodies and institutions of the European Union or States) may be subject in order to resolve the financial difficulties encountered by a State facing the need to recapitalise its banking system are likely to vary significantly from case to case depending on the experience acquired and on a set of specific circumstances. Those circumstances can include in particular the economic situation of the recipient State, the size of the assistance in relation to the whole of its economy, the prospects of the banks concerned becoming economically viable again and the reasons which led to the difficulties encountered by them, including, where appropriate, the excessive size of the banking sector of the recipient State in relation to its national economy, the development of the international economic environment or an increased likelihood of future ESM interventions (or interventions of other international organisations, bodies and institutions of the European Union or States) in support of other States in difficulty which can require a preventive limitation of amounts dedicated to each intervention (judgments of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 311, and of 13 July 2018, Bourdouvali and Others v Council and Others, T‑786/14, not published, EU:T:2018:487, paragraph 310).

73      In the present case, the applicants refer to the financial assistance granted to the Hellenic Republic, the Kingdom of Spain and the Portuguese Republic, mentioning the amounts granted or the economic difficulties faced by those MSCEs in terms, in particular, of public deficit, access of the public authorities to financial markets or unemployment rates.

74      In addition, the applicants put forward an argument based on the lack of difference between the situation of the Republic of Cyprus and that of other MSCEs, claiming that at no point prior to the negotiation of the MoU of 26 April 2013 was the Cypriot economic situation officially depicted as being substantively different.

75      However, the information provided elsewhere in the applicants’ own written pleadings demonstrates that there was in fact such a difference.

76      As is apparent from paragraph 72 above, the excessive size of the banking sector makes it possible to distinguish the economic situation of a country requesting financial assistance.

77      It is apparent from the application that, at the time of the negotiation of the FAF, the value of the assets of the Cypriot banking sector was eight times the country’s gross domestic product (GDP). The applicants also state that that GDP was approximately EUR 18 billion, while the losses suffered by the banks concerned amounted to approximately EUR 4 billion.

78      However, when the applicants set out the situation of the Hellenic Republic, the Portuguese Republic and the Kingdom of Spain at the date at which those MSCEs requested financial assistance, they do not indicate that their banking sector was excessive in size. On the contrary, it is apparent from the application that the size of its banking sector put the Republic of Cyprus in a situation similar to a single MSCE that received financial assistance, namely Ireland, the situation of which is not, however, detailed in the applicants’ written pleadings.

79      In addition, the documents placed on the file by the applicants confirm the specific nature of the situation of the Cypriot economy in that regard. It is apparent from the Eurogroup statement of 25 March 2013 that the economic adjustment programme the main components of which had been agreed ‘will address the exceptional challenges that [the Republic of] Cyprus is facing and restore the viability of the financial sector’ and, in particular, ‘will contain a decisive approach to addressing financial sector imbalances’ by ‘an appropriate downsizing’ of that sector. However, such considerations do not appear at all in the Eurogroup statements of 2 May 2010, 16 May 2011 and 9 June 2012 relating to the financial assistance granted to the Hellenic Republic, the Portuguese Republic and the Kingdom of Spain, respectively.

80      Accordingly, the evidence brought to the Court’s attention by the applicants themselves shows that the excessive size of the banking sector of the Republic of Cyprus compared to its national economy, at the time when the negotiations relating to the FAF were held, makes it possible to distinguish the situation of that Member State from that of the Hellenic Republic, the Portuguese Republic and the Kingdom of Spain when those MSCEs made their own requests for financial assistance.

81      It is to no avail that, in the reply, the applicants claim that the capital needs of Cypriot banks amounted to 44% of the GDP of the Republic of Cyprus and that the amount of financial assistance granted to the Hellenic Republic represented a far higher proportion of that country’s GDP, or that the risk of a massive withdrawal of capital and an ‘exit from the euro’ existed in those two MSCEs. Those considerations, which are, moreover, unsubstantiated, are not capable of overturning the finding of the excessive size of the banking sector of the Republic of Cyprus compared to its national economy.

82      Moreover, the applicants do not explain how the World Bank’s Ease of Doing Business Index to which they refer is relevant to assessing the comparability of the situation of the banking sectors of two different countries. Similarly, the mere fact, mentioned by the applicants, that Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (OJ 2000 L 126, p. 1) refers to ‘comparable types of credit institutions’ and is applicable both to Cypriot banks and to Greek banks, like Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p. 338), is not, in itself, sufficient to establish that the measures to which the grant of financial assistance to the Republic of Cyprus and the Hellenic Republic could be made subject should have been similar.

83      It follows that the applicants’ situation, such as they describe it themselves, is manifestly not comparable to that of depositors of the other MSCEs that received financial assistance to which the applicants refer.

84      Since it was for the applicants to identify precisely the comparable situations which they consider to have been treated differently (see paragraph 71 above), the plea alleging infringement of the principle of equal treatment must be rejected as manifestly lacking any foundation.

 Plea alleging infringement of the principle of proportionality

85      The applicants claim that the restructuring measures placed a disproportionate burden on them and that, if they are compared with those agreed with other MSCEs, ‘for example’ Ireland, the Kingdom of Spain, the Portuguese Republic or the Hellenic Republic, other less onerous measures could have been implemented in order to achieve the objectives pursued. They also maintain that the defendants ‘did not publicly debate the consequences of their new “experiment” with regard to the ESM agreements’ and that there was therefore no possibility for the applicants to put forward arguments in favour of stronger protection of their interests. Furthermore, the fact that nine months passed between the request for assistance from Cyprus and the conclusion of the MoU of 26 April 2013 prevents the Commission and the ECB from pleading ‘urgency and necessity’.

86      The defendants contest that line of argument.

87      It should be recalled that the principle of proportionality requires that the means employed by a provision of EU law be appropriate for attaining the legitimate objectives pursued by the legislation at issue and do not go beyond what is necessary to achieve them (judgment of 16 December 2020, Council and Others v K. Chrysostomides & Co. and Others, C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P, EU:C:2020:1028, paragraph 160).

88      First, it must be noted that that principle does not provide that, in a situation such as that at issue in the present case, the Commission and the ECB would be required to ‘publicly debate’ any ‘new “experiment”’ with regard to the agreements concluded within the framework of the ESM in order for persons such as the applicants to be able to submit their comments. The applicants’ arguments in that regard must therefore be rejected as manifestly unfounded.

89      Second, as is apparent from paragraphs 161 to 164 of the judgment of 16 December 2020, Council and Others v K. Chrysostomides & Co. and Others (C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P, EU:C:2020:1028), which the defendants cite in their written pleadings, the negotiation of the conditions of the FAF, during which the restructuring measures were agreed, met a public interest objective consisting in ensuring the stability of the Cypriot financial system and of the euro area as a whole.

90      In order to argue that the restructuring measures went beyond what was necessary to achieve that objective, the applicants merely submit that, having regard to the conditions laid down in the context of the financial assistance granted to other MSCEs, such as the Kingdom of Spain, the Portuguese Republic or the Hellenic Republic, it was possible to make the FAF subject to conditions less detrimental to their rights, not providing for the contribution of depositors to the restructuring of the banks concerned.

91      However, as has been noted in paragraphs 75 to 80 above, it is apparent from the applicants’ written pleadings and from the documents placed by them on the file that, compared to the situation prevailing in the Kingdom of Spain or the Portuguese Republic at the date at which those MSCEs requested financial assistance, the situation of the Republic of Cyprus was characterised by the excessive size of its banking sector in relation to the size of its economy.

92      It follows that, in the light of the evidence brought to the Court’s attention by the applicants themselves, the comparison, for the purpose of demonstrating that the restructuring measures went beyond what was necessary, between the situation of the Republic of Cyprus and that of other MSCEs that received financial assistance is manifestly unfounded. The claims that the defendants cannot rely on considerations relating to the urgency and necessity of the measures decided upon are not capable of overturning that finding.

93      As regards the comparison with Ireland, the applicants merely refer to the situation of that Member State in the context of their line of argument concerning the principle of proportionality, without ever describing it in detail.

94      Accordingly, the plea in law alleging infringement of the principle of proportionality must be rejected as manifestly unfounded.

95      It follows from all of the foregoing that the action must be dismissed in its entirety as manifestly lacking any foundation in law.

 Costs

96      Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicants have been unsuccessful, they must be ordered to bear their own costs and to pay those incurred by the Commission and the ECB, in accordance with the forms of order sought by the latter parties.

On those grounds,

THE GENERAL COURT (First Chamber)

hereby orders:

1.      The action is dismissed.

2.      Fersher Developments LTD and Mr Vladimir Lisin shall pay the costs.

Luxembourg, 21 July 2022.

*      Language of the case: English.

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