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The Supreme Court, in Civil Appeal No. 344/2017, issued a significant judgment in which it held that the Bilateral Agreement for the Promotion and Mutual Protection of Investments between the Republic of Cyprus and the Republic of Poland became inapplicable and inoperative following the accession of both countries to the European Union (EU).
The Appellant, a citizen of the Republic of Poland, had suffered a loss of her deposits at the Laiki Bank due to what is known as the "deposit haircut" in March 2013, when her investment was reduced from almost half a million euros to just below 25,000 euros. Pursuant to Article 4 of the Bilateral Agreement, she considered the Republic of Cyprus liable to compensate her for the loss she incurred.
The critical question raised before the Supreme Court was whether Article 4 of the Bilateral Agreement was contrary to EU law and, in particular, contrary to Article 18 of the Treaty on the Functioning of the European Union (TFEU). The Supreme Court noted that, the first instance court had correctly held that if it were found that the Appellant was entitled to compensation under the Bilateral Agreement, this would result in the creation of two categories of depositors, with Polish citizens having more rights and being in a more favourable position than citizens of another EU country. This would amount to discrimination on the grounds of nationality, which is prohibited under Article 18 TFEU.
The Supreme Court in its reasoning, relied on the ruling of the case C-478/07, Budĕjovický Budvar, in which the Court of Justice of the European Union held that the provisions of international agreements concluded between two Member States cannot be applied in the relations between those two states if they are contrary to the Treaties of the EU. Furthermore, the Court referred to the obligation of Member States regarding compliance with Union law, as set out in the judgment C‐284/16, Achmea.
The Supreme Court dismissed the appeal and upheld the judgment of the first instance court that, following the accession of the Republic of Cyprus and the Republic of Poland to the EU, the Bilateral Agreement between the two countries became inapplicable and inoperative.
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