WP 2015/03: The Cyprus Crisis and the Legal Protection of Foreign Investors

3 Posted by - 9 aprile 2015 - Working Papers Print This Post

The legal protection of foreign investments deposited in EU financial institutions has attracted considerable attention both in the legal as well as in the business community following European Parliament’s approval on last April of the Bank Recovery and Resolution Directive which includes the so called bail in clause. As the introduction of this clause reflects the intentions of EU’s institutions to put an end to the use of taxpayers’ funds to resolve financial crises, on the other hand it already had a remarkable impact on banks’ creditors’ property rights, especially in the case of foreign investors. In this view, this dissertation will survey the possible legal protection, mostly but not exclusively included in ad hoc Bilateral Investment Treaties (“BIT”), provided to foreign investors to recover the losses suffered following bail-ins’ of credit institutions. In this regard, particular attention will be given to the analysis of the relevant crisis of the Cypriot’s banking sector and the following laws enabling its restructuring by means of creditors’ assets write off, the subsequent institutionalization of this template at the EU level and the connections of this new legal framework with international law rules and principles which safeguard property rights of expropriated foreign investors.

Giovanni Battista Donato
School of Law – Queen Mary University
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Keywords: International Monetary Arrangements and Institutions, International Lending and Debt Problems, Government Policy and Regulation, International Law, Property Rights

JEL classification: F33, F34, G28, K33, P14.

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