The shareholders of the Federal Bank of the Middle East (FBME) said on Thursday they are seeking the arbitration of the Arbitral Tribunal of the International Chamber of Commerce over the Central Bank’s decision to sell its Cyprus branch.
The Central Bank took its decision -- which the owners regard as a hostile takeover – after the US authorities accused FBME of money laundering. The bank has denied the allegations and brought in forensic accountants to back up its case.
“The arbitration invokes the Lebanese-Cyprus Convention on the reciprocal promotion and protection of investment, dated 5 June 2002 (law number 399),” the FBME shareholders said.
“The shareholders seek a resolution of the actions of the Central Bank of Cyprus and its Special Administrator in line with internationally recognised bi-lateral treaties,” they added.
They described steps to sell the Cyprus branch of FBME Bank “as an obvious and unjustified infringement of this Convention”
These measures were issued under the Special Resolution Decree of the Central Bank of Cyprus which was designed for insolvent banks or those facing serious liquidity problems, not a healthy financial institution such as FBME Bank, where the financial position is sound and fully in line with capital adequacy and solvency requirements of the European Central Bank, they added.
FBME Limited, the holding company for FBME Bank, said the resolution decree was “hasty and ill-judged” and seemed designed to prevent the investigation being completed or the bank having the chance to answer the allegations.