France’s Court of Cassation Confirms Arbitration Award in Favour of Cyprus in FBME Case

On 9 October 2024, the Court of Cassation (Cour de cassation) of France dismissed the appeal of the judgment of the Paris Court of Appeal that rejected the application for the annulment of a high profile arbitral award in favor of the Republic of Cyprus relating to the failure and resolution of FBME Bank Ltd. (FBME).

The ICC arbitration was brought under the Cyprus-Lebanon bilateral investment treaty (BIT) by Ayoub-Farid Michel Saab and Fadi Michel Saab, who were the indirect owners of FBME. FBME failed in 2014 after the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury designated it a financial institution “of primary money-laundering concern” for facilitating money laundering, terrorist financing, transnational organized crime, fraud, sanctions evasion, and other illicit activity. Soon after the designation, FBME became unable to fulfill its obligations as they fell due because of the reaction to the designation of the international market and the bank’s customers and counter-parties.

The claimants sought $ 1.4 billion in damages from Cyprus alleging that it was responsible for the failure of the bank because the Central Bank of Cyprus (CBC) had acted arbitrarily in placing the Cyprus branch of FBME in resolution following the FinCEN designation, and because Cyprus had failed to prevent the designation or assist the bank in continuing to do business after the designation. In a final award issued in 2019, the arbitral tribunal rejected all of the claimants’ claims. It found that the CBC had acted as a prudent financial regulator in quickly responding to the bank’s failure to protect financial stability, and that Cyprus could not be held liable for not preventing FinCEN’s action or helping FBME survive its consequences.

The claimants brought an action to annul the final award in the Paris Court of Appeal in 2019. They argued that the tribunal had failed to perform its mandate, including by not determining whether FinCEN’s designation was unreasonable for the purpose of finding that the CBC should have acted differently, and acted contrary to international public policy in purportedly basing its decision on confidential information that had been redacted from documents made available to the claimants. In March 2022, the Court of Appeal dismissed those annulment grounds, finding that the tribunal had acted in accordance with its mandate and had not improperly relied on information that had been concealed from the claimants.

The claimants appealed that judgment in July 2022. In its recent decision, the Court of Cassation has found that the Court of Appeal’s holdings were legally justified. As the Court of Cassation is the highest court in the French judiciary, the claimants have no further recourse for pursuing the annulment of the final award.

In the ICC arbitration (Ayoub-Farid Michel Saab and Fadi Michel Saab. v. the Republic of Cyprus (ICC Case no. 20588/ZF//AYZ), Cyprus was represented by a Curtis team including Justin Jacinto, Mark O’Donoghue, Peter Wolrich, William Hampson and Sena Tsikata. Before the Cour de Cassation, Cyprus was represented by Bernard Tapie of Cabinet Rousseau & Tapie supported by Olivier Loizon of Gide Loyrette Nouel (who represented Cyprus before the Paris Court of Appeal) in close collaboration with Mr. Jacinto and Ms. Tsikata.