Riga regional court has turned down a lawsuit from former Parex bank owners Valerijs Kargins and Viktors Krasovickis filed against the state of Latvia concerning an investment agreement they had signed in 2008.
The full verdict will be released on February 3, after which Kargins and Krasovickis will have twenty days to appeal it to the Supreme Court if they want to.
Attorneys for both sides said they could comment once the full court ruling is available.
Kargins and Krasovickis' claim against the Finance Ministry, "Parex banka", "Latvijas Hipoteku un zemes banka" (Latvian Mortgage and Land Bank, Mortgage Bank) and Latvian Privatization Agency demands that the "Parex banka" takeover agreement signed in 2008 be ruled invalid. Under the agreement, the state took over their shares in "Parex" banka for 2 lats ( 2.8 euros).
Kargins and Krasovickis' attorney Ugis Grube was quotes as saying that that the lawsuit filed by Kargins and Krasovickis was based on the fact that in October 2008, when active support was being provided for many banks all over the world, the Latvian authorities kept believing that the global financial and economic crisis would not affect Latvia, and there were no regulations in place on providing support for commercial banks or on bank bailouts by the state.
Everyone was aware that a collapse of Parex bank would destroy the entire financial system of Latvia, however, the state had no mechanism to prevent this. As a result, the state tried to make impression that Kargins and Krasovickis signed the bank bailout agreement of their own free will in November 2008, claimed Grube.
However, the applicable law was only drawn up after the Parex bank takeover whilst it only came into force only on Dec. 2008. According to law, if a bank's shareholders do not voluntarily hand over their shares to the state, the given bank may be taken over for a price decided by the state. This means that the bank's shareholders may receive a symbolic price for their shares, however, they cannot be held otherwise responsible.
Therefore, the lawsuit of Kargins and Krasovickis claims that they may not be treated otherwise than provided for in the said law, because it is not their fault that the state had not timely prepared for the global financial crisis, and had not timely adopted the relevant European Union regulations.
As reported, the state took over Kargins and Krasovickis' shares in "Parex banka" on Dec. 5, 2008, and later the remaining shares in the bank. In Aug, 2010, Parex bank's liquid assets were transferred to Citadele bank. Parex bank now only deals with debt recovery and does not perform standard banking operations.