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Is litigation the answer?

Will a protracted legal battle against the Alpha Bank in Cyprus concerning the alleged mis-selling of Swiss Franc mortgages achieve a positive result or can more be achieved through negotiation?

LAST week, the much anticipated legal action by Alpha Bank Cyprus against defaulting borrowers was announced.

The issue of litigation has been much discussed by both sides as a way out of their predicament but the debate seems to have been centred around the outcome of the litigation when it should be more focused on the aftermath.

It is rare that litigants look back on opportunities to reach a settlement and do not wish they had taken them. Even a complete victory leaves people thinking whether there was an easier way.

“The problem is that if someone only has a hammer, he will use it on screws as well as nails,” said George Kounis Consultant with Maxwell Alves, Solicitors in the City of London, “and this is often the case with lawyers. They seem to have no other tool than litigation. If only Alpha Bank could see that they are fighting a losing battle. What are they going to do? Repossess and be left with even more empty properties that nobody wants? Enforce judgments in the UK and make their customers bankrupt?

Most people will ensure that there is not much left to take and their costs will far outweigh anything they recover.

In my opinion, the only sensible way out for them is to negotiate a settlement framework for all these cases whereby they can minimise their losses and let these borrowers breathe and regularise their loans.”

Maxwell Alves have outlined just such a settlement framework in their document ‘A Plan for All Reasons’ published in August.

“The banks seem to have a lot more paper losses than real ones,” explained George Kounis. “A large percentage of these loans are in Swiss Francs and it would be incredible if the banks had not secured a favourable rate when the CHF was still low. So, I believe that the so called ‘loss’ they need to write-off is no more than ‘loss of the gain’ they would have made if borrowers had not defaulted.”

Equally dangerous would be for the borrowers to initiate litigation unless the chances of opposition are slim. “I dread to think what we would be saying to our clients if we were to lose or even if we won it and faced an appeal from the other side. To think that your opponent in the litigation would simply give-up is optimistic to say the least,” declared George Kounis.

“I believe that a lot more can be achieved by negotiation than through litigation.”

Maxwell Alves have written to Alpha Bank in Cyprus and in Greece on behalf of their clients inviting talks.

About the author

George Kounis started his career in banking and has been running businesses for over 30 years. He has recently joined Maxwell Alves as a business consultant.

Established in 2003, Maxwell Alves is a firm of solicitors and international lawyers based in Central London. The firm is on the panel of legal advisers that are maintained by UK Trade and Investment (UKTI). UKTI is a government body which forms part of the Foreign and Commonwealth Office that promotes UK bilateral trade and investment.

Readers' comments

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  • andyp says:

    Like Denton I agree that litigation is indeed a last resort and in my limited experience no matter how good one thinks one’s case is the outcome is a lottery.

    I guess this case is however the last resort for many of these people as I have read on this and other publications that many have tried to reason/negotiate with The Bank but to no avail.

    Cyprus “professionals” whilst probably not unique have in my opinion a fairly standard set of negotiating “rules” which can only lead to frustration and ultimately court proceedings. Ignore, deny and ignore again.

  • Martyn says:

    Sometimes it takes someone to state the blindingly obvious, especially in/around Cyprus – and some other Mediterranean countries. The lawyers could have a ‘Field Day’ on this and likely the only ‘Winners’ would be them!

  • Denton Mackrell says:

    Why is Mr Kounis making such a big meal out of advocating what is (or should be) the standard approach of any half decent lawyer? None of my lawyers has ever sought to go straight to litigation proceedings on any subject. They always seek first to persuade the other party to put right any alleged wrong and this may involve negotiation and compromises. Courtroom litigation should always be the last resort when other, softer approaches have failed. No need to make a virtue out of standard professional practice, surely!

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