A regulatory enforcement action can be correct in every substantive respect and still be void. The defect here had nothing to do with whether Bank of Cyprus actually violated market abuse rules. It had everything to do with who was sitting at the head of the table when the fine was imposed.
The Cyprus Supreme Court (Administrative Appeals Division) dismissed CySEC's appeal on 15 March 2024, upholding the annulment of fines on Bank of Cyprus and six of its executives. The ground: the CySEC Chairwoman who presided was simultaneously a guarantor and mortgage debtor on loans held by the bank she was sanctioning — a personal financial relationship that objectively compromised her impartiality under Article 42 of the General Principles of Administrative Law, N.158(Ι)/1999.
The underlying enforcement: CySEC's 2013 fines
In a decision dated 2 July 2013, CySEC determined that on 13 January 2010 and 28 April 2010, Bank of Cyprus Public Company Ltd had infringed specific provisions of the Cyprus Market Abuse Law (N.116(Ι)/2005) — the Law on Acts of Persons in Possession of Inside Information and Market Manipulation — in connection with the bank's investment in Greek government bonds.
On 30 September 2013, CySEC followed up with a second decision imposing administrative fines on each respondent individually:
→ Bank of Cyprus Public Company Ltd (Case No. 6329/2013)
→ Andreas Iliadis (Case No. 6495/2013)
→ Giannis Kypris (Case No. 6496/2013)
→ Andreas Artemis, Kostas Z. Severis, Georgios M. Georgiadis, and Kostas Chatzipaas (Case No. 6514/2013)
The six individuals were Board members — some executive, some non-executive. CySEC concluded that the bank's violations were attributable to their fault, as the bank had acted through them, and calibrated fines to reflect each person's respective degree of responsibility.
The decision followed written submissions from all respondents and a report by investigating officers appointed to examine potential violations of N.116(Ι)/2005.
The first-instance annulment
Bank of Cyprus and the six executives filed four consolidated recourses challenging CySEC's decision on twenty grounds. The Administrative Court, in a judgment dated 29 October 2021, examined only the first — breach of the principle of impartiality — accepted it, and annulled CySEC's decision without reaching the remaining nineteen.
The impartiality challenge turned on the personal financial position of the CySEC Chairwoman, Dimitra Kalogeerou, at the time of the 30 September 2013 decision.
The facts were as follows. Her husband, Andreas Antoniades, had taken two loans from Laiki Bank — one for €690,000 (for residential purposes, in 2006) and one for €350,000 (in 2010). Mrs Kalogeerou was both a guarantor and a mortgage debtor on both. By a decree dated 29 March 2013 — the Sale of Certain Operations of Cyprus Popular Bank Public Co Ltd Decree 2013, KDP 104/2013 — those loans were transferred to Bank of Cyprus, the very entity CySEC would fine six months later.
At the time of the transfer, the loans were in arrears. Mr Antoniades applied for restructuring. By a letter dated 15 May 2013, Bank of Cyprus notified him that it accepted the application and would grant specific facilities, including clearing the arrears on both loans and suspending capital repayments for six months on the €350,000 loan. To secure these facilities, on 5 June 2013, both Mr Antoniades and Mrs Kalogeerou signed a consent to maintain the existing mortgage over identified property.
The first letter warning Mrs Kalogeerou of renewed payment failures — Exhibit 1 in the proceedings — arrived on 10 October 2013: exactly ten days after she had presided over the decision imposing fines on Bank of Cyprus and its directors.
The Administrative Court characterised the relationship between Mrs Kalogeerou and the Bank, under these circumstances, as a special relationship ("ιδιάζουσα σχέση") falling within Article 42(2) of N.158(Ι)/1999. Even though no formal legal dispute had crystallised by 30 September 2013, there was, on the facts, an incipient civil dispute: overdue loans, recently restructured, now immediately showing signs of failure again, with the Chairwoman exposed as guarantor and mortgage debtor for a total exceeding one million euros. She had been required, the court held, to recuse herself. She did not.
The Supreme Court's 2024 ruling: impartiality applies to administrative authorities
CySEC's appeal raised two main arguments: that the impartiality issue had not been raised before CySEC itself, and that Bank of Cyprus had known about the relevant correspondence from the start and had waived the point.
The Supreme Court, in a judgment delivered by Yiasemis J (sitting with Dimitriadou-Andreou and Ioannidis JJ), rejected both.
On waiver, the court confirmed the established rule: a party with full knowledge of the facts founding a bias claim must raise it at the earliest opportunity or be taken to have abandoned it. But the precondition is actual knowledge. The four letters (Exhibits 1 to 4) were Bank of Cyprus's own documents. They surfaced only after the bank's lawyers instructed a targeted search during the recourse proceedings. The court found there had been no actual knowledge when the matter was before CySEC. No waiver arose.
On the substantive question, the Supreme Court affirmed the first-instance analysis. Article 42(1) of N.158(Ι)/1999 requires every administrative body to provide guarantees of impartial judgment. Article 42(2) identifies specific relationships that trigger disqualification, including a "ιδιάζουσα σχέση" (special relationship) with the person affected.
Objective impartiality asks whether an independent observer, knowing the circumstances, could reasonably doubt the decision-maker's impartiality. Proof of actual bias is not required. Mrs Kalogeerou was simultaneously the Chairwoman of the regulator and a guarantor and mortgage debtor on substantial overdue loans held by the entity she was sanctioning. The restructuring had been agreed in May 2013 and the mortgage consent signed in June 2013 — less than four months before the fines. The loans immediately showed further default. The court held that an independent observer could reasonably have doubted her impartiality: the "presumption of influence" (τεκμήριο επηρεασμού) was made out.
The court also rejected any distinction between courts and administrative authorities exercising punitive powers for the purposes of the impartiality standard.
Because the impartiality violation contaminated the bank's decision, and the executives' liability was entirely derivative of it, the annulment extended to all respondents. The Supreme Court dismissed CySEC's appeal and awarded costs to the respondents.
What this means for practitioners and regulated entities
The practical exposure is structural, not marginal.
CySEC decision-making is concentrated at board level. Any personal financial relationship between a board member and the entity under investigation — loans, guarantees, mortgages, recent restructurings — creates a potential Article 42 impartiality issue. The relationship does not need to have matured into formal litigation. An incipient civil dispute is sufficient.
→ A CySEC board member with a relevant financial relationship must assess whether recusal is required before participating in any decision affecting that entity.
→ A failure to recuse voids the decision regardless of whether the underlying violation was correctly found. Substantive correctness does not cure a procedural integrity defect.
→ For respondents, the Article 42 ground should be investigated early. The key date is the date of the final CySEC decision. What financial relationships did any board member hold with the respondent at that time?
→ The waiver rule operates once there is actual knowledge of the conflicting position. If a regulated entity knows of the conflict while the matter is before CySEC, the point must be raised then, not saved for the Administrative Court.
The evidentiary lesson: the four letters that established the impartiality issue here were the bank's own documents, found only after lawyers instructed a targeted internal search. Possession of documents is not the same as operational knowledge of them.
FAQ
What was the legal ground on which CySEC's enforcement was voided?
Both courts held that the principle of objective impartiality under Article 42 of N.158(Ι)/1999 had been violated. The CySEC Chairwoman was a guarantor and mortgage debtor on loans held by Bank of Cyprus at the exact time she presided over the decision imposing fines on it. That financial relationship created an objectively compromised position, regardless of any subjective bias.
Did the court find that Mrs Kalogeerou was actually biased?
No. The court accepted her evidence that she did not regard herself as in dispute with the Bank. The test for objective impartiality is different: whether an independent observer, knowing the circumstances, could reasonably doubt her impartiality. On these facts, that threshold was met.
Why were the six executives' fines also voided?
Their liability was derivative — CySEC imposed fines on them because the bank's violations were attributed to their fault as board members. Once the impartiality breach voided the decision against the bank, the decisions against the executives could not stand independently.
What is the practical takeaway for entities under CySEC supervision?
Any financial relationship between a CySEC board member and an entity under investigation — loans, guarantees, mortgages — triggers an Article 42 analysis. Respondents should investigate board composition at the date of the final CySEC decision. If actual knowledge of a conflict exists while the matter is before CySEC, the impartiality point must be raised immediately or it will be treated as waived.
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