Conclusion of a significant landmark litigation in Latvia

Ellex in Latvia has successfully represented Latvia (the Ministry of Finance of the Republic of Latvia) in complicated legal proceedings brought by Latvian state companies against the former shareholders of AS “Parex banka” (now AS “Reverta”).

Claimants AS “Parex banka” (now AS “Reverta”) and Privatization Agency of the Republic of Latvia (now SIA “Public Assets Manager Possessor”) raised claim to collect contractual compensation EUR 117.671 million, penalty EUR 6.472 million and damages 17.383 million incurred due to false representations made by the defendants,  ex-bankers  Mr Valerijs Kargins and Mr Viktors Krasovickis, under the Investment Agreement pursuant to which the Latvian state took over majority of the shares of Parex banka in late 2008 and afterwards provided multi-million state support to the bank, thereby saving it from insolvency. The ex-bankers being defendants, in turn, filed a counterclaim challenging certain terms of the Investment Agreement to avoid their legal liability, thus involving in the proceedings the Republic of Latvia (in the capacity of the Ministry of Finance) as co-defendant with respect to the counterclaim.

Both the first and the appellate instance court rulings were in favour of the Ministry of Finance of the Republic of Latvia. The appeal court satisfied major part of the claim (EUR 124.336 million) and fully rejected ex-bankers’ counter-claim. The cassation complaint of the former bankers was rejected by the Supreme Court and the case was finally resolved in favour of the client. As a result, Kargins and Krasovickis are obliged to pay the state privatization agency and its subsidiary 124.3 million euros, including legal costs.

AS “Parex Banka” (at that time the largest independent Baltic bank) was taken over by the Latvian government in late 2008 to prevent a financial crisis that could have wrecked the fragile Baltic economies. Until now that is the only such kind of bank takeover in Latvian history.

This particular case is the main and one of numerous litigation cases initiated due to the take-over of the bank by the Latvian government. Previously, in another case, former bankers Valērijs Kargins and Viktors Krasovickis tried to challenge the validity of the Investment Agreement, and also in that case Ellex Kļaviņš successfully represented clients (Ministry of Finance of the Republic of Latvia and Privatization Agency of the Republic of Latvia), ultimately reaching them a favourable court decision.

This landmark litigation case is unique in Latvia due to its scale and being the first matter of its kind.

The Ministry of Finance of the Republic of Latvia was advised and represented by Ellex Senior associate Raivis Leimanis.