National Bank shareholders have compensation slashed to €71m

Updated 12.50pm

A compensation package awarded to former shareholders of a bank taken over by Malta's government in 1974 has been revised down from €111 million to around €71 million.

The Constitutional Court on Monday reduced the compensation awarded to former shareholders of the now-defunct National Bank of Malta (NBM) by the Civil Court last year.

It said compensation had to reflect the number of shareholders who instituted the case, with compensation awarded to each plaintiff reflecting their share quotas.

The shareholders had argued that their rights had been breached when the government of the day, led by then Prime Minister Dom Mintoff, failed to compensate them when it took over the bank.

Mintoff pushed through emergency legislation to transfer the NBM’s business to the then-new state-backed Bank of Valletta (BOV) following a run on deposits at NBM.

The 82 compensation claimants were among shareholders who refused to sign an agreement transferring their shares to the government without payment.

Last year, the Civil Court, operating in its constitutional jurisdiction, awarded those claimants over €111 million as material compensation for the breach of their fundamental rights.

The claims, spread across two cases, were filed in 1992.

Run on deposits

The saga kicked off in December 1973 when Mintoff updated Parliament about the situation of the National Bank of Malta, which suffered a run on deposits — the withdrawal of large numbers of deposits — that month. 

He also spoke about plans to take over the bank, which he said had been suggested by a representative of the same bank.

A week later, the administration of the National Bank and its subsidiary Tagliaferro Bank was “temporarily” taken over by an administrative council after the government pushed through the National and Tagliaferro Banks Act, placing the bank under state control.

In March 1974, the assets and debts of NBM were transferred to BOV by public deed published by Notary Maurice Gambin.

Compensation claims

Some 18 years after that transfer, the aggrieved shareholders took the case to court, claiming their fundamental right to peaceful enjoyment of their property had been breached through the takeover for which they received no compensation.

The two cases filed by 33 and 49 applicants, respectively, progressed along parallel lines before the Civil Court.

The 33 applicants were awarded €44.7 million, while 49 applicants received €66.4 million, plus interest at a rate of eight per cent beginning from the date of the judgment.

Both the shareholders and the government appealed the decision.

Appeal

In their appeal, a sizeable group of shareholders argued the €111 million did not go far enough.

They argued the compensation should include dividends paid out by BOV from 1974 to date, as well as legal interest, taking the compensation up to €1.4 billion.

Another group of shareholders argued the court’s decision to divide the €111 million equally among all shareholders would create a new injustice, as each shareholder would end up receiving an equal sum irrespective of the extent of their shareholding in the National Bank.

Revised awards

The Constitutional Court revised the €44.7 million in damages awarded to the 33 plaintiffs to just over €21 million.

Meanwhile, the €66.4 million awarded to the 49 shareholders was reduced to €50.7 million, which is to be paid according to the shares of each plaintiff.

In both cases, it also awarded €30,000 in non-pecuniary damages, excluding the heirs of plaintiffs who died before the case was filed.

Reasoning

The Constitutional Court reduced the compensation originally awarded to reflect the number of shareholders who instituted a case and claimed a breach of their rights.

It also ruled that the compensation awarded to each plaintiff should reflect their share quotas.

The court overturned a ruling by the court of first instance and awarded non-pecuniary damages, following an appeal by some of the plaintiffs.

It took into consideration the claimants' breach of rights, the lack of compensation throughout the years and delays to the case it said resulted in shareholder frustration.

The shareholders had argued that they did not bring the case earlier due to political tensions in the country.

The Constitutional Court was presided over by Mr Justice Robert Mangion, Mr Justice Grazio Mercieca and Madam Justice Josette Demicoli.

Lawyers Patrick Galea, José Herrera, Joe Schembri, Conrad Cassar Torreggiani, Evelyn Caruana Demajo, Sarah Grech, Mark Refalo, Ian Refalo, David Camilleri, Max Ganado, Michael Psaila and Massimo Vella represented the different shareholders.

State Advocate Chris Soler and lawyers Miguel DeGabriele and Paul Cachia represented the state.