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THE Nicosia district court will next week continue hearing the case brought before it, where the Central Bank of Cyprus (CBC) is seeking to appoint a liquidator for the Cyprus branch of the Federal Bank of the Middle East (FBME).

The owners of FBME Cyprus have challenged the CBC’s petition, arguing that the banking regulator’s move is illegal.

Earlier this month, the district court allowed FBME to prepare its objections to the liquidation request. The court’s decision was seen as a setback for the CBC, which had hoped to initiate the bank’s liquidation without contest.

Countering, the CBC has meanwhile petitioned the Supreme Court for a writ of certiorari – an order by which a higher court reviews a case tried in a lower court – effectively seeking to have the district court’s decision annulled, thus preventing FBME from challenging the liquidation process.

On a separate track, a hearing is pending before Supreme Court which the CBC has petitioned for revoking the bank’s license.

The Central Bank needs court approval to revoke a lender’s license.

The CBC filed the revocation petition on December 21, but FBME likewise challenged it.

The CBC took over the operations of FBME in 2014 after the latter was named a “financial institution of primary money-laundering concern” by the US Department of the Treasury (FinCEN).

The term of Andrew Andronicou, the second administrator appointed by the CBC for FBME, expired in late December.

It was not clear whether the CBC has appointed a replacement for Andronicou. The CBC declined comment.

On behalf of the shareholders of FBME, Nigel Perry told the Cyprus Mail it was his understanding that since December 31 bank customers have been unable to access their funds, which have long since been moved to Bank of Cyprus.

“Without an administrator for FBME, there is no one to sign off on the cheques,” he said.

FBME customers have a €1,000 per week withdrawal limit.

Technically, the bank itself is still open and its staff continue to be on the payroll, Perry said.

FBME deposits are currently controlled by the Central Bank, with some €270m placed in escrow with the Bank of Cyprus, widely rumoured in the past as the potential buyer of the Tanzania-based bank’s local branch.

In mid-December, former Attorney-general Alecos Markides penned an open letter to the President, warning that Cyprus could pay a “huge sum” in compensation to FBME as the Central Bank has failed to act as an independent institution.

Markides, on behalf of FBME bank owners Ayoub-Farid Michel Saab and Fadi Michel Saab, said the Republic was at risk over “mishandling” the FBME case.

Last September, an Arbitral Tribunal of the International Chamber of Commerce (ICC) in Paris decided it had jurisdiction over the claims by the owners of FBME against the Republic of Cyprus regarding the Lebanese-Cyprus Treaty governing the protection of investor rights.

And in November, FBME clocked another success in the United States, where a judge ordered FinCEN to carry out and complete a new administrative process within four months.

This week, main opposition AKEL renewed calls for the matter of the bank to be tabled for discussion at the House ethics committee.

Last year, the ethics committee was twice scheduled to discuss the issue, but refrained from doing so after being advised by the Attorney-general, who said it would be against the public interest and would cause problems to ongoing legal procedures.

But given the latest developments with FBME and the potential for compensation, said AKEL MP Aristos Damianou, it was now all the more urgent to revisit the matter.

“Now is the time to take a look at this issue, because as we consider ways of generating savings for the state, it cannot be that through our own actions we burden state coffers,” Damianou said.

Back in April last year, ruling DISY MP Andreas Kyprianou alleged that AKEL were rooting for FBME because the communist party had had a cosy relationship with the bank owners during the administration of Demetris Christofias.

AKEL hit back, arguing that any money lent by the bank was to the Cypriot state, not the government of the day.

In the past, FBME has commented that since 2008 it has invested €134m in the Cyprus economy, while in 2012 it rushed to the government’s aid when Cyprus needed to sell €240m in sovereign debt, while in 2014 the finance ministry said an agreement had been reached in principle for a further investment of $300m.

By Elias Hazou