Bloomberg News

Latvian Court Rules Part of Credit Law Violates the Constitution

October 19, 2011

Oct. 19 (Bloomberg) -- The Latvian Constitutional Court ruled part of a credit-institution law violates property protection rights, helping a claim by Parex Banka AS investors who say their holdings were diluted in the bank’s split-up.

Investors including Amber Trust SCA, Firebird, KJK Capital and East Capital lodged an appeal to the court after their stakes were diluted and left in the bad bank.

The investors saw their 8 percent stake in Parex reduced to 2 percent after the institution required a state rescue in 2008 and turned to the court since they were not allowed to purchase new shares or participate in capital increases.

“We do understand that you can’t go back in time and make the capital increases void,” said Antti Partanen, who represents the investors, in an interview. “We need to wait for the government to form properly. When that is done we expect a person or persons or a team that can work constructively with us in ways to resolve the dispute.”

Latvia poured 1.1 billion lati ($2.2 billion) of state guarantees, capital and liquidity support into Parex after the state rescue, which forced the country to turn a group led by the European Commission and the International Monetary Fund for a 7.5 billion-euro ($10.4 billion) loan.

Initially Latvia took a 51 percent stake in the lender, later increasing it to 85 percent before splitting the lender and re-capitalizing it.

--Editor: James M. Gomez

To contact the reporter on this story: Aaron Eglitis in Riga at

To contact the editor responsible for this story: Balazs Penz at

The Good Business Issue
blog comments powered by Disqus