The index-linked bond case involving Luminor (ex. DNB) is referred to the Court of Justice of the European Union

Press release

Vilnius, 27/12/2017

The Vilnius Regional Court appeals to the Court of Justice of the European Union (CJEU) for a preliminary ruling in the case concerning the index-linked bonds issued by Luminor (formerly - DNB). On 22 December 2017, the court passed a ruling in a case in which four of the bank's clients were defending their rights against Luminor Bank AB.

In 2007-2008, the then DNB Nord bank was offering issues of index-linked bonds, which were acquired by the bank's ordinary clients with the funds borrowed from the bank itself. As a result of this "toxic" product, they incurred an estimated loss of over 100 million litas (about 30 million euros). Currently, several cases involving aggrieved clients are pending in the courts, some of which are collective, under the joint claims of several clients.

"We are pleased to have the matter concerning the index-linked bonds issued by DNB referred to the CJEU. We have always been of the opinion that the current case law of the Lithuanian courts is not in line with the jurisprudence developed by the CJEU in the field of protection of the investors' rights. We hope that the response of the CJEU to the preliminary reference would be able to change the case law of the Lithuanian courts in a way favorable to investors," advocate Dominykas Vanhara said.

According to the extensive study carried out by the Securities Commission of the Republic of Lithuania in 2011, in 2005-2010, 640 bank's customers chose the investment strategy offered by DNB bank in Lithuania to buy index-related bonds with borrowed funds. Back then, the then head of the Securities Commission and the current Minister of Finance Vilius Šapoka, said: "Such an unprofessional approach to the provision of investment services cannot be tolerated. The financial market is based on trust which can be undermined by inappropriate actions of even a single intermediary. The Commission considers that the bank should assume the responsibility and compensate the damages incurred by the misled investors."

As the bank had been reluctant to cover the losses of the Lithuanian customers, they turned to the courts. An analogous case concerning the losses suffered by a Norwegian citizen was resolved by the Norwegian Supreme Court in 2013. At that time, a panel consisting of 12 judges decided unanimously that the bank's client Ivar Petter Røeggen was right and the DNB bank was wrong. The compensation of all damages was paid to the client as well as the litigation costs were covered.

Luminor Bank AB, Luminor in brief, was formed on October 1 this year by merging DNB and Nordea banks in the Baltic States. The merged banks have publicly announced that their contractual obligations will remain valid in respect of each bank's client. Luminor bank assumed the rights and obligations of DNB bank.

It will not be the first time when the Court of Justice of the European Union will be considering the grievances caused by Lithuanian banks to the country's citizens. A similar high-profile case concerning the deposit certificates of SNORAS bank deposit has been referred to the CJEU as well. In the judgment of 25 June 2015, the CJEU found that the directive on investor compensation schemes had not been transposed properly by the Law on Insurance of Deposits and Liabilities to Investors of the Republic of Lithuania. After a half-year, according to the interpretation of the Supreme Court of Lithuania of 17 November 2015, the deposit certificates were subject to deposit insurance allowing the SNORAS deposit certificate holders to recover their funds.