I INTRODUCTION TO DISPUTE RESOLUTION FRAMEWORK
Cyprus was a British colony until 1960 when the island became an independent republic. It was essentially the English legal system that applied to Cyprus whereby the applicable laws included the Constitution of Cyprus, the laws retained in force by virtue of Article 188 of the Constitution, the principles of common law and equity and the laws enacted by the House of Representatives. Following the accession of Cyprus to the European Union in 2004, the Constitution was amended so that EU law has supremacy over the Constitution and the domestic law of Cyprus. Moreover in 1960 the House of Representatives of Cyprus passed the Law referred to as the Courts of Justice No. 14/1960 which remains until today the backbone of the Cypriot legal system stating that ‘the common law and the principles of equity shall apply, save where they do not coincide with or where they are in conflict with the Constitution of the Republic of Cyprus or where any law provides differently’.2
Like most legal systems, the judicial procedure in Cyprus can be divided into the criminal procedure, the civil procedure and the administrative procedure. As regards civil procedure the relevant applicable law is mainly the Civil Procedure Rules and the Supreme Court case law that is published online and accessible to everyone via the website www.cylaw.org. It is worth noting that the procedure with respect to the labour courts, rent control courts and the family courts is based on civil procedure.
There are two tiers of courts in Cyprus, the Supreme Court and the subordinate courts. In both civil and criminal proceedings there are no jury hearings. The Supreme Court, which comprises 13 members, one of whom is its president, is the highest court in the Republic of Cyprus. The Supreme Court acts as an admiralty court with jurisdiction to adjudicate on all admiralty matters both at first instance and on appeal, and has exclusive jurisdiction to issue the prerogative orders of certiorari, habeas corpus, mandamus, prohibition and quo warranto. It is also the final appellate court and has jurisdiction to hear and determine appeals in both civil and criminal cases from the other subordinate courts.
The five district courts, one for each geographic district exercise initial criminal and civil jurisdiction. Assize courts are vested with unlimited jurisdiction to try all criminal offences and to impose punishment provided by the law. Family courts have jurisdiction in all family matters including divorce, custody disputes and any property divisions, while labour courts that are situated in Nicosia and Limassol exercise jurisdiction in claims concerning disputes between employers and employees. Besides the above, there are also three rent control courts exercising jurisdiction in claims relating to evictions, rent issues and premises.
II THE YEAR IN REVIEW
i Amendments to Orders 25 and 30 of the Civil Procedure Rules
Orders 25 and 30 of the Civil Procedure Rules have been amended in order to speed up the court process specially the proceedings in relation to smaller claims that used to be heard within five or six years of their filing, creating costs even greater than the amount claimed via the action.
With regards to Order 25, a party to an action may proceed with the amendment of its pleadings either with or without the leave of the court, which depends on the stage of its case. The plaintiff may amend the writ of summons without the leave of the court any time after the filing of the writ of summons and before the service of the latter.3 Furthermore following the exchange of the pleadings and before the issuance of the summons for directions, a matter governed by Order 30, any amendment is permitted without obtaining the permission of the court.4 In such a case, the other party has then 15 days after the filing of the amended pleading to file its own amended pleading, if this is considered necessary.5 However, after the issuance of the summons for directions as per Order 30, no amendments are permitted unless these are related to a (i) bona fide mistake relating to the drafting of the pleadings or (ii) to new facts which were not in existence at the time when instructions were received or at the time of the filing of the writ of summons or of any other pleading.6
As per Order 30 of the Civil Procedure Rules, irrespective of the scale of each lawsuit, a plaintiff must issue a summons for directions within 30 days upon the completion of the pleadings. Consequences can arise if the plaintiff fails to do so, particularly where the defendant notifies the plaintiff of its omission to file a summons for directions and the defendant once again neglects to comply with same. In such cases the lawsuit will be rejected by the court. Provided, however, that a summons for directions is issued, each party has 30 days after the filing and the service of the said summons, to specify in a written annex, which is Form 25,7 the precise directions that the plaintiff wants the court to issue.
With regards to this Order, a distinction must also be drawn between claims under €3,000 and those above €3,000. For the actions under €3,000, the court will direct the parties to submit and exchange their testimony in writing and state for example the number of witnesses they intend to call during the hearing. The trial of such actions is completed solely via written testimony. With regards to actions above the scale of €3,000, the parties are required to file a list including the names of the witnesses they intend to call together with a summary of each witness’ testimony. The trial of such actions is based on the written testimonies that have been filed with the court and the latter allows each party to proceed into an examination-in-chief, cross-examination or re-examination. However, the new Order 30 makes reference to time limits whereby examination-in-chief is 15 minutes and the time for cross-examination and re-examination will be set by the court depending on the statements and documents that have been submitted by each witness during the latter’s examination-in-chief.
ii Amendment to the Courts of Justice Law 14/60
Amendments have also been made with regards to the Courts of Justice Law 14/60 in particular with regards to the matter as to which decisions are subject to appeal. Under the new Article 25 of the Courts of Justice Law 14/60, the following decisions are subject to appeal:
- a every final decision or order of the court which exercises civil jurisdiction;
- b prohibitory orders or orders for the issuance of receiver which are issued as per the provisions of any law; and
- c interim decisions which are absolutely decisive as to their effect on the rights of the parties.
Furthermore in any event, a party is not deprived of the right to raise issues relating to any interim decision at the stage of appeal against the final decision.
iii With regards to the Company Indigo Travel Retail Group Limited, First Instance interim decision dated 31/01/2017, District Court of Nicosia
In a recent judgment issued by the District Court of Nicosia, it had been adjudicated that an affidavit was inadmissible due to the fact that the jurat was not in one of Cyprus’s two official languages being Greek or Turkish. Without going into detail on the facts of the case, the Court had concluded that a proper jurat is a mandatory requirement for an admissible affidavit. It had furthermore considered whether a jurat can be considered as being evidence with the meaning of the Official Languages of the Republic Law 67(I)/88.8 In coming to its decision the Court ruled that a jurat is a validation of an affidavit and therefore wholly separate from the affidavit itself. Accordingly a jurat, unlike an affidavit, must always be in one of the two official languages of the Republic of Cyprus.
The above judgment is a first instance judgment and it remains to be seen what the stance of other judges and perhaps the Supreme Court will be on this issue. It raises huge problems especially since it is very common for practising lawyers to ensure that a jurat is in the same language as the affidavit that it purports to validate. It also questions the practice adopted until recently to have affidavits executed before an English notary or a solicitor as per order 39 of Cypriot Civil Procedure Rules.
iv Right to paternity leave
The parliament of Cyprus voted on legislation introducing two weeks’ paid paternity leave for new fathers. Under Section 3 of the Law9 an employee is entitled to paternity leave when his wife is giving birth to a child, when his wife is having a child by a surrogate mother and when both parents are adopting a child up to the age of 12. The permitted leave is two weeks’ consecutive leave and must be taken within the 16 weeks from the birth of the child or the placement for adoption. In order to take paternity leave, an employee must give his employer at least two weeks’ written notice before the intended start date.10 Other issues that are raised in the said Law relate to the prohibition of termination of employment, the rights during and after paternity leave, and any penalties to be imposed on an employer if it is in breach of such provisions.
v Tax residency under the 60-day rule
On the 14 July 2017 the parliament of the Republic of Cyprus unanimously approved a bill that allows an individual to acquire Cyprus tax residence by staying at least 60 days in Cyprus per year. The 60-day rule has been in effect as from the 1 January 2017 and an individual is considered to be a tax resident in Cyprus provided he or she:
- a remains in Cyprus for at least a period of 60 days during the tax calendar year;
- b is not a tax resident of any other state or remains in any other state for a period or periods exceeding 183 days during the year in question;
- c maintains a permanent residence in Cyprus, which can either be owned or rented by him; and
- d carries out business activities in Cyprus or have employment in Cyprus or is a director in a company that is tax resident in Cyprus at any time during the tax year in question.
III COURT PROCEDURE
i Overview of court procedure
The Civil Procedure Rules of Cyprus deal with all of the procedural steps for the trial of civil actions, and the relevant law with regards to evidentiary matters in the course of proceedings is the Evidence Law. Further to the above, different rules of procedure may also depend on whether, for example, Company Rules apply to a particular case or any other Rules.
ii Procedures and time frames
Before commencing proceedings one will need to examine the limitation or prescription periods for the filing of civil claims, a matter governed by the Limitation Law 66(I)/2012.11 The said Law states the limitation period for civil wrongs,12 contracts,13 secured loans14 and various other types of actions.
Once the above issue has been examined, then civil proceedings may either be commenced with the filing of an originating process that states the nature and extent of the claim made or the remedy or relief sought by the plaintiff. The forms of an originating process are the writ of summons, the application for originating summons and the petition. Most civil actions in Cyprus commence by a writ of summons having the form of either a writ with a general endorsement or a writ with a special endorsement. The difference is that the specially endorsed writ of summons has the statement of claim of the plaintiff providing a factual background whereas the generally endorsed writ has only a concise statement of the nature of the claim made and the relief sought. When a generally endorsed writ is filed, a statement of claim should be filed separately. As regards to originating summons the body of the summons must include a statement of the questions on which the plaintiff seeks the court’s determination of the relief or remedy claimed. Moreover petitions are those related to the bankruptcy of individuals and winding up of companies.
Following the determination of commencement for any action to be filed, legal proceedings in a district court are commenced when a writ of summons or an originating summons is filed and sealed. Actions filed by resident Cypriot plaintiffs must be accompanied by a retainer which demonstrates the appointment of the advocate whereas this is not a requirement with regards to foreign resident plaintiffs. Following the above, the next step for the plaintiff is to serve the legal proceedings to the relevant parties to the action. Service nowadays under Order 5 B of the Civil Procedure Rules is effected through private bailiffs approved by the Supreme Court of Cyprus for carrying out this type of service upon payment of a fee.15 As regards to service upon foreign defendants to the action, the plaintiff is under an obligation to file an ex parte application in order to obtain the authorisation of the Court to serve the relevant party through methods which shall be included and supported by the plaintiff in the said application. The service of the writ of summons or the notice thereof to the foreign defendants, is made in accordance with any multilateral or bilateral conventions concluded between the Republic of Cyprus and the country where such service is to be made. Customarily this is effected through the Ministry of Justice of the Republic of Cyprus. In the absence of any such bilateral arrangement service may be effected by registered post, courier or any other method approved by court.
Copies of all of the relevant documents to be sent for service need to be stamped by the court registrar as true copies in order to be served accordingly and shall be accompanied by translations into the language of the country where the defendant resides. Particular importance lies in the service of a corporate entity whereby service must be effected either at its registered office to a person authorised to accept judicial documents or one of the company’s directors or its secretary. Recently the Civil Procedure Rules, Order 5 Rules 9 and 10 has been amended, permitting for substitute service via email, fax and other electronic means, methods which had not been permitted previously.16
Once service is effected, the defendant has to file a notice of appearance before the court within 10 days in cases of local defendants. Usually in cases of service outside of jurisdiction orders, the court limits the time after such service or notice within which the defendant is to enter an appearance since in cases where the relevant parties fail to do so, an application for default judgment may be filed on behalf of the plaintiffs. In such circumstances the plaintiff proves his case before the judge in the absence of the defendant on an ex parte basis. If, however, the particular defendant disputes the jurisdiction of the court or wishes to apply to set aside of the service effected upon same, then the defendant may apply for leave to file a conditional appearance.
Where the writ of summons is specially indorsed the plaintiff may apply for summary judgment, meaning that upon appearance of the defendants, the plaintiff may apply to the court for judgment as per the amount claimed in the writ of summons unless the defendant satisfies the court that he has a good defence to the action. This procedure for summary judgment is normally used where it is obvious on the facts of the case and the evidence that the defendant has no real defence and has entered an appearance merely for purposes of delaying the matter (i.e., claims under promissory notes, cheques, bill of exchange etc.). In practice if the defendant shows that he has some reasonable defence, summary judgment will not be entered and he will be allowed to file his defence.
Pleadings consist of the statement of claim, whether it be on special writ of summons or filed subsequently, the defence and counterclaim if any and the reply and defence to the counterclaim. In the statement of claim the plaintiff is required to set out the facts of the case on which he intends to rely upon in order to prove his cause of action. It is vital to note that evidence in such circumstances is never pleaded. The statement of defence must contain a reply to the various allegations contained in the statement of claim, setting the material facts on which the defendant relies for his defence. A counterclaim may also be filed together with the defendant’s statement of defence. The next step is for the plaintiff to file its reply to the statement of defence answering any issues as a matter of response to the defence. Provided that the defendant’s statement of defence also included a counterclaim then the plaintiff may also file the reply and defence to the counterclaim. The Civil Procedure Rules also provide for time frames upon which the parties need to abide in order to file their respective pleadings however in practice the parties do not follow the prescribed time limits. Usually each party may file an application before the court to obtain an order for extension of time to file the statement of defence, a practice commonly used in Cyprus courts and granted by the courts.
Once the pleadings have been closed, the case will be set for directions before the judge, who will give directions to the parties for among others matters such as the disclosure and discovery of documents and requests for further and better particulars. When all of the interim procedures have been concluded, the case shall be set for hearing and depending on the availability of the court’s schedule usually it may take three to four years from the date of the filing of the action for the case to be adjudicated. During the hearing it is the duty of the plaintiff to prove its case on a balance of probabilities. The Civil Procedure Rules, particularly Order 33, provide for the procedure to be followed at trial.
Provided that the plaintiff is successful its action, he or she will need to take steps to enforce the judgment against the defendant, such as by the enforcement against moveable or immovable property and third party enforcement orders against banks which hold the funds or the assets which belong to the particular judgment debtor. Orders 40–47 of the Civil Procedure Rules provide for the procedure and the method of effecting execution under a writ of movables or writ for the seizure and sale of movable property or for the issue of a writ of sale of immovable property. Provision is also made under Order 42A for the attachment and sequestration as well as Order 44 with regards to the power and duties of the bailiffs entrusted with execution and Order 45 with regards to receivers.
The issuance of interim orders before the Cyprus courts
The Courts of Justice Law 14/60 particularly Section 32 confers power to the Cyprus courts to grant an injunction ‘in all cases in which it appears to the Court just or convenient so to do’.17 The ability to grant interim orders secures satisfaction of any final court judgment or arbitral award, ensuring that for example property is not alienated or assets are not disposed of. The different types of interim orders include interim injunctions, freezing injunctions which may include ancillary disclosure orders, search order and disclosure or inspection orders, appointment of interim receiver etc.
A plaintiff seeking to obtain the interim order will need to satisfy the court that there is (i) a serious question to be tried, (ii) that there is a likelihood that the plaintiff will succeed in its claim and that (iii) it will otherwise be difficult or impossible to do justice at a later stage. The issuance of such an interim order lies within the discretion of the court taking into account all of the relevant conditions and by weighting the balance of convenience, whether damages are likely to be an adequate remedy to either party and the ability of the other party to pay as well as maintaining the status quo. Applications for such interim orders are filed usually on an ex parte basis, however, there are certain occasions when it is not adequate to file ex parte applications since there is no matter of urgency or exceptional circumstances which can be proved by the plaintiff and which gives jurisdiction to court to hear the application on ex parte basis. In such cases, the plaintiff opts to file an application by summons.
Generally under such interim order applications, the plaintiff needs to provide a strong affidavit supporting the said application since besides the above three conditions to be proved, it also needs to illustrate and provide evidence as regards the risk of alienation or disposal of assets if the application relates to this aspect. Such evidence may be evidence that the defendant has already taken steps to remove or dissipate assets, past incidents of debt default by the defendant or even whether the evidence supporting the substantive cause of action discloses dishonesty or suspicion of dishonesty on the part of the defendant.
iii Class actions
Class action lawsuits can be brought by a number of people particularly where they share similar harm or the same issue in an action both in law and in fact, against another entity or person, since this is a form of collective redress. Cases involving class action lawsuits can include consumer fraud, or the haircut Cyprus cases by bank depositors or even cases where shareholders act on behalf of all other shareholders in an attempt to redress wrongs that have been committed against the company.
The English common law derivative action recognised and adopted by Cypriot law is one strong tool that minority shareholders can use to redress wrongs committed by the majority shareholders against their company.
iv Representation in proceedings
In Cyprus, physical persons may decide to either represent themselves in legal proceedings or opt to have an experienced lawyer act on their behalf. It very much depends on the financial ability of each litigant but also the type of case since for example for simple small claims cases many choose to represent themselves. Legal entities cannot be represented by their directors but only by lawyers.
v Service outside of the jurisdiction
In Cyprus, the issue as to the service of proceedings is governed by the Civil Procedure Rules. Particularly Order 5 deals with the service of the writ of summons and explains how service of the writ of summons is to be effected and thereafter considered as good service depending on the category of defendants in the particular action. Furthermore Order 5B of the Civil Procedure Rules provides for service of court documents effected by private bailiffs approved by the Supreme Court of Cyprus. Besides the said Orders, Order 5A is also relevant when dealing with the service outside of jurisdiction on foreign defendants. Such an application must be supported by an affidavit or other evidence satisfying the court that the plaintiff has prima facie a good cause of action and showing in what place or country such defendant is or probably may be found, and whether such defendant is Cypriot or not, and the grounds upon which the application is made.
It is vital to note that there are mandatory methods of service depending on the country of residence of the defendant. For example, Cyprus has entered into bilateral treaties with inter alia Ukraine and Russia and hence the method of service provided by in the said Treaty or a Convention (Hague Convention) will need to be followed. Usually service to Ukraine and Russia is completed via the Ministry of Justice. Moreover, service to EU Member States is governed via the Council Regulation (EC) No. 1393/2007. Besides the above, on various occasions usually where the said defendant could not be found at the given address and therefore the plaintiff is given the right as per the Civil Procedure Rules to file an ex parte application requesting an order of the court for the purpose to serve the said defendant by an alternative substitute service method such as by courier, email, Facebook messenger or even service via the local daily newspaper where the particular defendant is residing.
vi Enforcement of EU foreign judgments
All types of EU Judgments issued by any EU Member State court are enforceable in Cyprus pursuant to the relevant EU Regulations. Of significance is the fact that the judgment creditor as the applicant is time barred based on actions to enforce a foreign judgment, which pursuant to the Limitation of Actionable Rights Law of 2012, No. 66(I)/2012, become statute barred 15 years from the date on which the judgment became final.
For EU judgments that fall within the sphere of the EU Regulation 44/2001 or the Brussels Recast Regulation 1215/2012, the judgment creditor must provide to the Cyprus Courts, a certificate of authenticity for the judgment, issued by the court of origin, and a declaration of enforceability from the court of origin if filed pursuant to the EU Regulation 44/2001 or the standard certificate issued by the court of origin pursuant to the applicable regulation pursuant to Article 53 of the Brussels Recast Regulation 1215/2012. As per the changes effected by the Brussels Recast Regulation 1215/2012 the judgment creditor will solely need to present a copy of the judgment and a standard form certificate and can then begin the enforcement process. It is worth noting that the procedure for the enforcement of judgments given in another Member State shall be governed by the law of the Member State addressed. As per Article 43 of the Brussels Recast Regulation 1215/2012, where enforcement is sought of a judgment given in another Member State, the certificate issued pursuant to Article 53 shall be served on the person against whom the enforcement is sought prior to the first enforcement measure.18 The certificate shall be accompanied by the judgment, if not already served on that person.
Besides the above EU Regulations, EU judgments may also fall within the ambit of the European Enforcement Order Regulation No. 805/2004 creating a European enforcement order for uncontested claims. For applications filed pursuant to this EU Regulation, the judgment creditor must provide the European enforcement order issued by the competent authority in the country of origin. Automatic recognition and enforcement is allowed once a certificate is issued by the court of origin, following an application to the court of origin. Other EU Regulations include the EU Regulation No. 1896/2006 whereby the creditors have the choice to apply for a European order for payment. Such European Order is recognised and enforced in all EU Members (except Denmark) without the need for any intermediary proceedings in the EU country of enforcement or a declaration of enforceability, prior to its recognition and enforcement. EU Regulation No. 861/2007 is also applicable for the small claims procedure in cross-border litigation to civil and commercial matters for monetary claims of under €2,000.
Provided that the judgment creditor applies before the Cyprus courts for the enforcement of a foreign judgment, it will need to comply with certain formal requirements including providing a (1) complete and certified copy of the foreign judgment, (2) if the foreign judgment was rendered by default, the originals or true copies of the documents required to establish that the summons was duly served to the judgment debtor, (3) all documents required to establish that the foreign judgment is no longer subject to ordinary forms of review in the country of origin and, where appropriate, that the judgment is enforceable in the country of origin, unless indicated in the judgment itself, and (4) unless otherwise provided for in a convention or treaty between Cyprus and a third country, all documents referred to above must be accompanied by a certified translation into Greek.
Cyprus is bound by bilateral treaties relating to the recognition and enforcement of foreign judgments with the Czech Republic,19 Serbia,20 Slovenia,21 Slovakia, Ukraine,22 Russia,23 Bulgaria,24 China, Greece,25 Hungary, Poland,26 Syria and Egypt. Further to the above, Cyprus is also a signatory to various multilateral conventions including the Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters and Supplementary Protocol the European Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and the New York Convention for enforcement of international arbitral awards.
In Cyprus, the rules that relate to the procedure for the recognition, enforcement and the execution of foreign judgments are contained in Law 121(I)/2000, a law that applies where the judgment issued is by a non-EU Member State or a country with whom Cyprus has concluded an agreement for mutual recognition and enforcement of both judicial judgments and arbitral awards. With regards to non-EU judgments from countries with which Cyprus has no bilateral treaty, the foreign judgment has no direct operation in Cyprus but it may be enforced by an action or counterclaim at common law. In such circumstances a judgment creditor has the option of bringing an action on the foreign judgment. The creditor may, in the meantime, also apply for interim relief (i.e., freezing orders) blocking assets held by the judgment debtor etc.
vii Assistance to foreign courts
Assistance can be provided to foreign courts for among others the service of judicial and extrajudicial documents, the taking of evidence by witnesses or experts, the extradition of persons and in the recognition, enforcement of court judgments or arbitral awards. Cyprus has entered into the Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters as well as the Council Regulation EC 1206/2001 on Cooperation between the Courts of the Member States in the Taking of Evidence in Civil and Commercial Matters.
viii Access to court files
Parties to an action are permitted to inspect or obtain copies of the pleadings that are filed before the court and kept in the court file. In order to do so, the relevant party who wishes to inspect or obtain copies will need to pay a small fee and fill in the details in the certification form which is located at the Registrar of the District Court in which the case is before. Thereafter the Registrar will hand the case file to the relevant party who will inspect and possibly obtain copies of any pleadings in the said case file.
Besides the parties to the action, any other interested party can obtain access to court files only provided that they file an ex parte application before the Court explaining the reasons as to why they require access to the court file and what their interests are. In most cases permission is granted where such parties are allowed to intervene in the proceedings and added as parties or for collection of evidence to be used in pending or new cases to be filed.
ix Litigation funding
With regards to litigation matters the winning party is usually awarded an order for costs, and usually the losing party bears the costs of the winning party. The litigation is funded by the parties themselves while there is also the possibility of a party to request legal assistance from the state depending on his or her financial abilities. Another issue is also the third-party litigation funding whose legality has not yet been examined by the Cypriot courts but if it is examined, Cyprus courts will look for guidance from English and other common-law case law. In the context of litigation funded by third parties, the English courts have taken an increasingly liberal approach to the principles of champerty and maintenance.
IV LEGAL PRACTICE
i Conflicts of interest and Chinese walls
Qualified practicing lawyers and trainees are subject to the Code of Conduct Regulations which set out their legal duties with respect to their clients and the profession in general. As stated expressly under Article 21 of the Code of Conduct Regulations, advocates must not ‘act as counsellors or representatives or advocates of more than one client in the same case, if there is a conflict of interests among the said clients or significant risk of such a conflict arising.’27 Furthermore even in cases where there is an issue as to conflict of interest, advocates must abstain from handling the cases of all concerned clients, since there is the risk of violation of secrecy or of prejudice to their independence.28 The practical approach is for law firm who are approached by new clients to undergo a conflict of interest check before accepting and moving forward to any engagement agreement between the said client. If this is not complied with, then disciplinary actions can be initiated against the particular law firm. The Cyprus Securities and Exchange Commission regulates companies and includes Cysec Rules and Regulations establishing policies and procedures to manage conflict of interest that may arise.
ii Money Laundering, proceeds of crime and funds related to terrorism
In an effort to combat money laundering and the financing of terrorists’ activities and to increase transparency the European Commission issued the Fourth AML Directive 2015/849, which should be fully implemented by all EU Member States including Cyprus by 26 June 2017. One of the main issues under the Fourth AML Directive is the identification of the beneficial owner, a matter which still has no place in Cyprus. Under the existing regime applicable in Cyprus banks, lawyers, accountants and other professionals are obliged to know the ultimate beneficial owners of entities they are dealing with, but with the register supervision will be made faster and simpler, if ultimately implemented by Cyprus.
Other issues covered by the Fourth AML Directive include:
- a The creation of a national central register whereby Member States will be required to hold satisfactory, precise and up-to-date information on the beneficial owners of all corporate and other legal entities incorporated within their territory in a National Central Register. No such national central register has yet been created in Cyprus.
- b The widening of the scope of obliged entities that is achieved by submitting gambling services to the Directive beyond casinos. Member States, having carried out a risk assessment, may exempt certain gambling services some or all of the requirements laid down in this Directive but must provide justification for doing so and also notify accordingly the Commission.
- c Introduction of provisions to facilitate cooperation between financial intelligence units.
- d Enabling the financial intelligence units to identify holders of bank and payment accounts. The Commission proposes to require Member States to set up automated centralised mechanisms so as to swiftly identify holders of bank and payment accounts.
MOKAS is a unit for combating money laundering and its tasks include receiving, requesting, analysing and disseminating disclosures of suspicious transactions reports and other relevant information concerning suspected money laundering and terrorist financing. Furthermore the Central Bank of Cyprus the main body which cooperates with the MOKAS on any such issues. Other bodies that work with MOKAS include the Cyprus Bar Association, which is the supervisory authority of lawyers, and the Cyprus Association of Certified Public Accounts, which supervises all auditors and accountants licensed to practise in Cyprus. They cooperate with MOKAS in order to monitor the compliance of their members. The relevant law on the above matters in Cyprus is Law No. 58(I)/2010 that has replaced the Prevention and Suppression of Money Laundering Activities Law 2007 No. 188 (I) 2007.
V DOCUMENTS AND THE PROTECTION OF PRIVILEGE
Privileged documents are those that cannot be used as evidence and their admissibility may be challenged by the party who claims privilege. Documents considered as being privileged include a confidential document, a self-incriminating document or documents protected by legal professional privilege. There are two types of legal professional privilege, namely legal advice privilege and litigation privilege. Legal advice privilege protects communications between client and lawyer while litigation privilege protects communications between client and lawyer and even third parties in the context of reasonably contemplated or actual litigation. It is vital to stress that as a matter of Cyprus law, in-house lawyers are not members of the legal profession for the purposes of legal advice privilege and this position is very different to the United Kingdom where in-house lawyers enjoy the same privilege as external lawyers. Furthermore, documents holding the title of ‘without prejudice’ have in some cases adjudicated before the Cyprus courts and been held admissible in evidence while the general rule is for them to be inadmissible.
ii Production of documents
Order 28 of the Civil Procedure Rules provides that a party to the proceedings may apply to the court for an order directing the other party to make discovery on oath of the documents which are or have been in his possession or power.29 If a party ordered to make discovery of documents fails so to do, he shall not afterwards be at liberty to put in evidence on his behalf in the action any document he failed to discover or to allow to be inspected, unless the court is satisfied that he had sufficient excuse for so failing, in which case the court may allow such document to be put in evidence on such terms as it may think fit.30 Additionally, documents that are referred to in pleadings need to be produced or if required admissible for inspection.
VI ALTERNATIVES TO LITIGATION
i Overview of alternatives to litigation
Litigation is the predominant method for resolving disputes in Cyprus, however, there is also an increased trend of the use of arbitration particularly relating to cross-border transactions and commercial matters and disputes relating to construction, insurance, shipping and trade. Moreover negotiation mediation is a method used either before legal proceedings are initiated or during the period when proceedings are commenced for an amicable out of court settlement of a dispute.
Arbitration is progressively considered a more popular choice within the business community of Cyprus predominantly where the disputes involve complex technical issues or foreign parties since arbitration offers confidentiality, efficiency, less expense, faster adjudication of disputes etc., and is conducted in an informal way that avoids the adversarial litigation system in Cyprus.
In Cyprus, arbitration proceedings are governed by two separate legal regimes. Domestic arbitration is governed by the 1944 Arbitration Law which provides for the procedure to be followed. International arbitration is governed by Cypriot International Arbitration in Commercial Matters Law of 1987 (L. 101/87), which is identical to the United Nations Convention on International Trade Law Model Law on International Commercial Arbitration. It is vital to note that the route to arbitration lies within the parties who via their written agreement, choose and submit their disputes, and gives discretionary powers to an impartial person specialising in the subject matter of the dispute to be resolved. The arbitral tribunal’s decision on the given matter is final and binding and also enforceable. In particular, Cyprus has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards by Law 84/79 and therefore arbitral awards issued in Cyprus may be registered in and enforced in other states that are signatories to the New York Convention and vice versa.
Cyprus has satisfied the Washington Convention of 1965 concerning awards issued by the International Centre of Settlement of Investment Disputes.
The most prominent alternative dispute resolution centres in Cyprus are the Cyprus Eurasia Dispute Resolution Centre (CEDRAC), the Cyprus Chamber of Commerce and Industry (CCCI) and the Cyprus Arbitration and Mediation Centre (CAMC).
Cyprus courts have jurisdiction to issue interim measures of petition (i.e., freezing injunctions etc.) in aid or in support of international commercial arbitration cases before the filing of the requests for arbitration or during the arbitral proceedings.
Besides arbitration another commonly used method of alternative dispute resolution in Cyprus is mediation and is a method that is increasingly becoming popular. Mediation is a flexible, non-binding, private and confidential procedure that helps the parties to find common ground and work towards resolving their dispute by agreement. Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters has arguably given a boost to mediation and Cyprus has implemented this directive via the Law 159(I)/2012. In Cyprus there is the Cyprus Mediation Association with its seat in Nicosia, which is an established society of experienced professionals who have been specially trained to provide high-quality mediation services in a variety of fields.
iv Other forms of alternative dispute resolution
Besides mediation and arbitration, there are also various other methods of dispute resolution available to parties including conciliation which is a non-binding procedure, similar to mediation which is considered as an extension of mediation in that it provides a non-binding opinion to the parties in cases where they are unable to agree with the third party.
VII OUTLOOK and CONCLUSIONS
i Incoming EU General Data Protection Regulation
Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data will take effect on 25 May 2018 being directly applicable in all Member States without the need for implementing national legislation.31 The main amendments relating to personal data include (1) higher standards for obtaining the data subject’s consent; (2) profiling; (3) broadening the meaning of personal data; (4) significant sanctions; (5) the duty to designate a data protection officer and (6) the obligation to notify the supervisory authority in the event of a personal data security breach.
ii Commercial Court to be established
It is expected that by 2018 a Commercial Court will be set up in Cyprus that shall have jurisdiction over matters including claims arising from contracts or disputes between companies, the purchase or sale of goods, the exploitation of oil or gas, the purchase or exchange of shares, intellectual property and insurance affairs. It shall apply to cases the scale of which shall exceed €5 million. The seat shall be in Limassol and Nicosia with consultations with the Supreme Court. The Commercial Court will have a separate structure and will operate independently from the district courts.
The idea is to have a fast-track procedure that is completed within 18 months at first instance. The establishment of the Commercial Court is to increase the speed and efficiency of the system in Cyprus and is an attempt to attract further investment and companies to Cyprus as well as promoting Cyprus as an attractive and efficient dispute resolution centre.
iii Implementation of the New EU Pensions Directive in Cyprus
The EU Pensions Directive 2341/2016/EC on the activities and supervision of institutions for occupational retirement provisions came into force in January 2017 and EU countries among which is the Republic of Cyprus are entitled to enact the regulations and administrative provisions required to comply with the directive by 13 January 2019. Some of the most vital requirements under the new Directive include the (1) implementation of a remuneration policy; (2) risk management and (3) an independent internal audit and (4) actuarial functions.
iv Cyprus arbitration forum
A Cyprus arbitration forum – in the form of a limited by guarantee company – is in the process of being established whose main aim is the promotion of the development of arbitration, as well as mediation in Cyprus. Furthermore it shall organise annual conferences and seminars both in Cyprus and abroad for the promotion of the use of Cyprus as a preferred venue for hosting international arbitrations, whether in ad hoc proceedings, or in proceedings administered under the rules of Cypriot arbitration institutions, as well as leading international arbitration institutions. It will also serve as a forum for carrying out Cyprus educational work for use in arbitration and mediation as the best method and mechanism of dispute resolution.
1 Soteris Pittas is a managing director and Nada Starovlah is a barrister at law at Soteris Pittas & Co LLC.
2 Section 29(i)(c) of Law 14/1960.
3 Section 25(1) of the Civil Procedure Rules.
4 Section 25(2) of the Civil Procedure Rules.
5 Section 25(2) of the Civil Procedure Rules.
6 Section 25(3) of the Civil Procedure Rules.
7 Annex 25 to the Civil Procedure Rules.
8 Article 5 of the official Languages of the Republic Law 67(I)/88.
9 Section 3 of the Protection of Paternity Law 117(I)/2017.
10 Section 4 of the Protection of Paternity Law 117(I)/2017.
11 Limitation Law 66(I)/2012.
12 Section 6 of the Limitation Law 66(I)/2012.
13 Section 7 of the Limitation Law 66(I)/2012.
14 Section 5 of the Limitation Law 66(I)/2012.
15 Order 5B of the Civil Procedure Rules, Cap 6.
16 Order 5, Rules 9 & 10 of the Civil Procedure Rules, Cap 6.
17 Section 32 of the Courts of Justice Law 14/1960.
18 Article 43 of the Brussels Recast Regulation 1215/2012.
19 Ratifying Law 68/82.
20 Ratifying Law 179/86.
21 Ratifying Law 179/86.
22 Ratifying Law 172/86 and 8/2005.
23 Ratifying Law 172/86.
24 Ratifying Law 18/84.
25 Ratifying Law 55/84.
26 Ratifying Law 10/97.
27 Article 21(1) of the Code of Conduct Regulations.
28 Article 21(2) of the Code of Conduct Regulations.
29 Order 28(1) of the Civil Procedure Rules.
30 Order 28(3) of the Civil Procedure Rules.
31 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016.