I COMMERCIAL OVERVIEW OF THE SHIPPING INDUSTRY

The history of the sea, trade and shipping in Cyprus traces back thousands of years. When Cyprus gained its independence in 1960, it heralded a new era of prosperity that witnessed an upsurge in the economy and modernisation of the business and commercial sectors. The development of the shipping industry in Cyprus began in 1963 with the introduction of legislation concerning the registration of ships, the terms of employment of sailors and the relevant taxation. In 1963, the Cyprus fleet consisted of two vessels of 96 gross tonnage (GT), while in 2019, the Cyprus fleet reached the impressive number of 1,743 vessels with a total GT exceeding 24.5 million. Internationally, Cyprus takes pride in its re-election to the International Maritime Organization (IMO) Council for 2020–2021, ranking fourth in Category C with 140 votes, higher than ever before, strengthening Cyprus' role in the European and international decision-making process. Cyprus has been re-elected into Category C every year since 1987. Moreover, in December 2019, Cyprus successfully prolonged its Tonnage Tax and Seafarer Scheme for the next 10 years (until 31 December 2029), following extensive negotiation and discussion between the Shipping Deputy Ministry to the President of Cyprus (SDM) and the European Commission. The Scheme provides competitive advantages, including, among others, a wider list of eligible vessels and ancillary activities and discount rates for environmentally friendly vessels. Cyprus had the first ever open registry within the European Union, with a comprehensive, transparent tonnage tax system approved by the EU.

Cyprus has one of the largest registered merchant fleets in the world, being, at the same time, a well-established shipping and ship management centre, located close to the Suez Canal, at the eastern edge of Europe, at the core of bustling air and shipping routes connecting Europe, Asia and Africa. Notably, in 1981, the Cypriot fleet was ranked 32nd globally, in terms of its size, whereas currently, Cyprus has the 11th largest fleet in the world and the third largest in Europe. In addition, 220 shipping-related companies with approximately 4,500 employees are registered under the Cyprus Tonnage Tax System. Of these, 87 per cent are controlled by EU interests. The Register of Cyprus Ships is also one of only two open registries within the EU, and allows non-Cypriot citizens to register their ships under the Cyprus flag, provided that they fulfil the specific conditions of ownership that the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, require. Cyprus has also concluded 27 merchant shipping bilateral agreements.

The SDM, which is responsible for maritime and shipping matters, was established on 1 March 2018, replacing the Department of Merchant Shipping. Prior to this, the Department of Merchant Shipping had been a distinct entity within the Ministry of Transport, Communications and Works of the Republic of Cyprus, since 1977 and was responsible for the control and development of shipping in Cyprus. The date of the SDM's establishment (1 March 2018) is marked as a historic day for Cyprus shipping because the SDM is an autonomous deputy ministry, dedicated entirely to Cyprus' maritime industry. Since its establishment, the SDM has developed with regard to its internal restructuring, aiming to make Cyprus' maritime administration even more modern, efficient and industry-focused, and thus, even more business-friendly to Cyprus-related shipping companies. The SDM is headquartered in Limassol, the shipping and financial capital of Cyprus.

The establishment of the SDM clearly reflects the importance of the shipping sector in Cyprus and the significance that the government places on its development, since the yearly contribution of merchant shipping to the Cyprus economy is extremely high, with recent figures indicating that shipping accounts for approximately 7 per cent of the country's GDP. Pursuant to the Central Bank of Cyprus' report published on 16 April 2020, Cyprus' ship management revenues amounted to €581 million during the second half of 2019, which corresponded to 5.2 per cent of Cyprus' GDP.

Today, shipping stands as one of the financially strongest and most significant pillars of the Cypriot economy. More specifically, it has been characterised as a 'blue economy', with the sector contributing around €1.034 billion to the island's GDP per annum. More than 5 per cent of the world's fleet is controlled from Cyprus and more than 20 per cent of the world's third-party ship management activity (more than 200 shipping companies) is managed by companies based in Cyprus, making the island the largest third-party ship management centre within the EU and among the top three in the world. In addition, more than 55,000 seafarers are employed on board Cypriot ships and 9,000 personnel are employed on shore with the sector employing around 3 per cent of Cyprus' workforce.

II GENERAL OVERVIEW OF THE LEGISLATIVE FRAMEWORK

Cyprus is a common law jurisdiction, meaning that its legal framework is based on both legislation and case law. The Cypriot legal system from 1878 until its independence in 1960 was based on the English legal system.2 The laws enacted for the colony applied the principles of common law and equity in Cyprus, and many of those laws are still in force today.

Shipping legislation in Cyprus is essentially based on the UK model. The Register of Cyprus Ships is regulated by the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, which are similar to the UK's Merchant Shipping Acts 1894–1954. In addition, Cypriot shipping companies are regulated by Chapter 113 of the statute laws of Cyprus, which is modelled on the UK Companies Act 1948.

As far as admiralty law is concerned, both the Administration of Justice Act of 1956 (AJA), which defines the admiralty jurisdiction of the Supreme Court of Cyprus, and the Cyprus Admiralty Jurisdiction Order 1893, which regulates the procedure and rules before the Supreme Court, apply in Cyprus.3

Moreover, following the accession of the Republic to the European Union in 2004, all EU maritime laws, including treaty provisions, regulations, directives and decisions (acquis communautaire) apply in Cyprus. Several international maritime conventions on safety, security, pollution prevention, maritime labour and health to which Cyprus is a signatory or that have been incorporated into Cyprus law also regulate the shipping industry.

III FORUM AND JURISDICTION

i Courts

In Cyprus, all shipping disputes are litigated by the Supreme Court of Cyprus in its first instance jurisdiction as Admiralty Court and then as an appellate court, by a distinct judicial panel, at the second and final instance. However, the Supreme Court has the power to refer4 an admiralty case for adjudication by a district court5 (that is, a first instance court) in the following cases:

  1. irrespective of its amount, any claim that relates to a marine accident involving a ship and that includes any claim for loss of life or personal injury caused by a ship defect or as a result of an illegal or negligent act or omission of the owners, charterers or other persons possessing or controlling the ship; and
  2. any of the following admiralty claims, provided they do not exceed the amount of €100,000:
    • claims in relation to goods or materials supplied to the ship;
    • claims for loss of life or goods carried on board;
    • claims pertaining to the building, repairing or supplying of a ship; and
    • claims for wages or for disbursements made on behalf of a ship.

The jurisdiction of the Supreme Court to hear and determine admiralty claims and the extent of its jurisdiction are governed by the AJA.6

The Supreme Court has, in many instances, stayed its jurisdiction in favour of a more convenient foreign forum with a closer relation to the dispute and the litigants than Cyprus. The same approach has been adopted by the Supreme Court when the parties have agreed to refer their disputes to arbitration.

As far as the invocation of the Admiralty Court's jurisdiction is concerned, the AJA makes a distinction between in personam and in rem actions and for the latter category, it makes a further distinction between occurrences in which the subject matter relates to a maritime lien or a statutory lien. In particular, Section 3(1) of the AJA stipulates that the jurisdiction of the Court may be invoked by an action in personam (i.e., against a person) in all cases, irrespective of the category of claim. However, the jurisdiction of the Court may be unconditionally invoked by in rem action against a ship only for claims that give rise to a maritime lien of the ship or for claims relating to the possession, ownership or (between co-owners) the business and earnings of the ship. Any other action in rem against the ship or against a sister ship may trigger the jurisdiction of the Court, only on the premise that the person who would otherwise be liable on an in personam claim was, both at the time the cause of action arose, the owner or charterer or person in possession or control of the ship, and at the time the action against the ship was brought, the beneficial owner of the ship in terms of all the ship's shares.

The Admiralty Court, pursuant to Section 1(1)(m) of the AJA (any claim in respect of goods or materials supplied to a ship for her operation or maintenance), has assumed jurisdiction for claims pertaining to bunkering7 and supplies.

The time within which an admiralty action may be commenced is limited by the Limitation of Actionable Rights Law (Law No. 66(I)/2012 (the Limitation Law)), which constitutes the general law on limitation, and by the Torts Law when it comes to claims on negligence. After a few years of suspension, the Limitation Law eventually entered into force on 1 January 2016. It is the general law prescribing time bars for all legal actions to be instigated in the Cypriot courts, including admiralty actions. Hence, the time bar period depends on the nature of the claim and applies in the same fashion for all actionable rights, irrespective of jurisdiction. Indicatively, the following time bars apply:

  1. three years for actionable rights on negligence; and
  2. six years for actionable rights pertaining to a contract, including loan agreements.

The Supreme Court has recognised the right of the parties in a contract to set commonly acceptable time bars for certain aspects of their contractual relationship by adopting, for instance, that stipulated in shipping-related international conventions. As such, the Supreme Court, in one of its judgments, endorsed the agreement of the parties to adopt the one-year time bar provision of the Protocol to amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading 1968 (the Hague-Visby Rules) to raise a claim against the carrier and the ship in respect of carriage of goods.

Finally, regard must be paid to various international conventions containing limitation of action stipulations, provided these have been ratified by Cyprus. Cyprus has not ratified the Hague-Visby Rules, the UN Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules) or the Athens Convention on the Carriage of Passengers and their Luggage by Sea 1974 (the Athens Convention), which contain certain limitation of action provisions (even though, as mentioned in more detail below, Cyprus has adopted most of the provisions of the Hague-Visby Rules and incorporated these into domestic law). However, Cyprus has ratified the International Convention on Civil Liability for Oil Pollution Damage 1969, replaced by 1992 Protocol (the CLC Convention).

Reform of Cyprus' judicial system

On 6 May 2019, the Council of Ministers of the Republic of Cyprus announced the approval of a draft bill8 providing for the establishment of admiralty and commercial courts in Cyprus. This new bill aims to constitute the fundamental basis of reforming the judicial system of Cyprus by providing fast and effective remedies for commercial and admiralty disputes.

ii Arbitration and ADR

No arbitration tribunal exists in Cyprus and, similarly, no specific maritime arbitration procedure is prescribed in the Cypriot legal framework. The arbitration rules of Cyprus are widely applicable to all sectors of the legal arena, irrespective of the nature of the dispute or the jurisdiction to which they should be referred.

A dispute may be adjudicated by an arbitrator if the parties involved originally agreed in the underlying agreement (or thereafter agree in writing through a separate agreement) to refer the subject matter of their contention for resolution to one or more arbitrators of their choice.

The law of Cyprus categorises arbitral procedures and agreements into 'domestic', which are governed by the Arbitration Law, Chapter 4 and 'international', which are regulated by the International Commercial Arbitration Law (Law No. 101/87), which adopts and reflects, in its greater extent, the provisions of the UNCITRAL Model Law on International Commercial Arbitration of 1985, including the definition of 'international arbitration'. Cyprus has been a contracting state to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) since December 1980.

Irrespective of the arbitration time frames set by the parties in their agreement, the provisions of the Limitation Law apply to arbitration claims alike.

Finally, Cyprus has quite recently introduced the Law Providing for Certain Aspects of Mediation in Civil Matters (Law No. 159(I)/2012 (the Mediation Law)). Pursuant to this Law, 'mediation' means a structured process, however named or referred to, whereby two or more parties to a dispute attempt by themselves, on a voluntary basis, to reach an agreement on the settlement of their dispute with the assistance of a registered mediator. For the purposes of the law, the term 'dispute' also includes a shipping dispute. Nonetheless, it is important to note that mediation law and practice in Cyprus is still in its infancy and not in common use for any kind of civil disputes, including maritime and shipping disputes.

iii Enforcement of foreign judgments and arbitral awards

Cyprus' legal framework does not specially classify or treat judgments or rulings of a maritime nature or context (foreign judgments) for recognition and enforcement purposes. As one would expect, the rules, principles and procedures governing the recognition and enforcement in Cyprus of foreign judgments awarded within the European Union area are enunciated in Regulation (EU) No. 1215/2012 (the Brussels I Regulation (recast)), which also applies to maritime and admiralty judgments. The Regulation entered into force on 10 January 2015 and by virtue of its transitional provisions, the superseded Regulation (EC) No. 44/2001 continues to apply within the EU legal system (including Cyprus) to judgments given in legal proceedings instituted to authentic instruments formally drawn up or registered, and to court settlements approved or concluded, before 10 January 2015.

Foreign judgments given in legal proceedings outside the EU are enforceable in Cyprus by terms of reciprocity where a bilateral or multilateral agreement is in place between Cyprus and the country in which the foreign judgment was handed down. In that regard, Cyprus, through the EU legislative initiatives, is a contracting party to the multilateral Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 1988, 2007 (the Lugano Convention), together with Denmark, Iceland, Norway, Switzerland and the other EU Member States. The Lugano Convention entered into force on 1 January 2010. Cyprus has also signed and ratified the Hague Convention of 1 February 1971 on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (in force since 1979) and has entered into bilateral agreements with a number of other countries to govern the mutual recognition and enforcement of court judgments, including the United Kingdom, China, Egypt, Russia, Belarus and Ukraine.

In the absence of any bilateral or multilateral convention governing the matter, the foreign judgment might be enforced in Cyprus by following and applying common law rules.

Finally, Cyprus is a contracting party to the New York Convention, based on which an arbitral award made in the territory of another Member State to the convention, including rulings in maritime disputes, might be recognised and enforced in Cyprus.

The Limitation Law and the provisions thereof also apply to maritime claims.

IV SHIPPING CONTRACTS

i Shipbuilding

Cyprus does not have a shipbuilding industry and, therefore, there is no specific regime nor local laws regulating shipbuilding contracts. The general contract law principles apply.

ii Contracts of carriage

Cyprus has adopted, by way of succession, the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924 (the Hague Rules) (extended to Cyprus on 2 June 1931). Also, the UK Bills of Lading Act of 1855 applies in Cyprus by means of Articles 19 and 29 of the Courts of Justice Law of 1960 (Law No. 14/1960), as seen in The Ship LIPA.9 In the absence of an express choice of law in a bill of lading or charter party, Article 5 of the Rome I Convention10 applies.

Despite the fact that Cyprus has not ratified the Hague-Visby Rules, it has adopted most of the Rules' provisions and incorporated these into domestic law.11

Furthermore, Cyprus has ratified the Hague Rules through the Carriage of Goods by Sea Law, Chapter 263. However, the Hamburg Rules and the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea 2009 (the Rotterdam Rules) have not yet been ratified in Cyprus.

Cabotage

Maritime cabotage in Cyprus is reserved to Cypriot and European nationals and it is governed by Council Regulation (EEC) No. 3577/92 in relation to the freedom to provide services to maritime transport within Member States. The Regulation is directly enforceable in Cyprus and provides that the transport between the ports of mainland Cyprus is reserved for vessels operated by shipowners that are nationals of and registered in EU or European Economic Area (EEA) Member States and are flying a flag of one of those States. 

Cyprus has concluded bilateral agreements on merchant shipping with Bulgaria,12 Lithuania,13 Italy14 and Romania,15 which provide for a cabotage restriction.

iii Cargo claims

The Supreme Court of Cyprus, in its admiralty jurisdiction, is vested with the jurisdiction to hear and determine questions or claims, inter alia, for loss of or damage to goods carried in a ship or arising out of any agreement relating to the carriage of goods in a ship.16

Cyprus has not ratified the Hamburg Rules. The operation of cargo claims in Cyprus is very much based on the old law and practice that applies in England and the common law or equity principles. In particular, the Carriage of Goods by Sea Law, Chapter 263, which essentially adopts the Hague-Visby Rules, applies only in relation to carriage of goods by sea from a port in Cyprus to any other domestic or foreign port. Also, the Bills of Lading Act 1855 and relevant sections in the UK Merchant Shipping Act of 1894 (both of which apply in the legal system of Cyprus pursuant to Section 29(e) of Law No. 14/1960) may intervene in cargo claims to clarify the legal position and possible liability of owners, carriers, shippers and agents. In addition, Cyprus ratified the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC Convention 1976)17 in 2006.

According to Rule 29 of the Rules of the Supreme Court in its admiralty jurisdiction (RSC), stated in the Schedule of the Cyprus Admiralty Jurisdiction Order 1893, any number of persons with interests of the same nature arising out of the same matter may be joined in the same action, whether as plaintiffs or defendants, while Rule 31, which was providently inserted in the Rules, makes it clear that an underwriter or insurer shall be deemed to be a person interested in the action.

In terms of the procedurally recognised right of the underwriter or insurer to be joined in an admiralty action as interested party, the principle enunciated in one of the important admiralty judgments given by the Supreme Court in plenary session18 highlights matters relating to insurers and underwriters when issuing 'subrogation receipts'. The Court stressed that subrogation does not, by itself, give rise to a right of insurers or underwriters to bring an action to pursue the subrogated claim in their name but the action should be brought in the name of the assured, unless the claim has been clearly assigned to the insurer or underwriter. In any event, the Supreme Court stressed in a number of judgments that it is desirable that the names of both the insurer and the assured are joined in the action.

Sometimes, contracts for the carriage of goods by sea may pose uncertainty on the locus standi of an innocent party, being a shipper, consignee, endorsee of the bill of lading or other, to initiate an action to the Admiralty Court. In one of its judgments,19 the Supreme Court shed light on the importance and meaning of the bill of lading. Effectively, it adopted the principles articulated in common law cases and English case law, namely that the bill of lading is issued to the order of the person to whom the goods are destined and serves three purposes: (1) it is evidence that the cargo has been laden on board the ship, (2) it constitutes or may constitute evidence for the contract of carriage and (3) it also constitutes prima facie title of the goods. Nonetheless, the Supreme Court highlighted that whether the bill of lading contains the entirety of the terms and conditions of the carriage agreement is clearly a matter of the circumstances and the factual background embracing the dispute. The intentions of the parties as to the time and manner of passing the property of the goods, as reflected in the contract of carriage, is of decisive importance on the right of the consignee or end receiver of the goods to sue anyone who is responsible in terms of damage to or loss of the ordered goods.

When it comes to the possible liability of forwarding agents that undertake to transport goods from one destination to another on behalf of their clients, the Supreme Court reiterated that the contents of the bill of lading are not conclusive evidence but only an indication of the legal position of each party in the transaction for the carriage of goods. If a forwarding agent is engaged by the client to arrange the transportation of the goods to the destination that the client determines without expressly agreeing to do so only as agent of the client and, on the contrary, it essentially assumes the responsibility to ensure the safe transportation of the goods to the destination that the client will specify, the forwarding agent may be found liable against the client for the loss or damage that the goods may suffer during their delivery to the client.20

If an owner, charterer, carrier, forwarding agent or other is found liable for breach of the contract of carriage due to its failure to safely deliver the goods to the prescribed destination and as a result the goods sustained loss or damage, the receiver or owner of the goods will be awarded compensation for the loss or damage suffered and that naturally arose in the usual course of things from such breach or that the parties knew, when the contract was made, to be the likely result from the breach of it. Such compensation shall not be awarded for any remote and indirect loss or damage sustained by reason of the breach. This emanates from the Contract Law, Chapter 149, which reflects the principles of common law and, likewise, the Tort Law, Chapter 148, which includes similar provisions for the award of compensation for negligent or tortious acts. The Admiralty Court has, in some instances, awarded compensation for consequential pecuniary loss in the form of loss of profits where the circumstances of the case so justified.

In relation to demise clauses, even though the Supreme Court (at first instance as Admiralty Court or in its jurisdiction as appellate court) has not specifically interpreted or examined the effect of such a clause in a charter party, if such a question would be brought before it for adjudication, the Supreme Court would, in all likelihood, follow the case law developed in England since The Berkshire case;21 in other words, the validity of the demise clause will be recognised.

iv Limitation of liability

Cyprus has ratified the LLMC Convention 1976, whereby a shipowner may limit his or her liability for the claims set out in Article 2 of the Convention (except for those claims provided in Article 3) for the limits determined in Articles 6 and 7.22 Furthermore, the Merchant Shipping (Shipowners' Insurance for Maritime Claims) Law of 2012 (Law No. 14(I)/2012) transposed Directive 2009/20/EC on insurance against maritime claims subject to the limitations of the LLMC Convention 1976.

In addition, Section 502 of the UK Merchant Shipping Act 1894 fully relieves a shipowner of a Cypriot sea-going ship to compensate any loss or damage occurred on any goods by reason of fire on board, if it happened without his or her actual fault or privity. Also, under Section 503 of the Act, the liability of the owner of any ship for loss of life, personal injury or damage to any goods caused without actual fault or privity, is limited to specified extents.

Furthermore, the parties to a contract may agree to expressly limit the liability of any of the parties by incorporating relevant and appropriate terms in the contract.

V REMEDIES

i Ship arrest

Cyprus is not itself a party to the International Convention Relating to the Arrest of Sea-Going Ships 1952; however, the AJA, which ratifies the Convention, applies to Cyprus.23

Under Cypriot law, maritime liens enjoy advantages over all other permitted actions in rem (statutory liens), at the time of creation of the lien, in priority and in the enforceability of the security. In addition, statutory liens have no priority over mortgages.24

Cyprus courts follow the English case The Bold Buccleugh,25 which recognises as maritime liens salvage, bottomry, master and seafarers' wages, disbursements and liabilities, and damage done by a vessel. The arrest of a ship is only possible in the case of an action in rem (however, the possibility of securing a Mareva injunction for freezing of assets, including a vessel, is discussed in the 'Procedures of ship arrest' subsection).

Thus, the filing of an action in rem is a prerequisite for such an arrest. The court has wide discretion to order the arrest of the vessel if it is satisfied that the plaintiff is eligible for arrest. Similarly, the arrest of a sister ship is applicable in Cyprus by means of Section 3(4) of the AJA. However, the concept of 'associated ship arrest' is not recognised under Cyprus law.

Procedures of ship arrest

Rule 50 of the RSC allows any party to apply to the court for the issue of a warrant for the arrest of property (i.e., for the arrest of ship or cargo), at the time of, or at any time after, the issuance of the writ of summons (but not without the submission of a writ of summons) in an action in rem. The application must be accompanied by an affidavit containing the particulars prescribed in the RSC, including the nature of the claim, that the aid of the court is required, the national character of the ship and that, to the best of the deponent's belief, no owner or part owner of the ship was domiciled in Cyprus at the time the necessaries were supplied or the work was carried out. However, the judge has the discretion to issue an arrest warrant even if the affidavit does not contain all the prescribed particulars.

The arrest warrant shall be served by the marshal of the court in the same manner as prescribed by the Rules for the service of a writ of summons in an action in rem. For instance, if the arrest warrant is to be served upon a ship, or upon cargo, freight or other property that is on board a ship, the warrant shall be considered as duly served if an office copy of it is attached to a conspicuous part of the ship, including a mast. If the cargo, freight or other property is not on board the ship, an office copy must be attached to some portion of the cargo or property.

The RSC vest the power and discretion on the judge to issue provisional arrest orders, notwithstanding that no notice of the application has been given to the ship or the shipowner, on such terms as to the furnishing of security as shall appear to the judge to be having regard to the circumstances of the matter in question (Rule 205). In practice, almost invariably the judge will order the arresting party to provide security in the form of a bank guarantee from a Cyprus bank, the aim of which is to cover the costs of the marshall and to compensate the shipowner for loss he or she may have suffered due to the detainment of the ship, acknowledging the concept of wrongful arrest. However, the security of the arresting party shall not be seized in all cases where the provisional arrest order is finally set aside as unjustified. The arresting party's guarantee may be claimed only in the event of wrongful arrest, which was so unwarrantably brought that it rather implies malice or gross negligence.

At the time the arrest warrant is issued, the judge will determine the amount of the security that the shipowner or other opposing party may deposit to the court for the arrested ship to be released, taking into account the level of the claim. The ship may be released by an order of the judge upon a written application and provided that the security originally set by the judge is deposited to the court.

Any person desiring to prevent the arrest or the release of any property under arrest or the payment of any moneys out of court may, by a written application to the Registrar of the Admiralty Court, cause a caveat against any such action or procedure and the court or judge will not proceed to issue the requested order without notice to the caveator, unless the judge deems that special circumstances have been presented that render it desirable or necessary to make such order without notice to the caveator, upon such terms as may seem fit to the judge. The caveat shall not remain in force for more than three months from the date of being entered, unless extended by further applications.26

Almost invariably at the time an arrest warrant is issued, the ship is located within the territorial waters of Cyprus,27 either anchored in the port area or anchorage or berthed in one of the ports controlled by the Cyprus government (i.e., the ship must not be berthed in any of the ports that have been illegally occupied by the Turkish administration since Turkey's invasion of Cyprus in 1974). An arrest warrant against a ship may be issued even if, at the time the warrant is issued, the ship is located outside the territorial waters of Cyprus. However, in this case, the arrest warrant will not be able to be served unless the ship heads within the territorial waters. In such instance, the arresting party must see that the warrant will be adequately timetabled so that it does not expire before served on the ship.

The Supreme Court has recognised the option of a party to the admiralty proceedings to seek the 'arrest' of a ship by using the Mareva injunction mechanism under Section 32 of Law No. 14/1960. However, the Court stressed that the power of the Court to issue such an injunction must be exercised only on the premise that the ship is within the jurisdiction of the court or, in other words, within the territorial waters controlled by the Cyprus government.

The issuance of an arrest warrant, based on Section 50 of the RSC or by way of a Mareva injunction, as security for court proceedings (not arbitration proceedings) pending in another jurisdiction is plausible pursuant to the provisions of Regulation (EU) No. 1215/2012 and, in particular, Section 35 of the Regulation, provided that the ship is within the jurisdiction of the court.28

In Nationwide Shipping Inc v. The Ship 'Athena',29 the Supreme Court, by adopting an extract from the judgment given in the English case The 'Vasso' (formerly 'Andria'),30 held that the Admiralty Court has no jurisdiction to issue an arrest warrant in an action in rem for the purpose of providing security for an award that may be made in arbitration proceedings. However, it seems that the extract from the English judgment extends to other proceedings as the court in The 'Vasso' case stressed that the purpose of the exercise of the Admiralty Court's jurisdiction to arrest a ship is to provide security in respect of the action in rem before it and not for any other purpose. In The Ship 'Athena' case, the Court did not consider the application of Regulation (EU) No. 1215/2012, which, of course, prevails over any domestic law and, therefore, confers the jurisdiction to the Admiralty Court to issue provisional measures and orders for matters adjudicated on their merits in other European jurisdictions.

ii Court orders for sale of a vessel

An arrested ship, cargo or other property may be appraised and sold by order of the court or judge, either before (pendente lite) or after the final judgment. In such case, the judge will appoint the marshal of the court or any other person to appraise the property under arrest (in practice, the court appoints the marshal in almost all cases) and to proceed with its sale at auction (the sale procedure adopted in most cases). Nonetheless, the judge may allow the sale of the ship by private sale if he or she deems this fit and provided that all parties in the litigation acquiesce.31

The proceeds from the sale of a ship are paid into the court and, upon an application by any judgment creditor, will be distributed to all judgment creditors who claimed a share of the proceeds, in order of priority. In Cyprus, the priorities have been determined by case law and no guidance is found in the RSC or in any other law or procedural rules applying in Cyprus. Detailed analysis of the order of priorities is outside the scope of this chapter. In general terms, however, governmental fees, including the costs and expenses of the marshal, take priority over any other claims, and maritime liens take priority over statutory liens, while statutory liens have no priority over mortgages.

VI REGULATION

i Safety

The marine safety regulation regime in Cyprus is based upon the International Convention for the Safety of Life at Sea 1974 (SOLAS)32 and other international conventions, such as:

  1. the International Convention on Load Lines 1966 (the Load Lines Convention);
  2. the International Regulations for Preventing Collisions at Sea 1972 (COLREGs);
  3. the International Convention on the Tonnage Measurement of Ships 1969 (the Tonnage Convention), as amended;
  4. the Special Trade Passenger Ships Agreement 1971 and the Protocol on Space Requirements for Special Trade Passenger Ships 1973;
  5. the International Convention for Safe Containers 1972;
  6. the International Safety Management Code 1998 (the ISM Code); and
  7. the International Ship and Port Facility Security Code 2004 (the ISPS Code), which adopt various international maritime safety standards.

In addition, Cyprus has a comprehensive and pioneering national legislation for the protection of Cypriot ships from piracy and other unlawful acts, including a legal framework allowing and regulating the use of private armed security personnel in high-risk areas.

In December 2019, the SDM issued Circular 21/2019, through which it clarified the policy adopted by the SDM in response to IMO Resolution MSC.402(96) on the requirements for maintenance, thorough examination, operational testing, overhaul and repair of lifeboats and rescue boats, launching appliances and release gear in conjunction with IMO Resolution MSC.404(96), which, among other things, amends Regulations 3 and 20 of Chapter III of SOLAS. The amendments came into force on 1 January 2020. In addition, the SDM has clarified the adoption of the Guidelines on Safety during Abandon Ship Drills Using Lifeboats (MSC.1/Circ.1578).

During February and May 2020, the SDM issued a plethora of circulars,33 taking urgent provisional measures for the operation of Cypriot ships and minimising risks to seafarers, passengers and others on board Cypriot ships, during the covid-19 outbreak. Furthermore, the Minister of Transport, Communications and Works of the Republic of Cyprus, in exercising the powers vested in him by Article 14(1) of the Cyprus Ports Authority Legislation of 1973 to 2016, issued instructions for the implementation of restrictive measures at ports and port installations, as well as regarding crew-change protocol, to counter the covid-19 pandemic.

Lastly, it is of great importance to note that, during the last quarter of 2019, the SDM successfully passed European Maritime Safety Agency (EMSA) audits with no observations on safety and security, while the Cyprus case will be used by EMSA as an example of successful use of best practices and procedures on safety.

ii Port state control

The SDM is the competent port state control (PSC) authority in Cyprus. It carries out all inspections of foreign ships in Cypriot ports,34 verifying that crew, ship and equipment comply with the requirements of international conventions on safety, pollution prevention, operation, management and security, qualifications, living conditions and terms of employment.

Each SDM surveyor has wide-ranging powers on PSC. More specifically, the surveyor can, among other things, interrupt, enter, inspect and conduct inspections on any ship, whether lying at anchor or on a voyage and provide any necessary assistance to the master, as he or she deems fit.

The operator and the master of each ship have, individually, the obligation to provide the surveyor with any requested information and a signed declaration as to the accuracy and truth of the information provided. It is a criminal offence punishable by imprisonment for up to 12 months or a fine of up to €6,000 for this information to be refused.

Cyprus is a signatory to the Paris Memorandum of Understanding on Port State Control 1982 (the Paris MOU)35 and the Mediterranean Memorandum of Understanding 1997 (the Mediterranean MOU).36 The inspections in Cyprus are carried out according to the Merchant Shipping (Port State Control) Law of 2011 to 2015 (Law No. 95 (I)/2011) as amended, which harmonises Directive 2009/16/EC of the European Parliament and of the Council of 23 April 2009 on port state control, as amended.

The operator, agent or master of a ship calling at a Cyprus port,37 which, in accordance with Section 17 of Law No. 95 (I)/2011, is eligible for an expanded inspection and bound for a port or anchorage of the Republic, has the obligation to ensure that one of them notifies the competent authority or the Cyprus Ports Authority38 of the ship's arrival and to provide any necessary information regarding this. The notification shall be as per the Fourth Schedule of the relevant Notification39 and shall be submitted at least three days before the estimated arrival time or before departure from the previous port or anchorage, if the voyage is expected to take fewer than three days.

In addition to the above-mentioned laws, the Merchant Shipping (Port State Control – Duration of Night) Order of 2011 (PI 339/2011), the Merchant Shipping (Port State Control – Geographical Areas of Ports and Anchorages) Order of 2017 (PI 155/2017) and related SDM circulars40 also apply.

Recent detainment of foreign ships in Cyprus

The Cyprus administration detained nine foreign ships in 2019 and one foreign ship in the first quarter of 2020, for safety deficiencies. The deficiencies included, among other things, matters affecting seaworthiness, life-saving equipment, fire appliances, safe navigation and crew conditions such as excessive working hours and outstanding wages. Generally, a detention lasts until the deficiency is rectified.41

Classification of Cyprus flag

The Cyprus flag is classified in the white list of the Paris MOU and the Tokyo Memorandum of Understanding on Port State Control in the Asia-Pacific Region 1994 (the Tokyo MOU). It is a top-quality sovereign flag that duly adheres to all safety and security standards deriving from both Paris and Tokyo MOUs.

Pursuant to the 2018 Paris MOU Annual Report titled 'Consistent Compliance', between 2016 and 2018 1,964 Cypriot ships were inspected, 47 of which were detained. In particular, in 2018, 707 inspections of Cypriot ships took place, with 20 detentions, while in 2019, the number of Cypriot ships detained was only 19. In addition, as of 1 July 2019, the Cyprus flag meets the criteria for low-risk ships, which will definitely lead to fewer inspections of Cypriot ships in the future.

As far as the Tokyo MOU is concerned, according to its 2019 Annual Report on Port State Control in the Asia-Pacific Region, 551 Cypriot ships were inspected, with only 24 detentions. In addition, pursuant to the 2019 Annual Report of the Memorandum of Understanding on Port State Control for West and Central African Region 1999 (the Abuja MOU), 79 Cypriot ships were inspected, one of which was detained. According to the 2018 Annual Report of the Riyadh Memorandum of Understanding on Port State Control in the Gulf Region (the Riyadh MOU), 51 Cypriot ships were inspected with zero detentions.

According to the 2019 Annual Report of the Indian Ocean Memorandum of Understanding on Port State Control (the Indian Ocean MOU), 140 Cypriot ships were inspected, seven of which were detained. Pursuant to the 2018 Annual Report of the Caribbean Memorandum of Understanding on Port State Control in the Caribbean Region (the Caribbean MOU), 16 Cypriot ships were inspected with only one detention. Furthermore, pursuant to the 2018 Annual Report of the Memorandum of Understanding on Port State Control in the Black Sea Region 2000 (the Black Sea MOU), between 2016 and 2018 159 Cypriot ships were inspected, with only six detentions.

United States Coast Guard Qualship 21 list

Based on the outcome of the US government's 2019 Annual Report on Port State Control, Cyprus is no longer part of the Targeted Flag List of the United States Coast Guard (USCG) in relation to the safety performance of flag administrations.

More specifically, the three-year average detention ratio of Cyprus in 2017–2019 was 0.96 per cent compared to an average USCG ratio of 1.08 per cent. In 2019, the annual detention ratio of Cyprus ships was reduced to 0.55 per cent, down from 1.79 per cent in 2018, while the USCG's 2019 ratio was 1.12 per cent. This has resulted in Cyprus joining the USCG's Qualship 21 list, which recognises the top performing flag states based on PSC performance over a three-year period. This will not only mean fewer inspections and delays of Cypriot ships at US ports, but also adds to the Cyprus flag's status as a high-quality flag.

iii Registration and classification

Cyprus' registry

Cyprus has an EU-approved open registry. The ship registry unit of the SDM is responsible for the registration of ships in the Register of Cyprus Ships and in the Special Book of Parallel Registration. In addition, it carries out all other transactions related to Cyprus ships, such as the transfer of ownership and the deregistration of ships, the registration of mortgages on Cyprus ships and other transactions related to such mortgages. Furthermore, it is responsible for all transactions related to the Small Vessels Registry.

Under the Advocates Laws, Chapter 2, only lawyers registered as practising advocates in Cyprus are entitled to carry out registry transactions, acting on behalf of the owner and, therefore, the first step to be taken by persons interested in registering a ship under the Cyprus flag is to engage the services of a locally registered advocate.

Types of registration

According to the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, which are the main statutes for all matters relating to the registration of ships and related transactions in the Register of Cyprus Ships, prima facie any ship used in navigation and not propelled by oars is eligible to be registered provisionally,42 permanently or in parallel (parallel-in and parallel-out) in Cyprus, given that she meets the age-related and type-related requirements, along with the ownership prerequisites.

The aforementioned Laws allow the provisional registration of a ship for a period of six months, provided she is out of the territorial waters of the Republic at the time of her registration and that she is not already a Cypriot ship. The provisional registration may be extended for another three months under special circumstances.43 Conversely, when a ship is in the territorial waters of the Republic, there is no option other than to 'permanently' register her directly. It is of great importance to note that if a vessel is under construction, it can be registered (provisionally or permanently) even if it is not yet finished. Common practice of the SDM is that it accepts the registration of such vessel, and issues a certificate of registration in which the phrase 'not used for navigation' is used. Once the vessel is built, a new certificate of registration without this phrase and restriction can be obtained.

Small Vessels Registry

All ships (other than portable or collapsible crafts for use by bathers) with a length of less than 13 metres, which only sail in the territorial waters of the Republic, should be registered in the Small Vessels Registry, regulated by the Emergency Powers (Control of Small Vessels) Regulations 1955 (PI 740/1955).

Port of registry

On 27 September 1974, the port of Limassol became the official port of registry of the Republic of Cyprus, by virtue of the Merchant Shipping (Temporary Provisions) Law of 1974 (Law No. 45/1974), as a result of the illegal Turkish invasion and occupation of the northern part of the Republic of Cyprus. Prior to this, the port of Famagusta, currently under Turkish occupation, was the official port of registry of the Republic.

Government policy on the registration of ships

The Registrar of Cyprus Ships does not consider applications for registering ships in either the Register of Cyprus Ships or in the Special Book of Parallel Registration if the ship:

  1. at the time of the registration application, is banned (on PSC grounds) from entering ports of any States party to a PSC MOU or is banned by a State from entering its ports;
  2. has been detained on PSC grounds on three or more occasions during the two-year period prior to the date of application by States of the Paris, Tokyo or Mediterranean MOU or by the USCG;
  3. has been constructed for exclusive use on inland navigation or to be used exclusively on inland navigation (e.g., in internal waters, rivers, inland waterways, canals, natural or artificial lakes, water reservoirs or dams); or
  4. at the time of filing the registration application, does not satisfy the conditions related to its age.

Condition of ownership

According to the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, a ship is eligible for registration under the Cyprus flag if:

  1. more than 50 per cent of the shares of the ship are owned by Cypriot citizens or by citizens of other EU or EEA Member States who, if not permanent residents of Cyprus, have appointed an authorised representative in Cyprus; or
  2. 100 per cent of the shares are owned by one or more corporations that have been established and operate:
    • in accordance with the laws of Cyprus and have their registered office in the Republic;
    • in accordance with the laws of any EU or EEA Member State and have their registered office, central administration or principal place of business within the EU or EEA and that have either (1) appointed and maintained an authorised representative in Cyprus; or (2) ensured that the management of the ship is entrusted in full to a Cypriot or a Community ship management company with its place of business in Cyprus; or
    • outside Cyprus or outside any other EU or EEA Member State but controlled by Cypriot citizens or citizens of Member States and have either appointed an authorised representative in Cyprus or ensured that the management of the ship is entrusted in full to a Cypriot or a Community ship management company having its place of business in Cyprus.

The corporation is deemed to be controlled by Cypriots or citizens of any other Member State when more than 50 per cent of its shares are owned by Cypriots or citizens of any other Member States or when the majority of the directors of the corporation are Cypriot citizens or citizens of any other Member State.

The registration of any ship may be subject to any condition the SDM may impose and as it may consider appropriate as the government's general policy and, in particular, in terms of the adoption of more up-to-date and improved methods and standards relating to the safety of human life at sea, the welfare of seafarers, the protection of the sea environment, the preservation of marine life or for public interest in general.

Appointment of authorised representative

According to the relevant provisions of the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, an authorised representative may be:

  1. a Cypriot citizen or a citizen of any other EU Member State (including Norway, Iceland and Liechtenstein as parties to the European Economic Area) who is resident in the Republic within the meaning of the income tax laws of the Republic;
  2. a partnership that has been established and registered in accordance with the provisions of the Partnerships and Business Trade Law, having its place of business in the Republic and employing permanent staff in the Republic;
  3. a corporation that has been established and registered in accordance with the provisions of the Companies Law, having its place of business in the Republic and employing permanent staff in the Republic; or
  4. a branch of any foreign company that has been established and registered in accordance with the provisions of the Companies Law, having its place of business in the Republic.

In practice, the authorised representative's main responsibility is to be the contact link between the Registrar and the shipowner.

Any document that is required to be served to the shipowner, is deemed to be duly served if it is delivered to his or her representative. The authorised representative is then obliged to contact and inform them accordingly. On the other hand, however, authorised representatives shall not be responsible for any action or omission made by the shipowner. Therefore, a shipowner has to select his or her representative carefully.

Age-related requirements

The entry inspection and additional inspections specified in the table below are required to be carried out if the age of the ship is equal to or greater than the number of years indicated under the related conditions corresponding to the type of the ship.

Type of ship Entry inspection? Additional inspection required?
Cargo ships Yes, if ≥ 15 years No
Passenger ships engaged in international or short international voyages or engaged in domestic voyages within the territory of a state other than Cyprus Yes, if ≥ 20 years Yes, if ≥ 20 years, biennially
Fishing vessels under 25 years of age Yes Yes, annually
Ships of types other than those listed above Yes, if ≥ 15 years* No
*Pleasure yachts, non-propelled craft and other vessels with a GT of less than 500 may be excluded from this condition.

All ships (except passenger ships and fishing vessels) of an age exceeding 25 years are required to comply with the following requirements:

  1. entry inspection with satisfactory results that must be completed prior to the registration of the vessel in the Register of Cyprus Ships; and
  2. provision of the ship's records, age and detention history to justify such registration.
Timescale of entry inspection and additional inspections

The entry inspection shall be carried out within six months of the date of provisional, parallel-in or direct permanent registration of the ship. If a ship that is required to undergo an entry or additional inspection (or both) is laid up or is to be laid up within three months of the date of provisional, parallel-in or direct permanent registration, the entry inspection and, where required, the additional inspection will be postponed for the duration of the lay-up period and should be carried out no later than six months after the lay-up period ends.

If the parallel-out registration of a ship that is required to undergo an entry or additional inspection (or both), is effected within three months of the date of the provisional or direct permanent registration, the entry inspection and, where required, the additional inspection are postponed while the ship is registered in parallel in a foreign registry and should be carried out no later than six months after the date of expiry or termination of the period of parallel-out registration.

Inspection expenses

The entry inspections and, where required, the additional inspections (annual or biennial) are carried out by SDM surveyors at the expense of the registered owner or registered bareboat charterer, as the case may be.

Parallel registration

The Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended allow the parallel registration of vessels that are used in navigation and not propelled by oars in the Special Book of Parallel Registration. By parallel registration, a foreign vessel can be registered, for a certain period of time, under the Cyprus flag while at the same time continuing to be registered, in parallel, in the foreign registry and vice versa.

Parallel-in registration

Parallel-in registration is used for cases of bareboat chartering where a bareboat charterer of a foreign ship wishes to register the ship in parallel under the Cyprus flag. The deletion of the ship from the registry of the state in which its ownership is registered is not required. However, its right to fly the flag of the state of registry and to have its nationality is suspended and the foreign registry remains operative only with respect to the ownership and encumbrance's status of the ship. The period of parallel-in registration is usually two years and is renewable.

Parallel-out registration

Parallel-out registration is used when a bareboat charterer wishes to register, in-parallel, a vessel that is already registered provisionally or permanently under the Cyprus flag, to a foreign registry. The deletion of the ship from the Register of Cyprus Ships where its ownership and mortgages are registered is neither required nor allowed. However, its right to fly the Cyprus flag and to have the Cypriot nationality is suspended. The period of parallel-out registration may be up to three years and is renewable.

Annual maintenance fee

For all ships registered in the Register of Cyprus Ships, there is an annual maintenance fee of €300, payable by 31 March of each calendar year, while there is no maintenance fee for ships in the Small Vessels Registry.

Submission of documents

As a rule, the supporting documentation44 relating to the registration of ships and to other transactions in the Register of Cyprus Ships or in the Special Book of Parallel Registration should be submitted to the Registrar. However, some of the required documents (except for the documentation for permanent and parallel registration) may be submitted abroad to any one of the Diplomatic and Consular Missions of Cyprus.45 In such cases, the Registrar issues instructions to the relevant consular officers to accept said documentation and to proceed with the transaction required.

Provisional registration

For the purposes of the provisional registration of a ship, scanned or faxed copies of the corresponding document or certificate may be submitted, accompanied by an undertaking to submit the original of the same within a specified time and, in any event, not later than by the time of the permanent registration of the ship under the Register of Cyprus Ships.

Permanent registration

For direct permanent registration, all required documents must be submitted in their original form, being duly executed.

Use of electronic certificates

According to Circular 14/2018 issued by the SDM, it is acceptable for statutory certificates issued to Cyprus-flagged vessels by recognised organisations to be in electronic form, provided that this is on the condition that they satisfy the requirements set out in IMO Circular FAL.5/Circ.39/Rev.2 regarding the guidelines for the use of electronic certificates. However, the existing practice of issuance of hard copy certificates remains acceptable.

Electronic services

The SDM has implemented an effective use of technology, allowing the electronic submission of seafarers' applications, the electronic verification of certificates issued by the SDM, management of the electronic tonnage tax system through which beneficiaries (owners, charterers or ship managers of qualifying ships) can submit their application and, lastly, the administration of the seafarers' e-learning platform.

Deletion of ship

According to Article 54A of the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, a ship must be deleted from the Register of Cyprus Ships as soon as its ownership is transferred to a person (legal or natural) not qualified to own a Cyprus ship.

In addition, a Cypriot ship may be deleted from the Register upon submission of an application by the owner of the ship, for the same to be registered in a foreign registry. The owner can request the deletion at any time.

A closed transcript of registry is issued by the Registrar and a deletion certificate is issued by a consular officer as soon as the registered mortgages and other encumbrances are discharged and all pending matters are settled. The owner has to return the certificate of registry or submit a declaration by which he or she will undertake the responsibility to return the same within a reasonable time period.

A ship can be also deleted in the following cases:

  1. the Cyprus character of the ship is revoked by order of the Deputy Minister;
  2. the ship is totally, actually or constructively lost;
  3. the ship is broken up; and
  4. there has been no news regarding the ship for a period of six months from the date of receipt of the last information, under such circumstances that make it highly probable that the ship has been either lost or broken up or that it has been sold to a non-qualified person.

Registration of mortgages

A mortgage against a ship can be registered at any time after the completion of the vessel's registration (provisional, permanent or parallel-out) under the Cyprus flag.

By a registered mortgage, the shipowner can secure a loan or other financial benefits, subject to the conditions agreed between the contracting parties, without the need for exchange control permission. The creation of a mortgage under Cypriot law is not allowed on vessels registered parallel-in in the Register of Cyprus Ships. Under the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, there is full protection for financiers and mortgagees and there is no stamp duty on ship mortgage deeds or other security documents.

A mortgage can be created independently of whether the ship is provisionally or permanently registered. If the ship against which a mortgage was created belongs to a Cypriot company, the mortgage will also have to be registered with the Registrar of Companies within a maximum period of 42 days after its creation.

In this way, mortgagees' security is protected in the case of liquidation of the ship-owning company. Transfer of a mortgage may be effected by completing the statutory form of transfer and submitting it to the Registrar of Cyprus Ships or to a consular officer, together with the relevant deed of covenants. Both the statutory mortgage and the deed of covenants must be duly certified or notarised.

For discharging a mortgage, a memorandum of discharge is needed to be duly executed by the mortgagee. The same has to be later attested and delivered to the Registrar of Cyprus Ships or a consular officer on the instructions of the Registrar.

Application of unmanned ships

Under the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, the word 'ship' includes every description of vessel used in navigation not propelled by oars. This broad definition clearly allows any potential unmanned or autonomous ship to fall under it and, further, to be considered as a ship in the same way as a traditional (conventional) vessel. Ships of this nature have already started appearing in the modern commercial world and there is a strong possibility of this being an alternative option for ship operations in the near future.

Registration issues in the Register of Cyprus Ships

In February 2020, the Registrar of Cyprus Ships refused to register a vessel that was previously registered in a non-European registry because it was not free from quantities of HALON. According to government policy for vessels whose keel was laid before 1 October 1994, a confirmation from the classification society, stating that the ship is free from HALON, is required.

In May 2019, a fishing vessel that was above the age limit set by governmental policy was initially refused registration by the Registrar of Cyprus Ships based on the age limit requirements; however, successful registration of the vessel was achieved after proving that it had undergone a major conversion, ensuring the Registrar considered it as a new ship.

Moreover, in December 2018 the biggest ever newly built coastal passenger vessel was registered in the Register of Cyprus Ships, under the name Ocean Vision. The aforesaid vessel has been characterised as a green ship, due to its environmentally friendly equipment, engines and facilities; while, in May 2015, the successful registration of the first commercial megayacht in the Register of Cyprus Ships, under the name ANKA, was achieved.

Recent updates

The prolongation of the Cyprus Tonnage Tax System

On 16 December 2019, the European Commission approved the prolongation of the Cyprus Tonnage Tax System (TTS) and Seafarer Scheme, for the next 10 years (until 31 December 2029). The Scheme was unanimously approved on 15 April 2020 by the Plenary of the House of Representatives of the Republic of Cyprus, securing the viability of Cyprus' registry and shipping industry, at the same time maintaining its prominent position in the global shipping arena. The approved and updated TTS includes a wider list of eligible vessels and ancillary activities. In addition, it provides discount rates for environmentally friendly vessels and the companies operating under current TTS can continue to do so with no major changes.

The TTS has been found to contribute to the global competitiveness of the EU maritime sector without unduly distorting competition, and encourages ship registration in Europe while at the same time preserving Europe's high social, environmental and safety standards and ensuring a level playing field.

Moreover, the Commission found that it complies with the rules limiting tonnage taxation to eligible activities and vessels. Furthermore, as regards taxation of dividends of shareholders, the Commission found that the TTS ensures that shareholders in shipping companies are treated in the same way as shareholders in any other sector. As regards the Seafarer Scheme, the Commission found that Cyprus has agreed to apply its benefits to all vessels flying the flag of any EU or EEA Member State.

The TTS applies to ship ownership, ship management and ship chartering activities. It is a tax system whereby beneficiary companies can choose to be taxed on the basis of their net tonnage (tonnage tax) rather than on their actual profits from maritime transport activities. The tonnage tax is considered as one of the key assets of the Cypriot shipping industry in efforts to attract more ships and companies to the Cypriot maritime cluster.

The attractive and transparent Cyprus TTS, among other things, provides exemptions to beneficiaries (owners of Cyprus ships, owners of foreign ships, charterers and ship managers) from income tax. The tonnage tax for companies owning foreign vessels is payable by 28 February of each calendar year, while the tonnage tax for Cypriot vessels is payable by 31 March of each calendar year.

New regime on Cyprus yacht leasing scheme

On 23 December 2019, the Cyprus Tax Department released the Interpretative Circular 240 (VAT Tax), referring to the registration, in the VAT Registry, of Cypriot companies that operate in the business sector of leasing pleasure yachts in Cyprus. The Circular introduces new procedures that have been approved by the European Commission.

More specifically, pursuant to the Circular, the lease agreement must relate to supply of services and not to supply of goods. The classification of such lease agreement as supply of services will be held based on the criteria the Court of Justice of the European Union set out in Mercedes-Benz Financial Services UK Ltd.46

Abolishment of commercial ships' initial registration and mortgage fees

On 27 September 2019, the Merchant Shipping (Fees and Dues with respect to Ocean Going Commercial Cyprus Ships) Regulations of 2019 (PI 322/2019), which were issued by the Council of Ministers of the Republic of Cyprus, entered into force. The abolishment of ships' initial registration fees and mortgage fees occurred in a bid to boost the Cypriot registry's competitiveness and attract more ship registrations.

New registration policy

On 23 May 2019, the SDM issued Circular 10/2019, through which it revised and simplified the policy (age and type-related requirements) on the registration of ships in the Register of Cyprus Ships. More precisely, the new policy clarifies certain discrepancies of the previous policy and aims at further developing the competitiveness of the Cyprus flag.

Classification societies

As at July 2019, Cyprus had approved all 12 International Association of Classification Societies members with no reservation on their approval. Their performance is checked through biannual audits for the SDM or on auditing their performance. Any defect in their performance is discussed at the audits. Their performance is also monitored through ships' performance in PSC inspections. They are consultant organisations acting on behalf of flags, so are, in a way, liable for the performance of the flag they are acting on behalf of.

The Merchant Shipping (Recognition and Authorisation of Organisations ) Law of 2011 (Law No. 128(I)/2011), which harmonises Directive 2009/15/EC, establishes measures to be followed by the Cyprus administration in its relationship with organisations entrusted with the inspection, survey and certification of ships for compliance with the international conventions on safety at sea and prevention of marine pollution, while furthering the objective of freedom to provide services. According to Article 8 of Law No. 128(I)/2011, the SDM, as the competent authority, shall monitor the work of recognised organisations acting on behalf of the Republic, to satisfy itself that they effectively carry out the functions required, while Article 7 states that when the SDM considers that a recognised organisation should no longer be authorised to act on behalf of the Republic, it may suspend or withdraw such authorisation.

The 12 specialised and internationally acclaimed organisations acting on behalf of Cyprus are the following:

  1. the American Bureau of Shipping;
  2. Bureau Veritas SA;
  3. China Classification Society;
  4. the Croatian Register of Shipping;
  5. DNV-GL AS;
  6. the Korean Register;
  7. the Indian Register of Shipping;
  8. Lloyd's Register Group;
  9. Nippon Kaiji Kyokai;
  10. the Polish Register of Shipping;
  11. Registro Italiano Navale; and
  12. the Russian Maritime Register of Shipping.

iv Environmental regulation

For air and marine pollution, the key legislation in Cyprus is the International Convention for the Prevention of Pollution from Ships 1973 (as modified by the Protocol of 1978) (MARPOL (73/78)). Through its six annexes, it regulates the actions to avoid polluting the sea and the air, if that risk of pollution is associated with maritime activities.

The annexes regulate the risks of pollution from the following.

  1. Oil: related to the transport of oil and its products as cargo, and the use of oil or its products as fuel for ship-installed machinery. This refers to the measures to be taken by ships when oil is transported as cargo, or when ships are using oil for their propulsion. There are regulations for loading, discharging, transport, storage, controlling leakages and how to handle residues produced.
  2. Noxious liquid substances in bulk: related to chemical products transported by sea in bulk form.
  3. Noxious liquid substances in packaged form: related to chemical products stored in any sort of container.
  4. Sewage: related to the sewage produced on a ship including the sewage produced by livestock when transported as cargo. It regulates the processing, storage and disposal of sewage and associated systems.
  5. Garbage: related to any sort of items intended to be disposed after use, including cargo remnants. It guides crews to the segregation, processing and disposal of the garbage of a ship. It also refers specifically to the cargo remnants, a category of garbage on their own, and how to process and dispose of it.
  6. Air-polluting emissions: related to the air emissions produced by the operation of any machinery on board, related to the ship operation (including freezing means). It sets the limits of emissions released either by the engines (main or auxiliary), as well as of the other machinery emitting gases, such as air conditioning and freezer units. A major breakthrough of this Annex was the introduction of the use of fuel with low sulphur on 1 January 2020. Additionally, it regulates the installation and operation of emission control systems, commonly known as 'scrubbers', that are installed on ships to minimise harmful emissions.

Cyprus has ratified all six annexes by amending the related national legislation (Law No. 57/1989) on the ratification of each Annex.

For clean ballast water, the related convention fully implemented by Cyprus is the Convention for the Control and Management of Ships' Ballast Water and Sediments 2004 (the Ballast Water Management Convention). Cyprus has been a party to this Convention since 2018; however, Cyprus-flagged ships implemented it in 2017. The Convention regulates measures to prevent transport of species, new or alien, to a part of the marine environment where they did not exist before, thus altering the ecosystem and posing threats to the marine ecosystem of a territory, through the ballast water taken by ship from one location and discharging it in another. The Convention has a two-part implementation, for its flag ships operation worldwide and the ships operating in the sea around Cyprus. The Convention provides for the discharging of ballast water in an area away from the coastline inhabited by local species and taking new water resembling the ecosystem of the coastal state. Also, by 2024, all ships should install a treatment system that cleans ballast water before its discharge.

The Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships 2009 (the Hong Kong Convention), although not yet implemented internationally, has key provisions provided for in Regulation (EU) No. 1257/2013.47 The Regulation provides for the procedures to be adhered to by a ship bound for a scrapping yard. Every item on board the ship should be recorded and graded according to the pollutant load, to ensure it will be handled accordingly during demolition. Before going to the yard, the ship will have to receive certification that all items have been graded and considered. The yard's procedures should be checked to ensure it properly disposes of the scrapped items, to eliminate or minimise pollution impact.

In addition to the main conventions mentioned above, several other supplementary conventions are important in facilitating marine pollution prevention, including:

  1. the CLC Convention, providing for the recovery of expenses after a pollution incident from oil when carried as cargo;
  2. the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (the Bunker Convention), providing for the recovery of expenses after a pollution incident from oil used as a ship's bunkers;
  3. the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (the Fund Convention), providing for the compensation for damage occurring after a pollution incident; and
  4. the International Convention on the Control of Harmful Anti-Fouling Systems on Ships 2001 (the Anti-Fouling Convention).

As well as the international conventions, Cyprus has implemented EU legislation relating to or supplementing IMO conventions, including:

  1. Regulation (EU) No. 530/2012 on the accelerated phasing-in of double-hull or equivalent design requirements for single-hull oil tankers, to prevent pollution in marine accidents;
  2. Regulation (EC) No. 782/2003 on the prohibition of organotin compounds on ships, to prevent the poisoning of marine life that can occur when such compounds are used as anti-fouling systems on ships;
  3. Regulation (EU) 2015/757 on the monitoring, reporting and verification of carbon dioxide emissions from maritime transport;
  4. Regulation (EC) No. 1005/2009 on substances that deplete the ozone layer; and
  5. Directive 2016/802/EU relating to a reduction in the sulphur content of certain liquid fuels.

Recent enforcement record

In line with the enforcement of the above, Cyprus performs random checks on ships arriving in its ports, either under the PSC regime or specifically for pollution control purposes. For example, in the past 24 months, approximately 180 checks on docked ships were carried out to assess whether their fuel complied with new regulations ensuring sulphur content was not above 0.1 per cent, as provided by Directive (EU) 2016/802. The same practice is followed by other Member States for Cyprus-flagged ships.

Recently, Cyprus checked three ships calling at Cyprus ports that had been reported as polluting the sea area under EU jurisdiction, which were detected by the Clean Sea Net, a system of satellite monitoring operated by the European Maritime Safety Agency.

Environmental legislation

In terms of environmental regulation, the following laws are also applicable in Cyprus:

  1. regarding international conventions:
    • the United Nations Convention on the Law of the Sea 1982 (Ratification) Law of 1988 (Law No. 203/88);
    • the International Convention for the Protection of the Marine Environment and the Coastal Region of the Mediterranean and its Protocols and amendments 1995 (the Barcelona Convention 1976);
    • the International Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matters of 1972 (Law No. 38/1990);
    • the Basel Convention on the Control Transboundary Movement of Hazardous Wastes and Their Disposal of 1989 (Law No. 29(III)/1992), as amended;
    • the Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters of 1998 (the Aarhus Convention) (Law No. 33(III)/2003); and
    • the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea 1996 (the HNS Convention) and for Matters Connected Therewith Law of 2004 (Law No. 21(III)/2004) (not yet in force);
  2. European regulations and directives:
    • Commission Directive (EU) 2015/2087 of 18 November 2015, amending Annex II to Directive 2000/59/EC of the European Parliament and the Council on port reception facilities for ship generated waste and cargo residues;
    • Regulation (EU) No. 757/2015 on the monitoring, reporting and verification of carbon dioxide emissions from maritime transport;
    • the Water-Framework Directive (Directive 2000/60/EC);
    • the Environmental Liability Directive (Directive 2004/35/EC); and
    • the Waste Directive (Directive 75/442/EEC);
  3. bilateral agreements:
    • the Agreement on Merchant Shipping with the government of the Arab Republic of Egypt signed on 26 November 2006;
    • the Memorandum of Understanding Between the Republic of Cyprus and the Arab Republic of Egypt on in the Field of Environmental Protection signed on 26 November 2006; and
    • the Agreement Between Cyprus, Israel and Egypt for Cooperation in Combating Major Marine Pollution Incidents in the Mediterranean Law of 2001 (Law No. 21(III)/2001); and
  4. domestic law:
    • the Merchant Shipping (Ship Source Pollution) Law of 2008 (Law No. 45(I)/2008) and its subsequent amendments;
    • the Protection of the Environment Through Criminal Law of 2012 (Law No. 22(I)/2012);
    • the Control of Water Pollution and Soil Law of 2002 (Law No. 106 (I)/2002); and
    • the Maritime Strategy Law of 2011 (Law No. 18(I)/2011).

v Collisions, salvage and wrecks

Collisions

Cyprus has adopted, by way of succession, the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels 1910 (the Collision Convention 1910) (extended to Cyprus on 1 February 1913). In addition, as upheld in Danish Kingdom v. Mystic Isle Navigation Company Ltd,48 the UK Maritime Conventions Act of 1911, which ratifies the Collision Convention 1910, applies in Cyprus.49

Furthermore, as seen in The Ship BAYONNE50 and in The Ship NATALEMAR,51 the COLREGs (Ratification) and for Matters Connected Therewith Law of 1980 (Law No. 18/80) also applies to all Cyprus and foreign ships within the territorial waters of Cyprus.

Moreover, Cyprus has, by statute, ratified the International Convention for the Unification of Certain Rules Concerning Civil Jurisdiction in Matters of Collision 1952 (Ratification) Law of 1993 (Law No. 31(III)/93) and the International Convention for the Unification of Certain Rules Relating to Penal Jurisdiction in Matters of Collision or other Incidents of Navigation 1952 (Ratification) Law of 1993 (Law No. 32(III)/93).

The Cypriot courts have jurisdiction to hear any claim for damage done to or received by a ship in an action in rem. A necessary condition for invoking the in rem jurisdiction is the physical presence of the res within the territorial jurisdiction of the Cypriot courts to enable service of the writ of summons. However, service out of jurisdiction is not available for in rem proceedings.

Alternatively, proceedings may be filed against the owners of the vessel if their residence or place of business is in Cyprus. Conversely, if the owners are not Cyprus residents, in personam proceedings are subject to the rules of court relating to service out of jurisdiction. Leave of the court is granted where the cause of action arose within the jurisdiction, a related action is before the Cyprus courts or the owners have submitted to the jurisdiction.

Competent authority for investigating maritime casualties in the event of a collision

When a collision occurs anywhere in the world involving a ship flying the Cyprus flag, or involving a ship flying a foreign flag within Cyprus' territorial and internal waters, the master, owner, manager or agent of the ship must notify the Marine Accidents Investigation Committee (MAIC). The MAIC is not an enforcement or prosecuting body, it is an independent committee responsible for the investigation of all types of marine accidents (casualties and incidents), established on 19 December 2013 by virtue of the Marine Accidents and Incidents Investigation Law of 2012 (Law No. 94 (I)/2012), which transposed EU Directive 2009/18/EC into Cyprus legislation.

The objective of MAIC, in investigating an accident, is to prevent future accidents by establishing its cause and circumstances. Its purpose is not to apportion blame or liability; nevertheless, it will not refrain from fully reporting on the causal factors of an accident, which blame or liability can be inferred from. However, the SDM continues to be responsible for investigating marine accidents for certain types of ships (ships not propelled by mechanical means, wooden ships of primitive build, pleasure yachts or crafts not engaged in trade, unless they are or will be crewed and carrying more than 12 passengers for commercial purposes; or fishing vessels of less than 15 metres in length).

Salvage

Cyprus has adopted, by way of succession, the Brussels Convention for the Unification of Certain Rules of Law respecting Assistance and Salvage at Sea 1910 (the 1910 Salvage Convention) (extended to Cyprus on 1 February 1913).52

As held in L&M Seamasters Limited,53 Cyprus courts will enforce any existing salvage contract, and in assessment of such operation they will apply the common law principles on salvage, as seen in Cyprus Ports Authority v. the Ship 'Zinovia' and her Cargo.54 In the absence of a salvage contract, or if the contract is silent in relation to the salvage operation,55 Part III of the Wrecks Law, Chapter 298, along with the 1910 Salvage Convention, apply.

In Cyprus, there is no compulsory local form of salvage agreement and, therefore, the Lloyd's Open Form is acceptable.

Any contractual provisions dealing with general average will be followed and the courts will respect the choice of the contracting parties. The York-Antwerp Rules have no statutory force in Cyprus and the set of rules to apply is a matter of agreement between the parties.

Wrecks

Cyprus has implemented the Nairobi International Convention on the Removal of Wrecks 2007 (the Nairobi WRC 2007),56 which requires ships, both Cyprus-flagged and those calling at Cyprus ports, to attest that their insurance will cover any expenses incurred in the removal of a ship that becomes a wreck, or the removal of a ship that poses a threat to the environment. The Nairobi WRC 2007 entered into force in Cyprus on 22 October 2015, as per Article 18(2) of the Convention. In addition, the Wrecks Law, Chapter 298, regulates wrecks in Cyprus. More specifically, it is a private maritime law that regulates inquiries into wrecks and provides for the custody and disposal of wrecked property. Pursuant to Section 8 of the Wrecks Law, Chapter 298, the receiver of the wreck57 is responsible for the removal of wrecks in the territory of Cyprus. However, in accordance with Section 16 of the Law, if the owner, or if the wreck is insured, the underwriter or his or her agent, is present, the receiver shall not interfere with the wreck, unless he or she is requested to do so by the owner or underwriter.

vi Passengers' rights

Cyprus has in place the Merchant Shipping (Liability of Carriers of Passengers by Sea in the Event of Accidents) Law of 2014 (Law No. 5(I)/2014), which applies to carriage of passengers of sea-going ships, falling within the scope of the EU Passenger Liability Regulation (Regulation (EC) No. 392/2009), which incorporates certain provisions of the Athens Convention. In addition, the Shipwrecked Passengers Law, Chapter 297, also applies in Cyprus. Cyprus is not a contracting member of the Athens Convention, but through Law No. 5(I)/2014, which transposed the EU Passenger Liability Regulation into national law, has incorporated certain provisions of the Athens Convention as acquis communautaire and not at the level of international convention.58 The Athens Convention, on which the EU Passenger Liability Regulation is based, sets out limits for death, personal injury, and loss or damage to luggage and vehicles. It lays down a harmonised regime of liability and insurance for the carriage of passengers by sea, based on the Athens Convention and the IMO guidelines for implementation of the Athens Convention, adopted in 2006. More specifically, the contractual carrier is strictly liable under the two tiers of liability regime. For the loss suffered as a result of death or personal injury there is, for the carrier, a prima facie limitation right of 250,000 special drawing rights (SDRs) per passenger. This liability can further reach up to 400,000 SDRs per passenger if a fault by the carrier is proved. In addition, ships must obtain a certificate from their flag state confirming that insurance or other financial security is in force.

Moreover, Regulation (EU) No. 1177/2010, concerning the rights of passengers when travelling by sea and inland waterway, is also applicable in Cyprus, along with European Union regulations and decisions of 2015, which introduce a mechanism of imposition of administrative fines for infringement of certain provisions of Regulation (EU) No. 1177/2010.

vii Seafarers' rights

Legislative framework

Most of the relevant domestic legislation and circulars adopt, basically, the provisions of international conventions in which Cyprus participates, such as the Maritime Labour Convention 2006 (MLC),59 which entered into force in Cyprus on 20 August 2013, and the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978. Furthermore, the following are also in force in Cyprus:

  1. the Merchant Shipping (Safety and Seamen) Law, Chapter 292;
  2. the Merchant Shipping (Masters and Seamen) Laws of 1963 (Law No. 46/1963), as amended;
  3. the Merchant Shipping (Safe Manning, Hours of Work and Watchkeeping) Law of 2000 (Law No. 105(I)/2000);
  4. the Merchant Shipping (Criminal and Disciplinary Liability of Seafarers, Suspension or Cancellation of Certificates) Law of 2000 (Law No. 106(I)/2000);
  5. the Merchant Shipping (Medical Examination of Seafarers and Issue of Certificates) Law of 2000 (Law No. 107(I)/2000);
  6. the Merchant Shipping (Registration of Seafarers and Seafarers' Register) Law of 2000 (Law No. 108(I)/2000);
  7. the Merchant Shipping (Minimum Safety and Health Requirements for Work on Board Fishing Vessels) Law of 2002 (Law No. 160(I) 2002);
  8. the Merchant Shipping (Minimum Requirements of Medical Treatment on Board Ships) Law of 2002 (Law No. 175(I)/2002);
  9. the Merchant Shipping (Organisation of Working Time of Seafarers) Law of 2003 (Law No. 79(I)/2003);
  10. the Merchant Shipping (Issue and Recognition of Certificates and Marine Training) Law of 2008 (Law No. 27(I)/2008);
  11. the Merchant Shipping (Dietary of the Crew) Regulations 1964 (PI 204/1964);
  12. the Merchant Shipping (Certificate of Maritime Competency of Radiotelegraph Operators) Regulations 1984 (PI 338/1984); and
  13. the Merchant Shipping (Official Log Books, Ship's Articles and Six-Month Lists) Regulations 2001 (PI 297/2001), as amended.

Nationality of crew

There is no restriction on the nationality of the seafarers on board Cypriot ships, provided that they are holders of a valid Cyprus Seafarer's Identification and Sea Service Record Book issued by the Cyprus Maritime Administration. There are also no restrictions on officer nationality. Moreover, there is no income tax upon the salary or other benefits of officers, crew members or masters of a qualifying Cyprus ship. More than 55,000 seafarers are employed on board Cypriot ships and 9,000 shipping personnel are employed on shore. The sector employs around 3 per cent of Cyprus' workforce.

Recent detainment of foreign vessels in relation to seafarers' rights

SDM surveyors60 recently detained two foreign vessels for non-compliance with the MLC: one in 2019 and one in the first quarter of 2020. The common MLC detainable deficiency in both cases was the non-payment of the seafarers' wages.

VII OUTLOOK

Given the unique characteristics of the island, Cyprus will always have a prominent place in the global maritime sector. Cyprus' maritime tax system, registration procedures and other maritime policies attract numerous shipowners annually, making the fleet of ships registered under the Cyprus flag one of the largest fleets in the world. Cyprus is a modern, efficient and integrated shipping cluster ranked among the leading in the world. Limassol, the heart of the Cyprus maritime cluster, hosts more than 200 companies offering shipping and shipping-related services from ship ownership and ship management to shipping insurance, shipping finance, brokerage, bunkering, ballast water system production, marine training and maritime technology in satellite and radio systems.

Recent changes in shipping lean towards taking drastic measures to minimise air pollution by ships, such as reducing the sulphur content of the fuel to one-seventh of the previous limit (now 0.5 per cent as opposed to 3.5 per cent five years ago), have created a number of legislative instruments or amended existing ones, such as MARPOL (73/78). Cyprus has adopted all related legislation. This is the main challenge the shipping sector is facing today and, to meet the targets, effort will be required across the industry for a number of years, for various reasons, including the availability of compliant fuels, the effects on ships' machinery and the training of crews on proper documentation.

Cyprus has recently amended its policy on registration of ships, eliminating the age limit, and placing trust in the improved quality of ships and the global system of monitoring ship performance in regard to safety and pollution prevention practices. Another interesting innovation is the policy on taxation of shipping activities, which offers attractive taxation options to shipowners that have been affected by the recent financial crisis and global recession. In addition to the above, the abolishment of ships' initial registration fees aims to boost the Cypriot registry's competitiveness and attract more ship registrations.

As far as the tax benefits the Cyprus flag provides are concerned, there is no tax on the income or profit made from the sale of a qualifying ship, nor is tax on capital gains payable on the transfer of a ship or shares in a shipping company. Also, there is no tax on profits from the operation or management of a Cypriot-registered vessel or on dividends received from a ship-owning company in Cyprus. In addition, there is no estate duty on the inheritance of shares in a ship-owning company, nor is registration duty payable on the shares of a shipping company. Moreover, a shipowner whose company is registered in Cyprus is fully exempted from income taxes from operations in international waters, as well as there being no income tax on compensation and wages for officers on shore and crew on board Cypriot ships. Competitive investment funds legislation offering alternative funding solutions to shipping companies is also provided in Cyprus.

Cyprus has concluded double tax avoidance agreements with 65 countries globally. Moreover, according to the Cyprus VAT Law,61 a zero rate of VAT is applicable to:

  1. the supply, modification, repair, maintenance, chartering and hiring of sea-going vessels that are used for navigation on the high seas and carrying paying passengers or that are used for the purpose of commercial, industrial, fishing or other activities; and
  2. the supply of services to meet the direct needs of sea-going vessels.

Committed to safeguarding and enhancing the competitiveness of the Cyprus maritime cluster, the SDM has obtained the approval of the EU for the prolongation of its tonnage tax system for another 10 years. The SDM has taken steps to promote maritime education in Cyprus, while marine and maritime innovation has acquired new momentum with the set-up of the CMMI. Cyprus takes pride in its role as a member of the IMO Council, the International Labour Organization and the EU, striving to contribute to shape international policies for greener, smarter and safer shipping.

On 20 May 2020, the SDM signed a memorandum of cooperation with the Cyprus Marine and Maritime Institute (CMMI) confirming the interest of both sides in the development and support of a joint strategic cooperation in the maritime sector with the aim of encouraging and developing maritime technology and innovation in Cyprus, promoting bilateral research cooperation in the field of blue economy.

The CMMI is based in Larnaca, Cyprus, and is an independent international scientific and business centre of excellence for marine and maritime activities that carries out research, technological development and innovation activities to provide practical solutions to the challenges that the marine and maritime industry, and society, face or will face in the future.

The proposal for the creation of the CMMI was submitted to the European Commission in November 2018 under the HORIZON 2020 'Spreading Excellence and Widening Participation' programme, and the project was eventually awarded the grant. The Municipality of Larnaca is the coordinator of the project and the remaining partners are the Limassol Chamber of Commerce and Industry, the Maritime Institute of Eastern Mediterranean, Cypriot companies SignalGeneriX and GeoImaging, Irish research organisations Marine Institute and SmartBay Ireland and UK research institute, the Southampton Marine and Maritime Institute.

On 18 September 2019, the Council of Ministers approved the state aid scheme for coastal vessels, aiming to:

  1. enhance the protection of the marine environment;
  2. upgrade coastal vessels;
  3. further improve health and safety conditions for crew and passengers; and
  4. advance accessibility for people with disabilities.

Beneficiaries of the scheme are physical or legal entities that own coastal passenger vessels (registered under the Cyprus flag) that have been engaged in the coastal passenger industry for no less than three of the previous seven years, with at least 60 trips per high season (from April to November).

The scheme will be implemented by the SDM for the 2019–2022 period, and has been allocated a budget of €3 million (€1 million per year). Budgetary support will not exceed €200,000 per beneficiary, and up to 60 per cent of eligible expenses. Pursuant to the scheme, the minimum investment should be €20,000.

Two marinas, the Marina of Paralimni and the Marina of Ayia Napa, are under construction in Cyprus and are both expected to be completed by 2021. These marinas will be a point of reference and a tourist attraction in the region, since they will contribute to the development of nautical tourism and will enrich the tourist offering in the city of Famagusta. Both marinas will be official ports of entry into Cyprus, providing customs and immigration clearance 24 hours a day. Moreover, on 12 February 2020, the government of Cyprus signed an agreement with an Israeli consortium for the development of the Larnaca port and Larnaca Marina with an overall value of €1 billion, which will be the largest investment in Cyprus to date.62 In addition, following the completion of the privatisation process in February 2017, the Limassol port's operations are now provided by three private concessionaires.

However, in addition to the above-mentioned developments, the crucial factor that could dramatically drive the growth of Cyprus' shipping industry, resulting in the further expansion of Cyprus' registry, is a viable and functional solution to the lifting of the Turkish embargo on Cypriot ships, which, since 1987,63 has been the 'Achilles heel' of the Cyprus flag, hindering the development of the Register of Cyprus Ships as well as that of Cyprus' ports.64


Footnotes

1 Antonis J Karitzis is the managing director and Zacharias L Kapsis is a shipping lawyer at A Karitzis & Associates LLC.

2 Cyprus was under the dominion of the British Empire from 1878 to 1914, as a British protectorate from 1914 to 1922 and as a Crown colony from 1922 to 1960.

3 Both Cypriot admiralty laws are based on the UK model.

4 By virtue of Article 22B of the Courts of Justice Law of 1960 (Law No. 14/1960).

5 Judgments issued by district courts can be appealed to the Supreme Court.

6 The AJA confers to the Supreme Court jurisdiction to hear and determine claims that relate, among other things, to damage done by or received by a ship, disputes as to loss of life or personal injury, any claims that are concerned with the construction or repair or equipment of a ship, any disputes that arise in respect of goods or materials supplied to a ship for her operation or maintenance, any claim by a master, shipper or agent in respect of disbursement made on account of a ship and any collision or salvage claims.

7 In Admiralty Case No. 32/2014, Interbunker Management Ltd and Novoil Ltd v. m/v 'BARIS', A Karitzis & Associates LLC successfully represented the plaintiffs in issuing an arrest warrant against the defendant's vessel, which was anchored in the port of Larnaca, Cyprus. The plaintiff's claim related to the supply of bunkers to the defendant's vessel, and the arrest warrant was issued upon filing an ex parte application at the Supreme Court of Cyprus.

8 The bill provides that the Commercial Court will adjudicate specific commercial affairs disputes, namely those where the value of the claim exceeds €2 million, and these cases shall be subject to adjudication via fast track procedures. On the other hand, the Admiralty Court will adjudicate shipping and maritime matters that will also be subject to the fast track procedure regardless of the value of the claim. The ultimate aim of this establishment is to strengthen the island's shipping industry and simultaneously help to attract more investors.

9 (2001) 1B CLR 1220.

10 Regulation (EC) No. 593/2008.

11 The Carriage of Goods by Sea Law, Chapter 263, basically adopts the Hague-Visby Rules.

12 Article 6 of the Agreement between the Government of the Republic of Cyprus and the Government of the Republic of Bulgaria on Co-operation in the Field of Merchant Shipping, signed on 19 December 1985 (Gazette No. 2108, Supplement VII, dated 24 January 1986).

13 Article 5 of the Agreement between the Government of the Republic of Cyprus and the Government of the Republic of Lithuania on Merchant Shipping, signed on 15 February 2000 (Gazette No. 3392, Supplement VII, dated 10 March 2000).

14 Article 1 of the Agreement between the Government of the Republic of Cyprus and the Government of the Italian Republic on Maritime Navigation, signed on 18 November 2004 (Gazette No. 3944, Supplement VII, dated 14 January 2005). The Agreement was amended by exchange of Diplomatic Notes (Circular 1/2012 of the SDM).

15 Article 5 of the Agreement between the Government of the Republic of Cyprus and the Government of Romania on Maritime Transport, signed on 23 October 2006 (Gazette No.4077, Supplement VII, dated 10 January 2007).

16 Sections 1(1)(g) and 1(1)(h) of the AJA.

17 Cyprus has also ratified its Protocol of 1996 (the LLMC Protocol 1996), which amends the LLMC Convention 1976.

18 Gold Seal Shipping Company Ltd v. Standard Fruit Company (Bermuda) Limited and another [2000] 1C JSC 1552.

19 Andreas Orthodoxou Limited v. Demetriou Tylliri Limited [2007] 1B JSC 1247.

20 Magelire International SA and others v. Freetrade (SAL) [2003] 1C JSP 1370; Lord Jeans Ltd v. Orbit-Kazoulis Ltd [2004] 1B JSC 1300.

21 [1974] 1 Lloyd's Rep 185.

22 The LLMC Convention 1976 liability limits were increased as from 8 June 2015 under the tacit acceptance procedure provided by Article 8 of the LLMC Protocol 1996. See www.imo.org/en/MediaCentre/PressBriefings/Pages/24-LLMC-limits.aspx for the revised limits.

23 By virtue of its Constitution and by Articles 19 and 29 of Law No. 14/1960.

24 As seen in Nordic Bank PLC v. The Ship 'Seagull' (1989) 1 CLR 420.

25 The Bold Buccleuch (1851) 7 Moo PC 267.

26 Rules 65–73 of the RSC.

27 The Republic of Cyprus, pursuant to the United Nations Convention on the Law of the Sea 1982 (UNCLOS), as well as the Territorial Sea Law of 1964 (Law No. 45/1964), has a territorial sea, the breadth of which extends to 12 nautical miles from the baselines. The geographical coordinates and the relevant map of the Cypriot baselines were submitted to the Secretary General of the United Nations on 3 May 1993. In the territorial sea, the Republic of Cyprus exercises full sovereignty and applies all related domestic laws, in line with UNCLOS provisions. Furthermore, according to the Regulation of Innocent Passage of Ships through the Territorial Waters Law of 2011 (Law No. 28(I)/2011), as well as UNCLOS, every foreign ship, whether merchant or warship, has the right of innocent passage through the territorial sea of the Republic of Cyprus, without encroaching upon its sovereignty and without a prior licence.

28 The Commerzbank Aktiengesellschaft v. The Ship 'Tour 2', Admiralty Action No. 2/2018, 25 May 2018 is relevant.

29 [2012] 1C JSC 2343.

30 [1984] Lloyd's Law Reports 235.

31 Rules 74–77 of the RSC.

32 And the 1978 Protocol thereof, as well as Resolutions MSC 1 (XLV) and MSC 2 (XLV) 1981 (Ratification) and for Matters Connected Therewith Law of 1985 (Law No. 77/85), as amended.

33 Circulars 3/2020, 5/2020, 6/2020, 7/2020, 8/2020, 9/2020 and 12/2020.

34 The ships have to be located within the territorial waters of Cyprus, either anchored in the port area or anchorage, or berthed in one of the ports controlled by the Cyprus government. As a result of the illegal Turkish invasion and military occupation of the northern part of Cyprus in 1974, all ports in the occupied part of the Republic have been declared by the government of Cyprus as prohibited ports of entry and exit, and no visitor should enter or leave the Republic through these ports. More precisely, the relevant restrictions regarding the ports of Famagusta, Karavostasi and Kyrenia have been imposed by an order (PI 265/1974) of the Council of Ministers of the Republic of Cyprus issued on 3 October 1974, declaring the ports in the occupied areas closed for all vessels. Thus, the ships must not be berthed in any of the ports that are illegally occupied and operated by the Turkish administration. In addition, Section 15(2) of the Cyprus Ports Authority Law of 1973 (Law No. 38/1973), as amended, provides for the relevant sanctions as follows: 'The master and / or the owner of a ship which arrives and departs from a port closed for such ship or enters or stays therein in contravention of an Order under subsection (1) shall be guilty of an offence and be liable to imprisonment not exceeding two years or to a fine not exceeding €17,086 or to both such imprisonment and fine, and in the case of a ship registered in the Register of Cyprus Ships, the Court dealing with the case has the power to order her deletion from the Register of Cyprus Ships.' The above restrictions were taken to uphold and maintain the sovereignty of the Republic of Cyprus over its ports and harbours and due to the fact that safety of navigation could no longer be guaranteed in the areas illegally occupied by the Turkish Army since 1974.

35 The Maritime Authority of Cyprus adhered to the Paris MOU on 12 May 2006, and it took effect on 1 July 2006. The Paris MOU has been adopted by 27 flag states.

36 Signed in Valletta (Malta) on 11 July 1997. The Mediterranean MOU comprises 10 member states: Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Tunisia and Turkey. According to the Mediterranean MOU's Annual Report of 2017, published in 2018, the Cyprus administration carried out 119 inspections of foreign vessels, 11 of which were detained. On the other hand, in 2017, 82 inspections of Cypriot ships took place, with only two detentions.

37 The information relating to ship calls are provided through the Safe Sea Net (SSN), which is the European Community maritime information and exchange system. The SSN has been developed according to Directive (EC) No. 2002/59 (later amended by Directive (EC) No. 2009/17), which has been transposed to the Cyprus legislation by virtue of the Merchant Shipping (Community Vessel Traffic Monitoring and Information System) Laws of 2004 to 2012, as amended. Also according to Directive 2009/16/EC, the Member States shall provide information to THETIS (the PSC inspection database) on ships' actual times of arrival and departure through the SSN.

38 The Cyprus Ports Authority (CPA) is a public sector entity established in 1973 on the basis of the 1973 Ports Authority Law and is under the supervision of the Ministry of Transport, Communications and Works of the Republic of Cyprus. The CPA is the competent entity to administer, operate and develop the ports, as well as to facilitate international shipping aids and issue licences for pilotage. All ports, harbours and lighthouses of the Republic are under the jurisdiction of the CPA with exception to the new Limassol Port (which is now operated by three concessionaires). Its jurisdiction extends up to 12 nautical miles from the port's facilities. The Cypriot ports are among the first 33 ports worldwide that managed to be certified in accordance with the International Ship and Port Facility Security Code 2004 (the ISPS Code), which relates to the security of port areas and services.

39 The Merchant Shipping (Port State Control) Notification of 2015 (PI 411/2015).

40 Relevant Circulars: 7/2010, 8/2010, 41/2010, 24/2011, 31/2011, 26/2012 and 13/2016.

41 If a deficiency cannot be fixed immediately, the ship, under specific circumstances, may be eligible to sail to the nearest port facility for repair or may be eligible to sail with the undertaking of fixing the deficiency within 15 to 30 days.

42 The provisional registration allows the owner of a ship to settle any administrative formalities with the vessel's previous flag, to collect and submit all the relevant and applicable documentation to the Registrar of Cyprus Ships for her permanent registration and complete all the necessary surveys of the ship. Furthermore, the physical presence of the ship in Cyprus is not obligatory. All the necessary inspections can take place at any port around the globe. In addition, it goes without saying that the provisional registration is as valid as the permanent registration and, therefore, the vessel immediately enjoys all the benefits the Cyprus flag has to offer.

43 The possibility of the three-month extension is not applicable if a vessel is situated within the territorial waters of the Republic. Thus, if a vessel is located in the territorial waters of Cyprus and her provisional registration expires, the only option for the vessel is permanent registration, by the filing of an application to the Register of Cyprus Ships and the submission of all documents required. It is crucial that between the date of the expiry of her permanent registration and the date prior the completion of her permanent registration in the Register of Cyprus Ships, the vessel is not allowed to sail with the Cyprus flag, as it is not considered as a registered ship.

44 In practice, most of the documents are admissible in the English language.

45 Cyprus has overseas maritime offices at Piraeus, Brussels, Rotterdam, Hamburg, London and New York, offering services to seafarers and Cyprus ships.

46 Case No. C-164/16.

47 Pursuant to the Regulation and the relevant Circular (29/2015) issued by the SDM, all new and existing ships of 500 GT and above, flying the EU flag, must carry on board a verified Inventory Of Hazardous Materials (IHM) Report with International IHM Certificate by 31 December 2020. Ships flying the flag of a third (non-EU) country, when calling at a Cyprus port or anchorage, shall comply with the requirement to have on board a verified IHM report with a Statement of Compliance from 31 December 2020.

48 (1990) 1 CLR 850.

49 By virtue of Articles 19(a) and 29(2)(a) of Law No. 14/1960.

50 (1994) 1 CLR 54.

51 (1999) 1B CLR 1079.

52 Publication of succession by SDM Circular dated 17 April 1992 (FM 1569/69; 103 BSP 297).

53 L&M Seamasters Limited v 1. The Tug Boat Zohara, Israeli Flag, 2. The Fishing Trawler Black Tiger (2007) 1A CLR 303.

54 (1990) 1 JSC 655.

55 Article 34 of the Wrecks Law, Chapter 298 and Article 8 of the 1910 Salvage Convention provide for the method of defining the salvage remuneration.

56 The Nairobi WRC 2007 (Ratification) and for Matters Connected Therewith Law of 2015 (Law No. 12(III)/2015), (Gazette No. 4207, Supplement I (III), dated 29 May 2015).

57 The receiver of the wreck under Cyprus law is the permanent secretary of the SDM.

58 This means that the Cypriot courts are not legally bound to follow the Athens Convention in disputes related to passenger claims.

59 Cyprus has been a member of the International Labour Organisation since 23 September 1960, and has had a prominent role in forming global shipping policies with a strong presence and powerful voice.

60 The jurisdiction of inspecting and further detaining vessels for MLC deficiencies is derived from Article 21A of the Merchant Shipping (Port State Control) Law of 2011 to 2015.

61 Article 25 and Schedule 6 of the Value Added Tax Law of 2000 (Law No. 95(I)/2000).

62 According to the International Boat Industry.

63 In April 1987, Turkey imposed restrictive measures exclusively against Cyprus-flagged vessels, prohibiting them to call at Turkish ports. In May 1997, Turkey issued new instructions to its ports and harbours to clarify uncertainties arising from the imposition of the restrictions, thus, extending them against vessels under a foreign flag (of any nationality) sailing to Turkish ports directly from any Cypriot port under the effective control of the Republic of Cyprus (Limassol, Larnaca) and to vessels of any nationality related to the Republic of Cyprus in terms of ownership or ship management. The immediate effect of the May 1997 instructions was to restrict the use of Cypriot ports for transhipment operations of shipping lines in the Mediterranean.

64 It is important to note that the Republic of Cyprus fully complies with its international and Community obligations regarding Turkish-flagged vessels, as these vessels can freely call at any port under the effective control of the government of the Republic of Cyprus.