CYPRUS: An Introduction to General Business Law: Dispute Resolution

CYPRUS: An Introduction 

OVERVIEW  

Cyprus, which is one of the Member states of the European Union, is a small island in the Mediterranean Sea that is strategically located at the crossroads of three continents, namely Europe, Asia and Africa. It has a population of approximately 1.2 million people. Cyprus was a British colony until 1960 when the island became an independent republic. The official languages of the Republic according to its constitution are Greek and Turkish, however the English language is widely used in all circles and governmental authorities. Due to the increasing presence of the Russian community established in Cyprus in recent years, there is also wide use of the Russian language, especially in business circles.

LEGAL SYSTEM 

Overview 

Until 1960, when Cyprus achieved its independence, it was essentially the English legal system which applied. Since then, the applicable legal regime includes the Constitution of Cyprus, the laws retained in force by virtue of Article 188 of the Constitution, the principles of common law and equity and the laws enacted by the House of Representatives. Moreover, in 1960 the House of Representatives of Cyprus passed the law referred to as the Courts of Justice No. 14/1960, which remains the backbone of the Cypriot legal system. It states that "the common law and the principles of equity shall apply, save where they do not coincide with or where they are in conflict with the Constitution of the Republic of Cyprus or where any law provides differently." Following the accession of Cyprus to the European Union in 2004, the Constitution was amended so that EU law has supremacy over the Cypriot Constitution and domestic law.

Due to the application of well-known common law principles and EU law, the legal system of the Republic of Cyprus offers reliability and predictability as well as a business-friendly environment, while at the same time being friendly on legal expenses and costs.

Recognition and Enforcement of Judgments and Awards 

Being a Member state of the EU means that any court judgments issued before the Courts of Cyprus are easily recognisable and enforceable in other Member states and vice versa. Interim relief in support of court proceedings pending in other Member states can be granted by Cypriot Courts. Due to the fact that Cyprus is a common law country, it also offers the option for recognition and enforcement of judgments under the principles of common law. This option can be used to recognise and enforce judgments of other common law jurisdictions such as Hong Kong, British Virgin Islands, etc... Significantly, despite the withdrawal of the United Kingdom from the EU, the existence of statutory arrangements ensure that judgments issued either in Cyprus or in the UK can be recognised and enforced quite easily. Cyprus is also a signatory to the New York Convention, which provides for the recognition and enforcement of arbitral awards in any of the contracting states that as of the beginning of 2022 totalled 169 nations. Cypriot Courts have a strong pro-arbitration bias and also have jurisdiction to issue free-standing injunctions in aid of international arbitral proceedings, both in Cyprus or abroad.

Recent Developments and Upcoming Changes 

In recent years, there have been ongoing attempts to implement significant changes in the legal and judicial systems of the Republic of Cyprus. These include, inter alia, the establishment of a Commercial Court, the creation of an electronic judicial system for filings, the introduction of new civil procedure rules and of a second level for appeals and the introduction of the English language as an option to litigants.

The COVID-19 pandemic has only managed to speed up this process, with the electronic judicial system for filings being fully implemented as of February 2022. The majority of the other aforementioned changes are awaiting the approval of the House of the Representatives, which is expected to be given over the course of 2022.

Implementation of these changes will only reinforce and further establish the Republic of Cyprus as an attractive business and international dispute resolution centre.

ECONOMY 

The Cypriot economy primarily revolves around services, which accounted for approximately 83.7% of the economy in 2020, whilst the industry and construction sectors made up around 8% and 6% respectively. While the tourism sector remains unto this day a substantial part of the economy, the adoption of a pro-business stance with the introduction of various legislations and investment schemes has spurred a considerable amount of foreign investment in recent years.

Particular focus has been given by the Cyprus government on matters of taxation, aiming to provide an appealing, competitive and efficient tax regime. This regime offers, inter alia, a corporate income tax rate of 12.5%, no imposition of inheritance or immovable property tax and other tax incentives aimed to attract multinational companies and high-net-worth individuals. Cyprus also offers a wide tax treaty network with 65 countries, including Russia, Ukraine and the USA, which deals with issues of double taxation. It also offers access to all EU treaties, regulations and directives as a result of its EU membership.

Until recently, Cyprus also offered a program for the granting of Cypriot passports through investments, the so-called "Golden Passports" scheme. Although this program has been temporarily suspended since November 2020, it is expected that a similar program will become available again in the upcoming years.

Recent trends 

Despite the ongoing effects of the COVID-19 pandemic, which have affected both the local market as well as the degree of incoming foreign investment, the economy remains buoyant with an approximate growth in GDP of 5.4% for the year 2021. The real estate sector has started to bounce back following the slump suffered during 2020 that began with the start of the pandemic and the discontinuation of the Cyprus Passport Program. Due to recent legislative developments in the last couple of years, there is also a strong trend towards the creation and relocation of investment funds in Cyprus, as well as in investment activities in the areas of intellectual property, technology and R&D among others. The governmental restrictions imposed due to the pandemic have also led to an increase in the use of technology by many governmental and other public authorities, which is expected to increase both efficiency and speed.

Contributed by: Soteris Pittas & Co LLC, www.pittaslegal.com

Authors:

(1) Soteris Pittas, Managing Partner
(2) Kyriakos Pittas, Advocate/Legal Consultant