CYPRUS: An Introduction to General Business Law: Dispute Resolution

General  

As one of the very few common law jurisdictions within the EU, Cyprus has established itself as a commercial, corporate and tech hub over the past few years. Due to its strategic location at the crossroads of three continents, in combination with its legal system, which is based on common law but also benefits from various bilateral and multilateral treaties, Cyprus is a jurisdiction that can very often be found within complex corporate structures. This has naturally led to a rise in high-profile litigation cases, fraud claims, cross-border insolvencies and asset-tracing exercises taking place in or through the country.

The main pitfall faced by litigants in Cyprus was often that of delay, something that – as analysed further below – has been actively targeted over the past few years and is expected to be resolved completely in the near future, as a result of the overhaul of the Cyprus legal system.

Global Developments and the Impact on the Disputes Arena and the Economy

Cyprus and Russia had developed very strong links, having maintained several bilateral treaties covering political, economic, commercial, cultural and legal aspects, for several years, resulting in a substantial flow of capital.

As a result, for a number of years, a significant volume of high-value and complex litigation and fraud cases has been adjudicated in Cyprus, given the existence of Cyprus structures in companies/groups from the CIS region. The recent sanctions imposed on Russia have impacted work of such nature, but also specific sectors of the economy.

Despite the initial negative predictions and the subsequent war in the Middle East region, Cyprus has demonstrated remarkable adaptability in these changing times. The Cypriot economy has once again demonstrated its resilience and flexibility, which can partly be attributed to its relatively small size, which allows for more agile adjustments in response to adversities. Concurrently, there has been a noticeable increase in dispute-related work, particularly in the technology sector.

As indicated by the Central Bank of Cyprus, the economy recorded significant annual growth in the range of 2.6% in the first half of 2023, compared with 7.1% in the same six-month period the previous year, despite the ongoing conflicts in Europe and the Middle East, as well as the international sanctions that were imposed on Russia, which shows how resilient the Cyprus economy is.

Reforms in a Nutshell 

The latest major reforms of the legal system have sought to modernise processes and increase efficiency. In this spirit, a new electronic filing system has been adopted across the district courts and case allocation has been revamped, to allow for better and faster scheduling of hearing dates.

At the same time, a new, comprehensive and contemporary set of Civil Procedure Rules, modelled after the English CPRs, has been approved by the Supreme Court and put into force as of mid-2024, whilst the new Commercial Court is expected to commence operations in the next year.

As of 2023, Cyprus has evolved from a two-tier court system (first instance courts and the Supreme Court) to a three-tier system.

First instance courts include district courts and specialist courts (including the Military Court, Administrative Court, Rent Control Court, Family Court and Labour Court).

The second tier comprises the newly established Court of Appeal, which hears appeals of all first instance judgments (with limited exceptions).

The third tier now comprises the Supreme Court and the Supreme Constitutional Court – the former hearing appeals from the Court of Appeal and exercising other special powers conferred on it by statute (for example, the issuance of prerogative writs), and the latter hearing appeals referred by the Court of Appeal on Administrative Court judgments and matters of public law or other general public importance.

As a result, the third tier is operating within the Cyprus legal system for the first time. In the context of the restructuring and modernisation of the Cyprus justice system, a number of proposals for the formalisation of the process by which judges are appointed, promoted, disciplined and dismissed are also being pursued, with a view to promoting transparency and diversity within the judiciary.

Finally, a new Admiralty Court has been established, which will take over maritime cases from the current Supreme Court. The House of Representatives in Cyprus approved the relevant legislation in 2022 and the operations of the Admiralty Court are expected to commence in the near future.

The New Commercial Court 

In the wake of a long consultation with various stakeholders, the legislation establishing the new Commercial Court in Cyprus was approved by Parliament in mid-2022. The Commercial Court is expected to start operations in 2024.

The Parliament also amended the Cyprus Constitution to allow proceedings pending before the Commercial Court to be conducted in English. This is a welcome development that will relieve the district courts (ie, the first instance, generic courts) from handling high-value complex commercial disputes and will enable Commercial Court judges to advance their specialty in resolving such disputes.

The Commercial Court will hear commercial claims the value of which exceeds EUR2 million.

The Commercial Court will also have jurisdiction to try all cases relating to arbitration, competition and intellectual property, irrespective of the value of the claim. The Commercial Court will have jurisdiction over cases when:

Given the aforementioned amendment of the Constitution, upon the application of one or both parties, the Commercial Court may allow proceedings to be filed and to take place in English, in which case the Court’s judgment will also be issued in English.

Like other Cyprus courts, the Commercial Court will have the power to issue worldwide interim orders, which may be recognised globally through the wide network of bilateral and multilateral recognition treaties that Cyprus enjoys.

Delays 

One of the most obvious challenges faced by litigants in Cyprus is that of delay. Whilst steps have been taken to actively tackle this issue through the recent reforms of the legal system, the current system unfortunately continues to be burdened by this pitfall, especially as a result of the inevitable backlog of the past.

In fraud litigation, this difficulty is also overcome by making use of the courts’ wide jurisdiction to issue interim relief, which can be pursued on an ex parte (without notice) basis and issued within a few days after filing. Where ex parte relief cannot be justified and the relevant application is heard on a by-summons (on notice) basis, interim relief is expected to be issued within 3 to 12 months from filing.

As noted above, recent actions have been implemented to combat delays and speed up adjudication time. The welcome reforms of the Cyprus legal system are a ray of hope for litigants. The establishment of a backlog system, whereby specific judges are appointed to deal with older cases, has already assisted across the island in clearing the dockets of the district courts. At the same time, the stricter provisions of the new CPRs are already strongly discouraging litigant behaviour that results in unnecessary and unjustified delays to the process.