Cyprus law Archives - IOANNIDES DEMETRIOU

Cyprus: A leading investment funds centre in the EU

Posted on October 23, 2024 | by Paschalis Paschali

Cyprus has emerged into a leading investment funds centre in Europe offering direct access to key markets. The island is an ideal investments gateway into the European Union and a portal for investments outside the EU, particularly into the Middle East and India. Cyprus’ competitive advantages are further enriched by a robust and transparent legal and regulatory framework and a versatile tax regime.

CYPRUS: A leading investment funds centre in the EU Download

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Οι συνέπειες της αφαίρεσης του αρχιτέκτονα στη ρήτρα διαιτησίας

Posted on September 2, 2024 | by Paschalis Paschali

Στο πρόσφατο του άρθρο, ο Θεόδουλος Δημητρίου, Partner, IOANNIDES DEMETRIOU LLC, αναλύει τις συνέπειες αφαίρεσης του αρχιτέκτονα στην ρήτρα διαιτησίας.

ΟΙ-ΣΥΝΕΠΕΙΕΣ-ΤΗΣ-ΑΦΑΙΡΕΣΗΣ-ΤΟΥ-ΑΡΧΙΤΕΚΤΟΝΑ-ΣΤΗΝ-ΡΗΤΡΑ-ΔΙΑΙΤΗΣΙΑΣ—Θ-ΔΗΜΗΤΡΙΟΥ-IDLAW-1 Download

Μπορείτε να βρείτε το κείμενο της απόφασης ημερομηνίας 19.8.2024 στην Αγωγή 2604/2023 του Επαρχιακού Δικαστηρίου Λεμεσού, την οποία χειρίστηκε επιτυχώς το γραφείο IOANNIDES DEMETRIOU LLC, και στην οποία εκπροσωπήσαμε τον εργολάβο, στον ακόλουθο σύνδεσμο: https://www.idlaw.com.cy/wpcontent/uploads/2024/08/2604-2023-19-8-
2024.pdf

Για να λαμβάνεται άμεση ενημέρωση για τα άρθρα των δικηγόρων του Ιωαννίδης Δημητρίου Δ.Ε.Π.Ε, ακολουθείστε την σελίδα μας στο LinkedIn.

-COVER STORY- The Legal Issue – The Lawyer’s View: Andrew Demetriou, Managing Director, IDLAW

Posted on August 28, 2024 | by Paschalis Paschali

“Anything that can take us out of our island mentality and open us up to wider scrutiny is very welcome.” Andrew Demetriou, Managing Director, Ioannides Demetriou LLC
In GOLD The Business Magazine of Cyprus | The Legal Issue – The Lawyer’s View / August 2024

Let’s start with the failed rollout in January of the e-justice system, with completion now projected for 2025. How did the profession react to this setback and how has it affected your firm’s operations in particular?

The “failed rollout” was not met with surprise or undue consternation because the previous i-justice system was brought back into operation immediately so there was no noticeable effect or downtime as court filings were concerned. The revision of the civil procedure system and court filing system in Cyprus was an overdue and very necessary project for the legal industry and the economy in general. Progress always has its hiccups and, as a practising lawyer, I prefer to focus on the positive, which is that this particular leap was made for the reasons mentioned.

Macroeconomic challenges and geopolitical strife have led to the contraction of the local industry in recent years. How do you assess its present state?

The legal industry, throughout the world and not just in Cyprus, can be characterised as “swings and roundabouts.” – You lose in one area but you gain in another. The significant loss of business arising from the Russian invasion of Ukraine, allied to the sanctions that followed, has been made up by an upturn in local business, notably in the fields of inward foreign investment and significant local merger and acquisition cases, along with a greater service offering, particularly in the areas of financial services and regulatory compliance. This, as well as an increase in alternative dispute resolution services, which is another area in which we are particularly active, has more than made up the difference as far as Ioannides Demetriou LLC is concerned.

Given these challenges, are Cyprus law firms identifying and pursuing new revenue opportunities by tapping into new markets or introducing new service offerings?

Cypriot law firms have always been enterprising when it comes to sourcing work. Firms that have – or can develop or source – expertise in new areas of work will do so and will seek to attract new clients from both the local market and abroad. There are opportunities for law firms in many fields. Development projects are on the rise and inward foreign investment in all fields is at an all-time high. Despite the reputational damage that Cyprus has incurred lately, due to scandals such as the passport debacle, it is still an attractive venue for foreign investors.

Meanwhile, other industries are taking market share from law firms by providing ‘one-stop solutions’ to clients. Do you foresee this trend driving consolidation within the legal sector? Can law firms adapt to this competitive landscape?

It has become clear that clients are demanding ever-increasing expertise from their lawyers. The days of the small law office – where the only “specialisation” was “generalisation” – are nearing their end. Law firms will either have to specialise and limit their offering to their area(s) of specialisation or grow to have a number of specialist lawyers of different expertise at their clients’ disposal – there is no halfway house. We do not view the ‘one-stop shop’ per se as a direct challenge. There will always be a demand for legal expertise and for top lawyers. Such lawyers are not born but are the product of hard work, dedication, support and encouragement and access to cases and resources so that they can reach the very top in their respective fields. All leading law firms invest time and effort in nurturing their promising junior lawyers to become leaders in their fields of practice. The firms that succeed in this will not only survive but will thrive as they will offer a far superior service to that of any ‘one-stop shop’.

The Finance Ministry plans to introduce a single authority to supervise the whole of the professional services sector, as part of broader efforts to improve the country’s image abroad. What are your thoughts on this?

This is actually an EU initiative, not one being taken by the Ministry of Finance alone. Provided that it is well managed, this can only be a good thing as it will force the Cypriot services sector to be on a par with the rest of Europe. Anything that can take us out of our island mentality and open us up to wider scrutiny is very welcome, as far as I am concerned.

Finally, what strategies should be adopted if a substantial rebranding initiative is to be undertaken with the aim of restoring Cyprus’ reputation within the international business community?

We need to see far-reaching investigations away from political influence, speedy and competent prosecutions, and harsh sentences that have a true deterrent effect. Local confidence in the country’s political and legal systems is at an all-time low and, if this is the case, how can we possibly believe that the international community will think any differently? We are kidding ourselves if we believe that the international community has forgotten or will forget in a hurry the scandals that have plagued Cyprus in recent times. They will only be forgotten if Cyprus can demonstrate that it has realised the error of its ways by taking active and concrete steps to eradicate them and punish those involved.

EAC & CYTA contract: smart electricity meters

Posted on July 25, 2024 | by Paschalis Paschali

IOANNIDES DEMETRIOU LLC, acting on behalf of the Electricity Authority of Cyprus, has secured a victory of pivotal significance to our client and the electricity market of Cyprus

Client Alert: IOANNIDES DEMETRIOU LLC, acting on behalf of the Electricity Authority of Cyprus, has secured a victory of pivotal significance to our client and the electricity market of Cyprus in general before the Court of Appeal (Administrative Division).

The judgment in Appeals 13/2024 and 14/2024, handed down on the 18.7.2024, reverses the first instance judgment of the Administrative Court and paves the way for the signature of the contract between the Electricity Authority of Cyprus and the Cyprus Telecommunications Authority (CYTA) for the installation of 400,000 smart electricity meters all over Cyprus.

This project, valued at approximately EURO 50million, is a highly significant project as it represents a major and long awaited first step in the opening of the electricity market as well as the advent of the smart grid in Cyprus. Additionally, the introduction of a first roll out of 400,000 electricity smart meters will allow EAC and consumers to obtain electricity consumption data in real time. This translates to cost savings, improved efficiency, better planning and forecasting in relation to energy consumption and a host of other advantages the Cypriot consumer can benefit from.

The three lawyers involved in the matter from the outset on the part of our firm were our Managing Director, Andrew Demetriou and senior members of our Administrative law team, namely Partner Mrs. Anna Christou and Associate Director Mr. Demetris Kailis.

Pictured above at the signing ceremony of the contract between EAC and CYTA on 24.7.2024, from left to right, is the General Manager of EAC Mr. Adonis Yiasemides, the President of the Board of EAC Mr. George Petrou, the President of the Board of CYTA Mrs. Maria Tsiakka Olympiou, the Minister of Energy of the Republic of Cyprus Mr. George Papanastasiou and the Director General of the Ministry of Energy Mr. Marios Panayides.

The Implementation of Telework Law Framework

Posted on July 4, 2024 | by Paschalis Paschali

The implementation of the remote working law framework. Article by Irene Kattami, Senior Associate at Ioannides Demetriou LLC

The landscape of work has undergone significant transformation in recent years, which was particularly accelerated by the global pandemic. Teleworking has become increasingly common, prompting the need for a clear legislative framework to govern its implementation. This need has been addressed with the House of Representatives’ approval of a comprehensive framework regulating remote working. The Framework for Telework of 2023 Legislation (the “Law”), which came into effect on December 1, 2023, aims to establish guidelines and protections for both employers and employees navigating the remote work environment.

The Law stipulates that teleworking can be implemented under the following circumstances: (i) an optional teleworking scheme may be adopted subject to a written agreement entered into between the employer and the employee, (ii) mandatory teleworking may be imposed under a Decree issued by the Minister of Health due to public health considerations and (iii) mandatory teleworking may be required for an employee whose health is demonstrably at risk, which can be mitigated by refraining from working on the employer’s premises.

Apart from prescribing the conditions under which teleworking can be established, the Law also delineates the responsibilities that the employer bears towards the employee. Firstly, among these obligations is the coverage of expenses incurred by the employee related to teleworking. These expenses include various aspects, such as equipment costs (unless agreed to utilize the employer’s equipment), telecommunications, usage of the home workspace, and the maintenance and repair of equipment. Moreover, the employer bears the responsibility of ensuring that the employee receives the essential technical support required for their work. To further regulate the financial aspects, the Minister of Labour and Social Insurance is expected to issue a Decree specifying the minimum teleworking cost payable to the employee. Importantly, the Law stipulates that any expenses covered by employers will not be considered as part of the employee’s remuneration, but they are deemed as deductible expenses, exempted from both social insurance and taxation.

In maintaining consistency with the aforementioned responsibilities, the employer is obliged, among other things and in addition to those outlined in the Occupational Safety and Health Law 1996 to (i) have at their disposal a suitable and sufficient written risk assessment of the existing teleworking risks, (ii) determine the preventive and protective measures to be taken based on the written risk assessment, (iii) provide such information, instructions, and training to ensure the safety and health of their employees. Employers have the same health and safety responsibilities for employees, whether they work from home or in a workplace.

Furthermore, the Law requires that employers should provide certain information to employees regarding teleworking, within eight (8) days from the date of commencement of such arrangement. This information includes:
a) The employee’s right to disconnect;
b) An analysis of the extend of teleworking costs incurred by the employer;
c) The equipment necessary for the provision of services remotely and the procedures in place for the technical support, maintenance and repair of the equipment;
d) Any restrictions on the use of the equipment and any penalties in case of violation of the restrictions;
e) The agreement regarding remote readiness, it’s time limits and the response deadlines of the teleworking employee;
f) An evaluation of the risks associated with remote work and measures taken by the employer for their prevention based on the risk assessment;
g) The responsibility to protect and secure the professional and personal data of the teleworking employee and the relevant procedure to comply with such obligation;
h) The supervisor from whom the teleworker will receive instructions.

Any information which does not have to be personalised and addressed to teleworking employees, can be communicated to appropriate personnel through the employer’s internal policies.

Employees engaged in teleworking have the equivalent rights and obligations as their counterparts working on-site at the employer’s premises, including rights or obligations concerning their workload, assessment criteria and procedures, compensation, access to employer-related information, training, professional development, and where applicable trade union activity including their unhindered and confidential communication with trade union representatives.

A key protection established by the Law is the employees’ right to disconnect in order for the provisions of the Transparent and Predictable Working Conditions Law to be implemented. Employers and employees’ representatives are required to agree on the technical and organizational methods to ensure that remote employees can disconnect from electronic communication without any adverse consequences. If no such agreement is reached, employers must still notify employees of this right.
Moreover, the Law also sets out the duties and powers of Inspectors, who are officials of the Ministry and/or other public servants appointed by the Minister of Labour and Social Insurance. Their primary responsibility is to ensure the thorough and effective enforcement of the provisions of the Law. Failure to comply with the provisions of the Law could render employers liable, with potential fines upon conviction not exceeding €10.000.

In conclusion, the Framework for Telework of 2023 represents a significant step towards formalizing and protecting the evolving landscape of remote work. This legislation not only establishes clear guidelines and responsibilities for both employers and employees but also ensures a fair and supportive environment for teleworking. By addressing key aspects such as expense coverage, health and safety requirements, and the right to disconnect, the Law aims to create a balanced framework that promotes productivity while safeguarding employee well-being. As teleworking becomes an integral part of the modern work environment, the effective implementation and adherence to this framework will be crucial in fostering a sustainable and equitable remote working culture.

Corporate tax policy and the European Union institutions

Posted on June 25, 2024 | by Paschalis Paschali

On the 9th of June 2024, Cyprus and other Member States elected their representatives to the European Parliament. This is the only institution of the European Union whose members are directly elected from the people. Nevertheless, this is also one of the institutions with limited powers in many areas. As far as taxation is concerned, the European Parliament has no role whatsoever in the legislative process. This is rather ironic, given the general political slogan of ‘no taxation without representation’.

But which institution makes tax policy in the European Union? The answer is not very straightforward and requires a basic understanding of institutional dynamics in the European Union and competences.

The most important institutions in the European Union are the European Commission, the Council of the European Union, the European Parliament, the European Council and the Court of Justice of the European Union. The legal system of the European Union, as underpinned by the Treaty on the European Union and the Treaty on the Functioning of the European Union, empowers these institutions to participate in the law-making process but only when such power has been so conferred under EU law. In other words, different institutions have different law-making powers, and can only act within the scope of these powers (i.e. competences).

The European Commission is the quasi-executive body of the European Union which proposes laws and manages and implements EU policies. In the field of competition law, it also has some judicial functions. There are 27 Commissioners – one from each Member State. The Commissioners are not directly elected but they are appointed by the government of each Member State. However, once appointed, they are not supposed to represent their Member State. Rather, they take on a portfolio of a policy area and assisted by the relevant directorates-general, they exercise leadership in that area. As far as taxation is concerned, the relevant portfolio is that of ‘economy’ and it is assisted by the DG-TAXUD.

The Council of the European Union is the institution which represents Member State governments in different configurations. The configuration relevant for taxation is the Economic and Financial Affairs Council (ECOFIN) configuration, which is made up of the economic and finance ministers from all Member States. It is in the ECOFIN meetings that the Commission tax proposals are considered and voted upon. The Presidency of the Council rotates among Member States every six months.

The European Council is the EU institution that defines the general political direction and priorities of the European Union. The members of the European Council are the heads of state or government of the 27 EU member states, the European Council President and the President of the European Commission. It has bi-annual meetings, usually at the end of each Council presidency.

The European Parliament comprises of the Members of the European Parliament, which are directly elected by voters in each Member State. Although usually parliaments are legislative bodies, the European Parliament’s powers are rather limited and circumscribed. In the adoption of legislative acts, a distinction is made between the ordinary legislative procedure (co-decision), whereby the European Parliament is on an equal footing with the Council, and the special legislative procedures, which applies only in specific cases where Parliament has a consultative role only. In certain areas such as taxation the European Parliament can only ever give an advisory opinion.

The Court of Justice of the European Union is the judiciary of the European Union and is considered to be the guardian of the Treaties. The judges of the Court of Justice are appointed by Member States though again, not to represent the Member States, but to apply and interpret EU law in the spirit of the acquis communaitaire.

As mentioned above, each institution can only exercise law-making powers only to the extent that it has competence to do so – this is EU competence. Broadly, EU competence can be exclusive or shared. Where the EU does not have any competence, then this area has remained within the exclusive powers of Member States.

Trade policy and trade law is an exclusive competence of the European Union. This means that only the European Union (through the relevant institution(s)) can legislate on trade matters and conclude trade agreements with third countries. A Member State cannot enter into its own trade agreements with other countries, nor deviate from the EU’s trade rules. This was one of the thorny issues under the Brexit negotiations: the UK was not able to negotiate trade agreements with third countries until it left the EU. That is why there was a brief transition period following the UK’s departure from the EU during which period it still benefitted from the EU’s trade agreements with third countries.

There can also be shared competence, where both the EU and Member States can legislate. Examples of shared competence are the internal market, environment and consumer protection.

As far as corporate taxation is concerned, the EU has no competence whatsoever. This remains within the powers of Member States. Nevertheless, even in areas where the EU has no competence, sometimes, the EU legislates by using what I call ‘proxy’ legal bases under the Treaty. More characteristically, in the area of taxation, general (i.e. non-tax specific) Treaty provisions have been used to propose tax legislation, such as Art 115 of the Treaty on the Functioning of the European Union. Pursuant to this Article, the Commission can propose directives in any area it does not have competence (e.g. taxation) on the basis that this is necessary for the establishment or functioning of the internal market. This Treaty provision stipulates that for these proposals to become law, they must be approved by all Member States in Council. This unanimity requirement often makes it very difficult for any tax proposal to go through, as even one Member State can veto the proposal.

A distinction should be made between direct taxation (which includes corporate taxation and the taxation of individuals) and indirect taxation (which includes VAT, customs & excise taxes, etc). The latter area is largely harmonized. It should be pointed out that the Treaty provision which enables the harmonization of indirect taxes (Art 113 of the Treaty on the Functioning of the European Union) also requires unanimity in Council. However, from the early stages of the European Union, there has always been more willingness by Member States to harmonise these taxes compared to direct taxes, which are thought of as more closely aligned with sovereignty.

In any case, due to the lack of competences and the use of general Treaty proxy bases, the Commission and the Council are effectively the only EU institutions that have a meaningful role in the development of direct tax policy. This can be problematic if it is a controversial proposal, which does not enjoy the support of all Member States. It can take years for such proposal to go through, if at all. Even if it does go through, the amendments made to appease some Member States may significantly water down the approved legislation or render it incoherent.

Let us take as an example the proposal for a Financial Transaction Tax. This was first proposed in 2011 but has never been approved. There was an attempt to bypass the unanimity requirement by proposing to introduce a Directive through enhanced cooperation (i.e. only to bind the Member States agreeing to it) but again, this has not been successful. Up until recently, a draft Directive on a Financial Transaction Tax featured in the agenda of ECOFIN meetings but it seems to have faded away.

A more recent example of a proposal which faced opposition in Council but this time eventually got through is the Directive on Minimum Effective Tax Rate. This was originally proposed in December 2021, with the expectation that it would be transposed into the domestic law of Member States by 1 January 2023. However, from the beginning Member States voiced concerns and asked for the delayed implementation of it (mostly, Estonia, Hungary and Poland). Two subsequent revised compromise texts were rejected at ECOFIN meetings in March and April 2022. Whilst many had written off this draft Directive, rather surprisingly, unanimity was achieved in Council (at an ECOFIN meeting) in December 2022 and the Directive was eventually approved.

One could argue that the power of the fiscal veto protects some of the smaller Member States from being forced into unwanted tax harmonization. However, experience from recent years suggests that apart from some Member States in the eastern bloc, smaller Member States such as Cyprus, Malta, Ireland, Luxembourg are unlikely to veto tax proposals. The fiscal veto is more effectively used by the larger Member States to block a proposal. For example, the UK’s objections to the proposed Financial Transaction Tax were one of the reasons that the proposal never went very far. It was feared that with the UK’s departure from the European Union there would be a power vacuum and all tax proposals would be pushed through in Council but some Member States have very effectively filled this gap.

This brief overview explains how the institutional dynamics, combined with the very restrictive legal bases (Treaty bases) for harmonization, have led to limited and often uncoordinated legislation produced in the area of corporate taxation. There have been calls to remove the unanimity requirement and allow other Treaty bases to be used which only require qualified majority voting. So far, these calls have been resisted by most Member States. Nevertheless, this seems to be a pyrrhic victory as experience so far shows that many of the smaller Member States are rather muted when it comes to negotiations in Council. But the threat of vetoing Commission tax proposals, especially if raised by more than one Member States, is a powerful deterrent for the Commission to make amendments. Therefore, alliances amongst Member States are crucial in influencing tax policy in the EU.

What this brief note shows is that in principle, Member State governments have the final say in the development of corporate tax policy, through their voting in Council. However, whether they choose (or are able to) exercise their power of veto is often a political question. Rather counterintuitively, due to the limitations of the legislative process, taxpayers often have a greater role in the development of tax law in the EU, but in a reactive manner. Taxpayers can challenge domestic tax laws on the basis that they breach the EU’s fundamental freedoms and fundamental rights. They can also make complaints to the Commission and urge it to start an infringement proceeding against a Member State on the basis of Art 258 of the Treaty on the Functioning of the European Union. Many important developments in the area of corporate tax policy in the European Union were in fact a result of taxpayers’ action, with the help of a good legal team.

For more information on any of the issues raised in this newsletter, please get in touch with us.

Liquidated damages in construction contracts

Posted on June 6, 2024 | by Paschalis Paschali

Client Alert: Ioannides Demetriou LLC has scored an important victory for its client, the University of Cyprus, in a bitterly contested interim order application by a contractor seeking to restrain the University (as employer in the contract) from deducting liquidated damages for delay under the contract. The contract was the standard Cyprus public sector construction contract.

The Applicant contractor claimed that the contract had become “time at large” due to the fact that the employer had failed to respond to an application for extension of time and had also given instructions for additional works after the contractual date for completion of the works.

The judgment provides both contractors and public sector employers with guidance as to the legal considerations that may influence a Court in relation to issues such as requests for an extension of time, the liquidated damages clause and the role of KEAA in the standardised construction contract for public works. The court adopted a common sense approach and emphasised the need for both contractor and the employer to comply with the terms of the contract in so far as the submission of claims and their evaluation is concerned.

The case was handled by our Senior Associate, Anna P. Christou

Links to judgment: pp.1-10 / pp.11-20 / pp.21-30

Χρόνος στα Κατασκευαστικά Συμβόλαια

Posted on June 4, 2024 | by Paschalis Paschali

Μια σύμβαση εργολαβίας, όσο περίπλοκη και αν είναι, είναι ουσιαστικά μια συμφωνία μεταξύ
ενός εργοδότη / ιδιοκτήτη και του εργολάβου, σύμφωνα με την οποία, σε αντάλλαγμα για το
ποσό της σύμβασης, ο εργολάβος συμφωνεί με τον εργοδότη / ιδιοκτήτη να εκτελέσει τις
εργασίες για μια σταθερή ή προσδιορίσιμη τιμή, εντός καθορισμένου χρόνου, στην ποιότητα
που ορίζεται στη σύμβαση, όπως εύλογα καθορίζεται από τον Αρχιτέκτονα / Μηχανικό /
Εργοδότη / εκπρόσωπο του Εργοδότη, ανάλογα με την περίπτωση.

Επομένως, ο χρόνος είναι ένα σημαντικό στοιχείο σε μια κατασκευαστική σύμβαση. Είναι
τόσο σημαντικός όσο το χρήμα.

Είναι επίσης η πιο κοινή πηγή διαφορών.

Διαβάστε πιο κάτω την μελέτη με τίτλο: Χρόνος στα Κατασκευαστικά Συμβόλαια του Ανδρέα Δημητρίου, Διευθύνων Σύμβουλος, Ioannides Demetriou LLC:

AD_article_full_v2 Download

Illegal purpose contracts: Can they ever be enforced under Cyprus Law? – Understanding the “illegality defence”

Posted on April 24, 2024 | by Paschalis Paschali

“No Court will lend its aid to a man who founds his cause of action upon an immoral or illegal act” said Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp 341, and marked the Cyprus legal framework around illegality in contracts up to the present date. The principle was redefined in the case of Tinsley v Millingan [1994] 1 AC 340 where the so called “reliance test” was established, essentially providing that if a Claimant needs to rely upon an illegal act in order to advance his claim, then that claim should be rejected. Also known as the common law principle of “ex turpi causa non oritur actio” (meaning “no action can arise from an illegal act”), this maxim usually presents itself as the “defence of illegality”, which is invoked by Defendants so as to argue that the claim against them should not succeed as it is based upon an illegal act.

The case of Christodoulou and others v Antonius H.F.M. Vraets, Civ.Appeal No. 329/2006, is a good example of how Cyprus Courts react to the invocation of this defence. In that case, the Claimant, claimed that he was entitled to the recovery of the amount of $856.000 which he paid as part of an agreement between himself and Defendants 1 and 2. The agreement considered the purchase of rough diamonds from Africa, which would subsequently be sold to the black market and would be exported from Angola to Belgium for processing. All three parties would divide the proceeds from the sale of the processed diamonds. The Claimant brought an action against both Defendants, as after the payment of the amount above he received no percentage from the sale of the processed diamonds. Defendant 1 attempted to rely on the “illegality defence” and subsequently alleged that since the agreement between the parties was carried out for an illegal purpose, the Court could not “lend its aid” to a man whose cause of action was based on an illegal contract and therefore the Claimant was not entitled to recover his money. The Cyprus Court of Appeal, based their reasoning on the cases of Holman v Johnson and Tinsley v Millingan above and upheld the Defendant’s argument. It was essentially held that since the Claimant was aware of and participated in the illegality of the transaction, he was not entitled to the recovery of his money.

The case of Andronikou v Mavropoulou and another, Civ. Appeal No. 14/2014 is also relevant. In this case, the Claimant brought an action against the Defendant and his daughter for fraud, false representation, deceit and unjust enrichment. The Claimant contended that she had made an agreement with the Defendant, that she would pay him an amount of money, which the Defendant subsequently would pay to certain “key officials” of a developing company so as to persuade them to buy the Claimant’s land. The Claimant’s land was indeed acquired by the developing company but the Defendant took the money and placed them to his daughter’s account instead. The first instance court held that the Claimant was entitled to the return of her money. The Defendant appealed. The Court of Appeal’s decision was not unanimous. It was held by majority that it was evident that the agreement between the parties was signed for an illegal purpose, namely bribery. The Court could not therefore “lend its aid” to the Claimant and hence the latter was not entitled to the recovery of her money.

Remarkably enough, the Court of Appeal accepted in both cases cited above that the Claimant and the Defendants were “in pari delicto”, meaning “in equal fault” regarding the signing of the illegal contract. Yet despite the above finding, the Court held that the Claimants were not entitled to the recovery of their property, the inevitable result of their decision being that the property remained to the Defendants’ possession.

The following questions subsequently arise: If it is accepted that both parties have contributed equally to the illegality of the contract, why is it acceptable for one party to retain the property and not for the other? Why do we consider it unacceptable for the Claimant to recover his property because of his misconduct, while, the Defendant who is culpable of the same misconduct, is often allowed to keep the property?

Although it is evident that this strict approach aims at encouraging morality and ethos in every-day transactions, it is doubtful whether it represents the common sense of justice given the “paradox” results that is sometimes creates.

The UK Courts did not fail to notice the “anomalies” created by the strict application of the “illegality defence” and completely changed their approach as to its application in 2016 with the adjudication of the case of Patel v Mirza [2016] UKSC 42. The Claimant in this case transferred an amount of money to the Defendant intending the latter to trade in shares in the Royal Bank of Scotland using insider information that he anticipated receiving. Neither the insider information, nor the purchase of shares ever materialized. When the Claimant brought an action against the Defendant, the Defendant attempted to rely on the “illegality defence” and argued that the Claimant could not recover his money as trading by using insider information is illegal. The Supreme Court held that the Claimant was entitled to the recovery of his money and that in fact, there is no reason for a party who manages to prove that he is capable of recovering his property on the basis of unjust enrichment, not to do so, just because the monies were paid to the Defendant for an illegal purpose. Additionally, the Supreme Court, held that in applying the “illegality defence” the following three considerations need to be taken into account: a)what is the purpose of the law that has been infringed and whether rejecting the claim would enhance that purpose b) any other relevant public policy on which the denial of the claim may have an impact c) whether the denial of the claim would be a proportionate response to the illegality.

The approach adopted in of Patel v Mirza demonstrates a shift from a rigid approach to a more flexible one which takes into consideration the peripheral circumstances of the case and is capable of producing more reasonable and pragmatic results.

Although the case of Patel v Mirza has been invoked in several first instance court decisions in Cyprus, to some of which, the invocation was indeed successful, it is apparent that the dominant approach regarding the application of the illegality defence remains the one established by Holman v Johnson and Tinsley v Millingan. Of course, the fact that the Cyprus Court of Appeal has not yet been given the chance to apply or make holistic reference to the case of Patel v Mirza plays an important role to the reproduction of the strict approach established by the “reliance test”.

What is certainly inarguable is that the case of Patel v Mirza which has shown the “way forward” to a more liberal approach has not been overlooked by the Cyprus Courts. What remains to be seen is how this approach will affect and re-shape the application of the “illegality defence” in Cyprus law.

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Cyprus’ Path in the European Green Deal: Integrating the Just Transition Mechanism

Posted on February 19, 2024 | by Paschalis Paschali

As the European Union (EU) embarks on a transformative journey towards a greener and more sustainable future through the European Green Deal (EGD), the question of ensuring that no one is left behind takes a central stage. This article aims to analyse the measures that the government of Cyprus is undertaking to achieve its 2030 and 2050 climate targets and to assess how the concept of social inclusion is endorsed along the way.

National Energy and Climate Plan (NECP)

Cyprus, like other EU nations, has embraced the ambitions of the EGD, aiming to tackle climate change and move towards sustainability. [1] The NECP is a vital part of this, mandated by EU regulations from 2021 to 2030. Its main objective is to devise cost-effective policies to meet energy and climate goals, driving economic growth and addressing environmental challenges. [2] Approved by Cyprus’ Council of Ministers in January 2020, it outlines the energy sector’s current status, past policies, and future trajectory to achieve national goals by 2030. Its three key pillars focus on emission reductions, energy efficiency, and increasing renewable energy sources.

For emissions, Cyprus targets a 21% reduction in non-ETS sector emissions compared to 2005 levels. Strategies include promoting natural gas, boosting renewable energy, improving carbon sinks, enhancing energy efficiency across sectors, and reducing emissions in transport, agriculture, and waste. [3]

Regarding energy efficiency, Cyprus aims for a final energy consumption of 2.0 megatonne of oil equivalent (Mtoe) and a primary energy consumption of 2.4 Mtoe by 2030. The plan includes energy efficiency obligations for distributors, low-interest loans for efficiency projects, support programs for households and businesses, voluntary agreements with businesses, and various initiatives for efficient lighting, water, and transportation.

Lastly, Cyprus aims to increase the share of renewable energy sources (RES) in its energy consumption. Targets include RES constituting 23% of gross final energy consumption, 26% of gross final electricity consumption, 39% in heating and cooling, and 14% in transportation.

To achieve these targets, Cyprus has adopted a wide-ranging approach, including various support schemes for RES, incentives for electric vehicles, and integrating RES and energy efficiency into public buildings. Efforts also focus on enhancing RES utilisation in the transportation sector.

Solar water heater adoption rates are impressive, with over 90% of households and 50% of hotels utilising these systems. However, effective energy storage solutions are crucial to fully harness solar potential. [4] Initiatives like the experimental energy storage system in Nicosia and EU projects aim to develop policies for integrating energy storage effectively, boosting photovoltaic self-consumption in the Mediterranean.[5]

To address energy security, Cyprus is implementing Liquefied Natural Gas (LNG) imports through the “CyprusGas2EU” project, diversifying energy sources and reinforcing security. Support for projects like the “EuroAsia Interconnector” and “EastMed Pipeline” will further eliminate energy isolation. The EuroAsia Interconnector, connecting Cyprus’ electricity network to the EU continental network, will facilitate RES development, reduce CO2 emissions, and enhance Cyprus’ position in the regional energy sector. [6] This project will also pave the way for widespread adoption of solar energy and sustainable practices, promoting both environmental and economic sustainability. [7]

Future trajectory

Importantly, Cyprus has submitted an updated draft of its NECP to the European Commission for review and approval. This revision is prompted by institutional obligations, failure to meet existing targets, and changes in European energy and climate goals. The revised draft includes, inter alia, commitments to reduce GHG emissions by 32% by 2030 compared to 2005 levels, increase carbon dioxide removals from land use, achieve a 42.5% penetration of RES in gross final consumption by 2030, and contribute to the EU’s mandatory energy efficiency improvement target. [8]

Additionally, Cyprus aims to design policies to support low-emission growth, laying the groundwork for achieving zero emissions by 2050. The Long-Term Low GHG Development Strategy for 2050 aligns Cyprus with the European objective of transitioning to a climate-neutral economy by 2050, emphasising a commitment to a greener future.[9] This strategy complements the NECP and envisions a shift towards clean technologies, promoting innovation and new business models, mitigating climate change impacts, enhancing economic competitiveness, and addressing environmental challenges.

Nevertheless, transitioning to carbon neutrality and renewable energy adoption presents a series of social challenges that require proactive solutions. Therefore, as Cyprus embarks on its journey towards a greener future, the integration of the Just Transition Mechanism (JTM) takes a central role in ensuring that this transition is not only environmentally sound but also socially equitable.

Just Transition Mechanism

The JTM is a critical component of the EGD, acknowledging the socio-economic realities of member states.^[10] It provides a framework for financial and policy support to facilitate the transition to cleaner and more sustainable economies while safeguarding livelihoods and communities.^[11]Each member state’s unique circumstances further underscore the necessity of adaptable strategies to harmonise environmental and economic aspirations.^[12]

In terms of Cyprus, it has recently received the approval for its Partnership Agreement and Just Transition Plan from the EU, entailing over €1 billion in funding from 2021 to 2027. This funding will support various initiatives aimed at promoting economic, social, and territorial cohesion, facilitating the green and digital transition, and fostering competitive, inclusive, and sustainable growth. [13]

One of the most important aspects of the Agreement is the ‘Thalia 2021-27’ Cohesion Policy operational program.[14] A multi-annual, multi-fund development initiative, the Thalia program outlines Cyprus’ strategic plan for utilising resources allocated through the Cohesion Policy Funds.[15]

Central to this initiative is the Just Transition Fund (JTF), which will support an array of vital interventions. The strategic goal is to reduce GHG emissions at the power station in Dekelia and of energy-intensive businesses in general.[16] Recognising the need for social inclusion, Cyprus plans to allocate a portion of the JTF budget to modernise labour market services and support vulnerable populations, women, and youth. Additionally, initiatives to address the shortage of qualified human resources through green education initiatives are emphasised. The program prioritises equal opportunities, non-exclusion, and non-discrimination, ensuring gender equality and compliance with fundamental rights.

In conclusion, Cyprus’ proactive approach aligns with the EGD, addressing climate change, promoting economic growth, and ensuring social inclusion. However, and despite the series of green measures and initiatives that are underway, the nation faces a substantial gap between its commitments and actual outcomes.[17] To improve results and make progress toward the 2030 and 2050 targets, the government of Cyprus must enhance its efficiency in the public sector and collaborate closely with the private sector to streamline not only the processes but also the procedures for implementing all its ambitious projects.

References and URLs:

[1] General Secretariat of European Affairs, ‘CY National Strategy for EU Affairs’ (November 2021)

[2] ‘National Energy and Climate Plans (NECPs)’ <https://energy.ec.europa.eu/topics/energy-strategy/national-energy-and-climate-plans-necps_en>

[3] ‘Cyprus’ Integrated National Energy and Climate Plan’ (January 2020)

[4] Theodoros Zachariadis, ‘Monitoring EU Energy Efficiency First Principle and Policy Implementation’ (Odyssee Mure, November 2021)

[5] ‘Invest Cyprus – CEO Interviews 2018’

[6] ‘Commission Participates in Launch of EuroAsia Electricity Interconnector’

[7] EuroAsia, ‘Significant Benefits for Cyprus from Construction of the EuroAsia Interconnector | EuroAsia Interconnector’ (26 July 2023)

[8] ‘PRELIMINARY DRAFT UPDATE CONSOLIDATED NATIONAL PLAN OF CYPRUS ON ENERGY AND CLIMATE OF CYPRUS 2023’ (27 July 2023)

[9] Department of Environment, Ministry of Agriculture, and Rural Development and Environment, ‘Cyprus’ Long-Term Low GHG Emission Development’ (September 2022)

[10] ‘The Just Transition Mechanism’

[11] Aliénor Cameron and others, ‘A Just Transition Fund – How the EU Budget Can Best Assist in the Necessary Transition from Fossil Fuels to Sustainable Energy’ [2020] Policy Department for Budgetary Affairs Directorate General for Internal Policies of the Union