Ranked as the 3rd largest fleet in the EU, Cyprus flag is expected to benefit from a number of recent legislative developments which are of great interest to the shipping community.
The statutory developments discussed in this short update clearly point that recently adopted legislation aims to align Cyprus law with current trends concerning the administration of justice, including addressing specialised or high value cases; at the same time the developments in question underpin the shipping orientation and ambition of the island as a competitive flag and an international business centre.
In a nutshell:
In May 2022, the House of Representatives of the Republic of Cyprus adopted Law 69(I)/2022 which set forth two new specialist courts with an international vocation for technical cases, i.e. the Commercial Court and the Admiralty Court.
The Law is titled Law on the Establishment and Operation of the Commercial Court and the Admiralty Court of 2022 (Ο περί της Ίδρυσης και Λειτουργίας Εμπορικού Δικαστηρίου και Ναυτοδικείου Νόμος του 2022). At the time of writing this update, the new courts were under development.
The new courts should normally contribute to alleviating the workload of District Courts. It is noteworthy that following an amendment of the Constitution of the Republic of Cyprus, the new specialist courts under discussion will have the possibility, upon conditions, to use the English language, including for the conduct of court proceedings and the filing of documents.
Additional developments stem from the adoption in October 2022 of Law 161(Ι)/2022 which set forth the Shipping Limited Liability Company (SLLC).
The Shipping Limited Liability Company Law of 2022 (Ο περί Ναυτιλιακής Εταιρείας Περιορισμένης Ευθύνης Νόμος (Ν.Ε.Π.Ε.) του 2022) states the sole purpose of the new corporate entity, which is the ownership and operation of a Cyprus ship. It is clear that the ambition of Law 161(I)/2022, which has not entered into force yet, is to contribute to the creation of a one-stop-shipping-frame-work for shipowning companies using the Cyprus flag.
The Law is a lengthy instrument with 115 articles. Secondary legislation is required under Section 114 in view of its implementation.
This aspect, which is critical for the entry into force and the implementation of the Law at large, is currently pending.
In greater detail:
-Law 69(I)/2022 -Specialist Commercial Court and Admiralty Court
According to the Preamble of Law 69(I)/2022, the establishment of the new specialist courts that will adjudicate commercial and admiralty cases at first instance was considered necessary in view of expediting dispute resolution.
The Law also states in its introductory part that it seeks to ensure that justice is administered more effectively. The enhancement of competitiveness in Cyprus as a centre of qualitative services attracting foreign investments, thus contributing to the long-term economic development of the Republic of Cyprus, are additional goals. It is interesting to take note of the rationale of the legislator in the introductory part of the statute.
The reasoning in detail underpinning the adoption of laws is commonly found in the explanatory notes in the legislative process in Cyprus rather than in the statutes. This may be indicative of the importance attributed by the legislator to the reasons which have prompted the creation of the new courts. That said, the Commercial court will be competent to hear and determine any commercial dispute at first instance provided that the amount at dispute or the value of the dispute exceeds two million Euros.
However, there are disputes that the court can examine regardless of the amount or value involved (competition law disputes, intellectual property law disputes, arbitration related matters). Territorial jurisdiction of the Commercial Court is set forth in Section 12.
The appetite of the regulator to see Cyprus becoming a dispute resolution centre via law and jurisdiction clauses in private contracts referring to Cypriot courts, is obvious.
The Admiralty Court is regulated in Part III of the Law (14 sections). The Admiralty Court will be competent to examine at first instance any admiralty case («[…] επί πάσης ναυτικής υπόθεσης»). Admiralty cases are broadly defined for the purposes of the Law in Section 2.
Regardless of the amount involved, claims range, for example, from those concerning the possession and ownership of the vessel to claims in relation to vessel towing or to the mortgage or lien over a vessel. The influence of English admiralty law can be seen in numerous provisions and comes as no surprise.
-Law 161(Ι)/2022 – Shipping Lim- ited Liability Company (SLLC)
As noted in the relevant circular of the Cypriot maritime administration, “The enactment of Law 161(I)/2022 constitutes the implementation of action no. 14 of the new Long-Term National Strategy for Cyprus Shipping “Sea Change 2030”, adopted in October 2021 by the Council of Ministers and aims to simplify the procedures and operating regime of Cypriot shipping companies that own Cyprus ships” (Circular 31/2022, 21.12.2022).
Law 161(I)/2022 regulates registration and incorporation of the new corporate entity. It has been influenced by the provisions of the Cyprus Companies Law (Cap. 113), which has been the legal framework of reference for shipping companies. However, there are noteworthy differences between the Companies Law and the SLLC in view of simplifying certain aspects.
Furthermore, under the new Law, the Cyprus Shipping Deputy Ministry, which is also the Registrar of Cyprus flagged ships, will become the competent authority for the registration of SLLC.
It is worth mentioning, that shipping companies owning Cyprus ships already registered as limited liability companies in Cyprus will have the right, upon conditions, to request transfer to the new SLLC Register (Section 104 of the Law).
A last highlight is that the Law regulates electronic signatures in relation to documentation, which can be seen as a step towards modernisation and simplification.
Concluding remarks
The first expectation is to see the above-mentioned specialist courts becoming fully operational, and serving smoothly the vocation for which they were designed.
The adoption of secondary legislation (regulations) concerning SLLC is also a matter which deserves close attention.
The ultimate objective is to see both instruments contributing to the modernization of the Cypriot legal framework which governs the flag of the 11th largest merchant fleet globally while surrounding the activities of a vibrant shipping business centre.
Source: Maritime Intelligence, by Dr. Iliana Christodoulou-Varotsi | Senior Legal Consultant & Lead Trainer
