Georgiades & Mylonas

Land Swap Precedent - The Reality

It has been noted there a potential problem has arisen between Cyprus and the European Court of Human Rights over the land swap deal between a Greek and Turkish Cypriot.

The issue relates to whether the European Court of Human Rights (ECHR) will accept the deal made through the controversial property commission in the north as an adequate domestic remedy. If this happens it is likely that a large number of applications by Greek Cypriot refugees would begin to be sent to the property commission for a solution.

A further issue that has surfaced as a result concerns the Guardian of Turkish Cypriot Property, which is part of the Cyprus government. It is the only authority which is legally allowed to return land which is claimed back by Turkish Cypriots though the courts.

If the ECHR allows the land swap it gives over legitimacy to the property commission and also potentially puts Guardianship on the spot as it would mean that a Greek Cypriot refugee would be claiming Turkish Cypriot land which had not been legally returned by the Guardian.

The legal consequences of a decision by the Cyprus government not to accept the decision to hand over the land under the jurisdiction of the guardianship could be a clash between Cyprus and the European Court of Human Rights and the European Council.

The situation is not just a legal but also political. The political parties have expressed their concern over the developments, believing that it could bring about the end of any possibility of justice for refugees. As this is a current topic which is the center of discussion and debate further updates will be available as the discussion and progress develops.

Loophole in Legislation - 90% of property contracts not revealing true contract price:

The House Legal Affairs Committee has authorized the preparation of a new Bill by the Legal Services and Land Registry Office. The Bill is believed to allow for the improvement of the procedure of land purchases.

It has been suggested that loopholes exist in the legislation regarding the preparation of contracts, their validity and the prices that are represented on the actual contract.

It is thought that up to 90% of contracts do not show the real sale price of the property; this has serious implications for public expense. If the land ever needs to be expropriated it will be the price on the contract that is used to determine the amount of compensation.

It has become apparent that some members of the public have noticed the weakness in the legislation and are using it to sell the same land twice to the severe detriment of the purchaser; this occurs when someone has sold his land for a fixed price and then realized that the value of the land has risen and so proceeds to sell the same property on for more whilst at the same time compensating the first buyer.

This practice amounts to deception at the expense of the buyer, it is a dishonest and damaging practice and therefore it is essential that the Land Registry, who have noted the problem, commence action to put measures in place to avert further similar acts.

Further updates will be added as more information on the progress of the Bill and its consequences becomes available.

Forum Non Conveniens: 20m – euro claim Cypriot company vs. Reuters

It has been held that choice of jurisdiction and law clauses can not present an obstacle to protecting commercial representatives which exercise their activity within Member States; this protection is provided by a European Directive that has now been incorporated into Cypriot legislation.

The President of Nicosia District Court dismissed an application by Reuters’ which asked for the legal action filed against them by Cypriot company, Farmanet Holdings Ltd, in the Cypriot courts to be dismissed, alleging that it was in fact the American courts which had jurisdiction to try the dispute.

Reuters attempted to suspend the proceedings which had commenced in Cyprus and refer them to New York, by relying on a jurisdiction clause. The clause contained an agreement by the parties that in the event of any dispute the courts of New York would have the jurisdiction to try the matter.

Farmanet, via its lawyers Georgiades & Mylonas, filed an objection claiming that the Cyprus courts were the most appropriate place to try the dispute. The burden of proof lay with Farmanet as the defendant. The submissions put forward by Yiannos Georgiades referred to a case that had come before the European Court which contained similar circumstances and characteristics.

The court used the principles laid down in The Eleftheria (The All England Law Reports 1969 Vol 2 pp 641) and the principle of forum non conveniens. Regard must be had in particular, but without prejudice to; 1) the country in which evidence is situated or more readily available and the effect of that on the relative convenience and expense of trial as between the two jurisdictions; 2) whether the law of the foreign courts applies and the differences between the laws of the two jurisdictions; 3) the connection of the parties to the country and how close the connection is; 4) whether the defendants genuinely desire the trial in the jurisdiction or whether they are merely seeking procedural advantages and 5) whether the plaintiff would be unfairly prejudiced by having to sue in the foreign country. The court was satisfied that in this case the five principles above were relevant and present.

As a result the Cypriot court held, 8 November 2006, that it had been proven that the plaintiffs had adequate reasons which justified the continuation of the proceedings in Cyprus. The existence of the jurisdiction clause in the agreement did not weaken the reasons.

The 'Rule of Specialty' In Action:

On the 16 March 2007 Yiannos Georgiades of Georgiades & Mylonas successfully acted for a 52 year old businessman man who was then acquitted in a Nicosia Court. The defendant was traced in Germany and after the issue of a European arrest warrant by the Cyprus authorities was arrested and handed over to the Cypriot police. It was deemed that he had been wrongfully extradited by the authorities in Germany. The man was charged with seven counts of forgery and theft to an amount of over 120,000.

Georgiades told the judge that our client should be acquitted because of the improper way in which he was arrested then extradited by German police to Cypriot authorities. Georgiades successfully argued that there was a breach of the ‘Rule of Specialty’ and also because our client had been located 21 days after the European arrest warrant was issued.

The ‘Rule of Specialty’ is a principle that is reflected in extradition treaties; under the principle the requesting state may only prosecute the defendant for crime(s) that the warrant was granted for and not others. However, in the case in question the charges stated in the arrest warrant were substantially different from the charges on indictment. The warrant also stated that the warrant would be cancelled if the fugitive was not located within 10 days.

In this case it is apparent that the manner in which the defendant was collected and transferred to the Republic had broken the legal chain by being in breach of the rules, as had the delay in locating the fugitive. It therefore follows that the trial against the defendant was based upon his illegal transfer to the Republic and incorrect use of the rules.

The case serves to show the courts to be safeguarding the law and the rights of individuals; it highlights the importance of following the correct procedures.

The link below will automatically take you to the full decision of the cited case, please note this copy is in the Greek language.

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Central Bank of Cyprus Defend Property Margin Action

The decision of the Cyprus Central Bank to increase the margin requirement on loans for property purchases in Cyprus has been defended by the Governor of the Central Bank, Athanasios Orphanides. Bank lending in August 2007 had surged by 25% compared to August 2006. The higher margin requirement is said to be an attempt to curtail the sharp increase in bank lending and to improve the risk profile of the bank loan portfolios. The mix of the solid growth of the economy, a high level of foreigners seeking to purchase property in Cyprus and the EU membership has lowered the country risk of Cyprus but has contributed to the level of higher prices. To date it is too early to judge whether the changes have had the desired effect or to comment in depth on the actual effects on the economy and whether first time buyers will in fact be priced out of the market. However, concerns that the measures were too harsh against foreigners have been dismissed by Orphanides.

Property Finance - Guidelines of the Central Bank of Cyprus

According to the guidelines of the Central Bank of Cyprus the lending ceiling for the purchase of a property by a non permanent resident of Cyprus is set up to 60% of the sale value of the property. Purchasers of property are now required to contribute 40% of the market value of the property, but we believe that in practice upon a specific request from the purchaser, along with the relevant securities, this percentage may be lower. The loan repayment period will be up to 25 years, however this could be extended to 30 years depending on the circumstances.  First time buyers will not be affected by the credit squeeze and will still be able to borrow up to 80% to buy the property. The Association President Lakis Tofarides has stated that property purchases by Cypriots and first time buyers should remains at 80% as a method of safeguarding foreign purchase incentives.

This announcement has raised strong reactions amongst developers who have expressed concerns over its effect on tourism and the economy of Cyprus. If we become aware of further developments with regards this matter we will leave a further update.

Reviving our Weblog

Today we decided to revive our weblog which has been hibernating for quite some time. We have been motivated to do so by a new comer in our team Rebecca Howarth who will be responsible for upgrading our academic sight of the firm so that we can offer our clients and colleagues more knowledge and keep them updated with recent legal developments. We also take this opportunity to welcome Rebecca in our firm and wish her all the best for her career here in Cyprus.