Background

Since gaining independence from the UK in 1960 Cyprus has transformed itself into a successful, modern international business centre. A Member State of the European Union (‘EU’) since 2004, it provides a gateway for investment into and from Europe and, due to its geographic location, it enjoys strong commercial ties with Eastern Europe, the Middle East, Asia and Africa. A consequence of this is that commercial disputes frequently involve international parties at corporate and individual level. Additionally, where main court or arbitration proceedings take place in another EU Member State or in a third country with which Cyprus has a bi-lateral agreement or has ratified an international agreement, it is common where a link exists, for the parties to look for provisional measures in Cyprus in support of the foreign court proceedings. The commercial disputes arising are varied and may be linked to issues such as negligence, fraud, contractual disputes, corporate disputes etc. The dominant means of settling large commercial disputes in Cyprus is via litigation. Until September 2023 there was often negotiation before and during court proceedings but no legal obligation on or expectation that the parties will engage in such discussions unless they have specifically agreed to do so. However, since September 2023, with the implementation of the new Civil Procedure Rules, the parties in a dispute are obliged to engage in discussions with the aim to amicably settle such disputes before proceeding to the pursue of a Claim before the Courts of Justice. Alternative dispute resolution methods (“ADR”) are a relatively new concept, other than in the construction and co-operative institutions sectors, but they do exist. Cyprus is primarily a common law jurisdiction with a justice system which is based on the adversarial model. This is a legacy from its period as a British colony. Much of Cypriot legislation is based on the UK laws in force at the time Cyprus ceased to be a colony. It is updated and amended regularly to ensure alignment with all relevant EU Guidelines and Directives. Where there is no applicable Cypriot legislation, English common law and equity are applicable, and English authorities have persuasive force. The courts are bound by the doctrine of precedent according to which where the common law has been interpreted by the Supreme Court of Cyprus in a particular way, the subordinate courts will be bound by that interpretation. This offers the parties to a commercial action the advantages of consistency, predictability and efficiency.

Problems

Despite the apparent attractiveness of the Cypriot legal system to national and international business it has, since the 2008 financial crash, been heavily criticized as an obstacle to the commercial growth of the island. It should be stressed that this criticism does not stem from a real or perceived lack of integrity or independence on the part of the judges. Rather, it is directed at the enormous backlog of cases pending before the courts and the average time it takes to get a final judicial decision in any given case. Whilst the courts are generally efficient in determining applications for interim relief, final adjudication in a case can commonly take between three and six years to obtain. A functional review of the justice system in 2017/18 supported by the EU Structural Reform Support Service (SRSS)[1] found that the length of court proceedings was among the longest in the EU, and the level of backlogs in litigious civil and commercial cases among the highest. Such delays run contrary to the democratic nature of the EU which, along with the Cypriot government, citizens, and businesses adopts the view that ‘justice delayed’ is ‘justice denied’. Working with the EU and its representative bodies Cyprus determined that problems in the justice system were primarily caused by:

A large increase in cases and appeals being brought before the courts as a consequence of events linked to the financial crash.
A lack of support resource within the system. The use of legal officers to support judges in the research and drafting of judgements was very limited.
An increase in the complexities of the cases brought before the courts.
An unrestricted right of appeal.
Reliance on a paper based system with very minimal use of ICT for internal or external communication resulting in significant inefficiencies and, inter alia, a management information deficit.

Next steps

The reaction of the Cyprus government to the findings of the SSRS was twofold. Firstly It determined that there was an urgent need to begin addressing the backlog of existing cases. Secondly, it realised that the entire justice system was in need of radical reform.

Case Backlog

To help facilitate a reduction in the backlog the first step taken was a decision to increase the overall capacity of the justice system by increasing the number of judges. The House of Representatives passed a 2019 budget which included the creation of 32 new judges. Following on from this a pilot project was introduced in the Paphos District Court. The project involved the assignment of seven experienced judges to a ‘task force’ dedicated to reducing the case backlog. The theory was that the experience level of the judges would allow them to assess the cases with relative speed. The pilot was deemed to be beneficial and was expanded in September 2021 to cover all districts. In addition, an amendment was made to Civil Procedure Rules which established a ‘small track’ procedure. This allowed for the introduction of a simplified process for claims under €3,000. This increased the case management options available to judges by allowing them to give summary judgments on the lower value cases and thereby accelerating the speed with which they could be dealt with.

Reform of Justice System

It was clear from a series of EU backed reviews that a wholesale redesign of the system was required. This required detailed planning and necessitated the involvement and ‘buy in’ of all stakeholders in the system. Consequently, and with the support of the European Commission for Democracy through Law, a period of comprehensive consultation and review took place with the cooperation of all stakeholders. The result of this exercise was the production, in 2021 of a coherent plan (the Plan) to reform the Cypriot justice system with the object of building a modern, accessible and efficient system. The key pillars of the plan are:

New Civil Procedures Rules
Training for judges
Reform of the court structure
Introduction of technology

In its entirety the plan represents a seismic change for the Cypriot justice system. The plan is now in the process of implementation and many parts of it feature in the post covid ‘Recovery and Resilience Programme of Cyprus’ (the ‘RRP’).

New Civil Procedures Rules

The Civil Procedures Rules (the ‘CPR’) which were in use until the end of August 2023, were substantially in the form of the Civil Procedures Rules that operated in England and Wales in 1958. The revision of the CPR was one of the most significant reforms included in the Plan. The project was undertaken by a team of international experts who worked in collaboration with a Rules Committee established by the Supreme Court. A revised set of rules drafted by them was then subject to consultation with the Cyprus Bar Association and the Judge’s Association. Following this, on 19 May 2021 the new CPR were approved by the Supreme Court and came into force on 1st of September 2023. This reform is expected to have a material impact on the efficiency of the courts, as it is structured in such a way that many disputes could be resolved at a pre-trial stage and unsubstantiated legal procedures are discouraged. In addition, firm compliance with the new CPR is expected to achieve the granting of justice is a much faster pace and without the delay currently experienced, with significant reduction of legal costs.

Training for Judges

Obviously, the introduction of the new CPR and the adoption of new technologies will only be successful if judges are adequately trained in their use. Consequently, following the enactment of the relevant law 14 August 2020 a training school for judges was established. This formalises training for the new justice system and will also support ongoing training of judges. It is envisaged that, in line with many other professions, judges are now required to engage in continual education for their period of tenure. This move to a higher level of professionalism follows on from a decision taken by the Supreme Court in 2019 to publish the criteria for the recruitment of judges and for the promotion of judges. Said criteria were set following a study undertaken by the DG Reform of the European commission. Within the framework of the RRP a commitment was made to ensure that at least 110 judges had completed annual training on the new CPR and various other agreed topics and skill by quarter 4 of 2025. According to the Ministry of Justice and Public Order this target had already been surpassed by 31 January 2023.

Reform of Court Structure

Prior to the proposed reforms, the Supreme Court sat at the apex of the court system in Cyprus. The Supreme Court consisted of 13 members, and it exercised both original and appellate civil and criminal jurisdictions. It was vested with authority as:

Supreme Constitutional Court.
Supreme Administrative Court.
Admiralty Court.
Appellate Court.
A court with exclusive jurisdiction to hear and determine petitions concerning the interpretation and application of the electoral laws.
A court with exclusive jurisdiction to issue prerogative writs (e.g. habeas corpus, mandamus, prohibition, quo warranto, and certiorari).

No special leave to file an appeal was required. The Supreme Court, in its appellate jurisdiction, was not bound by any determination on a question of fact made by the trial court, and it had power to review all the evidence, draw its own inferences, hear or receive further evidence and give any judgment or make any order which the circumstances of the case may have justified, including an order for retrial. The wide jurisdiction of the Supreme Court and the increasingly specialized knowledge required to deal with many of the cases before it created perfect conditions to foster a bottleneck in the justice system. Changes were required to disperse the workload and ensure that the more complex cases were dealt with by judges with the appropriate skills and expertise. On 7 July 2022, the House of Representatives voted (the 22nd amendment) for:

The separation of the Supreme Court into two Supreme Courts: one Supreme Constitutional Court with 9 judges and one Supreme Court with up to 7 judges.
The creation of a new Second Instance Court, i.e. the Court of Appeal (Appellate Court). The Appellate Court will hear appeals from the First Instance Courts (administrative, civil and criminal) and will be comprised of up to 16 judges. The new Supreme Court will act as a third level appellate court hearing cases referred to it by the Appellate Court.

Additionally, on 12 May 2022, the ‘Establishment and Operation of Commercial Court and Admiralty Court Act 2022’ (‘the Act’) was passed. The Act establishes a dedicated Commercial Court which will have jurisdiction to hear and determine at first instance all commercial disputes where the amount or value in dispute is at least €2,000,000. Excluded will be claims or counterclaims in personal injury cases and claims, counterclaims, or registration of an arbitral award in relation to banking or financial matters. The Act also establishes an Admiralty Court which, once operational, will have jurisdiction to hear Admiralty cases as defined in the Act. Given the rising importance of Cyprus as an international business and shipping hub, the introduction of these dedicated courts should significantly decrease the pressure on the Supreme Court. Also significant is that, prior to the passing of the Act, the House of Representatives approved an amendment of Article 3 of the Constitution of the Republic of Cyprus to allow the use of English in both courts when to do so would be in the interests of justice. Greek will remain the official court language but a Judge of either court may, at the request of one of the parties, allow the use of English, including for the submission of documents and evidence. Since English is more widely spoken than Greek this should again increase efficiency by removing the need to always involve translators and certified translations of documentary evidence. Originally it was intended that the new court structure should become operational on 1 January 2023. This deadline was later extended to 1 July 2023 to allow more time for the recruitment and training of additional judges and court staff. Whilst targets set out in the RRP have been exceeded the Supreme Court, the Justice Minister and the Attorney General agreed that fully staffing the new courts on the original deadline would have resulted in understaffing of the lower courts.

Introduction of Technology

Widespread introduction of technology into the justice system is essential if the system is to become and remain efficient and effective. The failure to engage with technology led to a catastrophic situation during the Covid 19 lockdowns where the courts were forced to close because they lacked both equipment and expertise to function remotely. The Plan therefore incorporated the introduction of an i-justice platform as an interim step towards full engagement in the EU wide e-justice project. The platform was launched on 21 July 2021 as a pilot version with the objective of streamlining legal processes. The pilot was judged to be a success and use of the platform for commercial cases became obligatory from 1 February 2022. The full implementation of the system was preceded by thorough training and a sufficient period to allow users to build familiarity with the system. Additionally, the Cyprus Bar Association (CBA), organized training points in the local bar associations, so that any difficulties of a technical nature could be resolved immediately and effectively. The I-Justice platform aimed to bring together litigants, advocates, law firms, court staff and clerks, judges, the police and relevant governmental authorities so that justice is administered in an effective and practical digital environment. The platform allows lawyers to:

1. Submit claims remotely.
2. Access electronic case files
3. Pay fees and commissions remotely.
4. Access up to date information about the progress of ongoing cases.
5. Attend tcourt appearances remotely, through the communication portal.

Supplemental to the above, on 15 September 2021 the Supreme Court issued a court regulation, the so-called ‘e-Justice Procedural Regulation’. This regulates the handling of cases through electronic communication (emails) with the Court and allows but does not compel judges to handle cases without any physical presence. Use of the i-justice platform greatly simplified and sped up the operation of the court system in general with specific advantages accruing to those seeking to settle commercial disputes. It has eased the transition to the ‘e-justice’ platform which is expected to be implemented before the end of 2023. Further modernization will involve the introduction of Digital Audio Recording of minutes to the courtroom. This is currently being piloted and should be fully implemented by the first quarter of 2025 and again lead to time savings and greater efficiency.

Mission accomplished?

There can be no doubt that important progress has been made in the march to deliver a new justice system that will be fit for future generations. The President of the Supreme Court and the President of the House of Representatives have both publicly stated that they expect the backlog of cases to be cleared within a 5-year period[2]. Within the RRP framework a commitment has been given by the Supreme Court to meet specific targets in the reduction of cases and appeals which have been pending for more than two years. An ex-President of the Supreme Court has been appointed to co-ordinate and monitor progress. Some protests by members of the Cyprus were recorded at the introduction of the possibility of summary judgements of small claims but these have not been sustained. The passage of the legislation introducing a new court structure was a significant milestone. Whilst some disappointment has been expressed at the delay in the implementation of the new courts, criticism has been muted. The general perception appears to be that it is better to ensure that all necessary resources are in place from the outset than to risk creating new problems to resolve. It is, however, important for the economic future of Cyprus that the delay does not become a lengthy one. The introduction of formal training requirements for judges can only prove to be beneficial for all stakeholders in the system. The same is true for the use of technology which finally allows the courts to move out of the 20th century. January 2023 saw the delivery of a report following completion of a project related to the establishment of a modern, efficient Court Service to support the management and administration of the courts. It produced recommendations on re-engineering of procedures, organisational and governance structures and staffing requirements. These recommendations are now under consideration by the Supreme Court and the relevant Ministries and effectively form the final part of the ‘jigsaw’. Overall, provided momentum can be maintained, the signs are favourable for the creation of a justice system which is fit for Cyprus in the 21st century and which will be capable of adapting to future requirements. Given that the EU has stressed that lack of reform is deterring investment in the country it seems unlikely that the desire for change will dissipate any time soon.

Footnotes

[1] http://www.supremecourt.gov.cy/Judicial/SC.nsf/All/EBD26B775C1A627DC225843F0041884A/$file/Functional%20Review%20of%20Courts%20System%20of%20Cyprus%20(IPA%20Ireland)%20-%20Final%20Report%20March%202018.pdf [2] https://knews.kathimerini.com.cy/en/news/the-backlog-in-court-cases-will-be-alleviated-in-4-to-5-years https://knews.kathimerini.com.cy/en/news/the-backlog-in-court-cases-will-be-alleviated-in-4-to-5-years

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