Beyond Black Swan – Arbitration and Dispute Resolution

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Since the Black Swan verdict(1), most international asset recovery lawyers in Cyprus hoped that the jurisdiction recognized by the BVI courts to grant interim orders and particularly asset freezing orders in cases where assets were located in the BVI jurisdiction would eventually “fly over” to Cyprus. It was hoped that such authority would be recognised/established through case law. After all, there was no reason in principle to suppose that the intention of the Cypriot legislature was to provide a “safe haven” for debt defaulters and to render “immune” any party who chose to hold property in Cyprus from claims, injunctions or executions. More than a few lawyers (including our firm) have tried to convince the trial judge that the time has come for the Cypriot courts to follow suit, albeit with mixed results.

These expectations came to a halt when the judgment in the Taruta case(2) issued by the Supreme Court. In the Taruta case, where a foreign claimant sought recognition, registration and enforcement of a foreign judgment against a foreign defendant, it was made clear that the mere existence of property in Cyprus was not sufficient to confer jurisdiction on the Cypriot courts, as jurisdiction could only be established if , if one of the instances of Article 21 of the Law on Courts of Justice (No. 14/60) has been proven. None of these cases existed as neither party was domiciled in Cyprus and there was no evidence/allegation that the cause of action arose in Cyprus and/or that the defendant carried on business in Cyprus.

This was an unsatisfactory result as it meant that the Cypriot courts could not exercise the power conferred on them by law or otherwise, simply because the law did not specify in which of the district courts a claim could be brought, and this led many to seek another route to change through amendments to relevant statutory provisions.

The recent radical legislative changes to Articles 21 and 32 of the Cyprus Judiciary Act 1960 (Law 14/60), which follow on from equally radical changes introduced by Article 25 of the new Rules of Civil Procedure, have effectively given Cyprus unprecedented powers. Short. They now have the power to issue any kind of injunction if there is property in Cyprus, even if neither party is domiciled in Cyprus, and they can do so outside of the action, even before the action (stand-alone injunctions) and also where an order is sought in respect of any action or arbitration brought or to be brought abroad. Even if there are no assets in Cyprus, such injunctions can be issued in all cases where the connection with Cyprus originates. Furthermore, the “problem” of territorial jurisdiction has been abolished in practice, since in all cases where no other provision provides otherwise, the claimant can exercise a remedy which the Cypriot courts are competent to resolve (by statute, common law, etc.), by that he is pursuing it in the District Court of Nicosia.

Based on some relevant English jurisprudence, it can be argued that jurisdiction to grant interim orders exists whenever the claimant can show that, because of some connection with Cyprus, there is some advantage to the claimant which the grant of the order may bring to the claimant at present or in the foreseeable future. It is clear that this disjunctive provision/requirement for remand to Cyprus is much broader and substantially expands the boundaries of the jurisdiction of the Cypriot courts to issue preliminary injunctions.

Not only does the Black Swan appear to have flown to Cyprus following the recent, much-anticipated legislative amendments expanding the territorial jurisdiction of the Cypriot courts to grant final and interim measures, but the Cypriot courts are now armed with the powers As a result, lawyers based in Cyprus and their clients have been given tools that are well beyond Black Swan’s jurisdiction.

The content of this article is intended to provide a general guide to the issue. Professional advice should be sought regarding your particular situation.

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