Enforcement of trade finance instruments in Cyprus and abroad. Costas Stamatiou

Transcription

1 Enforcement of trade finance instruments in Cyprus and abroad Costas Stamatiou

2 Andreas Neocleous & Co LLC Cyprus s largest and bestregarded law firm 18 partners, more than 100 other fee-earners Offices in Cyprus, Belgium, Czech Republic, Hungary, Russia and Ukraine (and soon in China and France) Full-service firm Focus on quality international work Building for the future

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4 Independent ratings of Cyprus law firms Legal Andreas Neocleous & Co LLC is the only Cyprus firm (and one of only a handful of firms worldwide) to be listed in the top tier in every practice area. PLC Which Lawyer? - Andreas Neocleous & Co LLC heads the Cyprus rankings, as it has done for several years. Chambers Europe - Andreas Neocleous & Co LLC is ranked in the top tier in four practice areas, twice as many as its nearest competitors. IFLR Andreas Neocleous & Co LLC is ranked in the top tier for the seventh successive year.

5 Our environment - Cyprus An island at the crossroads of Europe, Asia and Africa. A stable and transparent political and legal system. A well-educated and cosmopolitan population. A member of the EU since 2004 and the Eurozone since A modern, business-friendly tax system and legal regime based on common law.

6 Finance instruments A finance instrument may be widely defined as any document that has a monetary value including loan agreements, bills of exchange, bonds and the like.

7 Proving the claim - the most appropriate jurisdiction As to the main proceedings (the substantive proceedings): In general, the presence of a defendant within Cyprus (the anchor defendant) or the occurrence of the cause of action within Cyprus will give Cyprus courts jurisdiction to try a matter. When there is a dispute over jurisdiction as between EU Member States, EC Regulation 44/2001, which provides common rules on jurisdictional issues as well as on recognition and enforcement of judgements, applies. As between Cyprus and a non EU country, the forum non conveniens doctrine applies and the courts will determine whether Cyprus is the appropriate or the most appropriate forum to try the action based upon examination of a series of factors. Contractually agreed jurisdiction/arbitration clauses: courts in Cyprus will prima facie respect a jurisdiction/arbitration clause agreed by the parties. In the case of George Petrou v Zim Navigation where the plaintiff, contrary to what was contractually agreed, purported to file an action in Cyprus, it was held that the plaintiff failed to show good and strong reason to overcome the prima facie rule that the parties must keep their agreement. This burden becomes heavier if none of the defendants are in Cyprus.

8 Provisional measures - the most appropriate jurisdiction As to provisional measures (interim orders): [15] Where a defendant and his assets are located outside the jurisdiction of the court seised of the substantive proceedings, it is in my opinion most appropriate that protective measures should be granted by those courts best able to make their orders effective. In relation to orders taking direct effect against the assets, this means the courts of the state where the assets are located; and in relation to orders in personam, including orders for disclosure, this means the courts of the state where the person enjoined resides. (see Credit Suisse Fides Trust SA v Sergio Cuoghi [1998] I.L.Pr.41)

9 Main remedies available Damages are awarded to compensate for losses suffered. Restitution is a common law principle which provides remedies in respect of unjust enrichment and money had and received. Specific performance is a discretionary remedy which may be granted where damages would not be an adequate remedy. Constructive trust: In addition to the remedies described above, by operation of the law of equity an asset may be deemed to be held on constructive trust for the victim of fraud where it would be unjust for the (fraudster) holder of the asset to retain it for his own benefit due to it having been obtained by means of a fraudulent or otherwise unacceptable abuse of the law. Injunctive relief (provisional measures) is a discretionary remedy which is extremely useful for the freezing, tracing and recovery of assets. It may be granted "in all cases in which it appears to the court just or convenient so to do" provided the following conditions are satisfied:- (a) a serious question arises to be tried at the main trial; (b) there appears to be a probability that the plaintiff is entitled to relief and, lastly, (c) it shall be difficult or impossible to do complete justice at a later stage without granting an interlocutory injunction." It is possible to apply to the court for interim measures without notice to the respondent by an ex-parte application. The applicant is under a duty to make full and frank disclosure to the court of all material facts. The court will approve an ex-parte application provided it is satisfied that there is an element of extreme urgency.

10 Interim orders in aid of domestic court or arbitration proceedings The Courts of Justice Law of 1960 is the main legal basis upon which Cyprus courts may issue provisional measures in the context of a domestic action or in aid of local arbitration proceedings.

11 Interim orders in aid of international arbitration proceedings Section 9 of the International Commercial Arbitration Law, (Law 101 of 1987) forms the legal basis upon which courts may grant interim orders in aid of international commercial arbitration. Section 9 of the International Commercial Arbitration Law is identical in effect to Article 9 of the UNCITRAL Model Law, which provides as follows: It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.

12 Interim orders in aid of court actions and arbitration proceedings in EU Member States Article 31 of EC Regulation 44/2001 states: Application may be made to the courts of a Member State for such provisional, including protective, measures as may be available under the law of that State, even if, under this Regulation, the courts of another Member State have jurisdiction as to the substance of the matter.

13 Interim orders in aid of legal proceedings in non- EU countries There are no specific legal bases similar to article 9 of the International Commercial Arbitration Law 101/97 or Article 31 of EC Regulation 44/2001 upon which interim orders in aid of legal actions in countries outside the European Union may be requested. However, this should not be interpreted as meaning that Cyprus courts cannot issue interim orders in such instances should they consider it appropriate under the circumstances. In this respect, reference may be made to the English case of Credit Suisse Fides Trust SA v Sergio Cuoghi [1998] I.L.Pr.41: [17] In other areas of law, such as cross-border insolvency, commercial necessity has encouraged national courts to provide assistance to each other without waiting for such co-operation to be sanctioned by international convention. International fraud requires a similar response. It is becoming widely accepted that comity between the courts of different countries requires mutual respect for the territorial integrity of each other's jurisdiction, but that this should not inhibit a court in one jurisdiction from rendering whatever assistance it properly can to a court in another in respect of assets located or persons resident within the territory of the former.

14 Forms of injunctive relief most commonly encountered The armoury of the Cyprus courts includes the discretionary power to issue the following types of provisional measures: freezing orders to prevent further alienation of assets; Norwich Pharmacal disclosure orders to identify wrongdoers and current location of alienated assets, if unknown; gagging orders to prohibit the tipping-off of so-far unidentified wrongdoers and co-conspirators, hence limiting the risks of further alienation of assets; and search orders to prevent the destruction of evidence.

15 Third parties The Supreme Court of Cyprus has confirmed the power of courts in Cyprus to issue provisional measures against co-defendants against whom no direct cause of action lies, provided that the claim for the relevant order is ancillary and incidental to the claimant's cause of action against that primary codefendant. The rationale behind the availability of disclosure orders against third parties derives from the leading English decision of Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133: [The authorities] seem to me to point to a very reasonable principle that if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers. I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did. It may be that if this causes him expense the person seeking the information ought to reimburse him. But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration. I am the more inclined to reach this result because it is clear that if the person mixed up in the affair has to any extent incurred any liability to the person wronged, he must make full disclosure even though the person wronged has no intention of proceeding against him. It would I think be quite illogical to make his obligation to disclose the identity of the real offenders depend on whether or not he has himself incurred some minor liability ".

16 Worldwide reach of provisional measures The Supreme Court of Cyprus has confirmed the power of Cyprus courts to issue asset freezing orders with worldwide effect. Furthermore, Regulation 44/2001 has introduced legal bases under which Cyprus courts may issue provisional measures in support of court and arbitration proceedings in another European Member State and viceversa..

17 Necessary conditions for interim orders Cyprus courts have the discretionary power to issue interim orders where it is considered just to do so provided that all three of the following conditions are satisfied: a serious question arises to be determined at the main trial of the action; there appears to be a probability that the plaintiff is entitled to relief; and, it will be difficult or impossible to award complete justice at a later stage without granting the requested interlocutory injunction.

18 Necessary conditions for interim orders The first condition, namely the existence of a serious question to be determined at the main trial of the action, has been interpreted "as not including anything further than demonstrating an arguable case based on the pleadings that were submitted". Turning to the second precondition (which to an extent overlaps with the first), namely, that there appears to be "a probability" that the plaintiff is entitled to relief, " it has been explained as referring to the existence of something more than a simple possibility of success but something less than the "balance of probabilities" which is the measure and degree of proof that is required in civil cases". The third precondition, namely that it would be difficult or impossible to award justice at a later stage without the issuance of the requested order or orders, should be examined in the light of the answer to the question whether, on the basis of the facts of the case, the award of damages at the end of the trial would be sufficient remedy. Assuming the three preconditions are satisfied, the court must go on to consider whether on the balance of convenience it is fair and just to issue or maintain the interlocutory injunction.

19 Recognition and enforcement of foreign judgments Recognition of foreign decisions may be accomplished under EU Regulations such as Regulation 44/2001, under statutes, relevant bilateral or multilateral agreements where applicable, or by common law actions. Article 32 of Regulation 44/2001 defines a judgment as: any judgment given by a court or tribunal of an EU Member State, whatever the judgment may be called, including a decree, order, decision or writ of execution, as well as the determination of costs or expenses by an officer of the court. Omitting the reference to EU Member States, this is a reasonable approximation of the definition used throughout Cyprus law.

20 EU Regulation 44/2001: Every judgment entitled to recognition and enforceable in the EU Member State in which it was given (eg England), may, in principle, on application be declared enforceable in another EU Member State (eg Cyprus) by means of the simple procedure specified in EC Regulation 44/2001. A party seeking recognition or applying for a declaration of enforceability of a judgment is required to produce a certified copy of the judgment and a certificate in the form specified in Article 54 issued by the designated authority in the Member State in which the judgment originated. Regulation 44/2001 does not apply to certain types of claim including arbitration awards, in order to avoid conflict with existing international conventions on arbitration, particularly the New York Convention of 1958 (ratified by Cyprus via Law 84 of 1979).

21 Enforcement under common law A final and conclusive judgment originating in a country not covered by a relevant multilateral or bilateral agreement (eg Kazakhstan) may be enforced by bringing a common law action. At common law a foreign judgment is recognised when the Cyprus court concludes that a particular claim has already been adjudicated and determined once and for all by the foreign court (res judicata). A judgment creditor can enforce a foreign judgment in Cyprus at common law by bringing a fresh action. As soon as he files a writ of summons (usually specially endorsed), he can apply by summons for summary judgment under Order 18 of the Civil Procedure Rules on the ground that the defendant has no defence to the claim. The judgment must be final and conclusive and for a fixed sum of money. The merits of the judgment are not reviewable. "Final" has been interpreted to mean that the judgment cannot be reopened in the court of origin, even though an appeal may be pending against it, and "conclusive", that the judgment represents the court s settled conclusion on the merits of the case. If the application is successful, the defendant will not be allowed to defend. Alternatively, the judgment creditor, instead of filing an action on the foreign judgment, can file an action relying on the facts which created the cause of action in which the foreign judgment was given. However, the Supreme Court has ruled that if the judgment is capable of registration (see statute section below) it cannot be enforced by a common law action on the judgment.

22 Grounds on which recognition at common law may be challenged public policy; the foreign judgment was obtained by fraud; incompatibility with natural justice and due process; the foreign judgment is not final and conclusive; lack of jurisdiction of the issuing court; and inconsistency of the foreign judgment with a prior judgment.

23 Recognition and enforcement under statute The substantive grounds on which registration of a foreign judgment may be made or set aside closely reflect the common law in Cyprus. A foreign judgment can be enforceable by direct registration, under the provisions of an applicable statute. For example, the registration of judgments obtained in the UK is governed by the Foreign Judgments (Reciprocal Enforcement) Law 1935 and the rules made under the Law by an Order in Council. The Law is modelled on the corresponding UK measures, the Foreign Judgments (Reciprocal Enforcement) Law Rules and the Maintenance Orders (Facilities for Enforcement) Law 1921.

24 Recognition and enforcement under international agreements Cyprus is also bound by bilateral treaties relating to the recognition and enforcement of foreign judgments with various countries including Ukraine and Russia and is a signatory to various multilateral conventions relating to the recognition and enforcement of foreign judgments, including: the Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters 1971 and Supplementary Protocol thereto; the European Convention on the Recognition and Enforcement of Decisions concerning Custody of Children and/or Restoration of Custody of Children 1980 the European Convention on the Recognition and Enforcement of Certain International Aspects of Bankruptcy In order for a judgment to be registered the following requirements must be satisfied: the judgment is final and conclusive; there is a sum of money payable under it which is not related to tax claims or similar charges, or in respect of a fine or penalty; the application is made within six years of the judgment having been given or an appeal adjudicated; the judgment is unsatisfied, at least in part; and the judgment is capable of execution in the original foreign court.

25 Cyprus Ukraine Bilateral Agreement of 2004 on Cooperation in Civil Matters Article 20 - Scope: Each Contracting Party shall recognize and enforce in its territory the following decisions given in the territory of the other Contracting Party: decisions of courts of justice in civil matters, including family matters, and amicable settlements approved by courts in civil matters. decisions of Courts of Justice in criminal matters concerning damages.

26 Article 21 - Conditions of recognition and enforcement A decision referred to in Article 20 shall be recognized and enforced provided that: it is final and enforceable by means of execution under the law of the Contracting Party in the territory of which it was given; in the case of a decision given in the absence of the defendant, he was duly notified on the institution of proceedings and the place, date and time of the hearing in accordance with the law of the Contracting Party in the territory of which the decision was given; no decision which became final was earlier given on the same subject matter between the same parties by a court of the requested Contracting Party; proceedings between the same parties on the same subject-matter were not instituted before a court of the requested Contracting Party before the proceedings in which the decision in question was given; the recognition or enforcement of the decision would not be contrary to the public order of the requested Contracting Party; The decision or its effects would not be contrary to the fundamental principles and any law of the requested Contracting Party; the decision is not given by a court without jurisdiction according to the provisions of Article 17; the recognition or enforcement of the decision would not be contrary to the public order of the requested Contracting Party.

27 Article 22 - Application for recognition and enforcement The application for the recognition and/or enforcement of a decision may be submitted by a party directly to the court of justice of the requested Contracting Party or to the court of justice of the Contracting Party which has given the decision in the first instance and the said court of justice shall transmit the application in the manner prescribed by Article 2 paragraph 3. The application for recognition and/or enforcement shall be accompanied by: a certified copy of the decision, including a document stating that is final, and if the request concerns enforceability that is enforceable, unless this is indicated in the decision itself; confirmation that the party, who failed to appear and take part in the proceedings and against whom the decision was given, was duly notified of the institution of the proceedings and the place, date and time of the hearing in accordance with the law of the Contracting Party in the territory of which the decision was given and in the case of incapacity he/she was properly represented. The application and documents referred to in paragraph 2 above shall also be accompanied by a certified translation into the language of the requested Contracting Party, or English.

28 Arbitration awards Cyprus is a party to the relevant New York Convention of A judgment creditor seeking to enforce a foreign arbitral award in Cyprus may request the relevant district court to recognize and enforce the award. To do this the creditor will file an application by summons. The application must be served on the judgment debtor and supported by an affidavit together with the documents required under article IV of the New York Convention, namely: the authenticated original award or a duly certified copy of it; the original agreement or a duly certified copy of it; and duly certified translations of these documents in Greek.

29 Insolvency Regulation (EC) No 1346/2000 on insolvency proceedings is directly applicable in Cyprus. Under the regulation, a judgment initiating insolvency proceedings issued by a competent court of an EU member state will be recognised in Cyprus and vice versa.

30 Execution measures Once a foreign judgment has been duly registered it immediately takes effect as a judgment of a domestic court, and all the methods of executing domestic court judgments are available, including: writ of execution for the sale of movables; registration of charging order over the immovable property or chattels of the judgment debtor; writ of delivery of goods ordered to be delivered to the judgment creditor; writ of possession of land ordered to be delivered to the judgement creditor; committal for breach of an order or undertaking; writ of sequestration; bankruptcy or liquidation proceedings against the judgement debtor.

31 Company winding up (liquidation) An application for the winding up of a Cyprus company may be filed if the company is unable to pay its debts. Under the Cyprus Companies Law, a company is deemed to be unable to pay its debts when one of the following conditions is met: a creditor to whom the company is indebted in a sum exceeding 854 has served on the company a demand in writing for the payment of the outstanding amount and the company has failed to pay the sum within three weeks; a judgment creditor has tried to enforce his judgment by execution on the company s property and the execution has failed to meet the debt; or the court is satisfied that the company is unable to pay its debts.

32 Questions? Costas Stamatiou Advocate/partner Andreas Neocleous & Co LLC Telephone: Fax:

33 . Costas Stamatiou is an advocate and partner in the law firm of Andreas Neocleous & Co. LLC. He graduated in law from the University of Wales, Cardiff in 2001 and obtained a Master s degree in Legal Aspects of Marine Affairs from there in 2002 and a Master s degree in European Legal Studies from Bristol University in He was admitted to the Cyprus Bar in He joined Andreas Neocleous & Co LLC in 2003 and became a partner in January He was appointed as a member of the shipping committee of the Cyprus Bar Association in Since 2010 he has acted as a visiting law lecturer at Frederick University Cyprus. Publications: Costas has contributed various articles to leading publications including, "Establishing the Boundaries: Cyprus offshore oil, gas and shipping industries", published in Lloyd's List Cyprus, September 2005; "The Shortsea Shipping Market of the Future", Lloyd s List Cyprus, September 2006; "The Marco Polo Programme & Cyprus: Financing the Motorways of the Seas", ICCLR. 2006, 17(8); "Cyprus Shipping and Competition: The new tonnage tax regime" Legal & More Journal, 2010 Issue 5 page 46. University theses were on the subjects of "Carrier s Liability: A comparative study of the CMI/UNCITRAL draft instrument on transport law, the Hague, Hague-Visby and Hamburg Rules", Cardiff, 2002 and "Aspects of EC Competition Law in Maritime Transport", Bristol, He is a co-author of "Cyprus: Freezing orders, ship arrest warrants, anti-suit injunctions, disclosure orders and Norwich Pharmacal relief in aid of court or arbitration proceedings in Cyprus and overseas", ICCLR (2); "The New Era of EC Competition Law in the Shipping Industry", ICCLR, 2009, 20(1); "Ready, Steady, Drill: the legislation governing the race for Cyprus s offshore hydrocarbon reserves", ICCLR. 2007, 18(12); "Shipping The Cyprus Way", Offshore Investment September 2007; "Black Boxes and the Proposed EU Fundamental Principles on the Investigation of Accidents in the Maritime Industry", ICCLR 2007, 18(5); the Cyprus chapter of 'Dispute Resolution Handbook 2007/08' by Practical Law Co; "Legal Aspects of the ISM Code", ICCLR (7); "Cyprus: Commercial Shipping", ICCLR (11); "Cyprus: Forum Non Conveniens in the European Era", ICCLR (8); "Cyprus Company law - Corporate Governance", ICCLR (6). Costas is also a co-author of the Cyprus chapter of the "Encyclopaedia of International Commercial Litigation" published by Kluwer Law International and the recently-published third edition of Neocleous s Introduction to Cyprus Law by Andreas Neocleous & Co LLC.

34 Bibliography Neocleous s Introduction to Cyprus Law C Stamatiou and P Neocleous: Cyprus: freezing orders, ship arrest warrants, anti-suit injunctions, disclosure orders and Norwich Pharmacal relief in aid of court or arbitration proceedings in Cyprus and overseas, ICCLR (2).