Shipping 2021

Last Updated February 23, 2021

Cyprus

Law and Practice

Authors



Scordis Papapetrou & Co LLC is a leading and dynamic Cyprus law firm whose roots date from 1922. The firm and its associated entities comprise over 35 qualified lawyers and over 70 other professionals of various disciplines, working out of offices in Nicosia, Limassol, Athens, Moscow and Valletta. The firm offers, together with its affiliates and subsidiaries, in addition to other traditional services of a law firm, a wide range of services, such as international litigation, arbitration and dispute resolution, corporate and commercial, mergers and acquisitions, shipping, estate and tax planning and trusts, company/fund formation and administration, fiduciary and trustee services, accounting and tax advisory, and financial services. To date, the firm and its affiliated entities have acted in and advised on a multitude of multimillion corporate, shipping and commercial matters as well as major landmark court and arbitration cases.

The Supreme Court of Cyprus has exclusive jurisdiction to act as an Admiralty Court sitting as a court of first instance (original jurisdiction) and as a court of appeal (appellant jurisdiction). By virtue of sections 19(a) and 29(2)(a) of the Courts of Justice Law of 1960 (Law No 14/1960), the Admiralty Court is vested with and exercises the same powers and jurisdiction as those vested in or exercised by the High Court of Justice in England in its admiralty jurisdiction (as they existed immediately before the independence of Cyprus in 1960). Consequently, the English Administration of Justice Act of 1956, defines the admiralty jurisdiction of the Admiralty Court. Further, the Cyprus Admiralty Jurisdiction Order 1893 regulates the procedure before the Court.

Also, the District Courts have limited jurisdiction on maritime claims, but only on referral by the Supreme Court under certain circumstances. Judgments issued by District courts can be appealed to the Supreme Court.

Pursuant to Section 1(1) of the English Administration of Justice Act 1956, the Supreme Court has jurisdiction to hear and determine any claim:

  • to the possession or ownership of a ship or to the ownership of any share therein; 
  • arising between the co-owners of a ship as to possession, employment or earnings of that ship;
  • in respect of a mortgage of or charge on a ship or any share therein;
  • for damage done by a ship;
  • for damage received by a ship;
  • for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or of the wrongful act, neglect or default of the owners, charterers or persons in possession or control of a ship or of the Master or crew thereof or of any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of a ship are responsible, being an act, neglect or default in the navigation or management of the ship, in the loading, carriage or discharge of goods on, in or from the ship or in the embarkation, carriage or disembarkation of persons on, in or from the ship;
  • for loss of or damage to goods carried in a ship;
  • arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship;
  • in the nature of salvage;
  • in the nature of towage in respect of a ship
  • in the nature of pilotage in respect of a ship;
  • in respect of goods or materials supplied to a ship for her operation or maintenance;
  • in respect of the construction, repair or equipment of a ship or dock charges or dues;
  • by a Master or member of the crew of a ship for wages;
  • by a Master, shipper, charterer or agent in respect of disbursements made on account of a ship;
  • arising out of an act which is or is claimed to be a general average act;
  • arising out of bottomry;
  • for the forfeiture or condemnation of a ship or goods which are being or have been carried or have been attempted to be carried in a ship or for the restoration of a ship or any such goods after seizure or for droits of Admiralty.

The jurisdiction may be invoked by:

  • an action in rem against the vessel or property in question, if this is lying within the territorial jurisdiction of the court; such territorial jurisdiction extends to the territorial waters, but in practice the arrest of a vessel or the service upon her of a writ in rem is not possible unless the vessel calls at a Cyprus port; and
  • an action in personam if the defendant has his or her residence or a place of business within Cyprus or if the cause of action arose in Cyprus or if an action arising out of the same incident or series of incidents is pending or has been determined in the Court.

In Cyprus, the system and powers of port state control are regulated by:

  • the Merchant Shipping (Port State Control) Law of 2011 to 2015 (Law 95 (I)/2011) as amended for the purpose of harmonising the Law with the European Union directive titled “Directive 2009/16/EC of the European Parliament and of the Council of 23 April 2009 on port state control” as amended;
  • the Merchant Shipping (Port State Control) Notification 2015;
  • the Merchant Shipping (Port State Control-Duration of Night) Order of 2011;
  • the Merchant Shipping (Port State Control-Geographical Areas of Ports and Anchorages) Order of 2017;
  • the Merchant Shipping (Community Vessel Traffic Monitoring and Information System) Law of 2004 (Law No 131(I)/2004) as amended; and
  • the Relevant Circulars of the Shipping Deputy Ministry of Cyprus, issued from time to time.

Cyprus is also a signatory to the Paris Memorandum of Understanding and the Mediterranean Memorandum of Understanding on Port State Control.

The Shipping Deputy Ministry to the President of Cyprus (SDM) is the competent port state control authority in Cyprus. It carries out all inspections of foreign ships in Cypriot ports, verifying that crew, ship and equipment comply with the requirements of international conventions on safety, pollution prevention, operation, management and security, qualifications, living conditions and terms of employment. The Port State Control officers and officials have the authority to board vessels and inspect them if necessary, investigate and copy materials, interject and/or detain ships with insufficiencies following inspection or have hazardous materials that may create safety, health or environmental issues. Also, authorities in some cases may not allow entry to ships into Cyprus’ ports if the ship Masters and operators do not abide with the law and do not provide information as requested by the competent authorities and, furthermore, may impose administrative fines.

Also, the Marine Accidents Investigation Committee (MAIC) and the SDM are the authorities responsible for the investigation of marine casualties in Cyprus.

When an accident occurs involving a ship flying the Cyprus flag anywhere in the world, or a ship flying a foreign flag within Cyprus’s territorial and internal waters, the Master or the owner/manager or the agent of the ship must notify the MAIC, by virtue of the Marine Accidents and Incidents Investigation Law of 2012 (Law No 94 (I)/2012) (which transposed the EU Directive 2009/18/EC into Cyprus’ legislation). The MAIC is responsible for the investigation of all types of marine accidents (casualties and incidents) and any marine accident notifications should be addressed to the MAIC.

The Marine Accidents and Incidents Investigation Law of 2012, gives the MAIC extensive powers, including access to any relevant area or casualty site and to any evidence or witnesses. However, according to the SDM Circular 17/2014, the SDM will continue to be responsible for investigating marine accidents for certain types of ships, ie: (a) ships not propelled by mechanical means, wooden ships of primitive build, pleasure yachts/crafts not engaged in trade, unless they are or will be crewed and carrying more than 12 passengers for commercial purposes, and (b) fishing vessels with a length of less than 15 metres.

The laws and regulations which govern matters relating to the registration of ships and related transactions in the Register of Cyprus Ships or in the Special Book of Parallel Registration are the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963 (the Law), as amended and the provisions of the Government Policy on the Registration of Ships under the Cyprus flag, which is established pursuant to the provisions of the Law.

Applications for the registration of ships and for the related transactions in the Register of Cyprus Ships or in the Special Book of Parallel Registration must be submitted to the Registrar of Cyprus Ships, who is stationed at the Head Office of the Shipping Deputy Ministry in Limassol (the Registrar). However, the provisional registration of ships and other transactions (other than the permanent and the bareboat-charter registration) may be effected abroad by a consular officer of the Republic of Cyprus upon instructions issued by the Registrar. In such cases, the transactions are recorded by the Registrar in the Register as from the date and time they have been effected by the consular officer.

A ship may be registered under the Cyprus flag if either:

  • more than half (50%) of the shares of the ship are owned by Cypriot citizens; or
  • by citizens of other Member States of the European Union or the European Economic Area (EEA) (who, in the instance of not being permanent residents of the Republic of Cyprus, will have to appoint an authorised representative in the Republic of Cyprus); or
  • all (100%) shares of the ship are owned by one or more corporations established and operating in accordance with the laws of the Republic of Cyprus or any other EU or EEA Member State which has its registered office, central administration or principal place of business within the EEA, or by corporations registered outside the European Union or the EEA, but controlled by Cypriot citizens or citizens of a Member State.

If the corporation is not incorporated and located in Cyprus, either it must appoint an authorised representative in Cyprus or the management of the ship must be entrusted in full to a Cypriot or EU ship-management company located in Cyprus.

Applications for the registration of ships must be made through a Cypriot lawyer and the ship must be surveyed by an approved classification society at the time of registration.

The corporation is deemed to be controlled by Cypriots or citizens of any other Member States when more than 50% of its shares are owned by Cypriots or citizens of any other Member States or when the majority of the directors of the corporation are Cypriot citizens or citizens of any other Member State.

An authorised representative may be a Cypriot citizen, or a citizen of any other Member State, who is resident in Cyprus or a partnership/corporation/branch established in accordance with the laws of Cyprus which has its place of business in Cyprus.

Also, vessels under construction are registrable in Cyprus.

In Cyprus, the following three types of registration are allowed:

  • provisional;
  • permanent; and
  • bareboat-charter registration (parallel).

Provisional registration of a ship may remain in force for six months. Thereafter, it may be renewed once, for a further three-month period.

Dual registration and flagging out are permissible in Cyprus. The basis of such types of registration is the bareboat-chartering of a ship by the ship-owner to the charterer on the condition that the respective laws of the underlying registry and of the bareboat registry (i) explicitly permit dual registration and (ii) contain preventive covenants whereby matters relating to ownership and to mortgages over the ship shall be exclusively governed by the laws of the ship’s underlying register. In addition, the bareboat charterer must undertake to maintain the same safety standards to the ship, even if the chosen bareboat register applies safety standards that are lower than those applied by the ship’s underlying register.

The Register of Mortgages is entrusted by the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963 (the Law) to the Registrar of Cyprus Ships and that Register contains a description of the vessel, the owner of the vessel, the particulars of the mortgages registered on the vessel and the registered mortgagees.

A Cyprus mortgage consists of a statutory mortgage and collateral deed of covenants (the Mortgage). The documentary requirements for registration of a Mortgage on a Cyprus Ship are:

  •     a written application by a local lawyer;
  •     resolutions of directors, on behalf of the ship-owners;
  •     a duly executed Power of Attorney, on behalf of the ship-owners;
  •     a duly executed Power of Attorney, on behalf of the Mortgagee;
  •     the duly executed Mortgage;
  •     a Certificate of Directors and Secretary (if the ship-owner is a Cyprus-registered Company) or a duly executed Incumbency Certificate (if the ship-owner is a foreign entity).

Although the Cyprus Ships’ Registry is open to the public, accessibility is limited to physical searches at the Ships’ Registry itself upon payment of a search fee.

Further, a transcript of registration of a registered vessel can be ordered by the public (upon payment of the prescribed fee) evidencing, inter alia, the particulars of the vessel, the name and address of the legal owner of the vessel and the details of any registered mortgage (ie, the date and time of its registration and the details of the mortgagee).

In the event of pollution, the legal regime that the Republic of Cyprus will apply is the use of international conventions, EU Law and also national law. These, inter alia, are:

  • the Merchant Shipping (Ship Source Pollution) Law of 2008 (Law 45(I)/2008), as amended;
  • the International Convention on Civil Liability for Oil Pollution Damage of 1969 (CLC) and its Protocols of 1976 and 1992 and Amendments of 2000;
  • the International Convention for the Protection of the Marine Environment and the Coastal Region of the Mediterranean (Barcelona Convention) 1975 and its amendments;
  • the International Convention for the Establishment of an International Fund for Compensation for Oil Pollution Damage of 1971 and its Protocols of 1976 and 1992 and subsequent amendments;
  • the International Convention on the Prevention of Marine Pollution by Dumping of Wastes and other Matter (London Convention) 1972, as amended;
  • the International Convention for the Prevention of Pollution from Ships (MARPOL) 1973 as amended by Protocol 1978 and its Amendments;
  • the Basel Convention on the Control of Trans-boundary Movements of Hazardous Wastes and Their Disposal (Basel Convention) 1989;
  • the International Convention on Civil Liability for Bunker Oil Pollution Damage (BUNKER) 2001; and
  • the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious substances by Sea (HNS) 1996 (Law No 21(III)/2004).

As regards wreck removal, the Nairobi International Convention on the Removal of Wrecks 2007 (Law No 12 (III)/2015) entered into force in Cyprus on 22 October 2015. Further, the Wrecks Law Cap 298 regulates wrecks in Cyprus.

Also, as regards both wreck removal and pollution, Cyprus is a signatory and a state party to the United Nations Convention on the Law of the Sea (UNCLOS) 1982.

With regard to collision cases, the International Convention for the Unification of Certain Rules of Law with respect to Collision between Vessels and Protocol of Signature, Brussels of 23 September 1910, was extended to Cyprus on 1 February 1913 when it was still a British colony and still continues in force until today. Also, the Maritime Convention Act of 1911, derived from the Law of the United Kingdom, applies to Cyprus by virtue of Articles 19(a) and 29(2)(a) of the Cyprus Courts of Justice Law of 1960, as amended.

Further, (i) the International Convention for the Unification of Certain Rules Concerning Civil Jurisdiction in Matters of Collision of 1952 (Law No 31(III)/1993), (ii) the International Convention for the Unification of Certain Rules Relating to Penal Jurisdiction in Matters of Collision or other Incidents of Navigation 1952 (Law No 32(III)/1993) and (iii) the International Regulations for Preventing Collisions at Sea, 1972 (COLREGs) (Law No 18/1980), as amended, have been ratified by Cyprus.

The legal regime in relation to salvage is (i) the Convention for the Unification of Certain Rules of Law relating to Assistance and Salvage at Sea and Protocol of Signature, Brussels, 23 September 1910 (extended to Cyprus on 1 February 1913) and (ii) Part III of the Wrecks Law, Chapter 298.

The LLMC Convention (1976 Convention and its 1996 Protocol) was ratified by the Republic of Cyprus by virtue of the Convention on Limitation of Liability for Maritime Claims of 1976 and of its Protocol of 1996 Amending the Said Convention (Ratification) and for Matters Connected Therewith Law of 2005 (Law 20(III)/2005).

Pursuant to Article 11 of the LLMC Convention, any person alleged to be liable may constitute a fund with the court or other competent authority in any State Party in which legal proceedings are instituted in respect of claims subject to limitation. The fund shall be constituted in the sum of such of the amounts set out in Articles 6 and 7 (which set the general limits and the limit for passenger claims, respectively) as are applicable to claims for which that person may be liable, together with interest thereon from the date of the occurrence giving rise to the liability until the date of the constitution of the fund. Any fund thus constituted shall be available only for the payment of claims in respect of which limitation of liability can be invoked.

The ratified Law 20(III)/2005 (see 2.3 1976 Convention on Limitation of Liability for Maritime Claims), provides that a person wishing to set up a limitation fund, as provided for in Article 11 of the LLMC Convention, may set up such a fund in the Supreme Court of Cyprus, upon application made to the Supreme Court. In the case of a person wishing to set up a limitation fund by lodging a bank guarantee with the Supreme Court of Cyprus, the Supreme Court shall decide on the characteristics and conditions which such a guarantee must meet.

Cyprus has adopted, by way of succession, the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924 (extended to Cyprus on 2 June 1931).

Further, the UK Bills of Lading Act of 1855 applies in Cyprus by means of Articles 19 and 29 of the Courts of Justice Law of 1960 (Law No 14/1960). Additionally, the Hague Rules are applicable in Cyprus through the Carriage of Goods by Sea Law, Chapter 263.

However, the Hamburg Rules and the Rotterdam Rules have not yet been ratified in Cyprus.

Cyprus has adopted the UK Bills of Lading Act 1855 to regulate the transfer of rights under a contract of carriage. Any party to a contract of carriage can sue for damages against the carrier, as well as consignees of goods named in a bill of lading and endorsees of a bill of lading, having acquired full proprietary rights upon or by reason of such consignment or endorsement. Ownership of the cargo will also depend on the way the parties deal with each other, and such dealings may or may not include the transfer of the bill of lading. Such a transfer may extinguish the rights of the original shipper or any intermediary, but, in respect of matters for which the shipper still remained at risk, may entitle him or her to sue.

Pursuant to the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC Convention), a ship-owner (as defined in the LLMC, a ship-owner shall mean the owner, charterer, manager and operator of a sea-going vessel) may limit his or her liability for the claims set out in Article 2 of the LLMC Convention, which includes claims for loss or damage to property.

The limitation amounts of each incidence are stated in Articles 6 and 7 of the LLMC Convention. However, a person liable shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her personal act or omission committed with the intent to cause such loss or recklessly and with the intent that such loss would probably result.

The Merchant Shipping (Ship-owners’ Insurance for Maritime Claims) Law of 2012 which transposed Directive 2009/20/EC on insurance against maritime claims (the Law) provides that an operator of a vessel (being the owner of a sea-going ship or any other person, such as the manager or the bareboat charterer, who has assumed responsibility for operating the ship from the ship-owner and who, on assuming such responsibility, has agreed to undertake all the duties, responsibilities and commitments that are imposed by that Law) shall be required to have insurance:

  • covering that ship for maritime claims subject to limitation under the LLMC Convention for an amount, for each incident, equal to the relevant maximum amount for the limitation of liability as laid down in the LLMC Convention;
  • the existence of which is to be proved by a valid certificate carried on board the ship issued by the relevant insurance provider.

Further, section 502 of the UK Merchant Shipping Act 1894 (which applies in the legal system of Cyprus pursuant to the Courts of Justice Law of 1960 - the Act), provides that a ship-owner of a sea-going vessel shall not be liable to make good to any extent whatever any loss or damage happening without his or her actual fault or privity where any goods, merchandise, or other things whatsoever taken in or put on board his or her ship are lost or damaged by reason of fire on board the ship. Also, section 503 of the Act provides that the liability of the owner of any ship for (inter alia) damage to any goods caused without actual fault or privity is limited to certain extents.

Pursuant to Carriage of Goods by Sea Law, Cap. 263 and provided the contract of carriage is governed by the Hague Rules, the shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight, as furnished by him or her. The shipper shall indemnify the carrier against all losses, damages and expenses arising or resulting from the inaccuracies in such particulars. 

The shipper has also a common-law duty to notify the carrier of any dangerous cargo. If the shipper fails to declare dangerous cargo, then the carrier may also have a claim against the shipper for losses incurred as a direct consequent of the mis-declaration, eg, for damage to the vessel.

The Limitation of Actionable Rights Law No 66(I)/2012 (the “Limitation Law”) is the general law prescribing time bars for all legal actions to be instigated in the Cyprus courts, including admiralty actions. Pursuant to the Limitation Law, the time bar period depends on the nature of the claim and indicatively the following time bars apply:

  • in a claim of breach of contract, six years from the date on which the cause of action accrued;
  • for civil wrongs (with certain exceptions including negligence, and breach of statutory duty), six years from the day of completion of the basis of the claim;
  • in a claim in negligence, three years from the time the plaintiff sustained damage or where the negligence caused fresh damage continuing from day to day, from the time the damages cease to occur.

The period of limitation can be suspended, in (inter alia) the following circumstances:

  • if, in the last six months of the applicable period of limitation, the claimant was prevented from commencing proceedings due to a moratorium or force majeure; and
  • if, in the last six months of the applicable period of limitation, the defendant or any other person for whom the defendant is responsible prevented the claimant from instigating proceedings.

Further, the period of limitation can be reset in (inter alia) the following circumstances:

  • if the obligor recognises in writing a right to an action against him or her;
  • in the event of a monetary debt, if the obligor pays at least 50% of the aggregate owed sum, including any accrued interest;
  • with the commencement of arbitration proceedings;
  • if the court orders that the arbitration award is annulled or ceases to have effect.

As soon as the limitation period expires, the court no longer has jurisdiction unless a party with a legitimate interest submits an application and, as a result, the court may extend the prescribed limitation period up to two years on an equitable and reasonable basis.

Cyprus is not itself a party to the International Convention Relating to the Arrest of a Sea-Going Ship, 1952. However, the English Administration of Justice Act of 1956 ratifies this Convention and the Act applies to Cyprus by virtue of its Constitution and Articles 19 and 29 of the Courts of Justice Law of 1960 (Law No 14/60).

Cyprus law recognises the following maritime liens that give rise to an action in rem against and a right to arrest a vessel:

  • lien for damage, which is a lien for the amount of a claim arising only in tort against a vessel as a result of her negligent navigation or operation (such as a collision);
  • lien for salvage;
  • bottomry;
  • lien of the Master, officers and crew for wages and other emoluments; and
  • reimbursement to the Master of disbursements made by him or her out of his or her own pocket on behalf of the owners.

The Supreme Court has jurisdiction to hear and determine all the claims of Section 1(1) of the English Administration of Justice Act 1956, which are all described as “maritime claims” (see 1.1 Domestic Laws Establishing the Authorities of the Maritime and Shipping Courts) and for which arrest of a vessel can be requested. Maritime liens enjoy certain advantages over certain other permitted actions in rem of Section 1(1) of this Act, in the time of creation of the lien, in priority and in the enforceability of the security.

A vessel may be arrested at any time, irrespective of who its owner is, in an action in rem in respect of a claim related to: her possession or ownership (section 1(1)(a) of the English Administration of Justice Act 1956 – the Act) or a claim by a co-owner as to possession, employment or earnings of that ship (section 1(1)(b) of the Act) or a claim under a registered mortgage (section 1(1)(c) of the Act) or a claim for her forfeiture or condemnation (section1(1)(s) of the Act) or a claim by a maritime lien holder or chargee of that vessel.

In all other claims of section 1(1) of the Act, an arrest can be made in an action in rem, where (a) the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of the vessel and (b) at the time when the action is brought, that the vessel is beneficially owned as respect all the shares therein by that person.

A bunker supplier can arrest a vessel in an action in rem, provided that its claim falls within the permissible in rem action under the Administration of Justice Act 1956 (in particular section 1.1(m) – “any claim in respect of goods or materials supplied to a ship for her operation or maintenance”).

Although the supply of bunkers may give rise to a maritime claim, that claim is not a claim whereby a vessel may be arrested irrespective of who its owner is (see 4.3 Liability in Personam for Owners or Demise Charterers). Therefore, an arrest for unpaid bunkers can only be made in an action in rem, where (a) the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the vessel and (b) at the time when the action is brought, that the vessel is beneficially owned as respect all the shares therein by that person.

Thus, in the case of bunkers supplied by a bunker as an intermediary whereby the ship-owner/demise charterer has no contractual link and therefore no in personam liability, that bunker supplier may have no right to arrest. While some physical suppliers have argued that the contractual relationship is established by the bunker receipt, this, on its own, is unlikely to give rise to a contractual relationship without clear wording, a course of dealing or other evidence to establish an intended contractual relationship.

A warrant for the arrest of a vessel can only be applied for at the time of, or at any time after, the commencement of proceedings in rem against that vessel. Such proceedings are commenced by the issue of a writ of summons. The name, the place of residence, occupation of every claimant and defendant, and a concise statement of the claim made or the relief or remedy sought, should be included in the structure of the writ of summons.

In order to arrest a vessel, the plaintiff must file an ex parte application which must be supported by an affidavit. The affidavit must state the nature of the claim and the aid of the court is required, since the claim remains unsatisfied.

Practice has now been established that the plaintiff is required to make full and frank disclosure of all the material facts of the case which may influence the judgment of the court.

The claimant is best advised to engage the services of and be represented by a local lawyer. A power of attorney or other form of written authority is not required, either by the court or the local lawyer, in the case of a foreign litigant. A retainer in writing in the form provided by the Cyprus Civil Procedure Rules is required in the case of a local plaintiff.

The documents supporting the claim may not be notarised or apostilled; however, they must be in a language that is understood by the court, otherwise they have to be officially translated into Greek. Where possible, original documentation should be provided, although the court may order an arrest even though some original documentation is not available.

The court is following the practice of requiring the arresting party to put up security for the issue of warrant of arrest. The amount of security ordered varies and it usually depends on the particular judge dealing with the case, the nature of the claim made in the action in which the arrest is ordered and the extent of that claim.

It is not possible to arrest bunkers themselves in Cyprus and, where the bunker supplier asserts its claim on the basis of a retention of title, this does not give rise to arrest as it is not a maritime claim under section 1(1) of the English Administration of Justice Act 1956. However, retention of title clauses in contracts may be difficult to enforce and are unlikely to be enforced where the bunkers have already been used or have been mixed with others. Even if such a claim could be effective, it would require an injunction to detain the vessel until the bunkers were returned.

Also, it is not possible to arrest freight itself, except perhaps in the case of freight at risk, by arresting the cargo in respect of which the freight is due.

Cyprus law permits the arrest of a ship other than the one in respect of which the claim arose in certain circumstances.

Specifically, section 3(4) of the English Administration of Justice Act of 1956 applicable to Cyprus allows a claimant to invoke the admiralty jurisdiction of the Supreme Court by an action in rem and to obtain a warrant of arrest in respect of certain claims either:

  • against the vessel in connection with which the claim arose, provided that the beneficial owner of that vessel at the time when the action is brought is the person who is personally liable to the claimant in respect of the claim, as owner or charterer of the vessel; or
  • any other ship which is beneficially owned by that owner or charterer.

Apart from a formal arrest, when it is not possible to file an admiralty action in rem against a vessel, Article 32 of the Courts of Justice Law, Law 14 of 1960, empowers the courts to make interim orders to protect assets that may be at risk or alienation or in order to preserve a particular status quo pending the final determination of an action, provided that the following conditions are all satisfied:

  • a serious question arises to be tried at the hearing;
  • there appears to be a “probability" that the plaintiff is entitled to relief; and
  • unless an order is made it would be difficult or impossible to carry out complete justice at a later stage.

Interim measures include freezing orders with domestic or worldwide effect and “Chabra” type orders. Thus, a vessel may be effectually detained by the issue of a freezing order in the context of the main action in the civil courts instituted against the owner.

Further, Section 30 of the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law (Law 45/63), provides that the Supreme Court may, on the application of any interested person and if the Court thinks fit, make an order prohibiting for a time specified any dealing with the ship or any shares therein.

A vessel may also be detained by Cyprus competent authorities for breaches under various international maritime conventions or local laws (for ex. The Merchant Shipping (Port State Control) Laws of 2011 and 2015).       

Pursuant to the Cyprus Admiralty Jurisdiction Order of 1893, the court may, by order and upon a written application, direct the release of the arrested vessel upon such terms as to security as to the court shall deem fit.

Therefore, the owner or interested party has to apply to the court for the release of the arrested vessel. The form of security which is usually requested by the court is a bank guarantee issued by a licensed financial institution in Cyprus. Unless the arresting party consents, it is unlikely that the court will accept a club Letter of Indemnity (LOI) or a foreign bank’s bank guarantee.

Pursuant to Rule 74 of the Cyprus Admiralty Jurisdiction Order of 1893, the Supreme Court, either before judgment (pendente lite) or after final judgment, on the application of any party, by its order can appoint the Admiralty Marshal of the Court or any other person to appraise the arrested vessel or to sell that vessel, either with or without appraisement. The sale may be ordered to be either by public auction (the sale procedure adopted in most cases) or private treaty.

The sale is advertised in the local press and in appropriate shipping publications. The proceeds from the sale of a ship are paid into the court and, upon an application by any judgment creditor, will be distributed to all judgment creditors who claimed a share of the proceeds, in order of priority.

Whenever an arrest order is issued by the Supreme Court, the arrested vessel is placed under the safe custody and supervision of the Admiralty Marshal and/or the Deputy Admiralty Marshal(s) who are appointed pursuant to rule 5 of the Cyprus Admiralty Jurisdiction Order (1893) (in practice, the Court appoints the Admiralty Marshal in almost all cases). The Admiralty Marshal acts as the custodian/bailee of the arrested vessel, having the duty to ensure that the property and crew of the vessel are safe and in good condition or health at all times (and to comply with the relevant orders issued by the Court in the course of the legal proceedings from which the arrest order originates).

The ordinary order of priority of claims is as follows.

  • Marshal expenses in connection with the arrest, custody and sale.
  • Recoverable legal costs of:
    1. the arresting party up to an including the arrest; and
    2. the party who obtained the order for the appraisement and judicial sale.
  • Possessory liens.
  • Maritime liens.
  • Claims of the Republic of Cyprus for fees, dues and tonnage taxes, in the case of a Cyprus-flag vessel.
  • Claims under registered mortgages.
  • Caims under foreign or unregistered mortgages.
  • Administrative fines imposed by the Competent Authorities of Cyprus.
  • Other maritime claims.

The Companies Law, Cap. 113 as amended (the Law), contains proactive self-help provisions afforded to companies, similar to the US Chapter 11 protection. It is a process whereby the protection of the court is obtained to assist the survival of the company and essentially allows a company to restructure with the approval of the court.

Specifically, in cases where the court considers that:

  • a company is, or is likely to be, unable to pay its debts; and
  • any resolution regarding the liquidation of the company has not been approved and published in the Official Gazette of the Republic; and
  • no decree has been issued for the liquidation of the company;

may, upon a request submitted to it, appoint an examiner to the company for the purpose of examining the state of affairs of the company and the performance of such duties in relation to the company as may be imposed by or in accordance with the provisions of the Law.

The court shall issue an order only if it is satisfied that there is a reasonable prospect of survival of the company and of all or any part of that undertaking as an active entity (going concern). The court granting an order for the appointment of an examiner places the company under court protection for a certain period of time. The examiner formulates a scheme of arrangement, which requires the approval of at least one class of creditors before it can be brought before the court for approval.

The question as to whether an order on the arrest and judicial sale of a vessel owned by owners that are under the proceedings mentioned above can be granted has not yet been decided before the Supreme Court. However, the Law provides that for as long as a company is under the protection of the Court, the following (inter alia) provisions apply:

  • no liquidation proceedings may be instituted against the company, nor may a resolution for liquidation be adopted in relation to that company, and any resolution thus adopted shall have no effect;
  • no seizure in the hands of a third party, suretyship, seizure or execution shall take place in respect of the property or objects of the company, except with the consent of the examiner;
  • in the event that any claim against the company is secured by a mortgage, lien, lien or other lien or pledge on or affecting all or any part of the company's property, objects or income, no action may be taken for the liquidation of all or any part of this security, except with the consent of the examiner;
  • no measures may be taken to recover goods held by the company in accordance with any lease agreement, except with the consent of the examiner.

Damages for “wrongful arrest” may be awarded in favour of the owner of the arrested vessel, if the arresting party has acted in bad faith or through gross negligence (relevant English law principles are followed).

The international conventions and domestic laws applicable to Cyprus for maritime passenger claims are mainly:

  • the Limitation on Liability for Maritime Claims Convention 1976 as amended by its Protocol (LLMC Convention). Pursuant to Article 2.1(b) (and subject to certain exceptions mentioned in Articles 3 and 4 of the LLMC Convention), claims in respect of loss resulting from delay in the carriage be sea of cargo, passengers or their luggage, shall be subject to limitation of liability;
  • the Regulation (EU) No 1177/2010 concerning the rights of passengers when travelling by sea and inland waterway;
  • the Merchant Shipping (Liability of Carriers of Passengers by Sea in the Event of Accidents) Law No 5(I)/2014 (which transposed Regulation (EC) No 392/2009 on the liability of carriers of passengers by sea in the event of accidents into national law; although Cyprus is not a contracting member of the Athens Convention, Law No 5(I)/2014 incorporates provisions of that Convention). It sets out limitation of liability for death, personal injury for loss and damage to luggage and vehicles;
  • the Shipwrecked Passengers Law, Chapter 297. It sets out limitation to the amount recovered for expenses related to the harbouring and forwarding of shipwrecked passengers.

See 3.5 Time Bar for Filing Claims for Damaged or Lost Cargo for the time bar for filing court claims in Cyprus for bringing a claim in breach of contract and in negligence.

In addition, pursuant to Article 16 of the Athens Convention, any action for damages arising out of the death of or personal injury to a passenger or for the loss of or damage to luggage shall be time-barred after a period of two years.

Cyprus Courts will generally recognise and enforce a jurisdiction clause stated in bills of lading. However, they may still consider whether there are adequate grounds for displacing the prima facie presumption of insisting on the parties honouring their bargain. This presumption may be rebutted on "good and sufficient reasons".

In relation to the jurisdiction clauses, the Cyprus Courts will take into consideration the following factors:

  • in which country is the evidence on the matters in dispute situated or is readily available;
  • the relevant benefits of each alternative jurisdiction in terms of facilitating a better trial at less cost;
  • to what extent the foreign law applies to the matters in dispute and, if this is the case, to what extent it is substantially different from Cyprus law;
  • the country to which each of the parties is linked and how close this connection is;
  • whether the defendant sincerely wishes the issue in question to be tried somewhere else or whether he or she is just seeking a procedural advantage; and
  • to what extent the plaintiffs will be prejudiced in the case of filing proceedings abroad.

As a general rule, an express choice of law by the contracting parties will be recognised and upheld by the Cyprus courts. On 20 April 2006, Cyprus ratified the Rome Convention by Law 15(III) of 2006 and, since 17 December 2009, Regulation (EC) No 593/2008 ("Rome I") has applied. In accordance with Article 5 of Rome I, in the absence of an express or implied choice of law, the proper law shall be the law of the country of habitual residence of the carrier, provided that the place of receipt or the place of delivery or the habitual residence of the consignor is also situated in that country. If those requirements are not met, the law of the country where the place of delivery as agreed by the parties is situated shall apply.

General words in a bill of lading incorporating into it all the terms and conditions of another document, such as a charterparty, may not be sufficient to incorporate an arbitration clause contained in that document into the bill of lading in order to make its provisions applicable to disputes arising under the bill of lading. However, in the instance that a bill of lading contains specific words which attempt to incorporate an arbitration clause of a charterparty, the Cyprus Courts may recognise and enforce the arbitration clause on the condition that the provisions in the charterparty are worded in such a manner which makes sense in the context of the bill of lading and they do not conflict with any express term contained in the bill of lading.

Cyprus has ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Law No 84/1979) (the “New York Convention”).

Upon accession of Cyprus to the New York Convention on 29/12/1980, Cyprus as a signatory has made a specific reservation of reciprocity: "The Republic of Cyprus will apply the Convention, on the basis of reciprocity, to the recognition and enforcement of awards made only in the territory of another Contracting State; furthermore it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under its national law."

Domestic arbitration proceedings in Cyprus are governed by the Arbitration Law of 1944, Chapter 4 and international arbitration proceedings are governed by The International Arbitration in Commercial Matters Law 101/1987, which is almost identical to the UNCITRAL Model Law.

Although a foreign jurisdiction clause does not deprive the Cypriot courts of their jurisdiction, strong reasons must be presented as to why such a clause should be disregarded. The existence of an arbitration or a foreign jurisdiction clause must in any case be expressly disclosed when applying ex parte for the arrest; such information is considered as relevant for establishing the in rem jurisdiction of the Admiralty Court, hence necessary for the Court to reach the right conclusion regarding the arrest. Non-disclosure of such a clause may result in the discharge of the order and the release of the vessel. 

There is no domestic arbitration institute in Cyprus specialising in maritime claims.

The most prominent arbitral institutions in Cyprus are:

  • the Cyprus Arbitration and Mediation Centre;
  • the Cyprus Branch of the Chartered Institute of Arbitrators; and
  • the Cyprus Eurasia Dispute Resolution and Arbitration Centre.

Proceedings that have commenced, notwithstanding the foreign jurisdiction clause or arbitration clause, can be challenged by the defendant by an application for stay.

Where the application for stay has been filed, a Cyprus court is not bound to grant a stay but rather it has a discretion whether to do so or not. In practice, however, a stay of proceedings will be granted by the court unless a strong cause for not doing so is shown and the burden of proving such a cause lies with the party requesting the stay. When exercising its discretion, the court should take into account all the circumstances of the case.

On 29 April 2010, the Cyprus Parliament enacted the Merchant Shipping (Fees and Taxing Provisions) law of 2010 (which applied retroactively from 1 January 2010 for ten years). By a decision of the European Commission, this tonnage tax law has been extended for another ten years. Οn 15 April 2020, the Cyprus Parliament enacted the Merchant Shipping (Fees and Taxing Provisions) (as amended) Law of 2020, which applies from 1 January 2020 to 31 December 2029 (the Law). The tonnage tax law is fully compatible with the requirements of the EU acquis on State Aid to Maritime Transport.

The tonnage tax system (TTS) is based on the payment by the qualified persons of tonnage tax on the basis of the net tonnage of ships and provides full exemption from all income taxes that would normally be imposed under the Cyprus income and defence tax laws.

Pursuant to the Law, the TTS is available to qualifying ship-owners, charterers (bareboat, demise, time and voyage) and ship managers (providing technical and/or crewing services) who respectively own, charter or manage a qualifying ship engaged in a qualifying shipping activity and in ancillary activities to maritime transport.

The tax exemption for qualifying ship-owners covers:

  • profits from the use of a qualifying vessel;
  • profits from the disposal of a qualifying vessel and/or share and/or interest in it; 

Profits from the disposal of shares in a ship-owning company; 

  • dividends paid out of the above profits at all levels of distribution;
  • interest income relating to the financing/maintenance/use of a qualifying vessel and the working capital, excluding interest on capital used for investments.

Also, in the event that a qualifying owner earns income from a qualifying shipping activity and at the same time earns income from a non–qualifying activity, that income, that is not subject to TT, is subject to corporation tax at the normal rate of 12.5%. If mixed income is earned (TT and corporation tax), separate books must be kept.

Cyprus Government was, and still is, actively supporting the recommendations from the IMO, the European Union, the International Labour Organization and the International Chamber of Shipping by adopting measures early enough to facilitate crew changes in Cyprus ports, loading and discharging operations, whilst ensuring the safety of public health.

Initially, the crew restrictions constituted of a complete ban of entry into Cyprus of all persons, with certain exceptions. Subsequently, the complete ban of entry was relaxed and pursuant to the Decree issued by the Ministry of Health of Cyprus titled “the Infectious Diseases (Determination of Measures against the Spread of COVID-19 Coronavirus Decree (No 30) of 2020”, crew changes are possible at Cyprus ports subject to certain conditions being satisfied and procedures followed. The ease in restrictions included the facilitation of crew changes of seafarers of any nationality who served on cargo vessels, crew members of oil platforms as well members of cruise ships in lay-up or leisure crafts. This facilitation of crew changes continues today.

The relevant decrees issued by the Ministry of Health of Cyprus permit the long-term stay in anchorage of vessels, including cruise ships (warm lay-up).

Also, the Minister of Transport, Communications and Works of Cyprus announced several restrictive measures for both the Cyprus Ports Authority and Contractors, Operators, and licensed agents for port services and port installations to implement. These relate to the disembarkation of passengers and crew, the crew of commercial vessels performing international voyages – who must return to Cyprus and strictly comply with the instructions of the Medical and Health Services – and the movement of members of the UNIFIL Command based onshore.

Cyprus law recognises the defence of force majeure. This is a contractual defence and in order for it to apply, it must be expressly provided for in the relevant contract which governs the relationship between the parties.

Further, the circumstances giving rise to the force majeure must be clearly mentioned in the contract and the relevant facts must fit into those circumstances. In order that a party may be able to invoke force majeure in respect of COVID-19, the relevant contract must clearly set out that the performance of that party’s obligations thereunder may be postponed or excused in circumstances where the party is prevented from such a performance as a result of the COVID-19 pandemic or any other pandemic (even if COVID-19 is not specifically mentioned).

Further, the circumstances that are said to give rise to force majeure must not be induced by that party’s own actions or omissions, ie, those circumstances must be beyond that party’s control. If an appropriate force majeure clause has not been inserted in a contract, a party would be unable to rely on an event of force majeure, save where such an event leads to a frustration of the contract. The doctrine of frustration is a common-law principle which has been transplanted and codified into Cyprus Law under section 56 of the Cyprus Contract Law (Cap. 149) and states that a contract will be deemed automatically discharged where it becomes illegal or otherwise impossible to perform (by an event unforeseeable at the time of the contract). However, if performing the contract would be merely financially undesirable, a party will not be able to argue that the contract is frustrated and therefore terminated immediately.

On 6 May 2019, the Council of Ministers announced the approval of a draft bill providing for the establishment of Admiralty and Commercial Courts of Cyprus. This new bill constitutes the fundamental basis of reforming the judicial system of Cyprus by providing fast and effective remedies for Commercial and Admiralty disputes. In particular, the new bill provides that (a) the Commercial Court will adjudicate specific commercial affairs disputes, namely those where the value of the claim exceeds EUR2 million, and these cases shall be subject to adjudication via fast-track procedures and (b) the Admiralty Court will adjudicate shipping and maritime matters which will also be subject to the fast-track procedure, regardless of the value of the claim.

On 16 December 2019, Cyprus successfully prolonged its Tonnage Tax and Seafarer Scheme for the next ten years (until 31 December 2029). The Scheme provides competitive advantages, including a wider list of eligible vessels and ancillary activities and discount rates for environmentally friendly vessels.

On 27 September 2019, the Merchant Shipping (Fees and Dues with respect to Ocean-Going Commercial Cyprus Ships) Regulations of 2019 (P.I. 322/2019), were entered into force whereby the Ocean-Going Commercial Ships’ initial registration fees were abolished. Also, there is no cost for the issuance of the initial certificates of Ocean-Going Commercial Ships.

The Cyprus Shipping Deputy Ministry (SDM) has announced a new range of green incentives to reward vessels that demonstrate effective emissions reductions. From fiscal year 2021, annual tonnage tax will be reduced by up to 30% for each vessel that demonstrates proactive measures to reduce its environmental impact, ensuring ship-owners are rewarded for sustainable shipping efforts.

The Cyprus flag will provide a "discount" on its Tonnage Tax System by comparing what emissions reductions are required of a vessel, with what it actually achieves. For example:

EEDI - vessels that have achieved further reduction of their attained EEDI compared to the required Energy Efficiency Design Index (EEDI) (Regulation 20/MARPOL ANNEX VI) will obtain the respective annual tonnage tax rebate of between 5% to 25%.

IMO DCS - the environmental incentive relating to the IMO Data Collection System (DCS) applies to ships of 5,000 GT and above that comply with Regulation 22A of MARPOL ANNEX VI. Ships which demonstrate a reduction of the total fuel oil consumption in relation to the distance travelled, compared to the immediately previous reporting period, will obtain an annual tonnage tax rebate of between 10% to 20%.

Alternative fuels - vessels using an alternative fuel and achieving CO2 emissions reductions of at least 20% in comparison with traditional fuels will receive a rebate on annual tonnage tax of between 15% to 30%. This will be reviewed on a case-by-case basis, following review of documents submitted from a classification society.

Scordis Papapetrou & Co LLC

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3501-P.O. Box 51094
Cyprus

+357 2581 8444

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Trends and Developments


Authors



A. Karitzis & Associates L.L.C. is a full-service, innovative and forward-thinking law firm headquartered in Limassol, the shipping and financial capital of Cyprus, with offices in Athens, Greece, as well. It is composed of an experienced, diligent and dedicated team of dynamic professional lawyers, who deal with most areas of common law-based Cypriot law in its adapted form after the accession of Cyprus to the EU in 2004. The professionals of A. Karitzis & Associates L.L.C. provide integrity, efficiency and trust to clients, offering a comprehensive range of legal and administrative services. The firm covers all major practice area disciplines and boasts a diverse portfolio of clients ranging from local to global businesses and corporations, non-profit organisations, SMEs, large groups of companies, and private individuals of all levels of wealth, including some HNWI and UHNWI. The Shipping Department of A. Karitzis & Associates L.L.C. – having experience and in-depth knowledge of shipping and maritime law, and advising banks, owners, managers, charterers, cargo-owners and their respective insurers domestically and internationally – is able to offer clients any kind of services related to the legal aspects of maritime affairs.

Introduction

Shipping has been one of the most important pillars of the Cypriot economy for decades, with the sector contributing around EUR1.034 billion to the island’s GDP per annum. With the 11th-largest ship registry in the world and the third in the EU, Cyprus has a large resident shipping industry, with over 220 shipping-related companies based in the country. The Cypriot maritime transport cluster represents around 7% of the GDP and employs around 9,000 persons (3% of the total gainfully employed population).

Cyprus, and more particularly Limassol, is considered to be the largest third-party ship management centre in the EU, and one of the top five in the world, providing ship management services to around 3,300 ships under various flags, with a net tonnage of 47 million. Over 20% of the world’s third-party managed fleet and around 5% of the world fleet are managed from Cyprus.

Cyprus takes pride in its re-election to the International Maritime Organization Council for the two-year period 2020–21, ranking fourth in Category C, with a higher number of votes than ever before, strengthening its role in the European and international decision-making process. Additionally, in October 2020, Cyprus was elected for the first time to the Presidency of the Executive Committee of the Mediterranean Memorandum of Understanding on Port State Control, of which it is a member state.

The recent discovery of hydrocarbons in the Exclusive Economic Zone of the Republic of Cyprus widens the horizons of the Cypriot shipping industry, creating synergies and new prospects. Offshore exploration and production of oil and gas, as well as their transportation ashore, require specialised ships and equipment, and specialised supporting services. A new industry is emerging in Cyprus to meet the needs of the offshore activities. Many Cypriot-based shipping companies are very keen to be involved in the industry and some have taken this step by broadening their activities. It is also anticipated that additional shipping companies operating in non-EU jurisdictions will relocate their offices and operations to Cyprus to explore the benefits of the emerging Eastern Mediterranean offshore market. On the basis of the above, Cyprus can develop into an important energy centre in the Mediterranean region, with new shipping and energy projects, and the policy of its government includes Cyprus's future maritime transport needs for the exploitation of hydrocarbons.

The Establishment of the Shipping Deputy Ministry

The Shipping Deputy Ministry, which is responsible for maritime and shipping matters in Cyprus, was established on 1 March 2018, replacing the Department of Merchant Shipping. The day is marked as historic because the Shipping Deputy Ministry is an autonomous deputy ministry, dedicated entirely to Cyprus’s maritime industry, with strategically located overseas maritime offices – in Piraeus, Brussels, Rotterdam, Hamburg, London and New York City – offering services to seafarers and Cypriot ships.

Its mission is based on the safeguarding and further development of Cypriot shipping as a safe, socially responsible and sustainable industry; the enhancement of the national economy; and the creation of jobs, specialisation and expertise in the sector. At the same time, the Shipping Deputy Ministry has been implementing a comprehensive "Blue Growth" strategy that not only includes enhancement and updating of the shipping regulatory framework and processes, but also focuses on digitalisation, the promotion of blue careers and shipping education, and a focus on maritime innovation and contribution to the development of responsible environmental policies and solutions.

The Shipping Deputy Ministry strongly encourages and supports research and innovation initiatives. Examples such as the Cyprus Marine and Maritime Institute (CMMI) and the Cyprus Foundation of the Sea promote technological innovation, bringing together the academic world with the public and private sector to develop innovative systems providing solutions to respond to the green and digital transformation of the sector. At the same time, the steady growth of the three maritime academies operating across the country, the introduction of a maritime direction in secondary education and the extension of the Shipping Deputy Ministry’s grants and scholarships aim to ensure the continuous supply of high-calibre human talent into the Cypriot shipping market.

Safety Achievements of the Cyprus Flag

The International Chamber of Shipping published on 27 January 2021 its annual Flag State Performance Table for the year 2020–21, which provides an invaluable indicator of the performance of individual flag states worldwide. It analyses how the countries included delivering against a number of criteria, such as port state control records, ratification of international maritime conventions and attendance at IMO meetings.

Τhe level of performance of many of the largest flag states – including Cyprus – continues to be very positive. More specifically, Cyprus maintains its reputation as a traditional large flag state with exceptionally high standards. As a party to all international maritime conventions on safety, security, pollution prevention, maritime labour, and health and safety, Cyprus gives full and complete effect to their provisions.

It is worth mentioning that 48 Cyprus-flagged vessels were detained worldwide in 2019, while in 2020, the number of such vessels was only 29.

Moreover, during the last quarter of 2019, the Shipping Deputy Ministry successfully passed European Maritime Safety Agency (EMSA) audits with no observations on safety and security, while Cyprus's case will be used by EMSA as an example of successful use of best practices and procedures on safety. It is of great importance that a network of local inspectors of Cypriot ships covers important ports worldwide to ensure efficient and effective control of Cypriot ships and to avoid detentions by port state control (PSC).

The Cyprus flag is classified in the White list of the 1982 Paris Memorandum of Understanding on Port State Control (the Paris MOU) and the Tokyo Memorandum of Understanding on Port State Control in the Asia-Pacific Region 1994 (the Tokyo MOU). It is a top-quality sovereign flag that adheres to all safety and security standards deriving from the Paris and Tokyo MOUs. Cyprus is also a signatory to the Mediterranean Memorandum of Understanding 1997 on Port State Control.

In addition, based on the outcome of the US government’s 2019 Annual Report on Port State Control, Cyprus is no longer part of the Targeted Flag List of the United States Coastguard (USCG) in relation to the safety performance of flag administrations. The average detention ratio of Cyprus for 2017–19 was 0.96% compared to an average USCG ratio of 1.08%. In 2019, the detention ratio of Cypriot ships was reduced to 0.55%, down from 1.79% in 2018, while the USCG’s 2019 ratio was 1.12%. This will lead to fewer inspections for Cypriot vessels at US ports and it adds to the flag’s status as a high-quality flag that is consistently part of the White lists of the Paris and Tokyo MoUs.

New Cypriot Shipping Legislation

During 2019, 15 pieces of legislation were prepared by the Shipping Deputy Ministry. More specifically, five instruments were enacted and ten draft bills have been submitted to the office of the Attorney General for legal review.

The following are among the enacted instruments.

  • Instruments relating to the designation of the safety zones in the Exclusive Economic Zone of Cyprus, under these safety zones regulations.
  • Instruments referring to the simplification of the ship registration fees and dues to reflect the currency shipping needs that may be considered obsolete, resulting in lower registration fees. The Ocean-Going Commercial Ships initial registration fees were abolished in a bid to boost the Cypriot registry’s competitiveness and attract more ship registrations. In addition, there is no cost for the issuance of the initial certificates of Ocean-Going Commercial Ships, nor mortgage fees. New regulations with respect to the applicable fees and dues for non-Ocean-Going Commercial Cyprus Ships will be adopted within the coming months.
  • Furthermore, a model agreement has been drafted, governing the relations between the Cypriot government and the Recognised Organisations (classification societies) for statutory certification services. More specifically, in July 2019, a new agreement was signed between the Republic of Cyprus and the Recognised Organisations, which provides survey and certification services to ocean-going Cyprus flag ships on behalf of the Republic.

The conclusion of the new agreement with the 12 specialised and internationally acclaimed organisations was required as a result of legislative developments in shipping and to incorporate more flexible and technologically advanced procedures with the use of electronic services and certificates. In the new agreement the Croatian and Indian Registers of Shipping are included for the first time in the history of Cypriot shipping.

Among the ten draft bills prepared and submitted in 2019, the Shipping Deputy Ministry proceeded with the drafting of new legislation for the purposes of harmonisation with several EU directives. An integral part of this policy is the formulation of the national maritime spatial plan by March 2021, as required by the European Commission.

The directives deal with:

  • the registration of persons sailing on board passenger ships operating to or from ports of the member states of the Community;
  • the systems of inspections for the safe operation of roll-on/roll-off (ro-ro) passenger ships;
  • high-speed passenger craft in regular service; and
  • updated safety rules and standards for passenger ships.

The harmonising legislation referring to these directives is expected to be adopted in 2021.

Recent Changes in Shipping Legislation

Amendments to the basic law concerning the registration of ships, sales and mortgages

In December 2020, the Cyprus flag enacted the Merchant Shipping (Registration of Ships, Sales and Mortgages) (Amendment) Law of 2020, which expressly provides for the deletion of a Cypriot ship from the Register of Cyprus Ships following the sale of the ship by court order, as well as a new mortgage procedure.

New government policy on the registration of vessels in the Register of Cyprus Ships

In May 2019, the Shipping Deputy Ministry introduced the new government policy on the registration of vessels in the Register of Cyprus Ships, in an effort to clarify discrepancies in the previous policy and to further develop the competitiveness of the Cyprus flag, simplifying the ship registration procedures.

New government policy on yachts

In the first quarter of 2021, the Shipping Deputy Ministry is expected to adopt a special regulation policy for yachts, introducing an attractive provision for the yachting industry. In December 2019, the Cypriot Tax Department introduced the Cyprus Yacht Leasing Scheme, which has been approved by the European Commission. More specifically, the lease agreement must relate to the supply of services and not to the supply of goods, as the CJEU set out in Mercedes-Benz Financial Services UK Ltd (case No C-164/16).

Electronic Services Provided by the Cyprus Flag

Online services provided in the Register of Cyprus Ships

The Shipping Deputy Ministry recently upgraded its services with digitalisation and automatisation, allowing the electronic submission of seafarers’ applications, the electronic verification of certificates issued by the Cypriot registry and the management of the electronic Tonnage Tax System (TTS; an online tax calculator) through which beneficiaries (owners, charterers or ship managers of qualifying ships) can submit their applications. In addition, the Cyprus flag provides web services (eSAS) for Cypriot endorsements and seamen’s books, the recognition of the seafarers’ certificates of competency, the administration of the seafarers’ e-learning platform and the "Seafarers Career Information System" (SCIS), a career database to facilitate the employment of seafarers, including an interactive platform that allows seafarers to share career information with companies using the system. Last but not least, the electronic ship registration process (online applications) in the Cypriot registry, the digitalisation of the archives of the Shipping Deputy Ministry and the PSC platform are under development and are expected to launch in the coming months.

Use of electronic certificates in the Register of Cyprus Ships

Since 2018, the Shipping Deputy Ministry has accepted, in electronic form, statutory certificates issued to Cyprus-flagged vessels by the Recognised Organisations, provided that they satisfy the requirements set out in the International Maritime Organization’s (IMO's) Circular FAL.5/Circ.39/Rev.2, regarding the Guidelines for the use of electronic certificates. However, the existing practice of issuing hard-copy certificates remains acceptable.

Electronic deck logbooks on Cyprus-flagged vessels

In December 2020, the Shipping Deputy Ministry decided to accept the use of electronic deck logbooks as equivalent to the official deck logbooks that are published exclusively by the Cyprus flag, provided that the logbooks meet the requirements of IMO Resolution A.916(22), “Guidelines for the Recording of events related to Navigation”.

Use of electronic record books (ERBs)

The Maritime Environment Protection Committee, in its 74th session in May 2019, adopted Resolutions MEPC.314 (74), MEPC.316 (74) and MEPC.317 (74), by which amendments to MARPOL Annexes I, II, V and VI and the Technical Code on Control of Emission of Nitrogen Oxides from Marine Diesel Engines (NOX Technical Code 2008) are entering into force, allowing the use of ERBs (oil, cargo, garbage and ozone-depleting substances record books, the record of fuel oil changeover and the record book of engine parameters) for the purposes of recording operations related to the above annexes. These amendments entered into force as of 1 October 2020.

The Cyprus flag accepts the use of ERBs as an alternative means to a hard-copy record book, at the discretion of the ship-owner/manager. Ships using an ERB do not need to keep a hard copy of the same record. However, it is advised to have on board the ship a hard copy of the relevant record book, for use in case of failure of the ERB, lack of power to the electronic equipment, or until crew familiarisation with the use of the equipment.

The Development of the Environmental Policy in Cyprus

Another trend is an increasingly green and environmental focus within the shipping industry. New regulatory requirements, internationally and nationally, push the industry towards a greener environment that is also impacting shipping market dynamics in most sectors.

The environmental policy in Cyprus has undergone significant change, owing to increasing alignment of national law with European policy (acquis communautaire), and this has created momentum towards environmental protection by making it a political priority. Furthermore, in recent years, the Shipping Deputy Ministry has been promoting environmental protection as one of the major goals on its agenda.

Decarbonisation of Cyprus-flagged vessels

As a leading EU flag, Cyprus is committed to taking an environmentally sustainable path and supporting the industry in making progress towards its emissions reduction ambitions. In response to the latest IMO MEPC meeting from 16 to 20 November 2020, Cyprus welcomes the approval of the draft mandatory regulations to reduce carbon intensity of ships.

This is a step forward and a building block towards the implementation of the IMO's initial strategy for the decarbonisation of shipping. The draft amendments of MARPOL Annex VI, which are scheduled for formal adoption in June 2021, relate to mandatory goal-based technical and operational measures to reduce carbon intensity, including a review clause for the evaluation of the measures in the near future.

Cyprus encourages the examination of proposals put forward for the creation of R&D mechanisms. This will help to expedite innovation, and enable discussion of initiatives that support the development of low and zero-carbon technologies that the shipping industry can benefit from.

Financial incentives for environmental preservation

As a leading maritime nation, Cyprus recognises the need to encourage and reward those realising emissions reductions. To this extent, the Shipping Deputy Ministry has announced a new range of green incentives to reward vessels that demonstrate effective emissions reductions. The green incentives programme of the Shipping Deputy Ministry supports ship-owners in making sustainable choices and investing in new green technologies and cleaner operations.

State aid scheme for coastal vessels (de minimis)

Since September 2019, the Shipping Deputy Ministry has been implementing the state aid scheme for coastal vessels (de minimis), beneficiaries of which are the owners of coastal passenger vessels (registered under the Cyprus flag) engaged in the coastal passenger industry. The scheme will be valid for the period 2019–22 with a EUR3 million allocated budget (EUR1 million per year), provided that the minimum investment of the beneficiaries is at least EUR20,000. Among the scheme's aims are:

  • the enhancement of the protection of the marine environment;
  • the upgrading of coastal vessels;
  • further improvement of health and safety conditions for crew and passengers; and
  • the advancement of accessibility for people with disabilities.

Currently, 118 coastal passenger vessels of 7,671 gross tonnage (GT) are in the Register of Cyprus Ships.

Reduction of the Cyprus tonnage tax for environmentally friendly vessels

From fiscal year 2021, a reduction of up to 30% of the annual tonnage tax is possible in the case of a Cypriot ship or EU/EEA ship using mechanisms for the environmental preservation of the marine environment and the reduction of the effects of climate change. The Shipping Deputy Ministry gives particular importance to the environmental protection, internationally and locally, with the re-approval of the Cyprus tonnage tax, introducing discounted rates for environmentally friendly vessels.

The Cyprus flag will provide a "discount" on its TTS by comparing what emissions reductions are required of a vessel with what it achieves. For example:

  • the Energy Efficiency Design Index (EEDI) – vessels that have achieved further reduction of their attained EEDI compared to the required EEDI (Regulation 20/MARPOL ANNEX VI) will obtain a respective annual tonnage tax rebate of between 5 and 25%;
  • the IMO data collection system (DCS) – the environmental incentive relating to the IMO DCS applies to ships of 5,000 GT and above that comply with Regulation 22A of MARPOL ANNEX VI, and ships that demonstrate reduction of the total fuel oil consumption in relation to the distance travelled, compared to the immediately previous reporting period, will obtain an annual tonnage tax rebate of between 10 and 20%; and
  • alternative fuels – vessels using an alternative fuel and achieving CO₂ emissions reductions of at least 20% in comparison with traditional fuels will receive a rebate on annual tonnage tax of between 15 and 30%, which will be reviewed on a case-by-case basis, following a review of the documents submitted from a class society.

However, any vessel detained for any reason during a PSC inspection – that violates any European Commission regulation related to environmental protection, or in laid-up condition (warm or cold) during the calendar year – will not be eligible for the incentive.

Implementation of new environmental legislation

Recent changes in shipping lean towards taking drastic measures to minimise air pollution by ships, such as reducing the sulphur content of the fuel to 0.5% from 3.5% five years ago, have created a number of legislative instruments or amended existing ones, such as the MARPOL 73/78 Convention. Cyprus has adopted all related legislation. This is the main challenge the shipping sector is facing today and, to meet the targets, effort will be required across the industry for a number of years, for various reasons, including the availability of compliant fuels, the effects on ships’ machinery and the training of crews on proper documentation.

In addition, a significant change to the environmental regulations in Cyprus is the effort of Cyprus-flagged ships to comply with the requirement of obtaining an Inventory of Hazardous Materials Certificate, requested by Regulation (EU) 1257/2013, which expired on 31 December 2020.

Moreover, it is worth mentioning that on 8 November 2018, Cyprus ratified the International Convention for the Control and Management of Ship’s Ballast Water and Sediments (the Ballast Convention), to help prevent the spread of potentially harmful aquatic organisms and pathogens in ships' ballast water, and therefore Cyprus-flagged ships must carry on board an International Ballast Water Management Certificate issued by the Authorised Recognised Organisations.

Recent enforcement record

Cyprus performs random checks on ships arriving in its ports, under the PSC regime or specifically for pollution control purposes. For example, in the past 24 months there were about 180 checks on docked ships to check the compliance of the fuel they use with regard to the 0.1% sulphur content requirement, as provided by Directive (EU) 2016/802. The same practice is followed by other member states for Cyprus-flagged ships.

Recently, Cyprus checked five ships calling at Cypriot ports that had been reported as polluting the sea area under EU jurisdiction, which were detected by CleanSeaNet, a satellite monitoring system operated by EMSA.

The Action Plan of the Cyprus Flag during the COVID-19 Pandemic

Since February 2020, the Shipping Deputy Ministry has issued a plethora of circulars, taking urgent provisional measures for the operation of Cypriot ships and minimising risks to seafarers, passengers and others on board Cypriot ships during the COVID-19 outbreak. The Minister of Transport, Communications and Works, in exercising the powers vested in him by Article 14(1) of the Cyprus Ports Authority Legislation of 1973 to 2016, issued instructions for the implementation of restrictive measures at ports and port installations, as well as regarding crew-change protocol, to counter the pandemic.

In addition, the COVID-19 crisis has resulted in the rapid advancement of technology in the shipping sector. To that extent, the Shipping Deputy Ministry has made significant progress to simplify formalities and transform its services to a paperless environment, increasing the efficiency and attractiveness of the Cyprus registry and its relevant services. During the outbreak, the Shipping Deputy Ministry remained fully operational and continued to provide its services without any disruption, providing, at the same time, facilitations to shipping companies and owners of Cyprus-flagged vessels.

Among others, the Shipping Deputy Ministry adopted urgent provisional measures relating to the extension of the validity period of certain seafarers certificates, extended the annual/intermediate period or renewal surveys for all ships’ statutory certificates and gave the possibility of remote audits, acknowledging that Cyprus-flagged vessels are encountering increasing difficulties in arranging surveys, audits, inspections, etc. Moreover, the Shipping Deputy Ministry introduced special measures as to the deferral of payment deadlines for tonnage tax and annual maintenance fees.

Cyprus was one of the first countries worldwide that recognised seafarers as essential workers and introduced practical measures for crew changes. Since May 2020, around 5,000 seafarers have been repatriated or have been able to return to work through Cyprus.

With regard to the vaccination of seafarers, which is a complex issue in terms of logistics, Cyprus is involved in all the deliberations at global and EU level, for a collective and co-ordinated approach. More specifically, the Shipping Deputy Minister has recently declared that "Cyprus believes that it should be a distinction and a different approach for short sea and deep sea shipping. For short sea shipping, national measures appear to offer a better fit and regional co-operation might be easier to achieve. On deep sea shipping, issues such as the country of origin of the seafarers, transport (air travel restrictions, etc) issues, availability of vaccines, the two-stage vaccination process and the subsequent time required for a seafarer to be considered inoculated are potentially a logistical nightmare. For this reason, Cyprus believes that vessels operating in long-distance intercontinental routes should be considered an isolated COVID-19 zone, a ‘bubble’, hence the focus should be on seafarers ashore. In this respect, Cyprus proposes a co-ordinated global approach to ensure that an adequate number of vaccines for seafarers are available to the country of origin of seafarers." 

Brexit’s Impact on Cypriot Shipping

The risks to Cypriot shipping from Brexit seem to be minimal. British companies are in the process of registering ships to the Cypriot registry and other companies have moved their headquarters to the island. On a broader level, Brexit will affect shipping companies' income and trade, but Cypriot shipping has not been affected negatively, for the time being.

Cypriot registry

From 1 January 2021, British vessels are no longer considered part of the EU fleet. In addition, British shipping companies are no longer considered European and therefore cannot fit into the TTS unless they make the necessary changes to be considered European. The Shipping Deputy Ministry, to prevent the deletion of vessels from its registry, contacted and informed the affected parties to make their own preparations for the UK’s withdrawal from the EU, providing them with options. British nationals and companies that owned Cypriot-registered vessels, in order for them to continue to have their vessels registered under the Cyprus flag, had the following options:

  • to transfer the ownership of their vessels to a person who, by virtue of Section 5 of the Cypriot Merchant Shipping Law, is qualified to own a Cypriot ship;
  • to transfer the shares or change the directors of the registered owning company so that, by virtue of Section 5(4) of the Law, the registered owners will be deemed to be controlled by citizens of the EU or the EEA; and
  • to transfer the registered office of the current registered owning company (re-domicilisation) to the Republic of Cyprus (by virtue of Sections 354A to 354H of the Companies Law, Chapter 113) or to any other EU or EEA member state.

The vast majority of British ship-owners transferred the ownership of their vessels to newly incorporated Cypriot legal entities. More specifically, the British owners proceeded with the establishment of Cypriot entities in the island, in order for them to remain eligible to own Cypriot-registered vessels. No vessel has been deleted from the Cypriot registry as a result of Brexit.

Seafarers

Since the Merchant Shipping Law does not impose any restrictions on the nationality of seafarers working on board Cypriot ships, the around 2,000 British seafarers working on Cyprus-flagged vessels will continue to do so with no effect and the Cyprus flag will continue to certify and recognise these seafarers.

The arrival of British shipping organisations in Cyprus

Brexit has resulted in an increased interest form British-based maritime organisations that see Cyprus as an attractive jurisdiction for an outpost or base due to fears of loss of access to the bloc’s financial market.

The Steamship Mutual Underwriting Association (Europe) Limited, one of the largest shipping insurance companies in the international market, has operated in Limassol since February 2020, as a Brexit fall-back decision for the UK marine insurer following the uncertainty surrounding the UK's departure from the EU. The company’s decision to choose Cyprus for its activities shows that companies of this calibre confer prestige and consolidates Cyprus as a quality complex of maritime activities of international range.       

Another recent example is the British shipping firm P&O Ferries, which moved the registration of the six vessels in its English Channel operating fleet to Cyprus ahead of the UK’s departure from the EU, in part to keep its tax arrangements inside the bloc. On the question of why the company chose the Cyprus flag, the spokesman of P&O declared that "the Cyprus flag is on the White list of both the Paris and Tokyo Memoranda of Understanding on Port State Control, resulting in fewer inspections and delays, and will result in significantly more favourable tonnage tax arrangements as the ships will be flagged in an EU member state."

Apart from the financial perspectives, Cyprus provides competitive advantages in terms of attracting UK-based shipping and shipping-related companies that seek to retain their access to the European market. Among others, Cyprus has a high availability of highly educated, multilingual, motivated individuals specialised in a variety of areas, including shipping, finance, insurance and law. Cyprus is a common law jurisdiction, based on English law, with national legislation according to the acquis communautaire. The majority of the population have tertiary education and speak excellent English. More than 150 dedicated maritime specialists at the Shipping Deputy Ministry offer tailored, 24/7 service from their offices in seven countries. Moreover, Cyprus is a party to all international maritime conventions on safety, security, pollution prevention, maritime labour, and health and safety, giving full effect to their provisions. Cyprus has also concluded 27 bilateral agreements on merchant shipping, through which Cypriot ships receive national or most favoured nation treatment in the ports of other states. Those agreements with labour-supplying countries provide for specific terms of employment that are beneficial to ship-owners and seafarers.

The Development of the Ports and Marinas in Cyprus

Following the redevelopment of the old port of Limassol that is now available for pleasure boats and the success of Limassol Marina, which opened in 2014, work has been under way to develop a number of new marina projects to bolster Cyprus’s role as a yachting location in the Eastern Mediterranean. The Limassol Marina has already established itself as one of the most attractive and unique projects across Europe. Boasting a capacity of 650 berths, able to accommodate yachts between 8 and 115 metres, Limassol Marina is the first superyacht marina in Cyprus.

Two additional marinas, Paralimni and Ayia Napa, are under construction and are expected to be completed by the end of 2021. The two marinas will be a point of reference and a pole of attraction in the region, since they will contribute to the development of nautical tourism and, in general, the enrichment of the tourist product in the free city of Famagusta. Both marinas will be official ports of entry into the Republic of Cyprus, providing customs and immigration clearance 24 hours daily. Paralimni Marina will include 300 berths, while Ayia Napa Marina will host approximately 600 yachts in wet and dry storage.

Apart from the above marinas, in February 2020, the government of Cyprus signed an agreement with an Israeli consortium for the development of the Larnaca Port and Larnaca Marina, with an overall value of EUR1 billion, which will be the largest investment in Cyprus to date, according to the International Boat Industry. The signing of the concession agreement was completed in December 2020 and the “transition period” was activated in January 2021, which will last up to 12 months.

Construction work on the project is expected to start after the transition period – ie, at the beginning of 2022 – and is to be completed in four phases by 2037. The first phase will last five years and, among other things, aims to complete the new infrastructure works, so that citizens can use and enjoy the new spaces created.

The works include the expansion and reconstruction of the existing marina, so that it can accommodate 650 boats from 5 to 150 metres long and offer facilities such as boat repair and services. The upgraded marina will also have the possibility to accommodate "mega yachts” of up to 150 metres and approach a different clientele, which today seems reduced. The works also include the construction of the Marina Yacht Club. In addition, the upgraded Larnaca Port will be able to accommodate ships of up to 450 metres in length, such as luxury cruise ships, energy exploration vessels, military and other merchant ships.

Except for the above, following the completion of the privatisation process in February 2017, the Limassol Port’s operations are now provided by three private concessionaires. The Limassol Port, as the main port of Cyprus, is a multipurpose port with modern facilities for handling passengers, containers, ro-ro, general cargo vessels and bulk carriers. It also provides support to offshore oil and gas operations.

Last but not least, developments have been seen in the small port at Vassilikos, on the south coast approximately midway between Limassol and Larnaca, near to the main oil terminal of the island. There are plans that the Port of Vassilikos will be constructed as a new industrial port that will operate as an oil and gas service centre, and it is expected to be ready by 2023. Its strategic location makes Vassilikos the first terminal of its kind in the Eastern Mediterranean, connecting Europe and the Black Sea with the Middle East and Asia.

The Development of the Fishing Industry in Cyprus

Cyprus has a long-standing fisheries tradition. Despite its limited contribution (around 0.8%) to GDP, the Cypriot fisheries sector holds significant socio-economic importance, particularly in coastal areas. Over 300 types of fish have been found in the sea around Cyprus, some of them immigrants from the Red Sea through the Suez Canal. The Cypriot fishing fleet comprised 858 vessels in 2019, with a combined GT of 3,811 and a total engine power of 40,801 kW. The fleet is classified into three categories: small-scale coastal fishing vessels, bottom trawlers and purse seiners. Since 2010, the compulsory use of vessel monitoring systems is applicable to all professional fishing vessels of less than 15 metres in length overall that hold an A and B Category licence.

Cyprus accepted the European directions with respect to Cypriot Chapter 8 – Fisheries Law and it was generally agreed that the policy, priorities, management and other measures applied by Cyprus in this sector are aligned to this. A Fishing Monitoring Centre has been established to enforce the European Common Fisheries Policy.

The authority responsible for fishery matters in Cyprus is the Department of Fishery and Marine Research (DFMR) of the Ministry of Agriculture, Natural Resources and Environment. The mission of the DFMR is the sustainable management and development of fisheries and aquaculture, and the protection and preservation of the marine environment through an integrated scientific approach. It is also responsible for the maintenance and upgrading of existing fishing shelters on the island, along with the construction of new ones, with the aim of providing safe harbouring of professional fishing vessels. There are 16 fishing shelters in Cyprus under the jurisdiction of the DFMR.

New policy on the registration of fishing vessels under the Cyprus flag

On 23 May 2019, the Shipping Deputy Ministry updated its policy on the eligibility of fishing vessels registered under the Cyprus flag, imposing strict age-related restrictions. More specifically, fishing vessels aged 25 years and above are not accepted for registration in the Register of Cyprus Ships and in the Book of Parallel Registration. In other words, any fishing vessel of up to 24 years is eligible to be registered under the Cyprus flag, provided that an entry inspection and an annual inspection are carried out.

Furthermore, the Registrar of Cyprus Ships will not consider applications for the registration of fishing vessels unless they are accompanied by an official communication from the Director of the DFMR, informing the Registrar that the registration of the fishing vessel in question is allowed. Currently, 43 fishing vessels are registered in the Register of Cyprus Ships, with total GT of 2,507.

Recent issues in the Cypriot Registry

In May 2019, a fishing vessel that was above the age limit set by governmental policy was initially refused registration by the Registrar of Cyprus Ships based on the age limit requirements; however, successful registration of the vessel was achieved by this firm's shipping lawyer Mr Zacharias L. Kapsis, after proving that the fishing vessel had undergone a major conversion, ensuring the Registrar considered it as a new ship.

The redevelopment of the Liopetri fishing shelter

On 5 August 2020 the contract for the ambitious revamp of the Liopetri fishing shelter was signed. The EUR8.5 million project, one of the biggest involving a fishing shelter in Cyprus, includes the construction of a bridge over the Liopetri river, 100 berths for pleasure boats and another 35 for professional fishermen. In addition, there will be a training centre for canoes, coastal paths and facilities for fishermen, contributing significantly to sustainable fishing in Famagusta.

The project will boost not only the professional fishermen and tourism, but will also protect the marine environment. The project is co-financed by the European Maritime and Fisheries Fund (75%) and National Resources of the Republic of Cyprus (25%) and it is expected to be ready before the end of 2022. More specifically, the duration of the construction will last 30 months. The project has been on the cards for some years and was first intended to be launched in 2013 but was postponed because of the economic crisis that year.

Establishment of the Network of Scientists and Fishermen of Cyprus

On 23 September 2020 the Network of Scientists and Fishermen of Cyprus was created, which is co-financed by the European Maritime and Fisheries Fund. The Network is led by the Oceanographic Center at the University of Cyprus and is attended by the Pancyprian Association of Professional Coastal Fishermen, the Professional Fishermen of Multipurpose Boats, the Pancyprian Association of Professional Fishermen of the Small Fishing Boat and the Enalia Physis Environmental Research Center Ltd.

The main objectives of the Network are:

  • the protection of fisheries;
  • the safeguarding of the interests and rights of fishermen;
  • the identification, promotion and resolution of problems related to fisheries; and
  • the better and sustainable exploitation of fishery stocks.

Technological Innovation in Cyprus Shipping

Cyprus Centre for Land, Open Seas and Port Security

In September 2020, the Republic of Cyprus and the USA, in the framework of their bilateral co-operation in the security and defence realm, signed a memorandum of understanding to establish a training facility in Larnaca – the Cyprus Centre for Land, Open Seas and Port Security (CYCLOPS) – that will be Cypriot-owned and has already secured an initial funding sum from the US government for the purpose of establishing and operating. CYCLOPS will allow the USA to provide enhanced technical assistance related to safety and security, including border security, customs and export controls, port and maritime security, along with cybersecurity. Official construction began in February 2021.

Cyprus Marine and Maritime Institute

The CMMI is based in Larnaca and is an independent international scientific and business centre of excellence for marine and maritime activities that carries out research, technological development and innovation activities to provide practical solutions to the challenges that the marine and maritime industry, and society, faces or will face.

The proposal for the creation of the CMMI was submitted to the European Commission in November 2018 under the HORIZON 2020 "Spreading Excellence and Widening Participation" programme, and the project was awarded the grant. The Municipality of Larnaca is the co-ordinator of the project and the remaining partners are the Limassol Chamber of Commerce and Industry, the Maritime Institute of Eastern Mediterranean, Cypriot companies SignalGeneriX and GeoImaging, Irish research organisations Marine Institute and SmartBay Ireland, and the UK's Southampton Marine and Maritime Institute.

On 20 May 2020, the Shipping Deputy Ministry signed a memorandum of co-operation with the CMMI confirming the interest of both sides in the development and support of a joint strategic co-operation in the maritime sector with the aim of encouraging and developing maritime technology and innovation in Cyprus, promoting bilateral research co-operation in the blue economy.

Cyprus Foundation of the Sea

On 25 October 2017, the Council of Ministers of the Republic of Cyprus approved the establishment of the Cyprus Foundation of the Sea, the proposal of which was submitted by the Cyprus Shipping Chamber and MARINEM. The Foundation is supported by the Shipping Deputy Ministry and it will be the forum that, through R&D, will provide guidance as to the type of research, education and training that is required in the marine and maritime fields to promote “Blue Growth”.

Other Shipping-Related Developments in Cyprus

Re-establishment of the maritime passenger link between Cyprus and Greece

On 3 July 2020, the European Commission's Directorate-General for Competition approved a state subsidy for the operation of the sea passenger line between Cyprus and Greece. More precisely, EU’s Directorate-General for Competition has decided that the maritime passenger route between Cyprus and Greece is considered a general economic interest service under the current EU rules and can thus be supported with state/government funds.

On the basis of the above, in December 2020, the Shipping Deputy Ministry launched European Open Tender Procedure No SDM 13/2020 for the Establishment of a Passenger Maritime Link between Cyprus and Greece, securing the EU’s approval for a maximum state aid of EUR5 million annually for the 36-month contract, with the aim of reinstating the Cyprus–Greece ferry connection that was discontinued in 2000 after a sharp drop in the price of airline tickets, which made the line obsolete.

The ultimate aim of this project was to strengthen Cyprus’s connectivity with mainland Europe, creating a new market for travellers to and from Cyprus and Europe, since the only means of transport currently available to and from Cyprus is by air.

The tender closed on 29 January 2021 and despite the initial interest shown by potential bidders to secure the documents of the Open European Tender for the Cyprus-Greece Maritime Connection, no bids were submitted.

The Shipping Deputy Ministry said the reason for ferry operators not submitting tenders could be attributed to the uncertainty and economically precarious conditions created by the COVID-19 pandemic, which has taken its toll on the shipping and travel sectors. Further, it said resuming the Cyprus–Greece passenger ferry link will be revisited once conditions allow for negotiations with the shipping industry.

The new regime of the prolonged Cyprus tonnage tax and seafarer scheme

Following the formal assessment of the Cyprus tonnage tax and seafarer scheme, the European Commission concluded, on 16 December 2019, that the assessed scheme of Cyprus is compatible with the internal market and in line with the EU Guidelines on State aid to maritime transport, prolonging the Cyprus tonnage tax and seafarer scheme for next ten years (till 31 December 2029). The scheme provides competitive advantages, including a wider list of eligible vessels and ancillary activities, discount rates for environmentally friendly vessels and, more importantly, the companies operating under the current TTS can continue to do so with no major changes.

The scheme was unanimously approved, on 15 April 2020, by the plenary of the House of Representatives of the Republic of Cyprus, securing the viability of the Cypriot registry and shipping industry.

Cyprus was the first open registry within the EU to have a comprehensive, transparent and approved TTS by the EU.

Cyprus’s TTS applies to ship ownership, management and chartering activities. It is a system whereby beneficiary companies can choose to be taxed on the basis of their vessel’s net tonnage (tonnage tax) rather than on their actual profits from maritime transport activities. The tonnage tax is considered as one of the key assets of the Cypriot shipping industry in its efforts to attract more ships and companies to the Cyprus maritime cluster.

The Cypriot scheme has been found to contribute to the global competitiveness of the EU maritime sector without unduly distorting competition and encourages ship registration in Europe while preserving Europe’s high social, environmental and safety standards, and ensuring a level playing field.

Moreover, the Commission found that it complies with the rules limiting tonnage taxation to eligible activities and vessels. Furthermore, as regards taxation of dividends of shareholders, the Commission found that the Cypriot tonnage tax scheme ensures that shareholders in shipping companies are treated in the same way as shareholders in any other sector. As regards the seafarer scheme, the Commission found that Cyprus has agreed to apply the benefits of its respective scheme to all vessels flying the flag of any EU or EEA member state.

The attractive and transparent Cyprus TTS, among other things, provides exemptions to beneficiaries (owners of Cypriot ships, owners of foreign ships, charterers and ship managers) from income tax. Under the Cypriot corporate income tax law, every shipping company that is a tax resident in Cyprus and does not benefit from the tonnage tax scheme is subject to income tax in respect of its worldwide profits from its activities at the normal corporate tax rate (12.5%). As mentioned above, under the TTS, a special tax regime based on the amount of tonnage operated by eligible ship-owners, charterers and ship managers, applicable to eligible maritime transport activities, exempts the companies concerned from the general obligation to pay corporate income tax irrespective of the companies' profits or loss.

The tonnage tax for companies owning foreign vessels is payable by February 28th, while the tonnage tax for Cypriot vessels is payable by March 31st.

Before the establishment of the Shipping Deputy Ministry to the President of Cyprus in March 2018, 168 shipping-related companies were registered under the TTS, while 244 companies (45 ship managers, 42 charterers and 157 owners of foreign ships) are currently registered under it, with approximately 4,500 employees. Of those companies, 90% are controlled by EU interests.

There were more than 1,097 Cypriot qualifying vessels registered under the TTS as at January 2021.

The importance of the newly approved Cyprus tonnage tax and seafarer scheme

With the implementation of the new scheme, Cyprus intends to:

  • boost the competitiveness of ship-owners and operators (charterers and ship managers);
  • maintain and increase jobs and maritime expertise, to support the development of the maritime economy;
  • encourage the employment of seafarers from EU/EEA member states and the registration of vessels in their ship registers; and
  • contribute to linking up the maritime economies of member states whilst maintaining the overall competitiveness of the sector, as well as encouraging maritime-related research and innovation.

In particular, the Cyprus tonnage tax and seafarer scheme encourages the flagging or re-flagging of ships to EU/EEA member states' registers and promotes the maritime cluster, especially in terms of ship management services, thus helping to create a safe, efficient, secure and environmentally friendly maritime transport sector.

The maintenance and sustainability of a Cypriot-registered fleet is a national priority for the Republic of Cyprus, as well as the maintenance and attraction to Cyprus of companies engaging in shipping and shipping-related activities, with the aim of enhancing job creation and maritime expertise.

As regards the impact of the tonnage tax scheme, there has been a significant increase in the number of beneficiaries since 2010, mainly due to the relocation/establishment of additional companies in Cyprus as a result of the tonnage tax scheme as well as from the increase of the corporate tax rate in 2013. Based on data relating to the impact of the existing scheme, the Shipping Deputy Ministry estimates the forgone state revenue for 2020–29 at approximately EUR15 million per year.

As regards the financial impact of the seafarer scheme, the Shipping Deputy Ministry estimates the forgone state revenue for 2020–29 at approximately EUR400,000 per year.

Benefits for seafarers

There is no restriction on the nationality of the seafarers on board Cypriot ships, provided that they are holders of a valid Cyprus Seafarer’s Identification and Sea Service Record Book issued by the Cyprus Maritime Administration. There are also no restrictions on officer nationality. No income tax is charged, levied or collected upon the salary or other related benefits from the employment of eligible seafarers (officers, crew members or masters) who are tax residents of Cyprus and are employed on board a Cypriot ship that is a qualifying ship engaged in maritime transport. More than 55,000 seafarers are employed on board Cypriot ships and 9,000 shipping personnel are employed onshore. The sector employs around 3% of Cyprus’s workforce.

Reform of Cyprus’s judicial system

On 6 May 2019, the Council of Ministers of the Republic of Cyprus announced the approval of a draft bill providing for the establishment of admiralty and commercial courts in Cyprus. This bill aims to constitute the fundamental basis of reforming the judicial system of Cyprus by providing fast and effective remedies for commercial and admiralty disputes. The ultimate aim is to strengthen the island’s shipping industry and help to attract more investors.

Establishment of the Deputy Ministry of Tourism

In January 2019, the Deputy Ministry of Tourism was established, replacing the Cyprus Tourism Organisation. The Deputy Ministry of Tourism is responsible, amongst others, for the implementation of the Regulation of Marinas Laws of 1977 to 2002 and the Administration of Leisure Boats Docking Space Laws of 2007 to 2013. Larnaca Marina is also under the exclusive jurisdiction of the Deputy Ministry of Tourism.

Conclusion

Given the unique characteristics of the island, Cyprus will always have a prominent place in global maritime issues, playing a leading role and active contribution in the formulation of global and EU maritime policy, contributing to the IMO, International Labour Organization and EU discussions on forming regulation. However, despite the growth of the shipping industry in Cyprus, one of the major challenges that needs to be addressed is the Turkish embargo imposed on ships carrying the Cypriot flag and the relevant implications for the competitiveness of the Cypriot registry.

A. Karitzis & Associates L.L.C.

228 Arch. Makarios III Ave.
Agios Pavlos Court
Block B, 4, Floor 3030 Limassol
P.O. Box: 58244, 3732 Limassol
Cyprus

+357 25 028 114

+357 25 028 115

mail@karitzis.com www.karitzis.com
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Scordis Papapetrou & Co LLC is a leading and dynamic Cyprus law firm whose roots date from 1922. The firm and its associated entities comprise over 35 qualified lawyers and over 70 other professionals of various disciplines, working out of offices in Nicosia, Limassol, Athens, Moscow and Valletta. The firm offers, together with its affiliates and subsidiaries, in addition to other traditional services of a law firm, a wide range of services, such as international litigation, arbitration and dispute resolution, corporate and commercial, mergers and acquisitions, shipping, estate and tax planning and trusts, company/fund formation and administration, fiduciary and trustee services, accounting and tax advisory, and financial services. To date, the firm and its affiliated entities have acted in and advised on a multitude of multimillion corporate, shipping and commercial matters as well as major landmark court and arbitration cases.

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A. Karitzis & Associates L.L.C. is a full-service, innovative and forward-thinking law firm headquartered in Limassol, the shipping and financial capital of Cyprus, with offices in Athens, Greece, as well. It is composed of an experienced, diligent and dedicated team of dynamic professional lawyers, who deal with most areas of common law-based Cypriot law in its adapted form after the accession of Cyprus to the EU in 2004. The professionals of A. Karitzis & Associates L.L.C. provide integrity, efficiency and trust to clients, offering a comprehensive range of legal and administrative services. The firm covers all major practice area disciplines and boasts a diverse portfolio of clients ranging from local to global businesses and corporations, non-profit organisations, SMEs, large groups of companies, and private individuals of all levels of wealth, including some HNWI and UHNWI. The Shipping Department of A. Karitzis & Associates L.L.C. – having experience and in-depth knowledge of shipping and maritime law, and advising banks, owners, managers, charterers, cargo-owners and their respective insurers domestically and internationally – is able to offer clients any kind of services related to the legal aspects of maritime affairs.

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