Investment Treaty Arbitration

Investment Treaty Arbitration: Cyprus

Overview of investment treaty programme

1. What are the key features of the investment treaties to which this country is a party?

Cyprus

BIT Contracting Party or MIT

Substantive protections

Procedural rights

Fair and equitable treatment (FET)

Expropriation

Protection
and security

Most-favoured-nation (MFN)

Umbrella clause

Cooling-off period

Local courts

Arbitration

Albania (not in force)1

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Armenia (1 July 1996)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Belarus (3 September 1998)2

               

BLEU (Belgium-Luxembourg Economic Union) (5 June 1999)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Bulgaria (18 May 1988)

No

Yes

No

Yes

No

No

No

Yes

China (29 April 2002)3

               

Czech Republic (25 September 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes4

Yes

Egypt (11 May 1999)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Greece (26 February 1993)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Hungary (25 May 1990)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

India (12 January 2004)

Yes

Yes

No

Yes

No

6 months

No

Yes

Iran (not in force)6

               

Israel (17 June 2003)

Yes

Yes

Yes

Yes

No

6 months

Yes7

Yes

Italy (not in force)8

               

Jordan (19 July 2010)9

               

Lebanon (19 March 2003

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Malta (30 November 2003)10

               

Moldova (27 March 2008)11

               

Poland (6 July 1993)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Qatar (not in force)12

               

Romania (10 July 1993)

Yes

Yes

No

Yes

No

3 months

Yes13

Yes

Russian Federation (not in force)14

Yes

Yes

No

Yes

No

6 months

Yes15

Yes

San Marino (27 June 2007)16

               

Serbia and Montenegro (23 December 2005)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Seychelles (19 March 1999)17

               

Syrian Arab Republic (30 December 2007)18

               

 

FTAs/EPAs

Substantive protections

Procedural rights

Fair and equitable treatment (FET)

Expropriation

Protection and security

Most-favoured-
nation (MFN)

Umbrella clause

Cooling-off period

Local courts

Arbitration

ECT (16 April 1998)

Yes

Yes

Yes

Yes

Yes

3 months

Yes19

Yes

Qualifying criteria - any unique or distinguishing features?

2. What are the distinguishing features of the definition of “investor” in this country’s investment treaties?

Cyprus

Issue

Distinguishing features in relation to the definition of ‘investor’

Physical and juridical persons/citizenship and seat of investor

In general, the majority of Cypriot BITs define as investor any physical persons with the citizenship of a Contracting Party and any juridical persons established with the laws of a Contracting Party and who are making investments in the territory of the other Contracting Party. The Bulgaria BIT does not refer to physical persons with respect to Bulgarian investors. The following BITs require the juridical person to also have its seat at the Contracting State: Bulgaria, BLEU (Belgium-Luxembourg Economic Union), Greece, Lebanon and Serbia and Montenegro. The India and Romania BITs have such requirements only with respect to investors from the Cypriot Republic. The Czech Republic BIT specifically refers to a permanent seat in the territory of a Contracting Party.

Control by a non-national

The Albania and Lebanon BITs include in their definition of investors, those making investments in the territory of one Contracting Party which are a legal entity of that same Contracting Party and which are actually owned or controlled by investors of the other Contracting Party, if they have been made in accordance with the laws and regulations of the former Contracting Party.

Permanent residents

As far as natural persons are concerned, the vast majority of BITs define them in relation to their nationality.

Dual nationals

The Israel BIT includes as investors companies incorporated or constituted in accordance with the law of the Contracting Party which have not been accorded a non-resident status and which are not directly or indirectly controlled by companies incorporated or constituted in accordance with the law of the other Contracting Party. Further, it prohibits investors who are dual nationals, ie, physical persons who have the nationality of both Contracting Parties.

3. What are the distinguishing features of the definition of "investment" in this country’s investment treaties?

Cyprus

Issue

Distinguishing features in relation to the concept of ‘investment’

Eligible assets

The majority of Cyprus’ BITs include in their definitions of investments assets, rights and properties which are connected with participation in enterprises or in associations or in other types of participation. The Lebanon, Czech Republic, India, Russia, Albania, Serbia and Montenegro BITs also specifically include as investments rights to undertake economic and commercial activities conferred by law or by virtue of a contract.

Accordance with local laws

All of Cyprus’ BITs require an investment to be made in compliance with the laws and regulations of the relevant Contracting Party and any permission that may be required. A possible change of the form in which the investments have been made does not affect their substance as investments, provided that such a change does not contradict the laws and regulations and permissions of the relevant Contracting Party.

Substantive protections - any unique or distinguishing features?

4. What are the distinguishing features of the fair and equitable treatment standard in this country’s investment treaties?

Cyprus

Issue

Distinguishing features of the fair and equitable treatment standard

Illustrations of the FET standard

Almost all BITs with Cyprus contain the obligation to provide fair and equitable treatment to investments.

Customary international law

The Lebanon BIT qualifies that such treatment shall be no less favourable than that required by international law.

No explicit reference to the FET

The Bulgaria BIT does not explicitly refer to the fair and equitable treatment standard.

5. What are the distinguishing features of the protection against expropriation standard in this country’s investment treaties?

Cyprus

Issue

Distinguishing features of the ‘expropriation’ standard

Right to regulate for a public purpose

All of Cyprus’ BITs provide a Contracting State with the right to regulate for a public purpose.

Indirect expropriation

All of Cyprus’ BITs regulate the case of indirect expropriation by a Contracting State, usually by the provision of the following language: direct or indirect measures having an effect equal to nationalisation or expropriation.

Limited right to arbitration

Only the Bulgaria BIT is provides specifically for the right of an international ad hoc arbitration in cases of disputes on the amount of compensation for expropriation, which were not settled in an administrative order and within 3 months of consultations. The arbitration takes place at the request of the concerned investor.

Expropriation in accordance with the ‘due process of law’

All of Cyprus’ BITs provide that expropriation takes place with the ‘due process of law’.

The investor’s right to prompt review

The majority of Cyprus’ BITs (ie, Albania, Armenia, Bulgaria, Czech Republic, Greece, India, Israel, Lebanon, Serbia and Montenegro and Romania) provide an investor with the right to require from a judicial or any other independent body of the host-State the evaluation of the investor’s investment.

Right to compensation

All of Cyprus’ BITs qualify an expropriation for a public purpose and with due process with the obligation of prompt, adequate and effective compensation. The amount of such compensation is usually estimated in accordance with the laws and regulations of the country where the expropriation is made.

6. What are the distinguishing features of the national treatment/most-favoured-nation treatment standard in this country’s investment treaties?

Cyprus

Issue

Distinguishing features of the ‘national treatment’ and/or ‘most favoured nation’ standard

Scope of MFN and national treatments

All of Cyprus’ BITs provide for national treatment and most favoured nation standards. Such standards extend to the management, maintenance, exploitation, enjoyment or disposal of investments.

Common exceptions or limitations to MFN and national treatments

Common exceptions to such standards relate to the benefits resulting from a membership in a monetary union, customs union, economic union, common market, regional economic integration organisation or free trade area, (double) taxation agreements or taxation legislation.

Specific limitation to MFN and national treatments

The Lebanon BIT specifically provides that the standards will not prevent the Lebanese government from applying Decree Law No. 11614 of 4 January 1969 as amended, concerning the acquisition in Lebanon of real estate and other real rights by non-Lebanon investors. The Czech Republic BIT sets out those treatments will be granted on the basis of reciprocity. The Russia BIT also reserves the right to make or maintain exceptions to the national treatment standard in accordance with its own legislation.

7. What are the distinguishing features of the obligation to provide protection and security to qualifying investments in this country’s investment treaties?

Cyprus

Issue

Distinguishing features of the ‘protection and security’ standard

Extent of obligation

The majority of Cyprus’ BITs provide that investments shall enjoy full protection and security (ie, BITs with Armenia, Albania, BLEU (Belgium-Luxembourg Economic Union), Czech Republic, Egypt, Greece, Hungary, Israel, Serbia and Montenegro, Lebanon and Poland).

Restriction of obligation

The BLEU (Belgium-Luxembourg Economic Union) BIT provides an exception to the obligation for full protection and security protection for measures required to maintain the public order. Further, this BIT restricts the protection to the exclusion of any unjustified or discriminatory measure which could hinder, either in law or in practice the management maintenance, use, possession or liquidation.

International law on protection and security

The Lebanon BIT specifically sets out that such protection shall be no less favourable than that required by international law.

8. What are the distinguishing features of the umbrella clauses contained within this country’s investment treaties?

Cyprus

Issue

Distinguishing features of any ‘umbrella clause’

Scope

The majority of Cyprus’ BITs do not contain an umbrella clause. Examples of BITs that do are the ones with BLEU (Belgium-Luxembourg Economic Union) and Lebanon.

Qualification of the Obligation

The BIT with BLEU (Belgium-Luxembourg Economic Union) provides and undertaking to observe ‘commitments’ entered with investors. The BIT with Lebanon sets out that ‘obligations in writing’ entered into with regard to investment of investors shall be observed.

9. What are the other most important substantive rights provided to qualifying investors in this country?

Cyprus

Issue

Other substantive protections

Free transfer of payments

All Cyprus’ BITs provide for the unrestricted transfer of investments and their returns in a freely convertible currency, without delay.

Transfer restrictions

The Albania BIT stipulates that it may adopt or maintain measures relating to cross-border capital and payment transactions adopted by the European Communities.

Non-impairment

The following BITs with Cyprus impose upon Contracting Parties the obligation not to impair the management, maintenance, use, enjoyment or disposal in its territory, of investments by investors of the other Contracting Party: Albania, Armenia, Egypt, Hungary, Israel, Lebanon, Poland and Romania.

Essential security interests/ general exceptions

The Czech Republic, India and Serbia and Montenegro BITs set forth that nothing in the said BITs shall be construed to prevent either Contracting Party from taking measures to fulfil its obligations with respect to the maintenance of international peace and security.

Application of other rules

The following BITs with Cyprus’ provide if the laws of the Contracting Parties to the BIT, and current and future international agreements between them or other international agreements, whose signatories are the Parties to the BIT consist of provisions by which investments of other Party’s investor are given a treatment more favourable than the one provided by the BIT, such laws and agreements shall prevail if they are more favourable: Albania, BLEU (Belgium-Luxembourg Economic Union), Czech Republic, Egypt, Greece, Israel, Serbia and Montenegro and Poland.

Facilitation of the necessary permits

The following BITs with Cyprus’ provide that each Contracting Party will permit in accordance with its laws, regulations and administrative practices followed, the entrance and stay of the investors, employees and workers of the other Party who are involved in activities connected with the investments: Armenia, Albania, BLEU (Belgium-Luxembourg Economic Union), Bulgaria, Hungary, India, Lebanon and Romania.

Procedural rights in this country’s investment treaties

10. Are there any relevant issues related to procedural rights in this country’s investment treaties?

Cyprus

Issue

Procedural rights

   

Fork-in-the road

The majority of the Cypriot BITs contain fork-in-the-road provisions. According to these provisions, investors may submit their dispute for resolution either to the local courts or to international arbitration.

Waiver of local remedies

The BLEU (Belgium-Luxembourg Economic Union) BIT specifically provides for a waiver of local remedies.

Failure to amicably settle dispute/ time limits

The majority of Cyprus’ BITs provide for the opportunity of an amicable settlement of 6 months. The Romania BIT provides for a settlement opportunity of 3 months and the Bulgaria BIT sets no time limit.

Written notice

Belgium, Czech Republic, Serbia and Montenegro requires a written notice of the dispute accompanied by a sufficiently detailed memorandum.

ICSID or other institutions or ad hoc arbitration

All of Cyprus’ BITs provide for the opportunity of an international arbitration as a form of dispute settlement at ICSID or other institutions or ad hoc.

Applicable law

All of Cyprus’ BITs provide that the law of the Contracting Party in which the investment is made as well as international law and the BIT itself shall apply in the settlement of any investment disputes.

Status of award

All of Cyprus’ BITs provide that an international arbitral tribunal’s award is final and binding.

11. What is the status of this country’s investment treaties?

Cyprus

There has been no amendment in relation to the Bilateral and the Multilateral Investment Treaties noted above. Nor has there been any indication that the Republic would renounce its membership of ICSID.

Practicalities of commencing an investment treaty claim against this country

12. To which governmental entity should notice of a dispute against this country under an investment treaty be sent? Is there a particular person or office to whom a dispute notice against this country should be addressed?

Cyprus

Government entity to which claim notices are sent

If a Treaty does not stipulate upon whom a dispute notice is to be served, the notices should be addressed to the Ministry of Justice and/or the Ministry of Finance of Cyprus.

13. Which government department or departments manage investment treaty arbitrations on behalf of this country?

Cyprus

Government department which manages investment treaty arbitrations

The Ministry of Justice and/or the Attorney General of Cyprus.

14. Are internal or external counsel used, or expected to be used, by the state in investment treaty arbitrations? If external counsel are used, does the state normally go through a formal public procurement process when hiring them?

Cyprus

Internal/external counsel

Both internal and external Counsel are used. There is no formal public procurement process for hiring either Counsel.

Practicalities of enforcing an investment treaty claim against this country

15. Has the country signed and ratified the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965)? Please identify any legislation implementing the Washington Convention.

Cyprus

Washington Convention implementing legislation

The Washington Convention entered into force in Cyprus on 25 December 1966 (Council of Ministers Decision No. 5331 of 20 January 1966 (Off. Gaz. 532, October 27, 1966))

16. Has the country signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention)? Please identify any legislation implementing the New York Convention.

Cyprus

New York Convention implementing legislation

Cyprus International Arbitration in Commercial Matters Law of 1987 (L. 101/87)

17. Does the country have legislation governing non-ICSID investment arbitrations seated within its territory?

Cyprus

Legislation governing non-ICSID arbitrations

The Cyprus International Arbitration in Commercial Matters Law of 1987 (L. 101/87), which is almost identical to the UNCITRAL Model Law, would govern non-ICSID arbitrations (Article 2(5)). Its application is, however, subject to any bilateral or multilateral agreements in force in the Republic of Cyprus which may be relevant (Article 3(1)).

18. Does the state have a history of voluntary compliance with adverse investment treaty awards; or have additional proceedings been necessary to enforce these against the state?

Cyprus

Compliance with adverse awards

No publicly available awards have been rendered against Cyprus under its investment treaties. Three separate claims brought by Marfin Investment Group, CEAC Holdings Ltd. and Ayoub-Farid Saab and Fadi Saab respectively against Cyprus are presently being determined (see no. 23 below).

19. Describe the national government’s attitude towards investment treaty arbitration

Cyprus

Attitude of government towards investment treaty arbitration

All of Cyprus’ publicly available BITs include arbitration as the sole or one of the options for settling investor-state disputes. So far, Cyprus has not indicated that it would be derogating from such forms of dispute settlement.

20. To what extent have local courts been supportive and respectful of investment treaty arbitration, including the enforcement of awards?

Cyprus

Attitude of local courts towards investment treaty arbitration

Cypriot courts have never been called upon to enforce an investment treaty award against Cyprus, but it is expected that they take the same pro-arbitration stance they do in the enforcement of international commercial arbitral awards.

National legislation protecting inward investments

21. Is there any national legislation that protects inward foreign investment enacted in this country? Describe the content.

Cyprus

National legislation

Substantive protections

Procedural rights

FET

Expropriation

Other

Local courts

Arbitration

Constitution of Cyprus

No

Yes

No

Yes

No

Note: Cyprus also implements the investment policy of the Treaty on the Functioning of the European Union

National legislation protecting outgoing foreign investment

22. Does the country have an investment guarantee scheme or offer political risk insurance that protects local investors when investing abroad? If so, what are the qualifying criteria, substantive protections provided and the means by which an investor can invoke the protections?

Cyprus

Relevant guarantee scheme

Qualifying criteria, substantive protections provided and practical considerations

Multilateral Investment Guarantee Agency

Cyprus is a signatory to the Convention Establishing the Multilateral Investment Guarantee Agency (MIGA Convention) since 11 March 1987. Under MIGA, investors are protected against the risks of transfer restriction, expropriation, war and civil disturbance, breach of contract and not complying with financial obligations. The criteria for protection are set out by the Convention itself.

Awards

23. Please provide a list of any available arbitration awards or cases initiated involving this country’s investment treaties.

Cyprus

Awards

Vigotop Limited v Hungary (ICSID Case No. ARB/11/22) Award, 1 October 2014

Hulley Enterprises Limited (Cyprus) v The Russian Federation , UNCITRAL (PCA Case No. AA 226) Interim Award on Jurisdiction and Admissibility, 30 November 2009 and Final Award, 18 July 2014

Veteran Petroleum Limited (Cyprus) v The Russian Federation , UNCITRAL (PCA Case No. AA 228) Interim Award on Jurisdiction and Admissibility, 30 November 2009 and Final Award, 18 July 2014

Libananco Holdings Co. Limited v Republic of Turkey (ICSID Case No. ARB/06/08) Decision on Preliminary Issues, 23 June 2008 and Award, 2 September 2011

Plama Consortium Limited v Republic of Bulgaria (ICSID Case No. ARB/03/24) Decision on Jurisdiction, 8 February 2005 and Award, 27 August 2008

ADC Affiliate Limited and ADC & ADMC Management Limited v The Republic of Hungary (ICSID Case No. ARB/03/16) Award, 2 October 2006

Pending proceedings

Marfin Investment Group v The Republic of Cyprus (ICSID Case No. ARB/13/27)

Cyprus Popular Bank Public Co Ltd v Hellenic Republic (ICSID Case No. ARB/14/16)

CEAC Holdings Limited v Cyprus/Montenegro (ICSID Case No. ARB/14/8)

Poštová banka as and Istrokapital SE v Hellenic Republic (ICSID Case No. ARB/13/8)

Ayoub-Farid Saab and Fadi Saab v The Republic of Cyprus (ICC)

Bycell (Maxim Naumchenko, Andrey Polouektov and Tenoch Holdings Ltd) v India (UNCITRAL)

Reading List

24. Please provide a list of any articles or books that discuss this country’s investment treaties.

Cyprus

Article/Book

www.law.gov.cy

www.cypruslawdigest.com

Chapter on Cyprus in: International Protection of Foreign Investment (2nd Edition, Juris Publishing 2014)

Notes

1 The Albania-Cyprus BIT was signed on 5 August 2010.

2 The text of the Belarus-Cyprus BIT is not publicly available.

3 The text of the China-Cyprus BIT is not publicly available.

4 The investor has the option to submit the dispute before local courts (Article 8(2)(a) of the Cyprus-Czech Republic BIT).

5 The investor has the option to submit the dispute before local courts (Article 9(2) of the Cyprus-Greece BIT).

6 The Cyprus-Iran BIT was signed on 2 March 2009. The text of the BIT is not publicly available.

7 The investor has the option to submit the dispute before local courts (Article 8(2)(a) of the Cyprus-Israel BIT).

8 The Cyprus-Italy BIT was signed on 27 April 2004. The text of the BIT is not publicly available.

9 The text of the Cyprus-Jordan BIT is not publicly available.

10 The text of the Cyprus-Malta BIT is not publicly available.

11 The text of the Cyprus-Moldova BIT is not publicly available.

12 The Cyprus-Qatar BIT was signed on 11 November 2008. The text of the BIT is not publicly available.

13 The investor has the option to submit the dispute before local courts (Article 8(2)(a) of the Cyprus-Romania BIT).

14 The Cyprus-Russian Federation BIT was signed on 11 April 1997.

15 The investor has the option to submit the dispute before local courts (Article 7(2)(a) of the Cyprus-Russian Federation BIT).

16 The text of the Cyprus-San Marino BIT is not publicly available.

17 The text of the Cyprus-Seychelles BIT is not publicly available.

18 The text of the Cyprus-Syrian Arab Republic BIT is not publicly available.

19 The investor has the option to submit the dispute before local courts (Article 26(2)(a) of the ECT).

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