Month: July 2019

Cyprus is a member of the European Union (EU). It acceded to the European Union on 1^st May 2004.

Since its accession, as is incumbent on all member states, Cyprus has complied with the EU public procurement directives and has enacted legislation on public procurement.

In accordance with Directive 2014/2016, Cyprus has enacted the Regulation of Procedures for the Award of Public Contracts and for Related Matters Law of 2016 (Law 73(I)/2016).

This is the basic legislation governing the procedure for the procurement of public contracts. This law is based on EU Directive 2014/24 as amended.

Additionally and also in accordance with Directive 2014/16, Cyprus has enacted the Regulation of Procedures for the Award of Public Contracts by Authorities Acting in the Water, Energy, Transport and Postal Services Sectors and for Related Matters Law of 2016 (Law 140(I)/2016), which is based on the EU Directive 2014/25 as amended.

The ‘effective remedy’ process for any tenderer that believes that it has been the victim of injustice in a public procurement process is the Recourse Procedure in the field of Public Contracts Law (Law 104(I)/2010) (the Remedies Law). It regulates remedies and the functioning of the Tenders Review Authority. This law was enacted in compliance with Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007, amending Council Directives 89/665/EEC and 92/13/EEC.

The above laws represent the basic legal framework for the public procurement process in Cyprus.

They are supported by subsidiary legislation, namely, in the case of Central government, the applicable regulations are the General Regulations for the Award of Public Supply Contracts, Public Works Contracts and Public Service Contracts (Regulatory Administrative Act (RAA) 2001/2007). These regulations regulate procedural matters and provide for the establishment and the operation of the appropriate technical and administrative evaluation bodies and organs for the public tender process.

The above RAA of 2007 sets out the rules and the procedures that must be followed in respect of:

• the formulation of a tender;
• the content of the tender document;
• the form of communication of the tender process;
• the submission of the tender;
• the technical and financial evaluation of the tender; and
• the award of the tender.

Other RAAs regulate the public procurement procedures to be followed by awarding bodies in the wider public sector, which encompasses the public law bodies such as the Electricity Authority of Cyprus, the Cyprus Stock Exchange, the University of Cyprus and others, including municipalities, regional development boards and the like.

Qualifying Threshold Values

Each tender process, being for the supply of goods or services or financial facilities, is governed by threshold values.

The threshold values are reviewed in line with the reviews made by the EU Commission in accordance with Directive 2014/24/EU.

Currently the thresholds are as follows:

• Central government contracts: services and supply contracts of minimum €144,000 and works contracts of minimum €500,000.
• Public sector (local or rural authorities and the public law organisations): services and supply contracts of minimum €221,000 and works contracts of minimum €500,000.
• Contracting authorities of the central government or the public sector in general, acting in the public utility fields: services and supply contracts of minimum €443,000 and works contracts of minimum €500,000.
• Concession contracts: services contracts of minimum €5,548,000 and works contracts of minimum €500,000.
• Contracts in the defence and security fields: services and supply contracts of minimum €443,000 and works contracts of minimum €5,548,000.

The threshold values are significant as they determine the recourse procedure that applies to the tender process.

Remedies in Public Procurement Procedures

For those tenders with values equal to or above the above thresholds, the recourse procedure to be followed may be either the Tenders Review Authority or the Administrative Court.

In the case of tender processes falling under the threshold values, the only recourse procedure open to tenderers is the Administrative Court.

The above is significant as the Tenders Review Committee provides a much more effective remedy than a recourse to the Administrative Court.

The most significant difference is the injunctive relief that is available to a tenderer that feels that it has suffered injustice. The injunctive relief has the effect of suspending the procurement process until the application of the tenderer is reviewed. A review process typically takes between four and six months.

In the case of a recourse to the Tenders Review Authority, the injunctive relief is issued at the time that it is applied for and the burden of proof is on the awarding authority to show why the injunction should not continue. The application for an injunction is returnable within five days and the decision as to whether the injunction will remain in place is issued within five working days from the filing of the recourse.

In the case of a recourse to the Administrative Court the remedy that is realistically available to a party cannot truthfully be described as effective.

An injunction will only be granted by the Administrative Court in the rarest of cases – where there is a flagrant and apparent violation of law.

A recourse before the Administrative Court also takes much longer than a recourse before the Tenders Review Authority; the time varies between six months and one year.

Time Limits for the Filing of Applications for Relief

Applications before the Tenders Review Authority must be filed within fifteen days of the tenderer becoming aware that it has been the victim of injustice or of an unlawful act or decision by the awarding entity.

Recourses before the Supreme Court may be filed within 75 days of the tenderer being notified of any act or omission that constitutes a breach of the law and causes injustice to the tenderer.

The General Principles to be followed in Public Procurement Procedures – the guiding principles for awarding authorities and tenderers

Awarding Authorities

Awarding Authorities must comply with the three basic principles in each step of the tender process:

• Transparency;
• Equal Treatment of Tenderers;
• Proportionality.

The above principles must be complied with in each step of the tender process by all public sector awarding authorities.

It should be noted that, even if a contract does not fall within the above threshold values, the thresholds and a recourse to the Tenders Review Authority is not available, the above mentioned principles governing public procurement procedures as well as the legislation and subsidiary legislation all need to be complied with as a recourse to the Administrative Court is available to a tenderer who has suffered injustice.

The Awarding Authorities must take care to formulate tender documents in a fair and transparent manner and avoid inequality or bias both in the formulation of tender documents and in the evaluation of tenders.

It should be noted that a recourse is theoretically possible and represents an important available option to a tenderer as soon as the tender document is issued. If a tenderer feels that the tender document as issued contains inequality or bias with respect to the technical or financial criteria or with respect to the tender conditions, then it must file a recourse against the said inequality or bias contained in the tender documents. It is not permissible for a tenderer to submit a tender (thereby taking part in the tender process) and at the same time allege inequality or bias in the said tender process.

Tendering Entities (Economic Operators)

Tenderers must ensure that they are fully conversant with the law and the contents and requirements of the tender document.

Each tender process has a period for the submission of questions by tenderers relating to the requirements of the tender and for the submission of requests for clarifications of submitted tenders by the authority that has issued the tender.

Tenderers must ensure that their questions and requests for clarifications to the authority issuing the tender and its own responses to requests for clarification are clearly drafted so that no misunderstandings can occur.

Common Issues Leading to Disqualification

Experience shows that there are certain areas where tenderers must take particular care in order to avoid disqualification.

The requirement for equal treatment of tenderers extends to the evaluation of tenders. A non-compliant tender or a tender containing a material non-conformity in terms of the financial or technical capability and capacity of a tenderer, must be disqualified.

A tender once submitted may not be amended so as to rectify a non-conformity.

Tenderers should be aware that tenders are evaluated with care and the compliance with the terms of the tender, the requirements for transparency, equal treatment of tenderers and proportionality are strictly adhered to.

Where a tenderer wishes to rely upon supporting entities, it must ensure that it does so in strict accordance with the terms contained in the tender documents both with respect to the aspects of the eventual contract that may be performed by the supporting entity as well as to what documentation and undertakings must be provided by the supporting entity as provided for in the tender documents.

Similarly, the documentation evidencing the financial and technical capability and capacity of a tenderer must be provided in strict accordance with the requirements of the tender documents. If they are not, a tender will be disqualified. Such requirement extends samples and to type test certificates of goods or materials to be provided, certification of a tenderers experience, ISO certificates, bank references, parent company undertakings or guarantees, powers of attorney, registration certificates, licenses, board of directors’ decisions required under the tender documents.

Tenderers must also take care to ensure that any tender (bid) bonds and performance bonds are provided in strict accordance with the requirements of the tender.

It is essential for a tenderer to ensure that it clarifies all areas of doubt within the time allowed in the tender documents so that it is certain that it has submitted a compliant tender. There is no rule against asking as many questions and as often as a tenderer requires in order to obtain the necessary clarity.

The form and method of submission of the tender must also be in strict accordance with the terms and the time limits contained in the tender documents.

In the case of Electronic Tender Processes, tenderers must be aware that the E-Procurement portal of the Accountant General’s Department of the Ministry of Finance, which is the entity that receives E-Tenders, often experiences difficulties, delays, date jams and even crashes with respect to the uploading of electronic tenders. Tenderers are therefore advised to ensure that they commence uploading process in good time so as to ensure that they are in a position to comply with the time limit for the submission of their tender.

Even though the Securities Financing Transaction Regulation (EU) 2015/2365 (“SFTR”) has been adopted by the European Parliament and the Council in November 2015 and came into force on 12 January 2016, reporting obligations start one year after the formal adoption of the reporting rules by the Commission; they are therefore expected to go live in Q2 of 2020. SFTR catches within its ambit, banks, brokers, insurance companies, pension funds, other financing companies and non-financial companies, managers of AIFMs, UCITS and management companies of UCITS. SFTR aims to expand transparency on the collateralised transactions given the concerns arising out of the use of a collateral for multiple times as part of a chain of transactions for liquidity purposes and reduction of funding costs. It targets to the use of repos, securities or commodities lending and securities or commodities borrowing, a buy – sell / sell – buy back transactions and margin lending transactions (“SFTs”). 

Transparency for reuse is achieved through the reporting obligations imposed on the entities covered by the SFTR to the trade repository. In accordance with Article 15 of the SFTR reuse should take place with the express knowledge and consent of the providing counterparty. In accordance with the Commission’s Q&A back in 2015 the reporting of SFTs will in practice be based on the existing reporting framework for derivative contracts established by the European Market Infrastructure Regulation (EMIR) and will work in a similar way i.e. a counterparty to a SFT will have to report the details of this transaction to a trade repository. The Regulation allows the delegation of the obligation to a third party. A financial counterparty concluding an SFT with a non – financial counterparty shall be responsible to report on behalf of both parties, an AIFM is responsible to report on behalf of an AIF (where the AIF is the counterparty), the management company of a UCIT must report on behalf of a UCIT (where the UCIT is a counterparty). EU branches of non – EU entities are subject to SFTR reporting. Counterparties must in general keep records of any SFT for at least five (5) years following the termination of the transaction. Main information to be reported include the parties to the SFT, the beneficiary of the rights and obligations arising therefrom, the principal amount, type, quality and value of the assets used as collateral and other details specified in the SFTR.

ESMA published a consultation paper relating to its guidelines for reporting under Articles 4 and 12 of the SFTR and invited an open hearing on the same on 15 July 2019.  ESMA will consider the feedback it receives and expects to publish a final report on the Guidelines on Reporting under SFTR in Q4 2019.

While SFTR reporting obligations are just around the corner (starting in 2020), EU firms are still getting used to the reporting responsibilities imposed by EMIR and MiFiD II. The reporting frameworks set by EMIR and MiFiD II do not appear to overlap with the SFTR. However, the process of collecting, extracting and eventually reporting the data may appear to be costly, complex and far reaching.

This is the last article of a series of articles relating to interim orders in Cyprus.

Part B | Part A

How long does it take for an interim order to be tried?

Clients often ask the logical question of how long will it take for final judgment on an application for an interim order. The answer harks back to the old English adage of “how long is a piece of string?”. There is no fixed timeline for trying an application for an interim order. Some finish within two months, others can take even years.

The time it takes for the date of filing to the date of final judgment by the Court is influenced by a multitude of factors. Some of these factors are:

• Whether one is serving within or out of the jurisdiction of the Court.
• Whether service can be effected speedily and with ease or not.
• Whether other interim applications will occur within the main application of the interim order (such applications may be for the cross examination of affiants, for supplementary affidavits to be filed, for contempt of Court in relation to the ex parte issued interim order, for amending the terms of the interim order etc.)
• The Court’s own schedule
• Time required for preparation by either side.
• Delaying tactics by either side

What is the actual legal procedure for trying an interim order?

Step 1: As interim order applications cannot be filed on their own in Cyprus, a main legal proceeding, either in the form of an action or a general application, must be filed. In its simpler form (the filing of an action), the procedure is as follows: The applicant files a claim under Order 2 Rule 1 of the Civil Procedure Rules. This is a generally endorsed claim as opposed to a specifically endorsed claim under Order 2 Rule 6 of the Civil Procedure Rules. 

Step 2: Along with the filing of the claim the applicant also files the application for the interim order which is accompanied by the supporting affidavit which in turn has as attached exhibits all the documentation that must be brought before the Court.

Step 3: The Court Registrar brings the interim order before a judge based on a secret rotor which only the Court Registrar knows. The judge decides, based on his schedule, when to hear the ex parte application. It could be on the same day, the day after or even three days down the line. It depends on the judge’s schedule.

Step 4: The applicant appears on the set date and the Court decides if it will issue the interim order on an ex parte basis or if it will refuse its ex parte issuance and order it to be served.

Step 5: If the interim order is issued ex parte the applicant the Court gives directions for it to be served to the opposing party fixing a date for service. The applicant must then furnish the guarantee to the Court Registrar who types up the interim order so it can be served along with true copies of the application on which it was issued.

Step 6: On the date fixed for appearance to check if service has been effected the opposing party will (most likely) appear (if they have indeed been served) and request for time to file an objection. The Court will set another appearance for directions and give directions for the objection to be filed by then.

Step 7: Once the objection has been filed, if there are no other applications lodged, the Court will proceed with setting a date for the hearing of the application. The hearing will be conducted by both oral and written submissions which will be presented to the Court on the date set for hearing.

Step 8: Once the hearing takes place the Court will most probably reserve judgment for a later date but could also hand judgment down on the day from the bench by way of what is known as an ex tempore (at the time) judgment. If the judgment is reserved the Court has up to two months to issue it. With the final judgment the interim order will either be made absolute or be quashed. In some instances, some parts of interim order may be made absolute while others quashed, depending on the circumstances of the case.

Of course, the above process is not always the case. Sometimes, and especially if there are a number of applications ancillary to the main application, things can become more complex and the procedure takes longer to reach a conclusion.

Enforcement of interim orders

An interim order is always accompanied with a penal notice. The penal notice states that a party not adhering to the interim order may have its property confiscated by the Court or may be jailed. Once a party (or person) served with an interim order disregards it and/or acts contrary to it he is deemed to be in contempt of Court. Being in contempt of Court is considered a very serious transgression under the Cypriot legal system. It is not an exaggeration to say that persons found in contempt of Court in relation to disregarding and/or acting contrary to interim orders do indeed run the risk of jailtime.