Category: Knowledge

Directive on Administrative Cooperation (DAC) 6 – EC DIRECTIVE 2018/822/EU (25.5.2018)

European Council Directive 2018/822/EU of May 25, 2018 (DAC 6) represents the biggest shake-up of rules on automatic exchange of information (AEOI) in the EU since the imposition of the Common Reporting Standard (CRS) back in 2014.

However, unlike the CRS and DAC Volumes1 to 5 which have hitherto targeted financial institutions DAC Volume 6 has its focus on mandating disclosure of Reportable Cross Border Tax Arrangements from “intermediaries” involved in cross-border tax arrangements with their clients.

Many intermediaries, including law firms, accountants and auditors, have until now broadly not needed to report tax information periodically since they fall outside the “financial institution” definition under the CRS.

This is all about to end.

The European Commission has made it clear that it sees intermediaries at the heart of aggressive tax planning and is therefore seeking mandatory disclosure from them.

The International Aspect – Jurisdictions Outside Europe

The OECD will no doubt follow for non-EU jurisdictions.

It is clear that mandatory disclosure requirements are on the increase the OECD (Organisation for Economic Cooperation and Development) is going to follow the European Commission in the imposition of enhanced mandatory disclosure requirements for cross-border transactions.

The EU Perspective

What is DAC 6?

“DAC 6” stands for the Directive on Administrative Cooperation in (direct) taxation in the EU, volume 6.

It operates as the sixth amendment to the long-running series of directives designed to encourage cross-border information exchange in the EU. The CRS, for example, was implemented in the EU in 2014 under “DAC 2.”

DAC 6 is the part of the DAC series which provides for mandatory disclosure of reportable cross-border tax arrangements (RCBAs).

The background for the implementation of DAC 6 by the EU is of course the ongoing international tug-of-war between the Organization for Economic Co-operation and Development (OECD) under its framework on Base Erosion and Profit Shifting (BEPS), in particular Action Plan 12, and the ever-growing prominence of low or no tax international  financial hubs that look to the increasing commoditization of international finance.

Standard principles of EU law require that EU Directives such as the DAC 6 Directive be implemented by member states through local laws in order to be locally applicable.

DAC 6 has been in force across the EU and reports as described in the directive would have been due as from 1^st July 2020 with the obligation to report cross border arrangements occurring post June 25, 2018, which was the 20th day following publication of DAC 6 in the EU’s Official Journal.

On 24^th June 2020 following informal agreement reached by EU member states the EU Council announced that the EU will give EU member states an extended time period to comply with DAC 6 requirements.

The reason given for this is the impact of the coronavirus pandemic.

In reality however, if the EU were to be totally honest, if there can ever be a convenient time for a global pandemic for DAC 6 this was it. The initial deadlines of 1^st July 2020 for reporting cross border arrangements and 31^st August 2021 for reporting historical cross border arrangements (from 25^th June 2018 to 30^th June 2020) was looking an increasingly onerous obligation, that would have been almost impossible to comply with and enforce. The extended dates of 1^st January 2021 and 28^th February 2021 respectively still appear to be optimistic, but with rigorous education and application an acceptable degree of compliance may be achievable.

The Disclosure Requirement under DAC 6.

It is important to note that DAC 6 implementation applies as from the date of publication of the DAC 6 directive in the EU Official Journal which was 25^th June 2018.

Under DAC 6 “intermediaries” are subject to reporting requirements.

An intermediary is any legal or natural person:

• that designs, markets, organizes or makes available for implementation or manages the implementation of an RCBA); or
• that provides, directly or by means of other persons, aid, assistance or advice with respect to designing, marketing, organizing, making available for implementation or managing the implementation of an RCBA.

Intermediaries that are involved in that way with RCBAs must report information on the RCBA to their tax authorities: it is here that DAC 6 resembles a form of AEOI similar to the CRS. There will then be automatic exchange of that information with other EU tax authorities.

In certain situations, the obligation to report can fall on the taxpayer itself. Taxpayer’s obligation to report arises where an intermediary is a non-EU person (which is narrowly defined), where no intermediary is involved—such as where an RCBA is arranged in-house—or where an intermediary does not disclose owing to legal professional privilege.

The question of whether a professional intermediary who is involved but who may be precluded from reporting by applying legal professional privilege is under an obligation to ensure that reportable cross border arrangements that they have been involved in is a legal moot point.

What is a Reportable Cross-Border Arrangement?

An arrangement will be considered “cross-border” where at least one of the participants is based in the EU (and regardless of the location of other participants). Therefore, in theory if one participant is in the EU, say London, another in North America, another in Hong Kong and another in Mexico the arrangement may be “reportable”.

An arrangement may be “reportable” where it contains at least one of “hallmarks” outlined below. The Hallmarks are loosely designed as indicators of presumed aggressive tax avoidance by the EU.

The hallmarks are themselves broken down into five sub-categories:

• Hallmark category “A”: arrangements whose tax benefits are subject to confidentiality arrangements that give rise to performance fees or mass marketed schemes;
• Hallmark category “B”: arrangements such as the contrived acquisition of loss-making companies, the conversion of income into capital or other forms of income, or so-called circular transactions;
• Hallmark category “C”: arrangements that give rise to tax deductions without a corresponding amount of taxable income, to certain double reliefs or deductions, or other such mismatches;
• Hallmark category “D”: arrangements that have the effect of undermining the CRS or the rules on identification of beneficial ownership;
• Hallmark category “E”: arrangements concerning transfer pricing.

Certain hallmarks will only be satisfied if an additional “main benefit test” is satisfied. To satisfy the test, one of the main objectives of the arrangement must be to obtain a tax advantage.

As will be appreciated, the above tests are not only imprecisely drafted but require a significant degree of judgment to determine if they apply.

If one considers the possibility of national competent authorities across the EU taking different views it is inevitable that there will be a patchwork approach to enforcement.

What Happens if there are Multiple Intermediaries?

This will frequently be the case, and in many cases arrangements will involve more than one EU country. DAC 6 has painted a picture of an ideal world where all the intermediaries cooperate with one another and take the same view on what is reportable, and where a single intermediary is charged with the reporting. DAC 6 fails to set out a strict reporting regime.

It is clearly unsafe and imprudent for any business engaged in cross-border business to leave reporting to chance and to risk non-compliance and investigations.

As lawyers we must impress upon our clients that it is in their interests to take a strong lead in coordinating the DAC 6 reporting exercise.

It is clear that at times the presence of multiple intermediaries is likely to lead to multiple reporting. In such cases care must be taken for the reporting to be consistent.

Exemptions from DAC 6 Reporting Requirements

• Domestic tax planning arrangements will be out of scope. For an arrangement to be caught, it will need to have a cross-border element.
• Only direct taxation, such as income tax, is relevant for the purposes of determining tax planning arrangements within scope. For example, tax planning in relation to value-added tax would remain out of scope.
• Depending upon the rules relating to legal professional privilege (LPP), LPP may be fully adopted as a limitation on the disclosure obligation.
• The directive provides for penalties against intermediaries for non-compliance.

The Wider Implications of Increased Mandatory Reporting

DAC 6 aims to ensure that the disclosure of information on reportable arrangements in the EU occurs in a harmonized manner. The level of detail that will be requested and the interpretation of the “Hallmarks” will determine the level of information that tax departments and ultimately the EU Commission will receive from intermediaries. The fear is that the information that may be required in terms of disclosure will ultimately have little, if anything, to do with harmonized tax reporting, but may be used in an infinite number of ways.

What Does DAC6 Mean for Cyprus Legal and Accountacy Professionals – Make or Break?

Despite the fact that for a number of years now Cyprus has been fully, if not over compliant with all relevant EU regulations in relation to both financial reporting and compliance, it is still is still, unfairly, viewed and indeed referred to as a “tax haven”. This is a picture that envious rival economies in both Europe and abroad like to disparage Cyprus.

In truth Cyprus is not a tax haven. It is a cost – effective jurisdiction that allows companies of substance to operate their businesses in a fully compliant and extremely tax efficient manner and to benefit from one of the lowest, if not the lowest corporate tax rates in the world. That is the key competitive advantage of Cyprus.

Europe is however inexorably moving to the introduction of full and transparent disclosure of cross border arrangements and to a Europe-wide uniform taxation system.

DAC 6 is another step in this direction, and it comes at the same time as the decision of the Russian Federation to revise its double tax treaty with Cyprus and it adds another compliance measure and an extra layer of costs to burden the “intermediary” and the client.

Cyprus will come under pressure to enforce DAC 6 rigourously. This is yet another challenge that the Cyprus services sector will face in the next few years and one that it will need to face and overcome.

The method and manner of national enforcement DAC 6 is a challenge that must be taken up by our Government and by our professional associations with a view to avoiding a repetition of the compliance fiasco that we are enduring with our banking system, where it is now easier to open a bank account for a client in Switzerland than it is in Cyprus.

The approach that Cyprus will take must be business focused and must be geared at retaining and increasing and enhancing business rather than making it more difficult for business to remain in and transact through Cyprus.

Legal professional privilege must be supported and insisted on by Government as an exemption to the reporting requirements of Cyprus in relation to DAC 6.

Τα κυπριακά δικαστήρια παρουσιάζουν ίσως τις πιο μεγάλες καθυστερήσεις της Ευρώπης στην εκδίκαση υποθέσεων. Καθημερινά επιβεβαιώνεται το ρητό «justice delayed is justice denied».

Οι επιπτώσεις της πανδημίας του κορωνοϊού οπωσδήποτε θα χειροτερεύσουν αυτή την κατάσταση.

Ίσως να είναι καιρός για δικηγόρους και διαδίκους να στραφούν στην διαδικασία της διαμεσολάβησης (mediation) σε περιπτώσεις όπου κρίνουν ότι θα μπορέσει να επιφέρει τη λύση στις διαφορές μεταξύ των πελατών τους σε συντομότερο χρόνο.

Η διαμεσολάβηση είναι μια εμπιστευτική, δομημένη διαδικασία που δεν δεσμεύει τους διαδίκους σε οποιοδήποτε αποτέλεσμα αλλά ούτε και στη συνέχιση της.

Αν δεν επιτύχει, η διαμεσολάβηση δεν παράγει μαρτυρία που μπορεί να χρησιμοποιηθεί στο δικαστήριο και τουλάχιστο δίνει στην κάθε πλευρά την ευκαιρία να γνωρίσει τις θέσεις της άλλης καθώς και τα δυνατά και αδύνατα σημεία της υπόθεσης της.

Η διαμεσολάβηση μπορεί να γίνει εξ αποστάσεως και εντός προκαθορισμένου χρονικού διαστήματος.

Η διαμεσολάβηση τελειώνει με την αποχώρηση ενός εκ των διαδίκων μερών, ή με την κοινή συναίνεση των διαδίκων μερών, ή με την συμφωνία διευθέτησης της διαφοράς που συντάσσεται από τον μεσολαβητή και υπογράφεται από τα μέρη και κατατίθεται στο δικαστήριο για σκοπούς εκτέλεσης.

Σκεφτείτε το!

In a recent judgment in action 880/2018, in which our firm acted for the Defendants, the District Court of Nicosia struck out a claim for abuse of the court’s process basing its decision on the so called “Aldi requirement” and the rule in Henderson v Henderson.

The legal significance of this particular judgment lies in the facts that:

• is the first time in which a Cypriot Court has applied the Henderson rule in solitude and has accepted it as a rule capable of operating on its own, without the need for it to be hinged on res judicata. In doing so the Cypriot court accepted that the Henderson rule can apply to subsequent proceedings even though the first proceedings have not yet been concluded, 

• the “Aldi requirement” has been adopted in to Cypriot law

The rule in Henderson v Henderson

The rule in Henderson v Henderson is an old common law rule emanating from the old English case of Henderson v. Henderson, 1843-1860, All ER Rep 378. In short, the Henderson rule is a rule of public policy aimed at preventing abuse of process and it dictates that the parties to a litigation must bring their whole case forward in one proceeding. Parties who do not avoid such multiplicity of proceedings run the risk of being found to have abused the Court’s process.

The major English case on the rule is Johnson v. Gore Wood & Co, 2002, 2 AC, in which the rule was summarised as follows:

«Thus the abuse in question need not involve the reopening of a matter already decided in proceedings between the same parties, as where a party is estopped in law from seeking to relitigate a cause of action or an issue already decided in earlier proceedings, but, as Somervell LJ put it in Greenhalgh v Mallard [1947] 2 All ER 255 , 257, may cover:

«issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them».

The importance of the Henderson rule in its wide ambit application is that a party may invoke it even though:

• the first proceedings have not yet been concluded (i.e a judgment is not required before the rule is invoked) and,

• the parties to the succeeding litigation are not exactly the same as the parties to the first litigation.

The “Aldi requirement”

The “Aldi requirement” was borne out of the more recent English case of Aldi Stores Ltd v. WSP Group Plc, 2007, EWCA Civ 1260. The Aldi case created a requirement for parties who are contemplating to bring further actions in relation to a subject matter already before the Court to make this known to the Court and their opponents so that the Court may exercise its case management powers effectively and maintain fairness to both parties.

In short, the Aldi requirement prevents a party from keeping a claim secret and disallows the tactical use of proceedings. In the case of  Stuart v Goldberg Linde, 2008, 1 WLR 823, which the Cypriot court made reference to in its judgment, the Aldi requirement was summarised as follows:

«Secondly, as Aldi again makes clear and as the Master of the Rolls stresses, a claimant who keeps a second claim against the same defendant up his sleeve while prosecuting the first is at high risk of being held to have abused the court’s process. Moreover, putting his cards on the table does not simply mean warning the defendant that another action is or may be in the pipeline. It means making it possible for the court to manage the issues so as to be fair to both sides.

In the instant case, although the claimant knew that he had a potential claim for inducement to breach the contract after he received Mr Linde’s witness statement in October 2000, he did not make that clear either to Mr Linde or to the court. In my opinion he should have done so and it is at least arguable that his deliberate failure not to do so for partisan tactical reasons renders this second action an abuse of the process of the court».

The decision in action 880/2018

The Court, in accepting the arguments of the Defence, struck out the claim on the grounds of abuse of process basing its decision on the following factors:

• The Claimants had breached the Henderson rule by choosing to lodge subsequent proceedings when they could have included their particular claim in the first action (that is still ongoing)

• The Claimants had breached the Aldi requirement by choosing to keep the subsequent action, action 880/2018, secret both from the Court and their opponents in the first action in order to obtain a tactical advantage in interim applications that were being litigated in the first proceedings.

The legal significance of this judgment

This decision is important because:

• it highlights the Cypriot courts’ unwillingness to excuse or entertain abuse of process. At a time when the backlog of cases is such that that the Cypriot judicial system is overwhelmed, this decision is a step in the right direction of actively preventing unnecessary multiplicity of proceedings and sanctioning parties who cause it,

• the rule in Henderson has been afforded the wide ambit it enjoys under the English common law and,

• the adoption of the English common law “Aldi requirement” means that parties to litigation now have to abide by it or else run the risk of being found to have abused the Court’s process. Some parties may have to rethink existing case strategies and other parties, who have found themselves facing actions that their opponents have “kept up their sleeve”, might want to think about applying to the Court for redress.

Land registration is exercised by the Department of Lands and Surveys, one of the oldest government departments which commenced operations in 1858. The system was significantly developed in 1929 by completion of mapping, registration, and valuation of immovable property, following a cadastral general survey conducted by the authority at the time.

This had led to the legislative reform of 1945 by which the Ottoman laws and many of the later colonial laws were repealed. This reform comprised mainly of two laws: The Immovable Property (Tenure, Registration and Valuation) Law, CAP 224 and the Wills and Succession Law, CAP 195. The most striking effect of the said law reform was the rationalization and simplification of the law on property (categories of land, prescription, and inheritance). The 1945 legislation has been the subject of several amendments to date but nevertheless remains in force and forms, along with other related laws, the basis of the Cyprus property law system.

The system of immovable property registration is a system of registration of title. A registered person is considered to be the undisputed owner of the immovable property and his title to ownership is absolute, subject to the Director’s power to correct errors or omissions and the inherent power of the Courts to order the amendment or nullification of a registration.

The basic and most fundamental rights in land are the right to the use and enjoyment of the land, the right to income arising from land and the right to alienate or transfer land. These rights may be affected by contract, by legislation or by tenure.

There are two types of holding right or title over real estate in Cyprus, that is freehold and leasehold. Most Cyprus properties sold or purchased or otherwise disposed of constitutes freehold property. Land or immovable property may most commonly be acquired, inter alia, through transfer by way of gift or sale or exchange, by way of succession and pursuant to the provisions of an express trust.

Real estate has always been a safe long-term investment for Cypriots. The accession of Cyprus to the European Union in 2004 has led to an immense number of acquisitions of real estate in Cyprus for various reasons and purposes, by both EU and third-country nationals. In this respect, the increasing growth in the construction and real estate industry have consequently raised dealings with land or other property to thousands each year.

However, the need for maintaining legal security and protection in any given land or property transaction is of paramount importance for any interested or concerned party to such a transaction. This presupposes the obtainment of independent and reliable legal advice from the outset, in view of avoiding any unforeseen or potential pitfalls and undesirable consequences in the future. The complexity of the relevant laws and the formalities which need to be adhered to, make this imperative.

The recent past has shown that, particularly to the sale of off plan properties, buyers have repeatedly found themselves “trapped” in transactions that afforded no legal security. Victims of later bankrupt developers, of already mortgaged properties or of fraud, are only a few of the instances lacking clear legal advice and independent legal representation in conducting such transactions. There are other numerous cases where the seller had imposed his own advocate to act for the buyer, thus lacking impartiality. Consequently, the result has been the engagement of all these innocent persons in expensive and time-consuming legal battles with no certainty at all as to the outcome and further the negative impact to the good reputation of Cyprus as a safe destination to invest especially by foreign nationals.  

Legislative intervention has come at times to safeguard the conduct and finality of these transactions and moreover to protect the rights of innocent parties who, by default of acquiring legal advice or independent legal representation were inevitably faced with imminent financial and other consequences. This was done to cover the loopholes in legislation but not in absolute success.

It is believed that time has come for a more comprehensive solution that would serve proactively the rights of persons or entities wishing to transact in land or property at the Land Registry.

This necessitates the involvement of the legislature to enact and apply a system/framework that would make obligatory the handling of a property dealing or conveyancing to a competent, independent and experienced advocate representing either of the parties, or at least the buyer who is in most cases the party at risk, rather than leaving such appointment to the option or discretion of the parties. Further to this, no legal document should be left to be deposited within the Land Registry as per the Law, without the prior written verification or otherwise certification that such an advocate representing the affected party has advised accordingly this party of any hazards or legal implications surrounding the transaction.

The duty of care owed by the advocate in such a case would be to act with transparency in order to ensure, to all reasonable extent, legal protection to the party affected and to minimize any contingencies arising in the future, based on the principles set out in the landmark case issued by the Supreme Court of Cyprus in Muriel Beaumont and other v. NK [2010] 1 ΑΑΔ 525, which has in essence adopted English authorities on the matter with particular reference to Pilkington v. Wood [1953] 2 Αll E.R. 810. 

The duty of care owed by an independent and competent advocate in such a case would be to take all appropriate measures which, although not exhaustively, include the following:

• Identify the key legal issues and determine the steps necessary embracing the transaction.
• Identify any inherent dangers and warn the party about them.
• Conduct all necessary customary enquiries and more importantly conduct a comprehensive search at the District Land Registry in which the property is situated, in view of ascertaining the existence of any mortgages, memos, encumbrances or other charges on the property which take in priority, pursuant to section 51A (2) of the Immovable Property (Tenure, Registration and Valuation) Law, CAP 224.
• Where the property in question bears no separate title of ownership, identify and warn the client of all issues concerning the issuance of a title in the future and under what circumstances this matter may be at peril. Further, conduct a search to determine that an urban planning permit or a building permit is in place and if not, clearly advise party of all possible risks.
• If the seller is a legal entity, to conduct an appropriate due diligence search and provide advice on any issues or risks arising as to seller’s insolvency.
• Review the terms of the Contract with special reference to terms as to consideration, mode of payment, time prescribed to delivery of possession or of issue of separate title or of transfer, and all other related matters important to full execution of the Contract.
• Arrange for payment of stamp-duty imposed by Law on the Contract.
• Deposition of the Contract with the Land Registry giving priority over any charge or encumbrance later registered.
• Supervise and take all actions to ensure that all formalities are met until transfer of the property or otherwise at the Land Registry.
• Provide legal advice on all stages.

The above description of duties summarizes the measures and actions that advocates must take in protecting or safeguarding the interests of people wishing to transact in property. The aim of a professional is to assist parties and especially foreign nationals to have a clear view of the land registry system and the Law.

That is why we need to accept now more than ever, that the obligatory appointment or assignment of this work to independent and experienced advocates is necessary to ensure that the land registry system, with its rich history and its now developed form, is not exploited at the mercy of those who do not contract in good faith. The matter is left to the hands of the legislature.

PRESS_RELEASE_LEGAL_500_2020-1

Η πανδημία του κορωναϊού (COVID-19) ήδη επηρεάζει την παγκόσμια κατασκευαστική βιομηχανία, αφού τα κατασκευαστικά έργα αντιμετωπίζουν ελλείψεις σε εργατικό δυναμικό,  προβλήματα στην αλυσίδα προμήθειας των υλικών καθώς επίσης και στο τομέα της χρηματοδότησης. Πλήγματα στον τομέα αυτό, όπως ήταν φυσικό επακόλουθο της επιβολής ιδιαίτερα αυστηρών μέτρων για τη διακίνηση ολόκληρου του πληθυσμού της χώρας μας, έχουν παρουσιαστεί και με την Κυβέρνηση να προβαίνει στην έκδοση σχετικού διατάγματος που απαγορεύει τη λειτουργία εργοταξίων πέραν των τριών (3) ατόμων.

Το Πρόβλημα της Καθυστέρησης

Η καθυστέρηση (delay) είναι επομένως το κυριότερο ζήτημα που αναδύεται στον κατασκευαστικό κλάδο αυτή τη περίοδο, που στην πιο απλοϊκή της μορφή μπορεί να καθοριστεί ως την αργοπορημένη ολοκλήρωση (late completion) ενός κατασκευαστικού Έργου. Όταν δε παρατηρείται καθυστέρηση, τότε γεννώνται και ζημιές εξ’ αυτής, είτε από πλευράς του εργολάβου αν τα αίτια βαραίνουν τον εργοδότη, είτε από πλευράς εργοδότη προς εργολάβο αν καθυστερεί αδικαιολόγητα η τελική παράδοση του Έργου (συνήθως με τη μορφή κάποιας σχετικής ρήτρας στο συμβόλαιο).

Καθώς όλοι οι εμπλεκόμενοι φορείς της βιομηχανίας (Εργολάβοι, Μελετητές, Αρχιτέκτονες, Μηχανικοί και φυσικά οι Εργοδότες) προσπαθούν να ανταποκριθούν σε αυτές τις προκλήσεις, μελετούν τις συμβάσεις τους, που στη μεγάλη τους πλειονότητα και με εξαίρεση τα κυβερνητικά έργα, πρόκειται για τις τυποποιημένες συμβάσεις της Μικτής Επιτροπής Δομικών Συμβολαίων Κύπρου (ΜΕΔΣΚ) και βλέπουμε ότι:

(α) Παρέχεται η δυνατότητα παραχώρησης Ειδοποίησης από τον Εργολάβο προς Επιβλέποντα του Έργου και Εργοδότη που σχετίζεται με τον Covid-19 και δυνάμει της οποίας να απαιτείται δικαιολογημένη παράταση χρόνου (διατυπωμένη κι τυπικά ως γενική απαίτηση ανωτέρας βίας – force majeure) ενόσω εκκρεμεί η πανδημία.

(β) Παρέχεται επίσης η δυνατότητα παραχώρησης Ειδοποίησης που σχετίζονται με τον Covid-19, με τις οποίες απαιτείται παράταση χρόνου και χρηματικές απαιτήσεις ένεκα αυτού (διατυπωμένη ως αλλαγή του νόμου, κυβερνητικές πράξεις ή απαιτήσεις ή διατάγματα).

Να σημειωθεί ότι για τα πιο πάνω, η προσωπική άποψη του συγγραφέα, που συνάδει και με την επικρατούσα επί του θέματος νομολογία (London Borough of Merton v. Stanley Hugh Leach Ltd (1985) είναι πως δεν είναι λογικό να αναμένετε η παραχώρηση παράτασης μόνο αν ο Εργολάβος προηγουμένως παραχωρήσει τη σχετική ειδοποίηση, αλλά  κι ο ίδιος ο Επιβλέποντας του Έργου, που προφανώς δεν είναι ξένος σε αυτό, μπορεί αυτοβούλως να συνεκτιμήσει την κατάσταση και να παραχωρήσει άμεσα λογική και εύλογη παράταση στον Εργολάβο για την ολοκλήρωση των εργασιών συνέπεια ακριβώς της πανδημίας.

Παράλληλα και/ή ανεξάρτητα με τα πιο πάνω, οι εμπλεκόμενοι εργολάβοι και οι εργοδότες οφείλουν να εξετάσουν και το οικονομικό σκέλος των κατασκευών, ειδικά μάλιστα στις περιπτώσεις που βασίζονται για την ολοκλήρωσή σε δανεισμό, οπόταν  θα πρέπει να προβούν σε σχετικές ειδοποιήσεις προς τους δανειστές τους δυνάμει των σχετικών συμβάσεων χρηματοδότησής τους.

Τι γίνεται όμως στις περιπτώσεις που λόγω της καθυστέρησης υπάρχουν απαιτήσεις για αποζημιώσεις; Παρέχεται θεραπεία στα μέρη δυνάμει της σύμβασης;

Ο τύπος θεραπείας που παρέχεται σε ένα μέρος εξαρτάται από τη συγκεκριμένη διατύπωση της σύμβασης, οι πρόνοιες «ανωτέρας βίας» πάντως αποτελούν συχνά το σημείο εκκίνησης για τα μέρη που αναζητούν συμβατικές θεραπείες. Γεγονότα που αποτελούν ανωτέρα βία είναι, σε γενικές γραμμές, απροσδόκητες περιστάσεις εκτός του εύλογου ελέγχου ενός συμβαλλόμενου μέρους, τα οποία όταν προκύπτουν, εμποδίζουν κάποιο συμβαλλόμενο μέρος να εκπληρώσει τις συμβατικές του υποχρεώσεις ή συμβάλλουν στην καθυστέρηση εκπλήρωσης των εν λόγω συμβατικών υποχρεώσεων από αυτό. Όταν κάτι τέτοιο συμβεί, το αθώο /θιγόμενο μέρος θα απαλλαγεί από την υποχρέωση του να εκπληρώσει όλες ή μέρος των δικών του συμβατικών υποχρεώσεων ή θα έχει δικαίωμα να αναστείλει αυτές ή ακόμα υπό ορισμένες συνθήκες θα έχει το δικαίωμα να τερματίσει τη σύμβαση.

Τα διάφορα κατασκευαστικά συμβόλαια είναι πιθανόν να αντιμετωπίζουν διαφορετικά τις περιπτώσεις ανωτέρας βίας και είναι σημαντικό να ελέγχεται σε κάθε περίπτωση η ακριβής διατύπωση του συμβολαίου, συμπεριλαμβανομένου και του κατά πόσον τα μέρη επέλεξαν να καθορίσουν ρητά ποια γεγονότα συνιστούν ανωτέρα βία. Στα τυποποιημένα συμβόλαια της ΜΕΔΣΚ πάντως, που χρησιμοποιούνται ευρέως, δεν καθορίζεται ο όρος «ανωτέρα βία» και, επομένως αναμένεται να εξεταστεί στη κάθε περίπτωση το κατά πόσο το συγκεκριμένο γεγονός που επέφερε διατάραξη στην ομαλή πρόοδο των εργασιών εντάσσεται στον όρο «ανωτέρα βία»

Τα γεγονότα όμως ανωτέρας βίας συχνά έχουν ως αποτέλεσμα την παροχή θεραπείας δια της παραχώρησης παράτασης χρόνου και είναι εξαιρετικά αμφίβολο αν μπορούν να οδηγήσουν σε θεραπεία αποζημίωσης.

Άλλες είναι οι πρόνοιες της σύμβασης που ενδεχομένως να μπορούν να οδηγήσουν σε οικονομικής φύσεως θεραπεία. Παραδείγματα περιλαμβάνουν η αλλαγή νομοθετικών διατάξεων ή η έκδοση διαταγμάτων ή Κανονισμών της Κυβέρνησης (άρθρο 40 στα Συμβόλαια της ΜΕΔΣΚ), και στις περιπτώσεις που θεσπίζεται νομοθεσία έκτακτης ανάγκης που επηρεάζει την εκπλήρωση των συμβατικών υποχρεώσεων ή συμβόλαια που προβλέπουν υποκατάσταση της ανωτέρας βίας με θεραπεία, τόσο αναφορικά με την παράταση χρόνου, όσο και αναφορικά με το οικονομικό κόστος που προκύπτει από αυτή, π.χ. κυβερνητική δράση ή αδράνεια.

Σε όλες τις περιπτώσεις, είναι σημαντικό να εξετάζονται και να υπάρχει συμμόρφωση με οποιεσδήποτε προθεσμίες για την κοινοποίηση απαιτήσεων, καθώς υπάρχει η πιθανότητα όπως η μη συμμόρφωση με αυτές να ακυρώσει μια απαίτηση, αν θεωρηθεί ότι τέτοια προθεσμία αποτελούσε ουσιώδη όρο για την εγκυρότητα της απαίτησης.

Τι πρέπει να γίνει με τις κατασκευαστικές συμβάσεις που πρόκειται να συναφθούν την περίοδο αυτή;

Επειδή τα γεγονότα ανωτέρας βίας χαρακτηρίζονται συνήθως ως απροσδόκητα, άγνωστα ή ως απρόβλεπτες περιστάσεις και η ύπαρξη και οι συνέπειες της πανδημίας COVID-19 είναι επί του παρόντος γνωστές, αν και όχι απαραίτητα σε απόλυτο βαθμό η διάρκειά της, υπάρχει συζήτηση ως προς τον τρόπο αντιμετώπισης της επιδημίας αυτής αναφορικά με συμβάσεις που δεν έχουν ακόμη συναφθεί.

Αποτελεί την άποψη του συγγραφέα ότι η βεβαιότητα της σύμβασης εξυπηρετείται καλύτερα με συγκεκριμένη σύνταξη ώστε να περιλαμβάνει / αποκλείει τις συνέπειες του COVID-19. Το θέμα αυτό μπορεί να είναι ιδιαίτερα σοβαρό αναφορικά με συμφωνίες στις οποίες υπογράφηκαν πριν από την πανδημία, ενώ άλλων δεν είχαν υπογραφεί, και τώρα τα μέρη γνωρίζουν για αυτήν πριν από την υπογραφή των εγγράφων που δεν υπογράφηκαν.

Επιμέρους ζητήματα εξέτασης εκτός του συμβολαίου

Κατά την αξιολόγηση του αντίκτυπου του COVID-19 σε ένα έργο, μπορεί να είναι απαραίτητο να εξεταστούν οι ευρύτερες επιπτώσεις σε αυτό, πέραν της άμεσης σχέσης εργοδότη με εργολάβο. Για παράδειγμα, όταν ένα έργο έχει χρηματοδοτηθεί από τρίτους, ο δανειολήπτης ενδέχεται να χρειαστεί να ζητήσει κάποιου είδους θεραπεία από τις υποχρεώσεις του βάσει της συμφωνίας  χρηματοδότησης, στην περίπτωση όπου υπάρξει έλλειμμα ή καθυστέρηση στα έσοδα από το έργο. Θα πρέπει επίσης να προβληματίσει η πιθανή καθυστέρηση στην ολοκλήρωση του Έργου, ακόμα και με επιταχυντικά μέτρα, η ενδεχόμενη υπέρβαση του κόστους ή άλλες σοβαρές αρνητικές συνέπειες στο Έργο.

Θα πρέπει επίσης να εξεταστεί ο τρόπος με τον οποίο η πανδημία μπορεί να επηρεάσει τα μέρη που βρίσκονται πιο κάτω στην αλυσίδα, πχ υπεργολάβους, προμηθευτές κτλ. Για παράδειγμα, ένας εργολάβος μπορεί να αντιμετωπίσει δυσκολίες στην απόκτηση/ εξασφάλιση υλικών ή εξαρτημάτων από τους προμηθευτές και που βρίσκονται σε άλλες χώρες που ακολουθούν διαφορετικά μέτρα κατά της πανδημίας σε σχέση με τη Κύπρο.  

Η λελογισμένη πρακτική που πρέπει να ακολουθηθεί

Εν πρώτοις κατά την εξέταση των επιλογών του, το θιγόμενο μέρος θα πρέπει πάντα να ελέγχει τη διατύπωση της σύμβασης ούτως ώστε να μπορεί να αξιολογήσει τα δικαιώματα και τις υποχρεώσεις του. Οι τυποποιημένες συμβάσεις της ΜΕΔΣΚ περιέχουν ειδικές διατάξεις προς τούτο κι ένα συμβαλλόμενο μέρος ενδέχεται να μην τύχει θεραπείας, εάν προηγουμένως δεν έχει τηρήσει τις απαιτούμενες προϋποθέσεις του συμβολαίου.

Ποια μέτρα μπορεί να λάβει ένα μέρος για να μετριάσει τη ζημία του;

Είναι κοινή λογική του δικαίου των συμβάσεων που επηρεάζει και τα κατασκευαστικά συμβόλαια και που θέλει από το θιγόμενο μέρος να μετριάσει τη ζημία του, όπου αυτό είναι δυνατόν, και αποτυχία να πράξει τούτο δύναται να του στερήσει το δικαίωμα αποζημίωσης ή θεραπείας.

Τι αποδεικτικά στοιχεία έχει το θιγόμενο μέρος σε σχέση με το γεγονός που επέφερε τις εν λόγω επιπτώσεις;

Όταν ένας διάδικος προβάλλει απαίτηση για θεραπεία βάσει της σύμβασης (για παράδειγμα, αίτηση για παράταση χρόνου), θα πρέπει να αποδείξει πώς το γεγονός αυτό προκάλεσε την απώλεια ή την καθυστέρηση που υπέστη. Ως εκ τούτου, είναι σημαντικό το εν λόγω μέρος να λάβει μέτρα για να συγκεντρώσει και να διατηρήσει τα αποδεικτικά στοιχεία που χρειάζεται προς υποστήριξη της αξίωσής του.

Η αναζήτηση και εξασφάλιση επαγγελματικής συμβουλής είναι επίσης ένας παράγοντας που πρέπει να συνεκτιμηθεί από τα εμπλεκόμενα μέρη για την όσον τον δυνατόν πιο ορθή έγερση ή υποβολή αξιώσεων.

Covid-19 “lockdown” has inevitably affected the way people conduct their business. As a large part of the workforce is currently working from home, technology’s role in ensuring the continuity of all operations and transactions, whether cross border or not, is becoming increasingly important.

This is therefore, a point in time, where the rules and regulations relating to electronic transactions and electronic signatures, which may have been left “unexplored” and “unexploited” to date, now come into play.

Regulation 910/2014/EU (hereinafter the “Regulation”), is directly applicable on all Member States of the European Union including Cyprus. Cyprus has also incorporated the provisions of the Regulation in its national legislation by enacting Law 55(I)/80 (hereinafter the” Law”). Both the Law and Regulation establish a legal framework for e-signatures, e-seals, e-documents and in general all forms of electronic identification.

The Regulation introduced three different levels of electronic signatures: e-signature, advanced e-signature and qualified e-signature.  An e-signature, is defined as data in electronic form which is attached to or logically associated with other data in electronic form and is used by the signatory to sign. According to English case-law, examples of e- signatures include a signatory’s name typed at the bottom of an email, a scanned signature or even clicking an “I accept” tick box on a website. To be effective, an e-signature must demonstrate an authenticating intention i.e. that the signatory intended to be bound by the terms they have signed to.

The advanced electronic signature differs from the e-signature in that it must be uniquely linked to the signatory, capable of identifying the signatory, and created by using e-signature creation data that the signatory can, with a level of confidence use under his sole control. 

Lastly, a qualified electronic signature is being defined as an advanced electronic signature created by a qualified electronic creation device. This type of e-signature is based on a qualified certificate for electronic signatures, which is issued by a qualified trust service provider.

Qualified trust service providers are providers who have been granted a qualified status by a national competent authority as indicated in the national “trust lists” of the EU Member State. Currently, in Cyprus, there is only one trusted provider listed in the Trusted List Browser. The Cyprus Stock Exchange, has assumed the role of a local registration authority mediating between the applicant and the trusted provider for the issue of a qualified certificate for e-signatures. 

The competent authority and relevant supervisory body responsible for all matters regarding electronic identification and trust services for electronic transactions carried out in Cyprus is the Department of Electronic Communications of the Ministry of Transport, Communications and Works (DEC).

In practice, there are many online platforms which carry out their operations in conformity with both the Law and Regulation. Counterparties can therefore log in to those platforms, upload their documents and complete the signing process, sometimes even using the video facilities offered by such platforms. Once the document is signed, all parties are alerted and the document is stored electronically. It therefore follows, that the need for access to an industrial-sized fast printer or scanner is largely being diminished, or even eliminated, while transactions can still be completed by using any electronic device (including a pc, ipad or mobile phone) from any place a person can be working in isolation. 

Of course, the legal effect and admissibility of e-signatures remains to be seen, as due to the recent enactment of both the Law and Regulation, there is no relevant case law indicating how documents bearing an e-signature will be treated by Cyprus Courts.

However, pursuant to the Regulation, an electronic signature shall not be denied legal effect and admissibility as evidence in legal proceedings solely on the grounds that it was made in electronic form or on the grounds that not all requirements of qualified electronic signatures are being satisfied. Furthermore, the Regulation also expressly states that a qualified signature shall have the equivalent legal effect of a handwritten signature (Article 25).  Also, section 9 of the Law provides that even if the electronic signature does not meet the conditions of a qualified signature, it may still be considered as admissible evidence in legal proceedings in Cyprus.

It seems therefore, that despite the fact that the legal effects of an e- signature have not yet been fully tested by the Cyprus Courts, this may now be perfect timing to utilise the benefits provided by the Law and Regulation so as to ensure that all businesses and transactions remain active and connected.

The advent of the COVID – 19 Virus could not have come at worse time for Cyprus. It has decimated Cyprus’ biggest earners of external investment the tourist sector, foreign investment in real estate and the services sector.

These sectors combined account for over 60% of Cyprus GDP which stands at around Euro 25bn per year and employ well over 35% of the total workforce.

In a bid to contain the spread of the virus Cyprus has closed its schools, hotels, airports, construction sites, cinemas, shopping malls, restaurants, gymnasiums etc. Cyprus is in effective lockdown and under curfew from 9pm to 6am daily and is likely to be so for the rest of April and possibly into May.

Economic activity has drastically declined keep money in the economy the government has decreed that repayment of bank loans has been postponed on an interest free basis until the end of the year, and the payment of income tax and VAT have been postponed.

More than 50% of the workforce is working that still has work is working remotely in varying degrees of efficiency and economic activity has understandably declined severely.

Pay-cuts and layoffs are the order of the day despite various government schemes that are aimed at encouraging employers to retain staff. These schemes are however not generous enough to encourage bravery in employers especially in the light of the uncertainty that prevails over how long the economy will remain crippled by the containment measures and how the virus will affect Europe and Eurasia and the Middle East and the Far East and for how long.

Additionally, the measures adopted by government for government guaranteed loans to businesses are yet to have any discernable effect as the uncertain economic forecast is not conducive to the undertaking of additional burdens by local businesses at this time.

There are about 25 new infections daily, 500 infections in total and 9 deaths so far; in a population of 1 million. Not overwhelming figures by international standards but enough to stretch the health service to almost breaking point.

To cap it all on Friday the Supreme court of Cyprus is expected to rule on whether the 60.000 or so civil servants are entitled to be repaid the wages that they were docked as a result of the 2013 crisis. This could land the government with a bill of Euro 3,2 billion.

All in all, a bleak economic picture leaving Cyprus in urgent need of a cash injection. The government cannot finance its programmed “survival expenditure” by internal borrowing. Also, confidence is not high that the EU will be particularly generous to Cyprus, Cyprus has leaned to beware of Europeans baring promises of gifts.

In response to the above Cyprus has gone to the international lending markets and on 7^th April 2020 Cyprus issued two government bonds – a seven-year bond for Euro 1,75bn at 1.65% interest return and a 30-year bond for Euro 500m at 2.015% interest return. The bond launch was successful. It was 2.6 times over-subscribed.

The Government presumably feels that the Euro 2.25bn it has raised will be sufficient to pull it through and to allow it to implement its economic rescue package.

The downside is that Cyprus has been slightly down-graded on the international ratings as a result of this increase in national debt by Fitch from BBB- positive to BBB- stable. Fitch point to a downgrading of economic performance from a surplus of almost 3% in 2019 to a deficit of 1% in 2020 as a result of the measures that the government is taking to support the economy in the face of the pandemic.

Fitch point out that Government debt is still at 95,5% of GDP (down from a peak of 109% in 2014 – the height of the financial crisis). The external borrowing as a result of the aforesaid bond launch will further increase government debt, but there is no other way.

Desperate times call for desperate measures.