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A short guide to interim orders in Cyprus (Part A)

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By virtue of Cyprus’s position as well-known corporate and administrative services centre that has, over the last 30 or so years, proved an extremely popular venue to the former Eastern Block countries especially, companies registered in Cyprus often find themselves embroiled in multijurisdictional legal disputes. Sometimes the Cypriot company is at the centre of the dispute, other times it is on the fringes. Whatever the case may be, parties will sooner or later find themselves before the Cypriot Courts and, most often than not, their first experience of the Cypriot legal system comes through either applying for or resisting an interim order (aka an interim injunction).

First off, the term interim order and interim injunction is, nowadays, interchangeable. Both terms mean the same thing i.e. a discretionary interlocutory equitable remedy granted by the Court in the interim, the interim being the time before final judgement on the merits of the case.

One of the first questions clients ask once they have given a description of their case is whether they can obtain an interim order against their adversary. It is true that an interim order, once obtained and maintained, is an important step in the right direction because it can have a pivotal significance on the overall outcome of a case. In multijurisdictional disputes, an interim order issued by a Cypriot court could drastically affect proceedings not only in Cyprus but in other jurisdictions too. It is thus a highly coveted and bitterly contested legal tool.

Cypriot Courts do not issue interim orders readily or in a haphazard fashion. A Court will only issue an interim order once the party applying for it has convinced the Court that a certain set of legal and factual requirements have been fulfilled. The Court’s authority to issue interim orders is derived mainly (other legislative provisions also come into play) from Article 32 of the Courts of Justice Act, Law no.14/1960.  Before an interim order is granted a Court must be convinced that a set of three requirements have been fulfilled cumulatively. These requirements are:

First requirement: a serious issue to be tried

The first requirement is that there is a serious issue to be tried. Case law has interpreted this requirement quite liberally. In essence Courts have interpreted this requirement as meaning that the action must not be “frivolous or vexatious”. Cypriot courts follow, to some extent, the English judgment in the case of American Cyanamid Co v Ethicon, 1975, 1 All ER 504 HL in which it was explicitly stated that a serious issue to be tried should not be taken to mean a prima facie case and that the threshold of showing a serious issue to be tried was lower than that of showing a prima facie case.

In short, almost all applications for interim orders manage to surmount this first hurdle.

Second requirement: a probability that the applicant is entitled to relief

Once the Court is satisfied that the first requirement has been met it will move on to the second requirement which is that the applicant must demonstrate that there is a probability that he is entitled to relief. He must demonstrate this on the strength of the evidence adduced. The leading case on this requirement in the judgment of the Supreme Court of Cyprus in the case of Odysseos v Pieris Estates Ltd, 1982, 1 CLR 557. This judgment contains a passage which sums up how the Court’s determine if this requirement has been met. The passage states:

«a probability that the plaintiff is entitled to relief relates to something other than the complexion of the pleaded case of the applicant, and that could not be, in the context of this statutory provision, anything other than the evidential strength of the case of the plaintiff; that the standard required for the plaintiff to overcome the evidential hurdle is not very high; that he is only required to establish “a probability” of success; that the concept of “a probability” imports something more than a mere possibility but something much less than the “balance of probabilities”, the standard required for proof of a civil action; that legal probability is something different from a mathematical probability as the Court explained in Re J.S. (a minor), 1980, 1 AH E.R. 1061 (C.A.); that “a probability”, in the context of the proviso to s. 32(1), requires the applicant to demonstrate that he has a visible chance of success»

Understandably, this second requirement is somewhat harder to surmount that than the first requirement precisely because both the evidence relating to the case as well as the legal basis on which the case is grounded come into consideration by the Court. Having said that though, the requirement speaks of a probability of success and as long as the applicant can demonstrate this probability the Court will consider this second requirement fulfilled.

Third requirement: unless the interim order is granted it will be difficult or impossible for justice to be served at a later date.

Once the first two requirements are met the Court moves to examine the third and final requirement which is that the Court must be convinced that if it does not grant the interim order there will be a difficulty or impossibility of justice being served at a later stage.

This requirement is closely connected to the adequacy of damages in the monetary form. The Court will consider this requirement fulfilled if the applicant can show that unless the interim order is granted, a final judgment in his favour will most likely remain unsatisfied or that, unless the interim order is granted, a damage other than monetary damage will be caused to the applicant.

Cases in which there is a risk of alienation of property or other assets rendering execution of the final judgment difficult or impossible are instances in which the Court deems this requirement fulfilled.

This requirement is the most cumbersome to surmount because the applicant must show, with specificity, the damage other than mere pecuniary loss that will be brought upon him unless the interim order is granted. General and vague assertions of damage will not do. The applicant has to actually evidence the risk of damage to the Court.

The Court’s discretionary power

Once the three requirements have been fulfilled, the Court, before granting the interim order, looks to whether it should exercise its discretionary power to grant or refuse the interim order. Interim orders are a discretionary remedy borne out of the law of equity therefore a Court may exercise its discretionary power against the issuance of an interim order even if all the three requirements are fulfilled.The Court, in deciding how to exercise its discretionary power to grant or refuse an interim order seeks to convince itself that the “balance of justice” leans towards the interim order being granted. In adjudging the balance of justice, the Court looks balance the specific needs of the parties and/or the danger of injustice coming to the party against whom the interim order is issued if at a later stage it is proved that the interim order was wrongly issued.