Bringing a claim - initial considerations

Key issues to consider

What key issues should a party consider before bringing a claim?

There are various factors that a party should consider before bringing a claim, including the following:

  • its chance of success;
  • the strength, availability and admissibility of the evidence;
  • the financial position of the prospective defendant;
  • the time and cost involved in litigation;
  • the existence of jurisdiction of the Cypriot court to hear the claim;
  • the possibility of seeking interim relief simultaneously with the filing of the claim;
  • the limitation period applicable to the relevant cause or causes of action; and
  • the location of the assets of the prospective defendant for enforcement purposes.
Establishing jurisdiction

How is jurisdiction established?

Jurisdiction is determined by two different regimes, namely the European regime and national rules. National rules are residual, which means that they are invoked only where the European regime is inapplicable. Although the two regimes are different, they both adopt the concept of domicile in establishing jurisdiction and, in the absence of domicile, subject-matter rules.

In summary, jurisdiction over a defendant in civil or commercial proceedings who is domiciled in Cyprus is allocated to the district court of his or her place of domicile. In the case of a foreign defendant, subject-matter jurisdiction may be invoked where, for example, the subject matter of the action is immovable property located in Cyprus, or, in a case of breach of contract or tort, the breach or tortious act in question has been wholly or partly committed in Cyprus.

Importantly, where the European regime applies, a defendant who attempts to initiate an overlapping process in another jurisdiction preferred by him or her - even if a more appropriate forum - may be unsuccessful, as priority is generally given to the court of the country that is first seised (although this is subject to exceptions). However, in cases where national rules apply, it is open for the defendant to challenge jurisdiction on the basis that Cyprus is not the appropriate forum to hear the case or invoke the lis alibi pendens or abuse of process principles, as the case may be, and seek a stay of the proceedings in Cyprus.

Preclusion

Res judicata: is preclusion applicable, and if so how?

Preclusion is applicable in Cyprus and operates to prevent the re-adjudication of matters that have been, or could have been, adjudicated in prior proceedings before a court of competent jurisdiction when the subsequent proceedings in question are based on the same causes of action and involve the same parties who were given full and fair opportunity to be heard on the issue (or their successors in title).

Applicability of foreign laws

In what circumstances will the courts apply foreign laws to determine issues being litigated before them?

Given the adversarial nature of the Cyprus legal system, a Cypriot court cannot apply foreign law in its own motion or undertake an independent research into foreign law. A Cypriot court will, therefore, apply foreign law to determine issues being litigated before it if foreign law is connected to the dispute in question and is pleaded and proved as a fact to the satisfaction of the Cypriot court. Where a case has a connection with a foreign legal system, a party may consider pleading foreign law if it is more favourable than Cypriot law.

The onus of proving foreign law lies on the party which supports its claim or defence on it. If that party fails to adduce evidence or sufficient evidence of foreign law, the Cypriot court will apply Cyprus law for determining the dispute in question.

Initial steps

What initial steps should a claimant consider to ensure that any eventual judgment is satisfied? Can a defendant take steps to make themselves ‘judgment proof’?

A plaintiff may consider applying for freezing orders (with domestic or worldwide application) at an early stage in the proceedings, with a view to preserving the status quo or preventing the alienation of assets by a defendant pending determination of the dispute in question. Freezing orders may also be obtained against a third party who holds assets on behalf of the defendant.

In urgent cases, a freezing order can be obtained ex parte (ie, without notice) and at the same time as court proceedings are issued against the defendant. If a party, therefore, considers that proceedings may be issued against it and a freezing order may be obtained, such party can proactively take steps to make itself ‘judgment proof’ by strategically removing its assets from the reach of a prospective plaintiff.

Freezing assets

When is it appropriate for a claimant to consider obtaining an order freezing a defendant’s assets? What are the preconditions and other considerations?

A plaintiff may consider obtaining a freezing order if there is a risk that a defendant, or proposed defendant, will dissipate his or her assets with the intention or effect of frustrating enforcement of a prospective judgment against him or her. In evaluating the risk of dissipation, account should be taken of, among others, the nature and financial standing of the defendant, the value of the claim as against his or her assets, the nature of the assets in question, the ease with which they can be dissipated, the jurisdiction in which the defendant is based, and the defendant’s behaviour.

A Cypriot court has jurisdiction to grant a freezing order in all cases in which it appears that it is just and convenient to do so, provided that the following conditions are cumulatively satisfied:

  • the plaintiff has a good, arguable case;
  • the plaintiff has visible chances of success in obtaining a judgment on the merits;
  • unless the freezing order is granted, there is a real risk that a judgment issued in favour of the plaintiff will not be satisfied; and
  • the balance of convenience lies with the plaintiff.

In cases where urgency is demonstrated or in cases of exceptional circumstances, a freezing order can be sought without notice to the subjected party, in which case the plaintiff is placed under a duty to fully and frankly disclose all material matters to the Cypriot court, including those that may be adverse to the plaintiff.

Pre-action conduct requirements

Are there requirements for pre-action conduct and what are the consequences of non-compliance?

There are no requirements for pre-action conduct and neither does there exist any pre-action protocol that the Cypriot courts would expect the parties to follow. It should be noted, however, that for certain types of specialist proceedings (eg, winding up proceedings) the law imposes a specific procedure that must be adopted.

Other interim relief

What other forms of interim relief can be sought?

Except for freezing orders, which can be of domestic or worldwide application, a Cypriot court is empowered to grant a wide range of interim relief measures including, but not limited to:

  • disclosure orders;
  • search and seizure orders;
  • orders against third parties holding assets beneficially owned by a defendant;
  • orders for the appointment of a receiver; and
  • other prohibitory or mandatory or ancillary orders.
Alternative dispute resolution

Does the court require or expect parties to engage in ADR at the pre-action stage or later in the case? What are the consequences of failing to engage in ADR at these stages?

There is no requirement or expectation for the disputed parties to engage in ADR at the pre-action stage or during the period in which the action is pending before the Cypriot court. Although the enactment of the Mediation Law aims at the promotion of mediation as an ADR mechanism, it does not impose a court-ordered mediation regime and its use remains voluntary.

Claims against natural persons versus corporations

Are there different considerations for claims against natural persons as opposed to corporations?

A company registered under the laws of Cyprus can sue and be sued in its own name and is subject to legal obligations in the same manner as natural persons. Given, however, that a company is an artificial person that acts through its human representatives and often in group structures, depending on the nature of the claim in question, a prospective plaintiff should consider whether persons related to or holding assets for the benefit of the company should be made co-defendants.

Class actions

Are any of the considerations different for class actions, multi-party or group litigations?

Class actions are not available in Cyprus. However, where there are numerous persons having the same interest in one cause or matter, one or more of such persons may be authorised by the court to sue or defend on behalf, or for the benefit, of all persons so interested.

Also, multiple actions pending before the same court may be consolidated if they involve a common question of law or fact bearing sufficient importance in proportion to the rest of the matters involved in the actions to render consolidation desirable. If prospective plaintiffs aim at bringing separate actions with a view to consolidate the same, they should consider in advance whether the conditions for consolidation may be satisfied. In such cases, strategic planning is particularly important.

Third-party funding

What restrictions are there on third parties funding the costs of the litigation or agreeing to pay adverse costs?

Third-party funding is not available in Cyprus. If such funding occurs then it is not something that will be considered by the court as relevant, unless of course the funding is connected with some wrongdoing or illegal act. Litigation is funded by the parties to the legal proceedings and litigation costs are generally borne by the losing party by reference to fees fixed by the Supreme Court on the basis of the value of the claim (unless another arrangement is made). Where an executor, administrator or a trustee is a party to legal proceedings, his or her costs may be paid out of a particular estate or fund provided that he or she has not unreasonably instituted, carried on or resisted the legal proceedings.