Cyprus is a member of the European Union and the Eurozone. It features on the ‘white list’ of the OECD and has committed to the highest standards of transparency, assuming an early-adopter status for the automatic exchange of information on tax matters.
Cyprus provides an established, stable and solid legislative framework under which foreign investment is protected. EU law, Cypriot constitutional law and bilateral and multilateral investment treaties to which Cyprus is a party comprise the framework under which foreign investment is protected in Cyprus.
Cyprus, as a widely recognized international business centre, is signatory to many international conventions and treaties and has incorporated international investment best practices into its national legal order. Bilateral Investment Treaties to which Cyprus is a party contain protections that include:
► Most favoured nation provisions
► National treatment provisions
► Fair and equitable treatment
► Full protection and security
► Free transfer of investment returns
► Protection from expropriation without compensation
Foreign investors enjoy the same constitutional protection of fundamental rights as local investors. The Constitution of Cyprus guarantees equality between all persons, irrespective of nationality.
The right to own property is one of the fundamental constitutional rights protected by Article 23 of the Constitution. A foreign investor is entitled to seek legal remedies in the Cyprus courts against an administrative authority for any violation of these rights. Any administrative act or omission that harms the legitimate interests of any person may be subject to administrative recourse pursuant to Article 146 of the Constitution.
Protection under EU law
At an EU level, a comprehensive EU investment policy allows the EU to negotiate investment protection agreements itself. Article 207(1) of the Treaty on the Functioning of the European Union (TFEU) explicitly mentions foreign direct investment as forming part of the common commercial policy, while the TFEU itself establishes the EU’s exclusive competence on foreign direct investment.
Regulation No 1219/2012 establishing transitional arrangements for bilateral investment agreements between Member States and third countries, grants legal certainty to existing BITs between EU Member States and third countries until they are replaced by EU-wide investment deals.
Multilateral Investment Treaty Protection
International investment law aims to protect the owner of tangible or intangible assets on transfer of such assets from one country to another to generate wealth from their use in that country. The safeguards relating to the protection for foreign investment and proprietary rights afforded by international investment law comprise the requirement of non-discrimination, the prohibition of confiscatory taxation, the standard treatment of foreign investors, and the doctrine of abuse of rights.
The Energy Charter Treaty (ECT), ratified by Cyprus, is an international agreement which establishes a multilateral framework for cross-border co-operation. Its provisions protect investors and their investments from a broad range of political risk, including discrimination, expropriation, nationalization, breach of contract and damages due to war.
The Multilateral Investment Guarantee Agency (MIGA) is an autonomous international organization (under the World Bank), to which Cyprus is a member state. MIGA offers insurance to cover five types of non-commercial risks: currency inconvertibility and transfer restriction; government expropriation; war, terrorism, and civil disturbance; breaches of contract; and the non-honouring of sovereign financial obligations.
The International Centre for Settlement of Investment Disputes (ICSID), established under the ICSID Convention of 1966, ratified by Cyprus, is an impartial international forum providing facilities for the resolution of legal disputes between eligible parties, through conciliation or arbitration procedures. ICSID can be utilized for the resolution of any investment dispute arising from an investment made by a national of a contracting state in the territory of another contracting state.
Bilateral Investment Treaty Protection
BITs govern issues relating to investments carried out by nationals of one contracting state in another contracting state. They guarantee protection for such investments and provide regulations for settling any disputes which may arise therefrom.
Cyprus is a party to a wide range of Bilateral Investment Treaties with states including Armenia, Belarus, China, Egypt, India, Iran, Israel, Jordan, Lebanon, Montenegro, Qatar, Serbia and the Seychelles.