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Editorial

Interim injunctions in Cyprus for the freezing of assets and disclosure of documents and information

The availability of interim relief is often crucial in ensuring satisfaction of any final court judgment or arbitral award. An interim injunction can ensure that property is not alienated while a case is still pending. In other cases it can level the playing field if one party (or even non-party) is restricting access to information material to the case. The ability to apply for interim relief is a vital tool for any legal jurisdiction. Cyprus is no exception. Due to its popularity as a centre for company incorporation, its legal system must also cater for the large number of companies registered on the island. Its legal regime on injunctions must be an effective one.

Section 32 of the Courts of Justice Law of 1960 provides the Cyprus courts with the power to issue interim orders. A claimant seeking interim relief will have to convince the court that there is a serious case to be tried, that there is a likelihood that they will succeed in their claim and that it will be difficult or impossible for justice to be done at a later stage. Finally, the court will only issue the interim order sought if it considers that the ā€˜balance of convenienceā€™ weighs in this direction. The court will take all relevant factors into account in exercising its judicial discretion, and must consider in this respect whether it is just and reasonable for the requested order to be issued.

A party may also apply for an interim order without giving notice to the other side. In order to do so, such party will have to demonstrate urgency or other special circumstances that would justify the granting of the order sought in the other partyā€™s absence (s9 Civil Procedure Law, cap 6).

Furthermore, an applicant seeking interim relief in Cyprus on an ex parte basis has a duty of full and frank disclosure to the court. As the Supreme Court characteristically stated in the case of Grigoris N Grigoriou & ors v Christina Stavrou Christoforou & ors [1995] 1 CLR 248, ā€˜failure to present material facts before the court in an ex parte application is considered a form of deceiving the court, and the court responds ā€œI no longer hear youā€ and discharges the order issued, without examining the substanceā€™.

The Cyprus courts can also issue interim orders in support of foreign proceedings if the relevant legal framework exists on an international level. It is particularly common for interim relief to be sought in Cyprus in support of foreign international arbitration. The relevant legal framework on an international level is provided by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to which Cyprus is a party. Meanwhile, as a matter of domestic law, s9 of the International Commercial Arbitration Law of 1987 (Law 101/1987) (which was drafted on the basis of the 1985 UNCITRAL Model Law) provides that ā€˜the court has the authority, on an application of one of the parties, to order that conservative measures be taken at any time before or during the duration of the arbitral proceedingsā€™.

While the wording of s9 above suggests that the courtsā€™ authority to issue interim orders in aid of foreign arbitral proceedings is quite limited, the Cyprus courts have in recent times not been hesitant in attributing a broader interpretation to the phrase ā€˜conservative measuresā€™. In the case of Re Application of Starport Nominees Ltd & ors [2010] 1B CLR 1271, the Supreme Court stated that the district court did not exceed its authority in issuing an order of a mandatory nature on the basis of s9. With Starport therefore, the Supreme Court seems to be suggesting that interim disclosure orders may be issued on the basis of s9 Law 101/1987.

Yet, at first glance, disclosure orders do not seem to fall within the ordinary interpretation of ā€˜conservative measuresā€™. The court of first instance in the case of Commerzbank Auslandsbanken Holding AF & ors v Adeona Holdings Ltd (Application 13/2013 before the Limassol District Court) provides one possible explanation for the Starport approach: ā€˜Conservative measures can only be those measures which aim to preserve a real or legal situation. Preserving a situation is not only served through prohibitive orders. It can also be aided through the issuance of a mandatory order. The disclosure of assets may be ordered (with a mandatory order) so that it will be possible to supervise and apply the order prohibiting their alienation.ā€™

While the explanation in Commerzbank is logical and does not overly stretch the pure textual interpretation of ā€˜conservative measuresā€™, it does not fully capture or explain the extensive disclosure orders that have on occasion been granted by the courts of first instance on the basis of s9 Law 101/1987. Such orders have not always been ancillary to prohibitive orders.

Furthermore, the Commerzbank explanation is one of a court of first instance and therefore does not provide any solid guidance. It is not binding on other courts. Nonetheless, the Starport case and the first instance cases that have followed it constitute proof of the lawā€™s dynamic and evolving nature, especially in a common law country. For the author, these cases suggest that the Cyprus law on injunctions is currently adapting to the modern needs of international disputes and the ever growing interconnectedness of the global economy.

This article was published in the November 2014 issue of Legal Business Magazine. For more details and to access the digital edition of the article please clickhere.

For further information, please contact Christos Galanos at christos@kyprianou.com.cy

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