Cyprus law offers litigants the possibility of obtaining interim injunctions, including of a prohibitory nature, under a variety of circumstances.

Such orders can be granted in the context of substantive proceedings which are pending before Cyprus Courts, in aid of foreign proceedings, or in aid of arbitration proceedings (whether in Cyprus or abroad).

Prohibitory Orders: Types of prohibitory orders issued in Cyprus

A prohibitory order is defined as an order requiring a party to refrain from a specific act. Such orders can take various shapes and forms. For instance, a prohibitory order can be:

• An injunction prohibiting specific acts or events, such as the implementation of corporate resolutions, the General Meeting of a Company etc.
• An injunction restricting the authority of any individual, such as the director of a company.

More frequently a prohibitory order takes the form of a freezing order. A freezing order (also referred to as a Mareva injunction as per the fundamental judgment in Mareva Compania Naviera SA v. International Bulkcarriers SA [1980] 1 All ER 213 (CA)) freezes the assets of the respondent pending the final adjudication of the proceedings.

The assets which can fall within the ambit of a prohibitory order may entail, among others, movable and/or immovable property within and/or outside Cyprus which is directly and/or indirectly owned by a respondent.

Importantly, in this day and age, the assets which may be subject to a mareva injunction can also be bank accounts, legal rights (choses in action) as well as interests in cryptocurrencies such as BitCoin.

Prohibitory Orders: Cyprus Legal Framework

According to Section 32 of Court of Justice Law (14/60), Cypriot Courts have jurisdiction to issue interim orders in all cases, in which it appears to the Court just and convenient to do so, provided that:

1. There is a serious issue to be tried
2. There is a probability that the applicant is entitled to relief
3. If the interim order is not issued, it will be difficult or impossible for justice to be served at a later stage
4. The balance of convenience is in favour of the Applicant.

Note: In the context of the third condition, in contrast to the UK approach on the matter, the Supreme Court has recently reaffirmed that it is not necessary to prove that there is a risk of alienation of assets. It is enough to demonstrate that if the assets are dissipated it will be difficult to award justice at a later stage.

Prohibitory Orders: Procedure

The application requesting the prohibitory order should be served to the respondent who will be given the opportunity to oppose the application. The Court will thereinafter decide whether to issue or not the prohibitory order after hearing both parties.

Infrequently however, the matter is urgent and there is no time to serve the application or serving it would defeat the whole purpose of the application. In such cases, it is possible to apply to the Court on an ex-parte basis pursuant to section 9 of the Civil Procedure Law (Cap. 6).

An ex-parte application will only succeed if urgency or other peculiar circumstances are proven. Such will be the case if dissipation of assets is imminent. Importantly, an applicant resorting to Court on an ex-parte basis is obliged to make full and frank disclosure of all material facts which may affect the Court’s decision to grant the interim injunction.

If the prohibitory order is granted on an ex-parte basis, the respondent will have an opportunity to appear before the Court and oppose it. If the Court rejects the opposition, the ex-parte order will be rendered absolute until the final determination of the proceedings, namely until the end of the action.

Note: Before granting an ex-parte order, the Court shall request the applicant to provide an undertaking for any damages which the respondent may suffer as a result of the issuance of the order.

Prohibitory Orders: Further Discretion pursuant to Regulation (EU) 1215/2012 (Recast Brussels Regulation)

According to section 35 of the Recast Brussels Regulation, an application may be made to the courts of a Member State for such provisional, including protective, measures as may be available under the law of that Member State, even if the courts of another Member State have jurisdiction as to the substance of the matter.

The notion of provisional measures referred to in the Regulation includes protective orders aimed at obtaining information or preserving evidence or preventing the alienation of assets.

Note: Where provisional, including protective measures are ordered by a court of a Member State not having jurisdiction as to the substance of the matter, the effect of such measures should be confined to the territory of that Member State.

Prohibitory Orders: Further Discretion pursuant to e International Commercial Arbitration Law, Law 101/87 (“the ICA Law”)

Section 9 of the ICA Law gives discretion to Cyprus Courts to issue an interim (protective measure) at any time before or during the arbitral proceedings.

ICA Law applies in any arbitration with an international element. An arbitration is international if:

1. The parties to the arbitration agreement have at the time of the conclusion of the agreement their places of business in different States; or
2. One of the following places is situated outside the State in which the parties have their places of business:

1. The place of arbitration determined in the arbitration agreement
2. The place where a substantial part of the contracting obligations is to be performed
3. The place with which the subject-matter of the dispute is most closely connected

Prohibitory Orders: Ancillary Disclosure of Assets

Cyprus Courts retain the discretion to issue – simultaneously with the granting of a prohibitory order – an order forcing the respondent to disclose the value and location of his/her assets.

Such disclosure orders are made in aid of the freezing order in order to ensure the effectiveness of the latter.

Prohibitory Orders: Contempt of Court

Any violation of any interim prohibitory or mandatory order constitutes contempt of court which is punishable by imprisonment or sequestration of assets or a fine.

Any third party who while aware of the order knowingly and intentionally incites or assists in its violation may also be held liable in contempt of Court.

Cyprus Courts will treat any wilful violation with the utmost severity. In a well-known passage, often adopted by Cyprus Courts, the Supreme Court denoted the following:

«Invariably disobedience of the order of the Court undermines the effectiveness of the judicial process, a defiance of far reaching social repercussions. Obedience to orders of the Court constitutes one of the foundations of civilized life»

Prohibitory Orders: Our Services

Economou & Co LLC is a trusted Cyprus leader in all matters involving corporate litigation and interim relief. Please contact us if you are interested in:

• Strategic advice re the steps to be undertaken in Cyprus in order to achieve the desired result
• General advice in respect to all matters concerning corporate litigation, such as commercial fraud, civil conspiracy, jurisdictional issues, recognition and enforcement proceedings
• Filing and obtaining interim relief, including but not limited to prohibitory orders, Chabra orders, disclosure orders (Norwich Pharmacal), tracing orders (Bankers Trust), receivership orders, Search Orders (Anton Piller), gagging orders and anti-suit injunctions.