Filenews 1 August 2021 - by Eleftheria Paizanou
The Republic of Cyprus is in trouble because of its lame harmonizing with European Directive 2014/59/EU, which establishes a framework for the recovery and resolution of credit institutions and investment firms. It is the fourth attempt by the government to comply with the European acquis at a time when the Commission has already sent a letter of formal notice and a reasoned opinion (not yet satisfied) and is preparing to send Cyprus the Court of Justice of the European Union. This poses risks to the imposition of severe economic sanctions against the country.
As Finance Minister Konstantinos Petridis points out in a letter to parliament, in the event of failure to comply or correction of the harmonisation gap, the European Commission is entitled to initiate infringement proceedings against the Republic for infringement of EU law, resulting in the imposition of relevant financial sanctions. In fact, it notes that the Legal Service will not have the slightest legal defence to argue in favour of the Republic.
Many years back
Initially, the Republic had to incorporate this directive into its national law by 1 January 2015. After the European Commission sent the first firmani (warning letter), it gave the Cypriot authorities time to comply with European law by 18 January 2017. However, the Council of Ministers only approved the bill on 27 January of the same year, while in April 2017 the European Commission (EU), according to the Legal Service, decided to register an appeal with the Court of Justice of the EU, requesting a fine of €4,773 for each day that harmonisation was not completed!
The House then approved the bill prepared by the Treasury Department. Due to the harmonising gap, the risk of EU financial sanctions continued to drift. European authorities identified the problem of compliance with the Directive, which led the ministry to prepare a new bill, but which was voted down by the Parliament in January 2019.
The persistence of the SUPPORT and the refusal of the Parliament
In the meantime, in a letter to the Ministry of Finance, former Attorney General Costas Clerides cited relevant case-law of the Court of Justice of the European Union, which requires all state authorities to take all general or specific measures appropriate to achieve the result provided for in a Directive, as well as measures to eliminate the unlawful consequences of the infringement of Eu law.
In fact, he noted in the letter that the Refusal of the House to fulfil its legal obligation to incorporate the amendments into national law cannot be passively tolerated by the executive, calling on it to re-submit the bill.
It is worth noting that the ministry tabled a new bill, which was again rejected by the House in November last year. As part of the review of the bill, members of the parliamentary Finance Committee expressed reservations about resolution measures, the renewal of the mandate of the special administrator and the limitation of judicial proceedings and in particular the possibility for the resolution authority to ask the court to suspend the decision on judicial actions or proceedings in which the institution is or becomes a party under resolution. The Ministry of Finance accepted the House's recommendation to delete the provision concerning the obligation of the court to respond to the suspension of a decision, as well as for the other provisions.
The provisions of the new bill
The ministry resubmitted to the House the relevant bill, incorporating the changes proposed by the parties. The purpose of the new bill is to better harmonise with the Directive in relation to addressing obstacles to the possibility of group resolution, renewing the mandate of the special administrator and using the valuation carried out for resolution purposes in the exercise of the right to challenge reorganisation measures. At the same time, it gives the resolution authority the right to request the suspension of judicial actions or proceedings in which the institution is or becomes a party under resolution. Furthermore, it shall include provisions clarifying the possibility for the resolution authority to issue instructions or orders for the purpose of determining the sequence of impairment or conversion of liabilities in specific cases. It shall also ensure that the resolution authority has access to data and information and that the institution's resolution capacity is assessed and that procedural obligations for resolution measures are formulated more correctly. Obviously the new Parliament will give priority to the bill in order to avoid the worst for the state from Brussels.
