Filenews 12 October 2025 - by Eleftheria Paizanou
The number of lawsuits, appeals and arbitrations facing the state may have decreased, but they are one of the most serious fiscal risks for 2026 as well. And this, due to the risk of state compensation of hundreds of millions of euros, which the applicants claim from the state.
In the event that the Republic is called upon to cover possible obligations from court decisions and arbitrations, these may cause a hole in public finances. In fact, there are cases where the financial cost to the state is particularly high.
The number of lawsuits, appeals, appeals and arbitrations that are "running" amounts to 69. Besides, compared to the corresponding period last year, their number is clearly reduced, as it was 195. However, it is not clear whether this also applies to the amount of claims claimed through the courts.
Which cases are running?
Based on the data included in the Fiscal Risk Report accompanying the 2026 State Budget, 41 court cases involving general government entities, state-owned enterprises and state organizations are ongoing.
At the same time, 28 lawsuits against the Local Government Authorities are also underway. However, the cost of claims for each case varies between €500,000 and over €2 million.
In detail, for 16 lawsuits, appeals, etc. against the entities of the general government, the damages claimed by the complainants who have taken legal action against the Republic range between €500,000 to €2 million. On the same scale of claims are 18 lawsuits against local authorities. At the same time, damages from state organizations, businesses and general government entities claimed by 22 plaintiffs, exceed €2 million for every case.
Things are also dark for local government authorities, as for eight cases the compensations exceed €2 million.
At the same time, claims for five arbitration cases exceed €1 million for each case. The financial risks for the general government arise in the event that a court decision is issued against the Republic, in which case the payment of financial compensation to the plaintiffs is imposed. In case the financial compensations are high, then the public finances are negatively affected and consequently the non-achievement of the fiscal targets set with all the negative consequences. In relation to the financial risks that arise for the 22 general government entities and local authorities (20 Municipalities and communities), they concern either lawsuits by third parties or lawsuits by employees against the entities.
The financial cost is heavy
It is worth noting that in addition to the above cases, both for the central government and for the wider public sector there is also a number of lawsuits and appeals for which it was not possible to collect data.
However, if one takes into account the amount of compensation required by the complainants, one can understand the magnitude of the problem, which is why the state proceeded with a strategic plan to stem the risks. For the central government, lawsuits, appeals, appeals and arbitrations concern the following cases:
-Third-party lawsuits for financial claims for tenders that were not awarded to them, administrative acts or from contracts for the execution of government works and maintenance contracts.
-Lawsuits by third parties whose financial position was negatively affected by the March 2013 decisions to restructure the financial sector.
– Third-party lawsuits for accidents/injuries/health issues that occurred, and in the applicants' estimation the responsibility lies with the Republic of Cyprus.
-Third-party lawsuits for expropriations of fixed assets (mainly land) which, according to the plaintiffs' assessment, have suffered financial damage, whether this concerns the estimated value of the expropriated land and/or possible lost profits from the non-use of these fixed assets.
The plan to stem the risks
For years, the state has been acting preventively, taking a series of measures that will help stem the risks. The government's plan for the general government provides for the inclusion of a fund in the state budget to cover both the compensations and the expenses resulting from court decisions.
In addition, for cases that have not been completed in the courts, the state acts on the basis of the Constitution, administrative procedures and legislative provisions. It also uses out-of-court dispute resolution methods, which is usually a faster and less expensive way to deal with disputes.
Finally, for general government entities, through the Public Governance Code, specific actions have been implemented in recent years that contribute to reducing the risks arising from court decisions against them. At the heart of the government's risk mitigation planning is the strengthening of this code.
Compensation of €202 million was paid for Turkish Cypriot properties
Dozens of cases registered in the Courts are against the guardian of Turkish Cypriot properties, through which the claims range from €500,000 to more than €2 million. During the lawsuit process, the power that the guardian of Turkish Cypriot properties has by law to have under his management, the Turkish Cypriot properties located in the free areas, which were abandoned by their owners due to the Turkish invasion of 1974. This power, however, has already been judged constitutional, legal and justified, through a series of decisions of the Supreme Court of the Republic of Cyprus.
However, the current legislation may not cover the cases of more specific lawsuits for which expropriations of Turkish Cypriot properties have been made.
Already, the amounts of the expropriations have been transferred to the T/C Property Management Fund, which may be called upon to pay them to their owners. So far, claims of Turkish Cypriot owners have been registered for the payment of compensation amounting to €202 million.
At the same time, the risks that may affect public finances in relation to state-owned enterprises and organizations arise from the following assumptions:
-Lawsuits of third parties either from contracts or from damage to private property during the execution of works.
-Lawsuits/appeals of employees due to promotions/salary scales or other personnel issues.
In relation to the risks faced by municipalities and communities, these are related to lawsuits by third parties either from contracts or from damage to private property during the execution of works. They also arise from lawsuits and appeals of employees due to promotions, salary scales or other personnel issues.
