BANKING SECTOR - Law



FREEDOM OF ESTABLISHMENT AND FREE MOVEMENT OF SERVICES: AN OPPORTUNITY TO HARMONISE AND LIBERALISE THE CYPRUS SERVICE SECTOR

Elena Papageorgiou and Eleni Kouzoupi *

INTRODUCTION

“Freedom of Establishment and Free Movement of Services”[1] is simultaneously a complicated and wide-reaching subject area. Not least because, on the one hand, it touches on a variety of political issues regarding the extent of the national treatment on aliens and, on the other, it covers a wide spectrum of activities, mainly of financial nature, affecting almost all aspects of the economy.

This particular subject is considered of pivotal importance by the European Union (EU), reflected in the extensive reference to the subject in Articles 43 and 49 of the Treaty of European Community (EC)[2]. It may be stated that the harmonisation effort relating to this subject has “acquired a new eminence in the political agenda of the European Union and has been the subject of various consultation papers and Commission Communications”.[3] These were discussed and welcomed by both the European Parliament and the Council.[4]

Nowadays, with the implementation of the Euro expected to be completed by the end of the current year, the EU member states are concentrating their efforts on the liberalization of the service industry, so as to allow for the right of legal and natural persons to establish themselves in any member state, while only having to register with and comply with the home country’s regulatory authority. The attention of the EU naturally gravitates to the financial industry, much because of its pervasiveness and of the ease of establishment of financial service companies.

Freedom of establishment, covering Articles 43 to 48 EC, requires the removal of restrictions, legal as well as administrative, on the right of individuals and companies to maintain a permanent or settled place of business in a member state. Establishment has been defined as “the actual pursuit of an economic activity through a fixed establishment in another member state for an indefinite period”.[5] Establishment extends to the establishment through agencies, branches and subsidiary organizations. The right to establishment of self-employed individuals is acutely stressed. The abolishment of restrictions provides for freedom to acquire and use land and buildings as well as lifting indirect restrictions, wherever the latter might exist, in the differing treatment of European citizens and locals in obtaining state benefits.

The free movement of services, covered in Articles 49 to 55[6], requires the removal of restrictions on the provision of services between member states. In general, the services offered must be provided on payment and include industrial, commercial, manual and professional services.[7]

The basis of the provisions relating to both establishment and services, which are usually read in parallel, comprises the principle against discrimination on grounds of nationality, thus promoting market integration.

Apart from Article 43 EC on the freedom of establishment and Article 49 EC on the free movement of services, the acquis communautaire principally consists of directives which may be classified into those which generally concern the right of establishment and the freedom to provide services in specific fields, as well as directives which abolish restrictions and extend rights so that the citizens of the member states of the European Union can have equal treatment. Finally, there are also directives, which call for the alignment of the legislations, regulations and procedures applied by member states.

The acquis communautaire directives and articles pertaining to the subject of freedom of establishment and free movement of services include the following significant unities, each one of which to be presented and analysed separately in this chapter:

• Financial services:

i) Banking;

ii) Insurance;

iii) Investment Services and Securities Markets.

• Non-financial services:

i) Article 43 EC on the freedom of establishment and Article 49 EC on the freedom to provide services;

ii) Directive 95/46/EC on the protection of personal data and the free movement of such data;

iii) Directives on the freedom of establishment and the freedom to provide services for craftsmen, traders and farmers;

iv) Directive 86/653/EC on self-employed commercial agents;

v) Information Society Directive 98/47/EC on the provision of information in the field of technical standards and regulations and of rules and Directive 98/84/EC on the legal protection of services on conditional access.

The right of establishment and the freedom to provide services in many areas of the Cyprus economy is not necessarily regulated by specific legislation relating to each of these fields, but usually by legislation of a more general nature addressing the movement and residence of aliens in Cyprus generally, as well as the acquisition of immovable property by aliens and foreign exchange control applicable within the framework of government policy regarding the issuing of permits for foreign investments.

It appears to be that the subject “Freedom of Establishment and Free Movement of Services” impinges on a wide spectrum of services which cover almost all fields of the economy. It may be argued, therefore, that the pervasiveness of the service industry makes implementation of this subject rather challenging. The task of the Cypriot authorities is made even more cumbersome because they are obliged to adopt a vast number of directives which, in contrast to the regulations, by their very nature do not have direct effect[8]. Consequently Cyprus, by the time of accession to European Union[9], must adopt all necessary administrative and legal measures for their implementation[10]. The administrative measures usually aim at creating, introducing, and organising a competent authority to apply the legislation. The legal measures are in the form of primary or subsidiary legislation.

FINANCIAL SERVICES

BANKING SECTOR

The Cyprus banking sector is a dominant player in the local service industry. The banks’ clout is evident in their dominating presence in all fields of the financial services industry, with the inclusion of the insurance industry (for both general and life insurance products) and the securities and investment services industry.

The Cyprus domestic banking system can be broadly divided into three groups of credit institutions:

i) commercial banks·

ii) specialised credit institutions· and

iii) co-operative credit institutions.

At the apex, is the Central Bank of Cyprus (CBC), the competent authority vested with the power and responsibility for the regulation and supervision of the banking sector.[11]

The CBC has always aimed at a high standard of regulation and supervision. The rules and policies applied hitherto with respect to banks have, in many ways, outstripped the recommendations of the Balse Committee on banking supervision and the European Union Banking Directives. The CBC has its prudential standards under constant review to incorporate new developments and changing circumstances.

Following the application of Cyprus for full membership of the European Union,[12] the Central Bank of Cyprus has embarked upon a program of harmonisation of the banking legislation to the acquis communautaire.

The most important harmonisation measure instigated so far, in the field of banking, has been the enactment of the Banking Law in June 1997[13], achieving “legislative approximation with the EU in the field of banking to a very large extent”[14].

The Law[15] regulates the banking system in Cyprus and aims to grant protection to depositors. It sets the legal framework within which banking business may be pursued and reflects, to a very large extent, the principles and rules of the EU banking legislation[16]. It should be stated that the legal framework and the methods of supervision apply to domestic banks and offshore banks alike. However, the co-operative credit institutions are not captured by the Banking Law and are thus not under the prudential supervision of the CBS[17].

In particular, the Banking Law defines the term “banking business” and provides that a banking license is required for the pursuit of banking business.

Furthermore, it lays down minimum authorization requirements and prudential rules, in conformity with the acquis, that must be satisfied so as to permit any entity to operate as a credit institution. The Law prescribes limits on large credit exposures and non-banking holdings, defines a bank’s capital base and requires the maintenance of a solvency ratio. Furthermore, the Law empowers the Central Bank of Cyprus to exchange information with overseas supervisory authorities, provides for contacts between the CBC and external auditors of supervised banks, and enables the CBC to prescribe the format and content of bank accounts. Moreover, the Law provides for consolidated supervision and provides for the setting up of a Deposit Protection Scheme. The Law also contains extensive enforcement powers and penalties that the CBC may impose on banks breaching the provisions therein.

The First and Second Banking Directives[18], the Own Funds[19] and Solvency Ratio Directives[20], the Large Exposures Directive[21], the Consolidated Supervision Directive[22], the Deposit Guarantee Scheme Directive[23] and the Annual Accounts and Consolidated Accounts of Banks Directive[24] are, to a large extent, in conformity with the provisions of the Banking Law.

In particular, the Banking Law covers the First and Second Banking Co-ordination Directives approximately to their entirety. Prior approval of the Central Bank of Cyprus is required for qualified holdings, branches of foreign banks are not required to maintain endowment capital, the Central Bank of Cyprus has the right to co-operate with foreign supervisory authorities and the principle of “home country control” is recognised and applied. There are also rules governing holdings in non-bank companies or in companies carrying on business not closely related to banking or which do not consist of business dealing with insurance. The Law provides for measures and penalties against non-compliance.

The Banking Law and the Regulations issued by the CBC thereunder, incorporate, to a very large extent, the provisions of the Solvency Ratio Directive, including the obligation to maintain a solvency ratio at a level not less than 10%[25], the methodology for its calculation and the requirement for solo and consolidated positions in the case where a bank is a member of a wider group. The Central Bank of Cyprus achieves the classification of countries into Zone A and Zone B through the exercise of discretionary power. Under the current methods of classification employed by the CBC, there is some deviation from the EU’s classification. The Regulations currently in force do not cover market risk as the risks taken by the banks are small and are well below the threshold laid down by the Directive. Full harmonisation will be achieved upon accession.

The definition and computation of the level of own funds is in full conformity with the requirements of the Own Funds Directive.

The Large Exposures Directive is covered by the Banking Law, which prohibits excessive concentration of exposures to any one client or group of connected clients. The various exposures must be measured in relation to the bank’s own funds and must not exceed the limits specified, which limits are equal to those specified in the Directive. Specific limitations also apply with regard to the exposures to a bank’s director. Monitoring is effected through regular reports and on-site examinations.

In addition, the CBC has issued to banks[26] an instruction concerning the application of the limits on large exposures as stipulated in the Banking Law, including some clarifications on the matter and monitoring procedures[27], in full compliance with the EU Directive on the Monitoring and Control of Large Exposures of Credit Institutions.[28]

The Consolidated Supervision Directive is fully transposed by the Banking Law, which empowers the Central Bank of Cyprus to exercise supervision on a consolidated basis covering the holding company and any of the subsidiaries of a bank. The principle concerning supervision on a consolidated basis is also incorporated in the instructions issued to banks on the solvency ratio and on large exposures.

Moreover, the Banking Law requires banks to prepare financial statements in accordance with international accounting standards and in addition it empowers the CBC to issue regulations as to the content of the public accounts in conformity with the Bank Accounting Directives. Banks are required to submit to the Central Bank of Cyprus and to publish their balance sheet and profit and loss accounts, the format and the content of which are very much in line with the Bank Accounting Directives. Accounts must be consolidated when the bank is a member of a wider group; branches of banks having their head office outside Cyprus are also required to publish their accounts. An instruction issued to banks at the end of 1999, incorporates in all detail the layout and content of the balance sheet and profit & loss account, as described in the Directives concerning annual accounts and consolidated accounts of banks.

In December 1998, the CBC issued to banks instructions concerning the definition and computation of the level of own funds and the method of computation of the required solvency ratio. These are in conformity with the requirements of the EU Directive on the Annual Accounts and Consolidated Accounts of Banks and other Financial Institutions.[29]

Whilst giving the CBC “wide–ranging powers”[30] including the power to issue general or specific instructions to banks,[31] the Banking Law explicitly defines the Central Bank of Cyprus’ s obligations with respect to the exercise of its discretionary powers, and prescribes that the CBC should take cognizance of international practices and the relevant EU Directives, and that the CBC issues adequately reasoned decisions.

Concerning the application of articles 43 and 49 of the EC Treaty[32] to banking, the authorisation criteria apply similarly to national and non-national applicants, and foreign establishments are accorded national treatment.

Following the enactment of the Banking Law, other harmonisation measures have also been instigated. These include the following:

• The issue of Regulations pursuant to the powers granted to the CBC under section 34(2) of the Banking Law to issue regulations with the approval of the Council of Ministers, on 1.9.2000, for the operation of a Deposit Protection Scheme.[33] The Regulations incorporate all the requirements of the relevant EU Directive.[34] The purpose of the Regulations is to protect private individuals who deposit money with commercial banks registered in Cyprus by providing for damages to be paid to them out of the fund if the commercial bank is not in a position to repay the deposit due to its financial position, or a court order has been granted for the winding up of the bank. The minimum capital of the fund has been fixed at CY£2 million which amount may be increased in the future. The scheme initially covers only deposits in Cyprus pounds. The amount of damages granted to a private depositor may not exceed at any time the equivalent of Euro 20.000 in Cyprus pounds at the time. The intention, however, is to extend the scheme to other currencies in the future.

• An amendment of the Banking Law, abolishing article 37 therein, has been effected.[35] As a result, the CBC may no longer be able to exempt offshore banks from the full application of all the provisions of the Banking Law.

The main areas in which Cyprus is not yet in conformity with respect to the EU Banking Directives are the following:

• The application of the “economic need criterion” in relation to granting a license for carrying banking business. The Central Bank of Cyprus, in deciding whether to grant a license may take into account the economic need for the services of the applicant. It was thought expedient, as a matter of policy, for the CBC to retain this discretionary power because of the small size of the banking market, which, in its current state, is considered saturated. Nevertheless, it should be noted that this criterion is not enshrined in the Law and this particular discretionary power of the CBC may be eliminated. It is anticipated that the “economic need criterion” will be abandoned upon harmonisation with the single passport principle by the time of accession.

• The implementation of the Capital Adequacy Directive[36] (CAD). It should be noted that the provisions of this Directive have not been implemented because of the small scale on which banks have hitherto been involved in trading instruments captured by the Directive. Banks in Cyprus have not been engaged, to a significant extent, in activities exposing them to market risk. Their trading book business is small, well below the threshold laid down by the Directive. Therefore, Cyprus is not in breach of its requirements and will implement the Directive upon accession. There are enabling provisions in the Banking Law[37] allowing CBC to take steps for the implementation of CAD as and when the commercial banks’ trading business grows to a point where application of CAD will be mandatory.

• The implementation of the Directive on Contractual Netting[38] (amending the Solvency Ratio Directive) and Directive 33/98/EC amending both the Solvency Ratio Directive and CAD. The 2000 Progress Report on Cyprus, issued by the Commission on 8 November 2000,[39] states that “further alignment is needed in the field of the recognition of contractual netting agreements, consolidated accounts and capital adequacy for market risks”. However, according to the CBC, banks in Cyprus have not hitherto been involved in off-balance sheet items or derivatives, where contractual netting may apply. Thus, while Cyprus has yet to adopt these Directives, it is not at present in breach of their rules. These Directives will be implemented upon accession, as indicated in the harmonogram.[40]

In conclusion, it may be asserted that Cyprus is at an advanced stage of harmonisation in the field of banking regulation and supervision, with further legislative alignment scheduled for implementation upon accession. In this process, no serious problems are envisaged. By accession, full harmonisation of the banking sector will be in place.

CO-OPERATIVES

In addition to commercial banks and specialised credit institutions, the other significant part of the Cyprus banking system is the co-operative sector.[41]

The 2000 Regular Report on Cyprus[42], states that the financial supervisory structures within the credit co-operative sector are weak and as such are “worrisome”. The co-operative credit and saving societies (CCSSs), which account for around 30% of bank deposits, are not subject to the normal banking sector supervision undertaken by the CBC. In addition, the co-operatives enjoy a number of legal advantages; most notably, exemptions from both stamp duties and required reserve ratios. This may place them at a competitive advantage relative to the commercial banks.

CCSSs are autonomous, voluntary, mutual self-help, non-profit organisations, which focus on meeting the social and economic needs of their members, who are associated together with a common bond. This means that all members are from one stakeholder group[43], having a common interest, or living in the same geographic area.

The CCSSs offer a limited range of banking services basically consisting of the acceptance of deposits and the granting of loans or other credit facilities to their members only.[44] The emphasis of the co-operative sector’s lending activities has traditionally focused on mortgage lending for housing or on small loans for personal purposes.[45]

The first regulatory framework for co-operatives was established in 1914, with the introduction of the Co-operative Societies Law and Rules of 1914. Today, the operation of the CCSSs is governed by the Co-operative Societies Law[46] and Rules of 1987. The Co-operative Societies Law and Rules reflect the internationally accepted co-operative principles[47].

These institutions are not subject to monetary or prudential supervision by the CBC, but are supervised by the Department of the Co-operative Development of the Ministry of Commerce, Industry and Tourism. The Commissioner of the Department is responsible for the overall supervision of the co-operative movement.

An important element of the system is the co-operative Central Bank (CCB), which was established in 1937. The CCB is subject to the Banking Law of 1997 and falls under the supervision of both the Department of Co-operative Development and the Central Bank of Cyprus. Its members are all the CCSSs, for which it acts as their banker and lender of last resort.

There has been a long debate[48] regarding the position of the CCSSs in relevance to the harmonisation process.[49]

In the past, the Cyprus position was that the CCSSs were not considered as credit institutions and thus fell outside the scope of the EC Banking Directive[50]. However, following several meetings in Brussels[51] and in the light of the EC experts consultation study, the question of the possible exclusion of the co-operative credit and saving societies from the scope of the aforementioned EC Banking Directive is no longer under consideration.

A further step to the finalization of the stand of the Cyprus co-operative has been reached on the 23.02.2001 with the co-operative movement deciding to fully comply with the provisions of the acquis[52]. In the proposed scenario, no exemptions will be sought, the EC Banking Directive will apply to most CCSSs and a transitional period will be sought, so as to give to some of the CCSSs adequate time to fully comply with the requirements of the Banking Directive[53].

The steps to be taken in the proposed scenario may be summarized below:

• Procure amendments to the co-operative legislation so as to make it explicitly clear that the CCSSs are empowered to engage in the business of acceptance of deposits from the public without affecting in any way either their statutory characteristics as co-operative credit institutions or the co-operative principles as enunciated in the present Co-operative Societies Rules and Laws.

• Implement a series of reforms, including mergers and groupings on a geographical or functional basis, in order for small sized CCSSs to attain “critical mass” both in terms of membership and market shares, with a view to achieving administrative and operational efficiency.

• Take measures aimed at enabling CCSSs for purposes of the own funds, solvency ratio and the other prudential computations, to make full use of the possibilities in the Banking Directive in respect of certain items such as “uncalled share capital”, “members’ reserve liability” and eligible “subordinated loans”.

• Review and revise the organizational, procedural and functional structures of the Department of Co-operative Societies and Co-operative Development, with a view to putting in place, the legal, regulatory and supervisory framework envisaged by the relevant provisions of the Banking Directive.

The main difficulties to be anticipated by the CCSSs with respect to the prudential measurements of the Banking Directive are associated with these institutions’ own funds levels, which, in the wake of the aforesaid reforms and actions, could be expected to increase.

Time and effort will by needed to adapt and conform to a system of measurements applicable to both CCSSs and banks. Effective implementation of the reforms presupposes persistent action on several fronts. The Cyprus Cooperative Movement leadership is determined to do its utmost and to guide the CCSSs in the direction of effective harmonisation within set deadlines. It is encouraging that the EC Experts recognized the inherent constraints and have indicated that reasonable transitional periods should be allowed in appropriate cases.

It is envisaged that the situation should be as follows:

i) most CCSSs should be deemed as credit institutions within the ambit of the Banking Directive provisions·

ii) conforming CCSSs[54] should be accorded the recognition and privileges of “authorized credit institutions”·[55]

iii) a transitional period will be sought to give time to the rest of the CCSSs to conform to the provisions of the Banking Directive and be treated as “authorized credit institutions” upon satisfying all the prescribed requirements·

iv) the very small CCSSs that may not conform to the provisions of the Banking Directive after the expiry of the transitional period, will form into a permanent affiliation arrangement, affiliated to the Cooperative Central Bank which will act as their central body.[56]

Against this background, it is hoped that the groundwork will be completed soon, and the cooperative movement will follow the path of harmonisation at a swift pace.

INSURANCE

The creation of a common market in the insurance sector has always been considered by the European Union as one of its priorities.

The creation of an internal market in the insurance sector presupposes a market without internal borders within which insurance companies will be able to exercise their activities freely.

The aim sought for is twofold; on the one hand, to make it possible for all citizens of the European Union to have access to the widest possible spectrum of insurance products provided within the European Union, and on the other hand, to safeguard that every insurance company which has a license to operate in a member-state is enabled to carry out its activities in another member-state, always in accordance with the freedom of establishment and the freedom to provide services.

In order to achieve these aims, the European Union issued a number of directives in relation to the main sectors of insurance.

Regarding the Life Insurance sector, the Council adopted the First Life Co-ordination Directive[57] in 1979, which contained the basic rules governing the right of establishment for undertakings operating in the life insurance sector[58].

This was followed by the Second Life Co-ordination Directive[59], which aimed at completing the framework relating to freedom to provide insurance services throughout the Community[60].

On 10th November, 1992, the Commission approved the Third Life-Co-ordination Directive[61]. According to this Directive, insurance companies established in one Member State can operate freely throughout the Community, both in terms of offering their services directly across national borders and subject to the authorisation and control of their country of primary establishment within the Community[62].

Regarding non-life insurance, the Council adopted the First Non-Life Co-ordination Directive[63] in 1973, which lays the foundation of the right for EEC insurers to establish themselves in another member state, whether as a company, branch or an agency and to offer insurance services in that state (the host state) under the same conditions and with the same rights as nationals of the host country.

Τhe details of the application of freedom to provide services by insurance companies of this sector are regulated by the Second Non-Life Co-ordination Directive[64].

Finally, the Council adopted the Third Non-Life Co-ordination Directive[65] under which home state control is required for all insurance service providers.

Regarding motor insurance, the Council adopted the First Motor Insurance Directive[66] on 16th July 1996, which established an international “Green Card” system which operated as an internationally recognized insurance certificate indicating the countries for which cover is provided and the duration of such cover.

The Second Motor Insurance Directive[67], which was approved in 1984, harmonised both the scope and conditions of compulsory motor insurance cover.

Finally, the Council adopted the Third Motor Insurance Directive[68] to resolve many differences which existed between the Member States as regards the level and content of compulsory civil liability insurance.

Cyprus legislation regarding the insurance sector consists of the following statutes:

• The Insurance Companies Law of 1984 and 1990.

• The Motor Vehicles (Third Party Insurance) Law of 2000.

At present, the Insurance Companies Law of 1984 and 1990 regulates the establishment, operation and supervision of insurance companies in Cyprus and protects the rights and interests of the insured[69]. All the powers of the Law are conferred upon the Superintendent and the Assistant Superintendent, which are civil servants appointed by the Council of Ministers[70].

This Insurance Companies Law of 1984 and 1990 will be replaced by a new law harmonized to the acquis. The proposed law regulates both life insurance and non-life insurance. It has been prepared by the Ministry of Finance (Insurance Companies Control Service) in collaboration with the Insurance Association of Cyprus and has been sent to the Law Office of the Republic for legal vetting. The law is expected to come into force on 1st July, 2001. Provisions of the law regarding the single license and the home country control principle will come into force upon accession.[71]

The Insurance Companies Law of 1984 and 1990 deviates from the acquis communautaire mainly on the following areas:

Regarding the issue of a single licence by the country of primary establishment of the insurance company within the Community, the Insurance Companies Law of 1984 and 1990 presupposes the issue of a licence to foreign insurance companies to carry out business in the form of a branch or agency[72]. These provisions will be amended so that an insurance company which has a licence to operate in a member state will be able to carry out insurance business in Cyprus (either in the form of a branch or agency) without the issue of an additional licence by the Superintendent of Insurance of the Republic of Cyprus. And, in the same manner, an insurance company whose country of primary establishment is Cyprus, which has been granted a licence to operate from the relevant Cyprus regulatory authorities, will be able to carry out insurance business freely in any member state.

Regarding the supervision system, the Insurance Companies Law of 1984 and 1990 differs partially from that of the European Union as at this point in time.

With the amendment of the existing legislation, the supervision will be made by the country of primary establishment of the insurance company and not by the Superintendent of Insurance of the Republic of Cyprus.

Moreover, with the amendment of the legislation, the supervision by the Superintendent of Insurance of the Republic of Cyprus will only be restricted to the operation of the insurance companies whose country of primary establishment is Cyprus. In addition, this supervision will extend geographically within the borders of the European Union so as to cover the activities of the Cypriot insurance companies which carry out insurance business in the European Union.

Furthermore, the minimum solvency margin which the existing Cyprus legislation provides differs from that provided in the relevant directives[73] and, therefore, must be adjusted accordingly.

The increase of the minimum solvency margin will create financial difficulties to insurance companies which will be obliged to increase their assets withheld so as to cover the solvency limit on a permanent basis.

Furthermore, prudential provisions concerning minimum capital requirements “are still quite different from those contained in the acquis”.[74] The Insurance Companies Law of l984 and 1990 provides as minimum share capital the amount of CY£200,000 for all insurance companies irrespective of the class of business transactions.

This provision will be amended so as to increase the minimum share capital to CY£4000,000 for the non-life insurance business, to CY£600,000 for the life-insurance business, to CY£1,000,000 for composite activities. A provision will be included in the Law with reference to the interpretation of minimum guarantee fund as the latter is defined in Directive 79/267/EEC.[75]

Regarding the liberalization of premiums, Cyprus legislation, at present, defines premiums which insurance companies are obliged to charge in specific sectors. Directive 92/49/EEC[76] as well as Directive 92/96/EEC[77] provide for the liberalization of premiums. The Ministry of Finance has already submitted an amended bill in the House of Representatives for the liberalization of premiums.

Furthermore, “further alignment is needed as regards accounting rules”.[78] The Insurance Companies Law of 1984 and 1990 covers to some extent the Directive on accounting of insurance companies[79]. At present, no compulsory accounting rules specific to insurance business exist though insurance companies apply International Accounting Standards.

The Law will be amended so as to comply with Directive 91/674/EEC on accounting of insurance companies.

Furthermore, according to section 3 of the Insurance Companies Law 1984 and 1998, the Council of Ministers has the authority to exempt a captive insurance company from the provisions of the Insurance Companies Laws 1984-1998, provided that the company complies with any conditions or terms that the appropriate authorities in Cyprus deem it necessary to impose.

With the new legislation, this provision will cease being in force since it will constitute preferential treatment in favour of a class of companies, i.e. the captive, a fact which comes into contrast with sections 43 and 49 of the EC Treaty.

Regarding insurance intermediaries, the Cyprus legislation lays down only minimum requirements for the carrying out of insurance business by an agent without though there being a definition of a broker, the process of his registration and recognition of experience acquired in another country. This matter will be completely regulated by the new legislation.

The current legislation concerning the motor insurance, namely The Motor Vehicles (Third Party Insurance) Law[80], is harmonised with the relevant directives[81]. More specifically, this Law provides that :

• a “Green Card” is considered to be a valid certificate recognised by the Cypriot authorities;

• companies have the obligation to compensate victims of motor accidents irrespective of whether the driver was driving with the consent of the owner of the vehicle and with a valid driving licence;

• an insurance certificate issued by a country which is a member of the Multilateral Guarantee Agreement (MGA) is considered to be a certificate of insurance recognised by the Cypriot authorities.

INVESTMENT SERVICES AND SECURITIES MARKETS

The issue and trade in securities in Cyprus has, to a large extent, been codified. The various Laws and Regulations which have been enacted endeavor not only to protect investors but also to harmonise the existing regime with the main EU Directives in the field of securities regulation.[82]

The principal pieces of legislation are:

• The Cypriot Securities and Stock Exchange Law;

• The Cypriot Securities and Stock Exchange Regulations of 1995, as amended;

• Various Regulations passed under sections 19(3), 60A, and 71 of the Securities and Stock Exchange Law, such as the Mergers and Acquisitions Regulations, of 1997; and

• The Companies Law.

With respect to the investment services and securities markets,[83] the Securities and Stock Exchange Law and Regulations of 1993 to 2000 established the official Cyprus Stock Exchange (CSE) in April 1993, as a public legal entity through which all stock exchange transactions of listed companies must be executed.[84] The CSE has the responsibility to promote the development of an organized and orderly market in securities and to monitor and supervise trading so as to inhibit fraudulent or unacceptable practices.

The CSE is governed by a seven member Council appointed by the Council of Ministers. The Securities and Stock Exchange Law also provide for the establishment of the Cyprus Securities and Exchange Commission (CSEC). Whilst the CSE is assigned the day-to-day management of the securities market, the CSEC is responsible for supervising the operation of the securities market in accordance with the provisions of the Securities and Stock Exchange Law and Regulations.

Concerning the supervision and enforcement, the Securities and Stock Exchange Laws and Regulations empower the CSE and the Cyprus Securities and Exchange Commission (CSEC), in its capacity as the overall supervisory body, to continuously monitor issuers of securities and brokers. Apart from criminal action against brokers, issuers and investors, the CSE has the power to extend or withdraw licenses, as well as to impose disciplinary measures and fines on brokers and issuers.

Furthermore, the Central Depository and Central Securities Register Law[85] and new clearing and trading procedures in the form of the trading rules of the Stock Exchange (Electronic System) Regulations 100 of 1997, were adopted. The coming into effect of the Law will signal the final hours of the share certificate and call into being the “paperless exchanges”.

There has been progress on the harmonisation process, although “further legislative alignment is needed”.[86] This is due, inter alia, to the fact that some of the provisions of the acquis can only be applied upon accession.[87]

With regard to the Directive coordinating the requirements for the Drawing Up, Scrutiny and Distribution of the Prospectus to be published when Transferable Securities are offered to the Public[88], and the Directive coordinating the requirements for the Drawing Up, Scrutiny and Distribution of the Listing Particulars to be published for the admission of securities to official Stock Exchange Listing[89], partial transposition has been effected by the Securities and Stock Exchange Laws and Regulations. According to Neocleous, Georgiades and Zalewski[90], “the prospectus and listing particulars requirements imposed on issuers seeking a listing on the CSE closely follow the principal body of EU law in the field of securities regulation”.

For securities seeking listing or listed on the Stock Exchange in Cyprus, the conditions for listing, the content, scrutiny and publication of prospectuses and listing particulars, and the monitoring of announcements regarding major changes in shareholdings serve disclosure and screening purposes , following mainly the acquis, as the Securities and Stock Exchange Laws and Regulations have been largely modeled on the relevant EU Directives.[91]

Issuers are required to disclose all relevant information on the securities to be listed, their capital and main business activities, their financial position and prospects, their directors and executives, the structure of the shareholding of shareholders and the changes in such holdings. Thus, investors may evaluate in the best possible manner the assets, liabilities and prospects of the issuer and of the rights attaching to the securities to be listed on the CSE. In addition, they must regularly publish yearly and six monthly reports, on the basis of international accounting standards[92].

The Companies Law also lays down certain prospectus requirements with regard to public issues of securities.[93] They are mainly concerned with invitations to the public to acquire shares or debentures, prohibiting companies from issuing shares without having first filed the appropriate documentation with the Companies Registrar.

Where gaps exist with respects to the acquis, these relate to matters such as the ability of the Cyprus Stock Exchange to exchange information and co-operate with other competent authorities, the mutual acceptability of prospectuses, the treatment of certificates representing shares, Euro-securities, minor offers, certain debt instruments and certain forms and types of companies or institutions, which do not yet exist in Cyprus. There is still the need to permit exceptions for brokers to declare acquisitions.[94]

Furthermore, the Cypriot legislation does not reflect the exclusions contained in the Directive on Prospectuses relating to small offers, UCITS, non-profit organizations, Euro-securities and the possibility of providing for natural recognition of the prospectus. Some of the divergence will be eliminated in July 2001, by amending the Securities and Stock Exchange Laws and the Companies Law.[95] Full compliance will be achieved upon accession[96].

With regards to the Directive on Insider Trading,[97] the Law on Possession, Use and Announcement of Privileged Confidential Information was enacted on 15.4.1999[98], referring to the acquisition, use and disclosure of confidential information. It essentially prohibits insider trading, making the commission of it a criminal offence. This Law is in full compliance with the acquis on insider dealing. The objective of the Law is to secure a free and open market and to discourage share price fluctuations which are not attributable to facts relating to the issuer´s assets, prospects or profits. It thus “reinforces existing reporting requirements under the Securities and Stock Exchange Law”,[99] whereby listed companies are obliged to publish any significant new developments which may affect their share price promptly.

As stated, the law prohibits insider dealing, which, for the purposes of the law consist of the use of privileged confidential information defined in section 3, acquired under specific circumstances.

A person is regarded as having acquired privileged confidential information if such information has been obtained, inter alia, by reason of his position as a member of the managerial board or as a shareholder of the issuer or through his employment, office or profession.

Thereafter, the Securities and Exchange Commission of Cyprus sent directions to issuers, in relation to the requirements of the aforementioned Law, for establishing codes of conduct and internal control on insider dealing by their directors and officers. Issuers were asked to endorse and apply these instructions. Meetings were also held by the Commission to inform the Association of Company Auditors,the Association of Securities Brokers and the Association of Public Companies as to their responsibilities under the new Law.

In relevance to the Directive on the coordination of Laws, Regulations and Administrative provisions relating to Undertakings for Collective Investment in Transferable Securities (UCITS),[100] a harmonized Bill on Collective Investment Services has been prepared and has been pending at the House of Representatives for approval. It aims to regulate issues concerning the structure, organization, operation and surveillance of Undertakings Collective Investments in Transferable Securities, covering both UCITS and open-ended investment companies, which invest in transferable securities and bank deposits. Its main deviations from the acquis, given the emerging nature of the securities market in Cyprus, relate to some aspects of the investment policies for UCITS laid down in the acquis. It is anticipated that harmonisation will be fully achieved upon accession.

Regarding the Investment Services Directive[101], which applies to, inter alia, broker members of the SEC who offer investment services, such as execution of orders, underwriting, portfolio, management and investment advice, certain provisions of the aforementioned EU Directive have been already embodied into the Securities and Stock Exchange Legislation such as licensing, supervision, code of conduct and prudential practices. Where gaps exist in the Securities and Stock Exchange Legislation dealing mainly with conditions for licensing, capital adequacy and investor compensation, relevant amendments to the existing legislation will be effected, prior to the end of 2001.

As far as “investment firms” other than broker members of the CSE, a Financial Services Bill has been prepared and will be soon presented before the House of Representatives for approval. It is anticipated that this Bill should be enacted by October 2001. The Bill embodies the provisions of the EU Directive on Investment Services as well as all the relevant provisions of the Investor Compensation[102] and Capital Adequacy[103] Directives.

Regarding the Investor Compensation Directive,[104] pertaining to broker members of the Cyprus Stock Exchange, relevant amendments will be effected to the existing Joint Compensation Fund in order to comply with the acquis.[105] The main divergences with the acquis relate to the level of compensation, the clients of the brokers to which it applies, and the automatic triggering of compensation. The amendments should be effected by October 2001.[106] As far as rules relating to the acceptance of other member states’ schemes in part or full substitution of the host country scheme, these will be implemented upon accession.

As regards the Capital Adequacy Directive, [107] requirements already exist for broker members of the Cyprus Stock Exchange. However, the levels will be increased, so as to be brought in line with the aforementioned Directive. The relevant amendments should be effected before the end of 2001.[108]

In conclusion, and as Neocleous, Georgiades and Zalewski state,[109] “since the commencement of trading, the regulatory authorities have shown that they are prepared to achieve the objectives of the prevailing securities regime by implementing the relevant laws and regulations in the context of modern business transactions”. One may argue that Cyprus is progressing well with the harmonisation process in the field of securities market. As the last Progress Report[110] on Cyprus indicates, although “further legislative alignment is needed” there has been shown good progress.

OTHER SERVICES

ARTICLE 43 EC ON THE FREEDOM OF ESTABLISHMENT AND ARTICLE 49EC ON THE FREEDOM TO PROVIDE SERVICES

The main legislation of the Republic of Cyprus which pertains to the principles of freedom of establishment (Article 43 EC) and freedom to provide services (Article 49 EC) is the following:

a. The Aliens and Immigration Law, Cap. 105;

b. The Exchange Control Law, Cap. 199; and

c. The Immovable Property Acquisition (Aliens) Law, Cap. 109.

The above legislation contains provisions which restrict, either directly or indirectly, the freedom of establishment and the freedom to provide services, and, therefore, deviates from Article 43 EC and Article 49 EC.

In accordance with the Aliens and Immigration Law, Cap. 105, the necessary requirement for the residence of non-nationals in Cyprus is the possession of a residence permit which is issued by the Immigration Officer. A permit is also required in the case where a non-national wishes to work in Cyprus.[111] Such permits are issued on a case by case basis, using criteria which include, inter alia, the likely impact on the labour market. For a work permit to be issued, a minimum investment is also required.

In accordance with the Exchange Control Law, Cap. 199, a non-resident requires a permit from the Central Bank of Cyprus to be able to form a company; a permit is also required from the Central Bank of Cyprus for the issue of company titles (securities, including shares, bonds etc.) to non-residents and for the transfer of titles registered in Cyprus to non-residents.[112]

In accordance with the Immovable Property Acquisition (Aliens) Law, Cap. 109, approval is required from the Council of Ministers in case of a non-resident wishing to acquire immovable property.[113]

Besides the legislation referred to above, it must be stressed that other laws exist[114] which contain restrictions contrary to Articles 43 EC and 49 EC. These laws must also be harmonised.

Cyprus, according to the commitments it has undertaken, must gradually abolish all restrictions and discriminatory provisions which exist in its legislations and practices so that by the time of accession to the European Union it should be prepared to adopt and implement Articles 43 EC and 49 EC.

DIRECTIVE 95/46/EC ON THE PROTECTION OF PERSONAL DATA AND THE FREE MOVEMENT OF SUCH DATA[115]

At present there is no relevant legislation concerning the protection of personal data and the movement of such data.

The Ministry of Interior has prepared a bill, in conformity with the Directive above, now undergoing legal vetting. This bill is in accordance with the commitments which have been undertaken and is expected to be enacted by 1st July, 2001.

The bill aims to protect the right to privacy with respect to the processing of personal data. More specifically, it lays down the setting up of a competent independent control authority, regulates the transfer of data to third countries with an adequate level of personal data, and specifies rules for the processing of personal data.

DIRECTIVES ON THE FREEDOM OF ESTABLISHMENT AND THE FREEDOM TO PROVIDE SERVICES FOR CRAFTSMEN, TRADERS AND FARMERS[116]

National legislation[117] contains restrictions to the exercise of the freedom of establishment and the free movement of services by non-Cypriot nationals. The issue of a work permit by the Immigration Officer to non-nationals is a condition for the pursuit of an activity. Permission of the Central Bank of Cyprus is required for the setting up of companies by non-residents. Restrictions also exist as regards the acquisition of real estate by foreigners and on foreign direct investment.

In addition, the Law on the Registration of Agriculturist of 1987 restricts the provision of services to Cypriot nationals only. Other laws, such as the Mines and Quarries Law of 1953 provide that non-residents and companies whose central office is not in Cyprus should appoint an attorney who must be a Cypriot resident; the Petroleum Law of 1974, provides that the prospecting mining licenses are subject to the approval of the Council of Ministers. The Travel Agents and Tourist Guides Law of 1995 restricts the free provision of services for travel agencies.

These laws will be amended in order to comply fully with the acquis upon accession.

DIRECTIVE 86/653/EC ON SELF-EMPLOYED COMMERCIAL AGENT[118]

The Regulation of Relations between Commercial Agent and the Principal Law of 1992 transposes “partially”[119] the above Directive. This Law however, has been amended to fully comply with the acquis in the area of instructions given by the principal, the time limit for the obligation of the principal to notify the agent for the commission due, and the possibility to provide for indemnity or compensation.

INFORMATION SOCIETY DIRECTIVES 98/48/EC[120] ON THE PROVISION OF INFORMATION IN THE FIELD OF TECHNICAL STANDARDS AND REGULATIONS AND OF RULES AND DIRECTIVE 98/84/EC ON THE LEGAL PROTECTION OF SERVICES ON CONDITIONAL ACCESS[121]

As regards Directive 98/48/EC, at present there is no relevant legislation. In accordance with the commitments undertaken by Cyprus, new harmonised legislation must be prepared and come into force when Cyprus joins the European Union.

The relevant legislation regarding Directive 98/84/EC is the Private Radio and Television Station Law of 1998[122] which deviates from the Community Directives in so far as it provides for preferential treatment in relation to Cypriot nationals, leading to discriminatory effects against non-Cypriot nationals. This legislation will accordingly be amended in 2001.

CONCLUSION

Cyprus has always had a European orientation, cultivated through its social, political, cultural, commercial, trade and geographical ties with Europe. Following the official opening of EU accession negotiations on 30 March 1998, Cyprus is seeking to fulfil its ambition to join the European Union by 1 January 2003.

However, the process of harmonisation of the Cyprus legal order to the acquis communaiture, has so far been a healthy process. Aiming to join the EU has been a powerful incentive for Cyprus to promptly modernise its legal system and regulatory institutions.

With respect to the subject of free movement of establishment and services, the process of adopting established Community Law and practice, though painful at times, has been rewarding so far. Cyprus is primarily relying on the services industry to drive its economy. Any changes in the EU legislation pertaining the freedom of establishment and free movement of services, which legislation will also have to be adopted and implemented in the Republic of Cyprus is increasingly becoming of interest to the professionals of the service sector, who aim to adopt practices which will reinforce the links to EU member states. Cyprus has always been challenged by the relatively small size of its market; the abolition of restrictions pertaining to freedom of establishment and free movement of services will serve as a stepping stone for both Cypriot and European nationals to engage in business transactions of mutual benefit, reaping the profits in the years to come.

The Law Office of the Republic of Cyprus is keenly following the developments in the EU with respect to the efforts undertaken for the adoption and implementation of the legislation pertaining to the freedom of establishment and free movement of services in the current EU member states. A lot has yet to be done. The opportunity for further change has yet to be undertaken. In this process, quality and precision should not be compromised for. The process is by no means easy. But the European doorway lies ahead of us, and not so far away.

Δ04/ΕΕ/ΕΠ/20010220/03banking.Intro.Insur/ΠΓΠ

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* Legal Officers of European Community Law, Law Office of the Repu汢捩漠⁦祃牰獵മ敗眠畯摬氠歩⁥潴琠慨歮䔠牶灩摩獥䌠湯瑳湡楴潮⁵潦⁲楨⁳敧敮潲獵猠灵潰瑲‮桔⁥楶睥⁳硥牰獥敳⁤湩琠楨⁳桃灡整⁲牡⁥桴⁥数獲湯污瘠敩獷漠⁦桴⁥畡桴牯⁳湡⁤潮⁴桴獯⁥景琠敨椠獮楴畴楴湯琠桷捩⁨桴祥戠汥湯⹧ȍ匠整桰湥圠慥桴牥汩…慐汵䈠慥浵湯ⱴ錠䍅䰠睡Ⲕ㈠摮攠楤楴湯‬㤱㤹‬⹰㔠㔷阠㘠㈱മ 硅‮牁⹴㔠′湡⁤㤵മ 浅汩潩⁳癁潧汵慥ⱳ錠桔⁥慨浲湯獩瑡湯漠⁦畒敬⁳景挠湯畤瑣椠blic of Cyprus.

We would like to thank Evripides Constantinou for his generous support. The views expressed in this Chapter are the personal views of the authors and not those of the institution to which they belong.

[1] Stephen Weatherill & Paul Beaumont, “EC Law”, 2nd edition, 1999, p. 575 – 612.

[2] Ex. Art. 52 and 59.

[3] Emilios Avgouleas, “The harmonisaton of Rules of conduct in EU Financial Markets: Economic Analysis, Subsidiarity and Investor Protection”, (2000) European Law Journal, Volume 6, Issue 1 p. 72.

[4] EU Bull 5-1999, points 1.2.32 and 1.2.35.

[5] Case C-221/89, R v. Secretary of State For Transport, ex p. Factortame (1991) ECR 1-3905, (1991) 3 CMLR 589, para. 20.

[6] Ex arts. 59 to 66.

[7] For an analysis, see N.G.Green, T.C. Hartley, J.A. Usher, “The Legal Foundating of the single European Market”, see also, Paul Craig and Grainne De Burca, “EU Law, Text, Cases and Materials” 2nd ed., Oxford, p. 727., see also, Stephen Weatherill and Paul Beaumont “EU Law”, Penguin Books, 1999, p. 671.

[8] Article 249EC: “A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods.”

[9] As a working hypothesis Cyprus considers that its accession to the European Union will take place not later than 1st January, 2003.

[10] T.C. Hartley, “The Foundations of European Community Law”, 3rd ed. 1994, p. 210.

[11] Domestic and offshore, excluding the co-operative credit institutions.

[12] 4 July, 1990.

[13] Law 66(I) of 1997, as amended.

[14] Central Bank of Cyprus, Report on “The Harmonisation of the Cyprus Legal and Institutional Framework with the Acquis Communautaire” 22.01.1999, p.7.

[15] For an extensive analysis, see Stephanie Laulhe “Banking Law” in “Introduction to Cyprus Law”, by Andreas Neocleous & Co., Yorkhill Law Publishing, 2000.

[16] For a further analysis on the Community Legislation, see Stephen Weatherhill and Paul Beaumont, op. cit., p.698.

[17] With the exception of the Co-operative Central Bank.

[18] Directive77/780/EEC and 89/646 EEC as amended and codified by Directive 2000/12 EC.

[19] Directive 89/299/EEC as amended and codified by Directive 2000/12 EC.

[20] Directive 89/647/EEC as amended and codified by Directive 2000/12 EC.

[21] Directive 92/121/EEC as amended and codified by Directive 2000/12 EC.

[22] Directive 92/30/EEC as amended and codified by Directive 2000/12 EC.

[23] Directive 94/19/EC as amended.

[24] Directive 786/635/EEC as amended.

[25] As from 1/1/2001.

[26] May, 1999.

[27] It should be noted that prior to the issue of this Directive, banks were, for a number of years adhering to guidelines which were in line with the principles of the EU Directive.

[28] Directive 92/121/EEC.

[29] Directive 86/635/EEC.

[30] A. Neocleous & Co, 2000, op-cit., at p.685.

[31] Section 41(3) of the Banking Law as supplemented by Law 94(1) of 2000.

[32] Ex. Articles 52 and 59 of the Treaty of European Union.

[33] Public Instrument no. 66 of 2000.

[34] Directive 94/19/EC.

[35] Law 74(I) of 1999.

[36] Directive 39/6/EEC as amended.

[37] Articles 21 – 22.

[38] Directive 96/10/EC as amended.

[39] European Commission, 2000 Regular Report of the Commission on Cyprus’s Progress Towards Accession, 8 November, 2000, p.42.

[40] Under Articles 21-22 of the Banking Law, the Central Bank may issue instructions to banks regarding the level of capital requirements as deemed appropriate and in both the above cases determination of the required capital may take into account the provisions of the relevant Directives.

[41] For an analysis of the system in Cyprus, see, A. Neocleous & Co, 2000, op.cit at p. 689; see also speech by Pat McArdle, Head of Strategic and Economic Planning at the Ulster Bank, seminar on Co-operatives held in Nicosia, Cyprus, 28-29 April 1999.

[42] Commission, 8.11.2000, op.cit., at p. 29.

[43] For example, producers, workers etc.

[44] Section 37.

[45] With a view to improving the living standards of their members, their existence is geared towards serving the interests of small communities.

[46] Law 22 of 1985 and 68 of 1987 as amended.

[47] Report on “The Ways and mean of harmonising the Cyprus co-operative movement to European Legislation”, by Plunkett Foundation, 14.6.1999.

[48] For a detailed analysis, see, Professor P.O. Demetriades, “Interest Rate Liberalisation. A Report to the Cyprus co-operative movement”, by Jan. 1998.

[49] See “Ready for new competition”, Financial Times, 6.4.1998.

[50] Directive 2000/12/EC.

[51] October, 2000.

[52] See “Evolution of the Co-operative movement and harminisation with the acquis”, Phileleptheros, 24.02.2001.

[53] See: “Co-operative movement Harmonisation later”, Phileleftheros Newspaper, February, 2001.

[54] Including non-conforming institutions as and when they subsequently succeed in satisfying the prescribed requirements.

[55] “Single licence” and “passport”.

[56] Similar to the Dutch Rabobank model.

[57] Directive 79/267/EEC,OJL063, 3/3/1979, p.0001-0018.

[58] The First Life Co-ordination Directive deals with the freedom of establishment and the criteria for host state authorisation.

[59] Directive 90/619/EEC, OJL330, 29/11/1990 p. 0050-0061.

[60] According to this Directive, if an insured voluntarily enters into a policy contract with an insurer not based in his territory, he leaves the supervisory “protection” of his own member state. On the other hand, those policy holders not within that category will be granted protection by the host state.

[61] Directive 92/96/EEC OJ L360, 9/12/1992 p.001-0027.

[62] Home country control.

[63] Directive 73/239/EEC, OJ228, 16/8/1973 p. 003-0019. According to this Directive, the principle of “home state” control applies to “large risks”, i.e. policies taken out by large undertakings meeting certain minimum turnover, assets and employment criteria. In contrast, “mass risks” (i.e. all risks other than large risks) are under the control of the “host state”.

[64] Directive 88/357/EEC, OJ 172, 4/7/1988 p. 001-0014.

[65] Directive 92/49/EEC, OJ228, 11/8/1992 p. 001-0023.

[66] Directive 72/166/EEC, OJL103, 2/5/1972 p. 001-0004.

[67] Directive 84/5/EEC, OJL8,11/1/1984 p. 0017 – 0020.

[68] Directive 90/232/EEC, L 129 19/5/1990, p.0033-0035.

[69] A. Charalambides, “Legal Aspects of Insurance in Cyprus”, 1st Edn., Nicosia, 1991, at p. 9/1.

[70] A. Glykis, «Insurance Law» in Andreas Neocleous and Co., op. cit., at p. 721.

[71] As a working hypothesis, the Government of the Republic of Cyprus considers that accession to the European Union will take place not later than 1st January, 2003.

[72] Section 5, 7 and 8 of the Insurance Companies Laws 1984-1998.

[73] Directives 73/239/EEC and 79/267/EEC.

[74] Commission Report, 8.11.2000, op. cit., at p. 43.

[75] Directive 79/267/EEC L063, 13/3/1979, p. 001-0018.

[76] Directive 92/49/EEC L228, 11/8/1992, p.001-0023.

[77] Directive 92/96/EEC L360, 9/12/1992, p. 001-0027.

[78] Commission Report, 8.11.2000, op. cit., at p. 43.

[79] Directive 91/674/EEC, L374 31/12/1991, p. 0007-0031.

[80] Law 96(1) of 2000.

[81] Directives 72/166/EEC, 84/5/EEC and 90/232/EEC.

[82] See, E. Neocleous, K. Georgiades and M. Zalewski “Corporate Law” in “Introduction to Cyprus Law” by A. Neocleous & Co. 2000 op. cit., at p.353.

[83] For an analysis on the topic, see “Financial services: implementing the framework for financial markets: Action Plan”, Communication of the Commission, dated 11.05.99; see also Weatherill and Beaumont, 1999, op.cit., p.702, and Jan Wouters, “EC Harmonisation f National Rules Concerning Securities Offerings, Stock Exchange Listing and Investment Services: An Overview”, (1993) European Business Law Review. p.199.

[84] With some exceptions, for example, movement securities and inheritances.

[85] Law 27 (1) of 1996.

[86] Commission, 8 November 2000 op. cit., p. 42.

[87] For example, measures relating to the “single passport” principle.

[88] Directive 89/298 as amended.

[89] Directive 80/390 EEC as amended.

[90] A. Neocleous & Co 2000, op.cit. at p. 358.

[91] See S.57(1) of the Securities and Stock Exchange Law; Securities and Stock Exchange Regulations, leg. 64 and 68.

[92] For an analysis on community principles, see Emilios Avgouleas, “Market accountability and pre and post trade transparency: the case for the reform of the EU regulatory framework: Part 1”, The Company Lawyer 1998, volume 19, No. 6, p. 162, and, by the same author “Part II”, The Company Lawyer, 1998, Volume 19 No 7, p. 202.

[93] S. 38-51 and 355-361.

[94] For a more detailed analysis on the subject, see Dimitris Tsibanoulis “Harmonisation of the Financial Services and Capital Movements Sector of Cyprus with the Acquis Communautaire: Learning from the experience and Practice of the E.U. Member States Authorities. The Functioning of Stock Exchanges in the EU: The Securities Regulation: Principles for organisation of Stock Exchanges. The experience and Practice of Greece”. TAIEX CYPRUS WEEK, Nicosia, 23, May 2000.

[95] Cap 113, as amended.

[96] Regarding the mutual recognition of prospectuses and co-ordination and exchange of information with other supervisory authorities.

[97] Directive 89/592/EEC.

[98] Law 36(I) of 1999.

[99] A. Neocleous & Co. 2000, op. cit at p. 360.

[100] Directive 85/611 EEC as amended by Directives, 88/220 EEC and 95/26 EC.

[101] Directive 93/22/EEC as amended.

[102] Directive 97/9/EEC as amended.

[103] Directive 93/6/EEC as amended.

[104] Directive 97/9 EEC as amended.

[105] For example claims to be met without the prior requirement of broker bankruptcy.

[106] For other investments firms, relevant provisions will be introduced by the enactment of the Financial Services Bill.

[107] Directive 93/6 EEC as amended.

[108] For other investments firms, relevant provisions will be introduced by the enactment of the Financial Services Bill.

[109] A.Neocleous & Co., 2000, op.cit, at p.354.

[110] Commission, 8 November, 2000, op.cit., p.42.

[111] Work permit.

[112] Cyprus has adopted a gradual liberalization plan in this field so as by the time of accession all exchange control restrictions on capital movements to be abolished. The policy of Cyprus in respect of the Exchange Control Law, Cap. 199 has been analysed in Chapter 4: “Free movement of capital”.

[113] The provisions of the Exchange Control Law, Cap. 199, and the Immovable Property Acquisition (Aliens) Law, Cap. 109, which constitute an obstacle to the free movement of capital and to freedom of establishment and freedom to provide services have been discussed in Chapter 4: “Free movement of capital”.

[114] Other legislations which contain restrictions contrary to Articles 43EC and 49EC are: The Banking Law of 1997, (b) The Insurance Companies Laws of 1984 and 1990, (c) The Tertiary Education Schools Laws of 1996-97, (d) The Private Schools of Artistic Dance Law of 1997, (e) The Establishment and Operation of Private Employment Agencies Law of 1997.

[115] Directive 95/46/EC, OJ L281, 23/11/1995, p. 0031-0050.

[116] Concerning the Directive 63/262/EEC which provides for the freedom of establishment on agricultural holding abandoned or left uncultivated for more than two years, problems may arise due to a great number of absentee landowners, as well as due to restrictions on irrigation water supply and the need for agricultural land to remain uncultivated for more than two years.

[117] The Aliens and Immigration Law, Cap 105, The Immovable Property (Aliens) Law, Cap 109. The Exchange Control Law, Cap 199.

[118] Directive 86/653/EEC, OJ L382, 31/12/1986, p.0017-0021.

[119] Commission Report, 8.11.2000, p. 42.

[120] Directive 98/48/EC, OJ L217, 5/08/1998 p. 0018-0026.

[121] Directive 98/84/EC, OJ L 320,28/11/1998, p. 0054-0057.

[122] As amended.

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