Double taxation treaties operate as vehicles for international business because they are an important tool in facilitating the appeal of commercial transactions within a jurisdiction and give considerable advantage to those undertaking business in participating countries by offering certainty and constancy.

Double taxation occurs when two different countries charge one person (legal or natural) tax on the same financial transaction.  In the interests of equity, this effect is mitigated by jurisdictions that execute double taxation treaties.

A double taxation treaty will usually operate by allowing a credit to be issued against the taxes due in the taxpayer’s resident country for the taxes paid in the other treaty country.  The effect of this is that the taxpayer pays no more in tax on the transaction than the higher of the two jurisdiction’s rates.

Cyprus has executed almost 50 such treaties, most of which follow the OECD (Organization of Economic Cooperation and Development) model that is amended where necessary to conform to the various jurisdictions concerned.  The US agreement is a notable exception that follows the US Model. 

The countries with which Cyprus has signed a double tax treaty are as follows:[1]

Notes

*7 Denmark – The existing Convention shall cease to have effect as from 1.1.2012

* The treaty between Cyprus and the Socialist Federal Republic of Yugoslavia is

still in force. It shall cease to apply between Cyprus and Slovenia as from 1.1.2012

** The treaty between Cyprus and the Czechoslovak Socialist Republic is still in

force.The said treaty has ceased to apply between Cyprus and Chech Republic as

from 1.1.2010, date of application of the provision of the new agreement.

***The treaty between Cyprus and the Union of Soviet Socialist Republics

is still in force.

The essential functions of any confidentiality agreement will be:

• To protect sensitive information owned by a commercial entity; and
• To define the scope of permitted disclosure.

There are a number of instances in which confidentiality may be required, for example a term may be included in an employee contract to prevent disclosure of sensitive information during the course of and after employment and to prevent competition with the business during and after employment. Certain commercial relationships will also necessitate the disclosure of confidential information, for instance during a tender process and a business may seek to protect any sensitive information disclosed during such a process.

In some cases, law will create a duty of confidentiality automatically.  The banker/customer relationship holds a confidentiality protected by the Cyprus Banking Law and the lawyer/client relationship is protected by s 13(1) of the Code of Conduct Regulations which states that the courts and any state or public authorities are under a duty to protect the professional secrecy which is a hallmark of the association.

In a business relationship where one party needs to disclose confidential information to another person then it is usual to seek to impose a duty of confidentiality expressly in a non-disclosure agreement.  Such an agreement will usually incorporate some or all of the following provisions:

-          A definition of exactly what information is covered by the agreement;

-          A restraint on the recipient to prevent him from communicating confidential information to a third party/parties;

-          A restraint against the recipient making an announcement or disclosure about the subject matter of the confidential information without written agreement of the supplier;

-          A clear outline of the boundaries concerning what will be considered to be “confidential information”.  In other words that it will not include:

• information already known to the public;
• information already known to the other person;
• information disclosed by third persons who do not owe a duty of care;
• information which must be disclosed by virtue of law or similar.

-          Any special measures which are necessary in order to keep the information confidential;

-          A clause to state that injunctive relief may be sought in the case of an anticipated breach of confidentiality;

-          A definition of any permitted users;

-          A statement that ownership of the information vests with the supplier;

-          An indemnity for loss or damage as a result of disclosure.

Where a party has breached the obligation of confidentiality, an injunction (to prevent further disclosure) and/or damages may be awarded.

The European Convention on Human Rights has an impact on confidentiality.  Disclosure may be justified where it is clearly in the public interest for such information to be made public.  It should be noted that the ECHR makes it very clear that Article 10 (2) concerning freedom of expression does not directly override the obligation of confidentiality.

Michael Chambers and Co LLC’s team of commercial lawyers can advise on every aspect of protection and disclosure of the confidential information owned by a business. If you wish to speak to one of our commercial lawyers then please contact us.

In Cyprus copyright is governed by the Copyright Section of the Department of the Registrar of Companies and Official Receiver. The governing laws are: N.63/77, N.18(I)/93, N.54(I)/99, N.12 (I)/2001, N.128 (I)/2002, N.128 (i) 2004 and N.123 (I) 2006.

Copyright protection vests automatically and there is no need as such for an author/owner to register his right in order to benefit from protection.  The law aims to protect those who create original works by preventing others from copying or exploiting their works.

Copyright can subsist in a diverse range of creative works such as:

• Scientific works;
• Literary works;
• Musical works;
• Artistic works;
• Cinematographic films;
• Photographs;
• Sound recordings;
• Broadcasts.

In general copyright will be deemed to subsist for 70 years from the date of the death of the author of the work.  In the case of films, the 70 year period will start to run from the date of the death of the last of the producer, the primary director, the script writer, the screenplay writer and the composer of music for the film.

In order for the rights to be recognized, the beneficiary seeking to protect the work must be a citizen of the Republic of Cyprus who habitually resides in Republic of Cyprus, a legal person established in Republic of Cyprus, or a citizen of another Member State of the European Union.

Copyright protection permits the owner of the copyright the exclusive right to control in the Republic of Cyprus the reproduction, sale, rental, distribution, lending, advertising, exhibiting in public, communicating to the public, broadcasting, translation, adaptation and other arrangement of the whole or a substantial part of a work.  It is also an infringement of copyright to import into the Republic of Cyprus or export out of the Republic of Cyprus infringing articles.

Various orders may be sought by a person seeking to protect his rights, including injunction and an order to destroy infringing goods.  Moreover, the criminal sanctions for infringement can include penalties of fines and imprisonment of up to three years duration.

The owner of copyright is most often the author of the work, however (subject to agreement to the contrary) in the case of a work specifically commissioned then ownership will vest in the commissioner.  Moreover works made in the course of employment as part of the employee’s duties under a contract of employment will belong to the employer.

Copyright is transmittable by assignment, testamentary disposition and operation of law.  An assignment or exclusive license must be granted in writing and it is possible to assign or pass by will a future work.

Michael Chambers & Co. LLC’s team of intellectual property lawyers can advise on whether copyright subsists in a work, infringement proceedings as well as transmission of ownership.  If you wish to speak to one of our intellectual property lawyers then please contact us.

In order to register a patent in Cyprus, one must submit the relevant application to the Registrar, giving a full description of the invention, claims, drawings and an abstract.

In order to gain protection, the Registrar must be satisfied that the invention is:

New

This means that the invention cannot form a part of the current state of the art, in other words, it should not have previously been available to the public, either in Cyprus or abroad.

An Inventive Step

In order to make an inventive step, the invention must not have been obvious to an expert who is skilled in the relevant art.

Capable of Industrial Application

This means that the invention needs to be able to be made or used in any sector of “industry”, which is given a wide interpretation.

There are some matters that by their very nature cannot be patented including:

• Discoveries, scientific theories and mathematical methods;
• Aesthetic creations;
• Schemes, rules and methods of performance;
• Inventions contrary to public order or morality.

Once granted, a Cypriot patent will give the owner exclusive right to use the invention for a period of twenty years from the date of filing.

During this period the owner has the right to sell the patent rights as well as to license use of the invention.

A third party will be deemed to have infringed the patent if, in relation to a product that incorporates the invention, he does any of the following acts:

• Makes such a product;
• Offers or puts onto the market such a product;
• Uses such a product;
• Induces a third party to use such a product.

It should be noted that action for infringement will be brought before the District Court and that an injunction to freeze use pending the hearing can be obtained.

Michael Chambers & Co. LLC’s team of intellectual property lawyers can advise on the registration of a patent as well as assist in creation of sale or licensing agreements and defend the rights of patent owners and alleged infringers where infringement is at issue. If you wish to speak to one of our intellectual property lawyers then please contact us.

If the owner of a registered mark believes that someone has infringed his mark he is entitled to the protection of the District Court and may file a writ of summons to prevent further infringement and to obtain damages representing any infringement already incurred.

The first consideration in any claim is whether an infringement has actually occurred.  The most common form of infringement will occur when another party uses a trademark that is either:

similar; or

identical

to the registered mark.

The degree of similarity required to warrant an action is one that is likely to cause confusion amongst the public between the two marks.

An action will also subsist where permission to use the trademark has been given to a third party who does not use the mark in the permitted manner.

Prior to the commencement of the hearing, the owner of the trademark may apply for an interim injunction, the effect of which will be to prevent further use of the infringing mark until the matter has been decided by the District Court.

In the case a claim is successful then a variety of different remedies will be available to the owner of the mark:

• Damages;
• A declaration as to ownership of the mark;
• An injunction preventing any further use of the mark by the defendant;
• An account of profits gained by infringement;
• An order for destruction of infringing goods;
• An order for delivery up of infringing goods;
• An order for removal of the trademark.

There are a number of defenses available to a defendant and a claim will be defeated if the he can prove:

• That the trademark was not registered or validly registered (in which case a claim for passing off is a more appropriate course of action for the owner);
• That no infringement has actually happened;
• That he had the prior consent of the trademark owner to use the mark in the manner complained of;
• That the trademark owner took an unreasonable amount of time to bring the claim against him;
• That he was induced to infringe by the trademark owner;
• That he used an identical or similar trademark prior to the date of registration of the registered mark;
• That he did not use the mark in a manner that breaches his agreement with the trademark owner.

Michael Chambers & Co. LLC’s team of intellectual property lawyers can advise on the registerability of trademarks as well as undertake the process of registration of a trademark on behalf of clients.  We are also expert litigators who can advise both trademark owners and those accused of infringements on claims.  If you wish to speak to one of our intellectual property lawyers then please contact us.

A trademark may be registered or unregistered and the status of the mark will determine what the appropriate course of action for infringement will be.

A commercial entity is best advised to register its trademarks, which will most often form an important part of its identity and accordingly will be of considerable value to the business.  As such, protection of intellectual property rights is imperative to most businesses.

In order to register a trademark it is initially necessary to determine whether the mark itself is capable of registration.  In order to be capable of registration it needs:

•  to be capable of graphical representation.
•  to be distinct.
•  not to deceive.

The Registrar may refuse registration of a trademark in certain cases specified by law.  Some of the most important instances when a mark will be refused will be if: it is not distinctive; it consists of known signs in the trade to indicate the nature of goods or services; it is generic; it is misleading as to the nature of the goods or services; it includes a sign of symbolic importance or it is contrary to public policy.

The Registrar will also reject an application to register the trademark if it is identical or similar to an existing trademark.

Prior to applying to register a trademark it is possible to request an opinion from the Registrar on whether the trademark can be registered.  A lawyer may also prepare an unofficial search on behalf of his client.  The search will reveal any identical or almost identical marks that have previously been registered.

In order to apply, the relevant application is submitted to the Registrar with all of the pertinent details concerning the trademark and the goods or services that it will cover.  A notice of the application will be placed in the Official Gazette, which will permit objections to be raised by opponents of the trademark within a specified timeframe.

Once registered, a trademark must be periodically renewed in order to maintain its position on the Register.  The trademark must be renewed seven years from the registration or application date and thereafter every fourteen years.  The Registrar may revoke the registration in the case of bad faith, public morality or if after five years there is no legitimate use for the mark.

A registered trademark may be assigned by deed made in writing and signed by both parties, witnessed and notarized.  The deed must contain full details of the date of assignment and the applicable consideration in order to be effective.

Michael Chambers and Co. LLC’s team of intellectual property lawyers can advise on the registerability of trademarks as well as undertake the process of registration of a trademark on behalf of clients.   If you wish to speak to one of our intellectual property lawyers then please contact us.

1.  LEGAL REPRESENTATION

The importance of a purchaser receiving independent legal advice cannot be overstated.  Tempting though it may be to accept the (often innocently given) recommendation of the seller, the fact is that a purchaser needs to know that the guidance he is given by his lawyer is solely based on what is in his best interests.  This is impossible to achieve when the lawyer involved is either personally or professionally involved with the seller or, worse still, when one lawyer is appointed to write the agreement for both parties.

Think sensibly and find your own independent legal representation!

2.  RESERVATION FEES

Once a sale has been agreed in principle, many sellers will require a deposit to be paid in order to take the property off the market and hold it for the purchaser.  Whilst this is an acceptable practice, a purchaser should not hand over any money without first seeking the advice of his lawyer and, most importantly, ensuring that a written agreement covering the terms of the reservation payment is entered into.  The reservation fee agreement will cover:

•  The full details of the property;
• The agreed price;
• Whether the price includes VAT;
• When, to whom and how much of a deposit has been paid;
• Whether the deposit is refundable;
• Whether the deposit will be deducted from the final price.

3.    COSTS

It is imperative that a purchaser is aware of and budgets for every cost that may potentially arise during the course of a transaction.  Legal fees, surveyor’s fees, VAT, stamp duty, transfer fees and immovable property tax must all be calculated and considered prior to finalizing a decision to purchase.   Please see article entitled The Costs of Purchasing Property in Cyprus for more details.

4.  CONTRACT REGISTRATION

Once an agreement has been signed, it is crucial that it is stamped and deposited at the Land Registry within the timeframes specified by law.  If the purchaser fails to stamp and deposit in time, then he will lose the right to specific performance of the contract, which exposes him to considerable risk as the purchaser will not have the right to seek a court order to require the  seller to perform his obligations under the agreement.

5.  MORTGAGES

The purchaser’s lawyer will check the title deed to the property to find out whether mortgages subsist over the property prior to the sale.  If there is a mortgage, this must be addressed in the contract of sale with provision being made for the discharge of the mortgage prior to the point of sale.

6.  SELLER’S STATUS

An understanding of the financial status of the seller is very important in order to determine whether it is safe and advisable to proceed with a purchase.  Recovery of money handed to those on the verge of bankruptcy or liquidation can be difficult.  Your lawyer can undertake a simple credit reference search that will offer considerable peace of mind when handing over large sums such as those involved in property transactions.

When purchasing real estate on the island of Cyprus many buyers are relieved and pleased to discover that the system of property purchase on the island is a straightforward one with a great degree of protection offered to those investing money in property.  However, buyers must be cautious and guard against difficulties by taking the simple steps outlined in this article.

Michael Chambers and Co. LLC have a reputable real estate team who are able to advise both purchasers and sellers of real estate in both the commercial and residential sectors.  They are also able to advise on other property related matters, such as property litigation and landlord and tenant matters.  If you wish to speak to a member of the team then please contact us.

1.  LEGAL FEES

It is imperative that a buyer instructs an independent lawyer to act on his behalf when buying property.  The lawyer’s tasks will usually include:

• a search of the Land Registry;
• checking planning permission;
• checking building permits;
• drafting a reservation fee agreement;
• drafting and negotiating contracts of sale;
• stamping and registering the contract at the Land Registry.

Legal fees will vary according to the firm and level of experience of the lawyer instructed.  The fee may be a fixed fee or charged at an hourly rate.  The fee may also vary in the case of particularly complex transactions.  Additional disbursements may also be charged such as the costs of relevant searches and courier charges.

2.  SURVEYORS FEES

In some cases it is advisable to instruct a surveyor.  As in the case of legal fees, the set rate will vary according to the individual instructed and the complexity of report required.  A surveyor should be registered with ETEK (Cyprus Scientific and Technical Chamber).

3.  VAT

Value Added Tax is payable on the purchase of all new properties except those where planning permission was granted before 1 May 2004.

VAT is charged at 17%, although there exists a reduction for EU and Cypriot first time buyers who are charged at 5%.

4.   STAMP DUTY

This is payable after signature of the contract for purchase of the property.  The rate of stamp duty is calculated according to the purchase price of the property:

Up to €170,860 = 0,15%

Over €170,860 = 0.2%

5.   TRANSFER FEES

Transfer fees are paid upon the transfer of the property into the name of the purchaser(s).  They are calculated according to the market value of the property, as determined by the Land Registry (in other words, the contract of sale will not be a decisive indicator of market value).

Transfer fees are payable in portions of the graduated scale as follows:

Up to €85,430 = 3%

€85,431 – €170,860 = 5%

Over €170,860 = 8%

It should be noted that it is beneficial to transfer the property into joint names as in this circumstance each purchaser is able to take advantage of their share of the respective portions.

Transfer fees are applied at special rates for certain transfers, for example those made between family members or from a family company to its shareholders.

There are currently new transfer fee provisions in place that will remain in effect for a limited period, until 1^st June 2012.   Under these limited period provisions no transfer fees will be charged on purchases where VAT has been paid and 50% transfer fees will be charged on purchases where VAT has not been paid.

6.  IMMOVABLE PROPERTY TAX

This is an annual charge calculated on the property owned by an individual on 1^st January every year.  It is calculated according to the market value of the property on 1^st January 1980 as follows:

0– €120,000 = exempt

€120,001 – €170,000 = 0.4%

€170,001- €300,000 = 0.5%

€300,001- €500,000 = 0.6%

€500,001- €800,000 = 0.7%

€800,001and above = 0.8%

If you are interested in purchasing property in Cyprus and wish to speak to one of Michael Chambers and Co. LLC’s expert real estate lawyers then please contact us.

KEY CONSIDERATIONS

In deciding whether distributorship is an appropriate form of supply, a business must consider the following characteristics of the distributorship relationship:

LIABILITY

The degree to which the business may remain liable to the end consumer will be a factor influencing the choice of supply model used. A distributor is an independent seller and therefore there is no direct contractual liability between supplier and the distributor’s end customer. The supplier is responsible to the distributor and the terms of that liability can be limited in the agreement made between them. However, it must be remembered that the effectiveness of such limitations regarding liability to the end consumer may be restricted in certain specified cases under the law.

INDEPENDENCE

The distributor is an independent business. This is in direct contrast to, for instance, the use of an agent who acts on behalf of the principal. A distributor is an entity trading in its own right and therefore the degree of control that the supplier will have over the distributor’s actions (for example the content of the agreement with end consumers) must be carefully considered by the supplier.

RISK

The distributor usually buys the goods directly from the supplier and is then responsible for selling them on to his end customer. Therefore the distributor usually accepts the entire risk in relation to non-payment by the end customer. It should be noted though that as there is no relationship between the supplier and the end customer, in the event that the distributor were to enter into insolvency, the supplier would probably have no claim against the end customer.

PRICES

Use of distributors will invariably impact prices of goods. The supplier will need to reduce his profit margin or accept that the price of the goods will increase in order that the distributor makes a profit.

THE IMPACT OF EU LAW

A relationship of distribution must always be considered against the prevailing background of EC competition law. Distribution agreements (and most particularly sole and exclusive distribution agreements) are open to falling foul of EC governing regulations concerning competition, therefore great care must be taken in drafting such agreements.

In drafting any distributorship agreement it is critical that the protection of the block exemption applying to vertical agreements is considered and that the relationship is created in a manner that does not offend competition rules. Amongst other considerations, the relevant market share contemplated must not exceed 30% and the agreement must not include certain, so-called, “hard-core” restrictions listed by law.

THE CONTENTS OF THE AGREEMENT

When agreeing terms, it is important that supplier and distributor agree:

EXCLUSIVITY

Distributorship may be solely applicable to a certain area or exclusive to a certain territory. Conversely the supplier may decide to create a network of distributors none of whom have exclusivity and restrict selection of those distributors to compliance with certain key criterion which are important to him, such as training of sales staff, facilities or location.

PERFORMANCE OBLIGATIONS

The distributor will wish to ensure that the distributor will use his best endeavors to promote the goods.

DURATION

The longevity of the relationship will need to be considered, including when the agreement will terminate and how it will terminate, for example the distributor may wish to have the ability to buy back the outstanding goods at the termination of the relationship.

CONFIDENTIALITY

The distributor will be privy to key information concerning the supplier’s business and therefore it is prudent to include a clause binding him to confidentiality in this regard.

INTELLECTUAL PROPERTY

The distributor may need use of the supplier’s trade materials, trademarks and other intellectual property. Permission for such use should be granted in the agreement governing the relationship.

TERMS OF SALE

The supplier may wish to govern certain terms and conditions with the end customer and if this is the case provision must be made to this effect in the agreement.

REPORTING

Where the supplier requires information from the distributor, a clause providing for regular reporting of such will need to be agreed.

Use of distributors can be an effective tool for businesses seeking to sell products to a wider market. It is highly important when contemplating such an association that EC competition law is considered and that any distributorship relationship does not offend the principles embodied in those rules.

Michael Chambers and Co. LLC’s lawyers are able to advise on every aspect of the distributorship relationship. If you would like to speak to one of our lawyers, then please contact us.

IS AGENCY AN APPROPRIATE MARKETING ARRANGEMENT

There are a multitude of reasons why a business may find an agency relationship beneficial, but typically such an association can prove of value when setting up or seeking to represent your business in a new market or abroad.  Moreover use of agents will tend to keep costs low by allowing payment on a commission basis rather than an employment salary.

Other possible alternatives to agency such as distributorship, franchising or the use of subsidiaries when marketing goods or services through representative intermediaries may be considered depending upon the individual circumstances of the operation.

When weighing up the pros and cons of each form of marketing arrangement one must consider the impact that such classification might have on the relationship with the intermediary and particularly:
Responsibility to the ultimate customer;

The rights and duties of the parties;

What classification the business will hold in the event of representative insolvency;

The effect of domestic or European competition law.

THE WRITTEN AGREEMENT

Whilst a written agreement is not required in order to create a standard agency relationship, it is needed in order to create a commercial agency. However, regardless of the classification, it is advisable to commit certain terms of an agency to contract in order to ensure that all parties involved understand the relationship.  Some of the terms you will need to agree are:

EXTENT OF AUTHORITY

At the heart of the agency relationship is consent – the principal authorizes the agent to act on his behalf and to bind him.  However, there are a number of different ways in which that authority can be given – for example expressly, impliedly, by custom, by ratification or by necessity.   Expressly given authority may be regulated in the written agreement between agent and principal and such an agreement may be used to restrict the agent’s authority as required.

COMMISSION LEVELS

The agency agreement will make it clear what commission will be payable to the agent and how it will be calculated.  It will specify terms of payment, such as time payment will become due, how payment will be made, what will happen if payment is late and what will happen if the end customer does not eventually proceed.  It is sometimes agreed that the principal will indemnify the agent for any liabilities he may incur in the course of his actions as agent and if this is the case, it will need to be embodied in the agreement as well.

EXCLUSIVITY

An agent may act on an exclusive basis for the principal or he may be appointed as one of many agents representing that principal.  If an agent has some form of exclusivity it is important to specify the extent of the exclusivity he enjoys.  This will most often be made according to territory, with the agent being given exclusivity over one particular geographical area.

TERMINATION

The agreement will need to specify the minimum period of notice to be given by either party in order to bring the relationship to an end and such notice period will need to conform with minimum periods prescribed by law.  The agency may also terminate immediately upon the happening of certain events – such as agent bankruptcy.

 DUTIES

Although law can imply certain duties, it is advisable to outline the exact duties and responsibilities of the parties.  These may include on the part of the principal: the duty to provide agent with information; advertising material; samples as required etc and on the part of the agent: the duty to exercise good faith; comply with principal’s lawful requests; keep proper accounts and account to the principal for the money he receives in his capacity
as agent.

CONFIDENTIALITY

The agreement will also need to cover confidentiality and, where appropriate, restrict the agent to keeping confidential all of the information he may receive or learn concerning the principal’s business in the course of the agency.

The agency relationship can be complex and great care should be taken by a business seeking to investigate new forms of marketing arrangement in order to ensure that an agency is the appropriate form for promoting the business in the direction and manner intended by the parties.  Where an agency is the appropriate vehicle, a written agreement can be used to clarify, focus and extend the rights and duties imposed by law.

Michael Chambers and Co. LLC’s team of commercial lawyers is expert in supporting and advising businesses seeking to exploit new marketing arrangements.  If you wish to discuss how your business can use agency to explore new markets then please contact us.