Cyprus is a common law jurisdiction. It cites English case law in its courts mostly as a guideline, but also, under certain circumstances, as binding law.
For interim orders issued on an ex parte basis, the rule is that the jurisdiction of the first-instance court extends only to deciding whether the order will be made absolute or cancelled. When an interim order is cancelled after a hearing in which the first-instance court heard the arguments of both sides, by rule, this is considered the first-instance court's conclusive judgment on the application. In other words, the first-instance court cannot re-examine the same matters or issue a contradicting second judgment on the same issues.
Despite the existence of the above rule, there may be a need to preserve the validity of a cancelled interim order if the applicant intends to appeal the decision to cancel the order. This is particularly relevant regarding asset-freezing orders, as any appeal would be futile unless there were a means to keep the interim order in effect pending its outcome, since the initially frozen assets would have been alienated in the meantime.
This principle was initially enunciated in an English case by Cotton LJ, who said that "when a party is appealing, exercising his undoubted right of appeal, this court ought to see that the appeal, if successful, is not nugatory".(1) It was further fleshed out in another English case, Erinford Properties Ltd v Cheshire County Council, and became known as the 'Erinford principle'.(2)
In Erinford, when the court cancelled the interim injunctions, the applicant informed the court of its intention to file an appeal and a notice of motion to extend the injunction until the filing of the appeal. At the time, there was no accepted way of maintaining the status quo ante until the filing of the notice of appeal. Following the concerns of the applicant, the defendant volunteered not to change the status quo until the filing of the notice of appeal. The court then issued a judgment granting an injunction, slightly modified from the one that had been cancelled, reactivating it until the filing of the notice of appeal.
The Cyprus legal system follows a similar approach by providing the courts with discretion to issue an order for stay of enforcement pending an appeal. However, such orders are effective only when the losing party is obliged by the judgment to undertake a specific action, such as paying an amount of money or transferring movable or immovable property. In the case of prohibitory interim injunctions such as asset freezing orders, there is no specific action to be undertaken, and stay of enforcement cannot be effected in cases when an appeal has been filed challenging a judgment on an interim injunction.
In this spirit, the Cyprus courts may apply the Erinford principle in limited circumstances – namely, when a freezing order has been issued ex parte and cancelled following an inter partes hearing subject to the following conditions:
- The second application for issuance of interim freezing orders pending the outcome of the appeal must be filed immediately after the cancellation of the previously issued freezing orders, without delay.
- The second application should be filed before the issuance of the drawn-up judgment regarding the first interim application. This condition was set out in another English case, Re Harrison's Share under a Settlement, where the court stated that "an order pronounced by the judge can always be withdrawn, or altered or modified by him until it is drawn up, passed and entered. In the meantime it is provisionally effective"(3) On this basis, the court has the discretion to amend its initial decision even after its announcement to the parties in the case and after copies of the text of the judgment have been handed over to them, but not after the drawn up judgment has been issued and entered. However, this rule is not rigidly applied and there are cases in which applications have been approved when all other conditions were satisfied, notwithstanding that the judgment had already been issued.
- The court must restrict the exercise of its inherent jurisdiction to exceptional cases in which there is a real prospect of the appeal succeeding, perhaps because new information is available or new developments have occurred. In addition, it must be proved that by dismissing the application, there is a serious risk that the applicant will not be able to obtain a remedy if the appeal is successful.
The main reason that Cyprus case law imposes strict conditions on the issue of Erinford orders is that, if made, they are likely to be in effect in Cyprus for a much longer time than corresponding English orders. In Erinford, the extension of the validity of the interim orders was requested for only a short period of time, which was calculated in days, until the filing of the appeal. Conversely, in Cyprus, the order is effective until the outcome of the appeal, which could take years. This is because the UK Supreme Court's rules provide it with jurisdiction to examine applications for interim orders, while the Cyprus Supreme Court does not examine such applications.
For further information on this topic please contact Marina Joud at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email ([email protected]). The Elias Neocleous & Co LLC website can be accessed at www.neo.law.
Endnotes
(1) Wilson v Church (2), 12 ChD 454.
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