April 2011 - Cyprus is gearing up to amend its antiquated International Trust Law in an effort to catch up with global and regional competitive jurisdictions.

Already, the relevant bill has been unveiled and submitted to the House of Representatives and was due to pass in mid April if it wasn’t for a last minute impediment of the relevant Parliamentary Committee.

Trusts on the island are governed by the Cyprus International Trust Law, which was enacted in 1992 and remains unaltered ever since.

The shortcomings of the regulatory framework have been further underpinned by the modernization and successful emergence of other competitive trust jurisdictions, such as Malta, which has adopted a robust and highly attractive trust law framework, opening the way for substantial foreign investments to be channelled in or through the country.

Totalserve’s Chairman Peter G. Economides, who also serves as Chairman of the Cyprus branch of the Society of Trust & Estate Practitioners (STEP), commented “that several foreign investors with substantial investments being held under Cyprus international trusts, have expressed serious and justifiable concerns regarding the outdated nature of the existing framework.

He added: “Their concerns include the lack of adequate jurisdictional protection especially when compared to jurisdictions such as England, Malta, Ireland and of course the traditional tax havens, all of which are proving to be very capable in coping and keeping up with global trends, unlike Cyprus.”

Economides warned that if the trustees of such Cyprus trusts eventually opt to transfer the seat as well as the funds held by such trusts to other more attractive and secure jurisdictions, then the adverse economic effects to Cyprus could potentially be “detrimental and irreversible.”

The proposed changes to the Trust law include, inter alia, the introduction of efficient “firewall” provisions and modern jurisdictional protection clauses that address the security concerns expressed by existing and new foreign investors. The amendment also proposes that permanent residents of Cyprus are allowed to set up an international trust and even hold immovable property on the island. The amendment also addresses issues of confidentiality, trust duration, the application of foreign jurisdictional laws and more. The proposals take into account the realities of the Cyprus economy today and are in compliance with EU law and directives.

The Law is expected to be passed by the new Cyprus Parliament when it first convenes following the parliamentary elections of May 22, 2011.