The Republic of Cyprus, being a leading maritime state, understands the importance of promoting sustainable practices within its shipping sector. More specifically, the Shipping Deputy Ministry of Cyprus is well known for its practices for environmental developments at a worldwide level. One of the top priorities of the Shipping Deputy Ministry of Cyprus is the support of sustainable shipping by way of adopting various measures at a worldwide level for the reduction of emissions and to achieve a sustainable future of the shipping industry, such as the use of more environmentally friendly fuels, the development of relevant infrastructure, the electrification of ships and the use of energy efficiency technologies. By combining all of the aforementioned options, an opportunity is given for the improvement of the commercial and environmental sustainability of the industry, while at the same time shipowners are rewarded for investing in sustainable practices by way of financial incentives.

In this regard, in an effort to decarbonise Shipping, the Shipping Deputy Ministry of Cyprus is taking proactive steps to incentivize and accelerate decarbonisation by announcing a revised series of green incentives to reward ships that demonstrate effective reductions in Greenhouse gas emissions.

Started from January 2024, any vessel that takes measures for the reduction of its climate impact, its Annual Tonnage Tax will be reduced by up to 30%. Thus, this practise will ensure that any shipowner will be rewarded for his/her sustainable shipping efforts.

The benefit of such reduction of the Annual Tonnage Tax, can only be applied to Cypriot and Community ship owners by meeting the criteria of the environmental incentives as mentioned below:

• EEXI – ships that have achieved a reduction of the Achieved Energy Efficiency Index of the Existing Ship in relation to the Required Energy Efficiency Index of the Existing Ship by a percentage of more than 10%, (regulations 19, 23 and 25 / Annex VI of the revised MARPOL) will receive the corresponding annual tonnage tax discount between 5 – 25%.

• IMO DCS – the environmental incentive related to the Data Collection System (IMO DCS) of the International Maritime Organization, applies to ships of 5,000 gross tonnage and above with declared hours at sea of at least 4,380 per year and complying with regulation 27 of Annex VI of the revised MARPOL. Ships that achieve a reduction in the ratio of total fuel consumption to total distance travelled between two consecutive reference periods of more than 4% will receive an annual tonnage tax rebate of between 10 – 20%

• CII – the environmental incentive is related to the Carbon Intensity Index (CII) of the IMO and applies to ships of 5,000 GT and above, which are subject to the provisions of Regulation 28 of Annex VI of the amended MARPOL Convention. Ships that achieve Class A or B operational carbon intensity in one year, with declared hours at sea of at least 4,380 per year will receive an annual tonnage tax rebate of 10% – Class B and 20% – Class A.

It is worth mentioned, that any detention of a vessel due to environmental reason upon an inspection by the ECL, and/or violation by a vessel of any European Commission regulation regarding the environmental protection and/or decommission of a vessel during the calendar year, leads to non-eligibility for the environmental incentive.

In conclusion, the environmental incentives introduced by the Shipping Deputy Ministry of Cyprus, represent a significant step towards to achieving decarbonisation in the shipping industry. By providing these incentives, the Republic of Cyprus is positioning itself as a leader state in sustainable shipping practices and strengthening the shift of the Cyprus flag to the use of environmentally friendly vessels and methods. As the world transitions towards a low-carbon future, Cyprus is paving the way for a cleaner and more environmentally friendly shipping sector by demonstrating the commitment of Cyprus Shipping Industry to the Green transformation.

Bareboat Chartering by way of definition, is the lease and/or renting of a boat without a crew and skipper. The Deputy Ministry of Shipping (hereinafter the “DMS”) has introduced Circular 22/2022 (hereinafter the “Circular”), which outlines the regulations and guidelines for bareboat chartering activities within the territorial waters of the Republic of Cyprus (hereinafter the “RoC”), offering a framework that ensures both safety and enjoyment for charterers.

Specifically, the Circular sets out the requirements, conditions, procedures, and responsibilities which both the charterer and the chartering company must follow when engaging in bareboat chartering within the RoC’s maritime jurisdiction. Chartering companies operating in Cyprus must stay well-informed about Circular and ensure their operations align with the stipulated guidelines. This includes maintaining their vessels to the highest standards, providing comprehensive safety briefings, and facilitating compliance with all regulations.

The pleasure vessels which are to operate under bareboat chartering in the RoC – regardless of their flag – must:

  • has suitable accommodation;
  • be available for a fee on the basis of a charterparty agreement;
  • get in line with the customs clearance procedures – as a necessary prerequisite in order to engage in bareboat chartering and;
  • belong to chartering companies, duly complied with TAX and VAT registries.

The vessel must meet the required safety standards and be appropriately insured. A person in charge for the Chartering Operations as well as an Assistant to that person must be assigned and both of them must hold the necessary navigation license for operating a pleasure vessel.

Application for bareboat chartering

Firstly, as per the Circular, the chartering company must submit an application to bareboat charter pleasure vessels to the DMS alongside with the relevant documents and the relevant fee. After the examination of the application, the DMS shall issue an Attestation for the operation of the chartering company with validity up to one year.

Locations permitted for bareboat chartering

The locations that the chartering of pleasure vessels for voyages within the territorial waters of the RoC, are set forth in the Circular. These includes the Marinas, berthing places of pleasure vessels, fishing shelters or ports of the RoC. However, a written Departure note must be submitted to the Marine Police Station before the departure of each vessel.

Safety Measures

The circular emphasizes the importance of ensuring the safety of charterers and the vessels themselves. This includes the presence on board of a quality management system certificate which includes the procedures for the smooth management of the pleasure vessel such as maintenance procedures, emergency procedures, vessel waste management procedures etc. Charterers are required to follow established navigation rules and guidelines, including designated anchorage areas and speed limits.

Maintenance of the pleasure vessel

The Circular prioritizes safety, ensuring that charterers have access to properly maintained vessels and are equipped with the necessary safety information. Regular inspections must be carried out and providing the charterers with proper safety briefings before setting sail. A possession of an Inspection Attestation must be in place on each vessel operate under bareboat chartering activity. However, for the issuance of the Inspection Attestation, the technical requirements for bareboat charter vessels set forth in Annex IV of the Circular must be met. After an inspection by the DMS, the relevant Attestation will be issued.

Skipper and crew under bareboat chartering

In this regard, the Circular sets forth crewing requirements, stipulating the designated skipper of a pleasure vessel under bareboat chartering must not belong neither have a direct relation to the chartering company. The skipper must hold the appropriate qualifications and experience for the safe and smooth operation of the voyage. Specifically, the skipper must hold a certificate – depending on the type and length of the pleasure vessel – proving his maritime training as a prerequisite for the smooth operation of the vessel.

Liability and Insurance

Both the pleasure vessel and the chartering company must be insured for liability against death, injury of passengers or third parties which may be caused by any marine accident such as sinking, collision or any other cause. Insurance must also cover liability for marine pollution as a measure to protect and preserve the marine ecosystem.

Benefits for the charterers

The Circular offers several benefits for those interested in bareboat chartering in Cyprus. There are clear guidelines as to the navigation of the bareboat chartering and clear regulations in place to protect the interest and safety of the charterers.

By adhering to waste disposal and environmental protection measures, charterers can contribute to the preservation of Cyprus’ marine ecosystems.

In Conclusion

The Circular marks a significant step in promoting responsible and enjoyable bareboat chartering activities in Cyprus. By fostering safety, environmental protection, and adherence to regulations, this Circular enhances the bareboat chartering experience, allowing charterers to explore the stunning coastline of Cyprus while adhering to the highest standards of maritime practice. As maritime tourism continues to grow, Circular paves the way for a sustainable and exciting journey for all who set sail in Cypriot waters.

Cyprus has one of the largest registered merchant fleets in the world, being at the same time a well-established shipping and ship management center, located close to the Suez Canal.

Cyprus Registry is also one of the only two open registries within the European Union, allowing non-Cypriot citizens to register their ships under the Cyprus flag, provided that they fulfil the specific conditions of ownership that the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, require.

The Cyprus flag offers many economic benefits such as the following:

  • Low set-up and operating costs for companies;
  • No registration and mortgage fees for ocean going vessels;
  • Competitive yacht registration costs and fees;
  • No registration duty is payable on the shares of as shipping company.
  • Attractive and transparent Tonnage Tax System;
  • There are not any restrictions in relation to the nationality of the seafarers;
  • There are not tax profits from the operation or management of a vessel flying the Cyprus flag.

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Mortgages on vessels are a common practice in the maritime/shipping industry and can be an effective way for shipowners to obtain financing for their vessels. Cyprus, as a popular maritime nation, has a well-established legal framework for mortgages on vessels, which provides both lenders and borrowers with a clear set of rules and regulations to follow.

The Legal Framework

The legal framework which governs mortgages on vessels in Cyprus is the Cyprus Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963. Several amendments of this particular law have been made from time to time in order to keep up with the changing needs of the shipping industry and to ensure that the legal framework remains updated.

The procedure for registering a mortgage on a vessel in Cyprus

In accordance with the abovementioned law, a mortgage on a vessel can be created by way of a registered instrument. The mortgage must be registered with the Registrar of Cyprus Ships, and the mortgagee must be a person or entity that is entitled to hold a mortgage under the Cyprus law. The mortgagee must also have the right to enforce the mortgage in Cyprus. If the mortgagee is a Cypriot company and/or entity, the mortgage will also have to be registered with the Registrar of Companies on the first 42 days of its registration.

The mortgage instrument must be in writing and signed by both the mortgagor and the mortgagee. It must also contain certain mandatory provisions, including a description of the vessel, the amount of the mortgage, the interest rate, the repayment terms, and the conditions under which the mortgagee can enforce the mortgage. If the mortgagor defaults on the repayment of the mortgage, the mortgagee can enforce the mortgage in accordance with the provisions of the law. The mortgagee has the right to arrest the vessel, and it can seek a court order to sell the vessel in order to recover the outstanding debt.

In this respect, according to the Deputy Ministry of Shipping (DMS) in Cyprus, the documents required for the registration of a mortgage on a vessel are the following:

  1. Written Application by a local lawyer together with €30 Advocate stamps.
  2. Resolutions of Directors on behalf of the Shipowners.
  3. Duly executed Power of Attorney on behalf of the Shipowners.
  4. Mortgage and Deed of Covenants (duly executed).
  5. Certificate of Directors and Secretary (in case of Cyprus registered Company).
  6. Incumbency Certificate duly executed (in case of foreign registered Company’s).

The advantages of registering a mortgage on a vessel in Cyprus

There are of course several advantages to both shipowners and lenders if a mortgage is registered on a vessel under the flag of Cyprus. One of the main advantages is that Cyprus is a well-respected maritime nation, with a long history of maritime trade and shipping. This means that mortgages on vessels in Cyprus are generally viewed as secure investments, which can help to attract lenders and keep interest rates low. Another advantage is that mortgages on vessels in Cyprus are relatively easy to obtain, provided that the borrower meets the necessary requirements. This can be particularly beneficial for small and medium-sized shipowners who may struggle to obtain financing from traditional lenders.


In conclusion, mortgages on vessels in Cyprus provide a secure and reliable way for shipowners to obtain financing for their vessels. The legal framework in Cyprus is well-established and provides both lenders and borrowers with a clear set of rules and regulations to follow. Shipowners and lenders considering mortgages on vessels in Cyprus should consult with a maritime lawyer to ensure that they understand the legal requirements and obligations associated with this type of financing.

Στις 6 Οκτωβρίου 2022 ψηφίστηκε από τη Βουλή των Αντιπροσώπων «ο περί Ναυτιλιακής Εταιρείας Περιορισμένης Ευθύνης (Ν.Ε.Π.Ε.) Νόμος του 2022» (ο «Νόμος»). Ο Νόμος εγκαθίδρυσε ένα νέου τύπου εταιρικής οντότητας με την ονομασία «Ναυτιλιακή Εταιρεία Περιορισμένης Ευθύνης (Ν.Ε.Π.Ε.)», η οποία θα συστήνεται ως εταιρεία περιορισμένης ευθύνης με μοναδικό σκοπό την ιδιοκτησία και εκμετάλλευση κυπριακών πλοίων. Επίσης, ο εν λόγω Νόμος διέπει ζητήματα που αφορούν τις Ν.Ε.Π.Ε. από τη σύστασή τους μέχρι και την εκκαθάρισή τους και θεσπίζει τον θεσμό του Εφόρου Ν.Ε.Π.Ε. ως αρμόδιας αρχής για τα ζητήματα αυτά.

Ο Νόμος εφαρμόζεται στις Ν.Ε.Π.Ε. οι οποίες συστάθηκαν δυνάμει των διατάξεων του εν λόγω Νόμου και σε εταιρεία η οποία συστάθηκε ή ενεγράφη δυνάμει των διατάξεων του περί Εταιρειών Νόμου και εγγράφεται ως συνεχίζουσα στο Μητρώο Ν.Ε.Π.Ε. δυνάμει των διατάξεων του Μέρους XV του Νόμου. Όσον αφορά την  Σύσταση Ν.Ε.Π.Ε., τότε ένα (1) ή περισσότερα πρόσωπα τα οποία συνεργάζονται για οποιονδήποτε σκοπό δύνανται, με την υπογραφή των ονομάτων τους στο ιδρυτικό έγγραφο και αφού συμμορφωθούν με τις απαιτήσεις του παρόντος Νόμου αναφορικά με την εγγραφή, να συστήσουν Ν.Ε.Π.Ε. και η ευθύνη των μετόχων της Ν.Ε.Π.Ε. περιορίζεται από το ιδρυτικό έγγραφο στο ποσό, εάν υπάρχει, που δεν πληρώθηκε για τις μετοχές που κατέχουν έκαστος.

Με την εγγραφή του ιδρυτικού εγγράφου και καταστατικού, ο Έφορος Ν.Ε.Π.Ε. πιστοποιεί ότι συστάθηκε Ναυτιλιακή Εταιρεία Περιορισμένης Ευθύνης, εκδίδει τα πιστοποιητικά που αφορούν στη σύσταση και καταχωρίζει τα στοιχεία της Ν.Ε.Π.Ε. στο Μητρώο Ν.Ε.Π.Ε. το οποίο τηρεί ο ίδιος. Από την ημερομηνία σύστασης που αναφέρεται στο πιστοποιητικό σύστασης, όσοι προσυπέγραψαν το ιδρυτικό έγγραφο μαζί με οποιαδήποτε άλλα πρόσωπα που από καιρό σε καιρό καθίστανται μέτοχοι της Ν.Ε.Π.Ε., αποτελούν νομικό πρόσωπο με το όνομα που περιλαμβάνεται στο ιδρυτικό έγγραφο ικανό να ασκήσει αμέσως όλες τις δραστηριότητες μίας συσταθείσας Ν.Ε.Π.Ε., και με διηνεκή διαδοχή. Το πιστοποιητικό σύστασης το οποίο εκδίδεται από τον Έφορο Ν.Ε.Π.Ε. αποτελεί αναμφισβήτητη μαρτυρία ότι όλες οι απαιτήσεις του παρόντος Νόμου αναφορικά με την εγγραφή και στα προηγούμενα με την εγγραφή συναφή θέματα έχουν τηρηθεί και ότι η Ν.Ε.Π.Ε. ενεγράφη δεόντως με βάση τον παρόντα Νόμο. Θέσμια δήλωση συμμόρφωσης προς όλες ή οποιεσδήποτε από τις πιο πάνω απαιτήσεις από δικηγόρο που ανέλαβε τη σύσταση της εταιρείας ή από πρόσωπο που κατονομάζεται στο καταστατικό ως σύμβουλος ή γραμματέας της Ν.Ε.Π.Ε. παραδίδεται στον Έφορο Ν.Ε.Π.Ε., ο οποίος δύναται να αποδέχεται τη δήλωση αυτή ως ικανοποιητική μαρτυρία συμμόρφωσης.

Το ιδρυτικό έγγραφο και καταστατικό, όταν εγγραφούν, δεσμεύουν τη Ν.Ε.Π.Ε. και τους μετόχους της στην ίδια έκταση ως εάν είχαν υπογραφεί από κάθε μέτοχο ξεχωριστά και περιλαμβάνουν συναίνεση εκάστου μετόχου να τηρεί όλες τις πρόνοιές τους. Οποιαδήποτε ποσά είναι πληρωτέα από οποιονδήποτε μέτοχο στη Ν.Ε.Π.Ε. με βάση το ιδρυτικό έγγραφο ή το καταστατικό αποτελούν οφειλόμενο χρέος από αυτόν προς τη Ν.Ε.Π.Ε.

Επιπρόσθετα, οποιαδήποτε σύμβαση συνάπτεται πριν από την σύσταση Ν.Ε.Π.Ε. από τα πρόσωπα που υπέγραψαν το ιδρυτικό έγγραφο ή από εξουσιοδοτημένα από αυτά πρόσωπα επ’ ονόματι ή για λογαριασμό της υπό σύσταση Ν.Ε.Π.Ε. είναι προσωρινή και δεν τη δεσμεύει μέχρι την ημερομηνία της συστάσεώς της, μετά δε την πάροδο της ημερομηνίας σύστασης αυτής η σύμβαση καθίσταται αυτοδικαίως δεσμευτική για την Ν.Ε.Π.Ε και λογίζεται ότι έγινε από τη Ν.Ε.Π.Ε. Σε περίπτωση κατά την οποία η Ν.Ε.Π.Ε. δεν συσταθεί, οι υποχρεώσεις που ανελήφθησαν από οποιοδήποτε πρόσωπο επ’ ονόματι ή για λογαριασμό της, ισχύουν μόνον ως υποχρεώσεις των προσώπων αυτών, η δε ευθύνη των προσώπων αυτών είναι απεριόριστη από κοινού και κεχωρισμένως. Η εν λόγω ευθύνη δεν υφίσταται, σε περίπτωση που οι υποχρεώσεις ρητώς ανελήφθησαν υπό την αίρεση της συστάσεως της Ν.Ε.Π.Ε.

Συμβάσεις εκ μέρους της Ν.Ε.Π.Ε. δύνανται να συνάπτονται προφορικώς, γραπτώς ή ηλεκτρονικά. Σε περίπτωση Ν.Ε.Π.Ε. με ένα και μοναδικό μέτοχο, οι συμβάσεις που συνάπτονται μεταξύ του μετόχου αυτού και της εν λόγω Ν.Ε.Π.Ε. καταγράφονται σε πρακτικά ή καταρτίζονται γραπτώς, εκτός εάν αφορούν τις τρέχουσες πράξεις της Ν.Ε.Π.Ε. που συνάπτονται υπό κανονικές συνθήκες. Τέτοιες συμβάσεις έχουν νομικό αποτέλεσμα και δεσμεύουν τη Ν.Ε.Π.Ε., τους διαδόχους της και όλα τα άλλα μέρη της. Σύμβαση η οποία συνομολογήθηκε σύμφωνα με τις διατάξεις του εν λόγω Νόμου δύναται να μεταβληθεί ή ακυρωθεί με τον ίδιο τρόπο κατά τον οποίο η σύμβαση εξουσιοδοτήθηκε να γίνει σύμφωνα με τον εν λόγω Νόμο. Η Ν.Ε.Π.Ε. δεσμεύεται έναντι τρίτων από πράξεις ή συναλλαγές των αξιωματούχων της, έστω και εάν τέτοιες πράξεις ή συναλλαγές δεν εμπίπτουν στους σκοπούς της Ν.Ε.Π.Ε., εκτός εάν τέτοιες πράξεις ή συναλλαγές τελούνται καθ’ υπέρβαση των εξουσιών που ο εν λόγω Νόμος παρέχει ή επιτρέπει να παρέχονται στους συγκεκριμένους αξιωματούχους.

Η Ν.Ε.Π.Ε. δε δεσμεύεται έναντι τρίτων, σε περίπτωση κατά την οποία τέτοιες πράξεις ή συναλλαγές δεν εμπίπτουν στους σκοπούς της Ν.Ε.Π.Ε., εάν η Ν.Ε.Π.Ε. αποδείξει ότι το τρίτο πρόσωπο γνώριζε ότι οι πράξεις ή συναλλαγές δεν εμπίπτουν στους σκοπούς της Ν.Ε.Π.Ε. ή δεν ήταν δυνατόν, υπό τις περιστάσεις, να το αγνοεί. Νοείται περαιτέρω ότι, η δημοσίευση του ιδρυτικού εγγράφου και καταστατικού της Ν.Ε.Π.Ε. δεν αποτελεί από μόνη της επαρκή απόδειξη γνώσης από μέρους του τρίτου προσώπου. Οι εκ του ιδρυτικού εγγράφου και καταστατικού ή οι εξ αποφάσεως των συμβούλων ή της γενικής συνέλευσης της Ν.Ε.Π.Ε. περιορισμοί στις εξουσίες των αξιωματούχων της δεν δύναται να αντιταχθούν έναντι τρίτων προσώπων, ακόμα και εάν έχουν δημοσιευτεί.

Κάθε έντυπο, πιστοποιητικό, πρακτικό ή άλλο έγγραφο που παραδίδεται ή αποστέλλεται στον Έφορο Ν.Ε.Π.Ε. για καταχώριση ή που εκδίδεται από τον Έφορο Ν.Ε.Π.Ε., ανάλογα με την περίπτωση, για το οποίο απαιτείται δυνάμει των διατάξεων του εν λόγω Νόμου βεβαίωση, πιστοποίηση ή υπογραφή υπογράφεται και/ή πιστοποιείται και/ή επικυρώνεται με ηλεκτρονική μέθοδο, εφόσον ο Έφορος Ν.Ε.Π.Ε. εγκρίνει τη χρήση τέτοιας μεθόδου με Γνωστοποίηση που εκδίδει δυνάμει του άρθρου 31 (2) του Νόμου. Όπου γίνεται χρήση υπογραφής με ηλεκτρονική μέθοδο, αυτή θεωρείται ότι υπέχει την ίδια θέση με ιδιόχειρη υπογραφή, για τους σκοπούς οποιασδήποτε ποινικής ή πολιτικής διαδικασίας και το πρόσωπο που κάνει χρήση τέτοιας υπογραφής θεωρείται ότι έχει γνώση του περιεχομένου του εγγράφου που υπογράφει.

Σε σχέση με την έναρξη της ισχύος του Νόμου, ο εν λόγω Νόμος θα τεθεί σε ισχύ σε ημερομηνία που θα καθοριστεί με απόφαση του Υπουργικού Συμβουλίου η οποία θα δημοσιευτεί στην Επίσημη Εφημερίδα της Δημοκρατίας σε μεταγενέστερο στάδιο. Η θέσπιση του εν λόγω Νόμου έγινε προς την επίτευξη ενός πλαισίου μονοθυριδικής εξυπηρέτησης (one-stop-shop) των πλοιοκτητριών εταιρειών και των μετόχων τους, ώστε το Υφυπουργείο Ναυτιλίας να επιλαμβάνεται θέματα, πέρα του ναυτικού δίκαιου, τα οποία μέχρι στιγμής ο αρμόδιος φορέας για την αντιμετώπιση και χειρισμό τους ήταν ο Έφορος Εταιρειών.

In time charterparties, disputes may usually arise as to deductions made from charter hire in relation to an alleged underperformance of the vessel. As a matter of law, if a deduction is being made from hire, such deduction must be the result of good faith or be made on reasonable grounds.

As established in the case The Kostas Melas [1981] 1 Lloyd’s Rep 18, in the instance of a deduction for an underperformance of the vessel, the charterer may be required to show that its deductions were made in good faith and its calculations were made on reasonable grounds. In the case that such deductions were not made in good faith or reasonable grounds then the charterer may be liable for breach of contract.

In relation to the phrase “in good faith”, in some cases, the charterers claimed that these words have no effect in the context of a speed and consumption warranty, or, alternatively, as can be seen in The Lipa [2001] 556 LMLN 2,the phrase “in good faith” has not the effect of negating any warranty, as it is the case with the phrase “without guarantee”. Nevertheless, as seen in The Lendoudis Evangelos II [1997] 1 Lloyd’s Rep. 404, the owners may rely on to assert that only significant inconsistencies justify that the description was not given in good faith.

In London Arbitration 1/22, the Tribunal was called to consider whether the charterers made deductions in good faith and on reasonable grounds. The charterers withheld US$ 53,550.40 gross in respect of what they claimed was time loss due to underperformance to the extent of 6.6938 days. The Tribunal requested the charterers to show a prima facie case as to whether the deduction from hire was made in good faith and on reasonable grounds. The charterers then presented a weather routing report.

The Tribunal dismissed the charterers’ reliance on the weather routing report and also found that the charterers did not address the question of good faith, to substantiate their off hire claim and to address the claim made by the owners that there was no speed/consumption warranty in the charterparty as the fixture description of the ship was qualified by the words “all details about/in good faith”.

In the present case, the owners were entitled to payment. The Tribunal’s decision was based on the fact that the charterers had not demonstrated that their deduction was made in good faith or on reasonable grounds and as such, they should not have withheld the deduction from hire.

Since the first discussions of the use of Maritime Autonomous Surface Ships (MASS) there are many debates and concerns on whether the current legal framework, namely the 1982 Law of the Sea Convention (LOSC), is adequate and remains fit for its purpose. The use of MASS implies that a master and the rest of the crew on-board a vessel “disappear”; does this therefore necessitate the fundamental change of the current legal framework?

Besides LOSC, many international legal rules concern MASS, such as the International Convention for the Safety of Life at Sea (SOLAS). The most problematic aspect of the use of MASS as far as the international law of the sea is concerned, is when the MASS is operated from an on-shore remote control center or when such operation is performed by an algorithm on a computer.

There are a variety of viewpoints, ranging from the belief that MASS do not fall under the scope of LOSC since they are not considered to be ships, to the belief that no difficulties would occur since they are ships. Accordingly, certain articles of the LOSC exist which refer to masters, officers or crew, whom the flag State rely upon in order for certain obligations of the latter to be performed. An example of such responsibility/obligation is that a flag State must ensure that its ships have a master and officers who possess appropriate qualifications.

In general, the LOSC does not provide any specific guidelines to the flag State in terms of granting its nationality to the ships for their registration and for the right to fly its flag; the only requirement provided in the LOSC is that there must be a “genuine link” between the State and the ship. It can be assumed that a genuine link exists when the flag State has actual authority over the ship. The issue here is how such control/authority can be established when the operation of the vessel is controlled remotely in another State’s territory?

One possible solution is to consider such onshore controller as a master, nevertheless, this may also be problematic. The LOSC makes reference to a single master and thus, the difficulties will arise notably in terms of labor standards, when there are one or more controllers in such onshore remote-control center.

For the sake of argument, if such controller is considered to be a master pursuant to LOSC, in order for a flag State to satisfy its duties, namely to exercise effective jurisdiction and control, it would require the latter to do more in relation to MASS when comparing it with a manned vessel. For example, an existing argument is that in the event that something unexpected happens, there is the need to have in place extradition arrangements between the concerned States. Another recommendation which was made, was to include an annex in the current LOSC which will regulate the issue of MASS.

There are alternative methods however which may be considered as a way of regulating MASS: the International Maritime Organisation (IMO) recently considered whether its current conventions concerning safety of navigation, i.e. SOLAS, can be amended to safeguard the conformity thereof by the use of MASS.

Undoubtedly, the current legal framework is inadequate in relation to the use of MASS and therefore, any conformity with the existing legal rules is impractical. One can argue that any amendments to the LOSC may be undesirable and/or unfeasible for various reasons. Nevertheless, without any tailored-made regulations for MASS, flag States could potentially hesitate to register MASS and in general fly their flags. It is of vital importance for the IMO and the competent authorities to implement a comprehensive set of guidelines in relation to the use and operation of MASS.


Greece and Turkey, the two Aegean Sea neighbours, have a long tradition of confrontational relations. From the mid-1950s to the present, the two countries have been involved in a series of conflicts, some of which have escalated into major crises that have taken them to the verge of war. The main point of contention between the Greek and Turkish governments is the Aegean Sea. These problems are not only unresolved, but they also contribute to the region’s ongoing instability and tense atmosphere. Several resolution efforts were made in previous years but failed. The purpose of this article is to identify the relevant law governing the areas of conflicts and to propose a possible solution.

The essence of the problem is such that the two sides have fundamentally different perspectives concerning the Aegean. It should be acknowledged that Turkey has not signed up to the Convention on the Continental Shelf nor the superseding United Nation Convention on the Law of the Sea (UNCLOS), both of which Greece has signed and ratified. Turkey identified the inability of the UNCLOS to properly resolve exceptional geographical circumstances and the prohibition of reservations as reasons for its non-participation in the LOSC in a letter to the UN Secretary-General. The main reason Turkey refused to sign was the dispute with Greece over Aegean Sea delimitation issues. Turkey is one of the 16 countries which have not signed or ratified the Convention. Turkey believes that Greece regards the Aegean as a Greek sea and that Greece is trying to undermine Turkish security by controlling the Aegean disregarding Turkey’s rights and interests in the Aegean. On the other hand, Greece is arguing that UNCLOS Articles are binding to non-signatory countries.

Considering that the aim is to review the Aegean maritime disputes on the basis of international law, it is necessary to examine the relevant law regulating the maritime areas.

UNCLOS – Articles of Interest

Territorial Sea

The expansion of territorial waters, it has become a contentious issue. Article 3, s.2 of UNCLOS states that:

“Every State has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with this Convention”.

In relation to Article 3, Greece has expressed its intention to extend its territorial waters to 12 nautical miles in the Aegean sea, applying this article. However, until this day Greece retains a 6 nautical mile territorial sea due to the dispute with Turkey. The expansion of nautical miles from Greece could intensify the conflict with turkey and further destabilise the Eastern Mediterranean region.

On the other hand, the Turkish point of view is that because of the large number of Greek Islands, 12 miles of territorial waters will convert the Aegean into a Greek lake. Turkey argues that it will be locked out of the Aegean and confined to its own territorial waters as a result of this. Turkey also claims that Greece should not be allowed to expand its territorial waters in the Aegean Sea to 12nm and that doing so would result in a casus belli (cause of war).

The central issue in the Aegean Sea territorial sea dispute is whether international law requires a certain limit for specific areas in special geographical areas, and if so, what implications does this have for the Aegean Sea.

Continental Shelf

The term continental shelf is used as referring to the seabed and subsoil of the submarine areas adjacent to the coast but outside the area of the territorial sea, to a depth of 200 metres or, beyond that limit, to where the depth of the superjacent waters admits of the exploitation of the natural resources of the said areas.

However, the criterion of ‘exploitability’ was highly criticised as being “unsatisfactory” and it was gradually rendered obsolete as a result of technical advancements. As a result, it was replaced by the more precise “width” criterion in Article 76(1) LOSC for determining the continental shelf’s outer limit. In the absence of a delimitation agreement, the Aegean continental shelf has been another point of conflict between Turkey and Greece. The issue of the Continental Shelf has strained ties between Turkey and Greece in the past. Greece has requested the United Nations Security Council and the International Court of Justice (ICJ) with the following outcomes:

1) In Resolution 395, adopted on August 25, 1976, the United Nations Security Council urged Turkey and Greece to do everything possible to de-escalate tensions in the Aegean and urged them to resume direct talks to resolve their differences.

2) It urged them to ensure that these negotiations end in mutually satisfactory solutions. In a ruling issued on September 11, 1976, the International Court of Justice designated the Aegean continental shelf outside the territorial waters of the two coastal states as “areas in dispute” for which both Turkey and Greece seek exploration and exploitation rights.

Article 83 (1) of the Convention, as a result, is a compromise that states:

“The delimitation of the continental shelf between States with opposite or adjacent coasts shall be effected by agreement based on international law, as referred to in Article 38 of the Statute of the International Court of Justice, in order to achieve an equitable solution.” Despite the differences in content, Article 83 does not introduce a new concept. However, any prospect of agreement or resolution has failed so far.

Regime of Islands

UNCLOS Article 121 states,

“Except as provided for in paragraph 3, the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf of an island are determined in accordance with the provisions of this Convention applicable to other land territory.”

For Greece, international law, particularly UNCLOS grants the islands the right to exercise sovereignty over their continental shelf and stipulates that the continental shelf between two countries must be established on a median line basis. As a result, each of the Aegean Sea’s islands has its own continental shelf, and the median line can be used to describe the border with Turkey. For Turkey, the Greek islands do not have rights to exert jurisdiction on the continental shelf, as they are located on the Turkish continental shelf.

Maritime Boundary Delimitation

Maritime delimitation is one of the most important, although contentious, topics in maritime law. The East Mediterranean states took a leading role in the debate, citing the narrowness of the regional sea, as well as the uncertainty surrounding the relevant methods and factors to be considered, as significant obstacles to maritime delimitation. During UNCLOS III, arduous talks on maritime delimitation took place, and the East Med states found themselves in opposing interests. The limited extent of territorial sea delimitation, as well as the lower resource probabilities, made the median/equidistance line approach easier to apply. This is expressed in Article 15 LOSC and is part of customary international law. The doctrine of equitable principles is the fundamental norm of customary international law governing maritime boundary delimitation by agreement, in accordance with equitable principles, taking account of all relevant circumstances, so as to arrive at an equitable result.

Given the critical role of delimitation in maritime activities, including hydrocarbon operations, maritime boundary delimitation has been one of the most important topics for the East Med states. Greece and Cyprus supported the median/equidistance line because they saw it as the best way to ensure that their interests were properly protected. In contrast, against the scenery of the Aegean dispute, Turkey called for the equitable principles approach in order to take advantage of its long coastline and lessen the effect of islands.


Noting that the different positions were leading nowhere, Greece submitted the issue to the ICJ in August 1976, but Turkey refused to recognize the jurisdiction of the Court, which in the end declared itself incompetent. Since then, the maritime issue has remained and has been aggravated by territorial arguments.

As mentioned above, Turkey did not ratify UNCLOS and is a constant objector. In later articles it will be discussed whether an objector country as Turkey is bounded by UNLCOS and it will be analysed whether International law can propose a possible resolution or to have a mediating role in order to reach an agreement.

Α. Introduction

Cyprus is not itself a party to the International Convention Relating to the Arrest of Sea-Going Ships 1952; however, the Administration of Justice Act of 1956 (AJA)[1], which ratifies the Convention, applies to Cyprus[2]. Under Cypriot law, maritime liens enjoy advantages over all other permitted actions in rem (statutory liens), at the time of creation of the lien, in priority and in the enforceability of the security. In addition, statutory liens have no priority over mortgages.[3] The significance of a maritime lien is that it enables the Court or its appointees to arrest and seize the vessel in satisfaction of the claims against her. Cyprus courts follow the English case The Bold Buccleugh[4], which recognises as maritime liens salvage, bottomry, master and seafarers’ wages, disbursements and liabilities, and damage done by a vessel. The arrest of a ship is only possible in the case of an action in rem (however, the possibility of securing a Mareva injunction for freezing of assets, including a vessel, is also available). Thus, the filing of an action in rem is a prerequisite for such an arrest. The court has wide discretion to order the arrest of the vessel if it is satisfied that the plaintiff is eligible for arrest. 

Similarly, the arrest of a sister ship is applicable in Cyprus by means of Section 3(4) of the AJA. However, the concept of ‘associated ship arrest’ is not recognised under Cyprus law.

Β. Arrest of vessel for contracts relating to the sale and purchase of a ship

It is not possible to arrest a vessel for contracts relating to the sale and purchase of a ship, unless the circumstances of a case give rise to a claim to the possession or ownership of a ship or to the ownership of a share therein (under clause 1(1)(a) of AJA which applies in Cyprus under the Courts of Justice Law 1960 (Law No. 14/1960)). Also, while section 30 of the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963 to 2005 (Law No. 45/1963 as amended) provide for the right of an ‘interested person’, to apply to the Supreme Court, in its Admiralty Jurisdiction, for the issuance of the order prohibiting any dealing with a ship or any share therein if it thinks fit under the given circumstances, the case law of the Supreme Court has ruled out the buyer of a ship from the definition of the ‘interested person’.

 C. Arrest of vessel by bunker supplier

It is possible for a bunker supplier (whether physical and/or contractual) to arrest a vessel for a claim relating to bunkers supplied by them to that vessel. In the admiralty case No. 32/2014 between (1) Interbunker Management Ltd, and (2) Novoil Ltd v m/v ‘BARIS’,

The court issued an arrest warrant against the defendant’s vessel which was anchored in the port of Larnaca, Cyprus. The claim of the plaintiffs related to the supply of bunkers to the defendant’s vessel, and the arrest warrant was issued upon filing an ex parte application at the Supreme Court of Cyprus.

D. Procedures of ship arrest

Rule 50 of the Rules of the Supreme Court in its admiralty jurisdiction (RSC)[5] allows any party to apply to the court for the issue of a warrant for the arrest of property (i.e., for the arrest of ship or cargo), at the time of, or at any time after, the issuance of the writ of summons (but not without the submission of a writ of summons) in an action in rem. The application must be accompanied by an affidavit containing the particulars prescribed in the RSC, including the nature of the claim, that the aid of the court is required, the national character of the ship and that, to the best of the deponent’s belief, no owner or part owner of the ship was domiciled in Cyprus at the time the necessaries were supplied or the work was carried out. However, the judge has the discretion to issue an arrest warrant even if the affidavit does not contain all the prescribed particulars.

The arrest warrant shall be served by the marshal of the court in the same manner as prescribed by the Rules for the service of a writ of summons in an action in rem. For instance, if the arrest warrant is to be served upon a ship, or upon cargo, freight or other property that is on board a ship, the warrant shall be considered as duly served if an office copy of it is attached to a conspicuous part of the ship, including a mast. If the cargo, freight or other property is not on board the ship, an office copy must be attached to some portion of the cargo or property.

The RSC vest the power and discretion on the judge to issue provisional arrest orders, notwithstanding that no notice of the application has been given to the ship or the shipowner, on such terms as to the furnishing of security as shall appear to the judge to be having regard to the circumstances of the matter in question (Rule 205). In practice, almost invariably the judge will order the arresting party to provide security in the form of a bank guarantee from a Cyprus bank, the aim of which is to cover the costs of the marshall and to compensate the shipowner for loss he or she may have suffered due to the detainment of the ship, acknowledging the concept of wrongful arrest. However, the security of the arresting party shall not be seized in all cases where the provisional arrest order is finally set aside as unjustified. The arresting party’s guarantee may be claimed only in the event of wrongful arrest, which was so unwarrantably brought that it rather implies malice or gross negligence.

At the time the arrest warrant is issued, the judge will determine the amount of the security that the shipowner or other opposing party may deposit to the court for the arrested ship to be released, taking into account the level of the claim. The ship may be released by an order of the judge upon a written application and provided that the security originally set by the judge is deposited to the court.

Any person desiring to prevent the arrest or the release of any property under arrest or the payment of any moneys out of court may, by a written application to the Registrar of the Admiralty Court, cause a caveat against any such action or procedure and the court or judge will not proceed to issue the requested order without notice to the caveator, unless the judge deems that special circumstances have been presented that render it desirable or necessary to make such order without notice to the caveator, upon such terms as may seem fit to the judge. The caveat shall not remain in force for more than three months from the date of being entered, unless extended by further applications.[6]

Almost invariably at the time an arrest warrant is issued, the ship is located within the territorial waters of Cyprus,[7] either anchored in the port area or anchorage or berthed in one of the ports controlled by the Cyprus government (i.e., the ship must not be berthed in any of the ports that have been illegally occupied by the Turkish administration since Turkey’s invasion of Cyprus in 1974). An arrest warrant against a ship may be issued even if, at the time the warrant is issued, the ship is located outside the territorial waters of Cyprus. However, in this case, the arrest warrant will not be able to be served unless the ship heads within the territorial waters. In such instance, the arresting party must see that the warrant will be adequately timetabled so that it does not expire before served on the ship.

The Supreme Court has recognised the option of a party to the admiralty proceedings to seek the ‘arrest’ of a ship by using the Mareva injunction mechanism under Section 32 of the Courts of Justice Law of 1960 (Law No. 14/1960). However, the Court stressed that the power of the Court to issue such an injunction must be exercised only on the premise that the ship is within the jurisdiction of the court or, in other words, within the territorial waters controlled by the Cyprus government.

The issuance of an arrest warrant, based on Section 50 of the RSC or by way of a Mareva injunction, as security for court proceedings (not arbitration proceedings) pending in another jurisdiction is plausible pursuant to the provisions of Regulation (EU) No. 1215/2012 and, in particular, Section 35 of the Regulation, provided that the ship is within the jurisdiction of the court.[8]

In Nationwide Shipping Inc v. The Ship ‘Athena’,[9] the Supreme Court, by adopting an extract from the judgment given in the English case The ‘Vasso’ (formerly ‘Andria’),[10] held that the Admiralty Court has no jurisdiction to issue an arrest warrant in an action in rem for the purpose of providing security for an award that may be made in arbitration proceedings. However, it seems that the extract from the English judgment extends to other proceedings as the court in The ‘Vasso’ case stressed that the purpose of the exercise of the Admiralty Court’s jurisdiction to arrest a ship is to provide security in respect of the action in rem before it and not for any other purpose. In The Ship ‘Athena’ case, the Court did not consider the application of Regulation (EU) No. 1215/2012, which, of course, prevails over any domestic law and, therefore, confers the jurisdiction to the Admiralty Court to issue provisional measures and orders for matters adjudicated on their merits in other European jurisdictions.

E. Dsclosure obligations in court proceedings

Whilst the Judge always has the discretion to ask, out of its own motion, the parties in the litigation to proceed with disclosure of documents or facts, the Cyprus Admiralty Jurisdiction Order of 1893 (the Order), contains varied provisions which a party in a litigation may utilise to cause such disclosure.

More precisely, the disclosure of documents in an admiralty action is governed by sections 93 and 98 of the Order which constitutes the authoritative regulatory framework governing the admiralty procedure before the Supreme Court in its Admiralty Jurisdiction. In particular, section 93 of the Order provides that ‘the Court or Judge may, on the application of any party to an action and without notice to any other party, order that any other party shall make discovery, by affidavit, of all documents which are in the possession or power relating to any matter in question therein’. A similar ex officio power is vested to the Court or Judge without the motion of any party.

Rule 91 of the Order, empowers any party who is desirous to obtain the answers of the adverse party on any matters material to the issue, to apply to the Court or Judge for leave to administer interrogatories to the adverse parties to be answered on oath within such time as the Judge may direct. It is apparent that the administration of interrogatories by any party lies exclusively in the discretion of the Judge who pays regard on whether the interrogatories are material to the issue in litigation and on whether it is appropriate and convenient to grant the requested leave based on the applicable circumstances. Interrogatories which are intended to elicit admission of facts which may be adduced to the Court at the hearing or which are, or are expected to be, within the applicant’s sphere of knowledge are doomed to rejection.

The Court or Judge may, on the application of any party in the litigation and without notice to the adverse party, order the discovery, by affidavit, of all documents which the other party has in his possession or power relating to any matter in question. Any documents not contained in the affidavit of discovery cannot be put in evidence, unless with the leave of the Court or Judge (Rules 93–95). Also, a party to an action may serve upon any other adverse party a notice to produce, for inspection, any document in his possession or power relating to any matter in question and if the party so served with the production notice omits or refuses to comply with the notice, an order from the Court or Judge to this effect may be sought (Rules 95–100).

Moreover, in an action for damage by collision, the parties are procedurally obligated to file in the Court a statement with certain particulars (the so-called Preliminary Acts) outlined in the Order, relating to the circumstances of the collision. The Preliminary Acts must be sealed up and signed by the parties and must be filed by the plaintiff within one week from the issue of the writ and by the defendant at any time before the time fixed by the writ of summons for the appearance of the parties before the Court.

F. Electronic discovery and preservation of evidence

The Order does not currently contain provisions for, and the Admiralty Court practice in general does not currently permit, the electronic discovery and preservation of evidence. The Cyprus Government has recently established a Deputy Ministry of Research, Innovation and Digital Policy with the mission, inter alia, to develop and implement policies in information technologies and e-government in the public sector, including the justice system. Hence, it is expected that e-procedures, including the e-discovery and preservation of evidence, will soon be a reality in Cypriot justice system.

G. Court orders for sale of a vessel

An arrested ship, cargo or other property may be appraised and sold by order of the court or judge, either before (pendente lite) or after the final judgment. In such case, the judge will appoint the marshal of the court or any other person to appraise the property under arrest (in practice, the court appoints the marshal in almost all cases) and to proceed with its sale at auction (the sale procedure adopted in most cases). Nonetheless, the judge may allow the sale of the ship by private sale if he or she deems this fit and provided that all parties in the litigation acquiesce.[11]

The proceeds from the sale of a ship are paid into the court and, upon an application by any judgment creditor, will be distributed to all judgment creditors who claimed a share of the proceeds, in order of priority. In Cyprus, the priorities have been determined by case law and no guidance is found in the RSC or in any other law or procedural rules applying in Cyprus. Detailed analysis of the order of priorities is outside the scope of this chapter. In general terms, however, governmental fees, including the costs and expenses of the marshal, take priority over any other claims, and maritime liens take priority over statutory liens, while statutory liens have no priority over mortgages.

 Author: Zacharias L. Kapsis


[1] The Administration of Justice Act of 1956 (AJA) defines the admiralty jurisdiction of the Supreme Court of Cyprus.

[2] By virtue of its Constitution and by Articles 19 and 29 of the Courts of Justice Law of 1960 (Law No. 14/1960).

[3] As seen in Nordic Bank PLC v. The Ship ‘Seagull’ (1989) 1 CLR 420.

[4] The Bold Buccleuch (1851) 7 Moo PC 267.

[5] The Rules of the Supreme Court in its admiralty jurisdiction are stated in the Schedule of the Cyprus Admiralty Jurisdiction Order 1893, which regulates the procedure and rules before the Supreme Court.

[6] Rules 65–73 of the RSC.

[7] The Republic of Cyprus, pursuant to the United Nations Convention on the Law of the Sea 1982 (UNCLOS), as well as the Territorial Sea Law of 1964 (Law No. 45/1964), has a territorial sea, the breadth of which extends to 12 nautical miles from the baselines. The geographical coordinates and the relevant map of the Cypriot baselines were submitted to the Secretary General of the United Nations on 3 May 1993. In the territorial sea, the Republic of Cyprus exercises full sovereignty and applies all related domestic laws, in line with UNCLOS provisions. Furthermore, according to the Regulation of Innocent Passage of Ships through the Territorial Waters Law of 2011 (Law No. 28(I)/2011), as well as UNCLOS, every foreign ship, whether merchant or warship, has the right of innocent passage through the territorial sea of the Republic of Cyprus, without encroaching upon its sovereignty and without a prior licence.

[8] The Commerzbank Aktiengesellschaft v. The Ship ‘Tour 2’, Admiralty Action No. 2/2018, 25 May 2018 is relevant.

[9] [2012] 1C JSC 2343.

[10] [1984] Lloyd’s Law Reports 235.

[11] Rules 74–77 of the RSC.

The Supreme Court of Cyprus, in its admiralty jurisdiction, is vested with the jurisdiction to hear and determine questions or claims, inter alia, for loss of or damage to goods carried in a ship or arising out of any agreement relating to the carriage of goods in a ship.

Cyprus has not ratified the Hamburg Rules. The operation of cargo claims in Cyprus is very much based on the old law and practice that applies in England and the common law or equity principles. In particular, the Carriage of Goods by Sea Law, Chapter 263, which essentially adopts the Hague-Visby Rules, applies only in relation to carriage of goods by sea from a port in Cyprus to any other domestic or foreign port. Also, the Bills of Lading Act 1855 and relevant sections in the UK Merchant Shipping Act of 1894 (both of which apply in the legal system of Cyprus pursuant to Section 29(e) of Law No. 14/1960) may intervene in cargo claims to clarify the legal position and possible liability of owners, carriers, shippers and agents. In addition, Cyprus ratified the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC Convention 1976) in 2006.

According to Rule 29 of the Rules of the Supreme Court in its admiralty jurisdiction (RSC), stated in the Schedule of the Cyprus Admiralty Jurisdiction Order 1893, any number of persons with interests of the same nature arising out of the same matter may be joined in the same action, whether as plaintiffs or defendants, while Rule 31, which was providently inserted in the Rules, makes it clear that an underwriter or insurer shall be deemed to be a person interested in the action.

In terms of the procedurally recognised right of the underwriter or insurer to be joined in an admiralty action as interested party, the principle enunciated in one of the important admiralty judgments given by the Supreme Court in plenary session highlights matters relating to insurers and underwriters when issuing ‘subrogation receipts’. The Court stressed that subrogation does not, by itself, give rise to a right of insurers or underwriters to bring an action to pursue the subrogated claim in their name but the action should be brought in the name of the assured, unless the claim has been clearly assigned to the insurer or underwriter. In any event, the Supreme Court stressed in a number of judgments that it is desirable that the names of both the insurer and the assured are joined in the action.

Sometimes, contracts for the carriage of goods by sea may pose uncertainty on the locus standi of an innocent party, being a shipper, consignee, endorsee of the bill of lading or other, to initiate an action to the Admiralty Court. In one of its judgments, the Supreme Court shed light on the importance and meaning of the bill of lading. Effectively, it adopted the principles articulated in common law cases and English case law, namely that the bill of lading is issued to the order of the person to whom the goods are destined and serves three purposes: (1) it is evidence that the cargo has been laden on board the ship, (2) it constitutes or may constitute evidence for the contract of carriage and (3) it also constitutes prima facie title of the goods. Nonetheless, the Supreme Court highlighted that whether the bill of lading contains the entirety of the terms and conditions of the carriage agreement is clearly a matter of the circumstances and the factual background embracing the dispute. The intentions of the parties as to the time and manner of passing the property of the goods, as reflected in the contract of carriage, is of decisive importance on the right of the consignee or end receiver of the goods to sue anyone who is responsible in terms of damage to or loss of the ordered goods.

When it comes to the possible liability of forwarding agents that undertake to transport goods from one destination to another on behalf of their clients, the Supreme Court reiterated that the contents of the bill of lading are not conclusive evidence but only an indication of the legal position of each party in the transaction for the carriage of goods. If a forwarding agent is engaged by the client to arrange the transportation of the goods to the destination that the client determines without expressly agreeing to do so only as agent of the client and, on the contrary, it essentially assumes the responsibility to ensure the safe transportation of the goods to the destination that the client will specify, the forwarding agent may be found liable against the client for the loss or damage that the goods may suffer during their delivery to the client.

If an owner, charterer, carrier, forwarding agent or other is found liable for breach of the contract of carriage due to its failure to safely deliver the goods to the prescribed destination and as a result the goods sustained loss or damage, the receiver or owner of the goods will be awarded compensation for the loss or damage suffered and that naturally arose in the usual course of things from such breach or that the parties knew, when the contract was made, to be the likely result from the breach of it. Such compensation shall not be awarded for any remote and indirect loss or damage sustained by reason of the breach. This emanates from the Contract Law, Chapter 149, which reflects the principles of common law and, likewise, the Tort Law, Chapter 148, which includes similar provisions for the award of compensation for negligent or tortious acts. The Admiralty Court has, in some instances, awarded compensation for consequential pecuniary loss in the form of loss of profits where the circumstances of the case so justified.

In relation to demise clauses, even though the Supreme Court (at first instance as Admiralty Court or in its jurisdiction as appellate court) has not specifically interpreted or examined the effect of such a clause in a charter party, if such a question would be brought before it for adjudication, the Supreme Court would, in all likelihood, follow the case law developed in England since The Berkshire case; in other words, the validity of the demise clause will be recognised.

The risks to Cypriot shipping from Brexit seem to be minimal. British companies are in the process of registering ships to the Cypriot registry and other companies have moved their headquarters to the island. On a broader level, Brexit will affect shipping companies’ income and trade, but Cypriot shipping has not been affected negatively, for the time being.

Cyprus Registry

From 1 January 2021, British vessels are no longer considered part of the EU fleet. In addition, British shipping companies are no longer considered European and therefore cannot fit into the Cyprus Tonnage Tax System unless they make the necessary changes to be considered European. The Shipping Deputy Ministry to prevent the deletion of vessels from its registry, contacted and informed the affected parties to make their own preparations for the UK’s withdrawal from the European Union, providing them with options. British nationals and companies that owned Cypriot-registered vessels, in order for them to continue to have their vessels registered under the Cyprus flag, had the following options:

a)         to transfer the ownership of their vessels to a person who, by virtue of Section 5 of the Cyprus Merchant Shipping Law, is qualified to own a Cypriot ship;

b)        to transfer the shares or change the directors of the registered owning company so that, by virtue of Section 5(4) of the Law, the registered owners will be deemed to be controlled by citizens of the European Union or the European Economic Area; and

c)         to transfer the registered office of the current registered owning company (re-domicilisation) to the Republic of Cyprus (by virtue of Sections 354A to 354H of the Companies Law, Chapter 113) or to any other EU or EEA member state.

It is interesting to mention that the vast majority of British shipowners transferred the ownership of their vessels to newly incorporated Cypriot legal entities. More specifically, the British owners proceeded with the establishment of Cypriot entities in the island, in order for them to remain eligible to own Cypriot-registered vessels. It is of great importance that, for the time being, no vessel has been deleted from the Cypriot Registry as a result of Brexit.

I. Introduction

The Cyprus Tax Department on 22 March 2019, released the unified Interpretative Circular 4 (VAT and Income Tax), referring to the registration, in the VAT Registry, of Cypriot companies which operate in the business sector of leasing pleasure yachts (recreational boats) in Cyprus.

The aforementioned Circular applies to leases commencing from 22 March 2019 and after, introducing new procedures, which are in compliance with the European and Cypriot Law and most importantly, they are approved by the European Commission.

More specifically, the new circular provides that the use and enjoyment (provisions of Article 59a of the VAT Directive 2006/112/EC) of a yacht, will be determined by reference to the distances travelled and not by reference to the yacht’s type and size, which was the method followed since 13 March 2012 and it was based on the repealed previous guidelines.

II. Registration for Vat purposes

According to the said Circular:

  1. For long-term leases of yachts, the lessor can only be a legal entity (company), registered in  the Cyprus Tax Department, possessing a valid Cyprus VAT identification number.
  2. During the Registration Process, the company is entitled to submit both:

a)       A copy of the Lease Agreement (if the business will operate based on the details of a single contract) or any other agreements signed with prospective customers (laisse); and

b)      A document which describes in detail the procedure to be implemented for keeping the logbook (if this is kept manually) or if a geotracking system is installed on board the vessel to track her movement.

  1. The Director of the Company, or any other authorised person must sign a statement approving and agreeing that the registration of the Company in the Cyprus Tax Department will be under probation for at least six (6) months, (with the possibility to be extended up to one (1) year maximum). During this period, the Commissioner of Cyprus Tax Department, has the authority to deregister or diversify the Company, for the purpose of protecting the public revenue, taking into consideration any new information that may ensue.
  2. In the event that a Lease Agreement provides to the Lessee the option to purchase the pleasure yacht at any point of time during the lease period, then the Commissioner of Cyprus Tax Department may reject the contract on the basis that the contract relates to supply of goods and not to supply of services and thus the company as the lessor, will be charged the amount of 19% as VAT.

It is worth mentioning that the question what it could be considered and characterised as a supply of goods and what as a supply of services is replied in the Mercedes- Benz Financial Services UK Ltd (Case C-164/16)In the said case the Court of Justice of the European Union (CJEU), took the view that  ‘’legal certainty requires that lease agreements should be regarded as supplies of goods for the purpose of levying VAT only when it can be assumed with certainty that in the normal course of events, at the latest by the end of the agreement term, ownership of the subject matter of the leasing agreement will be transferred to the lessee’’.

 III. Yacht Usage and Enjoyment Determination

  1. If at the time of the VAT registration, the Company cannot provide sufficient details of the place that the leasing services are expected to be used and enjoyed, then the Commissioner of Cyprus Tax Department may at his discretion and using the best of his abilities to predetermine the percentage of use and enjoyment within the European Union (EU).
  2. Whenever predefined percentages are used and if the length of the yacht is 20 meters long or more, the Company should provide details to the Tax Authority in relation to the lease and sail of the yacht, every six (6) months. Subsequently, the Commissioner of Cyprus Tax Department can proceed with a new calculation of the VAT due, if any details with regards to the use of the yacht deviate from the predetermined rates, during the 6-year-registration period, at any point of time.
  3. No input VAT on running expenses of the yacht can be claimed by Companies that use the predetermined rates for any operating expenses incurred in the course of running the leasing business.

 III. Conditions for VAT Registration

 The following conditions need to be satisfied, for the VAT registration to be successfully completed:

  1. A guarantee payment is required – based on the market value of the pleasure yacht on the registration date, (it cannot exceed 3% of the market value of the pleasure yacht);
  2. If the yacht is new, then its value should be verified by a purchase invoice, in order to determine the value of the yacht at the time of the registration. If, however, the yacht is second hand, its value should be verified by an expert valuation;
  3. The Director of the Company, or any other authorised person needs to sign a specific statement, in order to confirm the predetermined rates of use and enjoyment, as well as the terms and conditions that shall apply during the period that the Company will be registered for VAT purposes, which cannot be shorter than six (6) years;
  4. The yacht should be placed at the disposal of the Lessee in the Republic of Cyprus, which means that the yacht should sail to Cyprus prior the commencement of the lease agreement, in order to be set at the disposal of the lessee in Cyprus. The Lessee, who can be established within or outside the Republic of Cyprus, should be a physical person (under any nationality) that does not lease the yacht for business purposes.

 V. Time and Duration of VAT Registration

The Company should remain registered for VAT purposes for at least six (6) consecutive years and submit VAT returns, even if the Company has already paid the total tax due. By maintaining its registration, the Company always has the obligation to consistently submit the required tax returns.

 VI. VAT Deregistration

In case the Company ceases its engagement in the leasing activity and/or becomes deregistered from VAT at any point of time prior to the lapse of a 6-year-period from its registration, this will result in the imposition of VAT at the prevailing standard rate on the replacement value of the yacht at that date.

VII. Other Taxes 

a)      Income Taxes

 For income tax purposes, the income tax due shall be calculated in accordance to the Income Tax Law in the Republic of Cyprus, or on the basis of any other methodology that may be determined by the Commissioner of Cyprus Tax Department at the time of the Company’s registration.

 The tax payment – as it is calculated on an annual basis – shall be made in 2 instalments; the 1st instalment shall be paid no later than the 30th of June; and the 2nd instalment on the 31st of December, of each calendar year, as per Commissioner’s of Cyprus Tax Department decision.

 b)      Stamp Duty

 For non-Cypriot flagged vessels, the lease contract is subject to stamp duty. The value of the lease shall be calculated based on the market value of the vessel, its operational expenses and the expected profit of the Company.

VIII. Penalty 

The Commissioner of Cyprus Tax Department has the right to withdraw any authorisation he has granted, in respect of the use of the aforesaid instructions, when there is an unjustified delay in the payment of any amount due and/or an incomplete presentation of information that may be requested.


In the light of the above, the VAT is calculated on the basis of the yacht’s effective use and enjoyment within EU territorial waters. Effectively, this means that no VAT is chargeable on the portion of the lease attributable to effective use and enjoyment of the yacht outside the EU territorial waters or within international waters. Thus, this supply of services by the lessor, is taxable at the basic VAT rate, but only to the extent that the leased yacht is used within the territorial waters of the EU.

 This long-term yacht lease, is considered a supply of a service falling within scope of Cyprus VAT when the yacht is put at the disposal of the lessee in Cyprus, provided that the lessor is established in Cyprus. Such rule applies provided that the lease contract does not include an “option to buy” clause and therefore, there will be no transfer of ownership as per the lease agreement.

In terms of the new Circular and its guidelines of the yacht leasing services, the following conditions should be satisfied:
The Lessor and the Lessee must enter into a yacht leasing agreement, which must be presented to the Cyprus Tax Department;The Lessor must possess a valid VAT identification number in the Republic of Cyprus;Concerning the long-term leases, the Lessor must be established in the Republic of Cyprus and the Lessee, who can be established within or outside the Republic of Cyprusmust be a physical person (under any nationality) that does not lease the yacht for business purposes;The yacht should be put at the disposal of the Lessee in the Republic of Cyprus, which means that the yacht should sail to Cyprus prior the commencement of the lease agreement;A guarantee payment is required, which cannot exceed 3% of the market value of the pleasure yacht on the registration date;At any time of VAT registration, the Lessor must maintain and provide enough records, in order to prove the percentage of use and enjoyment within or outside the EU; otherwise the Cyprus Tax Commissioner may, at his discretionto predetermine the said percentage within the EU;A six-month declaration should be filed by the Lessor with the Tax Commissioner, in order to state the use and enjoyment records, as the Tax Commissioner has the power to adjust the pre-agreed rates.
In terms of effective use and enjoyment of the standard VAT rules within the EU:
During submission of the VAT returns, the Lessor is obliged to charge any VAT to the Lessee on the lease fee, declare and pay any resulting VAT liability to the Tax Department of the Republic of Cyprus;Thus, in this scope of Guidelines, an adjusting process is provided, ensuring that the terminal VAT charge reflects the actual yacht’s effective use and enjoyment within the territorial waters of the EU; andIn light of the above, the use and enjoyment records shall be submitted as this is required by the Guidelines in a semi-annual basis to the Cyprus Tax Department, since the Cyprus Tax Commissioner has the power to adjust the pre-agreed use and enjoyment rates.
The Yacht Leasing Guidelines provide:
The Cyprus Tax Commissioner shall determine the use and enjoyment based on the data that will be provided to the said, during the VAT registration process;The Director of the Lessor must sign a statement approving the agreed rates resolved by the Cyprus Tax Commissioner, whilst the Lessor must maintain enough records to prove this effective percentage of use and enjoyment within or outside the EU; andIn conclusion, the use and enjoyment records shall be submitted to the Cyprus Tax Department in a semi-annual basis, as the Tax Commissioner has the power to adjust the pre-agreed rates.


In order to provide a better understanding to the reader of this article, we set out below an example reflecting the circumstances of a case handled recently by the Shipping Department of our Law Firm, which is related to the registration of a company, which is operated in the business sector of leasing pleasure yachts in Cyprus, before the Cyprus Tax Department.

For the sake of consistency and clarity, it is imperative to be emphasised that the below example is based on the unique characteristic and facts of this specific case per se and it can only be used for general information. This example does not create a precedent and should not be regarded as a standard to be relied upon with regards to the subject matter and for any decisions to be taken thereon.

 Pleasure Yacht’s Description

  • Length: 25m
  • Market Value: 1.200.000€
  • 20% agreed percentage of Yachts’ Usage and Enjoyment, within the EU.

I. Guarantee Payment

A guarantee payment of the amount of 36.000,00 € is required and it is due to be paid as soon as the company is registered in the Cyprus Tax Department (it cannot exceed the 3% of the market value of the yacht). The amount is based on the market value of the pleasure craft on the registration date and it could either be paid via bank cheque or bank transfer.

II. Duration of VAT Registration

 The company should remain registered for VAT for at least six (6) consecutive years and it is due to pay the following amounts:

III. Payments

 a) VAT Tax amount:  80.256,00€

The above mentioned Vat Tax amount is indicative and it is subject to any changes or amendments may occur after the Cyprus Tax Department receives further information about the yacht. The amount of 614,67 € shall be paid by the 10th day of each month.

It is well mentioning that in case the VAT Tax amount is paid in advance (in one instalment), accepted on the registration date, then the applicant may receive a discount, which ranges depending on the circumstances of the case, which normally does not exceed 3% of the market value of the pleasure craft.

 b) Income Tax amount: 24.000,00 €

The payment of the Income Tax amount shall be made in 2 instalments, each year throughout the period of six (6) years (unless the applicant elects to settle the VAT charged in advance as mentioned above). The 1st instalment should be paid no later than the 30th of June and the 2nd instalment on the 31st of December, of each calendar year. The amount of each instalment is 2.000,00 €.

 c) Stamp Duty amount: 4.139,00 €

 For non-Cypriot flagged vessels, the lease contract is subject to stamp duty, which is payable on the registration date.