Cyprus: Cyprus Chapter Of Merger Control, Jurisdictional Comparisons, Second Edition

Last Updated: 16 April 2014
Article by Elias Neocleous and Ramona Livera

LEGISLATION AND JURISDICTION

1. What is the relevant merger control legislation? Is there any pending legislation that would affect or amend the current merger control rules described below?

Mergers in Cyprus are currently regulated by the Control of Concentrations between Undertakings Law 22(I)/1999 as amended by Law 107(I)/1999 (Merger Law) and Law 154(1)2000.

In September 2013, the Commission for the Protection of Competition (CPC) conducted a public consultation on a draft law titled 'The Control of Concentrations between Undertakings Law of 2013'. The proposed new law reflects the provisions of Council Regulation (EC) 139/2004 and, in particular, introduces a new definition of a concentration so that one of the criteria for establishing whether there is a concentration would be the existence of two or more active participating undertakings in Cyprus. The new law was intended to be in place by the end of 2013, but the legislative timetable has slipped, and it is now anticipated that it will be enacted in January or February 2014.

Where relevant we have provided a brief summary of the proposed amendments based on the published draft law. Further changes may be introduced during the legislative process, but these are not likely to be substantial.

2. What are the relevant enforcement authorities, and what are their contact details?

The body directly responsible for merger control and competition issues in Cyprus is the CPC. This body is assisted in its functions by the Service of the Commission for Protection of Competition, which is responsible for receiving notifications of concentrations of major importance and providing written assessments of such to the CPC. Both the Service of the CPC and the CPC can be contacted at the following location:

53 Strovolos Avenue,

Victory Building,

Strovolos, 2018

Nicosia

P.O. Box 23467, 1683 Nicosia

Cyprus

T: +357-22606600

F: +257-22304944

E: chairman@competition.gov.cy

3. What types of transactions are potentially caught by the relevant legislation?

The legislation applies to transactions which fall under the heading of a 'concentration of major importance'. Three types of transaction qualify as a concentration:

  • transactions through which two or more previously independent enterprises merge;
  • transactions through which one or more persons that is already in control of at least one enterprise acquires directly or indirectly the control of the whole or parts of one or more other enterprises;
  • transactions through which a joint venture is established which permanently carries out all of the functions of an autonomous economic entity.

Thus mergers, acquisitions and joint ventures all fall under the heading of a concentration, and require notification to the CPC if the participating enterprises in such concentration fulfil the thresholds which would render the concentration one of major importance under Cyprus legislation.

It should be noted that control is derived not only from the acquisition of the whole or part of the assets of the enterprise but also from any rights acquired that give rise to the possibility of a decisive influence on the composition, meetings or decisions of the organs of the enterprise.

The new draft law introduces provisions regarding the factors which are taken into account by the Service of the CPC, particularly in its assessment as to whether a concentration constitutes a joint venture, namely:

(i) whether two or more parent companies retain to a significant extent activities in the same market or in a market which is downstream or upstream from that of the joint venture or in a neighbouring market closely related to this market; and

(ii) whether the coordination which is the direct consequence of the creation of the joint venture affords the undertakings concerned the possibility of eliminating competition in a substantial part of the relevant products or services.

4. Are joint ventures caught, and if so, in what circumstances?

Joint ventures are subject to the Merger Law provided that the joint venture is one that permanently carries out all of the functions of an autonomous economic entity. In the event that such independent entity is intended to coordinate the competitive behaviour of the enterprises which remain independent, such coordination is also examined under the scope of The Protection of Competition Law 13(I)/2008 (Competition Law) and its provisions on concerted practices.

5. What are the jurisdictional thresholds?

In order for a concentration to be subject to notification to the Cyprus Competition Authority, it must fulfil all three thresholds which render it a concentration of major importance:

  • the aggregate turnover achieved by at least two of the participating enterprises exceeds, in relation to each one of them, €3,417,203 (the new draft law rounds this figure to €3,500,000);
  • at least one of the participating enterprises conducts commercial activities in the Republic of Cyprus (the new draft law introduces the following amendment: 'at least two of the participating enterprises conduct commercial activities within the Republic of Cyprus');
  • at least €3,417,203 of the aggregate turnover of all the participating enterprises relates to the disposal of goods or the supply of services within the market of the Republic of Cyprus (the new draft law rounds this figure to €3,500,000).

In addition, it provides that the minimum turnover thresholds can be varied by an Order of the Council of Ministers published in the Official Gazette of the Republic of Cyprus.

Alternatively, a proposed concentration may also be declared a concentration of major importance by an Order of the Minister of Commerce, Industry and Tourism where the above thresholds are not met, due to the effect it may have on economic and social development, technical progress or employment or the supply of goods and services necessary for the public security of the Republic as a whole or of territories thereof.

In determining the turnover to be considered with regard to the thresholds above it should be borne in mind that the turnover of the enterprise includes the turnover of the parent companies and subsidiary companies (the latter of which is considered any company in which the enterprise has more than half the capital or voting rights, or the power to appoint more than half of the members of the administrative board, or the right to manage the affairs of the enterprise). The aggregate turnover is the amount arising from the sale of products or provision of services by the enterprises concerned for the preceding financial year, once discounts on sales, value added tax and other taxes directly related to turnover are deducted.

In effect, the proposed amendment of the second clause relating to the thresholds, which stipulates that at least two of the participating enterprises must conduct commercial activities within the Republic of Cyprus, in conjunction with the third clause which provides that at least €3,500,000 of the total turnover of all the undertakings together concern the disposal of goods or supply of services within the Republic, is to be interpreted that the obligation to notify would be triggered when both the acquirer and the target company generate a total turnover of at least €3,500,000 derived from activities within the Republic of Cyprus.

6. Are these thresholds subject to regular adjustment?

No, the thresholds are stipulated in the Merger Law and are not subject to any regulatory acts and any amendments.

The proposed new law provides for amendment of the minimum turnover thresholds by an Order of the Council of Ministers published in the Official Gazette.

7. Are there any sector-specific thresholds?

No, the only mention made with regard to different sectors is with regard to the calculation of the aggregate turnover. For a bank or credit organisation, the turnover is considered to be the one-tenth of the balance sheet totals of the last financial year, whereas for an insurance company, it is the value of the gross premiums during the last financial year minus the same tax deductions as applied for the calculation of the turnover of other undertakings.

With regard to credit institutions, financial institutions or insurance companies, there is also a further differentiation in that a concentration is not considered to have taken place where the transaction amounts to holding securities of another enterprise on a temporary basis with the intention of reselling such securities, provided that the holder does not exercise the voting right in respect of the securities other than with a view to disposing of the securities or assets of the enterprise, and provided that the securities are disposed of within one year of the date of acquisition.

The new draft law gives the CPC power to extend this limit if the holders demonstrate that disposal was not reasonably feasible within one year.

8. In the event the relevant thresholds are met, is a filing mandatory or voluntary?

The filing is mandatory.

9. Can a notification be avoided even where the thresholds are met, based on a 'lack of effects' argument?

No, in the event that the thresholds are met notification is obligatory regardless of which of the parties is active in Cyprus, and regardless of whether a competition effect will result from the transaction. The rationale behind the strictness of this approach of the CPC is that the issue of whether or not there is a competition effect can only be ascertained by the CPC once it has been provided with the relevant information it requires, and not by the parties to the transaction. It is considered that if the thresholds are satisfied, there may be a possibility of a competition effect, which can only be assessed properly by the CPC.

The new draft law provides that in the event that the thresholds described above are exceeded, notification is obligatory when both parties are active in the Republic of Cyprus.

10. Are there special rules by which a notification of a 'foreign-to-foreign' transaction can be avoided even where the thresholds are met?

No, if the thresholds are met notification is obligatory despite the parties having no physical presence in Cyprus or having no actual connection to Cyprus other than by generating a turnover in Cyprus that meets the thresholds. When assessing the turnover amounts the CPC refers to the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (2008/C 95/01).

11. Does the relevant authority have jurisdiction to initiate a review of transactions which do not meet the thresholds for a notification?

The Minister of Commerce, Industry and Tourism has the authority to issue an Order declaring a concentration as one of major importance despite the three thresholds not being satisfied. Such an order would usually only be issued following advice by the CPC.

NOTIFICATION REQUIREMENTS, TIMING AND POTENTIAL PENALTIES

12. Is there a specified deadline by which a notification must be made?

Yes. In the case of a transaction that is required to be notified by virtue of satisfaction of the three thresholds, the notification must be filed with the Service of the CPC within one week from the date of undertaking the relevant agreement (that is, by signing or executing said agreement) or from the date of publication of the relevant offer of purchase or exchange or from the date of the acquisition of a controlling interest, whichever occurs first. In the event that notification is required by Order of the Minister, the transaction must be notified within one week from the date of the notice of such Order to the parties obligated to notify. One week is interpreted to be one calendar week and includes any public holidays and weekends. In the event that the seventh day is a public holiday and the CPC is closed, notification may be filed on the next working day of the CPC.

The new draft law abolishes the current timeframe for the filing of notifications within one week from the date of undertaking the relevant agreement and requires that transactions creating concentrations of major importance are notified in writing to the Service before these are implemented and after the execution of the agreement, announcement of the public bid or the acquisition of a controlling interest. The notification can be filed where the participating enterprises prove to the Service a good-faith intention to conclude an agreement or in the case of a public takeover bid if they have announced an intent or definitive decision of such a proposal that will result in a concentration of major importance.

13. Can a notification be made prior to signing a definitive agreement?

A notification must be made on the basis of an agreement that is binding on both parties and that will give rise to a concentration. Technically and in accordance with relevant provisions of the law, notification would not necessarily be accepted on the basis of a letter of intent, term sheet for negotiations, or a memorandum of understanding, but only on the basis of a binding agreement for acquisition of control. Where however, circumstances are such that it can be successfully argued that such a document is practically binding on the parties (such as in the case of an irrevocable binding offer which is to be accepted by the offeree subject to the fulfilment of certain conditions), and that due to various time constraints notification must be made on the basis of such a document, the CPC may in its discretion accept the notification prior to the signing of the definitive agreement, although this would be decided on a case-by-case basis.

The new draft law stipulates that a notification can be filed where the participating enterprises prove to the Service a good-faith intention to conclude an agreement or in the case of a public takeover bid if they have announced an intent or definitive decision of such a proposal that will result in a concentration of major importance.

14. Who is responsible for notifying?

The undertaking responsible for notifying in the case of an acquisition of another enterprise is the acquiring party. If the concentration arises due to two previously independent enterprises merging, or due to a joint venture, or acquisition of joint control by more than one persons, both parties are obligated to notify the concentration either jointly or separately.

15. What are the filing fees, if any?

There are no filing fees.

The new draft law introduces a filing fee of €1,000. If a full Phase II investigation is undertaken there is a further fee of €6,000.

16. Where a notification is necessary, is approval needed before the transaction is closed/implemented (is there a waiting period or suspension requirement)?

Yes, there is a suspension requirement. The transaction cannot be implemented until approval has been provided by the CPC. The CPC has one calendar month from the date of receipt of the notification, or from the date of receipt of any further information it may require, to decide either that the concentration does not raise serious doubts as to its compatibility with the competitive market, and therefore allow the transaction to be implemented, or to determine that the concentration does raise serious doubts as to its compatibility with the market, and therefore decide to proceed to a full investigation. The CPC may extend this time period of one month for a further 14 days, provided that it informs the notifying party of the extension seven days prior to the end of the one-month time limit. If this period also expires without a decision yet having been reached, the concentration is considered to have been declared compatible with the competitive market, and can be implemented. Otherwise, the parties may not implement their envisaged transaction until notice of approval by the CPC has been received.

17. If there is a suspension requirement, is it possible to apply for a derogation in order to close before approval is granted? If so, under what circumstances?

There is no possibility of a derogation to the suspension requirement in the first phase of the examination of the notification. This examination phase is comprised of a preliminary evaluation of the concentration and the preparation of a written report including the reasoned opinion of the Service of the CPC as to the compatibility of the concentration with the competitive market of Cyprus. Upon receiving this report, the CPC then determines whether it will allow the concentration to be implemented, or whether the concentration does indeed raise serious doubts as to its compatibility with the competitive market and therefore warrants further investigation. In the event that a further investigation is decided, the concentration then proceeds to a Phase II examination. The results of such investigation must be provided by the CPC at the latest within four months from the date of receipt of notification by the Service or from the date of receipt of any further information that may have been required. This time period could be extended further if the participants to the concentration delay the process required for the full investigation to take place.

Derogation of the suspension effect is possible only with regard to a Phase II full investigation, where the participants can obtain temporary permission from the CPC to implement the concentration either partially or fully, with or without conditions set by the CPC prior to having obtained the final approval of the CPC. In order to obtain such derogation, the participating enterprises must show, to the satisfaction of the CPC, that they are likely to suffer serious damage as a result of further delay in the implementation of the concentration.

18. Are any other exceptions (carve-outs etc) available to allow parties to close/implement prior to approval?

Other than that mentioned above with regard to a Phase II investigation, no other exceptions exist that allow parties to close or implement prior to approval.

19. What are the possible sanctions for failing to notify a transaction?

Failure to notify a transaction according to the provisions of the law and within the timeframes required by the law could lead to the imposition of a fine on the party that is obligated to notify of up to €85,430 and a further fine of up to €8,543 for each additional day for which failure to notify continues.

The new draft law abolishes the administrative fine for failing to notify a transaction and introduces other amendments regarding administrative fines.

20. What are the possible sanctions for implementing a transaction prior to receiving approval (so-called 'gun-jumping')?

For implementing a transaction prior to receiving approval, whether partially or completely, the CPC may impose a fine of up to 10 per cent of the total turnover of the participating enterprises for the financial year preceding the year in which notification was made, and a fine of up to €8,543 for each additional day on which the concentration continues to be partially or completely put into effect.

The new draft law imposes an administrative fine of up to 10 per cent of the total turnover of the participating enterprise obligated to notify, for the financial year preceding the year in which notification was made, and a further administrative fine of €8,000 for every day the infringement continues.

To view this Chapter in full please click here.

Originally published in Sweet & Maxwell, European Lawyer Reference Series dated 08.04.2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions