Court Decisions On Amendments To Law – Government Contracts, Procurement & PPP

In accordance with Article 140 of the Constitution of the
Republic of Cyprus, prior to the publishing of an indented
legislation voted by the Parliament, the President of the Republic
of Cyprus, is entitled to refer said legislation to the Supreme
Court of the Republic, in order for the Court to opine as to
whether the referred legislation or a certain provision in said
legislation is contrary or inconsistent to the Constitution or
European Union legislation. This is one of the rare instances that,
the three separate powers of the Republic (executive, legislative,
and judicial) all immediately come together and can, in a way,
interfere with each other.

1. Reference No. 8/2021 – the President of the
   Republic-v- the Parliament, 06/06/2022:

The law in question was the Social Insurance
(Amending) (No. 6) Law of 2021. The intended
amendment aimed to include in the definition of
“employees” that is, of the persons that have the
obligation to have social insurance contributions, persons involved
in purchase or provisions of services or any other employment
contract, irrespective of the naming of said contract, including
the persons employed by the Republic of Cyprus.

The Supreme Court rejecting the Attorney- Generals (the
“AG”) arguments, who appeared on behalf of the President,
and concluding that the legislation can be published, noted
that:

1. No new categories of insurable employment are created with the
   amendment, which cause an increase of cost to the Republic. The
   legislation only covers cases where, irrespective of the fact that
   some contracts are named as “contracts of service” the
   circumstances are such, that create an employer-employee
   relationship. Such persons could and were entitled to be recognized
   as employees for social insurance purposes- a provision applicable
   by virtue of the legislation that in any event. existed before the
   proposed amendment.




2. Based on the above line of thinking, the Supreme Court also
   rejected the AG’s position that there is a breach of the
   relevant EU Directive for public procurement on the basis that now
   all service contracts will be considered contracts of employment.
   It was stressed by the Court that it is the circumstances of the
   relationship of the parties in a contract of service that determine
   whether there is an employer-employee relationship.




3. There is no interference between the powers of the Republic
   (legislative and executive or judicial power) because service
   providers could before the amendment and continue to be entitled to
   request from the Director of Social Insurance to examine their
   circumstances on an individual basis.




4. The intended legislation doesn’t interfere with the hiring
   of personnel in Public Sector, the legislation merely includes
   people that could be deemed to be employees of the Republic based
   on a contract of service, for social insurance purposes.

What will this mean going forward?

The immediate effect is that the proposed amendments to the Law
can proceed to be published in the official Gazette of the Republic
of Cyprus, so that the provisions will be enacted and come into
force.

The proposed provisions do not mean that a Contract of Services
would automatically become a Contract of Employment. As per the
already existing provisions of the Law, if it is deemed that the
terms and conditions of a contract of services are such that would
actually create an employer-employee relation, then this contract
can, constitute a contract of employment.

The additions to the Law will now specifically provide that,
should the above occur, then for the purposes of Social Insurance,
the employee could be considered as such and the employer would
need to pay the relevant contributions.

Generally, the Law also provides powers to the Director of the
Social Insurance office, in the event of an issue arising inter
alia, in terms of the characterization of a person as an employee
or self-employed, to appoint officials to undertake relevant
research so as to establish whether a person is to be considered as
an employee or a self-employed individual.

2. Reference No. 10/2021 – the President of the
   Republic-v- the Parliament, 06/06/2022:

The law in question was the Transfer and Mortgage of
Real Estate (Amending) (No. 2) Law of 2021. The
intended amendment aimed to extend the suspension of foreclosure
procedures of mortgaged properties until October 31, 2021, due to
the outbreak of the COVID-19 pandemic.

The Supreme Court rejecting the Attorney- Generals (the
“AG”) arguments, who appeared on behalf of the President,
and concluding that the legislation can be published, noted
that:

1. There is no breach on the freedom of contracting, as the
   intended legislation does not affect any contractual right of the
   mortgagee, but merely suspends a right to a particular way of
   foreclosure of the mortgage, for a limited amount of time.




2. The suspension of about three months was not long enough to
   affect the effectives of the right of access to court.




3. There is no breach of the doctrine of separation of powers as
   the indented legislation doesn’t interfere with the substance
   of the Decrees issued by the Minister of Finance for the derails of
   the electronic systems of foreclosure -it merely suspends
   theμ.




4. Τhere is no breach of the Constitution relating to the
   proposing of a bill by a member of the Parliament, resulting to the
   increase of the Republics budget. The AGs argument was that the
   suspension would create an increase of the capital needs of the
   banks, which would affect the credit rating of the Republic, with a
   potential further affecting of the Republic’s budget. The
   Supreme Court made clear that a mere possibility for the Budget
   being negatively affected is not enough, as based on previous
   decisions such impact on the budget should be an immediate or
   unavoidable outcome.

Since the legislation covers a period before the publication of
the legislation, in case that foreclosure procedures are initiated
or have taken place in the months that these procedures were
suspended, then the legitimacy of said proceedings can be
challenged to the competent Court of the Republic of Cyprus.

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.