CYPRUS Law and Practice Contributed by: Alexis Erotocritou, Dafni Loizou and Georgia Demou, A.G. Erotocritou LLC
6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries In the past few years, the use of corporate and profes - sional fiduciaries in Cyprus has been increasing, and such fiduciaries, including Administrative Service Pro - viders (ASPs) play a central role in the country’s inter - national business and wealth management sectors. Such fiduciaries and ASPs are subject to a higher standard of conduct than private individuals who may act as trustees. While non-professionals are judged by an ordinary prudency-test, licensed fiduciaries must exercise enhanced skill, care, and diligence, which is expected of experts. Additionally, they are regulated under relevant local and European fiduciary services legislation and are supervised by the Cyprus Securi - ties and Exchange Commission (CySEC), the Cyprus Bar Association (CBA) or the Institute of Certified Pub - lic Accountants of Cyprus (ICPAC) (as may be appli - cable). While trust deeds or other commercial arrangements with such professionals usually include an indemnity, indemnifying the trustee from any personal liability, provided that they act in good faith and do not exceed their authority, this cannot exclude any liability arising from (gross) negligence or fraud. 6.2 Fiduciary Liabilities While ordinarily trust agreements would include (i) provisions giving powers to the trustees to appoint third-party professionals; and (ii) indemnities protect - ing the trustees from any liabilities, as mentioned in 6.1 Prevalence of Corporate Fiduciaries , trustees cannot exclude any liability which may arise from their negligence or fraud. Additional, relevant laws would provide, to a certain extent, protection but such protection would not extend to cases involving dishonesty or gross neg - ligence. 6.3 Fiduciary Regulation In Cyprus fiduciary’s investment is regulated through a combination of English equitable principles, the Trus - tee Law, and the International Trusts Law, as may be
border dimension. It is now common for proceedings to involve assets, beneficiaries or fiduciaries located in multiple jurisdictions, giving rise to issues concerning beneficial ownership, control of family companies, the recognition of foreign judgments, and the co-ordina - tion of parallel proceedings. 5.2 Mechanism for Compensation As a common law jurisdiction, the overarching ration - ale for damages in claims of this nature is compensa - tory and restitutionary rather than punitive: the court aims to make good any loss and, where appropriate, to deprive the wrongdoer of any profit derived from the breach. While punitive or exemplary damages are not a typical feature of trust or fiduciary litigation in Cyprus, the courts retain a general discretion to award such damages in exceptional cases. The applicable rules concerning remedies awarded under Cyprus law are derived from statute, such as the Trustees Law (Cap. 193) and the International Trusts Law (Law 69 (I)/1992), as well as principles of equity. Such remedies may include: • equitable compensation (ie, monetary relief to restore the claimants to the position they would have been in but for the wrongdoing or breach); • an account of profits (compelling a defaulting trustee or dishonest third party to disgorge gains derived from the breach); • rescission of transactions; and • proprietary remedies, such as following trust property into the hands of third parties who are not bona fide purchasers for value without notice, and tracing its converted value into substitute assets. Where equity identifies that a person holds property unconscionably, the courts may also impose a con - structive trust for the benefit of the aggrieved party. In addition, Cyprus courts have a wide jurisdiction to grant interim relief under appropriate circumstances, including injunctions to restrain a breach of trust and the appointment of receivers over trust property.
204 CHAMBERS.COM
Powered by FlippingBook