CYPRUS Trends and Developments Contributed by: Ioanna Solomou, Stephanos Ayiomamitis and Andria Kouloumi, Michael Kyprianou & Co LLC
stage to gather the necessary data and documenta - tion. The notification process is inherently linked to a stand - still obligation. Transactions falling within the scope of the Law cannot be implemented until a decision has been issued by the Screening Authority. This sus - pensory effect aligns Cyprus with established interna - tional practice and ensures that potentially sensitive investments are subject to review before they take effect. Administrative sanctions The Law empowers the competent authority to impose administrative sanctions on foreign investors or any person exercising direct or indirect control over an FDI falling within its scope, in the event of non-compliance • administrative fines ranging from EUR5,000 to EUR50,000 for failure to submit a mandatory noti - fication; • fines of up to EUR100,000 for providing false or misleading information; and • fines of up to EUR50,000 for failure to supply required information. In cases of non-compliance with corrective measures imposed by the authority, additional penalties may be imposed, including daily fines of up to EUR8,000 for continued breaches. All sanctions are imposed by a reasoned decision, following due process and an opportunity for the affected party to be heard. Practical impact The introduction of the FDI screening regime is expected to have a tangible impact on the transaction landscape in Cyprus. From a regulatory perspective, it enhances the State’s ability to oversee foreign invest - ments and to intervene where necessary to protect national interests. with its provisions. Sanctions include: For investors, the regime introduces additional con - siderations that must be addressed during the plan - ning and execution of transactions. These include the need to assess whether a transaction falls within the
scope of the Law, to prepare and submit a notification where required, and to account for the timing implica - tions of the review process. Transaction documentation is also likely to evolve to reflect the new regulatory environment. Parties may need to include conditions precedent relating to FDI approval, allocate regulatory risk, and agree on co- operation mechanisms for the submission of notifica - tions and the handling of information requests. Despite these additional requirements, the framework is not intended to deter foreign investment. Rather, it seeks to provide clarity and predictability by estab - lishing a transparent process for the assessment of investments. By aligning with EU standards and inter - national best practices, Cyprus reinforces its cred - ibility as a jurisdiction that combines openness with regulatory robustness. The availability of conditional approvals further sup - ports this objective, allowing investments to proceed subject to tailored safeguards. This approach enables the authorities to address specific concerns without resorting to outright prohibition, thereby preserving economic activity while protecting public interests. Alignment with EU framework The Cypriot FDI screening regime operates within the broader context of Regulation (EU) 2019/452, which establishes a framework for co-operation among EU member states and the European Commission. The Regulation, fully applicable since October 2020, does not harmonise national screening mechanisms but provides a structure for co-ordination and information- sharing. Under this framework, member states are required to notify the European Commission and other member states of foreign investments undergoing screening. This enables the exchange of information and the issuance of comments or opinions where an invest - ment may have cross-border implications or affect projects of Union interest. Cyprus’s participation in this mechanism ensures that its national screening process is integrated into a wider European system. While the final deci -
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