CYPRUS Law and Practice Contributed by: Kyriacos Scordis and Sofi Mylona, SCORDIS PAPAPETROU & Co LLC
Unforeseeable events The event must be unforeseeable at the time the con - tract was made. If the reason for the delay or non- performance was known to the party beforehand, it may not qualify as force majeure. Inability to perform The event must directly prevent or hinder the perfor - mance of contractual obligations. For example, if a natural disaster blocks a port, delaying vessel arrival, this could be a valid force majeure event. Notification Parties invoking force majeure often must notify the other party promptly and provide evidence of the occurrence of the event Frustration Frustration refers to situations where, due to an unex - pected event, the contractual performance becomes impossible or radically different from what the parties originally agreed upon, even though it might not be due to the fault of either party. Frustration applies as follows in the context of ship - ping contracts under Cyprus law. Impossibility of performance Performance must become impossible due to unfore - seen events. For example, if a chartered vessel can - not arrive at the port due to a government-imposed blockade or an accident that leaves the vessel per - manently incapable of performing, this could be con - sidered frustration. Radical change in circumstances This occurs if the event leads to a change so sig - nificant that it alters the fundamental nature of the contract. For example, if a vessel is delayed for an unreasonably long time, making it impossible for the parties to fulfil their agreement within the intended timeframe, frustration may be argued. No fault of the parties This occurs when the event makes performance fun - damentally different or impossible, without fault by the parties involved.
The tax exemption for qualifying ship-owners covers: • profits from the use of a qualifying vessel; • profits from the disposal of a qualifying vessel and/ or a share and/or interest in it; • profits from the disposal of shares in a ship-owning company; • dividends paid out of the aforementioned profits at all levels of distribution; and • interest income relating to the financing/mainte - nance/use of a qualifying vessel and the work - ing capital, excluding interest on capital used for investments. If a qualifying owner earns income from a qualifying shipping activity and at the same time earns income from a non-qualifying shipping activity, the income that is not subject to tonnage tax is subject to corpo - ration tax at the normal rate of 15%. If mixed income is earned (tonnage tax and corporation tax), separate books must be kept. 9. Implications of Non-Performance, IMO 2020, Trade Sanctions and International Conflict 9.1 Force Majeure and Frustration Force Majeure Force majeure typically refers to an unforeseeable and unavoidable event that prevents one party from performing their contractual obligations. Cyprus law recognises the defence of force majeure as a contrac - tual defence, provided a relevant provision is explicitly included in the relevant contractual arrangement. Force majeure applies as follows in the context of shipping contracts under Cyprus law. Clause in the contract The contract should explicitly state the types of events that qualify as force majeure. If events such as late delivery, non-arrival of a chartered vessel, or slow loading/discharging are covered, the party invoking force majeure must demonstrate that the event was beyond their control.
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