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.
- 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:
- 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.
- 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.
- 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.
- 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.
- 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:
- 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.
- The suspension of about three months was not long enough to affect the effectives of the right of access to court.
- 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.
- 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.
For any further guidance regarding this procedure or if you require an initial consultation, please do not hesitate to contact our Law Firm at [email protected], +357 22 261 777 or +357 25 261 777 or please visit our office in Nicosia or Limassol.