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Brexit’s impact on Cypriot Shipping

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Brexit’s impact on Cypriot Shipping

The risks to Cypriot shipping from Brexit seem to be minimal. British companies are in the process of registering ships to the Cypriot registry and other companies have moved their headquarters to the island. On a broader level, Brexit will affect shipping companies’ income and trade, but Cypriot shipping has not been affected negatively, for the time being.

Cyprus Registry

From 1 January 2021, British vessels are no longer considered part of the EU fleet. In addition, British shipping companies are no longer considered European and therefore cannot fit into the Cyprus Tonnage Tax System unless they make the necessary changes to be considered European. The Shipping Deputy Ministry to prevent the deletion of vessels from its registry, contacted and informed the affected parties to make their own preparations for the UK’s withdrawal from the European Union, providing them with options. British nationals and companies that owned Cypriot-registered vessels, in order for them to continue to have their vessels registered under the Cyprus flag, had the following options:

a)         to transfer the ownership of their vessels to a person who, by virtue of Section 5 of the Cyprus Merchant Shipping Law, is qualified to own a Cypriot ship;

b)        to transfer the shares or change the directors of the registered owning company so that, by virtue of Section 5(4) of the Law, the registered owners will be deemed to be controlled by citizens of the European Union or the European Economic Area; and

c)         to transfer the registered office of the current registered owning company (re-domicilisation) to the Republic of Cyprus (by virtue of Sections 354A to 354H of the Companies Law, Chapter 113) or to any other EU or EEA member state.

It is interesting to mention that the vast majority of British shipowners transferred the ownership of their vessels to newly incorporated Cypriot legal entities. More specifically, the British owners proceeded with the establishment of Cypriot entities in the island, in order for them to remain eligible to own Cypriot-registered vessels. It is of great importance that, for the time being, no vessel has been deleted from the Cypriot Registry as a result of Brexit.

Seafarers

Since the Merchant Shipping Law does not impose any restrictions on the nationality of seafarers working on board Cypriot ships, the around 2,000 British seafarers working on Cyprus-flagged vessels will continue to do so with no effect and the Cyprus flag will continue to certify and recognise these seafarers.

The arrival of British shipping organisations in Cyprus

Brexit has resulted in an increased interest form British based maritime organisations that see Cyprus as an attractive jurisdiction for an outpost or base due to fears of loss of access to the bloc’s financial market.

The Steamship Mutual Underwriting Association (Europe) Limited, one of the largest shipping insurance companies in the international market, has operated in Limassol since February 2020, as a Brexit fall back decision for the UK marine insurer following the uncertainty surrounding the UK’s departure from the EU. The company’s decision to choose Cyprus for its activities shows that companies of this calibre confer prestige and consolidates Cyprus as a quality complex of maritime activities of international range.         

Another recent example is the British shipping firm P&O Ferries, which moved the registration of the six vessels in its English Channel operating fleet to Cyprus ahead of the UK’s departure from the EU, in part to keep its tax arrangements inside the bloc. On the question of why the company chose the Cyprus flag, the spokesman of P&O declared that ‘’the Cyprus flag is on the White list of both the Paris and Tokyo Memoranda of Understanding on Port State Control, resulting in fewer inspections and delays, and will result in significantly more favourable tonnage tax arrangements as the ships will be flagged in an EU member state.’’

Apart from the financial perspectives, Cyprus provides competitive advantages in terms of attracting UK-based shipping and shipping-related companies that seek to retain their access to the European market. Among others, Cyprus has a high availability of highly educated, multilingual, motivated individuals specialised in a variety of areas, including shipping, finance, insurance and law. Cyprus is a common law jurisdiction, based on English law, with national legislation according to the acquis communautaire. The majority of the population have tertiary education and speak excellent English. More than 150 dedicated maritime specialists at the Shipping Deputy Ministry offer tailored, 24/7 service from their offices in seven countries. Moreover, Cyprus is a party to all international maritime conventions on safety, security, pollution prevention, maritime labour, and health and safety, giving full effect to their provisions. Cyprus has also concluded 27 bilateral agreements on merchant shipping, through which Cypiot ships receive national or most favoured nation treatment in the ports of other states. Those agreements with labour-supplying countries provide for specific terms of employment that are beneficial to shipowners and seafarers.

 Author: Zacharias L. Kapsis

 

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