Cyprus: Cyprus As a Base for Shipping Operations

Last Updated: 10 May 1999
Cyprus has proved to be an ideal center for the establishment of enterprises by foreign shipowners and other professionals engaged in shipping activities and related services worldwide.

The islands´ strategic location which is at the crossroads of three continents - Europe, Asia and Africa - has enabled Cyprus to play a prominent role in its success as an international business center, including shipping related activities. As well as the geographical position of the island, several other factors have contributed to its attractiveness. In particular, Cyprus combines an English-based legal system, an efficient civil service, good labour relations and an outstandingly high level of professionalism in the legal and accounting sectors.

In addition, there are generous tax incentives available, a wide network of double taxation treaties and bilateral shipping agreements, excellent telecommunications and highly educated workforce combined with low cost of living and a pleasant way of life.

The Cypriot merchant fleet ranks sixth in the world with more than 2600 ships exceeding 26 million GT. Today, Cyprus is among the world leaders in the field of shipping with regard, in particular, ship registration and operation.

The globalisation of the world´s economy has drastically changed the role of the shipping industry in recent years. Governments and especially states operating international registers, are expected to foresee, promptly respond and adapt to the needs of the international shipping community. They need to maintain continuously a delicate balance between the fiscal incentives on the one hand, and the effective enforcement of international instruments to safeguard the public interest globally, with respect to safety and protection of the marine environment, on the other.

Cyprus could not remain indifferent to the views and policies advocated and implemented internationally, and with these considerations in the background, the Government during recent years has reviewed and adopted a new approach with regard to the role and the importance of the Register of Cyprus Ships.

A few years ago, Cyprus was regarded as "Europe's best kept secret" but has nowadays become one of the largest and most widely known shipping centers in the world with the largest number of third party shipmanagement companies. The success was not the result of pure chance. It was rather the outcome of concerted efforts by both the government and the private sector and the pursuit of a consistent, well defined and imaginative policy which proved highly successful in attracting shipping people to Cyprus. The island´s strategic location, the modern legal and accounting services, the generous tax incentives provided by the Government, the accession to the main international maritime conventions, the package of double tax treaties and the bilateral agreements on shipping, the telecommunications and the transport network, constitute an attractive base for shipping companies.

The rapid growth of the fleet in the 90´s was again not without problems to the maritime administration of the island which despite its strengthening could hardly cope with the increasing needs for the correct and effective control of the ships flying the Cyprus flag.

The result of this was the targeting of Cyprus vessels at the ports of the MOU countries and the ports of the USA, on account of an above average detention rate by port state control authorities.

The response of the Government was immediate and for the last three years a lot of work has been done and new measures have been introduced by the maritime administration, showing the commitment and attention of the Cyprus government to the development of Cyprus shipping, under the rules and standards set by the international shipping community.

Measures have been introduced by the government in order to improve compliance of our shipping with standards concerning the safety of ships, safety management, prevention of pollution of the marine environment, as well as suitable living and working conditions for seafarers. As part of our strategy to enhance the quality of the ships flying the Cyprus flag, their crew and operations, the merchant shipping legislation is being continuously updated and guidelines have been developed for the effective implementation of the International Safety Management Code.

At the same time a global network of inspectors of Cyprus ships is being established. The programme envisages the appointment of inspectors at ports where vessels under the Cyprus flag call frequently or are carrying out repairs. The scheme covers all the items addressed by the port state control authorities and goes beyond that to address more closely matters relating to the manning of ships and issues of an operational nature. Fourteen inspectors have been appointed so far at important ports in eight countries. These supplement the work of the twenty six exclusive Marine Surveyors of the Department of Merchant Shipping who are stationed at the headquarters in Limassol and at the overseas offices in Piraeus, Rotterdam, London and New York. More inspectors in several other ports are expected to be appointed in the course of the current year.

With regard to the implementation of the International Safety Management Code, guidelines have been prepared and classification societies have been authorized to carry out inspections and to issue the necessary certificates on behalf of the Republic. The criteria for selecting classification societies have been their compliance with IMO resolution A739(18) and the European Union Directive No.94/57 of November 1994. Full compliance with the Code has been achieved.

In the drive towards better quality, the human element plays a crucial role and the conditions of living and work on board Cyprus ships have been given particular attention. Cyprus is a contracting party to the International Labour Organisation´s, Merchant Shipping (Minimum Standards) Convention, known as ILO Convention No. 147.

The competence of the crews of the ships is decisive for the utilisation of modern technology. With assistance from the International Maritime Organisation we are in the process of upgrading the existing maritime training facilities. Furthermore, the work of the implementation of the 1995 amendments to the international Convention on Standards of Training Certification and Watchkeeping for seafarers, 1978 is already in hand and plans are made to respond effectively to the 2002 implementation deadline.

Accession negotiations between the Republic of Cyprus and the European Union (EU) in shipping commenced officially last November, during the "Acquis Screening" of the EU Transport Policy, with two meetings which were held in Brussels´ with Officials of the EU Commission. During the meetings it was concluded by the Cypriot delegation that the relevant approximation of Cyprus with the Acquis Communautaire is around 56%, and that the gap is at 44%. Harmonisation with the remaining items will be effected by the expected date of accession of Cyprus (01.01.2003).

The Acquis Screening Meetings proved that Cyprus is fully aware of the existing EU shipping legislation and requirements. In the next few months, Cyprus will have to prepare its negotiating positions for a successful integration of its shipping industry in the EU.

With regard to the economic side of the merchant shipping sector, the existing regime will not be altered before the accession of Cyprus to the European Union. But even then, there are strong indications that if we succeed in our aims concerning the qualitative improvement of the Cyprus Merchant fleet, our chances to succeed a favorable stand by the European Union, on the issue of taxation in shipping, will definitely be increased.

The aim of the Cyprus Government, which is pursued with determination, is to enhance the reputation of Cyprus as a maritime nation and a shipping power with high quality standards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances from a local lawyer or accountant.

This article also appears in the 'International Offshore and Financial Centres Handbook 1999/2000'. For further information about this highly informative guide to offshore centres, or to order your copy, please phone +44 (0) 207 820 7733 or send an email to iofch@mondaq.com

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