Security For Costs In Cyprus: Legal Framework And Practical Consideration

In certain circumstances, Cypriot Courts in civil proceedings may order the claimant to provide financial security for the legal costs that may be awarded to the defendant if the claim ultimately fails. This mechanism serves to protect defendants from the risk of litigating against claimants who may lack the financial means to satisfy a potential costs order.

Legal framework

The concept of security for costs was previously regulated under Order 60 of the former Civil Procedure Rules and is now governed by Rule 26 of the new Civil Procedure Rules introduced in Cyprus in 2023. Notably, the new provision does not introduce substantive changes to the previous legal framework but largely reflects the principles that applied under Order 60.

Conditions for Ordering Security for Costs

An order for security for costs under Rule 26 remains a matter within the discretion of the Court, which will consider the circumstances of each case. A prerequisite for the exercise of the Court’s jurisdiction is proof that the claimant does not have their habitual residence in Cyprus or in a Member State of the European Union. Where this requirement is satisfied, the claimant may, at any stage of the proceedings, be ordered to provide security for costs (even if they may be temporarily residing in Cyprus or in a Member State of the European Union).

Once this threshold requirement is established, the Court will consider several factors in exercising its discretion. Case law has identified that among the principal considerations is whether the claimant possesses assets in Cyprus, particularly immovable property. Where a claimant resides abroad and has no assets in Cyprus that could be realised to satisfy a potential costs order, the Court will generally be inclined to grant an order for security for costs in favour of the defendant, unless special circumstances render such an order unjust.

Another important factor considered by the Court is whether the claim demonstrates a reasonable prospect of success. The stronger the claimant’s claim appears, the less likely it is that the defendant will obtain an order for security for costs. The rationale underlying this condition is that where the claimant’s case appears strong, while the defence does not, it would be unjust to require the claimant to provide security for costs.

Furthermore, the Court will consider whether a security for costs order would effectively deprive the claimant of access to justice due to lack of financial means and in such case, an order may not be granted.

Finally, the timing of the application for security for costs can also be relevant. In certain circumstances, a party’s delay in applying for security for costs, when considered together with other factors, may lead the Court to refuse such an application.

Effect of a Security for Costs Order

Where the Court considers that the relevant conditions are satisfied and that it is appropriate to exercise its discretion, it may proceed to issue an order for security for costs. When the Court issues such order, the claimant is required to provide security for the defendant’s potential legal costs in the amount determined by the Court. The security is usually paid into Court or provided in the form of a bank guarantee issued by a bank operating in Cyprus, to the satisfaction of the Registrar. The Court may also stay the proceedings until the required security is provided. Once the claimant complies with the order and the security is deposited, the proceedings may continue normally. However, if the claimant fails to provide the security within the time specified by the Court, the Court has the power to dismiss the claim.

Rule 26 of the Civil Procedure Rules maintains the established approach to security for costs in Cyprus. Although the Court has discretion to order such security, this power is exercised carefully and considering the specific circumstances of each case, ensuring that any such order remains fair and proportionate.

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.