Successful business 17

Cyprus-Russian Successful Business magazine 17 - 2015

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Successful Business MagazineIssue 17, April-June 2015

Editorial Board: Natalia Kardash, Andrey Korneev, Igor Nossonov, Andrey Pavelko.

Editor:Maria Vetrova.

Contributors: Zoya Markova, Julia Avanesova, Diana Yavorskaya, Andrianne Philippou,Julia Minavnina, Irina Patsalidou.

Circulation: 3,000 copies.

Distribution: free at business forums, conferences, seminars. 1200 selected recipients (in Cyprus and Russia) mailing list.

Subscriptions 2015four issues 40 euro (delivery by courier service) or 20 euro (by mail).

Website: www.cyprusrussianbusiness.com

A note to readers: the views expressed are the authors' and not necessarily those of SuCCeSSful BuSINeSS Magazine. Authors may have consulting or other business relationships with the companies they discuss.

Copyright: no part of this publication may be reproduced or transmitted in any form or by any means without prior permission of VeSTNIK KIPRA or N. G. K. Cyprus Advertiser ltd.

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Director and Editor-in-Chief: Natalia Kardash ([email protected].)Head of Administration Dept.: Galina Panagassova ([email protected].)Financial Director: Andrey Pavelko ([email protected].)www.vkcyprus.com Tel.: (+357) 25 590530Fax: (+357) 25 584920Postal Address: P.O.Box 58236, 3732, limassol, Cyprus

(N. G. K. Cyprus Advertiser Ltd)

: ([email protected]) : ([email protected].) : ([email protected].)www.vkcyprus.com Te.: (+357) 25 590530: (+357) 25 584920 : P.O.Box 58236, 3732, limassol, Cyprus

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, 17 (- 2015)

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, 17 (- 2015)

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, 17 (- 2015)

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, 17 (- 2015)

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, 17 (- 2015)

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, 17 (- 2015)

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, 17 (- 2015)

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, 17 (- 2015)

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, 17 (- 2015)

This section of the magazine contains summaries of the most important articles. We have translated them into English for those of our clients and partners who do not speak Russian but want to know more on the content of this issue.

SuccESSful BuSinESS is the only business magazine in Russian language published in cyprus. it comes out quarterly. in order to keep our readers informed we update our website (www.cyprusrussianbusiness.com) every day with the most important business news, statistics, analysis, stock exchange results, all kinds of monetary questions and financial market issues.

Please look through summaries provided in this section of the magazine. And if you have questions or need more information, please do not hesitate to contact us for further details.

Natalia KardashPublisher

[email protected]

Education and carEErS

Higher and professional education in cyprus, professional development and advanced training, recruiting, head hunting, business psychology. Detailed programs of trainings, seminars, conferences, business forums in cyprus and abroad.

FinancE and invEStmEntS

Articles on cyprus banking, insurance, taxation, brokerage and investment fields. World tendencies in finance markets, reports and analysis on oil, gold and currency markets. insurance, investment in business and property (comparative analysis, statistics, price movement).

Law and taxation

comments and interpretations on taxation, auditing and accounting. corporate law. labour law. immigration and migration issues.

LiFEStyLE

independent rating of cyprus' restaurants, hotels, recreational facilities for business people. columns on wine, style, business fashion, cars.

TABLE OF CONTENTS: SUBJECTS COVERED BY THE MAGAZINE

VESTNIK KIPRA COMMUNICATION GROUPVESTniK KiPRA is a group of companies working with the Russian community of cyprus. The most important fields of activities are publishing, education, event management, PR and the promotion of cypriot enterprises in Russia and ukraine. Well known publications: weekly Russian newspaper VESTniK KiPRA, MAGAZinO (cyprus Shopping Guide). The biggest events: cyprus-Russian festival, limassol international children's festival.nGO: Association of Russian-speaking residents of cyprus.

Executive Summaries

Nikos Anastasiades: New Perspectives for CooperationThe Official Visit of the President of Cyprus to Russia

Stanislav Osadchiy: The pragmatic side of foreign policy of our countries

Cyprus and Russia Update Relations in the Context of Big-League Politics

Cyprus economy on the path to recovery and challenges ahead

Andreas Loizou: Funds as a Perfect Tool for Investors

The Process of Stabilizing the Financial Sector of Cyprus

Constantinos Petrides: I believe that the reform will be successful

The Legal System of Cyprus: Important Facts

Kypros Chrysostomides: Top-Ranking Jurisprudence

The Legal Profession in Cyprus

Kyriakos Skordis: Mutual Trust and Respect is the Key


Konstantinos Messios: Russian Business Should Stay

BuSinESS and tEchnoLogiES

news on iT, e-commerce, e-money. new business technologies, innovations. Advertising, PR, business communications.

Practical information on cyprus and ciS economies, business tendencies, reports and analyses on world economy and its influence on business.

BuSinESS and Economy


www.cyprusrussianbusiness.com Executive Summaries

In 2013 Cyprus found itself on the verge of a serious economic crisis. At that time the country managed to reach an agreement on the rescue of the Cyprus economy with the Troika of international creditors. It was a harsh, unprecedented and very controversial step.

However, one and a half years later, the economy began to show clear signs of re-covery. The decline was less severe than expected. Tourism, shipping and professional services proved to be the most stable areas of economy.

The process of fiscal consolidation is on track. According to President Anastasiades, the government will do whatever is necessary to bring public finances on a corrective course. The government is currently implementing a number of reforms covering the public sec-tor, health care and social welfare; the privati-zation prospects of state-owned enterprises are also being considered. This will help lay the foundation for a viable and sustainable economic model in Cyprus. The President believes that it is essential to strictly follow the requirements of the Economic Adjust-ment Programme. He also thanked Russia for restructuring the 2.5 bln loan granted to Cyprus in 2011.

It is well known that Cyprus offers many advantages for doing business here. Besides, new vistas of business are opening up. First of all, according to the President these are natural gas reserves in the EEZ of Cyprus. Another promising industry for cooperation is tourism. Great expectations in this area are assigned to the project of establishing an integrated casino resort.

In addition, the government is committed to creating a more efficient business envi-ronment in Cyprus. To this end, a number of administrative initiatives are currently being developed and implemented. Among them are tax incentives for existing and new companies doing business in Cyprus and fast-tracking of permits for large projects.

Interview with the President of the Republic of Cyprus.

Nikos Anastasiades: New Perspectives for Cooperation

On February 25th - 27th the President of the Republic of Cyprus, Nikos Anastasiades, made an official visit to Moscow. The first to receive the Cypriot President was the State Duma Speaker, Sergey Naryshkin. He stressed that the Russian-Cypriot cooperation has been af-fected by the anti-Russian sanctions imposed by the EU and assured that the State Duma aims at further expansion of cooperation with the Parliament of Cyprus.

Next Nikos Anastasiades held a meeting with the Prime Minister, Dmitry Medvedev. The Russian Prime Minister expressed confidence that the visit of the President of Cyprus will herald an intensification of rela-tions between the Russian Federation and the Republic of Cyprus.

The major event of the visit was of course the meeting of the two heads of state, where a wide range of issues of cooperation between the two countries was discussed. Following the talks, Vladimir Putin said that the Republic of Cyprus will allow Russian vessels involved in the fight against terrorism and piracy to enter the ports of the island. The Russian President also assured that Russia will help Cyprus re-verse the effects of the debt crisis. In his turn, Nikos Anastasiades said that more and more European politicians see the negative effects of sanctions imposed against Russia.

The two Presidents signed an extensive program of cooperation between the two coun-tries for the period 2015-2017. The Ministers of Foreign Affairs, Sergey Lavrov and Ioannis Kasoulides, signed the Memorandum on Co-operation in the Naval Area and the Program of Cooperation in the field of Science, Education and Culture for the years 2015-2018, as well as a number of other documents.

The head of the Central Bank of Russia, Elvira Nabiullina and the Chairman of CySEC, Demetra Kalogirou signed the Memorandum of Understanding. Finally, the Agreement on Cooperation was signed by the Chairman of the Board of Directors of CIPA, Christodoulos Angastiniotis, and his Russian counterpart, Yuri Spiridonov, from the Russian Investment Agency Invest in Russia.

The Official Visit of the President of Cyprus to Russia

The visit of the President of Cyprus, Nicos Anastasiades, to Russia in February this year, has been the first in five years, and has at-tracted a lot of attention from the international community. Successful Business magazine discusses the visit with Stanislav Viliorovich Osadchiy, Ambassador Extraordinary and Plenipotentiary of the Russian Federation to the Republic of Cyprus.

The February visit, the Ambassador said, was crucial for Russia. It proved that despite the attempts to isolate the country and revive the Cold War, there are countries which are against this scenario.

Putin, Anastasiades and Medvedev held warm and trusting conversations in Moscow. In fact, whereas in the history of Russian-Cypriot relations there were just 40 signed agree-ments, this time the countries signed 11 in a row. They cover a variety of areas of coopera-tion from investment to military agreements.

In particular, Osadchiy explained the es-sence of the agreement for cooperation in the naval field, widely discussed in the world press. It allows Russian vessels to dock in Cyprus ports and ensures the legal status of naval men from these vessels staying in Cyprus. An extensive agreement was also signed on military cooperation. It reflects the willingness of both countries to provide arms, hold joint military exercises and consult on military matters, etc.

Another important document signed is an agreement between the Cyprus Securities and Exchange Commission and the Central Bank of Russia, on the exchange of information on special request of either party.

The Memorandum of Understanding signed between the Cyprus Investment Promotion Agency (CIPA) and Invest in Russia, shall according to the Ambassador, help achieve greater understanding and openness and contribute to the de-offshorisation policy of Putin, which first of all implies the need to address the schemes which are harmful to both countries.

Interview with H.E. Ambassador of the Russian Federation in Cyprus.

Stanislav Osadchiy: The Pragmatic Side of Foreign Policy of our Countries


, 17 (- 2015)Executive Summaries

The visit of the Cypriot President to Moscow in February 2015 confirmed Russias tradi-tional strategy towards Europe during recent years. Moscow prefers to hold a dialogue with the EU through countries closest to it in terms of their economy and geoculture and in this respect the Republic of Cyprus holds a prominent place.

The latter in turn, by enhancing its relations with Russia, expressed its disappointment in the West which was manifested in the two most sensitive areas for Nicosia, i.e. the Cyprus issue and the exploration of the EEZ. That was the ideological basis for the visit of Nikos Anastasiades to Moscow.

The Moscow meetings of Anastasiades should be analyzed taking into account the ex-tremely difficult relations between Russia and the EU, which require a reboot. The Republic of Cyprus has an opportunity to participate in this process as an involved party and to exploit this climate to its personal economic benefit. Nicosia does have minor strategies in its diplomatic arsenal to mitigate the sanctions, and in general to improve relations between Russia and Europe. Especially in the context of the global economic goals of the Eurasian Economic Union to offer Europeans the crea-tion of a large free trade zone from Lisbon to Vladivostok on mutually beneficial terms.

According to European media reports, Rus-sias foreign policy has become more proac-tive, with Greece and Cyprus being proxies of its initiatives within the EU. An extensive program of cooperation between Cyprus and Russia for the next two years, signed as a re-sult of the negotiations of the two Presidents, proves that Nicosia has been attributed an important role in improving relations between Russia and the EU. In these circumstances the implementation of the strategy of a small Mediterranean outpost in big-league politics, especially in the relations of Russia and the EU, gives Cyprus a good chance for success.

Cyprus and Russia Update Relations in the Context of Big-League PoliticsVladimir Izotov, Political Scientist

Fund management is one of the most prom-ising areas in the field of corporate services in Cyprus. In terms of allocated funds, one third of this segment belongs to CyproFund Administration Services (CPF), making it the biggest player in the market. The area of com-petence of CPF includes fund operation, fund accounting, transfer agency, compliance and AML-related services.

Recently the Cyprus legislation on funds operation has been extensively amended in accordance with European requirements. The government realized that servicing of funds by the Cypriot economy has excellent prospects. In Europe, the main competitors of Cyprus are currently Ireland, Luxembourg and Malta, whereas in the rest of the world, these are the Cayman Islands and the British Virgin Islands.

According to Mr Loizou funds are a great tool, allowing the investment of large sums of money and high profit yields as well as optimiz-ing the taxation of ones investment activities.

Currently there are 100 ICIS funds regis-tered in Cyprus, which will soon be converted to AIF. AIFs are better than ICIS, as they re-quire more accountability, transparency and control thus meeting the European standards. The total amount of money invested in funds in Cyprus is 3.2 bln, of which CPF accounts for about one-third, i.e. 1.2-1.3 bln.

Cyprus offers investors tax benefits and a wide network of double-tax treaties. The so-called European passport is another strong benefit which implies that the investor who has established a fund in Cyprus is entitled to sell his product in any other EU country. Finally, one more significant advantage is the relatively low cost of fund registration.

Interview with Andreas Loizou, CPF

Andreas Loizou: Funds as a Perfect Tool for Investors

Cyprus Economy on the Path to Recovery and Challenges Ahead

The Cyprus economy is doing much better than anticipated after the Eurogroup deci-sion in March 2013. Despite the projections of Troika for a 4.5% contraction in 2014, the Cyprus economy contracted only by 2.3% in 2014. Professional services, the tourism sector and shipping have exhibited resilience in the financial crisis, while the construction industry is stabilizing.

A key challenge involves dealing with the high level of non-performing loans (NPLs), amounting to more than 50% of banks loan portfolios. This is heavily dependent on the timely implementation of an effective legal framework regarding foreclosures and repos-sessions. However, the application of the new foreclosures law has currently been postponed for a few months. This new piece of legislation, among others, outlines the framework and pro-cedures required to carry out public auctions.

In addition, handling of borrowers in finan-cial difficulties is now realised according to a Code of Conduct (Code) issued in April 2013 by the Central Bank of Cyprus (CBC). The purpose of this Code is to enhance the procedures for viable restructurings, in light of the increasing financial difficulties that borrowers are facing.

The reform of the insolvency laws of Cyprus is underway and the draft laws are being dis-cussed at parliamentary level. The suggested insolvency framework consists of five pieces of legislation, including two new and three amending laws. It aims to address the gaps of the existing insolvency legislation and the lack of an effective means of debt restructuring. It is expected that once the insolvency frame-work and the foreclosures law are in effect, there will be sufficient incentives and tools to address the challenge of NPLs.

Tassos Yiasemides, KPMG Limited


www.cyprusrussianbusiness.com Executive Summaries

The legal system of the Republic of Cyprus is based on the English Law. In addition, Cyprus is gradually unifying its laws and regulations in accordance with EU standards.

Cyprus applies the principles of English common law and equity on the issues that are not regulated by the current legislation of the island. One of the fundamental principles is judicial precedent, meaning that Cypriot courts are obliged to follow the decisions of courts of higher level.

Neither civil nor commercial law is codi-fied. Cyprus inherited from England the law of trusts.

There is no single family law in Cyprus. The divorce procedure in a special family court takes up to two years.

Commercial law in Cyprus is almost entirely based on the concepts of English law. Land law is based on three categories of land owner-ship, i.e. private, public and communal.

Modern criminal law is based on the Crimi-nal Code, developed in the 1920s by the Min-istry of colonies of Great Britain. The punitive policy in the Republic of Cyprus is considered extremely soft.

The Supreme Court consists of 13 members appointed by the President of the Republic. There are no courts dealing with specific categories of criminal cases (such as those related to national security). However, some non-criminal cases are judged by special courts: the Court of Labor Disputes, the Rent Control Tribunal and the Family Court.

In 1991, the post of Ombudsman (Commis-sioner for Human Rights) was established in the Republic of Cyprus.

The legal system of the country was shaped during British colonial rule (1878-1960). It replaced the Ottoman law system that was in force until 1878. After Independence in 1960, the adoption of the Court of Justice established the effectiveness of the provisions of the British legal system.

The Legal System of Cyprus: Important Facts

Speaking at the Cyprus-Russia Economic Forum held in Limassol on March 20, Nicos S. Kyriakides, Partner at Deloittes, reported on the state of the Cyprus economy two years after the peak of the financial crisis. This article presents the most interesting points of his review.

Despite the fact that the volume of deposits in Cyprus banks has decreased significantly, in general, the outflow of deposits from the Cyprus banking system has stopped. Four systemic financial institutions in Cyprus, repre-senting about 80% of asset base, are directly supervised by the European Central Bank as of November 2014.

What should be done to restore the Cyprus economy? First of all, it is necessary to focus on resilient sectors of the economy, i.e. tour-ism, business services and shipping. It is also crucial to restore investor confidence via structural reforms in fiscal governance and the banking sector. There is great potential in initiatives such as the privatization of semi-public organizations; expansion of the tourist season to reduce seasonality; provision of new services in the fields of business and thematic tourism; expansion of the double tax treaty network. In addition, there is a need to promote the new AIFs regime and alternative financial instruments in general.

At present, new opportunities are opening up for professional and private investors. The government has put in place a number of measures to simplify procedures and reduce the time required for the approval of new in-vestment projects. For example, applications for construction projects are now being consid-ered faster, the building coefficients for com-mercial developments have been increased. Currently, attractive sectors for investing are hotels and tourism, golf clubs, marinas, theme parks, casinos, medical and wellness centres and projects in the field of education.

Nicos S. Kyriakides, Deloitte


Constantinos Petrides: I believe that the reform will be successful

Under-Secretary to the President, Costanti-nos Petrides, tells our readers about his major project, public sector reform in the Republic of Cyprus.

Public sector reforms are a very broad concept. The governments goal is to imple-ment reforms in areas that are not covered by ministries, but at the same time are extremely important and horizontal by their nature, such as promotion and staff mobility, payroll, assessment system, etc. In addition, there is a fight against bureaucracy, which Mr Petrides believes will help establish a more favorable business environment in the country. The next step will be reforms within the ministries.

The first stage of the public sector reorgani-zation is the reform of the Presidential Admin-istration. These are technical changes that will greatly help the Administration to become a modern and effective governmental body.

It should be noted that the reform of the public sector has not caused an increase in staff. It is about transfers and substitutions, introduction of certain procedures, and ap-pointing appropriate people for specific posts. This raises the question of qualifications and their continuous improvement. The certifica-tion of staff is also required, especially of those who deal directly with the public. When the reforms are complete, it will be impossible to take a higher governmental post without an ISO certification.

The payroll system will change as well. If the situation is left as it currently stands, in 15 years 80% of the countrys budget will be spent on the salaries of civil servants. This is ridiculous, says Mr Petrides. The system should be changed so as to synchronize it with the growth of the local economy.

The Under-Secretary to the President stressed that he is determined and intends to turn Cyprus into a fully-fledged investment centre.

Interview with Under-Secretary to the President


, 17 (- 2015)Executive Summaries

Kypros Chrysostomides is an experienced practising lawyer, former Speaker of the Gov-ernment, Member of Parliament and Minister of Justice. In its 30 year history, Dr. K. Chrys-ostomides & Co LLC has become one of the largest law firms in the country.

One of the cases that the firm is currently involved with concerns claims filed against the European institutions (ECB, the Eurogroup, the European Council and the EU), due to the illegal measures for involving bondholders in providing emergency financial assistance (bail-in). The plaintiffs include individuals and companies, shareholders, depositors and bondholders of both banks Laiki Bank and Bank of Cyprus, as well as Russian compa-nies seeking for compensation. The European Court is invited to assess the damage and determine appropriate compensation. Accord-ing to Mr Chrysostomides, the confidence of foreign (including Russian) investors in Cyprus has been seriously shaken by the March 2013 events. However, during the visit of President Nikos Anastasiades in Moscow, it was clear that the parties are interested in keeping the Russian business presence in Cyprus.

Another high-profile case is the actions of the Central Bank of Cyprus in relation to FBME. According to Mr Chrysostomides, this was one of the biggest mistakes of the CB. Other measures could have been applied, such as the scrutiny of all of its bank accounts. The clients of Dr. K. Chrysostomides & Co LLC are suing the administrator of FBME, appointed by the Central Bank of Cyprus. It is quite probable that the Cypriot government and the Cyprus CB will finally have to compensate for the damage.

In the 30 years of its operations Mr Chrys-ostomides company was involved in a great number of high-profile cases. Dr. K. Chrysos-tomides & Co LLC operates a strong litigation department, department of corporate services (banking, mergers and acquisitions, tax law, competition law, etc.) and IP department.

Kypros Chrysostomides: Top-Ranking Jurisprudence

Kyriakos Skordis: Mutual Trust and Respect is the Key

Skordis, Papapetrou & CO LLC is one of the few law firms in Cyprus, whose portfolio in-cludes cross-border advice for transactions in excess of 1 bln for customers of Sberbank, VTB and Merrill Lynch level. Senior Partner Kyriakos Skordis talks about the most impor-tant developments in the Cyprus legislation for the past two years and reveals the secrets of cooperating with Russian businessmen.

Mr Skordis believes that the most important event of recent years is the adoption of the Law on Rehabilitation (basic law The Reso-lution of Credit and Other Institutions Law of 2013 L. 17()/2013). The law allowed the authorities to merge Laiki Bank with Bank of Cyprus (or in other words, to effect its forced sale) and to implement the bail-in procedure (haircut). Moreover, the forced purchase of Laiki Bank by Bank of Cyprus is considered illegal by Mr Skordis. The same applies to the issue of guaranteeing deposits.

Another important point concerns the laws aiming to simplify the procedure for collecting debts by banks. Mr Skordis believes that the adoption of this legislation is being delayed for purely political reasons.

This year Cyprus must keep the promises made to the European creditors, modernize the economy and create a stable environ-ment to encourage investments in the local economy.

According to Mr Skordis, over the last two years, many Russian investors left Cyprus or significantly reduced their presence on the island. For those who remained the decision was based on mutual trust and respect for their Cypriot partners. Besides, many custom-ers prefer to litigate not only in Russia but also abroad.

In his legal practice Mr Skordis prefers to engage in dispute resolution (litigation and arbitration), as it allows a good lawyer to prove himself.

The Legal Profession in Cyprus

Following is a brief overview of the legal profession in Cyprus, its framework and exist-ing rules and regulations in the field.

The basic law regulating the profession is the Advocates Law Cap 2. The Law includes 34 Sections and 3 Schedules. Part II provides for admissions and registration. This is regulated by the Legal Council that decides on admission or registration and carries out the relevant examination. The candidate must have cer-tain qualifications for registration (incl. age, nationality, education, etc.). Having received a certificate from the Legal Council, he is

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