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Trusts reform in Cyprus

The enactment of the International Trust (Amending) Law of 2011 has completely modernised the international trusts regime in Cyprus. When it was enacted in 1992, the Cyprus International Trusts Law gave Cyprus a state of the art international trusts regime. The world has changed considerably in the intervening 20 years, however, and a number of restrictions and limitations contained in the original law are no longer necessary. New opportunities and investment practices have emerged, which the original law did not take into account. As a result, while the basic structure provided by the International Trusts Law remained sound, it required updating to adapt it to the needs of investors today and in the coming years.

There have been several key changes. The first is a clarification of the provisions on residence, and removal of the prohibition on resident beneficiaries and of any obstacle to settlors subsequently taking up residence in Cyprus.

There is now an explicit provision that all questions relating to Cyprus international trusts will be determined in accordance with Cyprus law, and to the exclusion of overseas law. A Cyprus international trust containing a choice of law clause in favour of Cyprus law is fully protected from unfounded foreign judicial claims as a matter of public policy and order. There is also greater flexibility and control for settlors in terms of reserved powers and retained interests in trust property.

Any limits on the duration of Cyprus international trusts have been abolished, and there has been an extension of trustees' investment powers, giving them the same powers as those of an absolute owner, as well as the removal of any restriction on investing in Cyprus.

The amendments address a number of perceived deficiencies in the trust regime in Cyprus and restore it to the premier league of trust jurisdictions.

David Stokes

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