Following the watershed represented by the adoption of the euro in January 2008 and the election of a new government shortly afterwards, one might have expected a legislative pause. On the contrary, the government has continued to introduce new laws in order to transpose EC Directives into domestic legislation, and to enhance Cyprus's competitiveness as an international financial centre.
2009 was never going to be a good year for law firms, anywhere. And although Cyprus's exposure to the downturn has been mild, previous years have been so luxuriant for the legal profession that things seem a lot worse....
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2009 was never going to be a good year for law firms, anywhere. And although Cyprus's exposure to the downturn has been mild, previous years have been so luxuriant for the legal profession that things seem a lot worse.
"We had some very good years previously," says one partner at a leading firm. "There was too much work and not enough competent people to do it. In the last months we have been seeing a shake-up. M&A is not dead but almost dead, new business is scarce and the traditional work of starting up new companies has dried up."
But it has not been all bad news. In April 2009 Cyprus and Russia signed a protocol amending the double tax treaty between the two countries – a good indication that Cyprus will remain the primary country for cross-border investments into Russia.
And it's not just with Russia that Cyprus courts lucrative relationships. "Because we are members of the EU and the eurozone, and offer tax incentives, this makes us quite attractive to companies in the Middle East, and now China," says one partner.
The downturn has also brought an increase in strategic M&A – companies merging internal structures to reduce costs, and cross-border deals where European companies seek a merger to become tax-resident in Cyprus.
Incorporation work, however, has been hit hard, with a more than 40% drop in the number of company registrations.
Banking work has also seen a noticeable reduction. "There has definitely been a slowdown in banking," says one partner. "If someone says anything different then they must be from another planet. Now, banks are not willing to lend, they are willing to sort out their balance sheets. But there is quite a lot of restructuring."
Although they are cautious, Cyprus's banks remain healthy. "They weren't sophisticated enough to run after the derivatives market and our central bank did not encourage our banks to invest in these," explains one partner.
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