EU Funding – legal situation in Cyprus

by  Georgia Thoma, Advocate

The European Union provides funding and grants for a wide range of projects and programs aimed at the growth of businesses and the stimulation of the market of its member states.

The most important of the EU funds are:

  1. The European Structural and Investment Funds (ESIF);
  2. the EU Competitive Programmes; and
  3. the grants provided by the countries of the European Economic Area and Switzerland.

Unlike the other EU funds which are directly offered to EU citizens by the EU, ESIF are specific funds that have been allocated to Cyprus under the EU Multiannual Budget. Cyprus co-finances certain projects with the help of the EU for what have been decided as the ‘priority sectors’ of the Cypriot economy.  Therefore, it can be argued that legal issues may arise regarding European Union co-financed programs as their application, management and regulation is left to the hands of individual member states.

■  Legal Framework

Like in any other of its member states, EU law has a direct effect on Cyprus legislation as well. EU law is either applied directly or incorporated accordingly into national law through the enactment of legislation. Therefore, Cypriot authorities must follow and implement the EU Parliament and Council Regulations, the EU Commission Delegated Regulations and the EU Commission Implementing Regulations that exist on the matter of ESIF.

In an attempt to ensure that funds are allocated properly, fairly and in accordance with the EU regulations, Cyprus has implemented legislation on specific matters such as public contracts, the environment, provision and monitoring of state aid, equal opportunities for men and women and non-discrimination. Nonetheless, there is no national legislation regarding the management and regulation of EU funds by the relevant managing authorities.

■  Utilisation of funds

 For the Programming Period 2014 – 2020, Cyprus has secured a total of EU funding of €1,3 billion and the EU co-financing rate will be up to 95% of the total eligible public spending. For the effective utilisation of the resources, the Republic of Cyprus prepared strategic programming documents and submitted them to the European Commission. The Directorate General for European Programmes, Coordination and Development (DG EPCD), within its competence as Cyprus’ National Programming Authority, has assumed the overall responsibility for the coordination of the preparation of these documents. The DG EPCD has the overall responsibility for the programming, management and utilisation of funds allocated under the Programming Period 2007 – 2013 and those allocated under the Programming Period 2014 – 2020.

The content of all programming documents was formulated through a constant process of cooperation and consultation between the DG EPCD and the competent Ministries, Local Authorities, social and economic partners and bodies of the wider public and private sector, as well as with the European Commission.

■  Management and control in Cyprus

The Management and Control System (MCS) of the Operational Programmes for the programming period 2014-2020 will be established in accordance with the provisions of Articles 72-74 of Regulation (EU) No 1303/2013.

The MCS will provide for a description of the functions of each body involved in management and control, the allocation of functions within each body and procedures for ensuring the correctness and regularity of expenditure declared. In addition, the MCS provides for arrangements for auditing its functioning, systems and procedures to ensure an adequate audit trail, as well as the prevention, detection and correction of irregularities.

■ Contesting and Appeal of a decision of the responsible authority

The EU regulations provide that decisions of the responsible authority can be contested to the authority responsible for the management of the EU funds. In such a case, the authority may request the opinion of the EU.

Additionally, the Supreme Court of Cyprus under Article 146 of the Constitution of Cyprus has exclusive jurisdiction to hear any recourse filed against a decision, act or omission of any person, organ or authority exercising executive or administrative authority. A decision, act or omission may be annulled on the ground that it is in excess or abuse of any power vested in the administrative organ, or contrary to the provisions of the Constitution.

■  Conclusion

It is evident that a framework exists both in national and EU level in an effort for the transparent and proper allocation of EU funds. Nonetheless, it is my opinion that a major obstacle to the overall effort is the absence of national legislation concerning the management of the funds. National law could be more appealing to the individuals and legal entities in Cyprus compared to the vast amount of EU regulations that govern the issue of EU funds.

Cyprus Soteriou