Law 33(I)/2019 governs the National Investment Fund, the Cyprus Investment Management Organisation and related matters (“Law”).
It is important first to stress the significance of the following definitions:
The purpose of the Law is to regulate matters constituting possible the operation of the Investment Fund and concern the determination of the creation, structure, operation, responsibilities and duties of the bodies and competent minister managing the Fund, and the rules related to investments and management of assets of the Fund. The Fund however does not have a separate legal personality.
The objectives of the Fund include the following:
Importantly, the law states that the Fund cannot be used as security and/or guarantee for lending by the government, given the separation between gas revenues and Cyprus public debt.
Moreover, the Law provides that the Fund cannot be used for any other purpose stated in (c) above. However, it is noteworthy that (c) above explicitly makes reference to other long-term goals which clearly allows substantial room for manoeuvre. In fact, the original bill of the Law included provisions specifying that under certain economic conditions a portion of the fund would be channelled into government reserves.
The Law further describes how hydrocarbon revenue will be distributed to the Fund in accordance with subparagraph 1 of Article 73 of the Fiscal Responsibility and Financial Framework Law, and Directives thereunder from time to time.
Furthermore, the Law stipulates the regulations on the formation and operation of the Fund and the management body, as well as its duties and responsibilities.
Important multinational players of the energy industry recently made substantial natural gas discoveries in the EEZ of Cyprus. On 7 November 2019 Cyprus granted the first hydrocarbon exploitation licence for the Aphrodite field to the consortium of Noble Energy, Shell and Delek for 25 years. It is envisaged to transfer gas to a liquefaction facility in Egypt and, subsequently, export it to Europe as LNG. The licence is based on a revised Production Sharing Contract and Concession Agreement between Cyprus and the said consortium. You can find out more about the license at https://bit.ly/2Rek6Zr. On 13 December 2019 Cyprus and a multinational consortium signed a contract to build a EUR290mln LNG terminal in Cyprus for the import of liquified natural gas for electricity generation. You can find out more about the LNG terminal at https://bit.ly/2ucDZa1.
Cyprus therefore has significant potential to play a key role as an energy hub in the Mediterranean, however must simultaneously aim to meet expectations for Climate Change targets and Sustainable Development goals. It is at the heart of a region experiencing an exciting growth story for producers of natural gas, following such gas discoveries in its EEZ. New exploration and exploitation in Cyprus as well as the wider region can have tremendous strategic benefits – including for climate, energy security and industrial competitiveness – both in the Eastern Mediterranean and the European Union. Hence, geostrategic and geopolitical matters must be addressed with extreme caution.
This legal framework aims to responsibly manage hydrocarbon revenues and establish Cyprus as a credible investment destination. Cyprus must therefore sustainably use its hydrocarbon revenues in the long-term in the best interest of its current and future generations. The Fund must ultimately safeguard and build financial wealth for future generations. To do so however, emphasis must be given to transparency, consultation and accountability in accordance with the Aarhus Convention, on access to information, public participation in decision-making and access to justice in environmental issues in the EU.
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