Our firm assists client in important case related to the car leasing market in Cyprus

The Administrative Court of Cyprus has issued a decision that deemed Cypriot legislation to be incompatible with the EU Services Directive (Directive 2006/123). Our firm provided counsel for the applicant in the above cases, in order to annul the Republic’s administrative decision, which was issued on the basis of legislation which was incompatible with the Directive.

The case related to the regulation of the car leasing industry. The relevant national legislation purported to liberalise certain industries – including the car leasing industry – which were, at the time, characterised by barriers to entry. However, pursuant to the specific provisions of this law, each new business entering the market was subject to authorisation by way of permits. Acquiring such permits required businesses to pay a permit fee during the first three years of the enactment of this scheme (i.e. EUR 1500 the first year, EUR 1000 the second year and EUR 500 the third year) for each car to be leased. Thereafter no fee was payable. These fees were in no way reflective of the administrative costs incurred. Our client asserted that this measure was designed to protect current incumbents and to prevent new market entrants from disrupting the industry. In turn, the Republic supported that the permit scheme was introduced to prevent the distortion of competition.

The Court found that the Republic failed to provide sufficient justification as to why the introduction of a permit scheme, coupled with the requirement of the payment of a fee; was an appropriate, suitable measure in preventing unfair competition, nor did the Republic explain how these measures did not go beyond what was necessary to do so. In declaring the Cypriot legislation to be incompatible with the Services Directive, the Court stated that the Republic failed to consider less restrictive measures to safeguard effective competition.

Comment

The decision is a welcome judgement that can be used as a template of a recourse capable of challenging national legislation that is potentially incompatible with EU rules.