articles | 20 October 2014

Decision on foreclosures bill expected end of October 2014

The Supreme Court decision concerning four foreclosures-related bills referred by the president will be issued at the end of the month, it was announced recently.

The four bills were passed by opposition parties in September to limit the scope of the foreclosures law.

President Nicos Anastasiades said the bills were in conflict with the constitution and referred them to the Supreme Court for a ruling. The court will announce its decision on October 31, at 12pm.

The contentious bills, tabled and voted for by opposition parties supposedly as a ‘safety net’ to vulnerable groups against the risk of foreclosure, prompted international lenders to withhold the next tranche of bailout cash, which was due in September.

Enactment of effective foreclosures legislation was a condition for the release of the tranche. Cyprus was meant to receive some €485 million – it has so far received €5.1 billion with €4.9 billion to go.

The law is considered important in the effort to tackle rising non-performing loans.

From the four bills sent to the Supreme Court, the first allows distressed borrowers with non-performing housing loans of up to €350,000 to apply for court-ordered protection against foreclosure, while the second stipulates that foreclosing properties would relieve small borrowers of any further obligation, even if the property’s auctioned value does not cover the outstanding loan. The third relieves guarantors of any obligations after the property is sold, and the fourth links the foreclosures bill with the insolvency framework.

The state argued that parliament had violated the separation of powers and by doing so it had disrupted the banking sector’s course to stability.

One of the bills passed by the opposition suspends the enforcement of the main foreclosures bill until the insolvency framework comes to force.

Clerides said “the exercise of government policy was remained in limbo and a prisoner of the legislature.”

Parliament basically linked implementation of the main law with the approval – by parliament – of a series of laws of unknown content, Clerides said.

The attorney-general argued that the bill suspended compliance with the government’s international obligations. Clerides was referring to the memorandum of understanding agreed with international lenders and ratified by parliament.

Deputy attorney-general Rikkos Erotocritou told the court that the executive was essentially being blackmailed under the pretext that parliament legislates on all matters.

He acknowledged that this was the case, provided the principle of separation of powers was respected. At stake, Erotocritou said, was the stability of the economy.

The deputy attorney-general said a potential shortfall in the banks’ capital would probably be covered by fresh borrowing by the state, resulting in the disruption of the fiscal balance. “What in this hall we call public interest,” he said.

Representing parliament, lawyer Christos Clerides suggested that the memorandum was not an international agreement but an understanding, as its name implied.

He argued that the bill did not impose any obligation on the executive and that parliament was not just an ornament. Clerides said the government sets policy on one condition, they are approved by parliament.

The alternative would be to “dissolve parliament. The House of Representatives is not a decoration,” Clerides said. He added that it had every right to suspend enforcement of a law it had passed, arguing that it had been done many times before.

Source: Cyprus Mail

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