Pamboridis: The current legal system is outdated and ineffective

Dr George Pamboridis, Senior Partner Pamboridis LLC, Advocates and Legal Advisors recently shared his view on Cyprus’ legal sector and why he suggests immediate reform and structural changes.

Among other things, he also discusses how mere orthodox legal support is no longer sufficient for businesses with diverse needs, suggesting law firms must adapt by offering supplementary advisory services.

How would you describe the current state of the legal services market in Cyprus? What major changes, if any, do you expect to see by the end of the decade?

The Cyprus legal market has always been outward-looking, seeking to pull in clientele from the greater region, so any changes in the regional or global economy invariably affect it. The over-reliance on Russian clients, particularly High Net Worth Individuals and businesses seeking EU access, has made Cyprus their preferred forum. However, recent developments in Russia, including the conflict with Ukraine and Putin’s ethnocentric policies, have depleted the Cyprus market. As a result, an over-supply of legal services in a shrinking market will lead to cannibalisation. While economic considerations dictate that consolidation will follow, particularly from firms struggling to meet global market demands without joining forces with global and regional players, the Cyprus way does not always follow that paradigm. The biggest change in Cyprus in recent years (without the legal community actually realising it) has been the ‘invasion’ of big accounting firms, which have taken a huge chunk of business from law firms. As long as consolidation is delayed, this trend will likely continue and accounting firms’ market share may grow further, as global businesses prefer a one-stop professional advisory service. Mere orthodox legal support is no longer sufficient for businesses with diverse needs; law firms must adapt by offering supplementary advisory services or lose clients as their business shrinks.

Compliance with anti-money laundering (AML) and anti-corruption regulations continues to be a much-discussed topic. Where does Cyprus stand on this and what is the role of law firms in maintaining and improving the country’s international image and reputation?

Unfortunately, we have traditionally viewed AML and KYC issues as a formality rather than a substantive issue, and this is what has led to the loss of Cyprus’ reputation as a law-abiding nation. We need to build a culture of substance that expands beyond lawyers to cover professional services, especially the banking sector, which only cares about ticking the right boxes. All of us – from the Bar Association to the Central Bank and all the regulators in Cyprus – need to come together to create a safe environment within which professionals are not afraid they will lose their licences if they don’t tick the right boxes. It will take time for all of us to change this culture.

What are the main challenges facing Cyprus’ legal sector today and what do you expect from the long-awaited reforms to the judicial system?

We have debated internally about why law firms in Cyprus are shrinking in size. In the recent past, when firms were engaged with the Cyprus Investment Programme (our firm never was), and business was rushing in from Russia, the Eastern Bloc and the Arab world, among others, they hired as many hands as possible. This helped them process those clients fast, reduce costs and portray the image of a big firm that can cater to their needs. Moving away from this and towards more substantive legal work, lawyers who can just fill out forms are no longer needed. A few skilled professionals with a commercial understanding – indeed, a rare commodity – will replace them. As far as the judicial reforms are concerned, let me say this: when a building’s foundations are decaying, giving it a fresh coat of paint will do little to cater to the needs of the residents. Structural changes are needed, as the current system is outdated and ineffective. There is no justification anymore for a system that is ailing so badly – one in which clients face severe delays that hinder their business. We have judges who do not understand the basic concepts of commercial reality, and this has to stop! The judiciary and the House of Representatives need to understand that the judicial system must be supportive of the economy and society, and not the other way around. To deal with this, judges must understand that it’s their business to speed up their procedures. Otherwise, they are obsolete and they have to go.

Cyprus’ consistent efforts to attract foreign direct investment (FDI) and become a recognised international business centre appear to be bearing fruit. How is the legal profession assisting Cyprus in this endeavour?

Being based on the English common law system, the Cyprus legal world is, by definition, welcoming to any new business. At the same time, with Cyprus being an island, its human capital has to look beyond its shores to do business and generate wealth. However, you have all these handicaps, like the judicial system, leading to a contradiction in terms that cannot be fixed unless things are viewed holistically. For example, the Government has introduced a new policy to attract white-collar professionals and their companies to the island but rigid AML and KYC procedures have obliged them to avoid the local banks, while the hilarious delays of our justice system have forced them not to do business with our courts. The same applies when dealing with government agencies or even schools. We are creating a bubble, as businesses and people are moving to Cyprus without integrating into the country’s system – this is wrong! The whole system should be reviewed to attract foreign businesses to make Cyprus not only their place of business but also their new homeland.

What, in your opinion, needs to be done to minimise the adverse impact on Cyprus of the imposition of international economic sanctions on Russia? How do you view the future of the local professional services sector?

As members of the EU and the Western world, we need to embrace all the decisions and sanctions that might be imposed from time to time; this is not an à la carte approach. Of course, we should have policies that affect these decisions before taking effect, and this is something that we need to work on. However, once these decisions are taken, we need to comply since the loss of our credibility over the past few years requires us to prove we have turned the page. That said, in this new reality of transparency and over-regulation, you need a strong government authority and leadership to create a safe environment in which the private sector can flourish without fearing that it is deviating from decisions taken at the European level, or that it is being monitored and investigated by people who do not understand the substance of the world but rather focus on formalities. I think we’re running out of time; we’ve seen that competitors like Malta, Luxembourg and Ireland are much faster at changing their culture. We are still very risk-averse and this needs to stop; we must move in a fast and decisive manner. If we do not take these steps, I don’t see a bright future for the professional sector.

This interview first appeared in the August edition of GOLD magazine. Click here to view it.