Elias Neocleous: Single supervisory authority could improve the country's reputation but also presents challenges

"The proposal for a single authority to supervise the professional services sector, including legal services, is a significant development. This could lead to enhanced regulatory oversight and consistency across the sector, potentially improving the country's reputation and attracting more international business," Elias Neocleous, the Managing Partner of Elias Neoclous & Co LLC suggests.

Commenting on the current state of the legal sector and its prospects, as well as the role it plays in the country's economy, Neocleous also talks about the e-justice system and how the sector is responding to macroeconomic challenges and geopolitical strife.

Neocleous also discusses the legal sector's pursuit of new revenue opportunities and Cyprus' efforts to rebrand its reputation abroad.

The Finance Ministry plans to introduce a single authority to supervise the whole of the professional services sector, as part of broader efforts to improve the country’s image abroad. What are your thoughts on this?

The proposal for a single authority to supervise the professional services sector, including legal services, is a significant development. This could lead to enhanced regulatory oversight and consistency across the sector, potentially improving the country's reputation and attracting more international business. However, it also presents challenges, particularly regarding compliance and the need for firms to adapt to new regulatory frameworks. The trend towards excessive regulation and over-compliance has already created an unfriendly business environment that discourages new businesses. For instance, the bank account opening procedure has become excessively lengthy, often taking months to complete, which is overly burdensome. It is therefore crucial that the implementation of this authority is handled meticulously and comprehensively; otherwise, it could introduce new distortions and challenges for the professional services sector, potentially undermining its competitiveness.

What strategies should be adopted if a substantial rebranding initiative is to be undertaken with the aim of restoring Cyprus’ reputation within the international business community?

To rebrand Cyprus in the international business community, actionable steps are crucial, including enhancing regulatory frameworks to align with global standards, promoting economic diversification beyond traditional sectors and engaging in active diplomacy to position Cyprus as a stable business hub. Investing in digital and physical infrastructure and launching targeted marketing campaigns can help reintroduce Cyprus as a competitive and ethical destination for international business, thus ensuring sustainable growth.

Let’s move on to the failed rollout in January of the e-justice system. How did the profession react to this setback and how has it affected your firm’s operations in particular?

The failed rollout of the e-justice system has raised significant concerns among companies and investors in Cyprus. Extended court proceedings and administrative inefficiencies deter reliance on judicial proceedings, as highlighted in the European Commission’s 2024 Rule of Law Report. This uncertainty negatively impacts the business environment, causing hesitation among stakeholders. Our firm, like others across the island, has been affected by these delays, resulting in increased costs and extended timelines for our clients. We have had to manage expectations and explore alternative dispute resolution mechanisms to mitigate these impacts. Cyprus also relies heavily on foreign investment, making the efficiency of the legal system a key factor in maintaining investor confidence. However, there are positive developments, such as the major court system reform in 2023 and new civil procedure rules, which are expected to enhance efficiency. Reduced disposition times and increased clearance rates are promising signs. We remain optimistic that ongoing reforms and digitalisation efforts will improve the justice system, and we are committed to providing our clients with the best possible support during this transitional period.

Macroeconomic challenges and geopolitical strife have led to the contraction of the local industry in recent years. How do you assess its present state?

The local legal industry in Cyprus has been significantly impacted by macroeconomic challenges and geopolitical uncertainties. The COVID-19 pandemic disrupted key sectors like tourism and global trade, worsening vulnerabilities from the 2013 financial crisis, leading to reduced business activity, increased unemployment and cautious investor behaviour, decreasing demand for corporate and commercial legal services. More recent geopolitical issues, including the Ukraine-Russia war and the Israel-Palestinian conflict, have further complicated the landscape, causing market volatility and a decline in cross-border investments. In addition to these conflicts, tensions are spreading across the Middle East, exacerbating overall instability. Law firms in Cyprus have had to navigate complex regulatory environments, particularly concerning sanctions and compliance. This has increased the need for specialised legal services in international law, compliance and dispute resolution. These factors have created challenges but also opportunities for firms to diversify into emerging sectors like fintech, renewable energy, digital transformation and artificial intelligence, where there is growing demand for legal expertise.

Given these challenges, are Cyprus law firms identifying and pursuing new revenue opportunities by tapping into new markets or introducing new service offerings?

Yes. This includes offering specialised services in areas like regulatory compliance, environmental law and technology law. Additionally, there is a growing trend towards serving international clients, particularly in sectors such as shipping, investment funds and corporate restructuring. Firms are also expanding their capabilities in dispute resolution and arbitration, which are becoming more relevant in the current global business environment. Our firm is actively engaged in these initiatives, continually enhancing our service offerings and leveraging our extensive expertise, including the use of AI and advanced technologies, to meet the evolving demands of both local and international clients.

Finally, other industries are taking market share from law firms by providing ‘one-stop solutions’ to clients. Do you foresee this trend driving consolidation within the legal sector? Can law firms adapt to this competitive landscape?

The trend of other industries offering one-stop solutions poses a significant challenge for international law firms, as clients increasingly seek comprehensive services under one roof. To address this, law firms must focus on enhancing their internal capabilities. This can be achieved by diversifying the range of legal services offered, ensuring that they cover all aspects of a client's needs within the firm's expertise. Additionally, investing in technology and process automation can streamline services and improve efficiency, making legal processes more convenient and accessible for clients. Law firms can also differentiate themselves by offering deep specialisation in specific areas of law, such as technology, intellectual property, regulatory compliance or international arbitration. By becoming recognised experts in these niche areas, firms can attract clients seeking high-quality, specialised legal advice that generalist competitors cannot provide.

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