NEW CYPRUS PROPERTY LAW: TURNING THE SCREWS

C O N F I D E N T I A L SECTION 01 OF 02 NICOSIA 001970

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/29/2016
TAGS: PGOV PREL PHUM ECON CASC EUN TU CY
SUBJECT: NEW CYPRUS PROPERTY LAW: TURNING THE SCREWS

REF: A. 05 NICOSIA 870

B. NICOSIA 1565

C. NICOSIA 1505

D. NICOSIA 1916

Classified By: Ambassador Ronald L. Schlicher, reasons 1.4 (b/d).


1. (C) SUMMARY. New ROC legislation introducing stiff prison
sentences for those buying Greek Cypriot property in the
north has upped the stakes in the ongoing property war
between Greek and Turkish Cypriots. Three non-Cypriot
land-buyers have already been arrested under the new law, and
more arrests are possible. Turkish Cypriot observers feel
this is part of a deliberate strategy to increase pressure on
their community, while distracting from Greek Cypriot
foot-dragging on the UN settlement track. Many fear that the
Green Line will be effectively closed -- and already frosty
bicommunal relations worsened -- if the ROC begins arresting
Turkish Cypriots. Greek Cypriot legislators tell us that
their goal is not to go after Turkish Cypriots, but rather
foreigners who "fraudulently" acquire property in the north.
The bulk of foreigners investing in property up north are
British, although some American citizens also live in the
Turkish Cypriot areas and could theoretically be arrested
under the new law. We will continue to monitor the situation
in coordination with our British colleagues, and plan to
propose changes to the language in our Consular Information
Sheet. END SUMMARY.

NEW LAW TURNS UP THE HEAT
--------------


2. (SBU) A new ROC law that went into effect on October 20
labels as a felony any "fraudulent" transactions involving
real estate, and envisions a penalty of up to seven years
imprisonment for those found guilty of the offense. The
legislation -- which is designed to deter the exploitation of
Greek Cypriot property in the "Turkish-occupied" north --
forbids the sale, renting, advertisement, or other use of
property without the owner's permission. It also places a
high standard of due diligence on prospective buyers,
envisioning punishment for those who "acted with the
intention of committing fraud" -- as well as for those who
might "be reasonably expected to know" that they did not have
the consent of the registered owner.


3. (SBU) On November 22, local press reported that ROC police
made the first reported arrests under the new law, detaining
a Russian woman and her Latvian husband after they were
discovered, while crossing the Green Line, to be in the
possession of a real estate contract for property in the
north. The woman was charged (presumably because the
contract was in her name) and released on CYP 50,000
($114,000) bail pending trial on December 15. Another
British citizen was arrested under similar circumstances
on/about November 26, but reportedly released because the
contract in his possession pre-dated the new legislation.

THE POLITICS OF REAL ESTATE
--------------


4. (C) The new law is the latest in a series of attempts by
the ROC to deter foreigners from investing in the north,
where the vast majority of land (an estimated 80-85 percent)
was in Greek Cypriot hands prior to the 1974 war. In the
spring of 2005, ROC authorities issued arrest warrants under
previously existing legislation (ref a) for Turkish Cypriots
and others who operated hotels on Greek Cypriot property in
the north. Although these warrants never led to arrests or
trials as far as we are aware (indeed, one Turkish Cypriot
proved that the title to his hotel pre-dated 1974),they did
have a dampening effect on the north's economically important
construction and real estate and construction sectors.


5. (C) Nevertheless, development of Greek Cypriot property in
the north has continued -- thanks in some measure to the
establishment of a Turkish Cypriot Property
Restitution/Compensation Commission (refs b, c, and
previous). The Property Commission is designed to remove
uncertainty in the Turkish Cypriot real estate market -- and
get Turkey off the hook for violating the rights of Greek
Cypriot property owners -- by providing compensation or
restitution to pre-1974 deedholders.


6. (C) Hoping the ECHR will accept their Property Commission
as a legitimate and "sufficient local remedy" (a ruling is
expected this month),Turkish Cypriots are convinced that the
new ROC law is a Greek Cypriot attempt to accomplish with
domestic criminal legislation what they have been unable to
do in European courts. The Turkish Cypriot public reaction
to the new law has been swift and negative. "TRNC President"
Talat said that the threat of arrest was a scare tactic that

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could virtually choke off traffic across the Green Line,
since the vast majority of Turkish Cypriots work, live, or
otherwise use at least some Greek Cypriot property.


7. (C) In an off-the-record conversation with us, "TRNC PM"
Ferdi Soyer agreed with this assessment. He recalled
"politically-motivated Greek Cypriot threats" to close the
Green Line during an avian flu scare earlier in 2006. This
time, he said, President Papadopoulos was "clearly trying to
distract attention" from the fact that his foot-dragging in
the UN process (ref d) and inflexibility in the EU (for
example, refusing to discuss opening Ercan Airport, even in
return for Varosha) had not brought Greek Cypriot voters any
closer to their dream of getting their properties back.
Soyer's guess was that the ROC would make some symbolic
arrests under the new law in order to deter foreign investors
-- but not risk a public-relations backlash by applying the
legislation to "innocent Turkish Cypriots."

WHAT WILL IT AMOUNT TO?
--------------


8. (C) Greek Cypriot observers appear to agree with Soyer, at
least in his assessment that mass arrests of Turkish Cypriots
are unlikely. Ionas Nicolaou, MP and Chairman of the ROC
House Legal Affairs Committee, assured us that parliament's
intent was not to persecute Turkish Cypriots, but to stop
foreign developers and estate agents from exploiting Greek
Cypriot property. He noted that prosecutors would have to
prove that defendants intended to commit "fraud" by acquiring
or profiting from property in the north -- a charge which
could not reasonably be made against most average Turkish
Cypriots forced by circumstance to live or work in Greek
Cypriot houses.


9. (C) The fact that individual arrests under the new
legislation must each be authorized by the Attorney General
also suggests that mass arrests are not in the offing. One
local journalist suggested to us this was testimony to the
law's "seriousness;" it would be applied only in the most
egregious cases. Other observers have suggested to us that
there is some confusion in the scope of the law, thus opening
the door to possible challenge in European courts should it
be enforced.

COMMENT: IMPLICATIONS FOR AMERICAN CITIZENS
--------------


10. (C) The impact of this law will depend on how vigorously
it is applied -- and there are several obstacles to effective
enforcement. The people arrested so far were all caught
red-handed with real estate documents in their possession;
building cases against those who don't bring their contracts
with them to the checkpoint will be significantly harder.
The ROC may be hoping that a handful of arrests will have the
desired effect of spooking foreigners away from the north
Cyprus property market, although the confused public
statements coming from Cypriot officials suggest they
themselves have not yet decided on how broadly to apply this
law. One near-certain result, however, will be a further
deterioration in the frosty relations between Greek and
Turkish Cypriots.


11. (C) The vast majority of third-country nationals
investing in property up north are British, although there is
a small number of Americans resident in the "TRNC" as well.
We will continue to monitor the situation in coordination
with our UK High Commission colleagues, who have just updated
their public travel information to reflect the latest
developments. Post will propose septel similar edits to our
own Consular Information Sheet. END COMMENT.
SCHLICHER