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Cyprus National Investment Fund

Law 33(I)/2019 governs the National Investment Fund, the Cyprus Investment Management Organisation and related matters (“Law”).

It is important first to stress the significance of the following definitions:

  • Republic” means the Republic of Cyprus and includes the national territory, land, territorial sea, as well as any other area outside the Territorial Sea, including the border area, the Exclusive Economic Zone and the Continental Shelf, as determined by the provisions of the respective legislation, as well as any installation, construction and artificial island located at these areas in the exercise of sovereign rights and jurisdiction of the Republic.

  • "Hydrocarbon Activities" means "hydrocarbon exploration"; "hydrocarbon research" and "hydrocarbon exploitation", as interpreted in the Hydrocarbons (Search, Research and Operation) Law, as amended.

  • "Hydrocarbon Revenue" means hydrocarbon revenue as defined in subparagraph 6 of Article 73 of the Fiscal Responsibility and Financial Framework Law.

  • "Investment Fund" or "Fund" means the National Investment Fund, which was established in accordance with the provisions of Article 74 (1) of the Fiscal Responsibility and Financial Framework Law.

The purpose of the Law is to regulate matters constituting possible the operation of the Investment Fund and concern the determination of the creation, structure, operation, responsibilities and duties of the bodies and competent minister managing the Fund, and the rules related to investments and management of assets of the Fund. The Fund however does not have a separate legal personality.

The objectives of the Fund include the following:

  1. The creation of an alternative, fixed income stream for the State Budget, allowing a secure margin to be achieved for public finances and the economy against large fluctuations in hydrocarbon prices, with accumulation of assets during periods of high returns

  2. The reduction of government debt and, consequently, enhancing compliance in accordance with the principle of sustainability

  3. The investment of surpluses in international financial assets with sufficient dispersion to secure future generations or other long-term goals

Importantly, the law states that the Fund cannot be used as security and/or guarantee for lending by the government, given the separation between gas revenues and Cyprus public debt.

Moreover, the Law provides that the Fund cannot be used for any other purpose stated in (c) above. However, it is noteworthy that (c) above explicitly makes reference to other long-term goals which clearly allows substantial room for manoeuvre. In fact, the original bill of the Law included provisions specifying that under certain economic conditions a portion of the fund would be channelled into government reserves.

The Law further describes how hydrocarbon revenue will be distributed to the Fund in accordance with subparagraph 1 of Article 73 of the Fiscal Responsibility and Financial Framework Law, and Directives thereunder from time to time.

Furthermore, the Law stipulates the regulations on the formation and operation of the Fund and the management body, as well as its duties and responsibilities.

Important multinational players of the energy industry recently made substantial natural gas discoveries in the EEZ of Cyprus. On 7 November 2019 Cyprus granted the first hydrocarbon exploitation licence for the Aphrodite field to the consortium of Noble Energy, Shell and Delek for 25 years. It is envisaged to transfer gas to a liquefaction facility in Egypt and, subsequently, export it to Europe as LNG. The licence is based on a revised Production Sharing Contract and Concession Agreement between Cyprus and the said consortium. You can find out more about the license here. On 13 December 2019 Cyprus and a multinational consortium signed a contract to build a EUR290mln LNG terminal in Cyprus for the import of liquified natural gas for electricity generation. You can find out more about the LNG terminal at here.

Cyprus therefore has significant potential to play a key role as an energy hub in the Mediterranean, however must simultaneously aim to meet expectations for Climate Change targets and Sustainable Development goals. It is at the heart of a region experiencing an exciting growth story for producers of natural gas, following such gas discoveries in its EEZ. New exploration and exploitation in Cyprus as well as the wider region can have tremendous strategic benefits – including for climate, energy security and industrial competitiveness – both in the Eastern Mediterranean and the European Union. Hence, geostrategic and geopolitical matters must be addressed with extreme caution.

This legal framework aims to responsibly manage hydrocarbon revenues and establish Cyprus as a credible investment destination. Cyprus must therefore sustainably use its hydrocarbon revenues in the long-term in the best interest of its current and future generations. The Fund must ultimately safeguard and build financial wealth for future generations. To do so however, emphasis must be given to transparency, consultation and accountability in accordance with the Aarhus Convention, on access to information, public participation in decision-making and access to justice in environmental issues in the EU.

Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. For specific legal guidance on Cyprus legal matters, it is advisable to consult with a qualified legal professional. If you have any questions or require any legal advice or assistance, please do not hesitate to contact us at

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