Following its meeting on 30 October 2020, the European Commission ('EC') has taken the decision to refer Cyprus to the European Court of Justice (the 'ECJ'). This is due to the failure of the Cypriot government to notify the EC that it will take measures to transpose the Trade Secrets Directive (EU) 2016/943 (the 'Directive') into national law.
A trade secret is a valuable piece of information for an enterprise that is treated as confidential and which confers a competitive advantage on that enterprise. The Directive sets out rules harmonizing national laws on protection against the unlawful acquisition, use and disclosure of trade secrets. It is intended to act as a deterrent against illegal acquisition, use and disclosure of trade secrets without infringing fundamental rights and freedoms.
The Directive defines lawful means of acquiring a trade secret and clarifies what would be regarded as unlawful acquisition, use or disclosure. Importantly the Directive also sets out exceptions to what would otherwise be automatically regarded as unlawful acquisition, use or disclosure. Applications for measures, procedures or remedies must be dismissed if the person concerned was:
- Exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights;
- Acting to protect public interest by revealing misconduct, wrongdoing or illegal activity;
- A worker disclosing information to a representative to enable that representative to fulfill their duties;
- Protecting a legitimate interest as recognized by EU or national law.
Under the Directive EU countries must ensure that civil law redress is available to those who are victims of illegal acquisition, use or disclosure of trade secrets. The Directive further states that any measures, procedures or remedies applied must be fair, effective and dissuasive. They must also be uncomplicated and timely. Civil law remedies that may be applied for include damages, injunctions and the recall of any infringing goods from the market. The limitation period for claims cannot exceed 6 years.
The Directive has applied since 5 July 2016 and EU countries had until 9 June 2018 to transpose it into their national law. When Cyprus failed to meet this deadline, the EC opened infringement proceedings against it in July 2018. A year later, having concluded that Cyprus was failing to fulfil its obligations under EU law, a reasoned opinion was sent to the Cypriot government. A reasoned opinion is a formal request to comply with EU Law. It explains why the country is believed to be in breach of its obligations and requires a response within a specified period (normally 2 months) explaining measures taken to ensure compliance. It is now almost 16 months since the reasoned opinion was issued and to date the Cyprus government has still failed to notify the EC of any measures that it has taken towards transposition of the Directive.
It is rare for the EC to refer matters such as this to the ECJ, generally they are settled before the EC decides that such a step must be taken. In this instance, the severity with which it views the breach can be gauged by the fact that not only has it referred the matter to the ECJ, but it has also requested that the ECJ imposes financial penalties. Normally, such a request is only made if it becomes necessary to refer the offending country back to the ECJ for a second time. At the same meeting where the decision to refer Cyprus to the ECJ was taken, it was also decided to send a reasoned opinion to Cyprus for failing to transpose the 5th Anti-Money Laundering Directive into national law by the 10 January 2020 deadline. No explanations have been forthcoming from the Cyprus government for the transposition delays. Transposition of both directives into Cypriot law would provide a much needed boost for those seeking to establish the probity of Cyprus as an international business centre.
Originally Published by Elias Neocleous, November 2020
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