Deflation trends in the assessment of damages under Cyprus law

The guidance of the Cyprus Supreme Court in the assessment of damages in accident claims has traditionally been founded on certain principles: first, that damages in civil torts do not aim to the punishment of the tortfeasor but to restoration; second, that although money does not result to a full reinstatement of loss in case of accident claims, this element is not per se a factor that should increase damages; and third, that in placing a value on pain and suffering, there is a need for a more just and liberal approach, that should take into account the human pain, the deprival of amenities and the disabilities that may be left to a victim. On the basis of these principles, the jurisprudence of the Supreme Court has demonstrated a consistent increase in the level of damages that takes into account the consistent reduction of the value of money due to inflation.

Nevertheless, following the recorded trend of deflation in 2013 by the Statistical Service of Cyprus, the question has now arisen as to whether the Cyprus Courts would continue to observe the above principles or if a new trend shall prevail that will advocate towards a departure from the above principles. Signs of change have already appeared in first instance judgments. In a recent workplace accident case litigated before the Nicosia District Court, the Court was asked to reconsider (downwards) the level of damages in view of the recent deflation trends observed in the Cyprus economy. The accident in question had happened in 2004 in Greece. The Claimant, a mechanical engineer and an employee of the defendant company, was supervising a construction site in Chalkidiki.

While exiting the construction site, the Claimant suffered a serious head injury as a result of an object falling from above. On the aspect of damages, the Judge observed that the recent developments in Cyprus economy, especially since March 2013, have changed the overall economic landscape and have resulted in increased unemployment and salary cuts. Accordingly, it was no longer the case that the real value of money was decreasing but, on the contrary, deflation trends are now in operation. On this basis, general damages should reflect this new landscape and concluded that the proper measure of damages should have been 10% lower than what was awarded in recent years. Although this was a first instance decision, it gives an indication of the Court’s approach regarding damages in the future. It remains to be seen if this trend shall be endorsed by the Cyprus Supreme Court as well as for how long it shall influence the decision making process in Cyprus.

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