Problems and Anomalies with the Second Annan Plan and Suggestions to Correct them

by: Assoc. Prof. Zeki O. Bayram

Let me start by stating that the opinions expressed in this document are mine, and do not represent the official view of any organization, including my university. As any responsible citizen, I sat down, read the Kofi Annan plan, and came up with the observations, problems, and solutions to the problems that are given below.

I am assuming that the reader is familiar with the technical terms introduced in the Kofi Annan plan for Cyprus, such as "affected property" etc., so I will not define them here, unless it is necessary to make my point clear.

Note: This document is constantly evolving as I find more things that need to be corrected in the plan.


Acquisition of Internal <component state> citizenship status and permissible limitation on residency of Cypriots - RED FLAG for Turkish Cypriots!

Article 2 of Attachment 3 (Annex II) states that "Any Cypriot citizen who has been resident in a <component state> for any seven consecutive years shall be entitled to apply to change his/her internal <component state> citizenship status to that of the <component state> where s/he resides".

Article 6.1, Attachment 3 of Annex II reads:" A <component state> may restrict the right to reside of Cypriot citizens who do not hold its internal <component state> citizenship status, if the number of such residents has reached 28% of its population".

The main motivation behind the above article is to prevent the Turkish Cypriot <component state> from being taken over by an ethnic Greek majority. However, taken together, the two articles conspire to make possible the taking over of the Turkish Cypriot <component state> by ethnic Greek Cypriots over the long term.This is because any limitations on residence, including the eventual 28% mentioned above, compare the permanent residents residing in the <component state> with the current citizens (I have to assume that "population" means "current citizens" ) of the <component state>, which includes all those who obtained their citizenship after spending 7 years in that <component state>. This effectively nullifies any limitations whatsoever on population composition.

To see the implications of Greek Cypriot residents becoming citizens of the Turkish Cypriot <component state>, enter the rate at which authorities will grant applications for citizenship and click the compute button.
%

You will realize that even for an acceptance rate of 10%, after 59 years, there will be more Greek Cypriot citizens of the Turkish Cypriot <component state> than there are Turkish Cypriots. If the acceptance rate is 50%, the time in which Greek Cypriots are a majority is only 37 years. You can experiment with various values yourself by choosing an acceptance rate and clicking on the compute button. No matter how low the acceptance rate (unless it is zero, which is not practically possible), Greek Cypriots will eventually achieve majority status in the Turkish Cypriot < component state>. This is unavoidable.

There are other problems with the population composition issue. Article 1.3 of Attachment 3 (Annex II) states that "Cypriot Citizens residing abroad shall be afforded the internal <component state> citizenship status of the Greek Cypriot <component state> if they or their forebears belonged to the Greek Cypriot community before 1974, or the internal <component state> citizenship status of the Turkish Cypriot <component state> if they or their forebears belonged to the Turkish Cypriot community before 1974." This is all logical, and natural. But are we going to count the Turkish Cypriots living abroad as part of the population of the Turkish Cypriot <component state> and include it in the computations for population composition? That surely cannot be the intention of Article 6.1 . However, a literal reading of the article may result in such an interpretation.

Proposed Solution:

The problem lies in the compounding effect of the naturalization process, as well as the lack of a precise definition for "population". To remain loyal to the spirit of the above articles and prevent the ethic Greek Cypriot population from achieving a political majority status in the Turkish Cypriot <component state>, article Article 6.1, Attachment 3 of Annex II should be changed as follows:

" A <component state> may restrict the right to reside of Cypriot citizens who do not hold its internal <component state> citizenship status, if the number of such residents plus all previously naturalized citizens of that <component state>, has reached 28% of the non-naturalized citizens of the <component state> who physically reside in that <component state>". This solves both the compounding problem, and the lack of a "population" definition problem.

Furthermore, just like the right of residents to apply for citizenship is explicitly stated, the right of component states to deny applications should be explicitly stated. Article 2.2 of Attachment 3 (Annex II) should be changed to:

"Any Cypriot citizen who has been resident in a <component state> for any seven consecutive years shall be entitled to apply to the authorities of the <component state> where s/he resides to change his/her internal <component state> citizenship status to that of the <component state> where s/he resides. A <component state> is free to grant or deny as it sees fit any application for change of internal citizenship status, and its decision is final."


3 days per week? Or 5 moths in a row?

Article 6.3, Attachment 3 of Annex II reads: " Any restrictions on residence shall not prevent the freedom of movement throughout Cyprus, including the right of any Cypriot citizen to temporarily (i.e. no more than an average of three nights a week) stay or holiday in their own properties or any other accommodation anywhere in Cyprus."

The keyword here is average. Since no upper limit has been placed on the number of days a person can stay in a fixed period of time, somebody could spend 5 months continuously in a <component state> in which he is not a citizen or a resident, and claim that on the average he spent 3 days per week, in a 1 year period ((3/7)*365= 156 days = 5 months). And he would be right! Or he could spend 10 months continuously, and claim that he spent 3 days per week, in a 2 year period.

Proposed Solution:

Put an upper bound on the number of days a person can stay in a fixed period of time. For example, we can change the above item as: "Any restrictions on residence shall not prevent the freedom of movement throughout Cyprus, including the right of any Cypriot citizen to temporarily (i.e. no more than an average of three nights a week) stay or holiday in their own properties or any other accommodation anywhere in Cyprus, provided that his stay does not exceed 12 days in a calender month."


Problems with "Current Value"

The concept of "current value" was apparently introduced to safeguard the interests of owners of affected property by providing them with compensation for their property that is as close as possible to theoretical market values had the extraordinary events of 1963 and 1974 not taken place. The way in which it has been used in the cases below however is erroneous.

Problem 1: When is an improvement significant?

According to the current rules, when determining whether an improvement to a property is significant or not, the market value of the improvement is compared to the current value of the unimproved property in original state. If the market value of the improvement is greater than the current value of the unimproved property, then the owner of the improvement has a right to claim the title to the property, provided he pays the current value of the unimproved property. On the other hand, if the current value of the unimproved property is more than improvement's market value, the current owner has no right to claim the title, and will be able to ask for compensation for the market value of improvement.

In principle, the idea of comparing the value of the improvement to the value of the original property is logical and fair. But valuing the improvement and original property with different yardsticks is fundamentally wrong. It defies common sense. It's like comparing apples and oranges, or dollars and pounds, without performing a rate conversion.

Proposed Solution:

Let us define the current value of the improvement as

(current value of the property in improved sate - current value of the property in original state).

Let us define the market value of the improvement as

(market value of the property in improved sate - market value of the property in original state)

Now we should either compare the market value of the improvement with the market value of the property in unimproved state, or the current value of the improvement with the current value of the property in unimproved state. Only then do we have a meaningful comparison.

Problem 2: Requiring the current user to pay for the unimproved property at current value.

Assuming that the current user's improvement is found to be significant and he will be able to claim the title to the property by paying for the original unimproved property. According to the rules in the plan, he will be asked to pay the current value of the unimproved property. Assuming (realistically) that the market value of the property will be less than the assessed current value, he will be asked to pay an amount of money for the property which he will know he would not be able to get back should he decide to sell the property later on in the market. No reasonable person would make that choice! That is indeed an indecent proposal to the current user!

On the other hand, the dispossessed owner has a rightful claim to the current value of his property.

Proposed Solution: The fair solution for both the current user and the dispossessed owner to the problem is to sell the unimproved property to the current user at market value, and compensate the dispossessed owner at current value. Surely, there will be a difference in amounts, but that difference should be borne by the property board, and indirectly by the provider of funds to the board.

Problem 3: Determining whether the owner of an improvement that does not qualify as significant will receive compensation for his improvement.

Currently, the market value of the improvement needs to be 10% or more than the current value of the property in original state. By the same reasoning as in problem 1 above, the comparison should be made using either the market value or the current value for both the improvement and the property in unimproved condition.


Determining when Current Users who are both Dispossessed Owners themselves and also Owners of Improvements have a claim to the title of Affected Property

In determining whether an affected property is eligible for reinstatement or not, we need to check whether the current user is a dispossessed owner himself, or whether he is the owner of an improvement. The logic here is to compare the intrinsic assets of the current user (be it improvement to dispossessed property, or his own dispossessed property), with the value of the property that he is currently using.

In the current set of rules, the case of a current user who is both an owner of an improvement and a dispossessed owner is not specified. Applying the rules for each case separately to this kind of current user is not fair because we need to compare the total value of his intrinsic assets with the value of the property he is currently using.

Proposed Solution:

According to the current rules, if the current user dispossessed of property with current value of 100 cents, the current value of the property he is currently using can be as high as 150 cents. On the other hand, assuming we adopt current value of the improvement as argued above, if his improvement is worth 100 cents, the current value of the property he is currently using can be as high as 100 cents.

This leads to the following succinct decision procedure, which in fact covers the cases of current users who are just owners of improvements or dispossessed owners.

If

current value of the improvement + (1.5 * current value of dispossessed property)

>

current value of the affected property in original state

then the current user has a claim to he title of the property he is currently using. Otherwise he does not.


Compensation: Cash or Bonds?

The issue of compensation is not treated uniformly in the current plan. Consider the following anomalies.

Proposed Solution:

For uniformity, and avoidance of anomalies, all compensation at current value should be in bonds, and all compensation at market value should be in cash. Individuals can buy bonds if they need to make payments at current value.


Charging rent for improved properties

Assume that an improvement on an affected property does not qualify as significant, and the property becomes eligible for reinstatement. At that moment, the Property board will start charging market rent from the current user for the property. Apparently, this rent will be charged for the property in improved condition, not in original condition. At the same time (or even possibly later), the current user will be issued bonds to compensate for his improvement. So he will be in a position of paying rent for his own improvement, while he still hasn't obtained compensation for this improvement.

Proposed Solution:

For the current user who is the owner of an improvement, rent should only be charged for the unimproved state of the property he is using up until the time he is compensated fully, in cash, for his improvement.


People who are current users or dispossessed owners of multiple pieces of affected property

Consider a person who is the current user multiple pieces of property (e.g. a house and some land). He is also a dispossessed owner of one or more pieces of property in the "other" <component state>. The current version of the plan makes no explicit arrangement for this kind of person. Apparently, the current value of all the property of which he is the current user will be compared with the current value of all the property of which he was dispossessed. If the total value of the properties of which he is a current user is no more than 50% of the properties of which he is dispossessed, he will have the right to apply for the title of the properties he is currently using (Article 12.2, Draft Annex VII). Otherwise, he will not have this right. What if the property of which he was dispossessed qualifies him to claim title to some of the properties of which he is the current user, but not all of the properties of which he is the current user? Currently, he seems to have no choice. His claim to the title will just be refused. It only makes sense that he should have a choice of "letting go" of some of the properties of which he is the current user in order that he may apply for the title of the remaining properties of which he is the current user.

On the other hand, he could be the dispossessed owner multiple pieces of property far greater in value than the property he is currently using. In such a case, if he wants to claim title to the property he is currently using, he must give up all of his rights to the property of which he is dispossessed in exchange for compensation. However, it only makes sense that he should be able to use only part of the property of which he was dispossessed to claim the title to the property which he is currently using, and use his remaining properties any way he wishes, such as selling and asking for reinstatement.

Proposed Solution:

The value of all affected property should be determined before any transactions are made. Once property values are known, individuals should be able to use individual pieces of property of which they were dispossessed for whatever purpose they want, including asking for title to some property they are currently using, selling, asking for compensation etc.


Uncertainties Regarding Housing for People Who Will Be Required to Move

Who is responsible?

It is not clear whatsoever in the plan whose responsibility it will be to build housing for people who will be required to relocate. Nor is it known where the funding for such construction will come from. These matters should be explicitly decided and stated in the final version of the plan if chaos is to be avoided.

Who will benefit?

My suggestion is that such housing be available to all people who will be required to relocate, irrespective of their financial situation. Those who can pay for it, they should be required to. A dispossessed owner should also be able to use his compensation bonds to make payments for the housing.

Making it possible for all relocating persons to purchase housing specifically built for the relocating people is especially important, since there will be a severe shortage of housing as a result of the influx of relocating people, and property prices will soar. In such a case, even people who normally would be considered as having sufficient financial means, would find buying or even paying mortgage beyond their reach!


Putting the territory of Cyprus at the disposal of International Military operations

Article 6, item 2 of Annex I says: "Cyprus shall not put its territory at the disposal of international military operations other than with the consent of Greece and Turkey or the consent of the governments of both <component states>". This allows the possibility of Cyprus putting its territory at the disposal of international military operations only with the consent of Greece and Turkey, without having to ask for the consent of the component states!

Proposed Solution:

Change Article 6, item 2 so that it reads: "Cyprus shall not put its territory at the disposal of international military operations other than with the consent of Greece and Turkey and the consent of the governments of both <component states>".

Or this can even be put more emphatically as "The only case in which Cyprus can put its territory at the disposal of international military operations is with the consent of Greece, Turkey, and the governments of both <component states>".


People or Citizens?

Article 21, item 3 of Annex I reads: "... The people of each <component state> shall elect ..."

This should be:"... The citizens who are eligible to vote of each <component state> shall elect ..."


A suggestion: Generating additional funds for the property board

For a transitional period of say 10 years, all income from the operation of the Hotels in Varosha may be channeled to the compensation fund, and used both for compensation and new construction for relocating people.


Other issues that are left open and need to be put in writing