Cypriot Court Intervention In International Commercial Arbitration


  • Constantinos Messios, Advocate, LLB (Hons), Solicitor, F.C.I. Arb.
    Marilena Stylianou, Advocate, LLB (Hons), LLM.
    C.D. Messios LLC

Why would someone choose Arbitration as an alternative method of dispute resolution?

Arbitration is an essentially private contractually binding dispute resolution process conducted before an independent arbitrator or panel of arbitrators who act as the judge on the dispute before them.

Those who are appointed arbitrators and are asked to decide on matters before them, are appointed by the parties or an appointing body on the basis of their particular knowledge, expertise or experience in a particular field and of course their expected honesty and impartiality.

These attributes are perhaps the real reason why arbitration is often the preferred method of dispute resolution in technical disputes, disputes in particular industries or areas of commercial activities or where cross border transactions between counter parties who chose a neutral method, venue or jurisdiction where disputes can be resolved.

Arbitration, especially international arbitration, should be a speedy and efficient method of resolution of disputes in commercial relationships. Alternative dispute resolution (ADR) is popular in the construction, insurance, shipping and trade fields where expert arbitrators can draw on their expertise and knowledge in particular fields to produce the type of awards which should be enforceable, with limited need for the Courts to intervene either during or subsequent to the end of the arbitration process.

What is the legal basis of International Arbitrations in Cyprus?

Local Arbitrations under CAP 4 (a facsimile of the UK 1950 Arbitration Act) still allow for matters to be referred to the courts during the arbitral process and for awards to be set aside for misconduct of the arbitrator or on public policy grounds. International Commercial Arbitrations where at least one of the parties does not reside in Cyprus are conducted under the International Commercial Arbitration Law (Law 101/1987) which is based on the relevant UNCITRAL model law.

As one would expect of any modern commercial jurisdiction, Cyprus is signatory to the 1958 New York Convention on the Recognition and Enforcement of Arbitral Awards (ratified on the 29/12/1980 and incorporated in Law 101/1987).

The adoption of the UNCITRAL Model Law has put in place a cohesive and comprehensible set of rules which create a framework in which disputes arising from international commercial transactions can go to Arbitration under Cyprus Law. The House of the Representatives did not replace CAP 4 with the International Commercial Arbitration Law

101/1987. Both CAP 4 and the International Commercial Arbitration Law (“the ICAL”) run in parallel. The word “commercial” is given a broad meaning as it refers to matters “arising from relationships of a commercial nature”. The Law provides an extensive, non-exhaustive list, of potential relationships that may be termed as ‘commercial’ but does not restrict the definition to that list. The intention of the legislature is to enable the parties to bring their disputes under the provisions of the ICAL.

Although agreements invariably include detailed governing law, jurisdiction and arbitration clauses, under the UNCITRAL Law, and although the Arbitration agreement between the parties has to be in writing, it need not be in one document but it should be readily available in its original form and inferred from exchanges between the parties that the intention was to refer a matter for resolution in an arbitration. This can be an issue if an award is to be registered in Cyprus.

The Supreme Court of Cyprus has recently confirmed the importance of the strict adherence to the provisions of Article IV (1)(b) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The aforesaid article required the party seeking to recognise or enforce a foreign arbitral award to bring along with application the original document of the arbitration agreement (or the relevant clause) or a certified copy of that.

In the case of Bristol Business Corporation v. Besuno Ltd ((2011, Appeal 321/07, 30th May) the court rejected the application of the plaintiffs for recognition and enforcement of an arbitral award by the national arbitration centre in Austria. The reason for the refusal was the failure of the plaintiffs to follow the requirements set by Article IV (1)(b). Failure to follow the requirements of the law will be deemed fatal as to the recognition and enforcement of a foreign arbitral award.

Will the Courts intervene in Arbitration where the seat is in Cyprus?

There is a clear provision in the ICAL which seeks to minimize court intervention and allows it only under specific circumstances. Section 6 severely restricts the ability of any party to an arbitration to delay proceedings by referring every question put to the arbitrator to the Local Courts for consideration as a point of law.

The courts can intervene only in the following instances:

  • The court can and will appoint an arbitrator/s if one of the parties or the party- appointed arbitrators fail to do so.
  • If the arbitral tribunal dismisses a challenge against an arbitrator the court shall deal with the challenge.
  • The court shall decide on the termination of an arbitrator’s mandate if he fails to discharge his duties or is guilty of undue delay in doing so.
  • The court may review a ruling of the Tribunal that it has jurisdiction to deal with the matter before it.

After the delivery of an award will the courts intervene?

The court may set aside an award or refuse recognition or enforcement only on the grounds of:

  • Incapacity of the parties;
  • Invalidity of the arbitration agreement;
  • Lack of proper notice or denial of a party’s right to present his case;
  • Lack of jurisdiction of the tribunal;
  • Defective composition of the tribunal;
  • The subject matter of the dispute being incapable of settlement by arbitration under the law of Cyprus;
  • The award being contrary to the public order of the Republic of Cyprus;

Failing such grounds, the award is binding on the parties and cannot be the subject of an appeal. The power to set aside an award which can only be exercised on the basis of one or more of the above grounds is distinctive from the general power of appeal (whether for error of law or otherwise) which simply does not exist in International Arbitrations carried out under ICAL.

What is the result of the non-interventionist policy that the courts have adopted?

The award can be given quickly without undue delay which may under other circumstances (our own separate local arbitration law for example) be caused by misuse of the referral procedure which will inevitably lead to delays and considerable costs.

The exclusion of extensive rights of appeal does not mean that the assistance of the Court cannot be obtained. The Courts are still able to grant interim injunctive relief and also assist in the obtaining of evidence should this be required.

What does the Law on International Commercial Arbitration 101/1987 seek to achieve?

One of the most important principles that the aforesaid law tries to safeguard is party autonomy. The autonomy given to the parties in dispute allows them to come to an agreement in practically all matters which can lead to a smooth arbitral process.

The parties can agree on the choice of ICAL, the language of the proceedings, composition of the arbitral tribunal, challenge procedure so far as this is allowed by ICAL, the method of submission of expert evidence, pleadings and generally the whole process. In short, the law intervenes only where the parties cannot agree on essential issues.

Another important feature of the legislation is that it guarantees equal treatment of all parties participating in the arbitration as it is essential to reassure all parties to an arbitration that an adversary experienced in International Commercial Arbitrations will not have or be able to obtain an unfair advantage.

Section 2 of ICAL specifically allows for arbitration administered by permanent arbitral institutions to proceed under its provisions. In this way institutional arbitrations, (ICC or LCIA arbitrations for example), can quite easily take place under ICAL with appropriate issues being, at the discretion of the parties, determined by such institutions.

What is the approach of the courts in International Commercial Arbitration as evidenced by case law?

In Open Joint Stock Company ‘Novokuznetsk Aluminum Plant’ v. 1.Base Metal Trading Ltd, 2. Marios Eliades ((2003) 1 ΑΑΔ 1856) the plaintiffs argued that the arbitration agreement was invalid ab initio and applied to the court for an order which would prevent the arbitrator from deciding the aforesaid matter. The defendants argued that according to Article 16 of the ICAL, the issue as to the validity of the arbitration agreement had to be determined by the arbitrator and not by the court. The court of first instance ruled that the matter had to be decided by the arbitrator. On appeal at the Supreme Court the judges affirmed the ruling of the first instance court. The court commented that the plaintiffs had not raised an issue as to the subject matter of the arbitration agreement. Based on that, the Supreme Court could not intervene as this was a matter that, according ICAL, had to be determined by the Arbitrator. The court confirmed that ICAL itself states when the Court can intervene.

In Dansk Moller Industry A.O. S. v. Bentex Minerals Co. Ltd A.O. ((2007) 1 ΑΑΔ 692), which confirmed what was said in Attorney General of the Republic of Kenya v. Bank Wr Arbeit und Wirtschaft AG (1999), the court ruled that the provisions of Article 6 of the ICAL are clear and they provide that the courts can only intervene in the limited circumstances that the law defines.

In 2009, in RE 1. Helington Commotidies Ltd, 2. Soleggiato Investments Ltd, 3. Ceac Holdings Ltd, and 4. En & Coal Ltd ((2009) 1 ΑΑΔ 926) in an application for a prerogative order, annulling the order for injunctive relief issued by the first instance court, the Cyprus Supreme Court in refusing grounds to apply for these orders, stated that the applicants had not proved that there were extenuating circumstances that justified the issuing of any prerogative order. This is obviously an indication of the unwillingness of the courts to interfere and intervene.

In a more recent case, in 2010 the District Judge examined the nature and purpose of ICAL and concluded that the underlying philosophy of the national law is to avoid unnecessary interference in the arbitration process except as expressly provided in the law for the purpose of supporting the arbitration process.

If one is to consider the amount of international arbitrations in Cyprus the limited number of interventions from the Courts is an encouraging indication of the process and the lack of Court intervention.

What is the status of foreign Arbitral awards in Cyprus?

Cyprus is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards which is incorporated in the Law. Cyprus is bound to enforce awards made in foreign states and countries signatory to the Convention are bound to enforce awards made in Cyprus. Apart from nearly all the member states of the European Union, a number of countries in the Middle East are signatories to the Convention. These include Egypt, Israel, Jordan, Syria and Kuwait. In a leading case in 1995, involving Beogradska Banka D.D. ((1995) 1 ΑΑΔ 737) it was held that the role of the courts is supervisory in nature and that it is not up to the courts to examine the reasons behind the decision of an arbitrator. As a result, procedural mistakes as to the application of the Convention on the recognition and enforcement of foreign arbitral awards, cannot be revisited through an order either of certiorari or prohibition. The relevant philosophy is therefore that the courts are there to provide assistance (in matters such as measures to conserve assets which are found within the jurisdiction of the Cyprus Courts) and not to interfere in arbitral proceedings.

ICAL is available for use to anyone doing business internationally. ICAL’s flexibility in enabling parties to create or adopt the appropriate form of dispute resolution specifically tailored to their requirements should no doubt be kept in mind when considering how disputes to which it can apply should be dealt with.




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