Cyprus: Enforcement Of Foreign Arbitral Award Under New York Convention

31^st October 2007

In a very recent decision, a Cyprus District Court rejected an application for the recognition and enforcement in the Republic of Cyprus of an arbitral award issued by the Austrian Arbitral Center due to the failure of the applicant to produce the original arbitral agreement or a certified true copy of same.

The applicant presented to the Court a copy of the arbitral agreement which was presented as exhibit during the arbitration process in Austria, accompanied by a certificate of the Secretary of the Austrian Arbitral Center, certifying that the said document was photocopy of the copy presented in the said proceedings.

The Applicants disclosed to the Cyprus Court that they did not have the original arbitral agreement or any true copy of same and could not comply with Article IV of the New York Convention.

The Applicants tried unsuccessfully to persuade the Cypriot Court that due to the fact that the validity of the arbitral agreement was not questioned by the Respondents during the arbitration proceedings in Austria, it was opened for the Cyprus Court to accept the presentation of a photocopy of the arbitral agreement instead of the original arbitral agreement or a certified true copy of same as requested by Article IV of the New York Convention.

In addition, the Applicants argued, that the Respondents were estopped from disputing the existence of the arbitral agreement, because the Respondents relied on the arbitral agreement in order to request and obtain a stay of the legal proceedings which they were commenced in Cyprus by the Applicants for the same subject matter.

Before the issue of the aforesaid decision, numerous other decisions of Cypriot First Instance Courts, adopted the same strict line of interpretation of the provisions of the New York Convention.

The issue will be reviewed very soon by the Cyprus Supreme Court in its Appellate jurisdiction because the Applicants lodged an appeal.

In Cyprus, the recognition and enforcement of foreign arbitral awards cannot be considered automatic. Parties should expect that in appropriate cases Cypriot courts will refuse to recognise and enforce arbitral awards. Nevertheless, the "pro-enforcement bias" persists. The Convention's seven enumerated defences continue to be applied narrowly and the burden of proof remains very much with the party opposing enforcement. In general, Cypriot courts have resisted allowing defences beyond those specified in Article V, although arguments based on procedural considerations have met with some success.

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