Cyprus: The International Comparative Legal Guide To International Arbitration 2015 Edition


1 Arbitration Agreements

1.1 What, if any, are the legal requirements of an arbitration agreement under the laws of Cyprus?

The principal laws regulating arbitration proceedings in Cyprus are the Arbitration Law, Cap 4, and the Law on International Commercial Arbitration of 1987, Law 101 of 1987 ("the ICA Law").

Both laws require an arbitration agreement to be in writing (article 2(1) of Cap 4 and article 7 of the ICA Law). Under the ICA Law, an agreement is deemed to be in writing if it is contained in a document signed by the parties, or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. An arbitration agreement may take the form of a separate agreement, or an arbitration clause incorporated into a contract or another document referred to in a written contract.

1.2 What other elements ought to be incorporated in an arbitration agreement?

The only formal requirement is that the arbitration agreement should adequately demonstrate the parties' intention to submit all or any present or future differences or disputes to arbitration. It is, however, advisable and customary to include details regarding the procedure to be followed in the arbitration, such as the number and powers of the arbitrators, the procedure for their appointment and the venue and language of the arbitration.

1.3 What has been the approach of the national courts to the enforcement of arbitration agreements?

Courts in Cyprus are generally supportive of the use of arbitration and other alternative dispute resolution methods. If a civil action has been filed in relation to a matter which is covered by an arbitration agreement, the court is obliged under article 8(1) of ICA Law, on the request of any party before the delivery of any pleadings or the taking of any steps in the proceedings, to stay the proceedings and refer the dispute to arbitration. Under article 8 of Cap. 4, the court may stay proceedings if it is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement.

2 Governing Legislation

2.1 What legislation governs the enforcement of arbitration proceedings in Cyprus?

The enforcement of arbitration proceedings in Cyprus is governed by the provisions of Cap 4 (which relates to domestic arbitrations), the ICA Law (which relates to international commercial arbitrations), and the Law on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1979, Law 84 of 1979, which transposed the provisions of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards into national legislation.

2.2 Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?

No, domestic arbitration proceedings are governed by Cap 4 and international commercial arbitrations are governed by the ICA Law. Article 2(2) of the ICA Law defines an international arbitration as one in which:

  • at the time of conclusion of the arbitration agreement, the parties to the agreement have their place of business in different countries;
  • the place of arbitration, if determined in, or pursuant to, the arbitration agreement, or the place of performance of a substantial part of the obligations deriving from the commercial relation which forms the basis of the dispute or the place with which the subject matter of the dispute is most closely connected, is situated outside the country in which the parties have their place of business; or
  • the subject matter of the dispute has been expressly agreed by the parties to relate to more than one country.

The ICA Law reproduces the provisions of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration of 1985, and limits the intervention of national courts in arbitral proceedings to a small number of specified circumstances, including the setting aside of an arbitral award in exceptional cases and the recognition and enforcement of an foreign arbitral award. Cap 4 allows for more extensive intervention by national courts.

2.3 Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

Yes, the ICA Law reproduces the UNCITRAL Model Law, with the only difference being that the national legislation explicitly defines the word "commercial''.

2.4 To what extent are there mandatory rules governing international arbitration proceedings sited in Cyprus?

There are a number of mandatory rules dealing with issues such as the power of the court to stay legal proceedings, challenges to arbitral awards and recognition and enforcement of arbitral awards.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred to arbitration under the governing law of Cyprus? What is the general approach used in determining whether or not a dispute is "arbitrable"?

Criminal matters, matrimonial disputes, and disputes with public policy implications cannot be settled by arbitration.

Cap 4 does not contain any specific definition of matters that may not be referred to arbitration, but it gives the court discretion to order that an arbitration agreement will cease to have effect when a dispute arises between the parties which involves the question of whether any such party has been guilty of fraud.

3.2 Is an arbitrator permitted to rule on the question of his or her own jurisdiction?

Article 16 of the ICA Law empowers arbitral tribunals to rule on their own jurisdiction and to examine any objections raised as to the existence or validity of the arbitration agreement. There is no similar provision in Cap 4.

3.3 What is the approach of the national courts in Cyprus towards a party who commences court proceedings in apparent breach of an arbitration agreement?

Under Cap 4, a court before which an action has been brought in relation to an issue that is covered by an arbitration agreement may make an order staying the court proceedings, if it is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration.

Under the ICA Law, at the request of a party against whom legal proceedings are brought, the court is required to stay the proceedings and refer the matter to arbitration, unless it finds that the agreement in question is null and void, inoperative or incapable of being enforced.

However, in either case, if both parties submit to the jurisdiction of the court, then the court will hear the case despite the existence of an arbitration agreement.

3.4 Under what circumstances can a court address the issue of the jurisdiction and competence of the national arbitral tribunal? What is the standard of review in respect of a tribunal's decision as to its own jurisdiction?

Articles 13 and 14 of Cap 4 empower the court, on the application of any party to a reference to arbitration, to remove an arbitrator who fails to use all reasonable dispatch in entering on and proceeding with the referral and making an award, and to appoint a replacement. Article 16(3) of the ICA Law provides that if, in response to a plea from any party made no later than the submission of the statement of defence that the arbitral tribunal does not have jurisdiction, the tribunal rules, as a preliminary question, that it does indeed have jurisdiction, any party may apply to the court to decide the matter of jurisdiction. The application must be made within 30 days of the initial ruling by the tribunal. Such a decision will not be subject to appeal, but the arbitral tribunal may continue the arbitration proceedings and make an award pending the court's final determination on the matter.

3.5 Under what, if any, circumstances does the national law of Cyprus allow an arbitral tribunal to assume jurisdiction over individuals or entities which are not themselves party to an agreement to arbitrate?

There is no power for an arbitral tribunal to assume jurisdiction over natural or legal persons who are not parties to the arbitration agreement, except in cases of administration of a deceased's estate or the appointment of a trustee in bankruptcy over the estate of a party, unless the third party wishes to be included in the arbitration and all other parties to the arbitration agree to include the third party in the proceedings.

Usually, third parties may only be summoned to appear before a tribunal for the purposes of testifying or producing documents. Third parties cannot be compelled to produce any documents which they would not be compelled to produce at trial.

3.6 What laws or rules prescribe limitation periods for the commencement of arbitrations in Cyprus and what is the typical length of such periods? Do the national courts of Cyprus consider such rules procedural or substantive, i.e., what choice of law rules govern the application of limitation periods?

Article 24 of Cap 4 and article 21(3) of the ICA Law provide that the limitation provisions applicable to legal proceedings also apply to arbitration proceedings. Law 66(I) of 2012 sets out the limitation periods for various classes of claims. For claims arising from contracts, the limitation period is generally six years.

Any term in an arbitration agreement to the effect that no cause of action shall accrue in respect of any matter required by the agreement to be referred to arbitration until an award is made under the agreement, will be disregarded for the purposes of the law regarding limitation periods, and a cause of action will be deemed to have accrued at the time when it would have accrued, but for that term in the agreement.

The limitation period constitutes a procedural defence and this is confirmed by the relevant Cyprus case law and Law 66(I) of 2012 which provides that the court cannot, on its own motion, take into account the limitation period (article 20), and within the context of an action, the limitation period can be pleaded by any party.

3.7 What is the effect in Cyprus of pending insolvency proceedings affecting one or more of the parties to ongoing arbitration proceedings?

Article 5(1) of Cap 4 provides that an arbitration agreement contained in an agreement to which a bankrupt is a party will be enforceable by or against the trustee in bankruptcy if the trustee adopts the overall agreement. In addition, if the provisions of article 5(1) do not apply, the trustee in bankruptcy or any other party to the agreement may apply to the court for an order directing that any disputed matter covered by the agreement should be referred to arbitration in accordance with the arbitration agreement.

4 Choice of Law Rules

4.1 How is the law applicable to the substance of a dispute determined?

As a general principle, arbitration tribunals should determine any dispute in accordance with the rules of law chosen by the parties as applicable to the substance of the dispute. If the parties to the arbitration agreement have not made any choice, the tribunal should apply the law determined by the conflict of law rules which it considers applicable.

4.2 In what circumstances will mandatory laws (of the seat or of another jurisdiction) prevail over the law chosen by the parties?

While Regulation (EC) No 593/2008 on the law applicable to contractual obligations (particularly article 9(3)) refers to the applicability of overriding mandatory provisions, article 1(e) of the Regulation expressly excludes from its scope arbitration agreements and agreements on the choice of court.

4.3 What choice of law rules govern the formation, validity, and legality of arbitration agreements?

There are no specific choice of law rules governing the formation, validity and legality of arbitration agreements, and the usual factors such as the express choice of the parties and the existence of a close and real connection with a specific jurisdiction will determine the choice of law.

5 Selection of Arbitral Tribunal

5.1 Are there any limits to the parties' autonomy to select arbitrators?

Neither Cap 4 nor the ICA Law places any limit on the parties' freedom to select arbitrators.

5.2 If the parties' chosen method for selecting arbitrators fails, is there a default procedure?

Article 10 of Cap 4 provides for a default procedure in cases where the parties' chosen method for selecting arbitrators fails. In particular, where:

(a) the arbitration agreement provides for a reference to a single arbitrator and the parties do not concur in the appointment of an arbitrator;

(b) an appointed arbitrator refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be filled, and the parties do not fill the vacancy;

(c) the parties are at liberty to appoint an umpire or third arbitrator and do not appoint him; or

(d) an appointed umpire or third arbitrator refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be filled, and the parties do not fill the vacancy,

and no appointment is made within seven clear days after the service of a written notice to appoint an arbitrator, umpire or third arbitrator by any party, the court may, on the application by the party who gave the notice, appoint an arbitrator, umpire or third arbitrator with the same powers as if he had been appointed with the consent of all parties.

Article 11(3)(a) of the ICA Law provides that if the agreement stipulates that three arbitrations should be appointed and the parties fail to do so, then each party appoints one arbitrator, and the two arbitrators appointed by the parties select a third arbitrator. Article 11(3)(b) of the ICA Law provides that if the agreement is to appoint one arbitrator and the parties fail to do so, the arbitrator is appointed by the court following an application by any of the parties to the arbitration agreement.

5.3 Can a court intervene in the selection of arbitrators? If so, how?

Article 13 of Cap 4 provides that the court may, on the application by any party to a reference, remove an arbitrator or umpire who fails to use all reasonable dispatch in entering on and proceeding with the reference and making an award.

Article 14 of Cap 4 empowers the court, on the application of any party, to appoint a replacement for an arbitrator whose appointment has been revoked or who has been removed by the court on the grounds of misconduct or failure to act with due despatch. Under article 11 of Cap 4, if the agreement provides for two arbitrators and one of them ceases to act, the party who appointed him may appoint a replacement. If no appointment is made, the remaining arbitrator may be appointed as sole arbitrator. In either case the court has the power to set aside the appointment.

Article 10 of the ICA Law expressly specifies that the method for appointing arbitrators and the number of arbitrators to decide the dispute is a matter for the parties. The court will become involved in the process of choosing arbitrators only as a last resort, for example, if the parties fail to appoint arbitrators and do not agree on a mechanism for choosing their arbitrators or to apply the default procedure provided for by section 11(3) (namely that each party appoints one arbitrator, and the two arbitrators appointed by the parties select a third arbitrator).

Article 12 of the ICA Law, which reproduces article 10 of the UNCITRAL Model Law, provides a mechanism for challenging and potentially replacing an arbitrator if circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence, or for reasons of which the arbitrator becomes aware after the appointment has been made. Article 13 gives the parties the power to agree on the procedure for challenging an arbitrator. It also allows the court to assist in determining an arbitrator's impartiality and independence. In such a case, the court's decision will be binding and no review or appeal to a higher court is permitted.

Article 14 of the ICA Law provides that an arbitrator's mandate may be terminated if he becomes de jure or de facto unable to perform his functions, or fails to act without undue delay for other reasons.

The arbitrator's mandate may be terminated if this is the case, if he withdraws from his office or if the parties agree on the termination. If, however, controversy remains concerning any of these grounds, any party may request the court to decide on the termination of the mandate, which decision shall be subject to no appeal.

5.4 What are the requirements (if any) as to arbitrator independence, neutrality and/or impartiality and for disclosure of potential conflicts of interest for arbitrators imposed by law or issued by arbitration institutions within Cyprus?

Cap 4 does not contain any express requirements as to the independence, neutrality or impartiality of an arbitrator, but article 9(1) of Cap 4 provides that a party may apply to the court, on the ground that the arbitrator named or designated is not or may not be impartial, for leave to revoke the arbitration agreement, or for an injunction to restrain any other party or the arbitrator from proceeding with the arbitration.

Article 12 of the ICA Law reproduces the disclosure requirement of the UNCITRAL Model Law and requires any person who is approached in connection with his possible appointment as arbitrator to disclose any circumstances which are likely to give rise to justifiable doubts as to his impartiality or independence. Once appointed, arbitrators are under a similar obligation throughout the proceedings. The ICA Law expressly provides that an arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, and also requires a court or other authority appointing an arbitrator to have due regard to any qualifications required of an arbitrator by the agreement of the parties and to considerations of independence and impartiality.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure of arbitration in Cyprus? If so, do those laws or rules apply to all arbitral proceedings sited in Cyprus?

There are no detailed rules governing the procedure of arbitration and the parties are free to agree on the procedure to be followed. In the absence of such an agreement, the arbitral tribunal may conduct the proceedings in the manner it deems appropriate.

6.2 In arbitration proceedings conducted in Cyprus, are there any particular procedural steps that are required by law?

No, there are no particular procedural steps required by law.

6.3 Are there any particular rules that govern the conduct of counsel from Cyprus in arbitral proceedings sited in Cyprus? If so: (i) do those same rules also govern the conduct of counsel from Cyprus in arbitral proceedings sited elsewhere; and (ii) do those same rules also govern the conduct of counsel from countries other than Cyprus in arbitral proceedings sited in Cyprus?

The ICA Law requires all parties to be treated with equality throughout the proceedings and to be given a full opportunity to present their case, but leaves the parties free to determine the detailed conduct of the proceedings.

Similarly, Cap 4 does not prescribe any detailed procedural rules.

6.4 What powers and duties does the national law of Cyprus impose upon arbitrators?

An arbitrator or umpire acting under an arbitration agreement has a number of powers that are incidental to the power to make an award, including the power to administer oaths or take the affirmations of the parties and witnesses appearing in the proceedings, to appoint expert witnesses, and to request the production of documents for inspection.

In domestic arbitrations, Cap 4 requires arbitrators to conduct the arbitration and issue an award with all due diligence and expedition. Article 27 of Cap 4 also gives an arbitrator power to apply to the court to resolve any legal issue that arises during the arbitration.

6.5 Are there rules restricting the appearance of lawyers from other jurisdictions in legal matters in Cyprus and, if so, is it clear that such restrictions do not apply to arbitration proceedings sited in Cyprus?

The Advocates Law, Cap 2, allows lawyers residing in other EU member states, and who meet the requisite conditions, to offer their services in Cyprus on the same footing as a local lawyer.

The ICA Law makes clear that the parties are free to agree on the conduct of the proceedings, and imposes no restrictions on appearance.

6.6 To what extent are there laws or rules in Cyprus providing for arbitrator immunity?

There are no laws or rules relating to arbitrator immunity.

6.7 Do the national courts have jurisdiction to deal with procedural issues arising during an arbitration?

Cap 4 provides that domestic courts have jurisdiction to deal with a number of procedural issues listed in the second schedule, including the securing of the attendance of witnesses, the taking and preservation of evidence, the granting of interim relief or the appointment of a receiver, and the determination of preliminary points of law.

The ICA Law leaves matters of procedure to be agreed between the parties. The courts may intervene only where the ICA Law expressly permits their involvement (for example, as to replace an arbitrator to assist in taking evidence at the request of the arbitral tribunal).

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Previously published by Global Legal Group

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