A successful party in an arbitration may find the losing party unwilling to honor the arbitral award.
The successful party would then have to consider how to enforce the award. He can do so in either one of two ways: (a) by way of a statutory process pursuant to the provisions of the New York Convention, which has been ratified by Law 84/1979; or (b) by a way of a common law action on the award.
The Statutory method
The statutory method provides a "short cut" for enforcement of an arbitral award, and it is a summary procedure, which takes less time and costs than an ordinary action to enforce the award.
The successful party can simply apply on a by-summons or on an ex parte basis (with a supporting affidavit), for leave of Court to enforce the arbitral award in the same way, as if it were a judgment of the Court.
The enforcing Court has limited powers in the context of such application for enforcement of arbitral awards, because its court judgment must be "in the terms of the arbitral award" (see DAMIAN CEMENT (1975) 1 QB 9).
The statutory process is not appropriate, where the successful party wishes to sue other parties who were not parties to the arbitration.
The Common Law method
The alternative method of enforcement of an arbitral award is a common law action on the award.
Under English law (as well as under Cypriot law), if the losing party does not honor the award, there is a breach of his implied promise to honor the award, which creates a new cause of action (i.e. an implied promise by law to honor the award), and the losing party may be held liable for damages towards the winning party for all losses caused due to the breach of such implied promise (see THE BUMBESTI (1999)).
The essential elements of this new cause of action are a valid submission of a dispute to arbitration, an award in favor of the Plaintiff and the defendant's failure to honor it.
In the context of enforcement of an award by an action at common law on the award:
- The Cypriot Courts are not hamstrung by the precise terms of the award in the same way that it would be in enforcing it by way of the statutory process.
- As with all breaches of promise, an innocent party is entitled to the full range of remedies.
- The winning party has the right to join as defendants to such common law action, not only the losing party, but any third party, who might be liable for inducing breach of the implied promise by the losing party, or for conspiracy to defraud the Claimant etc.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
