1 Arbitration Agreements
1.1 What, if any, are the legal requirements of an arbitration agreement under the laws of your jurisdiction?
Firstly, there are two laws governing arbitration proceedings in Cyprus: domestic arbitration proceedings are governed by the Arbitration Law of 1944, Cap. 4 (hereinafter "Cap. 4"); and international arbitration proceedings are governed by the International Commercial Arbitration Law 101/1987 (hereinafter "ICAL"), which is an almost identical translation into Greek of the UNCITRAL Model Law. The ICAL was actually amended in February 2024 to bring it more in line with the amendments made to UNCITRAL Model Law in 2006 (the "ICAL Amendment").
The only requirement pursuant to the arbitration laws is that the arbitration agreement must be in writing in order to be enforceable. Despite the fact that there are no other formal statutory requirements, pursuant to the common law principles, the arbitration agreement must be clear and certain in order to be enforceable, it should deal with matters that are arbitrable under the laws of Cyprus, and it should be valid under the general principles of contract law.
In writing
Under section 2(1) of Cap. 4, an "arbitration agreement" is defined as a written agreement to submit present or future disputes to arbitration.
Likewise, section 7 of the ICAL determines that for an arbitration agreement to be valid, it must be in writing. An arbitration agreement is considered to be in writing if it is contained in:
- a document signed by the parties;
- an exchange of letters, telexes, telegrams or other means of telecommunication which provide a record of the agreement; or
- 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.
Further, an arbitration agreement can be in the form of an arbitration clause duly incorporated into a contract, or in the form of a separate agreement. A reference in a contract to another document containing an arbitration clause also constitutes an agreement to arbitrate, if the contract is in writing and the reference is such as to make the clause an integral part of the contract.
After the ICAL Amendment, an arbitration agreement is also considered to be "in writing" if (i) it is included in electronic communication if the information contained therein is accessible and useable for subsequent reference (section 7(4) of the ICAL), (ii) it is included in the exchange of statements of claim and defence, which include an allegation by one of the parties of the existence of an arbitration agreement, which allegation is not rebutted by the other party (section 7(5) of the ICAL), and (iii) the reference in a contract to any document containing an arbitration clause is such as to make that clause part of the contract (section 7(6) of the ICAL).
Clear and certain
An arbitration agreement is void if its terms are uncertain or if it does not include a clear reference to arbitration. The relevant English judgment that constitutes a persuasive precedent for Cypriot courts is Finnegan v Sheffield City Council (1988) 43 BLR 124. In Yalta Sea Trade Port v 1. EMED CHARTERING LIMITED a.o. (2001) 1 ΑΑΔ 7, the Supreme Court (first instance jurisdiction), taking into account Finnegan, noted that the courts tend to uphold arbitration agreements when they clearly express the will and choice of the parties to use the institution of arbitration.
1.2 What other elements ought to be incorporated in an arbitration agreement?
There are no other express provisions found in either Cap. 4 or the ICAL regarding specific elements that must be included in the arbitration agreement, but in general such arbitration agreements will specify if the arbitration will be institutional or ad hoc, and will include provisions for the number and appointment of arbitrators, the language of the proceedings, the incorporation of procedural rules such as the UNCITRAL Rules in the event of ad hoc arbitration, and could even include provisions for the timeframe within which the arbitration proceeding should be concluded. The seat of the arbitration should be considered and agreed by the parties and stated clearly in the arbitration agreement, since, in the absence of any other provision, this will determine the law governing the arbitral proceedings and provide for various matters such as replacement of arbitrators or access to court in aid of the arbitration. In addition, the arbitration agreement must be a valid agreement under the general principles of contract law.
1.3 What has been the approach of the national courts to the enforcement of arbitration agreements?
Cypriot courts are generally inclined to enforce arbitration agreements and Cyprus is an arbitration-friendly jurisdiction.
Pursuant to Cap. 4, the court may stay the court proceedings and refer the dispute to arbitration upon the application of a party, if the court considers that there is no sufficient reason why the dispute should not be referred to arbitration and that the applicant, at the time of commencement of proceedings, was and still remains ready and willing to do all things necessary for the proper conduct of the arbitration.
According to the ICAL, the court must refer the parties to arbitration upon the request of a party made before the submission of its pleadings, unless the court finds that the arbitration agreement is null, void or incapable of being enforced. When there are allegations of fraud affecting the arbitration agreement itself, the court may be reluctant to enforce an arbitration agreement; however, each case is decided on the basis of its facts.
2 Governing Legislation
2.1 What legislation governs the enforcement of arbitration proceedings in your jurisdiction?
The enforcement of arbitration proceedings in Cyprus is governed by Cap. 4 and the ICAL.
Furthermore, Cyprus is a party to the New York Convention (hereinafter "NYC") (see further question 11.1 below), which was ratified by the Ratification Law 84/1979. In addition, the Foreign Courts Judgments (Recognition, Registration and Enforcement) Law of 2000 ("Law 121(I)/2000") provides, inter alia, for the procedural steps to be followed by a party wishing to have a foreign award recognised and enforced in Cyprus, provided it was issued in a country with which Cyprus has signed a relevant treaty to this effect. Τhe procedure is now also governed by section II of Part 44 of the Civil Procedure Rules, which entered into force in September 2023.
2.2 Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?
Cap. 4 applies to domestic disputes referred to arbitration on the parties' agreement, and gives the national courts extensive powers when dealing with domestic arbitration issues. It is an outdated law (adopted in 1944) not adapted to the needs of modern arbitration.
The ICAL applies exclusively to international commercial disputes. According to section 2(2) of the ICAL, an arbitration is considered "international" if:
- the parties had their place of business or relevant commercial relations in different countries when they entered into the contract;
- either the place of arbitration if so designated by the arbitration agreement or the place of performance of a substantial part of the obligations arising out of the commercial relationship which is the subject matter of the dispute or the place to which the subject matter of the dispute is most closely connected are outside the country in which the parties have the place of business; or
- it has been expressly agreed by the parties that the subject matter of the dispute relates to more than one state.
According to section 2(4) of the ICAL, an arbitration is "commercial" if it relates to matters that arise from relationships of a commercial nature, whether contractual or not. The ICAL was modelled on the UNCITRAL Model Law and is an almost exact translation thereof, and puts greater emphasis on party autonomy whilst only allowing judicial intervention in the particular circumstances provided for in the ICAL.
2.3 Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?
The ICAL has adopted the UNCITRAL Model Law of 1985 in its entirety, except for the fact that the ICAL is limited to arbitrations that fall within the definition of "international" and "commercial" as provided therein. As mentioned above, the ICAL Amendment introduced in early 2024 has brought the ICAL in line with the UNCITRAL Model Law as amended in 2006.
2.4 To what extent are there mandatory rules governing international arbitration proceedings sited in your jurisdiction?
Generally, the ICAL is drafted in a way that respects the freedom of the parties to the arbitration to agree on matters relating to the conduct of the international arbitration. Mandatory rules are limited to issues relating to the issue of the arbitral award, the challenge of its validity and its recognition and enforcement by the national courts.
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Originally published by ICLG.
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.
