Arbitration in Cyprus

1. General Principles – Governing law of arbitration 

The position under Cypriot law as regards the arbitration agreement, the issue of arbitral awards, the procedure for recognition and enforcement of awards and the powers of the Court with regard to arbitration procedures is set out by: (i) the Arbitration Law, Cap. 4, as it is amended (the “Cap. 4”); and (ii) the International Commercial Arbitration Law 101/1987, as it is amended (the “Law 101/1987”).  

It is noted that, Law 101/1987 is the Cypriot adaptation of the 1985 UNCITRAL Model Law on International Commercial Arbitration, which applies: 

1. exclusively to international commercial arbitrations (ie, arbitration between parties who have their place of business in different states that pertains to matters arising from relationships of a commercial nature1); AND 
2.  only if the place of arbitration is in the territory of the Republic of Cyprus.  

All other arbitral proceedings are governed by Cap. 4 which is based on the UK Arbitration Act 1950. 

It should be noted that, as a general principle, the above laws limit the intervention of the Courts in the cases which are expressly provided for in the law. 

2. Arbitration agreement (or clause) is of great importance 

The parties are free to agree, clearly and in writing, the dispute which will be referred to arbitration, the language or languages to be used in the proceedings, the seat of arbitration and the number of arbitrators who will be appointed. Furthermore, arbitration is a procedurally flexible process and it is up to the parties to agree on the procedure to be followed and on the applicable rules of law in relation to the substance of the dispute. Failing such an agreement between the parties, the above decision is left to the arbitrator(s) which in most of the cases the parties wish to avoid. Therefore, evidently, the provisions of an arbitration agreement are of great importance since they will govern the process from day one: namely, from the service of the first notice, to the request for arbitration until the recognition and enforcement of the award in Cyprus and abroad. 

Furthermore, in the event an action is brought before the Cyprus Courts in a matter and/or dispute which is subject to an arbitration agreement, the other party may file an application to the Court and request stay of court proceedings and that the said dispute be referred to arbitration due to the written provisions of the arbitration agreement. An order for stay and/or dismissal of the proceedings will be issued by the Court, unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. 

It should be noted that, an arbitration clause included in a contract is considered as a separate agreement. As a result, an arbitration clause (i.e arbitration agreement) will be considered valid, even if the contract in which it is included is considered invalid. 

3. Appointment and removal of an arbitrator – Intervention of the Court (if needed) 

Under Cyprus law there are no provisions limiting the parties’ autonomy to select arbitrators. Therefore, the parties are free to appoint arbitrators who are knowledgeable in the dispute’s subject matter and with an expertise relevant for deciding their dispute. 

In the absence of an agreement between the parties on the appointment procedure, then the default procedure shall be the following:  

1. if the parties have agreed to arbitration by a three-member tribunal, then each party will appoint one arbitrator, and the two appointed arbitrators will appoint the third arbitrator.  
2. If a single arbitrator will be appointed but the parties cannot agree on the person to be appointed, then on the application of any of the parties the court will appoint an arbitrator.  

Each party to an arbitration may challenge an arbitrator, where circumstances exist that give rise to justifiable doubts as to their impartiality or independence. The parties are free to agree on a procedure for challenging an arbitrator. If a challenge under any procedure agreed on by the parties is not successful, the challenging party may proceed with relevant application before Cypriot Courts. It is noted that, while such a request is pending before the Court, the arbitral tribunal, including the challenged arbitrator, can continue the arbitral proceedings and issue an award. 

In arbitrations governed under Cap.4, a party may apply to the Court in order to remove an arbitrator who fails to act expediently in the proceedings and/or who has has misconducted himself or the proceedings. The Supreme Court of Cyprus in its judgment in the case of Solomou Neophitos v Laiki Cyprialife Ltd (2010) 1 Α.Α.Δ 687, noted, among others, that the classic approach to “misconduct” refers – but not limited – to bribery of the arbitrator or to the existence of a secret interest on their behalf in the dispute before them. Based on certain Supreme Court judgments, the “misconduct of the arbitration proceedings” term expands to other matters so to include morally or ethically improper behaviour or the wrongful admission or exclusion of evidence, or the acceptance of extrinsic evidence for the construction of the contract or issuance of an award based on an illegal contract.  

4. Which types of disputes are considered arbitrable? 

Arbitration is usually used in Cyprus for construction disputes, banking disputes between debtors as well as all international commercial disputes.  

Matters of family law, criminal law, disputes concerning minors, disputes which relate to the title of property and insolvency or bankruptcy and winding-up proceedings, disputes directly affecting the existence or validity of a registered intellectual property right, competition or antitrust matters are considered non-arbitrable.  

Finally, we should note that, if any of the parties involved in a dispute is guilty of fraud, then the other party may, pursuant to Article 9(2) of Cap4, request from the Cyprus Courts to exercise their discretion to invalidate the arbitration agreement and refer the dispute to adjudication by the Courts. 

5. Rules of confidentiality of arbitration proceedings 

It is for the parties to agree whether they will have any right to disclose to any third party information regarding the arbitration proceedings, since there are no express provisions neither in Law 101/1987 nor in Cap. 4 with regard to the confidentiality of the proceedings. It is clear that where a party applies for the recognition and enforcement of an arbitral award and the respondent files an objection, the case will proceed to a hearing, the judgment of a Cyprus court will be published and thus, confidentiality will be lost. 

However, arbitration is a private method of alternative dispute resolution on the basis of the consent of the parties. This private nature of arbitration proceedings entails an obligation on the part of the arbitrators as well as to the parties not to reveal or disclose information with regards to the arbitral proceedings, documents or award. 

6. Is Cyprus an appropriate forum to initiate arbitration proceedings? 

It is certain that choosing a place of arbitration is a particularly difficult decision for each contracting party since all parties must identify a neutral jurisdiction whilst on the other hand, parties must be certain that nothing will jeopardize the arbitral proceedings as well as the recognition and enforcement of the arbitral award.  

Cyprus incorporates all the characteristics which make a country an attractive and suitable forum for international arbitration: (i) geographical proximity to Middle East, UK and Russia, (ii) arbitration laws which enable the parties to agree on the language or languages to be used in the proceedings, (iii) freedom of the parties to select any person (including specialist and/or expert) to act as arbitrator and decide the number of arbitrators to be appointed, (iv) flexible process and (v) sufficient limits on Courts’ intervention.  

7. Limitation period of actionable right 

The law which regulates the limitation period imposed for an action to be filed (the Limitations Law L.66 (I) 2012 as it is amended), provides, inter alia, that if arbitration proceedings will be initiated i.e from the day a notice of arbitration is served to the other party, the limitation period of actionable right will be suspended and will begun to run from the day the said notice was served. 

8. Is an arbitral award final and binding? 

Once an arbitral award is issued is final and binding, unless a party request by the tribunal and/or Cypriot Courts (A) the correction of the arbitral award or (B) the setting aside of the award on specific grounds as provided by law and common law.   

Under Law 101/1987, a party may: 

1. seek the correction of an arbitral award within 30 days from the receipt of the award, in order for the tribunal to correct computational or other errors of similar nature in the award or, if the parties agree, to provide further guidance on the interpretation of a specific part or point of the arbitral award; 
2. may request the tribunal to make an additional award for claims that, although included in the claims of the party in the arbitration proceedings, they were omitted by the award.   
3. A party may apply before a competent Court and request to set–aside the arbitral award only if:  
   1. a party to the arbitration agreement was incapacitated or arbitration agreement was not valid under the applicable law chosen by the partie or, in the absence of any agreement thereon, under the laws of Cyprus; or   
   2. a party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or, for any reason, the party was deprived of the opportunity to present its case before the tribunal or  
   3. the award deals with a dispute which does not fall within the scope of the arbitration agreement or decides on matters beyond the scope of the arbitration; or   
   4. the composition of the tribunal or the arbitration procedure was conducted in breach of the agreement of the parties or of the law.  

Under Cap. 4, an award may be set aside by the court if the arbitrator has conducted themselves improperly, or the arbitration procedure was conducted and/or the award was procured improperly.