Stay of proceedings due to arbitration clause in a Cyprus construction contract 

Legal basis of the application  

Jurisdiction: The court’s jurisdiction to order a stay of proceedings between a Cypriot constructor and the owner due to an arbitration clause derives exclusively from Article 8 of the Arbitration Law, Cap.4. 

Furthermore, the below sections of the new Civil Procedure Rules 2023 related an application for stay shall be considered: 

Part 10 – Notice of Appearance 

This part covers the procedure for a party to file a notice of appearance in legal proceedings, formally notifying the court and other parties that they intend to participate in the case. Filing an appearance is a crucial step before submitting any pleadings or taking any action in the proceedings. 

Part 12 – Challenging the Jurisdiction of the Court 

This part outlines the process for disputing the court’s jurisdiction over a matter, with a focus on the following provisions: 

– Paragraph 1(b): Sets out grounds on which a party can challenge jurisdiction. 

– Paragraph 2: Explains the timeframe and method by which a party can challenge jurisdiction, typically after entering an appearance. 

– Paragraph 3: Addresses the consequences if a party fails to challenge jurisdiction within the specified period, potentially leading to the loss of the right to do so. 

Part 23 – General Rules for Applications for Court Orders 

This section provides general rules regarding how to apply for court orders, including interlocutory applications such as injunctions. It specifies the format, evidence required, and procedural steps to file such applications, ensuring clarity and efficiency in obtaining court orders. 

Part 44 – Arbitration 

This part deals with arbitration procedures in civil litigation, focusing on: 

– 44.: Discusses the enforcement of arbitration agreements and the stay of legal proceedings where an arbitration agreement exists. 

– 44.3(2): Explains how parties can apply to the court to enforce or challenge arbitration decisions. 

– 44.8(1)-(3): Outlines the circumstances under which a court may issue orders related to arbitration, including enforcing, staying, or referring matters to arbitration based on the agreement between the parties.  

Legal requirements for obtaining a Court Order 

A brief summary of the key principles governing the issuance of a stay of proceedings due to an arbitration clause in Cyprus is as follows: 

Conditions for Stay: According to United Feeder Serv. Ltd. v. Vessel “Anna Elisabeth”, the court will exercise its discretion to stay proceedings if the following conditions are met cumulatively: 

1. Existence of a Valid Arbitration Agreement: There must be a valid agreement between the parties to refer the dispute to arbitration. 
2. Commencement of Court Proceedings: Legal proceedings must have already begun before the court. 
3. Proceedings by a Contracting Party: The court proceedings must be initiated by a party to the arbitration agreement or by someone claiming under it, against the other party or someone claiming under them. 
4. Relevant Dispute: The court proceedings must relate to a dispute that is agreed to be referred to arbitration. 
5. Application for Stay: The request for a stay of proceedings must be made by a party to the legal proceedings. 
6. Timing of the Application: The application must be submitted after an appearance has been entered and before any exchange of pleadings or other significant steps in the litigation. 
7. Willingness to Arbitrate: The applicant must demonstrate readiness to do everything necessary for the proper conduct of the arbitration. 

Burden of Proof: The burden to demonstrate valid reasons for not staying the proceedings lies with the plaintiff i.e the respondent in the application for stay of proceedings. This principle was affirmed in Balkancarimpex FTO v. Leasco Ltd (1994), among other cases. 

These principles ensure that arbitration clauses are respected, unless justified reasons are provided to proceed with litigation.