Cyprus: International Arbitration (4th edition)

The In-House Lawyer Logo

This country-specific Q&A provides an overview of the legal framework and key issues surrounding international arbitration law in Cyprus.

This Q&A is part of the global guide to International Arbitration.

For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/international-arbitration-4th-edition/

  1. What legislation applies to arbitration in your country? Are there any mandatory laws?

    (a) The Arbitration Procedure is governed by; (a) the Arbitration Law (Cap. 4), (b) the 1979 Convention on the Recognition and Enforcement of Foreign Arbitration (Ratification) Law (Law 84/1979) which validates the New York Convention, (c) the International Commercial Arbitration Law of 1987 (N. 101/1987), (d) Law 121(I)/2000 which provides for the Civil procedure Rules when applying for recognition and enforcement of an arbitral award.

    (b) All laws above are mandatory and are prescribed to issues relating to the Courts’ powers, immunity of arbitrators and the issue of the arbitral award, the challenge of its validity and its recognition and enforcement by the national Courts.

  2. Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?

    (a)Yes. Cyprus became a signatory to the New York Convention on 29 December 1980.

    (b)One of the reservations to the general obligations of the Convention is reciprocity whereby an award made by an international arbitration tribunal in Cyprus can be enforced in the countries which have also ratified the Convention. The second reservation permits a Contracting State to narrow the application of the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under national law.

  3. What other arbitration-related treaties and conventions is your country a party to?

    Cyprus is also a contracting state to the Convention on the Settlement of Investment and Disputes between States and Nationals in other States. Also in a number of bilateral and multilateral investment treaties for reciprocal recognition and enforcement concluded with other countries as different between them as Germany, China and Syria.

  4. Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?

    (a)Law 101/1987 applies exclusively to international commercial disputes and it is almost identical to the UNCITRAL Model Law of 1985.

    (b) The only addition to the Law 101/1987 is the definition of “commercial arbitration” and the definitions of “international” and “commercial” disputes. Even though Law 101/1987 incorporates fully the UNCITRAL Model Law, it does not incorporate the amendments which have been made in 2006.

  5. Are there any impending plans to reform the arbitration laws in your country?

    There have been many discussions to reform the framework of Arbitration in Cyprus, however nothing concrete has been initiated.

  6. What arbitral institutions (if any) exist in your country? When were their rules last amended? Are any amendments being considered?

    (a)There are five Arbitral Institutions in Cyprus offering arbitration services, namely: (a) the Arbitration Service of the Cyprus Chamber of Commerce and Industry, (b) the Euro-Mediterranean Alternative Dispute Resolution (EMADRC), (c) the Cyprus Arbitration and Mediation Centre (CAMC), (d) the Cyprus Eurasia Dispute Resolution and Arbitration Centre (CEDRAC) and (e) the Chartered Institute of Arbitrators Cyprus Branch (CIArbs).

    (b)Each institution has its own code of conduct and set of rules and there is no indication of any amendments made to the rules or any amendments being considered.

  7. What are the validity requirements for an arbitration agreement under the laws of your country?

    Law 101/1987 stipulates that an arbitration clause which is an integral part of a contract shall be regarded as an agreement separate from the other terms of the contract. Notwithstanding the above, an arbitral tribunal’s decision which declares the contract void from the outset shall not automatically give rise to the nullity of the arbitration clause.

  8. Are arbitration clauses considered separable from the main contract?

    Nothing except than to say they permitted. No statutory provisions constraining parties from entering into multi-party or multi-contract arbitration exist.

  9. Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?

    Nothing except than to say they permitted. No statutory provisions constraining parties from entering into multi-party or multi-contract arbitration exist.

  10. In what instances can third parties or non-signatories be bound by an arbitration agreement?

    According to Cypriot Law on arbitration, an arbitral tribunal shall not assume jurisdiction over third parties who are not signatories and therefore not contractually bound by the arbitration agreement without their consent. However, other members may be bound to an arbitration agreement made between two parties when applying the group of companies’ doctrine. Also, third parties may be a part of a domestic or international arbitration when summoned to appear before the tribunal in order to testify or produce documents, but on the other hand they wouldn’t be bound to take part in arbitration proceedings and produce documents if they wouldn’t have been compelled to do so at a trial.

  11. How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?

    (a)According to Section 28 (1) of Law 101/1987, the parties to an international commercial arbitration will have the freedom to decide themselves the law which will apply to the substance of their dispute. Failing this, the Arbitral Tribunal will have the discretion to apply the law which it considers applicable to a particular dispute.

    (b) In the absence of a choice of law of the parties, the Cyprus arbitration tribunal will apply by default Cyprus law.

  12. Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?

    (a)The types of disputes which are considered non-arbitrable are criminal, matrimonial and family matters and disputes concerning minors and disputes of public policy.

    (b)There hasn’t been any evolution in recent years.

  13. In your country, are there any restrictions in the appointment of arbitrators?

    Arbitration Law in Cyprus does not have any restrictions as to who may act as an arbitrator. The parties can appoint anyone they deem fit depending on the nature of the dispute referred for arbitration. The arbitrator may be a retired judge, a lawyer or any other professional.

  14. Are there any default requirements as to the selection of a tribunal?

    If there is no prior agreement between the parties Law 101/1987 sets out a default appointment procedure for International Arbitrations. It provides that in case arbitration involves three arbitrators, each party will appoint one arbitrator and the two arbitrators will appoint a third arbitrator. Alternatively, if the arbitration is handled by a sole arbitrator and the parties fail to come to an agreement as to this appointment, the Court itself shall appoint an arbitrator upon request by one of the parties.

  15. Can the local courts intervene in the selection of arbitrators? If so, how?

    Local Courts may intervene in the selection of arbitrators according to Law 101/1987, in case:

    a) one of the parties fails to act according to the agreement, or
    b) the parties or the two arbitrators fail to come to an agreement, or
    c) a third party, natural or legal person including the arbitral tribunal fail to act according to the expected procedure agreed.

    In either case, following a request by one of the parties, the court will have the power to take the necessary steps unless the parties agree otherwise for the appointment of arbitrator(s). Further, local Courts can assist in domestic and international arbitrations at the request of an Arbitral Tribunal or a party following agreement of the tribunal. In addition, Cap. 4 provides power to the Court to intervene in the appointment process of Arbitrators.

  16. Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge?

    (a)The Court may remove an arbitrator(s) following request by any of the parties to the arbitration and appoint any person(s) to act as arbitrator(s) in their place.

    (b) There are various grounds all stipulated in the laws of Cyprus. Misconduct is a popular ground, bias is another. Also, questioning of the arbitrator’s qualifications especially in cases of purely technical disputes.

    (c) The Law provides that the parties to the agreement shall be free to agree on the procedure for challenging the appointment of an arbitrator and if no such procedure is agreed, a party shall within fifteen days challenge the arbitrator to the Arbitral Tribunal if he becomes aware of any justifiable doubts of the arbitrator’s impartiality, independence or disqualification. The proposal for exclusion is submitted to the Court with reasons for the exclusion and the Court will thereafter decide on this matter unless the arbitrator who is proposed to be excluded resigns from his position or the other party agrees to the challenge.

  17. What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?

    In case of a truncated tribunal, the tribunal will continue with the proceedings while complying with Section 14 of Cap. 4 which provides that following removal of an arbitrator(s) by the Court, the Court may -following request from any of the parties to the arbitration agreement- appoint a person(s) to act as arbitrator(s) replacing the person who has been removed. When the arbitrator is terminated by leave of the Court, or when the Court removes a sole arbitrator or all the arbitrators after the commencement of the arbitration, the Court may following request by any of the parties to the arbitration agreement to:

    a) appoint a person to act as the sole arbitrator replacing the person(s) which has been removed or

    b) order that the arbitration agreement ceases to apply in respect of any dispute it’s referred in it.

    A person which has been appointed as arbitrator by the Court in accordance with this section has the power to act and give a decision as if he was appointed according to the provisions of the arbitration agreement.

  18. Are arbitrators immune from liability?

    Arbitrator immunity is not included in any laws or rules of Cyprus.

  19. Is the principle of competence-competence recognised in your country?

    Yes. The doctrine of competence-competence was approved by the Supreme Court of Cyprus in the case of Open Joint Stock Company v Base Metal el al (2003) 1C C.L.R. 1856, whereby according to Section 16 of Law 101/1987, an arbitral tribunal may rule on its own jurisdiction, including ruling on objections to the existence or validity of the arbitration agreement.

  20. What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?

    The courts tend to stay the court procedure provided the breach is raised early on and there’s no apparent reason not to have the dispute arbitrated instead of adjudicated.

  21. How are arbitral proceedings commenced in your country? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?

    (a)According to Cap. 4 arbitration proceedings commence when one of the parties to the arbitration agreement serves notice to the other party(ies) which calls for them to appoint an arbitrator or when the arbitration agreement acknowledges that the referral will be made to a person who is named or referred to in the arbitration agreement and calls him or them to report the dispute to that person.

    (b) there are no special time bars or limitation periods. However the doctrine of “laches” would probably apply. The parties should be aware that once the notice -under (a) above- is given, the appointment of an arbitrator must take place within seven working days from the day that the notice was served, otherwise the Court may appoint an arbitrator following request by the party who had given notice which has powers to take part in the referral and give a decision as if it was appointed with the consent of all the parties.

  22. In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?

    The New York Convention prescribes that a state is not entitled to plead immunity from jurisdiction once it has agreed to submit a dispute to arbitration. By agreeing to arbitrate a dispute, the state essentially waives the immunity from jurisdiction offence. However, it is not common in Cyprus for the Cyprus government to concede to arbitration clauses.

  23. What happens when a respondent fails to participate in the arbitration? Can the local courts compel participation?

    (a)Unless otherwise agreed by the parties, if a respondent fails to participate in the arbitration pursuant to Section 25 (c) of Law 101/1987 the arbitral tribunal may continue the proceedings without treating the respondent’s failure as an admission of the claimant’s allegations.

    (b) No the local courts cannot. But they can do so indirectly by stopping court proceedings brought by him either in the form of claim or as counter-claim.

  24. Can local courts order third parties to participate in arbitration proceedings in your country?

    No.

  25. What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?

    (a) The same interim measures pertinent to court proceedings. Freezing orders, disclosure orders, Chabra orders, Norwich Pharmacal etc.

    (b) Yes, if is an international arbitration (provided, that is, that Law 101/87 is applicable) interim measures are available in anticipation of the constitution of the tribunal.

  26. Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence? Can local courts compel witnesses to participate in arbitration proceedings?

    (a)There are no specific rules regarding the submission and admissibility of evidence set out but evidence law as applied in the civil jurisdiction of the Cyprus Courts tend to be taken into consideration and generally adhered to.

    (b)Under Article 27 of Law 101/87, the arbitral tribunal, or one of the parties with the approval of the tribunal, may request the assistance of the Court in the process of collection of evidence. The Court may satisfy the party’s claim within its jurisdiction and according to the provisions set out regarding the collection of evidence.
    (c)Article 17 of Cap. 4, provides that each party of the arbitration agreement may refer to the Court for the issuance of a warrant that compels any witness to appear in Court in order to be examined or to present any document.

  27. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?

    Under the Code of Conduct Regulations of the Cyprus Bar Association, Article 34 provides that, the regulation applies to the relations between advocates and judges, also applies to their relations with arbitrators, experts or any other persons occasionally called to assist the Judge or the arbitrator.

  28. In your country, are there any rules with respect to the confidentiality of arbitration proceedings?

    Article 43, Section IV of CEDRAC Arbitration Rules, provides that a general principle of confidentiality towards all awards and orders is undertaken by the parties, unless expressly stated otherwise in their agreement. Material submitted by another party in the framework of the proceedings shall also be confidential. The deliberations of the tribunal are also confidential.

  29. How are the costs of arbitration proceedings estimated and allocated?

    Article 23 of Cap. 4, provides that any provision in the arbitration agreement, to the effect that the parties, will bear their own costs of the reference or award or any part thereof, shall be void. Any such provision shall not be void when it forms part of an agreement to submit to arbitration, in a dispute arising out of the signing of such agreement.

    The estimation of such costs is at the discretion of the Court.

  30. Can pre- and post-award interest be included on the principal claim and costs incurred?

    Arbitration Law allows the tribunals to direct accordingly on interest rates. Where the law does not provide express provisions as to interest, the Tribunal can make an award based on simple or compound interest. Unless the arbitral award decided otherwise, under Article 22, Cap. 4, the amount of such award bears statutory interest, from the date of judgement.

  31. What legal requirements are there in your country for the recognition and enforcement of an award? Is there a requirement that the award be reasoned, i.e. substantiated and motivated?

    (a)Under the International Commercial Arbitration Act of 1987 (101/1987), Article 35(1) provides that, an arbitration award, irrespective of the country in which it was issued, shall be declared binding. The Court, at the written request of any of the parties, shall issue an order of enforcement of the award, without prejudice to the provisions of this or the following article. Under Article 35(2), the legal requirements for recognizing or enforcing an award are, that the party relying on the award or seeking its enforcement, shall provide the duly substantiated original or duly substantiated copy of the award and arbitration agreement, as provided in Article 7 of the Law. If the award and arbitration agreement are not written in the official language of the Republic of Cyprus, the Court may require the furnishing of a duly certified translation thereof in the official Language of the Republic. In addition, Cyprus is bound to recognize and enforce awards made in foreign states that are signatories to the New York Convention. In accordance with the Civil Procedure Rules of Cyprus, under Order 49, Article 13 of the Arbitration process, ‘the award shall be in writing signed by the arbitrator; it shall be sent to the Registrar in a sealed cover together with the copy of the order of reference, the copies of the notes of the proceedings before the Court shall be handed to the arbitrator pursuant to Rule 8 of this Order and the arbitrator's own notes of the proceedings before him. Any documents and exhibits put in evidence before him shall be sent by him at the same time in a separate sealed cover with a distinguishing label. Save as provided in Rule 16 of this Order, copies of the papers sent by the arbitrator shall be furnished to any party upon payment of the prescribed fee. The Registrar shall note on the envelopes the day and time when he received them’.

    (b) Not explicitly. However, if it’s not, the Respondent might be able to raise a sound objection to its recognition and enforcement.

  32. What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?

    (a) Law 121(I)/2000 which is the regulatory legal frame on the procedural matters of the enforcement proceedings provides for a rather strict and concrete timeline from first step to up to final judgment. Taken on face value the timeframe set does not extent more than 3-4 months. In practice however, it could take -depending on the politics of parties involved- two or three times am much. As a rule of thumb, 8-12 months would be a realistic estimate.

    (b) Only if the award itself was granted on an ex-parte basis.

  33. Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?

    Under the 101/1987 Law, Article 35(1), the arbitral award, irrespective of the county in which it was issued, is declared binding. The only difference is that if the context of the award is not in the official language of the Republic of Cyprus, the Tribunal must be furnished with a duly certified translation of the award in the official language of the Republic.

  34. Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?

    The Arbitration Law (Cap. 4), imposes no limits to the types of remedies that the Tribunal can award. Annex I, section 8 is the only reference made in the Law regarding remedies. It provides that, an arbitrator shall have the same authority as courts to order the specific execution of any contract except for a contract relating to land or any interest in land. Punitive Damages is an example of remedy that must be examined by the Tribunal based on each jurisdiction. The tribunal must examine whether punitive damages can be awarded under the law applicable to the substance of the dispute and the provisions of the arbitration agreement. It is prudent for a Tribunal to ensure that a punitive remedy is severable in the event of refusal to enforce the arbitral award on a claim that it contradicts the public policy of the country which does not itself recognise punitive remedies. Cypriot case-law emphasises that punitive damages are prohibited in contractual actions.

  35. Can arbitration awards be appealed or challenged in local courts? What are the grounds and procedure?

    (a)Yes, arbitration awards can be appealed and challenged. In accordance with Article 20(2) Cap. 4, the award can be annulled when the arbitrator has misbehaved or has misconducted the proceedings; when the arbitration has been carried out improperly or the arbitration award has been rendered improper, the Court may overturn the arbitration award.

    (b)In accordance with Article 34(2) of the 101/1987 Law, an arbitral award shall be annulled by the Court only if one of the following:

    (a) The Party submitting the application for annulment shall demonstrate that:

    (i) a party to the arbitration agreement referred to in section 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the Republic of Cyprus; or

    (ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

    (iii) the award deals with dispute not contemplated by or not failing within the terms of the submission to arbitration, provided that, if the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

    (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreements of the parties, unless such agreements was in conflict with the provision of the Law, or, failing such agreement, was not in accordance with this Law; or

    (b) a Court finds that:

    (i) the subject – matter of the dispute is not capable of settlement by arbitration under the law of the Republic of Cyprus; or

    (ii) the award is in conflict with provisions relating to public order of the Republic of Cyprus.

  36. Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?

    In accordance with Article 28 (1) of the Contract Law, Cap. 149, every agreement which absolutely restricts a party from enforcing his rights under or in respect of any contract, or which limits the time within which he can enforce his rights, is void to that extent.

    On the other hand, under Article 31, Section III of the Arbitration Rules of 2011 set out by the Cyprus Eurasia Dispute Resolution and Arbitration Center, failure by any of the parties to comply with these Rules or with any requirements of the Arbitration Agreement shall be deemed to be a waiver of the right of such party to make an objection, unless such party can show that, under the circumstances, its failure to object was justified.

  37. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

    As a general rule, a state cannot plead state immunity once it has agreed to have a dispute be solved by arbitration. When a Party, after having lost the arbitration proceedings, raises a question of State immunity regarding the enforcement of the award, it is necessary to examine the national law of the State that sought enforcement.

  38. In what instances can third parties or non-signatories be bound by an award? To what extent might a third party challenge the recognition of an award?

    According to Cypriot Law on arbitration, an arbitral tribunal shall not assume jurisdiction over third parties who are not signatories and therefore not contractually bound by the arbitration agreement without their consent. However, other members may be bound to an arbitration agreement made between two parties when applying the group of companies’ doctrine. Also, third parties may be a part of a domestic or international arbitration when summoned to appear before the tribunal in order to testify or produce documents, but on the other hand they wouldn’t be bound to take part in arbitration proceedings and produce documents if they wouldn’t have been compelled to do so at a trial.

  39. Have courts in your jurisdiction considered third party funding in connection with arbitration proceedings recently?

    No.

  40. Is emergency arbitrator relief available in your country? Is this frequently used?

    No, it is not.

  41. Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?

    (a)According to Article 42 (2), Section IV of the Arbitration Rules of 2011 set out by the Cyprus Eurasia Dispute Resolution and Arbitration Center (CEDRAC), all cases in which the claim does not exceed 10.000.000€, the proceedings shall be conducted in accordance with the Expedited Procedure set forth in Article 41 of the Rules. For example, CEDRAC may shorten the time-limits for the appointment of arbitrators. The award shall be made within six months from the date the Center transmitted the file to the arbitral tribunal and only in exceptional circumstances the Center may extent the time limit.

    (b) No, they are not.

  42. Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?

    No.

  43. Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? If so, how?

    The organisations that support arbitrators in Cyprus such as CEDRAC or CIArbs Cyprus Branch, are of different racial, social, age and origin backgrounds, but other than that there is no actively promoted diversification.

  44. Have there been any recent court decisions in your country considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?

    Not an award already recognised/enforced in the Courts of another jurisdiction.

    But in 2011, an arbitral tribunal -of the International Commercial Arbitration Court at the Russian Federation Chamber of Commerce and Industry- handed down an award which the Applicants sought to have it recognised and enforced in Cyprus. The First Instance Court -the District Court of Limassol- denied the recognition and enforcement of the award. However, the Court of Appeal in 2017 overturned the First Instance Court decision and permitted the enforcement.

  45. Is corruption an issue that is regularly raised in your jurisdiction? What standard do local courts apply for proving of corruption?

    (a) No, it is not.

    (b) The standard would be that of the balance of probabilities for civil cases and for criminal cases the one that dictates that an offence should be proven beyond any reasonable doubt.

  46. Have there been any recent court decisions in your country considering the definition and application of “public policy” in the context of enforcing or setting aside an arbitral award?

    Not with the Court of Appeal, not recently. The definitive precedent on the issue is still the 20 years old Republic of Kenya v. Bank Fur Arbeit Und Wirtschaft AG (1999) 1 A.A.D. 585. There it was decided that, the term ‘public policy’ encompasses the fundamental values that are recognized by a society in a given period, that governs the transactions and events of its members’ lives. However, in the First Instance Courts around the country the defence of “public policy” merges every now and again. The most recent case on “public policy” is probably -first instance courts decisions are not exhaustively listed- an application for enforcement of a London Court of International Arbitration award tried by the District Court of Limassol in which the Defendants put forward the “public policy” defence on the grounds that under Cyprus law the notion of “reflecting loss” is not recognised and therefore the award should not be recognised as contrary to “public policy”. The District Court of Limassol held that the award was not a “reflecting loss” award but it rather awarded damages on the grounds of breach of contract and therefore “public policy” rule was not infringed. The District Court of Limassol judgment was given on 18 July 2018. It is unclear at this stage whether an appeal was filed.

  47. Have there been any recent court decisions in your country considering the judgment of the Court of Justice of the European Union in Slovak Republic v Achmea BV (Case C-284/16) with respect to intra-European Union bilateral investment treaties or the Energy Charter Treaty? Are there any pending decisions?

    No.

  48. Have there are been any recent decisions in your country considering the General Court of the European Union’s decision Micula & ors (Joined Cases T-624/15, T-694/15 and T-694.15), ECLI:EU:T:2019:423, dated 18 June 2019? Are there any pending decisions?

    No.