Reflections On The ‘Culture’ Of Arbitration In Cyprus

By Maria Kozakou

Posted: 28th September 2016 08:20

Μechanisms of alternative dispute resolution (‘ADR’) have been a long time brewing, braising, and accruing.The documented history of formal peace and conflict practices begins with the Kingdom of Mari (Modern Day Syria) in 1800 B.C. In addition, it is a common perception that arbitration in Ancient Greece mirrored modern day practice, providing parties with a flexible means to resolve their disputes. Significantly, references to arbitration can be found in the poem of Homer (“Iliad”) and Hesiod (“Works and Days”). Arbitration was also used extensively in the classical antiquity, where the likes of Aristotle and Cicero sang its praises. Even many of America’s most famous figures—such as George Washington, Benjamin Franklin, and Abraham Lincoln—were advocates of dispute resolution. However, the conflict resolution movement only began to define itself as a distinct field of study and practice following World War II.
 
The case of Cyprus
 
In the case of Cyprus, it is not surprising that in recent years, arbitration became progressively more popular. A convincing explanation is the fact that the island is constituted by all the characteristics which make a country an attractive venue for international arbitration, such as (a) having an ideal geographical position being situated in the middle of three continents; (b) membership to the European Union; (c) political and legal stability; (d) quality of service; (e) impartiality; and (f) confidentiality and secrecy.
 
In Cyprus, there is a distinction between domestic arbitration and international commercial arbitration:
 
(A) Domestic arbitrations conducted in Cyprus are covered by the 1944 Arbitration Law (Cap. 4). This special law sets the framework for arbitrations in Cyprus, including the rules for the arbitration process, the powers and duties of the arbitrator, the rights and obligations of the parties and judicial control of the arbitration process itself. The Arbitration Law resembles the Arbitration Act 1950 that was adopted, often with minimal changes, as the arbitration law, in most British colonies and later the British Commonwealth countries.
 
This legal framework is complemented by Articles 35-39 of the Courts of Justice Law 1960 (N.14 / 1960), Order 49 of the Civil Procedure Rules and certain specific Acts such as the Cooperative Societies Law of 1985 (N.22 / 1985), the Law on Labour Disputes (Conciliation, Arbitration and Research) Act (Cap. 187) and the Law on Extrajudicial Settlement of Consumer Claims Via Arbitration (Law. 78 (I) / 2011), which promote the out-of-court settlement of consumer claims.
 
(B) The “internationalisation” of arbitration in Cyprus commenced with the ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 through Cyprus Law 84/1979. Law 84/1978 was supplemented by the International Commercial Arbitration Law, N. 101/1987 (hereinafter referred to as “ICAL”) which provides that, apart from sections 8, 9, 35 and 36, it is the exclusive law governing international commercial arbitrations which take place in the Republic of Cyprus. This Law adopts the central ideas and the whole of the Model Law provisions on Arbitration (Model Arbitration Law). Regarding the field of investments, Cyprus is a party to numerous multilateral agreements and has signed bilateral investment treaties with 23 countries, including China, Greece, Israel, Qatar, Syria and the United States. These guarantee protection of investments, carried out by a national of one contracting state, in another contracting state and provide regulations for settling any disputes that may arise from them.
 
There is a general consensus that legal framework which regulates international arbitration can look squarely in the eyes of any national legislation in the world. Τo demonstrate its soundness and adequacy we need to only take a look at the following characteristic and essential provisions:
 
To begin with, the well-known doctrine of competence-competence, a fundamental principle of international arbitration providing arbitral tribunals with the power to determine their own jurisdiction, applies in Cyprus and is embedded in section 16 of the ICAL. Further to this, the doctrine of separability, which provides that an arbitration agreement contained in a written contract is to be considered independently from the other terms of the contract and the main contract in general, also applies in Cyprus and is also found in section 16 of the ICAL.
 
Regarding interim relief, it is very common for Cypriot lawyers to rely on Section 9 and 17 of ICAL, in order to secure the granting of injunctions restraining companies or individuals involved in arbitral proceedings from disposing of their assets. In turn, this ensures that the successful party will not be frustrated in its attempt to enforce an award in its favour.
 
Moreover, unlike the domestic Arbitration Law, ICAL (particularly Section 6) prohibits the intervention of the courts, except where the Law expressly permits their involvement. That phenomenon signifies a supportive approach towards accepting arbitration as an alternative dispute resolution process both by the Cyprus Courts and by the legislative body.
 
Equally important is Section 34 of ICAL which grants the power to the court to set aside an arbitral award. The section provides a specific and exhaustive list of grounds which require the following: (a) incapacity of the parties; (b) invalidity of the arbitration agreement;(c) lack of proper notice or denial of a party’s right to present his case; (d) lack of jurisdiction of the tribunal; (e) defective composition of the tribunal; (f) the subject matter of the dispute not being capable of settlement by arbitration under the law of Cyprus; (g) or the award being contrary to the public policy of the Republic of Cyprus.
 
Another key component are the provisions of Section 35 of the ICAL, which mirror Article III of the New York Convention and provide that once an arbitral award is made, it is binding, irrespective of the country in which it was made. The exclusive grounds for refusing recognition or enforcement of an arbitral award are provided by Section 36 of the International Arbitration Law. In cases where recognition or enforcement is sought the court may, if it considers it proper, adjourn its decision or on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security, if an application for setting aside or suspension of an award has been made to the court of the country in which that award was made.
 
Conclusion
 
No longer at the margins of legal practice, arbitration thrives in the mainstream. Undeniably, so great is the level of acceptance of ADR that some have remarked that “we now see ADR processes playing a role in maintaining social stability and order,”and others have now gone one step further as to suggest that there is a legal duty for lawyers to advise clients of ADR options. All over the world, states have modernised their laws of arbitration to take account of this fact.
 
A glaring exampleof a modern, comprehensive system for resolution of international commercial disputes can be found in the ‘arbitration friendly’ legal system of Cyprus. The island’s role as an international financial and investment centre, its strategic location between arbitration centres in Western Europe to the west and Singapore to the east, and its high-quality professional services and infrastructure, are some unique characteristics that definitely make Cyprus an attractive venue for international arbitration, able to become one of the most recognised arbitration centres for Eastern Europe, the Middle East and North Africa.
 

Maria Kozakou joined Christodoulos G. Vassiliades & Co. LLC in July 2015. She is an Advocate in the Litigation and Dispute Resolution department with a focus on Banking Law, Property Law, Administrative and Constitutional Law. She regularly appears before Court in matters related to areas of her expertise.

Maria obtained an LLB at the National and Kapodistrian University of Athens, an MA in Political Science: European Policy and Politics at the University Of Manchester (UK) and a PgDip in International Commercial Arbitration from the Queen Mary, University of London. She is also a member of the Chartered Institute of Arbitration (MCIArb).

Maria can be contacted on + 357 22 55 66 77 or by email at maria.kozakou@vasslaw.net

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