Cyprus has a familiar law for international arbitrations based on the 1985 UNCITRAL Model Law, courts supportive of arbitration, and it is a party to the New York Convention, thus facilitating the enforcement of Cyprus-seated awards around the world.
Regulatory Framework
International arbitrations in Cyprus are governed by the International Commercial Arbitration Law (Law No. 101/1987) (the “Cypriot Arbitration Law”). By contrast, domestic arbitrations in Cyprus are governed by a different law, i.e., the Arbitration Law 1944 (Cap. 4).
The Cypriot Arbitration Law is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration (“1985 Model Law”), widely recognised as a practical framework for international arbitration proceedings. The 2006 amendments to the UNCITRAL Model Law have not been adopted in Cyprus, however. The Cypriot Arbitration Law sets out the overarching procedure for conducting international arbitrations in Cyprus, including the appointment of arbitrators, the conduct of arbitration proceedings, and the recognition and enforcement of arbitral awards.
Cyprus is also a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1980 (“New York Convention”), which currently has 172 parties (see status of New York Convention in March 2023), thus ensuring the mutual recognition and enforcement of Cypriot awards worldwide.
Cyprus’ legal system is based on the English common law, which is the most widespread legal system in the world and is known for being transparent, fair and predictable. As a member of the European Union, Cyprus is also bound by European Union law.
The Arbitration Agreement
Under Section 7(2) of the Cypriot Arbitration Law, an arbitration agreement shall be in writing.
Under Section 7(3) of the Cypriot Arbitration Law, an arbitration agreement is deemed to be in writing if:
it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract.
The doctrine of separability of an arbitration clause is set out in Section 16(1) of the Cypriot Arbitration Law, which provides that “an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.”
The Arbitral Tribunal
1) Number of Arbitrators
Under Section 10(1) of the Cypriot Arbitration Law, the parties are free to agree on the number of arbitrators. In the absence of an agreement by the parties, the default number of arbitrators is three, pursuant to Section 10(2) of the Cypriot Arbitration Law (“Failing [an agreement of the parties], the number of arbitrators shall be three.”). Similarly, Article 7(1) of the UNCITRAL Arbitration Rules also provides for three arbitrators as the default option (“If the parties have not previously agreed on the number of arbitrators […] three arbitrators shall be appointed.”)
To compare, a sole arbitrator is the default option under other leading arbitration laws, such as Section 15(3) of the 1996 English Arbitration Act (“If there is no agreement as to the number of arbitrators, the tribunal shall consist of a sole arbitrator.”) and leading institutional arbitration rules, such as Article 5(8) of the 2020 LCIA Arbitration Rules and Article 12(2) of the 2021 ICC Arbitration Rules. A sole arbitrator reduces the cost of arbitration and often leads to speedier decisions.
2) Constitution of the Arbitral Tribunal in Cyprus
The parties are also free to agree on the procedure for the constitution of the arbitral tribunal (Section 11 of the Cypriot Arbitration Law).
Absent an agreement, the default rules of Section 11 of the Cypriot Arbitration Law apply, depending on whether there are three arbitrators (in which case, each party appoints one arbitrator and the two so appointed then appoint the presiding arbitrator) or a sole arbitrator (in which case, the parties shall agree on an individual).
3) Challenge of Arbitrators
Under Section 12 of the Cypriot Arbitration Law, an arbitrator may be challenged only if (a) circumstances exist that “give rise to justifiable doubts as to his impartiality or independence” or (b) “if he does not possess qualifications agreed to by the parties.”
Under Section 13(2) of the Cypriot Arbitration Law, a challenge must be raised by a party before the arbitral tribunal within fifteen days after becoming aware of the constitution of the arbitral tribunal or any circumstances that could give rise to justifiable doubts as to the arbitrator’s impartiality or independence.
An arbitral tribunal has the power to rule on its own jurisdiction under the internationally recognised principle of kompetenz–kompetenz, which is reflected in Section 16(1) of the Cypriot Arbitration Law (“The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.”). This principle is essential in practice because, without it, a party could easily stall an arbitration at any time by raising a jurisdictional objection that would have to be resolved in likely lengthy and costly court proceedings.
The arbitral tribunal’s power to rule on its jurisdiction is neither exclusive nor final, however. If the arbitral tribunal rejects a challenge, a party may challenge the decision of the arbitral tribunal within 30 days before Cypriot courts (whose decision shall not be subject to any further appeal), as envisaged in Section 13(3) of the Cypriot Arbitration Law. Apart from the aforementioned immediate review by a state court, a tribunal’s decision on its jurisdiction is also subject to later court review in potential setting aside proceedings under Section 34, as well as in potential recognition and enforcement proceedings under Section 36 of the Cypriot Arbitration Law.
4) Liability of Arbitrators
The Cypriot Arbitration Law is silent on the issue of liability of arbitrators, unlike Section 22(1) of the 2010 Irish Arbitration Act, for instance, which provides that “[a]n arbitrator shall not be liable in any proceedings for anything done or omitted in the discharge or purported discharge of his or her functions.”
Arbitration Costs
The Cypriot Arbitration Law is also silent on the issue of the costs of arbitration. Provisions dealing with arbitration costs are commonly found in institutional arbitration rules (such as Article 38 of the 2021 ICC Arbitration Rules) and other arbitration laws (such as Section 21 of the 2010 Irish Arbitration Act), which normally specify the categories of arbitration costs and empower the arbitral tribunal to fix the arbitration costs in its final award.
The Cypriot Arbitration Law is also silent on the issue of the allocation of costs. In Cyprus, the losing party generally bears the costs of the winning party, however, as is the case under English civil litigation and English-seated arbitrations (see, for example, Section 61(2) of the 1996 English Arbitration Act, which provides, “Unless the parties otherwise agree, the tribunal shall award costs on the general principle that costs should follow the event except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs.”).
The Cypriot Arbitration Law does not deal with interest either, unlike Section 49 (Interest) of the 1996 English Arbitration Act, for instance, which empowers a tribunal to award interest (simple or compound interest) “from such dates, at such rates and with such rests as it considers meets the justice of the case”.
Challenge of Arbitral Awards
An arbitral award rendered in Cyprus cannot be challenged on the merits or for an error of law (unlike English arbitrations, where an appeal is permitted for a question of law under Section 69 of the 1996 English Arbitration Act).
An arbitral award may be set aside on very limited grounds specified in Section 34 of the Cypriot Arbitration Law, including, for instance, if a party was not given proper notice of the appointment of an arbitrator or the arbitral proceedings or was otherwise unable to present its case. An application to set aside an arbitral award must be made within three months from the date on which the party making the application received the award.
Recognition and Enforcement of Arbitral Awards
Section 36 of the Cypriot Arbitration Law sets out the limited grounds for resisting the recognition and enforcement of an arbitral award, which mirror the grounds set out in Article V of the New York Convention, as well as the grounds for setting aside an arbitral award specified in Section 34 of the Cypriot Arbitration Law.
The Cypriot Arbitration Law is silent on the limitation period for the enforcement of an arbitration award, however. It could be assumed that the general limitation period of ten years stipulated in Section 4 of the Limitation of Actions Law No. 66(I)/2012 applies (“Unless otherwise provided for in any other law, no action shall be brought upon, for, or in respect of, any cause of action after the expiration of ten years from the day of completion of the basis of the claim.”). The limitation period could also arguably be six years, however, as held in the English judgement of Ability SA v Tinna Oils and Chemicals Limited [2009] EWCA Civ 1330, which has a persuasive effect in Cyprus, as Cypriot law is largely based on English common law. It is always prudent to attempt to enforce an arbitration award as swiftly as possible, however.
Arbitral Institutions
The most prominent arbitration institutions in Cyprus are:
- the Cyprus Arbitration and Mediation Centre (“CAMC”), which was established in 2010. CAMC has its own CAMC Arbitration Rules and model arbitration clause for incorporation in contracts (“Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof; shall be settled by arbitration in accordance with the CAMC Arbitration Rules. The appointing authority shall be the Cyprus Arbitration and Mediation Centre.”).
- the Cyprus Eurasia Dispute Resolution and Arbitration Center (“CEDRAC”), which was established in 2011. CEDRAC also has its own CEDRAC Arbitration Rules, reasonable CEDRAC Schedule of Costs and model arbitration clause (“Any dispute, controversy or claim arising out of or relating to this contract, including but not limited to the formation, performance, breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the CEDRAC Arbitration Rules.”).
* * *
In conclusion, international arbitrations in Cyprus are governed by the 1987 Cypriot Arbitration Law, which mirrors the 1985 Model Law, thus providing a familiar and reliable framework for international arbitrations. Nevertheless, it would be prudent for Cyprus to revise its arbitration law to include provisions regarding, inter alia, the allocation of arbitration costs, interest, the liability of arbitrators and the time limit for enforcing arbitral awards, in order to stay up-to-date with recent developments, enhance legal certainty and become a competitive legal seat for international arbitrations.
