B. Cyprus as a suitable Venue #9;
C. Cyprus Arbitration Law #9;
D. The Cyprus Law on International Commercial Arbitration
E. Convention of the Recognition and
Enforcement of Foreign Arbitral Awards F. Appendix 1: The International Commercial Arbitration Law 1987
Appendix 2: New York Convention 1958 #9;
Already a well-established offshore and shipping centre, Cyprus is now ready to become a popular venue for international arbitrations. Its prompt ratification of the Uncitral Model Law on International Commercial Arbitration (the second country to do so after Canada) has added to the Republic's existing advantages and gone a long way towards establishing it as an extremely suitable venue.
Parties to international arbitration seeking a suitable venue have a difficult decision to make. The venue must be both neutral and politically stable and its legal system both sophisticated and effective. No legal obstacle must exist which would jeopardise the conduct of the arbitration and equally importantly, the successful party must be able to obtain legal enforcement in the country where the other party has assets.
Cyprus has all this and more to offer. We hope that this booklet will give the reader a fair idea of the advantages of choosing Cyprus as a venue for international commercial arbitration and will help to explain the working of its laws on such arbitrations.
Cyprus' strategic geographic location, excellent commercial infrastructure, political stability, favourable tax incentives, high standard of living and European lifestyle have contributed towards its development as an important financial centre.
Due to its numerous advantages, the island compares favourably with all other similar locations. Many of these benefits are inherent in the nature of the country itself whilst others have been specifically tailored to meet the needs of foreign investors and parties to international arbitrations.
While the range and extent of advantages are vast, the following are the most appealing:
Though located in the often stormy and turbulent Middle East area, Cyprus is a centre of democracy and stability where businessmen from all nations are able to conduct their affairs in a harmonious and friendly environment. The rule of law is a well-entrenched principle which is endorsed by free elections and a Western parliamentary system. In addition, the authorities' desire to assist foreign businessmen is strengthened by the friendly and enterprising spirit of the Cypriot people themselves.
Two British bases are maintained on the Island, and there is also a strong presence of United Nations forces consisting of, inter alia, British, Irish, Canadian, German and Scandinavian troops. The result is that there has been no major incident for over twelve years and the stability of the Island is secured.
2. Geographic Location
Cyprus is privileged to enjoy what is possibly one of the most strategic geographic locations in the world. The Island is situated at the crossroads of Europe, Asia and Africa and forms a gateway to the oil-rich Arab states and the rest of the Middle East.
In addition, the Island's time zone is convenient to all other regional centres and this is enhanced by its excellent telecommunication links. It is also within easy flying time of the rest of Europe and the Middle East and the Island's efficient airport facilities (at Larnaca and Paphos) avail daily flights to all major destinations in these areas. Above all visitors from more severe climates will enjoy the excellent weather conditions prevailing in Cyprus.
While the policy of the authorities has. been manifestly in favour of assisting and promoting foreign participation in the Cypriot economy, this has not in any way operated to adversely affect their respectability or good standing in the eyes of the international business community or foreign income tax authorities.
Indeed, the authorities have admirably succeeded in maintaining a balance between upholding their respectability while also avoiding the imposition of restrictive and suffocating bureaucratic regulations and restrictions.
The commercial infrastructure of Cyprus, which is refined and well developed, lends itself ideally to all forms of business activities. In particular it avails a civilized environment, pleasant working conditions, comfortable accommodation and comparatively low operational costs and living expenses.
In addition, a wide range of professional services are offered, including UK trained lawyers and a number of international accounting firms. Their advice, which is usually based on extensive experience, may be relied upon with confidence and can be obtained at reasonable rates.
The English legal system, practice and procedures, which the Island acquired during the time it was a British colony, have continued after independence despite the subsequent promulgation of further legislation. Moreover, although the official languages of the Republic are Greek and Turkish, English is spoken by the majority of the population. It is also a language which is taught extensively in schools and is greatly used in commerce and administration. Business transactions and negotiations will undoubtedly be facilitated through communication and co-operation in a language with which all parties are familiar.
The Island's telecommunication system compares favourably with the highest international standards and direct dialling telephone connections are available to all world centres. The Cyprus international automatic telex exchange extends to a vast network of countries and efficient facsimile, datel, radiotelegraph, and radiotelephone services are available. The postal service is fast and regular and is supported by numerous courier services. From the two international airports at Larnaca and Paphos, daily flights are available to destinations in Europe, Asia, Africa and the Middle East. Cyprus is one of the new places that have flights to Bagdad and Bahrain.
The Cypriot authorities are firmly committed to forging and maintaining strong bonds of friendship with all neighbouring states and with countries further abroad. In addition, the official policy is one of fostering and promoting good relations with all international organisations.
Cyprus is also a member of numerous international associations, including the United Nations, the Council of Europe, the Commonwealth, and the Non-Aligned Movement and has entered into an agreement for a Customs Union with the European Economic Community, which is anticipated to lead to full membership.
The Island's enormous goodwill blends with its other more obvious advantages, to make it one of the most suitable world locations for all business activities.
C. CYPRUS ARBITRATION LAW
Chapter 4 of the codified laws of Cyprus, based on and similar to the U.K. Arbitration Act 1950, is the vehicle used for domestic arbitrations and for a long time was the only existing law on arbitration. As Cyprus began to involve itself in international arbitrations, it was found that this law was suitable, mainly because it allows for extensive intervention by the Courts at all stages of the proceedings. The parties were tempted to use these rights as tactics to delay the proceedings. Parties to international commercial arbitration seek speedy resolutions and under the circumstances would not have chosen Cyprus as the venue for their arbitration. In order to avoid this situation, the law was adapted to make it more suitable for international commercial arbitrations.
It was convenient that at the stage when the Cyprus legislature had to consider the manner in which it was to adapt the 16w, the United Nations Commission of International Trade Law (UNCITRAL) adopted a model law on International Commercial Arbitration. Cyprus decided to adopt this law with only minor amendments. It has not replaced Cap. 4 but runs parallel thereto.
Applicable only to international commercial arbitration, the law clearly defines the words "international arbitration" as an arbitration between two parties who have their place of business in different states.
The word "commercial" is defined as referring to matters "arising from relationships of a commercial nature" allowing for a wide interpretation.
The most important aspect of this law is the fact that the intervention of the courts is minimised. Only in those instances specifically mentioned by the law are the courts entitled to intervene. These are briefly:
Prior to delivery of the award:
(a) the court shall appoint an arbitrator/s if one of the parties or the party- appointed arbitrators fail to do so
(b) if the tribunal dismisses a challenge against an arbitrator, the Court shall deal with the challenge
(c) the court shall decide on the termination of an arbitrator's mandate if he fails to discharge his duties or is guilty of undue delay in doing so
(d) the court may review a ruling of the tribunal that it has jurisdiction to deal with the matter.
These are similar to the powers given to a Court under Cap. 4. However, unlike under Cap. 4, these decisions are not subject to appeal.
After the delivery of an award, the court may set aside an award or refuse recognition or enforcement on the grounds of:
(a) incapacity of the parties
(b) invalidity of the arbitration agreement
(e) defective composition of the tribunal
(f) if the subject matter of the dispute is not capable of settlement by arbitration under the law of Cyprus
(g) if the award is contrary to the public order of the Republic of Cyprus.
Failing such grounds, the award is binding on the parties and cannot be the subject of an appeal. It is important therefore to distinguish between the power to set aside an award which can only be exercised on the basis of one or more of the above grounds and a general power of appeal (whether for error of law or otherwise) which simply does not exist.
Another important factor is what has been called Party Autonomy. The par- ties are given complete power to decide on the procedure and a variety of other matters relating to the arbitration. Only if no agreement is reached are alternative provisions made.
The law which applies to the dispute is the one chosen by the parties. If none is chosen, the tribunal decides on which law to apply.
The Cyprus law provides that time shall run against the parties to international commercial arbitrations which, in matters of limitation, shall be governed by the same provisions as those applicable to domestic arbitrations (section 21).
E. CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS
It is of course essential that once an award is made, the successful party is able to enforce it in the country in which the losing party has assets.
The above convention was passed in New York on the 10th June 1958 and signed by Cyprus on the 29th December 1980. It was incorporated in Law 101/87 which repeats the main provisions of the Convention. (See especially Section 36).
It applies to the recognition and enforcement of awards made in the territory of a state other than the state where such recognition is sought and provides in Article III:
"Each contracting state shall recognise arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon".
As a contracting state therefore Cyprus is bound to enforce awards made in foreign states. Whether such foreign states will enforce awards made in Cyprus is dependent on whether they are signatories to the convention. A list of these countries follows.
Algeria 7 February 1989
Antigua and Barbuda 2 February 1989
Argentina 14 March 1989
Australia 26 March 1975
Austria 2 May 1961
Bahrain 6 April 1988
Belgium 18 August 1975
Benin 16 May 1974
Botswana 20 December 1971
Bulgaria 10 October 1961
Burkina Iaso 23 March 1987
Byclorussian SSR 15 November 1960
Cameroon 19 February 1988
Canada 12 May 1986
General African Empire 15 October 1962
Chile 4 September 1975
China 22 January 1987
Columbia 25 September 1979
Costa Rica 26 October 1987
Carba 30 December 1974
Cyprus 29 December 1989
Czechoslovakia 10 July 1959
Democratic Kampuchea 5 January 1960
Denmark 22 December 1972
Djibona 14 June 1983
Dominica 28 October 1988
Escuador 3 January 1962
Egypt 9 March 1959
Finland 19 January 1962
France 26 June 1959
German DR 20 February 1975
Germany, FR of 30 June 1961
Ghana 9 April 1968
Greece 16 July 1962
Guatemala 21 March 1984
Haiti 5 December 1983
Holy See 14 May 1975
Hungary 5 March 1962
India 13 July 1960
Indonesia 7 October 1981
Ireland (Rep.) 12 May 1981
Israel 5 January 1959
Italy 31 January 1969
Japan 20 June 1961
Jordan 15 November 1979
Kenya 10 February 1989
Kuwait 28 April 1978
Lesotho 13 June 1989
Luxembourg 9 September 1983
Madagascar 16 July 1962
Mexico 14 April 1971
Monaco 2 June 1982
Morocco 12 February 1959
Netherlands 24 April 1964
New Zealand 6 January 1983
Niger 14 October 1964
Nigeria 17 March 1970
Norway 14 March 1961
Panama 10 October 1984
Pera 7 July 1988
Philippines 6 July 1967
Poland 3 October 1961
Rep. of Korea 8 February 1973
Romania 13 September 1961
San Marino 17 May 1979
Singapore 21 August 1986
South Africa 3 May 1976
Spain 12 May 1977
Sri Lanka 9 April 1962
Sweden 28 January 1972
Switzerland I June 1965
Syrian Arab Rep 9 March 1959
Thailand 21 December 1959
Trinidad and Tobago 14 February 1966
Tunisia 17 July 1967
Ukrainian SSR 10 October 1960
United Kingdom 24 September 1975
United Republic of Tanzania 13 October 1964
United States of America 30 September 1970
Uruguay 30 March 1983
USSR 24 August 1960
Yugoslavia 26 February 1982
THE INTERNATIONAL COMMERCIAL ARBITRATION LAW, 1987
(English translation prepared by the Service for the Revision and Consolidation of the Cyprus Legislation and issued by the Ministry of Justice)
No. 101 of 1987
A LAW TO PROVIDE FOR INTERNATIONAL ARBITRATION IN COMMER- CIAL MATTERS AND FOR MATTERS CONNECTED THEREWITH
(29th May, 1987)
The House of Representatives enacts as follows:
1. This Law may be cited as the International Commercial Arbitration Law, 1987.
2. (1) In this Law, unless the context requires "arbitration" means any arbitration whether not administered by a permanent arbitral institution;
“arbitral tribunal" means a sole arbitrator or a panel of arbitrators;
"Court" means the competent District Court or a Judge thereof;
"parties to the agreement" or "parties" means the parties which have concluded the arbitration agreement.
(2) "International" is an arbitration if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties have their places of business:
(4) "Commercial" is an arbitration if it refers to matters arising from relationships of a commercial nature, whether contractual or not.
(5) The term "relationships of a commercial nature" includes, but is not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services: distribution agreement; commercial representation or agency; leasing; construction or works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road.
(6) Where a provision of this Law, except section 28, leaves the parties free to determine a certain issue, such freedom includes the right of the parties to authorize a third party, whether an individual or body corporate, including an arbitral institution, to make that determination;
(7) Where a provision of this Law refers to the fact that the parties have agreed or that they may agree or in any other way refers to an agreement of the parties, such agreement includes any arbitration rules referred to in that agreement;
Scope of application
3. (1) This Law shall apply exclusively to international application arbitration subject to any bilateral or multilateral agreement in force in the Republic of Cyprus.
(3) The provisions of this Law shall in no way affect any other Laws by virtue of which certain disputes may not be submitted to arbitration or the Arbitration Law, which shall continue to be in force in relation to arbitration of disputes not failing under the provisions of this Law.
Receipt of written communications
4. (1) Unless otherwise agreed by the parties:
Waiver of right to object
5. A party who knows that any provision of this Law from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time-limit is provided therefor, within such period of time, shall be deemed to have waived his right to object.
Extent of Court intervention
6. In matters governed by this Law, no Court shall intervene except where so provided in this Law.
PART II. - ARBITRATION AGREEMENT
Definition and form of arbitration agreement.
7. (1) "Arbitration agreement" is an agreement by the parties to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(2) The arbitration agreement shall be in writing.
(3) An agreement is 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 or the contract.
Arbitration agreement and substantive claim before Court.
8. (1) A Court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting claim his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
(2) Where an action referred to in sub-section (1) of this section has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the Court.
Interim measures by Court
9. It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a Court an interim measure of protection and for a Court to grant such measure.
PART Ill. - COMPOSITION OF ARBITRAL TRIBUNAL
Number of arbitrators.
10. (1) The parties are free to determine the number of arbitrators.
(2) Failing such determination, the number of arbitrators shall be three. Appointment of arbitrators
11. (1) Subject to the provisions of the following sub-sections of this section, no person shall be precluded by reason of his nationality from acting as an arbitrator, unless otherwise agreed by the parties.
The parties are free to agree on a procedure of appointing the arbitrator, subject to the provisions of sub-sections (4) and (5) of this section.
Grounds for challenge
12. (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall have the same obligation to disclose any such circumstances.
13. (1) The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions of sub-section (3) of this section.
(3) If a challenge under any procedure agreed upon by the parties or under the procedure of sub-section (2) of this section is not successful, the challenging party may request, within thirty days after having received notice of the decision rejecting the challenge, the Court to decide on the challenge, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.
Failure or impossibility to act.
14. (1) If an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay, his mandate terminates if he withdraws from his office or if the parties agree on the termination. Otherwise, if a controversy remains concerning any of these grounds, any party may request the Court to decide on the termination of the mandate, which decision shall be subject to no appeal.
Appointment of substitute arbitrator.
15. Where the mandate of an arbitrator terminates under section 13 or 14 or because of the revocation of his mandate by agreement of the parties or in any other case of termination of his mandate, a substitute arbitrator shall be appointed according to the provisions of section 11 of this Law that were applicable to the appointment of the arbitrator being replaced.
PART IV. - JURISDICTION OF ARBITRAL TRIBUNAL
Competence of arbitral tribunal to rule on its jurisdiction.
16. (1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For the purposes of this sub-section, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
Power of arbitral tribunal to order interim measures.
PART V. – CONDUCT OF ARBITRAL PROCEEDINGS
Equal treatment of parties.
19. (1) Subject to the provisions of the Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.
Place of arbitration.
20. (1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
Commencement of arbitral proceedings.
21. (1) Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
57 of 1964.
22. (1) The parties are free to agree on the language or languages to be used in the arbitral proceedings. Failing such agreement, the arbitral tribunal shall determine the language or languages to be used in the proceedings. This agreement or determination, unless otherwise specified therein, shall apply to any written statement by a party, any hearing and any award, decision or other communications by the arbitral tribunal.
Statements of claim and defence.
23. (1) Unless otherwise agreed by the parties, the statement of claim shall contain the facts supporting the claim, the points at issue and the relief of remedy sought, and the statement of defence shall clearly state the defence in respect of these particulars. The statement of claim and the statement of defence shall be submitted within the time agreed by the parties or determined by the arbitration tribunal and may be accompanied by all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.
Hearings and written proceedings.
24. (1) Subject to any contrary agreement by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials. However, unless the parties have agreed that no hearings shall be held, the arbitral tribunal shall hold such hearings at an appropriate stage of the proceedings, if so requested by a party.
Default of a party.
Appointment of experts.
26. (1) Unless otherwise agreed by the parties, the arbitral tribunal-
Court assistance in taking evidence.
PART VI. - MAKING OF AWARD
AND TERMINATION OF PROCEEDINGS
28. (1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conflict of laws rules.
Decision making by a panel of arbitrators.
30. (1) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form, of an arbitral award on agreed terms.
31. (1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated therein.
32. (1) The arbitral proceedings are terminated by the final award or by an order of the arbitral tribunal in accordance with the following sub-section.
Correction and interpretation of award; additional award.
33. (1) Within thirty days of receipt of the award, unless another period of time has been agreed upon by the parties, a party, with notice to the other party, may:
PART VII. - RECOURSE AGAINST AWARD
Application and grounds for setting aside an award.
34. (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside in accordance with the following provisions of this section.
(ii) the award is in conflict with provisions relating to public order of the Republic of Cyprus.
PART VIII. - RECOGNITION AND ENFORCEMENT
Recognition and enforcement of an award
35. (1) An arbitral award, irrespective of the country in which and enforcement it was made, shall be recognized as binding. Upon application in writing by either party, the Court, shall issue an order of enforcement of the arbitral award, subject to the provisions of this or the following section.
Grounds for refusing recognition or enforcement of an arbitral award.
36. (1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only:
CONVENTION ON THE RECOGNITION AND ENFORCEMENT
OF FOREIGN ARBITRAL AWARDS
Done at New York, 10 June 1958
United Nations, Treaty Series, vol. 330 P. 38 No. 4739 (19.59)
3. When signing, ratifying or acceding to this Convention, or notifying extension under article X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.
3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
Each Contracting State shall recognize arbitral awards as binding and en- force them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
(a) The parties to the agreement referred to in article 11 were, under the law applicable to them, 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 country where the award was made; or
(b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V (1) (e), the authority before which the award is sought to be relied upon may if it considers it proper, adjourn the decision of the party claiming enforcement of the award, order the other party to give suitable security.
In the case of a federal non-unitary State, the following provision shall apply:
A contracting State shall not be entitled to avail itself of the present Convention against other Contracting States except to the extent that it is itself bound to apply the Convention.
The Secretary-General of the United Nations shall notify the States contemplated in article VIII of the following:
2. The Secretary-General of the United Nations shall transmit a certified copy of this Convention to the States contemplated in article VIII.
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