Arbitration: What to bear in mind

Michał Gawlak

Michał Gawlak

Partner / Attorney-at-law

Without a doubt, International Commercial Arbitration is the most preferable and modern method of the so called ADR (Alternative Dispute Resolutions). The most significant reason why parties choose Arbitration in order to resolve their disputes is mainly for the avoidance of delays in resolving the disputes arising between them.

One may argue that there is no effective justice in Cyprus. Judges deliver judgments two or three years after the lawsuit is filed to the Court Registrar due to the procedural rules which have to be followed and the compliance time with the above-mentioned rules, received from the Lawyers. Thus, parties nowadays prefer Arbitration as a Dispute Resolution incorporating to their main agreement an arbitration clause or drafting a separate arbitration agreement.

The delay in justice is not the only reason why parties in a dispute may decide to refer to Arbitration. Arbitration is recognized as an effective ‘tool’ and is enforced on an international level. There are many conventions which refer to the procedure followed in Arbitration, such as the New York Convention for the recognition and enforcement of arbitral awards.

Party autonomy also plays an important role why parties resolve their disputes with Arbitration. Party autonomy is considered to be the fundamental cornerstone of the arbitral proceedings since parties must clearly express their consent to arbitrate. Furthermore, parties are free to choose the arbitrator, the applicable law, the seat of arbitration etc.

What is more important, arbitration procedure is of a confidential nature and third parties are not entitled to attend and/or obtain any information regarding the case. Thus, arbitration offers privacy, a benefit court proceedings are not offering. This is of great significance where the parties in a dispute are internationally known, (e.g. ‘big’ companies) who definitely do not want to have their dispute published.

One must note that Cyprus has two Legislations related to Arbitration. We have the Arbitration Law, Cap.4 (1944) and the International Commercial Arbitration Law (L.101/1987). The First – which unfortunately has not been modified yet – refers to disputes between two or more Cypriot individuals or companies, it is of a domestic enforcement. The Second does not refer to local individuals but it mainly covers the disputes arising out of international nature relationships. So, if a Cyprus Company is entered into agreement with an Italian one, and there is a clause regarding arbitration, the Second one will be enforced, of course if the parties agree to resolve their disputes in Cyprus and/or under the Cyprus Law. This also applies in cases where a Cyprus Company is entered into agreement with non-European Companies.

Amongst the most known Arbitration Institutions are the following: the London Court of International Arbitration, the International Chamber of Commerce, Vienna International Arbitral Centre, the  Arbitration Institute of the Stockholm Chamber of Commerce, American Arbitration Association, China International Economic and Trade Arbitration Commission, Singapore International Arbitration Centre, World Intellectual Property Organization, Arbitration and Mediation Centre etc. One must bear in mind that every Institution has its own Arbitration Procedural Rules and the parties have to be willing to apply these rules to their dispute.

Arbitration became known in Cyprus the last two-three years, after the ascertainment of the necessity to relieve the Court from its workload. In my opinion, the main problem why Arbitration in Cyprus is not so preferable than any of the above International Institutions – not even preferable locally- is because of the Legislation we already have which has to be modified in order to comply with the International Standards of Arbitration and Arbitration Institutions. It is unacceptable for the Domestic Legislation – Cap.4 to remain the same as the first document enacted in 1944. Also, the provision of the Application of the Civil Procedure Rules – Article 30 creates another problem why an individual thinks twice before he/she refers the matter to Arbitration. If the Arbitrator applies the Civil Procedure Rules, then one party may argue what is the difference than going to a Court and resolve the dispute arisen. Our Civil Procedure Rules – which have not been modified yet, except from two Rules only (Rules 25 &30) – are considered to be a most significant ground in the delay of justice.

To conclude, Arbitration is still considered to be the most effective method of Dispute Resolution and its various advantages are worldly recognized, with the most important one to be the prompt resolution of the dispute between two parties. As William E. Gladstone states, ‘Justice delayed is justice denied’.

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    CGO Group

    CGO Group
    Michał Gawlak
    Partner / Attorney-at-law
    CGO Legal CGO Finance