Legal framework for arbitration to be updated

The Ministry of Justice has drafted a bill aimed at updating the legal framework for arbitration as a means for out-of-court settlements to resolve disputes.

The bill, which will replace the Laws on Arbitration and International Commercial Arbitration, has already been put to public consultation with the stakeholders involved.

In a note accompanying the bill, the ministry informed stakeholders that it was prepared taking the following laws into account:

• England’s Arbitration Act 1996
• Hong Kong’s Cap 609
• The Ireland Arbitration Act
• Law 5016/2023 of Greece on international commercial arbitration
• The Convention on the Recognition and Enforcement of Foreign Arbitral Awards “New York Convention, and
• The Unictral Model Law on International Commercial Arbitration.

All stakeholders must examine the bill and submit their positions to the Justice Ministry by 27 September the latest.

The bill’s provisions

The bill is divided into nine sections:

• General provisions
• Arbitration agreement
• Composition of arbitral tribunal
• Jurisdiction of arbitral tribunal and measures of interim protection
• Conduct of arbitration process
• Process to issue arbitral award and termination of arbitral proceedings
• Process to appeal arbitral award
• Recognition and execution of arbitration award
• Other general provisions

The first part interprets, inter alia, that arbitration covers all forms of arbitration and concerns both domestic and international arbitrations, while it provides clear provision for the arbitral tribunal's limited power to intervene in arbitration matters.

It also indicatively regulates the service of notices for purposes of commencing arbitration proceedings and provides clear provision for the waiver of the right to appeal.

The second part focuses, among other, on the process of drafting the arbitration agreement, which is either written or oral, and forms the basis for the referral and conduct of arbitration to resolve any dispute.

Composition of the arbitral tribunal

The third section of the bill outlines the composition of the arbitral tribunal. It allows the parties to agree on the number of arbitrators that will make up the arbitral tribunal and whether there will be a President or Arbitrator. If the parties fail to agree, there is a provision stating that the number of arbitrators can reach up to three.

In addition, it sets out the duties of the President and Arbitrator, as well as majority decision-making when the parties appoint two arbitrators without a Chairman or Arbitrator – among other things.

Tribunal’s jurisdiction and interim protection

The fourth section lays out the provisions surrounding the arbitral tribunal’s jurisdiction as well as interim protection.

In relation to jurisdiction, it is provided that the arbitral tribunal itself is competent to rule on its own jurisdiction.

With regard to temporary protection, this part contains express provisions which provide the arbitral tribunal with the power to take interim protection measures at the request of one of the parties, which presupposes the commencement of the arbitral proceedings.

In addition to the power of the arbitral tribunal to take measures of temporary protection, the bill also regulates its power to order the taking of such measures.

The arbitration process

The fifth section concerns the arbitration process and stipulates the following:

• Parties are generally free to agree on any system of law and procedure they wish to resolve their disputes. In the event that there is no agreement between them, then the arbitral tribunal decides at its discretion the procedure for conducting the arbitration and everything related to the evidence brought before it, the place of the arbitration, as well as the language in which it will be conducted. The only requirement is the application of the principle of equality and the right to be heard on both sides.
• The commencement of arbitration is clearly defined, which begins when one party by written notice calls upon the other to fulfill its obligations under the arbitration agreement, whether these relate to cooperation in the appointment of a joint arbitrator, or the appointment of an arbitrator by the other party or a written notice is sent to the third party named in the agreement to appoint an arbitrator. Another important provision in relation to the time limits for the initiation of arbitration proceedings concerns the application of statutes of limitations.
• The framework that must be included in the pleadings and the right to correct or supplement them throughout the arbitration process.
• The arbitral tribunal shall decide the oral discussion of the dispute or the entire conduct of the arbitration proceedings based on written proposals and supporting documents.
• Regulates the case of failure or negligence of a party to submit a document or appear before the arbitrator.
• The arbitral tribunal has the power to compel the parties to produce documents or other evidence likely to have a material influence on the outcome of the arbitration.
• The arbitral tribunal may call witnesses or appoint experts.
• The parties have the right to be represented by legal or other counsel to assist them in presenting their case before the arbitrator.
• The arbitral tribunal has the power to issue provisional arbitral awards.
• In addition to the normal hearing process, the arbitral tribunal may on application by a party to the proceeding make an arbitral award on a summary basis in relation to the claim or a particular matter arising from the claim.
• When a legal issue arises during the arbitration process, a part of the process may be brought before a court, in order to assist and strengthen the arbitration as a dispute resolution institution. In this case, the court's decision on a preliminary legal issue is subject to appeal within ten days before the Court of Appeal.

issuing the arbitration award

The sixth part of the bill determines the procedure for issuing the arbitral award and the manner of termination of the arbitral procedure.

More specifically, it provides the following:

• If the parties have not reached an agreement, the arbitral tribunal decides on the merits of the dispute and applies the substantive law it deems applicable in accordance with the provisions of private international law.
• Regulates the type and content of the arbitral award. Specifically, the arbitration decision is issued in writing and signed by the members of the arbitral tribunal, while in the case of a multi-member arbitral tribunal, the signature of the majority of the members is sufficient. The decision must be fully reasoned, unless the parties agree otherwise. Decisions of the multi-member arbitral tribunal are made by a majority of the members, unless the parties agree otherwise. In the event that a majority is not reached, the opinion of the President of the arbitral tribunal prevails.
• If a settlement of the dispute is reached, the arbitral tribunal shall terminate the proceedings and record the settlement as an arbitral award based on the agreed terms.
• The court may, in order to facilitate the conduct of the arbitral proceedings, intervene and issue a decree extending the deadline for issuing the arbitral award, under certain conditions.
• Termination of the arbitration proceedings. The arbitration proceedings are terminated by the issuance of the final arbitral award or the issuance of an order terminating the arbitration proceedings subject to conditions.
• The arbitral tribunal's power to correct, interpret or supplement the arbitral award within a predetermined period of thirty days and its power to make an arbitral award apportioning the costs of the arbitration between the parties.

The seventh section of the bill refers to the possibility of appeal against an arbitral decision. In particular, it clearly and restrictively defines the grounds for annulment of an arbitral award, which are similar to the grounds mentioned in Article II of the New York Convention of 1958 (which provides for the recognition and enforcement of the arbitral award), a convention which has been ratified by the Republic of Cyprus with Law 84/1979.

The eighth part of the bill concerns the recognition and execution of the arbitral award.

More specifically, it provides that the recognition and execution of the arbitral award results only with judicial intervention, provided that it is based on a written agreement of the parties. That is, at the request of any of the parties, the court can issue a decree for the execution of the decision.

The ninth and final part of the bill provides for the repeal of the Laws on "Arbitration" and the "International Commercial Arbitration" and the transitional provisions which provide that the provisions of this Act shall apply to all pending arbitrations as of its commencement date.