Cyprus is widely regarded as a key jurisdiction for international business, shipping and cross-border finance. Given the wide range of double taxation treaties concluded by Cyprus, the jurisdiction is highly popular, particularly with businesses originating in the former Soviet Union. Multiple large and medium-sized businesses have their holding structures in Cyprus. Some large businesses have their trading and shipping arms in Cyprus. It is therefore no surprise that Cyprus is one of the jurisdictions where claimants often seek to enforce international arbitration awards.
As a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Cyprus provides an internationally recognised legal framework for turning arbitral awards into judgments of its national courts. Thus, in turn, it opens multiple avenues for enforcement in Cyprus (freezing orders, receivership orders, third party debt orders and others). This article explains the procedure and requirements for recognition of a foreign arbitration award as a judgment of the Cypriot courts. The News section of our website (link) contains multiple other articles on enforcement in Cyprus, where you already have a Cypriot court judgment in terms of the foreign arbitration award.
Procedure for recognition and enforcement
The recognition and enforcement process begins with the filing of an inter partes application before the competent District Court of Cyprus.
- If the respondent appears and contests the application, the Court will hear both sides before deciding whether to recognise the arbitral award as equivalent to a Cypriot judgment.
- If the respondent chooses not to appear or refrains from opposing the application, the Court will proceed to examine the matter on the basis of the applicant’s submissions alone.
Once granted, the order of recognition and enforcement gives the arbitral award the same legal standing as a judgment of the Cypriot courts, making it possible to proceed with enforcement against the respondent’s assets in Cyprus.
A recent change in law permits enforcement by way of an ex parte application, whereby an enforcement order is issued in the absence of the respondent, but it does not enter into effect until such time as the respondent has had the opportunity to challenge it within a specified deadline. However, at the time of writing, there are no known cases where this procedure has been successfully used.
What is essential to comply with the procedure
An application for recognition and enforcement must be supported by:
- the original arbitral award (or a duly certified copy);
- the original arbitration agreement (or a duly certified copy).
These documents must be submitted in compliance with both the New York Convention and the relevant provisions of Cypriot procedural law.
Foreign arbitration awards are normally recognised and enforced provided that they are final and binding, and no grounds exist to challenge enforcement under the New York Convention and the Cypriot implementing legislation.
What are the grounds to challenge the arbitral award?
There are very limited grounds upon which recognition and enforcement can be opposed. They are the grounds contained in the New York Convention and adopted by the national legislation of Cyprus, and include:
- Invalidity of the arbitration agreement - for instance, if the clause was not validly incorporated into the contract.
- Lack of proper notice - if the respondent was not duly informed of the appointment of arbitrators or of the arbitral proceedings.
- Denial of due process - if, during arbitration, the respondent was deprived of a fair opportunity to present its case.
- Violation of public policy - if recognition of the award would run contrary to the fundamental principles of public policy of the Republic of Cyprus.
Practical examples
Fortior Law has substantial experience in applying for and opposing enforcement of foreign arbitration awards in Cyprus, England and Wales, Switzerland, Ukraine and other jurisdictions. It is rare for courts to refuse recognition and enforcement, but in our practice, recognition and enforcement was refused in the following scenarios (anonymised to maintain arbitration confidentiality):
- The arbitration award was obtained on the basis of a forged contract, which the respondent never signed.
- Recognition and enforcement would be contrary to local public policy, because the criminal proceedings in the jurisdiction of enforcement reached a different conclusion on the merits to the conclusion reached by the arbitrators.
- The arbitration proceeded despite a civil case on the merits being commenced in the courts where the award was sought to be enforced and where those courts had jurisdiction to determine similar issues despite the arbitration clause.
- The claimant sought recognition of a foreign arbitration award, despite the pending appeal in the jurisdiction of the seat of the arbitration.
The following are real-life examples from our practice of where the Courts proceeded to enforce arbitration awards over the respondents’ objections:
- Factual and legal mistakes in the award which were not sufficiently serious to affect the outcome of the arbitration.
- A new arbitration is being commenced on similar issues as those covered by the disputed award.
- The respondent asserting that the tribunal has no jurisdiction to make the award when the issue of jurisdiction was considered in the arbitration and the jurisdictional challenge was dismissed at the place of the seat.
Conclusion
Recognition and enforcement of arbitral awards in Cyprus is an efficient and reliable process, backed by the country’s adherence to the New York Convention and its common law tradition. For creditors holding arbitral awards, Cyprus offers an effective avenue for converting those awards into enforceable judgments, particularly where assets or respondent companies are located on the island.
At Fortior Law, we have extensive experience in guiding clients through the recognition and enforcement process in Cyprus, from preparing applications to representing them in contested proceedings. Our team ensures that each step is carefully managed to maximise the likelihood of successful enforcement.
If you or your company are seeking to enforce an arbitral award in Cyprus, reach out to [email protected]. Our Nicosia office represents clients throughout the Republic of Cyprus (including Limassol) and has experience in acting at all levels of the local judiciary, up to the Supreme Court. Our other offices can also help enforce awards in other jurisdictions, such as England and Wales ([email protected]), Switzerland ([email protected]), Ukraine ([email protected]) and Georgia ([email protected]).
