Litigation - Cyprus

Cyprus has adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, with minor amendments. In a recent case the Supreme Court of Cyprus was invited to interpret Articles 25(a) and 34(1) of the UNCITRAL Model Law.

An arbitrator, appointed by the parties to arbitrate pursuant to the Cyprus legislation adopting the UNCITRAL Model Law, dismissed the arbitration claim due to the failure of the claimants to lodge their statement of claim within the time directed. Before the designated time period for filing the pleading expired, the claimants lodged an application for an extension alleging, among other things, various reasons for being unable to lodge the claim in time.

The respondent opposed the application for an extension. The arbitrator, relying on Article 25(a) of the UNCITRAL Model Law, dismissed the application for an extension and terminated the arbitral proceedings.

The claimant lodged an application for a review of the arbitrator's decision pursuant to Article 34(1) of the UNCITRAL Model Law.

The court of first instance dismissed the claimant's application for a review and confirmed the validity and legality of the arbitrator's decision. The claimant lodged an appeal with the Supreme Court of Cyprus, which held that the decision of an arbitrator to terminate arbitral proceedings on the grounds of Article 25(a) does not amount to an 'arbitral award' within the meaning of Article 34(1). Consequently, the decision is not subject to the review of the courts.

The Supreme Court ruled that an 'arbitral award' within the meaning of Article 34(1) is exclusively an arbitral decision based on the merits of the dispute. Consequently, the courts did not have jurisdiction to review the decision of the termination of the arbitral proceedings pursuant to Article 25(a) of the UNCITRAL Model Law.

The Supreme Court's decision is in line with the analysis of Article 25(a), which states that such a termination has the same legal effect as the claimant withdrawing its claim in the early stages of the proceedings without creating an issue of res judicata or issue estoppel.(1) For this reason, in such a situation the claimant can invite the respondent to proceed to an arbitration before a newly appointed arbitrator and, in the event of disagreement, they can proceed with a court action.

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