GILS Commercial contracts: Cyprus

GENERAL CONTRACT LAW REGULATIONS

CYPRUS

1. Is it mandatory for a commercial contract to be governed by local law?

In Cyprus, it is not mandatory for a commercial contract to be governed by local law. Parties to a commercial contract are generally free to choose the governing law, provided their choice is expressed clearly in the contract. This principle is recognized under the Cypriot legal system, which adheres to the concept of "freedom of contract."

Key points to consider:

1. Mandatory Local Laws: Even if parties choose a foreign law to govern their contract, certain mandatory provisions of Cypriot law may still apply, particularly in areas like employment, consumer protection, or where public policy is concerned.

2. EU Regulations: Since Cyprus is a member of the European Union, the Rome I Regulation (Regulation (EC) No 593/2008) also applies. This regulation allows parties to choose the law governing their contractual obligations but includes certain exceptions, such as the protection of weaker parties (e.g., consumers, employees).

3. Jurisdiction: The chosen law does not automatically dictate the jurisdiction. The parties must also specify the jurisdiction in their contract, or it will be determined according to applicable rules, which might lead to Cyprus courts having jurisdiction even if the contract is governed by foreign law.

Generally speaking, while parties are free to choose the law governing their contract in Cyprus, they must be aware of the potential application of mandatory local laws and the rules of jurisdiction.

2. What language applies to commercial contracts on the territory of the Country? Is it possible to establish the prevailing language? 

In Cyprus, there is no legal requirement that commercial contracts be written in a specific language. The parties to a contract are generally free to choose the language in which the contract is drafted. However, Greek and Turkish are the official languages of Cyprus, with Greek being the more commonly used language in legal and business contexts in the Republic of Cyprus (southern part). In the Turkish-controlled northern part, Turkish is predominantly used.

It is however advisable for parties to a commercial contract to establish a prevailing language within the contract. This is particularly important when the contract is drafted in more than one language, and is made the following way:

1. Language Clause: The contract should include a clause specifying which language version will prevail in the event of any discrepancies or disputes arising from different interpretations between the versions. For example:

"This contract is executed in both English and Greek. In the event of any inconsistency or discrepancy between the two versions, the [English/Greek] version shall prevail."

2. Official Translations: If the contract is submitted to Cypriot authorities or used in court, an official translation into Greek (or Turkish, in the northern part) may be required, especially if the original contract is in a foreign language. However, if a prevailing language is specified in the contract, that version will typically be considered authoritative.

3. Is it possible to use electronic signatures for the execution of commercial contracts between private entities? 

Under Cypriot law, it is possible to use electronic signatures for the execution of commercial contracts between private entities. Cyprus, as a member of the European Union, adheres to the EU Regulation No 910/2014 on electronic identification and trust services for electronic transactions in the internal market, commonly known as the eIDAS Regulation.

1. Electronic signatures are legally recognized in Cyprus and can be used to sign commercial contracts. However, for a higher level of security and legal certainty, using an Advanced or Qualified Electronic Signature is recommended.

2. According to the eIDAS Regulation, a Qualified Electronic Signature has the same legal standing as a handwritten signature, meaning that it cannot be denied legal effect solely because it is in electronic form.

There may be certain types of contracts or documents, such as those related to real estate transactions or those requiring notarization, where a specific form (e.g., handwritten signatures or notarized documents) may still be required by law.

4. Are there any requirements to the form of a commercial contract? Are there any standard forms of commercial contracts? 

In Cyprus, there are no general statutory requirements regarding the form of a commercial contract, meaning that commercial contracts do not have to follow a specific format to be legally valid. However, certain principles and exceptions apply:

A. General Requirements for the Form of Commercial Contracts:

1. Written vs. Oral Contracts:

• In general, a commercial contract can be either oral or written. However, written contracts are strongly recommended to ensure clarity and to provide evidence of the agreement, especially in cases of disputes.

2. Essential Elements:

• Regardless of whether the contract is oral or written, it must contain the essential elements of a contract under Cypriot law: offer, acceptance, consideration, intention to create legal relations, and capacity to contract.

3. Specific Contracts Requiring Written Form:

• Certain types of contracts must be in writing to be enforceable. For example, contracts related to the sale or transfer of real estate, guarantees, and contracts involving intellectual property rights typically require a written form.
• These contracts may also need to be signed and, in some cases, witnessed or notarized, depending on the nature of the contract.

B. Standard Forms of Commercial Contracts:

1. No Mandatory Standard Forms:

• Cyprus does not prescribe standard forms for commercial contracts. However, certain industries or sectors may have commonly used templates or standard clauses that are widely accepted, such as in construction, shipping, or finance.

2. Customizable Templates:

• While there are no mandatory standard forms, many businesses and legal practitioners use customizable contract templates that include standard clauses (e.g., governing law, dispute resolution, confidentiality). These templates can be tailored to the specific needs of the parties involved.

3. Sector-Specific Standards:

• In some sectors, standard contract forms may be provided by industry associations or regulatory bodies. For example, in the construction industry, FIDIC (International Federation of Consulting Engineers) contract templates are often used.

C.Key Clauses to Include:

Regardless of the form, it is important for commercial contracts to include key clauses such as:

• Parties to the Contract: Clearly identifying the contracting parties.
• Scope of Work or Services: Detailing what each party is required to do.
• Payment Terms: Specifying the amount, timing, and method of payment.
• Governing Law and Jurisdiction: Stating which law governs the contract and which courts have jurisdiction.
• Dispute Resolution: Outlining how disputes will be resolved (e.g., arbitration, mediation, courts).
• Termination: Defining the conditions under which the contract can be terminated.

Conclusion:

While there is flexibility in the form of commercial contracts in Cyprus, having a well-drafted written contract is crucial for clarity and enforceability. No specific standard forms are mandated, but certain types of contracts must be in writing, and industry-specific templates are commonly used.

5. Are there any types of preliminary agreement or “gentleman’s agreement” in the Country?

In Cyprus, parties often use preliminary agreements or informal understandings, such as "gentleman's agreements," in business dealings. These agreements can serve as a precursor to a formal contract or as a way to outline the basic terms of an arrangement before a final agreement is reached.

A.Types of Preliminary Agreements in Cyprus:

1. Memorandum of Understanding (MoU):

• An MoU is a common type of preliminary agreement in Cyprus. It is a document that outlines the general principles and intentions of the parties involved. While an MoU may include key terms of the agreement, it is typically non-binding unless explicitly stated otherwise. However, specific clauses within an MoU, such as confidentiality or exclusivity, can be legally binding.

2. Letter of Intent (LoI):

• A Letter of Intent is another form of preliminary agreement where one party expresses its intention to enter into a formal contract with another party. Like an MoU, an LoI can be either binding or non-binding, depending on the language used in the document. It often serves to set out the main terms and conditions before the parties proceed with detailed negotiations or due diligence.

3. Heads of Agreement (HoA):

• This is a document that outlines the main terms of a proposed agreement between parties. Heads of Agreement can be binding or non-binding and are often used in commercial transactions to establish the framework for further negotiations and the eventual drafting of a full contract.

4. Gentleman's Agreement:

• A gentleman's agreement is an informal, non-legally binding arrangement between parties based on trust, honour, and mutual understanding. In Cyprus, as in many jurisdictions, such agreements are generally not enforceable in a court of law because they lack the formalities and essential elements of a contract, such as intent to create legal relations. However, they can play a significant role in business culture and negotiations. 

B.Legal Considerations:

- Enforceability:

• The enforceability of these preliminary agreements depends on the specific wording and the intention of the parties. If the parties intend the agreement to be binding, it can be enforced as a contract under Cypriot law. Conversely, if the intention is merely to guide future negotiations, the agreement may not be enforceable.

- Binding Clauses:

• Even in non-binding preliminary agreements, certain clauses can be made binding, such as those related to confidentiality, exclusivity, or the obligation to negotiate in good faith.

- Good Faith Negotiations:

• While Cypriot law does not impose a general duty to negotiate in good faith, parties can expressly include a clause requiring such negotiations in their preliminary agreements. If included, this obligation can be enforced.

Conclusion:

In Cyprus, preliminary agreements like MoUs, LoIs, and Heads of Agreement are commonly used to outline the framework of a potential deal before finalising a formal contract. While gentleman's agreements are generally non-binding, these preliminary agreements can be binding depending on the wording and intent of the parties involved. It is advisable to clearly specify which parts of a preliminary agreement are intended to be legally binding and to seek legal advice when drafting or entering into such agreements.

6. What currency is allowed to be used for commercial contracts in the Country?

In Cyprus, the euro (EUR, €) is the official currency, and it is the standard currency used for commercial contracts within the country. However, parties to a commercial contract are generally free to agree on any currency they choose for their transactions, provided both parties consent to it.

Key Points on Currency Use in Commercial Contracts in Cyprus:

1. Euro as the Official Currency:

• Since Cyprus is a member of the Eurozone, the euro is the official currency. Most domestic transactions, especially those involving public institutions, are conducted in euros.

2. Freedom to Choose Currency:

• Parties to a commercial contract in Cyprus can agree to use a different currency (such as USD, GBP, or any other foreign currency) for their transactions. This is particularly common in contracts involving international parties or where goods or services are being traded internationally.
• The chosen currency should be clearly specified in the contract to avoid any disputes.

3. Exchange Rate Considerations:

• When a foreign currency is used, it is advisable to include clauses dealing with exchange rates, particularly how currency conversion will be handled if payments are made in a currency different from the one agreed upon.
• Parties may also want to consider including provisions that address currency fluctuations to protect against significant changes in exchange rates over the course of the contract.

4. Regulatory Considerations:

• While there are no strict regulatory restrictions on the use of foreign currencies in private contracts, transactions involving large amounts of foreign currency may be subject to reporting requirements or other regulations, particularly in the context of anti-money laundering laws.

5. Payment of Taxes:

• Any taxes or duties payable to the Cypriot government, such as VAT, must be paid in euros, even if the contract itself is denominated in a foreign currency.

7. Are there options for the limitation of liability of a party under the commercial contract?

In Cyprus, it is possible to include provisions in a commercial contract that limit the liability of a party. Limitation of liability clauses are common in commercial contracts and are generally enforceable under Cypriot law, provided certain conditions are met.

Key Considerations for Limitation of Liability in Cyprus:

1. Freedom of Contract:

• Cyprus adheres to the principle of freedom of contract, allowing parties to negotiate and agree upon the terms of their contracts, including the limitation of liability. This means that parties can generally agree to limit or exclude certain types of liability, such as consequential damages or indirect losses.

2. Types of Limitation of Liability Clauses:

• Monetary Caps: A common approach is to set a maximum monetary amount that one party can be held liable for, typically tied to the contract's value or a specific amount agreed upon.
• Exclusion of Certain Types of Damages: Parties may agree to exclude liability for certain types of damages, such as indirect, consequential, or punitive damages.
• Limitation on Time: Liability can be limited to claims made within a certain timeframe, such as a specified number of years after the contract's completion.
• Specific Circumstances: Liability might be limited to specific circumstances, such as breaches of particular contractual obligations or negligence but not for gross negligence or willful misconduct.

3. Unenforceable Limitations:

• While many limitations are enforceable, certain types of exclusions or limitations of liability may not be upheld by Cypriot courts. For example:
  • Gross Negligence and Willful Misconduct: Provisions that seek to limit or exclude liability for gross negligence, fraud, or willful misconduct are unlikely to be enforceable.
  • Public Policy Considerations: Clauses that go against public policy, such as those that attempt to exclude liability for death or personal injury resulting from negligence, would not be enforceable.
  • Statutory Obligations: Some liabilities cannot be excluded due to statutory requirements, particularly in areas such as consumer protection or employment law.

4. Reasonableness:

• The enforceability of a limitation of liability clause may depend on its reasonableness. If a clause is deemed excessively harsh or unfair, especially if one party has significantly more bargaining power, it may be challenged in court. The courts may consider factors such as the parties' relative bargaining positions, the nature of the transaction, and the foreseeability of the risks.

5. Express and Clear Drafting:

• Limitation of liability clauses must be clearly and expressly stated in the contract to be enforceable. Ambiguities may be interpreted against the party seeking to rely on the limitation.

8. Is the concept of release from liability or indemnity enforceable in the Country?

The concepts of release from liability and indemnity are enforceable in Cyprus, provided they are properly drafted and do not violate any legal principles or public policy. These clauses are common in commercial contracts and are recognized under Cypriot law, which generally respects the principle of freedom of contract.

A. Release from Liability

1. Definition:

• A release from liability clause (also known as an exculpatory clause) is a contractual provision where one party agrees to relinquish their right to claim against the other party for certain types of losses or damages.

2. Enforceability:

• These clauses are enforceable in Cyprus as long as they are clearly worded and do not attempt to exclude liability for gross negligence, willful misconduct, or fraud.
• The clause must be explicit about what liabilities are being released and under what circumstances. Ambiguity can lead to the clause being interpreted against the party seeking to rely on it.
• Courts in Cyprus may refuse to enforce a release from liability clause if it is deemed unreasonable or if it significantly undermines the basic purpose of the contract.

B. Indemnity

1. Definition:

• An indemnity clause is a provision where one party agrees to compensate or reimburse the other party for certain losses, damages, or liabilities that may arise. Indemnities can cover a wide range of scenarios, including third-party claims, breaches of contract, or specific events.

2. Enforceability:

• Indemnity clauses are generally enforceable in Cyprus. They must be clearly drafted, specifying the scope of the indemnity, the circumstances under which it applies, and the types of losses covered.
• Like release clauses, indemnity clauses cannot indemnify a party for liability arising from their gross negligence, willful misconduct, or fraud.
• Courts in Cyprus may scrutinise indemnity clauses to ensure they are fair and reasonable. An overly broad indemnity clause that imposes disproportionate burdens on one party might be challenged.

C. Limitations and Restrictions

1. Public Policy:

• Any clause that seeks to release a party from liability for serious wrongdoing, such as gross negligence, fraud, or criminal acts, is likely to be unenforceable as it would contravene public policy.
• Clauses attempting to limit or release liability for personal injury or death are generally not enforceable.

2. Statutory Obligations:

• Certain statutory obligations, such as those relating to health and safety, consumer protection, and employment law, cannot be overridden by contractual indemnities or releases.

3. Reasonableness:

• Courts may assess the reasonableness of these clauses, particularly if there is a significant imbalance in the bargaining power of the parties. Clauses that are excessively one-sided may be deemed unenforceable.

In Cyprus, release from liability and indemnity clauses are enforceable if they are clearly drafted and do not attempt to exclude liability for serious wrongdoing or statutory obligations. These clauses are commonly used in commercial contracts to allocate risk between the parties, but they must be reasonable and not contrary to public policy. 

9. Is there the concept of “consequential damages” in the Country? Can it be excluded from liability? 

The concept of "consequential damages" exists in Cyprus, and it is generally understood in the same way as in many other common law jurisdictions. Consequential damages, also known as indirect or special damages, are losses that do not flow directly and immediately from a breach of contract but rather stem from the breach's indirect effects.

Understanding Consequential Damages in Cyprus

1. Direct vs. Consequential Damages:

• Direct Damages: These are losses that arise naturally and directly from the breach of contract itself. For example, if a supplier fails to deliver goods on time, the direct damages might include the cost of acquiring the goods from another source.
• Consequential Damages: These are secondary losses that result from special circumstances beyond the immediate consequences of the breach. Using the same example, consequential damages might include lost profits due to the delayed goods impacting the business’s ability to operate.

2. Exclusion of Consequential Damages:

• Contractual Exclusion: Parties to a contract in Cyprus can agree to exclude liability for consequential damages. This is often done through a specific exclusion clause in the contract, which explicitly states that neither party will be liable for any indirect or consequential losses.
• Enforceability: Exclusion clauses that limit or exclude liability for consequential damages are generally enforceable under Cypriot law, provided they are clearly drafted and agreed upon by the parties. The clause must be unambiguous to avoid disputes over its interpretation.
• Reasonableness: While Cypriot courts respect freedom of contract, they may scrutinize exclusion clauses for fairness, particularly in cases involving significant imbalances in bargaining power. If an exclusion clause is deemed unreasonable or unconscionable, a court may choose not to enforce it.

3. Limitations on Exclusions:

• Gross Negligence and Willful Misconduct: As with other types of liability, clauses that seek to exclude liability for consequential damages arising from gross negligence, willful misconduct, or fraud may not be enforceable.
• Statutory Protections: Some statutory protections cannot be waived by contract, especially in cases involving consumer protection or employment law.

Conclusion

The concept of consequential damages is recognized in Cyprus, and parties can exclude liability for such damages through carefully drafted contractual clauses. These exclusion clauses are generally enforceable, but they must be clear, reasonable, and not attempt to exclude liability for serious misconduct.

10. Is the concept of “force majeure” recognized by the legislation and courts on the territory of the Country?

The concept of "force majeure" is recognized by both the legislation and courts in Cyprus, although it is primarily rooted in contract law rather than statutory law. In Cypriot law, as in many other common law jurisdictions, "force majeure" refers to unforeseen and uncontrollable events that prevent a party from fulfilling their contractual obligations.

Key Aspects of Force Majeure in Cyprus

1. Contractual Basis:

• Force majeure is typically addressed in contracts through specific clauses that outline what constitutes a force majeure event and the consequences for the parties involved. These clauses are not automatically implied by law; they must be explicitly included in the contract.
• Common examples of force majeure events include natural disasters (e.g., earthquakes, floods), war, terrorism, strikes, pandemics, or governmental actions that prevent the performance of contractual obligations.

2. Enforceability:

• For a force majeure clause to be enforceable, it must be clearly drafted, specifying the types of events that qualify as force majeure and the obligations that are excused or suspended due to such events.
• If a force majeure event occurs and the clause is invoked, the affected party is typically relieved from performing its contractual obligations without being liable for breach of contract. However, this relief is usually temporary and lasts only as long as the force majeure event persists.

3. Judicial Interpretation:

• Cypriot courts generally respect force majeure clauses and will interpret them according to the specific wording used in the contract. Courts will consider whether the event in question genuinely prevented the performance of the contract and whether it was beyond the control of the affected party.
• If a contract does not contain a force majeure clause, the courts may still consider doctrines like "frustration of contract," which can provide relief when an unforeseen event fundamentally alters the nature of the contractual obligations, making performance impossible or radically different from what was agreed upon.

4. Limitations:

• Not all events qualify as force majeure. For instance, economic hardship or an increase in the cost of performing a contract is generally not considered a force majeure event unless explicitly stated in the contract.
• The party invoking force majeure typically has a duty to mitigate the effects of the force majeure event and to resume performance as soon as possible once the event has passed.

The concept of force majeure is recognized and enforceable in Cyprus, primarily through contractual clauses. These clauses must be carefully drafted to specify what constitutes a force majeure event and the consequences for non-performance. Cypriot courts will enforce such clauses if the event in question falls within the scope of the clause and genuinely prevents the performance of the contract. Without a force majeure clause, parties may rely on the legal doctrine of frustration to seek relief in extraordinary circumstances.

11. Are export control provisions due to the economic sanctions specified by legislation and enforceable in the Country?

Export control provisions related to economic sanctions are specified by legislation and enforceable in Cyprus. Cyprus, as an EU member state, aligns with the European Union's regulations and directives concerning economic sanctions and export controls. These provisions are implemented through both EU legislation and national laws in Cyprus.

Key Aspects of Export Control and Economic Sanctions in Cyprus:

1. EU Regulations and Directives:

• Cyprus adheres to EU regulations and directives that impose economic sanctions and export controls. These regulations are designed to restrict trade, financial transactions, and other activities with specific countries, entities, or individuals based on geopolitical and security considerations.
• Key EU regulations include:
  • Council Regulation (EC) No 2580/2001 on the prevention and combating of terrorism and its financing.
  • Council Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.
  • Council Regulation (EU) No 267/2012 concerning restrictive measures against Iran.

2. National Legislation:

• Cyprus implements and enforces these EU sanctions through national legislation. The relevant laws include:
  • The Law on the Implementation of Sanctions (Law No. 17(I)/2004), which provides the framework for implementing EU sanctions in Cyprus.
  • The Customs and Excise Legislation, which includes provisions for the control of exports and enforcement of restrictions.
• These laws ensure that Cyprus's obligations under EU sanctions are enforced at the national level.

3. Enforcement:

• Enforcement of export controls and economic sanctions is handled by various Cypriot authorities, including the Customs and Excise Department, the Ministry of Finance, and other relevant regulatory bodies.
• Authorities monitor compliance, conduct investigations, and impose penalties for violations. They also provide guidance on compliance with export control regulations and sanctions.

4. Sanction Lists:

• The EU maintains updated sanction lists that identify individuals, entities, and countries subject to restrictive measures. Businesses in Cyprus must regularly consult these lists to ensure they do not engage in prohibited transactions.
• These lists are publicly available and must be checked to avoid inadvertent breaches of sanctions.

5. Penalties for Non-Compliance:

• Violations of export control provisions and economic sanctions can result in severe penalties, including fines, imprisonment, and other legal consequences.
• Businesses and individuals must ensure strict compliance with these regulations to avoid legal repercussions and financial penalties.

6. Due Diligence:

• Businesses involved in international trade are required to conduct due diligence to ensure that their activities comply with export control and sanctions regulations. This includes screening transactions, customers, and suppliers against sanction lists and understanding the legal implications of their business operations.

In Cyprus, export control provisions and economic sanctions are governed by EU regulations and national legislation. These provisions are enforceable, and both businesses and individuals are required to comply with them. Violations can lead to significant legal and financial consequences. It is essential for entities involved in trade and financial transactions to stay informed about current sanctions and export control regulations and to implement effective compliance measures.

12. Is there a mandatory dispute resolution regime in the Country for commercial contracts?

In Cyprus, there is no mandatory, one-size-fits-all dispute resolution regime specifically for commercial contracts. However, there are several mechanisms and guidelines that can influence how disputes are resolved in commercial agreements, which can be tailored based on the needs of the parties involved.

Dispute Resolution Mechanisms in Cyprus:

1. Contractual Freedom:

• Parties to a commercial contract in Cyprus have the freedom to choose their preferred dispute resolution method. Common options include arbitration, mediation, and litigation. It is important for parties to specify their chosen method in the contract to ensure that the agreed-upon process is followed.

2. Arbitration:

• Arbitration Act: Cyprus has a legal framework for arbitration under the Arbitration Law, Cap. 4, which is based on the principles of the UNCITRAL Model Law on International Commercial Arbitration. This provides a comprehensive and modern arbitration regime.
• Institutional Arbitration: Parties can opt for institutional arbitration through organisations such as the Cyprus Chamber of Commerce and Industry (CCCI) or other arbitration bodies.
• Enforcement: Arbitration awards are enforceable in Cyprus, and the country is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

3. Mediation:

• Mediation Act: The Mediation Law of 2012 governs mediation procedures in Cyprus. Mediation can be used as a means to resolve disputes amicably without proceeding to litigation.
• Court-Ordered Mediation: Courts in Cyprus may order mediation as a preliminary step before proceeding with litigation, although this is not mandatory.

4. Litigation:

• Cypriot Courts: Commercial disputes can be resolved through the Cypriot court system. The main courts with jurisdiction over commercial matters are the District Courts and the Supreme Court, which handles appeals.
• Commercial Court: Cyprus does not have a specialised commercial court, but commercial cases are heard by the general courts, which have experience in handling commercial disputes.

5. Contractual Clauses:

• Dispute Resolution Clauses: Parties are encouraged to include clear dispute resolution clauses in their contracts. These clauses should specify the method of dispute resolution, such as arbitration or mediation, and the process to be followed.
• Governing Law and Jurisdiction: Contracts should also specify the governing law and jurisdiction. This determines which legal system will be used to interpret the contract and where disputes will be adjudicated.

6. International Agreements:

• European Union Regulations: For cross-border disputes involving EU member states, EU regulations such as the Brussels I Regulation (recast) may apply to determine jurisdiction and enforce judgments.

In Cyprus, there is no single mandatory dispute resolution regime for commercial contracts; instead, parties have the flexibility to choose their preferred dispute resolution method. Arbitration and mediation are common alternatives to litigation, and parties are encouraged to specify their preferred methods in their contracts. The Cypriot legal framework supports these dispute resolution methods, and the country’s participation in international agreements enhances the enforceability of arbitration awards and court judgments.

13. May the arbitration (local or foreign) be chosen by parties as a method of dispute resolution? 

In Cyprus, parties to a commercial contract can choose arbitration—whether local or international—as a method of dispute resolution. Cyprus has a supportive legal framework for both local and international arbitration, reflecting its commitment to providing a flexible and effective means of resolving disputes.

Key Aspects of Arbitration in Cyprus:

1. Legal Framework:

• Arbitration Law: Arbitration in Cyprus is governed by the Arbitration Law, Cap. 4 (also known as the Arbitration Law of 1959), which aligns with the principles of the UNCITRAL Model Law on International Commercial Arbitration. This law provides a comprehensive framework for arbitration proceedings.
• Arbitration Law of 1987: Cyprus also has additional legislation that governs certain aspects of arbitration, such as the Arbitration Law of 1987 (Law 84(I)/1987), which deals with the enforcement of foreign arbitral awards under the New York Convention.

2. Local Arbitration:

• Parties can agree to local arbitration, where disputes are resolved by arbitrators appointed within Cyprus. This process follows the Arbitration Law, Cap. 4, which outlines the procedures for initiating and conducting arbitration, including the appointment of arbitrators and the rules governing hearings and awards.

3. International Arbitration:

• International Arbitration Framework: Cyprus is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), which facilitates the enforcement of international arbitration awards across member states.
• Institutional Arbitration: Parties can also choose institutional arbitration, with several international arbitration institutions available. For example, the Cyprus Chamber of Commerce and Industry (CCCI) offers arbitration services, and parties can choose other recognized institutions like the International Chamber of Commerce (ICC) or the London Court of International Arbitration (LCIA).

4. Arbitration Agreement:

• Contractual Clauses: It is essential for parties to include an arbitration clause in their contract, specifying that disputes will be resolved through arbitration. This clause should outline the arbitration process, the rules to be followed, the language of arbitration, and the location of the arbitration (which can be Cyprus or another jurisdiction).
• Arbitration Rules: Parties can agree on the rules governing the arbitration process. If not specified, default rules from institutions or the applicable local arbitration law will apply.

5. Enforcement of Awards:

• Domestic Awards: Local arbitration awards are enforceable in Cyprus, and the courts will generally uphold the validity of awards made under local arbitration rules.
• International Awards: International arbitration awards are also enforceable under the New York Convention, provided they meet the necessary criteria for recognition and enforcement.

In Cyprus, parties to a commercial contract can indeed choose arbitration—whether local or international—as their preferred method of dispute resolution. The legal framework supports both local and international arbitration, with provisions for the enforcement of awards under domestic and international agreements. 

Author: Nasos Kyriakides, Managing Partner