PUBLICATIONS

Stay of proceedings for breach of an Arbitration Clause under Cap. 4

There is a possibility of stay of legal proceedings in case of violation of an Arbitration Clause. The circumstances relating to this possibility are analysed below.

 

1. ARTICLE 8 OF ARBITRATION LAW, CHAPTER 4

Article 8 of Arbitration Law states the following:

If any party to an arbitration agreement, or any person claiming through or under him, commences any legal proceedings in any Court against any other party to the arbitration agreement or any person claiming through or under him, in respect of any matter agreed to be referred, any party to such legal proceedings may at any time after acceptance, and before delivering any pleadings or taking any other steps in the proceedings, apply to that Court to stay the proceedings and that Court, if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, may make an order staying the proceedings.”

Where an arbitration clause exists, it binds the parties even after the termination of the contract containing it. What Article 8 provides is that in case that a party to a contract containing an arbitration clause proceeds by filing a lawsuit in the Court, then the other party may use Article 8 to stop the proceedings commenced in Court.

In other words, Article 8 provides for the right to apply for the stay of the proceedings by the party who relies on the breach of the arbitration clause by the other party. There are of course conditions for the use of Article 8. These are, that the party making the application for a stay of proceedings should make the application in a timely manner and absolutely before delivering any written submissions or taking any other step in the proceedings.

A) TIMING OF THE APPLICATION

As regards the timeliness of the application, the case of G. J. Magdon Ltd v. A.L. Metal Trading Ltd[1]  is relevant, in which the following were mentioned:

We do not agree with the above recommendation, which essentially result in the defendant’s unlimited right to act as he pleases while a lawsuit is pending against him. This also happened in the case we are considering, where the appellant chose to file the application under consideration 9 months after the filing of the notice of appearance. The rule we have set out above, and the case law, are aimed at the immediate and in priority consideration of a possible objection to the court’s jurisdiction. Such a matter cannot be left to the defendant’s free choice of time.”

B) NEW STEPS IN THE PROCEDURE

Apart from the fact that such an application should be made quickly, the general rule is that an application for stay under Article 8 should be registered before any new steps in the proceedings are

taken. In the case Προοδευτική Ασφαλιστική Εταιρεία Λτδ ν. Κουρουκλίδη κ.α.[1] the following was mentioned by the honorable Judge Nikolaidis J:

In the case of Vector Onega A.G. v. Of the ship M/V Grivas et al. (1999) 1 A.A.D. 1, the Court rejected an application to stay the proceedings, due to an arbitration clause contained in a written agreement between the parties, simply because the application was made after new steps in the proceedings had been taken

In the book Halsburys Laws of England Vol 2 the following is also mentioned on page 25:

The applicant must have taken no step in the proceedings (g) after appearance (h)….Thus the filing of an affidavit (k) in opposition to a summons for summary judgement (l), delivery of a defence (m)… are steps in the proceedings.

In the book Russell on Arbitration the following are mentioned on pages 182-183:

The court has no discretion to stay,  if the defendant allows the action to continue… The following have been held to be the taking of “steps in the proceedingsAppearing before the master and asking for leave to defend

A motion to dismiss the proceeding and entry of a defence to a counterclaim are considered new steps in the proceedings.

It is noted that in relation to a request for the stay of proceedings in the context of arbitration conducted on the basis of the International Commercial Arbitration Law of 1987 (L. 101/1987) a provision similar to that of Cap. 4 (coincidentally in article 8 of Law 101/1987) is contained, although the specific provision is not as strict as to what constitutes new steps in the proceedings.

[4] (2001) 1 A.Α.Δ. 2064

[5] (2002) 1 ΑΑΔ 1374

Σχετικά Άρθρα

Conciliation Rules of the Cyprus Center for Alternative Dispute Resolution
Mediation Rules of the Cyprus Center for Alternative Dispute Resolution
Arbitration Rules of the Cyprus Center for Alternative Dispute Resolution