PUBLICATIONS

Power of the Court to extend the time for referring a matter to arbitration

 

An arbitration clause in a contract may state a specific time within which a dispute may be referred to arbitration. When this time has passed, it may be considered that the referral to arbitration is out of time and therefore the party requesting that the dispute be referred to arbitration may not be able to do so. Time may be extended by the arbitrators for referring a dispute to arbitration.

 

An arbitration clause in a contract may state a specific time within which a dispute may be referred to arbitration. When this time has passed, it may be considered that the referral to arbitration is out of time and therefore the party requesting that the dispute be referred to arbitration may not be able to do so.

The possibility of extending the time to submit a dispute to the Court is based on Article 24(5) of the Arbitration Law (Chapter 4). This article states the following:

“Where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings  is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may, on such terms ( if any) as the justice of the case may require, but without prejudice to the foregoing provisions of this section, extend the time for such period as it thinks proper. “

Although the above article has not yet been interpreted by Cypriot Courts, there are a number of English decisions that interpret the article in question. Thus, the words “undue hardship” have been interpreted in the English judgment of Libra Shipping and Trading Corporation Ltd. v. Northern Sales Ltd. (The Aspen Trader) [1981] 1 Lloyd’s Rep. 273, by Justice Brandon L.J. as follows:

(1) The words ‘undue hardship’ in section [24(5)] should not be construed too narrowly. (2) ‘Undue hardship’ means excessive hardship and, where the hardship is due to the fault of the claimant, it means hardship the consequences of which are out of proportion to such fault. (3) In deciding whether to extend time or not, the court should look at all the relevant circumstances of the particular case. (4) In particular, the following matters should be considered: (a) the length of the delay; (b) the amount at stake; (c) whether the delay was due to the fault of the claimant or to circumstances outside his control; (d) if it was due to the fault of the claimant, the degree of such fault; (e) whether the claimant was misled by the other party; (f) whether the other party has been prejudiced by the delay, and, if so, the degree of such prejudice.”

The critical factors as to the time that the said article is invoked should be related to the circumstances in which the delay arose, the length of the delay and the degree of fault of the party referring the dispute to arbitration with respect to the delay.

Note that the provision applies broadly to any arbitration clauses and any claims covered by arbitration clauses (see Sioux Inc. v. China Salvage Co., Kwangchow Branch and Another [1979] S. No. 785). Where the term does not form part of the arbitration clause and relates to a separate time limit stated within the contract then Article 24 does not apply. Thus, in Richurst Ltd v Pimenta, [1993] 1 W.L.R. 159 (1992)) where the contract provided for the landlord to send a notice to the tenant in relation to a rent increase and where the notice was sent 3 weeks late, the landlord could not proceed with an application for an extension of time to send the notice in order to refer the matter to arbitration.

It should be noted that the extension of time for referring a dispute to arbitration can also be done by the arbitrators where this is provided for based on the Regulations to be followed and/or based on the referral to arbitration agreement. It should be noted that, where it is foreseen that the matter can be decided by the arbitrators, this does not affect the possibility of the court to extend the time based on the relevant article of Chapter 4. In fact, even if the matter has already been decided by the arbitrators, the Court has the duty to make its own assessment, with due regard to the arbitrators’ decision to extend the referral time.

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