In a recent Limassol District Court case (Kompas Overseas Inc ν Public Joint Stock Company Northern River Shipping Lines), the applicants applied to the court to set aside a Cypriot court order which had allowed the ex parte recognition and enforcement of a judgment issued by the Rechtbank Amsterdam Court in the Netherlands pursuant to the EU Brussels Regulation (44/2001), or alternatively the recast EU Brussels Regulation (1215/2012). The Netherlands judgment recognised and allowed the execution of an arbitral award rendered by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC) in favour of the respondents to the present application.
The applicants raised several arguments to support their application – in particular, the fact that the Netherlands judgment allowed for the registration and execution of the arbitral award only in the Netherlands. The applicants presented expert evidence to this effect and argued that pursuant to Section 1 of the EU Brussels Regulation, arbitral awards fall outside the regulation's ambit. Further, the applicants advanced that:
- the recognition and enforcement of arbitral awards is exclusively regulated by the New York Convention (as incorporated in Cypriot legislation through Law 84/1979); and
- this also extends to the recognition of judgments from EU member states which have recognised arbitral awards pursuant to the EU Brussels Regulation.
Conversely, the respondents contended that once a judgment is recognised in an EU member state, it is mutatis mutandis enforceable in other member states pursuant to Section 38 of the EU Brussels Regulation. Further, the respondents maintained that the grounds on which courts may dismiss or retract the enforceability of a judgment are exhaustively listed in Sections 34 and 35 of the EU Brussels Regulation and that the courts can under no circumstances proceed to examine the merits or substance of the foreign judgment. Counsel for the respondents also claimed that the EU Brussels Regulation's provisions which exclude its application to arbitral awards were not applicable in the present case given that the respondent had not applied for recognition of the arbitral award.
The Limassol District Court examined the arguments advanced by both parties and decided to accept the applicant's submissions. The court explained that even though the respondents sought to recognise the Netherlands judgment as opposed to the ICAC award, this did not vary the nature of the arbitral award so as to render it capable of recognition pursuant to the EU Brussels Regulation. The court subsequently examined the precise wording of the Netherlands judgment, which was not granted in the context of a civil or commercial nature action, and the applicants were not ordered to pay any damages to the respondents. Similarly, the court concluded that the Dutch court had not examined the substance of the arbitral award and that the application presented to the Dutch courts was based on the New York Convention.
The court interpreted Section 38 of the EU Brussels Regulation, which provides that "a judgment given in a Member State and enforceable in that State shall be enforced in another Member State when, on the application of any interested party, it has been declared enforceable there".
In interpreting Section 38 of the EU Brussels Regulation, the court held that this provision concerns judgments issued in civil and commercial matters which are amenable to execution (eg, actions ordering the payment of a specific sum). It does not include the recognition of judgments from EU member states which simply permit the recognition of other judgments or arbitral awards.
Further, the court condemned the respondents' approach and stated that there was nothing prohibiting them from directly applying to the Cypriot courts to request the recognition and enforcement of the ICAC award according to the New York Convention as opposed to attempting to indirectly bypass it. In light of the above, the court agreed to set aside the order allowing the recognition of the arbitral award.
This case is useful in further understanding the scope of application of the EU Brussels Regulation despite it having been superseded by the recast EU Brussels Regulation and that the nature of an arbitral award remains unaltered despite its prior judicial recognition by a different EU member state.
For further information on this topic please contact Constantinos Pashiardis at George Z Georgiou & Associates LLC by telephone (+357 22 763 340) or email ([email protected]). The George Z Georgiou & Associates website can be accessed at www.gzg.com.cy.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
