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13 November 2007
In a recent decision, a Cypriot district court rejected an application for the recognition and enforcement of an arbitral award issued by the Austrian Arbitral Centre due to the applicant's failure to produce the original arbitral agreement or a certified true copy of the arbitral agreement.
The applicant presented to the court a copy of the arbitral agreement which was presented as an exhibit during the arbitration process in Austria, accompanied by a certificate from the secretary of the Austrian Arbitral Centre certifying that the document was a photocopy of the copy presented in the proceedings.
The applicant disclosed to the court that it did not have the original arbitral agreement or any true copy of it and thus could not comply with Article IV of the New York Convention.
The applicant tried unsuccessfully to persuade the court that since the validity of the arbitral agreement was not questioned by the respondent during the arbitration proceedings in Austria, the Cypriot court should accept the presentation of a photocopy of the arbitral agreement instead of the original arbitral agreement or a certified true copy of the arbitral agreement as required under Article IV of the New York Convention.
In addition, the applicant argued that the respondent was estopped from disputing the existence of the arbitral agreement because the respondent relied on the arbitral agreement in order to request and obtain a stay of the legal proceedings which were commenced in Cyprus by the applicant for the same subject matter.
Before the issue of this decision, numerous other Cypriot first instance court decisions have adopted the same strict line of interpretation of the provisions of the New York Convention.
The issue will soon be reviewed by the Cyprus Supreme Court in its appellate jurisdiction as the applicant has lodged an appeal.
In Cyprus, the recognition and enforcement of foreign arbitral awards cannot be considered automatic. Parties should expect that in certain cases the courts will refuse to recognize and enforce arbitral awards. Nevertheless, a pro-enforcement bias persists. The New York Convention's seven enumerated defences continue to be applied narrowly and the burden of proof remains very much with the party opposing enforcement. In general, courts have resisted allowing defences beyond those specified in Article V of the convention, although arguments based on procedural considerations have met with some success.
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