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30 May 2019
In Dr Walter Hoft ν Coraline Limited (Petition 11/2017), the applicants applied to the Limassol District Court for the recognition and enforcement of an arbitral award dated 13 June 2017 and issued by the Arbitration Institute of the Stockholm Chamber of Commerce. On 15 December 2017 the Cypriot court issued an interim judgment explaining the procedural steps and circumstances in which Article VI of the New York Convention had been applied. This article's application has seldom been examined by the Cypriot courts.
On 26 September 2017 the respondents in the main proceedings filed an interim application seeking a stay of its main petition pending the outcome of an appeal filed with the Svea Court of Appeal in Sweden. The Swedish appeal sought to annul and set aside the arbitral award.
According to Article VI of the New York Convention:
If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.
The Limassol District Court raised the question of whether the decision to order a stay pending the outcome of the Swedish appeal was a matter to be decided in the main petition itself or whether it was properly raised through an interim application filed for that purpose, such as the present application. To this end, the court invited counsel for both parties to provide their opinion on the matter. Both parties considered that the request for a stay had been properly raised in an interim application filed for this specific purpose.
The Limassol District Court disagreed and stated that all references made in the context of counsel submissions reinforced the view that this matter should be decided in the context of the main petition. The court emphasised that none of the authorities that it was referred to supported the view that the question of ordering a stay be examined in the context of an interim application filed for that purpose.
The court cited with approval the approach of the English courts in Soleh Boneh International Ltd v Government of the Republic of Uganda ( 2 Lloyd's Rep 208), in which the following options available to the court were described:
If the award is manifestly invalid, there should be an adjournment and no order for security; if it is manifestly valid, there should either be an order for immediate enforcement, or else an order for substantial security.
Further, the court adopted the analysis in IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation ( UKSC 16), in which it was explained that if a stay is granted subject to a cross-undertaking being offered that is subsequently not complied with, it does not follow that enforcement is instant. The court will still have to examine and be satisfied that the necessary prerequisites for recognising the arbitral award have been fulfilled.
The court subsequently considered and quoted passages from the United Nations Commission on International Trade Law Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which analyses the authors' rationale in drafting the convention. The court determined that the reference to the possibility to order the enforcement of the arbitral award immediately or a stay denoted that the matter had to be dealt with in the main petition. Similarly, in the court's opinion, the reference to the word 'request' did not imply the filing of an application. Drawing from the guide, the court concluded that it had inherent jurisdiction to order a stay in the context of the main petition, even if neither party requested it, assuming that the respondent filed an objection describing facts which would allow the court to safely reach a conclusion that a stay was merited.
Finally, the court explained that where an objection to the main proceedings has not yet been filed, it would decline to order a stay requested through an interim application. The court reasoned that such an action would infringe one of the underlying rationales of the New York Convention, which is to incorporate an accessible and swift process of recognising and enforcing foreign arbitral awards.
This case is one of the first examples of the judicial interpretation and application of Article VI of the New York Convention by the Cypriot courts and serves as a useful guide to the proper procedure to be followed by parties when invoking said article.
For further information on this topic please contact Constantinos Pashiardis at George Z Georgiou & Associates LLC by telephone (+357 22 763 340) or email (firstname.lastname@example.org). The George Z Georgiou & Associates website can be accessed at www.gzg.com.cy.
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