Cancellation of Arbitration Procedure When Fraud Issues are Raised in the Referred Dispute

Arbitration, often favoured as an alternative to traditional court proceedings, stands as a cornerstone in resolving contractual disputes. However, a recent legal case, as explored by Katerina Andreou, Senior Associate at Elias Neocleous & Co LLC, in the Phileleftheros, sheds light on the challenges arising when fraud allegations surface in the arbitration process.

In this case, concerning a public interest construction contract, disputes between the Municipality and a contracting company escalated due to allegations of fraudulent practices. Despite the company’s activation of the arbitration clause, the Municipality sought to cancel the arbitration agreement and initiate civil proceedings, invoking Article 9(2) of Cyprus’ Arbitration Law. In her article, Katerina explores the legal intricacies, highlighting the burden of proof incumbent upon the party alleging fraud and the requisite specificity of evidence. The First Instance Court’s ruling, subsequently upheld by the Civil Court of Appeal, emphasised the gravity of the allegations, deeming them unfit for arbitration resolution.

The article also underscores a paradigm shift in the perception of arbitration, challenging its status as a contractual right. Particularly in public contracts, the inclination towards judicial resolution after failed amicable settlement aligns with the imperative of safeguarding public interests.

The full version of the article in Greek can be found on Phileleftheros here.

The English version can be accessed on Lexology here.

For additional information, please don’t hesitate to contact Katerina Andreou.