Articles

The application of Arbitration in Cyprus - Article by Parparinos & Milonas

Nov 26, 2019

In Cyprus, Arbitration is often used by Cooperative Banks/Institutions regarding loan cases against their Clients.

The Cooperative Societies Act of 1985 (N. 22/1985) and more specifically the Article 52 refers to the arbitration proceeding. Article 52 does not make any reference on the method and the time individuals have to be notified/informed about the beginning of the proceedings, their right to choose a lawyer – not even if they consent to arbitrate with the Coop Bank. This is somewhat unorthodox because parties must consent to resolve their dispute with Arbitration.

However, the Clients of the Coops are not given the opportunity to be heard violating in that manner the ‘right to be heard’; one of the fundamental human rights recognized by our Constitution (Article 30, Constitution of Cyprus), European Convention of Human Rights (Article 6) and by the concrete provisions of International Law.

In order for the Arbitration to be effective, both parties must have an opportunity to be heard and have sufficient time to prepare their case with their Lawyers. Nevertheless, the common practice of Coop Banks is of proceeding to Arbitration despite client’s (defendant) unawareness of a procedure started against him and thus, losing the opportunity of practicing their right to be heard. After the Arbitration procedure takes place, the decision is of course in favour of the Bank and against the Client. This is likely to happen because the arbitrators are usually bank employees and not a ‘third’ person, meaning a completely impartial person. The Bank’s Lawyers achieve in this way, to register the Decision to the District Court with the aim of executing it. Definitely, by having the Coop Banks violating the constitutional right to be heard, Arbitration’s conduction leads to an unfair result. One must note that Article 52 of the abovementioned legislation does not explain the Arbitration Procedure, i.e. how it is conducted, when it will take place, the number of the Arbitrators etc.

To conclude, one may say that, in Cyprus at least, regarding Coop Banks, Arbitration is not applied correctly as it is usually held in the standards provided by International Commercial Arbitration. Essential changes have to be made in order for the procedure to be more accessible to individuals, especially to the weakest parties and do not have the chance to refer to Court and present their case. If we travel back in time, the main reason Coop Banks were established, was to help the poor and farmers and in general individuals in a weak financial position. In contrast to their original purpose, nowadays they seem to satisfy other political and economic purposes.