The dispute resolution clause is written when everything is going well and works when everything has gone wrong. What you are actually choosing between arbitration and the courts, without the clichés.
When the dispute arrives, that clause will decide where it is heard, by what procedure, in how long, at what cost, and how easily the result can be enforced. It is one of the few terms of a contract that nobody can negotiate at the moment they need it.
That is why it deserves ten minutes of thought at the drafting stage, rather than being copied across from the previous contract.
Whatever you choose will be held to
This comes first because it disposes of half the second thoughts: an arbitration clause is enforced. The Contract Law itself takes a side: section 28 of Cap. 149 voids terms that bar a party from the courts, and then expressly excepts the agreement to refer disputes to arbitration and to recover only what the arbitration awards, so the clause is not a disfavoured ouster but a recognised choice.
In international commercial arbitration, the Cyprus court must refer the parties to arbitration if asked in time, unless the arbitration agreement is null and void or inoperative. In domestic arbitration the court has a discretion, exercised on established conditions, and the application to stay must be made after appearance and before any other step in the proceedings: taking part in the litigation amounts to a waiver.
In plain terms: if you signed arbitration, do not count on the court, and the reverse. The time to decide is at drafting, not when the claim lands.
When arbitration is the better choice
In international contracts its strongest argument is enforcement. An award travels across borders through a route built for that purpose, which a national judgment does not always do as easily.
It is also chosen for privacy, for the ability to appoint a tribunal with the technical knowledge the dispute needs, and for procedural flexibility where the parties genuinely want to use it.
When the court is the better choice
Where both parties and all the assets are in Cyprus, the enforcement argument largely disappears, and the court brings things arbitration does not: interim relief with real teeth, a public record, an appeal, and no obligation to fund the tribunal.
Cost is the point most often assumed rather than checked. Arbitration is not automatically cheaper: the parties pay the arbitrators and the institution, which a court does not charge for.
Where clauses go wrong
The clause that names no seat, no rules, no number of arbitrators and no language creates a preliminary dispute before the real one. The clause that points at both arbitration and the courts creates a fight about which of them was meant. And the clause copied from a contract with different parties in a different country carries assumptions that do not survive the move.
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The contract with its dispute clause as drafted, where each party is established, where the assets are, and, if a dispute has already started, what steps have been taken and on what dates. The timing of the stay application is decided by that sequence.
The step that loses you the arbitration
If the contract has an arbitration clause and the other side sues in court anyway, the remedy is a stay. Section 8 of the Arbitration Law, Cap. 4, sets both the timing and the test, and the timing is unforgiving.
A party may apply for a stay at any time after appearance, and before delivering any pleadings or taking any other step in the proceedings. Filing a defence is taking a step. So, generally, is any application that engages with the merits. Once the step is taken the right is gone, whatever the clause says.
The test has two limbs. The Court may stay if satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the submission, and that the applicant was, when the proceedings began, and still remains, ready and willing to do everything necessary for the proper conduct of the arbitration. The second limb is why a party who has stalled the arbitration and then asks for a stay usually fails.
Note the word "may". Under Cap. 4 the stay is discretionary. Under Article 8(1) of the International Commercial Arbitration Law, Law 101/1987, it is not: the Court shall refer the parties to arbitration if a party so requests before submitting its first statement on the substance of the dispute, unless it finds the agreement null and void, inoperative or incapable of being performed. Article 8(2) adds that the court proceedings do not prevent the arbitration beginning, continuing, or an award being made while the matter is pending. Which of the two applies to your clause is the first question, not a detail.
What the court can still do afterwards
Choosing arbitration does not remove the court. Section 20(1) of Cap. 4 allows the Court to remove an arbitrator or umpire who has misconducted themselves or mishandled the case, and section 20(2) allows it to set aside the award where there has been misconduct or mishandling, or where the arbitration was conducted or the award made irregularly.
Section 21 is the point of the exercise: an award made under a submission may, by leave of the Court, be enforced in the same manner as a judgment or order to the same effect. And section 26(1) gives the Court, for the purposes of and in relation to a reference, the same power to make orders on the matters in the Second Schedule as it has for an action before it, without affecting any power given to the arbitrator over the same matters.
Questions we are asked
When is it too late to ask for a stay?
Under section 8 of Cap. 4, once you deliver pleadings or take any other step in the proceedings. The application may be made at any time after appearance but before that point. Filing a defence is taking a step, and so, generally, is any application engaging the merits. Under Article 8(1) of Law 101/1987 the line is drawn at the first statement on the substance of the dispute.
Will the court definitely stay the case?
Under Cap. 4, not necessarily. Section 8 says the Court "may" order a stay, and only if satisfied that there is no sufficient reason why the matter should not be referred to arbitration under the submission, and that the applicant was when the proceedings began, and still remains, ready and willing to do everything necessary for the proper conduct of the arbitration. Under Article 8(1) of Law 101/1987 the court shall refer the parties to arbitration, unless it finds the agreement null and void, inoperative or incapable of being performed.
Does the court case stop the arbitration in the meantime?
No, at least not under the international law. Article 8(2) of Law 101/1987 provides that the bringing of the action does not prevent the arbitral proceedings from beginning or continuing, or an award from being made, while the matter is pending before the court.
Can an award be challenged?
Section 20(1) of Cap. 4 allows the Court to remove an arbitrator or umpire who has misconducted themselves or mishandled the case, and section 20(2) allows it to set aside the award where there has been misconduct or mishandling, or where the arbitration was conducted or the award made irregularly. These are narrow grounds: an award is not reopened because it is wrong.
How is an award turned into something enforceable?
Section 21 of Cap. 4: an award made under a submission may, by leave of the Court, be enforced in the same manner as a judgment or order to the same effect. Leave is a separate application, and it is where a defective arbitration is most often exposed.
Can I ignore an arbitration clause and go to court?
No. In international commercial arbitration the Cyprus court must refer the parties to arbitration if asked in time, unless the agreement is null and void or inoperative. In domestic arbitration the court has a discretion exercised on established conditions.
When must the stay be applied for?
After appearance and before any other step in the proceedings. Taking part in the litigation amounts to a waiver of the arbitration agreement.
Is arbitration cheaper?
Not automatically, and this is the point most often assumed rather than checked. The parties pay the arbitrators and the institution, which a court does not charge for. Its stronger arguments are enforcement across borders, privacy, technical expertise and procedural flexibility.
When is the court the better forum?
Where both parties and the assets are in Cyprus, the cross-border enforcement argument largely disappears, and the court offers interim relief with real teeth, a public record, an appeal, and no obligation to fund a tribunal.
Related reading
What the journey costs either way is in what a court case costs. See also litigation and arbitration and enforcing foreign judgments and awards. Where the parties or the assets sit in different countries, the framework is in cross-border litigation.
This article is for general information only and does not constitute legal advice. Laws and their application can change, and individual circumstances differ. For advice on your own matter, contact Klitos Platis at klitos@kleanthousplatis.com or telephone +357 22 680 330.
Klitos Platis
Advocate, Partner
Kleanthous & Platis LLC, Nicosia · Published 19 January 2026
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