CYPRUS: Waiver of right to arbitrate by resorting to litigation
Waiver is constituted by the deliberate intentional and unequivocal release or abandonment of the right that is later sought to be enforced (see ZHANG –V- SHANGHAI WOOL & JUTE TEXTILE CO LTD (2006) VSCA 133).
The concept or doctrine of waiver, relates and overlaps with the concepts or doctrines of abandonment, election and estoppel, because their common feature is that they all involve a resignation or relinquishing of a legal right or claim by a party, which conduct binds such party.
The concept of abandonment focus on the unqualified forsaking or abandonment of a legal right or claim and as in waiver, abandonment needs to be intentional.
The concept of “election” requires a party to elect between two mutually inconsistent legal rights, each of which has different consequences.
The concept of “estoppel” prevents a party to litigation by its prior conduct, from relying upon a legal right, on the basis that to do otherwise, would produce an injustice.
From a review of the relevant case law of the most important common law jurisdictions, the following legal principles are traced:
(1) When the parties entered into an agreement to arbitrate, it is reasonable that a presumption in favour of arbitration should be recognised. This presumption would favour preservation of the arbitration right further along the litigation spectrum with a determination of waiver being less readily made.
(2) When parties enter into an arbitration agreement, they are seeking to limit the resolution of the subject dispute to one adjudication in one forum only, and the involvement in litigation is inconsistent with such core consideration underlying the arbitration agreement.
(3) A waiver of arbitration ought not to be readily inferred. Participation in the early stage of litigation ought not readily to ground a waiver determination.
(4) The progress of the litigation within the willing participation of both parties to an intermediate stage or nature stage, should ground a waiver.
(5) Where each of the disputants has on the evidence, clearly and unequivocally waived their right of arbitration then, whatever analysis is adopted (i.e. waiver, abandonment, election, estoppel, variation of contract etc.), and whether or not the matter has proceeded some distance along the litigation spectrum, a determination of waiver should be made. The arbitration mechanism is the product of the agreement of parties and they must have the power to vary or annul same.
The present article is based solely on the excellent paper of Peter Gillies and Andrews Dahdal “Waiver of Right to Arbitrate by Resort to Litigation in the context of International Commercial Arbitration”, published in Journal of International Commercial Law & Technology (Vol. 2, Issue 4 (2007).
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