Cyprus has proposed introducing a new fast-track mechanism for resolving disputes arising from construction contracts. The bill was submitted to the House of Representatives by ALMA MPs Odysseas Michaelides and Michalis Paraskevas. The initiative would create a legal framework for recognizing and enforcing decisions issued through a special procedure known as adjudication. It would allow the parties to obtain a binding interim decision on a dispute without waiting for lengthy court or arbitration proceedings to be completed.
The proposed mechanism would cover disputes involving payments, construction delays, extensions of time, additional works, project changes, and technical issues. Its main purpose is to prevent prolonged disputes from bringing construction work to a halt and increasing costs for both clients and contractors. The bill provides for the procedure to apply to both private and public construction contracts, but only where the parties have entered into a written agreement. The document contains 45 articles divided into five parts.
What Is Adjudication and How Would the Procedure Work?
Adjudication is an alternative dispute resolution method in which the parties refer a specific issue to an independent and impartial expert, referred to in the bill as the “adjudicator.” The expert reviews the contract, documents, financial calculations, and technical materials. If necessary, the adjudicator may inspect the construction site and consult specialists. At the end of the procedure, a written decision is issued and becomes binding on the parties under the proposed rules.
The main difference between adjudication and arbitration is that adjudication does not necessarily resolve the dispute permanently. Its purpose is to settle disagreements quickly while construction is ongoing, allowing the project to continue.
Participation in the procedure would be voluntary. The parties would have to enter into a written agreement in advance, either by including an adjudication clause in the construction contract or by signing a separate document. The agreement could specify which disputes would be referred to adjudication, how the adjudicator would be appointed, and which procedural rules would apply. If the parties do not agree on the appointment procedure or the rules governing the dispute, the bill allows them to rely on the adjudication rules of the Cyprus Scientific and Technical Chamber (ETEK). The organization already provides alternative dispute resolution services, including adjudication, mediation, and arbitration.
Decisions Would Have to Be Followed Even If a Party Disagrees
One of the key provisions of the bill is the temporarily binding nature of adjudication decisions. The parties would be required to comply with them without delay, even if they believe the outcome is incorrect and intend to challenge it in court or arbitration. Unless the decision specifies a different deadline, monetary obligations would have to be fulfilled within seven days. Filing an objection or commencing court proceedings would not, by itself, suspend enforcement. Decisions could also cover matters other than payments.
The independent adjudicator would be able to determine whether completed work should be accepted, defects corrected, certain elements rebuilt, or parts of the works removed. The procedure could also temporarily resolve issues involving extensions of time, project modifications, valuation of completed work, and related payments. However, an adjudicator’s decision would not replace construction licenses, permits, or other documents required by law.
How Could a Decision Be Enforced Through the Courts?
If one party refuses to comply with an adjudication decision, the other party would be able to apply to the competent district or commercial court to have the decision recognized and enforced. The court’s review would not amount to a new examination of the underlying construction dispute. The court would not reassess technical evidence, reinterpret the contract, or determine whether the adjudicator calculated the payment correctly.
The bill sets out a limited list of grounds on which recognition could be refused. These include the absence of a valid written agreement, a serious violation of a party’s right to be heard, lack of impartiality on the part of the adjudicator, as well as fraud, corruption, or forgery. Disagreement with the amount awarded or with the adjudicator’s conclusions alone would not be sufficient grounds for refusal.
In exceptional circumstances, a court could suspend enforcement in whole or in part or impose additional conditions. This could apply, for example, where there is a proven risk of serious harm that could not be adequately compensated after the dispute is finally resolved. Instead of a full suspension, the court could require a bank guarantee, payment into a special account, or staged compliance.
Can the Decision Be Challenged and When Would the Law Take Effect?
The proposed mechanism would not remove the parties’ right to seek a final resolution of the dispute. After an adjudication decision is issued, the parties could still go to court, proceed to arbitration, or use another agreed method of dispute resolution. Following the final proceedings, the original adjudication decision could be amended or overturned. If it is later determined that one party received money to which it was not entitled, the bill provides for repayment or another form of compensation. In particular, a 30-day period is proposed for the return of money received without justification.
Under certain conditions, the parties could also agree in advance that an adjudication decision would become final if it is not challenged within a specified period. The new mechanism is intended to apply to both private and public construction contracts. However, public-sector clients would not be required to include adjudication clauses in every contract. If such an agreement is made, the fact that one party is a public authority would not in itself exempt it from complying with the decision.
The bill also provides for a transition period. If adopted by the House of Representatives, it would enter into force six months after publication in the Official Gazette of the Republic of Cyprus. The new rules would apply to adjudication agreements concluded after the law takes effect.
Existing contracts would not automatically become subject to the new rules. The parties could extend the mechanism to them through a separate written agreement.
The proposed changes are intended to create a more predictable framework for resolving construction disputes, reduce delays, and lower financial risks for market participants. However, the final rules will depend on the version of the bill ultimately approved by Parliament.