South Africa

Africa

Key points
Arbitration in South Africa is governed by the Arbitration Act 42 of 1965 (the Act). The Act does not distinguish between domestic and international arbitration and is not based on the UNCITRAL model law. In 1998, a South African Law Commission report on international commercial arbitration proposed various reforms including a draft arbitration bill based on the UNCITRAL model law; this has not been implemented. South Africa acceded to the New York Convention without reservation in 1976. The South African courts are supportive and the Supreme Court of Appeal has affirmed the international principle that judicial intervention when reviewing international commercial arbitration awards is to be minimised (Telecordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA)). The Supreme Court of Appeal has affirmed the principle of party autonomy in arbitration proceedings, holding that the courts will defer to domestic awards except where there are clear procedural irregularities. South Africa is not a party to the ICSID Convention. Confidentiality The Act does not provide for confidentiality of either proceedings or award. Parties are advised to make provision for confidentiality in their arbitration clause. For a model confidentiality clause, see the Arbitration section on drafting arbitration clauses.

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Model arbitration clause

The parties agree to submit any disputes or difference between them arising out of this contract to conciliation and arbitration as provided by the UNCITRAL Arbitration Rules in respect of which the Arbitration Foundation of Southern Africa will act as the appointing authority. The Arbitration Foundation of Southern Africa (AFSA) See the Arbitration section for best practice in drafting arbitration clauses.

Weblinks www.arbitration.co.za Arbitration Foundation of South Africa www.arbitrators.co.za Association of Arbitrators www.ccma.org.za Commission for Conciliation, Mediation and Arbitration www.africaadr.com Africa ADR

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What arbitration bodies are there within the jurisdiction?

There are four main arbitration bodies in South Africa: the Arbitration Foundation of South Africa (AFSA), the Association of Arbitrators (AOA), the Commission for Conciliation, Mediation and Arbitration (CCMA), and the recently formed Africa ADR (AADR). Arbitration Foundation of South Africa AFSA was founded in 1996 and is a joint venture between business organisations and the legal and accounting professions. It provides a one-stop service, with facilities for arbitrations and mediations, a fully administered dispute resolution service (including panels of experts) and a choice of rules depending on the size and complexity of the matter. The Alternative Dispute Resolution Association of South Africa (ADRASA) is a wholly owned subsidiary of AFSA. Association of Arbitrators The AOA was formed in 1979 with the following aims: to promote arbitration as a means of resolving disputes; to provide a body of experienced arbitrators and alternative dispute resolution specialists; to help arbitrators and alternative dispute resolution specialists work efficiently; and to make arbitration and alternative dispute resolution more effective. The Association has concluded cooperation agreements with a number of arbitration institutes elsewhere in the world, notably the London Court of International Arbitration. Commission for Conciliation, Mediation and Arbitration The CCMA, established through the Labour Relations Act 66 of 1995, is an independent dispute resolution body created to address the shift in labour relations from the previously highly adversarial model
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to one promoting greater cooperation, industrial harmony, and social justice. The CCMA promotes effective dispute resolution and collective bargaining in the labour sector. The CCMA has compulsory jurisdiction to arbitrate specific labour disputes falling under the Labour Relations Act, and may also arbitrate disputes between parties who have consented to the jurisdiction of the CCMA and which fall within the jurisdiction of the Labour Court. Where compulsory jurisdiction exists, the twin hallmarks of private arbitration, being consent and privacy, do not apply to CCMA arbitrations. Africa ADR AADR was established in 2009 in keeping with the global trend to establish regional arbitral authorities which catered to regional needs. Up until then, Africa lacked a dispute resolution authority with a continental reach. AADR is a non-profit, neutral and independent dispute resolution administration authority, providing comprehensive administration services for tribunals engaged in the resolution of regional and international disputes through arbitration, mediation or conciliation.

Is there an Arbitration Act governing arbitration proceedings, and is it based on the UNCITRAL model law?

Arbitration in South Africa is governed by the Arbitration Act 42 of 1965 (the Act). This provides for the determination of disputes by arbitral tribunals through written arbitration agreements, and for the enforcement of the awards of these tribunals. The Act applies to all domestic and international arbitration proceedings in South Africa (where the South African court would have jurisdiction were it not for the written arbitration agreement).

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The Act prohibits any reference to arbitration for matrimonial or status issues. The Act contains provisions dealing with issues such as the powers of arbitrators, the summoning of witnesses, the production of documents, the giving of oral evidence, and the recording of evidence. However, there are no statutory laws or rules governing the procedure of arbitration. The procedure is usually set by the arbitral tribunal. It is widely accepted that the Act is out-dated and in need of reform. No distinction is drawn between domestic and international arbitration proceedings. International arbitration proceedings are also not based on the UNCITRAL model law. In 1998, the South African Law Commission (now the South African Law Reform Commission) (the Commission) submitted a report on its investigation into international commercial arbitration; it submitted a further report on domestic arbitration in 2001. Both reports proposed extensive changes to bring South Africa up to date with best practice in arbitration. The Commission recommended that the UNCITRAL model law compulsorily apply to all international commercial arbitration in South Africa, and that all South African legislation on international arbitration be embodied in a new international arbitration act. The Commission formulated draft Bills for discussion; despite widespread support for the Commissions recommendations from the legal and business communities, the government has yet to implement these.

What are the available rules?

In ad hoc domestic arbitrations, rules of procedure are adopted specifically for the purposes of the arbitration. In these circumstances,

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parties often choose to apply the rules of the High Court of South Africa, due to practitioners familiarity with those rules. This is particularly useful where the agreed reference to arbitration is a conversion from existing High Court proceedings, especially where the pleadings in the action have closed. Where the arbitration involves foreign parties, and the disputants have decided on arbitration but not agreed a formal dispute resolution mechanism, the rules of the London Court of International Arbitration and the rules of the International Chamber of Commerce are popular choices. Each of the South African arbitration institutions has its own set of rules. If the arbitration is administered by a particular institution, it is usual (not mandatory) to apply the rules of that institution. In domestic arbitrations, the parties can agree the procedural rules to be applied, and the arbitrators are obliged then to apply those rules. However, in the case of arbitrations before the CCMA, its rules of procedure must be followed. Under the AFSA rules and the AADR rules, the claimant has to pay a substantial first fee/registration fee as a deposit to commence the arbitration. This deposit, which is non-refundable, is, in the case of AFSA, determined as a percentage of the amount in dispute. Under the AADR rules, the registration fee is based on a schedule that is not published but is available from the tribunal administration (the Institute). Under the AADR rules, the parties are also liable to pay the tribunal administration advances on fees and administration costs. Many parties baulk at the extensive first fees payable under AFSA and opt for ad hoc arbitration with an agreed set of rules. In some quarters, the uncertainty on fees and costs payable under the AADR rules is seen as an impediment against selection of the AADR as tribunal of choice.

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AFSA also has a set of expedited rules for smaller, less intricate disputes. In practice, these are seldom used, parties more often agreeing between themselves particular ad hoc procedures suitable for the particular dispute.

What supervision is there of arbitrators and their awards?

Arbitration agreements may not exclude the jurisdiction of the South African courts. Under the Act, the courts retain certain powers of assistance, supervision and intervention in relation to the dispute and the arbitration, before, during and after the proceedings. Unless the parties stipulate to the contrary in the arbitration agreement, and provision is made for the mechanism by which any appeal process is to be undertaken, an award made in an arbitration conducted in terms of the Act is final and binding on the parties and not subject to any appeal. An arbitrator is permitted to rule on the question of their own jurisdiction. However, a party may apply to have an award set aside where the arbitrator has exceeded their powers. This would include the situation where the arbitrator has exceeded their jurisdiction. Under the Act, the jurisdiction and competence of the tribunal may be addressed by the court in the following circumstances: Where a party contests the validity of the contract containing the arbitration agreement and alleges the arbitrator has no jurisdiction, and the arbitrator declines to proceed with the arbitration, another party may apply to the court for a declaratory order as to the validity of the contract and the jurisdiction of the arbitrator. If the arbitrator proceeds with the arbitration in the face of objection from a party not under the arbitrators jurisdiction, that party may seek to enforce the objection by applying to court for an interdict preventing the arbitration from proceeding.

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If the successful party applies to court for an order enforcing the arbitrators award, its application may be opposed by the unsuccessful party on the ground that the arbitrator lacked jurisdiction. (The prospects of success, in the absence of an earlier attempt to obtain an interdict, would be open to question.) Should the tribunal exceed its powers, the court may, on the application of any party, make an order setting aside the award. Within six weeks following publication of the award, the parties may send any matter that was referred to arbitration back to the tribunal for reconsideration. The court may also send any matter back to the tribunal upon the application of any party, provided the application is brought within six weeks of the publication of the award and that the applicant shows good cause for such remission. The question of what constitutes good cause is dealt with below. Under the Act, if the parties agree, or the court so directs on the application of any party, any question of law arising in the course of the arbitration proceedings may be referred to the court or to counsel as a special case for an opinion on the law. This may happen at any time before a final award is made. The opinion is final and binding on the tribunal and the parties, and to ignore it would be a gross irregularity perhaps even misconduct on the part of the tribunal. However, the handing down of a final award by an arbitrator in the face of a pending application to the court for an opinion on the law has been held not to constitute misconduct.

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Arbitrators may have regard of public policy in reaching certain decisions. Where there is a conflict between a procedure ordered by the arbitrators and any provision of the Act, a party may apply to court to have the issue determined by the court. Whether an arbitration institution retains supervisory powers over the proceedings and the award depends on the rules of that institution. Under the South African Constitution, every person has a right to a fair public hearing (section 34). The South African Constitutional Court has held in the context of an allegation that the informal and investigative procedure adopted by the arbitrator in certain proceedings violated this right that these rights do not apply to private arbitrations not because the parties had waived these rights, but because they had chosen not to exercise them by virtue of their agreement that disputes were to be determined privately (Lufuno Mphaphuli & Associates v Andrews and Another 2009 (4) SA 529 (CC)).

How quickly can a tribunal be set up?

The time taken to set up a tribunal depends on the mechanism agreed by the parties in their arbitration agreement. Under the Act, unless otherwise stated in the arbitration agreement, there shall be a single arbitrator. The Act also has various mechanisms to deal with the following circumstances which may prevent a smooth start to the tribunal: The arbitration agreement provides for two or more arbitrators one for each party and a party fails to appoint its arbitrator.

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An appointed arbitrator either refuses to act or becomes incapacitated, and is then removed from office or has their appointment terminated or set aside. The agreement provides for an even number of arbitrators, each appointed by the parties concerned, and the arbitrators choose to appoint an umpire or a third arbitrator. The agreement provides for a single arbitrator and the parties cannot agree on the appointment the court can then appoint an arbitrator. The appointment of an umpire or third arbitrator causes disagreement among the already appointed arbitrators. The parties (or arbitrators) cannot agree on the appointment of a replacement arbitrator. The various institutional arbitral rules give specific time periods in which a tribunal can be established and stipulate various avenues of relief, as well as consequences, if these deadlines are not met. An uncooperative party may compel an opponent to resort to the courts, or the tribunal itself in certain circumstances, to make sure the arbitration is established successfully. Such obstruction and delay can be avoided with the inclusion of a well-crafted and comprehensive dispute resolution clause in the original agreement.

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What happens if one party refuses to participate in the process?

An arbitration agreement is binding and cannot be terminated save with the consent of all the parties involved. Where a party wishes to prevent a dispute from being determined by way of arbitration, that party must apply to court for an order and is obliged to show good cause why the dispute should not be referred to arbitration. The Act and the private arbitration rules provide mechanisms for the appointment of an arbitrator where a party refuses to participate in establishing the tribunal. Where a party institutes court proceedings despite an agreement for the mandatory arbitration of disputes, any other party may approach the court to stay those proceedings. It will then be for the party initiating the court proceedings to show good cause why arbitration will not suffice as a method for resolving the dispute. In considering the arguments, the court will be mindful of the principles reaffirmed in the Telecordia Technologies case and the reticence of the courts to interfere with party autonomy. Once the tribunal has been established, a partys refusal to participate may result in an award by default against them. Under the Act, a tribunal may proceed in the absence of a party if that party has received reasonable notice of the time and place of the hearing and has failed to show good cause as to its non attendance (section 15).

What interim measures are available?

The tribunal can order interim measures of protection only where the agreement provides for this or where the parties agree to confer this power on the tribunal when discussing procedural rules. In the absence of agreement, the tribunal has no power to order security for a claim or costs, or to compel the attendance of any witness at the hearing.
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The tribunal can require disclosure of documents and direct the inspection of any goods or thing involved in the dispute unless the arbitration agreement states otherwise (the Act, section 14(1)). Under the Act any party may secure the attendance of witnesses at the hearing, just as in ordinary civil proceedings. Under the Act the court can also order: security for costs the disclosure of documents and the provision of interrogatories the examination of witnesses on commission, either within South Africa or abroad the production of evidence by affidavit the inspection, preservation or sale of any property involved in the proceedings the appointment of a receiver certain injunctive relief. Under the AFSA rules and the AADR rules, there are mechanisms available to deal with security for costs, disclosure, inspections, securing the attendance of witnesses, and interim and conservancy measures. Similar provisions exist under the High Court rules. There is, however, no provision for obtaining security for the amount in dispute under AFSA, AADR or the High Court.

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What right is there to challenge the appointment of an arbitrator?

Unless the arbitration agreement provides otherwise, the appointment of an arbitrator cannot be terminated except in the limited circumstances provided for in the Act or in the applicable arbitration rules, or where the parties consent to termination. Arbitration Act Under the Act, any party may at any time apply for the termination of an arbitrators appointment if they can show good cause for that arbitrator to be removed. Good cause, although not defined under the Act, must include the failure by the arbitrator to either proceed with the arbitration or to make an award with all reasonable dispatch, or cover the situation where two arbitrators are unable to agree (the Act, section 13(2)(b)). The question of what constitutes good cause when challenging the appointment of an arbitrator has never been decided in the South African courts. In the context of an arbitration where the South African Constitutional Court and the Supreme Court of Appeal have reaffirmed the primacy of party autonomy it is likely that good cause will have to be highly persuasive. Case law would suggest that a matter of some importance in considering the question of good cause is that of likely prejudice to the other party. AFSA rules An arbitrator is obliged to disclose to the Secretariat any facts or circumstances that might give rise to reasonable doubt concerning the arbitrators independence and impartiality in the eyes of the parties.

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In the event the arbitrator discloses any such facts or circumstances, the Secretariat is obliged to inform the parties and afford them adequate opportunity to make submissions and comments. If the Secretariat, in its sole discretion, decides that there are insufficient grounds for not appointing an arbitrator or for removing them, it must notify the parties and the arbitrator accordingly. As with judicial officers in ordinary civil proceedings, arbitrators are obliged to withdraw if, due to physical, mental or other disability, they become incapable of performing their duties properly. AOA rules On appointment by the Association of Arbitrators, the prospective arbitrator is obliged to sign a declaration that there are no grounds known to them likely to give rise to doubts as to their independence and impartiality. The arbitrator must declare any facts or circumstances which may raise such doubts in the eyes of the parties. The parties are entitled to challenge the appointment of the arbitrator within five days of receipt of this declaration. In that event, a detailed process is followed under the auspices of a committee convened by the Chairman of the AOA. If the committee decides the arbitrator is to be replaced, and the parties are not able to agree on a replacement, the committee can either reopen the nomination process or appoint a new arbitrator itself. AADR rules A party may challenge the appointment of an arbitrator at any time if circumstances exist that give rise to justifiable doubts as to the arbitrators impartiality or independence (article 12).

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The challenge must be made in writing, setting out the full facts of the case, within 15 days of the party becoming aware of the circumstances concerned. Failure to do so within the stipulated time is deemed to constitute an irrevocable waiver of the right to make the challenge. A reply to any challenge must be made within 15 days of receipt of the challenge. In the absence of a voluntary withdrawal by the arbitrator or any agreement between the parties, AADR will decide the challenge and, subject to applicable law, that decision will be final. High Court rules There is no specific rule under the High Court that deals with withdrawal of the presiding officer. Where the parties have agreed that High Court rules will govern the proceedings, the Arbitration Act will apply to all matters of independence or impartiality.

Can a party appeal the arbitrators decision and, if so, are there any time limits to be aware of or unusual provisions?

The finality of arbitration awards is entrenched in South African law as a principle of common law and by statute. The award is final and not subject to appeal, unless the agreement provides otherwise (the Act, section 28). The parties can, however, agree on the right to appeal the award. The agreement may limit the appeal to a specific type with a time limit and certain procedural rules. Some institutional arbitration rules allow the parties to carry the matter to an appeal hearing. The parties can choose to have the right to appeal the arbitrators decision, and an appeal panel may be provided by the institution.

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AFSA rules Under the AFSA rules, where the parties have agreed a right of appeal, notice of any appeal must be delivered within seven calendar days of the publication of the interim award or final award. This applies unless the parties have agreed otherwise in writing. Notice of any cross-appeal must be delivered within seven calendar days of the delivery of notification of appeal. AOA rules Under the AOA rules, parties may appeal, provided there is a written and signed agreement. Either party may then, within 10 days of publication of the award, give written notice to the other party, to the arbitrator and to the Chair of the AOA of its intention to refer the award to an appeal tribunal. There is also a mechanism for the correction of the award. AADR rules Under the AADR rules, there is no appeal procedure and the award is final and binding. However, there is a process whereby the award can be corrected, and the tribunal can be requested to give an interpretation of the award. The tribunal will do so if, in its opinion, the request is reasonable, justified and necessary for the proper understanding and implementation of the award. The request for an opinion and any request for corrections must be made within 30 days of delivery of the award. High Court rules There is no automatic right of appeal leave of the court is required to appeal an adverse judgment to a higher court. Accordingly, in domestic arbitrations before a single arbitrator, where the parties have agreed to apply the High Court rules, if the parties wish to provide for an appeal mechanism, this is usually set out in the arbitration agreement.

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10 Is South Africa a party to the New York Convention?

Yes. In 1976 South Africa acceded to the Convention without reservation and in 1977 enacted legislation to give effect to this ratification. an arbitration award be enforceable in South Africa and, 11 Will if so, what is the procedure? A party seeking to enforce a foreign arbitral award may apply to the relevant division of the High Court of South Africa having jurisdiction over the respondent party, to have the award made an order of court. This procedure derives from the Recognition and Enforcement of Foreign Arbitral Awards Act 40 of 1977 (Foreign Arbitral Awards Act). A foreign arbitral award is defined as any arbitral award made outside South Africa and can therefore include both New York Convention awards and non-Convention awards. The application must be accompanied by the original, or certified copies, of both the arbitral award and the arbitration agreement; all documents must be properly authenticated. If the award is made in a language other than one of the 11 official languages of South Africa, a sworn translation of the award into one of those languages, also duly authenticated, must be attached to the application. Notice of the application must be given to the other party, to afford the respondent an opportunity to oppose the application and show the court any reasons, under the Foreign Arbitral Awards Act, why the award should not be made an order of court. The applicant is entitled to file replying papers in response to any answer given by the respondent.

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For the court to refuse to make the award an order of court, the respondent must prove one of the following: the parties had no capacity to conclude the arbitration agreement the arbitration agreement is invalid under the law governing the agreement or of the country in which the award was made the respondent did not receive the required notice of appointment of the arbitrator or of the arbitration proceedings or was otherwise not able to present its case the award deals with a dispute not contemplated by or falling within the provisions of the relevant reference to arbitration, or contains decisions beyond the scope of that reference the tribunal was not constituted or proceedings conducted in accordance with the arbitration agreement or in accordance with the law of the country in which the arbitration took place the award is not yet binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made. If opposition to the application is anticipated, the applicant should foreshadow each of these possible objections in its founding papers, providing sufficient evidence on the validity of the arbitration agreement, the validity of the proceedings, the scope of the award and the absence of any order setting aside or suspending the award. Should the tribunal or the courts of the seat of the arbitration have dealt with any of these objections, the appropriate determination should also be included.

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In the event the application is not opposed, an applicant should be able to obtain the requisite order within two months, and the cost of doing so should be reasonably modest. However, in the event the application is opposed, and full papers are filed, it could take up to a year before the matter is argued and a judgment given, much depending on the particular division of the High Court in which the application must be brought. In those circumstances, parties can expect to pay the same costs as for a short trial action. In deciding the matter, the court will be guided by the principles reaffirmed by the Supreme Court of Appeal in the Telecordia Technologies case.

12 What are the likely costs of the arbitration?

The tribunal is vested with a wide discretion regarding the award of costs. Usually, costs are awarded to the party that is substantially successful. A favourable costs award does not result in full indemnity. While practitioners will charge their clients according to agreed rates (attorney-own client costs), recoverable costs are determined by way of a tariff (based on the Supreme Court Act) and are assessed by the Taxing Master of the High Court having jurisdiction over the seat of the arbitration (party-and-party costs). As a rule of thumb, successful parties can expect to recover approximately 50 per cent of their actual costs of arbitration. Recoverable costs would include tribunal fees and expenses, expert and witness fees and expenses (provided these are qualified as part of the award) and the costs of counsel employed. Where more than one advocate is engaged, the successful party will be able to recover the costs of two or more counsel only where the tribunal expressly orders this.

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Usually the parties agree to share the costs of the tribunal, arbitration venue, and transcriber, on the basis that the unsuccessful party will reimburse the successful party its share. A number of the arbitration institutions charge significant administration fees and require substantial deposits (see Question 3). Usually, the unsuccessful party is ordered to pay these. Ordinarily, no interest accrues on costs. However, the parties may agree that the tribunal has the power to award interest on costs. Where an award is silent on costs, or silent on a particular aspect on costs, a party may apply to the tribunal for an appropriate order. This order must be made within 14 days of publication of the award.

13 Are split clauses valid and enforceable?

Split clauses allow one or more parties to elect arbitration or litigation after the dispute arises. In South Africa, the split clause usually takes the form of a permissive rather than a prescriptive reference of disputes to arbitration that a party may refer a dispute to arbitration. Where another party to the dispute does not consent to arbitration, the referring party cannot compel arbitration and must instead resort to the courts. If the dispute resolution clause in the agreement affords the aggrieved party the right to choose the method of determination either by way of arbitration or by way of court action the South African court is likely to respect the parties original agreement and enforce that notwithstanding opposition by the respondent.

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Where the dispute resolution mechanism does not afford any such right, but simply provides for resolution of disputes either through court action or through arbitration, it is quite possible for a party to assert that the clause is too vague and therefore unenforceable. The South African courts have not yet decided this issue. If arbitration in South Africa is contemplated, it is preferable to avoid uncertainty through the parties including in their original agreement a comprehensive dispute resolution mechanism that anticipates all eventualities as far as possible. Often disputes may arise on operational issues where full arbitration or court proceedings are too cumbersome and time consuming, and summary rules on expedited arbitration may be more appropriate. On the other hand, it would be foolhardy for parties to agree to have complex issues determined by way of a summary procedure. Parties would probably be better advised to craft a dispute resolution mechanism bespoke to their particular situation and agreement, to ensure that the right kind of issue is dealt with through the most appropriate, expeditious and cost-effective procedure. This might result in a hybrid mechanism, where operational issues are determined through an expedited procedure, and complex issues determined through a more comprehensive process. n

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