- Historical Background and Legislative Framework
- The Arbitration Agreement
- Composition of the Arbitral Tribunal
- Jurisdiction of the Arbitral Tribunal
- Conduct of the Proceedings
- Making of the Award and Termination of Proceedings
- The Role of the Courts
- Challenging and Appealing an Award Through the Courts
jurisdiction
- ADGM
- Angola
- Argentina
- Australia
- Bosnia and Herzegovina
- Brazil
- Bulgaria
- Chile
- China
- Colombia
- Croatia
- Czech Republic
- DIFC
- England and Wales
- France
- Germany
- Hong Kong
- Hungary
- India
- Ireland
- Italy
- Kenya
- Latvia
- Lithuania
- Luxembourg
- Mexico
- Montenegro
- Morocco
- Netherlands
- New York
- Norway
- Oman
- Peru
- Poland
- Portugal
- Romania
- Russia
- Saudi Arabia
- Scotland
- Serbia
- Singapore
- Slovakia
- Slovenia
-
South Africa
- South Korea
- Spain
- Switzerland
- Turkey
- UAE
- Ukraine
1. Historical Background and Legislative Framework
1.1 In South Africa, domestic arbitration is regulated by the Arbitration Act 42 of 1965 (1965 Act). The purpose of the 1965 Act is to provide for the settlement of domestic disputes by arbitration and for the enforcement of arbitral awards.
1.2 The International Arbitration Act, 2017 (2017 Act) was aimed at consolidating and updating South Africa law on international commercial arbitration. The 2017 Act incorporates the UNCITRAL Model Law on International Commercial Arbitration, 1985 (UNCITRAL Model Law) into South Africa Law. 1 In addition, the 2017 Act facilitates the recognition and enforcement of foreign arbitral awards by repealing the Recognition and Enforcement of Foreign Arbitral Awards Act, 1977 and giving effect to South Africa’s obligations under the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). 2 The 2017 Act does not repeal the 1965 Act, which continues to apply to domestic arbitration.
1.3 The 2017 Act applies to any international commercial dispute that the parties have agreed to submit to arbitration under an arbitration agreement and which relate to a matter that the parties are entitled to dispose of by way of arbitration. Exceptions include disputes that are not capable of determination by arbitration under South Africa law, for instance, matrimonial matters or any matter incidental to such and matters relating to status 3 or where the arbitration agreement is contrary to public policy. 4
1.4 The 2017 Act applies to international arbitration seated in South Africa. The High Court within the area of jurisdiction in which the arbitration is held will typically provide arbitration assistance and supervision. If there is no South African party or if the place within South Africa where the arbitration is to take place has not yet been determined, the Gauteng Division of the High Court seated in Johannesburg is the designated court. 5
2. The Arbitration Agreement
2.1 Arbitration agreements are contractual in nature and, accordingly, the general requirements for the existence of a contract must be met which includes, amongst other elements, consensus, intention of the parties to be legally bound, and awareness by the parties of the agreement. 6
2.2 There are two definitions for an “arbitration agreement”. In domestic arbitration, an arbitration agreement is a written agreement providing for the reference to arbitration of any existing dispute or any future dispute relating to a matter specified in the agreement. It is not necessary for an arbitrator to be named or designated in the arbitration agreement. 7 In international arbitration, an arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen, or which may arise between them in respect of a defined legal relationship.
2.3 The arbitration agreement can cover both contractual and non-contractual matters. 8 An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. 9 A reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.
2.4 Article 7 of Schedule 1 to the 2017 Act provides that an arbitration agreement must be in writing and is deemed to be in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means. The requirement for an arbitration agreement to be in writing seeks to ensure that parties do not get forced into arbitration unless it is clear that they have agreed to the said forum. It can be met by an electronic communication, 10 if contained in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, and where the parties have exchanged statements of claim and defence in which the existence of an arbitration agreement was alleged by one party and not denied by the other. 11
2.5 The parties to arbitration have the freedom to decide the venue of the arbitration, the number of arbitrators, and if applicable, which institutional rules such as those provided for by the Arbitration Foundation of Southern Africa (AFSA) will govern the arbitration proceedings. A simple arbitration agreement in South Africa usually includes clauses dealing with the following:
- the number of arbitrators to be appointed;
- the venue of the arbitration;
- the language of the arbitration;
- the confidential nature of the arbitration;
- the costs of the arbitration and how such costs will be shared between the parties; and
- the right to appeal (as Article 31 of Schedule 1 of the 2017 Act allows parties to set aside an arbitral award). 12
3. Composition of the Arbitral Tribunal
3.1 Arbitrators are selected either by agreement between the parties or, in the absence of agreement, in accordance with the rules of the institution administering the arbitration. The parties are usually free to determine the number and composition of the arbitral tribunal. In the absence of such an agreement, Article 11(3) of the 2017 Act prescribes certain procedures relating to the appointment of arbitrators. In an arbitration with three arbitrators, each party must appoint one arbitrator, and the two appointed arbitrators will appoint the third arbitrator. If a party fails to appoint an arbitrator within 30 days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment, the appointment will be made, on request of a party, by the court or other authority specified in Article 6 of Schedule 1 to the 2017 Act.
3.2 In terms of the 1965 Act, the parties to an arbitration agreement can select a sole arbitrator together or they can request that the AFSA or the Association of Arbitrators (Southern Africa) (AASA) suggest potential arbitrators (with the relevant expertise) or directly appoint members of the arbitral tribunal. The parties may agree on the jurisdictional seat of arbitration, but should they fail to do so, the arbitration seat will be determined by the arbitral tribunal who will factor in the circumstances of the case as well as the convenience of the parties. 13 If the appointment referred to in the notice served is not made or agreed to, as the case may be, within seven days after the service of the notice, the party who gave the notice may upon notice to the other party or parties or the arbitrators, as the case may be, apply to the court to make the necessary appointment, and thereupon the court may appoint an arbitrator or arbitrators or umpire.
3.3 If the parties have not previously agreed on the number of arbitrators, and if within 14 days after the receipt by the respondent of the notice of arbitration the parties have not agreed that there shall be three arbitrators, AFSA shall appoint a sole arbitrator. 14
3.4 If no other parties have responded to a party’s proposal to appoint a sole arbitrator within the time limit of 14 days, and the party or parties concerned have failed to appoint a second arbitrator in accordance with Article 9 or Article 10 of the Standard Rules for the Conduct of Unadministered Arbitration (Unadministered Arbitration Rules), AFSA may at the request of a party appoint a sole arbitrator pursuant to the procedure provided for in Article 8 if it determines this to be more appropriate. Notwithstanding any statutory or regulatory provision to the contrary, any decision by the parties for purposes of the Unadministered Arbitration Rules that the Arbitral Tribunal shall comprise three arbitrators, shall imply that the third arbitrator is the Presiding Arbitrator, not an umpire. 15
4. Jurisdiction of the Arbitral Tribunal
4.1 Any reference in the arbitration agreement or in the Unadministered Arbitration Rules to the place of arbitration shall ordinarily be construed as defining the juridical seat of the arbitration. Any controversy or absence of agreement between the parties in this regard shall be resolved by the arbitral tribunal. The award shall be deemed to have been made at the juridical seat of the arbitration. The arbitral tribunal may conduct hearings and meetings and it may deliberate at any place that it considers appropriate. Article 16(1) of Schedule 1 to the 2017 Act provides that the arbitral tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. 16
4.2 Articles 20(1) and 31(3) of Schedule 1 to the 2017 Act further provide for the juridical seat of arbitration. In this regard, the parties are free to exercise their discretion and agree on the place of arbitration. Should the parties fail to agree on the place of arbitration, the arbitral tribunal, having regard to the circumstances of the case, will determine the place of arbitration. This is in accordance with Article 16 of Schedule 1 to the 2017 Act which recognises the concept of kompetenz-kompetenz and provides that an arbitral tribunal can rule on its own jurisdiction. 17
5. Conduct of the Proceedings
5.1 With respect to the commencement of international arbitration proceedings, such proceedings commence on the date that a request for a dispute to be referred to arbitration is received by the respondent. 18
5.2 The procedural elements relating to international arbitration proceedings conducted in South Africa are contained in the 2017 Act. In this regard, parties are entitled to agree on the procedure to be followed by the appointed arbitral tribunal with respect to the conduct of such proceedings. 19 In the absence of such agreement, the arbitral tribunal may exercise its discretion in conducting the arbitration proceedings in a manner that it deems most appropriate, with specific reference to the weight, materiality, relevance and admissibility of any evidence (subject to the provisions of Schedule 1 to the 2017 Act).
5.3 Schedule 1 to the 2017 Act does not contain any provisions on the scope of disclosure of documents by a party to the other parties and/or the arbitrator. Usually, this is an issue that is dealt with by the arbitral tribunal in the exercise of its power to conduct the arbitration in such manner as it considers appropriate. The parties may set out the rules relating to the disclosure of evidence by agreement or by agreeing to submit the dispute to arbitration with due regard to the arbitration institution rules, which include provisions on the scope of disclosure. The arbitral tribunal is also permitted to request the assistance of a competent court in receiving and examining evidence. 20 In this regard, a competent court may execute such a request in accordance with its own rules, which may include the subpoena of witnesses to provide the arbitral tribunal with evidence.
5.4 The arbitral tribunal may, as it deems fit, follow formal or informal procedure and receive evidence or submissions, orally or in writing, sworn or unsworn, at joint meetings with the parties or, if the parties so agree, by the exchange of written statements or submissions provided that each party shall be given reasonable opportunity to present evidence or submissions and respond to those of the other party. 21 The 1965 Act and the 2017 Act do not expressly provide that a physical arbitration hearing should be held. Article 24 of Schedule 1 to the 2017 Act does provide that, subject to any contrary agreement reached by the parties, the arbitral tribunal shall have discretion to determine whether an oral hearing shall take place or whether the arbitration will be decided solely on the basis of documents and other materials. The parties are at liberty to discuss the procedure that will be used by the arbitral tribunal in facilitating the proceedings, and should the parties fail to agree, the arbitral tribunal is free to decide on a procedure it deems appropriate. 22
6. Making of the Award and Termination of Proceedings
6.1 As South Africa is a signatory to the New York Convention, international arbitration agreements and foreign arbitral awards are recognised and enforced in South Africa in accordance with the New York Convention. 23 Foreign arbitral awards can be enforced on application to a competent court and are recognised as binding, regardless of the jurisdiction in which such an award was made (subject to the provisions of Schedule 1 to the 2017 Act). 24
6.2 Generally, there are no limitations prescribed with respect to the period in which an application for recognition and enforcement of arbitral awards must be made to a competent court. In addition, South Africa law recognises that arbitral awards do not constitute a debt as envisioned in the Prescription Act 68 of 1969 and as such, arbitration awards cannot prescribe. 25
6.3 The length of enforcement proceedings is largely determined by the form of application submitted to a competent court. Unopposed enforcement proceedings may be conducted and finalised within two to three months from the date of filing such an application to the date on which a competent court makes its final order, whereas opposed proceedings can take longer. In addition, there are no expedited proceedings relating to the enforcement of an arbitral award, unless a competent court finds a compelling reason to treat such an application as urgent.
6.4 The arbitral proceedings are terminated by the final arbitral award or by an order of the relevant arbitral tribunal. 26
7. The Role of the Courts
7.1 South African courts recognise arbitration as a legitimate and constitutionally permissible form of dispute resolution. Accordingly, the courts are willing to enforce any valid arbitral award on the same basis as a judgment of the High Court of South Africa, unless there is an exceptional reason for not doing so.
7.2 There is little risk of a South African court intervening in an international arbitration seated in its jurisdiction. In fact, Article 5 of Schedule 1 to the 2017 Act provides that no court shall intervene in matters governed by the UNCITRAL Model Law. South African courts are generally supportive of arbitration, recognise the principle of party autonomy and favour the approach that court interference in arbitration should be restricted. Article 8 of Schedule 1 of the 2017 Act provides that a court may stay court proceedings and refer the parties to arbitration where a matter is subject to a valid arbitration agreement.
7.3 South African courts can only intervene during the arbitration in the following circumstances as set out Schedule 1 to the 2017 Act:
- where parties fail to agree on an arbitrator (Article 11(3));
- where a party fails to comply with the appointment procedure agreed on to determine the arbitrator(s)(Article 11(4));
- where a party may refer the challenge of an arbitrator to court (Article 13(3));
- where a party may request a court to decide the termination of the mandate of an arbitrator (Article 14);
- where party may refer the ruling on a preliminary question to a court (Article 16(3));and
- where an award may be set aside by a court for the reasons set out in Article 34(2). The South African courts may also order interim measures at the application of a party, if the arbitral tribunal has not yet been appointed and the matter is urgent, the arbitral tribunal is not competent to grant the order or the urgency of the matter means that obtaining the order form the arbitral tribunal would be impractical. 27 In other words, the local courts not grant an order if the arbitral tribunal competent to grant the order has already determined the matter.
7.3.2 The interim measures that may be ordered are limited to the following: 28
- an order for the preservation, interim custody or sale of any goods that are the subject matter of the dispute;
- an order securing the amount in dispute, but not an order for security for costs;
- an order appointing a liquidator;
- any other orders to ensure that any award that may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by the other party; and
- an interim interdict or other interim order.
7.4 As mentioned in paragraph 5.3 above, the local courts can also play a role in the taking of evidence. The arbitral tribunal, or a party with the approval of the arbitral tribunal, can request a competent court for assistance. The Registrar of the Division of the High Court or the Clerk of a Magistrate’s Court in whose area of jurisdiction the arbitration takes place can issue a subpoena to compel the attendance of a witness before an arbitral tribunal to give evidence or to produce documents, on the application of the arbitral tribunal or a party and with the approval of the arbitral tribunal. The Division of the High Court has the same powers to make an order for the issue of a commission or request for taking evidence out of its jurisdiction for the purposes of arbitral proceedings as it has for the purposes of its own court proceedings.
8. Challenging and Appealing an Award Through the Courts
8.1.1 The process for bringing an application to set aside a decision relating to an arbitral award is recorded in Article 34 of Schedule 1 to the 2017 Act. An arbitral award may be set aside by the court if the party making the application is able to prove that:
- a party to the arbitration agreement referred to was under some incapacity or the arbitration agreement is invalid under the law to which the parties have subjected it or, failing any indication thereon, under South Africa law;
- the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his or her case; or
- the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; or
- the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was against a mandatory provision of South African Law; or
- the court finds that the subject-matter of the dispute is not capable of settlement by arbitration under domestic law or the arbitral award is against South Africa’s public policy.
8.2 In relation to the time periods to bring such an application, Article 34(3) of Schedule 1 to the 2017 Act provides that an application for setting aside may not be made more than three months from the date on which the party making that application had received the award. If a request has been made under Article 33 of Schedule 1 to the 2017 Act in relation to an additional award, the three months will run from the date on which that request is disposed of by the arbitral tribunal, unless the party making the application can prove that he or she did not know and could not reasonably care have known, in which event the period will commence on the date when such knowledge could have been acquired by exercising reasonable care.
8.3 In arbitral proceedings, a party may waive its rights of appeal, however, a party would be precluded from waiving its rights of appeal in instances where a dispute cannot be settled by arbitration and where an arbitral award conflicts with South African public policy.