15 Jun 2023
Arbitration is a well-established and widely used mechanism for resolving commercial disputes in South Africa. Arbitration in the country received a significant boost through the enactment of the International Arbitration Act, 2017 ("IAA"), which incorporated the UNCITRAL Model Law into South African law.[1] The New York Convention was already part of South African Law via the Recognition and Enforcement of Foreign Arbitral Awards Act, 1977 - this has now been brought under the umbrella of the IAA.
Given that international arbitration, as distinguished from domestic arbitration, remains a relatively new phenomenon in South Africa, it is unsurprising that the South African legal profession is still transitioning from its archaic arbitration practices to best international practice. For example, memorandum-style pleadings, focused disclosure and factual witness statements have yet to be the norm, although they have gained considerably in usage in recent years and continue to do so.
It remains the case that the domestic arbitration legislation still needs to be formally modernised and continues to be governed by the Arbitration Act 1965.[2] Moreover, legislative reform initiatives in relation to domestic arbitration have been pending for the better part of two decades. They are not expected to see the light of day in the short- to medium-term future. However, the industry is progressively adapting to international norms.
Traditionally almost all arbitrator appointments in commercial disputes go to senior practising advocates or retired judges, as opposed to attorneys or specialist arbitrators, and advocacy by attorneys is rare. Domestic arbitrations sometimes track High Court civil procedure, which detracts from the speed and flexibility that are among the standard selling points of arbitration over litigation.
However, these remnants of archaic arbitration practice are mainly attributable to the parties and their representatives. It does not represent the South African arbitration industry and should not be a barrier to using South Africa as the seat for international arbitration. South African arbitrators, especially Ciarb members, generally prefer to follow the best international practice, whether under the Arbitration Act or the IAA.
The IAA led to a significant increase in the number of international arbitrations held in South Africa and has encouraged the development of initiatives to promote South Africa as a regional arbitration hub with considerable success. For example, the Arbitration Foundation of Southern Africa (“AFSA”) reports that in 2022, its most significant users, after South Africa, included several of the country’s neighbours such as Zimbabwe, Mauritius and Botswana and, further afield, Australia, Jersey and the UAE.[3] This speaks to South Africa's status as a regional centre for intra-Africa disputes as well as an increasingly attractive neutral venue for international parties.
The introduction of the IAA has had and is having a positive knock-on effect on the development of arbitration practice in the jurisdiction. The resultant modernisation of international arbitration legislation, practice and procedure in South Africa is encouraging the development of arbitration domestically, within the region, as well as internationally.
Statistics relating to the referral of commercial disputes to arbitration are generally unavailable for the South African market. However, the most recent statistics from AFSA provide a snapshot of the popularity of arbitration for the resolution of commercial disputes in South Africa and the size and strength of the South African market relative to the rest of the African continent. It is also noteworthy that the arbitral institutions, like Ciarb, are non-profit organisations that do not enjoy Government support or funding, making the arbitral industry genuinely independent.
The South African courts have repeatedly affirmed the finality and enforceability of arbitral awards.[4] The courts have shown a willingness to intervene in arbitration matters only when necessary, preserving the autonomy and effectiveness of the arbitral process. This judicial support helps maintain a conducive environment for arbitration and contributes to developing a favourable legal landscape. South African courts do not tolerate attempts to appeal arbitration awards under the guise of review proceedings. Nevertheless, such proceedings are occasionally instituted as a cynical delaying tactic by the unsuccessful party. Tactics such as these could perhaps be avoided by the introduction of a mechanism such as the Award Review Tribunal (ART) provided for in Nigeria's new Arbitration and Mediation Act, 2023 (the Act). The Act, if agreed to by the parties, requires the ART to render its decision within sixty days of being constituted. If the ART upholds the validity of an award, the court can only annul the award on the grounds of non-arbitrability or public policy. South African arbitration practitioners will be watching this innovation in Nigeria with interest.
Moreover, the South African courts recognise the arbitrator's autonomy over the process allowing the arbitrator freedom to manage the process. An arbitrator is not obligated to follow the strict rules of evidence or procedure subject to the terms of the arbitration agreement as long as the procedure is fair and in conformity with the requirements of natural justice.
The South African courts are independent and competent, and there is virtually no risk of a court intervening to frustrate an international arbitration seated in its jurisdiction.
Lastly, it bears mentioning that South Africa is affordable, has good weather, wine and food, good infrastructure and offers an attractive and accessible (being a regional travel hub) setting to conduct arbitrations.
About the author:
Pierre Burger FCIArb is a dual-qualified (South Africa, England & Wales) practitioner in the Dispute Resolution Department of Werksmans Attorneys in Johannesburg. He deals with complex and high-quantum commercial disputes across a range of sectors. Pierre serves as Secretary on the Management Committee of Ciarb South Africa Branch. He also serves on the Management Committee of AFSA International, the international division of the Arbitration Foundation of Southern Africa (AFSA), and on the ICC Commission on Arbitration and ADR.
[1] The International Arbitration Act, 15 of 2017.
[2] The Arbitration Act, 42 of 1965
[3] AFSA Commercial Rules of Arbitration domestic Arbitration see website https://arbitration.co.za/domestic-arbitration/commercial-rules/ and AFSA International Rules International Arbitration see website https://arbitration.co.za/international-arbitration/international-rules https://arbitration.co.za/international-arbitration/international-rules
[4] See, Lufuno Mphaphuli and Associates (Pty) Ltd v Andrews and another 2009 (6) BCLR 527 (2009 (4) SA 529) (CC);Wayland v Everite Group Ltd 1993 (3) SA 946 (W); Zhongji Development Construction Engineering Company Ltd v Kamoto Copper Company SARL [2014] 4 All SA 617 (SCA); De Lange v Presiding Bishop for the time being of the Methodist Church of Southern Africa 2015 1 All SA 121 (SCA); 2015 1 SA 106 (SCA); North East Finance (Pty) Ltd v Standard Bank of SA Ltd 2013 3 All SA 291 (SCA); 2013 5 SA 1 (SCA); Telecall (Pty)(Ltd) v Logan, 2000 (2) SA 782 (SCA); Halki Shipping Corp V Sopex Oils Ltd 1998 1 WLR 726, Sera v De Wet 1974 2 All SA 295 (T); 1974 2 SA 645 (T); Namasthethu Electrical (Pty) Ltd v City of Cape Town 2020JDR 1279 (SCA); Seabeach Property Investment No 28 (Pty) Ltd v Nunn 2019 JDR 0277 (WCC); Canton Trading 17 (Pty) Ltd T/A Cube Architects V Hattingh No 2022 (4) SA 420 (SCA);