South Africa: International Arbitration Comparative Guide

Last Updated: 16 September 2019
Article by Jonathan Ripley-Evans
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1 Legal framework

1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?

International arbitration is governed by the International Arbitration Act 15 of 2017.

The act governs all international arbitrations seated in South Africa. The act does not recognise oral arbitration agreements in accordance with the prescripts of Article 7 of Schedule 1 to the act, which incorporates the provisions of the UNCITRAL Model Law on International Commercial Arbitration.

1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?

The International Arbitration Act does not define what is meant by ‘domestic' arbitration, but it does define ‘international' arbitration for the application of the act. The act applies only to international arbitrations as defined in Article 1(3) of Schedule 1 to the act.

An arbitration is international if:

  • at the time of concluding the arbitration agreement, the parties to the arbitration agreement have their places of business in different states;
  • one of the following places is situated outside the state in which the parties have their places of business:
    • the place of arbitration, if determined in, or pursuant to, the arbitration agreement; or
    • any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected; or
  • the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.

1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?

Yes.

1.4 Are all provisions of the legislation in your jurisdiction mandatory?

No, not all provisions of the International Arbitration Act are mandatory. Mandatory provisions are identified by the wording of the provision in question.

Article 6 of the act denotes that the UNICTRAL Model Law has force of law in South Africa. As a result, mandatory provisions of the UNCITRAL Model Law will be applied as mandatory provisions of law in South Africa.

1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?

The International Arbitration Act came into force in December 2017. There are currently no plans to amend the act.

The Arbitration Act 42 of 1965 still governs all domestic arbitrations. A revision of the legislation governing domestic arbitrations was suggested in the South African Law Reform Commission's 2001 report on domestic arbitration. Notwithstanding this report, which included a revised domestic arbitration bill, no meaningful progress has been made in in this regard.

1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?

Yes, the New York Convention is given force of law through Chapter 3 of the International Arbitration Act. No reservations have been made.

1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?

No. Most notably, South Africa is not a signatory to the Washington Convention.

2 Arbitrability and restrictions on arbitration

2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?

Article 7 of the International Arbitration Act prescribes that any matter that is capable of disposal by agreement may be determined by arbitration, unless:

  • such a dispute is not capable of determination by arbitration under any law of South Africa; or
  • the arbitration agreement is contrary to the public policy of South Africa.

2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?

No.

3 Arbitration agreement

3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?

Article 7 of Schedule 1 to the act stipulates that an arbitration agreement must be in writing.

Article V of the New York Convention provides for discretionary non-recognition of an award where:

  • the contracting parties lacked capacity to conclude the arbitration agreement; or
  • the agreement is not valid under the law to which the parties have subjected it to or, failing an indication thereto, under the law of the place where the award was made.

3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?

Yes, Article 16(1) of Schedule 1 to the act stipulates that an arbitral clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract, and that any decision by the tribunal that the contract is null and void shall not automatically invalidate the arbitration clause.

3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?

Yes, Article 20 of Schedule 1 to the act empowers the tribunal, in the absence of agreement by the parties, to determine the juridical seat of the arbitration, having regard to the circumstances of the case, including the convenience of the parties.

Article 22 of Schedule 1 to the act empowers the tribunal, in the absence of agreement by the parties, to determine the language to be used in the proceedings. This determination shall apply to any written statement by a party, any hearing and any award, decision or other communication by the tribunal.

4 Objections to jurisdiction

4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?

Article 16(2) of Schedule 1 to the act requires a party seeking to challenge the jurisdiction of the tribunal to do so no later than the submission of the statement of defence.

Insofar as the objection relates to conduct of the tribunal which exceeds the scope of authority, this is to be raised as soon as the matter alleged to be beyond the scope of the tribunal's powers is raised in the proceedings.

The tribunal may admit a later plea (of lack of jurisdiction) if it considers the delay justified. No formalities are prescribed for the raising of such an objection.

4.2 Can a tribunal rule on its own jurisdiction?

Yes, in accordance with Article 16(1) of Schedule 1 to the act, the tribunal may rule on its own jurisdiction.

4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?

Yes, but only after a tribunal has made a ruling in accordance with Article 16(3) of Schedule 1 to the act. Such an application must be made to the court within 30 days of receiving the ruling concerned.

The decision of the court is not subject to appeal.

5 The parties

5.1 Are there any restrictions on who can be a party to an arbitration agreement?

No restrictions are prescribed in the International Arbitration Act.

5.2 Are the parties under any duties in relation to the arbitration?

Section 11(2) of the International Arbitration Act obliges the parties to a private arbitration to keep confidential the award and all documents created for the arbitration (not otherwise in the public domain), except where disclosure is required by reason of a legal duty or to protect or enforce a legal right.

No further duties exist.

5.3 Are there any provisions of law which deal with multi-party disputes?

The International Arbitration Act does not specifically address multi-party disputes.

6 Applicable law issues

6.1 How is the law of the arbitration agreement determined in your jurisdiction?

The International Arbitration Act does not prescribe any method for determining the law of the arbitration agreement, which will be left to the discretion of the tribunal.

Article 36 of Schedule 1 to the act provides for the (discretionary) non-enforcement of an award where the contracting parties lacked capacity to conclude the agreement, determined in accordance with the law chosen by the parties. It is submitted that an inference can therefore be drawn that the substantive law of the arbitration agreement is the same as the substantive law of the arbitration agreement, unless otherwise indicated.

6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?

Yes, Article 28 of the Schedule 1 to the act obliges the tribunal to decide the dispute in accordance with the rules chosen by the parties to be applicable to the substance of the dispute.

7 Consolidation and third parties

7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?

Yes, Section 10 of the International Arbitration Act provides for the consolidation of arbitral proceedings, but only if the parties agree.

The tribunal is not empowered to order consolidation in the absence of agreement by the parties.

No further conditions are imposed.

7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?

The joinder of additional parties is not governed by the International Arbitration Act. It is submitted that this is to be regarded as a procedural aspect subject to agreement by the parties.

The act does not preclude the joinder of additional parties.

7.3 Does an arbitration agreement bind assignees or other third parties?

The International Arbitration Act provides neither for assignment of the agreement nor for the binding of third parties.

It is submitted that this question should be determined in accordance with the substantive law governing the arbitration agreement.

8 The tribunal

8.1 How is the tribunal appointed?

Arbitrators are appointed in accordance with Article 11 of Schedule 1 to the act, which stipulates that the parties are free to determine their own procedure for the appointment of the tribunal.

In the absence of agreement, Article 11 of Schedule 1 to the act provides as follows:

  • For a tribunal of three arbitrators, each party will elect one arbitrator and the third arbitrator will be elected by the two elected arbitrators; and
  • If a party fails to appoint an arbitrator or the two chosen arbitrators fail to elect a third within 30 days of their appointment, upon request of a party, the court specified in Article 6 of Schedule 1 to the act will make the appointment.

Should the parties be unable to agree on a sole arbitrator, the same court shall make the appointment, on application of one of the parties.

8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?

The parties are free to determine the number of arbitrators. In the absence of agreement, the International Arbitration Act provides for the appointment of a sole arbitrator (Article 10 of Schedule 1 to the act).

No further requirements are prescribed by the act.

8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?

Yes, Article 12 of Schedule 1 to the act stipulates the grounds for challenge of an arbitrator.

An arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence, or if he or she does not possess the qualifications agreed to by the parties. ‘Justifiable doubts' require substantial grounds for contending that a reasonable apprehension of bias would be entertained by a reasonable person in possession of the correct facts.

A party may challenge an arbitrator whom it has appointed or in whose appointment it has participated only for reasons of which it becomes aware after the appointment has been made.

8.4 If a challenge is successful, how is the arbitrator replaced?

Article 15 of Schedule 1 to the act provides for a replacement arbitrator to be appointed in the same manner as the arbitrator being replaced.

8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?

All obligations imposed on an arbitrator are derived from the International Arbitration Act.

Article 12(1) of Schedule 1 to the act obliges an arbitrator to disclose any circumstance likely to give rise to justifiable doubts as to his or her impartiality or independence. This obligation persists throughout his or her appointment.

Article 18 of Schedule 1 to the act prescribes that the parties are to be treated equally and each party shall be given a reasonable opportunity to present its case.

8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?

(a) Procedure, including evidence?

Article 19(2) of Schedule 1 to the act empowers the arbitrator, in the absence of agreement by the parties, to conduct the arbitration in such a manner as it considers appropriate.

The arbitrator, in exercising this power, is free to determine the admissibility, relevance, materiality and weight of any evidence.

Article 26 empowers the arbitrator, in the absence of agreement to the contrary between the parties, to appoint an expert to the tribunal and to require any party to submit to the expert any relevant information.

Article 27 provides for the assistance of the court in the taking of evidence in the form of a subpoena for the attendance of a witness at proceedings or for the production of documents. In addition, Article 27 provides for the taking of evidence outside of the jurisdiction of the court.

(b) Interim relief?

Article 17 of Schedule 1 to the act provides for the granting of interim measures upon hearing both parties.

An arbitrator is not empowered to grant preliminary orders (ex parte).

(c) Parties which do not comply with its orders?

Interim measures may be enforced upon application to the competent court. The court order so obtained will then be enforced through the ordinary mechanism of service by sheriff and potential attachment.

(d) Issuing partial final awards?

While the concept of a partial final award is not reflected in the wording of the International Arbitration Act, the granting of such an award is not precluded.

Article 32 of Schedule 1 to the act states that proceedings are terminated by the final award of the tribunal. As a partial final award does not intend to discharge the arbitrator of his or her duties as arbitrator, it is submitted that a partial final award is not a final award as envisaged in Article 32. However, the partial final award is finally dispositive of the matters addressed in that award.

(e) The remedies it can grant in a final award?

The International Arbitration Act does not prescribe the remedies which an arbitrator can grant in a final award.

Section 7 of the International Arbitration Act requires that the dispute fall within the ambit of the agreement and relate to a matter which the parties are entitled to dispose of by agreement.

It is therefore submitted that an arbitrator is entitled to grant any relief which would otherwise be capable of being performed by agreement between the parties and which falls within the ambit of the arbitration agreement.

(f) Interest?

Article 31(5) of Schedule 1 to the act states that a tribunal may award interest on such basis and on such terms as the tribunal considers appropriate and fair in the circumstances, also having regard to the currency in which the award was made, commencing not earlier than the date on which the cause of action arose and ending not later than the date of payment.

8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?

Article 25 of Schedule 1 to the act addresses instances of default by a party.

If a claimant fails to deliver its statement of claim in accordance with Article 23(1) of Schedule 1 to the act, the tribunal shall terminate the proceedings.

If a respondent fails to communicate its statement of defence in accordance with Article 23(1) of Schedule 1 to the act, the tribunal shall continue the proceedings without treating the default of the respondent as an admission of the claimant's allegations.

If either party fails to appear at a hearing, the tribunal may continue the proceedings and make an award based on the evidence before it.

8.8 Are arbitrators immune from liability?

Section 9 of the International Arbitration Act provides that an arbitrator is not liable for any act or omission in the discharge or purported discharge of his or her functions as arbitrator, unless the act or omission is shown to be in bad faith.

9 The role of the court during an arbitration

9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?

Article 5 of Schedule 1 to the act states that no court shall intervene in matters governed by the International Arbitration Act, except where so expressly provided.

Article 8 of Schedule 1 to the act obliges a court to stay court proceedings in circumstances where an arbitration agreement exists and one of the parties requests a stay of the proceedings. Such a request is to be made no later than the submission of its first statement on the substance of the dispute.

A court is not obliged to stay the court proceedings if it finds that the agreement is null and void, inoperative or incapable of being performed.

9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?

Article 9 of Schedule 1 to the act empowers a court to grant interim measures. The court is granted the same powers as conferred upon the arbitrator by Article 17J of Schedule 1 to the act.

Article 11 of Schedule 1 to the act empowers the court to appoint an arbitrator in circumstances where either the parties or the two appointed arbitrators fail, within 30 days, to appoint an arbitrator.

Article 13 of Schedule 1 to the act provides a form of appeal to a court in circumstances where a challenge of an arbitrator is unsuccessful. This application to a court is not subject to further appeal.

Article 14 of Schedule 1 to the act empowers the court to decide on the termination of the mandate of an arbitrator in circumstances where controversy regarding his or her removal exists.

Article 16 of Schedule 1 to the act empowers the court to finally rule on a determination made by the tribunal, following a challenge of the tribunal's jurisdiction.

Article 17H of Schedule 1 to the act obliges the court to recognise an interim measure issued by the tribunal, regardless of whether the measure was issued in South Africa.

Article 17H of Schedule 1 to the act empowers the court to order that a party seeking recognition or enforcement of an award provide security, if it considers this proper, if the tribunal has not already made a determination with respect to security or if such a decision is necessary to protect the rights of third parties.

Article 17J of Schedule 1 to the act grants the court the same powers in relation to arbitration proceedings, regardless of whether the seat is in South Africa, as in proceedings before the court for:

  • preservation orders;
  • interim custody of goods;
  • an order securing the amount in dispute (but not an order for security for costs);
  • an order appointing a liquidator;
  • any other order to ensure that an award of the tribunal is not rendered ineffectual by the dissipation of assets; and
  • any interim interdict or other interim order.

Article 27 of Schedule 1 to the act empowers a court to assist with the taking of evidence in the form of issuing subpoenas to compel the attendance of witnesses and the provision of documents. The court shall also have the same power to make an order for the issue of a commission or a request for the taking of evidence outside of its jurisdiction as it would ordinarily have in civil matters before it.

Articles 34 and 35 of Schedule 1 to the act detail the court's power in setting aside, recognising and enforcing an award.

9.3 Can the parties exclude the court's powers by agreement?

Where the legislation confers a mandatory function upon the court, the parties cannot contract out of that power.

However, if the function or power is not mandatory, there is no reason why the parties cannot by agreement agree on the matter.

Whether a provision of the International Arbitration Act is mandatory will depend on the wording of the provision concerned.

10 Costs

10.1 How will the tribunal approach the issue of costs?

Article 31 of Schedule 1 to the act provides that the issue of costs is at the discretion of the tribunal (unless the parties agree otherwise).

The tribunal is entitled to specify:

  • the party entitled to costs;
  • the party which shall be liable for such costs;
  • the amount of such costs or the method of determining that amount; and
  • the manner in which such costs are to be paid.

10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?

No restrictions exist.

11 Funding

11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?

Third-party funding is permitted in South Africa. However, no legislation exists for the regulation of third-party funding.

12 Award

12.1 What procedural and substantive requirements must be met by an award?

Article 31 of Schedule 1 to the act prescribes that an award shall:

  • be in writing;
  • be signed by the arbitrator or a majority of the arbitrators where more than one arbitrator has been appointed;
  • state the reasons for the award (unless otherwise agreed by the parties or unless the award is in terms of a settlement reached); and
  • state the juridical seat.

After the award is made, a signed copy must be delivered to the parties.

12.2 Must the award be produced within a certain timeframe?

No.

13 Enforcement of awards

13.1 Are awards enforced in your jurisdiction? Under what procedure?

Yes, Article 17H of Schedule 1 to the act and Section 17 of the International Arbitration Act require that such awards be enforced in South Africa.

Section 17 of the act requires that in order to recognise and enforce an award, the requesting party must produce:

  • the original award, duly authenticated for use in a South African court;
  • a certified copy of the award;
  • a certified copy of the agreement; and
  • a sworn translation of the arbitration agreement and award, duly authenticated for use in a South African court, if not recorded in one of the official languages of South Africa.

A request for recognition and/or enforcement of an award may be brought on application to the court.

14 Grounds for challenging an award

14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?

Article 34 (2)(a) of Schedule 1 to the act provides that an award may be set aside only if a party furnishes proof that:

  • a party to the arbitration agreement lacked capacity to contract under the applicable law or the arbitration agreement is invalid under the applicable law;
  • a party did not receive the required notice of the appointment of the arbitrator or of the proceedings, or was otherwise unable to present its case;
  • the award addresses issues falling outside the reference to arbitration (however, if capable of being separated, those matters falling within the scope of the agreement will not be set aside); or
  • the tribunal was constituted in contravention of the agreement between the parties.

Article 34 (2)(b) of Schedule 1 to the act provides that a court may set aside an award (on its own volition) if:

  • it finds that the subject matter of the dispute is not capable of settlement by arbitration under the laws of South Africa; or
  • the award is in conflict with the public policy of South Africa.

In the absence of an agreement between the parties, an award is not subject to appeal or challenge before either the tribunal or a court.

14.2 Are there are any time limits and/or other requirements to bring a challenge?

Yes, Article 34(3) of Schedule 1 to the act provides that an application to set aside an award must be made within three months of receipt of the award.

14.3 Are parties permitted to exclude any rights of challenge or appeal?

Other than regarding matters addressed in Article 34 of Schedule 1 to the act, parties are free to exclude other rights of challenge or appeal.

15 Confidentiality

15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?

Confidentiality is not prescribed by the International Arbitration Act and will be determined with reference to the arbitration agreement.

In accordance with Section 11(1) of the act, all arbitrations in which a public body is a party are to be held in public, unless for compelling reasons the tribunal directs otherwise.

Where the arbitration is to be held in private, the award and all documents created for the arbitration (and not otherwise in the public domain) must be kept confidential by the parties and the tribunal, except to the extent required by reason of a legal duty to disclose or to protect or enforce a legal right.

15.2 Are there any exceptions to confidentiality?

Yes, confidentiality will not apply where a party (or the tribunal) is required by reason of a legal duty to disclose or in order to protect or enforce a legal right.

Article 11(1) of the International Arbitration Act prescribes that where one party to the arbitration is a public body, the arbitration is to be held in public.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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