South Africa: Does The Arbitration Bill Make South Africa An Attractive Seat Of Arbitration?

Last Updated: 24 July 2017
Article by Richard Power

On 1 March 2017 the South African international Arbitration Bill was approved. When enacted (anticipated in the next couple of months) the ensuing Act will largely incorporate the UNCITRAL Model Law on International Commercial Arbitration into South African Law.

This in effect modernises the law for international (not domestic) arbitrations including:

  • encouraging party autonomy to agree the procedure to be followed by the tribunal (within the Model Law)
  • adopting the principle of kompetenz-kompetenz
  • ensuring equality between the parties in their opportunity to present their case
  • providing a structure for the arbitration from the arbitration through to recognition and enforcement
  • allowing limited court involvement in arbitration
  • providing limited grounds for challenging the award – giving effect to the New York Convention (note these provisions already applied in South Africa but this brings the provisions together)

Having international-standard arbitration legislation is a fundamental step towards encouraging international arbitration between commercial parties in South Africa. It also signals that South Africa is open for business as a seat of international arbitration and a place for enforcement of awards.

This is part of a 'movement' in Africa to embrace arbitration and to attract international disputes, particularly those involving one of more African parties. Mauritius is keen to be the seat of choice in Africa and has taken steps including hosting the ICCA Conference 2016 to raise its profile and there are well-known institutions in other African states such as those in Nairobi and Lagos. At present however it is still fair to say that many African-related disputes are determined in Europe and Asia and there is currently no African seat competing effectively on the world-stage.

What makes an attractive seat?

In 2015 the Chartered Institute of Arbitrators issued guidance on the ten principles for an 'effective, efficient and safe seat', namely:

  • law: a clear, effective and modern arbitration law that recognises and respects the parties' choice to arbitrate by providing a framework for facilitating fair and just resolution of disputes through the arbitration process
  • judiciary: an independent judiciary experienced in international commercial arbitration and respectful of party autonomy
  • legal expertise: a legal profession experienced in international commercial arbitration and international dispute resolution, offering choice to those seeking representation in arbitration and before the national courts
  • education: a commitment to education of all key players and to the development of learning in the field
  • right of representation: a clear right for parties to be represented in arbitration by party representatives of their choice whether from inside or outside the seat
  • accessibility and safety: easy accessibility, adequate safety and protection for parties, their documentation and information
  • facilities: functional facilities for the provision of all services required to run an effective and efficient arbitration
  • ethics: professional and other norms embracing a diversity of legal and cultural traditions and the developing norms of international ethical principles governing the behaviour of arbitrators and party representatives
  • immunity: a clear right to arbitrator immunity from civil liability for matters done, or omitted to be done, in good faith in capacity as arbitrator

Can South Africa measure up?

Measuring South Africa against the CIArb principles:

  • law: with the introduction of the forthcoming Act South Africa addresses its critics on this point. A note of caution should be raised here however in the context of Investment Treaty Arbitration which is governed in South Africa by the Protection of Investment Act 2015. This Act essentially (after a 'run off period') replaces South Africa's Bilateral Investment Treaties (BITs) with other countries. Under this Act, disputes between the South African state and foreign investors will be determined by mediation or state-to-state arbitration only after the parties have exhausted remedies available in the South African courts. This is likely to be unsatisfactory to many incoming investors – even leaving aside concerns about neutrality, South African courts face considerable backlogs and delays - and could deter investment. The law will therefore improve for commercial arbitration this year but those involved in investor-state arbitration will not view South Africa as a progressive forum
  • judiciary: South African courts are known to have a pro-arbitration attitude and case law indicates that they adopt a non-interventionist approach. The more the caseload increases and the more complex cases become there may be a requirement for some training but indications are that the judiciary would take a pro-arbitration approach consistent with the New York Convention
  • legal expertise: there are many fine law firms in South Africa, often working in conjunction with larger global law firms. There is therefore some regional expertise in international arbitration but there is still room for an increased number of African arbitrators to be available to determine these disputes – a catch twenty-two situation of arbitrators requiring experience to become experienced
  • education: arbitration is taught in many South African universities (as the author can testify) and commercial dispute resolution attorneys, advocates and Judges should be familiar with its key concepts
  • right of representation: foreign lawyers are permitted to practise their home jurisdiction law and arbitration in South Africa
  • accessibility and safety: South Africa has good air links and internal transportation infrastructure. Safety concerns may be greater than in some other countries, particularly Europe and the USA, but business districts (where arbitrations are likely to take place) are usually well policed and protected
  • facilities: South Africa has excellent facilities to support arbitrations – quality accommodation and conference facilities, IT and telecommunications services, transcription and translation services etc.
  • ethics: South Africa's legal professional ethics measure up to those in Western jurisdictions
  • immunity: section 9 of the Bill provides for immunity for arbitrators and arbitral institutions as provided for in the UNCITRAL Model law

A bright future?

It is clear that adopting the UNCITRAL Model Law is a positive step both in terms of improving South Africa's arbitration law and improving its international standing in this regard. Alongside President Jacob Zuma's direction to 'make it easy to do business in South Africa' and a recovering economy it may well be the right time for South Africa to come to the fore as a seat of commercial arbitration and enable the personnel and infrastructure required to develop. The Bill is not a quick fix but as part of a long-term plan it is one with good prospects.

Does the Arbitration Bill make South Africa an attractive seat of arbitration?

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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Richard Power
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