South Africa: A New International Arbitration Hub

Last Updated: 28 March 2018
Article by Rob Scott and Alon Meyerov

A long awaited and an important development in the context of arbitrations in Africa is the adoption by South Africa, in December 2017, of The International Arbitration Act ("The Act"). The establishment of a fully operational and international arbitration forum in South Africa pursuant to this development will be of interest to global insurers given the proliferation of international arbitration clauses now appearing in insurance policies, and required by insurers in globally placed insurance programmes.

International Arbitration Act

The Act incorporates into law in South Africa the United Nations Commission on International Trade Law (UNCITRAL) Model Law ("Model Law").

The Model Law is an internationally recognised and accepted legislative framework within which international arbitrations are governed and resolved. The Model Law is the gold standard and best practice by which international arbitration regimes are measured and is now the cornerstone of South Africa's international arbitration regime.

The Act applies to any international commercial dispute which the parties have agreed to refer to arbitration and provides for international commercial disputes to be resolved by way of arbitration in South Africa.  An arbitration is international if it:

  • involves parties of different nationalities; or
  • if it takes place in a country that is foreign to the parties; or
  • it involves an international dispute.

Importantly, any international dispute outside of South Africa or involving non South African parties can now be adjudicated in South Africa under the auspices of the Act.

Why would parties agree to arbitrate subject to the South African International Arbitration Act?

  • The Act/Model Law provides a well-established, globally accepted and recognized framework within which an arbitration will be administered.
  • The Act/Model Law provides familiarity, certainty and clarity of process and procedure.
  • The Act/Model Law provides certainty that an arbitration agreement will be enforced and recognised by the South African courts.
  • The Act/Model Law reduces interference and intervention of South African courts. 
  • The Act/Model Law removes any perceived parochial/favouritism from South African courts.
  • The Act/Model Law provides certainty that foreign arbitral awards obtained outside South Africa will be recognised and enforced by the South African courts.

South Africa as a Regional Arbitration Hub

Africa has several established arbitration centres which provide for the adjudication of international disputes on the African continent. These include : the Kigali International Arbitration Centre in Rwanda, the Nairobi Centre for International Arbitration in Kenya, and the Mauritius International Arbitration Centre.  It is hoped that South Africa will become an important regional or Sub-Saharan Africa international arbitration hub. 

With the implementation of the Act, South Africa is well placed to establish itself as a regional hub for international arbitrations in Africa and to compete with the other centres. South Africa is well placed to do this for the following reasons:

  • The Act incorporates into law in South Africa the Model Law.
  • The Model Law will now provide parties and investors with comfort that disputes will be adjudicated fairly and in accordance with international best practice for adjudication of international arbitrations and against a framework that they understand and are familiar with.
  • The Act has support from the South African government and the South African courts.
  • South Africa has a well-established and well developed judicial system as well as strong and independent courts which will provide support to an arbitral tribunal.  The Supreme Court of  South Africa has stated:

"The South African court not only have a legal, but a socio-economic and political duty to encourage the selection of South Africa as a venue for international arbitrations.  International arbitrations in South Africa will not only foster our comity among the nations of the world, as well as international trade but will also bring about the influx of foreign spending to our country."  (Zhongji Development Construction Engineering Co. Limited v Kamoto Copper Co. SARL 2015 (1) SA 345 (SA)).

  • South Africa has good quality and independent arbitrators.
  • South Africa has the infrastructure, resources and logistical support such as hotels, airports and the Gautrain, in order to support large international arbitrations.
  • South Africa is well placed geographically to accommodate parties from different parts of the globe.
  • The costs of an arbitration in South Africa will be significantly less than the traditional international arbitration hubs such as London, New York or Paris.

It now remains for the global arbitration institutions, the legal community, in particular the global law firms now located in South Africa, and business, to take active steps in supporting and promoting South Africa as an international arbitration hub.

South Africa: a New International Arbitration Hub

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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