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THE INTERNATIONAL ARBITRATION BILL

REPUBLIC OF SOUTH AFRICA

INTRODUCTION:

  1. In the Government Gazette of 20 April 2016, the Minister of Justice and Constitutional Development, gave notice that he intends introducing the International Arbitration Bill of 2016 in the National Assembly shortly.
  1. From the explanatory summary accompanying the Bill, it appears that the Bill provides for the incorporation of the Model Law of the United Nations Commission on International Trade Law (UNCITRAL) as the cornerstone of the international arbitration regime in South Africa. By means of this incorporation process, the Bill seeks to give effect to the obligations of the Republic of South Africa under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 1958. (Vide: Clause 3)

2.1The Bill repeals the Recognition and Enforcement of Foreign Arbitral Awards Act of 1977 and provides afresh for the enforcement of foreign arbitral awards, seemingly with the object of bringing such recognition and enforcement in line with constitutional imperatives of the Republic of South Africa

2.2It also amends the protection of Businesses Act of 1978, more specifically Section 1 thereof which contains a prohibition on the enforcement of certain foreign judgments and arbitration awards in South Africa. This is a necessary amendment, otherwise how would a foreign company for instance be able to enforce an award against a recalcitrant opponent in South Africa.

2.3The recognition and enforcement of a foreign arbitral award is now regulated by Section 17 of this Bill. A party seeking to enforce a foreign award must in principle produce a certified copy of the award and arbitration agreement and a sworn translation of the aforesaid two items. The rigidity of these requirements are mitigated with a sensible proviso namely that the Court may accept other documentary evidence regarding the existence of the foreign arbitral award and arbitration agreement as sufficient proof where the Court considers it appropriate to do so (Vide: Clause 17).

2.4One of the main objects of the Bill is to facilitate the use of arbitration as a method of resolving international commercial disputes. Litigation in Court to solve international disputes will in all probability take much longer and therefore be less cost effective. The other advantage (of an economic nature) is that international arbitration will in all probability bring in an influx of foreign spending in the Republic of South Africa (Vide: Zhongi Development Construction Engineering Co Ltd v Kamoto Copper Co SARL (2014) 4 All SA 614 (SCA) at par 30) and the sentiments expressed therein by Wallis JA.

SCOPE OF THIS BILL:

  1. Clause 6 of the Bill provides that the Model Law applies in the RSA in respect of international commercial arbitration. This Law is defined as the Unciteral Modern Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL) on 21 June 1985 as amended and adopted during 2006.

3.1Schedule 1 of this Bill, points out that UNCITRAL improves the legal framework for international trade by preparing international legislative texts for use by States in modernising the Law of International Trade as well as non-legislative texts for the use by commercial parties in negotatiating transactions.

3.2The legislative texts addresses international sale of goods, international dispute resolution (arbitration as well as conciliation), electronic commerce, insolvency (including cross-border insolvency), international transportation of goods, internet payments, procurement and infrastructure development and security interests. The non-legislative texts include rules for conduct of arbitration and conciliation proceedings.

3.3In an internet article published by Department of Trade and Industry during December 2014, it was envisaged, that the right of a party to approach a Court to intervene in arbitration proceedings at any time, would be limited and arbitrators would have additional powers to issue interim awards. The power to issue an interim award on application by a party is now contained in Article 26 of the UNCITRAL rules. The limitation of a Court’s power to interfere in the proceedings, is presumably contained in Section 7(2) of the Bill which states that “arbitration may not be excluded solely on the ground that an enactment confers jurisdiction on a Court or other tribunal to determine a matter falling within the terms of an arbitration agreement”.

3.4Clause 7(2) is problematic as it does not specifically outline the limitations on the Court’s powers to interfere. However, Clause 6(1) of the Bill states that the Model Law applies in the RSA. In this regard, Articles 6 and 8 of the Model Law are instructive. Article 6 deals with the extent of a Court’s intervention. It provides that in matters governed by the Model Law, no Court shall intervene except where so provided for in this Law (Model).

3.4.1Article 8 thereof reads as follows:

  1. A Court before which an action is brought in a matter which is the subject of an arbitration agreement, shall if a party requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. Section 8(2) provides that where an action referred to in the above paragraph 1 of Article 8, has been brought, arbitral proceedings may nevertheless be commenced or continued and an award may be made, while the issue is still pending before Court.
  1. By following the Law as set out in the above articles, an arbitrator should be able to largely avoid costly and frustrating delays as well as reigning in a defiant party to an arbitration who constantly appeal for Court intervention.

CONFIDENTIALITY:

  1. From the said article from the Department of Trade and Industry it appears that a specific aim of the Bill is to provide greater transparency in what traditionally had been strictly confidential proceedings. To achieve this, Section 11(1) now provides that arbitration proceedings to which a public body is a party, are held in public unless for compelling reasons the arbitrator directs otherwise. This section does not deal with arbitration between private parties and therefore the traditional approach namely that arbitration between these parties are confidential, should be followed.

ARBITRATION PROCEEDINGS:

  1. As far as the arbitration proceedings are concerned, this Bill is not prescriptive in regard to the rules to be followed in this regard.
  1. One would neverthelss expect that in arbitrations where the Model Law applies the UNCITRAL rules would also apply. An overview of these rules indicate that an arbitrator is granted extensive powers to regulate proceedings specifically as far as the exchange of pleadings and the conducting of hearings are concerned.

OTHER INTERNATIONAL ARBITRATION INITIATIVES:

  1. A recent development on the international arbitration scene, is the establishment of the China Africa Joint Arbitration Centre (CAJAC). It was established to resolve trade and investment disputes which may arise between nationals, leading entities and authorities of China and Africa.
  1. The main operational centres are located in Shanghai, China and Johannesburg, South Africa. AFSA Pretoria serves as a venue for CAJAC arbitrations. Each is administered by an arbitral commission under the aegis of a Joint Guiding Committee. From CAJAC’s founding statement it appears that each arbitral commission administrates matters under its own rules and practices which conforms with the requirements of the legal jurisdictions in which they operate.
  1. In line with the goals of this initiative, the CAJAC Johannesburg Arbitral Commission has adopted its own rules for arbitrations being conducted under its auspices.
  1. When the CAJAC rules are compared to the UNCITRAL rules, then the influence of the latter on the CAJAC rules becomes evident. It is also flexible in nature and also equips the arbitrator with far-reaching powers to regulate proceedings of arbitrations over which he/she presides.
  1. The International Arbitration Bill of the RSA and the CAJAC initiative must be warmly welcomed. Together this Bill and initiatives such as CAJAC, can secure dispute resolution by an entity which is independent of the host state and which will take place according to international legal standards. Furthermore, as is already alluded to above, the international arbitration can be a spur to investments, as the investing party would have the reassurance that its investment, if subjected to a dispute, would be arbitrated upon in terms of international accepted standards.

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I M Bredenkamp SC

Arbitrator and Chairman of the Pretoria Branch of AFSA