Apr 2023

South Africa

Law Over Borders Comparative Guide:

Arbitration

Top

1 . Key considerations in deciding whether to arbitrate in this jurisdiction

In December 2017, South Africa enacted the International Arbitration Act (IA Act), which incorporates the UNCITRAL Model Law of International Commercial Arbitration 1985 (Model Law), with amendments as adopted in 2006, and the New York Convention into domestic law, albeit the latter already formed part of South African law. International arbitration in South Africa is now regulated by a single statute, based on international best practices.

Top

1.1. Advantages

South African courts are pro-arbitration. They consistently exalt the benefits of arbitration and respect the parties’ choice to arbitrate. The main local arbitration institutions have rules that meet best practices and are amongst the best on the African continent.

The rules of procedure, including the law of evidence, are largely based on English law. Accordingly, procedural rules are similar to those found in other common law jurisdictions. In comparison to more established seats, which have similar arbitral laws and the same quality of lawyers, the costs of South African legal services are more economical. 

Top

1.2. Disadvantages and common pitfalls

The process of recognition and enforcement of awards through the courts is not always efficient, particularly if the losing party resists enforcement or seeks to set aside an award.

Top

1.3. Other distinctive features

South African law is sophisticated, and its application is complemented by a modern legal system and an independent judiciary. South Africa is regularly chosen as the preferred seat for sub-Saharan disputes and is increasingly chosen as the seat for arbitrations without an African link.

Top

2 . Principal laws and institutions relating to international arbitration in this jurisdiction

Top

2.1. Legal framework

International arbitration in South Africa is regulated by the IA Act. The Model Law, which is set out in Schedule 1 of the IA Act, is incorporated into South African law, subject to narrow modifications.

Top

2.2. What qualifies as international arbitration?

An arbitration will be international if:

  • the parties to the arbitration agreement have, at the time that that agreement is concluded, their places of business in different States; or
  • the State in which the parties have their places of business differs from:
    • the place of arbitration; or 
    • any place where a substantial part of the obligations of the parties arising out of their commercial relationship is to be performed or the place that the subject-matter of the dispute is most closely connected; or 
  • the parties expressly agree that the arbitration is international in nature.
Top

2.3. Main local international arbitration institutions

The Arbitration Foundation of South Africa (AFSA) and the Association of Arbitrators (Southern Africa) NPC are the main local arbitration institutions used for international and domestic arbitration. Arbitrations before the international division of AFSA are regulated by AFSA’s International Arbitration Rules which came into effect in 2021, and are aligned with the IA Act. 

Top

3 . Arbitration agreements

Top

3.1. Requirements as to content and form

An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. The arbitration agreement must be in writing, in accordance with Article 7 (Option 1) of the Model Law.

Top

3.2. Validity of arbitration agreements

To be enforceable under South African law, arbitration agreements must meet the standard requirements for the validity of a contract, including:

  • consensus between the parties regarding the intention to contract; 
  • the parties should have the legal capacity to contract; 
  • certainty in respect of the terms;
  • performance under the contract must be possible;
  • legality, i.e., the contract must not be contrary to public policy; and 
  • all applicable formalities must be complied with. 
Top

3.3. Special formalities

There are no special formalities required for arbitration agreements.

Top

3.4. Governing law

The parties are free to elect the law that will govern the substantive merits of the dispute. The substantive law governing the overarching contractual agreement and the agreement to arbitrate, i.e., the law applicable to determine the validity, scope or interpretation of the agreement to arbitrate, may differ from the applicable procedural law in respect of the dispute, i.e., the law of the seat. 

Top

4 . Arbitrability

Top

4.1. Applicable restrictions

Parties may arbitrate all disputes they are entitled to dispose of by agreement unless:

  • the dispute is not arbitrable under the laws of South Africa; or
  • the arbitration agreement is contrary to public policy. 

Criminal matters and matters relating to status, including matrimonial matters, are excluded from arbitration.

A South African court will exercise restraint where a party seeks to set aside an arbitration agreement on public policy grounds. This is in line with the general approach of our courts to non-enforcement of contracts based on public policy considerations. Our appellate courts have emphasised the importance of freedom of contract and commercial certainty. The Constitutional Court has held that the courts of South Africa cannot set aside agreements on public policy grounds merely because they are unfair, unjust or unreasonable. In general, contracts will not be enforced based on public policy considerations in exceptional circumstances only, for example in cases of extreme unfairness or where a constitutional right is clearly and unreasonably infringed. Moreover, our courts have recognised that there are public policy reasons in favour of encouraging and enforcing arbitration agreements. 

Top

5 . Enforcing arbitration agreements

A party wishing to avoid the enforcement of an arbitration agreement will be required to show good cause or sufficient reasons why the arbitration agreement should not be enforced. This is not an easy burden to discharge and the courts of South Africa will, in general, not exercise their discretion in favour of setting aside an arbitration agreement. 

Top

5.1. Stay of proceedings

Article 8(1) of the Model Law provides that “[a] court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his or her first statement on the substance of the dispute, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed”. Accordingly, a party should seek to stay the court proceedings by no later than the time when they respond to the merits of the dispute. However, South African courts have not specifically considered whether an attempt by a party to object after it has filed its response to the merits of the dispute would amount to a deemed waiver of the right to object, however it is likely that the courts would apply the ordinary principles applicable to waiver to determine this. A court will therefore consider whether the prior conduct of the party which seeks the stay of proceedings demonstrates a manifest and deliberate intention to abandon its right to have the dispute arbitrated. This would need to be determined on a case-by-case basis. 

Top

5.2. Anti-suit injunctions

On the single occasion that an anti-suit injunction was sought to restrain a party from commencing or continuing legal proceedings outside of South Africa in breach of an arbitration agreement, the South African High Court, in an unreported judgment, granted the relief sought (Vedanta Resources Holdings Limited v. ZCCM Investment Holdings PLC and Another [2019] JOL 45353 (GJ)).

Top

6 . Arbitral Tribunal

Top

6.1. Restrictions on the parties’ freedom to choose arbitrators

South African law does not impose any restrictions on the parties’ freedom to choose arbitrators, save that an arbitrator should be independent and impartial.

Top

6.2. Requirement of arbitrator independence and impartiality

The appointment of an arbitrator may be challenged if circumstances exist that give rise to justifiable doubts (a reasonable apprehension of bias) as to their impartiality or independence.

Top

6.3. Mandatory rules applicable to the appointment process

Parties are free to agree on the procedure for the appointment of arbitrators, subject to certain deadlock-breaking mechanisms either as agreed to between the parties or specified in the IA Act. For example, under Article 11 of the Model Law:

  • if no agreement is reached between the parties on the appointment procedures, default provisions will apply in respect of the appointment of either a sole arbitrator or an arbitral tribunal consisting of three arbitrators;
  • where a court is called upon to make a determination on an appointment procedure, there shall be no right of appeal in respect of that decision; and 
  • no person shall be precluded from acting as an arbitrator by reason of his or her nationality, unless agreed otherwise by the parties.
Top

6.4. Appointment mechanism in the absence of party agreement or applicable institutional rules

If the parties are unable to agree on the mechanism for the appointment of an arbitrator or a party fails to act under applicable appointment procedures, the aggrieved party may approach the High Court for an appropriate measure, including appointing an arbitrator or directing the parties as to the manner in which an arbitrator shall be appointed, unless the agreement provides alternative means for appointment.

Top

6.5. Mandatory rules applicable to the replacement process

If an arbitrator is replaced, the replacement arbitrator is appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. 

Top

6.6. Mandatory disclosure obligations

Prospective arbitrators who are approached for possible appointment must disclose any circumstances that would raise justifiable doubts as to their impartiality or independence. This obligation remains throughout the arbitral proceedings.

Top

6.7. Grounds for challenge

The appointment of an arbitrator can be challenged on two grounds:

  • where there are justifiable doubts as to their impartiality or independence; or 
  • if they do not possess qualifications agreed to by the parties.
Top

6.8. Mandatory rules governing the challenge of arbitrators

Absent any agreement by the parties to the contrary, a party wishing to challenge the appointment of an arbitrator shall, within 15 days after becoming aware of any ground for such a challenge, send a written statement setting out the reason for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from office or the other party agrees to the challenge, the arbitral tribunal (whether comprising a sole arbitrator or a panel of three) shall decide on the challenge.

If a challenge is unsuccessful, the challenging party may, within 30 days of receiving notice of rejection, request the High Court to decide on the challenge. The court’s decision is final. The arbitration proceedings may continue while the court’s decision is pending.

Top

6.9. Removal

If an arbitrator becomes de jure or de facto unable to perform their functions, or fails to act without undue delay, their mandate will terminate if they withdraw from office or if the parties agree on the termination of the mandate. If there is controversy regarding any of these grounds, the High Court can be approached to make a final ruling regarding the termination of the mandate.

Top

6.10. Liability and immunity of arbitrators

An arbitrator will not be liable for any act or omission in the discharge or purported discharge of their functions as arbitrator unless the act or omission is shown to have been done in bad faith. 

Top

7 . Assistance by the State courts

Top

7.1. Interim measures

Overview of interim measures

An arbitral tribunal may, at the request of a party, grant interim measures, provided that a party can satisfy the arbitral tribunal that:

  • harm is likely to result if the measure is not awarded and that the harm cannot be adequately reparable by a damages award; and 
  • there is a reasonable possibility that the requesting party will succeed on the merits of the claim. 

A party requesting an interim measure may be required to provide appropriate security in connection with the measure. 

A court has the same power to order interim measures in relation to arbitration proceedings if:

  • there has been no arbitral tribunal appointed and the matter is urgent; or
  • the arbitral tribunal is not competent to grant the order; or
  • the urgency of the matter makes it impractical to seek such an order from the arbitral tribunal; or
  • the arbitral tribunal being competent to grant the order has not already determined the matter.

Relevance of availability of emergency arbitrator mechanism

The IA Act does not regulate the appointment of emergency arbitrators.

Article 11 of the AFSA International Rules provides for the appointment of an emergency arbitrator and other related matters. 

Top

7.2. Taking of evidence

The arbitral tribunal, or a party with the approval of the arbitral tribunal, may request a competent court for assistance in taking evidence, including the issuing of subpoenas to compel the attendance of witnesses before an arbitral tribunal to give evidence or to produce documents.

Top

7.3. Appointment or challenge of arbitrators

See Sections 6.4 and 6.8 above.

Top

7.4. Other available assistance

If an arbitral tribunal rules on its own jurisdiction as a preliminary matter, a party may, within thirty days of receiving the decision, apply to the High Court to decide the matter de novo. The court’s decision is not appealable, and the arbitral proceedings may continue whilst the court application is pending. 

Top

8 . General procedural (minimum) requirements

Hearings 

The parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. If the parties fail to agree, the tribunal may conduct the arbitration in the manner it considers appropriate.

Hearings may be held in-person or virtually as agreed between the parties notwithstanding the seat of the arbitration.

The arbitral tribunal will decide whether to hold oral hearings or whether the proceedings will be conducted on the basis of documents and other materials provided. However, unless the parties have agreed that no hearings should be held, the tribunal should hold a hearing at an appropriate stage if so requested by a party. 

Rules governing non-participation

Unless otherwise agreed by the parties and if, without showing sufficient cause, the claimant fails to deliver a statement of claim, the tribunal may terminate the proceedings. If the respondent fails to deliver a statement of defence, the proceedings will continue without treating such a failure as an admission. If a party fails to appear at a hearing or to produce documentary evidence, the tribunal may continue the proceedings and make the award on the evidence before it.

Top

9 . Confidentiality

Confidentiality obligations depend on whether the proceedings involve private parties only or a public body. 

For proceedings between private parties, the IA Act is silent on the issue of confidentiality. Parties may agree on the confidentiality of arbitral proceedings in their arbitration agreement or this may form part of the procedural rules. 

Where a public body is a party to arbitration proceedings, the proceedings will be open to the public unless the arbitral tribunal finds that there are compelling reasons to direct otherwise. 

If the arbitration is held in private, the award and all documents created for the arbitration (and which are not in the public domain) must be kept confidential by the parties and the tribunal, except where the disclosure of such documents may be required by reason of a legal duty or to protect or enforce a legal right. 

Top

10 . Awards

Top

10.1. Requirements as to content and form

In terms of the IA Act, an arbitral award must:

  • be in writing; 
  • be signed by the arbitral tribunal; 
  • state the reasons upon which it is based (unless the parties have agreed that no reasons are required); 
  • state its date and the juridical seat of arbitration; and 
  • be delivered to all the parties (electronic copies suffice).
Top

10.2. Time limit

The IA Act does not impose a time limit for rendering an award.

Top

10.3. Remedies

In the absence of limitations imposed by the parties in their agreement to arbitrate or the agreed terms of reference, arbitrators may award any remedy sought by a party under the governing law of the agreement between the parties, provided that the subject-matter of the dispute is arbitrable and there are no public policy concerns under South African law. 

Consequently, relief may include awards for damages, specific performance, declaratory orders, costs and interest. Under South African law, punitive damages are not permissible and will not be awarded under South African law or enforced regardless of the governing law, on the basis of overriding public policy considerations.

The remedies may also be determined by arbitrators with reference to the arbitration agreement, the nature of the dispute and the relief sought by the parties.

Top

11 . Post-award proceedings

Top

11.1. Interpretation and correction of awards

Within thirty days of receipt of the award, unless another period of time has been agreed upon by the parties in their arbitration agreement, a party may, with notice to the other party, request that the tribunal:

  • correct any errors in computation, any clerical or typographical errors or any errors of a similar nature; or
  • gives an interpretation of a specific point or part of the award.

If the tribunal considers the request to be justified, it shall make the correction or give the interpretation within thirty days of receipt of the request. The interpretation shall form part of the award.

The tribunal may, on its own initiative, correct its award within thirty days of the date of the award.

Top

11.2. Challenge of an award

The High Court may set aside an award if, on application, it is proven that:

  • the arbitration agreement was invalid; or
  • the party was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings or was unable to present their case; or
  • the award deals with a dispute not falling within the terms of the submission to arbitration; or
  • the composition of the tribunal was not in accordance with the arbitration agreement or, failing such agreement, the Model Law.

The High Court may also set aside an award if:

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

A challenge, in the sense of a judicial review application, must be brought within 180 days of the date of the award.

Top

11.3. Recognition and enforcement proceedings

An award, irrespective of the country in which it was made, is recognised as binding and, upon application to a competent court, is enforceable in South Africa. However, the High Court may refuse enforcement if the award meets the grounds for setting aside as detailed above in Section 11.2. A party seeking enforcement of the award must provide the award and, if it is not written in an official South African language, a sworn translation of the award. 

There is no time limit within which an action to recognise and enforce an award must be brought.

Top

11.4. Cost of enforcement

There are no direct or statutorily imposed costs associated with enforcement. However, the usual legal fees and costs (e.g., the Sheriff’s fees and expenses) are applicable.

Top

11.5. Enforcement of orders of emergency arbitrators

The enforcement of any order by an emergency arbitrator will either have to be sought by way of a High Court urgent application, provided it meets the High Court’s urgency threshold, or else in the ordinary course by way of a regular High Court application. An urgent application is heard on an expedited basis and the ordinary court timelines are truncated. On the other hand, a regular application follows the usual timelines for High Court litigation and the hearing date is determined by the availability of hearing dates on the ordinary court roll. 

Top

12 . Enforcement of foreign awards

Top

12.1. Process for enforcing New York Convention awards

A party seeking to enforce a foreign award in terms of the New York Convention must comply with the requirements of the IA Act to ensure “automatic” enforcement on the basis of reciprocity. That party must produce the following:

  • the original award and the original arbitration agreement in terms of which the award was made, duly authenticated, or a certified copy of that award and of that agreement; and
  • if in a foreign language, a sworn translation of the arbitral award and arbitration agreement into an official South African language, duly authenticated.

In certain instances, and where the court considers it appropriate to do so, the court may accept other documentary evidence regarding the existence of the foreign arbitral award and arbitration agreement.

Top

12.2. Grounds for resisting enforcement of New York Convention awards

South African courts may refuse to recognise or enforce a foreign arbitral award on the same grounds as those listed under Article V of the New York Convention.

The application of the public policy ground to resist enforcement has not been widely utilised and, despite its perceived broad scope, has been interpreted narrowly by South African courts. Its application has been limited to instances of illegality, fraud, contraventions of statue and/or overt dishonesty.

Top

12.3. Enforcing Non-Convention awards

See Section 11.3 above.

Top

13 . Professional and ethical rules

Top

13.1. Applicable to counsel

South African admitted lawyers are required to adhere to high standards of ethical conduct, which are set out in a code of conduct. Lawyers who practice as advocates are generally also members of the Bar Council of South Africa and must act in accordance with its uniform rules of professional ethics. 

Top

13.2. Applicable to arbitrators

Apart from the general requirements of independence and impartiality enunciated in the IA Act, there are no specific ethical rules applicable to arbitrators. Generally, the IBA Guidelines on Conflicts of Interest in International Arbitration are applied by and to arbitrators.

Top

14 . Third-party funding

Top

14.1. Applicable regulatory requirements

Whilst third-party funding is permissible, it is currently not regulated by legislation. South African courts have developed the law relating to third-party funding. The courts have held inter alia that third-party funding arrangements are not, in-principle, contrary to public policy and have provided guidance on the key factors that would ensure that such arrangements are fair and reasonable.

Under AFSA’s International Rules, if a third-party funding agreement is entered into, the funded party should notify the other parties, the arbitral tribunal, and the secretariat of the existence of the third-party funding agreement as well as the identity of the third-party funder.

Top

14.2. Overview of the third-party funding market in this jurisdiction

The third-party funding market in South Africa is, in comparison to major global centres, in its infancy. Third-party funding is prevalent in class action litigation. It is sometimes used in large commercial disputes, including in arbitration proceedings. 

Top

15 . Trends and recent developments

The Supreme Court of Appeal (SCA) recently had to consider the application of the IA Act for the first time on a question of interpretation. In the case, the SCA was required to interpret the IA Act in order to consider and determine whether the arbitration and governing law clauses of a licence agreement were superseded by the dispute resolution clauses in another set of agreements. Part of its decision was that unless an arbitration agreement is null and void, inoperable and/or incapable of being performed a South African court has no discretion, it must uphold the arbitration agreement. 

In a second, recent SCA case involving domestic arbitration legislation, the court considered whether new expert evidence could be led at the enforcement stage to oppose enforcement. The SCA refused the appellant’s attempt to introduce new expert evidence, as this would have amounted to an appeal of the award. The award therefore met the requirements of an order capable of being enforced and the appeal was dismissed. The SCA made several references to “the utility of arbitration as an expeditious, out-of-court means of finally resolving disputes” and the balancing act required to preserve this. This jurisprudence will undoubtedly apply equally to similar cases under the IA Act.

EXPERT ANALYSIS

Chapters

Australia

Cara North
Eleanor Clifford
Nastasja Suhadolnik
Samuel Kay

Brazil

Anna-Katharina Scheffer da Silveira
Paulo Macedo
Rafael Alves

Colombia

Juan Felipe Merizalde
Juan Pablo Gómez-Moreno

Ecuador

Adriana Rodas
David Toscano
Gabriela Ortega

England and Wales

Gregory Fullelove
Katie Bewlock

France

Carl Szymura
Julie Spinelli

Hong Kong

Kim M. Rooney

India

Sanskriti Sidana
Shaneen Parikh
Tushar Karkaria

Italy

Gregorio Baldoli
Massimo Benedettelli

Nigeria

Igonikon Adekunle
Konyinsola Osipitan
Sesan Sulaiman

Saudi Arabia

Fahad N. AlArfaj

Singapore

Joel Quek
Koh Swee Yen SC
Wendy Lin

South Korea

Brandon Bang
Hangil Lee
In Hyuk Hwang
Tony DongWook Kang

Switzerland

Noradèle Radjai

United States

Benjamin Guthrie
Carlos Hafemann
Daniela Páez
Emma McGrath
Lucila Marchini
Louis Thivierge

Powered by SimSage

Popular Articles

Latest Articles

BT Group offers automatic panel spot to firm that makes best use of AI

7h

The Global Legal Post launches international comparative guide to cryptoassets

12h

Paul Hastings, Weil called in for sale of majority stake in Edinburgh Airport

14h

South Korea’s legal profession lags on gender equality, IBA report finds

1d

Clyde & Co elevates 19 to partner in latest promotions round

1d