Arbitration in South Africa

Video | March 2017 | 4:07

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Arbitration in South Africa

The Arbitration Act of 1965 governs arbitrations - that dates back to the year of my birth - in South African terms that is relatively old. There has been much criticism about the Act in terms of its inflexibility, the ability of the parties to have the courts intervene and interfere with the arbitration process, and the fact that it doesn’t adopt universal and international procedures for arbitration.

It covers both domestic and international arbitration and what we have seen actually recently is a whole series of judgments by our courts that have confirmed that they see arbitration as a separate and distinct process which is acceptable as a dispute resolution mechanism in South Africa and where they have clearly said that the courts will be very loathe to interfere in the process. So it certainly is  a standalone independent process.

We are also signatories to the New York Convention, so we do enforce - both in terms of adherence to that Convention and through local legislation - international arbitrations as well.

But because of the criticism of the Arbitration Act there have been moves afoot, dating back to 1998, to actually align, certainly on the international arbitration side, our rules and our processes with international laws. A draft bill which is going through the parliamentary process which aligns international arbitration with the UNCITRAL Model Law Rules. It certainly seems to be that there is now momentum to adopt that legislation and that form of regime. So I would think that in the next few months you would see some legislation - we would then have an Arbitration Act which would deal with domestic arbitrations and the International Arbitration Act dealing with international arbitrations. What the Acts would then do is really move the enforcement mechanisms that now stand alone through separate pieces of legislation into the International Arbitration Act.

Hopefully then you will see South Africa being much more acceptable as a seat and place for international arbitrations. That certainly would allow South Africa to compete on the continent and take its correct place as a resolution forum for those types of disputes. There is a fair amount of competition already with the Mauritius International Arbitration Centre looking to resolve disputes in terms of the LCIA rules and of course there are also centres in Nigeria, Kenya and the East African corridor as well. But there are sophisticated arbitration forums in Johannesburg; the Arbitration Foundation of South Africa, the Association of Arbitrators who are sophisticated in the way that they deal with and administer arbitrations.

In 1990s you saw the new democratic government concluding a number of bilateral investment treaties with governments around the world. There has been though, over the years, a change of heart. We have seen the government in the last few years giving notice of cancellation at least of its investment treaties with Western governments and discussions in terms of Eastern governments about their termination. The intention is to replace the protections afforded by those bilateral investment treaties by way of legislation - there is a Protection of Investment Act and a change to an expropriation law - the intention is to give equivalent protections as given under those treaties but under the legislation.

That has been a subject of some criticism because in terms of the legislation, it doesn’t seem to afford countries and investors the type of heightened protections that they would have received under the investment treaties. It really is to accord them equivalent status to South African companies and investments. The intention being really to give the government leeway to implement its social change policies which it has been wanting to do and which those investment treaties have, to an extent, put a brake on. But it is early days in terms of that legislation - there is of course the Constitution, the Constitutional court, which may see challenges of that legislation, but that is yet to come.

Donald Dinnie, Managing Director of our South African practice, discusses arbitration in South Africa. Donald talks about South Africa’s current arbitration law as well as recent developments for commercial arbitration and investor-state dispute settlement (ISDS), including important changes to protections for foreign direct investment.