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A.1       Legislation

International arbitration in South Africa continues to be governed by the International Arbitration Act, 15 of 2017 (“IA Act”), which incorporates the UNCITRAL Model Law. Domestic arbitrations in South Africa continue to be governed by the Arbitration Act, 42 of 1965 (“Arbitration Act”).

A.2       Institutions, rules and infrastructure

The Arbitration Foundation of Southern Africa (AFSA) and the Association of Arbitrators, Southern Africa, remain the primary domestic arbitration organizations used to resolve commercial disputes in South Africa.

AFSA has a number of divisions, including domestic and international divisions. Given the uptake in AFSA international arbitrations since the IA Act came into effect, AFSA published new International Arbitration Rules (“new Rules”) on 1 June 2021. The new Rules are aligned with the standards of other major arbitration centers around the world.

Some of the key takeaways from the new Rules include the introduction of rules for virtual hearings, the introduction of an expedited arbitration procedure, rules for urgent arbitrations, early dismissal of frivolous claims, default proceedings and joinder of third parties. These provisions are expanded upon below:

  • Article 10 provides for an expedited arbitration procedure in circumstances where the amount in dispute, counterclaim (or set-off) defense does not exceed USD 500,000 or where the parties agree to an expedited procedure. Aimed at reducing the time and costs often associated with international arbitration proceedings, the expedited procedure requires that a final award be communicated to the parties within six months from receipt of the case file by the tribunal. Only in exceptional circumstances can the secretariat established under the Rules extend this time period.
  • Article 11 makes provision for the appointment of an emergency arbitrator in circumstances where urgent relief is required prior to the constitution of the arbitral tribunal.
  • Article 12 makes provision for the early dismissal of a claim or defense in circumstances where such claim or defense lacks legal merit or is manifestly outside the jurisdiction of the arbitral tribunal.
  • Article 17 provides that where a respondent fails to submit a Statement of Defense or a claimant a Statement of Defense to a Counterclaim, or if any party fails to avail itself of the opportunity to present its written case, then the tribunal may proceed with the arbitration and make one or more awards.
  • Article 29(1) provides that prior to the constitution of the tribunal, a party may bring an application for one or more additional parties to be joined, provided that all parties, including the party to be joined, have consented to the joinder or the additional party to be joined is prima faciebound by the arbitration agreement in terms of which the arbitration has been brought. After the tribunal has been constituted, article 29(8) provides that a party or non-party may only be joined if all of the parties have consented to the joinder (including the party sought to be joined).
  • Article 21(6) provides that the tribunal may direct that the hearing take place in person or by any other means appropriate, taking into account all of the circumstances of the parties. This includes hearings via video or teleconference or a combination of the two.
  • The new Rules also introduce the AFSA Court and a secretariat. The former is to be the final authority on the application of the new Rules such as the appointment of arbitrators, arbitrator challenges and issues of jurisdiction and the latter will be responsible for day-to-day case management.

These developments in the international arbitration framework in South Africa demonstrate AFSA’s move to align international arbitrations in terms of the IA Act with the standards of other prominent global arbitration centers. The AFSA Court will have the final say in requests for expedited and emergency procedures as contemplated in articles 12 and 13 of the new Rules. It will also play the role of assuring absolute independence and neutrality in the process of establishing arbitral tribunals. These, amongst other roles and functions of the AFSA Court, are some of the developments which make AFSA a viable and cost-effective forum for local and international parties to arbitrate their disputes.


B.1       A party against whom an award has been granted in international arbitral proceedings cannot stay the enforcement of that award on the basis of distinct ongoing litigation between the parties.

In the case of Industrius D.O.O v IDS Industry Service and Plant Construction South Africa (Pty) Ltd[1], a dispute between the applicant (“Industrius”) and the respondent (“IDS”) was referred to arbitration by virtue of an international arbitration agreement as defined in the IA Act. Industrius instituted a contractual claim against IDS, who responded by instituting a counterclaim against Industrius. Despite instituting its counterclaim, IDS ceased to participate in the arbitration, ostensibly due to a dispute between it and its attorneys and the hearing proceeded in IDS’s absence. The arbitrator found in favor of Industrius, who subsequently applied to the court to enforce the award. IDS opposed the enforcement application, despite having had its counterclaim dismissed, on the basis that the enforcement ought to be stayed on the basis of an action it had brought in the High Court. The High Court action brought by IDS sought the same relief as that which was sought in its counterclaim in the arbitration. The High Court in the enforcement application ultimately dismissed IDS’s opposition and ordered the enforcement of the award.

In coming to its finding, the court considered the UNCITRAL Model Law and its application in South Africa by virtue of the IA Act. In terms of the UNCITRAL Model Law, there are certain circumstances in which the enforcement of an award may be refused, contained in article 36(1)(a), which are mirrored in section 18 of the IA Act. In particular, IDS sought in the enforcement application to stay the enforcement of the award on the basis that the award dealt with a dispute not contemplated by, or not falling within the terms of the reference to arbitration, or contained decisions on matters beyond the scope of the reference to arbitration.[2] The court highlighted that a party wishing to rely on the provisions of article 18 of the IA Act bears the onus of proving that the relevant circumstances are present. It found that IDS had failed to adequately aver or lead evidence to its satisfaction that the staying of or refusal to grant the application would be justified. The court emphasized the purport of the UNCITRAL Model Law and the jurisprudence surrounding its provisions and those incorporated into national legislation and driving home its support for the enforcement of arbitral awards.

Given that IDS had instituted a new action in the High Court, albeit for the same relief as sought in its counterclaim in the arbitration, the court found that notwithstanding the similarity of the relief sought by IDS in the action, the action proceedings were not a challenge against the decision of the tribunal, nor was there any other nexus between the IDS’s action proceedings and the arbitration. The court specifically referred to the conduct of IDS as constituting “delaying tactics”, the allowance of which would be “counterproductive and create an imbalance in international trade”. Accordingly, it held that neither the IA Act nor the Model Law provides for a court to refuse or to delay enforcement of an award on the basis that a party has instituted other proceedings that are not related to the arbitral award or have no bearing on the finality or enforceability of the arbitral award.

This case demonstrates the South African courts’ attitude that an arbitration agreement may not simply be overlooked by a party, especially an unsuccessful party, in view of proceedings in court. By emphasizing IDS’s failure to establish the circumstances set out in section 18 of the IA Act, the case illustrates that parties to a dispute can expect the standards of international arbitration to be upheld and enforced, and speaks to South Africa as being a reliable jurisdiction for the arbitration of international disputes.

B.2       Circumstances in which a court may extend a time-bar clause in an arbitration agreement — the concept of “undue hardship”.

In the recent case of Samancor Holdings (Pty) Ltd and Others V Samancor Chrome Holdings (Pty) Ltd and Another,[3] the Supreme Court of Appeal (SCA) was tasked with deciding whether to grant an extension to refer a matter to arbitration in circumstances where the period for the initiation of arbitration proceedings had lapsed.

The first appellant, Samancor Holdings (“Samancor”), entered into a sale agreement (as the seller) with the first respondent, Samancor Chrome Holdings (“SCH”) (as the buyer), in terms of which, Samancor would sell the chrome business of one of its subsidiaries (“Target”) to SCH, and Samancor had indemnified SCH against any tax liability arising out of the assets excluded from the sale. At the effective date of the agreement (1 June 2005), the conditions precedent had not been fulfilled, and the closing date of the agreement was only reached some months later on 3 April 2006. The agreement included an arbitration agreement, subject to a time-bar clause in terms of which any claim for tax liability became barred and unenforceable unless arbitration proceedings were issued and served prior to the sixth anniversary of the effective date. Some seven years after the effective date (and over six years after the closing date), SCH suffered tax liability and penalties in the region of ZAR 27 million (approximately USD 1.8 million) pursuant to an assessment raised by the South African Revenue Service for the 2005 tax year, in which Samancor was still responsible for administering the Target’s tax affairs. SCH claimed the tax liability from Samancor, and Samancor denied its liability. Accordingly, SCH instituted arbitration proceedings against Samancor under the tax indemnity in August of 2013.

The arbitration ultimately became the subject of an appeal to an appeal tribunal, who in turn found that the time-bar clause in the agreement was enforceable, but afforded SCH an opportunity to apply to the High Court for an extension of the time-bar clause in terms of section 8 of the Arbitration Act, which provides that a court may extend a time-bar clause in favor of a party who has suffered undue hardship as a result of being barred. The High Court granted the extension, and Samancor accordingly took the matter on appeal to the SCA.

The SCA’s judgment is helpful insofar as it sets out the factors for consideration when determining whether a party has suffered “undue” hardship, particularly in the context of a time-bar clause. The SCA held that section 8 of the Arbitration Act does not require rare or exceptional circumstances. The factors, the SCA held, to be considered when determining undue hardship include:

  • The terms of the time-­bar clause and the broader contractual setting.
  • The extent of the claimant’s delay.
  • The explanation for the claimant’s failure to bring the claim timeously.
  • The extent of the claimant’s fault, if any, in relation to the delay.
  • Whether the defendant caused or contributed to the non­compliance and, if so, the extent of the defendant’s fault in that regard.
  • The nature and importance of the claim.
  • The extent of the prejudice, if any, suffered by the defendant in consequence of the delay.

The SCA further held that two English law considerations are worthy of consideration in South African law when determining undue hardship, namely whether either of the following applies:

  • If the circumstances are such as were outside the reasonable contemplation of the parties when they agreed to the provision in question, and that it would be just to extend the time.
  • If the conduct of one party made it unjust to hold the other party to the terms of the provision in question.

The SCA found in favor of SCH, dismissing the appeal on the basis that all time-bar clauses are subject to section 8 of the Arbitration Act, and that SCH had indeed suffered undue hardship on the basis of the factors set out above. This judgment provides guidance not only in the context of the arbitration itself but also for drafters of transaction agreements. Time-bar clauses do not oust in their entirety a party’s ability to arbitrate a matter, and the drafter must be conscious that the clause itself does not impart undue hardship on a party seeking to arbitrate. For aggrieved parties, it must be borne in mind that section 8 of the Arbitration Act is always available, provided an argument for undue hardship can be made in the context of the factors set out above.

B.3       Do local courts have discretion to hear matters subject to an international arbitration clause?

The first-ever case on the interpretation of the IA Act in South Africa is set to go before the SCA in early 2022. In the case before the SCA, the High Court’s decision to stay proceedings on the basis that they are subject to an international arbitration clause is currently subject to an appeal. The IAA, by incorporating the UNCITRAL Model Law, provides that a court faced with a matter subject to an international arbitration agreement “shall”, on request by a party, stay those proceedings and refer them to arbitration in accordance with the agreement.

The respondents, who were successful in their stay application in the High Court, argue that this is not a matter of the court’s discretion, as the IAA provides that only where a court finds an arbitration agreement to be null and void, inoperative, or incapable of performance, may it hear the matter in dispute. The outcome of the appeal could significantly curtail the power of a local court to hear matters which are otherwise subject to an international arbitration agreement, to the extent that the existence of an agreement to refer a matter to international arbitration proceedings will effectively oust a local court’s jurisdiction over a matter.

While this could alleviate local court backlogs and expedite the resolution of disputes between parties, it will significantly impact a litigant’s right of access to courts. The SCA is yet to hear the appeal, and notwithstanding the SCA’s decision, it remains to be seen whether the matter will, in turn, end up in the Constitutional Court, South Africa’s apex court, on the basis of the potential constitutional issues occasioned by the outcome of the matter.

 [1] [2021] JOL 51033 (GJ)

[2] UNCITRAL Model Law article 36(1)(a)(ii); IA Act 18(1)(b)(iv).

[3] 2021 (6) SA 380 (SCA)


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