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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. AFSA has recently concluded a joint venture agreement with the South African Restructuring & Insolvency Practitioners Association (SARIPA). SARIPA is a nonprofit organization, representing the business rescue and insolvency professions and whose members comprise qualified insolvency and business rescue practitioners, including accountants, lawyers, bankers, and academics. The joint venture agreement creates a further division within the AFSA corporate structure, being the AFSA-SARIPA Business Rescue Division.

The joint venture offers a new set of rules for arbitrations in South Africa: the “AFSA-SARIPA Rules for the Resolution of Disputes in Business Rescue Proceedings” (“SARIPA Rules”). These will operate alongside AFSA’s domestic arbitration Commercial Rules, international arbitration International Rules, Unadministered Standard and Expedited Rules, China-Africa Joint Arbitration Centre Rules and Mediation Rules.

Business rescue is a feature of South African law contemplated under the Companies Act 71 of 2008 (“Companies Act”), which makes provision for companies in financial distress to enter into business rescue proceedings in appropriate circumstances, as an alternative to fully-fledged insolvency or liquidation proceedings. The primary purpose of business rescue is to provide for the temporary supervision of a company and the management of its affairs, business and property by a specialist business rescue practitioner (BRP) with a view to rehabilitating a financially distressed company or generating a better return for creditors than in ordinary insolvency proceedings. One of its key features is the creation of a temporary moratorium over the rights of claimants against the company or in respect of property in the company’s possession. Once proceedings are commenced, a BRP is required to prepare a “business rescue plan” (“Plan”) for consideration and adoption by the creditors of a company. Business rescue accordingly strikes a balance between rehabilitation of distressed companies on the one hand, and generating a favorable return for creditors on the other.

The SARIPA Rules were developed in the above context, to provide for disputes arising in connection with business rescue proceedings. Any arbitration under the SARIPA Rules will be overseen and administered by the AFSA-SARIPA Secretariat, through the joint venture’s AFSA-SARIPA Business Rescue Division. As a point of departure from the status quo in business rescue proceedings, and a gateway to business rescue arbitrations, the SARIPA Rules create a model arbitration clause for inclusion in a Plan. BRP’s are now empowered by the SARIPA Rules to insert into the Plan a model arbitration clause in the following terms:

            “Any dispute of whatsoever nature relating to:

(i)         the acceptance or rejection of any claim whether in whole or in part or the value or ranking of any claim or the recognition of any security or preference, lien or hypothec attaching to such claim; or

(ii)        claims which are not reflected in the records of the company in business rescue and are not recognized under the business rescue plan;

(iii)        any act or omission by the Business Rescue Practitioner affecting the rights or legal interests of any Affected Party (as defined in Section 128(1)(a) of the Companies Act) of the company in business rescue; or

(iv)       the proper interpretation or implementation of any provision in the Business Rescue Plan,

shall be submitted for final determination in accordance with the AFSA-SARIPA RULES by an accredited arbitrator appointed by the Secretariat of the AFSA-SARIPA Division.

For the purpose of this clause:

claims” means secured, preferent or concurrent claims as envisaged in the Insolvency Act, against the company, the cause of action in respect of which arose, prior to or on the commencement date of business rescue proceedings or thereafter and of whatsoever nature and from whatsoever cause, including claims, arising from contract or delict, actual and contingent, prospective, conditional and unconditional, liquidated and unliquidated, assessed and unassessed and whether or not due for payment or performance, specific or otherwise, and including all claims arising out of any agreements entered into by the company on or prior to the commencement date;

creditors” means all legal entities, including natural persons and Trusts, having secured, preferent and/or concurrent or contingent claims against the company as at the commencement date or thereafter.

The SARIPA Rules then set out, with a clear focus on expedience, the ordinary procedure by which such arbitrations will be conducted. The standard form request for arbitration (at Appendix A to the SARIPA Rules) provides for the making of a statement by a claimant that “briefly sets out the nature of the dispute which has arisen and the relevant facts and contentions” on whichthat party relies. In response to the request, a BRP is required in terms of rule 6.1 to:

“answer the claimant’s claim as set out in paragraph 5 of Appendix A by way of a brief written statement indicating which statements made in support of the claim in paragraph 5 of Appendix A are admitted and which parts are denied, and why they are denied, further showing clearly and concisely the reasons and contentions which are relied upon to refute the claimant’s claim; […]”

The AFSA-SARIPA Secretariat, or the parties by agreement, is conferred with a discretion to first have the dispute referred to mediation for “quick and amicable resolution.” The AFSA-SARIPA Secretariat appoints the mediator and issues directions as to the mediation process. In instances where mediation is unsuccessful or where there is no referral to mediation, arbitration proceedings are commenced and subject to an initial meeting at which the appointed arbitrator is to decide whether a:

fair and expeditious determination of the dispute” (a): “requires further elaboration of the claim or the response…”; (b) “requires the production of books or documents…; and/or (c): “permits the submission of evidence and contentions upon which the parties rely in written form and without the need for oral presentation.”

The arbitrator in determining the procedure for the dispute, “must” draw up a timetable for the dispute, and “must give priority to the need for the expedited determination of the dispute and to a cost-effect process.” Where the dispute pertains to a review of a decision of a BRP, the proceedings are to be conducted by way of “written evidence and submissions save for oral argument.”

As is evident from the above, the SARIPA Rules are express in requiring arbitrators to prioritize efficiency and cost effectiveness. This is supported by the conferral of extensive general powers to arbitrators. Arbitrators are afforded “the widest discretion and powers allowed by law to ensure the just, expeditious, economical, and final determination of all the disputes raised in the proceedings, including the matter of costs.” These powers include:

“15.2.1 to rule on his or her own jurisdiction;

15.2.2   to admit claims or any security or preference whether recognized under the Business Plan or not and to review and set aside a ruling of the Business Rescue Practitioner in regard to the admission or rejection of claims including the power to admit a rejected or partially rejected claim or any security or preference;


15.2.4   to make any ruling or give any direction mentioned in these Rules or as he or she otherwise considers necessary or advisable for the just, expeditious, economical and final determination of the disputes raised on the pleadings, including the matter of costs;


15.2.6   to order any party who is a claimant, or claimant under a counterclaim, to furnish security for costs in respect of his claim; or counterclaim;

[…] and

15.2.9   to make any settlement agreement concluded between the BRP, claimant and any other party to the arbitration proceedings, an award which will have the same effect as an award made at the conclusion of the arbitration proceedings.”

Any award in an arbitration then made by an arbitrator in accordance with the broad range of powers conferred upon it in terms of the SARIPA Rules must be given within 30 days after the finalization of the proceedings. The default position in the absence of agreement between the parties to the contrary is that “there shall be no right of appeal from the award.” 

The SARIPA Rules make provision for a BRP to permit the referral to arbitration of a wide range of claims from a variety of creditors. For both BRPs and creditors, this is a positive development. Typically, disputes of the above nature would be referred to the High Court, which invariably entails extended lead-times and the resultant and compounded costs associated with protracted proceedings. The availability of arbitration proceedings enables both creditors and BRPs to have their disputes resolved expeditiously and cost-effectively. The SARIPA Rules are unambiguous in their prioritization of time and cost efficiency. This is ultimately to the benefit of both the distressed company, the BRP, and its creditors. In this regard, the SARIPA Rules appear to be a tool that will help give effect to business rescue proceedings as contemplated in the Companies Act. With that said, the SARIPA Rules were published on 22 February 2023 and they are yet to be tested. Their actual impact in the context of business recue related disputes will only be evident in due time.

B.         CASES

B.1       No discretion for South African courts to hear disputes subject to international arbitration clauses.  

The first ever case on the interpretation of the IA Act in South Africa was heard in the Supreme Court of Appeal (SCA) on 28 February 2022. In Tee Que Trading Services (Pty) Ltd v. Oracle Corporation South Africa (Pty) Ltd and Another, the SCA was faced with a decision of the High Court to stay proceedings instituted before it on the basis that the parties were subject to an international arbitration clause in the agreement under dispute. The IA Act, by incorporating the UNCITRAL Model Law, provides that a court faced with an 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 SCA held that the courts have no discretion in relation to such matters.

In 2018, Tee Que (the appellant) instituted a civil action in the High Court against Oracle for damages arising out of a breach of contract. Oracle responded to the civil action by way of an application for a stay of those proceedings pending referral of the dispute to arbitration. Oracle contended that in circumstances where an international arbitration agreement is at play, a court must stay the proceedings before it when called upon to do so, pending referral of the dispute to arbitration. This was based on the IA Act, which 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 High Court agreed with that position, finding that the provisions of the UNCITRAL Model Law, which forms part of the IA Act, applied to the dispute, and that in terms of article 8 of the Model Law, on a proper interpretation of the applicable agreements, it was compelled to order a stay of the action proceedings pending referral of the dispute to arbitration. The High Court held that, unlike with the provisions of the Arbitration Act, under the IA Act, it had no discretion.

Tee Que took the decision on appeal to the SCA. By way of a judgment dated 17 May 2022, the SCA dismissed the appeal. In doing so, it considered the question of whether the IA Act and the UNCITRAL Model Law applied to the dispute. The court pointed out that the IA Act was enacted in South Africa with the specific purpose of domesticating the UNCITRAL Model Law, and that the IA Act and the UNCITRAL Model Law, as incorporated into the IA Act, is South African law. It then had to consider whether, in the context of international arbitrations in accordance with the IA Act, the High Court had a discretion to refuse a stay of the civil action proceedings.

On the question of the court’s discretion, the SCA highlighted that the, “[UNCITRAL] Model Law reflects the international approach to international commercial arbitration agreements that, unless an arbitration agreement is null and void, inoperable or incapable of being performed, courts are obliged to stay action proceedings pending referral to arbitration.” The agreements between the parties being valid and operative, the SCA found that there was no basis for interference with the arbitration agreement underlying the dispute, and accordingly that no discretion exists for a court to refuse a stay application in the circumstances.

The impact of the SCA’s judgment cuts two ways. On the one hand, a South African court has no discretion to hear a matter subject to an international arbitration clause where a party to proceedings raises such a clause. In these circumstances the inherent jurisdiction of the South African High Court is effectively ousted by the provisions of the IA Act. On the other, a party to an international arbitration agreement effectively loses its right of access to court in relation to a dispute, and must refer that dispute to arbitration in accordance with the agreement. Failure to do so entitles a counterparty to raise the arbitration agreement and effectively force the matter to arbitration.

While the SCA’s judgment is likely to alleviate local court backlogs and expedite the resolution of disputes between parties, it will significantly impact litigants’ right of access to courts. This raises a potential constitutional issue which was not dealt with before the SCA, and which may in due course occasion a decision by South Africa’s apex court, the Constitutional Court, on the issue. In the case of Tee Que however, no appeal to the Constitutional Court has been lodged, and the SCA’s decision remains the authority on the issue in South Africa.


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