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South Africa’s new arbitration law

Deborah Ruff
Jeffrey Kron
Gregory Nott
Julia Belcher

On 21 April 2017 a new International Arbitration Bill (the Bill) was presented to South Africa’s parliament, following a nearly 20-year long campaign by the South African Law Commission to modernise the country’s arbitration law. The Bill adopts (in the main) the UNCITRAL’s Model Law on International Commercial Arbitration (the Model Law) and updates the procedure for enforcement of foreign arbitration awards.

Currently, arbitration in South Africa is governed by the South African Arbitration Act 1965. The 1965 Act applies to both foreign and domestic arbitration proceedings. The recognition and enforcement of foreign arbitral awards is governed by the Recognition and Enforcement of Foreign Arbitral Awards Act 1977.  The 1965 Act gives the courts broad powers to intervene in the arbitration process. For example:

  • section 3 of the 1965 Act provides that the court may, “on good cause shown”, set aside the arbitration agreement, or order that any particular dispute referred to in the arbitration agreement shall not be referred to arbitration, or order that the arbitration agreement shall cease to have effect with reference to any dispute referred.
  • section 6 of the 1965 Act provides that the court may stay proceedings initiated by a party to an arbitration agreement, but only if a party makes an application to court requesting it, and does so “before delivering any pleadings or taking any other steps in the proceedings”; the court has the power to impose any conditions to the stay as it deems “just”.

Understandably, as these provisions give a great deal of discretion to the local courts to intervene in the arbitration process and thus increase uncertainty, parties are deterred from pursuing their international commercial disputes through arbitration in South Africa.

The Bill provides that the objects of the new legislation are to:

  • facilitate the use of arbitration as a method of resolving international commercial disputes,
  • adopt the UNCITRAL Model Law for use in international commercial disputes,
  • facilitate the recognition and enforcement of certain arbitration agreements and arbitral awards, and
  • give effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the NY Convention).

Once enacted, the legislation will govern international commercial arbitration, but will not impact on the existing arbitration laws governing domestic disputes, which will continue to be governed by the existing 1965 Act. If enacted, the new law will apply to agreements entered into before and after the enactment of the Bill, provided that an arbitration has not already commenced before the Bill has become law. 

The Bill incorporates the Model Law almost in its entirety and brings South Africa’s 1977 legislation dealing with the recognition and enforcement of foreign awards in line with the NY Convention, to which South Africa acceded in May 1976 without any reservations. Although the country implemented the NY Convention through the 1977 Act, its legislation nonetheless prohibits the enforcement of awards relating to mining, production, import, export, refining, possession or use, sale or ownership of any material located anywhere in the world, without the consent of the country’s Minister of Trade and Industries. It is proposed that this limitation will be abolished.

The Bill is aimed at making the country a more attractive jurisdiction for foreign parties to resolve their commercial disputes. On the one hand, the country’s efforts to modernise its outdated international arbitration law are welcome. On the other, these efforts are co-mingled with other legislation such as the recently passed Protection of Investment Act 2015 (not yet in force) which requires investors to pursue arbitration against the government only after first having exhausted domestic remedies and then having obtained consent by the State to arbitrate with a foreign investor. The international commercial community’s reaction to the new legislation remains to be seen.

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