10 August 2017 by Dispute Resolution Alert

What International Arbitration is not

There is no doubt that the imminent promulgation of the International Arbitration Act has created equal levels of excitement and confusion in the South African legal fraternity. South Africa does not have a particularly long history in resolving disputes by means of international arbitration. While the courts are undoubtedly “arbitration friendly”, South Africa was never really regarded as a choice seat for international arbitrations, mainly due to outdated legislation. This is expected to change with the promulgation of new Act. 

This note seeks to clarify a few misconceptions about this area of law. 

  1. International arbitration is no different to a domestic arbitration – International arbitration Law is a set of international laws, treaties, customs and norms, grounded by local statutes operating as a transnational framework for the resolution of cross border disputes. It is entirely different to a domestic arbitration which essentially remains under the influence of local courts. 
  2. International arbitration is a “European thing” – International arbitration is not linked with any country, region or legal system. It is a mechanism which evolved as a result of the difference in legal systems and cultures and whilst certain regions have a longer history in facilitating the resolution of such disputes, there is no one location which will be appropriate in all circumstances.
  3. A good template international arbitration clause is all one needs – It is often insufficient to simply insert a “template” international arbitration clause in all contracts. Important factors to bear in mind when concluding an international arbitration clause include the nationality of the parties, language, the place of performance, the place of potential enforcement, the nature of the contract itself and the currency of the agreement. These are often different for each contract. 
  4. It is always better to refer a dispute to one of the established seats in accordance with their rules – For a number of years, this was indeed the default position. The biggest justification for not doing so today is cost. The majority of the established seats for example in London, Paris, Singapore and Hong Kong, are very expensive, especially for parties based in developing regions like Africa. There is a growing trend to choose a seat which will not push the resolution of a dispute beyond the means of the financially weaker party. 
  5. Arbitral awards are not as enforceable as court orders – Whilst technically correct, this statement is misleading. It is correct that an arbitral award is only enforceable once recognised by a national court at the place of enforcement. However, signatories to the New York Convention (on the enforcement and recognition of foreign arbitral awards) are obliged to enforce foreign arbitral awards and may only refuse such enforcement under certain exceptional circumstances. Currently there are over 150 signatories to the New York convention. In contrast, the Hague convention on the Recognition and Enforcement of foreign Judgments in Civil and Commercial matters, for example, only has 5 signatories. 
  6. One cannot arbitrate a dispute in South Africa if the governing law of the contract is a foreign law – This is entirely false. The content of the foreign law will be determined by expert testimony, if necessary, but there is no reason why the seat cannot be in South Africa. 
  7. I will be forced to fly-in legal representation from England if the governing law of the contract is English Law – This too is false. There is no requirement to be proficient or qualified in any particular law in order to represent a party in an international arbitration. What is more, there is no need to brief advocates to argue the matter. The manner in which the case is advanced is entirely up to the parties. 
  8. International arbitration enables forum shopping, something South African law does not permit – South African law does not permit forum shopping in court litigation. Arbitration, on the other hand is not restricted by such principles. In fact, parties are encouraged to shop for the most appropriate forum for each dispute in an effort to facilitate access to justice. 

The above are but a few misconceptions about international arbitration and its relevance for South Africa. International arbitration is certainly a “thing” and it is alive and kicking on the African continent. 

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