4 May 2021 by and Dispute Resolution Alert

Arbitration Act: The Intersection between Remittal and Review

It is arguable that (one of) the most important legal consequences of an arbitration award is that it brings finality to the dispute between the parties in that the arbitrator’s decision is final and there is no appeal to the courts or an appeal tribunal unless the arbitration agreement makes provisions for an appeal to an appeal tribunal. This feature certainly makes arbitrations appeal to users.

The reality however is that an award is often not the last piece in a dispute. The Arbitration Act, 1965 contain various mechanisms to challenge the outcome such as the remittal for consideration in terms of section 32 and the setting aside in terms of section 33.

Remittal of an award for reconsideration

Section 32(2) of the Arbitration Act provides that the court may, on good cause shown, remit any matter which was referred to arbitration, to the arbitration tribunal for reconsideration and for the making of a further award or a fresh award or for such other purpose as the court may direct. An award may therefore be remitted where “good cause” has been shown for doing so. Good cause is generally understood to be a phrase of wide import that requires a Court to consider each case on its merits in order to achieve a just and equitable result in the particular circumstances.

At reconsideration, the arbitration tribunal must dispose of a matter within three months unless the parties or the court direct otherwise. It is however crucial to bear in mind that remittal is not a disguised appeal or review, but a remedy to ensure that the arbitrator or tribunal resolves the disputes which fall for adjudication in a manner that is clear and unambiguous, thereby avoiding prejudice to the parties.

Setting aside of award

The circumstances under which an arbitral award can be set aside are set out in section 33 as follows:

  • where the arbitrator has misconducted himself in relation to his duties as arbitrator;
  • the arbitrator has committed any gross irregularity in the conduct of the arbitration proceedings or has exceeded his powers; or
  • an arbitration award has been improperly obtained.

If the award is set aside the dispute shall, at the request of either party, be submitted to a new arbitration tribunal constituted in the manner directed by the court.

It is clear from the above that the rights of parties to have an arbitral award set aside are very limited. Our courts observe a high degree of deference to arbitral decisions in line with the principle of party autonomy. Hence the scope for intervention by the courts is very limited.

In practice, it is always not entirely clear whether a party must submit the award for remittal and reconsideration or seek to set aside the award or a portion thereof in any particular set of circumstances. This is borne out by two recent High Court judgments of Croock v Lipschitz and Others (2019/18319) [2020] ZAGPJHC 80 (12 March 2020) and Quality Products (Pty) Ltd v MAMCSA Security Consultants CC and Another (12447/2017) [2020] ZAKZDHC 13 (20 May 2020).

In Croock, the applicant sought an order reviewing and setting aside an award on the basis that the arbitrator committed gross irregularities in the conduct of the arbitration proceedings. During the arbitration, one of the parties pleaded and argued that the terms of the agreement are such that it was contra bonis mores or against public policy, and consequently unenforceable. The arbitrators however did not deal with this defence at all. The court found in these circumstances, the arbitrators failed to deal with a substantive issue pleaded which resulted in not having a case fully and fairly determined. The court therefore set aside a portion of the award and referred it back to the same arbitration panel to hear argument and to determine the defence pleaded.

In MAMCSA, the applicant sought an order remitting the award to the arbitrator for reconsideration on the basis that he failed to consider and determine whether a natural person can hold a member’s interest as a nominee; and if so, does it necessarily follow that a nominee is vested with the rights of the registered member. The court found that the arbitrator failed to consider the second issue before him and in particular, consider the argument and the cases relied upon in support thereof. This was found to constitute good cause for a remittal as required.

So even though the guiding principle of consensual arbitration remains finality – right or wrong, the Arbitration Act, 1965 contains various mechanisms to upset an arbitral award. It is therefore important that parties carefully consider an arbitral award upon publication as it is always not entirely clear whether a party must submit the award for remittal and reconsideration or seek to set aside the award or a portion thereof in any particular set of circumstances. Identifying the correct cause of action is therefore key.

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