South Africa is a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention). Consequently, the South African courts are obliged to give effect to the provisions of the New York Convention and are consciously developing the common law, on a case-by-case basis, in order to achieve this goal.
However, South Africa's arbitration legislation is often subject to criticism. This criticism is not entirely without merit, since the only piece of legislation governing all forms of arbitration conducted in South Africa dates back to 1965. This tends to create the impression, particularly among those operating in jurisdictions with more developed arbitration legislation, that South Africa is ill equipped for international arbitration disputes.
South Africa's legal system is essentially a hybrid system in which codification and the common law co-exist. In such a system, the body of judicial precedent is fluid and remains as important a source of law as the codified law. Therefore, while the Arbitration Act dates back to 1965, South Africa's case law (also known as binding judicial precedent) is continually evolving, taking into account developments in the law – including developments in the law of international arbitration.
The recent case of Zhongji1 is an example of the South African courts' approach to international arbitration.
In this case, the South Africa Supreme Court of Appeal had to consider whether it was prepared to force two parties (both being foreign registered companies without any ties to South Africa) to arbitrate a dispute arising outside of the jurisdiction. The arbitration agreement in question was concluded between Zhongji Development Construction Engineering Company Limited (Zhongi) and the DRC Copper and Cobalt Project SARL, an entity that ultimately merged with Kamoto Copper Co SARL (Kamoto). Zhongi sought to enforce the terms of the arbitration agreement, and requested an order declaring that the arbitration agreement was valid and binding on Kamoto and that the dispute fell within the scope of the arbitration agreement.
The court, in dismissing the application, acknowledged the fundamental principle of "Kompentenz Kompentenz", being an arbitrator's inherent authority to rule on its own jurisdiction. As a result, the court (in agreeing with the decision of the lower court) refused to make any determination regarding the validity of the arbitration agreement and further warned about the risk of the courts expanding their area of influence to include matters subject to arbitration agreements. The court, by not taking any action to force the parties to arbitrate, confirmed the South African court's respect for the body of international law governing arbitration proceedings.
While the common law in South Africa in relation to international arbitration is evolving, there is widespread acknowledgment that the applicable legislation needs to be brought in line with those developments in the common law. Legislative changes have been anticipated since at least 1998 when the South African Law Reform Commission (SALRC) published a report on international arbitration in South Africa. This was followed in 2001 by the SALRC's report on domestic arbitration. Both reports included draft bills that were suggested as replacements for the current Arbitration Act. For various reasons, these bills were not passed into law. In 2012, both of these bills were updated in an effort to revive the process. However, due to political changes, the process has stalled.
In November 2014 the Deputy Minister of Justice and Constitutional Development stressed the need to pass into law the updated International Arbitration Bill as a matter of urgency. The intention now, as conveyed by the Deputy Minister, is to submit the International Arbitration Bill to parliament towards the end of 2015. All indications are that the Domestic Arbitration Bill will be passed sometime after that.
Although the International Arbitration Bill has not yet been published for public comment, it is expected that it will be largely (if not entirely) based on the UNCITRAL Model Law (2006 version).
Nonetheless, it is clear is that South Africa, despite the need to update its arbitration legislation, continues to develop the common law in relation to both domestic and international arbitration. Both the International and Domestic Arbitration Bills are not far from implementation. Once these bills are passed into law, South Africa's codified body of law will be aligned with the prevailing common law applicable to arbitrations in South Africa.
- Jonathan Ripley-Evans, DLA Cliffe Dekker Hofmeyr, Johannesburg