The changing face of dispute resolution

Terry Mahon of Routledge Modise Moss Morris discusses the pros and cons of arbitration.

Arbitration has been used for many years in South Africa as a means of dispute resolution and has been the principal form of dispute resolution in the construction and engineering industries. More recently, it has become popular as a procedure for resolving a wide range of insurance and other commercial disputes.

In arbitration, an impartial third party presides over the proceedings and, after hearing evidence and argument, gives an award determining the submitted issues. The decision of the arbitrator will usually be binding on the parties, either through agreement to this effect, or by operation of law. Arbitration may also be voluntary, where parties agree to resolve disputes by reference to arbitration, but it is usually compulsory, the process being dictated by law or by prior agreement. The actual form of arbitration is a procedure that can be agreed upon by the parties to suit their needs. The successful party in arbitration is entitled to apply to have the award of the arbitrator made an order of court, whereafter the award can be enforced through the courts.

Arbitrations in South Africa are governed by the Arbitration Act 42 of 1965. This Act does not distinguish between domestic arbitrations, ie, arbitrations between parties that are domiciled in South Africa, and international arbitrations in which one or more of the parties are not domiciled in South Africa.

The need to distinguish between domestic and international arbitrations has become apparent. As a result, legislation is pending whereby the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration is to be adopted for international arbitrations. New legislation is also to be passed for domestic arbitrations. Unfortunately, the passing of the proposed legislation has been unacceptably delayed. This has had a negative effect on the development of South Africa as an arbitration centre.

Dispute resolution provisions in agreements usually stipulate the procedural rules that will be applicable to the arbitration process. Thus, in domestic arbitrations, one would find that rules such as those of the Arbitration Foundation of Southern Africa (AFSA) or the rules of the Association of Arbitrators are applicable. Similarly, in international arbitrations, it is common to find the rules of bodies such as the London Court of International Arbitration (LCIA) or the International Chamber of Commerce (ICC) being applicable. However, it is open to the parties to agree on such rules as they deem appropriate.

There is no right of appeal to the courts against the decisions of an arbitrator. There is only a right of review. The parties can, however, agree that an appeal will lie from one arbitrator to a single arbitrator or a panel of arbitrators. The appeal tribunal would be entitled to substitute its decision for that of the arbitrator on matters of both law and fact. In contrast, the High Court reviewing the decision of the arbitrator where there is no agreed appeal procedure has a much narrower jurisdiction. It would only be entitled to set aside the award when:

1. An arbitrator has misconducted himself or herself in relation to his/her duties as an arbitrator;

2. An arbitrator has committed a gross irregularity in the conduct of the arbitration proceedings;

3. An award has been improperly obtained.

Since arbitration is final and binding, the whole process is more expeditious than court adjudication. In the case of fairly simply disputes, expedited procedures can be used. This is obviously advantageous insofar as costs are concerned. In complicated commercial disputes, however, arbitration may be more expensive than litigation in the courts. In these disputes, it is usual for the procedures to be similar to those in court proceedings. In addition, the parties not only pay the cost of the arbitrator/s, but will also have to pay for the venue, the interpreter, the stenographer and the administration fees of the arbitration agency in the case of administered arbitrations. The effect of this is to render these arbitrations more expensive than litigation in the courts.

Arbitration is not equally appropriate for all disputes and in some instances is prohibited by law. The process is, however, flexible and can be adapted and simplified by the parties to suit their particular needs. More importantly, by choosing to arbitrate rather than litigate, parties can ensure that an arbitrator with special knowledge of the issues in the particular dispute can be appointed, rather than the random selection of a judge.

Arbitration is not a panacea for the resolution of all disputes. Nevertheless it remains suitable for many disputes in various circumstances. This is particularly the case in the modern commercial world where parties to an international agreement are more likely to agree to arbitration rather than subject themselves to the jurisdiction of a foreign court.

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