The proposed new Domestic Arbitration Act

Mr Chris Binnington is the Chairman of the Association of Arbitrators (Southern Africa) and Managing Director of Binnington Copeland & Associates, a leading commercial and contractual consultancy to the construction industry. In 1994 his Association submitted a major re draft of the 1965 Arbitration Ad. This, together with the ground- breaking legislation encompassed within the 1996 English Arbitration Act, has formed the core of the South African Law Commission’s work on the proposed new Domestic Arbitration Ad. In this article he considers some of the major changes that can be anticipated in the forthcoming statute.

South Africa will “shortly” have a new Domestic Act, 1-low shortly’ is dependant on the legislation and prioritisation of other legislation. It is to be hoped that the new Act will be promulgated during the first half of the year 2001 since the new Act embodies major changes to the 1965 Act (42 of 1965) and will go a significant way towards meeting the criticisms which are sometimes levelled at arbitration (See for example Judge Basil Wunsh’s article in the Financial Mail of August 4 last year and my reply thereto on the August 18.)

Important method

At the Association of Arbitrators Conference 2000, held in Johannesburg during September, Mr Justice John Hlophe, Judge President of the Cape Provincial Division, in his paper on the New Domestic Act commented: “Arbitration is increasingly recognised as an important method of resolving commercial and other disputes, particularly in the construction industry. Arbitration is necessary to help to relieve the pres sure on the civil justice system. It is general 1)’ accepted that in order for arbitration to be a success it needs to be supported by appropriate legislation. The objects of any modern arbitration statute are the resolution of disputes by an impartial tribunal without unnecessary delay and expense; party autonomy, balanced powers for the courts; and adequate powers for the arbitral tribunal to conduct the reference effectively,”

He went on to state: ‘The Arbitration Act of 1965 was notorious in that the potential advantages claimed for arbitration com pared to litigation, namely a more expeditious and cost-effective method of resolving disputes, were often not achieved in practice under the 1965 Act. Therefore, there was obviously a need to come up with legislation that would effectively regulate arbitration as a process designed to resolve commercial and other disputes speedily.”

The major changes proposed

Conciliation – The new Act will recognize conciliation (a) if specified in the arbitration agreement and (b) if the parties con sent thereto. If (a) applies and the agreement also provides for the conciliator to act as arbitrator if the conciliation procedure fails, no objection can be taken to the arbitrator who may have communicated separately with the parties during the conciliation process. Draftsmen of construction contracts will be well advised to take note of this provision and to re write the dispute clause to provide for conciliation in place of mediation since the new Act will give far more “teeth” to the conciliation process.

Settlement agreement – Agreement reached via conciliation will be enforceable as if such Agreement was an award.

Removal of an arbitrator – The powers of a Court to remove an arbitrator will be clearly specified in the new Act in contrast to the subjective wording presently used, “on good cause shown.” Apart from the usual grounds of lack of independence or impartiality, the new Act will also specify absence of appropriate qualifications; physical or mental incapacity; dilatory conduct or failure to properly conduct the reference as being grounds for removal of the arbitrator.

Immunity of arbitrator – The arbitrator is granted immunity for the consequences of any act or omission unless same was in bad faith. The immunity also extends to the nominating body appointing the arbitrator.

Ability to rule on own jurisdiction — Jurisdictional challenges to court under the existing Act have regularly provided a basis for an unwilling participant to delay proceedings, The new Act will permit the arbitrator to rule on jurisdictional issues, with the proviso that the ruling may be challenged in court subject to notice in writing to this effect within 30 days of such ruling. Any court challenge will not be subject to appeal, The arbitrator may continue with the arbitration notwithstanding such challenge in court,

Evidence — The tribunal will be given much wider powers to accept evidence and to appropriately weight such evidence whether or not the evidence would be admissible in civil court proceedings. This will effectively allow the hearing of uncorroborated hearsay evidence, the Arbitrator being the sole judge as to its value.

Security for costs — The arbitrator will be given the power to order a claimant to provide security for costs. The present Act only allows for a court to order such security and this procedure has also been regularly used to cause delay to proceedings. It is to be expected that an arbitrator would only order security to be furnished in those circumstances where it would have been appropriate for a court to order security.

Representation — The new Act recognizes that the representative chosen by the party need not be a legal representative. This is welcome affirmation of the status of those of us who regularly represent parties in arbitration frequently being opposed by legal counsel some of whom seem to consider representation as being their exclusive preserve.

Reasons for award — Unless the parties agree otherwise, the arbitrator must give reasons for the award. Good arbitrators always give reasons for their awards and this requirement is to be welcomed.

Rights of appeal — These are now recognized to the extent that the arbitration agreement (or the Rules under which the hearing is being conducted) allows such an appeal. The Association of Arbitrators introduced an Appeal procedure into its 1997 Rules. To date this procedure has only been resorted to on two occasions.

Setting aside an award — A consider able amount of thought has gone into the drafting of the setting aside provisions which deal specifically and comprehensively with the grounds on which a Court may set an award aside. The court will require the applicant to furnish proof as to the invalidity of the award which grounds also include conflict with the public policy of South Africa. In giving greater clarity to the grounds for challenging an Award it is to be hoped that the numbers of challenges to Awards will be significantly reduced.

Significant step

The new Act represents a significant step forward and it is to be hoped that its introduction will not be unduly delayed. The Association of Arbitrators has already taken note of several of the innovative features of the new Act and have incorporated certain of these changes into their recently published 4th Edition Rules for the Conduct of Arbitrations which will shortly be available from their websitewww.arbitrators.co.za

THE CIVIL ENGINEERING CONTRACTOR JAN 2001