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by Johan Van Der Wath

The International Arbitration Act 15 of 2017 (the new Act) came in operation on 20 December 2017. International Arbitration is preferred over litigation of a dispute with cross border implications before a national court; the reason for this is twofold. Arbitration allows for a dispute to be resolved with minimal time and cost implications for parties on either side of the agreement.

The second reason revolves around the situation where parties include a choice of law provision in the agreement. With such a clause parties can agree that the agreement between them will be governed by the law of a specified country, or that the application of a particular clause of the agreement is governed by the law of a specified country. Such a clause has the potential to govern both the procedural and substantive law which will apply in the determination of the dispute.

In such a situation, a short coming of traditional litigation is that often the judge before whom a dispute is to be heard, does not have sufficient knowledge of the law of the country specified by the parties in their agreement. The advantage of international arbitration in this case would then be that parties have the ability to appoint an arbitrator that has knowledge specific to the peculiarities of the agreement between them.

The new Act has positioned SA as a primary seat for arbitration. The Arbitration Foundation of South Africa (AFSA) has added to its scope to include an International Division, providing informed arbitrators further adding to the allure of South Africa as a prime venue for international arbitrations. South Africa then becomes the obvious choice when drafting a choice of law clause relating to dispute resolution.

The significance of the new Act is that it adopts the Uncitral Model Law on International Commercial Arbitration with a few minor variations. The Uncitral Model Law came into existence in 1985 and was guided by the General Assembly of the United Nations. The Uncitral Model Laws policy is one of liberalisation of the international arbitration, with limited interference by national courts and emphasising the consensual nature of arbitration, removing the courts as far as possible from intervention.

Arbitration was set out to establish a call for mandatory divisions to ensure fairness, due process and the creation of a framework to conduct international arbitrations and to clarify certain issues. The objectives of the new Act facilitates the use of arbitration as a method of resolving international disputes. The Arbitration Act 42 of 1965 (the 1965 Act) remains in force in as far as domestic disputes are concerned. The Acts will run parallel for the time being.

The model law was incorporated in the new Act in schedule 1 by express reference.  The new Act has now made it possible that the model law can be used with international commercial disputes and it facilitates the recognition and enforcement of certain arbitration agreements and arbitral awards. The new Act has given effective obligations, under the convention on the recognition and enforcement of foreign arbitral awards.

The Uncitral definition of what constitutes an ‘international dispute’ has been adopted in the new Act. Section 1 of the model law defines what an international arbitration is. International arbitration is when parties – at the time when they entered into an agreement – had their places of business in different countries. It is also an international arbitration if parties stated in an agreement, that the subject matter of the agreement related to more than one country. Under section 20 the parties are free to choose where the judicial seat of arbitration will be and if parties fail to agree the tribunal is empowered to determine where the seat should be. Nothing prevents parties from choosing a venue that is different from the judicial seat.

Prior to the commencement of the new Act, the 1965 Act, was inadequate to deal with international disputes, which naturally had a cross-border aspect. The conclusion is an easy one to make, the introduction of the International Arbitration Act has placed South Africa in a position to become the leading seat for international arbitrations in the region.