The guidelines are a welcome move that will help to grow SA’s reputed position as an international arbitration seat.
On 1 June 2021, the Arbitration Foundation of Southern Africa’s (AFSA) new international arbitration rules came into effect (the Rules). The Rules usher AFSA’s international arbitral protocols into a new era of arbitration that reflects both international best practice and modern trends. The changes are a welcome addition to AFSA’s repertoire and promise to facilitate the continued growth of South Africa’s reputed position as an international arbitration seat.
The aim of this article is to provide you with a high-level overview of the key features introduced by the Rules
Oversight and administration
Perhaps the most significant change brought about by the Rules is the introduction of the AFSA Court (the Court), together with a Secretariat responsible for the Court’s day-to-day administration. The members of the Court have been appointed and consist of senior international and African practitioners.
The function of the Court is to supervise the administration of the resolution of disputes by the Arbitral Tribunal (the Tribunal). Specifically, the Court is empowered to appoint and sanction the appointment of arbitrators, and to deal with challenges to appointments and issues of jurisdiction.
AFSA has started the arbitrator accreditation process, with the aim of appointing individuals with appropriate qualifications and practical experience from across Africa, the UK, America, Europe and Australia. AFSA has indicated that it welcomes applications for inclusion on its list of accredited arbitrators.
Efficiency and speed
To promote the efficient and timely resolution of disputes, AFSA introduced Article 10 of the Rules to provide for an expedited arbitration procedure when the quantum in dispute of any claim (or counterclaim) does not exceed the equivalent amount of USD500 000. Any parties to a dispute may also agree to “opt-in” to the expedited procedure under Article 10, whatever the amount claimed.
Article 10 empowers the AFSA Secretariat to shorten any time limits under the Rules and vests the Tribunal with the power to decide the dispute between the parties on the basis of documentary evidence alone, unless the Tribunal deems it appropriate to hold one or more hearings.
To ensure a streamlined path to judgment, Article 10 allows judgment to be given in summary form. However, the final award must be communicated within six months of the Tribunal receiving the case file, unless exceptional circumstances justify an extension. In keeping with the theme of expeditiousness, Article 12 of the Rules provides for the early dismissal of a claim or defence, on the basis that it is either manifestly without legal merit or manifestly outside the jurisdiction of the Tribunal.
Article 12 provides a welcome addition to the arsenal of any litigant in warding off claims or defences that are plainly without merit at an early stage, before substantial legal costs are incurred.
Innovation and pragmatism
Article 11 of the Rules provides for the appointment of an emergency arbitrator when urgent relief is required prior to the constitution of the Tribunal.
An application under Article 11(1) is first made to the Secretariat, which should include, among other things, the specific grounds for requiring the appointment of an emergency arbitrator, including reference to the specific claim, with reasons, for emergency measures.
If the Secretary-General accepts the application under Article 11(1), the Court shall seek to appoint an emergency arbitrator within 48 hours of the Secretariat receiving the application, accompanied by the payment of the administration fee and deposits.
The emergency arbitrator is empowered to conduct the emergency proceedings in any manner he/she determines to be appropriate. Interestingly, the emergency arbitrator may not act as an arbitrator in any future arbitration relating to the dispute, unless the parties agree to it.
The emergency arbitrator must decide the claim as soon as possible, but no later than 14 days after being appointed.
To ensure an effective and pragmatic process in which all relevant parties to a dispute are involved in its resolution, Article 29 of the Rules introduces the mechanisms of joinder and intervention into the arbitral fray.
Article 29 allows for joinder prior to the constitution of the Tribunal, provided that:
If an application for joinder is necessary after the constitution of the Tribunal, a party or non-party may apply to the Tribunal for one or more additional parties to be joined, provided that all parties, including the additional party to be joined, have consented to the joinder.
The Tribunal, after giving all parties the opportunity to be heard, will then decide whether to grant the joinder or not.
Confidentiality and transparency
Article 36 of the Rules provides for the confidentiality of all awards, all materials created for the purpose of the arbitration and all other documents produced by a party in the proceedings, as well as the deliberations of the Tribunal.
However, in striking a balance between confidentiality and transparency, Article 36(3) contains an exception. AFSA is permitted, in principle, to publish all arbitral awards in an anonymised and pseudonymised form, unless a party to the arbitration proceedings objects in writing.
The theme of transparency is repeated in Article 27, which deals with third-party funding. Notably, the if a third-party funding agreement is entered into, the party who is being funded shall, among other things, notify all other parties, the Tribunal and the Secretariat of the existence of the agreement, and the identity of the funder.
Covid-19 and virtual hearings
Article 21(6) of the Rules provides that a hearing may take place in person or by any other means (including video or telephone conference) that the Tribunal considers appropriate, taking all relevant circumstances into account.
This is a positive, “catch-all” provision that covers the encumbrances of the current global pandemic and any other unforeseen event which may impede an in-person hearing in the future. In addition, the parties and Tribunal may need to have reference to AFSA’s “Remote Hearing Protocol” guidance document when agreeing the procedural details of a remote hearing.
Other noteworthy features of the new Rules that are not canvassed in this article include rules on multi-party/multi-contract issues, and rules that deal with the event that a party indicates an intention not to participate, or to no longer participate, in an arbitration.
In summary, the Rules promise to bring international arbitration under the auspices of AFSA in line with innovations embraced by other leading international arbitral institutions.
A copy of the Rules can be found here.
Erin Warmington, Kirsten Wolmarans, Dominic Harris from Webber Wentzel.
Few businesses in Africa appear to be taking advantage of the fact that, for arbitrations that involve African parties, there is no longer a good reason not to consider running those cases from arbitration centres on the African continent. South Africa, for instance, has updated its legislation to be fully internationally compliant with the infrastructure and has the professional skill and know-how to ensure effective resolution of international commercial disputes.
Legislation introduced in South Africa in recent years ensures that an effective legal framework is in place to regulate international arbitrations as well as the enforceability of any arbitration awards arising. “In fairness to international companies, until fairly recently, their concerns around having their disputes heard and determined in South Africa were legitimate,” says Siphokazi Kayana, a director at Commercial Law at the law firm CMS South Africa. Kayana, who is Head of Dispute Resolution at the firm, elaborates further: “South Africa’s Arbitration Act 42 of 1965 failed to regulate procedural rules for international arbitrations seated in South Africa. As a result, there was a risk of arbitration awards being set aside by foreign courts.” South Africa’s replacement legislation, the International Arbitration Act 15 of 2017, came into effect in December 2017 and aligns South Africa with the United Nations Commission on International Trade Laws (UNCITRAL) Model Law, yet this isn’t widely known. Says Zaakir Mohamed, a co-director at CMS South Africa and head of Corporate Investigations and Forensics: “This relieves any uncertainty about how international arbitration proceedings would be regulated if seated in South Africa.”
What the new legislation enables
The Act aims to facilitate arbitration as a method of resolving international commercial disputes. It adopts the UNCITRAL Model Law for use in international commercial disputes and facilitates the recognition and enforcement of certain arbitration agreements and arbitral awards. As a result, it gives effect to South Africa’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Of concern, notes Kayana, is that the new developments do not seem to have had the desired result yet: “We are still seeing disputes being run out of forums outside of the African continent that could easily now be heard and determined here.” This in spite of the biennial Arbitration in Africa Survey Report 30.06.2020.pdf 2020 Arbitration in Africa Survey Report having identified the major cities on the African continent that host arbitration cases, whether ad hoc or institutional. Among the top five ranked in the report, three are in South Africa – namely Johannesburg, Cape Town and Durban – with the other two being Lagos and Cairo.
The advantages of having arbitration seated in South Africa
“By aligning itself with modern arbitration legislation,” says Mohamed, “South Africa has given foreign parties the appropriate assurance that this country’s international arbitration laws meet recognised international standards and benchmarks.” Adds Kayana: “A key element of establishing a safe seat for arbitration is an independent legal profession with expertise in international arbitration, and an independent judiciary that respects a party’s choice to use arbitration rather than other legal avenues. South Africa satisfies all these requirements.” A bonus is that, against the backdrop of Covid-19, South African dispute resolution forums have adopted virtual platforms which make the dispute resolution processes accessible, efficient and physically safe. “Video conference facilities now make access to arbitration easier and curtail the costs, which for South African arbitrations are already very competitive,” notes Kayana. Without any compromise on the quality of either legal proceedings or professionals, it appears South Africa is, finally, a competitive alternative for international commercial arbitration, and it’s a realisation soon to be grasped and embraced in full by multinationals seeking the process.
The benefits of using local investigation teams in arbitration
The advantages of local arbitrations involving African parties on the African continent are many and include independence, the benefit of location and access to diverse languages, access to experienced panels, the implementation of modern rules and technology, a knowledge of the African socio-cultural context, and reduced costs. In particular, in South Africa, there are also significant cost-effective and efficient benefits of using local investigation teams to provide support to the legal teams running the arbitration. These include:
CMS South Africa Siphokazi Kayana and Zaakir Mohamed
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