Summary
Summary Commercial Dispute Resolution 442 notes
- Module
- Institution
Very good summary of all the classes as well as case law prescribed for the module - from a student now doing masters in CDR.
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Commercial Dispute ResolutionModule Framework:
Lecture 1 Introduction to module and arbitration
Lecture 2 & 3: Sources of arbitration law and agreement
Lecture 5 & 6: Quasi arbitrators & the scope of the arbitration agreement
Lecture 7 & 8: Binding effect of arbitration agreement & Statutory arbitrations
Lecture 9 & 10: What is mediation?
Lecture 11 & 12: Mediation in practice
Recess 18 – 26 September
Lecture 13 & 14: The mediator and the process: what do we expect of mediation?
Lecture 15 & 16: What does the mediation process look like?
Lecture 17 & 18: Arbitrators and umpires
Lecture 19 & 20: Preliminary meeting and modern arbitration practice
Lecture 21 & 22: The arbitration hearing
Lecture 23 & 24: The award
Other NB dates:
18 October: Test
25 October: Mediation Workshop
Jana Oosthuizen 1
,Lecture 1: Introduction to Arbitration
Definition of Arbitration
• In this module we will be focusing on Private Arbitration (rather than statutory arbitration – which is
not voluntary. We have well developed legislation governing arbitration in South Africa.
• We will also be specifically discussing domestic arbitration (arbitration within SA)
• The use of arbitration in practice & practical impacts on the referral of disputes to an arbitration forum,
especially in a post-pandemic setting (electronic arbitrations).
Definition of Arbitration:
• The arbitration is a suitable alternative to litigation in certain situations. It is becoming more and more
frequent and thus the use of arbitration agreements/ clauses are very common in practice. Disputes
are submitted to an arbitration forum (private forum) – it is very different from public litigation
(summons & application starts litigation as opposed to arbitration agreement). The flexibility of
arbitration being pursuant to an agreement has become extremely useful since it can be done
completely electronically. Often there is no other option and thus the flexibility of arbitration
agreements are especially useful as opposed to courts proceedings that are delayed (court is limited to
the High Court Rules & procedures). Facilities are not always available in all courts & the presentation
of evidence is subject to court rules.
• However, there are rules since it is a process fixed in justice and thus there are due process, natural
justice & procedural fairness rules that have to be abided by.
• If a process is unable to provide a final remedy for a dispute – arbitration would be less attractive in
many instances.
• Any good definition of Arbitration ought to include 5 elements:
1. Dispute – must be a dispute which requires resolution,
2. Which is referred by agreement – contractual basis, derived from & enforced by an agreement
between the parties in the dispute (a specific arbitration clause).
3. To an arbitrator or tribunal chosen by the parties = very different from a court process, parties
may choose from specialists in the field (allows confidence). Can also agree on the process for
appointing the procedure. It is voluntary.
4. With an agreed procedure – ultimately it is still a justice driven process which requires due
process- while there is flexibility there must still be a process as to how parties are making
submissions regarding evidence etc. Ensuring adequate mechanisms in place to allow a sense
of sue process.
5. Where the award is final & binding – parties can contract out of the binding nature to an
extent by saying it is subject to an appeal but think about these 5 essential elements & the
purposes of arbitration. Be careful of moving arbitration from an alternative judicial process
from a mean to an end which ultimately results in civil litigation (thus your appeal provision
needs to be constrained & grounds for appeal need to be narrow).
(Lawsa para 75 & Lufono Mphaphuli Case para 195-198)
[Areas not in bold are not content you need for testing purposes – text in bold is NB!]
Jana Oosthuizen 2
, “An arbitrator must decide a dispute by hearing both sides in a judicial manner
So, does that mean arbitration is basically like a private court? (consent between the parties)
• This statement / assumption is often made, look at these prescribed cases though:
Total Support Management (Pty) Ltd and Another v Diversified Health Systems: paras 22-25, especially 25: “As
arbitration is a form of private adjudication the function of the arbitrator is not administrative but judicial in
nature.”- this seemingly aligns with the role of the arbitrator to act as a judge, however, consider:
Lufuno Maphuphuli & Associates (Pty) Ltd v Andrews [2009] (CC) Justice O’Regan:
• Quoting from Total Support Management: “The hallmark of arbitration is that it is an adjudication,
flowing from the consent of the parties to the arbitration agreement, who define the powers of
adjudication, and are equally free to modify or withdraw that power at any time by way of further
agreement.” – the court identifies that private arbitration is ultimately based on consent & calling in
private court creates the assumption that an arbitrator acts as a judge which is an incorrect assumption
to make. It is a non-state process and must thus be distinguished from court proceedings which are not
private nor voluntary.
Referring a dispute to arbitration is not a departure from section 34 or inconsistent with the rights of parties.
Section 34 of the © provides for the right to dispute resolution & access to courts/tribunals.
The CC held that arbitrators do not perform the same function / resolve disputes in the same way as judges
since they have discretionary investigative powers, procedures of a flexible & voluntary nature as opposed to
the adversarial system which renders judges more remote – taking a step back. Arbitrators have far more
powers & scope as defined by the parties in the agreement & inherent to arbitration itself to encounter the
process in an investigative & far more involved way which sets the arbitrator apart from that of a judge. This is
why the following part of the judgement is NB in answering the above question.
• [223] Of course, as this Court has said on other occasions, what constitutes fairness in any proceedings
will depend firmly on context. Lawyers, in particular, have a habit of equating fairness with the
proceedings provided for in the Uniform Rules of Court. Were this approach to be adopted, the value
of arbitration as a speedy and cost-effective process would be undermined. It is now well recognized in
jurisdictions around the world that arbitrations may be conducted according to procedures determined
by the parties. As such the proceedings may be adversarial or investigative, and may dispense with
pleadings, with oral evidence, and even oral argument.
[212] Underlying this right, as this Court has held, is the rule of law and the positive obligation upon
the state to provide courts and, where appropriate, other fora for the resolution of disputes. Private
arbitrators are, of course, not provided by the state but are private agents employed by parties for
resolution.
What this means is that an arbitrator is not performing the same function as a judge.
Why is it important to have a clear definition of arbitration?
1. Application of law, that arbitration act and the Constitution
• Arbitration Act & its regulations & rules (elements referred to above) allowing for fair process only apply
to arbitration.
• Constitution and its application to arbitration (Lufuno Maphuphuli): referring a matter to arbitration is
not a departure from section 34 & not inconsistent with a © approach or the © rights & values.
2. Differences in process and expectations applicable
• Distinguishing from other forms of dispute resolution because it allows parties to have an expectation
of how parties will have a role in the procedure & how the outcomes may differ (e.g., the agreement
provides an independent 3rd person must be appointed for final decision, they must be an expert & not
an arbitrator - this would necessitate a very different procedure from that of an arbitration).
• Expert v. Adjudicator v. Arbitrator –
Jana Oosthuizen 3
, For example, if a matter deals with a shareholder’s dispute (overdrawing of s/h loan) & you look at
s/h agreement with dispute resolution clause which provides for referral to a charted accountant
appointed by CAASA. This expert’s role would not be to make an award that one s/h owes another s/h
(not their power) – their function would likely be to conduct a forensic investigation into those loan
accounts & determine if there is a dispute at play, any unlawful/unauthorized transactions, if they
were contemplated within the loan agreement etc.
- If the dispute is referred to an arbitrator - it would be consent for arbitration & for a tribunal to
make a final decision on the matter. In terms of company law & derivative actions, in order for a
company to pursue action they must be empowered to do so.
- Quite often in a company dispute with s/hs or directors – one needs to bring an application ito
section 165 of the CA asking the company to take certain steps: investigate the matter or to take
legal proceedings unless the company has already agreed by means of a resolution to take legal
steps or alternative dispute resolution ito sec 166 – in some instances the effect of that
alternative dispute resolution clause will be consent to the process of arbitration proceedings &
this mean you need no derivative action, whereas appointing someone as an expert serves a very
different purpose such as obtaining evidence to adduce in dispute resolution.
- Therefore, from a practical point a definition helps one understand the powers, roles & functions.
Adjudication is a much rougher & readier (quick & swift decision) – binding but usually interim &
may resort to arbitration or other forms of dispute resolution. This differs vastly from arbitration
since the nature of the award is different as well as the capacity of whom makes the decision
(adjudicator does not need to be an arbitrator) – process very different. Very NB to have the
definition for arbitration to determine what type of process is envisioned in this particular
procedure.
Ad hoc v Institutional arbitration
1. Institutional
(Administered by a specialist arbitration institution with its own rules such as AFSA/
Arbitration Foundation of SA – after submitting a dispute to them, they will appoint the
arbitrator, you pay a sizable deposit, they deal with document management & have tried &
tested procedures, guidelines etc. for arbitrator)
• It is a proceeding where the parties designate an institution to administer the arbitral
process in accordance with its arbitration rules.
• Institution ensures appointment of tribunal and negotiates its
fees. Institution pays arbitrators with funds provided by parties. Secretariat provides
advice on rules and a channel of communication between parties and the tribunal.
• Institutional arbitration is beneficial for inexperienced party in an international
arbitration bc of agreeing to an institution instead of attempting to collate all
procedures in agreement.
2. Ad hoc (you agree on your own procedures in the agreement).
• It is a proceeding that requires the parties to select the arbitrator(s), and the rules
and procedures.
• Ad hoc arbitration offers greater flexibility, but it is said that
it is dependent on the responsibility of cooperation between the parties. These
parties are generally in a dispute with one another & thus to try to get them to agree
to meticulous clauses can prove quite difficult, therefore institutional arbitration is
preferable. Agreeing to an institution’s rules can expedite things.
• Often ad hoc parties agree to the rules of the HC which is not appropriate since
arbitrators differ form a judge. Agreeing to a foundation’s tried & tested rules is
perhaps the more responsible choice.
Jana Oosthuizen 4
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