The South African law on arbitration is governed by the Arbitration Act of 1965. The South African Act followed traditional English legal principles pertaining to arbitration, and essentially reflects the position as it stood in English law in 1965.

The Act does not differentiate between international and domestic arbitrations. Accordingly, in the absence of an agreement to the contrary, provisions of the Act apply to both types of arbitration conducted in the South African jurisdiction, irrespective of whether the parties to the issue are local or foreign.

The potential difficulty with the South African regime is that the Arbitration Act creates too many opportunities for a party to use the formal court process, and thereby to defeat the cornerstone principle of arbitration – providing an expeditious and cost-effective resolution to disputes.

The problem lies in the very wide discretionary power of intervention given to South African courts. Although the Act permits contracting parties the choice of law, a choice of procedure and choice of arbitrator, the Act reserves South African courts the entitlement to intervene in the arbitral proceedings on the application by one or other of the parties to the arbitration on 'good cause shown'. The record of decisions emanating from South African courts clearly indicates that they are not always reluctant to exercise this discretion.

This difficulty is exacerbated by the lack of power arbitral tribunals have to adjudicate over matters pertaining to their own jurisdiction, to the initial validity of the arbitration agreement per se or even to the main agreement in which the arbitration clause is to be found. In the past, for various reasons, parties who wished to hamper or even derail the arbitral process have found the provisions operate to their advantage, notwithstanding their original agreement to resolve disputes in a timely manner.

The international community, namely the United Nations Commission on International Trade Law (UNCITRAL), has adopted a model law on international commercial arbitration. The aim of the UNCITRAL model law is to promote harmonisation and uniformity of national laws pertaining to international arbitration procedures.

The salient features of the UNCITRAL model law are the following:

l The model law is to apply to the arbitration of international commercial disputes;

l The parties to the dispute are free to determine most of the essential elements of the arbitral process, including appointment of the arbitrator, the arbitral procedure to be followed in the conduct of proceedings, the place of the arbitration hearing, the operative law to apply and other practical aspects;

l The power of domestic courts to intervene in arbitral proceedings conducted under the model law is strictly curtailed;

l The model law does not prevent a party from approaching a competent court for interim protection or relief, but only where an arbitrator has not yet been appointed and the need for relief is urgent or where the arbitrator is not competent to order such interim relief.

In a report in 1998, the South African Law Commission confirmed that the country's system and jurisprudence lags far behind most other international jurisdictions. The Law Commission expressly recommended "that South Africa should follow the example of most other African countries that ratify the Washington Convention [the UNCITRAL model law] as this would create the necessary legal framework to encourage foreign investment and further economic development in the region".

African countries that have ratified or acceded to the model law through domestic legislation include Egypt, Kenya, Madagascar, Mauritius, Nigeria, Tunisia, Zambia and Zimbabwe. Trading partners of South Africa who have adopted the model law include Australia, Canada, Germany, India, Japan, South Korea, Singapore, Thailand, the UK and several states within the US.

Under Project 94, the Law Commission has also dealt with domestic arbitration, in a report filed in May 2001. In that report, the Law Commission does not advocate the adoption of the UNCITRAL model law for both domestic and international arbitration. Rather, it recommends that a new statute combining the best features of the UNCITRAL model law and the English Arbitration Act of 1996 be enacted, with the inclusion of certain provisions of the existing South African Act which have worked well in practice.

In delivering its report, the Law Commission remarked on the fact that, in practice, the potential advantages claimed for arbitration compared to litigation as being a faster, cheaper method of resolving disputes are seldom achieved. The reality is that arbitrations can be prohibitively expensive and inefficient, with parties using provisions within the court rules to delay or hamper proceedings.

To counter this, the Law Commission recommended in its domestic arbitration report that a statutory duty be imposed on the arbitral tribunal to adopt procedures which, while fair, will in the particular circumstances of the dispute avoid unnecessary delay and expense.

The Law Commission reports were filed in 1998 and 2001 respectively. Over the intervening years, there has been no development of South African law in relation to arbitration. One might pause to briefly consider the possible reasons for this.

In its domestic arbitration report, the Law Commission recorded "the danger of a perception, particularly among black lawyers, that some white members of the legal profession see arbitration as a form of single 'privatised litigation', enabling them and their corporate clients to avoid courts which increasingly comprise black judicial officers. This perception needs to be addressed".

Accordingly, arbitration runs contrary to judicial transformation in South Africa. This thorny issue continues to affect the transformation debate within the country, and will continue to hamper and delay the implementation of the Law Commission's recommendations.

However, on the international front, the domestic situation is being overtaken by regional events. In April this year, a conference was held in Mauritius for the express purpose of determining the need for a regional resolution framework for cross-border commercial disputes in southern Africa. The conference examined the current situation, specifically the commercial need for expeditious and cost-effective resolution mechanisms for regional disputes, noting the fact that, currently, litigants are compelled to arbitrate in European or US forums to obtain such speedy relief, normally at exorbitant cost.

The conference agreed that private commerce should take responsibility for establishing a regional dispute resolution forum for the determination of cross-border disputes within southern Africa; one that is tailored to the requirements of the users themselves. The administrative structures for such a forum are in the process of being created.

It is proposed that the seat of the forum will be Mauritius. As a state that has already adopted the UNCITRAL model law, Mauritius has the requisite infrastructure to cater for the hearing and adjudication of disputes. It is also conveniently situated within four to five hours' travelling time from any state within the Southern African Development Community.

The fact that Mauritius is the seat of such an arbitration tribunal does not prevent the parties from having the hearings conducted in some place that might be more convenient to them, such as where the contract is being executed. This highlights one of the material benefits of the arbitral process – that it is inherently flexible enough to cater to the parties' specific requirements.

The creation of a new forum may well result in foreign parties being less insistent on the incorporation of dispute-resolution clauses that make a foreign system of law the operative law of the contract, as well as stipulations that disputes be determined by way of litigation or arbitration in a foreign jurisdiction such as New York, London or Paris.

Ultimately, the proof of the proverbial pudding will be in whether such disputes can be consumed efficiently, expeditiously and cost effectively in the proposed forum. The forum will need to display all the virtues the current law lacks – it will need to be expeditious where the law is slow; cheap where the law is costly; simple where the law is technical; and a peace-maker instead of stirring up strife. n

Matt Ash is a director at Deneys Reitz in South Africa.