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International Arbitration Law, Process and Examples

- Featured article by LAWYERS-ONLINE.CO.ZA - June 2019

The South African legal system makes provision for numerous alternative dispute resolution methods (where matters are settled without a court) and among them we find arbitration. When two parties engage in arbitration, they submit a dispute to a qualified arbitrator who then makes a decision regarding the matter – this decision is binding. Of course this does not do away with the need for attorneys, as they are pivotal to understanding the process and protecting your best interests. The benefit of arbitration over litigation is that it is often faster and can be handled privately without sensitive information becoming public knowledge, as it might if the issue was to be resolved in a court of law. If parties agree to arbitration, they may request an arbitrator from an organisation such as the Association of Arbitrators of South Africa, or the Arbitration Foundation of Southern Africa.

Generally, in South Africa, arbitration is normally governed by the Arbitration Act 42 of 1965. But as the world is continuously shrinking and borders are becoming thinner, what happens when arbitration stretches into international waters? That is where the International Arbitration Act 15 of 2017 comes in. Under this act, if the seat of arbitration is in South Africa, but international parties are involved, the laws within the new act will apply above those found in the 1965 act. However, the new act in no way repeals the 1965 act.

So what takes arbitration from the local sphere to an international level? Let’s take a look below:

  • If both parties in the agreement, at the time of the agreement, have business in different states
  • If one of the places is found outside of the state where the parties have their “places of business”
  • If they agree to a place of arbitration that falls within the international definition, or if both parties agree that the contents of the arbitration matter pertain to more than one country.

It is important to remember that international arbitration legislation in South Africa follows the United Nations Commission on International Trade Law (UNCITRAL) Model Law and that it will apply to international arbitration. It is a universally accepted model, making it easier for parties from different countries to come to an agreement that is globally enforceable.

So how does all this work in practical terms? Let’s look at an example. Let’s say a South African party is having a dispute with a German company. Because of the 2017 act, and the fact that it follows the UNCITRAL model, the South Africa party may have an easier time convincing the German party to adhere to and accept the jurisdiction of the International Arbitration Act and allow South Africa to be the seat for arbitration. Interestingly, the two parties may agree to turn to German law during the process as the “substantive law” for the matter.

Should you have any more queries regarding international arbitration and the laws that apply to it, please feel free to send our offices a query and we would be happy to refer you to an arbitration lawyer who can assist.

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