Investors close to easier arbitration as South Africa falls into line with more than 70 other countries

The South African government is expected to enact the International Arbitration Bill in the coming weeks, after agreeing a Bill late last year. Kwadwo Sarkodie, partner in the construction and engineering practice of the London office of Mayer Brown, said the Bill would make it much easier for investors doing business in the country, if they come into dispute. He explained: “The ability to resolve disputes effectively is an important concern for businesses involved in commercial activities in foreign countries. The new International Arbitration Bill, assuming it comes into force in its current form, promotes the effective resolution of disputes (and thus reduces risk) involving a foreign businesses in South Africa [that] elect to resolve disputes through commercial arbitration.” Mr Sarkodie continued: “A notable advantage of international arbitration is the ability to enforce international arbitration awards through the New York Convention, which is recognised in the new Bill. Most countries in the world are now signatories to this convention. Important too are the advantages of confidentiality and the possibility of selecting a tribunal, law and venue under which neither party has ‘home field advantage’.” When it comes into force, the new Act will automatically apply to all arbitrations involving a foreign business where the parties have agreed to arbitrate the dispute. The Bill is based on the UNCITRAL Model Law, which has been adopted by more than 70 other countries, is familiar, and is generally seen to adopt best practices in relation to arbitration. “Perhaps the most significant advantage for foreign businesses,” said Mr Sarkodie, “is that, while the current Act allows for interference by domestic courts in arbitrations in certain circumstances (which undermines the arbitration process and can lead to costly and frustrating delays), the new Bill limits recourse to a domestic court system (in line with international best practice). “It must be said though that the South African courts have, in any event, retained their independence and are generally respectful and supportive of the arbitration process. The Bill allows the prospect of further building upon and developing this positive position.” He also stressed the hope that the new law will promote foreign investment and trade in South Africa. “It may also lay the groundwork for South Africa to become a regional arbitration hub and South Africa’s sophisticated legal network and the infrastructure (particularly by comparison with other countries in the region) could well prove conducive to such a move,” he added. “This is particularly the case against a backdrop of the growing calls for a greater proportion of disputes involving investments in the region to be dealt with more locally, rather than further afield in venues such Paris or London (as often proves the case).” There are some warnings, however. Mr Sarkodie said the new Act will automatically apply to all arbitrations involving a foreign business where the parties have agreed to arbitrate the dispute. It does not, however, apply to investor-state arbitrations, where concern remains over investment protection for foreign investors vis-a-vis state bodies. In this regard, the Protection of Investment Act 2015, which has not yet come into force, will apply. This Act excludes recourse to binding investor-state international arbitration and instead will offer foreign investors the option to refer any investment dispute with the government to mediation (in addition to their ordinary rights of recourse to domestic courts and statutory bodies).

Investors close to easier arbitration as South Africa falls into line with more than 70 other countries

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