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What is Arbitration, What is ADR?
Arbitration and ADR (Alternative Dispute Resolution) are alternatives to adjudication of disputes by the courts of law. The right to have one's disputes decided by the courts of law is a constitutional one; it may, however, in certain private law cases be waived in favour of arbitration or ADR by written agreement between contract parties, either when they enter into their contract, or when a dispute arising from their contract has already come into existence.
What is Arbitration?
Parties submitting to arbitration have their dispute decided by an arbitrator, a private person who is a neutral third party. The decision of the arbitrator is contractually binding and will, on application, be enforced by the courts of law.
What is ADR?
Instead of opting for adjudication by the courts of law or the decision of an arbitrator, the parties to a dispute may also decide that they would rather settle their dispute amiably, with the help of a third person, but without being bound to the outcome. They then choose one of the available methods of Alternative Dispute Resolution (ADR): Conciliation, Mediation or Negotiation.
Why Resort to Arbitration or ADR?
There are many advantages to arbitration and ADR. These methods are usually resorted to by commercial contract parties within the same industry, but they are used also to settle labour disputes, neighbourhood problems, family matters. The advantages may be summarised as follows:
Expertise: many commercial disputes require knowledge of a certain industry or field and its customs and rules, or expertise in certain technical matters. Judges may have such knowledge or expertise, but often do not. Submitting such disputes to an expert in the field as arbitrator, conciliator or mediator saves time and money, and avoids confusion and unnecessary explanations.
Confidentiality: arbitration and ADR proceedings are confidential and conducted in private, without the publicity that often surrounds court litigation.
Procedural Flexibility: the formalities and rules applicable in the courts of law do not apply in arbitration or ADR procedures. The parties are free to arrange the procedure and the time and venue of the hearing in accordance to what is mutually convenient to them.
Informality and Amiability: because of the informality of and the influence of the parties on the procedure, arbitration and ADR are beneficial for the relationship of the parties after the dispute is resolved, as they produce much less antagonism than court litigation and more readily lead to an amicable settlement. In ADR the parties are moreover actively involved in finding a solution to the dispute.
Finality: normally, decisions in arbitration are without appeal, so that the dispute is finally settled by the arbitrator's award. Although this finality does not as such exist in ADR as ADR leads to recommended solutions instead of final and binding decisions, ADR solutions are usually accepted by the parties since they themselves were actively involved in their achievement.
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Relevant Legislation
Arbitration in South Africa is regulated by Arbitration Act 42 of 1965, concerning the arbitration procedure and the relationship between arbitration and the courts of law, and by Act 40 of 1977, on the recognition and enforcement of foreign arbitral awards.
The South African Law Commission has prepared a draft International Arbitration Act which, with a few minor alterations, will adopt for international arbitrations in South Africa the 1985 UNCITRAL Model Law on Arbitration, replace Act 40 of 1977 on the implementation of the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and provide implementing legislation for the 1965 Washington Convention for Settlement of Disputes Between States and Nationals of Other States (the so-called ICSID Convention). The new legislation is expected to be enacted sometime in 1998 or 1999.
Also the 1965 Arbitration Act (national arbitration) will be revised in the foreseeable future.
Other Arbitration Bodies in South Africa
Outside the field of labour relations and besides the Association of Arbitrators (Southern Africa) and its branches, only one other arbitration organisation exists in South Africa, the Arbitration Foundation of South Africa (AFSA).
Internationally, the International Court of Arbitration of the International Chamber of Commerce in Paris is represented in South Africa via ICC SA.
About International Arbitration
An arbitration is international if the parties to a dispute come from different national jurisdictions. In such arbitrations, different legal systems come into play, different procedural expectations, and sometimes even different ideas of justice.
The reasons to resort to arbitration in an international setting are somewhat different than in a purely national one. Arbitration's procedural flexibility is a particular advantage in international situations, as the parties may tailor their arbitration in accordance with their differing procedural expectations. Moreover, in international arbitration neither party is obliged to accept the jurisdiction of the opposing party's national courts. International arbitral tribunals often sit in neutral countries, and consist either of three arbitrators, two of which are chosen by the parties, often nationals from their respective countries, while the third one has a different nationality than the other two and often acts as chairman, or of a sole arbitrator who would also often be of a different nationality than the parties. Finally, if an arbitral award is not voluntarily complied with, it may be readily enforced abroad via a simple procedure under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, unlike court judgments, the enforcement of which is much more cumbersome, time consuming and uncertain.
Treaties and Conventions Involving South Africa
South Africa has adhered to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the 1985 Convention Establishing the Multilateral Investment Guarantee Agency (MIGA) and will shortly join the 1965 Washington Convention for Settlement of Disputes Between States and Nationals of Other States (the so-called ICSID Convention).
The Work of UNCITRAL
UNCITRAL is the United Nations Commission on International Trade Law. Among the instruments it has produced are the 1976 UNCITRAL Arbitration Rules and the 1980 UNCITRAL Conciliation Rules. Both may be declared applicable by parties seeking the appointment of an arbitrator or conciliator from the Association. UNCITRAL also has Guidelines for the Preparation of ...
UNCITRAL has also produced the 1985 Model Law on Arbitration which in the near future will become law in South Africa, and apply to international arbitration if the parties so choose.
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