2- assignment number cpa1 question 1 to 4
TRANSCRIPT
The Law and Practice of Arbitration
ASSIGNMENT NUMBER CPA1
THE LAW AND PRACTICE OF ARBITRATION
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TABLE OF CONTENTS
QUESTION 1.1 4
ANSWER 1.1 4
QUESTION 1.2 7
ANSWER 1.2 7
QUESTION 2 11
ANSWER 2 11
THE THREE RULES OF NATURAL JUSTICE ARE AS FOLLOWS: 12
1. Hear the Other Side (Audi Alteram Partem) 14
2. No one is fit to be judged in his own cause (Nemo iudex idoneus in propria causa est) 16
3. Justice must be seen to be done 18
CONCLUSION 21
QUESTION 3 23
ANSWER 3 23
1. ACT NO. 11, 2001: SOUTH AFRICAN BOXING ACT, 2001 23
2. ACT NO. 95, 1998: HOUSING CONSUMERS PROTECTION MEASURES ACT, 1998 24
3. ACT NO. 75, 1997: BASIC CONDITIONS OF EMPLOYMENT ACT, 1997 25
4. ACT NO. 63, 2001: UNEMPLOYMENT INSURANCE ACT, 2001 29
5. ACT NO. 102, 1996: NATIONAL SMALL BUSINESS ACT, 1996 30
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QUESTION 4 33
ANSWER 4 33
QUALIFICATION OF AN ARBITRATOR 33
Personal Quality 35
Expertise in Professional Field 35
Legal Knowledge 36
MANNER IN WHICH THE ARBITRATOR IS APPOINTED 36
The arbitrator can be appointed in one of the three ways 36
1. Arbitrator appointed by the parties 37
2. Appointment of the arbitrator by a third party or office bearer of an appropriate 39
3. Appointment of Arbitrator by the Court 39
CIRCUMSTANCES UNDER WHICH AN ARBITRATOR’S APPOINTMENT IS TERMINATED 40
QUESTION 5 42
ANSWER 5 (THE LETTER IS ATTACHED SEPARATELY) 42
Assumptions in drafting the letter: 42
BIBLIOGRAPHY 44
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QUESTION 1.1
What is an arbitration agreement?
ANSWER 1.1
Arbitration agreement is a written agreement between the parties to resolve
the dispute which is to occur or already occurred and according to Arbitration
Act 42 of 1965 (1),
“Arbitration agreement means a written agreement providing for the reference
to arbitration of any existing dispute or any future dispute relating to a matter
specified in the agreement, whether an arbitrator is named or designated
therein or not”.
Further the Rules of the conduct of Arbitration 6th Edition of The Association
of Arbitrators (Southern Africa) (5) referring to the arbitration agreement
states:
“Agreement” means the written arbitration agreement entered into between
the parties”.
Freeadvice web site defined the arbitration agreement as:
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“An arbitration agreement is a written contract in which two or more parties
agree to settle a dispute outside of court. The arbitration agreement is
ordinarily a clause in a larger contract. ….”.
Hence as per arbitration act, rules for the conduct to arbitration of association
of arbitrators, southern Africa and freeadvice web site, the arbitration is a
written agreement between parties to resolve the dispute. However an
arbitration agreement could be in oral too; however this arbitration agreement
is not regulated by arbitration act 1965, but by common law.
Arbitration agreement could be in the form of Arbitration clause in the main
contract, providing provision of arbitration to resolve the dispute such as
under FIDIC Conditions of Contract latest edition (1999) clause 20.6
(Arbitration) provides the provision of solving the dispute through arbitration,
in case the dispute is not solved through Dispute Adjudication Board and
Amicable Settlement. Arbitration Agreement could be a separate detailed
agreement too, detailing the conditions of arbitration agreement such
governing law, location of arbitration, initiation of arbitration process,
arbitration procedures to be followed, fees and costs, written award and the
arbitration award will be binding on the party or not etc. These clauses assist
the parties to the arbitration to resolve the dispute through arbitration. As
Sharrok, Robert (477) stated that:
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“An arbitration agreement does not have to be a separate, self-contained
agreement: it may be part of another agreement, eg. A clause in that
agreement”.
Hence it can be seen that the arbitration agreement could be with the original
agreement and could be separate from original agreement too.
Based on the above-mentioned definitions an arbitration agreement in an
agreement in writing or in oral, intended to resolve the present or future
dispute between the parties.
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Question 1.2
Must an arbitration agreement be reduced to writing and signed by the
parties? Discuss with reference to the Act, the Rules and relevant case
law.
Answer 1.2
As per Arbitration Act 42 of 1965 an
“Arbitration agreement' means a written agreement providing for the
reference to arbitration of any existing dispute or any future dispute relating to
a matter specified in the agreement, whether an arbitrator is named or
designated therein or not”.
Hence as per arbitration act 42 of 1965 an arbitration agreement must be in
writing, however the Arbitration Act 42 of 1965 does not states that the
agreement should be signed.
Rules of the conduct of Arbitration 6th Edition of The Association of Arbitrators
(Southern Africa) (5) referring to the arbitration agreement states:
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“Agreement” means the written arbitration agreement entered into between
the parties”.
Here too, we can see that there is indication of a written agreement but it
does not specifically states that the need of that agreement to be signed.
As per clause 1.2 Definition of Rules for the Conduct of Arbitration (6 th
Edition) of The Association of Arbitrators (Southern Africa) an Arbitration
Agreement shall be in writing. However if the parties wishes to adopt
Summary Procedure Rules for arbitration, parties can only do this by written
and signed agreement. Hence requirement of arbitration agreement to be
written and/or signed also depends upon the procedure of the arbitration to be
followed.
Here I would like to refer three different statements made in case law, experts
on internet and in book to describe the need of arbitration in writing and
signed or not. They are as follows:
As per the decision given in the case “Fassler, Kamstra & Holmes v Stallion
Group of Companies (Pty) Ltd 1992 (3) SA 825 (W)” it was ruled at page 4
out that:
“Where a written agreement is to be signed by the parties, the Legislature
uses words clearly indicating the need to achieve that end. The statutory
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arbitration provisions in the Transvaal, Natal and Cape or, for that matter, in
the present Arbitration Act, have never used the words 'signed by the parties'
in relation to a written agreement. My view in consequence is that it is not
necessary for the parties to sign the written agreement. It is enough if they
have adopted and acted on it”.
Further it was noted that the website www.nortonrose.com states that:
“Where a written arbitration agreement exists, arbitrations in South Africa are
governed by the Arbitration Act of 1965 (the Act). The Act is not based on the
UNCITRAL model law. In the absence of a written arbitration agreement,
South African common law applies”.
Butler and Finsen (38) have also supported this statement by stating that:
“Arbitration Act Applied only to a written arbitration agreement. The act does
not require the written arbitration agreement to be signed by the parties, it is
sufficient if they have adopted and acted on the agreement. An oral
arbitration agreement is not invalid but an oral reference to arbitration in
terms of an oral arbitration agreement is regulated by the common law”.
Hence based on above mentioned references, we can see that that arbitration
agreement could be in writing or could be oral. However the arbitration
act only applies to written arbitration agreement the oral arbitration
agreement is also a valid agreement but is regulated by the common law, not
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by the arbitration act. Here it is also be noted that Butler and Finsen (175) has
stated that
“even where the arbitration agreement is in writing, so that the provision of
the Arbitration Act will apply to the ensuring arbitration, the common law is
not excluded”.
Hence common law is applicable both for written and oral arbitration
agreement.
As far as arbitration agreement need to be signed or not is concern. There is
no requirement of arbitration agreement to be signed under arbitration act and
oral arbitration agreement does not need to be signed.
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Question 2
What are the rules of natural justice and of what importance and significance
are they to arbitration proceedings?
Answer 2
Butler and Finsen (165) stated that:
“Although the courts generally appear to regard the arbitrator as ‘master of
his own procedure’ he must nevertheless conduct the proceedings in
accordance with the rules of natural justice”.
Further they states:
“When an arbitrator has conducted the proceedings in a manner that did not
ensure the fair administration of justice between the parties, the court will
intervene. The arbitrator’s duty to comply with the rules of natural justice
means no more than the duty ‘to act fairly ….. in carrying out the decision
making process. There are three rules in particular which he should always
bear in mind”.
They refer the importance of rules of justice in arbitration proceeding as well
as three rules of justice.
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The three rules of Natural Justice are as follows:
1. Hear the Other Side (Audi Alteram Partem)
2. No one is fit to be judged in his own cause (Nemo iudex idoneus in
propria causa est)
3. Justice must be seen to be done
Importance and Significance of rules of natural justice
in Arbitration proceedings
The Article 2 (Supremacy of Constitution) of Constitution of South Africa
states:
“This Constitution is the supreme law of the Republic; law or conduct
inconsistent with it is invalid, and the obligations imposed by it must be
fulfilled”.
This indicates that the law stated in Constitution is supreme and further Article
33 (Just Administrative Action) of Constitution, while inferring to the rules of
natural justice states that:
“(1) Everyone has the right to administrative action that is lawful,
reasonable and procedurally fair. (2) Everyone whose rights have been
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adversely affected by administrative action has the right to be given written
reasons. (3)National legislation must be enacted to give effect to these
rights, and must- (a) provide for the review of administrative action by a court
or, where appropriate, an independent and impartial tribunal; (b) impose a
duty on the state to give effect to the rights in subsections (1) and (2); and (c)
promote an efficient administration”.
Hence, it can be seen that the supreme law of the country (South Africa) has
provided utmost important to the rules of natural justice and directs that
everyone has the right to administrative action that is lawful and impartial to
ensure fair decision. Adversely affected person must receive the written
reason, and national legislation should be in line with it, to provide
independent and impartial tribunal to effect to the rights of the people.
This rules of natural justice inferred under section 33 is also applicable to
arbitration proceedings. As aim of the arbitration proceedings is to resolve the
dispute between the parties with fairness, and to achieve this aim, arbitrator
must conduct the proceedings in accordance with rules of natural justice as
guided by the constitution of South Africa, so that decision of award will be
just, otherwise the court will intervene.
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1. Hear the Other Side (Audi Alteram Partem)
The Constitution of Republic of South Africa (article 33) provided every citizen
of South Africa right to administrative hearing, which is fundamental to the
fairness of arbitration proceeding. Hence before taking any decision by the
arbitration tribunal, the party must be given opportunity to be heard.
As per Butler and Finsen (165) this rules guides that:
“A party should be fully informed of the evidence and arguments
which have been produced against his case and have a proper
opportunity of presetting his own case to the arbitrator before the
arbitrator takes a decision”.
The arbitrator must inform the parties, what the evidence, documents,
argument and claims are made by one party to other party. During arbitration
proceeding while sending any document to arbitrator, one party should copy
the document to other party, similarly arbitrator while writing to one party must
copy the letter/document to other party. The arbitrator should not
communicate with one party when other party is not present. Following these
procedures, will help all the parties, to be fully informed of the matters in
dispute and arguments presented by parties. Further the arbitrator must
provide sufficient time to parties to present their case and, all the parties of
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the dispute, and arbitrator must ensure that one party must here what other
party is stating or claiming, so that other party can counter the statement, and
can produce the evidence to counter the claim, made by the first party.
Here it is very important that the defendant must be told what claimant is
claiming and claimants must be told what is the counterclaim of defendant, so
that accordingly the parties can prepare there defense.
In case of Kollberg v cape town Municipality 1967 (3) SA 472 (A), the court
has stated that:
“If the rules of natural justice are implied, the audi alteram partem rule is
applicable. Non constat , however, that every breach of the principles of
natural justice automatically renders void the decision in question.”.
Hence if the arbitrator during arbitration makes the award without informing
both the parties about the evidence, argument, claim, documents etc
produced by one party against each party or If the arbitrator does not gives an
opportunity to the affected person or entity to present his case or if the award
is not based on reasoning the court will intervene and render the award void.
The arbitration tribunal must provide written notice to finalize the date and
time of arbitration proceeding, convenient to all parties, and if reasonable
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reasons provided for change of the date and time, it should be accepted.
Inspect goods and property involved in dispute, if required.
The oral evidence should be recorded, as the parties agree; only in case the
parties do not agree, the arbitrator should direct the way to record the oral
evidence.
Following this rule of natural justice helps arbitrator carryout the proceeding in
transparent manner, gathering all the information that helps better analyzing
evidence and argument presented during arbitration proceeding and
eventually leading to quality award.
2. No one is fit to be judged in his own cause (Nemo iudex
idoneus in propria causa est)
As the heading clearly states that “No one is fit to be judged in his own
cause”, this rules guides that one can not judge himself, that is, if one has got
his interest in the outcome of the arbitration proceeding, he can not be the
arbitrator himself.
In case of Kolleerg v cape town Municipality 1967 (3) SA 472 (A), the court
has stated that:
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“it is quite foreign to the concept of arbitration that one of the parties to dispute
should be the arbiter of the dispute – a judge in his own case”.
Hence it can be seen that, in no arbitration proceeding, an arbitrator can
decide if he has interest in the outcome of the arbitration proceeding.
If the arbitrator is not impartial and free from bias during the arbitration
proceeding, the award will also be biased, and in that case, if any party will
come to know that, the arbitrator has got his interest in the arbitration
proceeding then, he may go to court and the court may decide to turn down
the award. Further this will lower down the reputation of the arbitration
proceeding too. Hence it is extremely important, that the arbitrators are
impartial, and work in such a manner that parties have faith in him.
Since the arbitrator must be impartial, hence he must disclose any conflict of
interest in the arbitration proceeding, at the beginning of arbitration
proceeding, and at any time, he comes to know that he is in conflict of
interest, during the arbitration proceeding.
Hence it is very important to have impartial and non-biased arbitration
tribunal.
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3. Justice must be seen to be done
This rule, guides the arbitration proceeding, that not only justice is to be done,
but it must be seen to be done. Hence arbitrators must act, in such a way that
all parties have faith in him. During arbitration proceeding, he must act, such
a way that all parties have confidence in him, that he is handling the
proceeding in right way. For example, the communication with one party must
take place in presence of another party, so that other party, if in disagreement
can counter and present his case in support.
Following this rule increases the faith of parties in arbitration proceedings and
hence more reasons to accept the arbitration award (avoid further litigation).
Butler and Finsen (167) stated that
“In practice, arbitrators would be well-advised to remember the advice of
Mustill & Boyd, who suggested that an arbitrator is unlikely to be held to have
acted unfairly, if he observes the following rules: 1) He should endeavour to
act fairly between the parties, eliminating conscious, and so far as he can,
unconscious bias. 2) He should not only be impartial in fact, but should
act in such a way that the parties are confident of that fact. 3) He should
pay careful attention to any evidence or arguments presented by the parties,
and should be seen to be doing so. 4) He should keep the parties fully
informed of what he is doing, and what he proposed to do”.
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Hence, the arbitrator must act, in such a way that, his all action should be fair,
and gives impression to the parties, that he is acting fairly, such as not
traveling with one party to inspection site, not having lunch with one party,
without substantive reason not having hearing in absence of one party, hear
both parties equally, do not give argument in support or against of any
argument of any party during proceeding, copy all correspondence to all
parties, if he receives any correspondence from one party, which is not
copied to other party, he must send the copy of that correspondence, to the
party who has not received that correspondence and communicate with one
party only in presence of other party. Following all these provisions will
indicate that the arbitrator is acting fairly and hence will increase faith of the
parties in arbitrator and arbitration proceeding.
The arbitrator must submit the award based on logical reasoning and analysis
of facts. The decision should clearly point out the evidence based on which
the determination of the arbitrator is based. The award must indicate that the
arbitrator has gone through all the evidence provided by all the parties. It
should also indicate that the arbitrator has analyzed the evidence and
argument of all parties in depth, and then came to any conclusion. The logic
and reasoning provided with the award will let the party understand the award
better and clear. This will clarify the issues in mind of the loosing party too,
that why he lost. This way both the parties will feel that justice is being done
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by the arbitrator, and hence increase the faith in arbitration proceeding and
award.
During arbitration proceeding the arbitrator may require parties to make
discovery of document, deliver pleadings or statements of claim and defense,
allow inspection of any goods and appoint any a commissioner to take the
evidence. Further arbitration tribunal determines the time and place of the
arbitration proceeding, administer oaths of the parties and witness, examines
the parties and require them to produce all books, documents which may be
required for the trail, examine any person who has been summoned to give
evidence, receive evidence by affidavit, inspect goods and property involved
in dispute. All these works that is the part of the arbitration proceeding could
be vulnerable with respect to providing just and fair result to the parties. The
arbitration tribunal must provide the parties sufficient time to produce their
case with supporting documents, any relevant book for the trail and any
witness. Providing enough information and opportunity to the parties will help
party to present their case properly to the arbitration tribunal, and will give
parties a feeling that arbitrator is giving all opportunity, and is not biased.
Following this rule of justice, creates faith of parties in the arbitration
proceeding and hence high chance of acceptance of award.
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Conclusion
These three rules must be observed by the arbitrators during arbitration
proceeding, as following these rules of natural justice will lead to the
decisions based on facts and will be accurate, will provide the confidence of
the parties. Sufficient time for presentation of documentation, calling of
witness and asking for inspection, and recording the matter stated by the
witness as per the agreement, and reasoned decisions based on these facts
will clearly indicate to all, that the decision is not biased, and will improve the
confidence of the parties in the decision. If the rules of natural justice will not
be observed in the arbitration proceeding, aggrieved party may go to court
and the court may refer the matter back to arbitration tribunal to observe the
rules of natural justice or cancel the award.
The adherence of rules of natural justice in arbitration proceeding is extremely
important as it is guided by the supreme law of the country, that is constitution
of republic of south Africa, to follow the rules of natural justice in any action
which has civil consequences. Further if the rules of justice will not be
followed during the arbitration proceeding then the court will intervene and as
stated in case of Kollberg supra, the breach of the principles of natural justice
automatically renders void the decision in question.
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Following rules of natural justice in arbitration proceeding, promotes faith and
confidence in the arbitration proceeding, and leads to right, just and fair
decision.
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Question 3
List any 5 South African Statutes that reference any form of appropriate
dispute resolution (ADR) and briefly discuss in what manner and/or
under what circumstance(s) ADR is referenced.
Answer 3
The 5 South African statutes that reference any form of appropriate dispute
resolutions (ADR) are as follows:
1. Act No. 11, 2001: South African Boxing Act, 2001;
2. Act No. 95, 1998: Housing Consumers Protection Measures
Act, 1998;
3. Act No. 75.1997: Basic Conditions of Employment Act, 1997;
4. Act No. 63, 2001: Unemployment Insurance Act, 2001;
5. Act No. 102, 1996: National Small Business Act, 1996.
1. Act No. 11, 2001: South African Boxing Act, 2001
One of the objectives of this act is effective resolution of Boxing Dispute.
As per this act, if there is a dispute concerning any matter regulated by or
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under this act, any party to dispute may in writing refer the dispute to
Boxing SA, a juristic person and independent body. Further the party who
refers the dispute to Boxing SA must satisfy Boxing SA that a copy of the
referral has been served on all the other parties to the dispute. After this
Boxing SA must attempt to resolve the dispute through conciliation and
must give its ruling in this regard, and make such order as to costs as it
deems fit. If the dispute remains unresolved or the parties do not agree
with the finding of Boxing SA any party may refer the matter to
arbitration. There is no reference of procedures to be followed for
arbitration in this act.
2. Act No. 95, 1998: Housing Consumers Protection
Measures Act, 1998
The objective of the act is:
“To make provision for the protection of housing consumers; and to provide
for the establishment and functions of the National Home Builders
Registration Council; and to provide for matters connected therewith”.
National Home Builders Registration Council (Council) has power to assist
in the resolution of disputes between registered home builders and
housing consumers. The council makes rules prescribing the procedures
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for resolution of disputes by conciliation or arbitration or fees for such
conciliation or arbitration by publication in the Gazette. Hence the
alternate dispute resolution method referred here is conciliation or
arbitration.
The Council has got internal complaints procedure for housing consumers
and home builders to review any decision or action of the Councils staff or
its agents. However going through the internal complain procedure of
council, a housing consumer or a home builder may refer:
“(i) any decision or action of the Council, its staff or its agents to the Public
Protector for review in terms of the Public Protector Act, 1994 (Act No. 23 of
1994); or 25
(ii) any decision of the Council to arbitration in terms of the Arbitration Act,
1965 (Act No. 42 of 1965)”.
Here it is clearly stated the arbitration will be as per Arbitration Act 1965
and the procedures of the arbitration will be based on the procedures
published by the council in the Gazette.
3. Act No. 75, 1997: Basic Conditions of
Employment Act, 1997
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As per this act, the purpose of this act is as follow:
“2. The purpose of this Act is to advance economic development and social
justice by fulfilling the primary objects of this Act which are—
(a) to give effect to and regulate the right to fair labour practices conferred by
section 23(1) of the Constitution—
(i) by establishing and enforcing basic conditions of employment; and
(ii) by regulating the variation of basic conditions of employment;
(b) to give effect to obligations incurred by the Republic as a member state of
the International Labour Organisation”.
As per chapter five, termination of employment, of this act, if an employee
is terminated/dismissed from his employment, he has right
“to dispute the lawfulness or fairness of the dismissal in terms of Chapter VIII
of the Labour Relations Act, 1995, or any other law”.
The chapter VII of the Labour relation Act 1995 provides the provision that
Commission for Conciliation, Medication and Arbitration (CCMA) will try to
solve the dispute through conciliation and if conciliation fails then
arbitration can start.
In addition if there is a dispute only about the entitlement to severance
pay, the employee may refer the dispute in writing to council or CCMA (if
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council has no jurisdiction). While referring the dispute to council or CCMA
the employee should copy the referral to other party to dispute. Then the
council or CCMA will try to resolve the dispute through conciliation. If the
dispute remains unresolved after conciliation, the employee may refer the
dispute to arbitration.
As per section 70 (Limitations) of this act, if the employer is covered by a
collective agreement that provides a provision for the resolution of dispute
through arbitration concerning amount, the labour inspector may not
issue a compliance order for the payment of those amount.
If an employee institutes legal proceedings for unfair dismissal, the Labour
Court or the arbitrator hearing the matter may also determine any claim for
an amount that is owing to that employee in terms of this Act if-
“(a) the claim is referred in compliance with section 191 of the Labour
Relations Act. 1995;
(c) no compliance order has been made and no other legal proceedings have
been instituted to recover the amount.
(3) A dispute concerning any amount that is owing to an employee as a result
of a contravention of this Act may be initiated jointly with a dispute instituted
by that employee over the entitlement to severance pay in terms of section
41(6) (Severance Pay)”.
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The clause 41(6) refers the dispute to be resolved through conciliation by
council or CCMA and in case the dispute remains unresolved, the
employee may refer the dispute to arbitration.
Section 70 of this act that is Protection of rights, which states that no one
may influence the employee not to exercise his right bestowed by this act,
however the parties to dispute if willing may settle the dispute by
agreement. Here it can be noted that parties are free to settle the dispute
by agreement.
Section 80 of the act describes in detail the procedure for dispute, if there
any dispute exists about the interpretation of the part of article, that is with
respect to Protection of employees against discrimination; any party to the
dispute may refer the dispute in writing to a council, if the parties to the
dispute fall within the registered scope of that council or to the
Commission for Conciliation Mediation and Arbitration (CCMA), if council
does not have jurisdiction. While referring the dispute to the council or
CCMA the party must provide the copy of the referral to other party too.
The first stage of resolution of dispute will be through conciliation
process carried out either by council or CCMA. If the dispute is not
resolved through conciliation, in second stage any party may refer the
dispute to the labour court for adjudication. Another important provision
made here is that the dispute will be governed by Chapter VII, Part C
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(Resolution of dispute under auspices of commission) of Labour Relation
Act, 1995, which provides the provision of conciliation by council or CCMA
and if dispute is unresolved then arbitration.
4. Act No. 63, 2001: Unemployment Insurance Act,
2001
The objective of this act is:
“to establish the Unemployment Insurance Fund; to provide for the payment
from the Fund of unemployment benefits to certain employees, and for the
payment of illness, maternity, adoption and dependant’s benefits related to
the unemployment of such employees; to provide for the establishment of the
Unemployment Insurance Board, the functions of the Board and the
designation of the Unemployment Insurance Commissioner; and to provide
for matters connected therewith”.
If the commissioner suspends the right of a person, who is entitled to the
benefits, such as unemployment benefit, Illness benefit, Maternity
benefits, adoption benefits or death benefits under the Unemployment
Insurance Act, or the personal has any other dispute related to payment or
non-payment of benefits. The person at first instance may refer the
dispute to the appeal committee of the board. The process to be followed
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by the appeal committed is not clearly stated. Later if the person is not
satisfied with the decision of the appeal committee, he may refer the
matter for arbitration to the Commission for Conciliation, Mediation and
Arbitration.
In addition, this act states that, the labour inspector can issues a
compliance order to employer on the ground that the employer has not
abided any provision made under section 39(1). The employer may object
the compliance order by refereeing the dispute to Director General for
resolution of the dispute. However the manner in which the Director
General will resolve the dispute is not clear.
Further chapter 6 of this act provides provision of Unemployment
Insurance Board to provide the minister advice and make
recommendation to minister. The constitution of the board provides the
provision of arbitration for settling any dispute concerning the
interpretation and application of constitution of Unemployment Board.
5. Act No. 102, 1996: National Small Business Act,
1996
The purpose of this act is:
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“To provide for the establishment of the National Small Business Council
and the Ntsika Enterprise Promotion Agency; and to provide guidelines for
organs of state in order to promote small business in the Republic; and to
provide for matters incidental thereto”.
The National Small Business Council is established as a juristic person.
The function of it, is to represent and promote the interests of small
business, and advise the national, provincial and local spheres of
government, on social and economic policy as stated under Section 3 (1)
(a) (b) of the act.
The constitution of the National Small Business Council provides the
provision of settling the dispute related to interpretation or application of
the constitution of the council through arbitration. Which procedure for
arbitration will be used is not stated here.
The Ntsika Enterprise Promotion Agency is established as a juristic
person. The function of it is to expand, co-ordinate and monitor the
provision of training, advice, Counseling, to provide financial support to
service providers and to consult with any organ of government, the
Council or a service provider in order to facilitate the provision of business
as stated under section 10 of the act.
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The Law and Practice of Arbitration
The constitution of the Ntsika Enterprise Promotion Agency provides the
provision of settling the dispute related to interpretation of the constitution
of the agency through arbitration.
There is no reference of which arbitration procedures to be followed for
the arbitration stated in this act.
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The Law and Practice of Arbitration
Question 4
Set out the qualifications that an arbitrator must possess, the manner in
which an arbitrator is appointed and the circumstances under which an
arbitrator’s appointment is terminated.
Answer 4
Qualification of an Arbitrator
While referring to statement of Voet (22), Association of Arbitrators, Southern
Africa in there study material “The Law and Practice of Arbitration” states that:
“Voet states that an arbitrator must be at least 18 years of age, and must be
sane. No other qualifications appear to be stipulated either in statutory or
common law and the parties are therefore entitled to appoint whosoever they
wish provided he or she meets with these qualifications”.
Hence it can be noted that it all depends on parties to decide the qualification
of the arbitrator.
Arbitration act 1965, section 1 define the arbitration tribunal as:
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“arbitration tribunal' means the arbitrator, arbitrators or umpire acting as such
under an arbitration agreement”.
Here, and in whole arbitration act 1965 there is no mentioned of any specific
qualification requirement for the arbitrator. This gives the parties to arbitration
to decide any person they wish to have as an arbitrator. Hence, if the parties
agree, they can hire any person of any social or official status, if the parties
knows the background of the person and believes that he/she will be suitable
as an arbitrator for the concerning dispute. However the parties must decide
the appointment of arbitrator considering any issues related with public
interest.
The parties to the dispute may include the qualification for the arbitrator in the
arbitration agreement, such as the arbitrator should have experience in
construction of water supply project or arbitrator must be member of
association of arbitrators or other similar institution. The parties may provide
restrictions for the arbitrators too, such as the arbitrator should not have
particular nationality (such as in case of Millennium Challenge Corporation
funded project, the arbitrator should not have the nationality of countries
debarred by US Government or UN Security Council Charter VII). Hence in
this particular case the prospective arbitrator must satisfy the requirement
stated in the arbitration agreement.
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The Law and Practice of Arbitration
Personal Quality
The arbitrator must be able to see the issues related to arbitration objectively
and dispassionately, and should not be emotionally involved with the
arbitration proceeding, and with any parties to the arbitration. They should
also possess the quality which enables the arbitrator to control the arbitration
proceeding authoritatively, have wisdom, patience, is polite and be able to
take honest and sound decision. Butler and Finsen (74) while referring the
quality of the arbitrator stated by the chartered Institute of Arbitrator, states
that:
“The ideal arbitrator should have wisdom of Solomon. The patience of Job,
the humility of St. Francis – and the ability to stay awake after lunch”.
This gives an indication that the arbitrator must be hard working too.
Expertise in Professional Field
The arbitrator should be expert in his professional field, and the needs of
expertise require depend upon the need stated in the arbitration agreement
(with reference to nature of dispute), and the way the arbitration hearing is
going to be conducted. On a highly technical issue, where it is expected that
the expert witness is going to be called, there does not seems any
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requirement that the arbitrator should also be expert of the same field, basic
knowledge of that filed would suffice. However, where the parties are not
represented legally and technically, the parties may expect that arbitrator
should have both legal and technical qualities. The need of expertise also
depends upon the type and nature of disputes between the parties,
complexity of dispute and amount in dispute. Arbitrator having experience in
arbitration proceedings too will be beneficial to the parties, in sense the
arbitrator will take full advantage of benefits of arbitration proceedings
compare to litigation.
Legal Knowledge
Considering the legal nature of arbitration proceeding, the arbitrator must
have understanding of rules of natural justice and knowledge, understating of
rules of evidence, law of contract, law related to his own particular field of
expertise, principle of law of delict. So that the arbitrator can apply these traits
the best manner he thinks suitable for the proceeding to improve the quality of
the arbitration and faith of the parties in the proceeding.
Manner in which the Arbitrator is appointed
The arbitrator can be appointed in one of the three ways
1. Appointment by the parties
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2. Appointment of the arbitrator by a third party or office bearer of an
appropriate.
3. Appointment of the arbitrator by the Courts
1. Arbitrator appointed by the parties
Section 9 of the arbitration act 1965 states that, when arbitration agreement
does not refer anything about the number of arbitrator, then the inference of
this will be a single arbitrator. The parties with agreement may choose some
one, who is an expert in the field of the dispute and known to them and they
have confidence in the person. In some cases the party may agrees at the
beginning of the contract about the arbitrator who should be hired at the
beginning of the contract. In other case the parties may hire arbitrator when
dispute arises. If the arbitrator selected at the time of dispute the parties can
hire the arbitrator who has expertise in the field of particular dispute, but this
will delay the dispute resolution process, as there will be time for hiring the
arbitrator and then the arbitrator will take little more time to understand the
dispute compare to full time arbitrator. However the full time arbitrator will be
costly.
There are cases where the arbitration agreement is silent about how the
arbitrators will be appointed in case of dispute. Here the following could be
the process of appointing:
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One party may request the list of proposed arbitrators from another party and
among that list the party who requested the list may choose any one whom
he thinks is the right candidates for the arbitration. In case, other party does
not provide the list, he himself may prepare the list and send it to other party
for selection of arbitrator from that list. In this way the parties may agree on
one of the person in the list as arbitrator.
Other way is that each party may appoint one arbitrator and in case these two
arbitrators do not agree, appoint umpire, but this process will be costly.
Further in case of appointment of Substitute Arbitrator, section (10) (1) of
arbitration act 1965 clearly states in case, arbitrator refuses to act or becomes
incapable of acting or dies or is removed from office or his appointment is
terminated, the party or parties who appointed the arbitrator can appoint
another arbitrator. In case of two or more arbitrator, if one party does not
appoint an arbitrator, other party may provide 7 days notice for appointment
to the party who has not appointed the arbitrator. If the failing party does not
appoint the arbitrator within this notice period, the arbitrator appointed by
other party will work as a sole arbitrator and award of this sole arbitrator will
be binding on both parties.
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2. Appointment of the arbitrator by a third party or office
bearer of an appropriate
Though the first choice with the parties is to hire the arbitrator with mutual
consent, frequently they disagree on the name of same person and hence
generally there is provision in the arbitration agreement that if disagreement
arises, a third party such as President of the International Chamber of
Commerce or Chairman of the Association of Arbitrators will appoint the
arbitrator. However before quoting the reference of the office bearer of this
institution, the parties must consult them, that they will be willing to appoint
the arbitrator or not, in case of dispute.
3. Appointment of Arbitrator by the Court
In case the parties does not agree to the appointment of the arbitrator by
mutual consent and procedure for appointment of arbitrator by third party.
Either party may give notice of seven days to other party to appoint an
arbitrator or agree to the arbitrator proposed by him. If other party does not
response, the first party may apply court for appointment of an arbitrator. The
court may instruct one party to appoint arbitrator from a particular profession
designated by the court or provide one list from which the party can choose
the arbitrator.
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The Law and Practice of Arbitration
In case arbitration agreement has not laid down any procedure for
appointment of arbitrator and if all the parties are not in agreement on the
appointment of arbitrator, any of the party may apply court to appoint the
arbitrator.
Circumstances under which an arbitrator’s
appointment is terminated
Section 13 of Arbitration Act 1965 provides the provision of Termination or
setting aside of appointment of arbitrator or umpire. Going through Arbitration
Act, Reference Book, Arbitration Procedures of Association of Southern Africa
and reference module provided by Association of Arbitrator, these seven
circumstances has been identified for termination of appointment of arbitrator:
1. If it is stated in the arbitration agreement that any one party can
terminate the appointment of the arbitrator, any party can terminate the
arbitrator’s appointment. Otherwise mutual consent of the parties is
needed to terminate the arbitrator’s appointment.
2. On application of any party based on good cause, the court may
terminate the appointment of the arbitrator.
3. An arbitrator is hired for resolving the dispute, and on date when
arbitrator has provided the award and settled all issues (in case of
adhoc appointment) arbitrators appointment automatically gets
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terminated. However where the arbitrator is hired for full time, the
appointment does not get terminated after the award.
4. The arbitrators are hired for settling the dispute, however during the
arbitration proceeding if the parties settles the dispute by mutual
agreement, the reasons behind the arbitration dies and hence, by
settlement of the dispute before an award is made, the arbitrator’s
appointment get terminated.
5. If the arbitrator does not wish to work as arbitrator due to any reason
and he submits his resignation, by resigning, the arbitrator’s
appointment gets terminated.
6. If the arbitrator dies or any reasons beyond his control due to which he
is not able to perform his service, the arbitrator’s appointment gets
terminated as he will not be able/available to perform the task of
arbitrator.
7. By the failure of the arbitrator to make an award within four months
after the date on which party of entering on the reference or the date
on which arbitrator was called on to act by written notice of any party.
This four month is the duration of arbitration stated in Section (23) (a)
of the arbitration act 1965, however if the arbitration agreement states
different duration than the duration for termination of appointment of
arbitrator will be as per arbitration agreement. This duration may be
extended by the parties, if they wish to do so.
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The Law and Practice of Arbitration
Question 5
Prepare a letter to the parties accepting your appointment as arbitrator.
Included in your letter of acceptance must be your tariff of your fees,
which you must clearly spell out.
Answer 5 (The Letter is attached separately)
Assumptions in drafting the letter:
I have been approached by Millennium Challenge Account Lesotho (MCA-L)
for the appointment of arbitrator. I received a letter from MCA-L, stating that
they are the implementing entity and Employer as per the contract for the
project activity “Contract of Design, Renovation and Expansion to Integrated
Out-Patient Department at 14 Hospitals throughout Lesotho (HS-A-25-10)”.
They have signed the contract with Lesotho Steel Products (Pvt) Ltd. and the
contract is based on conditions of contract of FIDIC Yellow book and there is
a provision of Arbitration by one member in case the dispute is not settled by
the Dispute Adjudication Board. Hence after consultation with other party,
they requested my interest and financial proposal. After requesting details of
project and understating the projects requirement and its stakeholders, I
submitted my CV and proposed fee to MCA-L stating my availability for their
consideration. MCA-L after going through there internal process and
consultation with other party (Lesotho Steel Products (Pty) Ltd.) sent me a
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letter of acceptance, stating that my proposal is acceptable to them, and they
are appointing me Arbitrator to the dispute between Millennium Challenge
Authority Lesotho and Lesotho Steel Products (Pty) Ltd. After receipt of MCA-
L letter, I have drafter the letter of acceptance based on the requirement of
assignment.
It was assumed that I am present in Maseru and the arbitration will also take
place in Maseru. Hence, in fee I have not quoted for international
transportation.
The letter to this question is attached separately.
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BIBLIOGRAPHY
Act (1965). Arbitration Act 42 of 1965. South Africa: Government of South
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Africa: Government of South Africa.
Act (1997). Basic Conditions of Employment Act 75 of 1997. South Africa:
Government of South Africa.
Act (2001). Unemployment Insurance Act 63 of 2001. South Africa:
Government of South Africa.
Act (1996). National Small Business Act 102 of 1996. South Africa:
Government of South Africa.
Anonyms (Time not stated). What is an arbitration agreement? [online].
Website: law.freeadvice.com. Available from:
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The Law and Practice of Arbitration
http://law.freeadvice.com/litigation/arbitration/agreement_arbitration.htm
[Accessed 06 April 2011]
Anonyms (June 2007). Modern Arbitration Clauses, South Africa [online].
Website: www.nortonrose.com. Available from:
http://www.nortonrose.com/knowledge/publications/pdf/Arbitration
%20manuals/Africa/file25761.pdf?lang=en-gb [Accessed 06 April 2011]
Anonyms (2011). The Law and Practice of Arbitration. South Africa:
Association of Arbitrators, Southern Africa
Butler and Finsen (1993). Arbitration in South Africa Law and Practice. South
Africa: Juta & Co, Ltd
Constitution of Republic of South Africa [online]. Website:
www.parliament.gov.za. Available from:
http://www.parliament.gov.za/content/Constitution.doc [Accessed 06 April
2011]
Fassler, Kamstra & Holmes v Stallion Group of Companies (Pty) Ltd 1992 (3)
SA 825 (W)
Kollberg v Cape Town 1967 (3) SA 472 (A)
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Rules of the conduct of Arbitration 6th Edition of The Association of
Arbitrators (Southern Africa) (5)
Rules for the Conduct of Arbitration. Johannesburg: Association of Arbitrators
Southern Africa.
Sharrock Robert (2001). Business Transactions Law. 5th Edition. South Africa:
Juta Law
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