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 ..........................................................................................................................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
Hear the Other Side (Audi Alteram Partem)......................................................................................14 No one is fit to be judged in his own cause (Nemo iudex idoneus in propria causa est).................16 Justice must be seen to be done............................................................................................................18

CONCLUSION................................................................................................21 QUESTION 3 ..................................................................................................23 ANSWER 3......................................................................................................23 ACT NO. 11, 2001: SOUTH AFRICAN BOXING ACT, 2001.........................23 ACT NO. 95, 1998: HOUSING CONSUMERS PROTECTION MEASURES ACT, 1998.......................................................................................................24 ACT NO. 75, 1997: BASIC CONDITIONS OF EMPLOYMENT ACT, 1997 . 25 ACT NO. 63, 2001: UNEMPLOYMENT INSURANCE ACT, 2001................29 ACT NO. 102, 1996: NATIONAL SMALL BUSINESS ACT, 1996 ...............30

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The Law and Practice of Arbitration QUESTION 4...................................................................................................33 ANSWER 4......................................................................................................33 MANNER IN WHICH THE ARBITRATOR IS APPOINTED...........................36 CIRCUMSTANCES UNDER WHICH AN ARBITRATORS 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 (6th 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 9 of 46 Assignment CPA1 of Rakesh Kumar

The Law and Practice of Arbitration 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 arbitrators 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. 11 of 46 Assignment CPA1 of Rakesh Kumar

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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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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 14 of 46 Assignment CPA1 of Rakesh Kumar

The Law and Practice of Arbitration 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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The Law and Practice of Arbitration 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.

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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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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The Law and Practice of Arbitration 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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The Law and Practice of Arbitration 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.

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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The Law and Practice of Arbitration 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.

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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The Law and Practice of Arbitration 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.

Act No. 75, 1997: Basic Conditions of Employment Act, 1997

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The Law and Practice of Arbitration 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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The Law and Practice of Arbitration 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 Law and Practice of Arbitration 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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The Law and Practice of Arbitration (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.

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 dependants 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 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

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The Law and Practice of Arbitration 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.

Act No. 102, 1996: National Small Business Act, 1996

The purpose of this act is:

To provide for the establishment of the National Small Business Council and the Ntsika Enterprise Promotion Agency; and to provide guidelines for

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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.

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. 31 of 46 Assignment CPA1 of Rakesh Kumar

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There is no reference of which arbitration procedures to be followed for the arbitration stated in this act.

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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 arbitrators 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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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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The Law and Practice of Arbitration 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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The Law and Practice of Arbitration 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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The Law and Practice of Arbitration 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 arbitrators 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 arbitrators appointment. Otherwise mutual consent of the parties is needed to terminate the arbitrators 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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The Law and Practice of Arbitration 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 arbitrators 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 arbitrators 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 arbitrators 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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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 42 of 46 Assignment CPA1 of Rakesh Kumar

The Law and Practice of Arbitration 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 MCAL 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 Africa.

Act (2001). South African Boxing Act 11 of 2001. South Africa: Government of South Africa.

Act (1998). Housing Consumers Protection Measures Act 95 of 1998. South 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: from:

www.parliament.gov.za.

Available

http://www.parliament.gov.za/content/Constitution.doc 2011]

[Accessed 06 April

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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