IN CONVERSATION WITH MICHAEL KUPER SC 05
T HE D I S T INC T I ONS W I T H L I T I G AT I ON A ND T HE REL AT I V E A D VA N TA GE S OF A RB I T R AT I ON NI COL A What is the preferredmethod for resolving disputes in South Africa? Can you talk a bit about the split between arbitration and litigation? MI CHAEL Yes. For many years arbitrationwas very much the little brother and it was used rarely in comparison to litigation. The growth in arbitration throughout the world had a knock-on effect and the launch of AFSA in 1995 reflected a feeling that there was a real need and that something was missing fromSouth African legal infrastructure. Now, the majority of large commercial disputes are referred to arbitration and it has become themainstay of dispute resolution settlement. It takes two forms. One form is the administered arbitration systemwhich is dominated by AFSA; and the other form is ad hoc arbitration. In both instances, we have always had to deal with the reluctance of lawyers to readapt their techniques and to fight the automatic assumption that a good arbitration is really a good piece of litigation conducted informally. Over the years we’vemanaged, I think, tomake real advances in arbitration technique and youwill now find arbitration here is indistinguishable fromarbitration anywhere else in the world. Oddly though, in South Africa there is a tendency for lawyers to schedule their preparationmuch closer to trial and the result is a spate of settlements at the ‘doors of the arbitration’. By contrast, in Europemuch of the preparation tends to be done at an earlier stage and as a result you get earlier settlements, often saving parties a great deal in legal fees and other costs. NI COL A Daniel, howdoes the divide between litigation and arbitration play out in your practice? DANIEL I would agree that the vast majority of complex commercial disputes are now referred to arbitration. That is certainly the case inmy own practice and also the experience of other practitioners in our offices in Johannesburg and in Cape Town, I believe. The downside, whichMichael maywish to comment on, is that we have lost a lot of jurisprudence in South Africa because the awards are of course kept confidential.
SOU T H A F R I C A A S A F ORUM F OR IN T ERN AT I ON A L A RB I T R AT I ON : T HE C URREN T L A NDS C A P E NI COL A Picking up on some of the comments that you’ve made already, would you say that South Africa is an attractive forum for international arbitration? MI CHAEL I think the answer to that up to the present moment has been negative but that is changing. First, let me deal with the legislative structure, which is essential as no one would voluntarily choose a venue inwhich that structure is questionable. In South Africawe still have one Arbitration Act which dates back to 1965. It makes no distinction between domestic and international arbitration and the reason it doesn’t is that it was completely unnecessary, as far as a draftsman was concerned, to deal with the international elements at that time. That leaves us with a rudimentary international arbitral structure from the legislative point of view. Then there was a long and unfortunate history inwhich the courts were intrusive in dealing with awards and did not display the caution and the reserve that one would expect of courts operating in an efficient arbitration environment. In addition, some judgments were particularly offensive to the arbitrationworld, so for a long time South Africa stagnatedwith a poor legislative structure andwith a questionable judicial approach to arbitration. That has altered in two fundamental respects recently: First, the Constitutional Court and the Supreme Court of Appeal have come out in a number of judgmentsmaking it absolutely clear that the courts in this country are to acknowledge, respect and support the arbitral process in all the ways that international arbitration practitioners have come to expect. The latest Supreme Court of Appeal judgments are instructive in that regard and I think one can say that without any doubt the attitude of the Courts is nowpositive and supportive. Second, so far as the legislation is concerned, in 1998 a South African LawCommission report on international commercial arbitration suggested reforms including a draft arbitration bill based on the UNCITRALmodel law. Unfortunately, it just sat in a drawer somewhere in the Department of Justice offices and nothing came of it.
MI CHAEL Yes I think it’s absolutely true. A great wealth of legal learning is contained in the awards and it’s a great pity that they remain confidential. Remember, there is no connection between arbitration in this country and the courts, other than in the very limited case of review. So there’s not much opportunity for awards to be published in the course of reporting on appeal cases and the like. Hencemost of the time parties are able to achieve total confidentiality, making arbitration very attractive to corporates in South Africa. I think it’s desirable that AFSA should look at including a formula in its rules whichwould allowat least an abbreviated award to be published but at themoment there is resistance from the participants prettymuch across the board. We’ve never had a case where both parties have beenwilling and eager to allow publication on any basis. NI COL A It’s a great loss that awards of such high quality are not published. It sounds quite different from international arbitrations where one hears anecdotally that awards can be a bit more of amixed bag. For example, I know fromspeaking to past and present Counsel for the ICC that the institution is very keen to defend its scrutiny of awards process on the basis that they see such varying quality of awards in the first draft. It seems tome that varying quality of awards could be a function of the less homogenous nature of three arbitrator panels which are common in international arbitrations. Often panels aremade up of arbitrators for the parties from two different jurisdictions and then a chairman froma third jurisdiction. Necessarily the arbitrators come froma large and diverse pool. It may be that that this is reflected in amyriad of approaches at the award drafting stage. Could it be that themore homogenous nature of the panels in South African arbitration explains why the awards are such high quality? MI CHAEL Yes, I’msure that is an important difference. We don’t have to worry about coordinating different legal backgrounds or establishing an average acceptable quality of award as our arbitrators here are invariably retired Judges and senior silks. The general quality of the award is therefore good and it is of course coming froma homogenous and limited pool.
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