MDA Law
The International Arbitration Act 15 of 2017
The International Arbitration Act 15 of 2017 (“the Act”) was published in the Government Gazette on 20 December 2017 and became effective on this date.
The Act will assist international businesses in resolving their international commercial disputes with African companies and will ensure that South Africa is seen as a suitable location for the conduct of arbitration proceedings between parties from different jurisdictions.
The Act also addresses the shortcomings of the Enforcement of Foreign Arbitral Awards Act 1977. It replaces it with a chapter giving effect to South Africa’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention.
Of primary importance is that the Act does not replace the Arbitration Act, No 42 of 1965 (the “Arbitration Act”) but rather replaces it in respect of international commercial disputes that are referred to arbitration (“international arbitrations”). Therefore, the Arbitration Act continues to apply to domestic disputes that are referred to arbitration, until such time that it is replaced by new legislation.
Note that section two of the Arbitration Act is still applicable to all disputes when it comes to enforcement and recognition of arbitration awards. This is the section which states that matrimonial matters or matters relating to status may not be referred to arbitration.
The Act sets out when an arbitration is to be considered “international” as follows:
- The parties to an arbitration agreement have, at the time of the conclusion of that agreement, their business in different Statee
- One of the following places is situated outside the State in which the parties have their places of business: The place of arbitration if determined in or pursuant to the arbitration agreement / any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected
- The parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country
The Act will incorporate the UNCITRAL Model Law on International Commercial Arbitration, 1985, as amended on 7 July 2006, into South African law. The model law is designed to assist states to reform and update their laws on arbitration procedure. Parties to international arbitrations must consider schedule 1 of the Act when conducting arbitration proceedings as it sets out some of the requisite procedure therefor – (i.e. how parties are to appoint arbitrators, jurisdiction of the tribunal, power of the tribunal to order interim measures, provision of security, statements of claim and defence, form and contents of the award, grounds for refusing to enforce an award, etc).
The Act does not incorporate the UNCITRAL Rules on Arbitration. The Act states that the parties are free to agree on the procedure to be followed. Should the parties fail to agree, the tribunal may conduct the arbitration in a manner it considers appropriate. Therefore, just because an international arbitration is to be dealt with in accordance with the Act, it does not mean that the UNCITRAL Rules have to be used, nor are they the default rules to be adopted should the parties not agree on a set of procedural rules.
The objectives of the Act are primarily to reform and update South Africa’s arbitration laws in line with those of other developed states and to position South Africa as a venue of choice in disputes not only in South Africa but also on the African continent. The gazetting of the Act has achieved the former objective. Whether or not the Act can achieve the latter objective is a matter which will become evident with the passage of time. Notwithstanding this, international business operating in South Africa can now take comfort knowing the South Africa’s law makers, have taken cognisant of international best practices in respect of arbitration.
Amendment to the Prescribed Rate of Interest Act.
The prescribed rate of interest which is claimed on debts outstanding is governed by the Prescribed Rate of Interest Act 55 of 1975 (the “Act”). Until recently the gazetted rate of mora interest under the Act (being the rate of interest levied as general damages which result from a failure to pay a debt due) was set at 15.5% from 1993 up until 2014 and at 9% from 2014 until now. This mora rate is that which is claimed when issuing summons or other proceedings for the recovery of a debt due where another rate of interest is not set by way of agreement between the parties.
The Act has however been amended effective 8 January 2016 and the mora rate is no longer a fixed rate but is now linked directly to the repurchase rate (the repo rate), the mora rate of interest is now calculated at the repo rate plus 3.5%, as per Section 1 read together with Section 2(a)1 of the Act.
When the Reserve Bank changes the repo rate, the new prescribed rate of interest becomes effective from the first day of the second month following the month of the repo rate announcement. This change will affect the interest that a party may claim on a debt in legal proceedings, which rate as of March 2016 is 10.25%.
Prompt Payment Regulations – Update as at 27 January 2016
The period for public comment on Construction Industry Development Board (cidb) Prompt Payment Regulations Government published in Government Gazette on 29 May 2015 (in Notice 482 of 2015) expired at the end of July 2015.
After a period of vigorous public comment, assimilation of the public comment received into an updated version of the Prompt Payment Regulations, the updated Prompt Payment Regulations have been approved by the cidb board.
The Prompt Payment Regulations are presently being reviewed by the Department of Public Works and Treasury for conflict with existing legislation.
We are hoping the Prompt Payment Regulations will be signed into law by the Minister of Public Works during 2017.
Click here to view the Government Gazette Notice 482 of 2015.
Click here to view the MDA commentary on the Prompt Payment Regulations.
