South Africa
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
The most commonly used ADR methods in South Africa for commercial disputes are mediation, arbitration, and expert determination.
Mediation is a form of ADR in which an impartial third-party mediator assists parties to resolve their dispute through negotiation and mutual agreement. Mediations do not produce binding resolutions, unless the parties formalize the agreement reached in a binding contract. Due to the non-binding nature of mediation, parties often agree to refer the dispute to arbitration, if mediation fails.
Arbitration is regulated by the Arbitration Act. Before a dispute can be referred to arbitration, the parties must enter into an arbitration agreement setting out the terms and basis for the arbitration, including the rules that will govern the proceedings and the arbitrator that will oversee the process.
Expert determination is another ADR method, typically used in professional industries for technical disputes. It involves the parties entering into an agreement to appoint an independent expert to privately determine the dispute.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Engaging in ADR can have a significant impact on existing or potential litigation or arbitration.
When parties have not previously agreed to ADR but have already commenced court proceedings, they may choose to suspend litigation and proceed with mediation. This allows an opportunity to resolve the dispute without further legal proceedings. If mediation is unsuccessful, the parties can simply return to the court process. Similarly, parties may agree to move a dispute from the court system to arbitration by mutual consent.
In instances where a commercial agreement stipulates that disputes must be resolved through arbitration, but a party initiates court proceedings instead, section 6 of the Arbitration Act 42 of 1965 provides a remedy. The opposing party may, at any time after entering an appearance but before filing pleadings or taking further steps in the proceedings, apply to the court for a stay of those proceedings. If the court is satisfied that there is no sufficient reason why the matter should not be referred to arbitration as per the agreement, it may grant a stay, subject to terms and conditions it deems just.
Parties must exercise caution when choosing their forum for dispute resolution. Under South African law, engaging in mediation does not automatically suspend the time period for instituting a claim. The prescribed period continues to run unless the parties expressly agree to suspend it during the mediation process.
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
The South African court rules include a provision allowing parties to agree to suspend litigation while engaging in mediation. If the parties choose not to mediate and forgo this provision, the court may award an adverse cost order at the end of the trial or application. However, aside from this provision, ADR is not compulsory under South African law, and there are no significant sanctions for parties failing to engage in ADR.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes, parties can agree to engage in ADR in advance and typically include an ADR clause in their commercial agreement. The clause can make ADR peremptory, obliging the parties to engage in ADR in the event of any dispute or in the event of specific pre-defined disputes. If a party ignores the ADR clause and initiates court proceedings or arbitration without following the agreement, the other party can raise a special plea and apply for a stay of proceedings. The non-complying party may face adverse cost implications which includes being ordered to pay the other party’s legal costs. It is worth noting that while court proceedings can be moved to an arbitration forum, the reverse is not possible. Thus, it is important that the initiating party comply with the terms of the commercial agreement insofar as ADR is concerned. If there is no ADR clause, the party should engage the counterparty to secure their agreement to proceed with ADR.
When does ADR generally take place?
In terms of South African court rules, mediation should take place before the counter party files its plea. If the parties do not proceed with mediation at that point, the parties can do so at any stage before a judgment is handed down. ADR can generally take place at any stage.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
Mediation proceedings are typically confidential. The parties and the mediator usually agree that discussions and documents exchanged during the mediation process will not be disclosed outside the mediation or used as evidence in subsequent proceedings. This confidentiality provision must however be reinforced in a written mediation agreement.
Other forms of ADR, such as arbitration or expert determinations, are not automatically confidential under South African law. Confidentiality can be achieved if the arbitration agreement or the procedural rules governing the arbitration expressly provide for it.
Does the output from ADR create precedents?
No, ADR does not create binding precedent in South African law.
Who bears the costs of ADR?
With mediation, the parties often agree to share the costs of the mediation equally and bears their own legal costs. While in other forms of ADR, such as arbitration or expert determinations, the costs of ADR are often shared initially, with the successful party recovering a portion of the costs at the end. This is because these proceedings generally follow a cost allocation approach similar to court proceedings, where the unsuccessful party is usually ordered to bear the other party’s costs on a party-and-party basis.
Is your jurisdiction subject to any specific rules for cross border ADR?
International or cross border commercial disputes in South Africa are regulated by the International Arbitration Act 15 of 2017 (“the Act”). The Act promotes arbitration as a method of resolving international commercial disputes and facilitates the recognition and enforcement of arbitration agreements and arbitral awards. South Africa is not a party to The United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention).
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
In South Africa, most civil disputes can be referred to arbitration. However, certain matters are excluded from arbitration and are reserved for adjudication by the courts. These include matrimonial disputes, issues relating to legal status, and judicial reviews brought under the Promotion of Administrative Justice Act.
To become a mediator in South Africa you must complete a mediation training course. This course must be at least 40 hours long, include assessment components, and provide certification of attendance and competence. Upon successful completion of the course, individuals may seek accreditation.
Arbitrators in South Africa, however, simply need to be 18 years old. Many arbitrators are lawyers, but parties with disputes often select arbitrators for their expertise in the subject matter of the dispute, for example, architects, engineers, even though they have minimal formal legal training or experience. Various professional associations in South Africa require arbitrators on their panel to be well-versed in arbitration law and practice. This includes familiarity with rules of evidence and procedure, the laws of contract and delict, and fundamental legal principles. To meet these requirements, several training courses are available to equip arbitrators with the necessary legal knowledge and practical skills.
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