WHEN CAN AN ARBITRATION AWARD BE REVIEWED

In a world driven by commerce more than ever before, it is not uncommon for contracting parties to conclude agreements which include arbitration clauses. This is done to ensure that any dispute that arises in terms of a particular agreement is resolved in a speedy manner. This is because arbitration, as a dispute resolution mechanism, is generally faster to initiate and conclude than going through the court system. The contracting parties further get to choose their preferred arbitrator, who, generally, will be a person with experience in the relevant industry (such as construction and engineering) in which the agreement is centered.

Due to the fact that the preferred arbitrator will be a person with experience in the relevant industry, contracting parties usually agree that any award made by that arbitrator will be final, binding and will not be appealable. This is indeed in line with section 28 of the Arbitration Act 42 of 1965.[1]

In an attempt to get a “second bite at the cherry”, a litigant to arbitration proceedings, in the absence of an opportunity to appeal an arbitration award, may look to have the arbitration award reviewed and set aside by a court of law and referred back to the arbitration tribunal for a new arbitration. We do not go into the bona fides of such endeavor, however, in this article, we look at where such an endeavor would be successful.

WHEN CAN AN ARBITRATION AWARD BE REVIEWED AND SET ASIDE BY A COURT OF LAW?

In order to have an arbitrator’s arbitration award reviewed and set aside, the party requesting such relief must show that the arbitrator committed a “gross irregularity” in conducting the arbitration proceedings.

The party alleging gross irregularity must establish it. It has been held in case law that where the arbitrator engages in the correct enquiry but errs either on the facts or the law of a matter, that this is not an irregularity and is not the basis for setting aside an arbitration award.[2] Due to the fact that arbitration is dispute resolution by agreement, if the parties choose it, the courts endeavour to uphold their choice and do not lightly disturb it.[3]

The fact that the arbitrator may have either misinterpreted an agreement, failed to apply South African law correctly, or had regard to inadmissible evidence does not mean that he misconceived the nature of the inquiry or his duties in connection therewith. It only means that he erred in the performance of his duties. An arbitrator ‘has the right to be wrong’ on the merits of the case, and it is a perversion of language and logic to label mistakes of this kind as a misconception of the nature of the inquiry – they may be misconceptions about meaning, law or the admissibility of evidence but that is a far cry from saying that they constitute a misconception of the nature of the inquiry.’[4]

To constitute a gross irregularity, the arbitrator has to misconceive the nature of the enquiry in the arbitration proceedings with the result that a party is denied a fair hearing or a fair trial of the issues.[5]

CONCLUSION

From the above, we see that having an arbitration award reviewed and set aside means proving that the party seeking such relief must show that the arbitrator committed a gross irregularity which had the result of denying it a fair hearing or a fair trial of issues. Where this is not established, the arbitration award will not be set aside.

It is, however, our recommendation that arbitration agreements contain an appeal clause. It is our observation that parties are normally unhappy with arbitration outcomes as opposed to how the arbitration process was conducted.

Please note that the above is a general summary of the review process and what the courts have held with regard to it. In drawing up specialized agreements as well as undergoing arbitration proceedings, the reader is advised to consult with an attorney where necessary.

[1] Section 28 of the Arbitration Act provides “Unless the arbitration agreement provides otherwise, an award shall, subject to the provisions of this Act, be final and not subject to appeal and each party to the reference shall abide by and comply with the award in accordance with its terms.”

[2] Palabora Copper (Pty) Ltd v Motlokwa Transport and Construction (Pty) Ltd (298/2017) [2018] ZASCA

[3] Palabora at paragraph 8; Industrius D.O.O v IDS Industry Service and Plant Construction South Africa (Pty) Ltd (2020/15862) [2021] ZAGPJHC 350 (20 August 2021) at paragraph 26.

[4] Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA) at paragraph 85; Industrius D.O.O v IDS Industry Service and Plant Construction South Africa (Pty) Ltd supra at paragraph 38.

[5] Palabora Copper (Pty) Ltd v Motlokwa Transport and Construction (Pty) Ltd supra at paragraph 8; Termico (Pty) Ltd v SPX Technologies (Pty) Ltd & others; SPX Technologies (Pty) Ltd v Termico (Pty) Ltd (418/2018) [2019] ZASCA 109 at paragraph 12.