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AGREEMENT TO ARBITRATE

Alastair Hay, Cox Yeats draft arbitration agreement for arbitrate was not a prerequisite In relation to separability, Rules is disputed, then it could
Attorneys consideration. Shortly thereafter, for a party to be bound to although it might seem not countenance a referral of
the Trust’s attorneys submitted arbitrate, and secondly that its logical that if the agreement the Existence Dispute to an
a draft arbitration agreement to denial of the existence of the embodying the arbitration AFSA arbitrator.
he Cube Architects’ attorneys. professional services contract clause is invalid the Existence
resolution was palpably untrue. Dispute cannot be determined In the opinion of the SCA
Tof disputes A pre-arbitration meeting was in terms of that clause, that is the High Court had fallen
by means of convened between the parties at Supreme Court of not inevitably so. into error in undertaking an
arbitration which the arbitration agreement Appeal (SCA) assessment of the probabilities
requires that was discussed. Cube Architects Undeterred, Cube Architects There have been cases where as to whether the professional
there be an requested that a clause be the court has found that services contract existed. It
agreement inserted in the agreement that continued the fight and the arbitration clause in an should have decided simply
appealed to the SCA. The
between the its terms would be subject to key issue before the SCA was agreement is a self-standing whether to dismiss the
disputing acceptance by its insurers. whether, in the face of a dispute agreement distinct from the application or to refer it for the
parties to that effect. Absent Not long after that, Cube main contract of which it forms hearing of oral evidence so that
agreement, the default Architects had a change of heart of fact that an agreement exists a part. In such cases the court the factual dispute could be
to refer disputes to arbitration,
mechanism for resolving and conveyed to the Trust that there is any basis to find that will leave it to the arbitrators to properly decided.
disputes is by means of legal it did not feel bound to proceed the parties had agreed to refer decide the controversy. (Known Accordingly, the SCA upheld
proceedings. What happens with the arbitration in that as Kompetenz-Kompetenz the appeal and referred the
if there is a dispute about the the draft professional services the dispute as to the existence which has its origins in matter back to the High
of an agreement to arbitrate
existence of the arbitration contract, which provided for to arbitration (“Existence German law.) Court to decide whether the
agreement that one of the arbitration, had never been Dispute”). If not, was it then the In some cases, arbitration application should be dismissed
disputing parties wishes to signed. It in short denied clauses are framed so as to allow because of the dispute of fact
rely on for purposes of the that there was any agreement competency of the High Court the question of the validity, which was not soluble on the
to decide the Existence Dispute?
determination of a dispute? between the parties obliging it enforceability or indeed the papers or whether to refer the
The Supreme Court of Appeal to arbitrate. The arbitration clause in the very existence of the contract application for the hearing of
(“SCA”) recently delivered a draft professional services of which they form a part to be oral evidence.
contract incorporated the Rules
judgment which provides useful High Court Proceedings decided by arbitration. The final score in the result
insight into this question. The Trust applied to the High of the Arbitration Foundation In such cases courts will defer was four judges for the Trust
Court for an order compelling of South Africa Ltd (“AFSA”) to that interpretation and leave and five against.
Background Facts Cube Architects to submit to which contain a provision to the decision to the arbitrators.
the effect that an arbitrator is
In 2013 the Qwaha Trust arbitration in relation to the taken to have the power to rule The principle of competence- Conclusion
(“the Trust”) requested Canton disputes between the parties by on his own jurisdiction. competence means that: Arbitrators faced with
Trading 17 (Pty) Ltd which virtue of the arbitration clause a challenge as to their
traded under the name Cube contained in the unsigned The SCA acknowledged that ■ arbitrators enjoy the jurisdiction on the basis that
Architects (“Cube Architects”) to professional services contract. parties may agree that a dispute competence to rule on their the underlying arbitration
accept appointment as Principal The High Court judge decided pertaining to the validity of the own jurisdiction and need agreement is invalid or never
Agent for a contract relating to to adopt a robust approach agreement which contains an not stay the proceedings came into being should apply
the expansion of a mill owned by and cut through the denial arbitration clause is to be itself pending a court decision on their minds to the issue and
the Trust in Bloemfontein. by Cube Architects that it determined by arbitration even the subject; and make up their own minds as to
In March 2014, a month after was bound by the unsigned though the arbitration clause ■ where arbitrators have been the validity of the challenge.
forms part of the agreement that
Cube Architects had orally professional services contract is subject to the validity challenge. seized of the question, a court They should not simply without
will not try and rule on the
accepted appointment to act which contained the obligation more abdicate to a court to rule
as Principal Agent for the mill to arbitrate. The court said Such an arbitration clause issue. on the issue.
project, its attorneys produced its denial of the contract may be embodied in the The SCA noted that the principle They may decide that the
a draft professional services was untenable and palpably disputed agreement or may has not been applied in our courts separability principle applies or
contract incorporating a clause implausible and ordered it to be something agreed upon by but that there is no reason why that invoking the competence-
providing for the resolution of submit to arbitration. the parties on an ad hoc basis. in appropriate cases our courts competence principle is
disputes by arbitration. Neither The High Court’s approach Where this type of agreement should not uphold the principle of justified. (Zhongji Development
party signed the contract. was contrary to the normal is not readily discernible, the competence-competence. Construction Engineering Co
(Canton Trading 17 (Pty) Ltd t/a practice of a court faced with a problem becomes who decides Ltd v Kamato Copper Co SARL
Cube Architects v Fanti Bekker dispute of fact on affidavit where the Existence Dispute, the SCA Decision [2014] ZASCA 160)
Hattingh NO [2021] ZASCA 163 the court will usually decline courts or the arbitrators?
The SCA decided that the
December 2021) to try and resolve the dispute The issue regarding an separability principle found If an arbitrator proceeds on
In August 2014 the Trust on paper and require that the Existence Dispute can crystallise no application in the case the basis that the arbitration
agreement is valid, there is
terminated its contract with dispute be referred to a court for the first time before the despite the fact that the AFSA always a risk that a court
Cube Architects because of hearing at which the necessary “appointed arbitrators” or, as Rules, incorporated into the might, when the successful
defective work performed witnesses can testify and be in this case, can be the subject arbitration clause, allowed for party applies to have the
by the Contractor, which the cross examined. matter of prior litigation. arbitrators to determine their award made an order of court,
Trust blamed Cube Architects In the former case, if arbitrators own jurisdiction. This because refuse the application on the
for not preventing. The Trust Provincial Appeal Court decide the Existence Dispute and the very existence of the grounds that the arbitration
declared an intention to pursue Cube Architects appealed uphold the arbitration agreement agreement incorporating the agreement relied on was not
a claim against Cube Architects this decision to the Free State and proceed with an arbitration, AFSA Rules was hotly disputed binding. However, the SCA
and, in conformity with the Provincial Appeal Court. In its ultimately that decision will be by Cube Architects. Leave aside having opened the door to
dispute resolution clause in appeal to the Provincial Appeal subject to scrutiny by the courts that the AFSA Rules do not the competence competence
the draft contract, invited Court Cube Architects complained when there is an attempt to expressly purport to confer principle being accepted into
Cube Architects to agree on that the High Court had ignored enforce the arbitration award. on an arbitrator the power to our law hopefully makes this
the appointment of a mediator, the normal rule that, in application determine the very existence of scenario less likely. 
alternatively an arbitrator. The proceedings where there is a SCA Analysis the main contract.
Trust invited Cube Architects to dispute of fact, the respondent’s
The SCA concluded that,
The SCA explained that there
agree on the appointment of a version, in this case Cube are two approaches that can where submission to the AFSA E: ahay@coxyeats.co.za
W: www.coxyeats.co.za
retired judge to act as arbitrator, Architects, should be accepted be followed in resolving the
namely Judge Hancke. as correct at face value and as
such the robust approach adopted Existence Dispute conundrum:
Cube Architects rejected by the court was not justified.
mediation but advised that it ■ the first is based on
was in principle prepared to The Appeal Court was separability; and
arbitrate before Judge Hancke as unpersuaded and, in ■ the second is based on the
the arbitrator. It requested the dismissing the appeal, held that principle of competence-
Trust’s attorneys to prepare a firstly a signed agreement to competence.

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