UNCLE OSWALD’S Q&A FORUM – AUGUST 2026
A JURISDICTIONAL CHALLENGE
Dear Uncle Oswald,
As arbitrator I recently had to rule on a challenge to my jurisdiction in terms of article 23 of the 2021 edition of the Standard Procedure Rules for the Conduct of Arbitrations (the Rules) published by the Association of Arbitrators (Southern Africa) NPC (the Association). I have already published my ruling. As a matter of interest, and for the benefit of my fellow ADR practitioners, my question to you is: How would you have ruled on the following facts?
The arbitration clause in a commercial contract between the claimant and the respondent determines that any dispute arising from the contract, including the validity and enforceability thereof, shall be referred to arbitration in Sandton under the 2021 Standard Procedure Rules for the Conduct of Arbitrations (the Rules) published by the Association of Arbitrators (Southern Africa) NPC by a single arbitrator appointed in terms of the Rules. A dispute arose.
The claimant instituted arbitration proceedings to recover damages sustained through breach of contract by the respondent. I was appointed as the arbitrator.
At the first preliminary meeting the respondent challenged my jurisdiction on the basis that the contract, including the arbitration clause, is void because of an initial illegality. The illegality relied upon by the respondent is that the signature page of the contract was signed but the remaining pages and annexures were not initialled. The respondent contended that a Court should decide on the validity of the contract and insisted that I adjourn the arbitration so that the Court may decide the issue of my jurisdiction.
The claimant opposed these contentions in reliance on article 24 of the Rules and contended that the validity of the contract, and my jurisdiction, should be decided by me in view of the clear wording of the arbitration clause in the contract.
Regards,
Challenged Charlie
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Dear Charlie,
Thank you for an interesting enquiry.
Be that as it may, you have touched a raw nerve. I have, over the years, shuddered at the nonsense contained in certain arbitration clauses. The consequences are often disastrous.
In short, my ruling would have been the following. I would have declined the respondent’s request to adjourn the proceedings for the jurisdiction issue to be decided by the Court. I would have decided the issue myself, as a preliminary matter. My reasons are the following:
- An arbitration agreement is defined in section 1 of the Arbitration Act 42 of 1965 (the Act) as a written agreement providing for a reference to arbitration of any existing or future dispute relating to a matter specified therein. The Act further defines arbitration proceedings as proceedings conducted by an arbitral tribunal for the settlement by arbitration of a dispute which has been referred to arbitration in terms of an arbitration agreement. These definitions confer wide powers on an arbitrator. In this instance, the arbitration agreement expressly determines, in equally wide terms, that any dispute arising from the contract, including any question as to the enforceability or validity thereof, shall be referred to arbitration governed by the 2021 Standard Procedure Rules for the Conduct of Arbitrations published by the Association of Arbitrators (Southern Africa) NPC (the Rules).
- Because the arbitration clause expressly dictates that the Rules shall govern the proceedings, the Rules are thereby incorporated as part of the arbitration clause and, as such, they form an integral part of the contract between the parties. Article 24 of the Rules contains express provisions directly applicable to the respondent’s request. They include, first, that the arbitrator has the power to rule on his own jurisdiction, which includes an objection to the validity of the arbitration agreement, second, that an arbitration clause included in a contract should be treated as an agreement independent of the other terms of the contract and, third, that if the contract is a nullity it shall not automatically invalidate the arbitration agreement.
- Therefore, the arbitrator is empowered to rule on the respondent’s challenge to his jurisdiction on the basis of an alleged invalidity of the contract, including the arbitration agreement. In addition, the facts indicate that the alleged initial illegality of the contract is not so serious that it would taint the arbitration agreement and, article 24.1 of the Rules in any event determines that a finding by an arbitral tribunal that a contract is a nullity shall not automatically invalidate the arbitration agreement. As can be discerned from the judgment in Zhongji Development Construction Engineering Co Ltd v Kamoto Copper Co[1], it is in any event the position in law that any arbitration agreement embodies an agreement that is distinct from the terms of the contract of which it forms part.
- The arbitrator’s power to rule on the respondent’s jurisdictional challenge is not the end of the matter. The judgment in Zhongji, informs us that there are good reasons why the arbitrator is obliged to rule on the challenge, as opposed to adjourning the proceedings for it to be decided by a Court, and why the Court is not entitled to do so and also does not have jurisdiction to adjudicate and rule on the jurisdictional challenge.
- As in Zhongji, the Rules in your matter were imported as terms of the arbitration agreement itself. The Rules determine that the very issue on which the respondent seeks a Court judgment falls to be determined by the arbitrator. In terms of article 24.1 of the Rules, the scope of the arbitrator’s jurisdiction and whether a particular dispute falls within such jurisdiction, are issues expressly placed within the jurisdiction of the arbitrator. A Court, if requested to pronounce on these issues, would be acting contrary to the provisions of the arbitration agreement by determining issues expressly placed within the jurisdiction of the arbitrator. The Court will only be entitled to do so if an order has been granted in terms of section 3(2)(b) of the Act that these issues shall not be referred to arbitration. The facts of your matter do not indicate that such order has either been sought or granted. This approach would show appropriate deference to the autonomy of parties to decide on the forum that should resolve their disputes.
- The policy considerations behind, and the authority for, this approach as referred to and relied upon in Zhongji, properly distilled, boils down to the following essentials. Parties who refer matters to arbitration waive/abandon their right to litigate in a Court of law and accept that they will be bound by the award of an arbitral tribunal. A voluntary decision to arbitrate should be respected by the Courts. Parties are entitled to determine which matters are to be arbitrated, the identity of the arbitrator, the arbitration process, whether there will be an appeal to an arbitral appeal body, and the like. The values of the Constitution will not be served best by interpreting section 33(1) of the Act in a manner that enhances the power of Courts to set aside private arbitration awards. Courts should be careful not to undermine the achievement of the goals of private arbitration by enlarging their powers of scrutiny imprudently. The Constitution requires of a Court to construe the three grounds for setting aside an arbitral award in section 33(1) of the Act reasonably strictly in relation to private arbitration. This note of caution with regard to section 33(1) of the Act applies with equal force to the powers of a Court in dealing with arbitrations in general, which would include powers expressly conferred on an arbitrator, such as the power to rule on arbitral jurisdiction. South African Courts have consistently respected the provisions of arbitration agreements and the principle of party autonomy in arbitration proceedings. It is a worldwide tradition in the ADR world to preserve the autonomy of the forum selected by the parties and to minimise judicial intervention. If Courts arrogate to themselves the right to decide matters which parties have agreed should be dealt with by arbitration, it will diminish the likelihood of arbitration being chosen as an alternative dispute resolution mechanism. Parties do not wish the process to be retarded by constant recourse to the Courts. They want their disputes decided quickly and efficiently by a tribunal chosen by them on various grounds, including neutrality, expertise, privacy, availability of local legal services and the unobtrusive efficiency of its supervisory law. Accepting that this is the clear purpose of an arbitration clause, there is no rational basis upon which businessmen would likely wish to have questions regarding the validity or enforceability of their contract decided in one forum, and any questions about its performance (in casu, jurisdiction) decided in another forum. The wording of arbitration clauses as a rule provide that arbitration is the chosen one stop method to determine all disputes between the parties. To recognise the limited powers of Courts in arbitral proceedings is in line with internationally accepted and applied protocol as referred to in Lufuno[2], Telcordia[3], and Fiona Trust[4].
- Paragraphs 28 to 31 of the judgment in Radon Projects (Pty) Ltd v NV Properties (Pty) Ltd and Another are essentially to the same effect namely that, when confronted with a jurisdictional challenge, an arbitrator should enquire into and rule upon the scope of his jurisdiction. An arbitrator should not leave the question of his jurisdiction to be held over to be determined by a Court. He or she might thereby merely waste his/her time, and everybody else’s too. What is called for is sound judgment by the arbitrator on the course to be followed, based on his/her view of the strength of the jurisdictional challenge, and the circumstances presenting themselves in a particular matter.
- For all the reasons relied upon by the Supreme Court of Appeal in Zhongji and Radon Projects[5] and, in particular, because of the plain wording of the arbitration agreement in your matter, read with the express provisions of article 24.1 of the Rules, an arbitrator is not only entitled but indeed obliged to decide on the validity of the contract and, hence, also to determine the issue of his/her own jurisdiction. Should the arbitrator rule otherwise by staying the proceedings and allowing the issue of jurisdiction to be decided by the Court, the outcome will in all likelihood be the same as in Zhongji; the Court will simply decline to rule on the issue.
- Article 24.1 of the Rules provides, among the other things, that the arbitrator may rule on the jurisdictional issue either as a preliminary matter or in an award on the merits. Theoretically, the arbitrator may choose either of the two. However, for practical and logical reasons it would, in most instances, be preferable to decide a jurisdictional challenge as a preliminary matter because, if the ruling is that the arbitrator does not have jurisdiction, that will be the end of the arbitration. This will save the time and costs wasted if the same ruling were to be held over for an award on the merits because, if the ruling is held over for determination as part of the award on the merits and the ruling is that the arbitrator does not have jurisdiction, the arbitration would clearly have been a waste of time and money.
These, my dear Charlie, are my views on the matter.
I hope they do not deviate too much from your ruling on the jurisdictional challenge.
Best regards,
Uncle Oswald
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Zhongji Development Construction Engineering Company Limited v Kamoto Copper Company Sarl (421/2013) [2014] SACSA 160; 2015 (1) SA 345 (SCA); [2014] 4 All SA 617 (SCA) (1 October 2014).
Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and Another (CCT 97/07) [2009] ZACC 6; 2009 (4) SA 529 (CC); 2009 (6) BCLR 527 (CC) (20 March 2009).
Telcordia Technologies Inc v Telkom SA Ltd (26/05) [2006] ZASCA 112; [2006] 139 SCA (RSA); 2007 (3) SA 266 (SCA); [2007] 2 All SA 243 (SCA); 2007 (5) BCLR 503 (SCA) (22 November 2006).
Fiona Trust & Holding Corporation & Others v Yuri Privalov & Ors [2015] EWHC 527 (Comm) (5 March 2015).
Radon Projects (Pty) Ltd v N V Properties (Pty) Ltd and Another (528/12) [2013] ZASCA 83; [2013] 3 All SA 615 (SCA); 2013 (6) SA 345 (SCA) (31 May 2013).
