Southern African states form harmonised arbitration framework

April 2024 saw the launch of the inaugural Johannesburg Arbitration Week. During the week, the focus of discussions was on the Southern African Development Community (SADC) alliance between Southern African states and their agreement to build a new arbitration framework, with the aim of providing certainty in dispute resolution and attracting foreign investment to the region.

The SADC Charter has been signed by 12 of the 16 SADC countries along with Johannesburg-headquartered Arbitration Foundation of Southern Africa (AFSA). The purpose of the “very ambitious” alliance, according to AFSA chairman Michael Kuper, is to standardise and harmonise relationships in the SADC region and to make the SADC region attractive to investment, so that anyone investing in SADC has the same reassurance that they would have investing in South Africa. He described the initiative as a bridge to unite the SADC countries on the grounds of dispute resolution.

Read more of our report on international arbitration in 2025

• International arbitration: regional, sectoral and industry developments reinforce dispute resolution status
• UAE: recent arbitration reforms while legacy DIFC-LCIA clause debate continues
• Saudi Arabia firmly on the map as key arbitration and dispute resolution hub
• New digital services and legal developments boost international arbitration usage in Qatar
• Egypt a ‘central hub’ for arbitration in the MENA region
• Investment disputes continue to drive international arbitration developments in Africa
• Southern African states form harmonised arbitration framework
• UK arbitration developments continue to enhance position as key dispute resolution jurisdiction
• French arbitration law evolves ahead of 2025 reforms
• Germany to become more attractive for international arbitration proceedings
• Singapore continues to rise as an international dispute resolution hub
• Continued improvements in international arbitration driven by new HKIAC rules and case law
• India continues work to modernise arbitration landscape
• Significant developments in Japan’s arbitration landscape
• South Korea strengthens international arbitration framework
• China continues to improve arbitration process efficiency and effectiveness
• Australian court rulings strengthen pro-arbitration stance and expand scope of arbitration
• Construction projects and contracts must consider sanctions risks
• New types of M&A disputes will drive up international arbitration cases
• Growing demand for expertise in cryptocurrency related arbitration in 2025
• Major changes crystallising in investor-state dispute settlement
• What the future holds for mediation in investor-state dispute settlement

Another important development for arbitration in the region is the adaptation of the China-Africa Joint Arbitration Centre (CAJAC) rules for resolving investment disputes among the BRICS nations – an alliance of nine developing countries including Brazil, Russia, India, China and South Africa. In 2023, the BRICS countries confirmed plans to prioritise the creation of common rules across the BRICS Dispute Resolution Network and the creation of a specific arbitral institution to deal with commercial and investment disputes among the BRICS nations. Whilst the reality of such an initiative has been slow to get off the ground, the latest developments show that there is still political and legal desire to standardise the resolution of commercial and investment disputes between the BRICS countries, and is a development to keep an eye on in 2025.

Investment protection

The Protocol on Investment (protocol) to the Agreement Establishing the African Continental Free Trade Area (AfCFTA) is a significant development reflecting a common African position on various key areas related to investment governance, including the need for reform in investment treaty frameworks to better reflect the region’s sustainable development goals and the development of dispute resolution protocols. The latest protocol sets out a plan to expand the investment dispute settlement mechanism beyond just state-to-state disputes, and to include investors and civil actors. Under the mechanism, parties are encouraged to engage in dialogue and seek amicable solutions before escalating the matter to formal dispute resolution processes, and are allowed to resolve disputes through mediation and arbitration according to the rules and procedures of the mechanism.

The inclusion of substantive provisions in the protocol improves the balance between investor and state rights, but more development of this is needed in the coming year.

Eastern African arbitration markets have also experienced strong growth in African practitioners and institutions. For example, Kenya has seen significant international arbitration activity in infrastructure projects, as the sector embraces public-private partnership (PPP) arrangements. Parties commonly used well-established international arbitration centres overseas, such as the International Centre for Settlement of Investor Disputes (ICSID) and the International Chamber of Commerce (ICC). However, locally-seated international cases are increasing, with the Kenyan government, for example, mandating the use of the Nairobi Centre for International Arbitration (NCIA) as the arbitral body for all government contracts in Kenya. As southern and eastern African markets continue to use PPP as a model of infrastructure development during 2025 and beyond, it is expected that other governments in the regions may also mandate the use of regional arbitration centres in resolving commercial civil disputes.

The continued rise of energy sector arbitration in South Africa

The past a few years have seen a significant change in the dispute resolution landscape in South Africa. Fewer South African disputes are being adjudicated overseas. Meanwhile, there has been a noticeable rise in the number of international arbitration cases in South Africa, helped by improvements in arbitral institutions.

Arbitration cases are expected to increase further, particularly after the South African parliament’s approval of the Electricity Regulation Amendment Bill. The new legislation aims to reform the regulatory and policy frameworks to drive forward South Africa’s electricity sector transition, pursuing a hybrid market system and facilitating the unbundling of state-owned power company Eskom’s generation, transmission and distribution divisions into separate legal entities. The interface between the private and public sectors, in particular through the integration of new assets by private sector parties into the state-owned transmission and distribution infrastructure, is anticipated to remain a significant area of risk, as are issues arising from the development of new technology. Increasingly, the market will also have to evolve to comply with climate and sustainability goals.

Arbitration in strong arbitral seats such as Johannesburg offers investors in the energy markets certainty, predictability and protection, fostering growth in this sector, and is an effective and attractive forum for the resolution of disputes given the ability to appoint subject matter experts and to retain confidentiality.

Pro-arbitration stance by South African courts

South African courts continue to maintain a pro-arbitration stance. Several recent cases have confirmed the Courts’ approach in strictly upholding valid arbitration agreements and any settlements achieved under those agreements.

The Supreme Court of Appeal, in the case of Krohne (Pty) Ltd v Strategic Fuel Fund Association (13-page / 175KB PDF), has ruled that businesses that agree to formally settle their disputes via agreement can enforce the terms of those settlement agreements before the courts in South Africa if those agreements have been endorsed by an arbitrator.

The reasoning of the SCA illustrates that settlement agreements may act as an integral tool in arbitration proceedings, which can be recognised as enforceable by South Africa’s courts. The judgment also clarifies that for settlement agreements to be enforceable as binding awards, they need to have been endorsed by an arbitrator. Courts have also cautioned against finding that settlement awards are not final and binding, on the basis that the awards are interim in nature. As outlined by the SCA, interim awards are treated as awards under South Africa’s Arbitration Acts too.

However, there remain certain challenges for parties to enforce arbitral awards. In recent years, a surge of review applications seeking to set aside arbitration awards have hit the South African courts, partly driven by parties appearing to challenge the awards on tactical grounds. One of the effects of these review applications is that the enforcement of the underlying arbitral awards is delayed due to the lengthy court procedures associated with these reviews. This misuse of review applications can also force parties to incur further legal costs in finalising their claims.

A potential option for the courts is to order harsher costs orders against parties who pursue frivolous review applications for tactical purposes in order to delay and frustrate the enforcement of an arbitral award. 

In South Africa, arbitrators have also encountered difficulties when faced with a defence premised on the principle of legality. At least two court decisions state that an arbitrator may not competently determine such questions, which is in conflict with the international approach. The law is not settled, and the industry may expect to see further development of this principle next year.