An arbitrator’s right to be wrong.

An arbitrator’s right to be wrong.

In a judgment handed down earlier this year, the South Gauteng High Court restated the legal principles for reviewing an arbitration award.

Any party who seeks to challenge an arbitration award under s 33(1) of the Arbitration Act 42 of 1965 would be well-advised to bear in mind the following opening remark of Carrim AJ in Transnet Soc Limited v Spill Tech (Gauteng) (Pty) Ltd:[1]

“...it is well-settled that the remit of the Court in this enquiry is a narrow one, the bar is high, and a court will not easily interfere in setting aside arbitral awards...”

Telcordia Technologies Inc v Telkom SA is one of the leading cases on this topic. In that matter, the Supreme Court of Appeal (SCA) held that by agreeing to arbitration parties to a dispute necessarily agree that the fairness of the hearing will be determined by the provisions of the Act and nothing else. This means that by agreeing to arbitration, the parties limit interference by courts to the grounds of procedural irregularities set out in s33(1) of the Arbitration Act.

To obtain a successful review under s33(1) is no easy task. What must be established is: (a) that the arbitrator misconducted himself, or (b) that he committed a gross irregularity in the conduct of the proceedings, or (c) that he exceeded his powers, or (d) that the award was obtained improperly. ?These are the only grounds for review.

It is trite that there is a fundamental difference between a review and an appeal. Examples of reviewable issues include fraud, corruption, bias, grossly violating the audi alterem principle or deciding an issue that does not fall within the scope of the arbitration agreement.

Where the arbitrator acts honestly and fairly but misinterpreted the law, that would be a ground of appeal, not review. Unless the arbitration agreement provides for a right of appeal, the arbitrator’s award will be final and binding, even if might be wrong in law. ?

In Telcordia, the SCA summarised this principle in the following unambiguous terms:

“An arbitrator “has the right to be wrong” and mistakes made by arbitrators, whether in relation to the facts or law, are not grounds for reviewing and setting aside an award.

To prove fraud, corruption or bias on the part of an arbitrator would require clear evidence and will not be easily inferred.

This means that a party seeking to review an arbitration award would usually be confined to establishing a gross irregularity or that the arbitrator acted ultra vires (outside the scope of his authority). An example of a gross irregularity would be where an arbitrator for some reason misconceives the nature of the enquiry in the arbitration proceedings.

In the words of Carrim AJ:

“A litigant who seeks to impugn an arbitration award in a court [under s33(1)] thus has a restricted and mainly procedural scope of challenge, the merits are not open to attack...the gross irregularity ground in s33(1)(b) is thus restricted to serious procedural missteps on the part of the arbitrator. This would include failing to afford the parties a fair hearing...”

Key Takeaways

Because of the principles set out in Telcordia, which have been applied consistently in subsequent cases, the choice of arbitrator is crucial. One of the main advantages of arbitration is that it allows the parties to appoint an arbitrator with special expertise to decide the dispute. Choosing a suitable arbitrator negates the risk of an arbitrator getting the facts or the law wrong, but in the end, every arbitration has one winner and one loser. The losing party will usually feel that the arbitrator ‘got it wrong’, one way or another.

And because one would likely only get one bite at the cherry, it goes without saying that you should present your case like your life depends on it. Not frantic, but in a clinical, professional and persuasive fashion.

Freddie Terblanche

076?018 7214

[1] ?Transnet Soc Limited v Spill Tech (Gauteng) (Pty) Ltd (2023-000980) [2024] ZAGPJHC 95 (2 February 2024).