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19 February 2020
In 2017 South Africa promulgated the International Arbitration Act (IAA) with a view to creating a viable arbitral forum on the African continent for the resolution of international disputes (for further details please see "What the International Arbitration Act means for maritime law").
Although the IAA is still in its infancy, the Supreme Court of Appeal has delivered an important judgment in Atakas v Glencore International which illustrates the tension created by the overlapping boundaries of the IAA and the well-established admiralty jurisdiction of the High Court under the Admiralty Jurisdiction Regulation Act (Admiralty Act), as well as the careful balancing act that the courts must perform. This tension is unsurprising given that, for the most part, maritime disputes themselves have an international dimension.
The dispute related to Atakas's purchase of a consignment of coal from Glencore and the related charter of the motor vessel Cecilia B from EFE Shipping & Trading, Istanbul to carry the consignment from Richards Bay (South Africa) to Turkey.
Shortly after the loading had been completed, an explosion occurred in Hold 6 of the vessel and subsequent investigations suggested that heated coal had been loaded, which heated further after the hold had been closed and ignited. As a result of the explosion, the voyage had to be abandoned and the cargo unloaded.
Atakas commenced an admiralty action in the High Court for damages in delict (similar to a claim in tort under English law) against the operator of the coal terminal, Richards Bay Coal Terminal (RBCT), which was premised on their alleged negligence for loading heated coal.
In its defence, RBCT asserted, among other things, that Atakas's claim lay against Glencore, as sellers, for breach of the sale contract. In light of this response, Atakas took the precautionary step of applying to court to join Glencore as another defendant in the action against RBCT. The application was made under Section 5(1) of the Admiralty Act. The discretionary power granted to the court under this provision is far-reaching and stretches well beyond the ordinary jurisdiction of the High Court in non-admiralty matters, allowing the joinder of any person:
It was at this juncture that the interplay between the court's jurisdiction under the Admiralty Act and the scope of the IAA came into focus. The reason for this was that the sale contract between Atakas and Glencore provided for disputes between the parties to be referred to arbitration.
Glencore opposed the joinder application by arguing that the sale contract contained an arbitration agreement as defined in Section 1 of the IAA and that, in terms of the IAA read with Article 8 of the United Nations Commission on International Trade Law (UNCITRAL) Model Law 1985 on International Commercial Arbitration (as incorporated into IAA by reference), the court was required to stay the court proceedings and refer the matter to arbitration unless it found the sale contract to be null and void, inoperative or incapable of being performed. This argument was accepted by the first-instance court in Durban, resulting in its appeal.
In deciding the matter, the appeal court's focus fell on two issues.
First, the court relied on the interpretation adopted in mv Summit 1 (2005), which underscored the far-reaching discretion afforded to the court in admiralty proceedings and held that:
the object of the Legislature was clearly to permit all the parties to a dispute to be joined in an action. The absence of such provision could well result in an undesirable situation of courts in different countries having to adjudicate on the same or substantially the same issues arising out of the same incident or set of facts.
The appeal court went on to pay special attention to the applicable rules of statutory interpretation to be applied when determining whether – in a situation of apparently conflicting statutory provisions – there is an implied repeal of the earlier provision by the latter. The established rule is that an implied repeal ought not to be adopted unless it is inevitable. Any reasonable construction which offers an escape from an implied repeal is more likely to agree with the real intention of the legislature.
Against this background, the court gave consideration to Article 1(5) of the UNCITRAL Model Law which, in the court's view, offered an "escape" from an implied repeal of the earlier by the latter. Article 1(5) states that the UNCITRAL Model Law should affect no other South African law by virtue of which certain disputes may not be submitted to arbitration or may be submitted to arbitration only according to provisions other than those of the UNCITRAL Model Law. In this regard, the court held that the phrase "any other law" in Article 1(5) plainly encompasses the Admiralty Act. Accordingly, the court found that the IAA left untouched the discretion to permit or refuse the joinder of Glencore to proceedings. The deciding factor in this case boiled down to the concessions made by Glencore in its own papers before the court. In particular, Glencore was prepared to accept that:
Taking these concessions into account in light of the applicable legal principle outlined above, the court found it appropriate to permit the joinder of Glencore as a defendant in the proceedings.
On the face of it, Glencore's case for a stay of the proceeding and referral to arbitration was compelling. Not only had the parties to the sale agreement chosen to resolve their disputes by arbitration, the IAA appeared to reinforce those rights and create a statutory framework for resolving the dispute. Therefore, this decision serves as a reminder of the courts' far-reaching powers in admiralty proceedings in South Africa and the benefits enjoyed by claimants that choose to litigate in the jurisdiction.
For further information on this topic please contact Jeremy Prain at Bowmans by telephone (+27 21 480 7800) or email (firstname.lastname@example.org). The Bowmans website can be accessed at www.bowmanslaw.com.
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