Arbitration has long been a preferred method of dispute resolution in commercial agreements, valued for its efficiency, privacy, and finality. However, the extent to which parties can appeal arbitration awards, particularly to the High Court, has been a matter of legal debate. The recent case of Level Seven (Pty) Ltd v Signature Restaurant Group (Pty) Ltd (2023/051229) [2024] ZAGPJHC 944 (“Level Seven case”) has brought this issue into sharp focus, specifically in relation to Section 28 of the Arbitration Act 42 of 1965 (“Arbitration Act”). This judgment confirms that parties cannot grant the High Court appellate jurisdiction by agreement, as courts derive their authority from legislation and common law, not private contracts.
Section 28 of the Arbitration Act establishes the principle that arbitration awards are final and not subject to appeal, unless the arbitration agreement provides otherwise. While parties may agree to an internal appeal process, such as a review by a senior arbitrator or panel of arbitrators, they cannot create a right of appeal to the High Court where none exists in law. The Level Seven case involved a management agreement that purportedly allowed either party to appeal an arbitrator’s decision to the High Court. When Level Seven sought to enforce this provision, Signature Restaurant Group challenged its validity, leading the court to rule that such a clause was unenforceable. The court reaffirmed that its role in arbitration is limited to ensuring procedural fairness, enforcing awards, and intervening in cases of gross irregularity.
This judgment has significant implications for arbitration agreements.
Firstly, it reinforces the finality of arbitration awards, confirming that unless an arbitration clause includes an internal review mechanism, an arbitrator’s decision is binding.
Secondly, it highlights the importance of careful drafting, as arbitration clauses purporting to grant a right of appeal to the courts will likely be struck down.
Thirdly, it clarifies the limited role of judicial oversight in arbitration. While courts may intervene in specific circumstances – such as setting aside awards due to misconduct or enforcing awards – they will not review the merits of an award.
Lastly, the judgment affirms that arbitration does not infringe constitutional rights. The court dismissed arguments that limiting appeal rights violates Section 34 of the Constitution, which guarantees access to courts, holding that submitting to arbitration constitutes a voluntary waiver of this right.
It is vital to take note of this ruling and ensure that arbitration agreements comply with Section 28 of the Arbitration Act. To avoid legal challenges, parties should structure internal appeal mechanisms within the arbitration process rather than relying on the High Court for review. Arbitration agreements should be clearly and precisely worded to avoid ambiguity or unenforceable provisions. Given the complexities of arbitration law, it is advisable to seek expert legal guidance when drafting agreements to ensure compliance with legal requirements.
Although the High Court’s ruling in the Level Seven case is clear, the matter is not yet settled. The court has granted leave to appeal to the Supreme Court of Appeal (SCA) as of 29 November 2024, meaning a final pronouncement on whether Section 28 should be interpreted differently is still pending. If the SCA upholds the ruling, it will confirm that arbitration awards cannot be appealed to the High Court. However, if the SCA rules otherwise, it may introduce a new approach to arbitration appeals.
For now, the Level Seven case serves as a strong reminder that arbitration agreements must align with legal frameworks. Arbitration remains an attractive alternative to litigation, but its effectiveness depends on clear, legally sound agreements. Parties must carefully draft arbitration clauses to maximise the benefits of arbitration while avoiding provisions that may be deemed unenforceable. As the law evolves, staying informed and obtaining specialist legal advice is essential to navigating the complexities involved in arbitration.
By:
Matthew Keegan
