Case Study (2025)

(See para 1.3 of the notes.)

Assumptions regarding law:
The case study is based on the existing South African
law (including the International Arbitration Act 15 of 2017).
To the extent that Malaysian arbitration law is relevant,
it must be assumed that Malaysia has adopted the
UNCITRAL Model Law of 1985 without alteration.
(See however footnote 39 regarding the post 2018 position in
Malaysia.)

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Case Study: Basic facts
A Malaysian manufacturer contracts with a South African
company to manufacture certain machinery in Malaysia
and then to deliver it to the South African company in
South Africa. The terms of the contract appear from a
written order sent by the South African party to the
Malaysian manufacturer on 20 August 2024. In terms of
the order, the Malaysian manufacturer should accept it
by signing and returning a copy of the order to the
purchaser in South Africa. The manufacturer fails to do
so and simply delivers the machinery.

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The order form contains the following arbitration clause:
“All disputes arising out of or in relation to this contract
shall be referred to arbitration in Gauteng, South Africa
under the UNCITRAL Arbitration Rules of 1976.”

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The Malaysian manufacturer uses a South African subcontractor
to make certain components of the machinery. There is no
arbitration clause in the contract between the Malaysian
manufacturer and the South African subcontractor.

Shortly after its installation in South Africa and before

the full purchase price has been received, the machine
malfunctions and is badly damaged in the process.
The South African purchaser alleges that the machinery
had a major defect for which the manufacturer is liable.
The Malaysian manufacturer denies liability on this basis
and states that any malfunction has been caused by the
failure of the South African purchaser to follow the
operating instructions.

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In the alternative, the Malaysian manufacturer alleges
that the problem was caused by defective components
furnished by the South African subcontractor, who is
therefore liable to indemnify the manufacturer for any
damages, which it may have to pay to the South African
purchaser.

Problem 1(a)
Assume that the South African purchaser wishes to
refer the dispute to arbitration in Gauteng. Is there a
valid arbitration agreement for purposes of South African
law?
Before considering that question, is there a valid contract
between the parties?

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Why does the International Arbitration Act apply? See s 20(1),
read with the UNCITRAL Rules article 3.2 as well as s 4. Compare
Delta Beverages v Blakey Investments (Pty) Ltd [2020] ZAKZDHC
36 paras 4 and 17.

International Arbitration Act Schedule 1

Article 7. Definition and form of arbitration agreement
…
(2) The arbitration agreement shall be in writing.
(3) An arbitration agreement is in writing if its content is recorded
in any form, whether or not the arbitration agreement or
contract has been concluded orally, by conduct, or by other
means.

Problem 1(b)
Would your answer differ if the validity of the agreement had
to be determined according to Malaysian arbitration law?
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UNCITRAL Model Law (original 1985 version)

“Article 7--Definition and form of arbitration agreement

(1)
(2) The arbitration agreement shall be in writing. An
agreement is in writing if it is contained in a document
signed by the parties or in an exchange of letters,
telex, telegrams or other means of telecommunication
which provide a record of the agreement … .”

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Compare Arbitration Act 42 of 1965 section 1
"arbitration agreement".

New York Convention article II(2):

"The term 'agreement in writing' shall include … an
arbitration agreement, signed by the parties or
contained in an exchange of letters or telegrams.“

The words “shall include” arguably give the NYC a flexibility

absent from the 1985 Model Law.

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Problem 1(c)
Assuming that there is a valid arbitration agreement,
which version of the UNCITRAL Arbitration Rules
will apply?

See the 2010 Rules, article 1(2).

The offer was made after 15 August 2010 and the
arbitration agreement was concluded after that date.
The parties are therefore normally presumed to have
referred to the Rules in effect on the date of the
commencement of the arbitration (as determined by
article 3(2)).
However, here the arbitration agreement refers
expressly to the UNCITRAL Arbitration Rules of 1976.
Presumption does not apply. Unlikely that this is
what the parties intended.

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Problem 2(a)
Assume that there is a valid arbitration agreement. If
the Malaysian manufacturer sues the South African
purchaser in the South African high court for the
balance of the purchase price, is the South African
party entitled to have the action stayed so that the
matter can be referred to arbitration?

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UNCITRAL Model Law (SA version))
"Article 8--Arbitration agreement and substantive
claim before court
(1) A court before which an action is brought in a
matter which is the subject of an arbitration
agreement shall, … stay those proceedings and
refer the parties to arbitration
unless it finds that the agreement is null and void,
inoperative or incapable of being performed.“

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Problem 2(b)
To what extent would your answer to these two questions
differ if the purchaser was from Namibia on the assumption
that the applications were made to the High Court in
Windhoek? Discuss each question briefly.

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If the issue had to be decided in Windhoek:
S 6 of 1965 Arbitration Act:
S 6(2) The court must be satisfied that there “is no
sufficient reason” why the dispute should not be
referred to arbitration.

The court therefore has a discretion not to enforce

the arbitration agreement.

See also the 1965 Arbitration Act s 3(2):

"The court may … on good cause shown (a) set aside
the arbitration agreement … or (c) order that the
arbitration agreement shall cease to have effect".

Problem 3(a)
How many arbitrators are required in the absence
of an agreement on this point between the parties?

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UNCITRAL Rules (2010) article 7.
Compare the IAA sch 1 article 10(2).
On the facts, the rules prevail.

Problem 3(b)
Assume that the Malaysian manufacturer (as
respondent in the arbitration) fails to nominate an
arbitrator. What happens in this event and who
appoints the tribunal? Does the SA IAA address
the problem in the UNCITRAL Rules?

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UNCITRAL Arbitration Rules articles 9(2) and 6.
Compare the IAA Schedule 1 article 11(4).
The problem is thus not addressed.

Problem 4
Assume that the South African purchaser appoints an
arbitrator who although being an experienced
commercial lawyer is also the brother-in-law of the
South African company’s managing director. Is the
Malaysian party, in principle, entitled to object to
the appointment and if so, who must decide on this
objection in the first instance?

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As to the principle, see the UNCITRAL Rules, articles
11 and 12 and the IAA, schedule 1, article 12).

As to the procedure compare the UNCITRAL Rules

article 13 with the IAA Schedule 1 article 13,
also taking note of article 13(3) which is mandatory.

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Problem 5
Assume that a suitable arbitral tribunal has at last been
appointed and that the arbitration is going to take place
in Gauteng. Assume further that the Malaysian
manufacturer has received a substantial portion of the
purchase price, but is still exposed to a very large claim
for damages. The Malaysian respondent in the
arbitration for tactical reasons therefore alleges that its
contract with the South African party is illegal, being
subject to South African law while contravening certain
South African statutory regulations and that the
arbitration clause is for this reason also invalid.
How should the arbitral tribunal deal with this allegation
and has the Malaysian party forfeited its right to
challenge the validity of the arbitral proceedings by
participating in the appointment of the tribunal?

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See the UNCITRAL Rules article 23 and the UNCITRAL Model Law
article 16. South African law common law now similar, thanks
to the Zhongji Development v Kamoto Copper case [2014]
ZASCA 160, 2015 1 SA 345 (SCA).

Problem 6
Assume that the Malaysian respondent hears that
the South African purchaser has called in a British
company to repair the machine, making it impossible
for the Malaysian company to prove its case. What
can it do and whom should it approach for relief?

See the UNCITRAL Rules article 26; and the International

Arbitration Act of 2017 Schedule 1 articles 9, 17, 17A, 17H, 17I
and 17J. [1965 Act s 21 not relevant.]

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Problem 7
Is the Malaysian party entitled to obtain full disclosure
of documents (“discovery”) against the South African
claimant as in a high court action?

See the UNCITRAL Rules article 27(3) and compare the Model
Law articles 19 and 24(3).
[Compare the South African Act of 1965 s 14(1)(a)(i) and
s 21(1)(b).]

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Problem 8
Is the arbitral tribunal obliged to apply rules of
substantive law to the merits of the dispute, and if
so, which system must it apply?

See the UNCITRAL Rules article 35(1), and the IAA

schedule 1, article 28).

Compare para 5.3 of the Module Notes for the more

liberal provisions of the Swiss legislation and the
ICC Rules and the more conservative position in
the English Arbitration Act.

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Problem 9(a)
Assume that an award has been given by the arbitral
tribunal in Gauteng against the Malaysian
manufacturer, in which it has been ordered to pay a
substantial amount of damages to the South African
purchaser. The Malaysian party believes that the
award is wrong on the merits. Can the Malaysian
party seek to have the award set aside on this basis?

See the IAA schedule 1 article 34 of the UNCITRAL

Model Law) and Part 9. (Compare, in a domestic context,
s 33 of the 1965 Act.)
On appeals compare s 28 of the 1965 Act with s 69
of the English Arbitration Act of 1996.

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Problem 9(b)
Although most of the Malaysian party’s assets are
in Malaysia, it has a valuable asset in South Africa in
the form of its shares in its South African registered
subsidiary. Would it be more beneficial (in principle)
to challenge the award in Gauteng or to resist its
enforcement by a South African court?
Difference between setting aside and refusal of recognition
and enforcement.
See the UNCITRAL Model Law article 36(1) and compare
article 34(2).

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