Arbitration clause: Does a court lose its jurisdiction?

The mere fact that an arbitration clause provides for mandatory arbitration does not bar a civil suit being instituted in the High Court.

In this regard, in Parekh v Shah Jehan Cinemas (Pty) Ltd and Others 1980 (1) SA 301 (D) the court noted that an arbitration clause does not deprive the court of its ordinary jurisdiction over the disputes which it encompasses. Instead, if an arbitrable dispute is taken to court, the other party must, if he wishes it to go to arbitration, request a stay of proceedings. However, the Court has discretion whether to refer the matter to arbitration or to tackle the dispute itself.

Additionally, in PCL Consulting (Pty) Ltd t/a Phillips Consulting SA v Tresso Trading 119 (Pty) Ltd 2009 (4) SA 68 (SCA) the Supreme Court of Appeal reiterated that the mere existence of an arbitration agreement does not mean that the court proceedings are incompetent. Instead, if court proceedings are instituted despite the existence of the arbitration agreement, the other party may either apply for a stay of proceedings under the Arbitration Act or raise a special plea for stay of the proceedings.

Therefore, as a practical matter, while the dispute may be taken directly to a court, in the absence of a compelling reason, the court will, if the other party so demands stay the proceedings.

Written by Jaco Hamman – Partner: Hahn & Hahn Attorneys, Construction Department



Author: Jaco Hamman LLB, Mcom Forensic Accounting. Jaco is a partner at Hahn & Hahn attorneys and is an admitted attorney, forensic accountant, a member of the Society of Construction Law Africa and an accredited Court annexed mediator. He provides his clients inter alia with assistance in the areas of Public Law, Commercial Law, Civil Litigation, Construction Law and Forensic Investigations.

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