Increasingly, complex — and not so complex — commercial disputes are being resolved through private arbitration.
Parties choose to have these disputes heard by privately appointed arbitrators, usually retired judges, senior counsel or attorneys, who often have years of experience and some expertise in the commercial field.
The usual explanation for this move is the speed and lower cost of such processes when compared with the glacial pace and high cost of litigation in the high courts. Recent statistics show that it will take an average of three to four years to obtain a date for trial.
Manifestly, there is a huge challenge to ensure that courts run more efficiently. In this, many of the techniques employed in alternative dispute resolution could assist in ensuring that trials run with greater speed. Alone, however, this may not be the sole cause of the dramatic decrease in commercial litigation through the courts and hence a loss of a vibrant jurisprudence.
More darkly, the lack of commercial experience of many judicial officers discourages litigants’ confidence in the courts and in the likelihood of a good, well-reasoned decision.
Whatever else may be said about the transformation of the judiciary in South Africa, it must be conceded that the initial goal of appointing judges with years of sophisticated commercial practice at the Bar or side-Bar behind them cannot be squared with that of transforming the race and gender composition of the Bench.
Simply put, as accomplished in a variety of areas of law as were many who were elevated to the Bench, as a result of discriminatory briefing patterns over decades, there were, by the end of apartheid, all too few black and women lawyers with sufficient commercial expertise. Indeed, white male legal practitioners still enjoy the overwhelming majority of opportunities to do that sort of work, a particularly disturbing fact, given that we are now 16 years into our nonracial and nonsexist democracy.
Nonetheless, there are a number of top-flight practitioners who should be attracted to the Bench and who would add to the commercial expertise of the judiciary. The problems of expertise and expeditious processes of litigation must be dealt with as matter of urgency.
A most unfortunate consequence of this history of “outsourcing” for the development of South African common law is that the decisions made in these private arbitrations are not reported anywhere.
The confidentiality that often cloaks these proceedings therefore results in the loss of a large and ever-growing body of precedent in vital areas of law. Suggestions of a reporter service, along the lines of the law reports but modified to protect the commercially sensitive information that may be disclosed during the arbitration, have so far not been taken up either by the profession or legal publishers.
This loss of precedent and the attendant benefit of exposure of the arguments and decisions of some of the most skilled commercial practitioners is devastating to the development of commercial law. Even in arbitration, the law relied upon by the parties turns on precedents that are decades old.
The problem may be exacerbated when the 2008 Companies Act comes into operation. If the practice of commercial arbitration continues apace, vast sections of the new Act will never be subjected to judicial examination.
Few judgments will be available to guide the commercial community about the meaning of a complex, innovative and far-reaching piece of legislation. On what basis of established principle will clients be advised by lawyers of the implications of key provisions of the new Act, which seeks to engage with and change the existing law significantly?
There is the possibility that the new compulsory dispute resolution forums created by the new Act may ensure that some of these disputes return to the public domain and enrich the common law.
The new Companies Act establishes the Companies and Intellectual Property Commission, the Companies Tribunal and the Takeover Regulation Panel. These bodies, to different degrees, are required to investigate, resolve and adjudicate disputes relating to company law and its administration in South Africa.
Modelled to a large extent on the highly successful Competition Commission and Competition Tribunal, these bodies are expected to replicate the competition authority’s development of a specialised body of precedent and case law.
Admittedly much company law will remain within the jurisdiction of the courts, but the new Commission and Tribunal may well shift some of the focus from private arbitration rooms and into the daylight where the public will see a transparent framework within which the new Act will operate.
If these bodies, like the competition authority, are staffed by specialists with expertise, skill and a vision for the field, we can hope for a return to a vibrant, sophisticated and growing companies law. If they are marked by incompetence or inexperience, commercial litigants will merely seek to avoid engaging with them and remain behind closed doors, to the detriment of the broader legal system.
The new Companies Act offers an opportunity to ensure that this critical area of law, particularly for the purposes of economic growth, develops in a transparent, accountable and accessible manner.