COMMERCIAL MEDIATION IN SOUTH AFRICA BY RONAN FEEHILY AND JOHN BRAND
Mediation is not a recent development in South Africa. It was used as the primary method of dispute resolution in some traditional pre-industrial societies, and more recently in resolving industrial conflicts and a range of disputes in other fields.1 The perception exists that mediation has more in common with traditional African methods of dispute resolution than the usual adversarial style of arbitration practice associated with colonial arbitration legislation of English origin.2
The traditional way of resolving disputes in Africa has been described as follows:
A dispute in a village between families, members of a family, or members of a tribe would be referred to the elders of the families, headman, chief or king, depending on the nature of the conflict. The aggrieved person will state his or her case fully to the inkundla/lekgotla. The defendant is called upon to meet the accusations and witnesses are heard. Interrogations follow until the truth is established. Discussions take place and an agreement is reached binding both parties. That the accused is also involved, and his or her case is heard, makes it possible for both parties to accept the decision of the inkundla/lekgotla. The question is not who is going to win or lose, but how to attain a win-win outcome.3
It has become common in South Africa to refer commercial disputes to arbitration with many arbitration agreements containing automatic rights of appeal to an appeal tribunal. Arbitration awards, even those of an appeal tribunal, are being taken on review to the High Court, the dispute thereby entering the very court process that the parties were initially endeavouring to avoid. Cases are still conducted on the basis of trial by ambush with arbitration becoming increasingly expensive and the final resolution of disputes being inordinately delayed.4
While the resolution of community-based disputes has traditionally been seen as part of ubuntu, many believe that this concept is developing in the corporate realm in the form of commercial mediation.5 The new Companies Act, expected to be passed later this year, provides for a Companies Ombud, an independent organ of the state with a mandate to serve as a forum for voluntary ADR in any matter arising under the Act. The King III Report on Corporate Governance, which is also expected later this year, will require company directors to consider ADR (including mediation) before resorting to litigation, based on the fiduciary duty of a director and the management of risk.6 45 IBA Legal Practice Division MED IAT ION COM ITTE NEWSLETERSeptember 2008
In addition to the advances in the commercial mediation sphere mentioned above, recent statutory provisions dealing with mediation in niche areas such as tax7 and consumer law8 show the advance of the process into these areas. There have also been non-legislative initiatives.
Johannesburg advocacy group
A group of attorneys and advocates in Johannesburg recently decided to foster the implementation and use of commercial mediation. They identified a need for high quality skills training, continual professional education and ongoing training, evaluation and accreditation in order to create a pool of competent commercial mediators.
As part of this initiative, Conflict Dynamics in association with CEDR recently trained and accredited three groups of South African commercial mediators. Conflict Dynamics is a South African training provider which specialises in the training of mediators.
Cape Town referral group
A group of small- to medium-sized law firms in Cape Town9 are in the process of establishing an organisation to promote the use of mediation to resolve commercial disputes. The immediate aim of the group is to publish information on the benefits of mediation and also promote the member firms of the group as potential service providers.
Tokiso is a well established private sector provider of labour mediation services in South Africa. On 18 March 2008, Tokiso Commercial was launched in Johannesburg and is comprised of a panel of commercial mediators who have been accredited by CEDR. The organisation’s main initiative is to promote commercial mediation and market its services. There are currently plans to hold similar launches in Cape Town and Durban, to arrange breakfast meetings with firms of attorneys and their clients, to make available through CEDR the training of lawyers who will appear in mediations and to speak to companies in the private and public sectors in order to encourage them to resolve their disputes through mediation. Tokiso Commercial is ideally placed to encourage the development and use of commercial mediation locally in South Africa and regionally in Africa.10
Centre for Mediation
The Institute of Directors (IOD), based in Johannesburg, has also recently established a Centre for Mediation (the Centre) for the resolution of commercial disputes.11 Where negotiations fail, the IOD believes that every director owes a duty to their company to consider mediation as the next logical step towards any dispute resolution.12 The Centre will assist disputing parties to find an agreeable solution to their conflict through the provision of a range of professional mediators who have mediation experience across a number of industries.13 The Centre plans to train and accredit its own mediators who must abide by the Centre’s Code of Conduct.14
The IOD promotes the use of IOD mediation clauses as a precondition to arbitration. The logic is that parties should first attempt mediation through the Mediation Centre and, if that fails, arbitration at the Arbitration Foundation of South Africa according to its rules.15 There has been traditional reluctance on the part of contract drafters to include mediation provisions in dispute resolution clauses in commercial contracts in South Africa.16 As the representative body for directors, professionals and business leaders, the IOD is well placed to develop a culture of including such provisions in agreements and in turn the use of mediation to resolve commercial disputes.
It has been suggested that commercial mediation in South Africa has a dual function, as a mechanism to resolve disputes and as a management tool.17 Corporate governance concerns not only how a board steers or directs a company and monitors management, but how managers manage. Consequently, a director has a duty of care to endeavour to ensure that there is a mechanism to manage disputes and if conflict arises to resolve it as effectively, expeditiously and efficiently as possible. Mediation, it is believed, can become this management tool.18
As it is good corporate governance to have an upfront agreement to encourage collaborative problem solving in order to achieve agreed goals when a dispute arises, it has been suggested that the constitution of a corporation should also have a negotiation, mediation and arbitration clause in it. Experience in South Africa suggests that 80 per cent of disputes are settled before reaching the doors of the court, on the steps of the court, 80 per cent of the balance is settled and of those that go to trial, several are settled after a few days of adversarial litigation. In light of this, a limitation on access to the courts could be built into the constitution of companies by spelling out why the parties to that constitution believe that the limitation is advantageous for its stakeholders. People contracting with the company could contract to align themselves with this limitation, which will, it is believed, be enforced by courts around the world.19
The basis for this belief is that there was a time when South African courts refused to order contracted mediation because they could not see that their orders would be carried out by the parties, for example, to negotiate in good faith. This is no longer the position.20
CommercialmediationinSouthAfrica46 IBA Legal Practice Division MED IAT ION COM ITTE NEWSLETERSeptember 2008
If the procedures are agreed or there is a reference to the rules of an administrator of mediators, the process will be enforced by the court.21 This is where Tokiso Commercial and the recently established mediation centre can play a key role.22
Access to justice
Access to justice is also a very material factor in driving the commercial mediation movement in South Africa. In August 2007, for example, the Deputy Chief Justice Moseneke urged the 300 residents of two derelict inner-city buildings to mediate their eviction dispute with a municipality.
The backlog in the court roll in most jurisdictions of the High Court is by itself evidence of the need for the introduction of active case management in the rules of civil procedure. These could include a provision, as in the UK, which entitles judges to refuse to enrol cases where no attempt has been made to mediate.
In the UK judicial activism has played a critical role in the growth of commercial mediation, as has the UK government’s pledge to consider ADR in the resolution of all disputes to which it is a party. The urging by Deputy Chief Justice Moseneke may represent the beginning of such activism in South Africa and the same pledge may be given by the government and private sector players in South Africa.
The University of Stellenbosch Business School recently launched a centre for conflict management, dispute resolution and negotiation.23 The purpose of the centre is to develop advanced conflict management and negotiation learning practice in the business and organisational context in Africa, through academic programmes at masters and doctoral level, research, staff development and curriculum development.24 There are also plans to run shorter courses such as management development programmes. It will be the first centre of education in South Africa to have a specific focus on the resolution of commercial disputes. It is to be hoped that this initiative will serve as an example to other tertiary level institutions in South Africa on the importance of commercial mediation as an essential module in their business and law courses.
Commercial mediation has the potential to offer huge benefits to dispute resolution in South Africa. The country has a rich mediation tradition to build on and although there is much to be done, there are signs that the commercial mediation movement is accelerating.
1 Charles Nupen, ‘Mediation’ in Paul Pretorius (ed), Dispute Resolution at 50.
2 South African Law Commission Project 94 Report on Domestic Arbitration (2001) at 9.
3 William Zartman (ed), Traditional cures for Modern Conflicts at 171.
4 John Myburgh, speech delivered at the launch of Tokiso Commercial, Johannesburg, 18 March 2008.
5 Amanda Bougardt and Mervyn King ‘The Only Place “Litigation” Should Precede “Mediation” is in the Dictionary’, 1 February 2007, Without Prejudice at 18.
6 John Myburgh, speech delivered at the launch of Tokiso Commercial, Johannesburg, 18 March 2008.
7 Rule 7 promulgated (1 April 2003) under section 107 (A) of the Income Tax Act 58 of 1962 (as amended) provides that any taxpayer who is entitled to object to an assessment and is dissatisfied with the decision of the Commissioner under the Act may request that the matter be resolved by an ADR process in their notice of appeal. Similarly the Commissioner can request an ADR procedure if he/she thinks it would be appropriate in the circumstances. Provided there is agreement, an ADR procedure such as mediation may be used, subject to the requirements set out in the schedule to the rules.
8 Section 134 of the National Credit Act 34 of 2005 provides as an alternative to filing a complaint with the National Credit Regulator regarding a complaint concerning an alleged contravention of the Act, a person may refer the matter to mediation, provided the credit provider is not a financial institution (in which case it would go to the relevant Ombudsman) and does not object. Similarly, under section 77 of the Consumer Protection Bill 2007, a person may refer a dispute to be mediated by an Ombud under the Act.
9 The group currently has four members: Walkers, Craig Schneider & Associates, Terence Matzdorss and De Rooy Brodziak. Interview between Ronán Feehily and attorney John O’Leary, Cape Town, 20 June 2007, as part of the empirical study for a PhD thesis at the University of Cape Town.
10 John Myburgh, speech delivered at the launch of Tokiso Commercial, Johannesburg, 18 March 2008.
11 www.iodsa.co.za/centre_mediation.asp (last visited 2 July 2007).
12 www.iodsa.co.za/centre_mediation.asp#info (last visited 2 July 2007).
13 www.iodsa.co.za/centre_mediation.asp#info (last visited 2 July 2007).
14 Telephone interview between Ronán Feehily and Michael Judin, Executive Committee Member, IOD, 20 June 2007, as part of the empirical study for a PhD thesis at the University of Cape Town.
15 Interview between Ronán Feehily and Mervyn King, Vice-President, IOD, Cape Town, 20 June 2007, as part of the empirical study for a PhD thesis at the University of Cape Town.
16 Interviews conducted by Ronán Feehily in Cape Town and Johannesburg with practising commercial mediators between 21 May and 20 June 2007, as part of the empirical study for a PhD thesis at the University of Cape Town.
17 Mervyn King’s speech delivered at a workshop on mediation held by the Global Corporate Governance Forum, with the International Finance Corporation, Paris, 12 February 2007.
18 King (n 17).
19 King (n 17).
20 See Southernport Development (Pty) Ltd v Transnet Ltd 2005 (2) SA 202 (SCA).
21 See the endorsement by the Supreme Court of Appeal of Kirby P’s reference to a readily ascertainable external standard in the Australian case Coal Cliff Collieries (Pty) Ltd v Sijehama Pty Limited (1991) 24 NSWLR 1.
22 Mervyn King’s speech delivered at the launch of the Mediation Centre, 28 March 2007.
23 Under article 1 of the Centre’s constitution, it is referred to as ‘The Africa Centre for Dispute Settlement’.
PhD Candidate, University of Cape Town
Director, Bowman Gilfillan, Johannesburg
Director, Conflict Dynamics, Johannesburg