TOOLS OF THE TRADE – JUNE 2021
CAN AN ARBITRATOR RESIGN?
Introduction
| 1. | Notwithstanding how careful an arbitrator may be upon acceptance of his or her appointment to decide a reference, circumstances may arise later on in the case that may prompt an arbitrator to consider resignation. Such circumstances might include unfounded challenges, health and other personal matters and the emergence of new conflict. |
| 2. | In terms of Rule 15 of the Code of Ethics adopted by the Association of Arbitrators (Southern Africa) (the Association), an arbitrator must proceed diligently to resolve the dispute or disputes between the parties in a fair and efficient manner. It appears that it is generally accepted internationally that arbitrators are under an obligation to perform the function for which they are appointed.[1] The corollary of this positive obligation to complete the mandate is the negative obligation not to resign, withdraw or abandon the appointment. |
| 3. | Section 13(1) of the Arbitration Act 42 of 1965 (the Arbitration Act) provides: |
‘Subject to the provisions of subsection (2), the appointment of an arbitrator or umpire, unless a contrary intention is expressed in the arbitration agreement, shall not be capable of being terminated except by consent of all the parties to the reference.’
The effect of this section is that an arbitrator cannot resign or withdraw unilaterally from his or her office, i.e., unless the arbitration agreement allows for such resignation or withdrawal.[2]
The Umgeni Water case
| 4. | In Umgeni Water v Hollis NO and Another[3] (Umgeni Water), the court had occasion to consider the contention that an arbitrator can resign from his or her office. The first respondent in the case, Adv Hollis SC (Hollis) was appointed as arbitrator by the applicant (Umgeni) and the second respondent in the case to determine a dispute between them. It appears from the judgment that formal rules did not apply to the arbitration. The Rules published by the Association certainly did not apply. |
| 5. | After Hollis had been appointed, Umgeni asked Hollis to step down as arbitrator. Hollis refused to voluntarily step down.[4] |
| 6. | Umgeni then brought the application to have Hollis’s appointment as arbitrator set aside. Umgeni conceded in its founding papers that the Arbitration Act does not expressly provide for the voluntary resignation of an arbitrator. However, it relied upon section 10(1) of the Arbitration Act which provides for the appointment of a substitute arbitrator.[5] |
| 7. | Section 10(1) reads: |
‘Where an appointed arbitrator refuses to act or is or becomes incapable of acting or dies or is removed from office or his appointment is terminated, or is set aside, and a contrary intention is not expressed in the arbitration agreement, the party or parties who appointed him may appoint another arbitrator in his place.’
| 8. | The reliance upon section 10(1) by Umgeni was misconceived. Hollis did not refuse to act, he was not incapable or acting and his appointment had neither been terminated nor set aside. He simply adopted the attitude that he would step down in the event of both parties jointly requesting him to do so. He considered that he was not entitled to step down by virtue of the provisions of section 13(1) of the Arbitration Act. |
| 9. | In his judgment, Van Zyl J stated that Umgeni could not legitimately invite Hollis to refuse to continue with his duties, and then reproach him for failing to accept such invitation.[6] Van Zyl J agreed with argument submitted on behalf of Hollis that if Hollis were to refuse to continue acting as arbitrator, despite lack of agreement between the parties to the reference, then Hollis would be exposing himself to potential claims for damages for breach of the duties which he had assumed as arbitrator.[7] |
| 10. | It was found that an arbitrator, upon his or her appointment as such, becomes obliged to perform the duties which he or she so assumed, unless there is any agreement to the contrary. According to Van Zyl J, it is for this reason that section 13(1) of the Arbitration Act provides for the termination of an arbitrator’s appointment only when the parties to the reference consent thereto.[8] |
| 11. | It is accordingly evident that in domestic arbitrations, to which the Arbitration Act applies, an arbitrator is not entitled to resign unilaterally. |
Provisions allowing for the withdrawal by an arbitrator from his or her office
| 12. | The Arbitration Act applies to all domestic arbitrations, to which the International Arbitration Act 15 of 2017 (the International Arbitration Act) does not apply. The International Arbitration Act applies to international commercial disputes as set out in Article 1 of Schedule 1 to the International Arbitration Act (Schedule 1).[9] |
| 13. |
Article 14(1) of Schedule 1 provides: ‘If an arbitrator becomes de jure or de facto unable to perform his or her functions or for other reasons fails to act without undue delay, his or her mandate terminates if he or she withdraws from office or if the parties agree on the termination …’ |
| 14. | The above provision contemplates the withdrawal from office by an arbitrator in limited circumstances. It is a requirement for withdrawal that the arbitrator must become unable to perform his or her functions, or for other reasons fails to act without undue delay. An arbitrator would, for instance, become unable to perform his or her functions if he or she is incarcerated, declared of unsound mind, falls seriously ill or becomes demented, among other things. |
| 15. | Article 13(2) of Schedule 1 of the International Arbitration Act provides that a challenged arbitrator may withdraw from office. Although this may be tantamount to a resignation, such resignation will not be voluntary and will flow from a challenge which is a requisite for the arbitrator’s withdrawal. |
| 16. | It follows that the International Arbitration Act does not allow for the voluntary resignation of an arbitrator unless the aforementioned instances arise. |
| 17. | The 2018 Edition Rules for the Conduct of Arbitrations (the Rules), published by the Association, provide for the withdrawal of an arbitrator from his or her office when challenged. In terms of Article 13(3) of the Rules, an arbitrator may, after the challenge, withdraw from his or her office. A challenge may arise in terms of Article 12(1) of the Rules if justifiable doubts exist as to his or her impartiality or independence. In terms of Article 12(3) of the Rules, it may also arise in the event of the de jure or de facto impossibility of the arbitrator performing his or her functions. It should be noted that the Rules, unlike the International Arbitration Act, do not allow for the withdrawal of an arbitrator where the arbitrator becomes de jure or de facto unable to perform his or her functions, absent a challenge. A challenge by a party to the reference is a necessary requirement. |
Conclusion
| 18. | It ought to be observed that in general, restrictions on the resignation of an arbitrator are necessary and sensible. The resignation of an arbitrator, especially if it happens at a late stage of the proceedings, can be very disruptive because it may lead to delays, increased costs and even the repetition of hearings. However, the regime under the Arbitration Act, which does not allow for the withdrawal of an arbitrator under any circumstances, save with the consent of the parties, may give rise to an arbitrator finding himself or herself in an untenable situation. For instance, the arbitrator may fall seriously ill, resulting in him or her being factually unable to perform the duties assumed upon appointment. In such circumstances it will be unfair to expect from the arbitrator to continue. On the other hand, it must be balanced with the arbitrator’s ethical duty to perform the function for which he or she was appointed. |
| 19. | It seems that Article 14(1) of Schedule 1 of the International Arbitration Act provides the solution to this conundrum. An arbitrator should be able to withdraw or resign in appropriate but well defined circumstances.. |
ADV K BAILEY, SC, FAArb (SA)
Sandton
8 May 2021
[1] International Bar Association’s Rules of Ethics for International Arbitrators, Fundamental Rule 1; American Arbitration Association’s Code of Ethics for Arbitrators in Commercial Disputes, Paragraph H of Canon I.
[2] South African Transport Services v Wilson NO and Another, 1990 (3) SA 333 (W) at 340 I – J.
[3] 2012 (3) SA 475 (KZD).
[4] Umgeni Water, para [14]
[5] Umgeni Water, para [16]
[6] Umgeni Water, para [39]
[7] Umgeni Water, para [38]
[8] Umgeni Water, para. [37]
[9] Schedule 1 comprises the ‘UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985, as amended by the said Commission on 7 July 2006 and as adapted in Schedule 1’ (Emphasis added). It is also defined as the ‘Model Law’ in section 1 of the International Arbitration Act.