In the 2007 case of Gutsche Family Investments (Pty) Ltd and Others v Mettle Equity Group (Pty) Ltd and Others [2007 (5) SA 491 (SCA)], the Supreme Court of Appeal delivered a key ruling on the limits of arbitral jurisdiction—especially in the context of appeal arbitrators under the AFSA Rules.
At issue was a seemingly technical, but critical question: can an appeal arbitrator decide whether he has jurisdiction to hear an appeal—particularly when that appeal concerns an interlocutory ruling like the dismissal of an exception?
The dispute stemmed from a sale agreement which included an arbitration clause referring disputes to the Arbitration Foundation of South Africa (AFSA). When a disagreement arose, it was referred to arbitration. The arbitrator dismissed part of Mettle’s counterclaim, and Gutsche attempted to appeal the ruling. Mettle objected, arguing that the parties had only agreed to appeals against final awards, not procedural rulings.
Despite this, the appeal arbitrator assumed jurisdiction, ruled on the matter, and awarded over R9 million in Gutsche’s favour.
The SCA, however, found this to be a step too far.
Quoting directly from the Court’s reasoning:
“Where the parties themselves disagree as to the powers conferred on an appeal arbitrator, the appeal arbitrator cannot extend the area of jurisdiction over the very matter which he is required to resolve. And if he does, he will act beyond his mandate.” (para [14], 495G–496A)
The court held that unless a written agreement expressly allows it, interim rulings such as the dismissal of an exception are not appealable under the AFSA Rules—just as they wouldn’t be in ordinary High Court litigation. By proceeding to hear the appeal, the arbitrator exceeded his powers under section 33(1)(b) of the Arbitration Act 42 of 1965. His award was set aside.
Takeaway for Practitioners
This judgment underscores the importance of clearly defining the scope of appeal rights in arbitration agreements. It also reinforces the rule that arbitrators—no matter how experienced—cannot grant themselves powers not conferred by the parties.
When it comes to arbitration, clarity is king, and caution is currency.