In a dispute over whether an arbitration could be held to resolve the dispute between the parties, one party alleged that the arbitration agreement itself did not exist for lack of agreement between them. Where there is a challenge to the arbitration agreement itself, so as to put into question the consent of the parties to have the dispute submitted to arbitration, a court will have to consider how best to deal with that challenge. A court may decide that it would be preferable to decline the invitation to do so and allow the arbitrator, the opportunity to first render an award on the question of their jurisdiction, unless the arbitration agreement specifically gives such competence to the arbitrators.
The fact that the commercial rules of the Arbitration Foundation of South Africa provide for referring such a dispute to the arbitrator cannot be used where the arbitration agreement applying those rules is itself the subject of the dispute. If the challenge is that the contract is invalid, unenforceable or never came into existence, then it may appear logical that the arbitration clause must fail. The court applied a principle from German law known as competence-competence. Arbitrators have competence to rule on their own jurisdiction (competence to hear the dispute) if the matter has already been referred to an arbitrator by the parties. If however one of the parties disputes the existence of the arbitration agreement, it is a matter for the courts.