This blog was co-authored with Felix Le Roux, Candidate Attorney

In a May 2023 judgment, the Pretoria High Court held that arbitrators are precluded from hearing reviews which are brought under the principle of legality.

The Independent Development Trust (IDT), an organ of state, and Bakhi Design Studio (Bakhi) concluded various procurement contracts for the provision of architectural services in 2013 and 2014. A dispute arose between the parties. Bakhi instituted action against the IDT. The parties subsequently agreed to submit their dispute to arbitration. However, less than a month before the arbitration hearing was scheduled to commence, the IDT brought an urgent application for an order staying the arbitration proceedings, pending the finalisation of a self-review application brought on the basis that the procurement contracts were concluded unlawfully.    

Since self-reviews may only be conducted under the principle of legality and not in terms of the Promotion of Administrative Justice Act, 2000 (PAJA), the issue before the court was whether an arbitrator may hear a legality review. The court considered it an underlying principle emanating from the Constitution that the courts are the only arbiters of constitutional matters. The issue of unlawful procurement under the principle of legality is, in the court’s view, a constitutional matter and the sole preserve of the courts for the following reasons:    

  • Non-compliance with section 217 of the Constitution, which requires a fair, equitable, transparent, competitive and cost-effective procurement process, raises constitutional issues;
  • If such non-compliance is found, the court must declare the procurement contract invalid in terms of section 172(1)(a) of the Constitution, and may exercise a discretion to grant just and equitable relief in terms of section 172(1)(b). The declaration of invalidity and related discretion may only be exercised by the courts in terms of the Constitution;
  • Public awareness and participation in constitutional litigation is fundamental to our democracy and is facilitated by Rule 16A of the Uniform Rules of Court, which requires notification of constitutional matters to the public. Arbitration proceedings take place in the private realm and do not allow for public participation; and
  • Court judgments are published online and in law reports, whereas arbitration awards are not published generally and in fact often kept confidential between the parties.

Accordingly, the court ruled that legality reviews fall beyond the scope of an arbitrator’s jurisdiction. Given that the continuation of incompetent arbitration proceedings would be futile and a waste of public funds, the court granted the stay of the arbitration proceedings, pending the finalisation of the self-review application.

Although the court was mindful of Bakhi’s frustration with the late scuppering of the arbitration proceedings, the court considered the public interest concerns arising from a legality review as weighing heavier than the narrow interests of the parties. Accordingly, it was ordered that the costs of the urgent application would follow the costs of the self-review application.

The judgment is available HERE.