In a previous article we wrote about how the draft King Report recommended that an alternative dispute resolution (ADR) clause be incorporated in all contracts.  They recommended a clause, which we then converted into plain language.  We were delighted to hear that the King committee accepted our plain language version (with a few amendments).  There are significant benefits to be gained from plain language.

The Practice Notes to King III

So below is the clause that appears in the Practice Notes to King III and that King III recommends be included in all contracts.  Any contract that includes an alternative dispute resolution clause, an arbitration clause, or a mediation clause, should use this clause. Many people worked on this clause and therefore it is very hard to argue that there is a better clause.

The introduction to the King Code says the following:

It is accepted around the world that ADR is not a reflection on a judicial system of any country, but that it has become an important element of good governance. Directors should preserve business relationships. Consequently, when a dispute arises, in exercising their duty of care, they should endeavour to resolve it expeditiously, efficiently and effectively. Also, mediation enables novel solutions, which a court may not achieve, as it is constrained to enforce legal rights and obligations. In mediation, the parties’ needs are considered, rather than their rights and obligations. It is in this context that the Institute of Directors in Southern Africa (IoD) advocates administered mediation and, if it fails, expedited arbitration. Together with the Arbitration Foundation of Southern Africa, the IoD has developed an enforceable ADR clause for inclusion in contracts, the precedent of which is to be found in the Practice Notes to the report. The King Committee endorses the approach by the IoD. In Chapter 8 Principle 8.6 ADR, is dealt with in more detail.

ADR is also in line with the principles of Ubuntu.

And that is not a reference to the operating system Ubuntu.

AFSA is recommended by the IoDSA, but if another administrator is appointed, then its name should be inserted in place of AFSA.

No doubt, there are a lot of precedents that need to be updated!

The recommended alternative dispute resolution clause

A dispute concerning or arising out of this Agreement exists once a party notifies the others in writing of the nature of the dispute and requires it to be resolved under this clause. The parties must refer any dispute to be resolved by:

  • negotiation; failing which
  • mediation; failing which
  • arbitration.

Within ten Business Days of notification, the parties must seek an amicable resolution to the dispute by referring it to designated and authorised representatives of each of the parties to negotiate and resolve it by the parties signing an agreement resolving it within 15 Business Days.[private]

If negotiation fails, the parties must refer the dispute for resolution by mediation under the rules of the Arbitration Foundation of Southern Africa (or its successor or body nominated in writing by it in its stead) (”AFSA“).

If mediation fails, the parties must refer the dispute within 15 Business Days for resolution by arbitration (including any appeal against the arbitrator’s decision) by one arbitrator (appointed by agreement between the parties) as an expedited arbitration in Sandton under the then current rules for expedited arbitration of AFSA. If the parties cannot agree on any arbitrator within a period of ten Business Days after the referral, the arbitrator will be appointed by the Secretariat of AFSA.

The periods for negotiation or mediation may be shortened or lengthened by written agreement between the parties.

This clause will not preclude any party from access to an appropriate court of law for interim relief in respect of urgent matters by way of an interdict, or mandamus pending finalisation of this dispute resolution process, for which purpose the parties irrevocably submit to the jurisdiction of a division of the High Court of the Republic of South Africa.

This clause is a separate, divisible agreement from the rest of this Agreement and must remain in effect even if the Agreement terminates, is nullified, or cancelled for any reason or cause.