THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:  421/2013

REPORTABLE

In the matter between:

ZHONGJI DEVELOPMENT CONSTRUCTION ENGINEERING COMPANY
LIMITED

Appellant

and

KAMOTO COPPER COMPANY SARL

Respondent

Neutral citation:
Zhongji Construction v Kamoto Copper Company (421/13) [2014]
ZASCA 160 (1 October 2014)
Coram:
Mpati P, Willis and Mbha JJA and Mathopo and Gorven AJJA

Heard:
5 September 2014

Delivered:
1 October 2014

Summary:
Appeal - jurisdiction – on appeal, held that the process of arbitration
should be respected – no basis for a declaratory order – appeal
dismissed.

ORDER

On appeal from: South Gauteng High Court, Johannesburg (Myburgh AJ sitting
as the court of first instance):
The appeal is dismissed.

JUDGMENT

Willis JA (Mpati P, Mbha JA and Mathopo AJA concurring):

[1] This appeal is concerned with whether the high court (Myburgh AJ) was
correct in dismissing an application for a declaratory order that a particular dispute
was „arbitrable‟ and whether an arbitration agreement applied in respect of certain
invoices that form the subject matter of the dispute between the parties. The appeal
to this court is with the leave of the high court.

[2] The appellant, which was the applicant in the high court, is a Chinese
company known as Zhongji Development Construction Engineering Company
Limited (Zhongji Construction). The respondent is a Congolese company, Kamoto
Copper Company SARL (Kamoto). The parties are therefore both peregrini of the
courts of South Africa.

[3] In April 2007 Zhongji Construction had been invited by a South African
company, Bateman Minerals & Metals (Pty) Limited (Bateman), acting on behalf of a
Congolese company known as DRC Copper and Cobalt Project SARL (the DCP), to
tender for the supply and construction of piling and civil works at the DCP‟s mining
site near Kolwezi in the Democratic Republic of Congo (the Congo). Arising from this
invitation, Zhongji Construction was awarded the tender. As a result of the award of
the tender Zhongji Construction and the DCP concluded a written agreement on 20
August 2008.

[4] The parties have referred throughout the proceedings in both the high court
and this court to this agreement as „the main agreement‟. For convenience, I shall do
so as well. In terms of this agreement, the „governing law‟ thereof is „English law‟.
The main agreement provides that, unless the parties otherwise agree, disputes
between them „shall be finally settled under the Rules for the Conduct of Arbitrations
as published by the Association of Arbitrators (Southern Africa)‟ (the Arbitration
Association). This main agreement also provides that three arbitrators would be
appointed in any arbitration between them, these arbitrators to be chosen either by
agreement between the parties or, failing such an agreement, by the chairperson of
the Arbitration Association. The arbitration clause in the main agreement moreover
provides that the arbitration shall be held in Gauteng.

[5] At all material times in its dealings with Zhongji Construction, Bateman had
been acting on behalf of the DCP. Prior to the formal conclusion of the main
agreement Bateman had advised Zhongji Construction in a series of letters,
stretching from 12 May 2007 to 21 September 2007, that it would be awarded the
tender and should proceed accordingly.  In November 2007 Bateman, again acting
on behalf of the DCP, informed Zhongji Construction that, as a result of „merger
talks‟, Zhongji Construction should suspend its construction operations for about
„three to six months‟.

[6] In the meantime, shipments from China to the Congo were already on the
high seas and could not be stopped. In consequence of the suspension of
operations, representatives of Zhongji Construction and the DCP met in Beijing on
26 and 27 November 2007 to reach an agreement that would ensure that Zhongji
Construction would not be compromised in respect of work already done and
expenses actually incurred thus far.

[7] Arising from the discussions which took place at the meeting in Beijing in
November 2007, an interim agreement was reached between Zhongji Construction
and the DCP to tide things over until there was greater certainty about the future of
the piling and construction project. This interim agreement is reflected, at first, in an
exchange of correspondence at the end of November 2007 and the beginning of
December 2007. The interim agreement was formalised on 30 January 2008. The

parties have referred to this agreement as the „interim agreement‟. I shall do so as
well. Concluded under stressful conditions, the interim agreement had, quite
understandably, been short on detail other than what were, in the minds of the
parties, the essentialia. Counsel for Zhongji Construction has referred to the interim
agreement as being „skeletal‟. This is not an inaccurate description. It contains no
clause dealing with any dispute resolution mechanisms.

[8] On 8 May 2008, Bateman gave notice to Zhongji Construction that the piling
and civil work should proceed and that the drilling rigs should be re-mobilised. With a
view to this work being done, Bateman supplied Zhongji Construction with geological
data so that it could proceed with the piling, as well as the pile cape and the pile
layout. Bateman also gave Zhongji Construction drawings for the civil works,
instructing Zhongji Construction to purchase the necessary materials for construction
and to mobilise the necessary equipment and personnel accordingly. Zhongji
Construction began driving the first test piles at the site during September 2008,
completing all test piles by 24 October 2008.

[9] Similarly to its conduct on 8 May 2008, the DCP instructed Zhongji
Construction on 15 October 2008 not to proceed with the procurement or shipping of
any cement or reinforcing steel and also informed it that it should not mobilise any
additional personnel to site until further notice. On 29 October 2008, the DCP
instructed Zhongji Construction to suspend progress of all works.

[10] On 20 November 2008, Bateman on behalf of the DCP gave Zhongji
Construction a written instruction that all materials in transit between China and the
site near Kolwezi should be dealt with as follows:
(a)
Cargo that was, at that time, in transit in Zambia, Zimbabwe or the northern
parts of South Africa should be delivered to and held in storage at Bridgeport, No1
Bridge Close, City Deep, Johannesburg; and
(b)
All other cargo, in transit either in or to South Africa, should be delivered to
and held in storage at Bridgeport, 151 South Coast Road, Rossburgh, Durban.

[11] In this instruction of 20 November 2008, Bateman assured Zhongji
Construction that it would be reimbursed for all expenses in relation thereto, storage

charges in South Africa to be levied at US$2.75 per ton per week and US$210 per
container per week. Zhongji Construction implemented the instruction, incurring
transport and storage costs.

[12]  On 5 December 2008, Zhongji Construction was given due notice that the
construction work by it was no longer to continue. As a result, Zhongji Construction
ceased operations and commenced with its demobilisation on 2 January 2009.
Zhongji Construction did no further construction work at the site near Kolwezi.

[13] Arising from the interim agreement, Zhongji Construction submitted payment
certificates to Bateman as follows:
(a)
On 21 May 2008 in an amount of US$ 1 733 294.39 (relating, inter alia, to the
construction costs of the construction camp itself as well as the batch plants and
approved lump sum costs). This was approved by Bateman on 19 June 2008.
(b)
On 13 July 2008 in an amount of US$1 049 386.30 (relating, inter alia, to the
cost of building the cement stores, as well as standing time from 1 May 2008 to the
end of June 2008). This was approved by Bateman on 2 October 2008.
(c)
On 25 August 2008 in an amount of US$623 994.30 (relating, inter alia, to
standing time for July 2008). This was also approved by Bateman on 2 October
2008.
(d)
On 23 September 2008 in an amount of US$823 994.30 (relating, inter alia, to
standing time for August 2008 as well as a once-off cost of remobilising and
servicing the drilling rigs). This was approved by Bateman on 19 November 2008.

[14] The DCP paid Zhongji Construction US$1 733 294.39 in respect of the first of
these invoices. Zhongji Construction has not been paid in respect of the remaining
three invoices, arising from the interim agreement, in respect of which there is a total
of US$2 497 374.90 outstanding. Zhongji Construction claims this amount, together
with interest and costs, from Kamoto.

[15] Moreover, Zhongji Construction also submitted an invoice in an amount of
US$7 938 780.98 for work performed in terms of the main agreement during
September 2008. Bateman rejected this claim, indicating a number of items that
should be removed therefrom. Zhongji Construction then submitted a revised interim

payment certificate for US$5 027 380.99, which Bateman approved on 1 December
2008.  Zhongji Construction also submitted a claim for work performed in terms of
the main agreement for the period from 1 to 29 October 2008 in an amount of
US$3 324 995.68.  This claim remains unpaid.

[16] In the meanwhile, the DCP and Kamoto concluded a written agreement of
merger in Kinshasa in the Congo on 25 July 2009. The language in which this
merger agreement was concluded is French. The merger was authorized by a
decree signed by the President of the Congo on 27 April 2010.  Translations into
English of both the merger agreement and the decree were annexed to Zhongji
Construction‟s replying affidavit. The accuracy of these translations is not in dispute.

[17] The English translation from the French of the relevant portion of the merger
agreement reads:
„Under the terms hereof, DCP hereby contributes with the ordinary legal guarantees and
subject to the definitive fulfillment of the conditions precedent hereafter set out under Clause
9, to KCC, which accepts all of its goods, rights and obligations, assets and liabilities on 31
December 2008, without exception or reserve, in return for taking over its liabilities on the
same date under the terms and conditions provided in this agreement in consideration of
these contributions, the shareholders of DCP shall be allotted, in exchange, new shares in
KCC.
Therefore, as a result of the merger:
-
The property of DCP shall vest in KCC in the state which it exists at the time of
realization of the merger, it shall include all the goods, rights and assets belonging to the
Absorbed Company at that time, without exception;
-
KCC shall become debtor to the creditors of DCP in place of these, without this
substitution implicating novation with respect to them.‟
„KCC‟ in the agreement is Kamoto and the DCP is defined as the „Absorbed
Company‟.

[18] A turn of events then occurred. On 15 November 2010, Mr Williams of
Werksmans informed Zhongji Construction‟s attorneys that he acted for the DCP,
that the DCP had been dissolved and that, as a result of the merger agreement,
Zhongji Construction‟s claim lay against Kamoto.   Thereafter, further turns occurred.
A pre-arbitration meeting was held and there were exchanges of correspondence

between the parties. Kamoto‟s attorneys were, all the while, careful to make it clear
that they neither consented nor submitted to arbitration. Ultimately, Kamoto‟s
position consolidated into one in which the following was its standpoint:
(a)
The interim agreement was silent on dispute resolution procedures and,
therefore, any claims arising out of that agreement were not susceptible to
arbitration;
(b)
Kamoto had not been a party to the dispute resolution procedures provided
for in the main agreement;
(c)
In any event, in the light of –
(i)
both parties being peregrini of South Africa;
(ii)
there having been no attachment to confirm or found jurisdiction;
(iii)
the contract having been concluded outside of South Africa; and
(iv)
the performance of the contract having been outside of South Africa
no court in South Africa had jurisdiction to make any order as to whether the dispute
was subject to the arbitration clause in the main agreement.

[19] On 24 November 2010 Kamoto‟s attorneys, Werksmans, referred Zhongji
Construction, once again, to the merger agreement, drawing attention to the fact that
it had the effect of dissolving DCP. Werksmans did so by sending a letter to Zhongji
Construction‟s then attorneys, Deneys Reitz. A copy of the Presidential decree
authorizing the merger was attached to the letter. In response thereto, Deneys Reitz
wrote to Werksmans advising that it would proceed against Kamoto with the
recovery of the debt allegedly owed to Zhongji Construction.

[20] In addition to the claims mentioned above, Zhongji Construction has asserted
that it was entitled to payment of US$27 724 677.02 arising from its being „out of
pocket‟ as a result of the suspension and, ultimately, the termination of the piling and
construction works in terms of the main agreement. Zhongji Construction‟s version of
events is that the suspension and termination of these works occurred in order to suit
the DCP‟s convenience.

[21] In July 2010 Zhongji Construction, acting through its erstwhile attorneys,
submitted a letter of demand to Kamoto in which it claimed payment of
US$25 661 345.36. This demand included claims that fell outside those that arose

from the interim agreement. In the letter Zhongji Construction threatened that if this
demand went unsatisfied, it would „institute proceedings‟. Following discussions
between the two respective sets of attorneys, it was agreed that the dispute would
be referred to arbitration and that an agreement to this effect would be prepared for
signature. Zhongji Construction‟s attorneys drew up an agreement which it sent to
the attorneys for the other side for consideration. It has not been signed.

[22] On 22 December 2011, more than a year later, Werksmans wrote to Bowman
Gilfillan, the attorneys that were then acting for Zhongji Construction, to advise that
Kamoto was prepared to agree to the submission of Zhongji Construction‟s claims
under the „main contract‟ (ie the main agreement) but that it would not agree to „the
submission to arbitration of any claims made against it, arising from the interim
agreement.‟

[23] Relying on the arbitration clause in the main agreement, Zhongji Construction
has sought redress by way of arbitration. Originally, when Zhongji Construction
made application to the high court, it sought relief in the following terms:
„1.
Declaring the dispute between the applicant and the respondent for the payment in
the sum of US$2 616 847.84 in respect of three invoices issued under the interim agreement
concluded between the applicant and the DRC Copper and Cobalt Project SARL on 30
January 2008 to be arbitrable;
2.
Declaring that the arbitration agreement contained in the main agreement concluded
between the applicant and the DRC Copper and Cobalt Project SARL on 20 August 2008
applies to the three invoices annexed hereto marked „A‟, „B‟ and „C‟, issued under the interim
agreement concluded between the applicant and DRC Copper and Cobalt Project SARL on
30 January 2008.
3.
Costs of suit.
4.
Alternative relief.‟
The three invoices „A‟, „B‟ and „C‟ to which reference was made in Zhongji
Construction‟s notice of motion are the three unpaid invoices referred to in paragraph
14 above.

[24] Kamoto‟s statement of its position in the answering affidavit has been
confusing. It appeared to Zhongji Construction, the high court and, until near the end

of the argument, to several members of this court that not only did Kamoto dispute
both its liability to submit to arbitration under the provisions of the main agreement
and any liability under the interim agreement, but also that Kamoto took the position
that even if the court found that it was bound by the arbitral provisions of the main
agreement, the arbitrator could not have jurisdiction even to consider the claims
arising from the interim agreement. The reason that was given was that the
arbitration tribunal could not decide its own jurisdiction and the interim agreement
contained no reference to dispute resolution procedures. Furthermore, Kamoto
appeared to contest its liability under the interim agreement not only because that
agreement contained no reference to dispute resolution procedures, but also
because Kamoto had not been a party to the interim agreement which, it contended,
stood entirely separate and apart from the main agreement.

[25] In its answering affidavit, Kamoto accepted that in terms of the merger
agreement, it „becomes the debtor to the creditors of DCP‟ and that it „acquired all of
DCP‟s goods, rights and obligations, assets and liabilities on 31 December 2008‟. It
then goes on to contend that:

„The dispute resolution regime agreed between those parties in the main agreement was not
agreed by the respondent and was not an obligation assumed by the respondent in terms of
the merger agreement‟.

Kamoto thereafter adds that:
„The respondent submits, therefore, that although it accepted all of DCP‟s “goods, rights and
obligations, assets and liabilities on 31 December 2008” in terms of the merger agreement, it
did not thereby agree to the submission to arbitration of disputes relating to “such goods,
rights and obligations, assets and liabilities” either under the main agreement or the interim
agreement.‟

[26] In its replying affidavit, Zhongji Construction says:
„[I]t was the applicant‟s understanding that the respondent had submitted to arbitration the
disputes under the main agreement, and that the only issue at the time of launching these
proceedings was whether the respondent had submitted to arbitration the disputes pertaining
to the interim agreement‟.

Zhongji Construction‟s confusion was understandable. This will have a bearing on
costs. After Kamoto had filed its answering affidavit, Zhongji Construction then
amended its notice of motion to seek an order as follows:
„1 Declaring that the respondent:
(a)
Has assumed the rights and obligations of DRC Copper and Cobalt Project SARL
under the main agreement concluded between the applicant and DRC Copper and Cobalt
Project SARL on 20 August 2008;
(b)
Is bound by the arbitral regime catered for in clause 20 of the main agreement in
relation to disputes in connection with or arising out of the main agreement or the execution
of the works thereunder as envisaged by clause 20.4 of the main agreement:
2 Declaring the following disputes between the applicant and the respondent to be
arbitrable:
(a)
Payment in the sum of US$5 263 896.79 in respect of an invoice issued under the
main agreement (annexed hereto marked “A”);
(b)
Payment in the sum of US$3 324 995.68 in respect of work performed in terms of the
main agreement for the period 1 October 2008 to 29 October 2008 and in relation to which
no interim payment certificate was issued (Annexed hereto marked “B”);
(a)
Payment in the sum of US$25 369 421.06 in respect of the suspension and
thereafter the rumination of the main agreement (Annexed hereto marked ”C”);
(b)
Payment in the sum of US$2 616 847.84 in respect of three invoices (Annexed
hereto marked “E”, “F” and ”G”) issued under the interim agreement concluded between the
applicant and the DRC Copper and Cobalt Project SARL on 30 January 2008.
3  Costs of suit.
4  Alternative relief.‟

[27] Kamoto‟s counsel, Mr Leech, submitted that the relief sought by Zhongji
Construction was without precedent – anywhere in the English-speaking world. That
may be so, but his Kamoto‟s stance with respect to the referral of the disputed issues
to arbitration has been singularly unforthcoming.  It was only after Kamoto‟s counsel
was confronted in this court with the confusing and contradictory statement of
Kamoto‟s position in the answering affidavit, as well as the stance which appeared to
have been taken by its attorneys in correspondence when the arbitration was first
mooted by Zhongji Construction, that Mr Leech made concessions which made
Kamoto‟s position comprehensible. I now understand Kamoto‟s position to be this: If
this court were to find that there was a binding obligation, in terms of the main

agreement, read together with the merger agreement, for Kamoto to submit to
arbitration in respect of Zhongji Construction‟s claims arising from the main
agreement, the duly appointed arbitration tribunal would then have the power (some
might describe this as the „jurisdiction‟) to decide whether Kamoto was liable to
Zhongji Construction for its claims that arose from the interim agreement. In the
meantime, Kamoto persisted with its contentions referred to in paragraph 18 above.
In the light of the letter from Kamoto‟s attorneys to Zhongji Construction‟s attorneys
on 22 December 2011, to which reference has been made in paragraph 22 above,
this stance is not only baffling but extraordinarily unusual.

[28] The high court judge said:
„I am accordingly of the view that the respondent‟s objection with regard to jurisdiction is well
founded: disputes between it and the applicant concerning the effects of the merger are, at
best for the applicant, disputes which fall to be addressed by the arbitrator; they are not
matters in respect of which this Court has any jurisdiction absent an attachment.
I think it appropriate to add that I have, in coming to this conclusion, grappled with the fact
that there does not appear to be any genuine dispute with regard to the legal effect of the
merger. I was not however referred to any authority to support the proposition that a court is
entitled to have regard to the merits of a dispute in determining whether or not it has
jurisdiction; nor have I been able to find any.‟
It was on this basis that he found that the application had to be dismissed.  The judge
also found that, in any event, there was a dispute as to whether or not the procedural
prerequisites for the arbitration had been waived and on this basis, too, he could not
find in favour of Zhongji Construction.

[29] The majority judgment in the Constitutional Court, delivered by O‟Regan
ADCJ in  Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and another1 makes it
plain that our law of arbitration is not only consistent with, but also in full harmony
with, prevailing international best practice in the field.  Since 1976, our country has
been a party to The New York Convention on the Recognition of Foreign Arbitral
Awards 10 June 1958, widely known simply as „The New York Convention‟. The duty
of our courts to support international arbitration and to give effect, where they can, to

1 Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and another 2009 (4) SA 529 (CC) esp in paras
195 to 236.

international arbitration agreements is bolstered by the Recognition and Enforcement
of Foreign Arbitral Awards Act 40 of 1977.

[30] In Bank Mellat v Helsinki Techniki S.A.2, decided in the English Court of
Appeal, Robert Goff LJ said:
„Many important states are now parties to the New York Convention; and in this country the
Arbitration Act 1975 was enacted to give effect to the convention, to which this country is a
party. Parties to international arbitrations must nowadays frequently rely upon the convention for the
purpose of enforcing awards; and when the award contains (as it will, for example, where the
arbitration is conducted in accordance with the I.C.C Rules) an order for costs, the enforcement of the
award will include an order for costs comprised in the award.
Parties to an arbitration may well choose London as a convenient neutral forum. There are
now excellent, and rapidly developing, services available in London for the conduct of such
arbitrations. The English language used is frequently a language familiar to both parties, and
often too the language of the contract: for that reason, too, London may be a suitable forum.
The services of very experienced solicitors, counsel, experts and arbitrators are readily
available here. So London may be chosen as a convenient neutral forum; or it may be
nominated by a body such as the I.C.C.
The holding of such an arbitration in London appears to me to be a far cry from litigation
where a foreign litigant comes to this country to sue an English resident in the English
courts.‟3
Mutatis mutandis, one could substitute for „London‟ in this passage, a number of
different centres in South Africa where the same observations would apply, with
equal effect. The South African courts not only have a legal but also a socio-
economic and political duty to encourage the selection of South Africa as a venue for
international arbitrations. International arbitration in South Africa will not only foster
our comity among the nations of the world, as well as international trade but also
bring about the influx of foreign spending to our country.

[31] In Fili Shipping Co Ltd v Premium Nafta Products and Others [On appeal from
Fiona Trust and Holding Corporation and others v Primalov and others]4, Lord
Hoffmann, delivering the speech with which all their lordships concurred, said:

2  Bank Mellat v Helsinki Techniki S.A [1984] Q.B. 291.
3 At 314G-315C.
4 Fili Shipping Co Ltd v Premium Nafta Products and Others [On appeal from Fiona Trust and Holding
Corpn and others v Primalov and others] [2007] UKHL 40;  [2007] Bus LR.

„In my opinion the construction of an arbitration clause should start from the assumption that
the parties, as rational businessmen, are inclined to have intended any dispute arising out of
the relationship into which they have entered or purported to enter to be decided by the
same tribunal. The clause should be construed in accordance with this presumption unless
the language makes it clear that certain questions were intended to be excluded from the
arbitrator‟s jurisdiction.‟5 (My emphasis.)

[32] In Fiona Trust6 (which the House of Lords upheld in Fili Shipping), decided in
the English Court of Appeal, Longmore LJ, delivering the court‟s unanimous
judgment, said:
„As it seems to us any jurisdiction or arbitration clause in an international commercial
contract should be liberally construed. The words “arising out of” should cover “every dispute
except a dispute as to whether there was ever a contract at all”.‟7
And
„One of the reasons given in the cases for a liberal construction of an arbitration clause is the
presumption in favour of one-stop arbitration. It is not to be expected that any commercial
man would knowingly create a system which required that the court should first decide
whether the contract should be rectified or avoided or rescinded (as the case might be) and
then, if the contract is held to be valid, required the arbitrator to resolve the issues that have
arisen.‟8
And
„If there is a contest about whether an arbitration agreement had come into existence at all,
the court would have a discretion as to whether to determine that issue itself but that will not
be the case where there is an overall contract which is said for some reason to be invalid, eg
for illegality, misrepresentation or bribery, and the arbitration is merely part of that overall
contract. In these circumstances it is not necessary to explore further the various options
canvassed by Judge Humphrey Lloyd QC since we do not consider that the judge had the
discretion which he thought he had.‟ 9

[33] The respective definitions of „arbitration agreement‟ and „arbitration
proceedings‟ in the Arbitration Act confer wide powers on an arbitrator. These
definitions read as follows:

5 Para 13.
6 Fiona Trust Holding Corpn and others v Privalov and others [2007] EWCA Civ 20; [2007] Bus LR.
7 Para 18.
8 Para 19.
9 Para 39.

„“arbitration agreement” means a written agreement providing for a reference to arbitration
of any existing dispute or any future dispute relating to a matter specified in the agreement,
whether an arbitrator is named or designated therein or not.‟10
And
„“arbitration proceedings” means proceedings conducted by an arbitration tribunal for the
settlement by arbitration of a dispute which has been referred to arbitration in terms of an
arbitration agreement.‟11

[34] In terms of rule 12.1 of the sixth edition of the Rules of the Arbitration
Association:
„The arbitrator may decide any dispute regarding the existence, validity, or interpretation of
the arbitration agreement and, unless otherwise provided therein, may rule on his own
jurisdiction to act‟.

[35] Accordingly, once the arbitration tribunal has been duly appointed in terms of
the main agreement, the rules of the Arbitration Association would give the tribunal
itself jurisdiction to decide the issues which may be raised before it, including those
which have been raised both in the high court and this court.

[36] In the light of an arbitrator‟s power to determine his or her jurisdiction in an
issue that arises from the referral to arbitration itself, there is, therefore, no reason
why the dispute about whether or not the claims arising from the appellant‟s
performance in terms of the interim agreement is indeed arbitrable should not be
decided by the arbitration tribunal prior to an application to the high court. In the
event that the arbitration tribunal decides in Zhongji Construction‟s favour, Zhongji
may then apply, in terms of s 31 of the Arbitration Act, for the award to be made an
order of court. Once that happens, the award would be internationally enforceable by
reason of the New York Convention and treaties, too numerous to mention, in terms
of which there is reciprocal recognition, within the comity of nations, of orders of
court made in foreign countries.12

10 Section 1 of the Arbitration Act.
11 Ibid.
12   See also the Enforcement of Foreign Civil Judgments Act 32 of 1988, esp s 2 thereof.

[37] In terms of s 19(1)(a) of the old Supreme Court Act 59 of 1959, which read the
same as s 21(1) of the now prevailing Superior Courts Act 10 of 2013, the high court
„has jurisdiction…in relation to all causes arising within, its area of jurisdiction and all
other matters of which it may according to law take cognisance.‟ Once the arbitration
has commenced, the high court in Gauteng would therefore have jurisdiction to
exercise its powers in terms of the Arbitration Act, by reason of the combination of
the following:
(a)
the arbitration will be held in Gauteng (and therefore a cause will have arisen
within its area of jurisdiction); and
(b)
the New York Convention; and
(c)
the Recognition and Enforcement of Foreign Arbitral Awards Act; and
(d)
the Arbitration Act, which, inter alia, provides for making an arbitration award
an order of court; and
(e)
international treaties, to which South Africa is a party, which enable the
international enforcement of orders of the South African courts.
The reason is that the coalescence of these factors not only permits the making of
an order by the court but also ensures its effectiveness. As this court made clear in
Bid Industrial Holdings (Pty) Ltd v Strang and another (Minister of Justice and
Constitutional Development, Third Party),13 the effectiveness of its orders remains an
important consideration when a court is making a decision as to whether jurisdiction
is present, even though, nowadays, a generally more relaxed approach is taken on
the issue.14

[38] The process of arbitration must therefore be respected. Zhongji Construction‟s
application to the high court was accordingly premature and perhaps unnecessary.
In Geldenhuys and Neethling v Beuthin15 Innes CJ said:
„Courts of Law exist for the settlement of concrete controversies and actual infringements of
rights, not to pronounce upon abstract questions, or to advise upon differing contentions,
however important. And I think we shall do well to adhere to the principle laid down by a long
line of South African decisions, namely that a declaratory order cannot be claimed merely

13  2008 (3) SA 355 (SCA).
14 Paras 38 to 59. See also Metlika Trading Ltd v Commissioner, South African Revenue Service
2005 (3) SA 1 (SCA) para 36.
15Geldenhuys and Neethling v Beuthin 1918 AD 426.

because the rights of the claimant have been disputed, but that such a claim must be
founded upon an actual infringement.‟16 (My emphasis.)
Kamoto came perilously close to infringing Zhongji Construction‟s right to arbitration
under the main agreement. Nevertheless, the relief which Zhongji Construction
sought in the high court related to an abstract or „academic‟ question of the kind to
which Innes CJ referred.17 The application ought to have been dismissed for this
reason alone. The arbitration must first be given the opportunity to have run its
course before the court considers any application relating thereto.

[39] In all the circumstances of the matter, it is inappropriate to mulct Zhongji in the
costs of this appeal.

[40] The following is the order of the court:
The appeal is dismissed.

_______________________
N P WILLIS
JUDGE OF APPEAL

Gorven AJA (Mpati P, Mbha JA and Mathopo AJA concurring):

[41] I have had the benefit of reading the judgment of my colleague Willis JA. I
arrive at the same outcome of the appeal but do so by a different route. The crisp
issue in this appeal was whether the court below was entitled or obliged to grant the
declaratory relief sought by the appellant (Zhongji). It held that it did not have
jurisdiction to grant the relief and, as a result, dismissed the application with costs.
This appeal is with its leave.

[42] The relief ultimately sought by Zhongji was an order:
„1 Declaring that the respondent:

16 At 441.
17  The term „academic‟,  in this context, has been  used in the following cases: Trustees J C Poynton
Property Trust v Secretary for Inland Revenue 1970 (2) SA 618 (T) at 620B-D; South African Mutual
Life Assurance Society v Anglo-Coal Collieries Ltd 1977 (3) SA 642 (A) at 658; Muller v The Master
and others 1992 (4) SA 277 (T) at 282A and was approved by the Constitutional Court in Zantsi v
Council of State, Ciskei, and others 1995 (4) SA 615 (CC) para 6.

(a)    has assumed the rights and obligations of DRC Copper and Cobalt project SARL under
the main agreement concluded between the applicant and DRC per and Cobalt Project
SARL on 20 August 2008;
(b)    is bound by the arbitral regime catered for in clause 20 of the main agreement in
relation to disputes in connection with or arising out of the main agreement or the execution
of the works thereunder as envisaged by clause 20.4 of the main agreement.
2 Declaring the following disputes between the applicant and the respondent to be
arbitrable:
(a)
Payment in the sum of US$5 263 896.79 in respect of an invoice issued under the
main agreement…
(b)
Payment in the sum of US$3 324 995.68 in respect of work performed in terms of the
main agreement for the period 1 October 2008 to 29 October 2008 and in relation to which
no interim payment certificate was issued…
(c)
Payment in the sum of US$25 369 421.06 in respect of the suspension and
thereafter the termination of the main agreement…; and
(d)
Payment in the sum of US$2 616 847.84 in respect of three invoices… issued under
the interim agreement concluded between the applicant and the DRC Copper and Cobalt
Project SARL on 30 January 2008.
3 Costs of suit.
4 Alternative relief.‟

[43] The following was common cause. Zhongji is a Chinese company and the
respondent (Kamoto) one based in the Democratic Republic of the Congo (the
DRC). Two agreements were concluded outside of South Africa between Zhongji
and another DRC based company, DRC Copper and Cobalt Project SARL (DCP).
The agreements were for the supply and construction of certain piling and civil works
at a mining site in the DRC. They were referred to throughout as the interim and
main agreements respectively. The interim agreement was concluded on 30 January
2008 and the main agreement on 20 August 2008. DCP terminated the main
agreement by letter dated 5 December 2008.

[44] The interim agreement contained no dispute resolution clause. The main
agreement contained an arbitration clause providing for disputes to be resolved by
arbitration in Sandton, Gauteng. It further provided that the arbitration would be
governed by the provisions of the Arbitration Act 42 of 1965 and would be subject to

the Rules for the Conduct of Arbitrations as published by the Association of
Arbitrators for Southern Africa (the Rules).

[45] Zhongji delivered four invoices to DCP arising from work done under the
interim agreement. One of these was paid and the other three were not. Zhongji also
delivered two invoices relating to work done under the main agreement. Neither was
paid. It invoiced DCP in respect of the suspension and termination of the main
agreement. This has not been paid. The unpaid invoices were disputed by DCP.

[46] Negotiations ensued for the disputes to be referred to arbitration. These
reached an advanced stage without actual agreement. On 15 November 2010,
attorneys who had been negotiating on behalf of DCP informed Zhongji‟s attorneys
that what was termed a merger agreement had been concluded in the DRC between
DCP and Kamoto (the merger agreement). They said that this had the effect of
dissolving DCP with effect from 31 December 2008 and, having annexed a copy in
the original French and an English translation, said that they assumed that Zhongji
would now pursue its claim against Kamoto, but that Kamoto did not admit liability.
When further correspondence did not result in an agreement on arbitration
proceedings, the application to the high court was launched. Its purpose, as appears
from the relief sought, was to establish that Kamoto was obliged to arbitrate disputes
between Zhongji and DCP in Sandton in terms of the arbitration clause in the main
agreement.

[47] The defences raised by Kamoto can be summarised as follows. First, the
court had no jurisdiction over it. Secondly, Kamoto was not bound by the arbitral
regime agreed between Zhongji and DCP in the main agreement. Thirdly, if it was so
bound, this arbitral regime did not apply to disputes under the interim agreement.

[48] Both parties were peregrini of South Africa. The interim, main and merger
agreements were concluded outside South Africa and all the work on the project took
place in the DRC. No attachment had been made to found jurisdiction. There had
been no submission to jurisdiction by Kamoto. These were the points advanced by
Kamoto in contending that the court below had no jurisdiction. Against that, it was
common cause that the lex arbitri comprised the Act, the New York Convention on

the Recognition and Enforcement of Foreign Arbitral Awards (the New York
convention) and the Recognition and Enforcement of Foreign Arbitral Awards Act.18
Zhongji sought to persuade the high court that it had jurisdiction to grant the relief on
the basis that „the Court a quo should have identified itself as the Court having
jurisdiction within the meaning of the Arbitration Act; it was the only Court, or at least
the best placed Court, to pronounce on the arbitration agreement in terms of the lex
arbitri which constitutes the relevant jurisdictional causa.‟19

[49] It was further submitted on behalf of Zhongji that if the court declined to
exercise jurisdiction, „then an essential piece of the infrastructure of international
arbitration is missing‟. This would, in turn, lead to a decline in the number of entities
being willing to select this country as a neutral international venue for arbitrating
disputes arising from their agreements. A submission made on behalf of Kamoto was
that the invocation of this jurisdiction would lead to the opposite result. It was
submitted that „[a]pplication of the concepts of competence/competence, party
autonomy and the consensual underpinning of arbitrations, as well as the
international trend to minimise court interference in international arbitrations militate
against the court extending its jurisdiction in the manner sought to be encouraged by
[Zhongji]‟.20

[50] When a party raises a challenge to the jurisdiction of a court, this issue must
necessarily be resolved before any other issues in the proceedings. The reason is
simple. If the court has no jurisdiction, it is precluded from dealing with the merits of
the matter brought to it.21 Both of the parties‟ submissions focussed on the question
of jurisdiction and both treated this as the real issue in the application. But what
these submissions overlooked in my view is that an arbitration clause embodies an
agreement that is distinct from the terms of the agreement of which it forms a part.
Sometimes the fact that it is embodied in another agreement may affect its validity
because a challenge to the validity of the agreement in which it is incorporated is

18 Act 40 of 1977.
19 Emphases in the original.
20 Emphases in the original.
21 Metlika Trading Ltd & others v Commissioner, South African Revenue Service 2005 (3) SA 1 (SCA)
para 25.

also a challenge to the validity of the arbitration agreement.22 In the absence of such
a challenge, however, the arbitration agreement must be given effect in accordance
with its terms. The terms of this agreement require that the parties submit disputes to
arbitration in Sandton, Gauteng. In other words, the arbitration agreement fell to be
performed within the area of jurisdiction of the court below, because the seat of the
arbitration was within that area of jurisdiction.

[51] It was accepted by both Zhongji and Kamoto that, in an arbitration subject to
the lex arbitri, a court must have jurisdiction to deal with certain matters concerning
the arbitration at a certain stage. This is correct. The question then is to identify the
court that will exercise that jurisdiction. The obvious answer is that it is the court of
the seat of the arbitration, in this case, the high court in Johannesburg. The
jurisdiction of the court arises from the principle that the arbitration clause is to be
performed in Sandton, Gauteng by way of conducting an arbitration there. The court
has jurisdiction in relation to the arbitration clause in terms of s 19(1)(a) of the
Supreme Court Act.23 The real issue is whether it was entitled to grant the relief
sought.

[52] As mentioned, the Rules were imported as terms of the arbitration clause.
Rule 12 provides, in its relevant parts:
„12.1
The Arbitrator may decide any dispute regarding the existence, validity or
interpretation of the arbitration agreement and, unless otherwise provided therein, may rule
on his own jurisdiction to act.
12.2
A party to the reference wishing to challenge the jurisdiction of the arbitrator or who
avers that the arbitrator is exceeding his jurisdiction shall raise the jurisdictional issue at the
first available opportunity, failing which he shall be deemed to have consented to the
arbitrator‟s jurisdiction.
12.3
Where the Arbitrator has made a jurisdictional ruling pursuant to this rule otherwise
than in an award, a party who wishes to contest that ruling in court may only do so after the
award, in the absence of exceptional circumstances.

22 North East Finance (Pty) Ltd v Standard Bank of South Africa Ltd 2013 (5) SA 1 (SCA).
23 Act 59 of 1959 (the old Act). The old Act governed the application but s 21(1) of the Superior Courts
Act 10 of 2013 is to the same effect as s 19(1)(a) of the old Act in this regard. The definition of court in
s 1 of the Arbitration Act 42 of 1965 refers us to the general grounds for South African courts to
exercise jurisdiction.

12.4
For the purposes of this Rule an arbitration clause which forms part of a contract
shall be regarded as an agreement independent of the other terms of the contract. A
decision by the Arbitrator that the contract is null and void shall not of itself result in invalidity
of the arbitration clause.‟24

[53] This means that, on Zhongji‟s own version, the very issues on which it sought
judicial pronouncement fell to be dealt with by the arbitration tribunal. This was
because the rules place the question of the scope of the arbitrator‟s jurisdiction and
whether any particular dispute falls within that jurisdiction in the hands of the
arbitrator. That is entirely permissible.25 If the arbitration tribunal in due course
makes an award concerning the disputed invoices, it must needs make findings on
the second and third defences raised by Kamoto in the application. In doing so, it
would give effect to the terms of the arbitration clause relied on by Zhongji.

[54] If the high court were to have pronounced on these issues, it would have
acted contrary to the provisions of the arbitration clause by determining issues that
are within the province of the arbitrator in terms of the arbitration agreement. A court
is not entitled to do that unless an order has been granted in terms of s 3(2)(b) of the
Act that those particular disputes shall not be referred to arbitration. No such order
has been sought or granted.

[55] This approach, and the underlying rationale for circumscribing the powers of a
court which has jurisdiction conferred by an arbitration agreement, shows
appropriate deference for the autonomy of the parties to decide on the forum which
should resolve their disputes. The supreme irony of the application is that Zhongji, in
ostensibly seeking to enforce the arbitration clause, in effect sought to have the court
act contrary to some of the terms of the agreement it invoked.

[56] This court has said that parties who refer matters to arbitration „implicitly, if not
explicitly, (and subject to the limited power of the Supreme Court under s 3(2) of the
Arbitration Act), abandon the right to litigate in courts of law and accept that they will

24 Rule 12 of the 6th edition of the Rules and Rule 11 of the 5th edition.
25 Amalgamated Clothing & Textile Workers Union of South Africa v Veldspun Ltd 1994 (1) SA 162 (A)
at 169E-G; North East Finance para 16.

be finally bound by the decision of the arbitrator.‟26 The Constitutional Court27 dealt
with the question whether s 34 of the Constitution applied directly to arbitrations. In
finding that it did not do so, O‟Regan ADCJ said:
„The decision to refer a dispute to private arbitration is a choice which, as long as it is
voluntarily made, should be respected by the courts. Parties are entitled to determine what
matters are to be arbitrated, the identity of the arbitrator, the process to be followed in the
arbitration, whether there will be an appeal to an arbitral appeal body and other similar
matters.‟28
O‟Regan ADCJ went on to state pertinently that:
„Given the approach not only in the United Kingdom (an open and democratic society within
the contemplation of s 39(2) of our Constitution), but also the international law approach as
evinced in the New York Convention (to which South Africa is a party) and the UNCITRAL
Model Law, it seems to me that the values of our Constitution will not necessarily best be
served by interpreting s 33(1) in a manner that enhances the power of courts to set aside
private arbitration awards. Indeed, the contrary seems to be the case. The international and
comparative law considered in this judgment suggests that courts should be careful not to
undermine the achievement of the goals of private arbitration by enlarging their powers of
scrutiny imprudently. Section 33(1) provides three grounds for setting aside an arbitration
award: misconduct by an arbitrator; gross irregularity in the conduct of the proceedings; and
the fact that an award has been improperly obtained. In my view, and in the light of the
reasoning in the previous paragraphs, the Constitution would require a court to construe
these grounds reasonably strictly in relation to private arbitration.‟29
It seems to me that the note of caution about enlarging the powers of courts in
matters concerning arbitrations, although made in relation to s 33(1) of the Act,
applies with equal force to powers of courts in dealing with arbitrations in general.

[57] The need to respect the provisions of arbitration agreements was
underscored by Harms JA in Telcordia Technologies Inc v Telkom SA Ltd30 when he
decried the approach of the high court in setting aside an arbitration award, saying
that, in doing so, the court had -
„disregarded the principle of party autonomy in arbitration proceedings and failed to give due
deference to an arbitral award, something our courts have consistently done since the early

26 Per Goldstone JA in Veldspun at 169F-G.
27 Lufuno Mphaphuli and Associates (Pty) Ltd v Andrews & another 2009 (4) SA 529 (CC).
28 Paragraph 219.
29 Paragraph 235.
30 Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA) para 4.

part of the 19th Century. This approach is not peculiar to us; it is indeed part of a worldwide
tradition. Canadian law, for instance, “dictates a high degree of deference for decisions . . .
for awards of consensual arbitration tribunals in particular.” And the “concerns of
international comity, respect for the capacities of foreign and transnational tribunals, and
sensitivity to the need of the international commercial system for predictability in the
resolution of disputes” have given rise in other jurisdictions to the adoption of “a standard
which seeks to preserve the autonomy of the forum selected by the parties and to minimise
judicial intervention when reviewing international commercial arbitral awards”.‟31

[58] In the present matter, the forum selected by Zhongji and DCP is that of a
private arbitration. Zhongji cannot be prejudiced if the arbitration tribunal gives effect
to the arbitration clause and rules on the issues which it sought to have resolved by
the high court. If the tribunal finds for Zhongji on the second and third defences
raised in the application and makes an award in its favour, it can apply to have the
award made an order of court.32 This order then becomes enforceable under the
New York convention. If the tribunal rules against it, it has chosen this forum.
Kamoto is entitled to raise a question of the jurisdiction of the tribunal to deal with the
matter as well as the second and third defences in resisting an award being made by
the Tribunal. Section 33 of the Act entitles a party to apply to set aside an award
where an arbitration tribunal has exceeded its powers. It has been held that if „an
arbitrator exceeds his powers by making a determination outside the terms of the
submission, that would be a case falling under s 33(1)(b)‟.33 Within the compass of
the Rules, a ruling on jurisdiction of an arbitration tribunal can be challenged in
court.34 Kamoto therefore has remedies to protect itself in the event that an
arbitration tribunal exceeds its powers. This is consistent with recognising that a high
court has jurisdiction but that its powers are circumscribed in deference to the
autonomy of the parties to the arbitration clause.

[59] With reference to the Rules and the international trend referred to and relied
on by both parties, it is clear that if courts arrogate to themselves the right to decide
matters which parties have agreed should be dealt with by arbitration, the likelihood

31 References omitted.
32 Section 31.
33 Veldspun at 169C-D.
34 Rule 12.3.

of this country being chosen as an international arbitration venue in future is remote
in the extreme. Persons wishing to have their disputes resolved by arbitration do not
wish the process to be retarded by constant recourse to courts. As was said by Lord
Hoffman:
„[6]
In approaching the question of construction, it is therefore necessary to inquire into
the purpose of the arbitration clause. As to this, I think there can be no doubt. The parties
have entered into a relationship, an agreement or what is alleged to be an agreement or
what appears on its face to be an agreement, which may give rise to disputes. They want
those disputes decided by a tribunal which they have chosen, commonly on the grounds of
such matters as its neutrality, expertise and privacy, the availability of legal services at the
seat of the arbitration and the unobtrusive efficiency of its supervisory law. Particularly in the
case of international contracts, they want a quick and efficient adjudication and do not want
to take the risks of delay and, in too many cases, partiality, in proceedings before a national
jurisdiction.
[7] If one accepts that this is the purpose of an arbitration clause, its construction must
be influenced by whether the parties, as rational businessmen, were likely to have intended
that only some of the questions arising out of their relationship were to be submitted to
arbitration and others were to be decided by national courts. Could they have intended that
the question of whether the contract was repudiated should be decided by arbitration but the
question of whether it was induced by misrepresentation should be decided by a court? If, as
appears to be generally accepted, there is no rational basis upon which businessmen would
be likely to wish to have questions of the validity or enforceability of the contract decided by
one tribunal and questions about its performance decided by another, one would need to
find very clear language before deciding that they must have had such an intention.‟35
Lord Hope of Craighead, in the same matter, said that the wording of an agreement
might provide that „arbitration may be chosen as a one-stop method of adjudication
for the determination of all disputes‟.36 In the present matter, the arbitration clause
also tends to the notion of a one-stop method for determining all disputes. To
recognise the limited powers of the court is in line with the international trends
referred to in Lufuno, Telcordia and Fiona Trust.

[60] In the result, I agree with my colleague Willis JA that the court a quo arrived at
the correct result in dismissing the application with costs. As to the costs on appeal,

35 Fiona Trust & Holding Corporation & others v Privalov & others [2007] UKHL 40; [2007] 4 All ER
951 (HL) paras 6 & 7.
36 Paragraph 27.

both parties dealt with the matter primarily as one involving jurisdiction. In fact,
Kamoto raised this as its primary point of defence to the application and on this point
it has failed. In the result, I also agree that there should be no order for costs on
appeal.

_______________________
T R GORVEN
ACTING JUDGE OF APPEAL

APPEARANCES:

For the Appellant:
M D Kuper SC (with him, W La Grange)
Instructed by:
Bowman Gilfillan, Johannesburg
c/o Matsepes Inc, Bloemfontein

For the Respondent:
B Leech SC
Instructed by:
Werksmans Attorneys, Johannesburg
c/o Lovius Block, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

September 2014

STATUS

Immediate

Zhongji Construction Engineering Company Limited v Kamoto Copper
Company SARL (421/2013)
Please note that the media summary is for the benefit of the media and does
not form part of the judgment.

Today the Supreme Court of Appeal (SCA) dismissed an appeal against an order
dismissing an application for a declaratory order relating to an arbitration which is to
take place in Gauteng between two foreign companies.

The SCA held that the process of arbitration must be respected.