Arbitration

ARBITRATIARBITRATIONON

ConceptConcept Arbitration is a means of securing an award on a Arbitration is a means of securing an award on a conflict issue by reference to a third party. It is a conflict issue by reference to a third party. It is a process in which a dispute is submitted to an process in which a dispute is submitted to an impartial outsider who makes a decision which is impartial outsider who makes a decision which is usually binding on both the parties. usually binding on both the parties.

It is a process where there is a hearing and a It is a process where there is a hearing and a determination of a cause between parties in determination of a cause between parties in controversy controversy by a person or persons chosen by by a person or persons chosen by them, or appointed under a statutory provision. them, or appointed under a statutory provision.

The parties submit their disputes/issues and are The parties submit their disputes/issues and are bound by the award of an arbitrator in relation to bound by the award of an arbitrator in relation to the matter which is in dispute between them. the matter which is in dispute between them.

BasicsBasics

The arbitrator enforces his own point of The arbitrator enforces his own point of view view on on the contending parties and the opinions of the the contending parties and the opinions of the participants are not participants are not given given any predominance. any predominance.

Arbitration is a judicial processArbitration is a judicial process

The award of the arbitrator is binding and rests The award of the arbitrator is binding and rests on equity and justice, on equity and justice, i.e., i.e., there is no scope for there is no scope for compromisecompromise

Arbitration is best suited for the settlement of Arbitration is best suited for the settlement of contractual rights, whereas mediation is suited to contractual rights, whereas mediation is suited to the adjustment of disputes over interests. the adjustment of disputes over interests.

Advantages of ArbitrationAdvantages of Arbitration

i.i. Since it is established by the parties Since it is established by the parties themselves, arbitration has the particular themselves, arbitration has the particular advantage of bringing the dispute settlement advantage of bringing the dispute settlement procedure down to the level of the parties to procedure down to the level of the parties to the dispute. Workers and management tend to the dispute. Workers and management tend to have greater faith and confidence in a have greater faith and confidence in a settlement machinery which is in effect their settlement machinery which is in effect their own. own.

ii.ii. Since arbitration is established by agreement, Since arbitration is established by agreement, it is more flexible than other procedures and it is more flexible than other procedures and can be adjusted to the views, desires and can be adjusted to the views, desires and experience of the parties and to the experience of the parties and to the circumstances obtaining in the undertaking or circumstances obtaining in the undertaking or industry. industry.

Contd.Contd.

III.III. This procedure, operating at the level closest This procedure, operating at the level closest to the parties to the disputes, has the to the parties to the disputes, has the advantage of enabling the arbitrators to advantage of enabling the arbitrators to acquire a much greater familiarity with the acquire a much greater familiarity with the characteristics of the particular industry or characteristics of the particular industry or undertaking than most courts or tribunals. undertaking than most courts or tribunals.

IV.IV. The procedure is relatively expeditious when The procedure is relatively expeditious when compared to that in ordinary courts or labour compared to that in ordinary courts or labour tribunals. It cuts down delays and results in a tribunals. It cuts down delays and results in a prompt settlement of differences. prompt settlement of differences.

V.V. It is informal in character because the disputes It is informal in character because the disputes are handled by the parties themselves, often are handled by the parties themselves, often without recourse to lawyers. Arbitration, without recourse to lawyers. Arbitration, therefore, is a less expensive than other therefore, is a less expensive than other procedures. procedures.

Contd.Contd.

VI.VI. Awards are capable of implementation without Awards are capable of implementation without any grudge on the part of both the parties of any grudge on the part of both the parties of the dispute and do not lead to further chances the dispute and do not lead to further chances of litigation. of litigation.

VII.VII. Since arbitration is based on the consent of Since arbitration is based on the consent of both the parties, it helps building up a sound both the parties, it helps building up a sound base for healthy industrial relations, mutual base for healthy industrial relations, mutual understanding and co-operation.' understanding and co-operation.'

VIII.VIII. "It is popular because it is suitable and "It is popular because it is suitable and compelling. It is far better than a costly work-compelling. It is far better than a costly work-stoppage, even though not wholly satisfactory stoppage, even though not wholly satisfactory from either parties' point of views."from either parties' point of views."

Types of ArbitrationTypes of Arbitration

Voluntary arbitrationVoluntary arbitration : : impliesimplies that the two that the two contending parties, unable to compose their contending parties, unable to compose their differences by themselves or with the help of the differences by themselves or with the help of the mediator or conciliator, agree to submit the mediator or conciliator, agree to submit the conflict/dispute to an impartial authority, whose conflict/dispute to an impartial authority, whose decision they are ready to accept. decision they are ready to accept.

In other words, under In other words, under voluntary arbitration, the voluntary arbitration, the parties to the dispute can, and do, themselves parties to the dispute can, and do, themselves refer voluntarily any dispute to arbitration before refer voluntarily any dispute to arbitration before it is referred for adjudication.it is referred for adjudication.

Essentials of voluntary arbitration Essentials of voluntary arbitration

The The voluntary voluntary submission of dispute to an submission of dispute to an arbitratorarbitratorThe subsequent attendance of witnesses and The subsequent attendance of witnesses and investigationsinvestigationsThe enforcement of an award may not be The enforcement of an award may not be necessary and binding because there is no necessary and binding because there is no compulsion. But, generally, the acceptance of compulsion. But, generally, the acceptance of arbitration implies the acceptance of its award-arbitration implies the acceptance of its award-be it favorable or unfavorable; and be it favorable or unfavorable; and Voluntary arbitration may be specially needed Voluntary arbitration may be specially needed for disputes arising under agreements /contractsfor disputes arising under agreements /contracts

Compulsory ArbitrationCompulsory Arbitration

Compulsory arbitration, Compulsory arbitration, is one where the parties is one where the parties are required to accept arbitration without any are required to accept arbitration without any willingness on their part. When one of the parties willingness on their part. When one of the parties to an industrial dispute feels aggrieved by an act to an industrial dispute feels aggrieved by an act of the other, it may apply to the appropriate of the other, it may apply to the appropriate government government to refer the dispute to an to refer the dispute to an adjudication machinery. adjudication machinery. Such reference of a dispute is known as Such reference of a dispute is known as 'compulsory' or 'involuntary' reference, because 'compulsory' or 'involuntary' reference, because reference in such circumstances does not reference in such circumstances does not depend on the sweet will of both the contending depend on the sweet will of both the contending parties or any party to the dispute. It is entirely parties or any party to the dispute. It is entirely the discretion of the appropriate the discretion of the appropriate government government based on the question of existing dispute, or on based on the question of existing dispute, or on the apprehension that an industrial dispute will the apprehension that an industrial dispute will emerge in a particular establishment. emerge in a particular establishment.

Essentials of Compulsory ArbitrationEssentials of Compulsory Arbitration

I.I. the parties fail to the parties fail to arrive arrive at a settlement by a at a settlement by a voluntary method; or voluntary method; or

II.II. when there 'is a national emergency which when there 'is a national emergency which requires that the wheels of production should requires that the wheels of production should not be obstructed by frequent work-not be obstructed by frequent work-stoppages; or stoppages; or

III.III. the country is passing through the country is passing through grave grave economic crisis; or economic crisis; or

IV.IV. there is a there is a grave grave public dissatisfaction with the public dissatisfaction with the existing industrial relations; or existing industrial relations; or (v) (v) industries of industries of strategic importance are strategic importance are involved; involved; or or

Contd.Contd.V.V. industries of strategic importance are industries of strategic importance are

involved; involved; ororVI.VI. parties are ill balanced, parties are ill balanced, i.e., i.e., where the unions where the unions

are weak, ill- organized, and powerless and are weak, ill- organized, and powerless and the means of production are in the hands of the means of production are in the hands of the capitalists who are well-organized and the capitalists who are well-organized and powerful; or powerful; or

VII.VII. public interest and the working conditions public interest and the working conditions have to be safeguarded and regulated by the have to be safeguarded and regulated by the state. state.

Compulsory arbitration leaves no scope for strikes Compulsory arbitration leaves no scope for strikes and lockouts; it deprives both the parties of and lockouts; it deprives both the parties of their their very very important and fundamental rights. important and fundamental rights.

Reference of Dispute to Arbitration Reference of Dispute to Arbitration Under Industrial Disputes Act, 1947Under Industrial Disputes Act, 1947

Under the Industrial Disputes Act, 1947, a dispute may Under the Industrial Disputes Act, 1947, a dispute may be referred to arbitration under the following be referred to arbitration under the following conditions: conditions:

a)a) An industrial dispute exists or is apprehended in An industrial dispute exists or is apprehended in an establishment; an establishment;

b)b) The employer and the workers agree, in writing, to The employer and the workers agree, in writing, to refer the dispute to arbitration; refer the dispute to arbitration;

c)c) The arbitration agreement is in the prescribed The arbitration agreement is in the prescribed form and signed by the parties to it in the form and signed by the parties to it in the prescribed manner; prescribed manner;

d)d) The agreement must be accompanied by the The agreement must be accompanied by the consent, in writing, of the arbitrator or arbitrators; consent, in writing, of the arbitrator or arbitrators;

Contd.Contd.

e)e) The dispute must be referred to arbitration at The dispute must be referred to arbitration at any time before it has been referred to a labour any time before it has been referred to a labour court or tribunal or a national tribunal; court or tribunal or a national tribunal;

f)f) The reference must be to the person or The reference must be to the person or persons specified in the arbitration agreement persons specified in the arbitration agreement to act as arbitrator/arbitrators; to act as arbitrator/arbitrators;

g)g) The arbitration agreement must set forth the The arbitration agreement must set forth the issue/issues to be decided by the arbitration issue/issues to be decided by the arbitration procedure and a copy of the agreement is procedure and a copy of the agreement is forwarded to the government and the forwarded to the government and the conciliation officer. conciliation officer.

Procedure for InvestigationProcedure for Investigation After the dispute has been referred to the After the dispute has been referred to the arbitrator, he will hear both the parties. arbitrator, he will hear both the parties. Hearing involves mastery of the facts of a Hearing involves mastery of the facts of a particular dispute as well as the relevant particular dispute as well as the relevant provisions of the collective agreement and of the provisions of the collective agreement and of the past practices of the parties in relation to matters past practices of the parties in relation to matters relevant to the dispute. relevant to the dispute. An investigation of the facts and circumstances An investigation of the facts and circumstances of the dispute is of great importance. The of the dispute is of great importance. The arbitrator may call witnesses, get evidence and arbitrator may call witnesses, get evidence and relevant records and documents, (bearing on the relevant records and documents, (bearing on the case) and arbitration decisions by other case) and arbitration decisions by other arbitrators in similar cases, that may suggest a arbitrators in similar cases, that may suggest a line of reasoning. line of reasoning. When an important witness is unable to attend, When an important witness is unable to attend, sworn affidavit is often used. sworn affidavit is often used.

After the collection of facts and supporting After the collection of facts and supporting materials, arguments take place. materials, arguments take place.

Certain principles are followed by an arbitrator Certain principles are followed by an arbitrator while dealing with a particular dispute, while dealing with a particular dispute, namely: namely:

I.I. Fair hearingFair hearing, , which demands that an which demands that an opportunity should be given to both the parties opportunity should be given to both the parties to be heard and cross-examined. to be heard and cross-examined.

II.II. Principle of natural justicePrinciple of natural justice requires that a requires that a party should have due notice of proceedings, party should have due notice of proceedings, and it must know what are the issues involved and it must know what are the issues involved and what part it has to play. and what part it has to play.

III.III. The party should be free to give any evidenceThe party should be free to give any evidence which is relevant to the enquiry and on which it which is relevant to the enquiry and on which it relies for its arguments. The evidence given by relies for its arguments. The evidence given by one party should be taken in the presence of the one party should be taken in the presence of the other party so that the other party may rebut and other party so that the other party may rebut and place counter evidence, if necessary. place counter evidence, if necessary.

IV.IV. The arbitrator should not relyThe arbitrator should not rely on any document on any document which is not shown and explained to the other which is not shown and explained to the other party and to which a reply has not been received. party and to which a reply has not been received. He has to be completely impartial without any He has to be completely impartial without any bias or prejudice against anybody. bias or prejudice against anybody.

Submission of AwardSubmission of Award

The arbitrator, after investigating the The arbitrator, after investigating the dispute, has to submit his award to the dispute, has to submit his award to the government. government.

The award will have the same legal force The award will have the same legal force as the judgment of a labour court or as the judgment of a labour court or tribunal. tribunal.

The award must be signed by the The award must be signed by the arbitrator. arbitrator.

While writing his award, the arbitrator has to While writing his award, the arbitrator has to ensure that:ensure that:

i.i. The award is in line with the terms of reference The award is in line with the terms of reference and that it does not go beyond its jurisdiction; and that it does not go beyond its jurisdiction;

ii.ii. It must be precise and definite, that is, it must It must be precise and definite, that is, it must be clear, unambiguous and without any, be clear, unambiguous and without any, vagueness, and that it is not in any way vagueness, and that it is not in any way capable of being misunderstood or capable of being misunderstood or misinterpreted; misinterpreted;

iii.iii. It should be capable of being enforced or It should be capable of being enforced or implemented; in other words, it should not implemented; in other words, it should not contain directives or provision which apparently contain directives or provision which apparently seem impossible of enforcement; seem impossible of enforcement;

iv.iv. The award should contain a date or a The award should contain a date or a specific period for its implementation; specific period for its implementation;

v.v. The award should not violate any The award should not violate any provision of any existing law or provision of any existing law or settlement legally arrived at, or one settlement legally arrived at, or one which is binding on parties which is binding on parties

vi.vi. The award should contain sufficient The award should contain sufficient justification or reasons for the settlement justification or reasons for the settlement arrived at by the arbitrator. arrived at by the arbitrator.

Evils of Compulsory ArbitrationEvils of Compulsory Arbitration

I.I. Compulsory arbitration promotes and Compulsory arbitration promotes and prolongs industrial disputes;prolongs industrial disputes;

II.II. Compulsory arbitration undermines self-Compulsory arbitration undermines self-government in industry, government in industry, i.e., i.e., it hampers it hampers the development of industrial democracy; the development of industrial democracy;

III.III. It takes away from the employers and It takes away from the employers and unions the responsibility of working out unions the responsibility of working out their mutual problems and transfers it to their mutual problems and transfers it to government-created tribunals; government-created tribunals;

IV.IV. It kills collective bargaining and replaces it It kills collective bargaining and replaces it with litigation; it allows the parties to avoid with litigation; it allows the parties to avoid unpleasant confrontation of their difficulties, unpleasant confrontation of their difficulties, creating a dependency upon public authority;creating a dependency upon public authority;

V.V. By requiring even an air of compulsory By requiring even an air of compulsory labour, it subjects workers to involuntary labour, it subjects workers to involuntary servitude; servitude;

VI.VI. It exposes workers to arbitrary restraints and It exposes workers to arbitrary restraints and penalties before trial and correction; penalties before trial and correction;