Money Matters

Conciliation & arbitration (Part I)

Money Matters
By Faisal Mahmood Ghani
Mon, 08, 18

Pakistan upon gaining independence inherited an industrial relations system in the form of the Industrial Dispute Act, 1947. This legislation provided for, amongst other rights, the establishment of works committees to remove causes of friction between workers and employers in the day-to-day operations of enterprises. This law was repealed by virtue of West Pakistan Industrial Dispute Ordinance, 1958 which was replaced thereafter by the Industrial Disputes Ordinance 1959. In 1969, the Industrial Relations Ordinance 1969 was promulgated, repealing the earlier laws. Currently the Industrial Relations Act 2012 (the “IRA 2012”) is in force for ‘establishments’ in more than one province or in Islamabad, and the provincial Industrial Relations Acts apply to establishments restricted to one province.

Pakistan upon gaining independence inherited an industrial relations system in the form of the Industrial Dispute Act, 1947. This legislation provided for, amongst other rights, the establishment of works committees to remove causes of friction between workers and employers in the day-to-day operations of enterprises. This law was repealed by virtue of West Pakistan Industrial Dispute Ordinance, 1958 which was replaced thereafter by the Industrial Disputes Ordinance 1959. In 1969, the Industrial Relations Ordinance 1969 was promulgated, repealing the earlier laws. Currently the Industrial Relations Act 2012 (the “IRA 2012”) is in force for ‘establishments’ in more than one province or in Islamabad, and the provincial Industrial Relations Acts apply to establishments restricted to one province.

The IRA 2012 offers the following modes to settle an industrial dispute:

Bilateral negotiations

Conciliation

Arbitration

Strike/Lockout

Adjudication

Intervention by the Government by reference to the National Industrial Relations Commission (“NIRC”) in matters of national importance.

Our discussion will be limited to conciliation and arbitration, and will not take account of the other modes just named for the resolution of Industrial Disputes.

CONCILIATION AND ARBITRATION

If bilateral negotiations fail, the matter will be dealt with by way of conciliation. Where conciliation efforts are un-successful, the conciliator persuades the parties to agree to arbitration. The arbitration is optional and not compulsory.

Arbitration is sometimes confused with other methods for peacefully resolving labour disputes. Conciliation, mediation, and arbitration are sometimes incorrectly used interchangeably. Conciliation is “the act of a third party, bringing together the two parties in dispute, for negotiation and for settlement of the dispute”. Mediation is “the process whereby the third party not only brings two parties together but actively participates in the negotiation, generally consulting with each of the parties separately and, by persuasion, affecting a compromise acceptable to both”. Arbitration is a “judicial process.” In Pakistan, a conciliator also acts as a mediator, as in the ultimate analysis, mediation by a conciliator is essential for the resolution of dispute.

In these proceedings, the conciliator or mediator does not take any decision or give any award; decision-making remains the jurisdiction of the arbitrator and/or the labour court. The arbitrator is a judge. The parties agree to accept the arbitrator’s decision as final and binding. The parties are required to submit evidence, and each is permitted to cross-examine the evidence of the other. The decision of an arbitrator after the hearing is known as an award. There is no appeal against an arbitration decision in the High Court and the decision acquires finality.

PROVISIONS OF CONCILIATION AND ARBITRATION

The provision for the appointment of conciliators is provided in Sections 36 to 39 of the IRA 2012.

It is to be noted that at the stage of raising an industrial dispute by issuing a notice under Section 35(1) of IRA 2012, the party issuing such notice is not required to send a copy thereof to the conciliator or to any other authority. At that stage, the law presumes that parties to the dispute shall come to terms by mutual bilateral negotiations and any interference by the conciliator is not called for. If an agreement is reached, that will be the end of the matter and copies of the agreement duly signed by the parties to the dispute are required to be forwarded to the conciliator and other prescribed authorities. On the failure of bilateral negotiations, the party raising the industrial dispute can issue a notice of conciliation to the other party under Section 35(3). Likewise, it is required by Section 38 to simultaneously serve a copy thereof to the conciliator concerned and to the Labor Court. On receipt of a copy of the notice under Section 38, the conciliator initiates conciliation proceedings. At this stage, the courts i.e. the National Industrial Relations Commission (“NIRC”) have no role whatsoever.

If a copy of the notice of conciliation were not delivered to the conciliator, there would be no valid commencement of the conciliation proceedings. It is the date of receipt of the conciliation notice and not the date borne by the said notice, which is material. As soon as the conciliator receives the notice, the conciliation proceedings are deemed to have commenced. The conciliator is required to call meetings between the parties to the industrial dispute with a view to bring about settlement. The parties are to be represented before the conciliator by the nominated and authorized representatives of the parties. The nominees of the parties should be fully authorized to enter into a settlement binding on the parties. The parties will not be allowed to plead that their representatives were only nominees and could not bind the principal employer in terms of a settlement signed by their duly authorized representative. If the conciliator at any stage of the conciliation proceedings feels that the presence of any particular person from the employer is necessary, he can issue a notice to the employer to appear before him at a specified date, time and place. Such person from the employer is bound to comply with the notice.

In all cases of industrial disputes in relation to an establishment notified as a public utility service or an industry other than public utility service, if the conciliation officer receives a notice of conciliation, he is under an obligation to initiate conciliation proceedings. The conciliator is bound to hold conciliation proceedings only in cases where an industrial dispute has arisen and there is a valid notice of conciliation. If any adjudication in respect of the same subject matter of the dispute is already pending, no valid conciliation notice can be served in respect of such subject matter because this would result in a multiplicity of proceedings, which is not permissible in law. The policy of the law has always been to confine parties to one process and to discourage simultaneous adjudicating in two parallel proceedings in respect of the same subject matter.

The function of the conciliator is to conciliate on the dispute between the parties and to narrow down the controversy. With this end in sight he can suggest such modifications and concessions as he feels necessary for amicable settlement of the dispute. During conciliation, a settlement may be arrived at on all demands or on any matter in dispute. To the extent of the settlement of the dispute, a memo is to be prepared, signed by the parties and shall be reported to the Government (Federal or Provincial as the case may be).

The conciliation proceedings are to be completed within 15 days or the parties by mutual consent may extend the time during which the conciliation proceedings may continue. In case the parties do not come to settlement within this 15 day period or agree to extend the period of conciliation proceedings, the conciliator is bound to declare the conciliation proceedings as having failed so as to enable the parties to pursue the industrial dispute and in the prescribed manner take further steps i.e. resort to strike or lockout, after serving due notice, as the case may be, or to file the industrial dispute in the NIRC (or Labour Court for Provincial establishment) for adjudication of the demands.

The questions of whether an industrial dispute exists, or whether a particular union of workers is competent to adjudicate the dispute on behalf of the employees and other objections, can be determined only by the courts and not by the conciliation officer. Similarly, a Labour Court can adjudicate the question of whether the signatory to the conciliation notice was competent to do so. However, a Division Bench of the Lahore High Court has held that “before holding any proceedings (the Conciliator) must satisfy himself that the notice is a valid one. If the notice is not valid, it is no notice in the eyes of law and the conciliation officer can ignore it”. However, the judgment is based on the law as it then existed which specifically conferred power on the conciliation officer to determine legality or validity of the notice.

Arbitration is provided for in Section 40 of the IRA 2012. The provisions of Subsection (1) of Section 40 relating to the appointment of an arbitrator between the parties to a dispute are attracted only upon failure of the conciliation proceedings. As such, in the absence of the failure of the conciliation proceedings the provisions of the IRA 2012 do not warrant the appointment of the arbitrator. The parties by consent cannot confer jurisdiction upon an arbitrator in the absence of failure of conciliation proceedings. According to section 40(5) and (6) the award given by an arbitrator is final for a period not exceeding two years or as may be fixed by the arbitrator.

IMPORTANCE OF CONCILIATION AND ARBITRATION IN SETTLEMENT OF DISPUTES

The Industrial law and Labour Laws provide for different modes for resolution or settlement of disputes. These can be divided into two main categories. One category comprises of resort to proceedings before a Labour Court set up by law for this purpose. Under this system, the entire proceedings, which are adversarial in nature, are conducted and the decision is taken in accordance with law. A prescribed procedure is required to be followed by the courts or tribunals in the conduct of cases. Decisions are then subject to appeals or revisions. All this takes time - a lot of time. Prolonged litigation is also very expensive, time consuming and usually beyond the reach of the ordinary citizen - the common man. As an alternative to litigation, the law provides for various methods for resolution of disputes, including arbitration and conciliation, which potentially provide more efficient avenues for dispute resolution.

The writer is an advocate Supreme Court