DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY

ADR AND INDUSTRIAL DISPUTES

Whether there is a need to shift from voluntary to

compulsory arbitration in settlement of industrial
disputes?

SUBMITTED BY- SUBMITTED TO-

Ankana Mukherjee Dr. Shakuntala Devi,

ROLL NO. 150101018 ASST. PROFESSOR LAW

B.A. LLB (Hons.)

VII Sem SEC. A

1
 TENTATIVE CHAPTERISATION

1. Introduction

2. Indian law on Arbitration

3. Recommendations of the National Commission on Labour

4. Arbitration in labour relations in

a. England

b. United States of America

c. African Nations

d. Australia

e. New Zealand

f. Argentina

g. Canada

h. Poland

5. Conclusion

6. Bibliography

2
 INTRODUCTION

We believe that collective bargaining and inbuilt arbitration will result in the bulk of the disputes
between parties being settled expeditiously.

We feel arbitration is the better of the two (adjudication and arbitration) and would like the
system of arbitration to become the accepted mode of determining disputes.1

Arbitration is in form of third party intervention in dispute settlement whereby one or more
impartial persons determine an issue on which the parties are unable to agree. Unlike conciliation
or mediation, where the disputing parties retain control over the outcome of the dispute, in
arbitration the third party is given the power of determination.

Industrial disputes can be solved either by settlement via a negotiation or arbitration or by

adjudication by referring the dispute to tribunal, National Tribunal and Labour Court. Section 10-
A of the Industrial Disputes Act, 1947 is related to the voluntary reference of the disputes to
Arbitration, where dispute is referred for arbitration by the agreement of the employer and the
workmen. The dispute is referred to the arbitrators(s) by the agreement or the consent of both the
parties.

The project raises and then tries to answer whether there is a need for the Indian Law to adopt the
concept of Compulsory Arbitration in settlement of the Industrial Disputes or whether the existing
system of voluntary arbitration still holds good in Indian scenario.

1
Report by the 2nd National Commission on Labour.

3
 INDIAN LAW AND COMPULSORY ARBITRATION

Section 10-A2 of the Industrial Disputes Act 1947 provides for the voluntary reference of the
disputes to arbitration. We do not have a provision for compulsory arbitration for the settlement
of the labour disputes. But we have judicial pronouncements which in some passing reference
mention about the concept of compulsory arbitration in labour adjudication.

In the case of Ballarpur Industries Ltd. v Presiding Officer, Labour Court3the case decided by the
Punjab and Haryana High Court held that if there is a compulsory arbitration clause in the
settlement proceedings, then the compulsory arbitration clause will bind both the parties and the
decision of the arbitrator will also be binding. It is only after the parties exhaust this remedy then
can they avail of the remedies provided under the Industrial Disputes Act, 1947.

The court also distinguished between the arbitration clause in the course of settlement and the
agreement to refer the dispute to arbitration and held that both cannot be equated on an equal

2
10A. VOLUNTARY REFERENCE OF DISPUTES TO ARBITRATION. - (1) Where any industrial dispute
exists or is apprehended and the employer and the workmen agree to refer the dispute to arbitration, they may, at any
time before the dispute has been referred under section 10 to a Labour Court, or Tribunal or National Tribunal, by a
written agreement, refer the dispute to arbitration and the reference shall be to such person or persons (including the
presiding officer of a Labour Court or Tribunal or National Tribunal) as an arbitrator or arbitrators as may be
specified in the arbitration agreement.
(1A) Where an arbitration agreement provides for a reference of the dispute to an even number of arbitrators, the
agreement shall provide for the appointment of another person as umpire who shall enter upon the reference, if the
arbitrators are equally divided in their opinion, and the award of the umpire shall prevail and shall be deemed to be
the arbitration award for the purposes of this Act.
(2) An arbitration agreement referred to in sub-section (1) shall be in such form and shall be signed by the parties
thereto in such manner as may be prescribed.
(3) A copy of the arbitration agreement shall be forwarded to the appropriate Government and the conciliation
officer and the appropriate Government shall, within one month from the date of the receipt of such copy, publish
the same in the Official Gazette.
(3A) Where an industrial dispute has been referred to arbitration and the appropriate Government is satisfied that the
persons making the reference represent the majority of each party, the appropriate Government may, within the time
referred to in sub-section (3), issue a notification in such manner as may be prescribed; and when any such
notification is, issued, the employers and workmen who are not parties to the arbitration agreement but are
concerned in the dispute, shall be given an opportunity of presenting their case before the arbitrator or arbitrators.
(4) The arbitrator or arbitrators shall investigate the dispute and submit to the appropriate Government the
arbitration award signed by the arbitrator or all the arbitrators, as the case may be.
(4A) Where an industrial dispute has been referred to arbitration and a notification has been issued under sub-section
(3A), the appropriate Government may, by order, prohibit the continuance of any strike or lock-out in connection
with such dispute which may be in existence on the date of the reference.
(5) Nothing in the Arbitration Act, 1940 (10 of 1940), shall apply to arbitrations under this section.
3
(1995) I LLJ 184 P&H, (1994) 108 PLR 73.

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footing. But a clause of compulsory arbitration would invalidate a direct reference to the Labour
Court for the adjudication of the dispute without recourse to the arbitration remedy.4

RECOMMENDATIONS OF NATIONAL COMMISSION ON LABOUR

The Commission has recommended that in certain cases there must be a compulsory reference of
the disputes to arbitration. In the report5 it is said that-

We, therefore, recommend that in the case of socially essential services like water supply,
medical services, sanitation, electricity and transport, when there is a dispute between
employers and employees in an enterprise, and when the dispute is not settled through
mutual negotiations, there may be a strike ballot as in other enterprises, and if the strike
ballot shows that 51% of workers are in favour of a strike it should be taken that the strike
has taken place, and the dispute must forthwith be referred to compulsory arbitration (by
arbitrators from the panel of the Labour Relations Commission (LRC), or arbitrators agreed
to by both sides).6

In the report it was also recommended that “where differences persist the law must enable
contending views to be settled through mediation and arbitration, including compulsory arbitration
where the disputes may lead to disruption of social life affecting public health, sanitation, drinking
water supply, medical facilities and transport, and cause suffering to large sections of people who
are unrelated to the disputes.”

In case of an Industrial Dispute the first recourse is of negotiation and conciliation. They are not
very effective. On the attitude of the parties National Commission on Labour observed that-

….conciliation is looked upon very often by the parties as merely hurdle to be crossed for reaching
the next stage. The representatives sent by the parties to appear before him are generally officer
who do not have the power to take decisions or make commitments: they merely carry the
suggestion to the concerned authorities on either side. This dampens the spirit of a conciliator. We

4
Ibid para 8.
5
paragraph 6.48.
6
W.R.Varada Rajan, ‘Second National Commission on Labour’

5
have been told by the employers and workers, organizations alike that the conciliation machinery
is weakened because of its falling into this type of disuse in recent years.7

LAW OF ENGLAND

The English law is somewhat similar to the Indian Law on the matter, focusing on the voluntary
reference of the disputes to Arbitration. The Trade Union and Labour Relations (Consolidation
Act, 19928 provides for the same.910

The law relates to voluntary Arbitration. But there are emerging views that there is a need to shift
to the system of compulsory arbitration. Arnold S. Tenorio in his article has argued for the
settlement of the industrial disputes not by adjudication but preferably by arbitration and also puts
forward the need to develop the system of compulsory arbitration.11

Recently a report in England was released by the bicameral Congressional Commission

on Labor (Laborcom)12 recommends the government to abolish certain agencies and streamline its
operations, with a view to withdrawing from active involvement in the labor market. It also
recommended altering government's role in the fields of training and education, dispute settlement,

7
Government of India Gazette (1969) page 323-446-7.
8
1992 Chapter 52, enforced on July 16 1992.
9
212Arbitration.
(1)Where a trade dispute exists or is apprehended ACAS may, at the request of one or more of the parties to the
dispute and with the consent of all the parties to the dispute, refer all or any of the matters to which the dispute
relates for settlement to the arbitration of—
(a)one or more persons appointed by ACAS for that purpose (not being officers or employees of ACAS), or
(b)the Central Arbitration Committee.
(2)In exercising its functions under this section ACAS shall consider the likelihood of the dispute being settled by
conciliation.
(3)Where there exist appropriate agreed procedures for negotiation or the settlement of disputes, ACAS shall not
refer a matter for settlement to arbitration under this section unless—
(a)those procedures have been used and have failed to result in a settlement, or
(b)there is, in ACAS’s opinion, a special reason which justifies arbitration under this section as an alternative to
those procedures.
(4)Where a matter is referred to arbitration under subsection (1)(a)—
(a)if more than one arbitrator or arbiter is appointed, ACAS shall appoint one of them to act as chairman; and
(b)the award may be published if ACAS so decides and all the parties consent.
(5) Part I of the Arbitration Act 1996 (general provisions as to arbitration) does not apply to an arbitration under this
section.
10
http://www.legislation.gov.uk/ukpga/1992/52/section/212
11
Arnold S. Tenorio, ‘Streamlining government may offer a solution to pernicious labor problems’
(BusinessWorld, March 16, 2001, Friday).
12
The report is titled “Human Capital in the Emerging Economy”.

6
and occupational safety and workers protection. The mode for dispute settlement advanced is
compulsory arbitration.

Labourcom quoted a data that 92% of disputes are resolved through compulsory arbitration, and
not through voluntary means.13

UNITED STATES OF AMERICA

The USA in its labour settlement mechanism follows the scheme of voluntary arbitration.
Section 201 of the Act14 provides for the same.1516

AFRICA

The standards promulgated by the International Labour Organization (ILO) have influenced the
labor relations and law of many countries. The majority of ILO standards regulate individual
employment relationships. Only a few concern collective labor entities. The most important
standards regulating collective employment relationships are: the Freedom of Association and the
Right to Organize, Convention No. 87, and the Right to Organize and Collective Bargaining,

13
Data quoted from the National Labor Relations Commission (NLRC).
14
Labour management Relations Act, 1947
Declaration of purpose and policy
It is the policy of the United States that—
(a) sound and stable industrial peace and the advancement of the general welfare, health, and safety of the
Nation and of the best interest of employers and employees can most satisfactorily be secured by the
settlement of issues between employers and employees through the processes of
15
(b) the settlement of issues between employers and employees through collective bargaining may by
advanced by making available full and adequate governmental facilities for conciliation, mediation, and
voluntary arbitration to aid and encourage employers and the representatives of their employees to reach
and maintain agreements concerning rates of pay, hours, and working conditions, and to make all
reasonable efforts to settle their differences by mutual agreement reached through conferences and
collective bargaining or by such methods as may be provided for in any applicable agreement for the
settlement of disputes; and
(c) certain controversies which arise between parties to
16
http://www.nlrb.gov/nlrb/legal/manuals/rules/act.pdf

7
Convention No. 98. These two pieces of collective human rights legislation have been adopted by
the majority of the African members states.17

Due to the influence of the ILO conventions 3 nations have adopted voluntary arbitration while 18
have adopted the scheme of compulsory arbitration and the others have gone for other ways for
the dispute settlement mechanisms.18

Algeria, Benin, Chad, Ethopia, Gabon, Ivory coast, Kenya, Lesotho, Madagascar, Mauritius,
Mali, Sudan, Tanzania, Tunisia, Zambia are some of the countries which have adopted the
scheme of compulsory arbitration.19

AUSTRALIA

In Australia section 51of the Constitution20 enables the federal parliament to enact laws with
respect to conciliation and arbitration for the prevention and settlement of industrial disputes
extending beyond the limits of any one State.

Experimentation with systems of industrial conciliation and arbitration in Australia began in the
early 1890s in the context of mass industrial conflict and economic depression. Employers and
unions were engaged in conflict over the employer's "freedom" to engage labour on non-union
terms (freedom of contract). Conciliation and arbitration was tried in several colonies as a means
of breaking this deadlock.21 However, the systems introduced were essentially voluntary in
nature and thus were quite unsuccessful in resolving disputes. By 1900, with increasing union
support for conciliation and arbitration, Australian governments were ready to try compulsion. In
that year the government of Western Australia introduced its compulsory arbitration system,
while the New South Wales government introduced its system the following year.22 The

17
ILO, International Labour Conference, 69th Session, June 1983, List of Ratification of Conventions, REPORT III
(PART 5) at 49 and 58.
18
Isik Urla Zeytinoglu(Assistant Professor, McMaster University) ‘The Impact of the ILO'S Freedom of Association
Standards on African Labor Laws; (8 Comp. Lab. L. 48).
19
Ibid table 3
20
Section 51 (XXXV) of the Constitution, known as the labour head of power provision.
21
Mitchell and Stern, The Compulsory Arbitration Model of Industrial Dispute Settlement: An Outline of Legal
Developments in FOUNDATIONS OF ARBITRATION.
22
The Industrial Conciliation and Arbitration Act, 1900 (Western Australian. Acts) and the Industrial Arbitration
Act, 1901 (N.S.W. Inc. Acts). Both of these were largely influenced by the New Zealand compulsory system
introduced in the form of the Industrial Conciliation Act, 1894.

8
direction of Australian industrial relations was confirmed when the federal parliament introduced
the Conciliation and Arbitration Act of 1904. In due course the compulsory arbitration systems
came to characterize industrial relations in the federal jurisdiction and in four of the six States.
The remaining two States, Victoria and Tasmania, adopted wage board systems which in
essential terms were variants of the compulsory arbitration schemes. So it can be concluded that
Australia has adopted a scheme of compulsory arbitration.23

But now the recent legislation in Australia24 has done away with the scheme of compulsory
Arbitration. Under section 65125 the power of election is now given to the applicant either to
proceed with arbitration or with adjudication from the court.

NEWZEALAND

23
Richard Mitchell, Malcolm Rimmer, Labour Law, Deregulation, and Flexibility in Australian Industrial
Relations; 1990, 12 Comp. Lab. L. 1.
24
Workplace relations Act 1996
25
651 Elections to proceed to arbitration or to begin court proceedings
(1) If the certificate given by the Commission under subsection 650(2) identifies only the ground referred to in
paragraph 643(1)(a) as a ground where conciliation is, or is likely to be, unsuccessful, the applicant must elect either
to proceed to arbitration to determine whether the termination was harsh, unjust or unreasonable or not to proceed.
(2) If the certificate given by the Commission under subsection 650(2) identifies only:
(a) the ground referred to in paragraph 643(1)(a); and
(b) the ground of an alleged contravention of section 661; as grounds where conciliation is, or is likely to
be, unsuccessful, the applicant must elect to do either, both, or neither of the following:
(c) to proceed to arbitration to determine whether the termination
was harsh, unjust or unreasonable;
(d) to begin proceedings in a court of competent jurisdiction for an order under section 665 in respect of the
alleged contravention of section 661.
(3) If the certificate given by the Commission under subsection 650(2) identifies:
(a) the ground referred to in paragraph 643(1)(a); and
(b) a ground or grounds of an alleged contravention of one or more of sections 659 and 660; as grounds
where conciliation is, or is likely to be, unsuccessful, the applicant must elect to do either or neither of the
following:
(c) to proceed to arbitration to determine whether the termination was harsh, unjust or unreasonable;
(d) to begin proceedings in the Court for an order under section 665 in respect of the alleged contravention,
or of any one or more of the alleged contraventions.

9
The Employment Relations Act, 200926 provides the scheme of settlement of the disputes via
arbitration in New Zealand.27

LAW OF ARGENTINA OF COMPULSORY ARBITRATION

If the ministry of labour and social security decides to intervene in a dispute and to submit it to
compulsory arbitration, the arbitrators may call the parties to a hearing for the identification of the
points in dispute and require submission of evidence within 10 days. If the parties do not agree on
the points in the dispute, the arbitrator may identify those.28

The award must be produced within 10 Days following the submission of evidence and may be
appealed before the National Labour Courts of Appeal.

The appealing party is under no obligation to comply with the award if it has appealed due to the
non-inclusion of the points of dispute in dispute referred and if the aforesaid time limit has not
been adhered to.29

COMPULSORY ARBITRATION IN POLAND

In Poland when labour disputes emerge then parties are statutorily obliged to undertake immediate
negotiations. Law does not intervene in the procedure but only obligates compulsory negotiations.
If the negotiations fail then the parties may demand for conciliation which is optional and may be
omitted.30

26
http://www.legislation.govt.nz/act/public/2000/0024/latest/DLM60930.html

27
155. Arbitration
1) Nothing in this Act prevents the parties to an employment agreement from agreeing to submit an
employment relationship problem to arbitration.
(2) If the parties to an employment agreement purport to submit an employment relationship problem to
arbitration,—
(a) nothing in the Arbitration Act 1996 applies in respect of that submission; and
(b) the parties must determine the procedure for the arbitration.
(3) The submission of an employment relationship problem to arbitration does not-
(a) prevent any of the parties from using mediation services or applying to the Authority or the
court in accordance with this Part; or
(b) otherwise affect the application of this Act.
28
Law 16, 936 article 2 and 4.
29
Professor Dr. R. Blanpain, ‘International encyclopedia for labour law and industrial relations’ (Vol. 4 at pg 86).
30
Professor Dr. R. Blanpain, ‘International encyclopedia for labour law and industrial relations’ (Vol 12 Poland
EEL Suppl. 95 (Nov 1988) at pg 161.

10
The third stage of the settling of the disputes is compulsory social arbitration. It is a necessary pre
condition of going to a strike action. Such arbitration settlement is binding on the parties.

Social arbitration is a very new and an original institution with no precedent in the socialist
countries. It operates through the-

 Social Arbitration Board of the Supreme Court of disputes involving more than one
enterprise
 Social Arbitration Board of the Provincial Labour Court competent to decide disputes of
only one enterprise.

According to the rules of the proceedings of the social arbitration the boards are guided in their
decisions by the provisions of the law and the rule of community life, they take into account both
the interest of the concerned parties and the interest of the state.31

COMPULSORY ARBITRATION IN CANADA

In Canada the parties are first allowed to settle the disputes through negotiation. If it fails then
32
there is provision for something called the Grievance Arbitration. It is a hybrid process
containing both public and private elements.

Although the process is mandatory in all but one jurisdiction the parties still have wide latitude to
define the process in their own terms. The legislative requirement only establishes a minimum
procedure, leaving the parties free to improve upon this basic model by devising new procedures
suited to their own personal needs.33

CONCLUSION

Now we have come to the following conclusions-

31
Ibid at pg 162.
32
Labour Canada Study, Industry and Expedited Arbitration Alternatives to Traditional Methods. (Ottawa 1977).
33
Professor Dr. R. Blanpain, ‘International encyclopedia for labour law and industrial relations (Vol 5 Canada
EEL Suppl. 154 (Dec 1993) at pg 371.

11
 Indian labour Adjudication has and it follows the scheme not of compulsory but of
voluntary arbitration.
 We have the recommendations of the National Commission on Labour which has pointed
out the need to undertake Compulsory Arbitration in certain cases.
 We have also come to know that the scheme of compulsory arbitration is not unknown to
other legal systems in the world.
 Compulsory Arbitration is not only prevalent in developed legal systems but also in the
under developed and the developing systems of Africa and Latin America.
 The scheme of Compulsory Arbitration is not a failure under their respective systems.
 How the scheme works is that the government lays down that the parties in case of the
failure of the negotiation or the mediation proceedings have to compulsorily go for
arbitration to settle their disputes.
 The parties have no choice but to agree to go for arbitration.
 The government or the state should only provide the basic guidelines and framework for
arbitration and the basic arbitration agreement has to be framed by the parties themselves.
 In the present scheme of voluntary arbitration also the parties themselves frame their
arbitration agreement but whether to refer the matter to arbitration or not is also decided or
pre-decided by the parties themselves.
 I totally agree with the recommendations of the National Labour Commission on Labour
that in the case of socially essential services like water supply, medical services, sanitation,
electricity and transport, when there is a dispute between employers and employees in an
enterprise, and when the dispute is not settled through mutual negotiations then the dispute
must forthwith be referred to compulsory arbitration.

12
 BIBLIOGRAPHY

STATUTES

Government of India Gazette (1969)

The Constitution of Australia

The Industrial Disputes Act, 1947

Employment Relations Act, 2000 (NZ)

Labour Management Relations Act, 1947 (USA)

Law of Argentina Law 16, 936 article 2 and 4.

BOOKS

Professor Dr. R. Blanpain, ‘International encyclopedia for labour law and industrial relations
(Vol 5 Canada EEL Suppl. 154 (Dec 1993) at pg 371.

Professor Dr. R. Blanpain, ‘International encyclopedia for labour law and industrial relations’
(Vol. 4 at pg 86).

ILO CONVENTIONS

ILO, International Labour Conference, 69th Session, June 1983, List of Ratification of
Conventions

13
ILO Convention no 87

ILO Convention no 98

WEBSITES AND URLS

http://www.legislation.gov.uk

http://www.cfmeu-construction-nsw.com.au

www.manupatra.com

http://www.legislation.govt.nz/act

http://www.comlaw.gov.au

http://www.nlrb.gov

www.lexisnexis.com

ARTICLES

Arnold S. Tenorio, ‘Streamlining government may offer a solution to pernicious labor problems’
(BusinessWorld, March 16, 2001, Friday).

Isik Urla Zeytinoglu(Assistant Professor, McMaster University) ‘The Impact of the ILO'S
Freedom of Association Standards on African Labor Laws; (8 Comp. Lab. L. 48).

Mitchell and Stern, The Compulsory Arbitration Model of Industrial Dispute Settlement: An
Outline of Legal Developments in FOUNDATIONS OF ARBITRATION.

14