The Arbitration Process and the Effect of the Arbitration Award in South Africa

Arbitration is an alternative dispute resolution (ADR) process in which a neutral third party (being the arbitrator) is appointed by both parties, in order to resolve the dispute or issues between them. Unlike Mediation, where parties may elect to whether accept or reject the proposed results by the Mediator, the decision taken by the arbitrator would be legally binding between the parties. Arbitration is usually the quicker and cheaper way to resolve any dispute between the parties out of Court.

As you may understand, litigation is very costly, and it may take between two to ten years for one matter to be finalised if the dispute is adjudicated by a court of law. It can therefore be prudent, depending on the nature of the matter, that parties agree to the referral of the matter to arbitration first, in order for same to be dealt with and/or resolved faster and much more cost effectively. When parties are preparing and entering into a written agreement, it is a norm for both parties to agree to the inclusion of the arbitration clause in the contract in order to provide for a dispute resolution mechanism, should any party breach the contractual term of the written agreement. Further, the insertion of Rule 41A of the Uniform Rules of Court has now mandated parties to consider mediation/arbitration for dispute resolution when initiating or responding to litigation. Should any party elect to oppose referral of the matter to mediation/arbitration, they are required to provide reasons for this election.

Arbitration is typically regulated by the Arbitration Act No. 42 of 1965. In the labour law context, it is regulated by the Labour Relations Act 66 of 1995 (“the Labour Relations Act”), which establishes the Commission for Conciliation, Mediation and Arbitration (CCMA). This article will deal specifically with the effect of Arbitration Awards as regulated by the Labour Relation Act, and whether they can be reviewed.

When an arbitration award has been issued, the award will be legally binding to both parties and legally enforceable. The award cannot be appealed[1] in any court of law but can only be reviewed on the grounds of irregularity and defects and may be set aside. In a labour law context, the party aggrieved by the decision made by a commissioner may apply in the Labour Court to review the decision of the Arbitrator and to be set aside in terms of section 145 of the Labour Relations Act. Section 145 of the Labour Relations Act provides that “Any party to a dispute who alleges irregularity or a defect in any arbitration proceedings under the auspices of the Commission may apply to the Labour Court for an order setting aside the arbitration award within six weeks of the date that the award was served on the applicant[2].  The Labour Court may, on good cause shown by the applicant, condone the late filing of an application in terms of subsection (1). A defect referred to in subsection (1), means that the commissioner:

• committed misconduct in relation to the duties of the commissioner as an arbitrator;
• committed a gross irregularity in the conduct of the arbitration proceedings; or
• exceeded the commissioner’s powers;
• that an award has been improperly obtained.

The Labour Court may stay[3] the enforcement of the award pending the outcome of the review proceedings. “The institution of review proceedings does not automatically suspend the operation of an arbitration award, unless the applicant furnishes security to the satisfaction of the Court in accordance with subsection (8)”[4]. Section 144 of the Labour Relations Act 66 of 1995 also provides for variation and rescission of arbitration awards and rulings. Any commissioner who has issued an arbitration award or ruling, or any other commissioner appointed by the director for that purpose, may on that commissioner’s own accord or, on the application of any affected party, vary or rescind an arbitration award or ruling based on the following grounds[5]:

1. erroneously sought or erroneously made in the absence of any party affected by that award;
2. in which there is an ambiguity, or an obvious error or omission, but only to the extent of that ambiguity, error or omission;

• granted as a result of a mistake common to the parties to the proceedings; or

1. made in the absence of any party, on good cause shown by the effected party.

In the case of Minnaar Boerdery v CCMA & Two Others Case No: JR 2187/2020, the CCMA granted an award in favour of the 23 employees who were dismissed for misconduct during a protected strike. The CCMA found that the dismissal was both substantially and procedurally unfair. In the Labour Court, the employer sought to review and set aside the commissioner’s decision and/or to have the matter remitted back to the CCMA for hearing de novo before another commissioner. The Court held that: “from the record filed and pleadings before me, I am satisfied that the Commissioner’s award was correct and justified in finding and outcome in light of the evidence that was placed before him by the parties in the arbitration proceedings[6]”. Accordingly, the CCMA award was confirmed, the dismissal of the 23 (twenty-three) employees by the applicant was ruled to be both procedurally and substantially unfair, the application was dismissed.

In the case of Shoprite Checkers v Commission for Conciliation Mediation and Arbitration and Others (D1288/2018) [2022] ZALC 8, the applicant sought for an order reviewing and setting aside the arbitration award, issued by the second respondent under the auspices of the CCMA. The application was opposed by the third respondent. The third respondent was employed as an Admin Manager at the time of her dismissal for alleged misconduct. “She was charged with gross negligence in that it was alleged that her banking was reported to be short by R10 000.00, such shortage causing a financial loss to the company. She attended a disciplinary enquiry, was found guilty and dismissed[7]”. Upon consideration of the evidence presented at the CCMA, the arbitrator found that the dismissal of the applicant was substantively and procedurally unfair.

In the review proceedings, the Labour Court found that, having regard to the evidence in its totality, the only plausible inference to be drawn, which is consistent with all the proven facts, is that the cash was short of one bundle of R100 notes totalling R10 000.00, when it was received by the teller, and that it was placed by the third respondent in the G4S cash bag. Accordingly, the applicant’s review application was granted, and the arbitration award of the second respondent was set aside. The applicant’s review application was therefore granted with no order as to costs.

In conclusion, arbitration awards are legally binding and may only be suspended and/or reviewed and set aside by the Labour Court of South Africa, on good cause shown by the aggrieved party. Should any party be aggrieved by the arbitrator’s decision, they have a right to review same in terms of sections 144 & 145 of the Labour Relations Act 66 of 1995.

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as legal advice.