Ferro-Alloy Employers Association of Zimbabwe v Zimbabwe Metal, Energy and Allied Workers Union & 2 Ors

### Preamble
1
HH 523-18
HC 5736/16
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FERRO-ALLOY EMPLOYERS ASSOCIATION OF ZIMBABWE

versus

ZIMBABWE METAL, ENERGY AND ALLIED WORKERS UNION

and

MR RUZIVA

and

Z MUTIMUTEMA

HIGH COURT OF ZIMBABWE

CHITAPI J

HARARE, 24 May 2017 and 20 June 2017 & 12 September 2018

Opposed Application

J Nyarota, for the applicant

K Masasire, for the 1st respondent

CHITAPI J: In this opposed application, the applicant prays for the setting aside of an arbitral award of Z Mutimutema and M Ruziva sitting together as joint arbitrators chosen by the applicant and the first respondent.  The application is premised on Article 34 (2) (b) (ii) of the Model Law to the Arbitration Act [Chapter 7:15] which provides for the power of the court to set aside an arbitral award if it is against the public policy of Zimbabwe. The first respondent opposed the application and prayed for its dismissal with costs. The second and third respondents are the arbitrators whose arbitral award is under challenge in this application. They, as expected have not filed any papers.

The bulk of the facts of this application are largely common cause. The material facts are as follows in summary.

The applicant and first respondent are parties to the National Employment Council for the Ferro-Alloy Industries of Zimbabwe (hereafter called NEC for brevity). As the names of the parties depict, the applicant is representative of the employers and the first respondent, the employees.

As is customary, the applicant and first respondent engage as stake holders in the NEC to discuss issues concerning or arising from the employer and employee relationship that impact on the interests of their membership like salaries and related benefits payable to members of the first respondent.

In 2012, the two parties engaged in negotiations relating to housing allowances. They agreed to refer the matter for determination at Works Council level.

In 2015 the parties engaged in negotiations for a salary increment for the period January 2015 to December 2015. The parties failed to reach agreement on the issue. A deadlock was mutually agreed and both parties agreed to refer the deadlock for determination by voluntary arbitration. In this regard they entered into an arbitration referral agreement which inter alia set out the selection criteria for the arbitrator and the issues for determination.

In terms of the agreement, a copy whereof is annexed to the applicant’s founding affidavit as Annexure A, it was agreed in relation to the selection of arbitrators that:

Two arbitrators, one selected by the applicant and the other one selected by the first respondent would constitute the arbitration panel.

The arbitrators in the event that they reached consensus on the dispute, would issue a joint reward. In the event of a deadlock between the two arbitrators, the dispute would be determined by a referee appointed by the Arbitral Tribunal.

In para 3.5 of the agreement it was specifically provided as follows:

“In the event that any party is aggrieved with the arbitral award, the aggrieved party shall have the right of appeal to the Labour Court in terms of the Labour Act [Chapter 28:01]”

The parties agreed that their deadlocked dispute was a dispute of interest. The parties respective positions were set out as follows in paras 6.2.1 and 6.2.2. of the agreement

“6.2.1 Zimbabwe Metal, Energy & Allied Trade Union’s Position (first respondent):

The minimum wage be pegged at US$250 per month for the period January to December 2015 and 20% of basic wage as housing allowance.

Zimbabwe Ferro Alloys Employers’ Association Position (applicant)

The minimum wage to remain at US$238 per month for period January to December 2015

Housing is not part of the NEC Negotiations as per standing NEC Agreement. This should be negotiated at Works Council level as per standing NEC Agreement.”

In para 7 of the agreement, the issues for determination were set out as follows:

“ISSUES FOR ADJUDICATION

7.1	Determining the minimum wage or salary (Grade one salary/wage) for the Ferro Alloy Industry for the period January to December 2015 and or housing allowance.

Conditions to apply in respect of compliance with award – Arbitral Tribunal to set terms and conditions of compliance with award with specific reference to newly awarded minimum wage level and back pay (where necessary)”.

The parties, following consultations with their Arbitral Tribunal, appointed their chosen abitrators namely Mathias Ruziwa second respondent herein, selected by the applicant and Zacheo Mutimutema, third respondent herein, selected by the first respondent or workers. The two appointees were described as the “Two Person Arbitral Tribunal.” They both were independent arbitrators.

It is common cause that the Two Person Arbitral Tribunal (hereinafter called the tribunal for brevity arbitrated on the dispute and reached a consensus award on 7 March 2016 as more fully set out in Annexure D to the applicant’s founding affidavit, the certified award issued in terms of s 98 (13) of the Labour Act.

The operative part of the award was couched in the following terms:

“In the premises, we order as follows:

Respondent’s members who have not concluded negotiations of the housing allowance must conclude such negotiations within 30 days from the date of receipt of this award and in the event that negotiations are not concluded , either party may refer the matter back to this honourable tribunal for determination.

Respondent is ordered to increase the wages or salaries of the claimants by 3% with effect from January 2015 to December 2015.”

The applicant’s contentions for seeking the setting aside of the award on the basis that it is against the public policy of Zimbabwe as provided for in terms of Article 34 (2) (b) (ii) of the Model Law to the Arbitration Act can be summarised as:

that  the award albeit acknowledging the depressed and subdued economic performance of the Ferro Chrome industry coupled with declining international prices and noting that the applicant’s members had accumulated debts which would take time to clear nonetheless awarded a salaries increment and further ordered that payment of a housing allowance be negotiated at Works Council level.

that the award did not take into consideration the effect which the increment would have on the applicant’s members’ balance sheets as they owed in excess of US$56 million to financers and in excess of US$125 million to other creditors. The increment would therefore result in increased indebtedness which was not matched by what the applicant’s members could sustain given below capacity operations and depressed market prices of Ferro-chrome. T

that the award would result in a collapse of the applicant’s member companies which   would end up insolvent and liquidating. The applicant pointed out without naming the member companies concerned that of their total membership of 14 companies, 5 had already closed down, 6 had ceased operations and only 2 were operational whilst 1was under judicial management. The award would result in the two viable companies being at risk of liquidation. Liquidation according to the application would result in “consequences of which are just too ghastly to contemplate not only for first respondent’s members but the generality of the economy” The “too ghastly to contemplate” consequences were not detailed.

that there was no justificaction for the award  of 3% and the payment of a housing allowance as no scientific basis was used to arrive at the decision.

(e) that the award constituted “a palpable inequality” that was so far reaching that it defied logic, moral standards and was so outrageous as to hurt one’s conception of justice.

The applicant averred that its members already owed salary arrears before the increment and that a further increase would impact negatively on the survival of the applicant’s members.

(f) 	that the applicant’s members were in the process of lobbying government to lift the chrome export ban and scrap the 20% tax on exports so as to remain viable. Further, the applicants members were negotiating for a reduced electricity tariff. This, it was averred presented proof that the applicant’s members were operationally in distress.

(g)      Lastly, that the reasoning in the award was “myopic and blinkered” and that labour

costs in Zimbabwe were generally high and deterred foreign investment. A further salaried increase would therefore act against attraction of foreign investment.

The first respondent in its opposing affidavit deposed to on its behalf by its deputy Secretary General had the following to say in summary;

That the arbitral process was a continuation of negotiation between the parties and that therefore the applicant ought to have referred the dispute to the Labour Court on review or appeal in terms of ss 92 E or 98 (10) of the Labour Act. I should comment that this allegation was denied vehemently by the applicant in the replying affidavit. The applicant averred that the arbitral award as evident upon reference to it was final and registrable for execution purposes in terms of the Labour Act. I have considered the arbitral award. It is accompanied by a certificate of authentication issued in terms of s 98 (13). In terms of the provisions of s 98 (14) such an award is registrable for enforcement at the instance of any party to whom the award relates. The arbitration referral agreement itself does not provide that the award is to be reconsidered by the parties in ongoing or arrested negotiations still to be concluded. There is also nothing in the arbitral award to suggest explicitly or by implication that the award could be described as anything but final because it makes specific orders to be complied with rather than to be considered by the parties.

That the applicant chose its own arbitrator who understood its plight and circumstances and should not be heard to cry foul. Further, the averment was made that the applicant did not appeal against the award to the Labour Court, such failure being indicative of its acquiescence in the award. I do not read the arbitration referral agreement as providing that a party would choose an arbitrator who is aware of and sympathizes with its plight. Indeed such an approach would clearly be wrong both at law and on principle because an arbitrator is a quasi-judicial officer who must be impartial and not have an interest in the matter before him or her. In casu, the second and third respondents were independent arbitrators. The applicant and first respondents were represented at the arbitration proceedings by their duly authorised representatives. I therefore hold that there is no merit in the first respondents’ assertion that the applicant’s nominated arbitrator had knowledge of the plight of the applicant members and vice versa too in that there is nothing to indicate that the first respondent’s chosen arbitrator had prior knowledge of the plight of the first respondent’s members either.

The second issue concomitantly raised with the one disposed of, concerns the failure by the applicant to appeal against the arbitral award. There is substance in the submission. I say after considering the provisions of the arbitration referral agreement. In clause 3.5 of the agreement, it is provided as follows:

“In the event that any party is aggrieved with the arbitral award, the aggrieved party 	shall have the right to appeal to the Labour Court in terms of the Labour Act,

[Chapter 28:01].”

When one unpacks the above provisions, it is clear that parties envisaged that either of them may not agree with the arbitral award. The parties agreed on the recourse to be adopted by the aggrieved party. The recourse agreed to was by way of noting an appeal to the Labour Court in terms of the provisions of the Labour Act.

The question which must however be answered is whether or not the applicant petitioned this court because it was aggrieved with the arbitral award. The answer is clearly an affirmative yes. The next question is then to ask why if the applicant was aggrieved, it did not follow the procedure agreed to by the parties to appeal to the Labour Court in terms of the Labour Act? The applicant did not address this objection by the first respondent in any of its papers nor did it address it in argument. The next question becomes whether or not the objection holds good at law and if yes, what this court should do. Should the court disregard the parties’ stated and agreed to procedures on noting an appeal by the aggrieved party to their agreed to forum. I think not. Parties are strictly bound to the covenant or agreement which they would have executed

inasmuch as the arbitrator is similarly strictly bound to the terms of his or her mandate. The objection by the first respondent is therefore sound. However, the matter does not end there.

The court must consider the nature of the relief which the applicant prays for. If the relief can competently be granted on appeal by the Labour Court, then the court can exercise its discretion to refuse to exercise its jurisdiction. I refer here to a discretion to exercise jurisdiction because in my understanding, this court’s jurisdiction being original in all civil and criminal matters throughout Zimbabwe as provided for in s 170 (a) of the Constitution cannot be ousted by agreement of the parties, let alone upon a consideration of the wording of clause 3.5 of the arbitral referral agreement. Smith J in P.T.A. Bank v Ellane (Pvt) Ltd & Ors 2000(1) ZLR 156 (HC) held that, the mere fact that an agreement imports that any matter arising out of the agreements must be referred to arbitration does not oust the court’s jurisdiction. I agree because where the court’s jurisdiction is given by statute, parties cannot oust it since legislation cannot be changed or compromised through the agreement of parties unless that enabling legislation provides that parties can do so.

In casu, the application by the applicant is not in the nature of an appeal. The relief sought falls outside the jurisdiction of the Labour Court. Article 34 of the Model Law to the Arbitration Act [Chapter 7:15] provides for the recourse of the setting aside of an arbitral award only by the High Court on grounds given therein. The ground relied upon by the applicant that that the arbitral award is in conflict with the public policy of Zimbabwe is one such ground which only the High Court can apply or determine. The Labour Court does not have such jurisdiction. I will therefore answer the first respondent’s objection that the applicant should have noted an appeal by dismissing it on the basis that clause 3.5 of the agreement cannot be interpreted as barring the applicant from seeking relief from this court especially so in regard to seeking relief of the nature that the Labour Court cannot competently grant at law.

That there is no merit in the applicants’ submission that the award was in violation of the public policy of Zimbabwe. The first respondent denied that the 3% salary increment would result in the closure of the applicants’ member companies nor that it amounted to a violation of the public policy of Zimbabwe. I must agree with the first respondent. The question to be addressed is the meaning and purport of what amounts to a violation of the public policy of Zimbabwe.

In her submissions Ms Matshiya submitted that the increase in salaries would have far reaching repercussions because the applicant’s members could scarcely afford the $1.1 million plus amount that the increase would represent given the state of affairs of the member companies which owed arrear salaries and other creditors. She argued that the arbitrator did not provide a scientific basis for making the award.

A careful reading of the arbitral award from pp 5-11, shows that the arbitrator dealt with the contentions of both parties. The arbitrators were also informed and advised of the provisions of section 76 (1) of the Labour Act which places the burden of proof to prove financial incapacity to pay or agree to negotiated terms of a collective bargaining agreement upon the party alleging the incapacity to pay. Further, such party is required to make full disclosure of all relevant financial records to support its contentions. The arbitrators considered the financial information provided by the applicant members and noted those who did not make disclosure. Only two members were found to have disclosed their records for 2015, 4 disclosed for 2014 and the rest did not do so nor did they explain their failure to make the disclosure.

On p 11 of the award, the arbitrators clearly stated that in the absence of information to the contrary, they had to accept the first respondent’s (as claimant) submissions that the applicant’s position had been ameliorated by a reduction in electricity tariffs from 8:3 cents to 6.7 per kilowatt and that the government had lifted the chrome export ban and scrapped the 20% export tax. The arbitrators accepted that the applicant’s members had, as alleged by the first respondent, diversified into cheaper means of alloy production by commissioning plant which recover chrome from slag. The arbitrators made a finding that the applicants had not disputed the first respondent’s allegations of the diversification of operations, the reduction in electricity tariffs, the lifting of the export ban and scrapping of the 20% export tax. It was determined that the applicant had indicated that the intervening measures had not yet borne any fruit and that debts would take time to clear.

In the two penultimate paragraphs before  they made the order the arbitrators stated as follows:

“We are also alive to the economic realities prevailing in the country. The inflation rate has dropped to close around – 3.29 in 2015. The price of chrome is internationally determined and has been falling down. Respondent has accumulated debts which will take time to clear.

It is our humble view that the problems prevailing in the industry require a shared responsibility on all parties concerned. Considering all the above factors, we are of the view that an increase of 3 per cent for the period January to December, 2015 is reasonable in these circumstances.”

It is therefore evident that the arbitrators were informed on the factors which the

applicant relies upon to seek a setting aside of the award on the grounds that it violates the public policy of Zimbabwe.

It is important to draw a distinction in approaches to the setting aside of an arbitral award which has been reached through the vehicle of private arbitration and a statutory compulsory arbitration. The latter arbitration involves the exercise of public power whilst the former is consensual. The application in casu necessarily requires the court to review the award. I have sought to draw a distinction between statutory compulsory arbitrations and private consensual ones because with the latter, the court adopts a narrow approach in that it should not lightly hold an arbitral award as being contrary to public policy unless it is clearly so in its effect. With a statutory compulsory arbitration, because it involves the exercise of public power, the court must adopt a higher standard of scrutiny as applicable to a review of all administrative decisions reached in the exercise of public power as provided for in s 68 (1) and s 68 (3) of the Constitution as read with the Administrative Justice Act [Chapter 10:28]. In a review of an arbitral award which follows on compulsory arbitration, the court would be entitled to raise mero motu points of law arising from the arbitral award where such points offend procedural and substantive law. With consensual arbitrations, the court when considering the challenge brought against the arbitral award by one of the parties to the consensual arbitration agreement should limit itself to the grounds of challenge raised by the aggrieved party.

In casu, the challenge to the arbitral award to all intents and purposes is founded upon what the applicant considers to be an award that would adversely affect the financial position of the applicant’s member companies. The arbitrators were aware of the financial impact of their awards and they reasoned that taking into account all the information placed before them, the first respondent’s claim for a 20% increase was not sustainable. They instead considered a 3% increase as a percentage level which would reflect a shared responsibility to each other between the parties.

The question to be addressed is whether such an award in form and substance is contraryto or in violation of public policy. Public policy is an elusive term to define. An award is not in violation of public policy merely because its terms are to the judge’s sense of propriety and fairness offensive. Patel JA in Peruke Inv. (Pvt) Ltd v Willoughbys Inv. (Pvt) Ltd & Anor 2015 (1) ZLR 491 (SC) when considering the question of whether an arbitral award was in violation of public policy held at p 499 H that, “courts should generally be loath to invoke the public policy defence except in the most glaring instances of illogicality, injustice or moral turpitude”. The learned judge quoted Gubbay CJ in Zesa v Maposa 1999 (2) ZLR 452 (S), the locus classicus case on the subject at 465 D-E as follows:

“In my opinion the approach to be adopted is to construe the public policy defence as being applicable to either a foreign or domestic award restrictively in order to preserve and recognise the basic objective of finality in all arbitrations; and to hold such defence applicable only if some fundamental principle of the law or morality or justice is violated”.

At p 466 E-H, the Chief Justice continued as quoted by Patel JA:

“An award will not be contrary to public policy merely because the reasoning or conclusions of the arbitrator are wrong in fact and law. In such a situation the court would not be justified in setting the award aside.

Under article 34 or 36, the court does not exercise an appeal power and either uphold or set aside or decline to recognise and enforce an award by having regard to what it considers should have been the correct decision. Where, however, the reasoning or conclusion in an award goes beyond mere faultiness or incorrectness and constitutes a palpable inequity that is so far reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair minded person would consider that the conception of justice in Zimbabwe would be intolerably hurt by the award, then it would be contrary to public policy to uphold it.

The same consequences apply where the arbitrator has not applied his mind to the question or has totally misunderstood the issue, and the resultant injustice reaches the point mentioned above.”

In my understanding therefore, and based on the dicta by the Chief Justice as

above cited, an arbitral award will be adjudged to be in violation of the public policy of Zimbabwe where its recognition has the effect of resulting in inequity of such a gross magnitude that it so defies accepted moral standards to such extent that it offends any reasonable person’s conception of justice.

It is important to caution that courts should not be pressured to expand the scope of public policy to accommodate what may appear to be every day commercial hardships. Public policy should always be viewed as a narrow concept and arbitral awards should only be set aside under article 34 (2) (b) (ii) in circumstances where the award is shocking to the conscience and hurtful to the public good as may be adjudged by an ordinary reasonable person informed of the facts. For example, an arbitral award would be in violation of public policy if its making is tainted with, induced or affected by fraud corruption, bribery or other serious unlawful conduct.

As to what constitutes public policy as a concept, I have already indicated that the term is illusive. Public policy like the term suggests must be understood as an issue or matter that concerns the public good and the public interest. Public policy principles and standards must be defined as those which address a public issue that has to do with the welfare of the whole society. It is an imprecise and ambiguous concept. Courts must be slow therefore to evolve new heads of public policy such as exceptional circumstances of a particular case as such approach would destabilize society in the long run. In casu, if I was to hold that because the award may result in increased hardship to a company by increasing its debt portfolio, such a decision would be in violation of public policy, this would result in undesirable consequences and open floodgates for parties to rush to seek the setting aside of arbitral awards on the basis that to implement them would result in financial hardships. Financial hardships are not unknown or uncommon in the business world. The court should therefore not been seen as the intervener in what is essentially a contractual issue which parties are qualified to and have dealt within in a manner that is beyond reproach and reached a decision which is not outrageous by reasonable person standards.

In this case, the arbitral award dealt with the issues raised by the parties. In an approach which commends itself for impartiality and realism, the arbitrators reasoned that the challenges alluded to by the applicant and as accepted should be a shared responsibility between the employer and employee. The arbitrators achieved this by ordering a small marginal increase of salary and referred the housing allowances issue for discussion at Works Council level or at Employer/Employee level.

In my judgment, the award was not one which could by any stretch of imagination be adjudged  by reasonable standards to be in violation of public policy of Zimbabwe.

Consequently the application fails and it is hereby dismissed with costs.

Wilmot & Bennet, applicant’s legal practitioners

Musoni Masasire, 1st respondent’s legal practitioners