Arbitration is a well-recognised form of alternative dispute resolution (ADR) that serves as an effective substitute for litigation in resolving disputes between parties. It involves the appointment of a neutral third party, known as the arbitrator, who hears the dispute and delivers a legally binding decision. Unlike mediation, where parties may choose to accept or reject the mediator’s proposals, arbitration results in a binding award that is enforceable in law. Arbitration is generally preferred for its efficiency, cost-effectiveness, and procedural flexibility compared to traditional court processes. 

Litigation in South Africa, especially within the civil and labour spheres, can be protracted and expensive. Cases may take several years to finalise, depending on the complexity and the judicial backlog. Consequently, parties often include arbitration clauses in their contracts to pre-emptively define how disputes will be resolved outside of court. Moreover, Rule 41A of the Uniform Rules of Court mandates parties to consider ADR methods such as mediation or arbitration before proceeding with litigation, requiring parties who oppose ADR to provide reasons for their refusal. 

Legal Framework Governing Arbitration 

Arbitration in South Africa is primarily regulated by the Arbitration Act 42 of 1965. However, in the context of labour relations, arbitration is governed by the Labour Relations Act 66 of 1995 (LRA), which also establishes the Commission for Conciliation, Mediation and Arbitration (CCMA). The CCMA serves as the primary institution for resolving workplace disputes through conciliation and arbitration. 

Nature and Procedure of Arbitration 

Where conciliation fails to resolve a dispute, either party may refer the matter to arbitration if the dispute is one that the CCMA has jurisdiction to arbitrate. Section 191(5) of the LRA allows arbitration in disputes concerning unfair dismissals and certain unfair labour practices. Such referrals must be made within 90 days of the failed conciliation, failing which a condonation application is required. 

In some matters, particularly those involving dismissals related to probation, or claims under sections 69(5), 73 or 73A of the Basic Conditions of Employment Act 75 of 1997 (BCEA), conciliation and arbitration may occur on the same day, in a process known as con-arb (conciliation–arbitration). 

The arbitration hearing itself is a quasi-judicial process during which the commissioner ensures procedural fairness while avoiding unnecessary legal formalities. Both parties are given the opportunity to lead evidence, cross-examine witnesses, and make submissions. Representation at arbitration is limited: parties may be represented by a trade union, employer organisation, or authorised official. Legal practitioners may represent parties only in limited cases, unless the commissioner grants permission in terms of Rule 25(1)(c) of the CCMA Rules. 

The commissioner issues a written arbitration award within 14 days of concluding the hearing. This award is final, binding, and enforceable, subject only to review proceedings in the Labour Court. 

Review of Arbitration Awards 

Although arbitration awards are binding, they are not immune from judicial scrutiny. Section 145 of the LRA provides that a party alleging irregularity or defect in arbitration proceedings may apply to the Labour Court to have the award set aside within six weeks of service. The Labour Court may condone late applications on good cause shown. 

A “defect” in arbitration proceedings under section 145(2) includes instances where the commissioner: 

• committed misconduct in relation to their duties; 
• committed a gross irregularity in the conduct of the proceedings; 
• exceeded their powers; or 
• issued an award that was improperly obtained. 

Section 144 of the LRA further allows for the variation or rescission of arbitration awards on limited grounds, such as where the award was erroneously granted in the absence of a party or contains an ambiguity or obvious error. 

Importantly, section 145(7) stipulates that instituting review proceedings does not automatically suspend the operation of an arbitration award. The applicant must provide security to the satisfaction of the Court if they wish to stay enforcement pending review. 

Case Law Illustrations 

In Minnaar Boerdery v CCMA & Two Others (JR 2187/2020), the employer sought to review a CCMA award that found the dismissal of 23 employees unfair. The Labour Court, after examining the record, upheld the award, finding it both procedurally and substantively justified. The application was dismissed, reaffirming the Labour Court’s deference to arbitrators’ factual findings when properly reasoned. 

Similarly, in Shoprite Checkers v CCMA and Others (D1288/2018) [2022] ZALC 8, the Labour Court reviewed an arbitration award concerning the dismissal of an Admin Manager accused of gross negligence. Upon assessing the totality of evidence, the Court found that the arbitrator’s conclusion was not supported by the facts and set aside the award. This case underscores the Labour Court’s willingness to intervene where arbitration decisions lack evidential support or demonstrate irregular reasoning. 

Enforcement and Contempt Proceedings 

Under section 143(1)–(4) of the LRA, a certified arbitration award may be enforced as if it were an order of the Labour Court. Failure to comply with a certified award may result in contempt proceedings. 

In a recent case involving Super Spar Polofields, the employer was found in contempt of court for failing to comply with a reinstatement order issued by the CCMA. Despite repeated notifications, the employer refused to reinstate the employee, Mr Moyo. The Labour Court held that the employer’s conduct was wilful and in bad faith, amounting to “contumacious disrespect of judicial authority”. The director, Mr Loubser, was found personally liable and fined R1 million, suspended on condition of compliance within 30 days. This decision highlights the judiciary’s intolerance toward employers who disregard arbitration awards and underscores the serious legal consequences of contempt. 

Pre-Arbitration Conferences 

In complex disputes, the CCMA may direct or the parties may agree to convene a pre-arbitration conference. This process serves to streamline proceedings by agreeing on documentary evidence, witness lists, and issues in dispute, thereby focusing the arbitration on substantive matters. A signed minute of this conference is submitted to the presiding commissioner to assist in expediting the hearing. 

Importance of Reasoned Arbitration Decisions 

A well-reasoned arbitration award enhances accountability and facilitates judicial review. Arbitrators must demonstrate a rational connection between the facts and their conclusions. This requirement not only upholds the integrity of the process but also encourages employers to make reasoned, lawful, and unemotional decisions when taking disciplinary action. Proper reasoning helps ensure that an arbitrator understands and accepts the employer’s rationale where it aligns with the evidence and the law. 

Conclusion 

Arbitration plays a critical role in promoting expeditious and cost-effective dispute resolution in South African labour law. While arbitration awards are final and binding, they remain subject to review under limited statutory grounds to safeguard fairness and legality. Employers must appreciate the gravity of such awards and the potential consequences of non-compliance, including contempt findings and personal liability for directors. Ultimately, arbitration fosters a culture of accountability and reasoned decision-making, ensuring that justice is achieved efficiently within the framework of the Labour Relations Act 66 of 1995. 

Written by Ross Hendriks, Specialist Employment and Labour Law, SchoemanLaw Inc