The
applicant is the employer of members of the respondent union. In
early 2009, the parties engaged each other in negotiating wage and
salary adjustments. The respondent was advocating for a minimum wage
of US$490= per month on behalf of each of its members. The applicant
argued that it could not afford to pay any adjustment above that
which was already being paid. These negotiations yielded an agreement
that wages would be pegged at US$100= while other benefits, including
transport and housing, would be $50= for each employee for April 2009
only.
Subsequent
negotiations yielded no positive results and a deadlock was declared
at NEC level. The parties then agreed to submit the dispute for
arbitration. The Commercial Arbitration Centre chose Mr Mordecai
Mahlangu to be the arbitrator. Following submissions by the parties
he handed down his award on 23 February 2012. That award is reasoned
and couched in these words:
“The
determination of this matter requires something of the wisdom of
Solomon in that there are two competing and patently legitimate
interests to be reconciled.
While
it is clear to me that the US$490= which has been sought by the
claimant, on behalf of its lowest paid members, is not easily
afforded, it is equally clear to me that I cannot, with a clear
conscience, simply leave matters as they are in respect of the period
between May and December 2009…,.
For
the period between 1 May and 31 August 2009, the salary of the lowest
earning employee of the respondent company should receive an
adjustment of US$25= in respect of each month and for the period
between 1 September 2009 and 31 December 2009 a further US$25= should
be effected. The effect of this, on the lowest earning employee of
the respondent, is that, in total, the back pay payable to him or her
will be US$300=.
In
doing this, I realize that further financial strain will be added to
respondent company but believe that this is necessary in fairness to
the claimant.”
The
applicant was dissatisfied with the outcome of the arbitration hence
this application seeking the setting aside of the arbitral award. The
application is being made in terms of Article 34(2)(b)(ii) of the
Model Law whose relevant provision provides:
“(2)
An arbitral award may be set aside by the High Court only if -
(a)…,.
(b)
The High Court finds that -
(i)…,.
(ii)
The award is in conflict with the public policy of Zimbabwe.”
The
gravamen for challenging the content of the award is predicated upon
the premise that recognition of the award, either in its present form
or its substantive effect, would be contrary to the public policy of
Zimbabwe. The award, so the argument went, plunges the apple cart
over the cliff; it has the effect of killing the goose that lays the
golden egg.
The
learned arbitrator found that the applicant was operating at a loss
and would continue to do so even in the foreseeable future. He agreed
that the applicant had no ability to pay as it was in a precarious
financial position and any adjustment will simply contribute to the
already existing deficit and funding gap. But, in spite of all these
findings, he went ahead and made an award which was certain to drive
the applicant into insolvency. The overall effect of the award is
therefore contrary to public policy of Zimbabwe.
The
respondent argued to the contrary submitting that it is for the
applicant to show that some fundamental principle of law or morality
or justice was violated. The learned arbitrator's reasoning cannot
be faulted. The respondent had claimed a minimum salary of $490= but
the award was much less with the arbitrator reasoning:
“It
seems to me that a fair and sensible compromise is to grant claimant
an adjustment in recognition of the plight of its members, but for
this to be in such an amount that it does not break the back of
respondent company and drive it to complete insolvency.”
This
reasoning does not constitute a palpable inequity. That inability to
pay or comply with the award makes the award contrary to public
policy is both erroneous and mischievous. If the applicant is unable
to pay its debts it must go into liquidation or judicial management.
When,
then, is an award in conflict with the public policy of Zimbabwe?
Article
34(5)(a) and (b) of the Model Law spells out instances when an award
is in conflict with the public policy of Zimbabwe, viz, if:
(a)
The making of the award was induced or effected by fraud or
corruption; or
(b)
A breach of the rules of natural justice occurred in connection with
the making of the award.
The
foregoing provision, however, clearly states that the two instances
are not exhaustive hence should not be taken as “limiting the
generality of paragraph (2)(b)(ii) of this article.” What this
boils down to, therefore, is that the determination of other
instances as falling under the category of being contrary to the
public policy of Zimbabwe is a question of value judgment; for the
words public policy are a wide and vague concept.
Below
are some of the instances where an award has been or could be held to
be in conflict with the public policy of a country:
(i)
Where the substantive effect of the award, after a consideration of
the merits of the dispute, endorsed immorality or crime: ZESA v
Maposa 1999 (2) ZLR 452 (SC)…,.;
(ii)
Where there has been a violation of fundamental principles of the
forum State's legal order, hurting intolerably the feeling of
justice: Leopold Lazarus Ltd (UK) v Chrome Resources SA reported in
(1979) 4 Yearbook of Commercial Arbitration 311…, quoted with
approval in ZESA v Maposa 1999 (2) ZLR 452 (SC)…,.;
The
list, I must say is also not exhaustive.
As
GUBBAY CJ stated in ZESA v Maposa 1999 (2) ZLR 452 (SC)…, the
difficulty is not with the formulation of an appropriate and
acceptable test but with the application of that test in an endeavour
to determine whether the arbitral award should be set aside, or
enforcement of it denied, on the ground of a conflict with the public
policy of Zimbabwe. The court went on to hold that the approach to be
adopted is to construe the public policy defence restrictively in
order to preserve and recognize the basic objective of finality in
all arbitrations.
An
award will not be contrary to public policy merely because the
reasoning or conclusions of the arbitrator are wrong in fact or in
law. 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.
In
Telone (Pvt) Ltd v Communications and Allied Services Workers Union
of Zimbabwe HH74-07, the award was held to be contrary to the public
policy of Zimbabwe on the basis that its effect would be to drive
corporations into insolvency thereby destroying the economic fabric
of the nation.
The
respondent contended that that case is distinguishable from the
current one on the ground that, in the former, facts before the court
showed that the wage bill would result in 130% of Telone (Pvt) Ltd's
income being committed to salaries and wages, which is not the
scenario in the latter.
While
that may be so, I remain un-persuaded by the respondent's
contention.
The
facts which were common ground were that the applicant was in the red
in 2009 by US$2,000,000=. Its shareholder, the Government, was not
prepared to bail it out as it also had no money and could not even
afford to pay its own employees (civil servants) a minimum wage of
more than US$150= per month. The applicant's staff costs
contributed 52% of overall expenditure and consumed 67% of total
revenue. This precarious financial position of the applicant was not
expected to improve in the foreseeable future. The learned arbitrator
found the foregoing as a fact.
The
applicant is a quasi public entity.
It
would be too simplistic and too onerous, on the part of its
shareholder, to argue that the shareholder (which on its part was
also broke) should bail it out, a fortiori to argue, as the
respondent did, that if the applicant is unable to pay its debts then
it should go for liquidation. Such a result is untenable and too
ghastly to contemplate as it would result in dire consequences for
the very employees who are seeking wage increment as well as for
their families.
On
the common cause facts, I am thoroughly persuaded that even applying
the public policy defence restrictively, the substantive effect of
the arbitral award, upon the applicant, never mind that the awarded
increments are not substantial, would be to drive it into insolvency
with the inevitable consequence of liquidation with massive loss of
jobs for all its employees and mass suffering for their dependants.
All these affected people will be rendered destitute with little or
no prospects of getting alternative employment in a tight job market,
starvation, and school drop-outs for their children. Certainly, this
will constitute a palpable inequity and the conception of justice in
Zimbabwe would be intolerably hurt by this substantive effect of the
award. That the award will be viewed as being in conflict with the
public policy of Zimbabwe would be beyond caevil.
In
the event, the arbitral award made by the learned arbitrator, Mr
Mordecai P. Mahlangu, on 23 February 2010 be and is hereby set aside
with costs.
