14 December 2010

Private arbitration clauses in contracts of employment - an unsporting bar to approaching the CCMA or Labour Court?

The above question was recently answered by the Labour Court in the decision of Soul Mmethi v DNM Investments CC t/a Bloemfontein Celtics Football Club (unreported case JS1298/09). The Applicant, a professional footballer, sought an order that his fixed term contract of employment with Respondent was incapable of cancellation for any other reason other than for material breach. In relying upon section 77 of the Basic Conditions of Employment Act 75 of 1997 (the BCEA), the Applicant sought compensation for the balance of his fixed term contract period following what he claimed to have been premature termination by the club based on its operational requirements.

At the outset of the trial, the Respondent contended that the court did not have jurisdiction to entertain the matter because the contract of employment required that disputes between clubs and players should be referred to private arbitration. Two opposing views where argued on behalf of either party. On behalf of the Applicant, it was argued that the existence of private arbitration clause did not overrule the Labour Relations Act 66 of 1995 (the LRA) and the BCEA. Even if the private arbitration clause was held to be binding, it did not have the effect of ousting the jurisdiction of the court. In this regard, the Applicant relied on the authorities in Coetzee v Comitis [2001] 1 All SA 538 (C), Fabian McCarthy v Sundowns Football Club and others [2000] JOL 10381 (LC) and Santos Professional Football v(Pty) v Igesund and another 2002 (5) SA 697 (C).

The court in the cases listed above accepted that the existence of internal remedies does not oust the Labour Court jurisdiction to deal with such matters. While the courts will always be reluctant to entertain matters where processes are in place to address disputes between parties, where the processes do not provide for matters to be heard on an urgent basis and the matter is in fact urgent, it is not improper for the court to deal with such a matter. Moreover, whilst an arbitration agreement does not deprive the court of its ordinary jurisdiction over the disputes which it encompasses, it does oblige the parties to refer such disputes in the first instance to arbitration. If however either party takes the arbitral dispute straight to court and the other party does not protest, the litigation follows its normal course.

Section 6 of the Arbitration Act 42 of 1965 provides for the stay of legal proceedings where there is an arbitration agreement. If on any such application the court is satisfied that there is no sufficient reason why the dispute should not be referred to arbitration in accordance with the agreement, the court may make an order to stay such proceedings subject to such terms and conditions as it may consider just. In short, the court reiterated that in terms of our law, the mere existence of an arbitration clause in an agreement does not preclude a party from initiating court proceedings to have the dispute adjudicated by the court. The arbitration clause does however oblige the parties in the first instance to refer the dispute arbitration. A party seeking to evoke and rely upon the arbitration clause in the agreement must request a stay of such proceedings pending the determination of the matter by an arbitrator. The court, however, retains discretion whether or not to entertain the matter or to hold the parties to their agreement and order them to resolve their dispute in terms of the agreement. In either case, the court retains the supervisory power over the arbitration process.

The court went further to find that because arbitration agreements are consensual courts should be very slow to exercise their discretion to entertain a dispute where parties have agreed that such disputes should be referred to arbitration. On an assessment of the facts in casu, the court could see no reason why the Applicant could not first exhaust the internal remedy before approaching the Labour Court for relief. The Applicant's claim was stayed pending the referral to arbitration and determination of the dispute by the Dispute Resolution Chamber as contemplated in the National Soccer Leagues Constitution.

Gavin Stansfield, Director, Employment Law

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