What is the prescription of Arbitration Awards?

The issue of whether arbitration awards prescribe after the three-year lapse, has been considered in numerous conflicting judgments of the Labour Court.

On 15 December 2016, the Constitutional Court clarified the position in the case of Myathaza v Johannesburg Metropolitan Bus Services Limited t/a Metrobus and others. The Constitutional Court was tasked with considering whether an arbitration award issued in terms of the Labour Relations Act 66 of 1995 (LRA) had prescribed in terms of the Prescription Act on the expiry of three years from the date on which the award was issued. More specifically, whether the Prescription Act applies to matters governed by the LRA, and if so, whether an arbitration award constitutes a debt as envisaged in the Prescription Act.

In this case, the employee was dismissed and after referring an unfair dismissal dispute to the bargaining council was awarded reinstatement and back pay. The employer then decided to take the arbitration award on review to the Labour Court. Almost four years later, and while the review application was still to be heard by the Labour Court, the employee applied to have the arbitration award made an order of court (which, in terms of previous decisions, interrupted prescription). The employer opposed the employee’s application on the basis that the review was still pending and in any event the arbitration award had prescribed after the three-year lapse from the date it was issued. Both the Labour Court and the Labour Appeal Court agreed with the employer and held that the arbitration award had prescribed.

The judges of the Constitutional Court were divided in their reasons as set out in three separate judgements, but ultimately came to the same conclusion that the Prescription Act does not apply to arbitration awards.

The reasons as set out in the first judgement were as follows:
• an arbitration award is an outcome in terms of which the claim (dispute) is finally settled between the parties, whereas the purpose of the Prescription Act is to extinguish the right to enforce a claim that is yet to be determined by a court;
• an award issued at the conclusion of an arbitration represents the resolution of a dispute in that it defines the parties’ rights and obligations in the same way a court order would. In this regard section 143 of the LRA states that an arbitration award is final and binding and it may be enforced as if it were an order of the Labour Court in respect of which a writ has been issued;
• the Prescription Act doesn’t cater for the situation whether a claim or dispute has been adjudicated and a binding outcome has been reached but that outcome has not yet been made an order of court;

The three year period provided for in the Prescription Act is meant for claims or disputes which are yet to be determined where evidence and witnesses may be lost if there is a lengthy delay.

The first judgment also held that prescription cannot run from the date the award is published because section 145 of the LRA affords a party to challenge the award on review within six weeks. Further, an award made in terms of the LRA constituted administrative action and applying the Prescription Act would defeat the purpose of the LRA, which is to provide expeditious finality in resolving labour disputes. The application of the Prescription Act to arbitration awards would also mean that a party who has failed to challenge the award may invoke the Prescription Act to avoid its obligations in terms of the award.

The second judgment commenced its reasoning stating that “manifest injustice of depriving the applicant of the arbitration award in his favour by first avoiding its implementation by way of instituting review proceedings and then crying prescription on the back of the time wasted by the review can be met by application of the principle that prescription should not run until court proceedings are finalised.”

The reasons set out in the second judgment were as follows:
• instituting proceedings in the CCMA (or a bargaining council) amounts to the commencement of proceedings which interrupts the running of prescription under the Prescription Act;
• a review in the Labour Court fulfils the same role in finalising the court proceedings as an appeal does in cases from the Labour Court. Until the review is finalised the applicant’s claim cannot prescribe.

The third judgment agreed, albeit for different reasons, that arbitration awards do not prescribe for purposes of the Prescription Act.

The decision of the Constitutional Court in effect means that a certified arbitration award is final and binding on the parties and this means that it cannot prescribe.

Deirdre Venter is a Partner at Webber Wentzel.