THE INDUSTRIAL COURT’S JURISDICTION IN DETERMING CLAIMS REGARDING CONTRACTS WITH ARBITRATION CLAUSES: A CASE REVIEW OF GIORGIO ZENEGALI VS. SARI CONSULTING LTD. (LABOUR DISPUTE REFERENCE NO. 299 OF 2019).

 

Introduction.

Arbitration clauses are a common feature in different kinds of contracts, as a dispute resolution mechanism in case of any hiccups during the execution of the contract. Usually, where parties have agreed to arbitration as the dispute resolution mechanism, it is mandatory and the parties cannot then go to the courts of law on first instance to resolve the dispute except where the arbitration clause is null and void. In other words, the courts of law would have no jurisdiction to entertain a dispute where the parties agreed to arbitration as the dispute resolution mechanism.

However, where it comes to matters relating to employment (contracts of or for services), the Industrial Court of Uganda has held that an arbitration clause notwithstanding, the Industrial Court still has jurisdiction over disputes arising from employment related matters.

This blog reviews the Industrial Court’s ruling in Giorgio Zenegali v Sari Consulting Ltd (Labour Dispute Reference No. 299 of 2019) on its jurisdiction in employment disputes regarding contracts with arbitration clauses.

 

Brief Facts.

The Claimant, Giorgio Zenegalia, was an employee of the respondent, Sari Consulting Ltd under a contract that provided for a dispute resolution mechanism of arbitration and conciliation under the rules of the Chamber of Commerce of Rome and in accordance with the Italian Law and Language. The claimant’s claim in the Industrial Court was for unpaid salary arrears and other benefits as agreed and breach of contract. The respondent raised a preliminary objection that on the basis of the contract between the parties, the Industrial Court had no jurisdiction to entertain the dispute since the Employment Act was not applicable to the contract as the parties had chosen mandatory arbitration to be done in Rome as provided for under clause 8 of the contract of service.

Relying on Section 91 of the Evidence Act and Section 5 and 40 of the Arbitration and Conciliation Act, the Counsel for the Respondent strongly submitted that jurisdiction being a creature of statute, the Industrial Court could not entertain the claim because in clause 10 of the respective contracts, the parties surrendered to Italian Law. He argued that except by mutual agreement of both parties, neither of them could run away from the binding terms of the agreement.

The Claimant on the other hand argued that Section 12(1) and (2) of the Employment Act and Section 8(1)(a) of the Labour Dispute (Arbitration and Settlement) Act as amended, both the Labour Officer and the Industrial Court are granted jurisdiction to entertain employment disputes. He argued that reliability on an exclusive clause in the contract was aimed at evading liability under the Contract. He relied on the decision in CMA Cam Uganda Ltd vs. M/S Sekatawa International Ltd (Civil Appeal No. 27/2013) which held that courts in Uganda have jurisdiction by virtue of the fact that the contract was performed in Uganda and that one of the circumstances which could be considered in establishing whether court could exercise jurisdiction was whether the defendant genuinely desired trial in a foreign country or was only seeking procedural advantages.

The Claimant submitted that the defendant in this case was only seeking procedural advantage as there was no plausible reason to have the matter tried in Italy.

 

Decision of the Court.

The Court acknowledged that parties have freedom to contract and once they reduce the contract in writing, they are bound by the provisions of the Contract so reduced in writing. Court further acknowledged that in interpreting the contract so reduced in writing, the courts have to take into account the intention of the parties at the time the contract was signed as well as the law prevailing at the time the contract was made but also at the time the court is making the decision.

 Court however pointed out that Section 9 of the Labour Dispute (Arbitration & Settlement) Act 2006 as now amended states that:

            “The Arbitration and Conciliation Act shall not apply to any proceedings of the      Industrial Court under this Act, or to any award made by the Industrial Court.”

Court therefore opined that the law since the Labour Dispute (Arbitration & Settlement Act) as the law that gives jurisdiction to the Industrial Court ousts the application of the Arbitration and Conciliation Act by the industrial Court, the Act could not apply in the circumstances and as such, the Industrial Court was not bound or obliged to refer the matter to arbitration under the said Arbitration and Conciliation Act.

While it was clear that the parties intended their dispute to be resolved outside the jurisdiction of the Industrial Court, court pointed out that the question for determination is whether the exclusion of the jurisdiction of the courts in Contract would automatically oust court’s jurisdiction. To answer this question, court relied on the decision in Huadar Guangdong Chinese Co. Ltd vs. Dance Logistics Uganda Limited (Civil Suit No. 4/2012) where court held:

            “It is settled law that a simple clause in an enforceable contract does not oust the        unlimited jurisdiction of the High Court as conferred to it by the Supreme law of the          land.”

As a court equipped with the same jurisdiction as the High Court, the arbitration clauses in the contracts could not oust its jurisdiction over employment matters.

The Court also found that the expenses likely to be incurred when a matter was to be handled outside the domestic jurisdiction would be a factor to consider in determining the question of jurisdiction embedded in a contract.

Court held that Section 5 of the Labour Dispute (Arbitration and Settlement) Act and Section 12 and 13 of the Employment Act grant the Industrial Court and Labour Officer respectively, jurisdiction to handle employment disputes. Court concluded that given the huge expenses that would be incurred by the respondent if the claim was referred to Rome in accordance with the contract, and given that no special and reasonable explanation was given to the Court for such expensive expedition, the respondent was merely  seeking procedural advantage intended to halt the progress of the claim under the contract of service and this is unacceptable in light of Section 27 of the Employment Act which allows for application by agreement between parties of terms and conditions that are more favourable  to the employee than those contained in the Act.

 

Conclusion.

From this decision, it is clear that the position of the law regarding the Industrial Court’s jurisdiction is adjudicating disputes regarding employment contracts with mandatory arbitration clauses is thus:

 

• 1.     The Labour Dispute (Arbitration & Settlement Act) as the law that gives jurisdiction to the Industrial Court ousts the application of the Arbitration and Conciliation Act by the industrial Court and as such, the Industrial Court is not bound or obliged to refer matters to arbitration under Arbitration and Conciliation Act. The Industrial Court has jurisdiction to preside over such matters.

 

• 2.     The exclusion of the jurisdiction of the courts in Contract does not automatically oust court’s jurisdiction and as such, a simple clause (even of mandatory arbitration) in an enforceable contract does not oust the jurisdiction of the Industrial Court over employment matters.

 

• 3.     The expense likely to be incurred in resolving a dispute outside the domestic jurisdiction will be a factor to be considered where the court is determining whether it can exercise jurisdiction over the dispute.

 

Conclusively, regarding employment matters, the Industrial Court has jurisdiction to handle disputes arising therefrom regardless of whether there is a clause on mandatory arbitration or not, especially where arbitration would be more costly.