Detergents, Edible Oils, Fats Employers Association v Detergents, Edible Oils, Fats Workers Union and Arbitrator P. Shawatu

The applicant (employers' association) and first respondent (workers' union) in the detergents, edible oils and fats industry engaged in wage negotiations through their National Employment Council. They agreed to adopt a US dollar linked wage payable at the prevailing auction rate and a three month negotiation period, but could not agree on actual figures and currency of payment for housing allowance. The matter was referred to voluntary arbitration before the second respondent. The first respondent proposed a basic wage of US$198.00, housing allowance of US$30.00 and transport allowance of $22.00. The applicant proposed US$69.50, $17.50 and $24.50 respectively (housing and transport in local currency). The industry was declared an essential service during the COVID-19 national lockdown and was permitted to sell goods in foreign currency. The arbitrator awarded a basic wage of US$140.00, transport allowance of US$20.00 (both payable in local currency at prevailing rate), and housing allowance with an option of US$25 in foreign currency or US$30 in local currency at prevailing rate.

• Whether the arbitral award was contrary to the public policy of Zimbabwe in terms of Article 34(2) of the Model Law
• Whether the arbitrator's recognition of the parallel market exchange rate constituted condoning an illegality
• Whether the award regarding housing allowance in US dollars was contrary to Statutory Instrument 85 of 2020
• Whether the award regarding transport allowance was based on illegal transport services contrary to the Public Health (COVID-19) regulations
• Whether the wage increase awarded would result in closure of companies and upset the balance between employers and employees

The application was granted with costs. The arbitral award dated 7 October 2020 was set aside.

An arbitral award will be set aside as contrary to public policy where: (1) the arbitrator bases the award on illegalities, such as recognizing and sanctioning the parallel market exchange rate when it is illegal to access foreign currency through such markets; (2) the arbitrator adopts positions contrary to statutory provisions, such as awarding payment in foreign currency when the law provides that the official legal tender is local currency and only gives the payee (not employer) the option to pay in foreign currency; (3) the arbitrator takes into account illegal conduct or services in determining an award; and (4) the award goes beyond mere faultiness and constitutes a palpable inequity that defies logic or accepted moral standards. Courts will not condone or sanitize illegalities through arbitral awards, regardless of harsh economic realities. A court sitting in review of an arbitral award cannot substitute its own determination for that of the arbitrator.

The court observed that it is a fundamental principle of law that a thing done contrary to the direct prohibition of the law is void and of no effect, citing Ndabezinhle Mkwananzi and Thokozile Mkwananzi v Angelus Mkwananzi and Assistant Master of the High Court. The court noted that while this is a general proposition and not a hard and fast rule, it was satisfied that the legislature did not intend to render the exchange of money on the parallel market valid, and that such conduct is actually an offence. The court also commented that where the effect of an award may result in the closure of companies, it cannot be upheld, as a balance must be struck between both parties and both need to survive. The court noted the economic reality that companies operate in difficult conditions with economic fundamentals at the low side of the spectrum, and that while the arbitrator considered the plight of workers, there was insufficient consideration of the effect of US dollar increments on the applicant's members.

This case is significant in Zimbabwean labour and arbitration law as it clarifies the limits of arbitral awards in wage disputes and reinforces that arbitrators cannot base their decisions on illegalities, even where there are harsh economic realities. It demonstrates the application of the public policy ground for setting aside arbitral awards under Article 34 of the Model Law, particularly where awards condone illegal conduct such as parallel market currency trading or illegal transport services. The case also emphasizes that arbitrators must balance the interests of both employers and employees, and cannot make awards that would potentially result in business closures. It reinforces the principle that official legal tender and legal frameworks must be respected in arbitral awards, regardless of practical realities on the ground. The judgment also reaffirms the limited scope of court intervention in arbitration, noting that courts sit in review and not on appeal, and cannot substitute their own determinations for those of arbitrators.