Senator WAGNER. If the men chose to have it; that is all there is to this.

Mr. CARMODY. That is all; thank you.

The CHAIRMAN. Thank you, Mr. Carmody.

(The stenographer will insert in the record the article referred to in the earlier hearings entitled "Problems of Conciliation and Arbitration, A Study in Comparative Law", by E. Kuttig, Research Division, International Labor Office.)

PROBLEMS OF CONCILIATION AND ARBITRATION: A STUDY IN COMPARATIVE LAW

(By E. Kuttig, Research Division, International Labor Office)

THE NATURE AND PURPOSE OF CONCILIATION AND ARBITRATION

Almost all industrial countries have institutions for the adjustment of industrial disputes; but the nature and the purpose of these institutions are not everywhere viewed alike. One school-to which most of the principal industrial States of continental Europe belong-has worked out a theory of the nature of such adjustment as distinct from the ordinary administration of justice. It regards it as having to do only with those collective labor disputes which may be described as classes of interest, where it is in effect the balance of power between capital and labor that is in question, and in which the object of the parties is to regulate their mutual relations, i.e., in practice, to fix conditions of employment, or, in other words, to create new law in this field. This conception of the adjustment of disputes distinguishes it sharply from the administration of justice, which is the application by the courts of existing law to disputes in which the parties are in conflict as to their respective legal rights. It is almost superfluous to say that disputes concerning legal rights, too, can be settled amicably by agreement between parties without recourse to a judicial decision; and in countries with a special judicial authority for the settlement of individual disputes on points of labor law, efforts in this direction are even strongly encouraged. But here, too the procedure for amicable settlement of such individual disputes is distinct, both in its fundamental idea and in law, from adjustment in the sense just described.

In English-speaking countries, with the exception of Australia and New Zealand, which have developed on distinctive lines, the position is somewhat different. While in these countries there is no doubt some recognition of the distinction between disputes concerning legal rights and clashes of interest, this has by no means always led to the adoption of separate procedure for the two types of dispute. The reason may lie in the nature of English civil procedure, which is not merely the application of existing law to individual cases, in the strict continental sense, but also, and far more than in continental countries, the creation of new law; it has not only an administrative but also a legislative function, in which it resembles adjustment in the sense described above. In Great Britain, for instance, even disputes in which individuals contest each other's legal rights can be brought either before a conciliation or arbitration board set up by agreement between the parties or before a State body (e.g., the Industrial Court) if there is the possibility of fear of a strike or lockout ensuing.

But this difference in the conceptions of the nature of conciliation and arbitration does not alter the fact that in the English-speaking countries, too, the adjustment institutions have in practice to deal chiefly with clashes of interest. It is only in the case of such disputes that the conciliation and arbitration system shows its peculiar characteristics; and it is just in these cases, where the battle is fought out with extraordinary tenacity and bitterness because the vital interests of powerful groups in the community are at stake, that the necessity for a solution leads to action, the initiative in creating the appropriate machinery being taken either by the parties themselves or by the State, which intervenes in order to protect itself, its economic system, and its citizens from the dangers involved in

1 Since completing this article the writer learns that in virtue of an act of Apr. 27, 1932 (Legislative Series, 1932 N.Z. 1) the compulsory adjustment of collective labor disputes in New Zealand has in practice ceased. This does not, however, affect the present discussion, which is not a description of facts but a comparison of legislative principles, and only takes the former New Zealand system as one example of a certain type of adjustment-the compulsory type-of which other examples may be found elsewhere.

such disputes. In view of the close economic connection between states in the modern world, these clashes of interest, and the open conflict which follows if no agreement is reached, have come to constitute a problem of international importance.

As regards the purpose of conciliation and arbitration, this follows from its nature. It is to reconcile the two contending classes of capital and labor, and to combine them into a single productive entity. The adjustment institutions have been happily compared to an industrial first-aid party, ready to intervene wherever a clash of interest endangers the harmonious collaboration of employers and workers in productive activity. These constant clashes are as constantly checked by the institutions, which for the purpose create new legal regulations adapted to the circumstances of each case and thus promote a peaceful settlement. Whatever form conciliation and arbitration procedure may take, it thus amounts to the creation of law on conditions of employment-a task the importance of which can hardly be overestimated.

Considered in closer detail, however, the purpose of conciliation and arbitration is wider in some countries than in others. The variety is confusing; but some order may perhaps be introduced by dividing the national systems into three groups.3

The first confines itself to what is the primary aim of all adjustment of disputes the maintenance of industrial peace. It is composed mainly of the English-speaking countries, excluding Australia and New Zealand. The second

is an intermediate group, which aims, beyond the simple maintenance of peace, at the legal recognition and extension of collective labor agreements, and uses conciliation and arbitration to help employers and employed to conclude such agreements whenever they cannot do so without outside aid. This group is not perhaps, so sharply defined, but Austria, the Netherlands, Norway, and Sweden, as well as France (according to the new bill before the Senate), may be regarded as belonging to it.

The German legislation explicitly states that the purpose of conciliation and arbitration is to assist in the conclusion of collective agreements, and, if this were all, the system of that country could undoubtedly be classed in the same group; but it also gives the conciliators and the Federal Minister of Labor the power to declare decisions-which are normally mere proposals for agreement, to be accepted or rejected as the parties please-legally binding in certain specified circumstances. This is a step further than the second group proper is prepared to go, and makes Germany the connecting link between it and the third group. There provision is ordinarily made for the issue by the conciliation and arbitration authorities of awards binding on the parties, and often for their enforcement by civil or criminal penalties. This is the system of compulsory arbitration, which adds to the typical purpose of the second group-the promotion of collective agreements—another, namely, the regulation of conditions of employment by the State. Besides Germany (in respect of this side of her system), the principal members of this third group are Russia, Italy, Australia, and New Zealand, and, according to recent legislation, Spain and Mexico.

Within this narrower threefold definition of the purpose of conciliation and arbitration, the national systems oscillate between the two rival principles of conciliation and arbitration. In fact, there are numerous transitional stages between the laws which content themselves with mediation between the parties and those which provide for State regulation of conditions of employment. The nature and extent of the acceptance of the principle of arbitration, with its compulsory issue and application of awards, and the exact view taken of the purpose of adjustment, have everywhere a marked influence on the form taken by the whole procedure. The closer a national system is to the principle of arbitration, and the more completely and logically it applies it, the more strictly will the whole procedure be regulated, and the more will that too be subject to compulsion.

It is proposed in the following pages to describe and compare the ways in which the legislation of several States has dealt with certain specially interesting questions concerning the adjustment of disputes. The capacity to be a party to the proceedings, the suspensive prohibition of strikes and lockouts, the determination of the facts, the legal nature and consequences of decisions, and finally, the conflict between the rival principles of conciliation and arbitration—that is, the problem of compulsion-will be considered in turn.

Cf. Weddigen: "Angewandte Theorie der Schlichtung", in Jahrbuch für Nationalökonomic und Statistik, March 1929.

This division is based partly on Sinzheimer's speeches at the session of the Gesellschaft fur soziale Reform held at Mannheim in October 1929 (cf. "Die Reform des Schlichtungswesens", in Veroffentlichungen der Gesellschaft fur sozialle Reform, vol. 83, pp. 17 et seq.; Jena 1930) and partly on an article by Sitzler in Neue Zeitschrift fur Arbeitsrecht, 1930, vol. 1.

THE PARTIES TO THE PROCEEDINGS

The definition of the scope of conciliation and arbitration institutions and of the right to use the machinery provided for the adjustment of disputes, that is to say, the question of capacity to be a party to proceedings, is the most important question relating to the parties. The nature of the proceedings themselves and their chances of success depend very largely on the manner in which it is answered. A glance at the principal systems shows that the practical issue is whether and. to what extent individuals or groups of persons, in particular organized groups (such as trade unions, staffs of undertakings, etc.), may be parties to proceedings, whether on the employers' or the workers' side, and that this question has been answered in a wide variety of ways. Certain interesting comparisons are nevertheless possible, and they show that there is a striking correlation (in general, even if not in every detail) between the particular task entrusted to the system for the adjustment of industrial disputes in each country and the answer given to this question of capacity.

It will be found that States which restrict the purpose of their systems primarily to the maintenance of industrial peace allow the machinery to be used not only by trade associations but also by informal groups of persons or by individuals on both sides. In systems where more emphasis is laid on the conclusion of collective agreements and the regulation of conditions of employment by the State, correspondingly greater restrictions are imposed on the persons who may make use of the machinery, until finally, in systems which clearly belong to the third group, only trade associations in a special category, at least on the workers' side, are allowed to use the machinery.

In the systems of the first group, which consists mainly of the English-speaking countries, excluding Australia and New Zealand, and whose sole or principal object is the maintenance of industrial peace, it seems that the problem does not arise. A typical example is the industrial courts act of Great Britain, which defines the trade disputes covered by that act as follows:

"The expression 'trade dispute' means any dispute or difference between employers and workmen, or between workmen and workmen, connected with the employment of nonemployment, or the terms of the employment, or with the conditions of labour of any person.'

This definition makes absolutely no distinction between collective and individual disputes. It is therefore easy to understand why no rules or restrictions have been laid down with regard to the parties. The position is the same under the Canadian industrial disputes investigation act of 1907 as amended in 1925; this is shown by the provisions defining industrial disputes, and concerning the representation of workers who are not members of a trade union.

In the systems of the second group, in which the purpose of conciliation and arbitration is primarily the conclusion of collective agreements, a corresponding preference is given to trade associations as parties. Austria, France, the Netherlands, Norway, and Sweden belong to this group.

The provisions of the Swedish act of May 28, 1920, seem to show that the right to use conciliation and arbitration machinery is not restricted to any definite organized groups of persons or trade associations. The French bill clearly shows that trade associations have not ipso facto rights in this matter; it is only when the dispute concerns an existing collective agreement that the trade unions or groups that have signed the agreement are de jure entitled to use the conciliation machinery. Both France and Sweden have legislation on the subject of collective agreements, and it is probable that—especially in Sweden, where the legislation is quite recent and the importance of collective agreements is great and rapidly increasing, the work of the conciliation and arbitration boards in promoting these agreements will continue to extend, so that in practice the workers' associations will acquire increasing importance as parties to the proceedings. The regulations in the Netherlands under the act of May 4, 1923, may be considered as on a par with those in Sweden. As in that country, there is no definite distinction between collective and individual disputes. If a dispute has caused or threatens to cause a strike or lock out affecting not less than 50 workers, then the conciliation procedure is applicable to it. Since 1927 the Netherlands has had legislation on collective agreements. This will presumably, as in Sweden, lead to an increase in the importance of trade associations on both sides as parties in conciliation proceedings, although by law they have no monopoly.

The new French bill clearly aims at preventing such a development. The Austrian system may also be mentioned in this connection. The preamble to the conciliation boards act of December 18, 1919, indicates clearly that no sharp

distinction was intended to be made between the treatment of individual and collective disputes. Here, too, therefore, the right of the workers to use the conciliation and arbitration machinery is not restricted to organized groups. In view of the extent to which collective agreements have been adopted in Austria the part played by the trade associations, at least on the workers' side, in the conciliation and arbitration procedure is in practice of decisive importance. The German regulations on the subject state explicitly that the task of the conciliation and arbitration authorities is to promote the conclusion of collective agreements. They may not undertake other tasks. It follows that the parties allowed to use the adjustment machinery must be identical with the parties who have the right to conclude collective arrangements, which in German law include agreements for a whole trade (collective agreements in the strict sense) and works agreements for a single undertaking. Consequently on the workers' side only certain specified groups—the trade unions in the case of collective agreements for a whole trade and the staff of an undertaking in the case of works agreements can be parties to the adjustment procedure.

The German system is the link connecting the second with the third group, in which the right to issue binding awards, which are subject to criminal penalties for nonobservance, means the intervention of the State in the fixing of wages and other conditions of employment. In Germany this function developed out of the adjustment authorities' primary duty of promoting collective agreements, through the provision of the law which makes it possible, in certain definitely specified and exceptional cases, to declare awards binding on the parties.

In systems of the third group, however, this has become the explicit and essential function of the conciliation and arbitration machinery. This group includes the systems of Russia, Italy, and especially Australia and New Zealand. In the last two countries the regulation of conditions of employment is naturally linked with the fixing of minimum wages, which in most cases has been the starting point of the conciliation and arbitration system. This last conception of the purpose of the machinery clearly affects the question of the parties that may make use of it.

According to the New Zealand legislation, an industrial dispute means "any dispute arising between one or more employers of industrial unions or associations of employers and one or more industrial unions or associations of workers in relation to industrial matters. Consequently, the party to a dispute referred to a council of conciliation or a court of arbitration must logically be, on the workers' side, an industrial union, which in addition must be registered. The situation is similar in New South Wales, where apparently only registered trade unions may be parties to the proceedings. Such a rule is not so strictly enforced in the other Australian States, but the principle is everywhere the same.

A perfect example of the correlation between the tasks of the conciliation and arbitration system and the determination of the parties to the proceedings is offered by the Italian system of jurisdiction in labor matters (magistratura del lavoro), according to the act of April 3, 1926, concerning the legal regulation of collective relations and the administrative regulations of July 1, 1926. The Italian system, though in the last resort it takes the form of judicial proceedings before the labor court, fulfills all the three tasks of maintaining industrial peace, promoting collective agreements, and regulating conditions of employment. We find as a consequence that even on the employers' side only recognized associations may take part in the proceedings.

In Russia, on the workers' side, only the trade unions may appear before the conciliation board or arbitration court in the case of collective disputes. In Russian law there are no associations of employers, so that on the employers' side an individual employer has the right to be a party to the proceedings. It must, of course, be remembered that in practice, in most of the more important cases, the trade unions will be opposed by a State undertaking or an association of such undertakings. There can be no doubt that such an association has the right to be a party to conciliation or arbitration proceedings.

What, then, is the real reason for this correlation between the tasks of the various systems and the question who may be a party to the proceedings? The more the task of conciliation and arbitration machinery is extended from the simple maintenance of industrial peace to the conclusion of collective agreements, and thence to the official regulation of conditions of employment, the more necessary does it become to have as parties to the proceedings responsible organizations which can apply the agreements arrived at or the authoritative awards issued.

This necessarily becomes particularly clear when the decisions of the conciliation and arbitration authorities are enforced not only by civil but also by criminal penalties, as in Italy and in most of the Australian States. In such a case the legislator has to make sure that, at least on the workers' side he is dealing with organized groups which can be held liable for the nonobservance of the decision and for the outbreak of any illegal strikes. This is why the Italian act mentioned above states that recognized associations of workers shall have legal personality; for the same reason many of the Australian States and New Zealand provide that industrial unions must be registered before they can take part in conciliation and arbitration proceedings.

THE SUSPENSIVE PROHIBITION OF STRIKES AND LOCKOUTS

A particularly effective means of insuring that the adjustment procedure shall be properly set in motion and carried out has been adopted in a number of countries, including some which do not otherwise apply compulsion; open conflict (a lockout or a strike) is explicitly forbidden, or at least declared to be illegal, until all the possibilities of conciliation and arbitration have been exhausted. Such an important limitation of the freedom of action of trade organizations cannot but have an effect on the procedure, an effect which is usually expressed in an obligation, either explicit or implicit in the law, to give notice of differences or to apply for a settlement.

The best known regulations on the subject are those of the Canadian act of June 12, 1925 (amending the original act of 1907), which provides for a suspensive prohibition of strikes and lockouts and also of changes in conditions of employment, and makes it obligatory to give at least 30 days' notice of any proposed change and to apply for the appointment of a board of conciliation and investigation. These regulations are enforced by heavy fines for any infringement of the prohibition of open conflict (up to $1,000 per day for employers and up to $50 for workers).

Similar regulations are contained in the legislation of Belgium, China, India, New South Wales, New Zealand, Norway, Queensland, Rumania, South Africa, and western Australia, and of Germany in virtue of an emergency order issued by the President on November 10, 1920, and in force together with the actual conciliation order. The regulations vary greatly in respect of the disputes to which they apply, the period during which open conflict is prohibited, and the civil, criminal, and other consequences of contraventions.

In Belgium, China, Norway, New South Wales, Queensland, and western Australia, the suspensive prohibition of strikes and lockouts applies to all undertakings, irrespective of their nature and size. In Rumania the prohibition applies only to undertakings that regularly employ at least 10 workers, in Canada to important undertakings with at least 10 workers, notably in the transport industry, and in India and South Africa principally to public-utility undertakings. In New Zealand there is a general prohibition, and in addition notice must be given of intended strikes or lockouts in public-utility undertakings. The order of November 10, 1920, issued by the German President, applies only to undertakings that supply the public with gas, water, and electricity.

The period during which open conflict is prohibited varies. According to the acts already mentioned of Belgium, Canada, China, Queensland, Rumania, South Africa, and Western Australia among others, strikes and lockouts are prohibited during the whole period before and during the conciliation and arbitration proceedings and until it is recognized that the possibilities of settlement are exhausted. In Germany, according to the President's emergency order, they are even prohibited for 3 days after the publication of the decision of the competent adjustment authority. The Belgian regulations do not explicitly prohibit strikes and lockouts, but merely attach legal consequences to them when premature; in effect, they support the opponents of the party declaring the strike or lockout. It is to be noted that the German emergency order just mentioned provides penalties, not for an illegal strike as such, but only for incitement thereto, while in the case of a lockout the action as well as the incitement is punishable.

A number of countries do not prohibit open conflict for the whole period of the negotiations, but provide only for the observance of certain time limits before which a lockout or strike cannot be legally declared. Instances are India, New Zealand, and New South Wales; in the last-named State this time limit applies to strikes only, lockouts being completely prohibited. The object of imposing such a time limit-usually from a fortnight to a month-before a