What are the differences between labor arbitration and commercial arbitration?

National or international arbitration is a stage of common agreement to resolve conflicts within the framework of civil or commercial contracts. In 2023, 760 requests have been registered in Colombia, according to the Conciliation, Arbitration and Amicable Composition Information System (Sistema de Información de la Conciliación, el Arbitraje y la Amigable Composición).. However, did you know that there are compulsory arbitrations in labor matters that are used to resolve disputes within the framework of collective bargaining? Find out below what it is, how arbitration works in collective bargaining and the differences between labor arbitration and commercial arbitration.

What is arbitration?

Article 1° of Law 1563 of 2012 defines arbitration as:

"An alternative dispute resolution mechanism whereby the parties defer to arbitrators the resolution of a dispute concerning matters of free disposal or those authorized by law.".

In other words, it is a form of conflict resolution through the intervention of an external agent called an "arbitrator", who acts with the consent and at the request of the parties, or by court order. Thus, it aims to generate agreements between them. 

In addition, this mechanism is governed by 7 basic principles:

1. Impartiality
2. Suitability
3. Celeridad
4. Equality
5. Orality
6. Advertising
7. Contradiction

What are the types of arbitration in Colombia?

According to the same Law 1563 of 2012, in Article 2°, it is specified that there are two classifications:

By who drives it

There are two types of arbitration: ad hoc (conducted directly by the arbitrators) or institutional (administered by an arbitration center). Likewise, it should be clarified that, "in the absence of agreement as to its nature and when the parties remain silent in the arbitration agreement, arbitration shall be institutional" and that, in the case of public contracts, the process shall be governed by the rules set forth in the aforementioned law.

By amount

In this case, there are two types of arbitration: for larger amounts (when the economic claims are greater than 400 SMLMV) and for smaller amounts (for the rest). It is also stipulated that "when due to the amount or the nature of the matter, a lawyer is not required before the ordinary judges, the parties may intervene directly in the arbitration".

How does arbitration work in collective labor disputes?

Unlike the arbitrations that usually take place in connection with commercial or civil contracts, in labor matters there is also an arbitration that seeks to resolve disputes between an employer and a union or its non-union workers. between an employer and a union or its non-unionized workers, in the context of collective bargaining that could not reach a voluntary agreement.In labor matters there is also an arbitration, but it seeks to resolve disputes between an employer and a union or its non-unionized workers, in the context of collective bargaining that could not reach a voluntary agreement. Arbitrators in a mandatory labor arbitration may only rule on economic disputes.

Legal and economic conflicts

Disputes of a legal nature are those in which the arbitrators resolve the dispute by applying the law (i.e., in law). Disputes of an economic nature are those resolved in equity. 

In economic disputes, the objective is to "solve situations that affect both the capital of the company and the economic interests of the workers" and, for this purpose, it is based on the principle of equity unless this affects the general interest in some way. 

However, the matters in which there must be mandatory arbitration are those expressly provided for in Article 452 of the Substantive Labor Code. article 452 of the Substantive Labor Codewhich states:

"They shall be subject to binding arbitration:

a) Collective labor disputes arising in essential public services that could not be resolved by direct settlement.

b) Collective labor disputes in which the workers opt for arbitration, in accordance with the provisions of Article 444 of this Code.

c) Collective labor disputes of minority unions, provided that the absolute majority of the company's workers have not opted for a strike when it is appropriate.

Collective disputes in other companies may be submitted to voluntary arbitration by agreement of the parties.".

When will the binding arbitration be filed?

In this regard, the compulsory arbitration in collective labor disputes, in the following cases:

1. When at the conclusion of the direct settlement stage of collective bargaining, the parties have not reached an agreement on the differences.
2. In the case of a collective conflict in the framework of essential public services.
3. When workers vote for the arbitration option instead of a strike.
4. When the maximum term of the strike and the mechanisms to resolve the conflict have expired, an agreement has still not been reached.

Finally, the decisions and agreements generated in this type of arbitration proceeding may be partial or total as appropriate. 

2 considerations for the arbitration procedure

In addition to the above, there are usually some general considerations for any arbitration proceeding that should be taken into account, according to the International Labor Organization (ILO) (ILO):

1. Arbitration for the resolution of collective conflicts has a more formal root than conciliations, but seeks speed and simplicity, and distances itself from technicalities and legal formalism.
2. It is common for arbitration tribunals to enjoy freedom in terms of presentation of written evidence, appearance of witnesses, presentation of books and records, and requesting the services of experts in financial or other matters.

Finally, it should not be lost sight of the fact that arbitrators are considered private individuals who exercise a judicial function on a temporary basis and, therefore, are considered true judges during their tenure.