Ratified treaties;¹ Work of international supervisory bodies²

Collective bargaining/ Wage bargaining/ Budget restrictions/ Exceptional circumstances/ Use of international law as a guide for interpreting domestic law

The enterprise SEDAPAR Sociedad Anónima (a public entity subject to private law) questioned an arbitration award handed down by the Arbitration Court appointed to resolve a collective bargaining procedure between the enterprise and the Single Trade Union (Sindicato Único de Trabajadores), on the grounds that the decision contravened the provisions of the temporarily applicable Public Sector Budget Act, which expressly prohibits the award of wage increases within the scope of its temporary duration.

The Supreme Court observed that the Enterprise and the Union voluntarily and freely agreed to the resolution of the list of demands corresponding to the collective bargaining by means of an arbitration process, and that the framework of that process gave each party the opportunity to put forward their final proposals and examine those put forward by their counterpart. The Arbitration Court decided to give primary importance to the constitutional right to collective bargaining above all state intervention that might restrict that process or affect it in a negative, absolute, repeated or permanent way, declaring that state acts that eliminate or impede, by means of budgetary or austerity standards, collective labour parties from regulating their interests through a collective labour agreement are unconstitutional, as in the case in question. Any other interpretation would contravene the collective autonomy recognized in the Constitution and the international treaties ratified by Peru.

The Supreme Court resolved that the case had to be decided “in the light of constitutional framework and the international treaties on that subject that regulate, guarantee and promote the right to collective bargaining, in accordance with the Fourth Final and Transitional Provision of the State Political Constitution”.

On these grounds, the Court concluded that, in accordance with the provisions of article 28 of the Constitution, the State recognizes workers’ right to collective bargaining, encouraging and promoting pacific solutions to labour disputes. Therefore, the State cannot contradict this mandate by reducing the possibilities for arbitration or any other pacific method of resolving conflicts.

In its decision, the Supreme Court also reiterated that on the international level it is necessary to refer to ILO Conventions Nos. 87 and 98, whose sphere of application includes private and public sector workers, with the only exceptions being those set out in the State Constitution and international standards. In particular, the Court highlighted the following:

“Article 4 of ILO Convention No. 98 constitutes a fundamental precept for interpreting this matter, and should be referred to in order to gain an understanding of the essential nature of collective bargaining, taking into account at all times that one of its main purposes is to improve the living and working conditions of its target groups.”³

Nevertheless, in confirming the resolution of the Arbitration Court, relying on ILO Convention No. 98, the Supreme Court highlighted that there are no absolute rights, and that the right to collective bargaining is subject to limitations as long as these do not affect its essential content, and with the understanding that any restriction must always have a legitimate, appropriate and necessary purpose. Referring to the Committee on Freedom of Association of the Governing Body of the ILO, the Court emphasized that this purpose could be a response to a serious economic crisis requiring a stabilization policy from the State in order to set out restrictions on the content of collective bargaining, fundamentally in the area of wages and as long as such restrictions: a) are preceded by consultations with workers’ and employers’ organizations; b) are applied only in exceptional circumstances; c) are limited to necessary measures only; d) do not exceed a reasonable period; and e) are accompanied by safeguards aimed at protecting workers’ living standards.⁴

¹ ILO Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87); ILO Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

² ILO Committee on Freedom of Association.

³ Paragraph 6 of the decision.

⁴ ILO: “Freedom of Association: Digest of decisions and principles of the Freedom of Association Committee of the Governing Body of the ILO” fourth (revised) edition (Geneva, 1996), paragraph 882. In the current version of the digest (fifth revised edition, 2006), see paragraph 1024.