Definitive Report - Report No 299, June 1995

Case No 1768 (Iceland) - Complaint date: 29-MAR-94 - Closed

1. 71. In a communication of 29 March 1994, the Icelandic Federation of Labour (its Icelandic acronym being ASI) submitted a complaint of violations of freedom of association against the Government of Iceland.
2. 72. The Government supplied its observations on the case in a communication dated 20 February 1995.
3. 73. Iceland has ratified the Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87), and the Right to Organize and Collective Bargaining Convention, 1949 (No. 98).

A. The complainant's allegations

1. 74. In its complaint of 29 March 1994, the ASI alleges that the passing by the Althing (Iceland's Parliament) of Act No. 15 of 23 March 1993, banning a strike and lockout on the ferry Herjólfur and under which a special Court of Arbitration was appointed to determine the wages and terms of members of the crew on the Herjólfur by 1 August 1993 violates Conventions Nos. 87 and 98. The judgement delivered by the Court of Arbitration on 9 August 1993 abridged the wages and terms agreements of members of a trade union which was not involved in the dispute, and deprived those members of their right to collective bargaining so that the demands of the members of other trade unions which were involved in the wages and terms dispute with the management of Herjólfur Ltd. could be met.
2. 75. More specifically, the ASI explains that the Herjólfur is a ferry which sails between the Westman Islands (Vestmannaeyjar, off the south coast of Iceland) and the Mainland. There are normally about 16 people working on the ship who are members of five trade unions: the mates are members of the Icelandic Ships' Officers' Association, the engineers are members of the Association of Icelandic Marine Engineers, the masters are members of the Icelandic Merchant Fleet Captains' Union, the stewards are members of the Icelandic Ship Stewards' Union and the stewardesses, able seamen and boatswains (ratings) are members of the Jötunn Seamen's Union. The management of Herjólfur Ltd. has reached separate agreements with each trade union, and the wages and terms agreements of these unions are completely independent of each other.
3. 76. On 3 February 1993, the Icelandic Ships' Officers' Association called a strike of the mates on the Herjólfur. The mates' demands included a claim that their wages be increased by a certain proportion in accordance with the wages of the boatswain. Shortly after the Icelandic Ships' Officers' Association began its strike, the Jötunn Seamen's Union was asked to take part in negotiations on changes in the working arrangements on board the ship. The Jötunn Seamen's Union pointed out that it had a valid wages and terms agreement which was not due to expire until 1 March 1993, and when it was asked to take part in negotiations on wages and terms, the union referred to this agreement.
4. 77. On 23 February, the ratings on the Herjólfur, i.e. the boatswains and the able seamen, received a letter of dismissal, stating that their employment was terminated after the legal period of notice. The seamen's union considered that the dismissals were being enacted in order to coerce the ratings to accept the demands of the officers and the Board of Herjólfur Ltd. concerning changes in the working arrangements; the ratings considered the proposals that had been presented constituted a gross violation of their rights. Vigorous objections were lodged against the dismissal of the ratings by the Icelandic Seamen's Federation and the Reykjavík Seamen's Union. The negotiating committee of the Icelandic Seamen's Federation, which had a mandate to negotiate on behalf of the Jötunn Seamen's Union, refused to negotiate with the Board of Herjólfur on the making of new wages and terms agreements with the ratings until the dismissals had been withdrawn.
5. 78. On 8 March 1993, the Board of Herjólfur retracted the dismissals on condition that representatives of the ratings attend a meeting. A meeting was held on 9 March 1993, at which the representatives of the ratings put forward an offer involving an unchanged wages and terms agreement, though with the amendment that wage items would be increased by amounts corresponding to those which might be agreed in wages and terms negotiations between the ASI and the Confederation of Icelandic Employers (VSI) for land-based workers. The ratings' proposal of 9 March also included a declaration on considering the making of a comprehensive wages and terms agreement for the crew of the Herjólfur during the agreement period. The ratings considered it would be more natural to discuss changes in the working arrangements under circumstances other than those in which the officers were on strike, which created a great deal of pressure. In addition, the officers had dragged the ratings into their wages and terms dispute with the Board of Herjólfur through their demands. The ratings considered that such circumstances formed a completely unacceptable background for negotiations on changes in the working arrangements on board the ship.
6. 79. The ratings' offer of 9 March was not answered. Instead, Act No. 15 of 1993 was passed on 23 March. (A translation of the Act is attached to the complaint.) The Act banned the strike by the Icelandic Ships' Officers' Association on the Herjólfur, "and also lockouts, strikes and other measures intended to institute by force a system of wages and terms other than that set forth in this Act ...". The Act then stated that if the unions of the workers on the ship and the Board of Directors of Herjólfur Ltd. had not reached an agreement on working arrangements and wage terms before 1 June 1993, the Supreme Court was to nominate three persons to sit in a Court of Arbitration which was to determine the wages and terms of the members of the crew of the Herjólfur by 1 August 1993. As the parties to the dispute had not reached an agreement by 1 August 1993, the Court of Arbitration delivered its judgement on 9 August of the same year. All five trade unions were named as parties in the case before the Court of Arbitration, and their claims were mostly the same as they had been previously. The officers, i.e. the mates, engineers and masters, demanded that their wages should at all times be higher than those of their subordinates by a certain proportion. The Jötunn Seamen's Union referred to the offer of 9 March, but repeated its assertion that changes in the working arrangements were a subject for negotiation, and not a matter for the attention of a legally appointed Court of Arbitration.
7. 80. The conclusion reached by the Court of Arbitration, however, was that the wages and terms of the officers on the Herjólfur during the period 23 March 1993 to 31 December of the same year should be based on the current wages and terms agreements of the four unions (excluding the Jötunn Seamen's Union). The wages and terms of the ratings during the same period, including those of the boatswains and stewardesses, on the other hand, were to be based on the last valid merchant seamen's wages and terms agreements between the Reykjavík Seamen's Union and the employers and between the Jötunn Seamen's Union and the defendant, Herjólfur Ltd., with the exception that overtime under article 3 of the special agreement between the parties, dated 15 August 1989 concerning able seamen, was to be abolished. These overtime payments were adopted in the agreements between the parties in 1981, when it was agreed that the number of able seamen was to be lower than the estimated required manning level, while instead they were to receive overtime payments. Work had proceeded according to this arrangement ever since 1981.
8. 81. However, the Court of Arbitration, in its summing up, referred to section 3 of Act No. 15 of 1993 stating that when determining wages and terms under the Act, the Court of Arbitration was to take account of the valid wages and terms agreements on merchant ships and the general wage trend in the country. The Court took the view that the overtime payment which the able seamen had received for 12 years was in excess of what was customary in the merchant fleet, and therefore was to be abolished. According to the ASI, the judgement by the Court of Arbitration reduces the ratings' wages by 10 per cent, so entailing a substantial abridgement of the ratings' wages and terms. The ASI objects to the handling of the case whereby it was possible to reduce the wages of the members of one trade union in order to resolve a dispute between the employers and another trade union. In addition, the Court of Arbitration stated in its summing up that the dispute could to a large degree be traced to internal disagreement between the trade unions, particularly as regards wage ratios. In the view of the ASI, it is not the task of trade unions to agree on wage ratios between them.
9. 82. In short, the ASI sums up its arguments as to why the Government violated Conventions Nos. 87 and 98 as follows. First, the Act of 23 March 1993 stipulated that a Court of Arbitration was to determine the wages and terms of the members of the crew of the ship, irrespective of whether or not they were involved in a wages and terms dispute with their employer, and irrespective of whether exhaustive attempts had been made to reach agreement by negotiation. The wages and terms agreement between the Jötunn Seamen's Union and the Board of Herjólfur Ltd. did not expire until 1 March 1993. The only meeting to which the ratings were invited after the expiry of their agreement was held on 9 March 1993. At it, the ratings put forward the normal demand that the wages and terms agreements should remain unchanged, but that they should receive wage increases corresponding to those which might be agreed by other unions within the ASI in the current round of agreements. Furthermore, the ratings declared that they were prepared to begin negotiations on changes in working arrangements on board the ship. However, their offer was not answered, and the Act was passed shortly afterwards.
10. 83. The ASI does not consider that anything like exhaustive attempts were made to reach a negotiated agreement with the Jötunn Seamen's Union, as the Act was applied very shortly after the agreement with the union expired. The fact that the ship's officers had called a strike could not result in the members of the Jötunn Seamen's Union (ratings) being deprived of their right to negotiate their wages and terms by collective bargaining, even though one of the demands of the strikers was that their wages should be increased in accordance with an increase which the ratings had received previously. One meeting can scarcely be regarded as sufficient evidence that exhaustive attempts were made to negotiate a settlement, as the ratings never received any counter-proposal after the meeting. The ASI therefore does not regard it as possible to say that a wages and terms dispute arose between the Jötunn Seamen's Union and the Board of Herjólfur Ltd., since no response was ever received to the ratings' demands. In Icelandic labour law, the basic principle applies that when wages and terms agreements are up for review, the wages and terms agreement between the parties that was last in force is considered as remaining in force until another one has been made. Therefore, an agreement could have been negotiated for the members of the Jötunn Seamen's Union, even if it were considered necessary to put an end to the strike by the officers and their wages and terms dispute with the employer by means of legislation.
11. 84. The ASI concludes that the right to organize is worthless if the Government is able to deprive the members of trade unions of their negotiated rights, and especially if this is done 12 years after the agreement is made, as was the case in the judgement of the Court of Arbitration concerning the abolition of overtime payments to the seamen.The ASI regards it as intolerable that it should be possible to invalidate the lawful wages and terms agreements of a trade union with its negotiating partners in this way. Such intervention undermines the credibility of trade unions and the confidence of their members in their activities.

B. The Government's reply

1. 85. In its communication of 20 February 1995, the Government indicates that the major part of economic activity in the country is based on fishing and the export of fisheries products, which is of vital importance in the context of the case under discussion, since the Westman Islands are one of the most important fisheries centres in Iceland. The Government then describes the measures taken by it in recent years in order to tackle high inflation and achieve equilibrium in Iceland's foreign trade balance. Finally, the Government gives an account of the long-standing disputes involving part of the crew of the Herjólfur and the reasons why the Althing approved an Act to put an end to a strike they had staged which had lasted for seven weeks.
2. 86. First of all, the Government explains that the role played by the fisheries in the Icelandic economy is considerable. Three-quarters of the country's exports consist of fisheries products, and they account for about 55 per cent of total foreign currency earnings. About 12 per cent of the workforce is employed in fisheries. However, fluctuations in catch levels and prices for fisheries products have unavoidably led to greater economic fluctuations in Iceland than in many other industrial countries. For example, on no fewer than eight occasions since the founding of the Icelandic Republic in 1944 has national production declined. Although these wide variations have become less frequent, they nevertheless pose narrow economic limits regarding economic policy. A serious drop in catches or collapse in prices can result in unemployment and/or the accumulation of foreign debt if national expenditure is not reduced. Among the ways that this has been achieved in Iceland are the devaluation of the currency, and through direct influence on real wage costs in the occupational sectors.
3. 87. The Government then points out that inflation has been a persistent problem in Iceland where it grew during the 1970s to a level that was many times higher than in other OECD member countries. Inflation reached 49 per cent in 1975. That year and the following year, far-reaching methods were adopted to reduce inflation, which stood at 30 per cent during the two years. One of the measures adopted was to limit the indexation of wages. However, the wages and terms agreements of 1977 provided for, amongst other things, a general 25 per cent increase in wages in addition to full indexation. Inflation grew once again, reaching levels of 50 to 60 per cent in the early 1980s, thus requiring measures to be taken in 1983 such as the abolition of the indexation of wages for a two-year period, and devaluation. The Government states that inflation has been brought down, step by step, over the past few years. It was of the order of 20 to 25 per cent in the years 1986-89; it dropped sharply in 1990, measuring 7.3 per cent between the beginning and end of that year. Inflation in 1991 was 7.2 per cent; in 1992 it was 2.4 per cent and in 1993 it was 3.2 per cent. In 1994, inflation from the beginning to the end of the year proved to be only about one per cent. This was due to the 1986 consultative agreement and the February 1990 "national reconciliation" agreement which were based on a unified stance by the social partners and the Government in order to tackle inflation. The Government has thus exercised the utmost restraint in all areas of the economy and in wages and terms agreements in order not to jeopardize these achievements. It is with this background in mind that the Government's measures in these areas must be examined.
4. 88. The Government then goes on to describe the particular features of the Westman Islands, which are among the country's most important centres of the fishing industry. In 1992, for example, 227,600 tonnes of fish were landed in the Westman Islands; this catch was valued at ISK4,723 million. In the Government's view, the vital role played by the Westman Islands in the national economy is beyond dispute. The Government explains that goods and people are carried between the islands and the mainland by aircraft and ships. There are regular scheduled flights to Heimaey, though flights often have to be cancelled due to weather conditions. The Herjólfur is therefore the main, and without doubt the most important, means of carrying goods and passengers to and from the islands. The Herjólfur makes daily trips between the mainland and the islands, and up to ten trips a week during the summer. The Government emphasizes that good and reliable transport services are essential for the survival of the community in the islands.
5. 89. It is in this context that the Government refers to the dispute between the crew members and the operating company of the Herjólfur. The root of the dispute, in its view, lies in the wages and terms agreement between the Board of Directors of Herjólfur Ltd. and the Jötunn Seamen's Union in the Westman Islands, which was made in 1981. The Government indicates that it has come to light that the national organization of employers, the Confederation of Icelandic Employers (VSI) was not consulted, nor was the agreement sent to the VSI for approval as its constituent enterprises are required to do. Those who signed the agreement were the chairman of the Westman Islands Trade Union, on behalf of the Board of Herjólfur Ltd, and the chairman of the Jötunn Seamen's Union. In this connection, the Government points out that the chairman of the Westman Islands Trade Union at the time sat on the Board of Directors of Herjólfur Ltd. as the representative of the Minister of Finance, and the chairman of the Jötunn Seamen's Union was the deputy representative of the Minister of Finance on the Board of Herjólfur Ltd. The aforementioned agreement secured considerable improvements in wages and terms for the members of the Jötunn Seamen's Union over and above those enjoyed by the members of other unions who were employed on the Herjólfur. Thus, the agreement became the source of dissatisfaction and long-lasting quarrels between the members of the crew. The Government contends that no satisfactory explanation has been advanced as to why it was necessary to improve the terms of one group of crew members more than those of the others. It is safe to say, however, that the wages and terms agreement of 1981 gave the ratings on the Herjólfur abnormally large wage increases as compared with other groups of workers on board, and not least if the wages and terms of the ratings on other ships elsewhere in Iceland are taken into account.
6. 90. According to the Government, the company which operates the Herjólfur had made repeated attempts to review the crew members' working arrangements with the aim of coordinating the wage systems applying to the crew. The prerequisite for achieving this aim was the holding of negotiations with all the relevant trade unions at the same time. The Jötunn Seamen's Union repeatedly avoided participation in purposeful negotiations on this matter because it had previously managed, through the 1981 agreement with the vessel's operators, to secure substantial improvements in wages and terms over and above those of the other trade unions whose members worked on the ferry. The Government considers that it was a mistake on the part of the operating company to enter into that agreement since it discriminated between elements in the crew and gave rise, unnecessarily, to an internal problem between trade unions.
7. 91. As regards the information presented by the ASI in the complaint itself, the Government is of the view that not all of it reflects correctly the origins of the dispute on board the Herjólfur. First of all, according to it, it is not true that there was not a wages and terms dispute involving the Jötunn Seamen's Union. The fact is that the VSI referred the dispute involving all five unions representing workers on board the Herjólfur to the State Conciliation and Arbitration Officer by a letter dated 12 February 1993 and sought his assistance in having all five unions take part in negotiations at the same time, so making it possible to reach agreement with them at the same time. The Government points out that the root of a wages and terms dispute may lie not only in the calling of a strike but also in the announcement of a lockout. It draws attention to the fact that the Herjólfur's operating company had announced a lockout against that part of the crew which was not on strike. VSI requested in the above-mentioned letter of 12 February 1993 that the industrial dispute with the above-mentioned trade unions, including the Jötunn Seamen's Union, be resolved in a single move. This letter also states clearly that agreements with all the unions were open for review, with the exception of the Icelandic Ship Stewards' Union; its agreement was to expire on 1 March 1993.
8. 92. Secondly, it is not strictly true that the Jötunn Seamen's Union was first invited to attend negotiations only after the beginning of the strike by the mates. According to the Government, VSI sent identically worded letters to all the crew members' unions on 14 February 1992 with the stated aim of making simultaneous wages and terms agreements with all the crew of the new Herjólfur, which was under construction in Norway. Despite an initial positive response, this was not successful. Consequently, the assistance of the State Conciliation and Arbitration Officer was sought on 12 February 1993.
9. 93. Thirdly, because of the linking of the wages and terms agreement of the Jötunn Seamen's Union with that of the Reykjavík Seamen's Union, it was in force until 31 December 1992, and not 1 March 1993 as is maintained in the complaint. Wages and terms agreements with the crews of fishing vessels were in force until 1 March 1993; those with the crews of merchant vessels only remained in force until 31 December 1992.
10. 94. Fourthly, the Government agrees to a certain extent only, with the ASI's view that it is not the task of trade unions to agree on wage ratios between them. Experience shows that claims by individual trade unions are more often than not based on comparisons with the wages of other groups or unions. This is perhaps even more noticeable in small societies such as Iceland than among more populous nations. According to the Government, workers on ships indulge in such comparisons to a large degree and are very much on guard against one receiving more than another.
11. 95. Referring to the passing of Act. No 15 of 1993, the Government states that the strike by the mates on board the Herjólfur began on 3 February 1993, and from that date the ship lay moored by the quayside until Act No. 15, banning a strike and lockout on the Herjólfur, was passed as law on 23 March 1993. The reason why the Act was passed was first and foremost to limit the enormous damage which the continuing stoppage of the Herjólfur could have had on economic life in the Westman Islands and the economic health of the country as a whole. The Government explains that the Minister of Transport had received the following resolution from the Westman Islands Town Council, which the council had passed unanimously at its meeting of 16 March 1993:
    • The Westman Islands Town Council resolves to request the Government of Iceland to propose a Bill in the Althing to end the wages and terms disputes, strike and lockout on the Herjólfur. The Westman Islands Town Council stresses that it is unavoidable that the Bill should deal with the wages and terms agreements of all trade unions involved in the dispute and that the matter should thus be resolved in its entirety.
    • It is a matter of great urgency for the Westman Islands that this dispute come to an end as soon as possible, as the ship is the Islands' main means of transport and it has already been out of operation for six weeks and there is no prospect of a solution to the dispute being found.
12. 96. Of the 16-man crew, it was the two mates who were on strike. The mates were demanding a wage increase, as they considered the wage differential between themselves and the able seamen to be too little. Shortly before, the able seamen on the Herjólfur had negotiated a reduction in the number of able seamen in return for their receiving one hour of paid overtime each working day, while the mates' wages were comparable with those of mates on other ships. Before the strike began, many attempts were made to reach a compromise and make an agreement in order to avoid a strike. Thereafter, and when the stoppage began, the matter was completely in the hands of the State Conciliation and Arbitration Officer, as the parties considered there was no use in negotiating further; all avenues had been exhausted before the strike. After the strike began, the State Conciliation and Arbitration Officer worked unceasingly for a solution, and a very large number of meetings aimed at conciliation were held. The officer made a special trip to the Westman Islands and stayed there for about a week, during which there were constant meetings between the parties to the dispute. In the Government's view, this shows the importance that was attached to achieving a wages and terms agreement by free collective bargaining between the parties. Finally, after seven weeks of strike, both of the parties to the dispute and the State Conciliation and Arbitration Officer were of the opinion that there was such a gap between the parties that there was no likelihood that the dispute would be resolved in the near future. At this point it was clear that the stoppage by the mates was having a great effect on the job security of other members of the crew, in addition to the fact that the job security of those who, directly or indirectly, made their living from running and servicing the ship, was being jeopardized.
13. 97. In the light of the situation that had developed, the Minister of Transport agreed, after receiving the aforementioned resolution of the Westman Islands Town Council, to propose a Bill banning a strike and lockout on the Herjólfur. Even though the great majority of the members of the Althing voted in support of the Bill, some parts of it were criticized. The general criticism was made that it was not right for the legislature to intervene in an industrial dispute by introducing legislation, and that doing so reduced the obligation of the social partners to resolve their disputes through free collective bargaining. The first article of the Bill was criticized. It was not thought right that the Act should cover members of the crew who had not called a strike and were not to blame for the dispute. It was also thought unfair that those who were not to blame for the dispute were to be bound until the end of 1993 by any decision made by the Court of Arbitration.
14. 98. The Government contends however, that, many attempts had been made in previous years to end the disputes about wages and terms on board the Herjólfur. They had not been successful because not all parties were prepared to take part in negotiations. In the light of this, it was clear that the disputes on board the Herjólfur could not be resolved unless a solution were found which would cover all the categories of workers involved. The Government took the view that the dispute on board the Herjólfur involved all the workers on the ferry since the ship's operating company had announced a lockout against those employees who were not on strike. Consequently, it was proposed that the Act cover not only those who were on strike, but also all other workers on the ferry who were covered by the proposed lockout. It was considered that only in this way would a lasting solution be found which would ensure that the ferry, which plays a crucial role in the transport of goods and passengers between the mainland and the islands, would continue in operation.
15. 99. No criticism was made of section 3, which stated that when determining wages and terms under the Act, the Court of Arbitration was to take account of the valid wages and terms agreements on merchant ships and the general wage trend in the country. Particular attention should be given to this provision, which was included due to the "national reconciliation" agreement of 1990, when a broad consensus was achieved in Iceland on a deliberate effort to overcome the persistent inflation which had plagued the Icelandic economy for decades. It has been the Government's fundamental policy to prevent inflation returning to its previous levels. Consequently, the past few years have seen a very restrictive policy on wages and fiscal matters. In concert with the organizations of the social partners, the Government has made it a top priority to prevent the successes which have undeniably been achieved in this area from being jeopardized. It is in this light the Government's handling of the industrial dispute under discussion must be viewed.
16. 100. Section 2 of Act No.15 of 1993 stated that if the parties to the dispute had not reached an agreement on working arrangements and wage terms before 1 June 1993, the Supreme Court was to nominate three persons to sit in a Court of Arbitration which was to determine the wages and terms of the members of the crew of the Herjólfur by 1 August 1993. As no agreement was reached, a Court of Arbitration was appointed in accordance with the provisions of the Act which delivered its judgement on 9 August 1993.
17. 101. The Government submits that the introduction of legislation to resolve the dispute on board the Herjólfur was a pure emergency measure. The strike had lasted seven weeks; shortages of goods were beginning to be felt, all other economic life was becoming paralysed and before long people's life and health would be jeopardized. The Government emphasizes that the dispute had reached a deadlock, and that it was compelled to resolve the issue by means of legislation. In particular, the Government rejects the assertion that exhaustive attempts to reach a negotiated agreement had not been made. In this connection, it refers to the fact that a large number of unsuccessful meetings were held between the parties to the dispute and the State Conciliation and Arbitration Officer.
18. 102. The Government therefore concludes by utterly rejecting the assertion that this legislation and the judgement of the Court of Arbitration were at variance with its obligations under Conventions Nos. 87 and 98. It draws attention to the special features of the Icelandic labour market, with a large number of small trade unions, each of which has an independent mandate to negotiate. It emphasizes that the most difficult problems faced by it are disputes which originate in internal quarrels between unions. The dispute on board the Herjólfur is a case in point; mandates to negotiate for the 16-man crew are in the hands of five trade unions. Despite many conciliatory meetings, it did not prove possible to resolve the dispute on board the Herjólfur by negotiation. After a seven-week strike, the Government considered that the dispute had reached a total deadlock and felt compelled to resolve it by passing legislation.

C. The Committee's conclusions

1. 103. The Committee notes that the allegations in this case concern violations of Conventions Nos. 87 and 98 by the passing by the Althing (Iceland's Parliament) of Act No. 15 of 23 March 1993 (hereinafter the Act), banning a strike and lockout on the ferry Herjólfur and setting up a Court of Arbitration to determine the wages of members of the crew of the Herjólfur. The Government maintains that after extensive consultations, it was obvious that the dispute on board the Herjólfur would not be resolved by negotiation and that the legislature intervened by passing Act No. 15 of 1993 only after a seven-week strike.
2. 104. The Committee observes that the complainant's and the Government's views differ on certain matters which arose prior to the introduction of the Act. For example, the complainant argues that the Jötunn Seamen's Union was asked to take part in negotiations on wages and terms shortly after a strike was called on 3 February 1993 by the mates on the Herjólfur. The union responded by referring to a wages and terms agreement that it had with the management of Herjólfur Ltd. and which was only due to expire on 1 March 1993. Moreover, after the expiry of this agreement, the union put forward an offer to the Board of Herjólfur Ltd. involving an unchanged wages and terms agreement on 9 March 1993. However, the members of the Jötunn Seamen's Union (ratings) never received any counter-proposal after that meeting following which the Act entered into force. In the complainant's view, therefore, exhaustive attempts were not made to reach a negotiated agreement with the Jötunn Seamen's Union. In addition, since no response was ever received to the ratings' demands, the complainant does not consider that a dispute ever arose in the first place between the Jötunn Seamen's Union and the Board of Herjólfur Ltd. It does not see how it is possible for a Court of Arbitration to determine the wages of the members of one trade union in order to resolve a dispute between the employers and another trade union (in this instance the Icelandic Ships' Officers' Association).
3. 105. The Government, on the other hand, contends that outside the context of the complaint itself, the company which operates the Herjólfur had made repeated attempts to hold negotiations with all the trade unions representing the crew of the Herjólfur with the aim of coordinating the wage systems applying to the crew. The Jötunn Seamen's Union however had repeatedly avoided participation in purposeful negotiations on this matter because it had previously managed, through a 1981 agreement with the vessel's operating company, to secure substantial improvements in wages and terms over and above those of the other trade unions whose members worked on the ferry. Referring more specifically to the complaint itself, the Government explains that the Jötunn Seamen's Union was invited to attend negotiations by the Confederation of Icelandic Employers (VSI) even before the strike by the mates began, with the aim of making simultaneous wages and terms agreements with all crew members. Since the outcome of this attempt was not successful, the assistance of the State Conciliation and Arbitration Officer was sought on 12 February 1993 who subsequently held a large number of meetings aimed at conciliation between the parties to the dispute. As to the question of who the parties to the dispute were, the Government asserts that the Jötunn Seamen's Union was very much involved in a wages and terms dispute. When the VSI referred the dispute involving all five unions to the State Conciliation and Arbitration Officer on 12 February 1993, it sought his assistance in having all five unions take part in negotiations at the same time in order to reach agreement with them at the same time. In addition, the Government emphasizes that a wages and terms dispute may result not only from the calling of a strike but also in the announcement of a lockout, which was what had occurred in the present case. In any event, since the wages and terms agreement of the Jötunn Seamen's Union was linked to that of the Reykjavík Seamen's Union, the former was in force until 31 December 1992, and not 1 March 1993 as is maintained in the complaint.
4. 106. The Committee, for its part, notes that the two above arguments differ widely on the issues of: (i) whether there was a dispute at all involving the Jötunn Seamen's Union; and (ii) whether sufficient attempts had been made to reach agreement by negotiation. As regards the first issue, the Committee is inclined to be of the view that this specific dispute did not involve the Jötunn Seamen's Union since the strike in question had been called by members of the Icelandic Ships' Officers Association. This is not to say that the Jötunn Seamen's Union was not indirectly concerned by the dispute since according to both the complainant and the Government, one of the main demands of the strikers (the mates) was that their wages be increased by a certain proportion in accordance with an increase which the members of the Jötunn Seamen's Union had received previously. Moreover, a lock-out had been announced against that part of the crew which was not on strike. However, Act No. 15 of 1993 was passed primarily to ban the strike by the mates, in other words, because of the failure of the officers and the management of Herjólfur Ltd. to reach an agreement on the wages and terms of the former. The Committee therefore fails to see why this Act should also have applied to the Jötunn Seamen's Union, thereby determining the wages and terms of its members too. It is reinforced in this view by the argument of the complainant, which is not refuted by the Government, that the wages and terms agreements of the five unions on the Herjólfur are completely independent of each other.
5. 107. Turning to the question of whether attempts had been made by the Jötunn Seamen's Union and the Board of Herjólfur Ltd. to reach a new wages and terms agreement by negotiation, the Committee notes that there is a vast difference in the assertions of the complainant and the Government. In view of this contradiction between the two arguments, the Committee will only draw the attention of both parties to the principle that both employers and trade unions should bargain in good faith and make every effort to come to an agreement, and that satisfactory labour relations depend primarily on the attitudes of the parties towards each other and on their mutual confidence (see Digest of decisions and principles of the Freedom of Association Committee, 3rd edition, 1985, para. 590).
6. 108. As regards the justification for the passing of the Act, the Committee notes the Government's argument that this Act was passed on 23 March 1993, more than seven weeks after the strike was called, during which period the Herjólfur was out of operation. The Committee also notes the Government's statement that during the strike period, a large number of meetings aimed at conciliation between the mates and the management of Herjólfur Ltd. were organized by the State Conciliation and Arbitration Officer. The Act was passed only after seven weeks of strike action, when both parties to the dispute and the State Conciliation and Arbitration Officer, were of the opinion that there was such a gap between the parties that the dispute would not be resolved through negotiation.
7. 109. In this respect, the Committee, like the Committee of Experts on the Application of Conventions and Recommendations, recognizes that there comes a time in bargaining where, after protracted and fruitless negotiations, the authorities might be justified in stepping in when it is obvious that the deadlock in bargaining will not be broken without some initiative on their part (see General Survey on Freedom of Association and Collective Bargaining, ILC, 81st Session, 1994, para. 258). The Committee is of the view that such a deadlock occurred in the dispute in question. It is reinforced in this view by the fact that under the terms of section 2 of the Act, the Court of Arbitration was to determine the wages and terms of the members of the crew only if the parties to the dispute had not reached an agreement on such matters before 1 June 1993 (emphasis added). The parties to the dispute were therefore given a further two months to reach agreement through negotiations which, however, did not occur in the present case. Consequently, a Court of Arbitration was appointed.
8. 110. The Committee notes with concern, moreover, that section 3 of the Act stipulates that "when determining wages and terms under this Act, the Court of Arbitration shall take account of the valid wages and terms of agreements on merchant ships and the general wage trend in the country". The Government argues that this provision was included in the Act due to the "national reconciliation" agreement of 1990, when a broad consensus was achieved by the social partners in Iceland in a deliberate effort to overcome the persistent inflation which had plagued the Icelandic economy for decades. The Committee further observes that the three members of the Court of Arbitration were nominated by the Supreme Court. It is nevertheless bound to note that the wording of this provision does not allow the Court any flexibility of interpretation. This is recognized by the Court itself, which points out in its judgement that this provision greatly limits its freedom of action in resolving this case. In this respect, the Committee reminds the Government that in order to gain and retain the parties' confidence, any arbitration system should be truly independent and the outcomes of arbitration should not be pre-determined by legislative criteria.
9. 111. For these reasons, the Committee considers that the Act, in so far as it applied to a union that was not directly involved in the dispute in question, constitutes an act of interference which restricts the right of trade unions to bargain freely with employers, thereby violating the principle of the autonomy of the parties to the collective bargaining process. The Committee therefore requests the Government to refrain in future from having recourse to such measures of legislative intervention.

The Committee's recommendations

1. 112. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) The Committee draws the attention of the complainant and the Government to the principle that both employers and trade unions should bargain in good faith and make every effort to come to an agreement, and that satisfactory labour relations depend primarily on the attitudes of the parties towards each other and on their mutual confidence.
   • (b) The Committee reminds the Government that in order to gain and retain the parties' confidence, any arbitration system should be truly independent and outcomes of arbitration should not be pre-determined by legislative criteria.
   • (c) Considering that Act No. 15 of 23 March 1993, in so far as it applied to a union that was not directly involved in the dispute in question, constitutes an act of interference which violates the principle of the autonomy of the parties to the collective bargaining process, the Committee requests the Government to refrain in future from having recourse to such measures of legislative intervention.