Social dialogue & conflict resolution mechanisms

Social dialogue and conflict resolution mechanisms in the acceding countries: Cyprus, the Czech Republic, Latvia, Lithuania and Slovakia

Prague, 14-16 January 2004

Discussion paper - Orestis Messios

Conflict resolution mechanisms in Cyprus

Industrial strife is an inevitable result of change, and change remains the main driving force behind modern economic development. Adaptability, though, must be achieved in a harmonious manner - a manner that seemingly blends the needs of employers for flexibility and a robust business environment, on the one hand, and the rights and needs of employees, on the other hand. Within this context, the existence of effective conflict resolution mechanisms is necessary to ensure that change, adaptability and flexibility are safeguarded from social and labour unrest that culminates in strikes and lockouts. It is an undeniable fact that industrial peace is a necessary prerequisite for high growth. In light of this, governments must design and adopt an industrial relations system that is the most appropriate, according to the social and geographical characteristics of the country.

Since the establishment of the Republic of Cyprus, in 1960, social partners have approached industrial relations, and in extension, conflict resolution mechanisms, in a voluntary manner, with very minimum legislative measures introduced to govern the relations between employers and employees. The Government's philosophy behind the promotion of a voluntary system has been the fostering of strong employer and employee organisations, with a view to maintaining a balance of power between the two sides.

Under the system operating in Cyprus, official strikes and lockouts are the natural legitimate outcome of the failure of the mediation process to bring employers and employees together, to reach a mutually acceptable agreement. Though collective bargaining is not governed by Law, the number of strikes registered each year in Cyprus remains considerably low, a fact that shows that the two sides are gifted with a high level of social responsibility, and on the other hand, that the existing conflict resolution mechanisms (i.e. the Industrial Relations Code) have a high level of effectiveness.

Collective Bargaining and Conflict Resolution

The Industrial Relations Code is a gentleman’s agreement signed by the Social Partners in 1977, and lays out in detail the procedures to be followed for conflict resolution. These procedures govern conflict resolution in the private and semi-government sectors, with the public sector adhering to a different set of rules. Collective agreements in the private and semi-government sectors usually have a two-year duration, whilst longer duration agreements cannot be ruled out, since the duration of a collective agreement remains a negotiable issue. It should be noted that collective agreements are not legally enforceable.

National and Sectoral Collective Bargaining

Currently in Cyprus there are 13 national/sectoral collective agreements in the private sector. These collective agreements cover 26.7% of the total number of employees in Cyprus, or 41,4% of all trade union members.

Direct negotiations are always held between the two sides, which namely are the trade union federations, and the relevant employer’s association. Due to the extensiveness of these collective agreements direct negotiations are usually long, arduous, and complex. In general, sectoral collective agreements, like for example for the Hotel and Catering Industry, the Banking Sector, and other industry wide agreements, cover to a much wider extent terms and conditions of employment, and also regulate other particulars pertaining to much more specific details of the functioning of the companies involved. Also the need for coding, and keeping the basic agreements up to date - a process that has yet to be seriously undertaken - leads to misunderstandings, misinterpretations, and differences of views, as to what applies for a number of articles of these agreements. It should also be concluded from the above, that due to the complex nature of the agreements, it is in many cases that labour disputes arise from the interpretation of the agreements (disputes over grievances) leading to an ongoing stream of labour disputes.

The complexity, is further accentuated by the strong position trade unions have in each sector, since for some industries, trade union membership approaches, or even equals, the total number of employees employed in the sector (Banking Sector, Construction Industry etc).

It can be understood from the above that within such a complex negotiating environment, direct negotiations are extremely difficult, and very rarely do they lead to agreement, at this stage. Consequently, with both sides acknowledging the existence and importance of the Mediation Service at the Ministry of Labour, and with strict adherence to the provisions of the Industrial Relations Code, in the majority of cases, direct negotiations end in a deadlock with both sides agreeing that the services of the Ministry are required to mediate in the labour dispute. What remains noteworthy is the fact that even though these agreements are complex, making the process of negotiations, and mediation difficult, very few labour disputes end in a deadlock, and thus strikes and lock-outs due to the complete breakdown of negotiations are few (usually the majority of mediation deadlocks do actually lead to industrial action).

Company Level Collective Bargaining

It is estimated that over 450 company level collective agreements are currently in force in Cyprus. Again the provisions of the Industrial Relations Code apply for these agreements. It should be noted though that to a larger extent company level collective agreements are resolved at the direct negotiations stage, since employers prefer to resolve issues as quickly as possible, instead of engaging in lengthy procedures. Furthermore, trade union representatives in private companies usually have more close and harmonious relations with the employer, making the settlement of issues much simpler. Of course this is not always the case, since in many cases financial problems in the company, the relative complexity and cost of the trade union demands, or even bad interpersonal relations with trade union representatives, necessitate the involvement of the mediation service, as the employer is not willing to accept certain demands at the initial direct negotiations stage.

Semi-Government Organisations

Collective bargaining in these companies is similar to that followed in the private sector, with the procedures for reaching an agreement adhered to in the same way. Employees in these companies are organised in the main trade union federations, or in independent enterprise trade unions, and direct negotiations are the main method by which terms and conditions of employment are agreed upon through collective agreements. The Mediation Service in a number of cases is requested to mediate in the case of direct negotiation deadlocks, but its role is in many cases hampered due to the fact that management fails to follow the guidelines issued by the Ministry of Finance for wage increases, or for agreeing to other employee demands. Consequently, if these guidelines are not followed by the organisation's management, the final saying for the approval of a given agreement lies with the Ministry of Finance. This has the result of deadlocks in these companies being much more complex.

Mediation in Labour Disputes

The Department of Labour Relations mediates in a considerably large number of labour disputes. On average, the Department mediates in around 220 labour disputes every year, a figure, which is considerably high, if one considers the relatively small size of the country. Ofcourse, it should be noted that if the coverage provided by industry-wide collective agreements was not as significant as it is today, labour disputes for the involved enterprises, would definitely be a much more often occurrence.

Year Labour disputes referred to mediation
Disputes Workers involved
1994 234 69473
1995 270 94460
1996 225 23289
1997 237 23269
1998 192 63944
1999 185 33891
2000 166 35992
2001 236 61257
2002 173 44336
2003 (Jan. - Nov.) 228 61668

Over the last ten years labour disputes submitted for mediation have shown a notable decrease. It should be noted that since collective agreements in force over this period have increased significantly, it is obvious that the two sides are showing higher levels of responsibility with real efforts being made to resolve differences at the direct stage of negotiations, in an effort on behalf of both sides, to preserve industrial peace, and to maintain the efficient operation of the involved company, or sector. Over the period between 1999 and November 2003, 60,4% of disputes dealt with were disputes over rights (grievances), and the remaining 39,6% were for disputes over interests.

Strikes - Workers Involved - Workdays Lost

Work Stoppages
Year Work Stoppages Workers Involved Workdays Lost
1983 28 3975 12831
1984 29 3915 11339
1985 30 8082 16834
1986 39 4796 9797
1987 38 18257 91109
1988 35 5590 30327
1989 37 12462 32826
1990 20 8045 32174
1991 31 4782 10347
1992 27 49897 59720
1993 24 16945 23883
1994 32 15362 28911
1995 26 64061 97609
1996 20 3914 7705
1997 16 2295 5240
1998 20 6591 7948
1999 21 2108 26037
2000 6 180 1136
2001 25 1699 4778
2002 23 3464 7019
2003 * 13 2622 4915

* Data for January - November 2003
Source: Department of Labour Relations and Statistical Service

For statistical purposes work stoppages that do not exceed two hours per day are not included in the above figures. When comparisons are made between the 20, 10, and 5 year average of work stoppages (26.4, 21.3, and 19 respectively) it is evident that industrial action has shown a significant decrease. This is probably the result of the gradual increase of employee benefits over the last 20 years, leading to less disputes remaining unresolved and consequently resulting in strikes.

Conflict Resolution Mechanisms

The Industrial Relations Code explicitly lays out procedures for mediation, arbitration and also public inquiry. No official role is given to conciliation in the settlement of labour disputes, but it should be pointed out that in practice, conciliatory roles are undertaken by various “actors” involved in, or affected by, the outcome of a labour dispute.

Conciliation - Mediation - Arbitration - Public Inquiry

Conciliation exists only on an unofficial level. It usually takes the form of behind the scenes interventions from a variety of individuals. These can be high-level trade union officials, or employer organisation officials, or even negotiators (from either side) who actually participate in the direct negotiations process. In the latter case, conciliation takes more the form of bargaining, and this leads to a game of give and take, with a view to satisfying both sides, as much as possible. So in practice unofficial conciliation takes many forms, all with a view to resolving the differences present between the two sides.

There are two types of labour disputes for which the Ministry mediates, and for which the Code outlines exact procedural provisions. These are labour disputes over interests (conclusion of a new, or the renewal of an existing collective agreement), and labour disputes over rights ((grievances) - meaning a dispute arising from the interpretation and/or implementation of an existing collective agreement or of existing conditions of employment, or arising from a personal complaint including a complaint over a dismissal).

According to Part II, paragraph 3 of the Industrial Relations Code, when both sides agree, they may refer all or any of the issues of a dispute to arbitration, at any point in time, either before, or after the submission of the dispute to the Ministry. Furthermore, when both sides agree to submit a dispute to arbitration they undertake to accept the arbitrator's award as binding.


Cyprus has a long history (more than 40 years) of applying a voluntary industrial relations system, based on the ILO guidelines for the development of tripartism. With a Basic Agreement providing for rudimentary conflict resolution procedures, signed as early as 1962, and the current Industrial Relations Code already been effectively applied and operating for nearly 28 years, it seems that Cyprus has managed to implement a conflict resolution system that with the good will and responsibility of the social partners actually works well, to a large extent.

Obviously there are cases where the balance of power between the two sides - employers and employees - is not ideal, with one side having an excess hold on the other. In these cases, this offset balance of power can cause a disruptive effect on the peaceful and efficient operation of enterprises, and consequently on the economy itself. Furthermore, as long as the system remains based on voluntary arrangements, there are cases when individual demands will override goodwill, since there are no real costs to be incurred by acting in an extreme way. Such problems though few and far between, still place a threat on the economic outlook of the country, since the escalation of industrial unrest could prove to be detrimental to the economic outlook of the island in the short and mid-term. This is especially true if one considers the strong reliance of the economy on the performance of the tourist and service sector.

Since the signing of the Industrial Relations Code, in 1977, labour market conditions, and the business environment have changed significantly. These changes when combined with new developments that will be the result of the accession of Cyprus to the E.U, make up a much more complex environment.

In light of the above, and keeping in mind that with any system there is always room for improvement, it should be considered that the Industrial Relations Code, in the least could be re-examined by the social partners, in an effort to improve the current system. This will by no means be an easy task, and it should be kept in mind that the shortcomings of the system and its relative freedom of operation obviously favour both sides, to a certain extent. On the other hand the adoption of more strict, and even legislative governance, of certain conflict resolution procedures could prove to be a destabilizing factor, adversely affecting the relative peaceful co-existence of social partners in the area of industrial relations. All of the above should be very closely examined, and any decisions will need to be the result of a consensus among the social partners.

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