As a form of class collaboration, arbitration originated in 19th-century England. However, the conditions necessary for the existence of conciliation and arbitration were already in place before the Westminster regulations of 1867, 1872 and 1896. The Elizabethan laws of 1562–1563 aimed to fix prices, impose maximum wages, restrict workers’ freedom of movement and regulate training. These laws provided that the assessment of wages could be sanctioned by mediators appointed by the state. Nevertheless, the concept of industrial arbitration is more clearly articulated in the Master and Workmen’s Act of 1824, ‘for the resolution of disputes that may arise between employers and workers engaged in cotton production’.

It was only within new federated governments under the British Empire that arbitration as a means of ensuring class cooperation was institutionalised: in the American colonies, New Zealand and Australia. In these colonies, the limited scope of local markets necessitated the security of production for export, which was maintained by relatively small working-class populations living close to production sites. This security was achieved through the courts. State-imposed ‘agreements’ bound the otherwise unstable labour force to controllable parameters. It was claimed that these compulsory industrial agreement tribunals could achieve a so-called ‘fair’ resolution, which would exclude any hint of worker mobilisation by channelling it along ‘appropriate’ paths.

Today as yesterday, the traitors of the working class tirelessly favour the ever-increasing involvement of the state. In an attempt to evade mobilisation and dismiss it as ‘destructive’ or ‘improper’, they instead offer to seek concessions from the ruling class in court. Of course, the bourgeoisie grants these reforms after sufficient discussion, away from the workplace, , so that workers give up mobilisation while they wait for legal proceedings to drag on, where, in the end, the initial request is approved as an empty shell. This is how the state and the bosses shape the framework: they seek to hinder, suppress and postpone any action by the working class that escapes their control.

In phases of expanded accumulation, the bourgeoisie can afford to mask its domination with a “social” veneer, strengthening the “welfare state” and consolidating its grip on the working class: arbitration tribunals, social assistance and working and living conditions become tools for integrating the proletariat into the apparatus of capital, for domesticating conflict.

However, this mechanism did not arise from strength, but from the defeats of the labour movement, when opportunistic currents and mediators from the middle or bourgeois class diverted the class struggle into institutional channels, offering workers “better deals” and removing the danger of open confrontation. Once incorporated, these concessions seem lasting, but with each recession, the mask falls and the same institutions that once promised fairness return to imposing bans and decrees, backed by police intervention and violence, to stifle unrest and break strikes. Integration and repression alternate, depending on the needs of the state and capital.

In this regard, we will examine the Australian labour courts, those of the Fair Work Commission (FWC), one of the most powerful and extensive courts in liberal democracies.

Why arbitration originated in Australia

The first significant growth of opportunism within the Australian trade union movement occurred during a period of great working-class mobilisation. As early as the 1880s, the Australian proletariat had distinguished itself as a significant force operating within the growing antagonisms of a growing capitalist society.

Following a major depression in Australia, where unemployment peaked at 33%, a period of significant labour mobilisation was triggered. Earlier, when the gold rush of the 1840s began to give way to cattle ranching as the dominant economic activity, unionisation developed significantly in the newly established sectors. Furthermore, workers, learning from the failed Eureka Rebellion (which was nothing more than a violent struggle by small producers), understood the need for collective struggle.

In the 1890s, the worsening economic situation led to major strikes. In particular, with the Maritime Dispute, a solidarity strike that spread from shearers to dockers and later to coal miners affected over 50% of Australia (mainly paralysing maritime trade, where lost exports accounted for most of the damage, as wool and coal reserves in ports could not be shipped to their destinations). These actions were a harsh lesson for the bourgeoisie.

The ruling class had to engage in significant repressive actions in which troops and police were ordered to “lay them out”, so a strike will not ‘be performed again’, mobilising resources to organise labour to replace the strikers. To this end, employers’ unions were created. Organisations such as the Victoria Employers’ Union (1865) and the New South Wales Employers’ Union (1888) were instrumental in promoting the creation of a national body: the Australian Chamber of Commerce (1901).

However, the workers’ mobilisation in 1891-92-94 had weakened the position of the bourgeoisie to such an extent that the petty bourgeoisie had almost resigned itself to the idea of having to witness the triumph of the working class. The middle class and the petty bourgeoisie were prepared to play a passive role in the wake of the proletariat in motion and growing urban unrest. The call for a “socialist 20th century” was frequent in the workers’ newspapers.

However, in the absence of a unified working-class vanguard organised into a political party prepared to lead the assault, the bourgeoisie and the large landowners were able to organise and defend themselves.

Counter-offensives against the workers prevailed, reversing previous wage increases with cuts of up to 30%. The middle class, now increasingly distant from the striking proletariat and its repeated defeats, absorbed the weakened workers and entered parliamentary politics. Thus, we witnessed the formation of state labour parties that successfully promoted conciliation tribunals as the main proponents of a legalistic method of resolving class conflicts.

The Labour Party, regardless of its organisational constitution as a “social democratic party”, with its reference point in the small and medium bourgeoisie, was and is materially the main defender of the capitalist system from which it only apparently protects workers.

Following the establishment of the Australian Federation, as the new parliaments were strengthened, legislation for the introduction of a federal labour tribunal for industrial agreements was successful thanks to the Commonwealth Conciliation and Arbitration Act of 1904. This Act was originally agreed upon by the colonies in 1886 “so that disputes between employers and workers could be resolved in the future without resorting to the cruel and unscientific means that had usually been adopted in the past, namely strikes and lockouts” (from the Intercolonial Congress of Trade Unions and Trade Associations of Australasia).

Learning from recent experience, the new constitution and the new law gave the Commonwealth explicit authority to centralise industrial regulation within a federal court, with the power to resort to compulsory arbitration and punitive action.

The law articulated this power by creating theCommonwealth Court of Conciliation and Arbitration, giving it clear powers to prevent strikes and picketing, impose arbitration on agreements between employers and employees, and issue binding awards on wages and conditions of employment.

Compulsory arbitration requires that when an employer and its employees are in negotiations over pay, working conditions, etc., the dispute be referred to a state or independent tribunal, which mediates and ultimately issues a binding award on the terms of the contract.

The definition of “industrial dispute” in the Constitution was immediately expanded in the law to include disputes relating to employment on the railways, civil servants and state-controlled industries.

Punitive measures were provided for: trade union action could be prohibited, legally binding wages and working conditions could be determined and enforced through fines, imprisonment and the dissolution of trade unions. The permissible scope of trade union action was defined, channelling the demands of the working class into legal channels and restricting strikes. The centralisation of trade union affairs in the hands of the court’s executive bodies meant eliminating the influence of the mass of workers on final decisions regarding industrial action .

But the effectiveness of the courts required greater submission on the part of the workers and their effective use by the bourgeoisie. It would therefore have been ‘correct’ for trade unions or employers to only go to court when the other party agreed. Trade unions that refused would be punished with the utmost severity.

Workers attempted their first and hardest strike in 1917. The standard of living, which had only just been restored after 20 years, had collapsed again, with real wages falling by a third and unemployment exceeding 10%. During the war, the government introduced several laws to pacify and repress the most subversive elements of the working class with absolute bans and harsh repression of workers in struggle. It would have been possible to expel “foreigners” who had “endangered” the government, restricted all communications and compelled “any person to disclose any information” that would allow for the expulsion of members of the prevailing IWW and union leaders. These repressive rules were later extended to become a full-blown attack on workers, including a ban on symbols such as the red flag.

The Court was able to use this law to explicitly suppress the 1916 coal miners’ strike and prohibited members of the more radicalised Waterside Workers Federation from working in the busiest ports. However, driven by the introduction of a new labour-saving system on trams and railways, as well as years of increasing sacrifices related to the war, workers mobilised in a general strike

Under the 1904 law, the court reacted. It fined the strikers for almost 10 years’ wages, imprisoned the leaders and cancelled 22 trade unions. The event involved over 100,000 workers and all strikes and blockades were declared illegal.

Once again, the arbitration courts had revealed themselves to be an organ of the repressive apparatus of the bourgeois state, operating in concert with its armed organs and its reactionary auxiliaries

The law banning the red flag provided a pretext for unleashing the most reactionary strata against the workers. The most militant members of the working class and soldiers, increasingly influenced by Russian émigrés from 1905, marched against the ban. While the bourgeois press spoke of a ‘Bolshevik revolt,’ reactionary gangs composed mainly of former military personnel were mobilised in two assaults on the Russian Workers’ Hall. The police intervened not to defend the workers, but to regulate the disorder they were unwilling to tolerate, ensuring that it remained manageable. Once the streets were quiet, the courts completed the repression: legal proceedings undermined solidarity between workers and soldiers and stifled mobilisation before it could become a danger to Sydney, the industrial capital.

The new trade union officials who replaced the militant grassroots leaders admitted, after these defeats, the need to collaborate with the state. They favoured the use of “order”, confident that they would then be rewarded with better agreements.

The unprecedented production recovery after the Second Imperialist World War had forced a continuous intensification of mining. The Australia-Japan trade agreement of 1957 and the relaxation and then removal of the ban on iron ore imports (1960 and 1963) by Japan had made it possible for the Australian mining industry to grow to meet the demand for steel. The railways, ports and mines of the Pilbara developed; extraction increased dramatically in the 1960s as a result of Japanese industrialisation. In 1973, a generalised tariff reduction of 25% further focused attention on mining, which prevailed over the Australian manufacturing sectors that had previously developed.

The oil shock of the 1970s, which stalled Japanese demand, led to the first decline in production since the early 1950s and an increase in consumer prices of around 17%. Strikes in many industrial sectors became the indispensable tool for the working class to assert its demands. During this period, wages rose at a record pace; in 1974, they increased by about 26%, or about 10% in real terms (Reserve Bank of Australia Annual Report, 1975). To contain the skyrocketing cost of labour, centralised wage indexation was introduced.

When global demand for steel slowed in the mid-1970s, Australia’s dependence on iron ore and coal amplified the recession; a brief recovery in resources in the late 1970s gave way to another deep recession in 1982-1983, with unemployment reaching around 10% and the imposition of a “wage freeze” by the government. Rising prices and job losses hit workers’ conditions hard, exacerbating the conflict. This led once again to increased mobilisation.

Compulsory arbitration, which had been widely used until then, became increasingly ineffective. During this period, grassroots activists simply ignored fines and “suspension” clauses and called wildcat strikes while the courts attempted to enforce punitive sanctions. The government resorted to criminal measures, but this only increased the demands of the unions, leading to a series of strikes, some of which were general in nature. With consumer prices rising by 15%, tensions reached a peak in April 1974, with over 12% of the workforce on strike, mainly in the construction, manufacturing, mining and transport sectors.

At the same time, the court also tried to calm the situation with national wage increases and through sectoral wage agreements (Metal Trades, May 1974), and the introduction of gender pay equality. These measures, however, proved ineffective in containing the workers’ mobilisation.

A change of tactics on the part of the bourgeoisie was therefore necessary. As agreed by the trade union umbrella organisation (the ACTU) and the Labour Party, the previous sectoral/industrial collective agreements would be restructured so that they would lose their generalised character. Company agreements (contracts at company level, with a single employer) became increasingly common, compared to the previous agreements between all employees and employers in that sector.

A measure was also introduced: the Prices and Incomes Accord, which provided for a commitment to increase public spending and social welfare in exchange for a wage freeze. This agreement meant that new industrial agreements would preferably be determined directly at company level, gradually replacing the previous national/industrial agreements between the state, employers and trade unions aimed at defining general wages and working standards for entire productive sectors.

This downsizing reflected the cooling of the class struggle: worker resistance had fallen to such low levels that a centralised wage-setting body had become superfluous. Arbitration was therefore emptied of its substance and its application shifted towards company-level negotiations.

In 1996, the arbitration body was renamed the Australian Industrial Relations Commission and limited to the resolution of specific disputes.

The decline of trade unions and bureaucratisation went hand in hand in the years following the Agreement. The trade unions would become so hollowed out that incoming governments felt confident to go on the offensive. And after the 2008 crisis, it would have been easy to introduce significant change. In 2009, the Labour Party introduced the Fair Work Act, an initiative to “modernise” industrial relations.