As of March 2016, there are over 85,000 pending civil cases in the High Court of Bangladesh according to the Law Minister of Bangladesh,2 Mr Anisul Haque. One of the steps that the Bangladeshi government is currently taking to manage the overwhelming amount of pending cases is to divert more time and resources to alternative dispute resolution (ADR) instead of going through the traditional court process, which takes longer.
In Bangladesh there are two main ways to resolve a dispute without seeking the assistance of the court, one being mediation and the other being through arbitration. It must be stated that mediation in Bangladesh is unregularised except for certain laws that provide room for mediation. On the other hand, the concept of arbitration was introduced to legal system of Bangladesh from the beginning of the country’s existence.
The first Act which has tried to tackle the issue was enacted in 1940 by the name of the Arbitration Act 1940,3 well before Bangladesh came into existence as an independent country. Hence the idea of an alternate means of handling court cases is not something new for Bangladesh, however, the implementation, practice and popularity of the Act has taken time. Though the 1940 Act was eventually repealed by the enactment of Arbitration Act 2001.4 The 2001 Act was heavily influenced by the UNCITRAL Model Law.5 The 2001 Act was mainly enacted to tackle some of the issues that were observed in its predecessor. The main issue with the 1940 Act was that it was extremely difficult to enforce foreign arbitration awards in Bangladesh. It was a result of the fact that the 1940 Act did not specifically have any provisions that dealt with foreign arbitral awards.
The Arbitration Act 2001 currently is the operative law that dictates the whole aspect of ADAR in Bangladesh, and the courts of Bangladesh are providing a steady flow of case law to sufficiently interpret and enforce the 2001 Act. The 2001 Act, though not perfect, attempts to resolve the issues observed in its predecessor.
i Form of arbitration clauses and their application
As per Section 9(1) of the Arbitration Act 2001 ‘An Arbitration agreement may be in the form of an arbitration clause in contract or in the form of a separate agreement,’ so like many other country’s arbitration law, Bangladesh also recognise an arbitration clause in an agreement. The other requirement for an arbitration clause to be valid is that it must be in writing if it is contained in any of the following forms as per Section 9(2) of the Arbitration Act 2001:
- a a document signed by the parties;
- b an exchange of letters, telex, telegrams, fax, e-mail or other means of telecommunication which provide a record of the agreement; or
- c an exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
It seemed that the Arbitration Act 2001 covered all the aspects regarding an arbitration clause, however, a question was raised regarding the legality of a separate arbitration agreement. This was seen as a problem as the Arbitration Act 2001 did not mention anything regarding a separate arbitration clause, however, this issue was resolved by the High Court Division of Bangladesh in the case of Lita Sama Samad Chowdhury v. Mohammad Hossain Bhuiyan.6 In this case the High Court stated that ‘An arbitration agreement which forms part of another agreement shall be deemed to constitute a separate agreement which giving decision for the purpose of determining the jurisdiction of the arbitral tribune.’ The High Court went so far as to criticise the decision of the joint district judge by stating ‘The learned Joint District Judge committed illegality by not acting in accordance with law by not staying the proceeding of Money Suit.’ The High Court division directed both the parties to take steps at first to refer the matter for arbitration as per the clause of the agreement to resolve the dispute. Hence, it was made clear that the arbitration clause would be considered as a separate agreement and it can also be used to determine the jurisdiction of the arbitral tribune. Therefore, the courts of Bangladesh have already accepted the status of an arbitration clause as a valid and very much as an enforceable term of a contract.
Two important aspects of the Arbitration Act 2001 that are of vital importance when an arbitration clause is present in the agreement are when is the correct time to apply for the matter to be referred for arbitration and the court’s duty regarding the claim that was filed.
ii When to invoke the arbitration clause
As per Section 10 of the Arbitration Act 2001, an arbitration clause may be invoked at any time before filing a written statement (defence statement or response to particulars of claim) and the application to do so must be made to court where the claim is pending. After receiving the application, the court must as per Section 10(2) of the Arbitration Act 2001 ‘... if it is satisfied that an arbitration agreement exists, refer the parties to arbitration and stay the proceedings, unless the Court finds that the arbitration agreement is void, inoperative or is incapable of determination by arbitration.’ Hence, the correct time to refer a matter to arbitration is after a claim has been filed at court and before the respondent or defendant has filed the defence.
Moreover, another way of invoking the arbitration clause is laid down in Section 27 of the Arbitration Act 2001, which states that the proceeding will be deemed to commence if any dispute arises where the concerned arbitration agreement applies and any party to the agreement has received a notice stating that the party wishes to refer a dispute to arbitration or a party has received from another party to the agreement a notice requiring that party to appoint an arbitral tribunal or to join or concur in, or approve the appointment of, an arbitral tribunal in relation to the dispute.
iii The court’s duty when an arbitration clause has been invoked
The court’s duty when an arbitration clause is invoked was clarified by the High Court Division in the case of International Sea Foods Limited v. BD Corporation7 where the Court stated ‘A plaint will not be rejected under Order VII, rule 11 of the Code [the Code of Civil Procedure 19088] because of the presence of an arbitration clause.’ The Proper recourse is to stay the proceedings under Section 10(2) of the Act, till the conclusion of arbitration proceedings. By the passing of this judgment the Court made two things abundantly clear. If a claim has been filed with regards to a dispute regarding an agreement where an arbitration clause has been mentioned then the correct time to refer the matter to arbitration is before submitting the defence statement, and the court must stay the proceeding and refer the matter for arbitration.
As per Section 7 of the Arbitration Act 2001 ‘where any of the parties to the arbitration agreement files a legal proceedings in a Court against the other party, no judicial authority shall hear any legal proceedings except in so far as provided by this Act’. Moreover, as per Section 2(b) of the Arbitration Act 2001 a court means ‘District Judge’s Court and includes Additional Judge’s Court appointed by the Government for the discharging the functions of District Judge’s Courts under this Act through Gazette notification’. Though, originally the jurisdiction was given to the courts of Bangladesh but as per ECOM Agro Corp. Lts. & Anr v. Mosharaf Composite Textile Mills Ltd9 if the arbitration procedure has already started in a different institute of Bangladesh then the courts of Bangladesh would not have any jurisdiction to accept and try a civil case in the courts of Bangladesh. In this case it was held that ‘The defendant has already commenced a proceeding against the plaintiff before the Tribunal if the MCCI10 under the arbitration clause of the contract, which is not defined by the plaintiff. If it is so, under Section 7 of the Act, the subordinate Judge would have no jurisdiction to proceed further with the suit.’ Therefore, if the arbitration process was initiated at tribunal then the courts of Bangladesh would not have any jurisdiction to try the case. This aspect of the law is crucial as it sets out a clear guideline as to the jurisdiction of the courts with regards to arbitration procedure and matters that must be left to the arbitration tribunals.
v Place of arbitration
Section 26 of the Arbitration Act 2001 provides the procedure to be followed while selecting a venue for the arbitration hearing to be conducted. Primarily the selection of the venue for holding the arbitration procedure is up to the joint mutual consent of the parties. However, if it seems that the parties cannot mutually agree upon a venue then the decision will rest upon the arbitral tribunal which will have regard to the circumstances of the case, including the convenience of the parties. The arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property. Hence, the Arbitration Act 2001 does not provide many restrictions as to the actual location of the hearing rather it has been left to the parties to mutually agree upon the venue.
iii the Arbitral tribunal
i Composition of the arbitral tribunal
As per Section 11 of the Arbitration Act 2001, it is the right of the parties to an arbitration tribunal proceeding to determine the number of arbitrators and if the parties fail to mutually decide upon the number of arbitrators then there will be three arbitrators. If the number of arbitrators decided by the parties is an even number then another arbitrator must be appointed with the joint consent of the parties.
The procedures to appoint arbitrators have been provided in Section 12 of the Arbitration Act 2001. Primarily it has been left to the parties to arbitration to agree on a procedure for appointing the arbitrator or arbitrators. The arbitrator can be of any nationality, unless otherwise agreed by the parties. If the arbitration clause requires only one arbitrator to be appointed and a request to appoint the arbitrator by one party to the other was not agreed within one month of receiving such request then the party requiring the arbitrator to be appointed must apply to the district judge of Bangladesh for it to appoint such arbitrator in cases other than international commercial arbitration. In the case of international commercial arbitration then the appointment must be made by a judge of the Supreme Court who was in turn nominated by the Chief Justice.
Where there are three arbitrators to be appointed then each party will appoint one arbitrator each and the third arbitrator will be appointed jointly by the other two arbitrators. Moreover, if two arbitrators fail to mutually appoint the third the arbitrator then again in cases of international commercial arbitration the third arbitrator will be appointed by a judge of the Supreme Court who was in turn nominated by the Chief Justice and in other instances the district judge. The third appointed arbitrator shall be the chairman of the said tribunal. The appointment of the arbitrator by the district judge or Supreme Court judge must be made within 60 days of the receipt of the application thereof.
So, it can be said that the composition of the arbitral tribunal is primarily up to the joint decision of the parties, as it was further evident in the case of Mohammad Enamul Huq v. Govt. Bangldesh &Ors11 where the district judge wrongly did not allow the parties to propose names who may be appointed as the arbitrators and the High Court in response to the decision stated that ‘The learned Joint District Judge in passing the impugned order stepped beyond his jurisdiction inasmuch as according to express provision of Section 12 of the Arbitration Act the District Judge is empowered to direct the parties to make proposal of the name of the Arbitrators.’
ii Arbitration procedure
General responsibilities of the arbitral tribunal are established in Section 23 of the Arbitration Act 2001, which states among other things that it is the duty of the tribunal to deal with any disputes submitted to it fairly and impartially. This Section also provides some general rights to the parties involved in the arbitration procedure such as the parties will be given opportunity to present their case orally or in writing or by both, each party shall be given reasonable opportunity to examine all the documents and other relevant materials filed by other party or any other person concerned before the tribunal, the tribunal shall deal with a dispute submitted to it as quickly as possible and the arbitral tribunal in conducting proceedings shall act fairly and impartially.
The Arbitration Act 2001 further provides that the tribunal is not bound by the Bangladesh Code of Civil Procedure and Evidence Act 1872.12 Hence, it provides the tribunal with a wide range of discretion while conducting the trial more specifically with regards to evidential matters. With relation to other procedural requirements as per Section 25 of the Arbitration Act 2001, the arbitration procedure will follow the same procedure that was agreed upon by the parties to the arbitration procedure through the arbitration clause in the agreement. In the instance where there is no agreement as to the procedural requirements of the arbitration then it will be duty of the arbitrators to set the procedure for the arbitration proceedings. As per Section 25(3) procedural and evidential matter relates to the time and place of holding the proceeding either in whole or in part, language of the proceeding, written statement of claim, specimen copy of defence, time of submission and range of amendment, publication of document and presentation thereof, the questions asked to the parties and replies thereof, written or oral evidence as to the admissibility, relevance and weight of any materials, power of the arbitral tribunal in examining the issue of fact and issue of law, submission or presentation of oral or documentary evidence and submission or presentation of oral or documentary evidence. Therefore, it is quite evident that arbitration as a procedure in Bangladesh is independent from the general ambit of the civil litigation and evidence law.
As per Section 29 of the Arbitration Act 2001 it is up to the tribunal to decide the period of time the claimant has to state the facts supporting his or her claim, the points at issue and the relief or remedy sought, and the period of time the respondent has to state his defence, unless parties have mutually decided upon a different time frame. The parties also have the right to submit all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit in future. The parties are also at liberty to amend or supplement the claim or defence during the course of the arbitral proceedings unless the tribunal decides the amendments to be inappropriate considering fairness or the delay in making such amendments.
With regards to terminating an arbitral procedure, the tribunal holds various powers, for example, as per Section 35 of the Arbitration Act 2001, the parties are at liberty to agree on the powers of the arbitral tribunal in case of a party’s failure to do what is necessary for the proper and expeditious conduct of the arbitration. However, the tribunal may terminate the arbitral proceedings if the claimant fails to communicate his or her statement of claim to the tribunal and if the respondent fails to communicate his or her statement of defence, the tribunal shall continue the proceeding without treating that failure in itself as an admission of the allegations by the claimant. Moreover, the tribunal may also dismiss the proceedings if the tribunal is of the opinion that there has been an inordinate and inexcusable delay on the part of the claimant in pursuing his or her claim and the delay has given rise or is likely to give rise to a substantial risk that it is not possible to have a fair resolution of the issues in that claim, or has caused or is likely to cause serious prejudice to the respondent. Moreover, as per Section 41 of the Arbitration Act 2001 an arbitral proceeding shall be terminated if:
- a a final arbitral award is made;
- b the claimant withdraws his or her claim;
- c the parties agree to terminate the proceedings or the arbitral tribunal; or
- d the tribunal finds that the continuation of the proceedings is unnecessary or impossible.
Whether the hearing is an oral hearing for the presentation of evidence or for oral argument, or whether the proceeding shall be conducted on the basis of documents and other materials will again depend on the decision of the arbitral tribunal as per Section 30 of the Arbitration Act 2001. The tribunal may hold an oral hearing at an appropriate stage of the proceeding either at the request of the parties or at its own motion unless the parties otherwise agreed that there shall be no oral hearing. The tribunal must also give sufficient prior notice before conducting a hearing and of any meeting of the tribunal for the purpose of inspection of different materials that are subject to the arbitration procedure. While making its decision, the arbitral tribunal must indicate to the parties the statements, documents or other information that was taken into consideration while reaching its decision.
Legal or other representation can be appointed by the parties to represent its case to the arbitral tribunal as per Section 31 of the Arbitration Act 2001. Moreover, as per Section 32 of the Arbitration Act 2001, unless otherwise agreed by the parties the tribunal may appoint different kinds of experts or legal advisers to report to it regarding different matters that might be an issue in the arbitral proceeding. In this instance the experts will have access to all the relevant documents or information that might be required to determine the issue referred to them. The parties have few rights as to the report produced by the expert and they also have the right to put question to the expert witnesses in order to testify them on the points of issue or issues, to review the documents, goods or other properties that were used by the expert to produce his or her report and the right to have reasonable opportunity to comment on the report, information, opinion or advice submitted in the tribunal by the expert.
With regards to a summons, the arbitral tribunal does not have any direct jurisdiction to compel any witness to come before the tribunal, however, as per Section 33 of the Arbitration 2001, the tribunal or a party with the permission of the tribunal may apply to the Court13 to issue a summons to the witnesses. The summons will have the same effect as the summons that was issued by the courts of Bangladesh. Therefore, a person who is compelled to attend the tribunal as per the summons and does not appear will be punished in the same manner as one failing to attend a summons for a hearing that was issued by the district judge.
iv the arbitral award
i Making of an arbitral award
Section 36 of the Arbitration Act 2001 the arbitral tribunal must decide the dispute in accordance with the rules of law as is designated by the parties as applicable to the substance of the dispute. Generally, in cases of arbitration proceedings the arbitration clause dictates the law of the country that shall be followed in determining the arbitration proceeding. Unless otherwise agreed by the parties, where there is more than one arbitrator the decision of the tribunal shall be made by a majority of all its members.
As per Section 38 of the Arbitration Act 2001 the arbitration award shall be made in writing and shall be signed by the arbitrator. In a proceeding where there is more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient as long as the reason for any omitted signature is stated unless otherwise agreed otherwise by the parties. The arbitral award shall state its date and the place of arbitration and the award shall be deemed to have been made at that place. After the award is made a copy of the award signed by the arbitrator or arbitrators shall be delivered to each party.
ii Enforcement of an arbitral award
The award obtained by arbitration can be enforced in the same manner as if it was a decree of the court as per Section 44 of the Arbitration Act 2001.
With regards to foreign arbitration awards as per Section 45 of the Arbitration Act 2001, a foreign arbitral award shall on the application being made to it by any party, be enforced by execution by the Court under the Code of Civil Procedure, in the same manner as if it were a decree of the Court. An application for the execution of a foreign arbitral award should contain the original arbitral award or copy thereof duly authenticated in the manner required by the law of the country in which it was made, the original agreement for the arbitration or a duly certified copy thereof and such evidence as may be necessary to prove that the award is a foreign award. The High Court division has recently made it clear in Goenka Impex SA v. Tallu Spinning Mills Ltd (Civil)14 that if all the requirements are met a court must accept the foreign award as having the same force as a decree of its own.
iii Recourse against an arbitral award
A party has the right to apply to the court to set aside an order given by the arbitration tribunal, however, such application as per Section 42 of the Arbitration Act 2001 must be made within 60 days of the receipt of the award in cases where it is not an international commercial arbitration and in cases of international commercial arbitration the appeal must be made to the High Court Division within 60 days of the receipt of the award.
Section 43 of the 2001 Act provides the situations where the appeal against an arbitration award will be accepted and these are (1) when a party to the arbitration agreement was under some incapacity, (2) the arbitration agreement is not valid, (3) proper notice was not given of the appointment of an arbitrator or of the arbitral proceedings, (4) was otherwise unable due to reasonable causes to present his or her case, (5) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, (6) the arbitral award contains decision on matters beyond the scope of the submission to arbitration, and (7) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties.
Also, the High Court Division has wide discretion that can undermine a decision given by the arbitral tribunal in cases of foreign arbitral awards. The High Court Division can as per Section 43(b) of the Arbitration Act 2001 can set aside an arbitral award if it is satisfied that (1) the subject matter of the dispute is not capable of settlement by arbitration under any law of Bangladesh in force, (2) the arbitral award is prima facie opposed to the law for the time being in force in Bangladesh, (3) the arbitral award is in conflict with the public policy of Bangladesh, and (4) the arbitral award was induced or affected by fraud or corruption. This aspect of the Arbitration Act 2001 produces a huge number of controversies mainly due to the fact that the High Court can easily throw out a foreign arbitral award if it goes against the public policy of Bangladesh. It should be noted that the meaning of ‘public policy’ has not been defined in the Act, hence the power of the High Court in this regard is immense. This is because the legislators intended the courts to have enough power to dismiss an arbitral award if it might cause substantial harm to the economy or to any other sector of the country. This fact was evident in the case of Maisha Corporation (Pvt) Ltd v. BSMMU (Civil),15 where the High Court outright stated ‘compensation for any part thereof can be allowed to spend from the Public Fund’ furthermore a very vague definition of the term public policy was provided that stated ‘It is against the Public Policy meaning thereby that Public Fund cannot be misused by granting such Award’. The High Court by delivering this decision has made its stance clear with regards to foreign arbitral awards.
The party appealing against the decision of the arbitral tribunal may be ordered by the Court or the High Court Division as the case may be to deposit the amount awarded by the arbitral tribunal in to it before it entertains the appeal. Therefore, the appeal procedure cannot be used to delay the payment of the arbitral award.
Alternative dispute resolution in Bangladesh has two branches and of them only arbitration is regulated. Though the arbitration law of Bangladesh is far from perfect, especially with regards to enforcing foreign arbitral awards, the procedures involved in the process of invoking and later obtaining an arbitral award are sound. Now that the government of Bangladesh is focusing on the concept of alternative dispute resolution, more changes can expected soon.
1 Fahad Bin Qader is an associate barrister at Counsels Law Partners.
2 The Independent BD.
3 Came into force on 1 July 1940.
4 Came into force on 24 January 2001.
5 UNCITRAL Model Law on International Commercial Arbitration (1985).
6 6 ALR (2015)-HCD-20.
7 22 BLC (2017)-HCD-145.
8 Act No. V of 1908.
9 23 BLT (2015)-HCD-42.
10 Metropolitan Chamber of Commerce & Industry Bangladesh.
11 23 BLT (2015)-HCD-542.
12 Act No. I of 1872.
13 As per Section 2(b) court means the district judge.
14 2 ALR (2013)-HCD-427.
15 18 BLC (2013)-HCD-194.