Upoma Saha :
The two evils of civil justice- delay and cost as identified by Lord Woolf, MR in the last decade of 20th century have urged the need of Alternative Dispute Resolution (ADR) including arbitration not only in the United Kingdom but also across the globe. Arbitration is a method for settlement and resolution of disputes outside of courts, by one or more impartial and independent arbitrator(s), which the parties have agreed to by means of arbitration agreement. The sentiment of arbitration as a means of resolving high scaled commercial disputes outside of the court has also developed in Bangladesh in the recent past. ADR as a whole is an extreme necessity in our judicial system because of high number of pending suits which has caused horrendous judicial gridlock, thus, delaying the process of justice. According to a recent seminar presentation document of Bangladesh International Arbitration Centre (BIAC) 77% civil cases in the Appellate Division and 27% civil cases in the High Court Division are pending. In addition, above 66% civil suits are pending in the districts and divisional level. However, the exact number of commercial suits is not estimated in the document but the document identifies partial solution of these through ADR.
Arbitration in Bangladesh is governed by the section 89B of the Code of Civil Procedure and Arbitration Act, 2001 which came into force on 10th April 2001. Previously, arbitrations in Bangladesh were governed by the Arbitration Act 1940 which allowed the arbitration parties to seek the assistance of the courts at almost every stage of the arbitration causing enormous delay to the dispute resolution process, thereby frustrating the very purpose of arbitration. In order to stop this interventionist approach of the local courts and to expedite the arbitral process, the legislature enacted the 2001 Act in an effort to modernize the outdated 1940 Act.
The Act attempts to orchestrate Bangladesh’s existing arbitration laws with the 1985 UNCITRAL Model Law on International Commercial Arbitration (the Model Law), which is extensively used across the globe. Nevertheless, not all the Model Law’s provisions were adopted in the 2001 Act. Further modernization of the current law is still essential as various loopholes yet subsist in the present Act. Firstly, the 2001 Act poses definitional and restrictive challenges. Although the Act applies to both domestic and foreign arbitrations, it was enacted with the specific purpose of addressing international commercial arbitration and recognizing and enforcing foreign arbitral awards. According to S. 2C of the 2001 Act, one of the parties of the dispute in an ‘international commercial arbitration’ must be one of the following:
a national of, or habitual resident, of any country other than Bangladesh;
a body incorporated in a country other than Bangladesh;
a company whose central management and control is exercised in a country other than Bangladesh; or
the government of a foreign country.
Apparently, the Act relies on the nationality of the parties in order to give it the status of an international arbitration, as opposed to the international seat or nature of the dispute, as stated in article 1(3) of the Model Law. Hence, while disputes between a foreign company and a company in Bangladesh may fall within the purview of the Act, a dispute between two Bangladeshi companies operating in a foreign country may not. It must be noted that for a dispute to come under the ambit of this provision, it must be considered to be a ‘commercial dispute’ under the laws of Bangladesh, which may be a more restrictive definition than that employed by the Model Law, where it is stated that the term ‘commercial’ must be given a wide interpretation so as to cover all matters of a commercial nature.
Moreover, the meaning of international commercial arbitration under the Act is further circumscribed by section 3(1) of the Act which expresses a restrictive territorial attitude whereby only arbitration that takes place in Bangladesh falls within the domain of the Act. Because of the restrictive territorial principle considerable confusion has been caused as to what ‘place… in Bangladesh’ means. The High Court Division of the Supreme Court of Bangladesh, in the case of HRC Shipping Ltd v MVX-Press Manaslu and Others (HRC Shipping), opted for a wide interpretation of the term. The reasoning behind the Court’s view was that the Act was prepared, in the spirit of establishing a uniform legal framework, for the fair and efficient settlement of disputes arising in international commercial arbitration, as embodied in the Model Law. It was held that the Act itself did not state that it will not apply if the place of arbitration is ‘not’ in Bangladesh or that it would apply ‘only’ if the place of arbitration is in Bangladesh. The Court further observed that a distinction had not been drawn between international commercial arbitration taking place in Bangladesh and that taking place outside Bangladesh.
In contrast, in a later judgment delivered in STX Corporation Ltd v Meghna Group of Industries Limited (STX Corporation), another Bench of the High Court Division adopted a literal construction of section 3(1) of the Act. In support of such an interpretation, the Court cited the case of Unicol Bangladesh v Maxwell, where the Appellate Division of the Bangladesh Supreme Court stated in unequivocal terms that ‘the law in section 3(1)… is limited in application as to the arbitration being held in Bangladesh’. Clearly, it can be seen that the Bangladeshi courts have come to conflicting decisions and has rendered the issue vague about the interpretation of the law.
Secondly, the issue of cost poses another challenge. Expense of arbitration proceeding in Bangladesh is comparatively higher than the court proceeding. Undeniably there is an extra cost in respect of the fees of the arbitral tribunal.
Thirdly, although section 7 of the 2001 Act restricts the court to decide matters where one of the parties to an arbitration agreement files the court proceeding, it cannot be said that there is no interruption at all. Surely, lesser interruption would enable the whole arbitration process to be more strengthened and effective.
Another crucial impediment in the arbitration of Bangladesh lies in the fact that the duration of the process is quite lengthy which, clearly, frustrates the principle of arbitration.
Lastly, enforcement of arbitral awards in Bangladesh remains challenging. The difficulty is greater when an international commercial arbitration is involved along with a foreign party.
To combat the pitfalls of arbitration and to encourage the people to avail the fruits of ADR especially arbitrations, it is the responsibility of the whole arbitration community, which includes the parties to the arbitration, to find way outs of the drawbacks of the arbitration. Nevertheless, it must be noted that Bangladesh is making excellent strides in the field of arbitration. In most cases is has been observed that it is not the arbitration law itself but the interpretation of it by the judiciary which poses a threat to the development of arbitrations. The only way to deal with this is through advanced education and more regular judicial contacts with this area of law.
The two evils of civil justice- delay and cost as identified by Lord Woolf, MR in the last decade of 20th century have urged the need of Alternative Dispute Resolution (ADR) including arbitration not only in the United Kingdom but also across the globe. Arbitration is a method for settlement and resolution of disputes outside of courts, by one or more impartial and independent arbitrator(s), which the parties have agreed to by means of arbitration agreement. The sentiment of arbitration as a means of resolving high scaled commercial disputes outside of the court has also developed in Bangladesh in the recent past. ADR as a whole is an extreme necessity in our judicial system because of high number of pending suits which has caused horrendous judicial gridlock, thus, delaying the process of justice. According to a recent seminar presentation document of Bangladesh International Arbitration Centre (BIAC) 77% civil cases in the Appellate Division and 27% civil cases in the High Court Division are pending. In addition, above 66% civil suits are pending in the districts and divisional level. However, the exact number of commercial suits is not estimated in the document but the document identifies partial solution of these through ADR.
Arbitration in Bangladesh is governed by the section 89B of the Code of Civil Procedure and Arbitration Act, 2001 which came into force on 10th April 2001. Previously, arbitrations in Bangladesh were governed by the Arbitration Act 1940 which allowed the arbitration parties to seek the assistance of the courts at almost every stage of the arbitration causing enormous delay to the dispute resolution process, thereby frustrating the very purpose of arbitration. In order to stop this interventionist approach of the local courts and to expedite the arbitral process, the legislature enacted the 2001 Act in an effort to modernize the outdated 1940 Act.
The Act attempts to orchestrate Bangladesh’s existing arbitration laws with the 1985 UNCITRAL Model Law on International Commercial Arbitration (the Model Law), which is extensively used across the globe. Nevertheless, not all the Model Law’s provisions were adopted in the 2001 Act. Further modernization of the current law is still essential as various loopholes yet subsist in the present Act. Firstly, the 2001 Act poses definitional and restrictive challenges. Although the Act applies to both domestic and foreign arbitrations, it was enacted with the specific purpose of addressing international commercial arbitration and recognizing and enforcing foreign arbitral awards. According to S. 2C of the 2001 Act, one of the parties of the dispute in an ‘international commercial arbitration’ must be one of the following:
a national of, or habitual resident, of any country other than Bangladesh;
a body incorporated in a country other than Bangladesh;
a company whose central management and control is exercised in a country other than Bangladesh; or
the government of a foreign country.
Apparently, the Act relies on the nationality of the parties in order to give it the status of an international arbitration, as opposed to the international seat or nature of the dispute, as stated in article 1(3) of the Model Law. Hence, while disputes between a foreign company and a company in Bangladesh may fall within the purview of the Act, a dispute between two Bangladeshi companies operating in a foreign country may not. It must be noted that for a dispute to come under the ambit of this provision, it must be considered to be a ‘commercial dispute’ under the laws of Bangladesh, which may be a more restrictive definition than that employed by the Model Law, where it is stated that the term ‘commercial’ must be given a wide interpretation so as to cover all matters of a commercial nature.
Moreover, the meaning of international commercial arbitration under the Act is further circumscribed by section 3(1) of the Act which expresses a restrictive territorial attitude whereby only arbitration that takes place in Bangladesh falls within the domain of the Act. Because of the restrictive territorial principle considerable confusion has been caused as to what ‘place… in Bangladesh’ means. The High Court Division of the Supreme Court of Bangladesh, in the case of HRC Shipping Ltd v MVX-Press Manaslu and Others (HRC Shipping), opted for a wide interpretation of the term. The reasoning behind the Court’s view was that the Act was prepared, in the spirit of establishing a uniform legal framework, for the fair and efficient settlement of disputes arising in international commercial arbitration, as embodied in the Model Law. It was held that the Act itself did not state that it will not apply if the place of arbitration is ‘not’ in Bangladesh or that it would apply ‘only’ if the place of arbitration is in Bangladesh. The Court further observed that a distinction had not been drawn between international commercial arbitration taking place in Bangladesh and that taking place outside Bangladesh.
In contrast, in a later judgment delivered in STX Corporation Ltd v Meghna Group of Industries Limited (STX Corporation), another Bench of the High Court Division adopted a literal construction of section 3(1) of the Act. In support of such an interpretation, the Court cited the case of Unicol Bangladesh v Maxwell, where the Appellate Division of the Bangladesh Supreme Court stated in unequivocal terms that ‘the law in section 3(1)… is limited in application as to the arbitration being held in Bangladesh’. Clearly, it can be seen that the Bangladeshi courts have come to conflicting decisions and has rendered the issue vague about the interpretation of the law.
Secondly, the issue of cost poses another challenge. Expense of arbitration proceeding in Bangladesh is comparatively higher than the court proceeding. Undeniably there is an extra cost in respect of the fees of the arbitral tribunal.
Thirdly, although section 7 of the 2001 Act restricts the court to decide matters where one of the parties to an arbitration agreement files the court proceeding, it cannot be said that there is no interruption at all. Surely, lesser interruption would enable the whole arbitration process to be more strengthened and effective.
Another crucial impediment in the arbitration of Bangladesh lies in the fact that the duration of the process is quite lengthy which, clearly, frustrates the principle of arbitration.
Lastly, enforcement of arbitral awards in Bangladesh remains challenging. The difficulty is greater when an international commercial arbitration is involved along with a foreign party.
To combat the pitfalls of arbitration and to encourage the people to avail the fruits of ADR especially arbitrations, it is the responsibility of the whole arbitration community, which includes the parties to the arbitration, to find way outs of the drawbacks of the arbitration. Nevertheless, it must be noted that Bangladesh is making excellent strides in the field of arbitration. In most cases is has been observed that it is not the arbitration law itself but the interpretation of it by the judiciary which poses a threat to the development of arbitrations. The only way to deal with this is through advanced education and more regular judicial contacts with this area of law.
(The writer is a Barrister-at-Law and an Advocate [email protected])
