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“All Citizens are Equal before Law and are Entitled to Equal Protection of Law”-Article 27 of the Constitution of the People’s Republic of Bangladesh

Issue No: 211
October 15, 2005

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Law Opinion

The new arbitration act and some afterthoughts

Professor Dr AFM Maniruzzaman

Bangladesh has recently enacted the Arbitration Act 2001 (the Act). It came into force on 10 April 2001, repealing the Arbitration (Protocol and Convention) Act 1937 and the Arbitration Act 1940, legacies of the British Raj in India. The new Act was again amended in 2004 in certain respects. Such legislative steps were urgent in the face of increasing foreign investment in Bangladesh in various sectors, especially in natural gas and power, and the ever-growing export trade with the rest of the world. The Act, consolidates the law relating to both domestic and international commercial arbitration. It thus creates a single and unified legal regime for arbitration in Bangladesh. This modernisation gives Bangladesh a facelift as an attractive place for dispute resolution in the field of international trade, commerce and investment. Although the new Act is principally based on the UNCITRAL Model Law, it is a patchwork quilt as some unique provisions are derived from the Indian Arbitration and Conciliation Act 1996 and some from the English Arbitration Act 1996.

The salient features of the Act are
(a) The preamble specifically mentions that it is "An Act to enact the law relating to international commercial arbitration, recognition and enforcement of foreign arbitral award and other arbitrations." However, the Act is also applicable to domestic arbitration.

(b) In an international commercial dispute one of the parties to the dispute must be either a firm registered abroad or a foreign national.

(c) The dispute in question must arise out of a legal relationship, whether contractual or not, but considered as a commercial dispute under the law in force in Bangladesh.

(d) The parties are free to determine the number of arbitrators. If the parties fail to fix the number of arbitrators, the tribunal is to consist of three arbitrators.

(e) The parties may choose an arbitrator or arbitrators of any nationality and the chairman of the tribunal may be of any nationality if that is accepted by the parties.

(f) The courts (i.e. the District Judge's Court in respect of domestic commercial arbitration and the High Court Division of the Supreme Court of Bangladesh in respect of international commercial arbitration) can intervene in regard to appointments of the arbitrators on behalf of the parties as well as of the chairman of the arbitral tribunal within sixty days from the receipt of a party's application, to facilitate the arbitral process.

(g) The court shall respect the parties' agreement to arbitrate and refer any party to such agreement to arbitration and stay any legal proceedings that may have been commenced against the other party.

(h) The parties are free to agree on the venue, failing which the arbitral tribunal, having regard to the circumstances of the case, including the convenience of the parties, shall determine it.

(i) In the absence of the parties' agreement as to the language of the proceedings, the tribunal can use any language it deems appropriate.

(j) The Act preserves the doctrines of severability of the arbitration agreement and kompetenz-kompetenz, so that the tribunal can rule on its own jurisdiction.

(k) The tribunal is not bound to follow the Code of Civil Procedure 1908 or the Evidence Act 1872. Subject to the parties' agreement, it may adopt any procedure for conducting the arbitral proceedings.

(l) In respect to the substance of a dispute, the parties are free to choose the rules of law or legal system of any country. In the context of the substantive law chosen by the parties, the Act expressly discards renvoi, unless the parties agree to the contrary.

(m) If the parties do not choose the applicable substantive law, the Act authorises the tribunal to apply the rules of law anything short of a legal system such as transnational commercial rules or the rules of lex mercatoria - which the tribunal deems most appropriate in the circumstances.

(n) If all the parties agree, the tribunal may use mediation, conciliation or any other procedure at any time during the arbitral proceedings to encourage settlement. This is in keeping with the Asian tradition of settling disputes in a consensual process rather than western confrontational method.

(o) The Act makes provision for the arbitral tribunal, and for the Court (by way of a latter amendment, i.e. Act II of 2004) to make interim orders in respect of the subject-matter of the dispute.

(p) No appeal lies against the tribunal's order of interim measure of protection.

(q) The tribunal can summon any persons to appear before it, albeit through the competent court, to give evidence or to submit materials if they do not do so of their own accord.

(r) The tribunal has no power to act in respect of consolidation of arbitral proceedings and concurrent hearings, unless it is given by the parties on agreed terms. The parties are free to agree on these matters.

(s) The tribunal must deal with any dispute submitted to it as quickly as possible and act fairly and impartially by giving each party 'reasonable opportunity' to participate in the proceedings, and in its deciding procedure and evidence and in exercising other powers conferred on it.

(t) Subject to the parties' agreement, the tribunal may appoint experts, legal advisers or assessors to assist it on specific issues.

(u) The tribunal may continue the proceedings in the absence of a party and make an award on the basis of the evidence before it.

(v) The tribunal must give its award without undue delay and the award will have the same force of law as if it were a decree of a court.

(w) An award shall be made by the majority of the arbitrators and shall be in writing and signed at least by the majority where the tribunal consists of more than one arbitrator.

(x) An award can be challenged in the court only on specified grounds.

(y) The Act makes provision for appeal against an order of the court setting aside or refusing to set aside an award, or refusing to recognise or enforce any foreign arbitral award. All these appeals go to the Appellate Division of the Supreme Court of Bangladesh.

The new Bangladesh legal regime on arbitration has embraced such fundamental tenets of modernisation as party autonomy; minimal judicial intervention; independence of the tribunal; fair, expeditious and economical resolution of disputes; and effective enforcement of awards. This has also been brought about in domestic arbitration. Although the new Act is principally based on the Model Law, it has introduced the improvements highlighted above. In many respects the Act allows more freedom to the parties than the Model Law. As the Act is only just over four years old, it is premature to express any judgment on its efficacy as an arbitral legal regime and the impact it will have in the future for Bangladesh as a place for settlement of international commercial and investment disputes by arbitration. Certainly Bangladesh, as a prospective destination for increasing foreign investment in the future, has made a positive step in the right direction by enacting the new law. Bangladesh, like its sub-continental counterparts, has a long tradition of settlement of disputes by alternative methods a phenomenon that has pervaded the social fabric for centuries. But it can still improve its international arbitral legal regime by incorporating, as appropriate, lessons from other jurisdictions in its efforts towards modernisation and internationalisation of arbitration. No doubt there is still room for improvement in the Act itself.

It has to be appreciated that for making Bangladesh an attractive place for her much needed foreign investment for economic growth and development and for alternative dispute resolution (i.e. ADR), it is not enough to enact a new law on arbitration only, the Government has to go a long way to achieve the stated purpose. Bangladesh needs more than a mere piece of legislation on arbitration at the present time. The Government, the judiciary as well as the legal profession must take initiatives and make constant efforts towards the development of legal infrastructure and institution building in the field of alternative dispute resolution including arbitration. In this respect the following tentative suggestions may be worth considering:

(1) The efficacy of the Arbitration Act 2001 depends, to a great extent, on the attitude of the judiciary. While interpreting the new Act Bangladesh courts should not be detracted from the spirit of modernization of arbitration as a global phenomenon and should not be guided by the 1940 Arbitration Act as a source of inspiration. Not only the judiciary, but also the legal profession has to change their traditional mind-set developed under the old legal regime.

(2) The judiciary as well as the legal profession have to appreciate the reality that in the era of globalization dispute settlement by alternative methods is not only a domestic matter, but also an increasingly growing international phenomenon in the context of cross-border transactions. They have to be prone to absorbing international values, norms and principles while performing their professional functions in the field of international dispute settlement, otherwise their professionalism will prove moribund and will be useless to the international business community.

(3) It is noteworthy, the new Act authorizes the High Court Division to set aside any arbitral award made in an international commercial arbitration held in Bangladesh, whereas for recognition and enforcement of foreign arbitral awards it is the District Judge's Court, exercising the jurisdiction within the district of Dhaka, that is entrusted with the responsibility. With this latter provision the Act seems to have downplayed the importance of international arbitration for which so much efforts have been given to modernize the arbitration law in Bangladesh. International commercial arbitration is a complex matter. It involves expertise in public international law, private international law and also knowledge of international commerce, law and practice. It is not too much of an expectation that District Court Judges should be well equipped with sufficient knowledge, expertise and training to handle foreign arbitral awards that may very often involve complicated international legal issues. If it is at all, perhaps High Court Judges with requisite specialism may be better placed to deal with the responsibility for enforcement of foreign arbitral awards. It is desirable that this specific responsibility should be given to the High Court Division even if it means to adjust the Code of Civil Procedure mutatis mutandis for the purpose.

(4) In due course, the need to create a specialist arbitration bench in the High Court Division may arise for the purpose of dealing with international arbitration matters more effectively and professionally. Such a specialist bench may be constituted by appointing a certain number of judges in the High Court Division with the appropriate expertise and background in the field of arbitration. It may even mean to relax the constitutionally requisite qualifications and experience for the appointment of judges in order to attract suitable people for the positions. The constitution of a specialist bench in the High Court Division would show the Government's seriousness in the matter of international arbitration. Such an arrangement would command respect from the international business community and create confidence in prospective parties to settle their disputes in Bangladesh and to enforce any foreign arbitral awards there. The Government has to consider seriously these matters in order to promote arbitration in Bangladesh and make it an attractive place for dispute resolution by arbitration as a method.

(5) It is not enough to enact a piece of legislation on arbitration in terms of modernization of arbitration law. The Government, the Bar and the Bench must attend to the development of the culture of arbitration in Bangladesh. Judges and lawyers must be aware of the value of alternative dispute resolution when the courts are heavily overburdened with caseloads. They must actively promote arbitration and ADR.

(6) The Government and professional organizations should promote arbitration and ADR and enhance the understanding of them by sponsoring and conducting educational and training programmes for both the bar and the bench and for arbitration and ADR professionals to keep them abreast of recent developments in theory and practice of arbitration, and by allowing cross-fertilization of knowledge in the field of dispute resolution by organizing occasional seminars and regional and international conferences under the auspices of the Ministry of Law and Parliamentary Affairs and concerned institutions.

(7) Last but not least, the Arbitration Act 2001 could be amended, on a later occasion, to incorporate rules on conciliation based on The UNCITRAL Model Law on International Commercial Conciliation (2002). There seems to be a trend in many countries now-a-days to incorporate arbitration and conciliation rules in the same document.

The author is a Professor of Law at the University of Portsmouth, UK and Advocate, Supreme Court of Bangladesh.


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