Arbitration In Bangladesh: Looking ahead

The world we are in today is greatly dependent on the free flow of trade and investment. Arbitration is one of the most common ways of settling a dispute between parties without having to recourse to the time consuming, costly and complicated procedure of litigation.  It is an excellent tool to facilitate international trade and investment as it allows a speedy and cost-friendly way to settle cross-border disputes.

In the early days after independence, arbitrations in Bangladesh were governed by Arbitration Act 1940. In order to rectify its shortcomings, Bangladesh enacted the Arbitration Act 2001. The Act is based on the UNCITRAL Model Law. The Arbitration Act 1940 had its own problems and provided for many hindrances to the arbitral process. For example, the national courts had an extensive supervisory role over the arbitral process and, most importantly, there were problems being faced by arbitration users in relation to the enforcement of foreign arbitral awards. The Arbitration Act 1940 did not expressly deal with foreign arbitral awards and thus enforcement of such awards was highly problematic. Although the Act of 2001 attempted to rectify these problems, it has failed to provide a complete solution. Fifteen years have passed since the enactment of the Arbitration Act of 2001, however, it seems that arbitrations in Bangladesh are still struggling with certain important issues such as interim measures and smooth enforcement of foreign arbitral awards.

Under the Act of 2001, the place of arbitration is a decisive factor as to whether interim remedies ordered by national courts are available to a party or not. According to the Act, the place of arbitration has to be in Bangladesh for the national courts to grant any interim remedy. The position was the same in India as well. However, in line with recent times and regular use of arbitrations, India has moved forward in this regard by amending its Arbitration Act 1996 in 2015. India has now changed its legal position and arbitration users may seek the help of nationals courts in India for interim remedies regardless of whether the arbitration is taking place in India or not. This is a marked improvement since an arbitration user may be contesting arbitration outside of Bangladesh and after winning the same, the user may come to Bangladesh only to find out that the Bangladeshi party has dissipated its assets here in Bangladesh.

Regarding enforcement of foreign arbitral awards, despite the Arbitration Act of 2001's attempt to make such enforcement of awards easier, in practice, enforcement in Bangladesh is highly time-consuming. A party must apply to the District Court in Dhaka to enforce such an award, and there is a list of circumstances under which the Court will not enforce an award. For example, an award may not be enforced if it is contrary to the public policy of Bangladesh. It is to be noted that no definition of 'public policy' has been provided by the Act of 2001, leaving it open to the national courts to interpret the same. This procedural requirement requires the arbitration user to go to the very national court, which it wished to avoid in the very first place. Given that national courts are marred with delays, arbitration itself then becomes a victim of this delay. Adopting the procedures of civil administration of justice (in cases of enforcement of awards) delays the overall completion of the arbitral process. Dealing with the topic of delay, a notable improvement which the amended Arbitration Act of 1996 did was to introduce a time limit for the arbitral process. The amendment provides that an arbitration process shall be concluded within a period of twelve months, which the parties may, by consent, extend for a further period not exceeding six months. It also provides a fast-track arbitration process, optional for the parties, where the process shall be concluded within a period of six months or extended for another six months by consent.

Given the passage of time, the amendment of the Arbitration Act of 2001 is now required in order to resolve the many problems being faced by arbitration users in Bangladesh. The archaic provisions of the Act of 2001, which was initially based on the UNCITRAL Model Law, need revision in order to address these problems. It is noteworthy that, even the UNCITRAL Model Law has been revised since the enactment of the Arbitration Act of 2001.

The writer is an Advocate, Supreme Court of Bangladesh.