Stamp duty in an arbitral award

There are two layers of foreign investment protection. The first layer consists of the International Investment Treaties (IITs) in bilateral or multilateral forms facilitating foreign investments to host States with the necessary provisions for promoting and protecting the same. The domestic laws, regulations, and dispute resolution mechanism fall under the second layer, which supplements the first one with its smooth functioning. Thus, the second layer relates to the foreign and domestic investment both in a respective manner.

Bangladesh enacted the Arbitration Act 2001 by repealing the previous Act of 1940. This Act contains everything relating to conducting a successful arbitration between the parties from home and abroad. Section 44 states that a person can file a petition to enforce the arbitral award. All petitions except regarding the International Commercial Arbitrations must be filed before the court of the District Judge. In filing a petition, the award should be stamped.

There are no provisions as to who will stamp the arbitral award as per the 2001 Act. Even the Stamp Act 1899 does not clarify the issue. Neither article 12 of Schedule I of the Stamp Act 1899 nor section 29 of the same Act talks about this. In section 29, there is a list of who will pay the stamp expense in the absence of an agreement to the contrary; but no arbitral award is mentioned there. This lacuna creates ambiguity as to who will pay the stamp cost in the arbitral award. These gaps are hampering the procedure of arbitration cases.

Without removing these defects, it would be difficult for the parties to seek remedies and solutions through the arbitration mechanism causing eventual harm to the country's investment regime. Our service sectors are reliant on foreign investment. It is one of the most jobs-providing sectors of Bangladesh. Our courts of law are overburdened with the mountainous pressure of cases. The traditional system of dispute is almost futile to give a speedy remedy.

In India, there is no explicit provision in any statute for the stamp of an arbitral award. It is a settled principle that the question as to whether the award is required to be stamped and registered would be relevant only when the parties would file the award for its enforcement under section 36 of the Arbitration & Conciliation Act, 1996. The Supreme Court of India, in the case of M. Anasua Devi v M. Manik Reddy and others held that the objection to non-stamping of the arbitral award is required to be dealt with at the enforcement stage of the arbitral award and not at the stage of objection. In a recent case, the Delhi High Court also held that whether an award is stamped or not is only relevant for enforcement proceedings.

However, there is a different tendency in our jurisdiction. Suppose a party has come before the court to set aside an award. He has to submit the stamp. There is no precedent by the superior court behind this order of the district judges in Bangladesh. We perceive that where any procedure has been made mandatory by the subordinate court, that must be incorporated by legislation or any matters. However, it is crystal clear that it is the duty of the person who got the arbitral award to pay stamp duty when the person produces before the court to enforce the arbitral award in the Indian legal arena. As a result, chaos has happened in our court arena about this matter. As arbitration suits are civil in nature, the court may yield a procedure for the ends of justice. However, this procedure is arbitrary in nature.

Our legislature should take the initiative to remove these lacunae relating to stamping the arbitral awards. As it is a procedural matter, many cases under Arbitration Act 2001 may have stayed before the court.

The writers are Advocates, Dhaka Judges Court and Chittagong Judges Court, respectively.