Commercial Arbitration in Bangladesh

Commercial arbitration offers a significant alternative dispute resolution (ADR) mechanism for businesses in Bangladesh, providing a private, often faster, and potentially more flexible way to resolve disagreements compared to traditional court litigation. The primary legislation governing arbitration in Bangladesh is the Arbitration Act, 2001, which largely aligns with the UNCITRAL Model Law on International Commercial Arbitration.

The Arbitration Agreement

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The foundation of any arbitration is the arbitration agreement, whereby parties consent to submit their disputes to arbitration rather than resorting to the courts.

• Form: Section 9 of the Arbitration Act, 2001 mandates that the arbitration agreement must be in writing. This can be:
  • A clause within a main contract (arbitration clause).
  • A separate agreement (submission agreement).
  • Contained in an exchange of letters, telex, telegrams, faxes, emails, or other means of telecommunication which provide a record of the agreement.
  • An exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
• Scope: The agreement defines which disputes are subject to arbitration. It’s crucial to draft this clearly to avoid ambiguity.
• Validity: The arbitration agreement is treated as separate from the main contract. Even if the main contract is found invalid, the arbitration clause may still survive (doctrine of separability).

Appointment of Arbitrators

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• Number: Parties are free to determine the number of arbitrators, provided it is not an even number (Section 12). If they fail to agree, the default is a sole arbitrator.
• Procedure: Parties can agree on a procedure for appointing the arbitrator(s). Failing such agreement:
  • In an arbitration with three arbitrators, each party appoints one arbitrator, and the two appointed arbitrators appoint the third (presiding) arbitrator.
  • In an arbitration with a sole arbitrator, if the parties fail to agree, the appointment can be made, upon request of a party, by the Chief Justice of Bangladesh or a designated judge of the Supreme Court (Section 13).
• Independence and Impartiality: Arbitrators must be impartial and independent. They are required to disclose any circumstances likely to give rise to justifiable doubts as to their independence or impartiality (Section 14).

The Arbitral Proceedings

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• Commencement: Unless otherwise agreed, arbitral proceedings commence on the date the respondent receives the request for the dispute to be referred to arbitration (Section 27).
• Procedure: Parties are free to agree on the procedure to be followed by the arbitral tribunal (Section 25). Failing such agreement, the tribunal may conduct the proceedings in the manner it considers appropriate, including determining the admissibility, relevance, materiality, and weight of any evidence. The Code of Civil Procedure, 1908 and the Evidence Act, 1872 do not strictly apply.
• Place and Language: Parties can agree on the place (seat) and language of the arbitration. If they fail to agree, the tribunal determines these based on the circumstances of the case (Sections 26 & 28).
• Hearings and Evidence: The tribunal decides whether to hold oral hearings or conduct proceedings based on documents. Parties must be given sufficient advance notice of any hearing and opportunity to present their case and evidence (Sections 30 & 31).

The Arbitral Award

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• Form and Content: The award must be in writing and signed by the arbitrator(s). It must state the reasons upon which it is based, unless the parties have agreed otherwise or it’s an award on agreed terms (Section 38). The date and place of arbitration must also be stated.
• Finality: The arbitral award is final and binding on the parties.
• Correction and Interpretation: Within a specified period, parties can request the tribunal to correct computational, clerical, or typographical errors, or to give an interpretation of a specific point or part of the award (Section 40).

Challenging an Arbitral Award

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Recourse against an arbitral award is limited under the Arbitration Act, 2001. An application for setting aside the award can only be made to the High Court Division on specific grounds outlined in Section 42 and Section 43, which include:

• Incapacity of a party.
• Invalidity of the arbitration agreement.
• Lack of proper notice or inability to present one’s case.
• The award deals with a dispute not contemplated by or falling within the terms of the submission to arbitration.
• The composition of the tribunal or the procedure was not in accordanceance with the agreement of the parties.
• The subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force.
• The arbitral award is in conflict with the public policy of Bangladesh.

Enforcement of Arbitral Awards

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• Domestic Awards: Once the time for making an application to set aside the award has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the court (Section 44).
• Foreign Awards: Bangladesh is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Foreign awards are generally enforceable in Bangladesh through the District Court, subject to conditions outlined in Sections 45 and 46 of the Arbitration Act, 2001.

Typical Arbitration Process Flow

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In comparison litigation, arbitration provides an efficient way to settle dispute in Bangladesh, particularly for commercial matters requiring expertise, confidentiality, and cross-border enforceability.

For assistance with dispute resolution matters in Bangladesh, including litigation and arbitration, please reach out to:

• Osman Goni
  • Phone: +8801715569498
  • Email: [email protected]
• Sazzad Hossain
  • Phone: +8801682571960
  • Email: [email protected]