A Call for Reform | The Daily Star
12:00 AM, May 23, 2017 / LAST MODIFIED: 12:00 AM, May 23, 2017

Law Opinion: THE ARBITRATION ACT 2001

A Call for Reform

The primary statute governing arbitrations in Bangladesh is the Arbitration Act 2001 (the AA 2001), which was drafted on the basis of the UNICITRAL Model Law of 1985 (the Model Law). The Model Law was prepared by UNCITRAL and adopted by the United Nations Commission on International Trade Law on 21 June 1985. In line with the progressive development of arbitration jurisprudence globally, the Model Law and other arbitration statues have been amended to bring clarity to its legal provisions and to improve the effectiveness of arbitrations generally. These amendments raise serious questions as to whether the AA 2001 is falling short in keeping up with the changing standards of arbitration globally. This article will highlight specific amendments that could be brought to the AA 2001, in order to increase its efficiency.

The first and foremost clarification that is required in the AA 2001 is its applicability; especially for interim remedies. It is clear that the AA 2001 is not applicable for arbitrations seated outside of Bangladesh and the Courts in Bangladesh cannot grant interim remedies where the seat of arbitration is abroad. This issue has been addressed by the revised Model Law, which states that provisions relating to, inter alia, interim measures shall apply irrespective of the fact that the place of arbitration is outside the country concerned. It is useful for parties when they are arbitrating in a foreign seat and the respondent's assets are located in the country where it is situated. Otherwise, this would result in the claimant having won an expensive arbitration, coming to enforce the award in the respondent's country only to realise that the respondents have dissipated its assets to avoid enforcement of the same. The claimant would then be left with only a paper award. As a result, the AA 2001 should be amended to specifically address this issue. 

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The AA 2001 grants the arbitral tribunal sufficient powers to order interim measures as the arbitral tribunal may deem necessary. However, it does not provide any clear guidance and/or restrictions in relation to the granting of the same. It would be helpful if the AA 2001 is amended to adopt certain provisions relating to interim remedies, which will be binding on the parties. Reference can be made to the recent amendments to the Indian Arbitration Act 1996, which states that local Courts shall not consider any application for interim measures after an arbitral tribunal has been constituted unless the Court finds special circumstances which may justify granting the same. The AA 2001 does not address these issues giving the parties in Bangladesh ample scope to file a case under the AA 2001 despite having a validly constituted arbitral tribunal. This causes undue pressure on the Court's caseload, which is already marred with delays.

In line with the revised Model Law, arbitral tribunals should also have the same powers that are available to a Court and that interim orders passed by an arbitral tribunal should be enforceable as if it was an order of a Court for all purposes. These amendments will increase confidence of arbitration users in the process. In addition, the parties will no longer need to rush to the Court for interim measures thereby saving both their time and money. More importantly, such amendments will help to alleviate the Court's problem of being overburdened with cases.

Perhaps, the most important amendment made in Indian Arbitration Act 1996 was the amendment of the term “Court” in so far as it relates to international arbitration. There is a clear distinction between an international commercial arbitration and a domestic arbitration with regards to the definition of “Court”. For the purpose of international commercial arbitration, the definition of “Court” has been amended to mean only the High Court, exercising its ordinary original civil jurisdiction. Accordingly, in an international commercial arbitration, the lower Courts will have no jurisdiction and, as a result, the parties can legitimately expect a speedier and effective result directly from the High Court, which may be better equipped to deal with the complex issues of arbitration. This amendment was a welcome change for foreign investors, who have been languishing before the lower Courts in order to enforce their arbitral awards. This applies squarely to Bangladesh since enforcement of foreign awards is a significant concern for foreign investors wishing to do business in Bangladesh. In the AA 2001, the 'Court' is defined as the District Judge's Court, including the Additional Judge's Court. The provisions of the AA 2001 state that the High Court Division has jurisdiction over arbitral proceedings only when passing orders for interim remedies and, that too, only in the case of international commercial arbitration.

One of the most prevalent problems in Bangladesh is that parties generally fail to agree on the appointment of arbitrators. As a result, the innocent party has to rush to the local Courts for an appointment. This usually takes a very long time in Bangladesh and, as a result, the overall arbitration process gets delayed. It is suggested that the AA 2001 be amended to the effect that any application for appointment of arbitrators gets disposed of within a fixed period of time.

Arbitration is a form of ADR (which means Alternative Dispute Resolution). However, in Bangladesh, most users say that arbitration has a different meaning. Instead of it being an alternate quicker remedy, they refer to arbitration as an Additional Dispute Resolution. There is no debate that arbitration in Bangladesh is a long drawn out process, which in fact defies the very ethos of arbitration. The AA 2001should be amended to impose strict time period for rendering arbitral awards. In the Indian Arbitration Act 1996, amendments have been made so that arbitral awards are rendered within a fixed period of time. Such amendments to the AA 2001 will be a positive step to impose a statutory burden and/or obligation on the parties and ensure that awards are rendered within a short time frame. This would certainly help overcome the stigma that arbitration in Bangladesh is a never-ending saga.

A valuable lesson can be taken by Bangladesh from the revised Model Law and from our neighboring countries. Such lessons will help Bangladesh make its arbitration statute, the AA 2001, more effective so that users feel more encouraged to use arbitration in Bangladesh as an alternative mode of dispute resolution rather than resorting to local Courts.

THE WRITER IS AN ADVOCATE OF THE SUPREME COURT OF BANGLADESH AND THE GOVERNMENT OF BANGLADESH'S DESIGNEE TO THE WORLD BANK ICSID'S PANEL OF ARBITRATORS.

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