Is arbitration becoming more expensive than litigation?

Alternative Dispute Resolution methods, particularly arbitration has become increasingly popular in Bangladesh over the last two decades, so much so that a separate law on arbitration was enacted to accommodate it. An entire arbitration proceeding can be completed within less than a year or six months. This is faster than the time it takes to prepare and file a case in a court, which is why arbitration is getting increasingly popular. Moreover, parties to a dispute often want their case to be settled at a private setting to keep things confidential.

While it is true that arbitration is viewed as a secure option, there is no guarantee that it is less expensive than court proceedings. This frequent assumption of 'low cost' is what gives arbitration its leverage over traditional court litigation. Surprisingly no research or study has been conducted to support this assumption.

According to section 7 of the Arbitration Act 2001, unless otherwise agreed by the parties, the costs of an arbitration shall be fixed by the Arbitral Tribunal. It also states that the Arbitral Tribunal shall specify the party entitled to costs, the party who shall pay the costs, the amount of costs or method determining that amount and the manner in which the costs shall be paid.

The Arbitration Act does not specify any particular range or standard of the costs but mentions 'reasonable costs' relating to the fees and expenses of the "arbitrators and witnesses, legal fees and expenses, any administration fees of the institution supervising the arbitration and any other expenses incurred in connection with the arbitral proceedings and the arbitral award."

In reality, the provision on 'reasonable costs' leaves room for arbitrators to set their own standards in terms of fees. The fees' range largely depends on the valuation of the dispute but sometimes it goes ridiculously beyond the reach of the parties.

Arbitrators have the liberty to claim fees as per their own standard per sitting or sometimes even charge by the hour. While our traditional law practice does not allow billable hours, arbitrators take this opportunity to set hourly rates for their professional time, be it hearing the parties or for a simple task such as going through a document. For example, in any typical arbitration proceeding consisting of two arbitrators and one Chairman, the standard fees can go up to BDT 15 lacs per arbitrator with the Chairman's remuneration alone sometimes standing at BDT 25 lacs for an average of ten days' sitting. This is farcical in comparison to an average civil suit filing cost that ranges from 20,000tk to 1,00,000 BDT. On many occasions, parties who agreed to arbitration earlier are compelled to back out due to not having enough funds.

It can be argued that the costs related to traditional litigation is no less than arbitration. The only difference is that in litigation, costs paid here and there sum up to just the same amount as arbitration but unlike the latter, it is evenly divided in instalments over a period of several years. The idea of having to pay large chunks of money within short intervals is what makes arbitration look expensive. However, that largely varies from one case to another.

A simple issue regarding fees should not undermine its capabilities and preclude litigants from reaping its benefits. With the above problem being addressed, the benefits of arbitration can never be underestimated. This ambitious mechanism still has the potential to get back its lost glory with regulating the standard of fees, training of arbitrators, setting standard rules of procedure, drafting clauses, and disposing of cases in an expeditious manner.

The writer is an Advocate, Dhaka Judge Court.