What, if any, are the legal requirements of an arbitration agreement under the laws of your country?
Arbitration in Bangladesh is governed by the Arbitration Act, 2001 ("the Act"). Section 9 of the Act sets out the necessary elements to be contained in an arbitration agreement and states that it may be in the form of an arbitration clause in a contract or in the form of a separate agreement. An arbitration agreement that would be recognized by the court includes written documents signed by the parties, exchange of letters, telex, telegrams, fax, e-mails or other means of telecommunication providing a record of the agreement or an exchange of statement of claim and defence in which existence of the agreement is alleged by one party and not denied by the other.
What other elements ought to be incorporated in an arbitration agreement?
The Agreement should contain all the ingredients of a usual agreement that would make it enforceable, i.e. the wordings of the agreement should be free of ambiguity, and should state the disputes to which the arbitration agreement would be applicable. It should also include the governing law for resolution of the dispute.
What has been the approach of the national courts to the enforcement of arbitration agreements?
Since the enactment of the Arbitration Act, 2001 there has been positive response both from the business community as well as from the Government. A specific Bench of the High Court Division of the Supreme Court of Bangladesh has been vested with the jurisdiction to appoint arbitrators in respect of an international commercial arbitration as defined in the Act.
2- Governing Legislation
What legislation governs the enforcement of arbitration agreements in your country?
As stated earlier, the Arbitration Act, 2001 governs the enforcement of arbitration agreements in Bangladesh. Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do the law differ? The Arbitration Act, 2001 governs both domestic and international arbitration proceedings. However, there are different procedures and Courts involved in enforcing an arbitration award depending on whether the award is domestic or foreign.
Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the governing law and the Model Law?
The Arbitration Act, 2001 is based on the UNCITRAL Model Law. However, on certain aspects the provisions of the 2001 Act differ and some of the major differences can be stated thus: Section 11 of the 2001 Act deals with the number of Arbitrators and mandates that, unless otherwise agreed between the parties, the number shall not be even. The Model Law permits the parties to approach a Court or Authority for appointment of a third Arbitrator or Sole Arbitrator as the case may be, in cases where the parties fail to reach an agreement. Under the 2001 Act, this power in the case of the domestic arbitration is vested with the District Judge and in case of international commercial arbitration this power is given to the Chief Justice or any Judge of the Supreme Court designated by him.
- Matters which are dealt with by the 2001 Act on which the Model Law is silent are:
- Award of interest by the Tribunal (Section 38(6))
- Costs of arbitration (Section 38(7)).
- Enforceability of an award in the same manner as if it were a decree of a Court under Section 44 in situations where the award is not challenged within the prescribed period or the challenge has been unsuccessful.
- Appeals in respect of certain matters (Section 48).
- Fixing the amount of deposit as an advance for the cost of arbitration (Section 49).
- Non-discharge of arbitration agreement by death of a party (Section 51).
- Rights of a party to an arbitration agreement in relation to insolvency proceedings (Section 52).
- Identification of Court having exclusive jurisdiction over the arbitral proceedings (Section 53).
- Applicability of the Limitation Act, 1908 to arbitrations as it applies to proceedings in Court and related issues.
Are there any subject matters that may not be referred to arbitration under the governing law of your country? What is the general approach used in determining whether or not a dispute is "arbitrable"?
Section 54 of the Arbitration Act, 2001 states that the Act is not applicable to the Industrial Relations Ordinance, 1968 or to any other law making special provisions for arbitration. The Arbitration (Protocol and Convention) Act, 1937 and the Arbitration Act, 1940 have been repealed by section 59(1). The saving clause provides that the repealed enactments shall be applied in relation to the proceedings which commenced before the Act came into force. Section 10(1) of the 2001 Act makes it obligatory on the part of the judicial authority to refer the parties to arbitration if action brought before it is a matter which is covered by the arbitration agreement, provided such request is made not later than submitting to the Court the first statement on the substance of the dispute. Pursuant to Section 10(2), the Court, if it is satisfied that an arbitration agreement exists, refers the parties to arbitration and stays the proceedings, unless it finds that the arbitration agreement is void, inoperative or incapable of determination by arbitration. Decisions under the old Arbitration Act, 1940 would have a bearing on this issue. Under the old Act a Court decided on the facts of each case whether sufficient cause had been made out or not for the dispute to be referred to arbitration and in doing so, the Court was not limited to the kind of causes referred to in the Arbitration Act. When the dispute required investigation into the charge of fraud the court could have refused to refer the matter to arbitration. When the dispute between the parties raised difficult and complicated question of law which required a decision by the court, it could have refused to refer the dispute to arbitration. The Court also considered the conduct of the applicant and considered whether such conduct was sufficient cause for not making the reference. Moreover, undue delay could be sufficient cause for not ordering the reference.
Is an arbitrator permitted to rule on the question of his or her own jurisdiction?
Under what circumstances can a court address the issue of the jurisdiction and competence of the arbitral tribunal?
Section 20 of the Arbitration Act, 2001 states that the High Court Division may, on the application of any of the parties to the arbitration agreement, after serving notice upon all other parties, determine any question as to jurisdiction of the arbitral tribunal if it is satisfied that the determination of the question is likely to save substantial cost, the application was submitted without any delay and there is good reason why the matter should be decided by the Court. The application will have to state the reasons on which the matter should be decided by the High Court Division. However, even if such an application is pending before the Court, unless otherwise agreed by the parties, the arbitral tribunal is expected to continue the arbitration proceedings and make an arbitral award.
4- Selection of Arbitral Tribunal
Is an arbitrator permitted to rule on the question of his or her own jurisdiction?
If the parties chosen method for selecting arbitrators fails, is there a default procedure?
If the parties fail to select arbitrators, section 12 of the Arbitration Act, 2001 sets out the default procedure for such selection and states that the District Judge in case of arbitration other than international commercial arbitration and Chief Justice or a Judge of the Supreme Court designated by the Chief Justice in case of international commercial arbitration would select arbitrators. In order to invoke section 12, either party may apply to the Court for appointment of an arbitrator.
Can a court intervene in the selection of arbitrators? If so, how?
A court intervenes in the selection of arbitration if the parties fail to select arbitrators or if the arbitrators selected by the parties fail to select the chairman of the tribunal.
What are the requirements (if any) as to arbitrator independence, neutrality and/or impartiality?
The Act requires the arbitral tribunal to deal with any of the disputes submitted to it fairly and impartially and for this purpose each party would have to be given reasonable opportunity to present his case orally and/or in writing; each party shall be given reasonable opportunity to examine all the documents and other relevant materials filed by another party or any other person concerned. The arbitral tribunal is not bound to follow the provisions of the Code of Civil Procedure, 1908 and the Evidence Act, 1872 in disposing of a dispute under the Act. An arbitral award need not state any reason if the parties agree that reasons are not to be given.
5- Procedural Rules
Are there laws or rules governing the procedure of arbitration in your country? If so, do those laws or rules apply to all arbitral proceeding sited in your country?
Generally the procedure of arbitration is governed by the Arbitration Act, 2001. The only exceptions are those stated in 3.1 above. The Act, however, empowers the Supreme Court to frame Rules. There have not been any Rules framed as yet. A Rules Committee has been formed under the Chairmanship of the Chief Justice of Bangladesh.
In arbitration proceedings conducted in your country, are there any particular procedural steps that are required by law?
Although the parties have freedom to lay down the procedure to be followed by the arbitral tribunal for conducting the proceedings, there are procedures suggested by the 2001 Act that the parties would have to follow in the absence of any other agreement between them. For instance, Section 29(1) requires the claimant to state the facts supporting the claim, the points at issue and the relief or remedy sought, and for the respondent to state his defence in respect of these particulars. Subsection (2) of Section 30 requires the parties to be given sufficient advance notice of any hearing and of any meeting of the tribunal for the purposes of inspection of documents, goods or other property. Sub-section (3) of Section 22 states that an arbitral award on agreed terms should be made in accordance with the requirements provided in Section 38 of the 2001 Act and should state that it is an arbitral award on agreed terms. Section 38 sets out the form and content of arbitral award and requires, inter alia, the award to be written, that it contains signatures of majority of the members of the arbitral tribunal along with a valid reason for the omitted signature, to state the date and place of arbitration and to deliver signed copies of the arbitral tribunal to each party. Mandatory provision set out in section 41 provides for the precise point of time at which the arbitral tribunal gets terminated and states that the proceedings can be terminated by the final award or in the event of withdrawal of the claim by the claimant or by agreement of the parties to terminate the proceedings or upon the finding of the tribunal that the continuation of the proceedings for any other reason(s) becomes unnecessary or impossible. Under Section 40 the parties may request the tribunal, within a period of fourteen days from the receipt of the award, unless otherwise agreed, to correct any computation, clerical, typographical or similar errors, give an interpretation of a specific point or part of the award or make additional award as to the claims omitted from the original award.
Are there any rules that govern the conduct of an arbitration hearing?
No. The arbitral tribunal follows the procedure agreed on by the parties. In the absence of any such agreement, the tribunal decides on the procedure to be followed.
Do the national courts have jurisdiction to deal with procedural issues arising during an arbitration?
The Court’s power to intervene is restricted to the following:
- Appeal against the decision of arbitral tribunal challenging arbitrator (Section 14(4)).
- Power to decide on termination of mandate of the arbitrator in the event of his inability to perform his functions or failing to act without undue delay (Section 15(2)).
- Powers of High Court Division in deciding jurisdiction (Section 20).
- Power to enforce interim measures taken by arbitral tribunal (Section 21(4)).
- Power to issue summons upon the application of the arbitral tribunal (Section 33).
Power to direct determination of any question in connection with insolvency proceeding by arbitration under certain circumstances (Section 52).
6- Preliminary Relief and Interim Measures
Under the governing law, is an arbitrator permitted to award preliminary or interim relief? If so, what types of relief? Must an arbitrator seek the assistance of a court to do so?
Yes. The arbitral tribunals have been endowed with the power to pass an interim award which is enforceable as a final award by the Court. Under section 21 of the Act, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal considers necessary in respect of the dispute and such an award is not appealable. The interim measures covered by Section 21 are not exhaustive and may include preservation, custody, sale, protection of goods, protection of trade secrets, maintenance of machineries, works, continuation of certain works. A tribunal may also grant specific performance of part of a contract or injunction. The interim orders must, however, be in respect of subject matter of dispute. An order of the tribunal may be enforced by the Court on an application made by any of the parties.
Is a court entitled to grant preliminary or interim relief in proceedings subject to arbitration? In what circumstances? Can a party's request to a court for relief have any effect on the jurisdiction of the arbitration tribunal?
Under the old Arbitration Act, 1940, the Court had wide powers to grant interim relief. Though these provisions have been omitted, it can be reasonably anticipated that the Court may grant some interim relief in aid of the arbitration proceedings. A party's request to a court for relief will have no effect on the jurisdiction of the arbitration tribunal, subject to any order made by the Court.
In practice, what is the approach of the national courts to requests for interim relief by parties to arbitration agreements?
It is yet too early under the new Act to generalize about the approach of national courts to requests for interim relief.
7- Evidentiary Matters
What rules of evidence (if any) apply to arbitral proceedings in your country?
Section 34 of the Arbitration Act, 2001 provides that unless otherwise agreed by the parties, evidence may be given before the arbitral tribunal orally or in writing or by affidavit. The arbitral tribunal may also administer an oath or affirmation to a witness subject to his consent.
Are there limits on the scope of an arbitrator's authority to order the disclosure of documents and other disclosure of discovery (including third party disclosure)?
The only limit to the scope of the arbitrator's authority with respect to ordering the disclosure of documents is set out in Section 33(2) of the Arbitration Act, 2001 which states that a person shall not be compelled under any summons to produce any document or material which that person could not be compelled to produce at the trial in an action before the Court.
Under what circumstances, if any, is a court able to intervene in matters of disclosure/discovery?
The arbitral tribunal or a party to the arbitration proceedings may apply to the Court for issuing summons upon any person necessary for producing or submitting materials. If persons fail to comply with the summons, they may be subject to punishments by order of the Court as they would incur for like offences in suits tried before the Court.
What is the general practice for disclosure/discovery in international arbitration proceedings?
As stated in 7.3 above.
What, if any, laws, regulations or professional rules apply to the production of written and/or oral witness testimony? For example, must witnesses be sworn in before the tribunal? Is cross-examination allowed?
The rules of procedure to be followed by the tribunal are those agreed by the parties or decided by the tribunal. Unless otherwise agreed between the parties, the tribunal decides whether to hold oral hearings for the presentation of evidence or argument or whether the proceedings should be conducted on the basis of documents and other materials.
8- Making an Award
What, if any, are the legal requirements of an arbitral award?
Section 38 sets out the requirements relating to the form and content of an arbitral award and requires the award to be written and to contain the signatures of the majority of the members of the arbitral tribunal along with a valid reason for any omitted signature. The date and place of arbitration should be stated and signed copies of the arbitral tribunal should be delivered to each party. The Act does not require reasons to be given by the arbitral tribunal if the parties have agreed that no reasons are to be given or the award is an arbitral award on agreed terms (Section 38(3)).
9- Appeal of an Award
On what bases, if any, are parties entitled to appeal an arbitral award?
Section 43 of the Act provides the grounds for setting aside arbitral awards. Fraud, corruption or conflict with public policy of Bangladesh, violation of principles of natural justice, acting beyond the terms of the submission and deciding on matters which are legally not arbitrable are the grounds on which an award can be set aside.
10- Enforcement of an Award
Has your country signed and/or ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? What is the relevant national legislation?
Bangladesh has acceded to the New York Convention on Enforcement of Arbitration Agreements and Awards. The Arbitration Act, 2001 provides for direct enforcement of foreign arbitral awards as provided in the New York Convention.
What is the approach of the national courts in your country towards the enforcement of arbitration awards in practice?
An arbitral award is taken to be final and binding on both the parties and on any persons claiming through or under them. It is enforceable under the Code of Civil Procedure in the same manner as if it were a decree of the Court.
Are arbitral proceedings sited in your country confidential? What, if any, law governs confidentiality?
Arbitral Proceedings sited in Bangladesh are not confidential, subject to any agreement between the parties, and there is no law governing confidentiality in Bangladesh.
Can information disclosed in arbitral proceedings be referred to and/or relied on in subsequent proceedings?
An admission before an arbitrator is admissible evidence. It is for the court dealing with the facts to attach whatever weight it thinks proper to such an admission.
In what circumstances, if any, are proceedings not protected by confidentiality?
Refer to 11.1 above.
Are there limits on the types of damages that are available in arbitration (E.g., punitive damages)?
There are no formal limits, but it is unlikely that punitive damages will be enforceable especially in commercial disputes.
What, if any, interest is available?
The arbitral award may include interest in the sum for which the award is made at such rate as the tribunal deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. Subject to what is specified in the award, interest on the sum directed to be paid by the arbitral award at the rate of 2% per annum more than the current Bangladesh Bank rate is payable for the period between the date of award and the date of payment.
Are parties entitled to recover fees and/or costs and, if so, on what basis? What is the general practice with regard to shifting fees and costs between the parties?
Parties are entitled to recover costs (which include fees and expenses of the arbitrators and witnesses, legal fees and other expenses) as agreed amongst themselves or as fixed by the arbitral tribunal. Arbitration costs include reasonable cost 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 expense incurred in connection with the arbitral proceedings and the arbitral award. The arbitral tribunal should specify the party entitled to costs, the party who shall pay the costs, the amount of costs or methods of determining that amount and the manner in which the cost shall be paid.
Is an award subject to tax? If so, in what circumstances and on what basis?
No tax is payable on an arbitral award. However, income tax may be levied when the payment of award is actually made. Moreover, stamp duty and court fees are payable at the time of converting the arbitral award into a rule of the Court.
Are there noteworthy trends in the use of arbitration or arbitration institutions in your country? Are certain disputes commonly being referred to arbitration?
In Bangladesh, until very recently the law relating to arbitration used to be governed by the Arbitration Act, 1940. Many provisions of the Arbitration Act, 1940 were anachronistic vis-a`-vis the modern national arbitration laws which are found throughout the world. Factors which stood on the way of wider use of procedures of arbitration under the previous Arbitration Act, 1940 included extensive role of the courts in the process of arbitration, its supervision and enforcement of arbitral awards. The enforcement of arbitral award was found to be slow and cumbersome. An award could only be enforced after obtaining an order from the District Court and that was a slow and much contested process. There was also considerable doubt whether it was possible to enforce arbitral awards despite the fact that Bangladesh acceded in 1992 to the New York Convention, 1958. However, with the enactment of the new Arbitration Act, 2001, there is a general rise in the use of arbitration as an alternate dispute resolution procedure. The problems of the old regime have been addressed in the new Act. Most importantly the involvement of the judicial system has been kept to a minimum level essential for effective operation of the tribunal’s work. Generally the court is bound to refer parties to arbitration where an arbitration agreement exists. No judicial authority is normally to hear any legal proceedings filed by one party to the arbitration agreement against the other till the arbitration process is exhausted and that hearing will be done in a manner prescribed by this Act. Disputes arising out of construction, engineering and infrastructure contracts are often referred to arbitration.
Are there any other noteworthy current issues affecting the use of arbitration in your country?
Bangladesh has begun to respond to the needs of reform and the new Arbitration Act, 2001 could be considered as a decisive step to this end. It is expected that the new Arbitration Act, 2001 would bring about an important change in at least one area of arbitration law in Bangladesh, i.e. in the area of enforcement of foreign arbitral awards as provided in the New York Convention, to which Bangladesh is a party. In fact, since the enactment of the 2001 Act there has been positive response both from the business community as well as from the Government. A specific Bench has been set up in the High Court Division with the jurisdiction of appointment of arbitrators in respect of international arbitration as defined in the 2001 Act.
Dr. Kamal Hossain and Associates
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