The Ultimate Guide to Arbitration in Bangladesh: Resolve Disputes Efficiently & Effectively

Introduction

Arbitration in Bangladesh is an alternative dispute resolution mechanism where disputes are settled outside the court through a neutral arbitrator. It is a cost-effective, time-efficient, and confidential method of resolving disputes.

Legal Framework of Arbitration

Arbitration in Bangladesh is governed primarily by the “Arbitration Act, 2001.” This Act outlines the rules and procedures for arbitration and aligns with international standards.

Key Provisions of the Arbitration Act, 2001

• Section 7: Enforceability of Arbitration Agreements\
  This section mandates that an arbitration agreement between parties is legally binding. If a dispute arises, the parties are obligated to resolve it through arbitration instead of going to court.
• Section 10: Freedom to Determine Arbitration Procedures\
  This section allows parties to mutually decide on the procedural rules for arbitration. It provides flexibility in structuring the arbitration process according to the needs of the disputing parties.
• Section 12: Qualifications and Appointment of Arbitrators\
  Arbitrators must meet specific qualifications, and the parties have the liberty to appoint arbitrators of their choice. If the parties fail to agree, a designated authority may appoint an arbitrator.
• Section 34: Enforceability of Arbitral Awards\
  This section ensures that an arbitral award is final and legally enforceable, similar to a court judgment. The winning party can seek judicial assistance to enforce the award if necessary.
• Section 42: Procedure for Setting Aside an Arbitral Award\
  If a party believes that an arbitration award is flawed due to procedural irregularities, fraud, or bias, they may apply to the court to have it annulled under this section.

Arbitration Process

Arbitration follows a structured procedure:

1. Execution of Arbitration Agreement – The disputing parties must have a written arbitration agreement.
2. Appointment of Arbitrator(s) – Parties can appoint arbitrators by mutual consent.
3. Hearing Process – Both parties present their arguments and evidence before the arbitrator.
4. Award Issuance – The arbitrator delivers a neutral and legally binding decision.
5. Enforcement of the Award – The court may assist in enforcing the arbitral award if required.

Advantages and Limitations of Arbitration

Advantages

• Speedy Resolution: Arbitration is significantly faster than traditional litigation. Court cases can take years to resolve, whereas arbitration typically concludes within months. This expedited process helps businesses and individuals resolve disputes efficiently, allowing them to focus on their core activities without prolonged legal battles.
• Cost-Effective: Litigation can be expensive due to attorney fees, court fees, and prolonged case durations. Arbitration eliminates many of these costs by streamlining procedures and reducing the number of hearings required. Parties can also choose arbitration panels with fixed fees, making expenses more predictable and manageable.
• Confidentiality: Unlike court proceedings, which are public records, arbitration remains private. This confidentiality is particularly advantageous for businesses dealing with sensitive information, trade secrets, or reputational concerns. The privacy of arbitration allows parties to resolve disputes without public scrutiny, preserving their business relationships and market position.
• International Recognition: Arbitration is widely accepted across jurisdictions, making it a preferred method for resolving cross-border disputes. Many countries, including Bangladesh, are signatories to international conventions such as the New York Convention, which ensures the enforceability of arbitral awards globally. This recognition provides assurance to multinational companies and investors that arbitration awards will be respected and enforced worldwide.

Limitations

• Potential Bias of Arbitrators: One of the primary criticisms of arbitration is that arbitrators may not always be entirely neutral. In many cases, arbitrators are appointed based on agreements between disputing parties, which can lead to concerns about favoritism or conflicts of interest. Additionally, some arbitrators may develop relationships with frequent clients or organizations, leading to perceived or actual biases in decision-making. Unlike judges in court, arbitrators are not always subject to strict regulatory oversight, making impartiality a significant concern.
• Limited Scope for Appeals: Arbitration awards are generally considered final, and there are very few opportunities to challenge or appeal the decision. Unlike court judgments, where multiple levels of appeal provide checks and balances, arbitration often has strict limitations on review. If a party believes that an error was made or that the decision was unfair, their options for legal recourse are highly restricted. This can be a disadvantage for parties who feel that the arbitrator’s decision was incorrect or based on flawed reasoning.
• Not Always Enforceable: While arbitration awards are legally binding, enforcing them can sometimes be challenging, particularly in international disputes. If the losing party refuses to comply with the award, the winning party may have to seek enforcement through national courts. In some jurisdictions, local courts may refuse to enforce an arbitration award due to public policy concerns, procedural irregularities, or lack of recognition of foreign arbitration rulings. This can create additional hurdles and prolong the resolution of disputes.

Application of Arbitration in Bangladesh

Arbitration is commonly used in Bangladesh for resolving commercial disputes, labor disputes, construction contract disagreements, and international trade conflicts.

Notable Case Examples

• Rahimafrooz (Bangladesh) Ltd. v. BPDB (2016)\
  This case reinforced the mandatory enforcement of arbitration agreements in commercial contracts. The ruling clarified that if parties have entered into an arbitration agreement, they must abide by the arbitration process instead of pursuing litigation in courts. This decision strengthened the legal validity of arbitration agreements in Bangladesh.
• Beximco Pharmaceuticals Ltd. v. Shamil Bank of Bahrain (2004)\
  This case addressed the application of Islamic law in international arbitration. The dispute involved financial agreements based on Islamic banking principles, and the ruling provided clarity on how such agreements should be interpreted in arbitration proceedings. The case highlighted the interplay between international commercial arbitration and religious-based financial transactions.

International Arbitration and Bangladesh’s Participation

Bangladesh became a signatory to the “New York Convention on Recognition and Enforcement of Foreign Arbitral Awards” in 1974, facilitating the enforcement of international arbitration awards in the country.

Control of Violence in Arbitration

Disputes in arbitration may sometimes lead to conflicts or threats. The Bangladeshi legal system classifies any intimidation or coercion related to arbitration proceedings as a criminal offense.

Research and Future Development

• Enhancing the Effectiveness of Arbitration in Bangladesh – Research is needed to improve transparency and neutrality in arbitration processes.
• Implementation of Digital Arbitration – The use of technology can facilitate online arbitration mechanisms.
• Strengthening Judicial Cooperation – Closer collaboration between the judiciary and arbitration bodies is required.

Conclusion

Arbitration is a crucial dispute resolution mechanism in Bangladesh, especially for commercial and international trade disputes. However, legal reforms and greater awareness are necessary to ensure its proper implementation.

References

1. Arbitration Act, 2001 (Bangladesh).
2. New York Convention, 1958.
3. Supreme Court of Bangladesh case rulings.