Term Paper

5 Semester-2018
th

Course Name:
Business & Competition Law (LAW-3504)

Topic
Comparative analysis of International commercial arbitration and Commercial arbitration of
Bangladesh

Submitted To:
Kazi Murad Hossain

Department of Law
Faculty of Security and Strategic Studies (FSSS)
Bangladesh University of Professionals (BUP)

Submitted By:
Name: Md. Mazharul Islam
Program: LL. B (Hons)
Class ID: 16421084
Email: zicobup@gmail.com

Date of Submission: 07.05.18

 Table of content

1. Introduction ……………………………………………3
2. Present scenario ……………………………………….3
3. Legal framework …………………………………...….7
4. Problems…………………………………………...…... 8
5. Recommendation ………………………………....…...10
6. Conclusion……………………………………....……. 11
7. Reference ……………………………………………...12

Introduction

Arbitration is often used for the resolution of commercial disputes, particularly in the context of
international commercial transactions. In certain countries such as the United States, arbitration is also
frequently employed in consumer and employment matters, where arbitration may be mandated by the terms
of employment or commercial contracts and may include a waiver of the right to bring a class action claim.

Page | 2
Mandatory consumer and employment arbitration should be distinguished from consensual arbitration,
particularly commercial arbitration. Arbitration can be either voluntary or mandatory (although mandatory
arbitration can only come from a statute or from a contract that is voluntarily entered into, in which the
parties agree to hold all existing or future disputes to arbitration, without necessarily knowing, specifically,
what disputes will ever occur) and can be either binding or non-binding. The world we are in today is greatly
dependent on the free flow of trade and investment. Arbitration is one of the most common ways of settling
a dispute between parties without having to recourse to the time consuming, costly and complicated
procedure of litigation. It is an excellent tool to facilitate international trade and investment as it allows a
speedy and cost-friendly way to settle cross-border disputes. Commercial arbitration is a means of settling
disputes by referring them to a neutral person, an arbitrator, selected by the parties for a decision based on
the evidence and arguments presented to the arbitration tribunal. The parties agree in advance that the
decision will be accepted as final and binding.

Present Scenario

There are lot of difference between international commercial arbitration process and conduct and
Bangladesh commercial arbitration. But recently Bangladesh arbitration act 2001 has introduced
international commercial business in it. What transaction will be called international commercial that has
been defined. My term paper focuses on comparative studies on international commercial arbitration and
Bangladesh commercial arbitration. International arbitration is arbitration between companies or individuals
in different states, usually by including a provision for future disputes in a contract. The predominant system
of rules is the UNCITRAL Arbitration Rules, as well as the United Nations Convention on the Recognition
and Enforcement of Foreign Arbitral Awards of 1958 (the "New York Convention"). The International
Centre for the Settlement of Investment Disputes (ICSID) also handles arbitration, but it is particularly
focused on investor-state dispute settlement and hears relatively few cases. In other hand Bangladesh is a
party to the New York Convention. The Arbitration Act 2001 provides for enforcement of foreign arbitral
awards in accordance with the New York Convention. Bangladesh is also a party to the ICSID Convention
1965 (Conventions on the Settlement of Investment Dispute between States and Nationals of Other States).
The Arbitration Act 2001 (the Act or the 2001 Act) governs domestic and international commercial
arbitration in Bangladesh. Chapter X of the Act relates to the recognition and enforcement of foreign awards.

Page | 3
The scope of application of the Act is generally limited to arbitration taking place in the territory of
Bangladesh section 3(1) of the Act.

International commercial arbitration between traders of different countries has long been recognized by the
business community and the legal profession as a suitable means of settling trade controversies out of court.
The procedure in international commercial arbitration is basically the same as in domestic arbitration. In the
mid-1960s, in order to establish more uniformity in procedure and to make access to arbitration facilities
more easily available, the United Nations economic commissions published new rules applying to
international arbitration for Europe and Asia. The development of international commercial arbitration was
furthered by uniform arbitration legislation prepared by the UN Conference on International Commercial
Arbitration in 1958 and by the Council of Europe and the Inter-American Juridical Committee of the
Organization of American States. One particularly difficult problem of international commercial arbitration
is the enforcement of awards in a country other than the one in which they were rendered. Statutory
municipal laws usually do not contain provisions for the enforcement of foreign awards, and parties are
faced with uncertainty about the law and practice of enforcement procedure in a country other than their
own. International agreements facilitate the enforcement of foreign awards to the extent that no further
action is necessary in the country in which the award was rendered; the opposing debtor must establish that
the award has been set aside or that its effects have been suspended by a competent authority, which thus
shifts the burden of proof of the nonbinding character of the award to the losing party. Further development
of international commercial arbitration has been encouraged by the UN Commission on International Trade
Law, which aims at promoting the harmonization and unification of laws in the field of international
commercial arbitration.

 Procedure
For Bangladesh domestic arbitrations it is common for the parties to conduct them on an ad hoc basis
without any institutional support. However for international commercial arbitrations, parties often use a
diverse range of well-known international arbitration centres such as the the ICC, LCIA or other similar
institutions in other countries. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI)
has introduced the Bangladesh Council of Arbitration (BCA) for the resolution of commercial disputes

 Because the arbitrator’s ability and fairness are the decisive elements in any arbitration, the selection
process is an important aspect of arbitration. Generally, both parties select an arbitrator at the time a
conflict arises or at the time the arbitration agreement is concluded. The two arbitrators then select a
chairman, forming a tribunal. The selection of arbitrators often is made by agencies administering
commercial arbitration under preestablished rules of procedure. These organizations—various trade

Page | 4
 associations, produce exchanges, and chambers of commerce in many countries—maintain panels of
expert arbitrators. The parties may either make their own selection or entrust the appointment of the
arbitrators to the organization. Challenges to the arbitration process are not uncommon. For example,
a party may claim that no valid arbitration agreement existed because the person signing the
agreement had no authority to do so or that a condition precedent to arbitration was not fulfilled.
More often, arbitration is contested on the ground that the specific controversy is not covered by the
agreement. In such cases, the issue of whether the arbitrator has authority to deal with the conflict is
usually determined by a court. The arbitration process is also sometimes challenged on the grounds
that an arbitrator lacked impartiality. Any such challenge generally can be maintained only after the
arbitration has been concluded, as courts are reluctant to interfere with the arbitration process before
an award has been rendered.

The arbitration process is governed by the rules agreed to in the arbitration agreement; otherwise, the
procedure is determined by the arbitrators. The arbitration proceedings must be conducted so as to afford the
parties a fair hearing on the basis of equality. The arbitrator generally has the authority to request the parties
and third persons to produce documentary evidence and to enforce such a request by issuing subpoenas. If a
party fails to appear at a properly convened hearing without showing a legitimate cause, the arbitrator in
most instances can proceed and render an award after investigating the matter in dispute.

 Under the law and arbitration practice of most countries, an award is valid and binding upon the
parties when rendered by a majority of the arbitrators unless the parties expressly request a
unanimous decision of the arbitrators. The statutory law of various countries and the rules of
agencies administering commercial arbitration contain provisions on the form, certification,
notification, and delivery of the award, with which requirements the arbitrator has to comply.

 A much-disputed question in commercial arbitration concerns the law to be applied by the

arbitrators. Generally, the award must be based upon the law as determined by the parties in their
agreement. This failing, the arbitrator must apply the law he considers proper in accordance with the
principles of the conflict of laws. In both cases, the arbitrator must take into consideration the terms
of the contract and the usage of the specific trade. If a compromise is reached by the parties during
any arbitration proceeding, that compromise may be recorded as an award by the arbitrator.

Page | 5
 Appeals to the courts from the award cannot be excluded by agreement of the parties, since the
fairness of the arbitration process as a quasi-judicial procedure has to be maintained. However, any
court control is confined to specific matters, usually enumerated in the arbitration statutes, such as
misconduct of the arbitrator in denying a party the full presentation of its claim or refusing a
postponement of the hearing for good cause. A review of the award by a court generally does not
address the arbitrator’s decisions as to facts or his application of the law. The competence of the
courts usually is restricted so as not to make the arbitration process the beginning of litigation instead
of its end. Recognition of an award and its enforcement will be denied when it appears to be contrary
to public policy. An arbitration award has the authority of a court decision and may be enforced by
summary court action according to the procedural law of the country in which execution is being
sought.

Legal Framework

Arbitration Act 2012 –

• The Arbitration Act 2001 (the Act or the 2001 Act) governs domestic and international
commercial arbitration in Bangladesh. Chapter X of the Act relates to the recognition and
enforcement of foreign awards. The scope of application of the Act is generally limited to arbitration
taking place in the territory of Bangladesh (section 3(1) of the Act). So there is loophole in this act.
Bangladesh has enacted the Arbitration Act (2001) which came into force on April 10, 2001. The Act
has repealed The Arbitration (Protocol and Convention) Act (1937) and The Arbitration Act
(1940).78) With this new enactment Bangladesh has kept pace with the recent trends in the field of
international commercial arbitration in the rest of the world.
• Bangladesh International Arbitration Centre is the first international arbitration institution of
the country. It is registered as a not-for-profit organization and commenced operations in April 2011
under a license from the Government. Three prominent business Chambers of Bangladesh, namely,
International Chamber of Commerce-Bangladesh (ICC-B), Dhaka Chamber of Commerce &
Industry (DCCI) and Metropolitan Chamber of Commerce & Industry (MCCI), Dhaka are sponsors
of BIAC. The International Finance Corporation (IFC) – the private sector arm of The World Bank –
with funds from UK Aid and European Union, is supporting BIAC in the initial stages under a co-
operation agreement. BIAC provides a neutral, efficient and reliable dispute resolution service in this

Page | 6
 emerging hub of South Asia’s industrial and commercial activity. BIAC introduced its Arbitration
Rules in April 2012. These Rules incorporate some of the leading developments in domestic and
international arbitration, while conforming to the Bangladesh Arbitration Act 2001. BIAC is
renowned for its first-rate, state-of-the-art arbitration facilities, experienced panel of independent
arbitrators and excellence in serving its clients. Discover from these pages why businesses
increasingly choose to arbitrate in BIAC.
• Since arbitration is by nature contractual, parties also can agree to different procedural laws
that will govern the arbitration proceedings. Usually, the rules of arbitral institutions such as the ICC,
ICDR, LCIA or HKIAC,12 or the UNCITRAL Arbitration Rules (in the case of ad hoc arbitration),
as well as supplemental rules such as the International Bar Association Rules on the Taking of
Evidence in International Commercial Arbitration, provide the procedural framework for the parties
to conduct the arbitration. Parties may also choose national or state laws either to govern the arbitral
procedure or to supplement the rules of the selected arbitral institution.
• The types of law that are applied in arbitration include international treaties and national
laws, both procedural and substantive, as well as the procedural rules of the relevant arbitral
institution. Previous arbitral awards carry persuasive authority, but are not binding. Scholarly
commentary, or “doctrine,” may also be applied.

Problems

 Lack of Express Provisions

While parties usually provide for their choice of law applicable to the contract in express terms, what
happens when the parties to a contract fail to do so, Generally, courts and arbitral tribunals resolve this issue

Page | 7
by assessing party intent and selecting the law that the parties are presumed to have intended to choose. For
example, in the absence of an express contractual provision, a Mexican arbitral tribunal resolving a dispute
between a Mexican company and a U.S. contractor for a construction project in Mexico under a contract
executed in Mexico may infer that the parties intended for the contract to be governed by Mexican law,
despite the fact that one of the parties is not Mexican.

In cases where no inference as to intent of the parties can be drawn, however, the governing law of the
contract shall be the one resulting from the application of conflicts of laws rules from the seat of
arbitration.Many jurisdictions include in their conflicts of laws rules specific criteria, such as the state or the
country to which the contract is most closely connected or where the contract was executed, to determine the
applicable law of the contract. In countries that are signatories to the European Convention on International
Commercial Arbitration of 1961, however, arbitrators are not bound by the conflicts of laws rules from the
seat of arbitration; rather they are free to “apply the proper law under the rule of conflict that the arbitrators
deem applicable

Generally ADR are usually faster, and cheaper than litigation they are also private and informal when also
compared to litigation and it gets both parties involved in the settlement process and the decisions are not
necessarily final. However ADR does not alway guarantee an agreed upon decision and with arbitration the
decision is final. The problems of ADR are given below:

 Unequal Bargaining Power– In certain situations one side is able to dominate the other, for example,
employment and divorce cases, making the courts a better option for a weak party.
 Lack of Legal Expertise– Where a dispute involves”-difficult legal points a mediator or arbitrator is
unlikely to have the same legal expertise and knowledge as a judge.
 No System of Precedent– It isn’t easy to predict the outcome of a dispute decided through ADR as
there is no system of precedent.
 Enforceability– Most forms of ADR are not legally binding, making any award difficult to enforce.
 A Court action may still be required– If using ADR fails to resolve the parties’ dispute, court action
may Still be needed. This adds to the costs and delays compared to taking a dispute direct to the
courts in the first place.
 No guaranteed resolution-There is no guaranteed resolution. With the exception of arbitration,
alternative dispute resolution processes do not always lead to a resolution. That means it is possible
that you could invest the time and money in trying to resolve the dispute out-of-court and still end up
having to go to court.

Page | 8
Though there are some disadvantages of ADR, it is the most easier and swiftest trial process in the judicial
system of any country. So its popularity is increasing day by day.

Recommendation

The world we are in today is greatly dependent on the free flow of trade and investment. Arbitration is one
of the most common ways of settling a dispute between parties without having to recourse to the time
consuming, costly and complicated procedure of litigation. It is an excellent tool to facilitate international
trade and investment as it allows a speedy and cost-friendly way to settle cross-border disputes.

In the early days after independence, arbitrations in Bangladesh were governed by Arbitration Act 1940. In
order to rectify its shortcomings, Bangladesh enacted the Arbitration Act 2001 (the “AA 2001”). The AA
2001 is based on the UNCITRAL Model Law. The Arbitration Act 1940 had its own problems and provided
for many hindrances to the arbitral process. For example, the national courts had an extensive supervisory
role over the arbitral process and, most importantly, there were problems being faced by arbitration users in
relation to the enforcement of foreign arbitral awards. The Arbitration Act 1940 did not expressly deal with
foreign arbitral awards and thus enforcement of such awards was highly problematic. Although the AA 2001
attempted to rectify these problems, it has failed to provide a complete solution. Fifteen years have passed
since the enactment of the AA 2001, however, it seems that arbitrations in Bangladesh are still struggling
with certain important issues such as interim measures and smooth enforcement of foreign arbitral awards.

Under the AA 2001, the place of arbitration is a decisive factor as to whether interim remedies ordered by
national courts are available to a party or not. According to the AA 2001, the place of arbitration has to be in
Bangladesh for the national courts to grant any interim remedy. The position was the same in India as well.
However, in line with recent times and regular use of arbitrations, India has moved forward in this regard by
amending its Arbitration Act 1996 (the “AA 1996”) in 2015. India has now changed its legal position and
arbitration users may seek the help of national courts in India for interim remedies regardless of whether the
arbitration is taking place in India or not. This is a marked improvement since an arbitration user may be
contesting an arbitration outside of Bangladesh and after winning the same, the user may come to
Bangladesh only to find out that the Bangladeshi party has dissipated its assets here in Bangladesh.

Regarding enforcement of foreign arbitral awards, despite the AA 2001’s attempt to make such enforcement
of awards easier, in practice, enforcement in Bangladesh is highly time-consuming. A party must apply to

Page | 9
the District Court in Dhaka to enforce such an award, and there is a list of circumstances under which the
Court will not enforce an award. For example, an award may not be enforced if it is contrary to the public
policy of Bangladesh. It is to be noted that no definition of ‘public policy’ has been provided by the AA
2001, leaving it open to the national courts to interpret the same. This procedural requirement requires the
arbitration user to go to the very national court, which it wished to avoid in the very first place. Given that
national courts are marred with delays, arbitration itself then becomes a victim of this delay. Adopting the
procedures of civil administration of justice (in cases of enforcement of awards) delays the overall
completion of the arbitral process. Dealing with the topic of delay, a notable improvement which the
amended AA 1996 did was to introduce a time limit for the arbitral process. The amendment provides that an
arbitration process shall be concluded within a period of twelve months, which the parties may, by consent,
extend for a further period not exceeding six months. It also provides a fast-track arbitration process,
optional for the parties, where the process shall be concluded within a period of six months or extended for
another six months by consent.

Given the passage of time, the amendment of the AA 2001 is now required in order to resolve the many

problems being faced by arbitration users in Bangladesh. The archaic provisions of the AA 2001, which was
initially based on the UNCITRAL Model Law, need revision in order to address these problems. It is
noteworthy that, even the UNCITRAL Model Law, based on which the AA 2001 was modeled has been
revised since the enactment of the AA 2001.

Conclusion

The foregoing examination of the new Bangladesh Act, 2001 from a comparative perspective shows that the
Bangladesh legal regime has embraced the fundamental tenets of modernization of international arbitration
such as

Page | 10
 (i) party autonomy
(ii) minimal judicial intervention in arbitration
(iii) independence of the arbitral tribunal
(iv) fair, expeditious and economical resolution of disputes and
(v) effective enforcement of arbitral awards. This modernization has also been brought about in the
context of domestic arbitration.

Although the new Act is principally based on the UNCITRAL Model Law, it has introduced certain
improvements on the Model Law prescriptions in certain respects as highlighted above. As the new Act is
now about three years old, it will be premature to express any judgment on its efficacy as an arbitral legal
regime and the impact it will have in the future for Bangladesh as a place for settlement of international
commercial and investment disputes by arbitration. Certainly, Bangladesh, being a prospective destination
for increasing foreign investment in the future, has made a positive step in the right direction by enacting the
new law on arbitration. Although Bangladesh, like her sub-continental counterparts, has historically a long
tradition of settlement of disputes by alternative methods – a phenomenon that pervades her social fabrics
for centuries – she can still improve her international arbitral legal regime by incorporating, as it may be
deemed appropriate, lessons from various other jurisdictions187 in her efforts towards modernization and
internationalization of arbitration.

References

BOOKS
1. Md. Abdul Halim, ADR in Bangladesh : Issues and Challenges, 2nd ed. (CCB Foundation : Dhaka,
2011).
2. Md. Akhtaruzzaman, Concept and laws on Alternative Dispute Resolution and Legal Aid, 4th ed.
(Dhaka; Razia Khatun, 2011).
3. Prof. Dr. Answar Ali Khan, An introduction to Alternative Dispute Resolution (ADR), 2nd ed. (Hira
Publication, 2010).
WEBSITES
Page | 11
 Gerhard wegen and stephan wilske, ' Arbitration in 42 jurisdictions worldwide 2008 ' (GETTING
THE DEAL THROUGH , 2008) <file:///C:/Users/DELL-PC/Downloads/Documents/Bangladesh
%2041.pdf> accessed 5 May 2018
 Assignmentpointcom, ' Development of Alternative Dispute Resolution in Bangladesh' (Assignment
Point, 2010) <http://www.assignmentpoint.com/business/business-statistics/development-of-
alternative-dispute-resolution-in-bangladesh.html> accessed 5 May 2018
 Soheila hashemi, nader mardani, 'Comparative Study of International Commercial Arbitration and
International Law in Iran' (Journal of Politics and Law, 2010)
<http://www.ccsenet.org/journal/index.php/jpl/article/view/62708> accessed 2016
 Emmanuel gaillard, 'The Representations of International Arbitration' (Journal of International
Dispute Settlement,, August 18, 2010)
<AQECAHi208BE49Ooan9kkhW_Ercy7Dm3ZL_9Cf3qfKAc485ysgAAAZ4wggGaBgkqhkiG9w0
BBwagggGLMIIBhwIBADCCAYAGCSqGSIb3DQEHATAeBglghkgBZQMEAS4wEQQMcSLnPS
vzUuJ_sMWaAgEQgIIBUYFUtLbISREFos4IsFz6VD3hRD8w23DqTytGXebvGrQqZL42TQ0Ded
M4O_rnKkzaz6k39U7SRxCCUnRUymTTWTT5lhRO3sKu_AlRENspy6kePCwhnCIOl0K3OHEJ2
mQIhoz05gpxI45868PCBDMQ_CTUKIuZDQ_zn> accessed 5 May 2018

Page | 12