ADR in Arbitration Act, 2001

Submitted By :
MD. Aabir Hossain Shihab
ID No. : 20153552
Session: 2019-20
2 Year 1st Semister
nd

Dept. Of Law & Justice

Jatiya Kabi Kazi Nazrul Islam University

Abstract
Arbitration Act, 2001 , a means of resolving high scaled commercial disputes outside of
the court has developed in Bangladesh in the recent past. Arbitration as a sister concern
of alternative dispute resolution (ADR) is a method for settlement of diverging disputes
outside of courts, by one more impartial and independent arbitrator(s), which the parties
have agreed to by means of arbitration agreement. Arbitration in Bangladesh either- ad
hoc or institutional or fast tract one is being governed by the section 89B of the Code of
Civil Procedure and Arbitration Act, 2001 which is based on UNITRAL model law. The Act
of 2001 will apply to all arbitrations in the country except those which may not be
submitted to arbitration by virtue of another law. The 2001 Act is the replacement of the
earlier one of 1940.

Submitted To :
Md. Ahsan Kabir
LL.B (Hons) , LL.M
Assistant Professor
Dept. Of Law & Justice
Jatiya Kabi Kazi Nazrul Islam University

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Introduction
ADR (Alternative Dispute Resolution) is a mechanism refers to private mechanisms of resolving disputes outside of
the Court processes allowing parties to tailor their process in order to incorporate the needs of both parties.
Alternative Dispute Resolution comprises all mechanisms for resolving legal disputes without resorting to litigation.
In other words, under ADR Mechanism, any dispute between two parties is resolved outside of the Traditional Court
System. ADR Methods such as Arbitration & Conciliation offer decisions which are legally binding & enforceable.
Trials are not the only way to resolve the dispute. One of the best things about ADR is that it presents opportunities
for Managers & Lawyers to be creative. Litigation, the most adversarial system, is based solely on legalistic
evaluation in Dollar Terms. With the active involvement or management, ADR makes it easier to view disputes as a
business problem and investigate business solutions contrary to the litigation where dispute resolution is viewed as a
Lawyer’s problem. ADR Mechanism requires great participation by the disputing parties and responds to it more
positively. A Manager’s investment or time & efforts will generate excellent returns in the long run. Unlike litigation
where one party loses & the other wins, but in ADR Mechanism both parties through settlement reach to a win-win
situation.

Below are the four basic methods:

ADR
Arbitration Conciliation Mediation Neutral
Evaluation

Arbitration
Arbitration is a process where parties agree to resolve the dispute by bringing the matter before a Neutral Third Party,
i.e. an Arbitrator, for decision. During an arbitration hearing, both parties, with their respective Lawyers, will present
their case to the Arbitrator. The Arbitrator will make a binding decision based on the merits of the case, i.e. the
parties must obey the Arbitrator’s decision. One of the perceived advantages of Arbitration is that it gives a final &
binding award.
Arbitration Rules are up to the Disputants to decide, but in practice mostly adopt either UNCITRAL Arbitration
Rules or the procedures recommended by American Arbitration Association or other leading Trade & Commerce
Associations, Arbitral Institutions. In essence, the parties to the dispute choose either a Single Arbitrator or a Panel of
Arbitrators (usually 3) who then hear events & arguments from Attorneys and render a legal binding in enforceable
decision. The advantages are relaxed discovery, relaxed rules of evidence, quicker hearings, quicker results &
drastically reduced cost. In case of a Panel of 3 Arbitrators, they can each pick 1 Arbitrator and their chosen
Arbitrators select a Neutral to Chair an Arbitration Panel. Arbitrators are not required to have legal background.

The process of Arbitration

The process of Arbitration cannot exist without valid arbitration agreement prior to the emergence of dispute. In this
technique of resolution parties refer their dispute to one or more persons called arbitrators. Decision of arbitrator is
bound on parties and their decision is called ‘Award’. The object of Arbitration is to obtain fair settlement of dispute
outside of court without necessary delay and expense.

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Any party to a contract where arbitration clause is there, can invoke arbitration clause either himself or through their
authorized agent which refer the dispute directly to the arbitration as per the Arbitration clause. Here, arbitration
clause means a clause that mention the course of actions, language, number of arbitrators, seat or legal place of the
arbitration to be taken place in the event of dispute arising out between the parties.

● Initially, applicant initiates an arbitration by filing a statement of claim that specifies the relevant
facts and remedies. The application must include the certified copy of arbitration agreement.
● Statement of claim is a written document filed in the court or tribunal for judicial determination
and a copy also send to the defendant in which claimant described the facts in support of his
case and the relief he seeks from the defendant.
● The respondent reply to the arbitration by filing an answer against the arbitration claim of
claimant that specifies the relevant facts and available defenses to the statement of claim.
● Arbitrators selection is the process in which the parties receive lists of potential arbitrators and
select the panel to hear their case.
● Then there is the exchange of documents and information in preparation for the hearing called
‘Discovery’.
● The parties meet in persons to conduct the hearing in which the parties present the arguments
and evidences in support of their respective cases.
● After the witnesses examined and evidences are presented, then there in conclusion arbitrator
gives an ‘Award’ which is binding on the parties.
● Now the intricacies of the proceedings vary with the arbitration agreement. For example, there
could be a timeline which must be followed. This timeline would be stipulated in the agreement.

Section 89 Of CPC & Arbitration

89B.(1) If the parties to a suit, at any stage of the proceeding, apply to the Court for withdrawal of the suit on
ground that they will refer the dispute or disputes in the suit to arbitration for settlement, the Court shall allow the
application and permit the suit to be withdrawn; and the dispute or disputes, thereafter, shall be settled in
accordance with Salish Ain, 2001 (Act No. 1 of 2001) so far as may be applicable: 

Provided that, if, for any reason, the arbitration proceeding referred to above does not take place or an arbitral
award is not given, the parties shall be entitled to re-institute the suit permitted to be withdrawn under this sub-
section.  
(2) An application under sub-section (1) shall be deemed to be an arbitration agreement under section 9 of the
Salish Ain, 2001 (Act No. 1 of 2001).
Interpretation Of Section 89B
Arbitration or conciliation can only be on account of the consent of parties to a dispute and it is not within the
powers of the court to refer disputes for arbitration in absence of consent of parties. Moreover, notwithstanding
the fact that a government is one of the parties to arbitration agreement, a court functions in accordance with the
jurisdiction conferred in on them. Judicial settlement, as under Sec 89(1)(c) and Sec 89 (2) (c), could only be in terms
of Legal Services Authority Act. Salish Ain, 2001 derive power from the aforementioned Act and the power to issue
an award by court is only on account of consent of parties towards the same..

Arbitration Act, 2001

The Arbitration Act 2001 (the AA 2001) is the governing arbitration legislation in Bangladesh which was formulated
on the basis of the United Nations Commission on International Trade Law (UNCITRAL) Model Law of 1985 (the
Model Law). Arbitration has increasingly become the more suitable method of dispute resolution in Bangladesh for

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corporate persons. Arbitration process in Bangladesh is primarily governed by Arbitration Act 2001. The Act is based
on UNCITRAL Model Law. As per Section 3(1) of the Arbitration Act 2001, the Act applies whenever the place of
arbitration is in Bangladesh. It must be noted, however, that the 2001 Act is not the first Act related to arbitration in
Bangladesh. Previously, arbitration in Bangladesh was governed by Arbitration Act, 2001

Arbitration as a sister concern of alternative dispute resolution (ADR) is a method for settlement of diverging
disputes outside of courts, by one more impartial and independent arbitrator(s), which the parties have agreed to
by means of arbitration agreement. The terminology arbitration is defined by Roomly, MR in the reputed case of
Collins v Collins, 28 LJ Ch 186 (1858) as a reference to the decision of one or more persons either with or without an
umpire of a particular matter in difference between the parties. The realisation of Lord Woolf, MR in the last decade
of 20th century, with two evils of civil justice- delay and cost, echo the need of ADR including arbitration not only in
the United Kingdom but also across the globe. Moreover, confidentiality, flexibility and global enforceability of
arbitral award, have added an edge for uplifting the popularity of the concept.

The procedures and tactics as apply in the arbitration proceeding are completely different from the complex legal
procedure of the court. The arbitral tribunal has the sole jurisdiction to try matter at its own accord without availing
the normal course of dispute mechanism process. But in doing so the tribunal must not violate prevailing norms of
law except the relaxation ensured by law. For example, the usual rules of evidence and procedure may be
disregarded if the Arbitral Tribunal wants (sec-27 of the Arbitration Act, 2001).

An arbitral award made by an arbitral tribunal pursuant to an arbitration agreement shall be final and binding both
on the parties and on any person claiming through or under them and such award shall be enforceable under the
Code of Civil Procedure in the same manner if it were a decree of a court (Sec-39 & 44 of the Arbitration Act, 2001).
Section 45 of the Arbitration Act, 2001 also recognise and provide the mechanism of enforcing foreign arbitral
award by the national court. Besides, as Bangladesh is a party to New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards 1958, foreign awards can be enforced in 149 member countries under the
Convention.

The 2001 Act has 59 sections organised in 14 chapters as follows:

1) Introduction

2) General Provisions

3) Arbitration Agreement

4) Composition of Arbitral Tribunal

5) Jurisdiction of Arbitration Tribunals

6) Conduct of arbitral Proceedings

7) Making of arbitral award and termination of proceedings

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8) Recourse against arbitral award

9) Enforcement of arbitral award

10) Recognition and enforcement of certain foreign arbitral awards

11) Appeals

12) Miscellaneous

13) Supplementary Provisions

14) Repeals and Savings

Section 2(c) of the Arbitration Act defines :

Definitions.- In this Act, unless there is anything repugnant in the subject or context, -

a) Legal representative” means a person who in law represents the estate of a deceased
person, and includes any person who intermeddles with the estate of the deceased, and,
where a party acts in a representative character, the person on
whom the estate devolves on the death of the party so acting;
b) Court mans District Judge’s Court and includes Additional Judge’s Court
appointed by the Government for discharging the functions of District Judge’s
Court under this Act through Gazette notification;
c) International Commercial Arbitration means an Arbitration relating to disputes
arising out of legal ‘relationships, whether contractual or not, considered as
commercial under the law in force in Bangladesh and where at least one of the
parties is —
i. an individual who is a national of or habitually resident in, any country
other than Bangladesh; or
ii. a body corporate which is incorporated in any country other than
Bangladesh; or
iii. a company or an association or a body of individuals whose central
management and control is exercised in any country other than
Bangladesh, or
iv. the Government of a foreign country;

d) “Limitation Act” means Limitation Act, 1908 (IX of 1908);

e) “Code of Civil Procedure” means Code of Civil Procedure, 1 908(Act V of

1908);

f) “Specified state” means a spec state declared by the Government under section
47 of this Act;

g) “party” means a party to an ‘ agreement;

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h) “Chief Justice” means the Chief Justice of Bangladesh;

i) “Rules” means any rules made under this Act;

j) “Person” means a statutory or other organizations, company and association and

includes partnership firm;

k) “Foreign arbitral award” means an award which is made in pursuance of an

Arbitration agreement in the territory of any state other than Bangladesh but it
does not include an award made in the territory of a specified state;

l) “Evidence Act” means Evidence Act, 1872 (Act I of 1872);

m) “Arbitration” means any arbitration whether or not administered by permanent

institution;

n) “Arbitration agreement” means an agreement by the parties to submit to

Arbitration all or certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual or not.

o) “Arbitration tribunal” means a sole Arbitrator or a panel of Arbitrator.

p) “Arbitral award” means a decision moxie by the arbitral tribunal on the issue in
dispute;

q) “High Court Division” means High Court Division of the Supreme Court of
Bangladesh.

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he Salient Features Of The 2001 Act Are As Follow
1. INTERNATIONAL COMMERCIAL ARBITRATION DEFINED
According to the new Bangladesh Act, a party to international commercial arbitration has to qualify
as (i) an individual who is a national of, or habitually resident in, any country other than Bangladesh;
(ii) a body corporate which is incorporated in any country other than Bangladesh; (iii) a company or
an association or a body of individuals whose central management and control is exercised in any
country other than Bangladesh; or (iv) the government of a foreign country.This means that a
commercial dispute between two Bangladeshi nationals having places of business even in different
States cannot be considered the subject matter of international commercial arbitration under the new
Act, which would be otherwise possible under the Model Law. In this context the internationality of
the nature of the transactions, in that they take place in different jurisdictions, has been subjugated to
the nationality of the disputing parties. Nationality thus remains one of the determinative factors of
the international character of arbitration. Such a prescription, however, is found in recent legislation
of some other countries such as Iran.

2. ARBITRATION AGREEMENT
An arbitration agreement, either in the form of an arbitration clause in a contract or in the form of a
separate agreement, may be concerned with future and existing disputes respectively. The new Act
requires the arbitration agreement to be in writing exactly in the same manner as the Model Law
prescribes.In other words, the new Act follows verbatim the Model Law prescription on the matter
which has, in fact, wider scope than that of the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards of 1958.

3. COMPOSITION OF THE ARBITRAL TRIBUNAL

Chapter IV of the Act deals with the composition of arbitral tribunal. Full autonomy is given to
the parties to determine the number of arbitrators according to section 11 of the Act. The arbitral
tribunal shall consist of three arbitrators in line with the UNCITRAL provisions if the parties fail
to determine the number of arbitrators. Where the parties appoint an even number of arbitrators,
the latter would jointly appeal for an additional arbitrator who would be the Chairman of the
tribunal. If accepted by the parties involved in the dispute, a person of any nationality may be
chosen as an arbitrator.

Generally, arbitration laws provide for the removal of an arbitrator, who is guilty of undue delay,
etc. The 2001 Acts also provides for challenging an arbitrator if circumstances give rise to
justifiable doubts as to his impartiality and independence. Under the 2001 Act, the arbitral
tribunal is to act in an impartial, practical and expeditious manner in dealing with any dispute
submitted to it for arbitration.

4.CONDUCT OF ARBITRAL PROCEEDING

● General Responsibilities of Arbitral Tribunal:

This act under Section 23, vested some general responsibilities upon The Arbitral
Tribunal,that is to give party equal opportunity to present their cases and examine all the
documents and relevant materials filed by other person concerned before the Tribunal.
The arbitration Tribunal is obliged by the provision of this act, to perform a fair and
speedy trial as quickly as possible.

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● Place of Arbitration :

The parties are free to agree upon to determine a place of arbitration, but if they fail to
determine the place of arbitration, then the the place of arbitration shall be determined by
the Arbitration Tribunal itself.

● Commencement and Consolidation of Arbitral Proceedings :

The commencement of arbitral proceedings shall be deemed to be commenced if any

dispute arises where the concerned arbitration agreement applies or any party to the
agreement get notice from another party. The party shall be free to agree upon this
respect that arbitration proceedings shall be consolidated by other arbitral proceedings
and concurrent hearing shall be held on such terms as may be agreed.

● Legal Representation and Power to appoint expert

Any or both parties to arbitral proceedings may be represented by the lawyers for any
other person chosen by the person the parties agree to the term or give consent on same
thing. The tribunal may appoint expert or legal advisor to the dispute subject matter on
the consent of both parties. Any party agreed on the term of appointing expert or legal
advisor, may make a request to the tribunal for appointment of an legal advisor or expert
on dispute subject matter.

● Summon to witness and evidence production:

The arbitration tribunal or a party to the preceding with the approval of tribunal may
apply to the court for issuing summon upon any person for necessary for examining or
submitting materials or appearing or producing before the tribunal for It's purposes. The
person summoned is not compelled to answer question or produce any documents or
materials which that person could not be compelled to answer at the trial in an action
before the court.
Evidences may be given orally or written or by affidavit on the consent of both parties.
The arbitration tribunal may administer an oath or affirmation to a witness subject to him
consent.

5.ARBITRAL AWARD AND TERMINATION OF PROCEEDINGS

● Award

According to Section 38(3) of the 2001 Act, the arbitral tribunal does not require reason
to be given if the parties have agreed that no reasons are to be given. The Act requires the
award to be in writing, signed by the arbitrators or a majority of them, stating the date,
place of arbitration and the reasons upon which it is based, unless the parties have agreed
that no reasons be given or the award is one made on agreed terms at the request of
parties. The tribunal could correct, modify or make an additional award and where parties
have so agreed, give an interpretation of a specific point or part of the award.

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● Status of the award

The 2001 Act confers, on the award, the status of a decree, subject to the possibility of
the award being challenged on certain grounds before the competent court. Section 39
states that an award shall be final and binding on the parties and persons claiming under
them respectively.

● Challenge to the award

The award of an arbitrator can be challenged before the competent court. 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 arbitral
are the grounds available for setting aside the awards.

6.ENFORCEMENT OR ANNULNENT OF AWARDS

An arbitral award is enforceable like a court decree provided the time period for initiating
proceedings for setting aside an award has elapsed. Proceedings for setting aside an arbitral
award will have to be initiated under Section 42 within 60 days of receipt of an award. Section
43 along with Section 42 of the Act provide the grounds for setting aside an arbitral award.
Fraud, corruption or conflict with the public policy of Bangladesh, a violation of the principles of
natural justice, acting beyond the terms of the submission and deciding on matters that are
legally not arbitrable are the grounds on which an award can be set aside.

A party aggrieved by an award may also initiate proceedings to set aside an arbitral award if
there is evidence that:

● a party to the arbitration agreement was under some incapacity;

● the arbitration agreement is not valid under the law to which the parties have subjected it;
● the party making the application was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings, or was otherwise unable because of some
reasonable cause to present his or her case; or
● the arbitral award deals with a dispute not contemplated by or not falling within the terms
of the submission to arbitration, or it contains a decision on matters beyond the scope of
the submission to the arbitrators.
Awards passed in arbitration are not appealable. In Oram Limited v. Reckitt Benckiser
(Bangladesh) Limited, a Division Bench of the High Court Division uphold the judgment of the
District Judge in setting aside an arbitral award principally on the grounds that the majority
arbitrators have dealt with disputes not contemplated by or not falling within the terms of the
arbitration and one of the arbitratiors was left out from providing deliberations. Recently, the
High Court Division in Jalalabad Gas Transmission and Distribution System Limited v. Lafarge
Surma Cement Limited Bangladesh expressed the view that the legislature did not provide any
appeal against an arbitral award, which categorically indicates that the grounds provided in
Section 43 of the Arbitration Act are required to be compulsorily followed by the court; even for
an appeal sought regarding allegations of injustice not covered by the provided grounds cannot
be taken as a ground against an award.

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CASE RELATING TO ARBITRATION ACT, 2001

1. HRC Shipping Limited v. M.V. X-Press Manaslu and others, 12 MLR (HC) 2007
("HRC")
2. STX Corporation Ltd v. Meghna Group, (2012) 64 DLR (HCD) 550 ("STX"),
3. Oram Limited v. Reckitt Benckiser (Bangladesh) Limited
4. Jalalabad Gas Transmission and Distribution System Limited v. Lafarge Surma Cement
Limited Bangladesh
5. Frigo Mekanik Insaat Tesisat Ve Taahut Sanayi Ve Ticarest A.S. v. Bangladesh Milk
Producers' Co-operative Union Limited (BMPCUL), 2019 (2) 16 ALR (HCD) 357

CONCLUSION:

The practice of resolving disputes through arbitration is relatively new in Bangladesh compared
to other jurisdictions, and it is still in the development stage. Therefore, the enforceability of an
otherwise enforceable award may be delayed if it is challenged in a court of law, which is often
the case. Hence, despite its effectiveness in the commercial context, unless the other party is also
willing and sensible, the arbitration process in Bangladesh may result in additional delays and
perhaps eventual litigation. Therefore, it is recommended that prospective investors should
conduct a thorough legal due diligence of their local business partner beforehand to understand
whether an arbitration arrangement in a contract would in fact be the best course to adopt.

An effective arrangement could be involving jurisdictions where arbitration proceedings are

well-defined – for example, Singapore – as the seat of the arbitration, if that is cost-effective in
terms of a proposed commercial contract, to obtain the best benefit from an arrangement.
However, the drawback of this option is enforcing the award in Bangladesh and the
unavailability of interim measures from the domestic courts.

Another alternative is to insert the requirement of executive negotiations and mediation as

prerequisites for arbitration. From recent trends, it can be noted that business entities do tend to
settle disputes if effective mediation is conducted.

The Arbitration Act was enacted with the aim of modernising arbitration, especially international
arbitration, by adopting features of the Model Law, which prefers the autonomy of the parties,
minimum judicial intervention, the independence of the arbitral tribunal, and the most efficient
resolution of disputes in a cost-effective manner. As Bangladesh is a prospective destination for
increasing foreign investment in the future, it may be time to modernise the Arbitration Act
further by removing the existing barriers: for example, following India's move, interim measures
should be available in the domestic courts for foreign-seated arbitrations. It is also time to
consider establishing a specialist bench in the High Court Division for the purpose of dealing
with international commercial arbitrations and enforcing foreign awards on a fast-track basis.
There should also be a timeline to complete arbitration proceedings.

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