Comparative Analysis of UNCITRAL Model Law On International Commercial Arbitration and Bangladesh

Comparative analysis of the UNCITRAL Model
Law on International Commercial Arbitration

and the Bangladesh's Arbitration Act 2001.
1
Table of Contents
Chapter One: Introduction ............................................................................................................ 3
Chapter Two: Development of Commercial Arbitration ............................................................. 5
Characteristics of International Commercial Arbitration ............................................................ 6
International Commercial Arbitrations and framework.......................................................... 9
Historical Development of Arbitration Institutions .............................................................. 12
Conclusion 14
Chapter Three: Comparative analysis of the UNCITRAL Model Law on International
Commercial Law .......................................................................................................................... 15
The UNCITRAL Framework ....................................................................................................... 16
Evaluation of UNCITRAL Model Law provisions ....................................................................... 17
Conclusion ................................................................................................................................ 28
Chapter Four: The Legal Framework of Arbitration Law in Bangladesh ................................... 29
Analysis of Arbitration Act 2001 ............................................................................................... 30
Conclusion ................................................................................................................................ 39
Chapter Five: Comparative Analysis of Bangladesh’s Arbitration Law ..................................... 40
Chapter Four: The effort to harmonise International Commercial Arbitration Law and
Recommendations ...................................................................................................................... 47
Harmonisation .......................................................................................................................... 48
Conclusion ................................................................................................................................ 49
Bibliography ................................................................................................................................. 51
2
Chapter One: Introduction
The UNCITRAL Model Law on International Commercial Arbitration is a form of adjudicative rules
relating to the legal system. The Bangladesh’s Arbitration Act 2001 aims to reflect the
international law and practices relating to arbitration to spear ahead as a leading legal system.
The task of the author of this research is to look at the historical development of arbitration as a
mean of the settlement of disputes over the judiciary. The second chapter will also check to
challenge the hypothesis that arbitration does not provide justice but rather it is a compromise.
It will also address the surge in arbitration centres and its mechanism, purposes and role in
developing smooth functioning of trade, investment and commercial practices. Finally, it will
address the statistic basis for assessing the success of arbitration as an alternative dispute
resolution (ADR) and discuss case-laws whether commercial disputes settlement was successful
through arbitration.
The third chapter will introduce the United National Commission on International Trade Law
((UNCITRAL) that strive to develop international trade and commerce. The UNCITRAL is a part of
the United Nations and has so far enacted various conventions, model laws, contractual texts
and explanatory notes published by its Secretariat. Some of the area covered by UNCITRAL are
international commercial arbitration and conciliation; the laws related to the international sale
of goods, security interests, insolvency, international payment and transport of goods, electronic
commerce and online dispute resolution. The primary research in this chapter will address the
Model Law on International Commercial Arbitration by embarking on evaluative research to
ascertain the viability of the Model Law as guiding legislative instruments for developing
countries. The UNCITRAL Model laws perform as a leading text for the sovereign countries which
are often adopted with the same arbitration, and it is considered as a benchmark for assessing
the arbitration law of a country. Therefore, the discussion in this chapter will be the foundation
for the critical analysis of Bangladesh’s Arbitration Act 2001.
The next chapter will introduce the Bangladesh’s Arbitration Act 2001 which was the first of its
kind, and it adopts the UNCITRAL Model Law to a certain extent. The purpose of this assessment
is to examine how far has the AA 2001 incorporates the UNCITRAL Model Law on international
3
commercial arbitration precisely and what are the elements that are left out. The discussion will
address the academic contribution regarding the AA 2001 and the reasoning of a judge through
case-laws. Various case-laws dealt with the AA 2001 and highlights some of the necessary area’s
of legislative as well as practical development needs to be critically evaluated. Therefore, a
comparative analysis will assess the Arbitration Act 2001 to objectively identify the differences
as well as the area that worked well.
The fifth chapter of this research project will address the potential reforms that are needed in
the Bangladesh’s Arbitration Act 2001 by comparative assessment. The final chapter will discuss
the scope of harmonisation with the UNCITRAL Model Law and why do we need harmonisation.
It will offer to assess regarding the UNCITRAL Model Law on International Commercial Arbitration
with differences that are identified in the previous chapter. Furthermore, it hopes to analysis
each provision that is not incorporated into Bangladesh’s arbitration law. The author hopes to
conduct functional research at this stage and discuss the other forms of legislation and
conventions that are implemented by the UNCITRAL such as the online dispute resolution and
electronic commerce that can improve the regulation of e-commerce and apply international
standards. This chapter will deal with a conclusion and recommendation based on the finding
through this research project.
The conclusion from this research suggests that the Arbitration Act 2001 resembles some of the
most relevant provisions of the UNCITRAL Model Law and other national legislation to posit itself
as a key legislation furthering the objective of providing a viable domestic legal framework for
arbitration of disputes. Nonetheless, there are certain provisions that needs to be updated to
cope with the ever growing arbitration laws and practices in the international commercial
arbitration. Moreover, the UNCITRAL Model Law needs to be further revised to provide
comprehensive legislative framework for the developing countries. It is further the purpose of
the Model Law, that is to improve harmonisation of laws and practices in the international
commercial arbitration.
4
Chapter Two: Development of Commercial Arbitration
Arbitration is a proceeding that resolves disputes between parties.1 It is an alternative method

of dispute settlement than seeking justice in a court of law. In the judicial system, the disputes
are settled publicly, that is claimed to be protracted, complicated, legalistic and ill-suited2 against
commercial disputes. In the commercial arena, there are several disputes which needs
settlement at a short period. The legislation that normally governs commercial disputes arise in
the UK is the Regulation on Jurisdiction and Recognition and Enforcement of Judgement in Civil
and Commercial Matters3 regarding the application of substantive law. Moreover, the Regulation
provides that the domicile of the defendants, that country has the jurisdiction to try the case and
different rules in other cases. The author wishes to examine the rules relating to arbitrability,
separability, arbitral jurisdiction and tribunal composition. The Arbitration Act 1996, on the other
hand, provide details for the procedural laws where the arbitration seat is in the UK. The United
Nations Commission on International Trade Law ((UNCITRAL) developed rules and policy for
international trade, that is also related to international commercial arbitration.
Goode, Kronke and McKendrick noted that Arbitration as a form of ADR is used mostly in the
“cross-border commercial disputes”4 and it is where the issue of lex mercatoria or merchant law
arises. Carr pointed out that arbitration became famous after the Second World War and its seen
as a “first step toward privatisation of justice.”5 Paulsson nevertheless, called arbitration a “social
institution” and posits that “arbitration derives its legitimacy and effectiveness from an indefinite
number of potentially relevant legal orders.6 Arbitration provides an escape route from the
limitation of adjudication in a court of law; its popularity has grown since then. Redfern and
Hunter posited that international arbitration had established itself a dominate methods of
1
M. Rubino-Sammartano, ‘International Arbitration Law and Practice’ (3rd eds, Springer, Netherlands, 1989) 51
2
A.S. Reid, ‘The UNCITRAL Model Law on International Commercial Arbitration and the English Arbitration Act: Are
the Two Systems Roles Apart?’ (2004) 21 (3) Journal of International Arbitration 227
3
Council Regulation (EC) 44/2001 of 22 December 2000 on Jurisdiction, recognition and enforcement of judgments
in civil and commercial matters (Brussels I)
4
R. Goode, H. Kronke and E. Mckendrick, ‘Transnational Commercial Law – Texts, Cases and Materials (2nd ed,
OUP, Oxford, 2015) 555, 556
5
I. Carr, ‘International Trade Law’ (5th ed, Routledge, Oxon, 2014) 585
6
J. Paulsson, ‘Arbitration in Three Dimensions’ (2011) 60 ICLQ 291
5
resolving the dispute in the international commercial spectrum for various reasons.7 The
rationale behind such as definite tilt towards arbitration as the main form of dispute resolution
process comes from the autonomy and control that are provided to the parties.8 In case of cross-
border disputes, the parties would like to take the advantages of settling the dispute without
recourse to the judicial system of a foreign country, where the procedure, laws, and process can
be complex as well as expensive. As Moses noted that “each party fear the other party’s home
court advantage.”9 Therefore, arbitration provides a forum for the parties which is neutral and
fair for both which provides a degree of flexibility as well as autonomy. Thus, ‘today, international
commercial arbitration has become the norm for dispute resolution in most international
business transactions.’10 Similarly, it can be argued that the international arbitration forum is the
best choice or realistic mechanism for resolving disputes in an international commercial dispute.
Characteristics of International Commercial Arbitration
Arbitration is favourable for many reasons but the first point to illustrate relates to the agreement
that binds the parties to arbitrate in case of a dispute. The agreement to arbitrate can arise after
or before the dispute arose.11 The arbitration agreement itself is considered as a separate
agreement; this separability is another distinct feature of an arbitration agreement that allows
in the party to resort to arbitration, even if there is a question about the validity of the initial
agreement.12 The next point is that the parties have the freedom to choose their arbitrator or to
arbitrate institute/ centre and the rules related to the arbitral proceeding. McKendrick noted that
“arbitration possesses certain advantages for the commercial man is undeniable.”13 The parties
would have to encounter informal and flexible procedural rules than the litigation, and the
arbitral tribunal will be less stringent regarding the certain rule of evidence. Moreover, for many
commercial parties or organisations, their reputation has a big market value which can be saved
7
A. Redfern and M. Hunter, ‘Law and Practice of International Commercial Arbitration’ (4 th ed, Sweet and Maxwell,
2004) 1
8
M. L. Moses, ‘The Principles and Practice of International Commercial Arbitration’ (2 nd ed, CUP, New York, 2012) 1
9
Ibid.
10
Ibid. 1
11
12
Fiona Trust Holding Co v. Privalov [2008] 1 Lloyd’S Rep 254
13
E. Mckendrick (eds), Goode on Commercial Law (4th ed, Penguin, London, 2010) 1300
6
by keeping the procedure private and confidential. Additionally, one of the main reason for
switching to arbitration instead of litigation is the issue of time and money; arbitration is a very
cheap and quicker process than litigation. Such requirement may not only arise from a deliberate
decision but having time can be a matter of saving the product or the business. Lastly, the most
important aspect of arbitration is the finality of the arbitral tribunal decisions which is enforced
as an award under the New York Convention 1958. The arbitral tribunal has an enormous
responsibility to ensure that the decision is accurate, fair, efficient and enforceable otherwise it
would be subject to judicial review in the court of law.14
Nonetheless, it is not to say that arbitration process has no disadvantages. Firstly, arbitration
process can be expensive if there are some arbitrators from different countries and the
institutional fees in case of arbitration proceeding being held in an arbitration centre. Moreover,
party’s cooperation would make the arbitration proceeding easier, but the uncooperative party
may hinder the proceeding and cause delay.15 Additionally, there is a resort to judicial
proceedings against the decision of the arbitrator that can cause delay, expense and also conceal
the confidentiality of the proceeding. McKendrick noted that the multi-party disputes are best
suited for litigation, not arbitration and consent can be a problem as a party unwilling to arbitrate
may not be forced to participate.16 Although, she stated that “the atmosphere of arbitration is
considered to be less hostile than that of litigation, and the arbitral award now has a greater
degree of finality that judgment.”17 However, the biggest disadvantage of an arbitration
proceeding is the lack of summarily trial or “interlocutory powers”18 that might be relevant for
certain party in the proceeding. Blackably and Partasides posited that “in general the powers
accorded to arbitrators, while adequate to resolve the matters in dispute, fall short of those
conferred upon a court of law.”19 Moreover, they noted that ultimately the arbitrator act as a
14
15
16
Ibid.
17
E. Mckendrick (eds), Goode on Commercial Law (4th ed, Penguin, London, 2010) 1302
18
Ibid. 1302
19
N. Blackaby and C. Partasides (eds), ‘Redfern and Hunter on International Arbitration’ (5th ed, OUP, Oxford,
2009) 1.104 found in R. Goode, H. Kronke and E. Mckendrick, ‘Transnational Commercial Law – Texts, Cases and
Materials (2nd ed, OUP, Oxford, 2015) 557
7
subordinate of the local courts from which it can derive a certain indirect mechanism to force
parties, which are not granted by the State to private arbitral tribunals. A similar notion was
introduced by Sammartano would hold that “arbitration is not an independent creation, but is a
process that arose in part from a decision by national legal systems to accept it as a dispute
resolution method that would operate within their ambit.”20 This is easier to justify in the national
spectrum, but when there is a cross-border element, the contemporary arguments does not
seem satisfactory argument. Although, it is admitted that the court has the power to enforce the
arbitral award and scrutinise the arbitration agreement such enforcement obligation was a
product of the New York Convention on Arbitral Award 1958, therefore, it begs the question
whether it was the national system that created ADR or it accepted the outside court settlement.
It is submitted the ADR development has posited itself far before the formal adjudicative process,
and the national system agreed to the position of arbitration as a prudent way to resolve disputes
because of the inherent lack in the judiciary. Although, the power nevertheless is still with the
court and will be because of its backing by the State. Such reasoning is deducted from the position
that arbitration was favoured in the Napoleonic Code of Procedure 1807.21 It is not surprising at
all to prove that the arbitration was a form of dispute resolution for the merchants in the earliest
time of common law and at that point when the formalistic legal system did not make itself as a
forum for conclusive and swift determination of the disputes.
However, Carr noted that “the national character of arbitration is often said to be an appealing
feature since parties agree to apply lex mercatoria or equitable principles (ex aequo et bono).”22
In case of any gap in the Model Law such as the UNCITRAL Model Law on International
Commercial Arbitration, recourse will be toward the national law. Additionally, Mauro noted that
the doctrine of the superiority of arbitration agreements over jurisdictional clause forces national
courts to defer to arbitration unless the arbitration is void.23 Therefore, the discussion will focus
on the various organisations that deal with arbitration. In Distribution Chardonnet v Fiat Auto
20
21
22
23
8
France,24 the Paris Court of Appeal gave prevalence over the jurisdictional clause to the
arbitration agreement. Cordero-Moss noted that the autonomy of international arbitration was
primarily confirmed by the New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards; which is ratified by 150 countries all over the world. If there is a valid arbitration
agreement, according to Article ii the national courts must refuse to try the dispute, and if there
is a valid decision by the arbitral tribunal, it must be upheld by the national courts of the member
states.25 Therefore, Cordero-Moss posited that “this is certainly enhancing the impression that
arbitration is an autonomous system, where national laws are allowed to have an impact only to
the extent that they have been chosen by the parties.”26 Paulsson called it the territorialist thesis
and tagged it to be outdated based on the mere fact that arbitration is treated differently in a
different jurisdiction. Hence, it cannot be limited to the national legal system.27 Therefore, it is
submitted that the arbitration law is applied with the principle of party autonomy which has
significantly developed in the international commercial arbitration arena.
International Commercial Arbitrations and framework
There are various sources that are applicable in this area of international commercial arbitration,
firstly, international conventions which laid down rules related to the seat of the arbitral tribunal
or the jurisdictional clause and provide the foundation for the enforcement of the arbitral award.
In case of an arbitral award, national laws are applicable as well which can provide a detailed
guideline for an arbitration such as the English Arbitration Act 1996. Moses, therefore, illustrated
the framework of international commercial arbitration through an inverted pyramid, where the
agreement to arbitrate essentially lays the foundation of the pyramid.28 Without an agreement,
there is no arbitration and highlights that “on the pyramid above the arbitration agreement, the
24
(1991) Court of Appeal, Paris, Rev. arb. 1993, 617
25
Article 5, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1968) 330 UNTS 38
(enacted on 10-06-1958 and came into force 07-06-1959)
26
G. Cordero-Moss, ‘International arbitration is not only international’ in G. Cordero-Moss (eds), ‘International
Commercial Arbitration – Different Forms and their Features’ (1st ed, CUP, Cambridge, 2013) 7
27
28
M. L. Moses, ‘The Principles and Practice of International Commercial Arbitration’ (2 nd ed, CUP, New York, 2012)
6
9
framework expands regarding scope and applicability beyond the immediate parties.”29 The
order maintained is that above arbitration agreement is the arbitration rules, after which there
are the national laws, international arbitration practice and finally, international treaties. He
explains that the arbitration rules form the first steps toward asserting the procedure where the
parties are few to draft or choose their own set of laws. Moreover, parties have the freedom to
dictate their position in their agreement, so if a particular matter is determined, then it will trump
the arbitration rules. 30 The national laws can be different from the laws that apply to the
arbitration. The substantive law of UK is laid down in the AA 1996 which is different from the
UNCITRAL Model Law, whereas, the AA 2001 adopted the UNCITRAL Model Law for Bangladesh.
Moses noted that “the Model Law is meant to work in conjunction with the various arbitration
rules, not to conflict with them. Thus, the Model law also has many provisions that primarily
default provisions: that is, they apply “unless the parties have agreed otherwise”31, and the task
of this research project is to assess the applicability of Bangladesh’s AA 2001. The national law
plays a vital role in the evaluation of the contractual liability and validity of clauses etc. The
international arbitration practices provide guidelines for the harmonisation of arbitration
practice and to simplify the process of arbitration; there is some international organisation that
provides such guidelines. Finally, as discussed above the international treaties form the backbone
of international commercial arbitration ensuring its validity, acceptance and enforcement related
to agreement and awards. The framework illustrated and reviewed by Moses provide a
comprehensive knowledge and evaluation of the sources of arbitration law globally. It will help
to explain the research ambit for this dissertation and necessarily would ensure that the effective
evaluation of arbitration law, national legislation and international treaties. The evaluation and
assessment of international arbitration practices are beyond the scope of this research.
The first step towards an arbitration is choosing the mode of arbitration: ad hoc or institutional.32
There are several national and international institutions such as the American Arbitration
29
Ibid.
30
M. L. Moses, ‘The Principles and Practice of International Commercial Arbitration’ (2nd ed, CUP, New York, 2012)
6
31
Ibid. 7
32
M. L. Moses, ‘The Principles and Practice of International Commercial Arbitration’ (2 nd ed, CUP, New York, 2012)
9
10
Association, the International Chamber of Commerce (ICC); the London Court of International
Arbitration (LCIA) or the International Centre for Settlement of Investment Disputes (ICSID) are
those that have a worldwide reputation. The arbitration clause would have to refer the choice of
law/ rules that will be applicable in the arbitration proceeding which should be either ad hoc
arbitration rules or the institutional rules. The choice is either the institutional rules which are
mostly selected when the parties opt to settle the dispute in one of that institution or ad hoc
proceedings rules such as the UNCITRAL Model Law on International Commercial Arbitration or
the Arbitration Act 1996 of the UK. Reid concludes that the difference between UNCITRAL Model
Law on International Commercial Arbitration and the English Arbitration Act 1996 are imaginary
rather than realistic. The function of arbitration law is to reduce the intervention of judicial bodies
which are achieved by the UNCITRAL Model Law and the English AA 1996. One of the objectives
of any dispute resolution is that the justice must be seen to be done which must be achievable
by the arbitrating body or institution. The study by School of International Arbitration, Queen
Mary University found that the 86% of the respondent take service from the arbitral institutions,
but the large corporations favour the ad hoc arbitration.33 The surveys showed the business opt
for institutional support because of the scrutiny, experience and convenience provided by the
institutions.34
Normally, the institutional rules have certain advantages such as their procedural rules are
already set with rules related to evidence. Additionally, the institution handles the administrative
matters themselves and can provide wide-ranging expertise in the area of dispute.35 Such
institutional rules can be adopted by the arbitrators as well when conducting proceedings or
before starting the proceeding. The party autonomy allows them to deal any form of standards
that choose as a mean of resolving their dispute which can be drafted by them as well. The ad
hoc arbitration is not part of any institutional office or rules. Therefore, there are no institutional
fees, but there will be the cost of administrating the arbitration.36 The UNCITRAL Model Law is
33
C. Wallgren-Lindholm, ‘Ad hoc arbitration v. institutional arbitration’ in G. Cordero-Moss (eds), ‘International
Commercial Arbitration – Different Forms and their Features’ (1st ed, CUP, Cambridge, 2013) 66
34
Ibid. 67
35
36
11
considered to provide adequate protection and laid down details rules related to arbitration if a
party is not drafting the rule for themselves. This is where the Bangladesh’s AA 2001 comes into
force, and the party for dispute from Bangladesh would be able to rely on that 2001 Act.
However, the question is whether the AA 2001 promotes arbitration properly for the settlement
of commercial disputes.
Historical Development of Arbitration Institutions
The formalistic development of arbitration laws and bodies started back in the 19 th century with
the enactment of Hague Conventions of 1899 and 1907 where the Convention for the Pacific
Settlement of International Disputes created the Permanent Court of Arbitration (PCA) to deal
with disputes outside court. The PCA provided sequences such as arbitral tribunals, library and
promoted the peaceful settlement of differences in various areas of maritime and border
disputes. However, arbitration as a method of dispute resolution dates to the time of King
Soloman, who is said to have dealt with the issue pertaining who is the true mother of a baby
boy.37 Furthermore, ‘Philip the Second, the father of Alexander the Great, used arbitration as a
means to settle territorial disputes arriving from a peace treaty he had negotiated with the
southern states of Greece as far back as 337 B.C.”38 Xavier identified that, in the UK, arbitration
was established before the King’s courts and dates back to 1224; the earliest record of arbitration
law was found in 1698.39
In the UK, the first major Act of Parliament dealing with arbitration was the Arbitration Act 1889
which was presided by the Common Law Procedure Act 1854. Later on, the Arbitration Act was
amended in 1950, 1975 and finally the 1996 Act which consolidates all the previous laws and
provides a provision that is different from the UNCITRAL Model Law. Although, there is debate
surrounding the fact that the UNCITRAL Model Law was followed during the implementation of
the AA 199640 but it submitted that the AA 1996 is far superior as a guiding legislation for
37
G. Xavier, ‘Evolution of Arbitration as a legal institutional and the inherent powers of the Court: Putrajaya
Holdings SDB. BHD v. Digital Green SDN. BHD (2009) Working Paper Series No. 009; Asian Law Institute; pg 1
38
Ibid. pg 2
39
Ibid.
40
J. Hill, ‘Some Private International Law Aspects of the Arbitration Act 1996’ (1997) 46 ICLQ 274, 275
12
arbitration because of UK’s dominant position as the centre of arbitration and legal centre.41 The
International Chamber of Commerce has developed during the beginning of the 20th century that
with collaboration with the Court of Arbitration promoted the New York Convention 1958. The
UN established the UNCITRAL in 1966 as an organisation for the promotion and harmonisation
of international trade law.42 The UNCITRAL creates a various form of legislations and rules for
arbitration relating to procedure, substantive law and framework.43 In 1985, the UNCITRAL
Model Law on International Convention on Commercial Arbitration because there was always
the divide between North and South as well as East and West in the UN bodies which ultimately
is still criticized in case of the ICSID rules and dispute resolution tribunals. Therefore, in order
ensure fairness and justice prevail, the UNCITRAL Model Law provided details laws that could be
incorporated directly by the member states, and it promoted harmonisation of arbitration laws.
Currently, the UNCITRAL Model Law was adopted by 75 countries out of 106 Jurisdictions. 44 In
the last amendment to the UNCITRAL Model Law, the UN General Assembly expressed its
appreciation towards the UNCITRAL for development of the Model Law “on the form of the
arbitration agreement and interim measures”45 and ask members to adopt it “in the view of
desirability of uniformity of the law of arbitral procedures and the specific needs of international
commercial arbitration practices.”46 Therefore, harmonisation was the main aim of this Model
Law which is one the verge of completion, and it provides a truly global framework for arbitration
law.
41
“Arbitration: What Makes London So Special? (15 Nov 2012) The Law Society <
https://www.lawsociety.org.uk/news/speeches/arbitration-what-makes-london-so-special/> [accessed on 16 July
2017]
42
UNCITRAL, ‘About UNCITRAL’ < http://www.uncitral.org/uncitral/en/about_us.html> [accessed on 16 July 2017]
43
UNCITRAL, ‘UNCITRAL Texts and Status’ < http://www.uncitral.org/uncitral/en/uncitral_texts.html> [accessed on
16 July 2017]
44
UNCITRAL, ‘Status – UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as
adopted in 2006’ <
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html> [accessed on
18 July 2017]
45
UN General Assembly, ‘Resolution on Revised articles of the Model Law on International Commercial Arbitration
of the United Nations Commission on International Trade Law’ (18 Dec 2006) UNGA A/RES/61/33
46
UN General Assembly, ‘Resolution on Revised articles of the Model Law on International Commercial Arbitration
of the United Nations Commission on International Trade Law’ (18 Dec 2006) UNGA A/RES/61/33
13
Conclusion
Arbitration as a form of dispute resolution has been enshrined in the legal system of all the
nations, especially for international commercial arbitration. The parties have a way out of the
compound and expensive recourse to the judicial system that provides certainty but at the
expense of delay and anxiety for the client. As a result, the international commercial arbitration
institutions and the legal framework provide the backbone for facilitating the alternative dispute
resolution. The UNCITRAL Model Law which is a kind of the most recent effort for promoting
arbitration forums and harmonisation, nevertheless, has pertaining conditions that must be
adhered which is not necessary for the parties. It is submitted that the theoretical foundation for
the implication of arbitration laws are solid and all developing countries must promote the ADR
mechanism.
14
Chapter Three: Comparative analysis of the UNCITRAL Model Law on International Commercial
Law
Globalisation has been the essence of development of international trade, hence, the
development and prosperity of arbitration as a mode of dispute settlement which is quicker,
cheaper and reliable for the businessman or corporations.47 The threat towards arbitration is to
ensure fairness and keep the confidence the arbitration system as well as institutions. The law
that governs arbitration relates to its authority as a private judicial system, whereas, the rules
that are applicable in arbitration is regarding the arbitration proceeding or process.48 Here, we
will be discussing both the form and the substance, hence, the law of arbitration. This chapter
aims to evaluate international commercial arbitration which can be distinguished by domestic
arbitration. A significant portion of the chapter will focus on evaluating the Model Law drafted
by UNCITRAL, and a comparison will be drawn with the UK Arbitration Act 1996. The reason for
such comparison is to identify the difference to utilise it in evaluating the Bangladesh’s
Arbitration Act 2001.
Arbitration as a mechanism anticipates providing a final and binding solution for the parties in
dispute. The salient feature of arbitration is that parties have autonomy and freedom to agree
on their way of dealing with the dispute. However, this autonomy of that parties should have
safeguarding principles in the interest of public protection. Therefore, in essence, the role of the
state has diminished to a greater extent in the arbitration process. However, the hypothesis is
flawed as domestic law plays an important part in the functioning of international commercial
arbitration. The position of national law relates to ensuring the finality of the arbitral award which
must be supported by the domestic legislation. In the international spectrum, the leading body
for the promotion of using arbitration is the UNCITRAL. The UNCITRAL performs the tasks in line
with their mandate to promote and improve international trade.49
47
J. A. E. Faria, ‘Legal Harmonisation Through Model Laws: The Experience of the United Nations Commission on
International Trade Law (UNCITRAL) 1
48
49
C. Montineri, ‘The UNCITRAL Arbitration Rules and their use in ad hoc arbitration’ in G. Cordero-Moss (eds)
International Commercial Arbitration: Different Forms and their Features (1st ed, CUP, Cambridge, 2013) pg. 82
15
The UNCITRAL Framework
The UNCITRAL’s main functions was to coordinate the work of organisations active in this field
and encourage cooperation among them; work towards promoting the participation of the States
in with regards and preparing new international conventions, model laws etc for the uniform
application of international trade law as well as pursue harmonisation of the legal principles;
gather information about national legislation regarding international trade law and deal with the
various organisation of the United Nations.50 Therefore, the functions of UNCITRAL primarily
include international trade, however, as part of its function, it has drafted several texts for
alternative dispute resolutions. The UNCITRAL Model Law is one of its creation which provided
rules and guidance for the states that does not have comprehensive arbitration law in line with
the international standard. The UNCITRAL Model law became famous and successful. Thus many
countries adopted the Model Law. The Model Law was mostly favoured because of its holistic
approach to dealing with the vast spectrum of arbitration law and provided the framework for
the developing states to build their laws.51 The UNCITRAL Model Law was considered to be a
legitimate source which could be utilised in all range of disputes. It is evident from the fact that
the Model Law was adopted in countries from all part of the world as the national arbitration
legislation.52 Redfern noted that the international arbitration is an established form of dispute
resolutions because the New York Convention 1958 has been ratified by more than 140 countries
and the UNCITRAL Model Law “provided a simple, modern code of law for the conduct of
international arbitrations.”53 Additionally, the number of new centres for the settlement of
disputes are also on the rise. Thus, it shows that arbitration referral has increased but without
any significant change to the process or rules in arbitration. Redfern pointed out that all remains
the same, the characteristics, objective and purpose of arbitration but the Iran-US claims tribunal
has increased the recognition of arbitration with increased growth in international trade.
50
UNCITRAL, FAQ – Origin, Mandate and Composition of UNCITRAL, <
http://www.uncitral.org/uncitral/en/about/origin_faq.html> accessed on 20 Aug 2017 UNGA, Resolution 2205
(XXI), Sect. II, para. 8
51
P. Sanders, ‘UNCITRAL’s Model Law on International and Commercial Arbitration: Present Situation and Future’
(2005) 21 Arb.Int. 443, 443
52
Ibid.
53
A. Redfern, ‘International Arbitration: The Golden Goose?’ (2008) Dispute Resolut Int 184, 184
16
However, Redfern warned that the stiff rise in arbitration cost and possible delay would be met
with its demise if the problem of delay and expense cannot be resolved.54 Moreover, if the proper
process and formality are not maintained, then the whole arbitration become the subject of
judicial intervention, therefore, increasing the expense and causing further delay. Nevertheless,
the advantages of international arbitration outweigh the disadvantages as arbitration facilitates
international trade and investment, promote the principles of equality and mutual respect.
UNCITRAL developed various legislative and non-legislative instruments for the promotion of
international trade. These instruments are “negotiated through an international process
involving a variety of participants, including member states of UNCITRAL, who represent different
legal traditions and levels of economic development,”55 it also includes in the process other
stakeholders, organisations and bodies; thus, the UNCITRAL legislations are widely accepted
which can be utilised in all forums and disputes arising in different countries. The UNCITRAL
Model law only takes the form of binding legislation after ratification or incorporation into the
domestic legal system. The Model Law provides a framework to harmonise standards and rules
concerning the conduct of arbitral proceedings in the context of international commercial
arbitration.
Evaluation of UNCITRAL Model Law provisions
Definitions and application of the Model Law
The Model Law applies to international commercial arbitration which is defined broadly to
include “all relationships of a commercial nature, whether contractual or not”56 which include all
kind of commercial activities. Interestingly, Article 1 (3) of the UNCITRAL Model Law provides that
“an arbitration is international if: a)…at the time of the conclusion of that agreement, their places
of business are in different states, or b) the place of arbitration or the place of commercial
relationship is situated outside the state in which the parties have their places of business; or c)
54
Ibid. 185
55
International Commercial Arbitration: Different Forms and their Features (1st ed, CUP, Cambridge, 2013) 84
56
Article 1 (1) of the Model Law, in UNCITRAL Secretariat, ‘UNCITRAL Model Law on International Commercial
Arbitration 1985 with amendments as adopted in 2006’ (2008) UN Publication
17
where the parties agreed that the subject-matter relates to more than one country.”57 Therefore,
accordingly by Art. 1(1) of the Model Law, it applies to international commercial arbitration
unless there is any other agreement between the States and the place of business is determined
according to a close connection with the arbitration agreement or the habitual residence of the
party.58 However, Goode, Kronke and McKendrick59 noted that the law of the seat of arbitration
created controversy in the case of international arbitration and noted the main difference had
been the lack of judicial supervision of international arbitration and the reference to the place of
business omitted the place of performance.60 Sanders considered that Art. 1 (3)(c) is irrelevant
as it does not leads to any indistinct conclusion. Many countries have omitted the reference to
‘more than one country’ or have extended the scope of application to domestic arbitration.61
Article 2 of the Model Law deals with definition, somewhat ambiguously describing ‘arbitration
as a means of arbitration whether or not administered by a permanent arbitral institution.’62 The
definition incorporates ad hoc institutions but leaves behind many other forms of arbitration.63
The UK’s 1996 Act provide a rather accurate definition by explaining the purpose of arbitration
to “obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or
expense.”64 The Model Law provides scope for investigation of issues arising out of the conflict
to the freedom of the parties; with the general scope to appoint an arbitrator or authorised an
institution to deal with the matter. The uniformity of law and the doctrine of good faith is
enshrined while interpreting the law.65
Article 3 dealt with the deemed date of service that is the date of delivery; which is to be done
personally, to the addressee’s place of habitual residence, mailing address, or last known
57
Art. 1 (3) of the UNCITRAL Model Law
58
59
OUP, Oxford, 2015) 562
60
Ibid. 561
61
(2005) 21 Arb.Int. 443, 445
62
Art. 2 (a) of the UNCITRAL Model Law
63
(2005) 21 Arb.Int. 443, 445
64
Section 1 (1) of the AA 1996
65
Art. 2 of the UNCITRAL Model Law
18
address.66 This Article Supplement Art. 7 regarding arbitration agreements, and needs to revise
to include the electronic form of communication enshrined in Art. 7. for Any objection for
breaching, derogating, non-compliance etc. of the arbitration agreement will not be entertained
if the party affirms by continuing the arbitration proceeding. Thus they have waived their right
to object. Art. 5 provides that “no court shall intervene except where so provided in this law”
which is a vital right of the parties and the backbone of the legitimacy of arbitration proceedings.
However, Sanders argues that there are legitimate situations where the court’s assistance is
required, such as the one related to taking evidence. Therefore, the Model Law can dictate
further where the court can intervene such as “in respect of truncated arbitrations that the other
two arbitrators may be empowered by the court to render an award.”67
The Arbitration Agreement and courts interventions
An arbitration agreement is defined as “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 specified
legal relationship, whether contractual or not.”68 One can restrict to the definition as given above
which is Option II in the Model Law; however, in Option I in addition to the definition, there are
further explanation and rules related to the arbitration agreement. Under Option I of Art 7, the
arbitration agreement must be in writing and can take any form as a clause or a separate
agreement. Furthermore, the arbitration agreement can be created through electronic
communication as long as it is usable for subsequent reference.69 The arbitration agreement can
also arise from the statements of claim or defence if one party alleges it and not denied by the
other.70 On this point, Germany and New Zealand adopted the provision for the consumer to
have a separate agreement when the dispute is being considered for arbitration and that the
66
Art 4 of the UNCITRAL Model Law
67
(2005) 21 Arb.Int. 443, 446
68
69
70
19
consumers understand their position regarding consumers.71 Therefore, the separate provision
for consumers will be beneficial.
Under Art. 8, the Court on the request of a party, where the agreement is subject to arbitration,
“refer the parties to arbitration unless it finds that the agreement is null, void, inoperative or
incapable of being performed.”72 However, such request is to be made before the submission of
“ the first statement on the substance of the dispute”, and the commencement of proceeding in
the court does not hamper the beginning or continuation of the arbitral proceedings or the
declaration of an award. Sanders argued that this question of the validity of arbitration
agreement should be considered by the arbitrator before resorting to the court; such reasoning
is in line with Art. 16.73 Moreover, member states such as California, Nigeria, Egypt and India
adopted this change in their arbitration law; which is also supported by case laws. Furthermore,
Art. 9 provided that “it is not incompatible with an arbitration agreement for a party to request,
before or during arbitral proceedings, from a court an interim measure of protection and for a
court to grant such measures.”74 However, arbitration should be given importance when
considering the application of provisional measures as if there is an opportunity to get the relief
from the arbitral tribunal, that should be primarily sought. Maniruzzaman posited that the
question of jurisdiction provision in the Model Law ‘remains vulnerable in certain respects, it
does not clearly answer the question whether the arbitration clause still survives even though
the agreement of which it forms part never came into being or was null and void ab initio.’75
Constitution of the arbitral tribunal
In regards to the composition of the arbitral tribunal, parties have the freedom to choose the
number of arbitrators, but in case of non-consensus, it should be three. There should be no
discrimination on the grounds of nationality, but the parties can agree otherwise including the
71
(2005) 21 Arb.Int. 443, 447
72
73
(2005) 21 Arb.Int. 443, 447
74
75
A.F.M. Maniruzzaman, ‘The New Law of International Commercial Arbitration in Bangladesh: A Comparative
Perspective (2003) 14 Am Rev Intl Arb 139, 150
20
procedure for appointing the arbitrator.76 If the parties fail to reach an agreement, one arbitrator
should be appointed by each party, and those two arbitrators shall appoint the third arbitrator.
However, if the parties or the arbitrators fail to make appoints within 30 days from the date of
receipt of a request or from the date of appointment; the relevant party may apply for the court
to appoint the arbitrator.77 In case of the arbitration with a sole arbitrator, one party can similarly
request the court, if there is a disagreement as to the appointment.78 The resort to court direction
is available even if party agree on the procedure or relies on an institution, but they fail to
perform their duty.79 However, the decision of the court is appealable if the appointed arbitrator
is not qualified, impartial or independent.80 The arbitrator is under an obligation to disclose any
circumstances related to conflicts of interest, or doubts about impartiality or independence of
the arbitrator without any delay; as these can become the grounds of challenge or question about
the qualifications of the arbitrator.81 Such challenge procedure can be agreed by the parties if
the parties fail to do so, Art. 13 lays down the procedure. An aggrieved party may challenge within
15 days after the composition of the arbitral tribunal or appointment of the arbitrator by sending
a written statement to the arbitral tribunal. The arbitral tribunal will decide on the challenge
unless the arbitrator leaves the office or the other party agrees to the challenge as well.82 If the
challenge is rejected, the challenging party may request the court within 30 days of the decision
to consider the challenge; “which decision shall be subject to no appeal”83 and the arbitral
tribunal can carry on their function until the court makes a decision. It has been suggested that
the provision can allow the appeal of the court’s decision.84 The arbitrator’s mandate will be
terminated if he fails to perform his duties for the valid reasons. In case of termination of office,
76
77
Art. 11 (3)(a) of the UNCITRAL Model Law
78
Art. 11 (3)(b) of the UNCITRAL Model Law
79
80
81
82
Art 13 (1)&(2) of the UNCITRAL Model Law
83
84
(2005) 21 Arb.Int. 443, 451
21
the parties can appoint a substitute arbitrator on the same procedure discussed above. However,
the arbitrator should be held liable if the withdrawal is without any valid reasons.85
Jurisdiction and interim measures/ preliminary orders
The jurisdiction of the Arbitral tribunal extends to dealing with the question of “existence or
validity” of the arbitration agreement. The arbitration clause will be considered an independent
and separate agreement than the original contract. Therefore, unjustifiability of it does not have
an impact on the arbitration clause.86 The objection to the jurisdiction of the arbitral tribunal
shall be raised before the filing of a statement of defence or as soon as the dispute arises.87 Such
objection should be made to the arbitral tribunal itself, which can deal with the question on the
preliminary stage or as an award on the merits. If the question of jurisdiction is affirmative, the
aggrieved party can seek a decision from the court within 30 days of the decision from arbitral
tribunal.88 Possible extension of the jurisdiction question involves providing general provisions
related to the termination of the arbitral tribunal if it appears that it does not have jurisdiction
which should be appealable to the court.89
The Model Law was amended to incorporated interim measures and preliminary orders in 2006,
which subject to the agreement of the parties to allow the arbitral tribunal to give provisional
measures. An interim measure is a temporary measure that could be granted at any stage of the
disputes.90 Interim measures would be awarded to “maintain or restore the status quo pending
determination of the dispute;”91 to ‘prevent, or refrain’ the parties from causing any harm or
prejudice to the arbitral process; protect assets or evidence relating to the dispute or award.92
However, the applicant would need to satisfy the arbitral tribunal that damage is not adequate
relief against the potential harm and the benefit of the interim measure outweighs the harm
85
Ibid. 451
86
87
88
89
(2005) 21 Arb.Int. 443, 452
90
Art. 17 (1) & (2) of the UNCITRAL Model Law
91
Art. 17 (2)(a) of the UNCITRAL Model Law
92
22
likely to be caused by the measure. The claim of the applicant is not frivolously, thus being based
on merits.93 Furthermore, “a party may, without notice to any other party, request an interim
measure together with an application for a preliminary order directing a party not to frustrate
the purpose of the interim measure requested.”94 The arbitral tribunal can grant such preliminary
order if it considers the measure for the benefit of upholding the provisional or protective
measure. Once the preliminary order is granted, the arbitral tribunal shall communicate with all
the parties involved regarding the order and any communication between the party and the
arbitral tribunal.95 The Arbitral Tribunal shall provide the opponent to present its case regarding
the preliminary order and deal with any objection regarding the preliminary order. The
preliminary order is only valid for 20 days unless the arbitral tribunal extends it. However, the
preliminary order is not something that is enforceable by the court. The arbitral tribunal may
amend, modify or suspend the interim measures or the preliminary order on the application of
the party or on its own initiative.96 It can also require the party to deposit security for the
measure97 or require prompt disclosure of any materials which are connected to the measure
sought, and the duty of full and frank disclosure is vested on the party seeking interim
measures.98 Moreover, the party seeking interim measure shall be liable for any costs or damages
arising out the measure. The interim measure will be enforceable front of the competent court,
irrespective of the country in which it was issued.99 The relevant court should inform the
subsequent actions, and such court may seek security before recognising or enforcing the interim
measure. re
However, the court can refuse to recognise or enforce the interim measures only if it satisfies the
grounds under Art. 36 which will be discussed later; or security concern has not been complied
with, or the interim measures have been terminated or suspended by the arbitral tribunal.100
93
Art. 17A of the UNCITRAL Model Law
94
Art. 17B of the UNCITRAL Model Law
95
Art. 17C (1) of the UNCITRAL Model Law
96
Art. 17D of the UNCITRAL Model Law
97
Art. 17 E of the UNCITRAL Model Law
98
Art. 17F of the UNCITRAL Model Law
99
Art. 17H (1) of the UNCITRAL Model Law
100
Art. 17I (1)(a) of the UNCITRAL Model Law
23
Moreover, the provisional measure is beyond the power conferred upon the court, in such case
the national court may adopt the measure according to its formulation.101 The Model Law further
allows the court to grant interim measures on similar fashion regarding arbitration proceedings
which the court can maintain according to their procedures.102 There have been the major
development since the enactment of the Model Law and should be incorporated by the member
states as this revised version creates a balance between the objective of arbitration and the
authority of the state.
The Model Law promotes equal treatment and equal opportunity related to hearing.103 The
failure of observing these basic principles cause actionable grounds to appeal against the decision
of the arbitral tribunal. The principle of ‘party autonomy’ is fundamental and it has been
enshrined in the UNCITRAL Model Law, where Art. 19 provides that the “subject to the provisions
of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal
in conducting the proceedings….failing such agreement between parties, the arbitral tribunal can
conduct their proceeding according to this Law and in such manner as it considers appropriate,
the tribunal should can determine the admissibility, relevance, materiality and weight of any
evidence.”104 The Model Law was adopted by Nigeria, where the Supreme Court referred to the
party autonomy principle to be very wider and construe only the intention of the parties.
Nevertheless, Fagbemi argues that the ambit of the doctrine is hard to determine.105 The freedom
of contract first arise from the arbitration agreement where the parties submit their dispute to
an international commercial arbitration rather than the court of law and in that agreement, the
parties are free to construct their terms for arbitration, and such an agreement forbid the
national legal system from taking the case.106
The parties can determine the place of arbitration, but if they fail to do so, the arbitral tribunal
can decide the place bearing in mind the circumstances of the case and the convenience of the
101
Art. 17I (1)(b) of the UNCITRAL Model Law
102
Art. 17J of the UNCITRAL Model Law
103
104
Article 19 of the UNCITRAL Model Law
105
S.A. Fagbemi, ‘The Doctrine of Party Autonomy in International Commercial Arbitration: Myth or Reality?’
(2015) 6 (1) J. OF. SUST. DEV. LAW & POLICY 222, 226 & 227
106
Section V (1) (a) New York Convention on the Recognition and Enforcement of Foreign Arbitral, 1958
24
parties.107 The arbitral tribunal can meet at any location to conduct the arbitration proceedings
unless the party agree otherwise. The arbitral proceeding can be started immediately upon
request unless the parties agree otherwise108 and the parties are free to choose the languages
that can be used in the arbitral proceeding. Otherwise, the arbitral tribunal will decide it.109 The
parties can provide their statement of claim or defence stating the facts in issue, the relief sought
etc which can be amended during the proceeding, “unless the arbitral tribunal considers it
inappropriate to allow such amendment having regard to the delay in making it.”110 Furthermore,
in the absence of agreement between the parties, the arbitral tribunal will decide whether to
hold a hearing or not for the determination of the dispute. If any oral hearing is held, the parties
should be given sufficient notice or for the inspection of the goods or property.111 However, if
the claimant fails to submit the statement of claim, the proceeding will be terminated.112 The
proceeding will continue without any prejudice if the respondent fails to submit its statement of
defence or the parties fails to turn up at a hearing or submit documents.113 The parties can agree
on the appointment of an expert. Otherwise, the arbitral tribunal may appoint an expert for
assessing the issue in question for the tribunal, for which the parties can be ordered to submit
information or documents etc for the examination by the expert. The expert can be called to give
evidence in the hearing if considered necessary by the tribunal or party. Furthermore, ‘the
arbitral tribunal or a party with the approval of the arbitral tribunal may request from a
competent court of this State assistance in taking evidence.’114 The respected court may provide
support according to their rules of evidence.
Arbitral tribunals authority and powers
The arbitral tribunal will function according to the will of the parties; they will decide the
substance of law which is to be applied. However, in the absence of an agreement, the arbitral
107
Art. 20(1) of the UNCITRAL Model Law
108
109
110
111
112
Art. 25 (a) of the UNCITRAL Model Law
113
Art. 25 (b) & (c) of the UNCITRAL Model Law
114
Art 27 of the UNCITRAL Model Law
25
tribunal shall apply the rules related to conflict of laws.115 The tribunal also has the power to
decide ex aequo et bono or aminable compositeur if the parties consent. Their decision is to be
taken by the majority, and in case of individual arbitration, the arbitrator himself shall make the
final determination.116 If the parties settle, then the arbitral tribunal on request may attach the
settlement as an arbitral award or may terminate the tribunal.117 The award has to be in writing,
signed by the arbitrators which should provide the reasons for decision unless parties agree
otherwise and such award should be delivered to the parties.118 The arbitral tribunal is
terminated after the declaration of award or otherwise terminated when the claimant withdraws
the claim, or the parties agree to termination or continuation is unnecessary or impossible.119
However, a party can apply to the arbitral award for correction in the award, seek interpretation
or clarification with 30 days, which should be returned within 30 days.120 The tribunal can correct
on its initiative any error. Any application under this article should be made on notice to the other
party.
The issue of conflict of laws might be troubling to some extent, and it has been suggested that
the distinction should not persist as the “rules of law” should be applied by the arbitral
tribunal.121 Blackably and Partasides (eds) stated that “first, to the extent that the procedure in
any arbitration is regulated by law, that law is usually the law of the place of arbitration: that is
to say, the law of the ‘seat’ of arbitration.”122 The essence of international arbitration that it does
not relate to the local, national legislation or the seat of arbitration. It is more important that
the seat of arbitration be rather neutral or have no connection to the parties involved.123
115
116
117
118
119
120
121
(2005) 21 Arb.Int. 443, 460, 461
122
N. Blackaby and C. Partasides (eds), ‘Redfern and Hunter on International Arbitration’ (5th ed, OUP, Oxford,
2009) 1.18
123
Ibid.
26
Moreover, in international commercial disputes, the parties involved are often the big
corporates, states and state entities and the value of the claim accedes any domestic claim.124
Court’s intervention powers
The party can resort to the court by making an application for setting aside the award exclusive
if it can be proved that one of the parties to the arbitration agreement was incapable of
conducting the proceeding, or the arbitration agreement was not valid or according to the law of
the state.125 The aggrieved party to the application was not given proper notice regarding the
arbitral proceeding126 or the award deals with other matters not falling under the subject matter
of the arbitral proceeding, or the award was made beyond the power of the arbitral tribunal.127
If the arbitral tribunal was not properly constituted according to the agreement of the parties,
then an application to set aside the award can be made. Moreover, the award will be set aside if
the subject-matter cannot be dealt according to arbitration law of the country or it conflicts with
the public policy of the country.128 However, there is a limitation period of 3 months within which
to make the application for setting aside. Nevertheless, after the initiation of the setting aside
proceedings, the court may on its own initiative or on the request of a party, give the arbitral
tribunal opportunity to deal the dispute according to the agreement of the parties or to eliminate
the grounds for setting aside.129 Sanders stated that “under the ML the only recourse against an
award is the action for setting aside.”130 Therefore, it has been suggested that the time limit for
making a set-aside application should be extended or omitted in the case of public policy
issues.131
Additionally, article 36 provides that all arbitral award shall be recognised and be enforceable by
the court of court, irrespective of where it was made. The original copy of the award will be
124
Ibid. 1.20-21
125
Art. 34 (2) (a)(i) of the UNCITRAL Model Law
126
Art. 34 (2) (a)(ii) of the UNCITRAL Model Law
127
Art. 34 (2) (a)(iii) of the UNCITRAL Model Law
128
Art. 34 (2) (b) of the UNCITRAL Model Law
129
130
(2005) 21 Arb.Int. 443, 465
131
Ibid. 465, 466
27
required in an application for enforcement. However, recognition or enforcement can be
rejected on the grounds of incapacity, on the question of validity of the arbitration agreement,
failure to provide proper notice to the opponent, misuse or overuse of the arbitral tribunals
powers or where question regarding the constitution of the arbitral tribunal persist; additionally,
where the arbitral award is set aside by the competent court or suspended, and it has not become
binding on the parties according to the law of the country where the award was made.132 These
requirements are similar to those discussed above under Art. 34 of the setting aside an arbitral
award on the question of subject-matter and public policy of the state.
Conclusion
The response towards UNCITRAL Model Law is overwhelming with the number of member states
that have adopted it, and it was not limited to countries that did not have an arbitration
legislation. The UNCITRAL Model Law has been adopted by developed countries to fill the gap in
their legislative framework. The Model Law provides a perfect legal framework acceptable to
parties or States with different legal traditions, values and norms. However, the revision in 2006
that amended the Model Law could have responded some additional matters which was left
untouched. International commercial arbitration forum is fast-growing and a vital mechanism for
many parties which will need to cope up with the fast-changing world of trade, investment and
technology.
132
Art. 36 (1)(v) of the UNCITRAL Model Law
28
Chapter Four: The Legal Framework of Arbitration Law in Bangladesh
Arbitration is an important mean of settling disputes in commercial/ industry related problems

in Bangladesh, and Bangladesh has resorted to arbitration on many occasions.133 Alternative
Dispute Resolution (ADR) was used in villages known as “Panchayat – village council” where the
leaders would settle the disputes within their territory without resorting to the formal litigation
system.134 Additionally, the ADR forms were utilised during the Mughal era. Nevertheless,
arbitration as a form of ADR was part of this region through the Arbitration (Protocol and
Convention) Act 1937 and the Arbitration Act 1940 as a legal heritage during the British
Colonisation of the South Asian Continent. However, Sattar sharply identified that the 1940 Act
allowed the parties to seek the support of courts to scrutinises every step of the opponent which
defeated the very purpose of arbitration as an alternative dispute resolution.135 The law of
arbitration was consolidated into the Arbitration Act 2001136 after repealing the above mention
Acts. The AA 2001 came into force on 10 April 2001 which applies to all disputes. The 2001 Act
was enacted to change the interventionist approach in the previous Acts by “local courts and to
expedite the arbitral process.”137
Bangladesh is a fast-developing country with an average 6% growth in 2016138 and one of the
destinations for investment in South Asia. The development has attracted many foreign clients
with interest to participate in this growth, hence, the demand for arbitration as a mechanism to
resolve disputes arises. The reason for opting to arbitrate a dispute is the amount of cost,
133
SAIPEM S.p.A v. The People’s Republic of Bangladesh (2009) ICSID Case No. ARB/05/7;
134
Historical Development of ADR in Bangladesh (2 Jan 2013)
http://aclawresearch.blogspot.com/2013/01/historical-development-of-adr-in.html accessed on 10 Aug 2017
135
S. Sattar, ‘Bangladesh – The Asia-Pacific Arbitration Review 2014’ (3 Sep 2013) Global Arbitration Review
http://globalarbitrationreview.com/insight/the-asia-pacific-arbitration-review-2014/1036766/bangladesh
accessed on 14 July 2017
136
The Arbitration Act, 2001, Act No. 1 of the 2001 (24th January, 2001)
http://www.mccibd.org/images/uploadimg/act_and_policy/corporate_governance/The-Arbitration-Act-2001.pdf
accessed on 10 Aug 2017
137
138
Feature Story, ‘Bangladesh Development Update: Economy Requires Focus on Sustainable and Inclusive
Growth’ (30 Apr 2016) http://www.worldbank.org/en/news/feature/2016/04/30/bangladesh-development-
update-bangladesh-economy-requires-focus-on-sustainable-and-inclusive-growth-moving-forward (accessed on 20
July 2017)
29
complexity and delay that is involved in the court of justice. Sattar specified that “the
development of arbitration laws and the positive shift in the general attitude of the judiciary
concerning arbitrations in Bangladesh is a welcome change for the inexorably running
litigants.”139 Moreover, it helps to flourish up-to-date legal principles with international
commercial arbitration laws that would foster foreign investment in the country.
Analysis of Arbitration Act 2001
Arbitration has been defined very broadly as “any arbitration whether or not administered by
permanent institution”140 and International Commercial Arbitration has been identified as
“arbitration relating to disputes arising out of legal “relationships, whether contractual or not,
consider 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 countries 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.”141 Therefore, the 2001 Act is specifically created to deal with commercial arbitration
having a cross-border element. The 2001 Act would apply to disputes between two parties who
are of Bangladeshi origin, therefore, the 2001 Act applies to a domestic dispute; thus making a
shift from the Model Law’s international approach. Nonetheless, the 2001 Act has specific
provisions that are relevant to international commercial arbitration only, which do not apply to
domestic arbitration.142 Moreover, the 2001 Act is applicable where the place of arbitration is in
Bangladesh.143 Nevertheless, the ambit of the Act was extended to include disputes where the
place of arbitration is outside Bangladesh based on the reasoning that the 2001 Act did not give
a restrictive provision to include “only” those disputes having the place of arbitration in
139
140
Section 2 (m) of Arbitration Act 2001
141
Section 2 (c) of Arbitration Act 2001
142
143
Section 3 of Arbitration Act 2001
30
Bangladesh.144 However, a different reasoning was adopted by the High Court of Bangladesh in
the case of STX Corporation Ltd v Meghna Group of Industries Limited145 which applied a literal
approach to the interpretation of Section 3 (1) of AA 2001. Therefore, it is not clear what is meant
by the requirement of ‘place of arbitration in Bangladesh’ which requires clarification from the
highest courts. Sattar suggested that the vacuum with regards to this definition has left the law
stranding and “leaves open the possibility that the innocent party, after undertaking expensive
arbitration proceedings, is left with little more than a paper award. To allow for such a result
would be against the spirit of the New York Convention, to which Bangladesh is a party.”146 The
AA 2001 allows certain extent of autonomy to the parties, including the choice of law that will be
applicable to settle the dispute;147 however if the parties fail to decide the applicable law, “the
arbitral tribunal shall apply the rules of law it considers to be appropriate given all the
circumstances surrounding the dispute;” also taking into account the contract between the
parties “for ends of justice.”148 The parties are free to appoint any person for determining the
issues concerning the agreed arbitration rules in their agreements. An arbitration agreement can
be in any form as a clause in a contract or as a separate agreement which should in writing signed
by the parties.149
The arbitral tribunal shall consist of three arbitrators in case parties fail to agree, with one being
the chairman of the tribunal.150 Appointment of the arbitrators has been dealt under section 12
of the 2001 Act which provides considerable autonomy of the parties; but if the parties fail to
appoint one arbitrator within 30 days of notice for the arbitration proceedings, the other party
can request the District judge to appoint an arbitrator for any arbitration other than international
commercial arbitration.151 However “in case of international commercial arbitration with three
144
HRC Shipping Ltd v MVX Press Manaslu and Others [2012] 1 LCLR 207
145
[2012] 1 LCLR 159
146
147
148
Ibid.
149
150
151
Section 12 (3) of Arbitration Act 2001
31
arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall
appoint the third arbitrator who shall be Chairman of the arbitral tribunal.”152 The provisions
seem to be a blur and confusing regarding the distinctions that exist between the domestic
arbitration cases and international commercial arbitration. Moreover, where the above
procedure is applicable if the arbitrators fail to decide to appoint the chairman of the tribunal;
the appointment will be made by the Chief Justice or any other Appellate Division judge in case
of international commercial arbitration. 153 Moreover, in the event of procedure agreed by the
parties are not followed or implemented, the parallel approach is adopted. The appointment of
arbitrators shall be completed with 60 days of the application. The judge or Chief Justice when
appointing an arbitration must have regard to the position of the parties and appoint an
independent and impartial arbitration154; the decision of the judges will be final.155 These laws
have been precise towards the objective of the smooth composition of the arbitral tribunal,
therefore does not require any further amendments. Nevertheless, it demonstrates the
distinction adopted in the 2001 Act between domestic and international arbitration.
Nonetheless, the appointment of the arbitrator or arbitrators can be challenged on the ground
of arbitrator’s legitimate doubts regarding his independence, impartiality or qualification.156 The
challenge should be made without delay; the procedure for the challenge can be agreed between
the parties. If the party fails to agree on the procedure, the 2001 Act provides that the aggrieved
party shall submit a written statement to the arbitral tribunal with the grounds for the challenge
within 30 days of knowledge of circumstances. This decision of the arbitral tribunal should be
given within 30 days; where the aggrieved again can appeal to the High Court Division within 30
days of the ruling of the arbitral tribunal. The HCD shall decide on the application within 90 days
of the filing of the appeal. However, if the challenge or appeal is dismissed; the arbitral
proceedings carry on as usual. Additionally, the arbitrator’s mandate will be terminated: if the
arbitrator withdraws from the tribunal, dies, the arbitrators fails to perform or where both the
152
Section 12 (3)(a)(ii) of Arbitration Act 2001
153
154
S 12 (9) of Arbitration Act 2001
155
S. 12 (12) of Arbitration Act 2001
156
S. 13 of Arbitration Act 2001
32
parties agree to do so. A substitute arbitrator can be appointed following the process discussed
above, and such arbitrator in case of absence of agreement between the parties can carry on the
arbitral proceeding from the previous stage arbitrator left.157 It has been argued that the point
of arbitrator’s liability for non-performance or negligence has not been considered in the Model
Law neither in the 2001 Act. The provisions related to arbitrator’s accountability and exclusion of
liability should be incorporated into the Act. It is submitted that the arbitrator should be able to
exclude liability. However, that exclusion should not be allowed against fraud, deliberate
wrongdoing, dishonesty.158 Such liability can extend to arbitral institutions and the agents or
employees of the arbitral tribunal.
Judicial Intervention
Section 5 of the 2001 Act provides that unless agreed by the parties, written communications,
notice or summons should be delivered personally or at the place of business, habitual residence
or mailing address, and if these are not available, then the last known address of the above; the
deemed date of delivery would be the same day.159 However, these rules do not apply judicial
proceeding. Moreover, if the parties do not object to any derogation under the 2001 Act or fail
to object against non-compliance waives its right to do so.160 Section 7 of the 2001 Act is
significant; it deals with the jurisdiction of the court to intervene in the arbitration proceeding. It
provides that “notwithstanding anything contained in any other law for the time being in force,
where any of the parties to the arbitration agreement files a legal proceeding in a court against
the other party, no judicial authority shall hear any legal proceeding except in so far as provided
by this Act.”161 This is a major shift from the previous Acts and is akin to the principle adopted in
Article 5 of the Model Law. However, these provisions now need to be revised and amended to
include the use of electronic communication. Furthermore, the court's powers to intervention
would require current arrangements where the court’s intervention is necessary.
157
S 16 of Arbitration Act 2001
158
(2005) 21 Arb.Int. 443, 475
159
160
161
33
However, Section 7A dealt with the competences of the court to issue interim orders on an
application of the party anytime before the enforcement of the award. It allowed the High Court
Division to make certain orders in case of international commercial arbitration and in any other
case of arbitration to pass orders. The court can “appoint a guardian for minor or insane”162
person; “take into interim custody of or sale of or other protective measures in respect of goods
or property included in the arbitration agreement;”163 to order a party from transferring property
which might lead to discontinuation of the enforcement of arbitral award by “restraint order” or
an “injunction”.164 Furthermore, the court has the power to “seize, preserve, inspect, to take a
photograph, collect the specimen, examine, to take evidence of any goods or property included
in the arbitration agreement and for that purpose to enter into the land or building in possession
of any party”.165 The court can issue an ad interim injunction, appoint a receiver or take any
interim measures for the property or ensure the protection of arbitral proceedings as they deem
‘reasonable and appropriate.’166 The application can be made without notice to the other party
where deemed appropriate; and can cancel, alter or amend the order.167 However, the court
must be satisfied that the arbitral tribunal could not initiate the proceeding by itself or has failed
to pass such order.168 The incorporation of the final test to give importance to arbitral tribunals
power to grant interim measures does make the 2001 Act on par with the international
standards.
Jurisdiction and competence
Under section 10 regarding arbitrability of the dispute provides that “any party to an arbitration
agreement or any person claiming under him commences any legal proceedings against any other
party to the agreement or any person claiming under him in respect of any matter agreed to be
referred to arbitration, any party to such legal proceedings may, at any time before filing a
written statement, apply to the Court before which the proceedings are pending to refer the
162
Section 7A (1) (a) of Arbitration Act 2001
163
Section 7A (1) (b) of Arbitration Act 2001
164
Section 7A (1) (c) of Arbitration Act 2001
165
Section 7A (1) (d) of Arbitration Act 2001
166
Section 7A (1)(e) (f)(g) of Arbitration Act 2001
167
Section 7A (5) of Arbitration Act 2001
168
Section 7A (4) of Arbitration Act 2001
34
matter to arbitration.”169 The court can on application stay the proceedings unless it finds “that
the arbitration agreement is void, inoperative or is incapable of determination by arbitration.”170
Therefore, the existence of administrative litigation does not affect the arbitration proceeding or
its award. This provision balances section 7, and it is based on article II (3) of the 1958 Convention
on the Recognition and Enforcement of Foreign Arbitral Awards. Sattar specified that “section 10
ensures that no Bangladeshi court shall interfere with a matter that is subject to an arbitration
agreement,”171 provided the objection to the proceeding is submitted before the filing of
defence.
Section 17 is significant as it deals with the competence of the tribunal to decide on its
jurisdictions regarding the validity of the arbitration agreement and the constitution of the
arbitral tribunals.172 The arbitral tribunal can deal with the questions of a) whether there is in
existence a valid arbitration agreement; b) whether the arbitral tribunal is properly constituted;
c) whether the arbitration agreement is against the public policy; d) whether the arbitration
agreement is incapable of being performed; and e) what matters have been submitted to
arbitration in accordance with the arbitration agreement.173 This is a shift from the provisions of
the UNCITRAL Model Law which do not provide the autonomy to the parties. Furthermore, the
2001 Act encapsulates the severability of the arbitration agreement and the actual contract as
‘an arbitration agreement which forms part of another agreement shall be deemed to constitute
a separate agreement while giving a decision to determine the jurisdiction of the arbitral
tribunal.’174 Objections to the jurisdiction of the arbitral tribunal shall be raised by the submission
of the defence statement; if it is about the authority of the arbitral tribunal, the objection should
be raised as soon as appears; and the arbitral tribunal should carry on with its functions if the
objection is refused.175 The High Court Division has the power to decide on the question of
169
170
171
172
173
Ibid.
174
175
35
jurisdiction of the arbitral tribunal, on an application by any party which should be with notice to
all parties.176 However, the HCD will not entertain the application unless it is apparent that the
question is likely to save cost; was made without any delay for good reasons which is why the
court should intervene.177 Moreover, the arbitral proceedings shall continue pending decision
from the HCD unless the parties agree otherwise and the HCD should provide reason for their
decision.178 The 2001 Act vests considerable power to the arbitral tribunal to grant interim orders
for the protection of the proceeding, subject matters against which no appeal is available.179 The
‘no appeal’ provision is often considered to create misbalance between the relationship between
the court and the arbitral tribunal. However, the interim orders should be made on notice unless
its likely to cause delay and the arbitral tribunal can ask the party to provide security for the
measure to be ordered;180 the order of the arbitral tribunal can be enforced by the court.181
The 2001 Act provides something unique approach to facilitation of alternative dispute resolution
from the counterparts in the Western jurisdictions. Section 22 (1) provides that “it shall not be
incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of
the dispute otherwise than by arbitration and, with the agreement of all the parties, the arbitral
tribunal may use mediation, conciliation, or any other procedures at any time during the arbitral
proceedings to encourage settlement.”182 Maniruzzaman noted that this is a “typical Asian
approach to dispute resolution”183 which promote using other methods of dispute resolutions to
settle the problem. Additionally, if any settlement is reached between the parties through this
other forms of ADR, the arbitral tribunal has the authority on an application by the parties “record
the settlement in the form of an award on agreed terms.”184 This is something exceptional that
is not apparent in the Model Law neither available in any other western countries arbitration law.
176
177
178
S. 20 (3) & (4) of Arbitration Act 2001
179
180
181
182
183
A.F.M. Maniruzzaman, ‘Bangladesh Embraces The UNCITRAL Model Law On Arbitration – But Not Quite’ (2004)
19 Mealey’s International Arbitration Report, 1, 2
184
Sec. 22 (2) of Arbitration Act 2001
36
The 2001 Act does not distinguish between the awards that is giving by the arbitrator after
adjudication or that which is agreed by the parties. Furthermore, the 2001 Act provides principles
that are relevant to ensure fairness as well as entrust duties on the arbitrators.
Arbitral Proceedings
The arbitral tribunal shall deal with the dispute fairly and impartially and deal with it as quickly
as possible by giving equal opportunity to be heard as well as investigate the allegation and the
documents.185 There is no strict requirement to follow the civil procedure and evidence rules;
rather they can monitor the procedure agreed amongst themselves including the parties
involved.186 The procedural and evidential matters shall include: time, place, language,
statements of claims, documents, questions regarding admissibility, relevance and weight of the
evidence, ‘power of the arbitral tribunal in examining the issues of fact and issue of laws,
submissions.187 The parties can agree or fail to do so, the arbitral tribunal can decide on the place
of arbitration according to the convenience of the parties; start the proceeding when disputes
arising from the arbitration agreement or one party serves notice on another.188 Moreover, the
parties can decide whether to consolidate any arbitral proceedings189 and decide whether to
have a legal representative.190 The rules related to statements of claim and defence, hearing and
proceedings verbatim of the Model Law. The arbitral tribunal can seek expert opinion on a
specific issue or appoint an assessor who can be asked to dissipate their views or appear before
the tribunal; the parties may be called upon to give the required information and have the
opportunity to comment on the report.191 These powers are broader than that is available under
the Model Law. Additionally, the arbitral tribunal can issue summons of witnesses through the
court to examine, or collect materials; however, such witness cannot be compelled to do
anything which wouldn’t be possible under the civil procedure of the court.192 A person will be
185
186
S. 24 & 25 (1) of Arbitration Act 2001
187
188
S. 26 & 27 of Arbitration Act 2001
189
190
191
192
37
subject to contempt of court if he/ she fails to submit to the summon and would be a liability for
offences.193 Any evidence can be adduced orally or in writing or by affidavit; oral testimony can
be taken on oath or affirmation.194 Furthermore, the powers of the arbitral tribunal to deal with
the party who default are more extensive than the Model Law, including also to the provision of
the Model Law195, the power to dismiss the claim that is caused by the inordinate and inexcusable
delay which poses a substantial risk or serious prejudice to the respondent.196 However, if the
party can show sufficient cause for the delay with regards to attending the oral hearing or
submitting documents, then the arbitral tribunal would not carry on with the proceeding or make
an award.197 Moreover, the arbitral tribunal can make such order necessary against the failure of
a party to comply with an order or direction of the tribunal, and inability to submit security for
costs leads to dismissal of claim; and in case of other situations the arbitral tribunal can reject
the evidence relied upon, draw adverse inferences; or make an award without the relevant
matters or make such order for costs arising from non-compliance.198 These provisions related to
costs, details provisions for evidence does not surface in the Model Law, which demonstrates
Bangladesh’s commitment to maintaining international standards with regards to arbitration
policy.
Arbitral awards and Enforcement of the awards
The arbitral tribunal will deal with the disputes according to the rules of law as designated by the
parties or according to the legislation of the country.199 The decision should be reached by the
majority and issues to be voted by the Chairman of the tribunal.200 The form and contents of the
arbitral awards are quite similar to the Model Law201; however, additional provisions regarding
193
194
195
196
197
198
199
200
201
M.A. Khan, ‘Issues of Jurisdiction, Choice of Law and Enforcement in International Commercial Arbitration: A
Bangladesh Perspective’ in S.R. Garimella and S. Jolly (eds), ‘Private International Law: South Asian States’ Practice
(Springer, Singapore, 2017) 285
38
payment of money, interest, costs of the arbitration and parties are provided under Sec. 38.202
The decision of the arbitral award is binding on the parties203, and the correction or interpretation
application should be made within 14 days.204 The provision related to termination, setting aside
an arbitral award and enforcement of the arbitral award is the verbatim of the Model Law
provision discussed in the previous chapter.205 Moreover, the orders of the court under section,
42, 44 and 45 are appealable to the High Court Division.206 The 2001 Act also deal with
miscellaneous provisions such as deposits of costs, bankruptcy etc in the later parts of the Act.207
Conclusion
The law of arbitration in Bangladesh is comprehensive and fair, in particular through the
incorporation of the interim measures. The Arbitration Act 2001 made the Report on the Proposal
for Amendment of the Arbitration Act, 2001, for Including a Provision Relating to Interim
Measures by Court by the Law Commission.208 Therefore, this reflects that the Bangladesh
government is committed to improving the law of arbitration to meet international commitment
and improve standards. Additionally, the 2001 Act applies to both domestic and international
commercial arbitration; which puts Bangladesh in a firm position for dispute resolution and
foreign investment. The assessment of the AA 2001 demonstrates that the UNCITRAL Model Law
is not the sole source of the law of arbitration in Bangladesh neither the Model Law is
comprehensive enough as a Model Law for the developing or least-developed countries.
202
203
204
205
S. 41, 42, 43, 44, 45 & 46 of Arbitration Act 2001
206
207
S. 49 – 59 of Arbitration Act 2001
208
Law Commission, Report on the Proposal for Amendment of the Arbitration Act, 2001, for Including a Provision
Relating to Interim Measures by Court < http://www.lc.gov.bd/reports/55.pdf> accessed on 20 July 2017
39
Chapter Five: Comparative Analysis of Bangladesh’s Arbitration Law
The Bangladesh’s 2001 Act resembles the provisions of the UNCITRAL Model Law, but it also has
consolidated provisions similar to other countries in South Asia. Sattar recognised that the 2001
Act “attempts to synchronise Bangladesh’s existing arbitration laws with the 1985 UNCITRAL
Model Law on International Commercial Arbitration.” However, not all the parts are similar to
the Model Law, which requires further amendments to meet the international commercial
arbitration standards applied globally. Maniruzzaman specified that “Bangladesh is not lagging
behind anymore in the current age of global movement towards the modernisation of
international law.”209 The 2001 Act provides scope for improving foreign investment in
Bangladesh “especially in natural gas and power, and her ever growing export trade with the rest
of the world.”210 Given the position and consolidation effort to modernise the arbitration law in
Bangladesh, “the new Act thus creates a single and unified legal regime for arbitration in
Bangladesh which has also been a trend in recent years elsewhere”.211 Furthermore, It is
identified that the Arbitration Act 2001 is “something of a patchwork quilt as there are some
unique provisions derived from the Indian Arbitration and Conciliation Act 1996 and the English
Arbitration Act 1996.”212 Nevertheless, the new legislation plays a vital role in uplifting the
position of Bangladesh because of its growing foreign investment and export trade; as it reaches
the pick of Foreign Direct Investment (FDI) to an average of US$ 4 billion investment.213
The definition of international commercial arbitration in Section 2 (c) of AA 2001 differs from the
approach adopted in the Model Law, where Article 1 (3) provides that the application of the
arbitration law will depend on the seat or nature of the dispute. The 2001 Act adopted the
provision from the Indian Arbitration and Conciliation Act 1996.214 Additionally, Sattar noted that
209
19 Mealey’s International Arbitration Report, 1
210
Ibid.
211
Ibid.
212
A.F.M. Maniruzzaman, ‘The Bangladesh Arbitration Act 2001 – Some Reflections’ (2005) Asian DR 73, 73
213
Bangladesh Investment Development Authority, ‘Monthwise-Statistic’ <
http://www.boi.gov.bd/site/page/f43327ac-454c-4175-957f-d29a3bb5cfe7/2016> accessed on 20 August 2017
214
40
“for a dispute to come under the ambit of this provision, it must be considered to be a
‘commercial dispute’ under the laws of Bangladesh, which may be a more restrictive definition
than that employed by the Model Law, where it is stated that the term ‘commercial’ must be
given a broad interpretation so as to cover all matters of a commercial nature.”215 Moreover, the
2001 Act deals with the competence of the arbitral tribunals to rule on its own jurisdictional
questions differently. Maniruzzaman pointed out that ‘the new Act allows more freedom to the
parties on the matter by adding the proviso “unless otherwise agreed by the parties” to the
arbitral tribunal’s authority to rule on its own jurisdiction.’216 As discussed above, the 2001 Act
provides list of circumstances where the tribunal has its direct power to deal with its competence.
Such approach is unique as it is not provided in the Model Law or in the Indian 1996 Act.
Therefore, it is submitted that the AA 2001 incline towards ensuring party autonomy to provide
confidence in the private justice system and safeguard impartiality, fairness and independence
of the arbitral proceeding. The party autonomy is maintain in the provisions related to
constitution of the arbitral tribunal following the UNCITRAL Model Law and its spirit.217 However,
the appointment procedure is akin to the approach adopted in the Indian 1996 Act; which also
followed with regards to the provisions related to parties defaulting to agree or appoint the
arbitrators.218
However, the 2001 Act was mainly criticised for not having laws related to interim measures.
Maniruzzamana stated that “this is a marked weakness of the new Act as far as it relates to the
protection of parties who intend to arbitrate in Bangladesh. Even before the constitution of the
arbitral tribunal or the commencement of arbitral proceedings, situations or circumstances might
warrant interim measures to be taken by the court to protect the interest of a party. Otherwise
215
216
217
218
Ibid. 144
41
the whole purpose of such arbitration will be frustrated.”219 However, as discussed above the
interim measures was incorporated into the 2001 Act under s 7A which to certain extent
replicates the Model Law provisions regarding provisional measures and was adopted after the
proposal of the Law Commission. However, the interim measures available under the 2001 Act is
more that the provisional powers provided in the Model Law or the Indian 1996 Act. Moreover,
it is quite apparent from the above discussions that the grounds of challenge to arbitrator’s
appointment has been adopted from the Model Law. The 2001 Act incorporated the separability
of the arbitration clause promoting the use of arbitral proceeding and guaranteeing that the
arbitration is not frustrated.
Maniruzzaman stated that “in the conduct of arbitral proceedings the new Bangladesh Act has
endorsed certain principles of natural justice which are common to other modern arbitration
laws elsewhere, not just the UNCITRAL Model Law.”220 Section 23 of the 2001 Act represents
those parts related to impartiality, fairness and justice. Moreover, it has provisions regarding
consolidation of the arbitration disputes which is not available in the Model Law. Maniruzzaman
assessed that the 2001 Act followed provisions related to “Article 28, 29, 31, 32 and 33 of the
UNCITRAL Model Law, it has deviated in some respects from the Model Law provisions and
introduced some innovation and added new provisions. These deviation, innovation and addition
are not surprising as they are in keeping pace with the post-Model law recent developments in
the international field of arbitration.”221 However, on the issue of applicability of laws in the
absence of agreement between the parties, the 2001 Act deviates from the principles in Model
Law. In the Model Law, the arbitral tribunal would have applied the conflict of laws rules to
ascertain the applicable substantive law. On the same point, Maniruzzaman stated that “this
prescription reflects the recent trend in many international institutional arbitration rules as well
as in some national legislative enactments on international commercial arbitration”222 such as
219
220
Ibid. 2
221
222
42
the International Chamber of Commerce Arbitration Rules 1998, for the former and the Indian
Arbitration and Conciliation Act 1996. It is submitted that the 2001 Act reflect most of the
provisions related to the UNCITRAL Model Law. However, certain provisions are borrowed from
the sub-continental national legislations. Maniruzzaman further pointed that “unlike the Model
Law, the Bangladesh Act makes no provision on the matter of the arbitral tribunal’s authority to
decide ex aequo et bono or as aminable compositeur.”223 Thus, the parties can choose to opt for
the institutional arbitrational rules with regards to the substantive rules. However, the
preference to the terms of the contract of parties and the trade usages reflects the principles
enunciated in the Model Law. However, in relation to the powers of the parties to choose the
procedural ‘the questions still remain as to what extent the parties’ choice of the arbitral
procedural law will prevail when such choice proves inconsistent with the Act itself, or simply
whether the choice of any foreign procedural law or any international institutional arbitration
rules will automatically exclude the application of the Act to the procedural matters unless the
parties have expressly so stated in their contract.’224 Thus, this position needs clarification as to
the ambit of the parties freedom to contract regarding the jurisdiction of the arbitral tribunal and
the procedural rules that ought to be applied.
The safeguarding measures introduced in the 2001 Act does not align with the Model Law or the
Indian 1996 Act; such as the provision related to appeal against the objection of the arbitral
tribunal ruling on jurisdiction.225 It is important to note here, that the English Arbitration Act 1996
allows appeal against the ruling of the arbitral tribunal only with the leave of the court.226
Furthermore, as discussed above, the 2001 Act neither the Model Law deal with the situation
where the arbitral tribunal declines jurisdiction. Maniruzzaman stated that section 43 of the 2001
Act provides similar grounds for setting aside arbitral awards as it is provided in Art. 36 of the
Model Law, but the Model Law enunciates the principle enshrined in Article 5 of the New York
Convention. However, the Model Law provided an exhaustive list of grounds for setting aside
223
Ibid. 3
224
225
226
Sec. 32 (5) of the Arbitration Act 1996, in ibid.
43
awards, although, the 2001 Act does not tend to limit the grounds. Maniruzzaman argues that
because the 2001 Act reflects the provision in the Model law, thus, “section 43 (1) of the new
Bangladesh Act contains an exclusive list of limited grounds on which an award may be set aside,
and no other ground should be entertained for such a purpose.” Additionally, there are concerns
regarding the enforcement of arbitral awards in Bangladesh which are provided under sec. 45,
46 and 47 of the 2001 Act. Some of the problem are rather social than legal as identified by
Mohammad and Nabi, such as ‘tendency of non-cooperation and anti-arbitration bias of local
courts, ineptitude of local courts to appreciate ethos of international private dispute
settlements’; lack of understanding and inefficiency of the local courts, local protectionism,
corruption and manipulation227 all plays a factor towards dismantling the extensive piece of
legislation which would need to nothing and discourage foreign investment in Bangladesh.
‘The new Bangladesh Act, however, unlike the Model Law, introduces a safeguard against the
move to set aside either domestic or international award.’228 Additionally, the parties must pay
a deposit to the court as security before making an application for setting aside an award. This is
a discretionary safeguarding measure that is available to the court, which ‘will be a deterrent to
the losing party’s playing prank with the arbitral award and it also will save the court’s valuable
time.’229 The 2001 Act further demonstrates its capability to ensure that the parties pay the fees
and costs, but the Act does not empower the court to scrutinise unreasonable fees or costs of
arbitration. The issue of costs and fees are very crucial as described by Redfern in Chapter Two,
which has the potential to threaten the advantages of arbitration and could lead to the demise
of the usefulness of arbitration. It is submitted that the AA 2001 should add provisions related to
the power of the court to control unreasonable costs and fees so that the impact of
comprehensive legislation does not reduce into ineffectiveness. Such provision can also be
relevant when considering the cost of legal representation in arbitration. It is also important to
consider the case of liability of the arbitrator for negligence and fraud as discussed in the previous
227
N. Mohammad and R. Nabi, ‘Enforcement of foreign arbitral awards concerning commercial disputes in
Bangladesh: A Brief overview’ (2008) 24 Humanomics 274, 281
228
229
44
chapter. Another important factor for consideration is the issue of confidentiality in the arbitral
proceedings which is neither addressed in the Model Law nor the Bangladesh’s Arbitration Act
2001.
The 2001 Act allows enforcement of arbitral awards irrespective of whether the award is granted
domestically or internationally. This enforcement mechanism does not require any explicit
conditions or formalities, and an arbitral award is considered to be a decree of the court under
the Civil Procedure Code 1908.230 However, the principles related to enforcement of arbitral
awards are differently enacted under the New York Convention 1958 that distinguishes between
foreign and domestic arbitration. Additionally, Act purports to disregard ‘error of law or fact or
manifest disregard of the law’ as a reason for setting aside the award. Therefore, the 2001 Act
dealt with a multitude of aspects to modernise the law and make it on par with the international
standard. Additionally, the 2001 Act provides the retrospective effect, thus covering the arbitral
proceeding that arose before the enactment of the new legislation. Therefore, to summarise the
legislative framework of the arbitration law in Bangladesh, it ‘embraced the fundamental tenets
of modernisation of international arbitration including (i) party autonomy; (ii) minimal
intervention in arbitration; (iii) independence of the arbitral tribunal; (iv) far, expeditious and
economical resolution of disputes and (v) effective enforcement of arbitral awards. This
modernisation has also been brought about in the context of domestic arbitration.’231 Therefore,
it has the potential to improve confidence in the foreign stakeholders for investing in Bangladesh
with certainty to use the private justice system. There are increasing cases of arbitration in
Bangladesh after the adopted the new legislation.232 However, there are scope for reforming the
arbitration law in many areas which have been identified throughout this dissertation with
reference to various provision of other jurisdiction and legislation.
230
Sec 44 & 45 of the Arbitration Act 2001
231
232
N. Mohammad and R. Nabi, ‘Enforcement of foreign arbitral awards concerning commercial disputes in
Bangladesh: A Brief overview’ (2008) 24 Humanomics 274, 279
45
Conclusion
The pertaining discussion leads to the conclusion that the AA 2001 have been adopted on par
with the international standards; submerging the principles enunciated in the UNCITRAL Model
Law, Indian Arbitration and Conciliation Act 1996 and the English Arbitration Act 1996. The 2001
Act purports to ensure the freedom of contract, thus giving importance to the arbitration forum
so as to make it viable for the commercial entities to utilise it. The 2001 demonstrate the
‘separability’ of the arbitration clause, mere intervention of the court which is mainly concerning
the safeguarding features that should exist in the arbitration laws of a country.
46
Chapter Six: The effort to harmonise International Commercial Arbitration Law and
Recommendations
Globalisation has immensely affected the international trade, thus impacted on the
harmonisation of international commercial arbitration. Maniruzzaman opted to call this trends
of harmonisation as “flu of modernisation of arbitration.”233 The rationale is straightforward, as
the liberal approach is adopted in the global economic forums, “the liberalisation of the private
justice system through modernised international commercial arbitration is considered to be vital
for the purpose.”234 The UK has been a major destination for international commercial arbitration
because of its long-standing position as a centre for trade, business, insurance and commercial
ventures. London became a centre of arbitration as a result of its strong legal institutions that
facilitated justice and fairness through the common-law jurisdictions, specialists’ adjudicators
and other institutions. Hence, the laws of the land promoted and developed principles, rules and
institutions to enable London to become the centre of international commercial arbitration. The
UNCITRAL Model Law initiated the scope for the harmonization of international commercial law.
In the UK, the Departmental Advisory Committee recommended that the UNCITRAL Model Law
should not be adopted, but it accepted the Model Law to be logical and coherent.235
Nevertheless, the UNCITRAL Model Law is criticised for promoting distinctive measures between
the domestic law and international law. Moreover, the Department Advisory Committee noted
that the adoption of the Model Law will not allow the aggrieved party to seek clarification
regarding error or law, and not to introduce something not known to the legal professionals of
the UK. Thus, the Model Law was not adopted in the UK; rather the Arbitration Act 1996 was
enacted in light of UK’s position as a centre of dispute resolution. However, this chapter aim to
analysis the policy of harmonisation of international trade law championed by the UNCITRAL.
Bangladesh has opted to adopt mainly the UNCITRAL Model Law, the New York Convention as
the international model for harmonisation. Additionally, it has aligned its legislation with sub-
233
A.F.M. Maniruzzaman, ‘Modernisation of International Arbitration Law in the Age of Globalisation: A
Bangladesh Perspective (January 2004) I.C.C.L.R. 132, 132
234
Ibid.
235
Departmental Advisory Committee on Arbitration Law, ‘A Report on the UNCITRAL Model Law on International
Commercial Arbitration (HMSO, 1989)
47
continental approach. However, it is posited that the arbitration law could also reflect the
principles and approach adopted in Singapore, Hong Kong and China due to its relative position
as global investment and arbitration centre.
Harmonisation
The effort to harmonise legislation and regulations can be traced back to the 19th century.236 The
rationale for harmonisation is legal certainty and predictability.237 In the field of international
commercial arbitration, the 1958 New York Convention was the first major development for the
harmonisation of law which is ratified by 154 countries. The organisation supporting this
harmonisation process was the Hague Conference on Private International Law; the Institute for
the Unification of Private Law (UNIDROIT) and the International Chamber of Commerce. The
UNCITRAL was established in 1966, and the Model Law was enacted in 1985. Goode, Kronke and
McKendrick posited that “the Model Law is devoted to substantive arbitration law and has been
widely adopted across the world, albeit with modifications from jurisdiction to jurisdiction.”238 It
is important to note here that the UNCITRAL objective related to harmonisation and effort to
promote cooperation, encouraging as well as preparing existing model and uniform laws;
ensuring uniform interpretation etc. Faria stated that the “in the area of trade law harmonisation
in the UN….arguments for unification have tended to emphasise the economic benefits to be
gained by the unification of trade law, in particular for the developing states.”239 Moreover, in
the international trade and commerce, the disputes are widely settled by the mechanism of
international arbitration.240 It also helps to improve efficiency and standard of international trade
by providing methods and protecting the interest of the parties. The harmonisation effort can be
seen from the adopted of the countries similar ‘regulatory requirements or government
236
International Trade Law (UNCITRAL)
237
Ibid.
238
OUP, Oxford, 2015) 563
239
International Trade Law (UNCITRAL) 3
240
R.Garnett, ‘International Arbitration Law: Progress towards Harmonisation’ (2002) 3 Melbourne Journal of
International Law 1
48
policies’241 despite having different legal and political spectrum. Garnett pointed out that ‘the
process of harmonisation is often justified on the ground that it creates stability and certainty in
international trade by enabling parties to predict in advance the rules that are likely to apply to
them.’242 Therefore, the UNCITRAL Model Law has played a significant role in the promotion of
harmonisation.
Nevertheless, the UNCITRAL Model Law requires amendments on issues such as the scope of
arbitration in the Model Law, the use of electronic methods, the power of the court to intervene;
certain provisions regarding the composition of the arbitral tribunal requires revision.243 In the
Bangladesh’s AA 2001, the author aligns with the recommendation of Maniruzzaman, who
pointed out that “in due course, the need may arise to create a specialist arbitration bench in the
High Court Division to deal with international arbitration matters more efficiently and
professionally.”244 The demarcation of a bench will allow for time, scrutiny, specialist to address
the issues related to arbitration expediently and efficiently. Furthermore, the institutions and
organisations working in this sector should get recognition and funding from the Bangladesh
Government to promote the use of arbitration at a cheaper cost.
Conclusion
While the UNCITRAL Model Law provides a comprehensive guide and framework for the member
states to develop the national arbitration law; it nonetheless, facilitate international trade and in
a broader sense promote the harmonisation of rules and regulation related to international
trade. It also helps to ensure the task of United Nations to promoting peace and prosperity
globally. The Model Law “contribute to building an open trading and financial system that is rule-
based, predictable and non-discriminatory, supporting good governance, development and
poverty reduction.”245 It also fosters the UN Millennium Development Goals: fostering a global
241
Ibid.
242
Ibid. 2
243
(2005) 21 Arb.Int. 443, 468, 469
244
245
International Commercial Arbitration: Different Forms and their Features (1st ed, CUP, Cambridge, 2013) 83
49
partnership for development.246 The relationship between the national court and the power and
function of arbitral tribunal lays down the cornerstone for the aggressive growth of arbitration.
The increase of arbitration will depend on how much legislation guides it, the position to conduct
proceedings according to the voluntary will of the parties and develop its own procedural as well
as substantive law. The UNCITRAL Model Law and Bangladesh’s Arbitration Act 2001 assumes an
approach to allow arbitration function freely, however, in case of the latter, it is more about the
willingness of the parties to share the growth of arbitration and respect the decision of the
arbitral tribunal. The development of AA 2001 will only be successful in Bangladesh if the people
and the professionals embrace it to the fullest; Maniruzzaman highlighted this point by stating
that “it is not enough to enact a piece of legislation on arbitration to modernise arbitration law.
The Government, the Bar and the Bench must attend to the development of the culture of
arbitration in Bangladesh, Judges and lawyers must be aware of the value of alternative dispute
resolution when the courts have heavily overburdened by their caseloads. They must actively
promote arbitration and ADR.”247 Therefore, the spread of information and educating the clients
regarding the usefulness of ADR is a first step towards making all these efforts to harmonise and
modernise arbitration law in Bangladesh. Furthermore, Bangladesh government should create a
specialist body for studying, updating and making proposals regarding arbitration law on par with
international practices. The relationship between the court and the arbitral tribunal is vital to
development arbitration law of the country, as highlighted in the last chapter, the problems are
related to social factors including the position of the judiciary.
Words: 15,130
246
Ibid.
247
50
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55

Comparative Analysis of UNCITRAL Model Law On International Commercial Arbitration and Bangladesh

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Comparative Analysis of UNCITRAL Model Law On International Commercial Arbitration and Bangladesh

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Comparative analysis of the UNCITRAL Model

Law on International Commercial Arbitration

Arbitration is a proceeding that resolves disputes between parties.1 It is an alternative method

Characteristics of International Commercial Arbitration

International Commercial Arbitrations and framework

Historical Development of Arbitration Institutions

Evaluation of UNCITRAL Model Law provisions

Definitions and application of the Model Law

The Arbitration Agreement and courts interventions

Constitution of the arbitral tribunal

Jurisdiction and interim measures/ preliminary orders

Arbitral tribunals authority and powers

Court’s intervention powers

Arbitration is an important mean of settling disputes in commercial/ industry related problems

Analysis of Arbitration Act 2001

Jurisdiction and competence

Arbitral awards and Enforcement of the awards

 Fiona Trust Holding Co v. Privalov [2008] 1 Lloyd’S Rep 254

Other International instruments

 UN General Assembly, ‘Resolution on Revised articles of the Model Law on International

 R. Goode, H. Kronke and E. Mckendrick, ‘Transnational Commercial Law – Texts, Cases

 Departmental Advisory Committee on Arbitration Law, ‘A Report on the UNCITRAL

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