Arbitration is a process of dispute resolution out of the Court, where the decision (i.e. Award) of the Arbitrators is final and binding on the parties. In this process, a single arbitrator or a panel of arbitrators is chosen by the parties to make a binding decision that is exceedingly difficult to overturn because there are very limited grounds for appeal.
Arbitration can be of two types – “Ad hoc Arbitration” (where the parties decide on whatever rules they deem appropriate) or “Institutional Arbitration” administered (where the arbitration is conducted under the rules and procedures set by a specialized arbitration institution, such as the International Chamber of Commerce (ICC), International Centre for Dispute Resolution (ICDR), or Bangladesh International Arbitration Center (BIAC).
Following is the process map for initiating an arbitration in Bangladesh –
1. Arbitration Agreement
The first and most important step is to ensure that there is an agreement between the parties to resolve their dispute through arbitration. The agreement could be in the form of a clause in a contract or a separate arbitration agreement. In the absence of an arbitration agreement, the process of arbitration cannot be initiated.
Section 9 of the Arbitration Act illustrates the requirements of a valid Arbitration Agreement –
An arbitration agreement shall be in writing and an arbitration agreement shall be deemed to be in writing if it is contained in – (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams, Fax, e-mail or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
In practice, however, the Arbitration Agreement is often a single clause in an agreement which typically looks like the following –
Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity, or termination, shall be referred to and finally resolved by arbitration under the Arbitration Act, 2001 by a sole arbitrator mutually appointed by the parties. The seat of arbitration shall be Dhaka, Bangladesh. The language to be used in the arbitral proceedings shall be English. The governing law of the contract shall be the substantive law of Bangladesh.
Once you are satisfied that the Arbitration Agreement exists (in the form of a clause or a stand-alone agreement), then the notice of Arbitration must be served on the other party.
2. Notice of Arbitration
The party initiating the arbitration must give written notice to the other party, setting out the nature of the dispute and the intention to refer it to arbitration. A typical arbitration notice should contain the following components –
i. Factual aspects detailing the breach of the Agreement
ii. Clarifying the seat of Arbitration etc.
iii. Nomination of an Arbitrator on behalf of the Party, and request to the other Party for nominating the Second Arbitrator. These two Arbitrators are supposed to mutually agree upon and select the Third Arbitrator, who shall be the Chairman. However, if the clause refers to Sole Arbitrator then you should propose the name of the Sole Arbitrator.
iv. A timeline specifying a deadline to appoint the Second Arbitrator (for a 3-panel arbitrator) or agree upon the Sole Arbitrator.
As per section 6 of the Arbitration Act, 2001, the notice is deemed to have been received if it Is delivered to the addressee personally or at the place of business, habitual residence or mailing address of the other party.
What happens if the other side does not respond to your Notice?
In that case, you can take the matter to the respective Court as per section 12 of the Arbitration Act, 2001. If this is a domestic arbitration, then the District Judge will decide on the issue. If this is international commercial arbitration, then the Company Bench of the High Court Division of Bangladesh Supreme Court will decide on the issue.
3. Initiation of the Arbitral Tribunal
Once all the Arbitrators are appointed, the Arbitral Tribunal becomes the sole authority to determine the procedure of the Arbitration. No Court shall be entitled to interfere with the Arbitration process once this is initiated (except for a few specific alternate grounds).
This is recognized under the doctrine of kompetenz-kompetenz (recognized under section 17 of the Arbitration Act, 2001).
Disclaimer: This brief is for general awareness and academic purposes only, and it does not, and is not intended to, constitute or to be construed as legal advice. You are advised to obtain advice from an Advocate with respect to any particular legal matter.