Bangladeshi Courts at Odds With Arbitration
Bangladeshi Courts at Odds With Arbitration
Bangladeshi Courts at Odds With Arbitration
Bangladeshi courts at
odds in respect of its
powers in relation to
arbitrations seated
outside of
Bangladesh
*
Sameer Sattar
A. Introduction
Barrister (Lincolns Inn), Advocate (Bangladesh Bar). The author is the Founder of Sattar&Co. (for details, please visit www.sattarandco.com). The author bears the sole
responsibility for any errors or inadvertent mistakes in this article. The author would like to convey his special thanks to Barrister Morshed Mannan for his assistance in
writing this piece.
1
Section 3 of the AA 2001 states: Scope(1) This Act shall apply where the place of Arbitration is in Bangladesh; (2) Notwithstanding anything contained in sub-section
(1) of this section, the provisions of ss 45, 46 and 47 shall also apply to the arbitration if the place of that arbitration is outside Bangladesh; (3) This Act shall not affect any
other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration; (4) Where any arbitration agreement is entered into before or
after the commencement of this Act, the provisions thereof shall apply to the arbitration proceedings in Bangladesh relating to the dispute arising out of that agreement.
2
HRC Shipping Ltd. v M.V. X-Press Manaslu and Others [unreported]. This case has been recently reported in 1 LCLR [2012], Vol.2, pp.20722.
3
STX Corporation Ltd. v Meghna Group of Industries Limited and others, Arbitration Application No.16 of 2009 [unreported]. This case has been recently reported in 1
LCLR [2012] Vol.2, pp.159178.
4
Section 10 of the AA 2001 states: 10. Arbitrability of the dispute(1) Where 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 matter to arbitration. (2)
Thereupon, the Court shall, if it is satisfied that an arbitration agreement exists, refer the parties to arbitration and stay the proceedings, unless the Court finds that the
arbitration agreement is void, inoperative or is incapable of determination by arbitration .
[2013] Int.A.L.R., Issue 1 2013 Thomson Reuters (Professional) UK Limited and Contributors
21
The court in the HRC case held that s.3(1) of the AA
2001 had to be given an inconclusive interpretation and
that it was delivering such judgment on the basis that the
AA 2001 avowedly sought:
to establish a uniform legal framework for the fair
and efficient settlement of disputes arising in
international commercial arbitration.5
The court noted that the AA 2001 was largely based
on the United Nations Commission on International Trade
Law (UNCITRAL) Model Law and that the harmonisation
and flexibility fostered by the UNCITRAL Model Law
was also enshrined in the AA 2001.6 The court relied on
the decision in M/s Strains Construction v Government
of Bangladesh ,7 where it was held that:
The Salish Ain, 2001 [AA 2001], repealing the
earlier Arbitration Act, 1940, is prepared on that
[UNCITRAL] model.8
Bearing this fact in mind and in spirit of the fair and
efficient settlement of disputes through arbitration, the
court ruled that s.3(1) is an inclusive provision rather than
an exclusive one. It explained as follows:
It is evident that Section 3(1) provides that 2001
Act would apply where the place of arbitration is in
Bangladesh. It does not state that it would not apply
where the place of arbitration is not in Bangladesh.
Neither does it state that the 2001 Act would only
apply if the place of arbitration is Bangladesh.9
In contrast, the Court noted that the UNCITRAL
Model Law through arts 1(2) and 8 have an exclusive
definition as it provides that proceedings will only be
stayed if it is in the territory of a State. The court
interpreted this omission to be an indication that the
Bangladesh Parliament did not intend to restrict the
application of the AA 2001 only to arbitration taking
place in Bangladesh.
Moreover, the court noted that no distinction was made
in the AA 2001 between International Commercial
Arbitration which takes place in Bangladesh and
International Commercial Arbitration which takes place
outside Bangladesh. The court relied heavily on the
Indian case of Bhatia v Bulk Trading,10 to elaborate on
the point that the applicability of a national arbitration
statute is not restricted to arbitration taking place in that
State. The court in the HRC case relied on the Bhatia
judgment to support its purposive interpretation of the
[2013] Int.A.L.R., Issue 1 2013 Thomson Reuters (Professional) UK Limited and Contributors
14
Section 7A of the AA states: 7A. Powers of court and High Court Division to make interim orders: (1) Notwithstanding anything contained in Section 7, unless the
parties agree otherwise, upon prayer of either parties, before or during continuance of the proceedings or until enforcement of the award under section 44 or 45 in the case
of international commercial arbitration the High Court Division and in the case of other arbitrations the court may pass order in the following matters: (c) To restrain
any party to transfer certain property or pass injunction on transfer of such property which is intended to create impediment on the way of enforcement of award.
15
Article VI(4) states: 4. A request for interim measures or measures of conservation addressed to a judicial authority shall not be deemed incompatible with the arbitration
agreement, or regarded as a submission of the substance of the case to the court.
16
Article 9 states: Arbitration agreement and interim measures by court: 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 measure.
17
Stephen Blumenthal v Merrill Lynch Pierce, Frenner & Smith Inc , 910 F2d 1049 (2nd Cir 1990), Fed. Sec. L. Rep. P 95, 417.
18
HRC Judgment, para.46.
19
M/s. Stratus Construction Company v Government of Bangladesh 22 BLD (HCD) 2002.
20
Stratus Construction Company Judgment, para.9.
21
Unicol Bangladesh v Maxwell 56 DLR (AD) (2004).
22
Uzbekistan Airways v Air Spain Limited 10 BLC (2005).
23
Canada Shipping v TT Katikaayu 54 DLR (2002).
[2013] Int.A.L.R., Issue 1 2013 Thomson Reuters (Professional) UK Limited and Contributors
23
After hearing the parties, the court started with a plain
reading of s.3 of the AA 2001 and held that the legislature
intended for the AA 2001 to apply only when the
arbitration proceeding is in Bangladesh. The court held:
from a combined reading of sections 2(ga) [2(c)],
2(ta) [2(k)] and 3 of the Act it is apparent that the
intention of the legislature is that the scope of the
Act of 2001 is limited within the territory of
Bangladesh, except that there is a scope to enforce
an award passed in a foreign arbitration, pursuant
to section 3(2) read with sections 45, 46 and 47 of
the said Act of 2001.24
In relation to the interpretation of statutes, the court
held that the literal construction of a statute is the golden
rule of construction and that when words in a statute are
clear and unambiguous, they should be construed
according to their tenor and meaning, as it most clearly
reflects the intention of the legislature. The court further
explained that, while interim measures for foreign
arbitration were provided for in other jurisdictions, until
and unless the Parliament enacts such a provision
explicitly in a statute, such measures cannot be granted
in Bangladesh.
The court found the line of authorities relied on by the
Respondents more convincing in relation to this particular
issue, i.e the scope of the AA 2001. In the Unicol case,
the Appellate Division of the Bangladesh Supreme Court
held that:
the law as in Sections 3(1) and 3(4) of the Act
is limited in application as to the arbitration being
held in Bangladesh, but not as to matter restraining
a particular party from proceeding with arbitration
in foreign country in respect of a contract signed in
Bangladesh.25
Similarly, in Uzbekistan Airways case, the Appellate
Division held that:
on a careful scrutiny of the scheme and the relevant
provisions of the Act, both the Divisions have taken
the view that Section 10 of the Act has no manner
of application with regard to foreign arbitral
proceeding In that view of the matter, it appears
that the scope of Section 10 of the Act is well settled
and it has been decided more than once by the
Appellate Division in the aforesaid two cases that
Section 10 of the Act does not apply to foreign
arbitral proceedings.26
Similarly, in Canada Shipping, where the arbitration
was to be held in London, it was found that:
24
[2013] Int.A.L.R., Issue 1 2013 Thomson Reuters (Professional) UK Limited and Contributors
E. Conclusion
Despite this, the uncertainty regarding the Bangladeshi
courts powers in respect of foreign arbitrations remain
in a state of uncertainty. It seems that, unless the
Bangladeshi Parliament amends the AA 2001 to expressly
include that the Bangladeshi courts would have the power
to issue interim remedies in cases of foreign-seated
arbitrations, this uncertainty created by the conflicting
judgments in the HRC and STX cases will continue. It is
feared that this might, in turn, dilute the reputation that
Bangladesh is trying so hard to develop as an arbitration
friendly jurisdiction. This is not healthy for a developing
country which is actively trying to attract foreign
investment and international trade.
For the sake of completeness, it is also necessary to
briefly mention that it would be interesting to see what
effect the recent Indian Supreme Courts decision in
Bharat Aluminium Co. (BALCO)32 will have on the
Bangladeshi courts considering Indian case law bears a
strong persuasive effect on Bangladeshi jurisprudence.
Recently, the BALCO case confirmed that the Indian
courts are unable to interfere and/or issue any interim
orders in respect of arbitration seated outside of India.
This has made the position in the STX case much stronger
but in a bid to help develop arbitration laws, along the
lines of non-interference from national courts, the BALCO
case has removed all possibility of international arbitration
users to seek help, through interim remedies from the
Indian courts, in order to support the process. This would
prove to be disastrous to the development of arbitration
laws and would be in direct conflict with the spirit and
ethos of the New York Convention.
In relation to this particular interim remedy issue, it
is felt that Bangladesh could take valuable lessons from
Singapore, which is a developed arbitral jurisdiction in
South-East Asia. In Multi-Code Electronics Industries v
Toh Chun Toh and Others,33 the Singapore High Court
took a less restrictive approach on this issue, deciding
that it could, under its general statutory power, grant
injunctions in support of foreign-seated arbitral
proceedings.
In terms of legislation and to avoid any future
confusion, Singapores International Arbitration Act
(IAA), which is largely based on the Model Law, has also
been amended in line with the amendments made to the
Model Law in 2006. In 2006, the Model Law was
substantially revised. As part of the revisions, the original
art.17 of the Model Law was replaced by a new chapter
on interim measures. This contains a new art.17J which
provides that:
29
J. Lew, L. Mistelis et al., Comparative International Commercial Arbitration, (London: Kluwer Law International, 2003) at paras.23113.
Bangladesh Law Commission, Report on the Proposal for Amendment of the Arbitration Act, 2001, for Including a Provision Relating to Interim Measures by Court
(January 8, 2003) Available at http://www.lawcommissionbangladesh.org/reports/55.pdf [Accessed January 10, 2013].
31
Article 6(b) of the Law Commission Act 1996.
32
Bharat Aluminium Co. v Kaiser Aluminium Technical Services Inc. , Civil Appeal No.7019 of 2005.
33
Multi-Code Electronics Industries (M) Sdn Bhd and Another v Toh Chun Toh Gordon and Others [2009] 1 SLR 1000.
30
[2013] Int.A.L.R., Issue 1 2013 Thomson Reuters (Professional) UK Limited and Contributors
25
a court shall have the same power of issuing an
interim measure in relation to arbitration proceedings
irrespective of whether their place is in the territory
of the enacting State, as it has in relation to
proceedings in court.
The intention of this new provision of the UNCITRAL
Model Law was to clarify beyond doubt the powers of a
competent court to grant interim measures. In line with
[2013] Int.A.L.R., Issue 1 2013 Thomson Reuters (Professional) UK Limited and Contributors