Navigating international arbitration in Bangladesh

Shahwar Jamal Nizam, Partner and Managing Director at DFDL Bangladesh, joins Joyce Fong to provide insight on the arbitration regime in Bangladesh. This episode delves into the availability and enforcement of interim measures in support of arbitration, the procedural steps for enforcing foreign arbitral awards, and the judiciary’s increasingly pro-arbitration approach. Shahwar also examines common grounds for challenging enforcement, providing practical examples and advice for parties navigating the Bangladeshi arbitration landscape, supported by illustrative case studies from recent practice.

Transcript:

Intro: Welcome to Arbitral Insights, a podcast series brought to you by our International Arbitration Practice lawyers here at Reed Smith. I'm Peter Rosher, Global Head of Reed Smith's International Arbitration Practice. I hope you enjoy the industry commentary, insights and anecdotes we share with you in the course of this series, wherever in the world you are. If you have any questions about any of the topics discussed, please do contact our speakers. And with that, let's get started. 

Joyce: Welcome to the latest edition of our Arbitral Insights podcast series. I am delighted to have Shahwar Nizam as our guest today. Good afternoon, Shahwar. It's a pleasure to be chatting with you this afternoon.

Shahwar: Good afternoon, Joyce. The pleasure is all mine. Thanks for inviting me on this series of podcasts.

Joyce: For the benefit of our listeners, Shahwar is the Managing Director of DFDL Bangladesh. He is qualified in Bangladesh, England, Wales, and has substantial experience in the energy and infrastructure industries. So while to kick us off, let's perhaps briefly discuss the arbitration landscape in Bangladesh. I believe that Bangladesh is a signatory to the New York Convention. How does the legal framework support the enforcement of foreign arbitral awards in Bangladesh?

Shahwar: So the Bangladesh arbitration landscape is based on the Bangladesh Arbitration Act 2001. And that act is actually based on the UNCITRAL model laws. Bangladesh is a part of the New York Convention, and as part of that, these laws were brought about. So the laws are pretty internationally sort of standardized and quite well drafted. And the implementation of it has also evolved for the betterment of arbitration awards enforcement in Bangladesh over the years. It's basically something that is gaining more and more popularity and it's becoming more and more acceptable.

Joyce: Thank you Shahwar, that's really positive to hear. Based on your experience, what are the most common seats for the Foreign Awards which you are seeing coming to be enforced and recognized in Bangladesh?

Shahwar: So the most common seat for across the board is actually SISC. Because of the proximity of Singapore and because of the fact that SISC has actually done a lot of outreach programs in Bangladesh, it is commonly perceived to be sort of more usable, user-friendly. So Singapore has done a pretty good job in sort of showcasing itself as a neutral venue. From a cost perspective it's uh you know it's closer to bangladesh than say London or anywhere else and now i mean it's more difficult to get to Hong Kong than Singapore so you know SISC has taken the pole position in terms of the popularity of all the arbitration venues but having said that for a lot of the government contracts we see exit arbitrations you have the trade association arbitrations as well you know like the London Sugar Association for shipping we see a lot of LMA arbitration. We see for cotton and textiles, we see the Liverpool Cotton Association arbitrations. We see the Phosphor arbitrations as well. And also in any event, HKAIC, the Hong Kong Arbitration Centre, historically has been quite prominent as well. So we still see some of that, especially with Chinese parties on the other side. And also ICC Paris, ICC London. I mean, all of these are quite sort of prominent for arbitration need involving Bangladesh.

Joyce: All right, that's really interesting. Well, let's now turn to enforcement. As you know, it's common for arbitral tribunals to issue interim awards and orders, for example, to preserve assets and evidence. Are such awards and orders enforceable in Bangladesh under the New York Convention?

Shahwar: Yes, they are directly enforceable. By directly enforceable, I mean an arbitration award from a foreign arbitration, as long as it falls under the scope of the Arbitration Act as an international arbitration award, it is given the same legal status as a decree of a court in Bangladesh. So just like enforcement of any decree of a court in Bangladesh, the arbitration award can also be enforced through the courts in Bangladesh. And there are specific courts through which the arbitration awards are sort of enforced. So, you know, there are certain procedural aspects that you have to qualify for in sort of enforcement. But once you go through and file the enforcement proceedings, the arbitration awards can be enforced through those.

Joyce: Okay. On a related note, can Bangladeshi courts issue orders such as injunctions or asset preservation orders in support of foreign seated arbitrations?

Shahwar: Yes. So for foreign seated arbitrations, while arbitrations are initiated or ongoing, parties in Bangladesh can apply for interim orders, directions, asset preservation orders, or all of those things under a special provision called Section 7A of the Arbitration Act 2001. That gives quite wide discretionary powers to the court, to the high court, to consider applications in support of the arbitration that is taking place outside Bangladesh. And also, if there is an interim order made in the arbitration tribunal itself, while there is a separate section that gives the legal status of those arbitrations as if there are interim orders of the tribunal themselves, to support those directions or orders, parties can also use the Section 7A route to apply to the court to sort of give force to those orders. If they are anticipating a contempt or breach of those interim orders given by the tribunal.

Joyce: It's great to hear that the Bangladeshi courts are so supportive of arbitration and the parties arbitrating. So moving on to final awards then, could you please share a brief overview of the process for seeking recognition and enforcement of foreign awards in Bangladesh? How long does this process normally take and is there a deadline for parties to enforce foreign awards in Bangladesh?

Shahwar: So usually it takes two to three years. The way it works, as I mentioned, that arbitration awards treat it as if they are decree of the local courts. And the way it works is that the arbitration award has to be received in Bangladesh, you know, notarized and consularized, which means that wherever it is a foreign arbitration, the award has to be taken to the Bangladesh High Commission or the embassy of that country, get it attested by that High Commission and then sent to Bangladesh. And along with other documents submitted to the court, and then the proceedings start. And it usually takes two to three years for the enforcement to take place because Bangladesh has a lot of due process safeguards built in the civil court of civil procedure. So that's why, you know, it usually takes a bit of time.

Joyce: I see. And is there a right of appeal to decision of the court to enforce or to not enforce an arbitral award?

Shahwar: Yes, I mean, that's actually something that we have to face with, or that's something that creates problems and delays. I mean, while we have seen a lot of the appellate courts or the superior court judgment that gives enforcement of international arbitration awards sort of priority, or they recognize arbitration agreement and arbitration award and gives direction for enforcement, In the lower courts, as I mentioned, because there are a lot of due process safeguards built in in the court of civil procedure. Parties usually file a lot of different types of application challenging the arbitral award themselves or challenge the procedural aspects of it and all these other things that sort of create a lot of delays. But what we have seen is that ultimately the appellate courts usually are quite stern in sort of upholding the sanctity of the arbitration awards and the Arbitration Act.

Joyce: And how long would an appeal process typically take? Because you mentioned earlier two to three years for recognition and enforcement. So if you add in an appeal process, how long are we looking at?

Shahwar: I mean, that's like a very difficult question to answer because, as I said, you have the high court process to go through. You have the appellate division to go through. And in Bangladesh, already the courts are overburdened with cases. We don't have enough courts or enough judges to look after the cases. So, I mean, it can get dragged up to five to six years.

Joyce: Okay. Okay. And just from your experience, do parties tend to fight it all the way to the end or do parties tend to settle or reach an amicable resolution of the issue before?

Shahwar: I mean, we have seen both. We have seen in some instances parties going all the way, but in many instances, parties usually try to use these proceedings to settle, to negotiate.

Joyce: Just going back then to the challenges which parties can make, What grounds do parties tend to rely on when trying to challenge the recognition and enforcement of foreign awards in Bangladesh?

Shahwar: So the Bangladeshi Arbitration Act, as I mentioned, it's based on the UNCITRAL model law. So it has the usual sort of exceptions or grounds under which arbitration award can be challenged. What we see is that in Bangladesh, in some instances, these are interpreted very widely. For example, the public policy or the national interest, right? I mean, these are the two grounds that we see used most commonly. And in certain instances, we see them being interpreted very, very widely. Okay. And that sometimes becomes the challenge. And also, I think some of the other grounds that are commonly used is that the arbitration or the arbitration agreement was not formed properly or the arbitration arbitrators or the tribunal lack jurisdiction or they considered issues that were beyond the scope of the arbitration award. Or sometimes we see, I mean, very petty things like what is argued is that the arbitrator did not have the requisite expertise. And that's something that we have seen in instances where the arbitrator is not a lawyer or a judge or not legally qualified, right? So they basically try and argue that, oh, this arbitrator did not have the requisite expertise. In doing that. And also, sometimes we see that, you know, there are a lot of times fairness and equity is argued in the sense that, oh, they were not given enough time, or they were only allowed two rounds of time extensions, they were not allowed more than that. So these are the kind of grounds that we see most commonly used. I mean, the more successful grounds for challenging, in our experience has been the public policy and national interest.

Joyce: I see.

Shahwar: The most successful cases are those where these two grounds have been pursued quite heavily and where the lower judiciary or the lower courts sort of interpreted these two exceptions quite widely. Now, unfortunately, we haven't seen that many cases that have gone all the way up to the appellate division where some of these particular matters have been sort of dealt with in that way. But in most instances, we see that the superior courts, the appellate division are quite pro-enforcement.

Joyce: That's great to hear. Bearing in mind what you've just said, Shahwar, is there anything which foreign parties and tribunals can or should do to maximize the chances of a successful enforcement in bangladesh?

Shahwar: Yeah I mean I think there are firstly when doing during the contracting stage parties should have very clear arbitration agreements right parties should have very clear clauses that says that stipulates the venue the the formation of the tribunal and the the seat i mean all these points should be quite clearly stated out and and that is why some arbitration seats like SISC are becoming more popular because you have the standard clauses that can be used and that are very clear, right? So that's like the first thing that we always advise, to have the very clear sort of language in terms of the arbitration clauses and also as to what would be the subject of arbitration. Going back, governing laws, the law of the arbitrations, and all of these things should be very clearly spelt out. What procedural rules they would follow for the arbitration, all of those things should be clearly spelt out. Because in some instances, you have seen arguments arising out of the procedural rules that are being used because they were not spelt out in the arbitration clause. And those kind of things can become problematic at the enforcement stage. During the preceding stage, I mean, you know, it's sort of standard common knowledge. I mean, you know, if there are sort of Bangladesh law, if it is a foreign arbitration, if there are Bangladesh law aspects to it, then you have good sort of solid Bangladesh law experts, Bangladesh law opinions and all of these things. Because those things sometimes create big problems because, you see, opinions may vary between practitioners, right? So it would be advisable to have sort of clear-cut opinions, clear-cut analysis of laws and opinions from Bangladeshi practitioners that should not be brought into question at a later stage, right? So that's one aspect where we have seen things go sideways. Also, parties should consider using the Section 7A provision for interim or asset preservation orders, injunctions, and other things while the arbitration is ongoing to make sure that there is something left at the end of the proceedings for the enforcement to bite off. And then once the award is received, just bring it back to Bangladesh as soon as possible for enforcement. You know, because there is delays in the backlogs and, you know, a lack of sort of enough courts and other things, things can be delayed. So my suggestion is to bring it as soon as possible to Bangladesh.

Joyce: That's really helpful, Shahwar. So my takeaway is, firstly, have clear contracts. Secondly, get Bangladesh law advice at an early stage during proceedings. Thirdly, if there are assets in Bangladesh, then look to preserve it under Section 7A. and then once you get the award, go as soon as possible to Bangladesh for enforcement.

Shahwar: Yes.

Joyce: That's a really handy tip. Okay, so two final questions for you, Shahwar. What recent trends are you seeing in Bangladesh-related international arbitrations? And secondly, what trends do you expect to see in the next kind of two to three years?

Shahwar: Okay, the first thing that we see is that arbitration is becoming more and more popular. Okay, especially for cross-border matters, cross-border contracts, government contracts, and even private contracts that involve multiple parties. People are becoming more and more open to arbitration, and people are becoming more familiar with arbitration, and familiar with international arbitration, and they're getting more and more comfortable with international arbitration, so much so that we see a lot of the template government contracts. For example, for all of the energy and power related contracts, arbitration clauses have become standardized. I mean, initially we saw sort of a lot of English law-governed contracts with ICC or SIIC arbitration. Now we see the government suggesting bifurcated arbitration clauses where you have one arbitration part for anything beyond a certain value, but the smaller value matters to be resolved in local arbitration in the Bangladesh International Arbitration Center. So that is a clear indication that even the government wants to promote arbitration. And yes, a lot of the other government bodies, I mean, not just the power of energy ministry, a lot of the other government bodies are having sort of arbitration or similar proceedings within their framework to facilitate sort of arbitration and alternative dispute resolution mechanism. I mean, we see for a lot of the construction contracts, all the government concession contracts, all the government purchase contracts for commodities, for equipment, for other things. We see a lot of the maritime-related contracts. I mean, almost all of the government-related contracts are now, I mean, it's quite common to see arbitration clauses in them. For private contracts also, if it is cross-border, we see that. Even though the government and BIAC, the Bangladeshi Arbitration Center, is trying to promote arbitration for local-to-local contracts, that's something that I think is yet in the development stage. But the threat is that it is becoming more and more acceptable, a form of resolution. And even mediation, in some respects, is becoming more and more sort of common and acceptable. I mean, recently, I was talking to the head of the Arbitration Center in Bangladesh, and he was suggesting that we worked together to do sort of like an outreach program across the country so that, you know, not just in the capital, but in other places for business, people choose arbitration as a method of dispute resolution. So that's, I think, one, that's the trend, and I think the development that we will see going forward.

Joyce: Oh, that's really interesting to hear, and I'm looking forward to seeing arbitration becoming more and more popular in Bangladesh, for sure. Well, Shahwar, thank you so much for joining me on this podcast. I've learned a lot and I'm sure our listeners will agree.

Shahwar: Well, thank you very much for inviting me.

Joyce: Take care.

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