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LAW vision

The Arbitration Act 2001: A critical analysis

NASER ALAM
***The Act has recognised I the independence of the desire of the parties more than the 1940 Act and intervention of the court has been kept to a minimum. Wide acceptance of the Act among the commercial community is envisaged, but the provisions should be made clearer and unambiguous.***
THE process of arbitration or settlement of disputes by other alternative means than litigation has been in existence in our society since time immemorial. The traditional and unregulated forms of dispute resolution found in place in the society strongly as the concept of 'amicability' was respected more than litigation. Thus the notions of 'salish', 'panchayet' and the condemned 'fatwa' have been the results of the evolving need of the society. Legally regulated Alternative Dispute Resolution (ADR) mechanisms were in place in this region since the middle of the colonial regimes. There was a need for more regulated framework for ADR with necessary intervention of the court for reasons of speedy, less costly and friendly but fair and effective settlements of disputes. Though under the traditional unregulated forms, the nature of the dispute may range from criminal matters to land disputes and from family matters to other personal contractual and non-contractual disputes, but under the regulated forms, dispute resolution mainly encircled commercial and contract related disputes.
Until 1940, arbitration was mainly governed by the Code of Civil Procedure, 1908 even though the Arbitration Act, 1899 was applicable to some parts of British-India. The Arbitration Act, 1940 was an innovation as it detailed the arbitration laws in a single enactment, which was hitherto unseen. After the independence of Bangladesh, we also applied the Act of 1940 as our main arbitration law despite the presence of other ADR process for specific disputes, such as, disputes relating to land, family mediation, and some disputes in the employment and related sectors. However, the growing demand from and within the commercial network coupled with significant increase in the commercial activities necessitated a more modern and flexible arbitration law. Moreover, the growing 'deadlockexperience' (delay, cost, corruption and ineffectiveness) in litigation required a more thoughtful approach into arbitration and other ADR methods. Hence the Arbitration Act of 2001 (the Act) has been enacted and the 1940 Act has been repealed.
In this article, some of the provisions of the Act would be discussed to see whether the present Act could live up to the expectations of the reform.
The Preamble and scope
The 1940 Act was for all arbitration, whether domestic or international, but principally was applied to domestic arbitration. Domestic arbitrations are those where the parties are all resident in Bangladesh. It is rather surprising to note that the drafters of the Act of 2001 while specified about international commercial arbitration did mention nothing about its application to domestic arbitration. It does not even mention whether the Act applies to international non-commercial dispute resolution held in Bangladesh. Even though the Act mentioned that it applies to 'other arbitration', but the term was not defined in the Act. We can deem only by analogy and other provisions in the Act that it is applicable to domestic arbitration. This is regrettable, since the Act is a major enactment in this area after sixty years. Failure to clearly identify the areas where it is applicable generates doubts and ambiguity. Moreover, the failure to define the term 'other arbitrations' would raise further doubt as to whether some kinds of dispute could fall under the Act. Such as, whether a noncontractual environmental dispute could fall under the Act? It is argued that too much emphasis on the resolution of 'international' 'commercial' disputes in the Preamble and as a whole is an example of poor legislative drafting. It is
Section 14 Challenge procedure vis-à-vis section 15
Sections 12 and 13 of the Act deal with the procedure for appointing an arbitrator. These sections acknowledge the freedom of the parties to agree on the procedure to appoint arbitrators. In the event that there is no agreed procedure or if the agreed procedure does not work, then the District Judge (in a domestic arbitration) or the Chief Justice or a Judge of the Supreme Court designated by him (in an international commercial arbitration) may act as an appointing authority and appoint arbitrators. But if any of the parties does not like an arbitrator for legitimate reasons, he can challenge the arbitrator under the procedure in section 14 where only the High court has the power to hear such a challenge. What is interesting here is that even though in a domestic arbitration, the appointing authority of the challenged arbitrator is the District Judge, he does not have any power to hear a challenge. It is a deviation from the general norm that the challenge as to an arbitrator should normally be considered at first by the person/authority who appointed him. It is not quite sure whether the drafters of the Act wanted to assimilate the powers to hear the challenge into one court or it is an omission by them resulted from too much emphasis on international commercial
arbitration.
The later view gains support from the fact that a more similar power to terminate an arbitrator under section 15 is exercisable by the District Judge in a domestic arbitration. Let us think of a scenario where an arbitrator in a domestic arbitration is challenged on ground of his qualification. Under section 14, a challenge can only be heard by the High Court, apart from the arbitrator himself. Whereas, if he is unable to perform his duties as a result of his disqualification, he could only be terminated by his appointing authority, -the District Judge. The result is that there is no coherency in the provisions of section 14 and 15 and section 14 lacks in sound logic since, a separate regime for appointment of arbitrators has apparently been created by the Act for domestic arbitration. Therefore, it is a dilemma that should be resolved and the power to terminate or hear a challenge should be vested generally to the appointing authority or in the alternative to the Commercial Court of the High Court Division.
Moreover, the Act generally should have vested power to the Commercial Court of High Court Division to widen its role in international and domestic arbitration.
Section 40 ambiguity
An arbitral tribunal has a general power to deal with issues as to correction and amendment of a final award. Section 40 of the Act empowers the parties
to apply to the tribunal to correct any clerical, typographical and other similar errors in the award. Any party to the arbitration may also request the tribunal to interpret a part or specific issues in the award. A party may also make a request for amendment of the award. In all the above the instances, the party seeking the correction, interpretation and an additional award should give the other party notice of such an application. It is not, however, clear form the Act whether such notice has to be in writing. This is a vital omission and is more certainly not conducive to good arbitration practice.
Moreover, sub-section (3) of this section empowers the tribunal to correct any clerical, typographical and other similar error on its own motion. What is, however, not clear from this provision is whether the tribunal should notify the other parties when it finds out that a correction etc. is to be made. The Act does not provide a clear answer.
Further uncertainty results from the absence of any provision as to whether the tribunal should hear the parties before deciding on any application for correction, interpretation and additional award. It is argued that a decision on such an application without hearing the parties would be improper since it has the potential to prejudice a party. The failure in the Act should be carefully scrutinised and necessary amendments should be made to the Act so that the tribunal should have no power to correct, amend, and interpret and to make an additional award without giving reasonable opportunities to hear both the parties to the dispute. Sub-section (3) should be amended accordingly and a new provision should be inserted to deal with the issue as to the party's right to be heard.
One other final point to make about section 40 is that while sub-section (5) empowers the parties to apply for an additional award after the tribunal has made its final award, it does not allow the tribunal to take any initiative if it thinks that an additional award is necessary as a result of its omission in the final award. Thus it is not clear what would be the procedure in such a circumstance. Should the tribunal ignore it or exercise its power under subsection (3) in the form of correction? The Act cannot answer. It is suggested that a provision should be inserted in the Act empowering the tribunal to exercise suo moto power if it considers that an additional award should be made. The tribunal in such a case should give the parties adequate notice in writing and an opportunity to be heard before making an additional award.
These are some of the provisions of the Act which need more careful scrutiny considering the fact that the Act may not live up to the expectation of the parties involved in international commercial arbitration if the ambiguous provisions are not amended and some new provisions are not inserted. It is also interesting to note that this Act being the only major legislation relating to ADR, does not inspire the concepts of other forms of dispute resolution, such as, mediation and conciliation which are also gaining prominence in the commercial disputes. Other provisions of the Act in need of revised scrutiny relate to the ground for challenge of an award (setting aside provisions). It is feared that the 'setting aside' provisions are far from complete and simple, especially section 43(b)(ii) and (iv). These provisions will be revisited on a later occasion, but suffice it to say here that the provision in section 43(b)(ii) may rather prove to be against the spirit of the provisions of applicable law under section 36. Apart from the above criticisms and observation made, the Act has recognised the independence of the desire of the parties more than the 1940 Act and intervention of the court has been kept to a minimum. Wide acceptance of the Act among the commercial community is envisaged, but the provisions should be made clearer and unambiguous.
Naser Alam, MCIArb, a Barrister-at-law, is an advocate, Supreme Court of Bangladesh