In Bangladesh, the present law of arbitration is contained mainly in the Arbitration Act, 1940, there being separate Acts dealing with the enforcement of foreign awards. There are also stray provisions as to arbitration, scattered in special Acts. Three types of arbitration are contemplated by the Arbitration Act of 1940, namely (i) Arbitration in the course of a suit, (ii) Arbitration with the intervention of the court, and (iii) Arbitration otherwise than in the course of a suit and without the intervention of the court In practice, the last category attracts the maximum number of cases.
Under the Act of 1940, an arbitration agreement must be in writing, though it need not be registered. The agreement might make a reference about present or future differences. The arbitrator may be named in the agreement, or left to be designated later, either by consent of the parties or in some other manner specified in the agreement. Very often, the rules of prestigious commercial bodies lay down that a person who becomes a member of the association must accept the machinery of arbitration created or recognized by the rules of the association. This also amounts to an “arbitration agreement” for the purposes of the Arbitration Act, 1940.
Once an arbitration agreement is entered into for submitting future differences to arbitration, it is not, necessary to obtain the fresh consent of all the parties for a reference to arbitration at the time when the dispute actually arises.
Generally speaking, all justiciable matters of a civil nature can be referred to arbitration, but there are certain exceptions to the rule. For example, it is not permissible to refer a matrimonial dispute to arbitration, since the issues in such dispute are not only those of fact or law but also involve questions of public welfare.
Types of institutional arbitration
Arbitration has been used customarily for the settlement of disputes between members of trade associations and between different exchanges in the securities and commodities trade. Many contracts contain a standard arbitration clause, referring to the arbitration rules of the respective organization. Numerous arrangements between the parties in industry and commerce also provide for the arbitration of controversies arising out of contracts for the sale of manufactured goods, for terms of service of employment, for construction and engineering projects, for financial operations, for agency and distribution arrangements, and for many other undertakings.
Selection of arbitrators
The matter of selecting arbitrators is an important aspect of the arbitration process, as the arbitrators’ ability and fairness is the decisive element in any arbitration. The general practice is for both the parties to select an arbitrator at the time the arbitration agreement is concluded. Selection of arbitrators is also often made by agencies administering commercial arbitration, under pre-established rules of procedure. These organizations, including various trade associations, and Chambers of Commerce, maintain panels of expert arbitrators. The parties may either make their own selection or entrust the appointment of the arbitrators to the organization.
Procedure in arbitration
The arbitration process is governed by the rules to which the parties refer in the agreement. In the absence of specific legal rules, the procedure will be determined by the arbitrators. The arbitration proceeding must be so conducted as to afford the parties a fair hearing on the basis of equality. The arbitrator generally has the authority to request the parties and third persons to produce documents and books and to enforce such a request by issuing subpoenas through court. If a party fails to appear at a properly convened hearing, without showing a legitimate cause, the arbitrator in most instances will proceed in the absence of the party and then render an award after investigation of the matter in dispute. The technical rules of evidence do not apply to arbitrations. “See section 1, read with section 3, Indian Evidence Act, 1872” as in force in Bangladesh.
The Arbitration Act adopts the approach, that in the working of an arbitration agreement, the parties are free to lay down provisions regarding various matters of procedure. But in the absence of an agreement, the rules contained in the First Schedule to the Arbitration Act, 1940, apply.
An arbitrator can be removed for misconduct. In applying this provision courts generally follow the wide construction adopted in most commonwealth countries, so that, it is not merely misconduct involving moral turpitude that attracts this power, but also misconduct of a technical nature, for example, a breach of the rules of natural justice.
Detailed provision exist for settling the problems that might arise where two or more arbitrators are contemplated by the arbitration agreement and a difference of opinion arises between them.
Law to be applied in transnational transactions
The statutory law of various countries and the rules of agencies administering commercial arbitration contain provisions on the form, certification, notification, and delivery of the award. The arbitrator must comply with these requirements.
A much debated question in commercial arbitration concerns the substantive law to be applied by the arbitrators. Generally, the award must be based upon the law as determined by the parties in their agreements. This failing, the arbitrator must apply the law which he considers proper an accordance with the rules of conflict of laws. In both the cases, the arbitrator will have to take account of the terms of the contract and the usages of the specific trade.
The arbitrator and the court
Challenges to the process of arbitration are not uncommon. A party may claim, for example, that no valid arbitration agreement came into existence, because the person signing the agreement had no authority to do so or that a condition precedent to arbitration had not been fulfilled. More often, the validity of an arbitration is contested on the ground that the specific controversy is not covered by the agreement. In such cases, the question whether the arbitrator has authority to deal with the conflict is usually determined by a court.
Challenges before the courts against the award cannot be excluded by agreement of the parties, since the fairness of the arbitration process as a quasi judicial proceeding has to be maintained by the legal system.
Challenges before the court are, however, confined to specific grounds and specific matters. A review of the award by a court will not generally deal with the arbitrators decisions as to facts or with his application of the law. The jurisdiction of the court is thus restricted. The arbitration process must be the end and not the beginning of litigation.
Filing the award
An award of the arbitrator must be filed in the court and a decree obtained in terms thereof. The decree so obtained can be executed, like any other decree of the court. However, the court may, instead of confirming the award, remit it to the arbitrator, modify it or set it aside for the specified causes. Most of the orders passed by a court under the provisions of the Arbitration Act, 1940 in this regard are subject to appeal.
The court having jurisdiction under the Arbitration Act 1940 is the court in which a suit on the matter under dispute could be instituted.
Provisions have been enacted in the Act to deal with questions concerning the cost of arbitration and the procedure to be followed by the arbitrators regarding filing of the awards. In case of difference of opinion between an even number of arbitrators, the parties can provide for an umpire. Generally, most of the provisions applicable to arbitrators apply, with necessary modifications, to umpire also.