Applicability of the Arbitration Act 2001 in relation to foreign arbitrations: towards a new horizon | The Daily Star
12:00 AM, June 15, 2021 / LAST MODIFIED: 03:00 AM, June 15, 2021

Law Opinion

Applicability of the Arbitration Act 2001 in relation to foreign arbitrations: towards a new horizon

The Arbitration Act 2001 (the "Arbitration Act") was enacted with the spirit of recognising and dealing with, inter alia, aspects of international commercial arbitration. To that end, the Arbitration Act was amended in 2004 to include a provision which conferred powers upon the High Court Division of the Supreme Court of Bangladesh (the "HCD") to issue interim orders (in cases of international commercial arbitration). Section 7A of the Arbitration Act provides that the HCD may pass, in cases of international commercial arbitration, any order in relation to matters enumerated thereunder which include, inter alia, the power to issue ad interim injunctions and to take "any other interim protective measures which may appear reasonable or appropriate" to the HCD. However, despite having such an express provision, the same could not be consistently used by the parties due to a confusion arising from Section 3 of the Arbitration Act, which deals with the scope and application of the Arbitration Act. The controversy appears to have stemmed from the meaning and application of Section 3 of the Arbitration Act.

The two decisions, HRC Shipping Limited v. M.V. X-Press Manaslu and others, 12 MLR (HC) 2007 ("HRC") and STX Corporation Ltd v. Meghna Group, (2012) 64 DLR (HCD) 550 ("STX"), both from different Benches of the HCD, dealt with the role of Bangladeshi courts in arbitrations seated outside of Bangladesh. In both these cases, the Bangladeshi courts had reached decisions starkly different to one another. The ruling in the STX case had confirmed that the Bangladeshi courts are unable to issue any interim relief, even to support the arbitration process, if the place of arbitration is outside Bangladesh. On the other hand, the HRC case had earlier taken a more liberal view of Section 3 of the Arbitration Act and held that it would apply even where the place of arbitration is outside Bangladesh. However, this issue arose again for consideration by the HCD in the case of Southern Solar Power and another v. Bangladesh Power Development Board and others, 2019 (2) 16 ALR (HCD) 91 ("Southern Solar") – where the HCD, in stark contrast to the views laid down in the STX case, went back to the position taken in the HRC case and ruled that the HCD is well competent to entertain an application under Section 7A of the Arbitration Act even in relation to an arbitration taking place outside of Bangladesh.

One of the focal points of deliberation in this case was the applicability of the Arbitration Act for arbitrations taking place outside of Bangladesh. On this point, the HCD stated that Section 3 of the Arbitration Act is not about the jurisdiction of the courts reiterating that its wording does not seek to oust the jurisdiction of the HCD in relation to foreign arbitration. Since there is no use of any prohibitory wording, the relevant provisions of the Arbitration Act may be applicable. This observation appears to be a bold shift from the more conservative and restrictive view taken in the STX case, wherein the HCD, on its perusal of Section 3 of the Arbitration Act, had stated that the modern method adopted by the courts is the literal construction of statutes - which is also called the golden rule of construction.

While deliberating on the maintainability point, on a word-for-word scrutiny of Section 7A of the Act, the HCD held that the said Section "being supernal" confers jurisdiction upon the Bangladeshi courts to issue interim orders not only for arbitrations taking place in Bangladesh but also for the ones taking place outside of Bangladesh. The HCD decided to differ from the previous decisions on this point since it was of the view that the earlier cases did not have the opportunity to consider and examine the expression "until enforcement of the foreign award" as embodied in Section 7(A) of the Arbitration Act, and, as such, the said judgments were given per incuriam (i.e. through lack of due regard to the law or facts). Moreover, in the past, the HCD was kept confined to the provisions of Section 3 of the Arbitration Act by portraying it to be a source for ousting jurisdiction of the courts and overlooked the provisions of Sections 7 and 7A of the Arbitration Act, by which jurisdiction regarding arbitration matters has been vested in the courts.

In the Southern Solar case, the HCD also stressed that the apparent purpose of the enactment of the Arbitration Act, upon repealing the earlier legislation, was done in order to harmonise the same with the UNCITRAL Model Law and, while the arbitration proceedings (both domestic and foreign) should be allowed to proceed with minimum interference from any courts, at the same time, the courts should come forward to assist the foreign arbitration tribunal as and when needed by keeping in mind the scheme and purpose of enactment of the Arbitration Act. Moreover, on such a standing, the HCD has put forth a recommendation for the Arbitration Act to be amended so that it can be applied to foreign arbitrations.

The HCD's ruling in the Southern Solar case is a welcome change to the arbitration landscape in Bangladesh (in so far as the jurisprudence is concerned). In the case of Frigo Mekanik Insaat Tesisat Ve Taahut Sanayi Ve Ticarest A.S. v. Bangladesh Milk Producers' Co-operative Union Limited (BMPCUL), 2019 (2) 16 ALR (HCD) 357, the HCD (following the Southern Solar case) upheld the maintainability of a Section 7A application even in case of foreign arbitrations. It is laudable as to how the HCD in the Southern Solar case has gone ahead to give a liberal interpretation to the provisions of the Arbitration Act in order to aid the arbitration process. For arbitration enthusiasts, it is most certainly to be seen as a timely attempt at stretching the provisions of the Arbitration Act to the point of giving effect to its actual spirit envisaged at the time of its conception. This is indeed a major paradigm shift in the jurisprudence of international commercial arbitration in so far as Bangladesh is concerned and, undoubtedly, a welcoming one - especially with the ushering in of an era where cross-border transactions are at their peak. Most importantly, the HCD's stance in the Southern Solar case is also in line with the revised UNCITRAL Model Law. In the year 2006, the UNCITRAL Model Law was substantially revised which stated that "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 regardless of the place/venue of arbitration. Although the Arbitration Act is yet to be amended in line with the revised UNCITRAL Model Law, the international community can take great comfort from the decision of the HCD in the Southern Solar case until such an amendment of the Arbitration Act takes place or until the overturning appeal of the Southern Solar case. The fact that judge-made law is an independent source of law contributes to its flexibility; and judges continue to adapt the common law to changes in commercial practice and social values. It is felt that judgments like the Southern Solar case will certainly instill a strong confidence on the part of foreign investors to keep on investing in Bangladesh instead of feeling discouraged to do so.

 

The writer is an Advocate of the Supreme Court of Bangladesh, assisted by his research associate Sajid Hossain.

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