Licensing Ad Hoc Arbitrators may popularise Arbitration in Bangladesh

Justice AFM Abdur Rahman: Despite all out sincere effort of the government in popularising arbitration as a method of ADR, a debate has cropped up recently in the minds of prospective arbitration users, whether to use Ad hoc arbitration or  vis-a-vis Institutional Arbitration in Bangladesh?

Britannica dictionary defines the word “ad hoc’ as a Latin term which literally means “for this.” In English it describes anything that can be thought of as existing “for this purpose only.” For example, a committee of an association constituted for time being for the purpose of constituting the regular committee is known as “ad hoc committee” which is generally authorised to look into a single matter of limited scope, that is to hold the election of the association and not to pursue any issue of interest.

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This term “Ad hoc arbitration” is in our centre point, so far the Arbitration Act 2001 is concerned. So also the term “Institutional Arbitration” as to its meaning in terms of the provisions of the said Act. These two terms recently became vital in view of the fact that Bangladesh has an open declared policy for inviting Foreign Direct Investment (FDI), towards which her excellency the Prime Minister of Bangladesh Sheik Hasina is trying hard and fast.

It is generally understood that in order to satisfy a foreign investor as to the security of his investment in a country where he is not a citizen, it has to be shown to the investor that the dispute resolution system of that country is impartial, strong and free from all interference from the incumbent government and the political elements. Further the Alternative Dispute Resolution System is also prevailing in the country which is manned by experienced impartial persons with dignified personality against bowing down to any undue influence which may be attempted by the incumbent government and the political elements.

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These requirements connected to FDI was taken into consideration by a commission of the United Nations, namely United Nations Commission on International Trade Law (UNCITRAL), which formulated a model law concerning Alternative Dispute Resolution (ADR) for its incorporation into the municipal law of the ratifying country. Bangladesh being a ratifying country has taken the said model law into consideration for some of its provisions for incorporation into its existing Arbitration Act.

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The government of Bangladesh enacted  Arbitration Act 2001,after repealing the age-old Arbitration Act 1940 taking Into consideration the particular provisions of UNCITRAL model law which are compatible to the situation. But although the legislature incorporated some of its provisions into the new enactment, it did not mention anything about either “Ad hoc” or “Institutional” arbitration. What was done is the incorporated provision of section 11 of the Act which has rendered independence to the parties to the International Commercial Arbitration to constitute arbitral tribunal amicably with as many as person as they choose on their own behalf along with appointment of the Chairman of the Tribunal, upon which the constitution of the Tribunal is final.

The Act further provides that  Arbitral Tribunal has to be appointed by the High Court Division in case of International Commercial Arbitration, where one party to the international commercial agreement failed to nominate his arbitrator within 30 days after that party was served with a notice by the other party who  invokes the arbitration clause of the agreement and informing of nomination of its own arbitrator. The High Court Division, if on the prayer of the initiating party, appoints arbitrator for the other party along with appointment of Chairman of the tribunal, the constitution of the  tribunal will be concluded.

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The provision of constitution of such arbitral tribunals by the parties amicably or by the High Court Division and the holding of arbitration by that tribunals is universally termed as Ad hoc arbitration tribunal.

On the other hand there may be authorised organisations in a country whose main object of service is to render a facility to hold arbitration in its owned venue through its panel of reputed arbitrators. These institutions, are being licenced by the government under its administrative capacity or under any statute or commission, are known as Arbitral Institution. Any arbitration held under these institutions is known as institutional arbitration. Example of such an arbitration institution, pioneer in Bangladesh is Bangladesh International Arbitration Center (BIAC). The other institutions is Bangladesh Institute of Arbitration (BIArb).

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These arbitration institutions have their well equipped venues and modern facilities for arbitral sittings. Both of them have their own Arbitration rules and panel of Arbitrators of reputed former Justices, Judges, experienced legal practitioner and trained mediator, negotiator and arbitrator. The service of these adjudicators is available in terms of scheduled fees and on payment of venue charges and other costs.

Both Ad Hoc and institutional arbitration has its benefits and drawbacks. A comparative study shows that institutional arbitration has a better benefit over Ad Hoc arbitration for a few reasons. Firstly, the modern world puts more preference on institutional arbitration and puts confidence in its reliability since these arbitration institutions are state recognised and more accountable than the Ad Hoc arbitral tribunals. The next reason is the availability of a list of reputed, experienced and lamented arbitrators classified in accordance with their subject of experience and also availability of them  under one umbrella. So far the cost of the arbitration is concerned it is generally understood that institutional arbitration is cost effective due to their offerings of one stop service.

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However institutional Arbitration has its drawbacks also. This may be the cause of the backlog of cases. The institutional arbitrators are engaged in more jobs than the ad hoc arbitrators and as such the disposal of disputes may be delayed due to non-availability of schedule. This cause is absent in ad hoc arbitration and the parties may get their dispute disposed off within the shortest possible time in ad hoc arbitration.

Whatever be the case, in order to create confidence and reliability in the minds of the arbitration users, Bangladesh has to formulate the rules under the provisions of section 57 of the Arbitration Act 2001 by the government, incorporating the licensing procedure and the terms of their licence of the prospective Arbitration Institutions. Which intends to render service in the field of arbitration. The government may not only grant licence to these intended arbitration institutions, but also to the intended ad hoc arbitrators who are former Justice of the Supreme Court, judge of the Subordinate judiciary and also to legal luminaries intending to render service in the field, terming them as Sole Arbitral Tribunal.

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The government may by gazette notification maintain an updated list of these licentiate ad hoc arbitrators for the conveniences of the business world of domestic and foreign. This sort of granting licence and maintaining a official list of licentiate arbitrators of competent persons of diversified experience, shall create confidence in the minds of the prospective arbitration users and in this manner arbitration as an ADR may be popularised in Bangladesh.

Writer is a retired justice of the High Court Division of the Supreme Court of Bangladesh.