Bangladeshi firm Khan IT and Services had been sourcing computer accessories and software from Singapore-based Limcon Technology Solutions. From 2017 to 2019, the cross-border trades accumulated around Tk378 crore in dues as Khan IT failed to clear the payments on time.
To solve the dispute, Limcon had two choices: lodge a lawsuit against Khan IT with the lower court or settle it through hearings behind closed doors. The foreign company chose the second option as it filed an arbitration with the High court in 2020.
The High Court subsequently formed a panel comprising two representatives of the parties and a business leader. The panel was asked to settle down the dispute and submit the report to the court within 15 days.
Then the High Court announced the binding decisions of the report, prompting Khan IT to clear the dues in six instalments.
"Both sides were very happy with the arbitration award. Because such a big dispute was settled in just two months. Besides, they did not have to spend much for the resolution. The clearing of the dues was also prompt," Taherul Islam, Bangladesh representative of the Singaporean IT firm, told The Business Standard.
But what if Limcon chose the first option and sued Khan IT?
"In Bangladesh, it would take three to ten years just to reach the verdict. Then there would be an appeal with the superior court," Barrister Ajmaull Hossain QC, a company law expert who practises arbitration in at least 30 countries, told The Business Standard.
And the cost of running such cases is very high, he noted, adding sometimes a quarter or half of the disputed money claim is spent for the legal battle.
The lawyer said arbitration is attractive because cases are heard behind closed doors, rather than in the glare of publicity. Arbitration is also seen as more likely to be free of political influence, can be cheaper, and parties can choose their own arbitrators to hear the case.
Bangladesh introduced the Arbitration Act in 2001, stipulating its adaptation in the Code of Civil Procedure. Besides, resolution of trade disputes are possible under the Company Act.
Works like magic
For trade disputes, Barrister Ajmaull Hossain QC said arbitration works absolutely like magic as the internationally recognised method saves money, time and effort.
Explaining how arbitration works, he said one of the disputing parties needs to file the arbitration with a civil court or with the High Court in case of cross-border disputes.
The court then appoints a panel including representatives from both the parties. Before proceeding further, both the parties agree that they will accept the decisions of the panel.
During the hearing, the parties can attend virtually and submit documents in favour of their claims.
Rise and rise of arbitration cases
From 2017 to June this year, around 14,000 arbitrations filed with the High Court, involving around Tk1.13 lakh crore disputed claims, were disposed of, according to the Supreme Court and the law ministry.
The official record shows 32,514 arbitration cases filed with the civil courts across the country were settled during the period. The cases involved a whopping Tk2.56 lakh crore in disputed claims.
Barrister Ajmaull Hossain said resolution of trade disputes through arbitration is rising in Bangladesh, especially for cross-border disputes. Besides, more and more local ventures and corporate businesses are opting for the out-of-court dispute settlement.
Data from the Supreme Court and law ministry's Solicitor Wing backed his statement.
The High Court settled 1,354 arbitration cases in 2017, 2,100 in 2018, 2,408 in 2019, 2,614 in 2020, 2,954 in 2021 and 1,907 cases till June this year.
Civil courts across the country disposed of 4,086 arbitration cases in 2017, 5,309 in 2018, 5,408 in 2019, 6,600 in 2020, 6,811 in 2021 and 4,300 cases till June this year.
According to Supreme Court sources, more than half of the arbitration awards finalised by the High Court and lower courts last year were from various foreign companies, individuals and organisations. Records in previous years also followed the same pattern.
Around 70% of the cases were trade transaction disputes. Besides, there were disputes over share transfers, ownerships, business frauds, agreement violations, investments and substandard product delivery.
A vital ecosystem for ease-of-doing-business
In most of the countries who have better ease-of-doing-business positions, 90% of business disputes are settled through arbitration, said company law expert Barrister Tanzib-Ul-Alam.
He attributed the better business environment to a better functionality of dispute settlement outside the court.
Barrister Tanzib-Ul-Alam called for coordinated measures by stakeholders to further progress on the already rising arbitration trend.
"Many multinational companies still assume that cases in Bangladesh never reach a final verdict. This has been deterring them from investing in Bangladesh.
"The government needs to adjust its policies to prioritise trade arbitration," he told The Business Standard.
Even private firms joining the arbitration fleet
Apart from the courts, there are seven firms in Bangladesh who do arbitration. The major firms include the Bangladesh Institute of Arbitration, Bangladesh International Arbitration Center, Bimac-Bangladesh International Mediation & Arbitration Center and Arbitration & Mediation Center, Dhaka.
Muhammad A (Rumee) Ali, vice chairman of the Bangladesh International Arbitration Center and former president of AB Bank, said arbitration cases are rising on the back of both local and cross-border business disputes.
Nearly 2.11 lakh business cases, involving Tk2.50 lakh crore, are now pending with the court in Bangladesh.
Against the backdrop, Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry, told TBS that arbitration could be a better alternative.
Law Minister Anisul Huq told TBS that the government is considering making arbitration mandatory for settling trade and business disputes.