International Chamber of Commerce Bangladesh (ICC-B), the world business organisation and two prominent business chambers of Bangladesh namely, Metropolitan Chamber of Commerce & Industry (MCCI), Dhaka and Dhaka Chamber of Commerce & Industry (DCCI) obtained a licence from the Government in 2004 to establish the Bangladesh International Arbitration Centre (BIAC) as a not-for-profit organisation.

BIAC formally started its operation on 9th April 2011. It is an ADR service-provider organisation, facilitating resolution of domestic and international commercial disputes in an expeditious and amicable manner, through Arbitration and Mediation. BIAC has its own Arbitration and Mediation Rules. BlAC’s Panel of Arbitrators consists of 11 eminent jurists among them 4 are former Chief Justices of Bangladesh. 47 experts and trained Mediators are in BlAC’s list of Mediators. BIAC has developed all the facilities required for systematic and comfortable Arbitration and Mediation and has

handled 294 ADR hearings till date.

BIAC offers excellent facilities for Arbitration hearings and Mediation meetings, including two state-of-the-art meeting rooms with audio-aids and recording facilities, arbitrators’ chambers, private consultation rooms, transcription and interpreter services. BIAC provides all necessary business facilities like video conferencing, powerful multimedia projection, computer and internet access, printing and photocopying. Full-fledged secretarial services and catering service are also available on request.

As the only Alternative Dispute Resolution (ADR) institution in the country, apart from facilitating Arbitration and Mediation, BIAC also provides training courses on ADR, especially Arbitration, Mediation and Negotiation.

BIAC has taken initiative of providing specialised ADR training courses for different sectors, for instance, ADR in Money Loan Court Act, ADR in Procurement Disputes, ADR in Human Resource Management and others. BIAC also organises training programmes abroad jointly with those ADR centres which BIAC has signed collaboration agreements with. Till date, BIAC has organized 7 ADR courses, 28 arbitration training courses, 22 mediation training courses and 10 negotiation training courses, 1 Risk Management training Course and trained 1537 participants.

From the very beginning, BIAC has been working hard to create awareness about ADR facilities by conducting several outreach programmes, seminars, workshops and dialogues. BIAC has arranged 120 workshop/seminar/dialogues as of March 2020. BIAC has received recognition by signing cooperation agreements with 17 International ADR Centres, namely, The Permanent Court of Arbitration (PCA), SAARC Arbitration Council (SARCO), Asian International Arbitration Center (AIAC), Vietnam International Arbitration Centre (VIAC), Malaysia Arbitration Tribunal Establishment (MATE), Thailand Arbitration Center (THAC), Singapore International Arbitration Centre (SIAC), Indian Institute of Arbitration and Mediation (IIAM), Hong Kong

Mediation Center (HKMC), Mainland-Hong Kong Joint Mediation Center (MHJMC), Hong Kong International Arbitration Centre (HKIAC), Institute for the Development of Commercial Law and Practice (ICLP), Sri Lanka, Bombay Chamber of Commerce & Industry (BCCI) , India, Bridge Mediation and Consulting Pvt. Ltd., India, International Commercial Arbitration Service Center of Kunming (KICASC), China, Badan Arbitrase Nasional Indonesia (BANI) and The Philippine Institute of Arbitrators (PIArb).

Moreover, 25 leading corporate companies, banks, real estate companies, NGOs, Insurance companies, universities, law firmsand financial institutions have signed Memoranda of Understanding (MoU) to seek BlAC’s assistance in matters related to ADR, namely, Green Delta Insurance Company Limited, Building Technologies and Ideas Ltd. (bti), Friendship Bangladesh , The City Bank Limited (CBL), First

Security Islami Bank Limited (FSIBL), Dhaka Bank Limited (DBL ), Eastern Bank Limited (EBL), Islami Bank Bangladesh Ltd. (IBBL), Mutual Trust Bank Ltd (MTB), IFIC Bank Limited, Mars Financial And Legal Consultancy Limited (MARS), Anwar Group of Industries (AGI), Apex Group of Companies, International Centre for Diarrhoeal Disease Research, Bangladesh (icddr’b), RANGS Group, Skayef Bangladesh Limited (SK+F), Summit Alliance Port Ltd., TRANSCOM LIMITED, University of Liberal Arts Bangladesh (ULAB), Prime Bank Limited, London College of Legal Studies (South), Rahman & Rabbi Legal, London College of Legal Studies (North), AB Bank Ltd. and One Bank Ltd.

BIAC BOARD

Unique Heights (13th Floor), 117 Kazi Nazrul Islam Avenue, Dhaka 1217, Bangladesh. Tel: +8802 55138092-93 Fax: +8802 55138095; Web: www.biac.org.bd; E-mail: info@biac.org.bd,biac.org.bd@gmail.com

BIAC QUARTERLY BULLETIN

Vol. 9 Number 1, January-March 2020

CONTENTS

BIAC News 04International News 17Articles 26Interviews 34BIAC Membership 37

BIAC MANAGEMENT

Muhammad A. (Rumee) AliChief Executive Officer

M A Akmall Hossain AzadDirector

Mahbuba Rahman RunaGeneral Manager

Md. Ashiqur RahmanManager (Accounts & Finance)

Rubaiya Ehsan KarishmaCounsel

Syed Shahidul AlamCommercial officer

Shahida Pervin Administrative Officer

From the EditorIn the wake of worldwide spread of Corona Virus (COVID-19) it is without a doubt an understatement to say that the ongoing lethal pandemic driven global health crisis is drastically impacting communities worldwide. News about COVID-19 is changing at a rapid pace and has likely changed drastically since this piece was written. Words like ‘lockdown’ and ‘social distancing’ are becoming commonplace as communities across the country are taking new measures to limit social interactions and keep them and individuals safe. Here in Bangladesh, this epidemic continues to raise all sorts of questions about what should remain open, what should be closed and when? Courts across the country are also grappling with these types of questions and are considering these concerns and currently taking a variety of different approaches with shut down of all court activities from the last week of March 2020.

At this time with courts closing down, Bangladesh International Arbitration Centre (BIAC) has to respond more to the ADR programmes with concern for the health of the parties coming up for Arbitration and Mediation and our own health. We are also concerned about not having sufficient Arbitrators and Mediators owing to their actual illness or need to protect them by quarantining. This may be a good time for us to use online platforms, such as Zoom or other video conference options to conduct ADR sessions.

We wish our valued readers enjoy the current online edition which includes articles and interviews on the perception and understanding of ADR as well as news on activities of BIAC and other ADR institutions around the world. We remain confident that we will all get past this terrible time together. We will all be healthier, smarter and stronger. In the meantime, we hope you are all staying well.

Mahbubur Rahman

Latifur Rahman

Rokia Afzal Rahman

Nihad Kabir

Shams Mahmud

Chairman

Members

BIAC News

Public Service Commission Member Kazi Salahuddin Akbar lauds BIAC’s role in resolving commercial disputes 16 January 2020

Kazi Salahuddin Akbar, Member, Bangladesh Public Service Commission (BPSC) lauded the role of Bangladesh International Arbitration Centre (BIAC) in resolving commercial disputes through its institutional rules of Alternative Dispute Resolution (ADR), while visiting the BIAC Secretariat in the city on 16 January 2020 in the afternoon. Welcoming the BPSC Member, Director of BIAC Mr. M A Akmall Hossain Azad said that BIAC, the country’s first and only registered ADR facilitating institution, has been, since its inception, nearly 9 years ago, trying hard to embed best internationally accepted

practices of ADR methods including Arbitration and Mediation in resolving commercial disputes given the fact of our judiciary overburdened with case dockets to help boost businesses with a view to overall economic development of the country and achieving the target of upgrading our status to a developed economy by 2041 as committed by the Government. Kazi Salahuddin Akbar opined that ADR methods can supplement court proceedings for which BIAC has been playing a pioneering role. He went round different sections of BIAC and expressed satisfaction, seeing BIAC’s unique facilities of arbitration and mediation. Director, BIAC gave him an overview of BIAC’s programmes and recent achievements in general and successes in building a human resource base, in particular, by organising training programmes/ workshops/ seminars on ADR at home and abroad for stakeholders from the Civil Service, banks and financial institutions, the judiciary, corporate houses, the legal fraternity, academicians and students. BIAC Counsel Ms. Rubaiya Ehsan Karishma was also present.

FID urged for giving facility to writ petitioners, loan swindlers16 January 2020

Eminent Economist, former Bangladesh Bank Governor Mr. Salehuddin Ahmed said that providing the relaxed loan restructuring to facilitate errant borrowers who filed writ petitions, not be declared defaulters and are facing ACC cases, would increase the burden of bad loans. He advised the Financial Institutions Division (FID) to encourage the state-owned commercial banks and the errant borrowers to settle issues through Alternative Dispute Resolution system of the Bangladesh International Arbitration Centre.

https://www.newagebd.net/article/96709/fid-for-giving-facility-to-writ-petitioners-loan-swindlers

Legislative and Parliamentary Affairs Division Secretary stresses cooperation with BIAC25 January 2020

Mr. Naren Das, Secretary, Legislative and Parliamentary Affairs Division stressed further cooperation with Bangladesh International Arbitration Centre (BIAC) while giving away certificates among participants of a day-long training course on Arbitration and Mediation organised by BIAC on 25th January

4

2020 at the BIAC office in the city for 24 Senior Assistant Secretaries and Assistant Secretaries of the Legislative and Parliamentary Affairs Division, Ministry of Law, Justice and Parliamentary Affairs. The Secretary lauded BIAC’s role in popularising norms and practices of Alternative Dispute Resolution (ADR) and appreciated its efforts in application of internationally accepted best practices of ADR through its training and outreach activities. He said that his Division is keen to train its officials through more intensive courses using BIAC as a platform.

The officers who took part in the training are mostly involved in drafting, vetting and legislative translation of the Legislative and Parliamentary Affairs Division. The curriculum of the training course was based on the need of the Legislative and Parliamentary Affairs Division. It well maintained the international standard certificate course although it was condensed into a one-day event. The training was intensive and there was a mock for better understanding of the subject.

Resource person for Mediation Training was Dr. Khaled Hamid Chowdhury, Barrister and Advocate of the Supreme Court of Bangladesh and for Arbitration Training was Mr. Margub Kabir, Barrister and Advocate of the Supreme Court of Bangladesh. Mr. M A Akmall Hossain Azad, Director, BIAC thanked the Secretary for gracing the occasion and hoped that BIAC will get all support from the Ministry of Law for implementation of its programmes including training on ADR at home and abroad. Dr. Md. Jakerul Abedin, Joint Secretary, Legislative and Parliamentary Affairs Division and Ms. Mahbuba Rahman Runa, General Manager, BIAC who coordinated the training, were present during the training session.

President, Bangladesh Women Judges Association visits BIAC27 January 2020

Ms. Tanjina Ismail, President, Bangladesh Women Judges Association (BWJA) and Senior District & Sessions Judge paid a visit to the BIAC Secretariat on 27 January 2020 in the afternoon. Welcoming her to its new premises, Director of BIAC Mr. M A Akmall Hossain Azad said that as Bangladesh Women Judges Association (BWJA) aims to promote human rights with special focus on gender parity and access to justice, BIAC is eager to work together with BWJA with a view to integrating Alternative Dispute Resolution (ADR) process with our judicial system. He said that in our system justice seekers struggle with

numerous economic, social and institutional barriers in accessing to judicial system and widening access to justice depends upon extending some facilities to the litigants and empowering them to overcome those barriers. Given our judiciary over burdened with case dockets, ADR can help litigants achieve justice expeditiously and in a cost effective manner. With this end in view, he offered training and outreach facilities of BIAC for members of BWJA. President, BWJA went round different sections of BIAC and expressed satisfaction seeing unique facilities of arbitration, mediation, training and conferences. She stressed the need of appreciation and application of ADR norms by the legal community as well as the judges to help mitigate the sufferings of the litigants. Ms. Tanjina Ismail also said that BWJA will work out a plan for arranging joint training programmes with BIAC on ADR for lady judges of the civil judiciary. Ms. Mahbuba Rahman Runa, General Manager and Ms. Rubaiya Ehsan Karishma, Counsel of BIAC were present during the visit.

Exchange of views held between ADR ODR International and BIAC29 January 2020

Dr. Khaled Hamid Chowdhury, Bar-at-Law, Global Trainer and Bangladesh Representative of ADR ODR International-a thought leader in progressive dispute resolution and training on international conflict management, paid a visit to BIAC Secretariat on 29 January 2020 in the

5

afternoon. Dr. Chowdhury is also Head of Laws of the London College of Legal Studies (South), a partner institution of BIAC. Discussion was held between Dr. Khaled Hamid Chowdhury and Mr. M A Akmall Hossain Azad, Director, BIAC and Ms. Mahbuba Rahman Runa, General Manager, BIAC regarding the prospect of holding a 5 day long joint mediation training programme to be organised in Dhaka by BIAC, ADR ODR International and LCLS (South) tentatively in June 2020. Both BIAC and ADR ODR International agreed to prepare a Terms of

Reference for the proposed programme considering that such an international platform will be beneficial to BIAC in its thrust to implement best practices of Alternative Dispute Resolution (ADR) in the country.

BIAC organises Asian Credit Risk Colloquium in India 8 February 2020

Bangladesh International Arbitration Centre (BIAC), in collaboration with Bridge Policy Think Tank, India jointly organised the 3 day long Asian Credit Risk Colloquium on the campus of Gujarat National Law University (GNLU), Gandhinagar, India, from 8 to 10 February 2020. Credit Risk is one of the major concerns at the moment in Bangladesh as reflected in the large volume of Non Performing Loans in Banks. It is a fundamental risk that any Government or other regulated financial institution has to face in the course of business. Credit Risk Management (CRM) and Alternative Dispute Resolution (ADR) are viewed as two separate risk management practices. For the first time, BIAC, as the country’s first and only ADR institution, organised a specialised training course on CRM in collaboration with Bridge Mediation & Consulting Pvt. Ltd. (BMCPL), a business consulting firm of Bridge Policy Think Tank, India. Gujarat National Law University (GNLU) was the venue partner and the Embassy of the Czech Republic in New Delhi, India was the knowledge partner. 29 participants from 6 countries- Bangladesh, India, Jordan, Ghana, Italy and the Czech Republic attended the training programme. The Bangladesh delegation of 22 officials was led by Director, BIAC Mr. M A Akmall Hossain Azad, comprised representatives from 11 banks and financial institutions including the Bangladesh Bank. Speaking at the inaugural ceremony of the event on 8 February 2020, Director, BIAC emphasised on creating wider perspective of practicing ADR in Asia and beyond so that businesses may flourish by resolving business disputes expeditiously and in a cost effective manner. He also highlighted BIAC’s objectives and achievements in the last 9 years of its functioning as the only ADR service provider institution in the country. Professor Dr. S. Shanthakumar, Vice Chancellor of the Gujarat National Law University (GNLU), in his remarks showed keen interest in the commitments of BIAC and willingness to work together with BIAC for jointly organising training programmes and enrolling Bangladeshi students at LL M Course of GNLU through BIAC. In his welcome speech Mr. Anuroop Omkar, Director, Bridge Policy Think Tank explained the purpose of the training programme on Credit Risk Management. He lauded BIAC’s role in harnessing ADR in Bangladesh and expressed gratitude to BIAC for successfully co-hosting the event. During the 3 day long programme, in 15 separate sessions a number of topics were covered including (1) Performance Analysis of Banks and

6

Financial institutions: Risk Management Perspective, (2) Credit Risk Evaluation in Era of Digital Banking Innovation, Cyber security and Credit Risk, (3) Global Mandate of Financial Inclusion, Block Chains and Artificial Intelligence in Credit Risk Management, (4) Basel Norms for and Future Perspectives of Credit Risk Management, (5) Interface between Healthy Competition and Credit Risk Management, Role of Policy Regulator, (6) Crypto Currency and Credit Risk: India’s Standpoint and (7) Conflict Management and Credit Risk- Industry Perspective, Judicial Interpretation and Mandate. Trainers of high eminence from both India and abroad, representing the Reserve Bank of India, Czech National Bank, Insolvency and Bankruptcy Board of India, Credit Risk Professionals and Mr. Shubhash Garg, former Secretary, Ministry of Finance, India, made the presentations.

Grafts, lack of judicial support hold back UK investment10 February 2020

British HC says in international trade lecture.

British High Commissioner in Dhaka Mr. Robert Chatterton Dickson on Monday said corruption and lack of judiciary supports were discouraging the big British businesses to invest in Bangladesh.

He made the remarks at a lecture titled, ‘The Importance of International Trade”, organized by the Department of International Business at the University of Dhaka.

“Contract enforcement is very difficult in the country as there are a lot of cases pending with the courts, causing British companies to suffer when their counterparts violate contracts,” he said while speaking at the conference hall of BBA faculty.

In other countries, designated courts were in place for hearing international trade related disputes, he said, adding, “If Bangladesh cannot build such a system in a couple of years, tapping foreign direct investment will be tough as there are other attractive investment destinations in the world.” 

He said uncertainty in the regulatory regime and corruption were also holding back British investment here.

‘I would not name the company, but a British firm was thinking to come up with big investment recently but later backtracked considering the magnitude of corruption and judicial barriers here,” he said.

Robert Chatterton said in the post Brexit scenario there would be scopes for trade diversification and Bangladesh could be a potential partner in that journey.

‘For the LDC’s we will continue our trade like before but after the graduation from this it will be difficult for Bangladesh and the country need to prepare for that,” he said.

The British high commissioner said in the local manufacturing market the country was doing well and should focus on other sectors than readymade garments.

“Products like fridge, television, mobile handset and other technology products manufacturers are doing well. Beside the readymade garment, the country needs to focus on such industries,” he said.

7

He also stressed climate change issues, saying the economic growth of the country polluted the air, soil and water and it was high time to take action on such issues.

Meeting with UGC Chairman regarding inclusion of ADR in the University Curriculum 11 February 2020

Mr. Muhammad A. (Rumee) Ali, CEO of BIAC met University Grants commission (UGC) Chairman Dr. Kazi Shahidullah at the latter’s office on 11 February 2020. The CEO started discussions with background on why ADR is important given the significant role FDI plays in economic growth. Referring to the data from the World Bank’s Doing Business Index Report of 2020, Bangladesh stands at 189 out 190 economies in terms of Enforcing Contracts. Time, cost and quality of judicial

process makes investors lose confidence as a result FDI influx is low. In addition, we are signatories to the Sustainable Development Goals (SDGs) which include Quality Education (SDG 4), Decent Work and Economic Growth (SDG 8) and Peace, Justice and Strong Institutions (SDG 16). ADR has been effectively implemented around the world and in most developed economies disputes are tried outside courts first and litigation is the last resort. Bangladesh laws have provisions for ADR in quite a few legislations and is also a signatory to the New York Convention, however, the law courses in our universities do not have different types of ADR as part of the curriculum. Therefore, the awareness must start from classrooms and ADR should be included in the business and law courses so that the coming generation of practitioners can apply this knowledge in their profession.

The Chairman of UGC appreciated the initiative and pointed out that usually regarding any changes in the curriculum the faculty members prepare a plan and proposal based on which the Members of UGC have a discussion and on approval the decision is implemented. Also, in terms of law courses the approval of the Bangladesh Bar Council is also needed.

The CEO of BIAC mentioned that we have already started conversations with the Bangladesh Bar Council and had a roundtable discussion with academicians last year. It was a unanimous recommendation that we get UGC on board to take this forward. Therefore, we can have a seminar jointly to generate awareness and come up with a plan to include ADR in the university curriculum.

Ms. Shiuly expressed interest to take discussions further at BIAC and have a look around the facilities.

A black hole for default loansA Taka 6 crore default loan case remains pending for 12 years, so are thousands of other cases

19 February 2020

Abdul Khaleq Khan took a Taka 6 crore loan from Brac Bank's Gulshan branch for his Maghbazar-based enterprise Atun Telecom in 2008. He only repaid one installment and the bank later declared him a defaulter. In 2016, the accumulated loan, with principal and

8

interest, stood at Taka 10 crore and the bank filed a case with the Artha Rin Adalat (Money Loan Court)-2 in Dhaka. 

Khaleq served prison time for a while after the case was filed but later secured bail from the High Court Division in 2017. In the same year, Khaleq obtained a High Court Division stay order on the case. The court initially stayed the case for six months but later extended it several times. "The case has not been disposed of yet," Brac Bank's lawyer Md Sharif Al Mamun told The Business Standard. 

Khaleq was also sued by Sonali Bank for being a defaulter. He borrowed Taka 4 crore from the bank's Motijheel branch in 2003 and 2004 for an enterprise named Riyana Fabrics. When the bank declared him a defaulter in 2011, his total loan amounted to Taka 9.35 crore. The bank filed a case against him with the Artha Rin Adalat-1 in Dhaka in 2014. Shahidur Rahman, lawyer of the bank, told The Business Standard that the High Court Division stayed the case in 2015 which is still in effect.

Khaleq's cases are not unique but only one among many such defaulters who manage to obtain High Court stay orders on their loan default cases and the orders are later extended, prolonging case disposals for indefinite periods. As a result, the banks fail to collect default loans amounting to thousands of crores of taka. Until October last year, there were 62,204 cases lodged with money loan courts involving defaulted amounts of Tk1,17,614 crore. Of those, 21,734 cases were stayed by the High Court Division.

Former Governor of the Bangladesh Bank Dr Atiur Rahman said that the High Court Division stay order is the key reason why such cases are not disposed of. He said, big defaulters go to the High Court when they are sued and hire high-profile lawyers for the legal battle. "The High Court Division also usually accepts petitions seeking stay orders on such cases," Dr. Atiur said.    There is a shortage of money loan court judges but there are even cases that have not been disposed of in 30-40 years, he said. Law experts agreed with Dr. Atiur, saying the dearth of judges as well as money loan courts and the High Court stay orders are slowing down case disposals. They also said disposal of such cases includes the provision of following alternative dispute resolution methods, such as arbitration and mediation, if necessary but that is not followed. Supreme Court documents show 2,894 cases were filed with money loan courts last year and 1,500 of those were disposed of.

Commenting on the Money Loan Court Act 2003, Law Commission Chairman Mr. Justice ABM Khairul Haque said that this is an outdated law and is not suitable to be applied at present. He said, the Commission recommended amending the Act in 2015."A draft amendment was also submitted with the recommendation. However, the law has not been amended yet," added the Chairman, also a former Chief Justice.

Dr M Shah Alam was a member of the Commission when he headed the preparation of the draft amendment. He said that cases filed with money loan courts cannot be disposed of quickly because the number of courts and judges is inadequate. The former professor of law at the University of Chattogram echoed Justice Khairul, saying the Money Loan Court Act has some drawbacks when it comes to initiating and conducting trials. "For example, issuing a summons in such cases is a lengthy process, and there has been no initiative to digitalise the process. On the other hand, the accused persons also try to find ways not to accept the summons. The official tasked with delivering the summons often resort to unlawful means to delay the process. These are the initial setbacks the court faces before starting a trial," explained Mr. Alam. He also said that only a few cases are disposed of with the alternative dispute resolution methods though the provision is there.  

9

Only four cases were disposed of through alternative dispute resolution methods last year. In 2018, the number was 11. The Supreme Court said, only small cases had been disposed of through such methods in the last five years.   Spokesperson for the Bangladesh Bank Mr. Md Serajul Islam said that even the central bank is concerned about the delay in disposal of loan default cases filed with Money Loan Courts. He said that a number of measures had been taken – such as discussing the issues with the Law Ministry and sending it letters – for quick disposal of these cases, but there has not been any progress. Law, Justice and Parliamentary Affairs Minister Mr. Anisul Huq said that his Ministry had held several discussions with the Supreme Court with a view to expediting case disposals. He said, the apex court had also issued a circular in this regard. "In fact, the rate of case disposals has increased," the Minister claimed.   Financial and corporate law expert Barrister Tanjib-ul Alam told The Business Standard that the High Court Division stay orders on the loan default cases have to be annulled first, and the central bank has to take initiatives in this regard.    A list of such cases has to be submitted to the Chief Justice through the Law Ministry, he said. "The Law Ministry, after discussing with the Chief Justice, can take necessary measures against the stay orders. Moreover, there should be competent judges to handle these cases," added Mr. Alam.    Former District and Sessions Judge Mr. Iktedar Ahmed said that the money loan courts nowadays also hold civil case trials which is slackening the trials of loan default cases.      Attorney General Mr. Mahbubey Alam told The Business Standard that he had discussed the matter with different banks as well as the central bank several times. "I told the Law Minister and the Chief Justice that disposals of such cases would have to be expedited. The Supreme Court should issue a circular and ask the money loan courts to only hold default case trials. Also, the money loan courts should be held accountable every month for case disposals," he said. The Government's chief legal adviser said that the banks concerned and the central bank have to take initiatives for resuming trials of the loan default cases stayed by the High Court Division.

https://tbsnews.net/economy/banking/black-hole-default-loans-45965

Lawyers’ role in Alternative Dispute Resolution legal practice emphasised

20 February 2020

Bangladesh International Arbitration Centre (BIAC) organised a seminar on ‘’ADR: An Additional Way to Practice Law’’, on 20 February 2020 at the BIAC Secretariat in the city. Speaking on the occasion as Guest of Honour, Bangladesh Bar Council Secretary (Senior District & Sessions Judge) Mr. Md. Rafiqul Islam emphasised lawyers’ role in Alternative Dispute Resolution (ADR) legal

practice. He said that in court directed ADR programmes, lawyers may act as either third party neutrals or as partisan advocates for clients. He also said that Bangladesh Bar Council has laid down standard of professional conduct and etiquette for Advocates and it will examine if special emphasis can be given on ADR in the curriculum of the Bar qualifying Exams.

10

Moderated by BIAC Chairman Mr. Mahbubur Rahman the seminar was attended by representatives from the legal profession, financial and corporate institutions, Justices and Judges, eminent jurists, Members of BIAC’s Panel of Arbitrators and List of Mediators, academicians and officials from the Ministry of Law, Justice and Parliamentary Affairs, National Board of Revenue, Bangladesh Investment Development Authority and trainers and experts on ADR.

In his address Mr. Mahbubur Rahman said that the aim of the seminar is to bring together lawyers, representatives from financial and corporate institutions, academicians and researchers to engage in a meaningful deliberation on how ADR can be an additional way to practice law. He said that the disinclination of the lawyers to resort to ADR mechanism is one of the principal reasons for the under utilisation of ADR, the reason being the apprehension about the prospective loss of earning.

In her keynote address Advocate Afrin Ahmed, Partner, Jural Acuity, highlighted the history of ADR in Bangladesh and why ADR is needed for general people. She viewed ADR from the clients’ perspective and how ADR can be beneficial to legal professionals. She stressed the need of lawyers’ proactive role in resolving disputes outside courts, using ADR methods. Ms. Afrin Ahmed insisted on training to judges, mediators, lawyers and NGO representatives, removing disincentives to conduct mediation and legal enforceability of the disputes settled.

In his address of welcome, Chief executive Officer of BIAC Mr. Muhammad A. (Rumee) Ali hoped that once lawyers come up to use ADR as an additional way to practice law, sufferings of the litigants will decrease through cost effective and expeditious disposal of cases. He said that Goal 16 of the SDGs pledges, '’ensuring access to justice for all'’ as a target to be achieved; whether any country is providing access to justice is determined through the procedures of reaching the justice mechanisms by the common people. In our country, justice seekers tussle with some economic, social and institutional barriers in accessing formal judicial system; widening access to justice depends upon extending some facilities to the litigants and empowering them to overcome those barriers. ADR can be a way forward given our judiciary overburdened with case dockets, Mr. Ali opined.

Panelists Discussants who participated in the seminar and spoke on the Keynote Paper were Ms. Anita Ghazi Rahman, Founder and Partner, The Legal Circle; Mr. Shafayat Ullah, EVP and Head of Legal, the City Bank Limited; Dr. Assaduzzaman Khan, Associate Professor, Department of Law, Independent University Bangladesh; Ms. Christabel Randolph, Head of Legal, Marico Bangladesh Ltd. and Mr. Md. Monzur Rabbi, Head of Chamber, Rahman & Rabbi Legal.

BIAC trainees urged to act as ambassadors of Alternative Dispute Resolution 27 February 2020

Bangladesh International Arbitration Centre (BIAC) organised a 2 day long Training Course on Negotiation and Mediation at BIAC Secretariat on 26-27 February, 2020. Thirty participants from different sectors including Banks, Corporate houses and legal practitioners took part in the training programme.

11

Mr. Sam Showket Hossain, former President, Bangladesh Law Association, Master Trainer and Professional Negotiator conducted the training on the first day on Negotiation and Ms. Shireen ScheikMainuddin, CEDR Accredited Mediator and Trainer and Mr. Shafayat Ullah, Head of Legal, the City Bank Ltd., Barrister-at-Law, Lincoln's Inn were the trainers of Mediation training on the second day.

In the closing ceremony of the training programme Mr. MahbubburRahman, Chairman, BIAC briefed the participants about the emergence of BIAC and he requested them, especially lawyers, to take forward the message of BIAC and intimate its activities to their lawyer friends and colleagues as ambassadors of BIAC so that Alternative Dispute Resolution (ADR) mechanism gets momentum to resolve business disputes towards contributing to overall development of the country’s fast growing economy. Mr. Muhammad A. (Rumee) Ali, CEO, BIAC said that it was observed that banks open LCs to parties against Pro Forma Invoice, which does not contain an ADR Clause. So, in case of default in a business transaction banks face problems in implementing LCs. We know, Banks have a compliance checklist before opening an LC, it would be preferred if the buyer and the seller have a separate agreement between themselves, which must contain an international ADR clause, Mr. Ali insisted.

On completion of the course certificates were distributed among the participants by Mr. Mahbubbur Rahman, Chairman, BIAC and Mr. Muhammad A. (Rumee) Ali, CEO of BIAC. Mr. M A Akmall Hossain Azad, Director, BIAC was also present in the closing session. Ms. Mahbuba Rahman Runa, General Manager, BIAC coordinated the training programme.

12

31st Meeting of the Executive Board of BIACheld4 March 2020

The 31st Board Meeting of BIAC was held on 4 March 2020 at the new premises of BIAC at Unique Heights, Dhaka. The meeting was presided over by Chairman, BIAC Mr. Mahbubur Rahman and was attended by Board Members Ms. Rokia Afzal Rahman and Ms. Nihad Kabir. Minutes of the last meeting were adopted unanimously. A number of decisions were taken in the meeting including building further cooperation with the Legislative and Parliamentary Affairs Division

of the Law Ministry.

Mohammad Abdur Rashid appointed member of the PCA 8 March 2020

Former Judge of the Supreme Court of Bangladesh, Justice Mohammad Abdur Rashid has been appointed a Member of the Court of the Permanent Court of Arbitration (PCA) at the Hague, the Netherlands from 27 January 2020. The PCA is an intergovernmental organization with 122 contracting parties including Bangladesh.

Mr. Rashid had enrolled at the Mymensingh District Bar in 1969 and then in 1976 at the Supreme Court Bar Association, Bangladesh. He was a former Judge of the Supreme Court of Bangladesh (1999-2009); Chairman of the Bangladesh Law Commission (2009-October 2010); Chairman of the Disciplinary Panel, Bangladesh Cricket Board (2013-2018). He has conducted many arbitration cases since and is author of various publications.

BIAC recently invited him to have a discussion about the Arbitration scene in Bangladesh. BIAC CEO Mr. Muhammad A. (Rumee) Ali started conversations by welcoming Mr. Rashid followed by a presentation on BIAC activities by BIAC Director Mr. M A Akmall Hossain Azad. Mr. Rashid has graciously shared his experience with the team and has expressed his opinion that Arbitration needs to be institutionalized to be effective in our country. Around the world the Arbitration is done by institutions instead of individuals. We can learn from the model in Singapore International Arbitration Centre (SIAC). Mr. Rashid has been advocating for institutional ADR throughout his career and has been a keen learner about arbitration skills and techniques. BIAC is delighted to have him as a well-wisher and seeks his guidance in taking ADR forward in Bangladesh.

New regulations to help companies avoid legal disputes 8 March 2020

Businesses can avoid possible risks and legal complications in domestic and international trade following new Incoterms rules, speakers said at a workshop held on 8 March 2020 in the city.

13

They said that the rules are accepted globally because of its standards, which define the responsibilities of sellers and buyers through fair sharing the costs and risks arising from the delivery of the goods.

The suggestion came at the inaugural session of a day-long workshop where a total of 125 participants from banks, law firms and companies attended.

Local chapter of the Paris-based International Chamber of Commerce (ICC) organised the workshop on the new rules.

Speaking as the chief guest, Commerce Minister Mr. Tipu Munshi said that Bangladesh has been following all international trade rules for its export and imports.

Incoterms (International Commercial Terms) rules are one of them. The rules are internationally accepted standards, which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts, he said. "As Bangladesh's trade is expanding year-on-year, so practice of Incoterms 2020 will be essential," the Minister said after launching of the eighth edition of Incoterms 2020 at a city hotel.

Mr Munshi was calling upon the participants to follow the international practices in dealing with global trade. "You cannot go a long way, if you're not competitive. Incoterms is one of the systems that can make us competitive," he added.

ICC Bangladesh president Mr. Mahbubur Rahman said the global economic growth has given most businesses greater access than ever before to markets all over the world. As a result, goods are sold today in more countries, in larger quantities, in greater variety, and at a faster pace. But as both the volume and complexity of global trade increase, so do possibilities for misunderstandings and costly disputes when sale contracts are not adequately drafted, he said. The Incoterms 2020 rules pay increased attention to security in the movement of goods, the need for flexibility in insurance coverage depending on the nature of goods and transport and the call by banks for an onboard bill of lading in certain financed sales under the FCA rule, Mr Rahman added.

ICCB Banking Commission Chairman Mr. Muhammad A. (Rumee) Ali said that L/Cs (Letters of Credit) are opened on the basis of pro forma invoice, which has no clause about dispute. "So, what does happen in the event of disputes between buyers and sellers?" he said. He advised the participants to acquaint themselves with the rules and include appropriate rules in the contract. He also suggested keeping the provision for arbitration following the Bangladesh Arbitration Act and the rules of the Bangladesh International Arbitration Centre for settlement of disputes, if any.

Chief Executive Officer and Managing Director of Mutual Trust Bank Syed Mahbubur Rahman highlighted the need for having appropriate technical know-how for safeguarding the international trade transactions.

After the first introduction of Incoterms in 1936 by the ICC, the first revision occurred in 1957 and thereafter in 1967, 1974, 1980, 1990, 2000 and 2010. The latest version became effective globally from 01 January 2020.

The inaugural ceremony was attended by ICCB vice president Ms. Rokia A. Rahman, ICCB Executive Board member Mir Nasir Hossain, and Uttara Group Chairman Mr. Matiur Rahman, among others.

14

This report was previously published in The Financial Express on 9 March 2020 (https://thefinancialexpress.com.bd/trade/new-regulations-to-help-cos-avoid-legal-disputes-1583730463)

Corona virus Condolence9 March 2019

To show solidarity with our colleagues at the Kunming International Commercial Arbitration Service Center (KICASC) BIAC had made a small contribution. We are touched by the response received from KICASC.

"...in this critical time of epidemic control and lack of medical materials, we have received your letter of condolence and the donated masks. This act of courtesy of yours is a great embodiment of your devoted heart for mercy of benevolence as well as a strong support for our fight against this epidemic. We would like to express our sincere thanks and highest respect."

We hope and pray to be able to overcome this difficult situation soon.

HSBC and BIAC to hold awareness programs on

11 March 2020

Messrs. Mustafizur Rahman (Team Head, Multinationals-International Subsidiary Banking) and Shadab Hossain (Team Head, International Subsidiary Banking) from the Hongkong and Shanghai Banking Corporation Limited (HSBC) visited BIAC for a discussion about collaborating in a series of awareness programs on ADR for the businessmen and bankers of our country. BIAC was represented by CEO Mr. Muhammad A. (Rumee) Ali, General Manager Ms. Mahbuba Rahman Runa and Counsel Ms. Rubaiya Ehsan Karishma. The team had a general discussion

about the prospects of including Institutional Mediation-Arbitration Clauses in all contracts, especially when it comes to Letters of Credit (L/C). Letters of Credit are usually issued based on a pro-forma invoice between buyer and seller, in the event that there is a non-performance and the seller goes to the L/C issuing bank to claim his payment, the bank demands proper paper-work under the UCP 600 regulations of the International Chamber of Commerce. The said paper-work will never be complete if the buyer has not performed as agreed on the pro-forma invoice. As a result, the seller gets into trouble with the only option to seek remedy under the

15

ICC court of Arbitration in Paris. It may be viable for large claims to seek remedy from Paris but it is not ideal for small claims which are more common. Therefore, it is suggested that banks encourage buyers and sellers to have a dispute resolution clause in their pro-forma invoice or in their sales contracts. In this way the sellers will have an option to try amicable settlement or arbitration in case of non-performance of contract.

“And We will surely test you with something of fear and hunger and a loss of wealth and lives and fruits, but give good tidings to the patient. Who, when disaster strikes them, say, 'Indeed we belong to Allah, and indeed to Him we will return.' Those are the ones upon whom are blessings from their Lord and mercy. And it is those who are the (rightly) guided.” -- Al Quran, 2:155-157

16

International News

Alternative Dispute Resolution Breaks a Legal Logjam in Serbia

7 January 2020

Ms. Snezana Stojanovic, a judge in Belgrade’s Second municipal Court, gave up a lot of authority in accepting her new job, but she is accomplishing more now than ever. Her story reflects an innovation that is quietly changing the Serbian judicial system.

The change is Alternative Dispute Resolution (ADR), a results-oriented, time-tested approach to resolving legal disagreements that relies on a simple process: discuss problems face-to-face, seek solutions rather than assigning blameand move on. ADR takes a variety of forms, but in

Serbia it basically involves removing lawyers and judges from the process so that the would-be litigants, aided by trained mediators, can settle their differences.

ADR delivers quantifiable results. In Serbia’s first two years of offering mediation, settlements were reached in 1,800 of 2,000 cases where it was used. In a survey of participants, all respondents – 100 percent – said they were fully or at least partially satisfied. Some 93 percent said that mediation increased their trust in the legal system. ADR is also fast. In Serbia, contract disputes that go to litigation typically require 40 separate proceedings and can take years to resolve. But ADR cases are usually settled in a single session. And while protracted litigation can easily wind up costing €150,000, a typical mediated dispute costs just €1,800.

International Finance Corporation (IFC) is helping four countries in Western Balkans – Albania, Bosnia and Herzegovina, FYR Macedonia and Serbia – establish ADR systems, advising their government on the legal framework for ADR, assisting with pilot projects such as the one in Belgrade’s Second Municipal Court, and supporting efforts to train mediators. Although ADR is not limited to commercial cases (in Serbia 60 percent of cases that go to ADR involve non-commercial matters), it has clear implications for economic development. 

First and foremost, judicial reform is a prerequisite for admission to the European Union. Also, the backlog of cases awaiting trial has grown to 500,000 in Serbia and is increasing 10 percent a year. And finally, ADR frees up capital that otherwise could be frozen for years during litigation; the first 1,800 Serbian ADR cases settled led to the release of €33.2 million. 

Does Judge Stojanovic miss having the final say? not at all. Within her courtroom, she explains, all the litigants – even the winners – eventually come to resent the control she wields. “But in mediation, both parties end up satisfied,” she smiles, “I like that much more.”

https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/alternative+dispute+resolution+breaks+a+legal+logjam+in+serbia

17

India’s Arbitration and Conciliation (Amendment) Act 2019 comes into force

14 January 2020

On 9 August 2019, the Arbitration and Conciliation (Amendment) Act 2019 (“the Amendment Act”) came into force in India. The legislative changes introduced by way of the Amendment Act seek to promote institutional arbitration in India and expedite the resolution of commercial disputes by arbitration with a view to making India a hub for domestic and international arbitration. In this regard, the Amendment Act introduces the following changes so as to make the arbitral process cost effective, speedy and with minimal court intervention.

Arbitral institutions

The Supreme Court (in cases of international commercial arbitration) and the High Court (in cases of arbitrations other than international commercial arbitration) have the power to designate arbitral institutions who will be responsible for the appointment of arbitrators. These arbitral institutions will be graded by a newly established Arbitration Council of India (“Council”). Where no graded arbitral institution is available, the Chief Justice of the relevant High Court may maintain a panel of arbitrators for discharging the functions and duties of an arbitral institution. The Chief Justice may also review the panel of arbitrators from time to time.

The appointment of an arbitrator or arbitrators will be disposed of by the arbitral institution within 30 days from the date of service of notice on the opposite party. The arbitral institution will also determine the fees and manner of payment to the arbitral tribunal.

Establishment of an Arbitration Council of IndiaThe Amendment Act also establishes the abovementioned Council with the head office in Delhi, India. The Council will consist of:

1. A Chairperson, to be appointed by the Central Government in consultation with the Chief Justice of India, who will be either a retired Judge of the Supreme Court or High Court, or an eminent person with special knowledge and experience in arbitration;

2. A Member nominated by the Central Government who is an eminent arbitration practitioner with substantial knowledge and experience in both domestic and international institutional arbitration;

3. A Member appointed by the Central Government in consultation with the Chairperson who is an eminent academician with experience in research and teaching in the field of arbitration and alternative dispute resolution laws;

4. An ex officio Member who is the Secretary to the Government of India in the Department of Legal Affairs, Ministry of Law and Justice;

5. An ex officio Member who is the Secretary to the Government of India in the Department of Expenditure, Ministry of Finance;

6. A Part-time Member who is a representative of a recognized body of commerce and industry chosen on a rotational basis by the Central Government; and

7. An ex officio Member-Secretary who will be the Chief Executive Officer.

The Chairperson and Members of the Council, other than ex officio Members, will hold office for a term of three years.

The Council has a number of duties focused on promoting and encouraging arbitration and all other alternative dispute resolution mechanisms as well as framing a policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of arbitration. The Council is required to make grading of arbitral institutions on the basis of criteria

18

relating to infrastructure, quality and caliber of arbitrators, performance, and compliance of time limits for disposal of domestic or international commercial arbitrations.

Qualifications and experience of an Arbitrator

The Council is also empowered to review the grading of arbitrators whereby the qualifications, experience and norms for accreditation of arbitrators are specified in the Eighth Schedule to the Indian Arbitration and Conciliation Act 1996. The Eighth Schedule specifies nine categories of qualifications as an arbitrator, including, inter alia, being an Indian advocate, chartered accountant, costs accountant or company secretary with certain levels of experience.

The Eighth Schedule also sets out the general norms applicable to an arbitrator, including, inter alia, being a person with a reputation of fairness and integrity, impartial and neutral, and without any conflict of interest.

Notably, the criteria set out in the Eighth Schedule do not qualify foreign registered lawyers or retired foreign officers as arbitrators.

Confidentiality of information

A new provision imposes an obligation on the arbitral institution and the parties to the arbitration agreement to maintain confidentiality of all arbitral proceedings except of an award where its disclosure is necessary for the purpose of implementation and enforcement of the award.Time limits

The Amendment Act imposes time limits on the filing of pleadings, issuing of arbitral awards and the granting of extensions of time.

1. A statement of claim and defence will need to be completed within a period of six months from the date the arbitrator receives notice, in writing, of their appointment.

2. Further, arbitral awards, other than in international commercial arbitration, will need to be made within a period of 12 months from the date of completion of pleadings. In international commercial arbitration matters, awards ought to be made as expeditiously as possible and endeavors ought to be made to dispose of the matter within a period of 12 months from the date of completion of pleadings.

3. Where an application for an extension of time is pending, the mandate of the arbitrator will continue until the disposal of the application.

Comment

The legislative changes under the Amendment Act are largely a positive step towards making arbitration in India consistent with current international best practices. However, it remains unclear whether India will become an attractive destination for international arbitration given that foreign-registered lawyers and academics are not qualified to be appointed as arbitrators under the Amendment Act.

Moreover, while the time limit for issuance of an award will likely bring about efficiency in arbitration proceedings, there are concerns with enforceability if the time limits are not complied with. Therefore, it is prudent for all parties to attempt to manage arbitration proceedings accordingly.

https://globalarbitrationnews.com/indias-arbitration-conciliation-amendment-act-2019-comes-force/

19

Singapore Court of Appeal rules that “arbitration in Shanghai” naturally refers to arbitral seat

3 February 2020

The Singapore Court of Appeal recently reversed the ruling of the Singapore High Court in BNA v BNB and Another ([2019] SGCA 84). It found that Shanghai, not Singapore, was the parties’ chosen arbitral seat and thus PRC law was the governing law of the arbitration clause. The decision of the Singapore High Court was earlier covered on Global Arbitration News.

Brief background to the appeal

The dispute arose out of a Takeout Agreement (“TA“) between the appellant and the respondents. The appellant buyer failed to make certain payments under the TA to the respondent sellers. The TA stated that it was governed by PRC law. The arbitration clause in the TA provided for disputes to be finally “submitted to the Singapore International Arbitration Centre (“SIAC“) for arbitration in Shanghai”, but it did not include any provision specifying the proper law of the arbitration clause. The latter governs the formation, validity, effect and discharge of the agreement to arbitrate.

The High Court ruled that the parties implicitly chose Singapore as the arbitral seat and thus Singapore law governed the arbitration clause.

The Court of Appeal’s decision

The Court of Appeal disagreed with the High Court and held that “arbitration in Shanghai” should be naturally read as a reference to Shanghai as the seat of the arbitration.

In arriving at its decision, the Court of Appeal accepted that contrary indicia could displace the natural reading that “arbitration in Shanghai” meant that Shanghai was intended to be the seat of the arbitration.

The Court of Appeal considered several indicia raised by the respondent but concluded that on the facts, none of them could be taken into account. First, evidence of the parties’ pre-contractual negotiations, particularly their concern that the arbitration be seated in a neutral forum, i.e. Singapore, was inadmissible because of the parol evidence rule. The Court of Appeal confirmed that the court is bound to apply the parole evidence rule and its exceptions, even in cases arising out of arbitration. Therefore, pre-contractual evidence that had not been admitted before an arbitral tribunal will be inadmissible in subsequent judicial proceedings.

Secondly, that the arbitration clause could potentially be invalid if governed by PRC law was also not considered, as there was no evidence that the parties were even aware that the proper law of the arbitration clause could impact its validity.

Finally, the Court of Appeal regarded the fact that Shanghai is not a law district (as compared to Singapore) as irrelevant, since the court felt that it was common for commercial parties to only

20

specify in their arbitration clause either a city or a country as arbitral seat. Accordingly, where parties had specified only one geographical location in an arbitration clause, and particularly where the choice had been expressed as “arbitration in [that location]”, that ought most naturally to be construed as a reference to the parties’ choice of seat.

Implications of this ruling

The Court of Appeal concluded that the “parties’ manifest intention to arbitrate is not to be given effect at all costs.” If parties choose to arbitrate in a certain way, in a certain place and under the administration of a certain arbitral institution, then those choices have to be given effect by a process of construction. The words chosen have to be given their natural meaning unless there is sufficient contrary indication to displace that reading. If the result of this process is that the arbitration clause is unworkable, then the parties will be bound by the consequences of their decision.

The Court of Appeal’s decision is yet another important reminder for parties to carefully lay out the groundwork at the contracting stage for a valid arbitration in the future by clearly stating their intention in the arbitration clause, including its proper law, the seat and arbitral institution. While properly drafted arbitration clauses will leave little room for disputes over their construction, poorly drafted arbitration clauses may result in the invalidity of the arbitration clause or unenforceability of an award. If the arbitration clause is invalid, the parties might find themselves before one or more national courts which is arguably what the parties would have sought to avoid when adopting an arbitration clause in their contract in the first place.

Conclusion

This ruling is an important reminder to all parties to ensure that their arbitration clauses explicitly and unambiguously specify both the arbitral seat and proper law of the arbitration clause. Lengthy litigation and the costs involved are avoidable if proper and adequate care is taken at the initial contracting stage, towards drafting an arbitration clause which expressly and unambiguously specifies the arbitral seat and proper law of the arbitration clause.

https://globalarbitrationnews.com/singapore-court-appeal-rules-arbitration-shanghai-naturally-refers-arbitral-seat/

Swiss Supreme Court confirms high barrier for extension of a State-owned entity’s arbitration clause to the non-signatory State

5 Feb 2020

In its decision dated 24 September 2019, the Swiss Federal Supreme Court (“SFSC“) held that a State is only bound by an arbitration clause signed by its State-owned company if the State constantly and repeatedly interferes in the negotiations and/or performance of the relevant contract (Case No. 4A_636/2018 (in German)).

Factual background

The reported dispute stems from a contract between a Turkish joint venture, as contractor, and a Libyan State-owned, but legally independent, entity for the construction of a 383-km long water pipe for the Great Man-Made River project in Libya. The contract contained an ICC arbitration clause.

21

Following the riots in Libya in Spring 2011, the joint venture stopped its work. At that time, about 70% of the project had been completed. In 2015, the joint venture and its participating companies initiated an arbitration against Libya and the State-owned entity. Libya contested the arbitral tribunal’s jurisdiction with regard to the claims raised against the State.

The Tribunal’s partial award

In a partial award, the arbitral tribunal partially accepted the claims against the State-owned entity but refused to accept jurisdiction for the claims against the Libyan State. In particular, the tribunal rejected claimants’ position, both under Libyan and Swiss law, that (i) the State-owned entity was a public authority or a tool of the State and therefore identical to the State and (ii) that the Libyan State had intervened in the negotiation or performance of the contract in such a way that the claimants’ could in good faith consider the State a party to the contract and bound by the arbitration clause. The arbitral tribunal relied in particular upon the Swiss Westland ruling (decision P 1675/1987 of 19 July 1988) which denied the extension of an arbitration clause entered into by a legal person established by States to such establishing States.

The claimants subsequently lodged a partial challenge of the award with the SFSC requesting a declaration that the arbitral tribunal has jurisdiction to decide on the claims vis-à-vis the Libyan State. The claimants argued inter alia that the Westland ruling is outdated.

The SFSC’s ruling

The SFSC preliminarily held that it is not allowed to correct or supplement the factual findings of an arbitral tribunal, even if they are manifestly incorrect or entail an infringement of rights. Therefore, the SFSC accepted the arbitral tribunal’s conclusions concerning the alleged State interference. The arbitral tribunal rejected any such interference and held that neither the executive branch of the Libyan government nor the state financial supervisory authority or the Prime Minister actually intervened in the negotiation, the approval or the execution of the relevant contract. Moreover, the SFSC adopted the arbitral tribunal’s findings concerning the State-owned entity’s identity. In particular, it acknowledged that the entity was not exclusively financed by the State but generated revenue from water sales and that the entity could not exercise sovereign authority.

The SFSC then stated that the arbitral tribunal correctly concluded from the Westland ruling that legal independence is recognized under Swiss law to legal persons established under public law or by States. Arbitration agreements concluded by such legal persons are thus not attributed to the controlling States. Claimants’ view that this principle has changed in subsequent case law was not accepted by the SFSC.

The SFSC referred to its previous decisions holding that a third party who constantly and repeatedly interferes in the performance of a contract with an arbitration clause shall be treated as if they had acceded to the contract and had subjected themselves to the arbitration clause. Such behavior, according to the SFSC, indicates the third party’s intention to become a party also to the arbitration clause. According to the binding findings of the arbitral tribunal, there were however no factual circumstances that could indicate an interference by the Libyan State in the contractual relationship from which the claimants could have deduced in good faith the State’s accession to the arbitration clause contained in the contract. The SFSC also observed that the authoritarian government of Libya at the time of the conclusion of the contract and the importance of Great Man-Made River project to the Libyan government are not sufficient to establish a legitimate expectation of the claimants on the State’s intention to directly enter into certain contractual commitments.

The SFSC has thus basically confirmed the established case law which had been recently applied also to the accession of a third party to an arbitration clause under the New York Convention (access the GAN summary here).

22

https://globalarbitrationnews.com/swiss-supreme-court-confirms-high-barrier-extension-state-owned-entitys-arbitration-clause-non-signatory-state/

Ninth Circuit Court vacates arbitration award based on reasonable impression of arbitrator bias

11 February 2020

In Monster Energy Co. v. City Beverages, LLC, Nos. 17-55813 & 17-56082 (9th Cir. Oct. 22, 2019), the United States Court of Appeals for the Ninth Circuit, vacated an arbitral award based on later-discovered information that created a reasonable impression of arbitrator bias.

The facts leading up to the application for vacatur

The arbitration giving rise to this case arose out of a dispute between Monster Energy Company (“Monster“) and Olympic Eagle Distributing (“Olympic Eagle“) regarding Monster’s right to terminate a franchise contract between the parties. Monster compelled arbitration before JAMS, as specified in the agreement. The parties

chose a sole arbitrator, who found in favor of Monster. Monster sought to confirm the award before the district court, and Olympic Eagle cross-petitioned for vacatur of the award based on later-discovered information that caused them to question the arbitrator’s impartiality.

The Federal Arbitration Act permits a court to vacate an arbitration award “where there was evident partiality . . . in the arbitrators.” [9 U.S.C. § 10(a)(2)]. In his disclosures, the arbitrator disclosed that he practices “in association with JAMS” and “[e]ach JAMS neutral, including me, has an economic interest in the overall financial success of JAMS.” However, the arbitrator failed to disclose that he had a direct ownership interest in JAMS, and that JAMS had administered 97 arbitrations for Monster over the previous five years. Despite this, the district court confirmed the award. Olympic Eagle appealed.

Appeal proceedings and decision of the Appeal Court

On appeal, Monster argued that Olympic Eagle had waived its partiality claim because it failed to timely object when it first learned of the potential “repeat player” bias and the sole arbitrator’s economic interest in JAMS. The court found that, while the arbitrator disclosed that he had an “economic interest” in JAMS and had previous arbitration activities that directly involved Monster, the arbitrator did not disclose his direct ownership interest in JAMS, and it was not evident that Olympic Eagle could have discovered this information prior to the arbitration. The court thus found that Olympic Eagle lacked the requisite constructive notice of the arbitrator’s potential non-neutrality for waiver.

In considering whether to vacate the award on the basis of “evident partiality,” the court relied on U.S. Supreme Court precedent that vacatur of an award is supported where the arbitrator fails to “disclose to the parties any dealings that might create an impression of possible bias.” The arbitrator’s undisclosed interest in an entity must be substantial, and that entity’s business dealings with a party to the arbitration must be nontrivial. Here, the court found that the sole arbitrator’s ownership interest in JAMS was substantial and Monster’s dealings with JAMS were not trivial; Monster had held 97 arbitrations with JAMS over the previous 5 years and had a JAMS clause in all of its form contracts. These were all facts that created a reasonable impression of bias, should have been disclosed, and therefore supported vacatur of the award.

Dissenting opinion

Circuit Judge Friedland dissented, disagreeing that the additional information that should have been disclosed would have made a material difference. First, by entering into a contract that required arbitration, the parties gave up Article III (U.S. Constitution) protections against judicial impartiality. While the dissent acknowledged that the lack of disclosures might require vacatur in some

23

instances, the disclosures here were not so extreme. The dissent further noted that the majority leaves it unclear how detailed an arbitrator’s disclosures must be or what constitutes nontrivial business dealings requiring disclosure.

https://globalarbitrationnews.com/ninth-circuit-court-vacates-arbitration-award-based-reasonable-impression-arbitrator-bias/

Dutch court restores USD 50 billion Yukos award

20 February 2020

Russia is back on the hook for a USD 50 billion payment after The Hague Court of Appeal reinstated the 2014 award made in favour of the former shareholders of Yukos.

The Hague Court of Appeal ruled on 18 February 2020 that the arbitral award ordering the Russian

Federation to pay USD 50 billion to the former shareholders of oil company Yukos should be reinstated. The shareholders’ appeal was filed in March 2017 before the Permanent Court of Arbitration (PCA), with hearings taking place between 23 and 30 September 2018, and following four months of deliberation, Court of Appeal judges S.A. Boele, C.A. Joustra and J.J. van der Helm have overturned the District Court’s decision on the grounds that the arbitral tribunal had no jurisdiction over the dispute.

Tim Osborne, GML, the shareholders’ parent company, celebrated the decision in a statement, saying: “This is a victory for the rule of law. The independent courts of a democracy have shown their integrity and served justice. A brutal kleptocracy has been held to account.” The Russian Ministry of Justice immediately stated its intention to appeal this latest ruling to the Supreme Court of the Netherlands. Yukos, once Russia’s largest oil company, was dismantled between 2004 and 2007, resulting in arbitration under the Energy Charter Treaty (ECT).

In its statement, the Ministry criticised the latest decision for ignoring what it called unlawful use of the ECT, which it said had only temporary application in Russia. It claimed that Yukos’ owners obtained the company through illegal means and should not be classified as investors and therefore not eligible for ECT protection. It further added that the decision went against the position of the European Court of Human Rights (ECHR), although and ordered it to pay compensation to the shareholders, an order with which the Government has not complied. Russia’s appeal will go to the Supreme Court without requiring leave to appeal, but on what grounds remains to be seen. The shareholders meanwhile have stated their intention to enforce the arbitral awards, although decisions about how and when have not yet been made.

As before, Russia was represented in The Hague by Albert Jan van den Berg of Hanotiau& van den Berg, with advocacy from John Dullaart of Cees Advocaten. Advice has been provided throughout the entire Yukos dispute by Cleary Gottlieb Steen & Hamilton and David Goldberg of White & Case. Taking the lead for the shareholders was MarnixLeijten of De Brauw Blackstone Westbroek. Shearman & Sterling partners Emmanuel Gaillard and YasBanifatemi have advised the clients since the beginning of the legal saga and had a consulting role here, while Paris-based partner Benjamin Siino and counsel Ilija Mitrev Penusliski were more actively involved in this appeal.

In typically forthright fashion, a pleased Gaillard says that he expected this outcome “assuming the court has a cold look at the facts, is not blinded by all the dirt which is presented by the Russian Federation and is not influenced by geopolitical considerations”. He cites the bitter and highly political nature of the dispute, adding: “I am very impressed with the Dutch justice and Court of Appeal, because it is really hard to resist Russia, it exercises all kinds of pressure,

24

implicitly or otherwise and it is really impressive to see that the court did not pay any attention to any of that.”

The USD 50 billion award consisted of three interim and three final awards in favour of three shareholder companies, Hulley Enterprises, Yukos Universal and Veteran Petroleum. The decision by three judges of the District Court to set aside the award was made on the grounds that while Russia’s Government was a signatory to the ECT, the Duma had not ratified the treaty. The Court of Appeal dismissed this argument on the grounds that under Russian law even treaties that require ratification are provisionally applied by the Government when the treaty is signed, and it pointed to other treaties which have been in force despite not being ratified.

https://www.cdr-news.com/categories/arbitration-and-adr/featured/10806-dutch-court-restores-usd-50-billion-yukos-award

“There are three ways of dealing with difference:

domination, compromise, and integration. By

domination only one side gets what it wants; by

compromise neither side gets what it wants; by

integration we find a way by which both sides

may get what they wish.” – Mary Parker Follett

25

ArticlesBuilding Financial Inclusivity for MSMEs through Technology & Innovations

Muhammad A. (Rumee) Al iCEO, B IAC*

The financial world has witnessed a quantum growth in access to information with advent of 4G mobile technology. The reason is the handheld device which morphed from being just a voice communication device to a ‘phone’ with formidable computing power. Here is a quote that may surprise many of you:

“The Orion spaceship, which NASA launched this week as a first step on a mission to take astronauts to Mars, has a less powerful computer than your smart phone. It's widely known that today's smart phones have more computing power than all of NASA did when it started sending astronauts to the moon.” (Dec 6, 2014, Matt Rosoff, Business Insider)

We now have in our hands a device that can communicate both data and voice. These are the two enablers we need to create the environment for innovation that can and will change the way we do business in every segment of the economy. The only thing that may stand in the way is investment and fear of disruptions to existing economic and market structures.

Mobile technology fast tracks empowerment of people by giving them access to areas that have been the preserve of a few. Take the case of the information revolution. Today, access to information and knowledge is an immense leap from where we were, only three decades earlier. The journey from handwritten books which were understood and read only by a privileged few, to almost a universal access to information would not have been possible without the emergence of a device we call ‘smart phone’ and internet. And as the price of the device came down and the internet is becoming more accessible, we are seeing a growth of enterprises by using mobile based technology at a dizzying pace. Indeed, it is access to technology that has created the enabling environment for innovation. Innovations that used to be the preserve of R&D Division of large corporations and government institutions, now is within the reach of a few young people with creative minds, firm commitment and persistence to create a ‘game changing’ application that could potentially change the way we do business.

This game changing application we call ‘disruptive technology’ in reality, simply a better, cheaper and a more effective way of doing business. The only thing that often stops these from happening is vested investments in the prevalent technology or simply cultural mindset. The push back “Uber” received from many regulators was precisely because of the “disruption” it caused to the existing commuting businesses. The coinage of the word “disruptive” which has negative connotations emerges from this mindset. It is interesting to note that George Stephenson’s steam engine wasn’t described as “disruptive”.

It is the ability of the technological innovation that mobile technology has made possible that will enable inclusivity. Inclusivity whether in health, education or in finance has been a victim of the existing cost structures created by vested investments that make universal access to these services uneconomical from the neo liberal ‘market economics’ point of view. No matter how we may feel about it from the socio-political point of view the emergence of neo liberal economics as the dominant policy plank and the main driver of resource allocation globally, market sustainability definitely is the main determinant of survival of a business.

26

In such a scenario the only way a sustainable model can be created is by harnessing the technology driven economies in the distribution structure. This will enable access to financial services possibly, at a lower entry cost.

Personally, I have seen this happen first hand when we had set up bKash (I was the founding chairman from inception to 2015). I had mentioned earlier about entrenched vested investments, but in the case of Bangladesh, the advent of bKash was not challenged by the banking industry because they were not interested in the market that bKash targeted, the MSME. This allowed bKash to overcome the challenge of ‘scaling up’ and it was also able to overcome the other hurdle, cultural mindset.

I was asked a few years back, what to my mind, was the single most important achievement of bKash. I still think it is changing the mindset in a matter of time people are usually very conservative. bKash was able to change the concept of mobile ‘phone’ being just a phone to a device they could trust for financial transactions.

The ‘trust’ is a ‘public capital’ this fin-tech startup has contributed to the future growth of Fin-tech industry in Bangladesh. The country has become a global force in Mobile Financial Services in a matter of few years and at a critical time in its economic journey towards becoming a middle income country. It is this capital that will be the building block for applications that would innovate different business models to create inclusive financing of MSMEs.

What does ‘inclusive financing’ mean? I would like to suggest that “inclusive” presupposes “access to finance”. To answer the question what is “access” for a firm or an entity? I define access as:

“Engagements of the firm with the formal financial sector that establishes the conditions necessary to buy or sell financial products and services in market usually on the basis of recognition of mutual benefits derived by the two parties. It is important because it signals the reliability of the firm to other stakeholders and creates the enabling environment for the firm to finance its growth and sustainability.”

Therefore, the major drivers of creating a meaningful engagement and access are:

Recognition of mutual benefit leading to;

Financing of present and future requirements;

Ensuring financial viability and sustainability of the firm.

If we go by this definition then the situation today, falls short of “sustainable access”.

This is because the condition of “mutual benefit” is predicated by subsidy which financial institutions receive for their participation from the government. While this is necessary at the initial growth stages but sustainability has to be built on a market driven model. Fin-tech innovations so far, have been limited to ‘payments’ only which cannot be considered ‘inclusivity’, just the first step in the right direction. It has not been able to resolve issues of creating effective, useful and workable liability and loan products due to lack of application of data analytics either by the state players or the private sector ones.

If we are to create an effective access leading to inclusivity, we will have to necessarily harness technology in general and mobile technology in particular, to create a sustainable business model for MSME financial services enterprise. This model will be based on products (both loan and savings) which will be modeled on automated risk analysis based on risk parameters derived from data analytics. The overall Asset/Liability Management too has to be automated and be a part of the software core banking system.

This will bring costs down in this volume-driven-retail-banking model with a mobile phone based distribution. There will be at least initially a need for minimally staffed agents to meet the ‘last mile/cash’ needs. Here the existing MFS operators can have synergies or may be able to take over this function on an outsourced basis.

27

The most important benefit this model will potentially have is a far reaching one. It will create the basis for the central bank to gradually roll out digital currency and integrate the dispersed and uneconomic and inefficient financial system.

To some all this may sound unrealistic but how many of us actually expected the quantum impact mobile technology will have, not only as a communication tool but as an instrument of change in our socio-economic-political ethos.

-------------------------------------------------------------------------------------------------------------------------------------

*This article was earlier published in the Special Publication of the International Chamber of Commerce-Bangladesh (ICC-B), the world business organization, on the event of The Asia-Pacific Conference on Financing inclusive and Sustainable Development, 10-12 December 2019, Dhaka.

‘’The corporations don't like open courts of law, trials by jury. They want to privatise by pushing people into compulsory arbitration where they win most of the time and the whole process is pretty secret.’’ -- Ralph Nader

28

Polish Civil Procedure Code is now clear on the arbitrability of corporate matters

Magda lena Nas i lowska , Par tne r in the Corpora te /M&A prac t i ce o f Baker McKenz ie in Warsaw

andA l i c ja Szczesn iak , Assoc ia te a t Baker

McKenz ie in Warsaw

Polish civil procedure law has recently been subject to a wave of amendments. They were various in nature, purpose and magnitude. Some were just a confirmation of already established practice and others could be classified as a reform of the core of the Polish civil court system. All of them, however, were promoted as aiming to ease bureaucracy and make legal measures more available to people and businesses. Most new laws, with varying degrees of success, were designed as an attempt to accelerate the proceedings and overcome the obstructive and dilatory behaviour of the parties to court proceedings.

With that noble purpose in mind, the legislator has not overlooked the arbitration law. Finally, the controversy surrounding the arbitrability of corporate issues has been resolved. The controversy was twofold. Up to this point there was a debate as to: (i) whether claims to repeal a resolution of shareholders or to declare such a resolution null and void could be resolved in arbitration and (ii) who could bring such a claim in arbitration if an arbitral clause was inserted in the company’s articles of association.

Firstly , there was a debate on the definition of arbitrability adopted in the Polish Civil Code. Quite commonly, the general rule in the Polish Civil Procedure Code conditions arbitrability on whether or not the dispute in question could be subject to a court settlement (i.e., whether it concerns rights that the parties may freely dispose of). However, a specific provision of the Polish Civil Code suggested the arbitrability of corporate disputes if an arbitration clause was included in the company’s articles of association.

The question was whether this specific rule on corporate disputes overrode the general test of capability to be subject to a court settlement. The jurisprudence on the matter was not uniform, which further promoted the uncertainty and reluctance to insert arbitration clauses into companies’ articles of association. Finally, in the judgement of 7 May 2009 (III CZP 13/09) the Supreme Court ruled that the general test of capability to be subject to a court settlement applied to corporate disputes too, thus excluding – in principle – disputes over corporate resolutions from the jurisdiction of arbitral tribunals. This unfortunate conclusion of the Supreme Court is now no longer applicable, as the new Civil Procedure Code disassociated pecuniary claims from the test of capability to be subject to a court settlement and now the test only applies to non-material claims. As a result, all corporate resolutions can – in principle – be resolved in arbitration proceedings.

Secondly , the pre-amendment wording of the Polish arbitration law on corporate disputes limited the entities that could invoke such an arbitration clause to the company itself and its shareholders. Members of the company’s bodies (including management board members) were excluded from the provision. This solution, heavily criticised, could have led to pathological situations in which, e.g. a shareholder challenged a resolution before an arbitral tribunal and a management board member challenged the same resolution before a national court. The new wording now includes management board members and is finally in line with the rights each entity has under the Code of Commercial Companies.

29

To promote transparency and award the entities involved the same level of protection as if the matter were resolved before a national court, the legislator introduced some extra requirements for an arbitration clause to be valid. Namely, arbitral proceedings which challenge corporate resolutions are public and their initiation must be announced within a month in the same way that other notices of a company are announced. Within another month from the announcement, every shareholder may join one party to the proceedings. What is more, all claims in that respect are to be resolved jointly, in the same proceedings. The arbitral tribunal selected in the proceedings that were initiated first will have jurisdiction over the claims that are raised later.

It is definitely welcome news that the doubts as to the arbitrability of corporate matters are no longer an issue. Any such doubts were always a strong argument against inserting arbitration clauses into a company’s articles of association. Any prudent lawyer had to inform his/her clients of the existing controversies and such advice commonly led to all corporate disputes being left to the national court’s jurisdiction.

The new solution, according to which in case of the initiation of more than one set of proceedings regarding the same resolution, all claims will be resolved by the same arbitral tribunal, is an excellent tool that accelerates the whole process and makes all disputes transparent to all stakeholders. On the other hand, it constitutes a minor bypass of the basic rule of arbitration that, generally, allows the parties to select the tribunal. However, it appears that the advantages outbalance the potential imperfection of the new regulation and, all in all, it greatly promotes the arbitration of corporate matters and hopefully will be well received by arbitration users too.

https://globalarbitrationnews.com/poland-changes-law-arbitrability-disputes-corporate-resolutions/

30

COVID-19 and Force Majeure: A Bangladeshi perspective

Md. Sameer Sat tar , Head o f F i rm o f Sat tar & Co and Md. Khademul Is lam Choyon, Associa te , Sat tar & Co*

The outbreak of COVID-19 in Wuhan, China was first reported to the World Health Organization (WHO) Country Office in China, on 31 December 2019. Within three months, COVID-19 has affected more than 100 countries and been characterised as a pandemic by the WHO. As the virus spreads, it is believed that it will have a far-reaching impact on the global economy and international trade. Companies will need to be prepared for the pandemic and circumstances where the outbreak brings an adverse impact on business generally and, more importantly, on the performance of commercial contracts. In particular, companies should consider whether they are entitled to invoke force majeure under the contracts, and thereby defer the performance of their contractual obligations without penalty.

A force majeure event means an extraordinary event or circumstance which is beyond the control of the contracting parties such as an act of God (like a natural calamity) or events such as a war, strike, riots etc. A successful invocation of a force majeure clause generally relieves the parties from their respective contractual obligation and/or liability. A force majeure clause does not excuse a party's non-performance entirely, but only suspends it for the duration of the force majeure event. If properly drafted, the force majeure clause may provide that where a force majeure event continues for more than a stipulated period then either party may, at its own option, terminate the contract without any financial consequences to each other.

Under English Common Law, the applicability of force majeure is purely contractual. It is understood that a generalised doctrine of force majeure does not exist and it is up to the parties to define the events as to what constitutes force majeure events and the parties' rights and obligations upon the occurrence of such events. In Bangladesh, the position is similar as there is no direct statute that directly governs the doctrine of force majeure or gives effect to it in express terms. Since the doctrine of force majeure does not have any direct statutory basis under the laws of Bangladesh, its reliance is based primarily on the parties' agreement and the respective terms of the contract entered into between the contracting parties. A typical force majeure clause would read as follows:  

"Notwithstanding the provisions of this Agreement, the Parties agree that this Agreement shall not be terminated for default, if any delay in performance or other failure to perform any obligation under this Agreement is the result of an event of Force Majeure. If a Force Majeure situation does arise, the defaulting Party shall notify the other Party in writing, within 10 (ten) days of such occurrence, the existence of such condition and the cause thereof. Unless otherwise directed by the innocent Party in writing, the defaulting Party shall try and continue to perform its obligations under this Agreement as far is reasonably practical and shall seek all reasonable alternative means for performance not prevented by the Force Majeure event."

However, not all commercial contracts may contain a force majeure clause and, in today's situation of COVID-19, parties may be in an uncertain position as to whether they can perform their respective obligations under the contract in a timely manner or, if at all. It is therefore essential to understand whether parties in Bangladesh can successfully claim a force majeure event or be relieved from their respective responsibilities due to COVID-19 under the existing legal framework in Bangladesh.

All contracts, which are governed by Bangladeshi law, are regulated by the Contract Act 1872 (the "Act of 1872"). The doctrine of frustration is enshrined in Section 56 of the Act of 1872 which provides that a contract becomes void when it becomes impossible to perform or, by reason of some event, it becomes unlawful after it was entered into. So, if the contract becomes impossible to perform for any reason whatsoever, it shall be treated as void under the laws of Bangladesh,

31

provided that the defaulting party did not know, or with reasonable diligence, could not have known that the contract would be so frustrated. The effect of a void contract, in simple terms, is that it cannot be enforced by law and the parties are relieved from their respective obligations.

It is clear that, to attract the doctrine of frustration, the performance of the contract must become absolutely impossible due to the happening of some unforeseen event. This was clearly held by the Supreme Court of Bangladesh where it stated with clear observations that "[w]here plea of frustration is raised on the happening of a certain event, the real question is whether the event which has accrued is such and whether its relation to the contract is such that in considering the contract and the surrounding circumstances it must be held that it would not be just and reasonable to hold the parties any longer to the terms of the contract. To attract the doctrine of frustration of contract the performance of the contract must become absolutely impossible due to the event, where in spite of intervention even subsequent to the making of the agreement which are not in contemplation of the parties and which could not be foreseen with reasonable diligence, the contract could still be performed in substance then it could not be said that the contract has become impossible of performance within the meaning of section 56 of the Contract Act." The position is similar in India as well where the Indian Supreme Court has articulated that force majeure events are governed by the Indian Contract Act 1872.

Therefore, in the absence of an appropriately worded force majeure clause in a contract, the parties in Bangladesh may have the option of relying on the existing provisions of Bangladeshi law - in particular, Section 56 of the Act of 1872 - in order to excuse itself from the timely performance of their respective obligations under the contract. However, in order to avoid unscrupulous parties from taking advantage of COVID-19 as a force majeure event and escape from their respective obligations, it must be remembered that a valid claim under a force majeure clause due to COVID-19 is likely to depend on strict considerations, and the contracting party should be prepared with clear evidence to support its claim. There has to be a clear nexus between the force majeure event and the non-performance of the contractual obligation. The burden of proof is on the party seeking to rely upon the force majeure provisions, and the provisions are usually construed narrowly against that party. In particular, the Courts have been reluctant to interpret such provisions so as to excuse non-performance where there is evidence of negligence or a breach of duty by the party affected. Even if it is established that there is a causal link between the force majeure event and delay, parties are likely to have to show that they have taken all reasonable endeavours to circumvent the force majeure event. For example, if the delay in delivery of materials has caused a delay in a party's performance of the contract, it will have to show that it has taken reasonable efforts to avoid the force majeure event by, for example, considering other options such as obtaining the materials from alternative suppliers.

It follows that, when considering claims for force majeure events, parties should diligently review and consider the precise wording of the relevant force majeure clauses of each contract and check the time limits and/or notification obligations of the same. The parties should ensure strict compliance with the notice provisions of such a clause and monitor closely the development of the COVID-19 situation and how it has affected and/or caused the delay in performance of the contract. The affected party should also formulate and record any emergency plans to mitigate the effect of such a force majeure event, and gather evidence to demonstrate that they have acted reasonably in the circumstances.

Lastly, it is important to mention that, in order to avoid any ambiguity on the subject, the Government of different countries have already issued circulars clearly stating that COVID-19 is to be treated as a force majeure event. For example, the Government of India has issued a notice on 19 February 2020 that "[a] doubt has arisen if the disruption of the supply chains due to spread of corona virus in China or any other country will be covered by the Force Majeure Clause" and that COVID-19 "should be considered as a case of natural calamity" meaning that force majeure clauses in contracts can be invoked for such events. On the other hand, the China Council for the Promotion of International Trade, a quasi-Governmental body, announced on 26 February 2020 that it had issued more than 1600 force majeure certificates covering contracts worth tens of billions of yuan. It is also advisable

32

that our Government of Bangladesh should consider the current situation and also take appropriate steps in defining this pandemic as a force majeure event, where applicable.

https://www.thedailystar.net/law-our-rights/news/covid-19-and-force-majeure-bangladeshi-perspective-1885861

--------------------------------------------------------------------------------------------------------------------------------

*This article was earlier published in the Daily Star, Dhaka.

“I’m not a combative person. My long experience has taught me to resolve conflict by raising the issues before I or others burn their boats.” -- Alistair Grant

33

Interview

We welcome interviews from academicians, corporate, financial and legal experts on their perception and understanding of Alternative Dispute Resolution (ADR), based on a number of questions put forward by BIAC. We are confident that these interviews will bring about more awareness about the norms and practices of ADR in the country and importance of introducing it to assist our judicial system in order to reduce the backlog of pending cases and the time taken to resolve commercial disputes. It is our pleasure to publish interview of Dr. Khaled Hamid Chowdhury, Head of Laws, London College of Legal Studies (South) , a partner of BIAC, in the current issue of the BIAC Quarterly Bulletin (BQB), the country’s only dedicated knowledge publication on ADR.

Dr. Khaled Hamid ChowdhuryHead of Laws London College of Legal Studies (South)

BQB: Globally, corporate bodies are moving away from using the traditional court based judicial system for resolving commercial disputes and adopting ADR. Do you believe that this global best practice has a future in Bangladesh? Why?

KHC: I believe the global practice of adopting ADR has a future in Bangladesh at a wide spectrum.

Bangladesh with a current population of around 170 million with the Supreme Court based in Dhaka without any of its benches sitting elsewhere is facing a monumental problem of access to justice becoming increasingly narrower.

According to the report, Justice Audit Bangladesh 2018, conducted by German organisations, UK Aid, and Bangladesh Bureau of Statistics- the country’s courts have a backlog of 34 lakh pending cases. As per a study by the Supreme Court in 2019, a total of 35,98,263 cases were pending with the courts across the country till June 30. In addition, it has been reported that the number of pending cases may reach a overwhelming figure of 5 million by 2020.

Considering the backlog of cases, ADR is undoubtedly the future of Bangladesh.

In fact, it is already here. Recently we can see that in Bangladesh there has been renewed emphasis on the Alternative Dispute Resolution schemes as a means to avoid the use of contested hearings in the formal litigation and to ensure the most fundamental right of access to justice for all in an easy way.

These Alternative Dispute Resolution (ADR) modalities are considered as less likely to fuel the parental conflicts, more likely to induce the parties to resolve their conflicts in an amicable manner preserving the future relationship between the parties and reducing cost, delay and loss

34

of energy to a significant extent. Following the considerable advantages of ADR almost every county of the world has introduced ADR system in its justice delivery system which has paved the way to the promotion of access to justice indiscriminately for all.

BQB: What are the main obstacles in the mainstreaming of ADR in this country?

KHC: Dispute resolution outside of courts is not new in Bangladesh; non-judicial and indigenous methods have been used by the societies for a very long time. The main problem is that there is no uniform ADR law in Bangladesh. There are a lot of legislations which contain provisions relevant to the ADR process in Bangladesh and there are some well known ADR mechanisms in Bangladesh, such as, mediation, negotiation, conciliation, arbitration and so on. 40 different legislations have prescribed different ADR mechanisms and different procedures to settle the dispute. This is a problem for the person who acts as a neutral mediator or conciliator because all procedures are different in different cases. Sometimes, the people who are involved in an ADR process are not properly trained and they do not have an adequate knowledge on how to manage and convince the disputants to settle the dispute. Sometimes, the decision of an ADR is biased and politically motivated. For this reason the vulnerable party is not getting a proper justice. Unfortunately, we do not have a Mediation Act in Bangladesh neither is Bangladesh a signatory to The Singapore Mediation Convention. Signing the Convention will mean that mediation will then have ‘teeth’ in Bangladesh. To that end, political support is necessary to pass the legislation.

BQB: What are your thoughts on 'reputation risk', given that the legal cases are heard in courts of Bangladesh the proceedings are considered to be in the public domain?

KHC: Over the last few years, we have seen a growing concern for reputation management when facing legal proceedings. It is increasingly common for litigations in the public domain to pose a severe threat to the reputation of a company and/or its management. This is due to the fact that legal processes significantly affect the opinion that the various stakeholders, and the society at large, have about the company, not only as a result of the proceeding itself, but also because of the “parallel trial” which involves the company or people that take part in the litigation, which might ultimately entail an important loss of trust.

BQB: Do you support insertion of ADR clause in all commercial contracts or do you feel the court system can adequately provide risk mitigation coverage without ADR clause in the contract?

KHC: We have always recommended including an alternative dispute resolution clause (ADR clause) in contracts.

Business disputes can prove to be contentious, costly, and complex, whether they stem from contract violations or lease negotiations. Rather than devote massive business resources to a lengthy trial, many business owners in the city would prefer faster, more efficient ways to resolve a dispute. 

ADR clauses can be very helpful and provide fast, consistent guidance in the event that parties have a conflict. Adding an ADR clause in a commercial contract is like adding a blanket to protect the parties.

The contracts must contain a clause, agreement or reference stating that the disputes will be resolved through an arbitration. As a result the arbitration must be conducted under the rules of

35

the Arbitration Act 2001or the rules of the Bangladesh Council for Arbitration. The arbitrations can take place where the parties choose or at the Bangladesh Council for Arbitration.

Litigation in the courts can be slow and expensive although there are specialist courts that can act with speed and expertise especially in the commercial field. Parties may nevertheless prefer to avoid litigation. They may wish to retain the flexibility of commercial agreement that courts cannot provide. Courts determine disputes by applying the law; they must do that regardless of the commercial interests or opportunity that may exist for both parties were they to renegotiate.

Courts do not seek to redesign the contract or even return it to the wishes of one party or the other. Courts apply legal rules to a disputed contract. Furthermore, the courts must conduct their work in open public hearings. ADR clauses allow parties to retain control over not just the dispute and the commercial flexibility available from private negotiated agreement and not available from Courts, but to do so privately.

BQB: It is widely accepted that we have not been able to mainstream the use of ADR due to inadequate coverage of this subject/discipline in the legal education system. The courses and the curriculum give little or no emphasis on ADR. Do you believe that there is need to upscale ADR in the legal education? How can it be achieved?

KHC: It is of paramount importance to promote a culture where litigation would not be preferred or promoted. Teaching and promoting ADR at undergraduate level and university level would also mean that they there would be increased skilled mediators and conciliators since the norm is that people get familiarised with ADR at a later point. Mediation or other forms of ADR should not only be introduced as a module at university and undergraduate level but it should also be promoted via extracurricular activities like mooting competitions based on arbitration trials or mediation or negotiation competitions. For instance, The module “Dispute Resolution Skills” is offered as an optional module in the 2nd year of the Bachelor of Laws (LL.B) course in UWE Bristol and as an optional module in the final year of the University of London LLB Programme.

“Relationships of trust depend on our

willingness to look not only to our own

interests, but also the interests of

others.” -- Peter Farquharson

36

37

38