Table of Contents
- • Introduction
- • Legal Framework of Arbitration in Bangladesh
- • What is an Arbitration Agreement?
- • Types of Arbitration in Bangladesh
- • Stages of Arbitration in Bangladesh
- • Practical Issues Clients Commonly Face
- • Advantages and Limitations of Arbitration
- • How Roy Law Nexus Can Help
- • Frequently Asked Questions
- • Conclusion
- • References
Introduction
Arbitration is an alternative dispute resolution process through which parties agree to resolve their dispute outside the ordinary court system before a neutral decision-maker known as an arbitrator or arbitral tribunal. In Bangladesh, arbitration is commonly used in commercial contracts, construction disputes, supply agreements, joint ventures, shareholder arrangements, banking and finance documents, international business transactions, and other private contractual disputes.
The main advantage of arbitration is that the parties can choose a more flexible and private dispute resolution process. They may agree on the number of arbitrators, the place of arbitration, the language of proceedings, procedural rules, applicable law, and sometimes even the professional background of the arbitrator. However, arbitration is not automatically cheaper or faster in every case. Its effectiveness depends on the arbitration clause, the complexity of the dispute, the cooperation of the parties, the tribunal’s management, the quality of evidence, and enforcement issues.
In Bangladesh, the principal law governing arbitration is the Arbitration Act, 2001. The Act deals with domestic arbitration, international commercial arbitration, recognition and enforcement of foreign arbitral awards, and related court assistance.
Legal Framework of Arbitration in Bangladesh
The Arbitration Act, 2001 extends to the whole of Bangladesh and applies where the place of arbitration is in Bangladesh. The Act also provides that sections 45, 46 and 47 apply where the place of arbitration is outside Bangladesh, mainly for recognition and enforcement of certain foreign arbitral awards (Arbitration Act, 2001, s. 3).
The Act gives limited but important roles to the courts. Section 7 restricts ordinary court proceedings where a matter is covered by an arbitration agreement, except as provided by the Act. Section 10 allows a party to apply to the court, before filing a written statement, to refer the parties to arbitration where the dispute is covered by an arbitration agreement and the agreement is not void, inoperative, or incapable of being performed (Arbitration Act, 2001, ss. 7 and 10).
Bangladesh is also a contracting state to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, commonly known as the New York Convention. The United Nations Treaty Collection records Bangladesh’s accession on 6 May 1992.
What is an Arbitration Agreement?
An arbitration agreement is the legal foundation of arbitration. Without a valid arbitration agreement, one party generally cannot force the other party to arbitrate. Under section 9 of the Arbitration Act, 2001, an arbitration agreement may be included as a clause in a contract or may be made as a separate agreement. It must be in writing and may be found in a signed document, exchange of letters, telex, fax, email or other communication that records the agreement, or in pleadings where one party alleges the agreement and the other does not deny it.
A well-drafted arbitration clause should usually mention the seat/place of arbitration, number of arbitrators, procedure for appointment, governing law, language, applicable rules, and whether the arbitration will be institutional or ad hoc. Poorly drafted clauses often create disputes before the actual dispute is even heard.
Types of Arbitration in Bangladesh
Domestic arbitration
Domestic arbitration usually refers to arbitration where the place of arbitration is Bangladesh and the dispute does not involve the foreign elements that make it an international commercial arbitration.
International commercial arbitration
International commercial arbitration involves a commercial legal relationship where at least one party has a foreign element, such as a foreign national, foreign company, foreign-controlled body, or foreign government entity, as defined in the Act (Arbitration Act, 2001, s. 2(c)).
Ad hoc arbitration
Ad hoc arbitration is conducted without the administration of an arbitral institution. The parties and tribunal manage the procedure themselves, subject to the Act and any agreed rules.
Institutional arbitration
Institutional arbitration is conducted under the rules of an institution, such as the Bangladesh International Arbitration Centre (BIAC). BIAC states that it is the only registered arbitration institution in Bangladesh and commenced operations in April 2011 under a licence from the Government of Bangladesh.
Stages of Arbitration in Bangladesh
1. Review of the Contract and Arbitration Clause
The first step is to review whether the contract contains a valid arbitration clause. The clause should be checked carefully to identify the parties, scope of disputes, seat/place, governing law, number of arbitrators, appointment method, and applicable rules. This stage is important because many arbitration problems arise from unclear clauses — for example, a clause may refer to arbitration but fail to state how the arbitrator will be appointed, or may confuse ‘seat’ and ‘venue’, which may later affect court supervision and enforcement.
2. Pre-Arbitration Strategy and Document Review
Before sending a notice of arbitration, the claimant should review the contract, correspondence, invoices, payment records, delivery documents, notices, minutes, emails, expert reports, and any applicable limitation period. Some contracts also require negotiation, mediation, engineer’s decision, or other pre-arbitration steps before arbitration can begin. Parties should also consider whether urgent protection is needed — for example, if there is a risk that the opposing party may transfer assets, remove goods, invoke a bank guarantee, destroy evidence, or frustrate enforcement.
3. Notice or Request for Arbitration
Unless the parties agree otherwise, arbitral proceedings are deemed to commence when a dispute arises under the arbitration agreement and a party receives notice from another party requiring reference of the dispute to arbitration or requiring appointment/approval of an arbitral tribunal (Arbitration Act, 2001, s. 27). A proper notice should include the contract details, arbitration clause, summary of dispute, relief claimed, proposed arbitrator if applicable, request for appointment, and supporting documents. Under institutional rules, the claimant may need to file a formal request with the institution and pay applicable fees.
4. Interim Measures by Court or Tribunal
A party may require interim protection before, during, or until enforcement of the award. Section 7A of the Arbitration Act, 2001 empowers the Court or the High Court Division, depending on the nature of arbitration, to pass interim orders, including preservation of goods or property, restraint against transfer of property, ad interim injunction, appointment of receiver, and other protective measures. The arbitral tribunal may also grant interim measures under section 21, unless otherwise agreed by the parties.
5. Constitution of the Arbitral Tribunal
The parties are free to determine the number of arbitrators. If they fail to agree, the tribunal will consist of three arbitrators. The parties are also free to agree on the procedure for appointment. If the agreed procedure fails, the Act provides court-supported appointment mechanisms. In non-international arbitration, the District Judge may appoint the arbitrator; in international commercial arbitration, the Chief Justice or a designated Judge of the Supreme Court may do so. An arbitrator must be independent and impartial.
6. Jurisdictional Issues
The arbitral tribunal has power to rule on its own jurisdiction, including whether a valid arbitration agreement exists. This is commonly known as the principle of kompetenz-kompetenz. A jurisdictional objection should generally be raised not later than submission of the statement of defence (Arbitration Act, 2001, ss. 17 and 19).
7. Preliminary Conference and Procedural Timetable
After the tribunal is formed, a preliminary conference is commonly held to set the roadmap of the arbitration. The parties and tribunal may discuss pleadings, document production, witness statements, expert evidence, hearing dates, venue, language, electronic filing, confidentiality, costs, and timetable. If the parties do not agree on procedure, the tribunal may determine procedural and evidential matters (s. 25).
8. Statement of Claim, Defence and Counterclaim
The claimant submits the statement of claim, setting out the facts, issues, legal basis, documents, and relief sought. The respondent submits the statement of defence and may raise counterclaim if permitted by the agreement or applicable rules (Arbitration Act, 2001, s. 29).
9. Evidence, Witnesses and Hearings
The arbitral tribunal must deal with disputes fairly and impartially and give each party a reasonable opportunity to present its case. The tribunal is not bound by the strict provisions of the Code of Civil Procedure or the Evidence Act, which allows more procedural flexibility than ordinary civil litigation (ss. 23–24). In commercial arbitration, documents often play a central role.
10. Settlement During Arbitration
Arbitration does not prevent settlement. The tribunal may encourage settlement through mediation, conciliation or other procedures with the agreement of all parties. If the parties settle, the tribunal may record the settlement as an arbitral award on agreed terms, with the same status and effect as any other arbitral award (s. 22).
11. Arbitral Award
The final decision of the tribunal is called an arbitral award. The award must be in writing and signed by the arbitrator or arbitrators. It should state the date and place of arbitration, and a signed copy must be delivered to each party (s. 38). Unless otherwise agreed, the tribunal may also deal with interest and costs.
12. Correction, Interpretation or Additional Award
After receiving the award, a party may request correction of computation, clerical, typographical or similar errors within the time stated in the Act, unless the parties agreed otherwise. A party may also request an additional award on claims presented in the proceedings but omitted from the award (s. 40).
13. Challenge or Setting Aside of Award
An arbitral award is generally final and binding, but it may be challenged on limited statutory grounds. Under section 42, a domestic award may be set aside by the Court, and an award made in an international commercial arbitration held in Bangladesh may be set aside by the High Court Division, upon application within 60 days from receipt of the award. Grounds (s. 43) include incapacity, invalid arbitration agreement, lack of proper notice, inability to present the case, award beyond the scope of submission, improper tribunal composition or procedure, non-arbitrability, conflict with Bangladeshi law or public policy, and fraud or corruption.
14. Enforcement of Domestic Arbitral Award
Once the time for setting aside has expired, or a setting-aside application has been refused, the arbitral award is enforceable under the Code of Civil Procedure as if it were a decree of the Court (s. 44). The award creditor may seek execution against the award debtor, subject to the usual enforcement procedure.
15. Recognition and Enforcement of Foreign Arbitral Award
Foreign arbitral awards are recognised and enforced under sections 45 and 46. A foreign award may be treated as binding and enforced by execution under the Code of Civil Procedure as if it were a decree of the Court. The application must include the original or duly authenticated copy of the award, the original arbitration agreement or certified copy, and evidence necessary to prove that the award is a foreign award. For the purpose of section 45, ‘Court’ means the District Judge’s Court exercising jurisdiction within the district of Dhaka.
Practical Issues Clients Commonly Face
Clients often face difficulty because arbitration clauses are copied into contracts without proper drafting. A clause may fail to identify the seat of arbitration, number of arbitrators, appointment process, institutional rules, governing law, or language. These gaps may cause delay at the very beginning of the dispute.
Another common issue is failure to preserve evidence. In commercial arbitration, documentary evidence is often more important than oral allegations. Parties should preserve contracts, invoices, payment records, delivery challans, emails, WhatsApp messages, meeting minutes, bank records, technical reports, and notices.
Parties also sometimes misunderstand the limited nature of challenge against an arbitral award. Arbitration is not the same as a full appeal. Courts do not usually re-hear the entire dispute on facts and merits. Challenges are limited to statutory grounds under the Arbitration Act, 2001.
Advantages and Limitations of Arbitration
Advantages
- Privacy and confidentiality of proceedings;
- Procedural flexibility agreed between parties;
- Choice of arbitrator with relevant expertise;
- Specialised, commercial decision-making;
- Awards enforceable as a court decree;
- Useful for cross-border commercial disputes.
Limitations
- Arbitrator, institutional and expert fees may be significant;
- Appeal rights are limited;
- Poorly drafted clauses create procedural disputes;
- Weak evidence undermines the claim;
- Enforcement may still require court assistance;
- Multi-party or multi-contract disputes can be complex.
How Roy Law Nexus Can Help
Roy Law Nexus / রয় ল’ নেক্সাস assists individuals, entrepreneurs, companies, contractors, suppliers, investors and commercial parties with arbitration-related matters in Bangladesh. Our assistance may include consultation, contract review, arbitration clause drafting, notice preparation, document review, claim strategy, tribunal appointment support, interim measure applications, hearing preparation, settlement advice and enforcement-related assistance.
- Reviewing contracts, arbitration clauses, correspondence and dispute documents
- Advising whether a dispute is suitable for arbitration or court proceedings
- Drafting arbitration clauses, notices of arbitration, replies, claims and defences
- Assisting with appointment or challenge of arbitrators where legally justified
- Advising on interim measures, injunctions, asset protection and preservation of evidence
- Supporting clients in domestic and international commercial arbitration proceedings
- Assisting with setting aside, enforcement or foreign award recognition issues
- Coordinating with experts, accountants, engineers or technical professionals where required
For consultation on this matter, you may contact Roy Law Nexus / রয় ল’ নেক্সাস:
Frequently Asked Questions about Arbitration in Bangladesh
Conclusion
Arbitration is an important method of resolving commercial and contractual disputes in Bangladesh. The Arbitration Act, 2001 provides the legal framework for arbitration agreements, tribunal appointment, proceedings, interim measures, awards, challenges and enforcement. For businesses and contracting parties, the most important preventive step is to draft a clear arbitration clause before any dispute arises.
Where a dispute has already arisen, parties should carefully review the contract, preserve evidence, serve proper notice, appoint a suitable arbitrator and follow the correct statutory procedure. Arbitration can be effective, but its success depends on proper preparation, legal strategy and enforceability.
Disclaimer: The information above is for general legal awareness only and does not constitute legal advice. Specific legal advice should be taken after reviewing the facts, documents and applicable law.
References
- Bangladesh International Arbitration Centre (BIAC) (2019) BIAC Arbitration Rules 2019. https://biac.org.bd/biac-arbitration-rules-2019/ (Accessed: 28 May 2026).
- Bangladesh International Arbitration Centre (BIAC) (2025a) Bangladesh International Arbitration Centre. https://biac.org.bd/ (Accessed: 28 May 2026).
- Bangladesh International Arbitration Centre (BIAC) (2025b) BIAC Arbitration Process. https://biac.org.bd/biac-arbitration-process/ (Accessed: 28 May 2026).
- Government of Bangladesh (2001) সালিস আইন, ২০০১ [Arbitration Act, 2001], Laws of Bangladesh. https://bdlaws.minlaw.gov.bd/act-850.html (Accessed: 28 May 2026).
- Government of Bangladesh (2001) The Arbitration Act, 2001 (English) — MCCI, Dhaka. https://www.mccibd.org/images/uploadimg/act_and_policy/corporate_governance/The-Arbitration-Act-2001.pdf (Accessed: 28 May 2026).
- Government of Bangladesh (2004) সালিস আইন, ২০০১, section 7A: Power of Court and High Court Division to make interim orders. https://bdlaws.minlaw.gov.bd/act-850/section-32657.html (Accessed: 28 May 2026).
- United Nations (1958) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June 1958. https://treaties.un.org/pages/viewdetails.aspx?chapter=22&clang=_en&mtdsg_no=xxii-1&src=treaty (Accessed: 28 May 2026).