A well-drafted arbitration clause in Bangladesh is the foundation of effective commercial dispute resolution. The arbitration clause in a contract determines how disputes will be resolved — through BIAC, BIArb, ICC, or ad hoc arbitration — and sets the framework for the entire arbitration process. A poorly drafted clause can lead to costly disputes about the dispute resolution process itself, sometimes called “pathological clauses.”
Legal Requirements for an Arbitration Clause in Bangladesh
Under Section 7 of the Arbitration Act 2001, an arbitration clause must be in writing and must clearly express the parties’ intention to submit their disputes to arbitration. The clause must be signed by the parties or contained in an exchange of letters, telexes, telegrams, or other means of telecommunication that provide a record of the agreement. An oral arbitration clause is not valid under Bangladesh law.
Key Elements of an Effective Arbitration Clause in Bangladesh
Scope of Disputes
The arbitration clause should clearly define the scope of disputes covered — either all disputes arising from the contract (“any dispute, controversy or claim arising out of or relating to this agreement”) or specific categories of disputes. A broad scope clause is generally preferable to avoid arguments about whether a particular dispute falls within the clause.
Arbitral Institution and Rules
The clause should specify the arbitral institution (BIAC, BIArb, ICC, SIAC, or LCIA) and the applicable rules. Using an institutional clause ensures that the arbitration is professionally administered and that there is a clear framework for the conduct of proceedings.
Seat of Arbitration
The seat of arbitration determines the procedural law governing the arbitration and the court that has supervisory jurisdiction. For domestic disputes, the seat should be Dhaka, Bangladesh. For international disputes, a neutral seat such as Singapore or London may be preferable.
Number of Arbitrators
The clause should specify whether the dispute will be decided by a sole arbitrator or a three-member tribunal. A sole arbitrator is faster and cheaper; a three-member tribunal provides greater procedural safeguards for complex, high-value disputes.
Language
The clause should specify the language of the arbitration — English or Bengali. For international disputes, English is generally preferable.
Sample BIAC Arbitration Clause for Bangladesh Contracts
The following is a recommended BIAC arbitration clause for commercial contracts in Bangladesh:
“Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Bangladesh International Arbitration Centre (BIAC). The seat of arbitration shall be Dhaka, Bangladesh. The number of arbitrators shall be [one/three]. The language of the arbitration shall be English.”
TRW Law Firm: Arbitration Clause Drafting in Bangladesh
TRW Law Firm advises clients on drafting and reviewing arbitration clauses for all types of commercial contracts in Bangladesh. Contact TRW at tahmidurrahman.com or visit lawfirm.com.bd.
Frequently Asked Questions
Is an oral arbitration clause valid in Bangladesh?
No. Under Section 7 of the Arbitration Act 2001, an arbitration clause must be in writing. An oral agreement to arbitrate is not enforceable in Bangladesh.
What is a pathological arbitration clause in Bangladesh?
A pathological arbitration clause is one that is defective or ambiguous — for example, a clause that provides for arbitration but fails to specify the institution or rules, or a clause that contradicts itself by providing for both arbitration and court litigation. Pathological clauses can lead to costly disputes about the dispute resolution process itself.
Can I add an arbitration clause to an existing contract in Bangladesh?
Yes. The parties can enter into a separate arbitration agreement (a submission agreement) after a dispute arises, even if the original contract did not contain an arbitration clause.
Related articles: Alternative Dispute Resolution in Bangladesh | Arbitration Lawyer in Bangladesh | Commercial Arbitration in Bangladesh
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Contact TRW Law Firm
If you need expert legal advice on this matter, contact TRW Law Firm — one of Bangladesh’s leading law firms specialising in ADR, arbitration, and commercial litigation. Visit tahmidurrahman.com or meheruba.com to speak with a specialist today.
