Tuesday, June 25, 2024


Dhaka Tribune

Creating an arbitration friendly regime

Update : 02 Apr 2014, 07:03 PM

With the advent of improved technology in transportation and communication, international trade has become dominant. Disputes arising out of such international transactions are often settled through international commercial arbitration. In Bangladesh, law relating to international commercial arbitration and the enforcement of such arbitral awards was codified in the Arbitration Act of 2001. Since the enactment of this Act, there were many seminal cases which appeared before the Supreme Court of Bangladesh, especially with respect to the  scope of various provisions of the said Act.

Striking down arbitral awards on the ground of public policy is a crucial fragment to consider in order to achieve a clear vision on how international commercial arbitration is treated by any national court. National courts may interpret public policy grounds differently, which would further depend on the particular judge and the general approach of the  national courts. There was an attempt from the International Law Association (ILA) to develop a conception of public policy which would be accepted universally. However, this attempt failed as it was difficult to lay out constitutions which could govern the scope of public policies. Thus, scope of public policy or its interpretation may differ from country to country depending on their ambiguousness and attitude towards the alternative dispute resolution methods.

If public policy is solely relied upon, a party may suffer regardless of their strength in  a case. In the case of Richardson v Mellish (1824), it was mentioned that public policy is much like an unruly horse.  A party can never be sure where it would lead them once they sit astride the horse. It may lead them away even from sound law and generally it is never argued at all. It often comes into play when other points fail. In short, it was stressed upon that the national courts do not use the public policy as an unfair weapon by which they might negate enforcement of an otherwise valid arbitral award.

The situation was dealt with strongly by the US courts. They have made their position clear regarding interferences in international arbitration by way of public policy. In the landmark case of Scherk v Alberto-Culver Co (1974), it was elucidated that the concept that all disputes must be resolved with US laws or US courts should not be encouraged. We have witnessed  that a different approach was taken by the Indian courts. In an Indian supreme court case, namely Renusagar v General Electric (1993), it was stated that an international arbitral award would be refused if it was in contradiction with any  public policy and if such enforcement would be contrary to (i) fundamental policy of Indian Law, (ii) the interests of India or (iii) justice or morality. The second phrase may commission a huge area. The scope for refusing any arbitral award increases vastly as the interest of India” can be interpreted hugely as well.  Having the scope of refusing an arbitral award on the basis of public policy terminates the capacity of fairness. Any national court acting in such a manner really shows the extent of how often systems become shackles and bind our own hands. 

It is important in the modern world to pave the way for alternative methods of dispute resolution and deal with public policy issues smartly. Although it is difficult to avoid public policy grounds wholly, it is not impossible to strike a balance between conflicting interests  which eventually sabotages an arbitration process. As public policy varies from regime to regime, and often from country to country, there can never be any fixed guidelines on what it should include. However, one can expect more initiatives being taken internationally, much like the one by ILA, as that would help different countries to come under a similar term and all of them would fix a framework when they choose to use the public policy defence.

One of the most important directives regarding the matter could be the directions given towards the Judges. They should be given proper training and a clear understanding of what is to be taken into consideration and what is required to be done when an arbitral award is given. Being a signatory of the New York Convention does bestow severe responsibilities. It should always be kept in mind that refusal to enforce arbitral awards on the basis of public policy can be harmful and therefore may have disadvantageous consequences. Thus, it is of paramount importance to uphold the arbitral awards, without undue hindrance by the courts on the ground of public policy, for the development and growth of our country. Bangladesh has massive investment and growth opportunities but a logged judicial system and disregard of alternative dispute resolution practices will serve as a deterrent for potential international investors, if not dealt with in the proper manner. 

Top Brokers


Popular Links