Introduction

Legal framework applicable to arbitration in Bangladesh

Why include an arbitration clause?

Core elements of an arbitration clause

• Arbitration agreement / consent: A clear statement that the parties agree to refer defined disputes to arbitration. Many laws, including the Arbitration Act, 2001, require the agreement to be in writing to be binding.
• Scope of disputes: A definition of which disputes are subject to arbitration. Clauses can be broad ("all disputes arising out of or in connection with this contract") or narrow (listing specific categories). Consider whether to include statutory or tort claims, third-party claims, and post-termination disputes.
• Seat / place of arbitration: Specification of the legal seat (jurisdiction whose law governs the arbitration procedure and whose courts have certain supervisory powers) and the physical place for hearings. The choice of seat has procedural and enforcement consequences.
• Number and appointment of arbitrators: Whether proceedings will be decided by a sole arbitrator or a panel, and the mode of appointment (party appoints, agreement on an appointing body, or institutional rules).
• Rules of arbitration: Whether the arbitration will be ad hoc or pursuant to specified institutional rules; identifying an institution and rule-set can provide procedural certainty.
• Language: The language of the proceedings, including of documents and testimony.
• Governing law of the contract: The law governing substantive contractual rights and obligations; this is distinct from the law of the seat.
• Interim measures and emergency relief: Whether the tribunal or courts have authority to grant interim relief; where urgent relief is required, parties often specify procedures and forums for emergency decisions.
• Confidentiality: Any agreement on confidentiality of proceedings and awards, subject to mandatory legal obligations that may require disclosure.
• Costs and fees: Allocation of arbitration costs and arbitral fees, and any agreed process for security for costs.
• Evidence and procedure: Any departures from default rules (e.g., document production, witness evidence, expert determination mechanisms).

Practical drafting points

• Use unambiguous language to express mutual consent to arbitrate and specify whether the clause is exclusive (i.e., all disputes go to arbitration) or non-exclusive.
• Clearly identify the seat of arbitration using a jurisdiction name (e.g., "seat of arbitration: Dhaka, Bangladesh"); avoid vague locational descriptions.
• If selecting institutional rules, cite the version and any opted-in rules (e.g., emergency arbitrator provisions) to avoid later debate about which edition applies.
• Set a mechanism for appointing arbitrators to reduce delay—e.g., each party appoints one arbitrator and the two arbitrators appoint the presiding arbitrator within a fixed period.
• Specifically address whether disputes concerning jurisdiction, validity of the arbitration clause, or interim measures go to the tribunal or courts.
• Consider inclusion of a severability clause so that if part of the arbitration clause is found invalid, the rest survives.
• Avoid inconsistent or overlapping dispute resolution provisions elsewhere in the contract; cross-reference the arbitration clause where appropriate.

Drafting a typical arbitration clause: an illustrative model

"Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be finally settled by arbitration in Dhaka, Bangladesh, administered under [insert institution or 'ad hoc'] in accordance with the [insert rules and year]. The arbitration shall be conducted in English. The tribunal shall consist of [one/three] arbitrator(s). The seat of arbitration shall be Dhaka, Bangladesh. The decision of the arbitral tribunal shall be final and binding on the parties, subject to the remedies provided by applicable law."

Step-by-step practical guide to incorporating an arbitration clause

1. Assess suitability: Consider whether arbitration is a suitable route for the likely disputes (value, complexity, confidentiality needs, interim relief requirements).
2. Negotiate key terms: Reach agreement on seat, rules, number of arbitrators, language and scope of disputes.
3. Draft clearly: Use precise drafting, include necessary cross-references and severability, and avoid internal inconsistencies.
4. Record mutual consent: Ensure the arbitration agreement is documented and signed in conformity with statutory requirements for a writing.
5. Incorporate institutional rules where appropriate: If parties prefer institutional administration, identify the institution and rules in the clause.
6. Consider related contract terms: Address confidentiality, interim relief, discovery obligations and costs allocation within the contract or by reference.
7. Execution and storage: Keep executed copies accessible and ensure authorised representatives have the capacity to agree to arbitration.

Commencing arbitration and preliminary procedural matters

• Serve a notice of arbitration or dispute notice in accordance with the contract and the chosen rules.
• Identify the tribunal composition and seek appointment of arbitrators per the agreed method.
• Seek interim protection if necessary—this may require urgent court relief or an emergency arbitrator depending on the agreed rules and the seat.
• Agree or seek procedural orders addressing timetable, disclosure, expert evidence and hearing arrangements.

Choosing between institutional and ad hoc arbitration

Selection and neutrality of arbitrators

Interim relief and the role of courts

Recognition and enforcement of arbitral awards

Challenging or setting aside an award

Costs, timing and practical risk management

Practical drafting checklist

• Identify seat and place of arbitration clearly.
• Specify language and governing law of the contract.
• Decide on institutional vs ad hoc and cite the applicable rules.
• Set arbitrator appointment procedures and qualifications.
• Address interim remedies and whether courts retain concurrent jurisdiction.
• Include confidentiality and costs provisions if important to the parties.
• Include a severability clause and cross-reference dispute resolution elsewhere in the contract.

2026 update

Common mistakes and how to avoid them

• Vague scope: Ambiguous descriptions of covered disputes invite jurisdictional challenge—define scope with care.
• No seat specified: Omitting a clear seat can create uncertainty about procedural law and court intervention.
• Unclear appointment mechanism: Lack of a clear method for appointing arbitrators can cause delay—agree fall-back methods.
• Contradictory clauses: Conflicting dispute-resolution provisions in the same contract should be harmonised.
• Ignoring interim needs: Failure to plan for emergency relief can be costly—specify emergency procedures or forum for urgent applications.

Institutional support and resources

When to seek tailored legal advice

• cross-border transactions with potential enforcement in multiple jurisdictions;
• complex commercial or technical disputes requiring specialist arbitrators;
• where interim relief may be needed urgently;
• where local statutory or regulatory controls affect enforceability; and
• when drafting bespoke cost allocation or security-for-cost arrangements.

Sample procedural timeline (indicative)

1. Notice of arbitration served and response filed (usually within a contractually specified period).
2. Tribunal constitution (appointment period may be set by the contract or institutional rules).
3. Preliminary meeting and timetable fixed for pleadings, disclosure and expert evidence.
4. Document production and witness statements exchanged in accordance with orders.
5. Hearing conducted (if required) and post-hearing submissions filed.
6. Deliberation and issuance of the final award, followed by any proceedings to enforce or set aside the award as applicable.

Practical considerations for cross-border parties

Five practical FAQs

Concluding remarks