INSTITUTIONALISING ADR FOR COMMERCIAL AND TAX DISPUTES
Changing face of dispute resolution regime in Bangladeshby Mahjabeen Quader and Md Mazedul Islam
RESOLVING disputes speedily while preserving important business rapport is a key priority in modern commercial milieu. Delayed resolution of any business dispute has adverse impact on the economy both from micro and macroeconomic viewpoint. Economic growth of a country like Bangladesh is decidedly reliant upon investment — whether from the internal private sector or outside the country — and ease of dispute resolution has always been one of the most important considerations for any investor to do business. According to Investing across Borders 2010, a World Bank group initiative to compare regulation of foreign direct investment around the world, Bangladesh has no mainstreaming process to enforce arbitration awards and no institution to administer commercial disputes beyond litigation.
Although backlog of cases appears to be a common predicament of the judiciaries worldwide, this difficulty for Bangladesh is worsening every year. According to the latest annual report of the judiciary, a total of 9,521 civil cases are pending with the Appellate Division of the Supreme Court while the number is 79,890 in the High Court and 701,789 for the district courts. Even if we consider only 15 per cent of these civil cases are commercial, a humongous 118,680 commercial cases are currently pending with the formal litigation system in Bangladesh. If we add to consider the very general assumption of dispute resolution where larger companies are always less affected and more successful than small and medium enterprises in resolving disputes through the court system, the situation appears more disquieting as 90-95 per cent of the total businesses in Bangladesh are SMEs. Do we really need any further statistics to assess the colossal amount of private capital funds locked up in all these disputes that eventually impede our economic growth significantly?
Bangladesh’s complex dispute resolution stance in turn also has a detrimental effect on its standing as an investor-friendly state. The current situation of commercial disputes causes investors to lose confidence in Bangladesh and in turn discourage existing investors from investing further in Bangladesh. Simultaneously, it can generate bad publicity amongst prospective investors and deter future foreign investments to Bangladesh. Therefore, an investment culture that allows for effective dispute resolution system would clearly benefit Bangladesh by promoting foreign investment and thereby creating the jobs necessary for Bangladesh.
Businesses have a very simple and straightforward approach to resolving disputes. They need disputes resolved quickly and efficiently. Therefore, businesses along with legal experts and visionaries across the world have started changing disputes resolution landscape to accommodate these growing needs by introducing less formal procedures for dispute resolution. These procedures are known collectively as alternative dispute resolution. Parties can settle disputes through ADR with or without the help of a third party outside the court system and is possibly the only plausible solution to discharge pressure from our overburdened court system. Despite historic resistance to ADR by numerous popular parties and their advocates all over the world, ADR has gained ubiquitous acceptance among both the general public and the legal profession in recent years.
The impact of ADR in resolving commercial disputes and releasing funds into the economy is real. The benefits of ADR are many but some of the major benefits are confidentiality, speedy resolution, improvement in business relationships and enhancement of good public sector governance by reducing the backlog of disputes.
Bangladesh is favoured with a sound legal framework, with the High Court providing an appropriately powerful forum for enforcement of fundamental rights and for judicial review of administrative action. There are, however, significant concerns as to the accessibility of the court system — as evidenced by official statistics showing a significant backlog of cases, timely dispute resolution is often not available. This is partly a result of under-resourcing in the courts, but can mainly be attributed to procedural delays.
The lack of any comprehensive review and updating of substantive laws is a significant issue. There are few mechanisms in place to prevent or reduce delays with regard to case management. Technical and personnel limitations also exist, for example the absence of any system for recording transcripts of hearings as well as the lack of recording, transcribing or computer facilities. The implications of these delays are, therefore, not providing for effective resolution of commercial disputes, most particularly because it does not offer timely resolution. There is, therefore, a strong incentive for businesses to look for ADR approaches, most notably arbitration and mediation.
Bangladesh has an Arbitration Act 2001, derived largely from the UNCITRAL Model Law on Arbitration, which provides a sound platform for the future development of arbitration within commercial disputes. The passing of this act has already had an impact on the level of interest in arbitration, particularly in matters involving government-controlled entities.
Some key difficulties remain, however. Whilst the act could be toughened up in some respects, the main issue concerns the approach of the courts to the enforcement of arbitration awards. This requires the successful party in arbitration to turn to the court of the district judge for assistance in enforcing an arbitral award, a procedure which is itself lengthy and time-consuming. Furthermore, this process then introduces the risk of appeal to the High Court and thence to the Appellate Court, all of which take a considerable period of time, and which collectively lead to the conclusion that arbitration might be regarded as offering little more than an additional layer in the court process.
Mediation is another ADR approach that has some history within the Bangladeshi legal system and culture. Culturally familiar through traditional approaches such as salish and through recent NGO-led initiatives at a community level, mediation has been piloted within the family and money loan courts.
In recent years, some schemes of alternative dispute resolution have been integrated in some of the laws of Bangladesh. One is the Code of Civil Procedure (Amendment) Act, 2003 where mediation and arbitration processes have been incorporated for faster relief of civil cases. The Muslim Family Courts Ordinance 1985 is reframed with ADR technique both in its pre-trial and post-trial stages to reach to a feasible decision in issues related Muslim marriage, restitution of conjugal rights, divorce, maintenance, guardianship and custody of the offspring’s . The Artha Rin Adalat Ain 2003 or the Money loan Court Act, 2003, which deals with the unpaid debts of individuals or organisations, also has the provisions of ADR titled as settlement of conference and mediation to manage such kind of cases more efficiently. The Village Court Act, 2006 has the provisions containing formation and strategies to dissolve any dispute within its jurisdiction in modest and flexible and non arbitrary way. Furthermore, the fully-functional Arbitration Act, 2001 is a comprehensive solution for both the national and international business Dispute with the periphery of the country.
There have been some significant milestones achieved in Bangladesh with regards to ADR reform.
The first-ever alternative dispute resolution centre, Bangladesh International Arbitration Centre, was established in April 2011 by the three key chambers — Dhaka Chamber of Commerce and Industry, Metropolitan Chamber of Commerce and Industry and International Chamber of Commerce, Bangladesh. BIAC has been established to offer arbitration and mediation services for commercial disputes in a cost-effective manner. BIAC’s presence would not only put Bangladesh on the global map as an arbitration-friendly state but also help access to justice for businesses so that businesses can have rapid and uncomplicated access to solutions to their disagreements.
The government also appears committed to effective commercial dispute resolution. The law ministry is working hand in hand with the private sector to create the necessary and sufficient regulatory frameworks to sustain the ADR reform through relevant laws’ amendments, capacity building and awareness. Already the ministry has drafted amendments to the CPC where mediation will be made mandatory. The ministry this time has taken care of the limitations that the earlier provision for mediation had. The CPC is now with the parliamentary standing committee and hopefully soon will be enacted. Once this takes place, this can significantly contribute in reducing the backlog of commercial cases. The ministry is also taking steps to introduce ADR for criminal cases.
The National Board of Revenue has very recently launched ADR for resolving tax disputes (disputes regarding income tax, value added tax and custom duty). The board aims to boost revenue collection and clear backlogs of thousands of tax-related cases pending at courts. Almost $1.4 billion government revenue is locked up till date. The board has amended all the relevant acts in 2011 to introduce facilitation (largely derived from the concept of mediation) and very recently enacted tax ADR rules for all three taxes to implement out of the court tax dispute resolution in Bangladesh. Four revenue collection centres in Dhaka and Chittagong are currently implementing ADR on a pilot basis to be followed by country-wide execution. The most remarkable feature of this initiative is that the board is working very closely with the private sector to sustain this scheme; a good example could be the selection of facilitators’ panel that will facilitate the cases, through extensive discussion and in agreement with the Federation of Bangladesh Chambers of Commerce and Industry.
The close conjunction of these milestones and private sector and government working hand-in-hand suggests that ADR is an idea whose time has come in Bangladesh for effective dispute resolution. They see ADR in any form as being an acceptable method of speeding up the delivery of justice and reducing their very heavy case loads.
Although Bangladesh is still a long way and institutional ADR is still a very new idea in Bangladesh that might take some time to pick up. Challenges for Bangladesh that are critical to overcome and sustain the reform are (i) establishing legal ADR frameworks (drafting and amendment of laws and regulations); (ii) enhancing BIAC’s capacity to be able to provide credible ADR services; (iii) capacity enhancement of mediators/arbitrators, judges, legal community; (iv) ADR awareness raising, communications campaigns and (v) knowledge management on commercial ADR: conferences, workshops, publications etc. In addition, perceptions of the Bangladeshi legal system would also have to be addressed so as to reassure clients of arbitration and/or mediation in particular that they would not become sucked into the courts following any award in their favour.
Mahjabeen Quader is a programme officer and Md Mazedul Islam programme analyst of the Bangladesh Investment Climate Fund, IFC Advisory Services in South Asia.
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