“Today, the parties often make the arbitration clause while comes to an agreement. In future if a conflict or dispute arises out of the contract, the arbitration clause helps them to resolve that dispute by the intermediary of a neutral third party” Disc


When two parties come to a contract, there are some legal steps through which they make the contract. Earlier, when a dispute between two parties occurred during the contract there became a chaotic situation. The parties fought against each other.  Moreover they issued case against each other. After all, they went to court for resolving the dispute. But today, the parties often make the arbitration clause while comes to an agreement. In future if a conflict or dispute arises out of the contract, the arbitration clause helps them to resolve that dispute by the intermediary of a neutral third party.


Arbitration is a dispute resolution process that takes the place of conventional litigation. Through this consensual process, parties agree to submit a dispute to a neutral third party called ‘arbitrator’ or ‘panel of arbitrators’ for resolution. The commitment towards arbitrate may emerge at the outset of commercial agreements through arbitration clauses that bind parties to seek arbitration for the future disputes. It may also derive from legal instruments or international agreements. Arbitration may also be chosen as an alternative to litigation or regulatory adjudication when a conflict arises.[1]

According to Jean Murray, “Arbitration is the process of bringing a business dispute before a disinterested third party for resolution. The third party, an arbitrator, hears the evidence brought by both sides and makes a decision. Sometimes that decision is binding on the parties”.[2]


Arbitrator is a private, neutral person selected to arbitrate a contradiction, as are against to a court of law. An arbitrator could be used to settle any non-criminal argument, and numerous business contracts make provisions for an arbitrator in the happening of a disagreement. Generally, settling a contradiction through an arbitrator is considerably less expensive than settling it through a court of law.[3]

 Advantages of Arbitration

Arbitration has many advantages. First of all, since it is generally a private or non-official method, it can better assure privacy and secrecy, protecting against disclosure of a party’s secret business information. In addition, the fear of a negative precedent can be reduced due to the personal nature of alternative dispute resolution mechanisms.[4]

The following are said to be advantages of arbitration over court litigation:[5]

  • Faster resolution; however, there can be exceptions due to multiple parties, arbitrators and litigation strategy.
  • Less costly; however, there can be exceptions due to multiple parties, arbitrators and litigation strategy.
  • Exclusionary rules of evidence don’t apply; everything can come into evidence so long as relevant and non-cumulative.
  • Not a public hearing; there is no public record of the proceedings. Confidentiality is needed of the arbitrator and by affirmation the entire argument and the tenacity of it can be subject to confidentiality enforced on the parties, their professionals and lawyers by so supplying in the arbitration agreement.
  • From protecting against issue of outlook, there is less exposure to punitive damages and run away juries.
  • The proficiency to get arbitrators who have arbitrator method know-how and exact subject issue expertise.
  • Limited breakthrough because it is controlled by what the parties have acquiesced upon and it is all controlled by the arbitrator.
  • Often, the arbitration method is less adversarial than litigation which assists to sustain enterprise connections between the parties.
  • The arbitration is more casual than litigation.
  • The finality of the arbitration accolade and the detail that commonly there is no right of apply to the enclosures to change the award.[6]

 Disadvantages of Arbitration

  • There is no right of apply even if the arbitrator makes an error of detail or law. However, there are some limitations on that direct, the accurate limitations are tough to characterize, except in general periods, and are detail driven.[7]
  • There is no right of breakthrough except the arbitration affirmation so presents or the parties stipulate to permit breakthrough or the arbitrator allows discovery.
  • The arbitration method may not be very fast and it may not be cheap, especially when there is a section of arbitrators.
  • Unknown bias and competency of the arbitrator except the arbitration affirmation set up the requirements or the association that administers the arbitration has pre-qualified the arbitrator.
  • There is no committee and from the claimant’s issue of outlook that may be a grave drawback.
  • An arbitrator may make an accolade founded upon very broad values of “justice” and “equity” and not inevitably on directions of regulation or evidence.[8]
  • An arbitration award will not be the cornerstone of a assertion for malicious prosecution.

 Arbitration clause

When two parties come to a contract, there may be an arbitration clause. An arbitration clause is a commonly used clause in a contract which requires the parties to resolve their disputes through an arbitration process. Although such a clause may or may not specify that arbitration occurs within a particular jurisdiction, it always binds the parties to a type of resolution outside of the courts, and is therefore considered a kind of forum selection clause.[9]

 Arbitration Law in Bangladesh

 Arbitration agreement

In Bangladesh, the law of arbitration is contained mainly in the Arbitration Act, 1940,[10] there being separate Acts dealing with the enforcement of foreign awards. However a new arbitration act has been passed in 2001. There are also stray provisions as to arbitration, scattered in special Acts. By the Arbitration Act of 1940, three types of arbitration are contemplated. They are 1) Arbitration in the course of a suit, 2) Arbitration with the intervention of the court, and 3) Arbitration otherwise than in the course of a suit and without the intervention of the court in practice; the last category attracts the higher number of cases.

Under the Act of 1940, an arbitration affirmation should be in writing, though it require not be registered. The affirmation might make a quotation about present or future differences. The arbitrator may be entitled in the affirmation or left to be designated subsequent, either by permission of the parties or in some other kind particular in the agreement. Very often, the directions of prestigious financial bodies lay down that a individual who becomes a constituent of the association should accept the mechanism of arbitration conceived or identified by the directions of the association.  This furthermore allowances to an “arbitration agreement” for the reasons of the Arbitration Act, 1940.

 Matters referable

All justifiable matters of a civil nature can be referred to arbitration, but there are some exceptions to the rule.  For example, it is not permissible to mention a matrimonial dispute to arbitration, since the matters in such dispute are not only those of fact or law but also involve questions of public’s welfare.[11]

 Types of institutional arbitration

Arbitration has been used customarily for the settlement of disputes between members of trade associations and between different exchanges in the securities and commodities trade.  Many agreements comprise a standard arbitration clause, referring to the arbitration rules of the respective organization.  A lot of arrangements between the parties in industry and commerce also provide for the arbitration of controversies arising out of contracts for the sale of manufactured goods, for terms of service of employment, for construction and engineering projects, for economic operations etc.

 Selection of arbitrators

The issue of selecting arbitrators is a significant facet of the arbitration method, as the arbitrators’ proficiency and fairness is the resolute component in any arbitration.  The general perform is for both the parties to choose an arbitrator at the time the arbitration affirmation is concluded.  Selection of arbitrators is furthermore often made by bureaus administering financial arbitration, under pre-established directions of procedure.  These associations, encompassing diverse trade associations, and Chambers of Commerce, sustain panels of professional arbitrators.

Procedure in arbitration

The arbitration process is governed by the rules to which the parties refer in the contract.[12]  In the absence of specific legal rules, the procedure will be determined by the arbitrators.  The arbitration proceeding must be so conducted as to afford the parties a fair hearing on the basis of equality.  The arbitrator commonly has the power to command the parties and third persons to produce documents and books and to enforce such a request by issuing subpoenas through court[13].  If a party fails to appear at a properly convened hearing, without showing a legitimate cause, the arbitrator in most instances will proceed in the absence of the party and then render an award after investigation of the matter in dispute.  The technical rules of evidence do not apply to arbitrations.

The Arbitration Act adopts the set about, that in the employed of an arbitration affirmation; the parties are free to lay down provisions considering diverse affairs of procedure.  But in the nonattendance of an affirmation, the directions comprised in the First Schedule to the Arbitration Act, 1940, apply.

An arbitrator can be taken for misconduct.  In applying this provision enclosures usually pursue the broad building taken up in most commonwealth nations, in order that, it is not only misconduct engaging lesson turpitude that attracts this power, but furthermore misconduct of a mechanical environment, for demonstration, a break of the directions of natural justice.

Detailed provision exists for settling the problems that might arise where two or more arbitrators are contemplated by the arbitration agreement and a difference of opinion arises between them.[14]

 Substantive Law

A much debated suspect in commercial arbitration fears the substantive law to be realized by the arbitrators.  Generally, the award must be grounded upon the law as motivated by the parties in their agreements.  This failing, the arbitrator must request the law which he imagines proper accordance with the administers of disagree of laws.  In both the cases, the arbitrator will have to take account assertion of the terms of the contract and the usages of the actual trade.

 The arbitrator and the court

 Challenges to the process of arbitration are not rare.  A party may claim, for example, that no valid arbitration agreement came into existence, because the individual marking the affirmation had no administration to manage so or that a status precedent to arbitration had not been fulfilled.  More often, the validity of arbitration is challenged on the ground that the exact argument is not enclosed by the agreement.  In such situations, the inquiry if the arbitrator has administration to deal with the confrontation is generally very resolute by a court.

 Challenges before the court are, although, confined to exact surrounds and exact matters. Moreover a reconsider of the accolade by a court will not usually deal with the arbitrators conclusions as to details or with his submission of the law.  The jurisdiction of the court is therefore restricted.  The arbitration method should be the end and not the starting of litigation.

 Filing the award

An award of the arbitrator must be filed in the court and a decree accepted in terms thereof.  The decree so accepted can be executed, like any other decree of the court.  However, the court may, instead of confirming the award, remit it to the arbitrator, amend it or set it aside for the specified causes.  Most of the orders surpassed by a court below the provisions of the Arbitration Act, 1940 in this regard are subject to appeal. So the award of the arbitrator are filed in the court.

Competent Court

The court having jurisdiction under the Arbitration Act 1940 is the court in which a suit on the issue under disputes can be instituted.[15]  Provisions have been enacted in the Act to deal with questions concerning the cost of arbitration and the procedure to be followed by the arbitrators regarding filing of the awards.  In case of distinction of opinion between an even number of arbitrators, the parties can provide for an umpire.  Generally, most of the provisions applicable to arbitrators apply, with essential modifications, to umpire also.


When a party comes to an agreement or contract with another party, many of them make the arbitration clause for future dispute resolution. The parties select a arbitrator or a bench of arbitrators for resolving the future dispute. The arbitrator acts as neutral for resolving the dispute if any conflict arises between the parties in future. So if any problem arises in the future, a party can’t go to the court first. First they have to come to the arbitrator for dispute resolution. After hearing and investigating the dispute, the arbitrator declares award for the winner. If any party thinks that the award given by the arbitrator is not fair, then the party can go to the court. Without exhausting the arbitration procedure embedded in the contract, no party can seek remedy.


  1. Mazirow, A.(2008). Advantages of Arbitration p. 1 Retrieved from at            www.mazirow.com
  2. Retrieved from http://www.vakilno1.com/saarclaw/bangladesh/arbitrationlaw/arbitration_law_in_bangladesh.htm
  3. Retrieved from http://www.ictregulationtoolkit.org/en/section.2069.html
  4. Retrieved from http://biztaxlaw.about.com/od/glossarya/g/arbitration.htm
  5. The American Heritage Dictionary of the English Language (2009). (4th ed.). Houghton Mifflin Company. (Original work published 2000)
  6. Retrieved from http://www.hg.org/arbitration-definition.html
  7. Retrieved from http://www.investorwords.com/250/arbitrator.html#ixzz1mlIxt2t8
  8. United States Arbitration & Mediation retrieved from http://www.usam.com/services/arb_clause.shtml
  9. Retrieved from http://en.wikipedia.org/wiki/Arbitration_clause

10. Mazirow, A. (2008). Disadvantages of Arbitration p. 2 rertieved from www.mazirow.com

[1] http://www.ictregulationtoolkit.org/en/section.2069.html

[2] http://biztaxlaw.about.com/od/glossarya/g/arbitration.htm

[4] http://www.ictregulationtoolkit.org/en/section.2069.html

[5]  See Mazirow, A.(2008). Advantages of Arbitration p. 1 available at www.mazirow.com

[6] See Mazirow, A. (2008). Advantages of Arbitration p. 2 available at www.mazirow.com

[7] See Mazirow, A. (2008). Disadvantages of Arbitration p. 2 available at www.mazirow.com

[8] See Mazirow, A. (2008). Disadvantages of Arbitration p. 2 available at www.mazirow.com

[10] http://www.vakilno1.com/saarclaw/bangladesh/arbitrationlaw/arbitration_law_in_bangladesh.htm

[11] http://www.vakilno1.com/saarclaw/bangladesh/arbitrationlaw/arbitration_law_in_bangladesh.htm

[12] http://www.vakilno1.com/saarclaw/bangladesh/arbitrationlaw/arbitration_law_in_bangladesh.htm

[13] http://www.tas-cas.org/en/arbitrage_reglement.asp/4-0-1030-4-1-1/5-0-1089-7-1-1/

[14] http://www.adr.org/sp.asp?id=22440

[15] http://www.vakilno1.com/saarclaw/bangladesh/arbitrationlaw/arbitration_law_in_bangladesh.htm