TRW & Co · Arbitration and commercial disputes
Drafting an Arbitration Clause for Bangladesh Contracts
An arbitration clause Bangladesh courts will enforce must be in writing and should state the seat, the rules or institution, the number of arbitrators, the language and the governing law. The Arbitration Act 2001 supports such clauses, but vague or conflicting wording is common in Chattogram contracts and can cost months of litigation before the real dispute is heard.
Key pointThe Arbitration Act defaults to three arbitrators while BIAC's rules default to one, so a clause that is silent on numbers can produce a different tribunal from the one the parties expected; always state the number.
At a glance
Must be in writing
Section 9 of the Arbitration Act 2001 requires a written agreement, which can be a contract clause, an exchange of emails or letters, or pleadings.
Seat decides supervision
The seat fixes which courts supervise the arbitration and hear challenges; it is different from the venue where hearings take place.
Default tribunal differs
If the clause is silent, the Act provides for three arbitrators, while BIAC's 2019 Rules provide for a sole arbitrator unless the centre decides otherwise.
BIAC defaults
Under BIAC's Rules, absent agreement, the seat is Dhaka and the language is English; its model clause also applies Bangladesh law.
Some matters excluded
Criminal, many family and insolvency matters cannot be arbitrated, and bank recovery claims belong to the Artha Rin Adalat.
Swipe or scroll →
The short answer: what an arbitration clause Bangladesh courts will enforce looks like
An arbitration clause Bangladesh courts will enforce is a written agreement to refer disputes to arbitration that clearly states the seat, the rules or institution, the number of arbitrators, the language and the governing law. The Arbitration Act 2001 recognises such clauses, and if one party sues in court anyway, the other can ask the court to refer the dispute to arbitration.
The difficulty is not whether arbitration clauses work in Bangladesh; they do. It is that many contracts signed in Chattogram, from supply agreements to charterparties and construction contracts, contain clauses that are vague, contradictory or copied from a template that does not fit. Those defects surface only when a dispute arises, and they can cost months of satellite litigation about where and how to arbitrate.
This guide explains the legal framework, the choices that matter most, sample wording and the drafting pitfalls that most often undermine enforceability.
The legal framework
The Arbitration Act 2001
The Arbitration Act 2001 is based on the UNCITRAL Model Law. Section 9 requires the arbitration agreement to be in writing, which includes a clause in a signed contract, an exchange of letters, emails or other communications recording the agreement, and an agreement alleged in a statement of claim and not denied in the defence.
The Act gives the parties wide autonomy and fills gaps with defaults. Section 11 lets the parties choose the number of arbitrators and, if they do not, provides for a tribunal of three. Section 26 deals with the place of arbitration, and the Act lets the parties agree the language and the procedure. Section 17 allows the tribunal to rule on its own jurisdiction, and section 18 treats the arbitration clause as separable from the main contract, so it survives an allegation that the contract itself is void.
Court support and court control
Section 7A allows the courts, and in international commercial arbitration the High Court Division, to grant interim measures such as injunctions and attachment. Awards made in a Bangladesh-seated arbitration can be set aside only on limited grounds, and foreign awards are enforced through the District Court under the Act's provisions on foreign awards. Bangladesh is a party to the New York Convention, which matters for enforcing Bangladeshi awards abroad and foreign awards here.
Institutional rules
The Bangladesh International Arbitration Centre (BIAC) publishes a model arbitration clause and its Arbitration Rules 2019. Under those rules, if the parties have not agreed otherwise, the seat is Dhaka, the language is English, and a sole arbitrator is appointed unless the centre considers three more appropriate. Our guide to BIAC arbitration covers the institution in detail.
The key choices in an arbitration clause Bangladesh parties must make
Every effective clause answers the same questions. Leaving any of them open invites a fight later.
| Choice | Options | What to consider |
|---|---|---|
| Seat | Dhaka, Chattogram, Singapore, London, other | The seat fixes which courts supervise the arbitration and hear challenges. A foreign seat means foreign courts supervise and the award is enforced in Bangladesh as a foreign award. |
| Institution or ad hoc | BIAC, SIAC, ICC, LCIA, ad hoc under the Act | Institutions handle appointments, fees and deadlines; ad hoc is cheaper on paper but relies on the courts if a party stalls. |
| Number of arbitrators | One or three | Three adds cost and time; one is efficient for smaller claims. If silent, the Act defaults to three, but BIAC's rules default to one. |
| Language | English, Bangla, both | English suits foreign parties and most commercial documents; specify translation arrangements if evidence is in Bangla. |
| Governing law | Bangladesh law or a foreign law | Distinguish the law of the contract from the law of the arbitration agreement and the seat; state each clearly. |
| Pre-arbitration steps | Negotiation, mediation, expert determination | Fix time limits so a party cannot use them to delay. BIAC's med-arb clause uses a sixty-day mediation window. |
Seat versus venue
The seat is a legal concept; the venue is where hearings physically happen. A clause can choose Dhaka as the seat but allow hearings in Chattogram, or choose Singapore as the seat with hearings by video. BIAC's rules, for example, allow the tribunal to hold hearings at any convenient place while keeping the arbitration legally seated where agreed. Say "seat" when you mean seat, and avoid phrases like "arbitration in Dhaka or Singapore at the claimant's option" unless you have thought through the consequences.
Ad hoc arbitration under the Act
Many Bangladeshi contracts simply say that disputes will be referred to arbitration "under the Arbitration Act 2001" without an institution. That is valid. If the parties cannot agree on appointments, the Act provides a court route: the District Judge in a domestic arbitration, or the Chief Justice or a judge he designates in an international commercial arbitration.
The trade-off is that every gap in the clause, from fees to timetables, has to be settled by agreement, by the tribunal or by the court. If you choose ad hoc arbitration, at least specify the number of arbitrators, the appointing method and the seat, and consider naming an appointing authority to avoid an application to court.
Sample wording and how to adapt it
The following is an illustrative starting point for an arbitration clause Bangladesh businesses could adapt for a domestic BIAC arbitration. It is not a substitute for advice on your contract.
All disputes arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be finally resolved by arbitration administered by the Bangladesh International Arbitration Centre under its Arbitration Rules in force when the request for arbitration is filed. The seat of arbitration shall be [Dhaka/Chattogram], Bangladesh. The tribunal shall consist of [one/three] arbitrator(s). The language of the arbitration shall be English. This contract shall be governed by the laws of Bangladesh.
For a cross-border contract, replace the institution and seat with the chosen foreign institution and city, and consider adding the law governing the arbitration agreement itself. For a multi-tier clause, add a negotiation or mediation step with a fixed period, after which either party may start arbitration.
Drafting an arbitration clause Bangladesh courts will uphold, step by step
- Map the likely disputes. Think about who is likely to claim, for what, and where the other side's assets are. Enforcement against assets in Chattogram points towards a seat and institution whose awards Bangladeshi courts will readily enforce.
- Choose the seat. Decide between a Bangladesh seat, usually Dhaka or Chattogram, and a foreign seat. Consider supervisory court practice, cost, neutrality and enforcement.
- Choose the rules. Pick an institution and name it correctly, or opt for ad hoc arbitration under the Act with a clear appointment mechanism.
- Fix the tribunal. State the number of arbitrators and, if useful, qualifications such as maritime or construction experience.
- Settle language and law. State the language of the arbitration and the governing law of the contract, and consider the law of the arbitration agreement.
- Add pre-arbitration steps carefully. If you include negotiation or mediation, give each a short, fixed period and say that arbitration can start when it expires.
- Align the rest of the contract. Remove or reconcile any jurisdiction clause pointing to the courts, and make related contracts, such as guarantees and sub-contracts, refer to the same arbitration.
Sector points for Chattogram contracts
The right arbitration clause Bangladesh businesses need varies by sector. A few recurring points from Chattogram's main industries are worth building in from the start.
Shipping and trade
Charterparties and bills of lading often incorporate a foreign arbitration clause by reference. Check whether the incorporation is effective for the contract in question, and remember that an arrest of a vessel in the High Court Division may still be needed as security. Our shipping team advises on how the two fit together.
Construction and infrastructure
Construction contracts often use standard forms with dispute boards or engineer's decisions before arbitration. Keep the time limits for each tier clear and consistent with the form, and make sure sub-contracts flow into the same forum. See our construction disputes page.
Supply and distribution
For recurring supply relationships, consider a fast, documents-only procedure for smaller claims and a sole arbitrator. BIAC's rules provide a fast track for disputes up to a stated value, with a shorter timetable.
Before signing, read the arbitration clause alongside every other document in the deal: guarantees, purchase orders, letters of credit and side letters. Disputes often arise under the document with the weakest clause, not the main contract.
An illustrative scenario
This scenario is illustrative only; the parties are generic.
A Chattogram manufacturer signs a supply contract with a foreign seller. One clause provides for "arbitration in Singapore", another says "the courts of Chattogram shall have jurisdiction", and the guarantee given by the seller's parent company has no dispute clause at all.
When the goods arrive defective, the manufacturer sues in Chattogram. The seller applies to the court to refer the dispute to arbitration. Months are spent arguing whether the parties intended arbitration, which rules apply, and whether the Singapore reference is a seat or merely a venue. Meanwhile the claim against the parent company must be brought separately, in court, because the guarantee is not covered by the clause.
A clearer clause naming an institution, a seat and a single forum for related contracts would have avoided most of this. The scenario is typical of disputes where the arbitration clause Bangladesh parties signed was never really negotiated.
Enforceability pitfalls and common mistakes
Optional or permissive wording
Clauses that say disputes "may be referred to arbitration" invite argument about whether arbitration is mandatory or merely one option. Use mandatory language such as "shall be finally resolved by arbitration". If you want flexibility, for example to let a lender choose between court and arbitration, draft an express option and take advice on how it will be treated, rather than relying on loose wording.
Naming the wrong institution or rules
Clauses that refer to an institution that does not exist, mix one institution's name with another's rules, or refer to "international arbitration rules" in general can be pathological. Courts try to give effect to the parties' intention, but the argument costs time. Check the exact name of the institution and its current rules, and use the institution's own model clause as the base.
Conflicting jurisdiction clauses
Many contracts contain both an arbitration clause and a clause giving jurisdiction to particular courts, often in different sections drafted at different times. If you want the courts only for supportive measures, such as interim relief or enforcement, say so expressly. Otherwise a counterparty can argue that the parties never agreed to arbitrate exclusively.
Matters that cannot be arbitrated
Some disputes cannot be resolved by private arbitration, or are reserved by law for particular courts. Criminal matters, many family and status questions, and insolvency proceedings are obvious examples. Recovery claims by banks and financial institutions fall within the exclusive jurisdiction of the Artha Rin Adalat under section 5 of the Artha Rin Adalat Ain 2003, so lenders should consider carefully how an arbitration clause interacts with that regime.
Unworkable escalation clauses
Multi-tier clauses requiring "good faith negotiations between senior executives" before arbitration, with no time limit, let a reluctant party argue that arbitration started too early. Specify who must meet, how a party triggers the step, and the number of days after which arbitration may begin regardless.
Cross-border contracts and foreign seats
Foreign investors and shipping counterparties in Chattogram often prefer a neutral foreign seat such as Singapore or London. That is a legitimate choice, but it has consequences: interim relief in Bangladesh is still possible, but the main supervisory court is abroad, and the award must be enforced in Bangladesh as a foreign award. Our article on how to enforce a foreign arbitral award explains that process, and our guide to charterparty arbitration covers maritime contracts.
For joint ventures and investment agreements, align the arbitration clause in the shareholders' agreement with those in the supply, licence and loan agreements. TRW & Co's offices in Dhaka, Singapore, Dubai and London help clients choose seats that work at both ends of the transaction.
Checklist before you sign
- Is the agreement to arbitrate mandatory and in writing?
- Is the seat stated expressly, and is it distinct from the hearing venue?
- Is the institution named correctly, with current rules?
- Are the number of arbitrators and the language stated?
- Are governing law and, if needed, the law of the arbitration agreement stated?
- Do pre-arbitration steps have fixed time limits?
- Do related contracts and guarantees refer to the same arbitration?
- Does any court jurisdiction clause conflict with the arbitration clause?
Drafting the arbitration clause Bangladesh courts will later have to read is a small task with large consequences. TRW & Co's Bangladesh advocates draft and review dispute clauses and act in arbitrations and related court applications. See our arbitration practice, our commercial contracts team, our guide to the arbitration process in Bangladesh, the Chattogram office page, or contact us. Court judgments on arbitration are published by the Supreme Court of Bangladesh.
Frequently asked questions
01Is an arbitration clause enforceable in Bangladesh?
Yes. The Arbitration Act 2001 recognises written arbitration agreements, including clauses in contracts and agreements recorded in exchanges of emails or letters. If a party sues in court on a matter covered by the clause, the other party can apply for the dispute to be referred to arbitration. Enforceability depends on clear wording, a valid written agreement and a dispute that is capable of arbitration.
02Should I choose Dhaka, Chattogram or a foreign seat?
It depends on the parties, the value and where enforcement will happen. A Bangladesh seat keeps supervision with Bangladeshi courts and avoids foreign enforcement steps against local assets. A neutral foreign seat such as Singapore or London may reassure foreign counterparties but means the award must later be enforced in Bangladesh as a foreign award. Consider hearing logistics separately, because hearings can take place away from the seat.
03How many arbitrators should the clause provide for?
State the number expressly. A sole arbitrator is quicker and cheaper and suits most small and mid-sized disputes; three arbitrators suit complex or high-value disputes where each side wants to nominate a member. If the clause is silent, the Arbitration Act defaults to three, while BIAC's Rules default to a sole arbitrator unless the centre considers three more appropriate.
04Can a bank loan agreement contain an arbitration clause?
It can, but recovery claims by banks and financial institutions fall within the exclusive jurisdiction of the Artha Rin Adalat under the Artha Rin Adalat Ain 2003. Lenders and borrowers should therefore take advice on how an arbitration clause will interact with that regime before relying on it. Trade and commercial disputes between businesses are more straightforwardly suited to arbitration.
05What is the BIAC model arbitration clause?
BIAC's standard clause provides that all disputes arising out of or in connection with the contract are finally settled under BIAC's Rules of Arbitration by one or more arbitrators appointed under those Rules, and that, unless otherwise agreed, Bangladesh law applies and the seat is Dhaka. BIAC also publishes a med-arb clause with a sixty-day mediation stage. Add the number of arbitrators and language expressly.
06Can I still go to court for an injunction if there is an arbitration clause?
Yes. Section 7A of the Arbitration Act allows the courts, and in international commercial arbitration the High Court Division, to grant interim measures such as injunctions and attachment in support of arbitration. The tribunal can also order interim measures once constituted. A well-drafted clause should confirm that applying to court for interim relief does not waive the agreement to arbitrate.
Sources and official materials
- Arbitration Act 2001 (Bangladesh Laws) — Form of agreement, tribunal, seat, interim measures and awards
- BIAC Arbitration Clause — Standard and med-arb model clauses
- BIAC Arbitration Rules 2019 — Default seat, language, number of arbitrators and procedure
- Artha Rin Adalat Ain 2003 (Bangladesh Laws) — Exclusive jurisdiction over financial institutions' recovery claims
- New York Convention — Recognition and enforcement of foreign arbitral awards
- Supreme Court of Bangladesh — Judgments on arbitration agreements and awards
General information only, current as at 27 October 2026. It is not legal advice and does not create an advocate–client relationship. It reflects the law of Bangladesh unless stated otherwise, and the law, court practice and official fees change frequently. Check current official sources and take advice on the facts of your matter.
