Time for alternative business dispute resolution

Life and livelihood in today's modern world is unthinkable without business. Business and business activities keep the steering wheel of state functionaries live and operative. Setting up a business particularly foreign participation in this sector in a country like Bangladesh has always been facing with stresses and strains.

One of such setbacks is easy and quick disposal of business disputes in the country. One of many reasons of slow inflow of foreign investment in Bangladesh is the absence of effective avenues of dispute resolutions in quickest possible time. An efficient and friendly regulatory framework is important to attract Foreign Direct Investment (FDI). Quick and easy dispute settlement system is also a vital aspect of the protection of foreign investment.

Alternative Dispute Resolution (ADR), from the perspective of business culture, has two aspects: domestic ADR mechanism to address possible domestic business litigation and international ADR to address possible business litigation having international elements. This write up will deal with, in brief, the development, effectiveness and shortcomings of ADR in the context of domestic business litigation in the country.

Development of ADR internationally

In the United States justice system since the 1970s, there has been widespread public talk about the crisis of excessive delay, expenses, inflexibility, and technicality in formal judicial system.

In line with these talks, the social movement for Alternative Dispute Resolution (ADR) culminated into legal movement with the enactment of the Civil Justice Reform Act-1990 and the Alternative Dispute Resolution Act-1998, which made ways for formal ADR mechanism in the US judicial system.

Ever since, this ADR movement has grown rapidly from experimentation to institutionalisation throughout the world. Our neighbouring countries like India and Pakistan adopted the ADR mechanism back in 2002.

Fortunately, Bangladesh has not lagged much behind in incorporating provision of ADR in general civil law as it passed the Code of Civil Procedure (Amendment) Act-2003 by inserting three new sections with ADR provisions. Unfortunately, the newly adopted system has not at all been kept under review since its inception in 2003.

Why Alternative Dispute Resolution (ADR)?

In many ways ADR system promotes and enhances the progress of business in the country. Usually, business activities involve manifold disputes. Litigation in the civil court is one of the main concerns that is casting serious impact on business promotion and protection. The need of ADR may be viewed from three different perspectives:

The ADR may serve the interest of the state and business in many ways. First, ADR reduces burden on courts and adjudication process by resolving disputes at an earlier stage. Second, by reducing workload of judges it allows sufficient times in dispensation of justice in other matters raising the standard and quality of justice. Third, by reducing backlog of pending cases it saves huge revenue. Fourth, ADR works as a contraceptive to the field of unnecessary jungle of litigation giving the legal system a healthy development. Fifth, when business partners and establishments find that business disputes may be resolved through a system otherwise than formal litigation, it gives a sigh of relief to business entrepreneurs and promotes business culture in the country.

Likewise, ADR serves interest of the stakeholders in different ways. First, ADR gives litigants respite from unbearable delay in dispensation of justice. Second, it is cost-effective for litigants. Third, it provides peaceful reconciliation between the disputants. Fourth, it is less cumbersome, easy and accessible to the stakeholders.

Thus, ADR process finds its way through the drawbacks and difficulties with the formal judicial process. ADR process can support not only the legal objectives, but also support other development objectives, such as economic and social objectives, by facilitating the resolution of disputes that are impeding progress of these objectives.

Pending Cases and need for ADR in Bangladesh

One of the most vexed and worrying problem of our judiciary is the backlog of pending cases which has negative impact on business progress in the country. Credibility of our judiciary is at stake due to three principal factors: mounting arrears of cases, (31,00,000 pending cases throughout the country of which a significant number is from business houses and bodies); unbearable delays in disposal; and high cost in obtaining justice.

Introduction of ADR in Bangladesh

Apart from introducing ADR in some special legislations, ADR mechanism has been introduced for the first time in Bangladesh in 2003 by way of the Code of Civil Procedure (Amendment) Act-2003 (Act No. IV of 2003) which was enacted on February 27, 2003, and came on effect from July 1, 2003.

This Act created three new sections designed for ADR mechanism in all civil suits. These provisions have further been amended by the Code of Civil Procedure (Amendment) Act-2012 adding two new sections (89D and 89E) and making the provision of referral to ADR of all civil cases mandatory.

Both the Supreme Court and the government should give every effort so that the new system can be a successful vehicle for the reduction of cases and a speedy justice delivery. Serious thoughts must be given in this area, even by introducing a pilot project of ADR, so that these suits may be resolved through ADR.

Although ADR mechanism has been introduced back in 2003, no step has been taken by the Supreme Court so far to make this device effective for the interest of justice. It is surprising that the Supreme Court does not feel obliged to ask for or even report on working of the ADR mechanism. Even, there is no overseeing on this device either by the Supreme Court or the Ministry of Law and Justice. Surprisingly no official statistics on the achievement of ADR is available either at the ministry or in the Supreme Court.

ADR provisions in the law

As mentioned above, the ADR provisions were introduced into the field of general civil litigation by passing the Code of Civil Procedure (Amendment) Act-2003. This act substituted part four of the code with a new chapter titled "Alternative Dispute Resolution" with three new sections.

Subsequently in 2012 the Government made further amendment to the Code of Civil Procedure making the provisions of ADR mandatory. However, there are some fundamental short-comings in the ADR process introduced by CPC which are as follows:

(1)    Absence of Mechanism of compelling appearance of the parties for mediation: In sub-section (1) of section 89A it is stated that after filing of written statement if all the contesting parties are present in the court in person or by their pleaders, the court may by adjourning hearing, mediate.

But what will happen if both the parties or their pleaders do not attend courts together?

Realities is that neither parties nor their lawyers attend the court together; if the lawyer of the plaintiff attends, lawyer of the defendant does not attend and the courts have no other option but to give date one after another. This problem is supplemented by another problem. Suppose lawyers of both the sides appear and the court makes an order for appearing before a mediator for settlement or asks themselves to mediate and report the court, the parties or party does not attend mediation. What is the consequence? This makes the span of the dispute lengthier only. The court has not been given any power to impose any penalty or measure as this is the stage even before first hearing. Thus, the present provision adds up delays only. 

In Order X of the code which has not been made available in case of mediation under section 89A unlike in India. Provisions in Order X should be linked with section 89A to the effect that both the parties or their pleaders must appear before the court at first hearing which would be also considered for mediation hearing and if any of the parties fail to attend, the court may dismiss the suit or proceed exparte as the case may be.

(2)    Absence of measures for not attending mediation or not compromising: There are many cases where the lawyers of both the parties attend mediation meetings very. The mediator suggests a compromise between the parties. However, one party does not want to compromise.

In such a case the mediator has to give a report of disagreement. There is no measure to be taken against the party which unreasonably withdraws from compromise. In such a situation the court should be armed with power to impose fine to the unreasonable defaulting party and this can be done by making a link with rule 6 of Order XIV of the Code of Civil Procedure.

(3)    Defects with certificate to get back court fees

Sub-section (11) of section 89A provides that on settlement of a suit by mediation the court shall issue a certificate directing refund of court fees within 60 days. Although this provision has been made to encourage mediation by the parties, in practice this has been proved meaningless. 

No allocation is made in the budget of the government for this purpose and the accounts offices of the government refuse to refund on the ground of non-allocation of budget. Thus, to create a congenial atmosphere of ADR, the government should consider allocating budget for this purpose so that court fees may be returned effectively and without any hassle on mediation.

At the same time, necessary provision for return of the court fees must be inserted in the Court Fees Act, 1870 as has been done in India.

Provisions of ADR in Artharin Adalat Ain-2003

Artharin Adalat Ain-2003 provides for special and quick disposal of money loan matters which have a high bearing on settling disputes of banks and other financial institutions in the country.

In line with the provisions in CPC, the then government introduced similar provisions of ADR into the Money Loan Court Act-2003. Chapter five of the Artharin Adalat Ain provides for mediations a mode of ADR. However, there are adequate provisions of appointment and remuneration of mediators in the act, there is no authentic statistics on the outcome and effectiveness of ADR in dispute settling of banks and financial institutions. On the contrary these provisions of ADR are being taken as grounds for filing writ petitions before the High Court Divisions blocking the quick disposal of the money loan disputes.

Recent recommendation of the law commission

In a recent report on Artharin Adalat Ain-2003 the Law Commission has made recommendation that there is no need of sub-section (9) of section 22 of the Act. The sub-section provides for return of court fees on a mediation being successful.

The Commission in its report dated February 2, 2010 stated two reasons for deleting the provisions in sub-section 22(9): First, there is no legal logic to refund the court fees; and second, no fact was found substantiating the return of court fees on the part of bankers-plaintiffs who are too wealthy to get back little amount of court fees.

This report of the Law Commission does not seem to be based on any sound principle. This is because even in India and Pakistan there is a provision of the return of court fees on settlement of a suit and it is a legislative policy of the state, so that, mediation or out of court settlements are encouraged.

If any plaintiff does not want to get back its court fee, there is no problem on the part of the government or the state. However, a legislative policy of the State should not suffer merely on the ground that a particular class of plaintiffs would not be willing to get back their court fees.

It is also to be borne in mind that when proper ADR jurisprudence and environment would develop, the fees of an expert mediator would be very high and that has to be paid out of the pocket of the disputing parties and return of court fees would, to some extent, lessen the burden of the plaintiff certainly.
    
In view of the increasing number of pending cases throughout the country, it is needless to say that ADR mechanism as introduced by the parliament should be reviewed and amended with qualitative improvement in the text to make the provisions effective, realistic and factually operational. In this regard the provisions introduced by our neighbouring countries, particularly India, may be considered by the parliament.

Md Abdul Halim, is a practicing advocate in the Supreme Court of Bangladesh and can be reached at halim_md@yahoo.co.uk