Huge case backlog enough to scare away investors

Govt's chief investment promoter tells roundtable as plea grows louder for legal redress to banks' NPL ballooning

FE Team | Published: February 17, 2018 22:47:41

FE Report
Government's chief investment promoter aired frustration over investment prospect for ballooning bad loans and huge loan-case backlog as experts at a seminar Saturday suggested legal amendments for a remedy.
The experts said the Bangladesh Arbitration Act 2001 should be amended to limit court intervention and to improve enforcement of arbitral awards to weather the worsening situation.
Simultaneously, the experts also called for amending the Artha Rin Adalat Ain 2003 to encourage pre-litigation mediation that will allow parties to try mediation even before filing a case with the lawcourt.
Such reforms will help ease huge backlog of cases in the courts of the country and would also help improve the country's investment milieu, the experts said at the roundtable discussion.
Bangladesh International Arbitration Centre (BIAC) organised the roundtable, themed 'Creating Investment-friendly Access: Can ADR be an Effective Remedy in Commercial Disputes?', in the capital, Dhaka.
"There is a demand for amendment of the 2001 Arbitration Act in line  with the global developments in arbitration while the Money Loan Court Act also needs to be revised," said Margub Kabir while delivering the keynote speech of the event.
Mr Kabir observed although mediation has been made mandatory in both the Code of Civil Procedure 1908 and the Money Loan Court Act 2003, it had not attained the projected success in settlement of disputes.
"For example, the mandatory provision for mediation comes into play after a party institutes litigation and the defending party appears in the litigation and files written statement," he said.
"By the time, the parties having already instituted legal proceedings before the court feel less interested to settle it by ADR."
He pointed out that in many countries, such as the UK and the USA, provisions are included in the law to ensure that parties attempt to settle the matter through ADR before they move court.
"In fact, in certain jurisdictions, there is a penal provision of costs being imposed if any party fails to participate in ADR before litigation. Similar provisions can be included in our law," Mr Kabir suggested.
Speakers at the roundtable also observed that amendment of the aforementioned laws is also critical for ensuring better enforcement of contracts and improvement in the investment milieu in the country.
"The sheer number of pending cases we have is enough to scare the investors," said Kazi M Aminul Islam, Executive Chairman of Bangladesh Investment Development Authority (BIDA).
"Businesspeople know that this court system does not serve. It is expensive, it's time-consuming, so they would like to stay away," Islam told the meet.
"And that does not generate the level of confidence we need among the investors," he added.
Chairman of BIAC Mahbubur Rahman said the huge backlog of cases not only costs time and money but also affects foreign direct investment in the country.
"This is also interlinked with the rising amount of non-performing loans of the banks," Mr. Rahman, also President of the International Chamber of Commerce, added.
"More than fifty-five thousand cases are pending with the Artho Rin Adalot, as of June 2017, while around 2.8 million cases are pending with the lower courts of the country," said Syed Mahbubur Rahman, Chairman of the Association of Bankers Bangladesh.
"Do these statistics give a positive indication to the investors?" he posed a question.
As a possible solution, the ABB Chairman proposed that the definition of Adalot could be redefined to recognise arbitration.
"Simultaneously, the pre-litigation mediation should be conducted by a neutral third-party institution like BIAC having thorough understanding of the process," he added.
Speaking on the occasion, Senior Economist of IFC Dr. M Masrur Reaz observed that low level of contract enforcement is giving rise to informality in the economy.
"Studies show that 66.2 percent of the claimed value of commercial dispute goes into litigation," Mr Reaz said to underline the paradox in the litigation for loan recovery.
"Lack of knowledge and awareness, absence of trained judges and lawyers, Ignorance of the parties and negative impression among the lawyers about alternative dispute resolution are some of the factors that are affecting the uptake of ADR in the country," said Naser Ejaj Bijoy, CEO of Standard Chartered Bangladesh.
"We need to have skilled judges and efficient arbitrators," said Ahsan H Mansur, Executive Director of the Policy Research Institute, adding: "Special training should be arranged for judges by the Ministry of Law to conduct such ADR."
ADR works only when there is a balance of power between the two parties, said Debapriya Bhattacharya, Distinguished Fellow of the Center for Policy Dialogue, adding: "It also requires a minimum level of trust while integrity is also critical issue."
Chief Executive Officer of BIAC Muhammad A. Rumee Ali in his speech called for carrying out a study on the economic cost of judicial backlogs.
Cabinet Secretary Mohammad Shafiul Alam, who was the Guest of Honor at the function, stressed amending the laws related to arbitration and adding BIAC as a third-party institution or platform to deal with ADR.
"I will request the Law and Justice Division to think over this issue very seriously so that we can see some reforms in this regard by June 2018," the Cabinet Secretary said.
Additional Secretary of the Legislative and Parliamentary Affairs Division Nasreen Begum also spoke.
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