BANGLADESH Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers
• Non-ICSID (foreign) awards – enforced under Sec- tion 45 of the Arbitration Act 2001 (New York Con- vention) via the District and Sessions Judge Court in Dhaka. The Supreme Court’s ruling in Smith Cogeneration v BPDB is crucial, preventing the use of generalised procedural tools under the CPC to stay the enforcement of a foreign award by citing pending challenges in other domestic courts. Consequences of Non-Compliance with ICSID Awards Failure by Bangladesh to comply with a final ICSID award constitutes a breach of Bangladesh’s interna- tional treaty obligations under the ICSID Convention. Although Article 27 of the ICSID Convention prohibits the investor’s home state from exercising diplomatic protection during the arbitration, this prohibition ceas- es if the host state fails to honour the resulting award. In such instances, the investor’s home state may exer- cise diplomatic protection, which can include formal protests, negotiations, or even the initiation of state- to-state dispute settlement proceedings to compel compliance. 9.2 Approach of the Courts Since the Arbitration Act 2001, the higher judiciary has generally adopted a supportive approach towards the recognition of international awards. Sovereign Immunity Bangladesh adheres to the restrictive theory of sov- ereign immunity, protecting assets used for sovereign purposes (jure imperii) but generally not those used for commercial activities (acta jure gestionis).
Consent to arbitration waives immunity from jurisdic- tion. Furthermore, PPAs and implementation agree- ments in Bangladesh typically contain explicit, broad waivers of sovereign immunity, covering jurisdiction, attachment of assets, and execution of awards – con- firming the commercial nature of the activities. However, the scope of these waivers varies. Some older PPAs include carve-outs that protect assets necessary for maintaining the electrical grid (“pro- tected assets”) from execution, thus limiting recovery options. 9.3 Asset Tracing and Recovery Enforcement is typically pursued against the com- mercial assets of the state or SOEs. Sophisticated enforcement strategies may involve targeting inter- national financial flows, such as funds held in Nostro accounts (correspondent accounts held by Bang- ladeshi banks abroad). Identifying the commercial purpose of such accounts, supported by contractual waivers of immunity, is crucial for successful execu- tion in the jurisdiction where the account is located.
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