'ADR mechanism can help save banks from risk profiling during pandemic'

Speakers at an online discussion said alternative dispute resolution (ADR) mechanism can help save the banking industry from risk profiling during the Covid-19 pandemic.

They also stressed the need for applying ADR mechanism in order to save the country's readymade garment (RMG) sector during the pandemic.

Bangladesh International Arbitration Centre (BIAC) has recently organised the webinar on "Risk management during Covid-19: How an Alternative Dispute Resolution Clause can strengthen and protect banks and the RMG sector?'

The webinar aimed at focusing on the possible impacts of Covid-19 on the ongoing ADR proceedings, risk factors and how to manage risks arising from commercial transactions.

Business leaders, bankers, lawyers, economists and ADR experts from home and abroad, academicians, corporate representatives and students took part in the webinar.

Addressing the webinar, Chairman of BIAC Mahbubur Rahman said the country is already suffering heavily due to non-performing loans (NPLs) and the outbreak of the coronavirus may increase the level of NPLs in the coming days.

"We need to appreciate the situation more judiciously," he added.

For the economic sustainability of Bangladesh, he said, the RMG sector needs due support through adequate, smooth and effective trade services by banks which must ensure proper risk identification, management and compliance issues in the process of offering required trade services.

Asif Ibrahim, Director, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in his speech said ADR can be a suitable tool to mitigate power imbalance between our exporters and foreign buyers.

He opined that popularization of the concept and practice of ADR is very important at this crucial turning point of the country's economy.

CEO of BIAC Muhammad A. (Rumee) Ali, who moderated the webinar, said our RMG sector is the largest foreign exchange earner which has been playing a pivotal role in empowering women having over 3 million women workers employed in the sector.

"Our garment industry is widely acclaimed throughout the globe for its safety measures," he said.

Mr Ali maintained that during the current global crisis of Covid-19, the country's RMG industry is at stake where buyers walked away and banks are facing mammoth risk mitigation issues.

For the greater interests of the national economy, it is high time to protect the interests of both the garment sector and the banking industry, which can only be done through resorting to best practices of ADR, for which BIAC is prepared to offer its services in terms of arbitration and mediation, the CEO of BIAC determined.

He insisted on mandatory insertion of an ADR clause into all commercial contracts which can help resolve business disputes expeditiously.

Sohail R.K. Hussain, MD and CEO of Meghna Bank Ltd., said in the wake of Covid-19, both courts and banks are facing extraordinary challenges.

He stressed the need for practicing ADR to reduce pressure on the courts, save the banking industry from risks and help the RMG sector overcome all odds and flourish in a new normal world.

Faisal Samad, Senior Vice President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), saw the issue from a legal perspective and sought protection of the RMG industry by strict legal mandate.

He opined that ADR is required for survival of not only the garment sector, but also the banking industry.

Tarique Afzal, President and MD of AB Bank Ltd., in his deliberations categorised that discrepancies in Letters of Credit eventually compel banks to run risks at higher scale which can be mitigated by provision of ADR clauses in all commercial contracts.

A well-structured ADR clause can protect multiple interests of banks and RMGs, Mr Afzal maintained.

Barrister Rashna Imam, Managing Partner, Akhtar Imam and Associates, said Covid-19 has contributed to higher NPLs and added to the colossal backlog in the courts and it has become difficult to address disputes between exporters and buyers in the RMG sector, where some buyers tend to take advantage of Force Majeure issues on flimsy grounds, not tenable in law.

She favoured ADR clause in all contracts for efficient risk management by banks and sustainability of the RMG sector.

Barrister Md. Monzur Rabbi, Head of Chambers, Rahman and Rabbi Legal,opined that existing laws relating to arbitration and mediation should be reviewed to incorporate provisions so that adversely affected-parties may choose between procedural and summary processes.

BIAC's own institutional rules for arbitration are unique and the BIAC clause can help both banks and RMGs to address their risk factors arising from commercial contracts, Rabbi insisted.

Dr. M. Masrur Reaz, Chairman, Policy Exchange of Bangladesh, in his speech said in Bangladesh, Covid-19 has disrupted the supply chain leading to negative impacts on overall international trade of the country.

With long suspension of courts' proceedings and banks becoming insolvent, ADR has come to limelight with renewed force, Mr Reaz maintained and preferred ADR clause in all commercial contracts for the greater interests of the banking and RMG industries.

Barrister Ho Meng Hee, Director of ADR of Financial Industry Disputes Resolution Centre (FIDRC), Singapore, took part in the webinar as one of the panellists and emphasised promotion of ADR practices in Bangladesh.

He said skepticism about inclusion of an ADR clause for mutual benefits of the adversaries should be done away with through training and research for which BIAC can be an ideal platform.

Director of BIAC M A Akmall Hossain Azad closed the session.