Security for Costs in Arbitration Involving Bangladeshi Parties (2026): How to Apply, When Courts or Tribunals Grant Security, and Practical Steps to Respond

Security for costs arbitration Bangladesh is one of the most practically significant interlocutory tools available to parties bracing for a drawn-out dispute with a counterparty whose ability to meet an adverse costs award is in doubt. The procedural landscape for obtaining, resisting and enforcing such protection continues to develop in Bangladesh, and recent reforms to commercial dispute resolution are aimed at making urgent interlocutory relief and the enforcement of arbitral interim measures more efficient. This guide sets out, step by step, how claimants and respondents apply for or oppose security, the interplay between tribunal orders and Bangladeshi court orders, the documents required, realistic timelines, and the costs involved.

It is written for claimants, respondents, in-house counsel and arbitration lawyers handling disputes seated in Bangladesh or involving Bangladeshi parties. Every figure and time span below is a conservative practical estimate intended to support decisions, not a substitute for case-specific advice.

Overview: Security for Costs Arbitration Bangladesh in 2026

Security for costs is a protective order requiring a party, usually the claimant, to post a sum (cash, bank guarantee or escrow) to cover the other side’s recoverable costs if the claim ultimately fails. In arbitrations connected to Bangladesh, the order may be made by the tribunal under the applicable arbitral rules and seat law, or supported and enforced through the competent Bangladeshi courts. The core legal sources are the Arbitration Act 2001 (Act No. I of 2001), the institutional rules chosen by the parties, and, for interpretive guidance on tribunal powers, the UNCITRAL Model Law on International Commercial Arbitration, on which the 2001 Act is substantially modelled.

Quick checklist before you act:

• When to consider security. Early, as soon as there is credible evidence the opposing party may be unable or unwilling to pay costs.
• Who can apply. Typically a respondent against a claimant; in counterclaim scenarios a claimant may seek security against a counterclaimant.
• Which route. Tribunal first for most seated arbitrations; a concurrent court application where urgency or enforcement requires it.

What is “security for costs”?

It is an interim measure obliging a party to provide a fund or guarantee against the possibility of a future adverse costs order. It is protective and provisional, not a determination of who ultimately bears costs, which is decided in the final award.

Why it matters in Bangladeshi disputes

Cost-recovery risk is acute where a claimant is impecunious, foreign-domiciled, or shows signs of insolvency. Without security, a successful respondent may win the arbitration yet be left chasing an unenforceable costs award. A party holding a tribunal order can seek the assistance of the Bangladeshi courts under the Arbitration Act 2001 for interim measures and enforcement, which is why security for costs arbitration Bangladesh rewards early, coordinated action across tribunal and court.

Eligibility: Who Can Apply and the Legal Bases

The standard applicant is a respondent facing a claim from a party whose financial standing is questionable. Common grounds relied upon include:

• Impecuniosity. Credible evidence the claimant cannot meet an adverse costs order.
• Foreign domicile. Where the claimant has no assets in a jurisdiction amenable to straightforward enforcement.
• Insolvency or dissolution risk. Winding-up filings, charges over assets, or registry evidence of distress.
• Change in financial position. A material deterioration since the arbitration commenced.

Tribunals generally assess these against the context of the arbitration agreement and the chosen rules, and some weigh the apparent strength of the underlying claim. The jurisdictional bases are layered: the arbitration agreement itself, the institutional rules (for example ICC, LCIA or SIAC), the tribunal’s interim-measures powers reflecting the Arbitration Act 2001 and Model Law principles, and, for complementary or enforcement relief, the competent Bangladeshi courts under the Arbitration Act 2001.

Tribunal powers vs court powers

Tribunals derive their power to order security from the parties’ agreement and the lex arbitri. Courts, by contrast, provide broader compellability and direct in-country enforcement. In practice, counsel often seek a tribunal order and then use the courts to enforce it or to obtain complementary measures that the tribunal cannot compel, for example, orders binding on third parties or asset disclosure. The comparison table later in this guide sets out the trade-offs so counsel can select the right route or run both in parallel.

Admiralty and maritime specific rules

In admiralty and maritime arbitrations, security is frequently secured through vessel arrest or P&I club letters of undertaking, which run alongside or substitute for a conventional security-for-costs order. In Bangladesh, admiralty jurisdiction is exercised by the High Court Division of the Supreme Court. Maritime claims therefore deserve tailored advice, because the security mechanisms and enforcement routes differ from ordinary commercial arbitrations.

Step-by-Step Procedure: How to Apply for Security for Costs

The following is the core how-to sequence. It covers the applicant’s path and flags the respondent’s position at each stage. Coordinate the tribunal track and any concurrent court track from the outset.

1. Pre-application assessment (who, why, quantum). Identify precisely who you are seeking security from and why. Quantify the recoverable costs you realistically expect to incur through to the award, and fix a defensible figure for the security sought, tribunals resist speculative or inflated amounts. Confirm that the applicable rules and seat law empower the tribunal to order security, and decide whether a concurrent court application is likely to be necessary for enforcement.

2. Evidence collection and drafting. Build the evidential foundation. Obtain the claimant’s company and registry searches, any charges registered against its assets, and insolvency or winding-up filings. Secure bank statements, audited financial reports and credit-agency data where available. Prepare a sworn affidavit or statement of means setting out the factual basis for the application, exhibiting each document. Where the claimant is foreign, assemble evidence that it holds no assets in a jurisdiction where a costs award would be readily enforceable. The quality of this package usually determines the outcome, weak or inferential evidence of impecuniosity is the most common reason applications fail.

3. Filing with the tribunal. File a formal request or application for security for costs setting out the grounds, the legal basis under the applicable rules, the amount sought and the proposed form of security. Request an expedited hearing where urgency warrants it, and attach the supporting affidavit and exhibits. Propose a draft order with precise relief wording, the amount, the form (cash, bank guarantee or escrow), the deadline for provision, and the consequences of non-compliance (for example, a stay of the claim). Clear, self-executing draft wording increases the chance the tribunal adopts your formulation.

4. Concurrent court application (when necessary). Where enforcement, urgency or compellability demands it, file a concurrent application to the competent court for interim measures in support of the arbitration under the Arbitration Act 2001. Identify the jurisdictional basis for the court’s complementary role, and consider whether urgent relief is appropriate to preserve the position pending the inter partes hearing. A well-prepared court filing can help translate a tribunal order into a locally enforceable instrument. Instruct local counsel admitted before the court and ensure filings comply with language and certification requirements.

5. Service and hearing. Effect valid service on all parties and the tribunal or court, and file proof of service. Prepare witness evidence to support the factual grounds and anticipate cross-examination on the affidavit of means. Be ready to respond to the opposing party’s alternatives, such as an offer of partial security or a bank guarantee.

6. Post-order enforcement. If security is ordered, monitor compliance against the deadline. If the ordered party fails to provide security, consider the available enforcement and procedural consequences, including a stay of the claim where that was built into the order, and court-assisted measures such as attachment or garnishee relief where appropriate. Ensure the security, once provided, is held in a manner that is accessible for later disposition, and that the mechanism (guarantee or deposit) is denominated and structured to match the likely costs award.

Sample grounds to plead: that the claimant is a foreign entity with no assets in a jurisdiction where a costs award is readily enforceable; that registry and insolvency searches disclose material financial distress; and that there has been a significant deterioration in the claimant’s financial position since commencement.

Suggested relief wording: that the claimant provide security in the sum of [amount] by way of [cash deposit / first-demand bank guarantee from a bank acceptable to the respondent / escrow] within [number] days, failing which the claim be stayed pending compliance.

If You Oppose Security for Costs: Step-by-Step for Respondents to the Application

A party resisting a security application has several tactical avenues. The objective is to defeat the application outright or to limit its scope and cost.

Evidence to resist

Challenge the sufficiency and currency of the applicant’s impecuniosity evidence. Put forward up-to-date financial statements, confirmed banking facilities, or evidence of assets within an enforceable jurisdiction. Where the applicant’s case rests on inference, demonstrate that the inference is unwarranted. Consider whether disclosing the existence of litigation funding or after-the-event insurance helps rebut concerns about cost-recovery, while arguing that detailed disclosure is neither automatic nor proportionate.

Procedural responses and cross-applications

Argue delay where the applicant sat on its rights, or abuse where the application is a tactical device to stifle a meritorious claim. Offer proportionate alternatives, partial security, a staged mechanism, or a bank guarantee rather than a cash deposit, to blunt the impact. Press for costs budgeting so that any security is pegged to a realistic, not inflated, figure. Where appropriate, bring a cross-application or reserve your own position on costs. Throughout, frame the response around proportionality: the touchstone for most tribunals is whether an order is fair and necessary, not merely available.

Required Documents: Checklist and Table

A complete, well-organised bundle accelerates the hearing and strengthens credibility. The applicant’s affidavit of means should set out each ground, exhibit the supporting evidence, and address the proposed form and amount of security. Corporate and registry searches establish the respondent party’s standing and any charges or insolvency filings. Financial exhibits provide the direct evidence of inability to pay. Draft protective orders and a proposed security mechanism should be prepared in advance. Where documents are not in English or Bengali, certified translations are required for court filings. The table below is the working checklist.

Step / Who / Duration Timeline for Security for Costs Arbitration Bangladesh

The durations below are conservative practical estimates. Emergency arbitrator mechanisms and urgent court relief can compress the early stages considerably; contested hearings extend them.

Timeline and Deadlines: Key Thresholds and Urgent Triggers

There is no fixed statutory limitation period governing when a security-for-costs application must be made. In practice, promptness is decisive: a tribunal is far more likely to make an order where the applicant moved quickly on discovering credible evidence of impecuniosity, and far less sympathetic where the party delayed and the claimant incurred significant cost in the interval. The application must also be read against the arbitration’s procedural timetable and the expected award timeline, a late application risks being overtaken by the substantive hearing. The practical rule is to commission forensic and insolvency searches the moment concern arises, and to file as soon as the evidence is in hand.

Delay is routinely cited by respondents to the application as a ground for refusal, and it can also inform the amount a tribunal is prepared to order.

Costs and Fees: Table and Practical Budgeting

Both sides face cost exposure. The applicant bears the filing fees, forensic search costs and counsel time of running the application; the ordered party bears the cost of arranging and maintaining the security itself, principally bank guarantee commission or the opportunity cost of a cash deposit. Budget for expert or forensic evidence where impecuniosity is contested, and for translation and certification where court filings require it. The figures below are indicative ranges only and will vary with the institution, the value in dispute and the complexity of the application; confirm current fees with the relevant institution and court before budgeting.

Supporting Security Orders Through the Bangladeshi Courts

Where a tribunal has ordered security and the party refuses to comply, a party may seek the assistance of the competent Bangladeshi court for interim measures in support of the arbitration under the Arbitration Act 2001. The practical steps that follow are concrete. Where urgency demands immediate protection, consider an urgent court application to hold the position pending the tribunal’s determination. And when preparing the initial application, structure the relief sought so that it maps cleanly onto the enforcement mechanisms the courts provide, a self-executing order is easier to enforce than a discretionary one.

Bangladesh has in recent years pursued reforms aimed at strengthening commercial dispute resolution, including proposals for dedicated commercial benches and faster handling of urgent interlocutory matters. Practitioners should verify the current status and text of any new legislation or procedural rules before relying on them, as reform measures may be at bill, ordinance or implementation stage at the time of reading. The authoritative texts should be consulted through the Ministry of Law, Justice and Parliamentary Affairs and the Bangladesh Gazette. The likely practical effect of a clearer commercial-court framework is that security for costs arbitration Bangladesh becomes a faster, more enforceable remedy for well-advised parties, provided they coordinate the tribunal and court tracks from the start.

Comparison Table: Tribunal Orders vs Court Orders for Security

Choosing the route, or deciding to run both, turns on speed, enforceability and the scope of relief you need. The table distils the trade-offs.

What to Do After an Order: Enforcing and Managing Compliance

Where the ordered party provides security on time, the task shifts to custody and preservation, ensuring the deposit or guarantee is held securely, remains valid for the duration, and is denominated to match the likely costs award. Where the party refuses or delays, escalate promptly. Options include seeking the tribunal’s procedural sanctions (such as a stay of the claim where that was built into the original relief), and applying to the competent court for interim measures in support of the arbitration, which may include attachment of assets or a garnishee order against third parties holding funds, as the court considers appropriate.

The earlier you move on non-compliance, the stronger your position: a stay of the claim pending compliance, where that was built into the original relief, is a powerful lever that avoids the cost of separate enforcement proceedings.

Common Pitfalls and How to Avoid Them

• Delaying the application. Moving late weakens the merits and invites a refusal on grounds of delay; commission searches the moment concern arises.
• Weak impecuniosity evidence. Inferential or stale financial evidence is the leading reason applications fail; invest in current, documented proof.
• Ignoring the concurrent court route. Relying on the tribunal alone can leave an order unenforced; use the court’s power to grant interim measures in support of arbitration where enforcement is at risk.
• Currency mismatch. Failing to tailor the security to the currency of the likely award can erode its value; fix the denomination at the outset.
• Foreign guarantees without local enforceability. A guarantee from a bank with no local reach may be worthless; insist on a mechanism recognisable and enforceable in Bangladesh.
• No protective wording for the funds. Omitting self-executing consequences and custody terms creates enforcement gaps; build them into the draft order.

Practical Annexures and Sample Wording

Counsel preparing an application will benefit from a small suite of templates, each of which should be adapted to the facts and reviewed by local counsel before use:

• Tribunal request for security. A structured application stating the grounds, the legal basis under the applicable rules, the amount, the proposed form of security and the consequences of non-compliance.
• Court application for interim measures. A concise filing identifying the jurisdictional basis under the Arbitration Act 2001, the urgency, and the enforcement or complementary relief sought.
• Draft bank guarantee language. First-demand wording specifying the beneficiary, amount, currency, validity period and the triggering event for a call.
• Affidavit of means checklist. A prompt list covering registry searches, charges, insolvency filings, financial statements, and the absence of enforceable assets.

For wider procedural context, see the Arbitration Lawyers Bangladesh practice guide and the related GAFTA Arbitration, Bangladesh guide.

Conclusion and Action Steps

Security for costs arbitration Bangladesh rewards parties who act early, evidence their application thoroughly, and coordinate the tribunal and court tracks from the outset. Enforcement in Bangladesh flows most readily to the party that structures its relief to match the available statutory mechanisms and moves without delay. Applicants should commission forensic searches at the first sign of financial concern, draft self-executing order wording, and prepare a concurrent court filing where enforcement is at risk. Respondents to an application should marshal current financial evidence, offer proportionate alternatives, and press for a realistic, costs-budgeted figure. Whether you are seeking, conceding or resisting security, the practical stakes, and the procedural detail, make early advice from Bangladesh-qualified arbitration counsel the decisive factor.

Sources

1. Bangladesh Ministry of Law, Justice & Parliamentary Affairs
2. Bangladesh Code (BDLaws), Acts & Statutes Repository (Arbitration Act 2001)
3. Supreme Court of Bangladesh
4. The Bangladesh Gazette / Government Printing Office
5. Bangladesh Bar Council
6. UNCITRAL, Model Law and Explanatory Notes