Bangladesh is set to reap benefits by embracing freedom of navigation
As early as 1957, a trade agreement between India and Pakistan envisaged the development of transit facilities in East Pakistan for trade between the Indian mainland and Northeast India. Cross-border transport links were indefinitely suspended during the 1965 Indo-Pakistani War.
In 1972, Bangladesh and India signed a protocol on transit via inland waterways. In 1976, a transit agreement was signed between Nepal and Bangladesh. Bhutan and Bangladesh signed a trade agreement in 1980 which envisaged transit through Indian territory. Bangladesh and Myanmar have discussed the potential for transit trade which would allow Bangladesh to access markets in China and ASEAN; and Myanmar and China to access markets in South Asia. However, transit and transshipment facilities have been non-operational for decades and have recently emerged as an economic priority.
For years, the transit question has been a controversial topic in Bangladesh over concerns of national security. Transit has been opposed by the far-right and far-left sections of Bangladesh’s society. Mistrust of trade is ultimately socialist, inward-looking, isolationist, and counter-productive. Transit to Nepal and Bhutan via India has been stalled due to Indian inaction; while the Rohingya refugee crisis and internal insurgencies in Myanmar have effectively stalled the development of trade routes in the east.
In 2010, a joint statement by the premiers of Bangladesh and India mentioned future opportunities for regional trade through the seaports of Chittagong and Mongla. In 2015, a memorandum of understanding (MoU) was signed between Dhaka and Delhi for the movement of goods via road, rail, waterways, and multimodal transport.
In July 2020, a cargo consignment travelled via Bangladesh between the Indian provinces of West Bengal and Tripura. Estimates for future transit trade are valued at several hundred millions of dollars in the next five years, if Bangladesh was to embrace freedom of transit and navigation.
The seamless movement of goods across the European Union, as well as the emergence of new transport corridors such as the China-Pakistan Economic Corridor, have renewed interest in the development of regional trade routes. The rule of law is vital for a prosperous and secure trade regime.
International trade law will play a vital role in ensuring that transport corridors conform to transparency, international peace and security, and legal rights and obligations for businesses.
Bangladesh currently lacks a comprehensive transit agreement with any of its neighbours. Neither Bangladesh nor any of its neighbours are state parties to the key international conventions on road, rail, and multimodal transport. Adherence to these conventions should ideally be a pre-requisite for a transit regime; or these conventions should be adopted as soon as possible as our countries go forward. Additionally, a strong legal system is essential to give remedies for businesses in regional trade.
The Convention on the Contract for the International Carriage of Goods by Road (CMR Convention) standardizes contractual conditions for goods transported by road. In February 2008, the “e-CMR” protocol was added to the convention, which promotes an electronic CMR format instead of the paper-based format. Benefits of the e-CMR include reduced handling costs, faster invoicing, data accuracy, real time monitoring of goods transport, lower administrative costs, and low risk of discrepancies in delivery.
The Convention on the International Carriage of Goods by Rail (COTIF) establishes a uniform railway law. Its oversight is the responsibility for the Intergovernmental Organization for International Carriage by Rail (OTIF). One of the key instruments of the COTIF regime is the Regulation concerning International Carriage of Dangerous Goods by Rail (RID), which covers explosive, radioactive, flammable, gaseous, infectious, toxic, and other substances which are restricted in the regime. Given that international trade is prone to risks of arms proliferation, including nuclear, biological, and chemical weapons proliferation, RID is an essential instrument to ensure the non-militarization of transit trade.
Any prospect of military transit through Bangladesh should first undergo joint exercises with the Bangladesh Armed Forces. Military transit can only be allowed with countries with which Bangladesh has a strong strategic partnership based on common values of democracy and human rights.
The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, also called the Rotterdam Rules, is yet to enter into force. But it envisages a new set of standards for contracts of maritime freight. Bangladesh, India, Nepal, Bhutan, and Myanmar can absorb the Rotterdam Rules into domestic law, or apply the rules to bilateral or multilateral shipping agreements.
Currently, transit negotiations have focused on coastal shipping in the Bay of Bengal. Moreover, other countries in the region can benefit from Bangladesh becoming a re-exporting hub, as seen lately in the potential for exports of LPG from Bangladesh. This would reinforce the importance of shipping rules.
Carriage of goods by at least two different modes of transport is called multimodal transport. The 2015 MoU between Bangladesh and India refers to multimodal transport. The United Nations Convention on International Multimodal Transport of Goods was adopted in 1980 but is not yet in force.
Transit in Bangladesh is likely to involve multimodal transport to a significant extent. For example, goods in transit may be shipped to Chittagong by sea and then transported by road or rail through Bangladeshi territory to a third country. Harmonizing rules with the UN convention can give more confidence to businesses.
An extensive network of commercial courts will be good for business. For example, France has 134 tribunaux de commerce (tribunals of commerce). One of the key advantages of logistical hubs like Hong Kong and Singapore have been their legal systems and use of English common law.
Bangladesh can set up an international trade court. Dedicated commercial chambers can also be set up within the High Court, including for matters related to admiralty, intellectual property, and construction. There should be greater scope for international commercial arbitration, including third-party funding. Our judges and lawyers can utilize the longstanding heritage of referring to the common law.
Transit and transshipment deserve a thorough appraisal along these lines.
Umran Chowdhury works in the legal field.