International Arbitration 2020

Last Updated August 18, 2020

Bahrain

Law and Practice

Authors



Charles Russell Speechlys LLP is one of the oldest and most respected law firms in the UK, and has an unusually broad range of skills and experience across the full spectrum of business and personal legal needs. The award-winning Middle East team understands the specific requirements and nuances of each marketplace in the region, and undertakes some of the region's highest-value transactions and cases from the firm's offices in Qatar, Bahrain and the UAE. The 150+ strong litigation team acts for multinational corporations, governments and regulatory bodies, as well as high net worth individuals, in resolving complex, high-value commercial disputes. Key clients include the Central Bank of Bahrain (CBB), which appointed CRS as the External Administrator of Awal Bank B.S.C. (in administration) in 2009. This is the region's largest administration, with multibillion-dollar claims and assets.

Although litigation remains the primary dispute resolution mechanism in the Kingdom of Bahrain, international arbitration is an increasingly popular alternative.

In line with other Gulf Cooperation Council (GCC) states, Bahrain has recently updated and streamlined its arbitration law, and has adopted the international norms set out in the United Nations Commission on International Trade Law (UNCITRAL) Model Law (the Model Law).

Parties to international arbitrations in or concerning Bahrain have indicated that the main drivers for their choosing arbitration over litigation or other forms of dispute resolution are the confidential nature, flexible procedure and international enforceability of arbitral awards.

The COVID-19 pandemic has had a significant effect on business in Bahrain and the wider region, and this has, in turn, caused some interruption and delay to international arbitration.

However, arbitration is by nature a flexible dispute resolution mechanism, and participants have been able to proceed with arbitrations with only limited COVID-19-related interference. Arbitral institutions such as the Bahrain Chamber for Dispute Resolution (BCDR), the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA) have implemented measures to streamline and improve remote working, facilitating online filing and case management.

Tribunals, legal representatives and parties have been able to adapt quickly to what some in the industry have described as the “new normal”, and have been able to make use of the state-of-the-art technology available to ensure that any COVID-19 interruptions are limited as far as possible.

Aside from COVID-19, the cultural preference to resolve disputes “behind closed doors” means that parties to international contracts or disputes in or concerning Bahrain (in keeping with those based across the GCC and Middle East region) are often attracted to arbitration over other forms of dispute resolution.

Costs, however, are an issue that parties have identified as affecting their decision to arbitrate in Bahrain. While arbitration has long been considered internationally as a cost-effective alternative to litigation, the costs difference between international arbitration and litigation is no longer considered to be particularly significant.

In light of this, it should be remembered that the flexibility of international arbitration means that an arbitral tribunal can often render a decision far quicker than the domestic courts, with limited scope for appeal and a facilitated international enforcement process, so the process should be more cost-effective than domestic litigation, at least in theory.

There has been international arbitration activity across a number of industries in Bahrain in 2019-20, in terms of both interest in and incorporation of arbitration clauses in contracts and the issuing of arbitration proceedings.

The construction industry in particular has remained active in terms of international arbitration. Construction disputes are often highly technical, and parties incorporating arbitration clauses in their construction agreements can choose the members of the arbitral tribunal based upon the nature of the disputes and the individuals’ specialisms.

Another reason for international arbitration's continuing popularity in the construction industry is that those involved in construction and engineering projects might be based in numerous different jurisdictions, and the procedure for the enforcement of arbitral awards internationally is often significantly less onerous than the enforcement of a foreign court judgment, in large part due to the prevalence of the adoption of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention).

The ICC remains the most popular international arbitral institution used for international arbitration in or concerning Bahrain.

The most popular institution based within the jurisdiction is the BCDR, whose rules were developed in partnership with the American Arbitration Association.

Other arbitral institutions commonly used for international commercial arbitration in Bahrain are the LCIA, the Dubai International Financial Centre-LCIA (the DIFC-LCIA), and the Gulf Cooperation Council-Commercial Arbitration Centre (the GCCCAC).

International arbitrations under the ad hoc UNCITRAL Arbitration Rules are also a popular method of dispute resolution in Bahrain.

In July 2015, Bahrain issued Legislative Decree No. 9 of 2015, promulgating the Bahrain Arbitration Law (the Arbitration Law), which adopts the UNCITRAL Model Law in its entirety and adds several further provisions, including in relation to the competent court, party representation and arbitrator liability.

The BCDR is governed by Legislative Decree No. 30 of 2009 with respect to the Bahrain Chamber for Economic, Financial and Investment Dispute Resolution (the BCDR Law), and is devised as a dual mechanism for parties to resolve disputes through either statutory court procedures or arbitration by parties’ agreement. If an international arbitration is conducted in the BCDR by an agreement between the parties, then the BCDR Law will also govern the arbitration.

There have been no significant changes to Bahraini law relating to arbitration in the past year and, given that the Arbitration Law was issued as recently as 2015 and adopts the UNCITRAL Model Law in its entirety, no significant changes to national arbitration legislation that might affect the arbitration landscape in Bahrain are expected in the near future.

Under Bahraini law, an arbitration agreement is an agreement between the parties to submit to arbitration all or certain disputes that have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not.

An arbitration agreement may be in the form of an arbitration clause in a contract or a separate agreement.

In order to be valid, an arbitration agreement must be in writing. This requirement will be satisfied if its content is recorded in any form, whether the arbitration agreement or contract has initially been concluded orally, by conduct or by any other means.

An arbitration agreement may be recorded in an electronic communication if the information contained therein is accessible for subsequent reference. Furthermore, a reference in a contract to any document containing an arbitration clause constitutes a written arbitration agreement, provided that the reference is such as to make that clause part of the contract.

While there are no express statutory barriers to “arbitrability” under Bahraini law, certain types of dispute may not be arbitrable in practice. These include some family and inheritance matters, and disputes that may involve tax or public policy issues.

Subject to the chosen arbitration rules adopted, parties are free to challenge the arbitrability of a dispute before the arbitral tribunal or the Bahraini Civil High Court.

The Bahraini courts will enforce an arbitration agreement at the request of a party to it.

Under Bahraini law, where a party has issued proceedings in the Bahraini courts in a matter that is the subject of an arbitration agreement, any party to those proceedings may request that the courts stay such proceedings and refer the parties to arbitration.

Such a request must be made no later than when the requesting party submits its first statement of case on the substance of the dispute.

The matter will be referred to arbitration, unless the courts find that the arbitration agreement is null and void, inoperative or incapable of being performed.

Under Bahraini law, an arbitration clause that forms part of a contract will be treated as an agreement independent of the other terms of the contract, and a decision by the arbitral tribunal that a contract is null and void will not necessarily result in the invalidity of the arbitration clause.

In principle, parties to an international arbitration in Bahrain are free to seek the appointment of anyone to act as an arbitrator.

However, in practice, an arbitrator should not be a minor, imprisoned or bankrupt, and should be independent, of full legal capacity and suitably qualified to rule on the dispute.

Under Bahraini law, in the absence of an agreement between the parties on the number of arbitrators, the arbitral tribunal will comprise three arbitrators.

The default procedure is that the claimant and the respondent will each appoint one arbitrator, and those arbitrators will then appoint a third arbitrator, who will act as the chairman.

Where there is a disagreement between the parties or the party-appointed arbitrators, any party may apply to the Bahraini Civil High Court for it to appoint the arbitrator(s). The Court’s ruling cannot be appealed.

The Bahraini Arbitration Law does not set out specific provisions relating to multi-party arbitrations, and it follows that the default procedure set out above will therefore apply.

In circumstances involving multiple parties, it would be sensible for those parties to incorporate specific provisions relating to the appointment of arbitrators in their contracts, or in a separate, supplementary arbitration agreement.

In the absence of an agreement between the parties, and subject to the procedure specified in the arbitration rules adopted by the parties, any party may request the Bahraini Civil High Court to intervene in the selection of arbitrators. Following such a request, the Court may appoint one or more arbitrators. The Court’s ruling cannot be appealed.

Under Bahraini law, the appointment of an arbitrator may be challenged only if the circumstances give rise to justifiable doubts as to the impartiality or independence of the arbitrator, or if he or she does not possess the qualifications agreed to by the parties.

The parties may agree on a procedure for challenging an arbitrator’s appointment. In the absence of such agreement, the challenging party must send a written statement of the reasons for the challenge to the arbitral tribunal, within 15 days of the information relating to the challenge coming to light. Unless the challenged arbitrator withdraws from his or her office or the other party agrees to the challenge, the arbitral tribunal will decide on the challenge.

If a challenge is unsuccessful, the challenging party has 30 days from receiving notice of the decision to request that the Bahraini Civil High Court decides on the challenge.

If an arbitrator is or becomes unable to perform his or her functions, or for other reasons fails to act without undue delay, his or her mandate will terminate when he or she withdraws from the post or by agreement between the parties.

A person in receipt of a request to be appointed to act as an arbitrator is obliged under the Arbitration Law to disclose any circumstances that are likely to give rise to justifiable doubts as to his or her impartiality or independence.

This is a continuing obligation and an arbitrator must disclose any such circumstances to the parties from the time of his or her appointment and throughout the arbitral proceedings.

As set out in 3.2 Arbitrability, while there are no express statutory barriers, certain types of dispute may not, in practice, be referred to arbitration in Bahrain, including some family and inheritance matters and disputes that involve public policy issues.

Under Bahraini law, an arbitral tribunal may rule on its own jurisdiction, including a party’s challenge to its jurisdiction, either as a preliminary issue or in an award on the merits.

If the arbitral tribunal rules as a preliminary issue that it has jurisdiction, any party may request that the Bahraini Civil High Court determines the jurisdiction of the arbitral tribunal, within 30 days of receiving notice of that ruling. The Court’s decision cannot be appealed.

While a request to the Court is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.

If an arbitral tribunal decides to combine its decision on jurisdiction with an award on the merits, any party may request that the Court determines the jurisdiction of the arbitral tribunal in proceedings challenging the award and in proceedings to enforce the award.

The Bahraini Arbitration Law (and the UNCITRAL Model Law) does not provide for the Court to review negative rulings on jurisdiction by arbitral tribunals, although in practice this may be possible by a party making an application to the Court for it to refer the parties to arbitration and/or appoint an alternative tribunal.

Under Bahraini law, a challenge to the jurisdiction of the tribunal should be raised no later than the date on which the statement of defence is submitted. A party is not precluded from making such a challenge by the fact that he or she has appointed, or participated in the appointment of, an arbitrator.

Any plea that the tribunal is exceeding the scope of its authority must be raised as soon as the relevant matter occurs in the arbitral proceedings. However, a tribunal may admit a later objection if it considers the delay to be justified.

As set out in 5.3 Circumstances for Court Intervention, if the arbitral tribunal rules as a preliminary issue that it has jurisdiction, any party may request that the Bahraini Civil High Court determines the jurisdiction of the arbitral tribunal, within 30 days of receiving notice of that ruling.

In circumstances where an arbitral tribunal decides to combine its decision on jurisdiction with an award on the merits, judicial review on the question of jurisdiction is available in proceedings challenging the award and in proceedings to enforce the award.

The Judges of the Bahraini courts have wide discretion when interpreting law and determining cases, and a holistic system of judicial precedent has not fully developed as a concept in Bahrain.

It follows, therefore, that the standard of judicial review is not prescribed and will be determined on a case-by-case basis.

The Bahraini courts generally take an inquisitorial approach when assessing the decisions, conduct and actions of arbitrators, and are therefore likely to conduct any review of questions of admissibility and jurisdiction de novo.

As set out in 3.3 National Courts' Approach, in circumstances where proceedings are issued in the Bahraini courts in a matter that is the subject of an arbitration agreement, the courts will refer the parties to arbitration, if a party so requests (no later than when submitting its first statement of case on the substance of the dispute), unless it finds that the agreement is null and void, inoperative or incapable of being performed.

An arbitration agreement or award will be binding only on the parties, and an arbitral tribunal therefore has limited scope to assume jurisdiction over third parties.

Third parties can be joined to arbitral proceedings, but it is generally necessary for them to consent to this.

Similarly, separate arbitral proceedings may be consolidated, either with the consent of the parties or where the proceedings arise from the same arbitration agreement or involve the same parties.

Unless otherwise agreed between the parties, an arbitral tribunal in Bahrain has the power to order preliminary or interim relief.

The types of relief available include orders for the preservation of assets and evidence, and orders to prevent any prejudice to the arbitral procedure.

A party requesting an interim measure must satisfy the arbitral tribunal that harm not adequately reparable by an award of damages is likely to occur, and that there is a reasonable possibility that the requesting party will succeed on the merits of its claim/defence.

An arbitral tribunal may require the party requesting an interim measure to provide appropriate security, and may modify, suspend or terminate an interim measure either on the application of one of the parties or, in exceptional circumstances, on its own initiative.

Upon application by a party, the Bahraini High Civil Court will recognise and enforce an interim measure issued by an arbitral tribunal, irrespective of the country in which it was issued, subject to limited grounds for refusing enforcement, including invalidity in law, the incapacity of a party and improper composition of the tribunal.

Furthermore, the Bahraini Civil High Court has the same power to issue an interim measure in relation to arbitral proceedings as it has in relation to proceedings in the courts, irrespective of whether the seat of the arbitration is Bahrain, and will exercise such power in accordance with its own procedures, having regard to the specific features of international arbitration.

Types of interim relief available therefore include orders for the preservation of assets and evidence, and orders to prevent any prejudice to the arbitral procedure.

The Bahraini Arbitration Law is silent as to the use of emergency arbitrators. However, recourse to emergency arbitrators is becoming more prevalent in international arbitration, in Bahrain and elsewhere, and various arbitration institutions include specific provisions relating to emergency arbitrators, including the ICC Arbitration Rules 2017 and the BCDR Arbitration Rules 2017.

In practice, therefore, recourse to emergency arbitrators is available in Bahrain, and the courts are likely to treat them in the same way as a regular tribunal.

Bahraini law does not contain any express statutory limitations on the availability of security for costs in arbitration proceedings, and it follows that parties are free to agree whether security for costs is to be available.

Some arbitration rules, such as the LCIA Arbitration Rules 2014, expressly provide that the tribunal has the power to make an order that a party provides security for costs.

As set out under 2.1 Governing Law, the legislation that governs the arbitration procedure in Bahrain is the Arbitration Law, including the provisions of the UNCITRAL Model Law, with arbitrations in the BCDR also being subject to the BCDR Law.

Parties are free to determine the procedural rules that govern an arbitration in Bahrain, including the arbitration rules under which the arbitral tribunal must conduct the case.

Parties are free to determine the procedural rules that govern an arbitration conducted in Bahrain, subject to the Bahraini Arbitration Law.

Under Bahraini law, arbitrators must treat the parties to an arbitration conducted in Bahrain equally, and give each party a full opportunity to present its case.

Subject to any prior agreement between the parties on the powers of arbitrators or the arbitration procedures, the arbitral tribunal may conduct the arbitration in whatever manner it considers appropriate.

The powers conferred on the arbitral tribunal include the power to determine the admissibility, relevance, materiality and weight of any evidence. The arbitral tribunal may also appoint one or more experts to report on specific issues to be determined by the tribunal, and may require a party to give the expert any information or documents that it considers relevant to the issues pertaining to the arbitration.

Suitably qualified non-Bahraini legal representatives are permitted to represent parties in international commercial arbitrations conducted in Bahrain. The national law does not set out particular qualification requirements for such individuals.

Parties to domestic arbitrations (ie, those where the governing law is Bahraini Law) are required to be represented by Bahraini-qualified lawyers.

The parties are free to agree on the approach to be followed by the arbitral tribunal in relation to the collection and submission of evidence at the pleading stage and at the hearing in Bahrain.

At the pleading stage, the parties may submit all documents they consider to be relevant with their statements of claim and defence, or may add a reference to the documents or other evidence they will submit.

Subject to any agreement to the contrary between the parties, the arbitral tribunal has broad discretion regarding how evidence is obtained and what kind of evidence is acceptable, including the power to determine the admissibility, relevance, materiality and weight of any evidence.

The arbitral tribunal will decide on the level and manner of disclosure/discovery, give directions on any issues of privilege, and determine whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings should be conducted on the basis of documents and other materials. Unless the parties have agreed that no hearings shall be held, the arbitral tribunal shall hold such hearings at an appropriate stage of the proceedings, if so requested by a party.

The tribunal also has the power to appoint one or more experts to give evidence if it considers that doing so would be necessary or beneficial.

The parties are free to agree on the rules of evidence.

If the parties do not reach agreement on the rules of evidence, the arbitral tribunal will determine the appropriate rules to be followed.

In general, however, all statements, documents or other information supplied to the arbitral tribunal by one party must also be communicated to the other party/parties, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision must also be communicated to the parties.

A number of sets of rules pertaining to the taking of evidence in international arbitration are available, and the best known of these historically has been the International Bar Association (IBA) Rules on the Taking of Evidence in International Arbitration.

The issuance of the “Prague Rules” (the Inquisitorial Rules on the Taking of Evidence in International Arbitration) in December 2018 provides an alternative set of rules with a more civil law-oriented approach, which has been welcomed by practitioners in civil law jurisdictions such as Bahrain.

The arbitral tribunal may request assistance from the Bahraini Civil High Court in the taking of evidence, and the Court will execute the request in accordance with the national law as it relates to evidence.

Pursuant to Chapter 2 of the Bahraini Civil and Commercial Procedures Law (No. 12 of 1971), the Bahraini Civil High Court has the power to order parties to attend Court for questioning, and to require the attendance of any person, including third parties, at Court to give evidence as a witness. The Court also has the power to order parties and third parties to provide documentary evidence to the Court.

The Bahraini Arbitration Law contains no express provision regarding the confidentiality of arbitral proceedings, so this is a matter for the parties to agree on or, in the absence of any agreement, for the tribunal to decide.

In practice, confidentiality is often expressly prescribed in the arbitration agreement.

In cases where confidentiality has not been expressly provided for in the arbitration agreement, many institutional arbitration rules recognise at least a partial principle of confidentiality in international arbitrations.

For example, the BCDR Arbitration Rules 2017 state that an award may be made public only with the consent of all parties and that, unless otherwise agreed by the parties, all matters concerning the arbitration shall be kept confidential by the tribunal, the BCDR and any experts (but not, interestingly, the parties themselves).

An exception to this general rule is found in arbitration conducted under the ICC Arbitration Rules 2017, under which no confidentiality of proceedings exists, and as such it must be expressly ordered by the tribunal at the request of a party.

An award must be made in writing and signed by the arbitrator(s). In arbitral proceedings with more than one arbitrator, the signatures of a majority will suffice, provided that the reason for any omitted signature is stated.

The award must state the reasons on which it is based, unless the parties have agreed that no reasons are needed or the award is an award on agreed terms. The award must also state the date and the place of arbitration, and will be deemed to have been made at that place. After the award has been made, a copy signed by the arbitrators must be delivered to each party.

There are no express time limits for the delivery of an award under Bahraini law. However, some arbitration rules, such as those of the BCDR and ICC, specify time limits for the delivery of an award.

The Bahraini Arbitration Law does not contain any express statutory limitations on the types of remedies that an arbitral tribunal may award.

There are no express provisions regarding the costs of arbitral proceedings under Bahraini law. It will be a matter for the parties to agree on or, in the absence of any agreement, for the tribunal to decide.

Many arbitral institutions (eg, the BCDR and the DIFC-LCIA) expressly provide for the calculation and allocation of administrative fees and arbitral tribunal fees.

Court fees for applications for the recognition and enforcement of arbitration awards and for challenges and appeals are subject to the rules based on which judicial fees are levied, as per the Judicial Fees Law.

Although Shari’a law prohibits the recovery of interest, Bahrain’s commercial laws recognise interest as a legitimate international business concept, and interest is therefore usually recoverable in Bahrain if it is awarded by a tribunal.

Unless otherwise agreed between the parties, an arbitral award will be final and binding in Bahrain, subject to limited grounds to challenge an award set out in the UNCITRAL Model Law, as adopted by the Bahraini Arbitration Law.

Under Bahraini law, a party can apply to the Civil High Court to set aside an award if:

  • the party making the application can prove that a party to the arbitration agreement was under some incapacity, or that the agreement is invalid under the law to which the parties have subjected it or, failing any indication thereof, under Bahraini law;
  • the party making the application was not given proper notice of the appointment of an arbitrator or the arbitral proceedings, or was otherwise unable to present its case;
  • it deals with a dispute not contemplated by, or not falling within, the terms of the agreement to arbitrate;
  • it contains decisions on matters that are beyond the scope of the arbitration – however, if these can be separated from the rest of the award, only the part of the award that contains decisions on matters not submitted to arbitration will be set aside;
  • it is in conflict with Bahraini public policy;
  • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the parties’ agreement (unless the agreement conflicts with Bahraini law) or, failing such agreement, was not in accordance with Bahraini law; or
  • the Court finds that the subject matter of the dispute is not arbitrable under Bahraini law.

Parties to arbitrations conducted under the BCDR Law may challenge an award before the Bahraini Court of Cassation on similar grounds to those set out above.

Parties cannot expand, limit or exclude the right of appeal and/or challenge under Bahraini law.

As set out in 5.5 Standard of Judicial Review for Jurisdiction/Admissibility, the standard of judicial review in Bahrain is not prescribed and will be determined on a case-by-case basis.

However, the Bahraini courts generally take an inquisitorial approach when assessing the decisions, conduct and actions of arbitrators, and are therefore likely to conduct any review of the merits of a case de novo.

Bahrain has been a signatory to the New York Convention since 6 April 1988.

Bahrain applies commerciality and reciprocity reservations, meaning that the New York Convention applies only to disputes that are considered commercial under Bahraini law, and to the recognition and enforcement of awards made in the territory of another contracting state.

Bahrain is also party to the following treaties relating to enforcement:

  • the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965;
  • the Riyadh Arab Agreement for Judicial Cooperation 1983;
  • the Gulf Cooperation Council Convention for the Execution of Judgments, Delegations and Judicial Notifications 1995;
  • the Hague Convention for the Pacific Settlement of International Disputes 1907; and
  • various bilateral investment treaties.

Under Bahraini law, an arbitral award shall be recognised as binding, irrespective of the country in which it was made (as long as that country is a signatory to the New York Convention), and, upon application in writing to the Bahraini High Civil Court, shall be enforced subject to limited grounds for refusing recognition or enforcement.

Once an award has been recognised by the Bahraini High Civil Court, a party seeking enforcement should apply to the Bahraini Court of Execution.

Available methods of enforcement include:

  • issuing an attachment order on property;
  • ordering the forced sale of property subject to the attachment order;
  • ordering the payment of amounts under the judgment;
  • collecting payment and transferring it to the successful party;
  • seeking assistance from the police, if necessary;
  • ordering the arrest of the debtor;
  • levying a distraint on the debtor’s property (including stocks and bonds) in order to satisfy the debt; and
  • ordering the sale of any property (movable and immovable) by public auction.

An award that has not yet become binding on the parties or that has been set aside or suspended by a court of the country in which, or under the law of which, that award was made may be declared unenforceable in Bahrain, upon the application of a party.

Although a state or state entity may raise a defence of sovereign immunity at the enforcement stage, the Bahraini courts take their judicial independence and the rule of law seriously and, as such, a state or state entity would need to show genuine and sufficient evidence in order to successfully defend enforcement on such grounds.

Under the Bahraini Arbitration Law, arbitral awards are recognised as binding irrespective of the country in which they were made (as long as that country is a signatory to the New York Convention), and will be enforced upon written application to the Bahraini Civil High Court, subject to limited exceptions, similar to those relating to challenging or appealing an award set out in 11.1 Grounds for Appeal.

In principle, therefore, the Bahraini courts will recognise and enforce international arbitral awards.

However, in relation to foreign arbitration awards, differences between the legal system of Bahrain and those of other jurisdictions may lead to a case being effectively retried on its merits by the Bahraini courts.

The Bahraini courts may also refuse to recognise and enforce an award at the request of the party against which it is invoked if that party can show that the award has been set aside or suspended by a court of the country in which or under whose law the award was made.

There are no provisions restricting class action arbitration or group arbitration under Bahraini law.

Pursuant to the UNCITRAL Model Law, under Bahraini law an arbitrator is obliged to treat parties equally and to give each party a full opportunity to present its case, and to disclose any circumstances that are likely to give rise to justifiable doubts as to his or her impartiality or independence.

There are few other express ethical codes and professional standards that apply to counsel and arbitrators conducting proceedings in Bahrain, so parties are generally free to decide on what codes and standards will apply. This may be either by express choice (eg, the IBA’s Guidelines on Party Representation in International Arbitration) or by implication (by appointing a member of the Chartered Institute of Arbitrators as the arbitrator, as he or she will be governed by that institution’s code of professional and ethical conduct).

The rules of certain arbitral institutions (eg, the BCDR and the ICC) have requirements relating to conduct that will apply to all arbitrations conducted under their administration.

Although there are no restrictions on third-party funding under Bahraini law, the concept of third-party funding in arbitration is not widely developed.

As set out in 5.7 Third Parties, separate arbitral proceedings in Bahrain may be consolidated by an arbitral tribunal, either with the consent of the parties, or where the proceedings arise from the same arbitration agreement or involve the same parties.

The Bahraini Arbitration Law does not provide an express power to the Court to consolidate arbitration proceedings, and it is questionable whether the Court would do so, in the absence of agreement between the parties.

As set out in 5.7 Third Parties, an arbitration agreement or award will be binding only on the parties, and an arbitral tribunal therefore has limited scope to assume jurisdiction over third parties.

Similarly, the Bahraini courts have limited scope to bind foreign third parties in support of arbitration proceedings, unless separate court proceedings are initiated in respect of the rights that are sought to be enforced.

Charles Russell Speechlys LLP

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Trends and Developments


Authors



Charles Russell Speechlys LLP is one of the oldest and most respected law firms in the UK, and has an unusually broad range of skills and experience across the full spectrum of business and personal legal needs. The award-winning Middle East team understands the specific requirements and nuances of each marketplace in the region, and undertakes some of the region's highest-value transactions and cases from the firm's offices in Qatar, Bahrain and the UAE. The 150+ strong litigation team acts for multinational corporations, governments and regulatory bodies, as well as high net worth individuals, in resolving complex, high-value commercial disputes. Key clients include the Central Bank of Bahrain (CBB), which appointed CRS as the External Administrator of Awal Bank B.S.C. (in administration) in 2009. This is the region's largest administration, with multibillion-dollar claims and assets.

The Kingdom of Bahrain has a long history of arbitration, and international commercial arbitration is an increasingly popular form of dispute resolution.

As a modern and business-friendly jurisdiction with a lively and diverse private sector economy, Bahraini business relationships give rise to a wide range of commercial agreements, often prescribing arbitration as a dispute resolution mechanism.

Inevitably, in international business relationships, disputes occasionally arise that cannot be resolved amicably between the parties, who must instead rely on their chosen formal dispute resolution mechanisms.

Bahrain’s legal framework provides a stable and robust system for the protection of individual rights and the rule of law, including through arbitration.

Bahrain was one of the first states within the Gulf region to accede to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), which it did in 1988; it is also home to the GCC Commercial Arbitration Centre (the GCCCAC), a long-established regional arbitration institution.

To ensure that this arbitration-friendly framework continues into the future, Bahrain has passed a number of statutory measures in recent years, aimed at substantially modernising its arbitration regime and adopting the best-practice approaches established by international groups, institutions and practitioners. It is no surprise, then, that arbitration, both domestic and international, has a firm following in Bahrain.

The BCDR

In 2009, Bahrain issued Legislative Decree No. 30 of 2009 with respect to the Bahrain Chamber for Economic, Financial and Investment Dispute Resolution (the BCDR Law).

The BCDR Law established the Bahrain Chamber for Dispute Resolution (the BCDR), which operates in partnership with the American Arbitration Association (the AAA).

The BCDR operates two separate and distinct dispute resolution components:

  • statutory court procedures through the BCDR Court; and
  • arbitration through the BCDR-AAA international arbitration centre.

The BCDR has jurisdiction over disputes in relation to which the parties have agreed in writing that the BCDR-AAA Arbitration Rules (the BCDR Rules) will apply, and it will also administer arbitrations under non-institutional rules or procedures, where the parties have made a written agreement to that effect.

In 2017, the BCDR Rules were updated to take account of changes to Bahrain’s arbitration legislation, and developments to the approach to international arbitration in the rules of other leading institutions, and in the UNCITRAL Arbitration Rules 2010.

The Bahraini Arbitration Law

While Bahrain’s previous arbitration law provided comprehensive statutory support for arbitration, Bahrain has nevertheless sought to continue to develop and update its legal framework.

As part of this, in July 2015 Bahrain issued Legislative Decree No. 9 of 2015, promulgating the Bahraini Arbitration Law (the Arbitration Law).

The Arbitration Law adopts the UNCITRAL Model Law on International Commercial Arbitration (the Model Law) in its entirety, and therefore gives businesses and individuals the freedom to make use of arbitral proceedings in accordance with the internationally accepted best-practice in arbitration.

The Arbitration Law also made a number of further changes to the existing arbitration regime, including the stipulation that non-Bahraini lawyers may now represent parties in international commercial arbitrations in Bahrain, and the limitation of arbitrator liability under the Arbitration Law, except in cases of ill will or gross negligence.

The Prague Rules

One issue in international arbitration that is perennially in the spotlight is the different approach and, sometimes, outcomes of the Civil Law versus the Common Law systems.

As a popular location for international arbitration, and a Civil Law jurisdiction based on the Egyptian/French/Roman legal systems, Bahrain’s arbitrations and especially Bahraini arbitrators have often leaned more towards the inquisitorial, rather than adversarial, approach to the resolution of disputes.

It is therefore important, in this context, to note the introduction in December 2018 of a comprehensive set of rules for the taking of evidence in international arbitration in Civil Law systems, in the form of the Rules on the Efficient Conduct of Proceedings in International Arbitration (the Prague Rules).

The Prague Rules provide a more inquisitorially focused system of guidance in relation to evidence in Civil Law-based arbitrations. Bahraini parties or those from other Civil Law jurisdictions will no doubt often prefer this approach, as it more closely aligns with the approaches taken by their respective domestic courts, particularly in respect of disclosure/discovery and witness evidence and cross-examination.

Practitioners in Bahrain have welcomed the Prague Rules. While many are very familiar with the International Bar Association Rules on the Taking of Evidence in International Arbitration (the IBA Rules), the adoption of a Civil Law-tailored alternative will doubtless become more and more popular in Bahrain.

Third-Party Funding

Another feature that is likely to become more and more popular in Bahrain is third-party funding.

While the funding of disputes by third parties is not novel, its historic uptake in Bahrain has been limited.

Although there do not appear to be any statutory barriers to third-party funding in Bahrain, it appears that funders, in particular, have not yet sought to fully engage with the arbitration sector in Bahrain.

Given the traditionally limited emphasis on costs in the Bahraini jurisdiction, this is perhaps not surprising. However, we are witnessing more interest in the availability of third-party funding for disputes, particularly from Bahraini and international businesses, and we predict that this will be an area of important change in the near future, both generally and from a regulatory perspective.

BCRD Developments and Statistics

The BCDR published its Annual Report for 2019 (the Report) on 4 May 2020, which highlights its ongoing commitment to advancing arbitration in Bahrain.

The Report details the steps taken by the BCDR in this regard, including through an ongoing review and refinement of its dispute resolution procedures, its participation in the UNCITRAL Working Groups and in international conferences on commercial and investor-state arbitration, and its publications, including the BCDR International Arbitration Review.

Issues that are being considered by the BCDR of late include many of the “hot topics” in international arbitration, such as meeting the increased needs of parties for expedited procedures, the availability and implications of third-party funding and, of course, the impact of COVID-19.

The Report also highlights the international nature of arbitration in the BCDR. Of the 282 cases administered by the BCDR since its establishment in 2009, 70% involved at least one non-Bahraini party, and 5% exclusively non-Bahraini parties. Tribunal appointments by the BCDR have been similarly international, with tribunal members hailing from a range of countries, including Australia, Bahrain, Egypt, France, Jordan, Lebanon, Syria, Singapore, Tunisia and the United Kingdom.

In terms of active caseload, 2019 was a busy year for the BCDR, with 41 cases registered, with a cumulative value of monetary claims of USD1.44 billion.

GCCCAC Developments and Statistics

The GCCCAC has similarly seen strong activity in arbitration recently.

In 2019, the GCCCAC received 16 requests for arbitration, with a cumulative value of monetary claims of USD62.5 million, involving international parties from countries including Bahrain, Saudi Arabia, India, Oman and the United Arab Emirates.

The increasing preference for arbitration in Bahrain’s institutions has continued in 2020, with the GCCCAC announcing that it had received four requests for arbitration in the first quarter of 2020, with a cumulative monetary value of USD5.5 million.

COVID-19 and Remote Working

It is evident that COVID-19 has had a significant global impact on all areas of life, and across the world the pandemic has caused substantial delay and interruption.

Businesses are experiencing cash-flow, contract-satisfaction and sometimes insolvency issues, and the individuals operating within those industries are having to adapt and engage novel measures in order to overcome the threats and weaknesses catalysed by the pandemic.

As people adjust to what some commentators are calling the “new normal”, they would be well-advised to look at the steps taken by institutions, practitioners and parties to international arbitration as a model for change management in these challenging times.

Arbitration has long been celebrated as a flexible, proactive and efficient mechanism. Parties are free to adopt whatever procedures work best for them, tribunals are able to supplement these appropriately and constructively, and institutions are able to implement conditional measures to counter issues faced by the arbitration field quickly and effectively. All of this means that arbitration has successfully steadied its course through the pandemic.

The pre-existing availability and adoption of state-of-the-art technology has enabled arbitration in Bahrain to continue relatively seamlessly throughout the pandemic , with parties enjoying the benefits of a streamlined and best-practice system within which to access justice, in an internationally recognised and enforceable form.

Institutions such as the BCDR have continued to actively manage cases remotely throughout this difficult period. Parties have continued to be able to commence and progress arbitration proceedings, often exclusively by way of online filing, and hearings have continued to be held and attended by tribunals, parties and their legal representatives, entirely remotely.

Bahrain looks set to continue its role as a positive model venue for arbitration in 2020, and, despite the current difficulties we are all facing, it is clear that recent trends and developments in arbitration in Bahrain can only reinforce this bright future.

Charles Russell Speechlys LLP

Floor 24 Bahrain World Trade Centre
East Tower Isa A1 Kabeer Avenue
Manama
Bahrain

+973 17 133203

+973 17 813 700

patrick.gearon@crsblaw.com www.charlesrussellspeechlys.com
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Law and Practice

Authors



Charles Russell Speechlys LLP is one of the oldest and most respected law firms in the UK, and has an unusually broad range of skills and experience across the full spectrum of business and personal legal needs. The award-winning Middle East team understands the specific requirements and nuances of each marketplace in the region, and undertakes some of the region's highest-value transactions and cases from the firm's offices in Qatar, Bahrain and the UAE. The 150+ strong litigation team acts for multinational corporations, governments and regulatory bodies, as well as high net worth individuals, in resolving complex, high-value commercial disputes. Key clients include the Central Bank of Bahrain (CBB), which appointed CRS as the External Administrator of Awal Bank B.S.C. (in administration) in 2009. This is the region's largest administration, with multibillion-dollar claims and assets.

Trends and Development

Authors



Charles Russell Speechlys LLP is one of the oldest and most respected law firms in the UK, and has an unusually broad range of skills and experience across the full spectrum of business and personal legal needs. The award-winning Middle East team understands the specific requirements and nuances of each marketplace in the region, and undertakes some of the region's highest-value transactions and cases from the firm's offices in Qatar, Bahrain and the UAE. The 150+ strong litigation team acts for multinational corporations, governments and regulatory bodies, as well as high net worth individuals, in resolving complex, high-value commercial disputes. Key clients include the Central Bank of Bahrain (CBB), which appointed CRS as the External Administrator of Awal Bank B.S.C. (in administration) in 2009. This is the region's largest administration, with multibillion-dollar claims and assets.

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