Bahrain: A more attractive place of Arbitration
Dispute Resolution / Bahrain
In 2023, the Bahrain Ministry of Justice organised a roundtable with the Singapore International Arbitration Center and other professional boards to discuss Bahrain’s strong culture of arbitration and mediation.
Law Update: Issue 362 - Sports and Event Management
Bradley PriceAssociate,Dispute Resolution
In 2023, the Bahrain Ministry of Justice organised a roundtable with the Singapore International Arbitration Center and other professional boards to discuss Bahrain’s strong culture of arbitration noting that the country has all the necessary features for an attractive hub for arbitration and mediation. The Ministry has taken significant strides to reform the Bahraini arbitration law in an effort to strengthen the attractiveness of Bahrain as place of arbitration. The reform is to build upon the thorough revision of the Bahrain arbitration law by the adaption of the UNCITRAL model law, as amended in 2006, through Bahrain Law No. 9 of 2015 promulgating the Arbitration Law (the “Arbitration Law”).
This is coupled with the streamlined processes to recognise and enforce arbitral awards before the courts of Bahrain, which allow a party, with a qualifying award, to elect whether to institute enforcement proceeding in either English or Arabic, a first for a civil court in the GCC.
Additionally, ground had been broken and work has commenced on a state-of-the-art arbitration facility to provide a neutral jurisdiction for arbitrations which is based primarily on model used by the Singapore International Arbitration Centre, the futuristic tower is set to house the new GCC arbitration hub. Further, Bahrain is currently in the process of establishing an international commercial court.
Arbitration in Bahrain can be conducted under any of the various arbitral institutions, as is the case in most of the world. However, arbitrations conducted under the laws of Bahrain will be subject to the Arbitration Law.
The Arbitration Law has adopted Article 7 of the UNCITRAL Model Law (2006) for the definition of an arbitration agreement and its form. It therefore goes without saying that in order for the parties to conclude a valid arbitration agreement, it will be essential that the arbitration agreement is in line with and meets the criteria of the provisions of Article 7 of the UNCITRAL Law, which provides as follows:
An Arbitration Agreement must constitute a clear agreement between the parties to refer to arbitration all, or certain disputes, which have arisen, or which may arise between the parties in respect of a defined legal relationship, whether contractual or not. This Arbitration Agreement can be incorporated as a clause in the contract, or it can be concluded as a separate document.
The Arbitration Agreement must be in writing.
Importantly, an arbitration agreement will be deemed to be in writing if it is contained in an exchange of pleadings in which the existence of an agreement is alleged by one party and not denied by the other.
Further, the Arbitration Law has rectified issues relating to the recognition and enforcement of foreign arbitral awards to ensure strict compliance with the New York Convention, to which Bahrain is a signatory.
The New York Convention provides that arbitral awards are generally enforced by the courts without the awards being specifically interrogated. However, the courts are at liberty to set aside awards, as seen above, in relation to liquidated damages if the award:
contradicts public policy;
is contrary to good morals;
has been obtained despite procedural irregularities; or
if there was no binding arbitration agreement between the parties.
Importantly, especially when considering International Arbitration as a vehicle for dispute resolution, the Arbitration Law has adopted the provisions of Article 11 of the UNCITRAL Model Law (2006) and accordingly, the Arbitration Law now provides that “non-Bahraini lawyers may represent the parties to a dispute in the case of international commercial arbitration in Bahrain.” This allows international entities the freedom of choice with regard to the appointment of legal representation for all arbitrations subject to Bahrain Law.
As discussed above, the Arbitration Law has aligned the enforcement procedures of Arbitral Awards in accordance with the principles of the New York Convention.
However, further steps have also been taken to ensure that the process to recognise and enforce Arbitral Awards is cost effective and efficient. In this regard, a party is entitled to apply for the recognition of an Arbitral award on notice to the court. If the value of the award is greater than US$1.3 million, then the application is immediately transferred to the Bahrain Chamber for Dispute Resolution (the “BCDR”) where a party is afforded an election either to proceed with the recognition in English before the English-speaking section of the BCDR, or to proceed before the Arabic section.
Generally, the Arbitral Award will either be recognised or refused, with reasons, within 7 – 10 days of the hearing. If the Arbitral Award is recognised, then it can immediately be taken to the enforcement court for execution. If the Arbitral Award has been refused, this decision can be appealed to the Appeal Court and thereafter to the Court of Cassation which should take approximately 2 and 3 months, respectively.
Mediation
Often going hand in hand, Bahrain has also ensured that its reforms include the development of mediation as a method of alternative dispute resolution. In this regard, Legislative Decree No. 22 of 2019, otherwise known as the Mediation Law, was promulgated and to all disputes of a civil and commercial nature.
In terms of the Mediation Law, parties who refer disputes to mediation are able to appoint their own mediator. Alternatively, the parties can apply for the appointment of a certified mediator who is registered with the Ministry of Justice.
Mediation settlement agreements are enforceable under Bahrain’s Mediation Law. However, the Court, should a case be referred to the Court for the enforcement of such settlement, will not review the contents of the settlement. Rather, the Court will merely review the form of the settlement to ensure that all formalities have been met and that the mediation settlement does not violate public order.
The reform that the Bahrain Ministry of Justice is currently undergoing will certainly further modernize the arbitration in Bahrain to meet the needs of arbitration practitioners throughout the wider GCC for the years to come. This is an intention to be welcomed and practitioners within Bahrain as well as throughout the region, if not the world eagerly look forward to the completion of the new arbitration facilities and the eagerly awaited International Commercial Court.
For further information,please contact Bradey Price.
Published in October 2023
