Guide to International Arbitration in the Middle East: Bahrain

This is the first in a series on Guides to International Arbitration in the Middle East.

In this guide, we will look at international arbitration in Bahrain.

The information in this guide is accurate as of January 6, 2022.

Is Bahrain a signatory to the New York Convention?

Bahrain is a signatory to the New York Convention subject to the following reservations:

i. the recognition and enforcement of foreign awards will be limited to awards issued:

in countries that are party to the New York Convention; and
in relation to contractual or non-contractual commercial disputes as determined by the laws of Bahrain; and

ii. the signing of the New York Convention shall not be considered as recognition of the State of Israel or lead to the establishment of diplomatic relationships.

What legislation applies to arbitration in Bahrain?

Law No. 9 of 2015 Promulgating the Arbitration Law (“Arbitration Law”) applies to: (i) an arbitration seated in the Kingdom of Bahrain; or (b) an arbitration seated outside of Bahrain if the parties have agreed to the application of the Arbitration Law.

What other arbitration-related treaties and conventions is Bahrain a party to?

In addition to the New York Convention, Bahrain is a party to the following treaties and conventions concerning arbitration:

the International Centre for Settlement of Investment Disputes (ICSID) Convention of 1965;[1]
the Riyadh Arab Treaty for Judicial Cooperation of 1983;[2]
the Execution of Judicial Judgements, Delegations and Notifications Treaty for the Cooperation Council for the Arab States of the Gulf;[3]
the Convention for Pacific Settlement of International Disputes (Hague Convention I);[4] and
the Commercial Arbitration Centre Regulation for the Cooperation Council for the Arab States of the Gulf.[5]

Moreover, Bahrain has ratified several bilateral investment treaties with other states.

Is the law governing international arbitration in Bahrain based on the UNCITRAL Model Law? Are there significant differences between the two?

The Arbitration Law adopted the UNCITRAL Model Law on International Commercial Arbitration (1985) as amended in 2006.

Article 1(1) of the UNCITRAL Model Law restricts its application to commercial international arbitration. However, the Arbitration Law amends Article 1(1) of the UNCITRAL Model Law by extending the scope of application to all arbitrations seated in Bahrain or seated outside of Bahrain if the parties have agreed to its application, irrespective of the nature of the legal relationship between the parties to the dispute.

What arbitration institutes exist in Bahrain?

The following institutions are based in Bahrain:

(i) the Bahrain Chamber of Dispute Resolution (“BCDR”) in partnership with the American Arbitration Association. The BCDR Arbitration Rules were last amended in 2017 (“BCDR 2017 Arbitration Rules”); and

(ii) the Gulf Cooperation Council Commercial Arbitration Centre (“GCCCAC”). The GCCCAC Rules were last amended in 1999 (“GCCCAC Arbitral Rules of Procedure”).

The BCDR is considering amendments to its 2017 Arbitration Rules. Draft amendments to the 2017 Arbitration Rules were published by the BCDR on January 19, 2021.

What are the validity requirements for an arbitration agreement under the laws of Bahrain?

An arbitration agreement is an agreement between parties to refer to arbitration all or some disputes that have arisen or that may arise between the parties in respect of a specific legal relationship, whether the disputes are contractual or non-contractual. The arbitration agreement can be entered into in any form, including verbally, as long as its contents are documented in writing.

The Arbitration Law additionally confirms that the following agreements shall be considered as documented in writing:

an arbitration agreement documented in electronic communication that is accessible and can be retrieved later on;
if, in the course of exchanging pleadings, a party alleges that an arbitration agreement exists and the other party does not deny its existence; or
if an agreement incorporates, by way of reference, an arbitration clause in another document.[6]

Are arbitration clauses considered separable from the main contract?

As per the laws of Bahrain, arbitration clause upholds the doctrine of separability from other clauses in an agreement. A decision by the tribunal that an agreement is null and void does not automatically render the arbitration clause contained within the agreement to also be null and void.[7]

Is there anything particular to note in Bahrain with regard to multi-party or multi-contract arbitration?

The Arbitration Law does not address multi-party arbitrations, or arbitrations related to multiple agreements. With that being said, the BCDR 2017 Arbitration Rules include provisions that govern the nomination of arbitrators in a multi-party arbitration, the consolidation of multiple arbitrations that are subject to different arbitration agreements and joinder rules. Additionally, the GCCCAC Arbitral Rules of Procedure also include provisions that address the nomination of arbitrators in a multi-party arbitration.[8]

In what instances can third parties or non-signatories be bound by an arbitration agreement? Are there any recent court decisions on these issues?

The legal effects of an arbitration agreement are limited to the parties of that agreement and do not extend to third parties. Notwithstanding, non-signatories can be bound by an arbitration agreement in certain cases as demonstrated by a recent ruling by the Bahrain Court of Cassation.

The ruling in question concerned an arbitration agreement signed between two parties in relation to construction works that were assigned and carried out by a branch of the contractor. This specific branch was then converted into a subsidiary of the contractor. Arbitration was commenced by the counterparty against both companies and the enforceability of the arbitration agreement against the new subsidiary was upheld by the courts of Bahrain.

The Court of Cassation concluded that the incorporation of the subsidiary as a separate company does not relieve it of any obligation incurred prior to its incorporation, including the arbitration agreement in question.[9]

Are any types of disputes considered non-arbitrable? Has there been any evolution in this regard in recent years?

Prior to the Arbitration Law, the Bahrain Court of Cassation considered disputes that relate to public order as “non-arbitrable”. The Bahrain Court of Cassation interpreted public order as rules that are legislated in mandatory provisions that cannot be waived, settled or resolved by arbitration. This was consistent with Article 233 of Legislative Decree No. 12 of 1971 Promulgating the Civil and Commercial Procedures Law, which was repealed by the Arbitration Law.[10] The Arbitration Law does not restrict the parties from referring certain types of disputes to arbitration. The Court of Cassation may provide more guidance on this matter moving forward.

Are there any restrictions in the appointment of arbitrators in Bahrain?

There are no restrictions on the appointment of arbitrators under the Arbitration Law, but the parties may agree to restrict the nationality of arbitrators that could be appointed. Moreover, when considering a request by one of the parties to appoint an arbitrator, the court must consider the appropriateness of appointing an arbitrator from a different nationality to that of either party.[11]

Can the local courts intervene in the selection of arbitrators? If so, how?

If the parties have not agreed on the process of selecting arbitrators, a party may request the Bahrain High Civil Court to appoint an arbitrator:

in a three-members tribunal, if the other party fails to select an arbitrator or if the party-selected arbitrators are unable to agree on the third member of the tribunal; or
in a one-member tribunal, if the parties are unable to agree on an arbitrator.

If the parties have agreed on a selection process, a party may still request the Bahrain High Civil Court to appoint an arbitrator if:

the other party fails to act as required pursuant to the selection process;
the parties or the party-selected arbitrators are unable to agree on the appointment of the third member of the tribunal; or
a third party, such as an arbitration institution, does not perform any act required by the selection process.[12]

Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge?

A party may challenge the appointment of an arbitrator if circumstances that raise suspicion regarding the arbitrator’s independence or impartiality have arisen and/or if the arbitrator does not hold the qualifications agreed on by the parties. However, a party is prohibited from seeking the removal of an arbitrator, if that party appointed or participated in the appointment of that arbitrator, unless such challenge is based on reasons that have arisen after the arbitrator’s appointment.[13]

The parties may agree on the procedure to challenge the appointment of an arbitrator. In the absence of an agreement, a party may challenge the appointment of an arbitrator within fifteen (15) days from the date the party is notified of the constitution of the tribunal or becomes aware of the circumstances concerning his impartiality, independence, or qualifications.

The tribunal must decide on the challenge if the arbitrator does not step down or if the other party does not agree to the challenge raised by the opposing party. If the tribunal rejects the challenge, the party that submitted the challenge may request the Bahrain High Civil Court, within thirty (30) days from the date that party is notified of the tribunal’s decision, to consider the matter. The tribunal may proceed with the arbitration and issue an award whilst the Bahrain High Civil Court simultaneously considers the challenge raised by one of the parties.[14]

Are arbitrators immune from liability in Bahrain?

Arbitrators appointed pursuant to the Arbitration Law are not liable for any act or omission relating to the performance of their duties unless such act or omission was made in bad faith or caused by gross wrongdoing. Individuals employed by an arbitrator or directly authorized to carry out activities related to an arbitrator’s duties are liable in a similar manner.[15]

Are there particular rules governing evidentiary matters in arbitration? Will the local courts in Bahrain play any role in the obtaining of evidence? Can the local courts compel witnesses to participate in arbitration proceedings?

The tribunal or any party, with the approval of the tribunal, may seek the assistance of the competent court in obtaining evidence. The court can enforce the request of the party in accordance with its rules on obtaining evidence and to the extent of its authority,[16] which includes authority to compel witness testimony. [17]

How are the costs of arbitration proceedings estimated and allocated?

The party requesting an interim measure or a preliminary order shall be liable for costs and damages caused by such measure or order, if the tribunal later determines that issuing the measure or order was inappropriate in the circumstances. The Tribunal may award such costs at any stage of the arbitration.[18] The Arbitration Law is otherwise silent on costs. However, the tribunal may award costs in accordance with the applicable institutional rules.

What legal requirements are there in Bahrain for the recognition and enforcement of an award? Is there a requirement that the award be reasoned, i.e. substantiated and motivated?

The recognition or enforcement of an award, irrespective of the country in which the award was issued, can only be rejected in the following cases:
(i) based on a substantiated request from the party facing execution proceedings if it demonstrates that:

either party to the arbitration agreement did not have the required legal capacity, or if the arbitration agreement is invalid under the governing law selected by the parties or, if the parties have not selected a governing law, the arbitration clause is invalid under the laws of the country in which the award was issued;
it was not notified correctly of the appointment of an arbitrator or the arbitration proceedings or if it was otherwise unable to present its case;
the award deals with a dispute that is not contemplated or covered by the arbitration agreement or includes decisions that are outside the scope of the arbitration agreement, provided that if such decisions are severable from decisions concerning disputes within the scope of the arbitration agreement then the court’s rejection of the award must be limited to the unenforceable decisions;
the constitution of the tribunal or the arbitration proceedings contravened with the arbitration agreement, or if such matters were not agreed in the arbitration agreement, contravened with the laws of the seat of arbitration; or
the award is not yet binding or has been set aside or suspended by a court in the country in which, or under the laws of which, that award was issued.

(ii) if the Bahrain High Civil Court decides that:

the dispute cannot be resolved by arbitration under the laws of Bahrain; or
the recognition or enforcement of the award contravenes with public policy as applicable in Bahrain.[19]

The Bahrain High Civil Court would enforce an award that is not reasoned if this requirement was waived in the arbitration agreement or if the award records an amicable settlement.⁴⁵

The enforcement of an award is made by way of a decision from the President of the Bahrain High Civil Court following the Bahrain High Civil Court’s review of the award and the arbitration agreement. A party seeking to enforce an award must make an application to the Bahrain High Civil Court. The application must include an original copy of the award. A translation of the award must be submitted if the award is written in a language other than Arabic.[20]

What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?

The estimated timeframe to recognize and enforce an award is subject to several factors, including the respondent’s willingness to voluntarily execute the award. If the court is required to impose forceable execution measures, the timeframe for enforcement of an award will be determined by the court’s ability to enforce the award against any assets of the respondent located in Bahrain.

Can arbitration awards be appealed or challenged in local courts? What are the grounds and procedure?

Awards can be challenged based on the following grounds:
(i) if the party challenging the award can demonstrate using supporting evidence:

that either party to the arbitration agreement did not have the required legal capacity or that the arbitration agreement is invalid under the governing law selected by the parties or, if the parties have not agreed on a governing law, the arbitration agreement is invalid under the laws of Bahrain;
the constitution of the tribunal or the arbitration proceedings contravened with the provisions of the arbitration agreement (to the extent such provisions do not breach a mandatory provision of the Arbitration Law) or if such matters were not agreed in the arbitration agreement, contravened with the Arbitration Law; or

(ii) if the Bahrain High Civil Court finds that:

the dispute cannot be resolved by arbitration under the laws of Bahrain; or
the award contravenes with public policy as applicable in Bahrain.[21]

The party challenging the award must submit its challenge to the High Civil Court within three (3) months from the date of the party’s receipt of the award or from the date the tribunal rules on a request for a correction or an interpretation of an award, or a supplemental award.[22]

Conclusion

If you require an arbitrator for a dispute relating to the jurisdiction of Bahrain, please click here to view our roster of arbitrators, or contact us for assistance in selecting an arbitrator for your dispute.

[1] Legislative Decree No. 16 of 1995 Ratifying the International Centre for Settlement of Investment Disputes Convention.

[2] Legislative Decree No. 41 of 1999 Ratifying the Riyadh Arab Treaty for Judicial Cooperation of 1983.

[3] Legislative Decree no. 9 of 1996 Ratifying the Execution of Judicial Judgements, Delegations and Notifications Treaty for the Cooperation Council for the Arab States of the Gulf.

[4] Law No. 10 of 2008 Approving the Accession of the Kingdom of Bahrain to the Convention for Pacific Settlement of International Disputes Executed in the Hague on 18 October 1907.

[5] Law No. 6 of 2000 Acceding to the Commercial Arbitration Centre Regulation for the Cooperation Council for the Arab States of the Gulf.

[6] Article 4 of the Arbitration Law and option 1, article 7 of the Model Law as adopted by the Arbitration Law.

[7] Article 16 of the Model Law as adopted by the Arbitration Law.

[8] Article 13 of the GCCCAC Arbitral Rules of Procedure.

[9] Bahrain Court of Cassation, Ruling in Challenge 590 of 2020

[10] Bahrain Court of Cassation, Ruling in Challenge 328 of 2005.

[11] Article 11 of the Model Law as adopted by the Arbitration Law

[12] Article 11 of the Model Law as adopted by the Arbitration Law

[13] Article 12 of the Model Law as adopted by the Arbitration Law

[14] Article 13 of the Model Law as adopted by the Arbitration Law

[15] Article 7 of the Arbitration Law

[16] Article 27 of the Model Law as adopted by the Arbitration Law

[17] Article 77 of Legislative Decree no. 14 of 1996 Promulgating the Law on Evidence in Civil and Commercial Matters.

[18] Article 17(g) of the Model Law as adopted by the Arbitration Law

[19] Article 36(1) of the Model Law as adopted by the Arbitration Law

[20] Article 31(2) of the Model Law as adopted by the Arbitration Law

[21] Article 34(2) of the Model Law as adopted by the Arbitration Law

[22] Article 34(3) of the Model Law as adopted by the Arbitration Law