On 11 January 2010, the Kingdom of Bahrain launched a new arbitration centre, the Bahrain Chamber for Dispute Resolution (BCDR). The BCDR is an initiative between the Bahrain Ministry of Justice and the American Arbitration Association (AAA) and is based in the Diplomatic Area of Manama, the financial hub of the Kingdom of Bahrain. The BCDR aims to provide a modern, effective ADR service that results in final and binding resolution of commercial disputes. The BCDR will offer and provide both arbitration and mediation services.

Bahrain has enacted Legislative Decree No. (30) for the year 2009 with respect to the Bahrain Chamber for Economic, Financial and Investment Dispute Resolution (the Decree). This Decree established the BCDR and set out the circumstances in which the BCDR has, or can assume, jurisdiction over a dispute.

The introduction of the BCDR will significantly change the way in which certain types of dispute are dealt with in Bahrain, not least because in certain circumstances the new legislative regime introduces mandatory statutory arbitration, so that disputes that would previously have come within the jurisdiction of the courts of Bahrain must now be referred to BCDR arbitration. The main features of the new BCDR are set out below.

BCDR jurisdiction

Disputes will be heard by the BCDR in the following circumstances:

1.Statutory Arbitration: Jurisdiction by law (Section 1 of the Decree)

  • The BCDR will have automatic and mandatory jurisdiction over any claim exceeding BD500,000 (approximately USD1.3m) which involves either an international (i.e. non-Bahraini) party in a commercial dispute or a party licensed by the Central Bank of Bahrain (Article 9 of the Decree).
  • A dispute is commercial if its subject matter is of a commercial nature, including, amongst other things, any transaction for the supply of goods or services, distribution agreements, investment and financing, insurance or consultation services.

2.Consensual Arbitration: Jurisdiction by parties’ agreement (Section 2 of the Decree)

  • The BCDR will also have jurisdiction if the parties have agreed in writing to refer any dispute for resolution by arbitration or mediation under the BCDR Rules (Article 19 of the Decree).

Use of international lawyers

Importantly, the Decree permits non-Bahraini lawyers to appear before any BCDR tribunal. However, any non-Bahraini lawyers must be accompanied by a Bahraini lawyer in any Statutory Arbitration (Article 30 of the Decree). This is a significant development in the history of Bahrain’s legal system, in that it grants foreign lawyers rights of audience to appear on behalf of their clients in arbitral proceedings in Bahrain.

Additional features

  • All Statutory Arbitrations must be heard by a Bahraini judge (in the case of a sole arbitrator tribunal) or by at least two Bahraini judges (in the case of a three-person tribunal) (Article 1 of the Decree). No such restrictions apply in relation to Consensual Arbitration.
  • For all BCDR arbitrations, the parties may agree upon the applicable law relevant to the subject matter of the dispute. In the absence of such agreement:
    • in Statutory Arbitrations, Bahraini law will apply (Article 11 of the Decree);
    • in Consensual Arbitrations, the tribunal shall determine the applicable law on the basis that it should be the law most applicable to the subject matter of the dispute (Article 21 of the Decree).
  • An award issued by the tribunal in Statutory Arbitrations will be a “final judgment issued by the courts of Bahrain” (Article 15 of the Decree). It will be interesting therefore to see whether awards issued in Statutory Arbitrations will be regarded in other jurisdictions as arbitral awards or as Bahraini court judgments for the purposes of enforcement. The BCDR’s intention is that it will issue awards that will be enforceable globally pursuant to the terms of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (often referred to as the New York Convention).

Rules and procedures

The BCDR Rules very closely follow those of the International Centre for Dispute Resolution (ICDR). The ICDR is the international division of the AAA, and its Rules are tried and tested, and generally regarded as of international standard.

Emergency arbitrator and interim measures

Interestingly, the BCDR provides a mechanism for an emergency arbitrator to rule on urgent applications prior to the constitution of the tribunal, but which also leaves open the possibility that a party can request a judicial authority to rule on any interim measures (Article 37 of the BCDR Arbitration Rules).

Once the tribunal has been constituted, the tribunal may grant such interim measures as it deems necessary, including injunctive relief, at the request of any party. Such interim measures may be granted in the form of an interim award. The tribunal may require the applicant to provide security for the respondent’s costs incurred in relation to the grant of such measures (Article 21 of the BCDR Arbitration Rules).

The use of emergency arbitrators and availability of interim measures may have the consequence that a party which wishes to resolve its dispute by BCDR arbitration will be able to obtain interim relief from the tribunal without the need to use the Bahraini (or any) court system for these purposes.

Limited appeal process

Awards are final and binding on the parties (Article 27 of the BCDR Arbitration Rules). However, parties may challenge an award issued by a BCDR tribunal before the Bahrain Cassation Court in a limited number of circumstances (which are set out in Article 13 for Statutory Arbitrations and Article 24 for Consensual Arbitrations).

The circumstances under which parties can appeal to the Cassation Court vary depending on whether the arbitration is statutory or consensual but include for all cases challenges on the basis that:

  • the award contradicts public order in Bahrain; and/or
  • the party applying to set aside the award:
  • was not properly notified of the arbitration or some or all of the tribunal; and/or
  • was not given opportunity to present a defence.

Significantly, in relation to Consensual Arbitrations, parties are not entitled to apply to set aside an arbitral award in the Bahraini courts if the parties have agreed in writing:

  • to choose a foreign law for the dispute;
  • not be entitled to apply to Bahrain’s courts to set aside the award; and
  • that any such application should be brought before the competent authority in another state (Article 25 of the Decree).

Parties can therefore choose to exclude the Bahraini courts from having the right to review or overturn an award.

Conclusion

The creation of the BCDR should enable parties to resolve their disputes in Bahrain in an efficient and timely manner before a neutral tribunal and provide them with an award that should be readily enforced. Due to its mandatory application for Section 1 cases the BCDR will have an opportunity in the near future to demonstrate how its procedures will work in practice.