Bahrain has launched a new arbitration centre, the Bahrain Chamber for Dispute Resolution (BCDR). As part of Bahrain’s “Vision 2030”, Bahrain aims to encourage international investment by providing a modern, effective ADR service that results in final and binding resolution of disputes. The BCDR will offer and provide both arbitration and mediation services.
The introduction of the BCDR will significantly change the way that many high value disputes are dealt with in Bahrain. In the circumstances described below, the new legislative regime introduces a form of statutory arbitration, so that disputes that would previously have come within the jurisdiction of the Bahrain courts must now be referred to BCDR arbitration.
“Non-Bahraini lawyers are permitted to appear before any BCDR tribunal, but must be accompanied by a Bahraini lawyer”
Legislative Decree No. (30) for the year 2009 (the Decree) established the BCDR and sets out the circumstances in which the BCDR has, or can assume, jurisdiction over a dispute.
The BCDR has jurisdiction over the following disputes:
- Disputes falling within the scope of Section 1 of the Decree (Section 1 cases), namely all claims exceeding BD500,000 (approximately US$1.3 million) which are:
- commercial and international (eg, involving a non-Bahraini party or substantial obligations outside Bahrain) in nature; or
- involve a party licensed by the Central Bank of Bahrain (Section 1 of the Decree)
- Disputes falling within the scope of Section 2 of the Decree (Section 2 cases), namely all claims which the parties have agreed in writing to refer the dispute for resolution by arbitration or mediation under the BCDR Rules.
- Non-Bahraini lawyers are permitted to appear before any BCDR tribunal, but must be accompanied by a Bahraini lawyer in any case under Section 1.
- Each party is in theory able to nominate an arbitrator, subject to the proviso that all Section 1 cases 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). No such restrictions apply in relation to consensual arbitration under Section 2. To address a drafting anomaly, the BCDR’s current proposal is that in Section 1 cases where each side nominates an arbitrator, provided the Chairman of the tribunal is a Bahraini judge this will be sufficient to satisfy the requirement for the panel to comprise a majority of Bahraini judges.
- Awards issued in Section 1 cases will be a “final judgment issued by the courts of Bahrain”. It will be interesting, therefore, to see whether such awards will be regarded in other jurisdictions as arbitral awards or as Bahraini court judgments for the purposes of enforcement. It seems likely that the lack of an ‘agreement’ by the parties to arbitrate will mean that Section 1 awards will not be treated as being compliant with the provisions of the New York Convention. The intention is that awards issued in Section 2 cases will be readily enforceable under the New York Convention.
- The BCDR is a joint initiative between the Government of Bahrain and the American Arbitration Association (AAA). The AAA provides training and support to the BCDR and the Rules of its international arm (the International Centre for Dispute Resolution (ICDR)) have in large part been adopted in the BCDR Rules. The ICDR Rules are tried and tested, and are generally regarded as of international standard.
- The parties are free to choose the language to be used in the proceedings (although Arabic will be the language used in the absence of the parties’ agreement).
- Interestingly, the BCDR Rules provide a mechanism for an emergency arbitrator to issue interim awards on urgent applications prior to the constitution of the tribunal, but they also permit parties to apply to a judicial authority for these purposes. Once the tribunal has been constituted, the tribunal may grant such interim measures as it deems necessary, including attachment orders and travel ban orders, at the request of any party.
Awards issued in Section 1 and Section 2 cases are final and binding on the parties. However, parties may challenge an award issued by a BCDR tribunal before the Cassation Court (the highest court in Bahrain) in a limited number of circumstances which vary depending on whether the arbitration is statutory or consensual.
Significantly, in relation to arbitrations under Section 2, parties can choose to exclude the Bahraini courts from having the right to review or overturn an award by agreeing in writing:
- to choose a foreign law for the dispute
- not to apply to Bahrain’s courts to set aside the award
- that any such application should be brought before the competent authority in another state.
The BCDR should enable parties to resolve their disputes in Bahrain in an efficient and timely manner before a neutral tribunal. 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, and we are aware that it is already dealing with a number of such cases.