Bahrain Significantly Heightens Its Attraction As A Commercial Dispute Resolution Centre In The Gulf

On 11 January 2010 the Bahrain Chamber for Dispute Resolution (BCDR-AAA) was officially launched. This is a significant step in a joint venture between the Bahrain Ministry of Justice (BMoJ) and the American Arbitration Association (AAA).

This new development builds significantly upon Bahrain's distinguished history of arbitration which extends back to the nineteenth century. Bahrain was one of the first Gulf countries to adhere to the New York Convention, and since 1994 its international commercial arbitration law has been based on the (1985) UNCITRAL Model Law.

In December 2008 the AAA signed a memorandum of understanding with the BMoJ in view of their joint development of the BCDR-AAA. Moreover, by this memorandum of understanding, as communicated by the AAA, the AAA "will provide technical advice, administrative and systems know-how, and staff training to the BMoJ, as well as provide neutral-skills training to Bahraini arbitrators and mediators. The AAA will also provide program design assistance to impart enhanced ADR knowledge to the judiciary and to the business and legal communities in Bahrain and the region. In addition, the AAA's international branch, the ICDR, will establish offices in Bahrain, to be known as ICDRBahrain."

A Bahraini legislative decree of 29 June 2009 foresaw the creation of an institution such as the BCDR-AAA. It also foresaw the promulgation of a set of arbitration rules, and this has occurred in the form of the newly issued BCDR-AAA Arbitration Rules.

The Legislative Decree (Legislative Degree No (30) for the year 2009 with respect to the Bahrain Chamber of Economic Financial and Investment Dispute Resolution) which establishes the BCDR-AAA relates not just to classic arbitration by agreement, but also to what is being referred to as the first so-called "statutory arbitration".

Although the Bahrain Constitutional Court took issue with the name of "statutory arbitration" in the first draft of the Legislative Decree, requiring instead the appellation "judicial dispute resolution proceedings", there is no doubt that there is established a unique hybrid system for the resolution of high-value "international commercial disputes".

Tribunals operating under this system have jurisdiction in respect of claims exceeding BHD 500,000 (about USD 1,320,000 at current exchange rates). A dispute is international if one of the parties or the place where a substantial part of the obligations is to be performed is outside Bahrain, or the location most closely connected with the dispute is outside Bahrain. A dispute is commercial if its subject matter concerns relationships of a commercial nature, whether contractual or non-contractual.

A number of specifics have been settled by an implementing regulation passed under the Legislative Decree. The Legislative Decree provides that the implementing regulation must be based on the statute governing procedural matters before the ordinary courts, and may only depart from the latter where otherwise there would be a contradiction with the nature of the BCDR-AAA's jurisdiction.

This statutory arbitration presents a fusion between classic arbitration by agreement and ordinary court proceedings. The Legislative Decree provides that a majority of any tribunal must be composed of Bahraini judges from a panel selected by the Bahraini judicial authorities. It is the BCDR-AAA which appoints the members of the tribunal. Bahrain's tradition of including foreign judges amongst its roster, including a number of western judges, may suggest that distinguished foreign commercial judges may be empanelled to round off the tribunal. The implementing regulation goes one step further towards the classic model of arbitration in permitting the parties by agreement to choose two of a three person tribunal. There are no qualifications requirement in respect of such appointees. They may, for example, be retired judges, law professors, lawyers, or other professionals.

Non-Bahraini counsel may represent the parties, but they must be accompanied by a Bahraini lawyer admitted before the Bahrain Court of Cassation. The default language of proceedings is Arabic, thus the language of the ordinary Bahraini courts, but, as in arbitration, the parties may agree that any other language will be used in proceedings before the tribunal. Since, however, a majority of the members of the tribunal will come from the Bahraini judiciary, for practical reasons, any agreed language will need to be one well known in commercial circles in the region. English would seem the obvious candidate. As before courts, tribunals must apply a certain conflict of laws regime, indeed, in this case, one favouring the application of Bahraini substantive law. Unless the parties agree otherwise, Bahraini law applies. The procedure will be that of the ordinary courts except where incompatible with the nature of the BCDR-AAA. As in classic arbitration, the tribunal's fees will ordinarily be payable in advance. The fees are calculated ad valorem of the amount in dispute, at a rate not exceeding 5% to be set by the Government. As with arbitration, challenges to the "award" are on a limited number of specified grounds, which are very similar to the New York Convention grounds for refusing enforcement, including the characteristic arbitration ground of ultra petita. Interestingly, challenges may also be brought on grounds...