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The BCDR: Where Are We Now?

Overview

Bahrain has a comprehensive dispute resolution system comprising of lower and higher courts, specialist courts and tribunals, and arbitration and mediation centres.

The two central legislative sources for international dispute resolution in Bahrain are Bahrain Law No. 9/2015 on the Issuance of the Arbitration Law (which adopts the UNCITRAL Model Law in its entirety) and Bahrain Decree-Law No. 30/2009 On Bahrain Chamber for the Settlement of Economic, Financial and Investment Disputes.

The main international dispute resolution forum is the BCDR, established in 2009, for the settlement of economic, financial and investment disputes.

The BCDR comprises of two separate components: a specialised court (the BCDR Court) and an arbitration centre (the BCDR). Any dispute that comes within the jurisdiction of the courts of Bahrain and where the claim exceeds BHD 500,000 (approximately USD 1.3 million) and involves an international commercial dispute (or a party licensed by the Central Bank of Bahrain, or under the provisions of Bahrain Decree-Law No. 21/2001 on the Issuance of the Commercial Companies Law will fall under the BCDR Court's jurisdiction.

Any dispute in respect of which parties agree in writing that the BCDR Rules of Arbitration 2022 will apply to will fall within the BCDR arbitration centre’s jurisdiction. The BCDR can also administer arbitrations under ad hoc procedures where the parties have made a written agreement to this effect.

In addition, the BCDR offers a bespoke mediation process, administered under the BCDR Mediation Rules.

With regards to international enforcement, Bahrain is a signatory to both the GCC Convention and the Riyadh Convention, and was one of the first states within the Gulf region to accede to the New York Convention, which it did in 1988 under Bahrain Decree-Law No. 4/1988 On the Approval of Bahrain’s Accession with Reservation to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.

There have been a number of important developments by the BCDR in the last few years and several of these are discussed below.

Definitions

  • AAA: American Arbitration Association.
  • BCDR: Bahrain Chamber for the Resolution of Economic, Financial and Investment Disputes.
  • BCDR Sports Arbitration Rules: BCDR Sports Arbitration Rules 2022.
  • DIAC: Dubai International Arbitration Centre.
  • GCC: Gulf Cooperation Council.
  • GCC Convention: Gulf Cooperation Council Convention for the Execution of Judgments, Delegations and Judicial Notifications 1995.
  • HKIAC: Hong Kong International Arbitration Centre.
  • ICC: International Court of Arbitration of the International Chamber of Commerce.
  • LCIA: London Court of International Arbitration.
  • Model Law: United Nations Commission on International Trade Law Model Law on International Commercial
  • Arbitration 1985, with amendments as adopted in 2006.
  • New York Convention: Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
  • Riyadh Convention: Riyadh Arab Agreement for Judicial Cooperation 1983.
  • SCCA: Saudi Centre for Commercial Arbitration.
  • SIAC: Singapore International Arbitration Centre.

Practical Guidance

The BCDR (previously the BCDR-AAA) was established in partnership with the AAA in 2009. In 2022 the BCDR and AAA agreed to end their formal relationship, entirely amicably, further reinforcing the BCDR’s autonomy as an independent arbitral institution. In a reflection of the continuing close relations, however, between the BCDR and the AAA, several of the BCDR’s board also have positions with the AAA or the International Centre for Dispute Resolution (the AAA’s international division).

BCDR Rules of Arbitration 2022

The new BCDR Rules of Arbitration 2022 were launched on 1 October 2022. They develop and enhance the framework of the previous rules, and add new rules relating to two important concepts in international arbitration: third party-funding and security for costs.

Article 21(bis) of the BCDR Rules of Arbitration 2022 requires the disclosure by a party of the existence of any third-party funding arrangement entered into at any time before or during the arbitration, and of the identity of the third-party funder.

This rule is designed to ensure that arbitrators are able to determine whether any conflicts of interest may arise from such an arrangement, and also take into account such funding in determining the costs of the arbitration.

Article 26(bis) of the BCDR Rules of Arbitration 2022 provides that the arbitral tribunal has the power, on the application of a party, to order the provision of security by a claimant/counter-claimant on such terms and in such form as it may consider appropriate, and further provides that the sanction for failure to comply with such an order may be a stay or dismissal of that party’s claim or counter-claim.

The BCDR Rules of Arbitration 2022 also include various helpful revisions and clarifications including:

  • in keeping with the increased use of technology in international dispute resolution, article 22(1) of the BCDR Rules of Arbitration 2022 expressly provides that hearings or meetings may be conducted by electronic means;
  • in line with the requirements imposed upon arbitrators, article 25(1) of the BCDR Rules of Arbitration 2022 requires that tribunal-appointed experts also sign a statement of impartiality and independence in which the expert must disclose any circumstances that may give rise to justifiable doubts as to his or her impartiality or independence; and
  • in a closer control of administrative costs, article 30(3) of the BCDR Rules of Arbitration 2022 states that the arbitral tribunal may not continue with the arbitration if it has not sought and obtained confirmation from the BCDR that the BCDR is holding sufficient funds on account of the accrued and anticipated costs of arbitration, other than the parties'
    own legal and other costs.

The costs provisions in the fee schedule to the BCDR Rules of Arbitration 2022 remain largely unchanged from the previous BCDR Arbitration Rules.

BCDR Sports Arbitration Rules

The BCDR launched the BCDR Sports Arbitration Rules on 17 March 2022. The BCDR’s objective in developing the BCDR Sports Arbitration Rules is to contribute to the development of sports law and arbitration in Bahrain and regionally.

The BCDR Sports Arbitration Rules are a modified version of the then-current 2017 BCDR Arbitration Rules, focussing specifically on the issues and procedures likely to be most relevant to this specialist field, and will apply where the parties agree in writing, or have agreed to arbitration administered by the BCDR but no reference is made to specific rules, and the dispute is sports related, or from the statutes or regulations of a sports federation, association or other sporting body.

In order to facilitate the timely appointment of tribunals, arbitrators under the BCDR Sports Arbitration Rules are appointed from a roster published by the BCDR who have been selected based on their expertise within this field, with an emphasis on those based in the MENA region.

Arbitrations under the BCDR Sports Arbitration Rules may be either first instance, or appeals of decisions issued by a sporting body or awards rendered by an arbitral tribunal. This reflects the international best practice in the sports arbitration field, with other arbitration institutions such as the Swiss Court of Arbitration for Sports providing similarly dual-tiered dispute resolution mechanisms.

One interesting aspect of the BCDR Sports Arbitration Rules is party representation: as is not uncommon in this field, provision is made for parties to be represented in arbitrations by their authorised representatives, such as, agents, managers or other trusted individuals, rather than a lawyer.

Forthcoming further rules

In what appears to be a trend towards the development of bespoke dispute resolution procedures, geared towards specific fields and sectors, the BCDR announced in its 2020/2021 Biennial Report that it expects shortly to publish new rules specifically to govern disputes in Islamic finance.

The Islamic finance sector has seen sustained growth over the last decade, and accounts, in the region, for a significant portion of the overall financial market. As an established Islamic finance centre, Bahrain is well placed to benefit from new rules governing Islamic finance disputes, which tend to be highly specialised and require different approaches to those common in conventional commercial dispute resolution.

In addition, the BCDR also announced that it expects shortly to publish new rules for the administration of proceedings conducted under ad hoc, or non-institutional rules or procedures, notably the UNCITRAL arbitration rules.

Expansion of the jurisdiction of the BCDR Court

Pursuant to section 1 of Bahrain Decree-Law No. 30/2009, cases will fall within the BCDR Court’s jurisdiction where the claim value exceeds BHD 500,000 (approx. USD 1.3 million) and either at least one party is a financial institution licensed by the Central Bank of Bahrain, or the dispute is an international commercial dispute.

Bahrain Decree-Law No. 26/2021 Amending some provisions of Bahrain Decree-Law No. 30/2009 expanded the jurisdiction of the BCDR Court to include disputes where the value of a claim is in excess of BHD 500,000 (as before) between parties are companies licenced under Bahrain Decree-Law No. 21/2001.

This is a significant expansion of the jurisdiction of the BCDR Court and has been welcomed by parties and practitioners, who will benefit from the BCDR Court’s efficient case management, tailored procedural rules, and specialist judges.

Electronic working in the BCDR Court

The impact of the global Covid-19 pandemic was felt in all areas worldwide, with dispute resolution being no exception. Given its party-chosen procedures, arbitration has always been seen as more flexible than centralised court procedures, and arbitral institutions, tribunals and parties were already well placed to adopt, if they were not already doing so, remote and electronic working methods. By way of example, both the former BCDR Arbitration Rules of 2017 and the current BCDR Rules of Arbitration 2022 provide for electronic working methods.

By contrast, the BCDR Court’s own procedural rules for litigation, introduced in 2009, placed more reliance on paper filings and in-person hearings. However, adapting quickly to the changed environment brought in by the pandemic, Bahrain’s Minister of Justice implemented several regulations in 2021 intended to facilitate and improve electronic working in the BCDR Court:

  • Bahrain Resolution No. 39/2021, which permits the use of electronic communications, including for filing submissions and exhibits, holding case management meetings and hearings, and for providing notifications;
  • Bahrain Resolution No. 40/2021 permitting the publication of judicial notifications in BCDR Court litigation on the website of the Bahrain Official Gazette website;
  • Bahrain Resolution No. 41/2021 providing for notification on parties of judicial papers in BCRD Court litigation by email and text message; and
  • Bahrain Resolution No. 134/2021, introducing new procedural rules for BCDR Court litigation, which enshrine electronic working throughout BCDR Court proceedings.

Language of proceedings

Article 5 of Bahrain Resolution No. 134/2021 expressly provide that parties may choose English as the language of their proceedings where:

  • the underlying contract is in a language other than Arabic;
  • the agreement to choose English as the language of the proceedings is recorded in either the underlying contract, in correspondence between the parties, or in a separate agreement; and
  • the agreement to choose English as the language of the proceedings is invoked during the case management phase of the proceedings and within the deadlines prescribed for that purpose.

This has been further expanded upon by Resolution No. 28/2023, which provides more detailed guidance on the use of the English language in the BCDR. Where a dispute has arisen in respect of a contract written in English, then English will be the language to be used in BCDR Court proceedings where:

  • the parties to the dispute are licensed by the Central Bank of Bahrain, or between such parties and other parties licenced under the provisions of Bahrain Decree-Law No. 21/2001 on the Issuance of the Commercial Companies Law;
  • the parties to the dispute are licensed under the provisions of Bahrain Decree-Law No. 21/2001 on the Issuance of the Commercial Companies Law, and the dispute relates to obligations arising from the commercial relationship between them; or
  • the dispute relates to international trade and the parties to the dispute are financial institutions and/or companies.

Parties to a dispute before the BCDR Courts may also agree in writing that the English language be the language used in proceedings where the language of the contract from which the dispute has arisen is in any other language other than Arabic.

Similarly, the English language may be used before the Bahrain Courts in litigation proceedings supporting arbitration proceedings (the High Civil Court is the competent court for the purposes of the Model Law), where the language of the arbitration is English and the value of the dispute or contract is over BHD 500,000, and the Court assistance is sought in respect of: (i) the appointment of or challenge to arbitrators; (ii) interim measures; (iii) the recognition and enforcement of an arbitral award; or (iv) an application to set aside an arbitral award.

In addition, Bahrain Order No. 3/2022 permits the appointment of Tribunal members specifically to hear BCDR Court cases in which the parties have agreed on English as the language of proceedings. The following internationally renowned individuals were assigned to hear cases in the English language: Professor Jan Paulsson, Neil Kaplan KC and Dr Michael Hwang SC (appointed Deputies of the Court of Cassation), and Adrian Cole, Michael Grose, Nadine Debbas Achkar, Simon Greenberg, Dr Karim Hafez and Amani Khalifa (appointed Judges of the Court of Cassation).

The option for parties to have their disputes heard in the English language enhances Bahrain’s legal framework, facilitating the dispute resolution process by avoiding translation and interpretation costs and thereby saving time and costs.

Recent case statistics

The BCDR’s caseload has steadily been built upon in the last two years, with 34 new cases registered in 2020 and 60 new cases in 2021. Of these new cases, 73 were BCDR Court litigation cases and 21 were BCDR arbitration or mediation cases. The cumulative value of these disputes was USD 820 million.

This brings the total number of cases filed since the BCDR’s inception in 2009 to 376, with a total cumulative value of USD 6.5 billion. The types of disputes that have been heard in the BCDR have been varied, with the largest share falling to the banking and finance sector (94 cases), closely followed by general commercial (90 cases), and then Islamic finance (65 cases).

With regards to case duration, of the total 376 cases filed since BCDR’s inception, 93 were concluded in less than six months; 161 within 6-12 months; 44 within 12-18 months; 22 within 18-24 months; and 10 within more than 24 months. Although case duration will be affected by the complexity of each dispute and the approach of the parties, it is welcome to see that the majority of cases have been concluded within 12 months of being raised.

Costs

Whilst overall BCDR arbitration costs are largely comparable to those of other institutions, the costs of each arbitration will depend upon the nature of the dispute, the approaches of the parties and the rules and procedures adopted.

Institutional arbitration costs, that is, costs other than the costs of parties’ own legal representation, are generally made up of an initial filing fee payable by the claimant, case management fees, and the fees of the arbitral tribunal.

The initial filing fee for BCDR arbitrations is USD 3,000. By way of comparison, the BCDR filing fee compared to several other institutions is set out below:

BCDR DIAC ICC LCIA SCCA SIAC
USD 3,000 AED 5,000 (c. USD 1360) USD 5,000 GBP 1,950
(c. USD 2,400)
SAR 5,000
(c. USD 1,330)
SGD 2,000
(c. USD 1,520)

In BCDR arbitrations case management fees are calculated according to the value in dispute. For example, for claims of USD 500,001 to USD 1 million the case management fee is USD 12,000/14,000 (1 arbitrator/3 arbitrators) and for claims of USD 5,000,001 to 10 million the case management fee is USD 23,000/25,000 (1 arbitrator/3 arbitrators). A comparative chart showing estimated average case management fees (for one arbitrator arbitrations) appears below:

Claim value BCDR DIAC ICC SIAC HKIAC
USD 1 million USD 12,000 c. USD 10,900 USD 23,335 c. USD 9,500 c. USD 10,000
USD 5 million USD 17,000 c. USD 20,400 USD 45,015 c. USD 19,000 c. USD 18,500
USD 10 million USD 23,000 c. USD 27,250 USD 57,515 c. USD 23,840 c. USD 24,250

One of the key costs variables that parties can control at the outset is the number of arbitrators: three arbitrators will generally cost more than a sole arbitrator, other than in exceptional cases.

Whilst many institutions calculate arbitrators’ fees based on the value of the dispute, the BCDR sets the maximum hourly and daily rates for arbitrator’s fees as USD 500 and USD 4,000 respectively. By way of comparison, arbitrators’ maximum hourly rates in the LCIA are GBP 500 (c. USD 615), and in the HKIAC are HKD 6,500 (c. USD 830).

Related Content

Legislation

  • Bahrain Law No. 9/2015 on the Issuance of the Arbitration Law
  • Bahrain Decree-Law No. 30/2009 On Bahrain Chamber for the Settlement of Economic, Financial and Investment Disputes
  • Bahrain Decree-Law No. 21/2001 on the Issuance of the Commercial Companies Law
  • Bahrain Decree-Law No. 26/2021 Amending some provisions of Bahrain Decree-Law No. 30/2009

Regulations

  • BCDR Rules of Arbitration 2022
  • BCDR Mediation Rules
  • BCDR Sports Arbitration Rules 2022

International Regulations

  • Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958
  • Riyadh Arab Agreement for Judicial Cooperation 1983
  • Gulf Cooperation Council Convention for the Execution of Judgments, Delegations and Judicial Notifications 1995
  • United Nations Commission on International Trade Law Model Law on International Commercial Arbitration 1985, with amendments as adopted in 2006

This article was published first on LexisNexis

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