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06 November 2017

New Zealand Courts find that the Bahrain Chamber for Dispute Resolution IS a Court

Charles Russell Speechlys assisted a leading Bahrain Bank (the “Bank”) in obtaining a ground breaking judgment in the courts of New Zealand confirming that the Bahrain Chamber for Dispute Resolution (the “BCDR”) is a court for the purposes of international enforcement.

The Bank entered into a Murabaha agreement with a high net worth customer (the “HNWC”), in respect of a New Zealand entity. The terms of repayment under the Murabaha agreement were not met and the Bank brought proceedings for breach of contract in the BCDR. The BCDR subsequently handed down judgment in favour of the Bank and ordered the HNWC to pay USD$ 3.4m in accordance with the terms of the Murabaha agreement (the “BCDR Judgment”).

For the purposes of enforcement, the Bank applied for summary judgment in New Zealand . At the summary judgment hearing the HNWC’s lawyers argued that the constitution of the BCDR and the terms of the BCDR Law strongly suggested that the BCDR was not a court, for the purposes of enforcement, but rather an arbitral tribunal. On the limited evidence available in such proceedings, the New Zealand court could not determine definitively that the BCDR was a court for the purpose of enforcement and ruled that the matter would proceed to full trial.

The parties agreed to a separate hearing of the specific question of whether the BCDR is a court for the purposes of enforcement in New Zealand and whether its judgments could be considered internationally enforceable.

The HNWC claimed that the limited appeal rights from the BCDR (being to the Court of Cassation only on specific grounds) mean that the appeal process is akin to that available in arbitral proceedings rather than courts.

The differences between the Arabic terminology in legislative decrees referring to courts and the BCDR’s governing rules were also specifically raised: in terms of Arabic terminology, the Constitution and the Law of Judicial Authority refer to the courts as “mahkamah”, uses the terminology judges and judgment, whereas the BCDR legislation uses “ghufrah” which translates to chamber and uses the terminology tribunal and award. The HNWC’s position was that BCDR’s numerous similarities to arbitral tribunals clearly demonstrated its illegitimacy to be recognised as a court.

The Bank argued that ‘court’ is a judicial tribunal whose decisions are entitled to recognition and enforcement. The HNWC’s suggestion that a “judicial body” exercising “judicial functions” does not constitute a court was rebutted. In relation to the terminology, the Bank asserted that it is common ground that “hukum” is a generic word for “decision”. In order to distinguish between decisions, qualifying words must be added: “hokum makhama” for judicial/court judgment and “hukum takheem” for arbitral award. The lack of clarity between the terms does not discredit the BCDR as a court.

The New Zealand court ruled in the Bank’s favour in June 2017, confirming that the BCDR is a court and that its judgments are therefore internationally enforceable.

This article was first published by Lexis Nexis in the MENA Business Law Review in the 3rd quarter of 2017.

This article was written by Georgina Munnik. For more information please contact Georgina on +973 1713 3205 or at georgina.munnik@crsblaw.com

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