Hatim Q Zu’bi, Partner, Zu’bi & Partners, Attorneys & Legal Consultants: Viewpoint

Viewpoint: Hatim Q Zu’bi

In an ongoing attempt to ease dispute resolutions, arbitration has become a core practice in the kingdom. Bahrain is the first country in the world to have a free arbitration zone and to introduce the concept of statutory arbitration for commercial and financial disputes, as stated by the President of the American Arbitration Association (AAA).

In order to address the great discrepancy between national laws in relation to arbitration, Law No. 9 of 2015 promulgating the arbitration law (the New Arbitration Law) was issued in Bahrain on July 19, 2015. This effectively repealed the previously applicable provisions of the International Commercial Arbitration Law promulgated by Decree No. 9 of 1994, along with Chapter 7 on arbitration and Article 253 from the Civil and Commercial Procedures Act promulgated by Decree No. 12 of 1971, which governed arbitration proceedings in the country.

The New Arbitration Law is essentially the adoption of the unified international arbitration rules issued under the UN Commission on International Trade Law (UNCITRAL) 1985 Model Law with its 2006 Amendments; this model has been adopted for application to all international commercial arbitrations, whether concluded in Bahrain or elsewhere, as long as the parties have agreed to be subject to its provisions. The provisions of the UNCITRAL law will also apply to all arbitrations, immediately after the New Arbitration Law’s instigation, regardless of whether the agreement in question was concluded beforehand or otherwise.

The most significant advantage of the New Arbitration Law is the unification of international arbitration rules under one model (the UNCITRAL 1985 Model). Given that the kingdom is the first in the region to accept the International Commercial Arbitration Law as its official arbitration law, the decision will undoubtedly attract a vast array of international corporations looking to quickly resolve disputes by arbitrational means they would likely be familiar with. Not only does this create an alluring jurisdiction where commercial disputes will be professionally settled, but it also attracts corporations to establish a presence within Bahrain as a gateway into the region.

Another advantage of the UNCITRAL 1985 Model is that it fills in the legislative gap caused by the absence of a comprehensive legal system for arbitration. Such actions will shift Bahrain to be in line with contemporary global expectations of arbitration practice and will further cast a lens on the kingdom’s efforts to update the insufficient legislative structure, thus enhancing levels of confidence amongst local and foreign investors when resorting to litigation.

The New Arbitration Law differs from the previously applicable ones in various ways, one of which is stated under Article 6, which provides that the legal representatives of the parties can either be local or international. This was not a provision of the repealed applicable provisions of the International Commercial Arbitration Law promulgated by Decree No. 9 of 1994, along with Chapter 7 on arbitration and Article 253 from the Civil and Commercial Procedures Act, but it will certainly enhance the procedures’ flexibility by allowing foreign investors to maintain preferred legal counsels and thus feel more at ease with the arbitration proceedings.

On a separate note, some may question Bahrain’s decision to adopt a model that has been completely created by the UN, an organisation whose legal proceedings may not directly coincide with those of Bahrain in practice. Nevertheless, through its constant efforts to shift from an oil to a knowledge-based economy and with its expanding wealth of highly skilled legislators, Bahrain has the ability, power and infrastructure to determine its needs and choose the best strategy to become an international jurisdiction for settling international commercial disputes. Since the application of the New Arbitration Law is subject to the consent of the parties, we do not see any harm in adopting this law as long as the parties agree to be subject to its provisions.