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Bahrain has notched another world-first by establishing an arbitration free zone and introducing the concept of statutory arbitration.
Styled the Bahrain Chamber of Dispute Resolution, it is an initiative of Bahrain's Ministry of Justice delivered in partnership with the American Arbitration Association, a provider of conflict management and dispute resolution services, and will be known formally as the BCDR-AAA.
The BCDR-AAA will provide the region with an international alternative dispute resolution (ADR) centre of excellence, but with the distinct added advantage of operating an arbitration free zone.
So, when international disputes are heard at the BCDR, where the parties involved agree to be bound by the outcome, the award will be guaranteed and not subject to challenge in Bahrain.
This resolves an issue that has been a significant problem in many parts of the world, despite existing international conventions. Bahrain's arbitration free zone will offer jurisdictional and legal certainty to the recognition of arbitration awards, an essential component of modern day commercial transactions.
"In establishing the BCDR-AAA, Bahrain has sought to bring the very latest in global ADR solutions to the region. BCDR has partnered with the world's leading provider - the AAA - to ensure the highest standards of international best practice are consistently delivered. And have also enacted cutting-edge legislation that guarantees the independence of the chamber itself and, vitally, the interests of its users," says Shaikh Khaled bin Ali Al Khalifa, Bahrain's Justice Minister.
"The BCDR-AAA will provide these users, including Bahrain's legal community, international legal firms, multi-nationals and governments contracting in the Gulf and beyond, with a purpose-built solution for the rapid, effective and certain resolution of commercial disputes. By introducing unique elements including an arbitration free zone and statutory arbitration, we are seeking to set the pace of ADR in modern day commerce," he says.
The BCDR will have automatic and mandatory jurisdiction over any claim exceeding BD500,000 (approximately $1.3 million) which involves either an international (i.e. non-Bahraini) party in a commercial dispute or a party licenced by the Central Bank of Bahrain. Parties can also choose to have their disputes resolved by BCDR arbitration.
Shaikh Khalid says the move is aimed at providing additional benefit to Bahrain's commercial, banking and financial services sectors.
The chamber, which would cost between BD2.5 million and BD3 million a year to run, was mainly aimed to serve regional needs in the Gulf, Iraq, Yemen, and Iran but it was open to review cases from across the globe.
The chamber's chief executive, James McPherson, says it hand-picked their team out of 700 initial applicants that was whittled down to just over 180, mainly Bahraini, applicants before the final selection was made.
"This team now includes four New York-trained lawyers, two Bahraini lawyers who have been trained in New York, as well as the wider team who have had the additional benefit of ongoing training and professional development via the Chartered Institute of Arbitrators in London," he says.
"We will continue to work with the Chartered Institute of Arbitrators specifically to train arbitrators, in Arabic, here in Bahrain. Furthermore, our own professionals as well as judges and lawyers in Bahrain's legal community, have participated in a series of symposia and briefings aimed at expanding professional development in the practice of ADR."
McPherson says that over the coming months, the chamber will be increasing by more than two-fold its ongoing investment in the development and training of Bahraini lawyers.
"We will also begin the process of reaching out to bankers, accountants, civil engineers and other professional sectors, to help develop sector specific arbitration expertise and, in the process, participation as potential arbitrators of tomorrow from among them," he says.
The creation of the BCDR-AAA is also a move aimed at attracting more foreign investors and reinforcing the kingdom's status as a commercial hub for the region.
It is a significant boost for the business community throughout the Gulf, says Shaikh Mohammed bin Essa Al Khalifa, chief executive of the Bahrain Economic Development Board (EDB).
The pioneering legislation assures jurisdictional and legal certainty in recognition of arbitration awards, giving added confidence to businesses and investors throughout the region, he says.
"Arbitration is a preferred dispute resolution mechanism in modern commerce and plays an increasingly important role in business and the development of economic trade. The independence of the BCDR-AAA gives international businesses looking to access the trillion dollar market of the Gulf further confidence that disputes can be resolved quickly, effectively, transparently and in line with the highest international standards," he says.
The BCDR-AAA represents yet another important step in achieving the ambitions of Bahrain's National Economic Strategy and Vision 2030 - and to contribute to the growth of the Gulf as a whole.
Major disputes between national and international companies operating in Bahrain are to be dealt with by the kingdom's new arbitration chamber rather than its courts.
The move will present lawyers from the UK and other non-Bahraini firms with rights of audience in Bahrain - something that Bahraini courts currently prohibit.
It will provide additional benefit to Bahrain's commercial, banking and financial services sectors, which form a long-established hub within the region.
