Posted: September 9th, 2022

COMPARATIVE APPROACH OF ARBITRATION BETWEEN BAHRAIN AND THE UNITED ARAB EMIRATES (UAE)

COMPARATIVE APPROACH OF ARBITRATION BETWEEN BAHRAIN AND THE UNITED ARAB EMIRATES (UAE)
by (Name)

Introduction
Over the past few years, there has been a proliferation of arbitration centres across the member states of the Gulf Cooperation Council (GCC). Respective governments are garnering resources and offering support for the development of the arbitration culture. The countries are moving towards establishing national arbitral institutions and enforcing legal regulations in the field of arbitration. Currently, the United Arab Emirates (UAE) in itself has seven arbitration centres. Some arbitration centres found in other countries include The Bahrain Chamber for Dispute Resolution, The Commercial Arbitration Centre of the Kuwait Chamber of Commerce and Industry (KCAC) and The Qatar International Center for Conciliation and Arbitration (QICCA).
Furthermore, the countries are looking to elevate their arbitration legislature to be a reflection of international practice standards. This is because many of the GCC member states have embraced the “New York Arbitration Awards” or also called the “Convention on the Recognition and Enforcement of Foreign Arbitral Awards”. The Convention entails recognising and enforcing foreign arbitral awards and the reference to arbitration done by the court. The enhanced efforts to meet international standards will potentially lead to arbitration being the preferred method for dispute resolution.
This research paper seeks to expound on arbitration, specifically in Bahrain and the United Arab Emirates. (UAE). The paper will adopt a comparative approach to analysing how these two countries have set up their arbitral institutions, their ADR services and their arbitration rules. A comparative review of the divergences and similarities is to be done between the two countries concerning the three aspects of arbitration.
Arbitration in Bahrain and the UAE.
Bahrain has for the longest time been among the countries in the Middle East and North Africa that were more friendly to adopting arbitration. The country had accepted the New York Convention by 1988, and the UNCITRAL Model Law found in the initial ICAL of 1994. As at January 2020, its BCDR-AAA would become the latest arbitration centre that opened within the Middle East Region. Since BCDR was formulated according to Bahrain’s New Arbitration Law, Bahrain would become the world’s first “Free Arbitration Zone”. This meant that parties in an arbitral award which has been issued in Bahrain had no entitlement whatsoever to challenge the decision in the Bahrain courts. The rule applies provided the award is to be enforced in another different region apart from Bahrain of the parties had a written agreement that indicates either a different law apart from Bahrain did apply to the dispute or parties are not to challenge the award in Bahrain courts or any challenge brought forth refuting the award can be taken before a competent authority from another country. Nonetheless, the benefits of Bahrain being a “Free Arbitration Zone” cannot be overstated.
On the other hand, the UAE has sought to put itself as the hub for global business, trade and finance. Therefore, being true to this ambition, they have undergone gradual but sophisticated mechanisms to be used in global dispute resolution. This includes establishing and promoting international arbitration, enacting new procedural regulations and the formulation of novel avenues to have them enforced. Nonetheless, the delay that occurred in the enforcement of the new Federal Arbitration Law from 2008 impeded the country’s attractiveness and growth potential of being a global arbitration centre. The country did accede to the New York Convention in 2006 with no reservations whatsoever. Conversely, the incorporation is taking more time. Suffice to say, and the UAE is on the right path into transforming itself to become a global arbitration centre reaching the levels of London and Paris. This makes the question of a modern arbitration regime of when will it happen and not of if it will happen.
Comparative overview of Arbitral Institutions between Bahrain and the UAE.
Both countries have experienced regionalisation efforts done by global institutions within their borders. The top global institutions- International Chamber of Commerce (ICC), International Centre of Dispute Resolution (ICDR) and London Court of International Arbitration (LCIA) are organisations that do not ignore trends. To this effect, each of them has embarked on designing initiatives that will capitalise on the perceived likings of some parties to achieve a localised approach to arbitration through the creation of their regional operations.
For the UAE, the LCIA would open offices in collaboration with the Dubai International Financial Centre (DIFC) in February 2008 as an opportunity to propagate arbitrations occurring in the region. The opening of the DIFC-LCIA as per the UAE arbitration legislation whose basis is on the UNCITRAL Model Law was done immediately (September 2018) after the long hold out the country had with the New York Convention. On the other hand, the ICDR-Bahrain initiative that was opened in 2009 was expected to be a direct competition to the DIFC-LCIA initiative and any other organisations within the Middle-East region. Bahrain had already made a name for itself in regards to being the leading jurisdiction in the Middle East for site arbitrations.
Bahrain and the UAE belong to the Middle East, where Sharia Law (Islamic Law) has a huge influence in their societies, including the laws they adopt. To this effect, the application of Sharia Law has seen occasional uncertainties on the implementation of foreign awards and also the fact that the current developments have happened very recently deterring foreign investors from carrying out their arbitration processes in the Middle East. Nevertheless, the two countries have put in efforts through partnering with foreign institutions to attract foreign arbitration.
Bahrain adopted the United Nations Commission of International Trade Law (UNCITRAL) Model Law on their International Commercial Arbitration. Additionally, the country collaborated with the American Arbitration Association to formulate the Bahrain Chamber of Dispute Resolution (BCDR-AAA). Following the new legislature, there is a guarantee for any disputes brought forth at the BCDR-AAA not being subject to being challenged at Bahrain as long as the parties have agreed that the outcome will bind them. For the UAE, the DIFC-LCIA Arbitration Centre located in Dubai that is also supplemented by proper establishments of Cairo Regional Centre for International Commercial Arbitration (CIRCICA) and Dubai International Arbitration Centre (DAIC) bring a modernisation effect to the foreign investors looking to seat arbitrations in the area.
Comparative Overview of the ADR Services offered in Bahrain and the UAE
The arbitration initiatives in both countries are working towards fulfilling the need for dispute resolution that is increasingly high due to the diversification of economies within the regions. The BCDR-AAA is primarily focused at arbitration and mediation services specifically in financial, construction and development infrastructure sectors . This focus has put the institution in direct competition with the UAE and other jurisdictions found in the Middle East. The reason BCDR preferred setting up in Bahrain was its accessibility from the whole region, Europe, Asia and Africa. Additionally, Bahrain was a unique opportunity in terms of being the only centre in the region that was a “free zone”. This meant that the parties in the disputes are allowed to select the law in which the dispute will take place. This zone guarantees that all global disputes occurring under the chamber are final, binding and not subject to a legal challenge in Bahrain. The rule applies to the involved parties being bound by the results and the law governing the dispute that is not Bahraini. The “free zone” benefit that Bahrain gains has always been a challenge for other international sites where parties can challenge decisions in the local courts. Bahrain has also introduced the statutory dispute resolution tribunals through its ADR legislation. For the disputes that involve global financial and commercial institutions that have a license for the country’s Central Bank and the sum disputed surpasses $1.3m then they are automatically heard by the BCDR-AA for the final and binding rulings.
Apart from the arbitration and mediation services from the respective institutions in Bahrain, they focus on achieving the utmost privacy and confidentiality levels. In reference to applicable law and the wishes of the parties as stipulated in their agreements, any confidential information given to the mediator by the parties or other involved parties during the mediation process cannot later be revealed by the mediator. All records, reports and any other documents must remain confidential as long as the mediator is serving within that capacity. Additionally, involved parties are mandated to uphold the confidentiality of the dispute resolution process and should not introduce the proceedings to any arbitral, judicial or any other proceedings.
On the other hand, the UAE has also focused on providing mediation and conciliation services like dispute resolution mechanisms. Nonetheless, the use of mediation services remains limited compared to other jurisdictions. The limited use of mediation in the country has been surprising considering the country has for a long time adopted collective conciliation to settle disputes in both Arabic and Islamic culture while reconciling it with the Sharia Law. Mediation services have been incorporated mainly in construction and property disputes.
The UAE has a Mediation Framework which acts according to Articles 101 that allows its parties to stay in proceedings for up to six months in an attempt to come to a settlement. Additionally, the Dubai Reconciliation centre offers mediation centres where the disputing parties should participate provided there is jurisdiction, and the head of the court has instructed the parties to use the services. The UAE court system also offers several measures that promote reconciliation between the parties in the dispute. It is important to note that the UAE Civil Procedures law has not put in regulations that have an express reference to mediation.
At the UAE, the ADR services are generally considered facilitative processes. Experts play a significant role in narrow and specific disputes such as real valuation disputes. Nonetheless, the expert will not act in any judicial capacity, and they have no general obligation for them to apply natural justice rules. This is in comparison to other forms such as litigation and adjudication. While the UAE has made tremendous progress in the implementation of ADR services such as mediation, there is still a need for it to be widely used. The recognised service providers need to promote mediation within the jurisdiction to achieve positive effects.
Comparative overview of Arbitration Rules between Bahrain and the UAE.
Regardless of its reputation and positioning as a global commercial centre, the UAE has still not formulated a common arbitration law. Arbitration in this country is currently ruled primarily by several provisions listed in the UAE’s Civil Procedure Code. For any arbitration to be considered valid, it needs to be evidenced in written form and a clear definition of the subject matter under dispute provided. The country will not uphold the soundness of an arbitration clause that has been enlisted in the general conditions of an insurance policy or on the back page of an invoice. The Code does provide the fact that arbitration is permissible between parties that have a legal entitlement to dispose of the disputed right.
The Code has indicated that an odd number of arbitrators. Their appointments can only be made in three ways: parties’ nominations as per the arbitration agreement, nomination from an arbitral institution in case there is no agreement between the parties or nomination from a competent court that is seated at the arbitration table following the request of any party. The UAE has provided a limited number of provisions to govern arbitration which are coupled with uncertainties on how to apply them.
Many agree that the UAE Code has not provided an adequate framework for the process. The fact that the proceedings are also subject to intervention and supervision by courts undermines the authority that has been accorded to the arbitrators. The courts are allowed to dismiss the arbitrators, listen to the preliminary issues, offer interim measures and make substantive education among others. The UAE Code has limited the arbitrators from carrying out these activities and any other related legal activities.
On the other hand, Bahrain boasts of being the most innovative and arbitration-friendly legislative regime in the Middle East region. This is because of the overwhelming support received from the contemporary and efficient institution, BCDR-AAA. BCDR has been governed by the Legislative Decree 30/2009 as per the country’s Chamber for Economic, Financial and Investment Dispute Resolution. The rules indicated that the parties could adopt a dual mechanism of resolving their disputes which were either arbitration or the statutory court procedures. In July 2015, Bahrain enforced the Arbitration Law 9/2015 that has incorporated the UNCITRAL Model LAw entirely. Therefore, the law accords the global consensus on key issues that relate to the procedures of international arbitration. The new Arbitration Law became mandatory and applicable to all arbitrations happening in Bahrain. Conversely, the Judicial Fess Law was to cover the application fees associated with the recognition, enforcement and cancellation of arbitral awards.
The arbitrators in Bahrain have been accorded the powers and obligations to conduct the arbitration in ways that they deem appropriate. The arbitral tribunal has been conferred powers such as determining admissibility, relevance, and the weight for any evidence brought forward among others. The arbitral tribunal can bring in experts that will give reports on specific issues as per the tribunal’s directions. The tribunal could also order interim measures to the parties. Arbitrators are also held liable for the cases in which losses have come from their intentional or negligent conducts.
Bahrain is putting extra efforts to attract foreign investors into their dispute resolution systems that are dependable, transparent and fair. They do realise a unitary Arbitration Law and common provisions that are key tools to achieving this goal
Conclusion
The CC Countries, Bahrain and the UAE have made tremendous efforts in making arbitration a go-to mechanism in settling disputes. Nonetheless, from the comparative overview, Bahrain has gone further in terms of their rules, services and the running of the respective institutions. UAE still has a long way to go to achieve a better status in terms of arbitral aspects.

Bibliography
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