Lawyer Monthly: April 2015

Continuing with our Legal Focus on Commercial Disputes, we turn to Bahrain and speak to Qays H. Zu’bi, the Senior Partner of Zu’bi & Partners Attorneys & Legal Consultants, a fourth generation family-run law practice.

Q: You have been practising law in Bahrain since 1981; how has the landscape surrounding commercial disputes altered in that time?

While I commenced practicing law in Bahrain in 1981, my legal career actually started in Bahrain in 1971 as a student, with the Independence of the State of Bahrain at the time and the set-up of my father’s legal practice Hatim S. Zu’bi& Partners, who pioneered the legal practice in Bahrain. At the time Bahrain was gaining independence from the British and with the vision, wisdom and foresight of its Rulers, the country developed into a hub for Offshore Companies and a Banking and Finance Centre. Investments and money poured into the country with the oil boom requiring the enactment of many laws and regulations. As a result, the legal and Court system infrastructure developed, enabling Bahrain to accede to many international conventions becoming a leader in the region and an international player.

With the upsurge in banking and commercial activity including infrastructure building, the landscape surrounding commercial disputes took a different turning. The legal system in Bahrain had to deal with international complicated contracts imposed by international companies assisting with the development of the infrastructure of the country. This elevated the level of commercial disputes forcing local legal firms to bring in expert lawyers and join hand in hand with international law firms to handle complex issues, not to forget the introduction of expert firms.

Due to this upsurge in development, the law Courts where not in a position to handle such complex and multi-jurisdictional disputes. As a result, conciliation and arbitration became an important element in resolving disputes. This prompted Bahrain to accede to the 1958 New York Convention on the recognition and enforcement of foreign arbitration awards. This significant step set the basis to enhance and encourage the arbitration culture in Bahrain as well as in the Arab World.

Q: Is it now more, or less, complex to resolve a business dispute? Why is this?

The complexity of resolving a dispute depends on the merits of the dispute itself and the circumstances surrounding it. Recent moves by authorities in Bahrain to create a fast track mechanism and provide disputants with alternatives to courts following arbitration rules embodied in the Bahrain Chamber for Dispute Resolution ( BCDR ) regulations, has somewhat relieved the procedural complexities often faced in litigation cases before the local courts. Firstly, the timeframe in which commercial disputes are resolved through the BCDR are well defined, enabling speedy judgments. Secondly, these mechanisms have opened the doors for disputants to engage international lawyers and experts to defend their cases. This will maximize successes. Having said this, any awards must still be executed through the execution courts reserved for normal courts. This has arguably hampered the effectiveness of the fast track judgment or award.

Q: How do the regulatory frameworks surrounding dispute resolution in Bahrain differ from other jurisdictions?

The majority of the countries surrounding Bahrain are Civil Law jurisdictions. Bahrain was among the first in the region in 1971 to pass a Civil and Commercial Procedures Law. The law stipulated, among other provisions, provisions relating to the appointment of an arbitrator and an arbitration process. Therefore, arbitration has been embedded in our laws since the early days of independence. In addition to Court procedures, independent arbitration clauses and bodies such as the ICC became popular, influenced by the size of transactions concluded and the multinational parties behind them.

Bahraini legislatures continue, to date, to develop and regulate various sectors depending on current developments within the country and globally. Bahrain is considered a vanguard amongst the Gulf and Arab Countries, having in place integrated laws in respect of most sectors, particularly, the banking and insurance sectors, as well as the international commercial relations sector.

Furthermore, Bahrain is mainly differentiated from its Gulf constituents by its comprehensive and up to date legislation regulating the banking sector, which has led Bahrain to be regarded globally as an important and leading country in this respect.

Q: What changes would you like to see made to the regulatory framework which surrounds dispute resolution in Bahrain?

Bahraini legislatures are required to review, improve and strengthen the laws and regulations governing litigation procedures. Such laws need to be updated to provide faster mechanisms and eliminate bureaucratic underpinnings, by which dispute resolution timescales are shortened without affecting work efficiency and quality. Moreover emphasis must be directed towards improving executions of judgements, which today remain a stumbling block towards efficient conclusion of litigation cases and enforcement of arbitral awards. One of the reasons is that these courts are overwhelmed with work and not adequately staffed.

Q:What are the biggest challenges you face within commercial dispute cases?

There are various challenges we could face. Among these challenges is the inability of judges to understand the complexity of a case as it could be a precedent foreign to our jurisdiction. Another complexity lies in the appointment of an expert. Court experts tend to be limited in numbers and experience. Another issue is that Court cases must be in Arabic which means that language difficulties and translations could influence meanings in a case including the outcome of a case or an expert’s report. Another challenge is in the timeframe for a judgement or award to be executed as this could run into months or years.

Q: What types of dispute resolution are the most popular currently in Bahrain and the GCC? Why do you think this is?

In relation to complex technical commercial contracts that contain an arbitration clause, which is the most common practice, the parties will be prevented from resorting to the courts for redress in relation to the respective contract, and only after arbitration has been exhausted and failed, the parties will be able to resort to the courts for recourse. In such instances, one would have to say that as the parties had agreed initially to resolve disputes by arbitration, such will be the popular route.

However, as a matter of quantum of disputes referred to the courts in Bahrain and the GCC region, in general, we still see that the courts are the preferred route for redress where possible, for the reason that, although the timeframes for procedures relating thereto tend to be lengthy and usually capable of being further extended, they are generally less costly than arbitration, and their procedures are better known amongst local lawyers and clients especially, unlike other alternative means of dispute resolution which are moreover, usually available at a higher cost, and further require detailed knowledge and sometimes specialization in the procedural aspects relating thereto.

Q: Would you agree with reports that mediation is rising in popularity?

It may be said that awareness of mediation as a mechanism for dispute resolution and its advantages are spreading widely, however slowly, and one could say that it may rise in the coming years. The slowness of the rise of mediation may be attributed to the culture it requires, whereby the parties to mediation must have a cooperative mindset capable of accepting compromise. In Bahrain, before mediation becomes popular, efforts must be made to prepare the legal arena for mediation especially in relation to the mindset it requires.