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Choice Of Law For Arbitration Agreements In Bahrain

1. Legal Framework in Bahrain

(a) Bahrain Arbitration Law

Bahrain’s arbitration regime is primarily governed by:

• Legislative Decree No. 9 of 2015 (Bahrain Arbitration Law)
• Based on the UNCITRAL Model Law on International Commercial Arbitration

This law does not explicitly prescribe a rigid rule for determining the governing law of the arbitration agreement, which leads courts and tribunals to rely on principles developed in international arbitration.

2. Conceptual Issue: Which Law Governs the Arbitration Agreement?

There are three possible laws that may apply:

1. Law governing the main contract (substantive law)
2. Law of the seat of arbitration (lex arbitri)
3. Law expressly chosen for the arbitration agreement

General Principle:

• If parties expressly choose a law, that law governs.
• If not, courts determine implied choice or apply the law with the closest and most real connection.

3. Position in Bahrain

Bahraini courts and tribunals generally follow internationally accepted principles:

(a) Party Autonomy

• Parties are free to choose the governing law of the arbitration agreement.

(b) Implied Choice

• If no express choice:
  • Often presumed to be the law of the main contract
  • Unless strong indications suggest otherwise

(c) Default Rule

• If neither express nor implied choice exists:
  • The law of the seat of arbitration usually applies

4. Doctrine of Separability

Bahrain recognizes the doctrine of separability (Article 16 of Arbitration Law):

• Arbitration agreement is independent of the main contract
• Even if the main contract is invalid, the arbitration clause may still survive

This directly affects the choice of law analysis because:

• The arbitration agreement may be governed by a different law than the main contract

5. Key Case Laws (International + Influential)

Although Bahrain has limited published arbitration judgments, its courts rely heavily on international jurisprudence. Below are at least 6 leading cases shaping the doctrine:

1. Sulamérica CIA Nacional de Seguros SA v Enesa Engenharia SA

Principle:

• Established a three-stage test:
  1. Express choice
  2. Implied choice
  3. Closest and most real connection

Relevance to Bahrain:

• Frequently relied upon in Model Law jurisdictions
• Supports presumption that the main contract law governs, unless rebutted

2. Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb

Principle:

• If no express choice:
  • Law of the main contract applies
  • If none, then law of the seat

Impact:

• Clarified modern approach widely followed in international arbitration

3. Fiona Trust & Holding Corporation v Privalov

Principle:

• Strong presumption that arbitration clauses are broad and separable
• Supports survival of arbitration clause even in cases of fraud

Relevance:

• Reinforces separability doctrine applied in Bahrain

4. FirstLink Investments Corp Ltd v GT Payment Pte Ltd

Principle:

• Emphasized that arbitration agreement can have a different governing law
• Applied closest connection test

Relevance:

• Influences Model Law jurisdictions like Bahrain

5. C v D

Principle:

• The seat of arbitration determines supervisory jurisdiction
• Reinforces importance of seat law

Relevance:

• Supports fallback to lex arbitri in absence of express choice

6. BCY v BCZ

Principle:

• Confirmed:
  • Implied choice usually = law of main contract
  • Unless inconsistent with arbitration clause

Relevance:

• Widely cited in international arbitration and persuasive in Bahrain

6. Practical Application in Bahrain

In practice, Bahraini tribunals typically follow this structure:

Step 1: Check Express Choice

• If clause states: “This arbitration agreement shall be governed by X law” → apply it

Step 2: Determine Implied Choice

• Usually same as contract governing law

Step 3: Apply Closest Connection Test

• Often results in:
  • Law of the seat (e.g., Bahrain)

7. Importance of the Seat in Bahrain

If Bahrain is the seat:

• Bahrain Arbitration Law applies as lex arbitri
• Bahraini courts have:
  • Supervisory jurisdiction
  • Power to set aside awards

8. Drafting Recommendations

To avoid uncertainty, parties should:

1. Expressly specify governing law of arbitration agreement
2. Align:
   • Governing law of contract
   • Seat of arbitration
3. Avoid conflicting provisions

9. Conclusion

The choice of law for arbitration agreements in Bahrain is guided by:

• Party autonomy
• Doctrine of separability
• International jurisprudence

In absence of express choice, Bahrain aligns with global practice:

Main contract law → failing which → law of the seat

The reliance on international case law ensures that Bahrain remains a pro-arbitration and internationally consistent jurisdiction.

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