Traditionally, litigation has been the common approach to dispute resolution in the Kingdom of Bahrain. However, the situation is witnessing a major change towards the adoption of Alternative Dispute Resolution (ADR) methods. ADR clauses embedded in commercial contracts play a vital role in establishing a framework for handling disputes, whether through traditional litigation or alternative means such as arbitration and mediation. These provisions allow parties to effectively navigate disputes and expedite the resolution process while minimizing additional losses and costs. This article aims to consider the use of ADR clauses in commercial contracts in the Bahraini legal framework. By highlighting the importance and benefits of well-drafted ADR clauses, this article demonstrates the critical importance of ADR clauses in promoting efficient dispute resolution and reducing costs traditionally associated with litigation. Further demonstrate that you are doing your part.
Late billing: extension of time
Late claims are one of the most common claims initiated by contractors. These occur when a construction project takes longer to complete than the agreed period of time. Delays are due to many factors including, but not limited to, unforeseen site conditions, issues with required approvals or permits, defects in design or materials, changes in scope of work, and improper management or control of the construction site. It could be the result. more.
In such circumstances, the Contractor may seek an Extension of Time (EOT) pursuant to FIDIC Article 8.4 to avoid liability for damages. The contractor must demonstrate that the delay event actually delays completion, which may be caused by:
- Delays in Drawings or Instructions (FIDIC Article 1.9)).
- Delays in Access to the Site (FIDIC Article 2.1).
- The original error in setting the points and levels of reference (FIDIC Article 4.7).
- Unforeseeable ground conditions (FIDIC clause 4.12).
- Fossil Discovery (FIDIC Article 4.24).
- The employer delays or obstructs the completion inspection (FIDIC Articles 7.4, 9.2 and 10.3).
- Very unfavorable climatic conditions (FIDIC Article 8.4(c)).
- Unforeseen shortages of personnel or goods caused by epidemics or government measures (FIDIC Article 8.4(d)).
- Delays or failures caused by the employer (FIDIC Article 8.4(e)).
- The host country’s public authorities cause unexpected delays or disruptions to the contractor (FIDIC Article 8.5).
- If the employer suspends the work (unless there is a default by the contractor) and/or if the contractor subsequently resumes the work (FIDIC Article 8.9).
- Variations (FIDIC Article 13.3).
- Changes in the law (Article 13.7 FIDIC).
- If the work is suspended because the contractor fails to pay or the employer fails to provide evidence of financial arrangements (Article 16.1 FIDIC).
- Employer Risk Impact (FIDIC Article 17.4).
- Force Majeure Events (FIDIC Clause 19.4(a)).
Alternative dispute resolution method
The Government of Bahrain regulates the enforcement of settlement agreements through mediation and mediation through Decree Law No. 22/2019 on Mediation in Dispute Settlement and Decision No. 126/2019 on the Issuance of Implementing Regulations of Decree Law No. 22. 2019 on Mediation for Dispute Resolution.
Decree Law No. 22/2019 establishes a framework for recognizing and implementing mediated settlement agreements, which are treated as legally binding court judgments. A party involved in a legal proceeding may request a suspension of the proceeding during the mediation process, and the court will respond to the party by allowing reasonable time to conduct the mediation.
This law applies to all types of civil and commercial disputes, including those related to contract, tort, and property. It also outlines the qualifications of mediators who must be formally registered with the Ministry of Justice, Islamic Affairs and Waqf (MOJ). Qualifications include education, training, and experience requirements. The parties have the freedom to appoint the mediator of their choice. Alternatively, you can seek the assistance of the President of the High Civil Court to appoint an accredited mediator through the Ministry of Justice.
Meanwhile, Decree Law No. 9/2015 on the issuance of arbitration law was enacted in July 2015. This law incorporates the UNCITRAL Model Law on International Commercial Arbitration (unamended) and applies to all arbitration cases in Bahrain, regardless of their subject matter. national or international in nature. Additionally, non-Bahraini lawyers are permitted to represent parties involved in arbitrations conducted in Bahrain.
Legal framework for commercial contracts
Commercial contracts are governed by the terms agreed by the contracting parties as stated in Article 2 of Decree Law No. 7/1987 on the Publication of Commercial Laws. This clause gives the parties significant flexibility and allows them to determine the specific terms governing the commercial contract. However, it is important to note that these mutually agreed conditions must be consistent with the requirements outlined in Article 110 of Decree Law No. 19/2001 on the Promulgation of the Bahrain Civil Code.
Article 110 sets limits on contract terms and states that any terms agreed to by the parties are permissible unless they are prohibited by law, contrary to public policy, or contrary to moral principles. . This ensures that the agreed terms and conditions do not involve illegal activities or violate legal principles. Disputes arising under contracts containing such prohibited terms will not be entertained in court.
By balancing flexibility and compliance, Bahrain’s legal framework for commercial contracts promotes parties’ freedom to determine the terms of their contracts, while safeguarding the integrity of the law and the public interest.
Legality of arbitration clauses
Bahrain’s legal framework is based on Decree Law No. 9/2015 and deliberately adopts the first option of Article 7 of the UNCITRAL Model Law. This careful decision represents a sensitive and comprehensive approach to defining arbitration agreements. Pursuant to Article 7 of the UNCITRAL Model Law, parties may establish an arbitration agreement through an arbitration clause embedded within the underlying contract or through a separate submission agreement. These methods give parties the flexibility to mutually agree to resolve certain or all disputes, whether contractual or non-contractual, through arbitration.
To ensure the validity of an arbitration agreement, it must be in writing. This requirement can be met through a variety of means, including verbal communication, action, or documentation of a written agreement that includes alternative approaches. In particular, the written requirement is considered to be satisfied if the parties are communicating electronically and the information exchanged is easily accessible and may be referenced in the future. Additionally, reference to a document between the parties that contains an arbitration clause allows the clause to be incorporated into the contract, further strengthening the validity and enforceability of the arbitration agreement.
Enforceability of ADR clauses by the Court of Cassation
The enforceability of ADR clauses depends on the parties’ clear intention to follow this method. Arbitration is considered a consensual judicial system in which the parties choose an arbitrator who will resolve the dispute in accordance with an arbitration agreement. The scope of arbitration will be determined by the contracting parties and may cover contractual or non-contractual issues in accordance with the principles of law or justice. As the Bahrain Court of Cassation held in Dissent Nos. 23 and 32 of 2023, “the modern trend in commercial law is that arbitration, far from being a national judiciary, is a judicial system based on an agreement chosen by the parties. Arbitrators are entrusted with the task of resolving disputes that have arisen or may arise between them pursuant to an arbitration agreement, whether conditional or stipulated. Masu. Contractual or non-contractual matters may be resolved by arbitration. Binding judgments are issued in accordance with the provisions of law or principles of justice. Agreement to arbitrate is not presumed, but must be clearly expressed as the other party’s intention to follow this path. It is the will of the contracting parties that creates arbitration and determines its scope as to the issues covered by arbitration. ”
The parties have the power to enter into an arbitration agreement before or after a dispute arises and to select the arbitrator, determine the time and place of arbitration, and specify the language.
and procedural rules and select the applicable law. This process does not require the supervision of a permanent arbitration center or arbitral institution. As the Bahrain Court of Cassation held Opposition No. 457 of 2022, “[Contracting Parties]Enter into an arbitration agreement before or after a dispute arises, select the members of the arbitration panel, and determine its time. Its place of storage, its language, the procedural rules governing arbitrated disputes and the law applicable to the subject matter of the dispute are all conducted without the supervision of any permanent center or permanent arbitral institution. ”
The arbitrator is an impartial person trusted by the parties to the arbitration dispute and has the authority to make binding decisions. This power is similar to a judicial judgment and takes effect immediately upon issuance. As the Bahrain Court of Cassation held in Opposition No. 457 of 2022, “arbitrators are not parties to an arbitrated dispute, but rather are persons who enjoy the trust of their adversaries, and their will is to recognize the arbitrated dispute. “It is established that it was directed in the direction of has. ”
Recent decisions of the Bahrain Court of Cassation emphasize arbitration as an independent mechanism chosen by the parties to resolve disputes, requiring explicit mutual consent and defining its scope. The parties have the power to independently formulate an arbitration agreement, including selecting arbitrators and determining procedural details, and their decisions are binding. Overall, the clarity and express consent of the parties is essential to the validity and effectiveness of ADR clauses, especially in the context of arbitration.
conclusion
ADR clauses in commercial contracts provide parties with the opportunity to resolve disputes outside of litigation. By incorporating well-crafted ADR clauses into contracts, parties can benefit from the flexibility, efficiency, and confidentiality afforded by these methods. However, it is important to ensure that ADR clauses comply with Bahraini law and are carefully crafted to address the particular needs and circumstances of the parties involved. To ensure the enforceability and validity of ADR clauses in commercial contracts in the Kingdom of Bahrain, you should seek professional legal advice.
The content of this article is intended to provide a general guide on the subject. You should seek professional advice regarding your particular situation.