Bahrain client updater

November 2011

Contacts

Introduction

Welcome to the next edition of the ‘Bahrain Client Updater’. Our aim is to provide you with a brief and regular update on a variety of topical subjects and current legal issues of interest to our Bahrain based clients. Please let us know if you have any feedback or requests for future topics.

This edition examines the inaugural figures for the Bahrain Chamber for Dispute Resolution (BCDR), the issue of collecting payment of service charges and community fees, commercial mortgages in the UAE and the new expanded Collective Investment Undertakings (CIU) Module for Bahrain funds.

Litigation and dispute resolution

BCDR announces its first year case data

The BCDR has published figures concerning the quantity and value of cases that it has dealt with since its opening. The BCDR state that around USD500 million (BD189 million) was claimed in the 13 cases which were resolved by the BCDR in its first year of operation. In 2011, 27 cases have been referred to the BCDR, mostly in the financial and insurance sectors.

For more information, please contact:

Adam Vause

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Construction and real estate

Service charges and community fees

The payment of service charges and community fees is becoming an increasingly important issue for developers who have finished part or all of their projects. Typically a structure should be put in place when selling plots, buildings, or units to ensure that the owners of units within buildings or communities are responsible for paying the ongoing cost of maintenance and repair of shared infrastructure and facilities.

However, many buildings and communities in Bahrain do not have an adequate legal structure in place to ensure that monies can be claimed, and as a result, maintenance and repair of such infrastructure and facilities cannot be undertaken. We are advising a number of developers and owners in relation to the steps that can be taken to remedy such issues within the Bahrain legislative regime.

For more information, please contact:

Nick Clayson or Joanne Emerson Taqi

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Banking

UAE Commercial Mortgages

This information may be of interest to clients undertaking transactions involving UAE security.

Unlike English law, UAE law does not recognise the concept of a floating charge over all current and future assets of a debtor. Instead, under UAE law, security has to be taken over specific assets (whether tangible or intangible) or classes of assets. Commercial mortgages constitute umbrella security under which a number of categories of moveable assets may be mortgaged. Under UAE law, commercial mortgages are governed by the UAE Federal Law No. 18 of 1993.

For more information, please contact:

Mark Adams or

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Corporate

New expanded CIU Module for Bahrain funds

The Central Bank of Bahrain (CBB) has recently acted to replace the existing funds regime with an enhanced set of rules to provide more detail on the roles and responsibilities of key stakeholders and provide greater consistency of content for fund documentation. The new rules have been issued for consultation and are likely to be adopted early in 2012.

Alongside the reshaping of the funds regime, the CBB has acted to prevent the use of restricted investment accounts (known as “RIAs”). RIAs have been extensively used by Islamic financial institutions as a simple way of raising money for a variety of projects avoiding the extensive disclosure required by fund documentation. RIAs have not been subject to the same degree of CBB scrutiny and regulation that funds have been subject to. The actions of the CBB bring an end to this disparity.

In addition, the CBB has introduced rules to accommodate new financial products such as Bahrain Real Estate Investment Trusts (B-REITs) and Private Investment Undertakings (PIUs). B-REITs will form a special sub-set of collective investment undertaking with their own asset class restrictions. PIUs will be subject to a limited number of high-level regulatory controls commensurate with the high minimum investment threshold for such funds (USD 3 million).

For more information, please contact:

Adrian Woodcock or Rayhana Sheikh Kapadia

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