Bahrain client updater

Publication | September 2011


We are delighted to bring you 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 in Bahrain. Please let us know if you have any feedback about the Bahrain updater or requests for future topics.

This issue explores: the key topic of the Central Bank of Bahrain Corporate Governance Code; the new English language version of the Regulation of Dispute Resolution Procedures before the BCDR; the evolution of the district cooling industry in the Middle East; force majeure in real estate contracts; and the changing law of registering security charges in the United Kingdom.


Will you be in full compliance with the Central Bank of Bahrain Corporate Governance Code by the financial year end 2011?

The Central Bank of Bahrain’s Corporate Governance Module became effective on 1 September 2011. The purpose of the Module is to establish best practice corporate principles in Bahrain and to provide protection for shareholders and other company stakeholders. All listed companies, any person licensed or authorised or involved in providing any activity specified under CBB Law including SROs and their members, need to be fully compliant by the financial year end 2011. The Module supplements the Corporate Governance Code issued by the Ministry of Industry and Commerce in 2010, which applies to public companies whether or not licensed by the CBB and existing provisions of the Commercial Companies Law.

For more information, please contact:

Adrian Woodcock

Rayhana Sheikh Kapadia

Litigation and dispute resolution

BCDR Regulation of Dispute Resolution procedures

The Bahrain Chamber for Dispute Resolution (BCDR) has published an English language version of the Regulation of Dispute Resolution Procedures before the BCDR. The BCDR is a dispute resolution centre in the Diplomatic Area of Manama that was created by Royal Decree and opened in 2010. Section (1) of Chapter (2) of Legislative Decree No. (30) of 2009 provides that the BCDR shall have mandatory jurisdiction over any claim exceeding BD500,000 which, prior to the creation of the BCDR, would have come within the jurisdiction of the courts of Bahrain and involves either an international commercial dispute or a party licensed by the Central Bank of Bahrain.

If you would like further information on the BCDR and its rules and regulations please contact:

Adam Vause

Patrick Bourke

Infrastructure and construction

District cooling in the Middle East - a Singapore solution?

District cooling remains an emerging utilities industry in the Middle East. There are significant benefits of district cooling, however these benefits often come at the cost of limited flexibility for subscribing consumers as well as perceived lack of control over quality and pricing. Moreover, district cooling providers can also face issues arising from the various demand, collection, succession and assignment risks associated with district cooling. To date, no comprehensive measures have been taken to address these issues in the Middle East.

In a pioneering district cooling market such as Singapore, the situation is markedly different. The risks associated with demand, collection and succession/assignment are largely ameliorated by the provisions of the District Cooling Act 2001 and the powers conferred on the Energy Market Authority (EMA) as the sector’s regulating authority. For example, whereas regional providers seek to control demand and succession risk through contractual mechanisms and phased construction programmes, in Singapore demand risk is expressly dealt with in the Act and provides that consumers must use district cooling where it is available. Moreover, in Singapore, tariffs are regulated by the EMA thereby reducing the perception that tariff adjustments in this sector are arbitrary and not adequately bench-marked.

The regime in Singapore provides an invaluable example of a legal framework within which district cooling industry can survive and thrive. Whether, however, the Singapore model can provide a model regulatory solution for the Middle East remains to be seen.

Joanne Emerson Taqi and Hugh Murray have recently had an article published on these issues in Gulf Construction magazine.

To obtain a copy of the article or more information about district cooling, please contact:

Joanne Emerson Taqi 

Hugh Murray

Real estate

Force majeure in real estate contracts

The recent instances of unrest may have consequences in relation to obligations under agreements governing property rights such as leases. For example, the Bahrain Civil Code permits (in certain circumstances) the cancellation of a lease (or a rent reduction) if the lessee is not able to use the leased property to the full extent intended under the lease, or if a material disruption caused by a third party is of a gross nature and deprives the lessee of his right to reasonable enjoyment of the property. In such circumstances compensation could be payable, and such compensation could be as much as the remaining rental payments due under the relevant lease depending on the relevant circumstances.

Not all contractually defined events of force majeure would be considered to be events of force majeure as a matter of law. Conversely, the legal position, to a party may be to be able to shield itself for a claim for breach of contract if the contractual regime sets out clear circumstances of force majeure, which upon their happening would otherwise give rise to rights to terminate. Many contracts for the acquisition of real estate contain provisions relating to force majeure which go beyond the legally recognised concept. The benefit of reliance on such contractually agreed event of force majeure may need to be triggered by a notice or other particular contractual requirements. Failure to protect your position in that regard could prejudice the ability to rely on such provisions.

We have been advising a number of clients in relation to their ongoing real estate commitments in Bahrain.

If you would like to discuss this further, please contact:

Nick Clayson

Joanne Emerson Taqi


Overseas registration requirements

Until now, the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 meant that certain security created by overseas companies (ie. companies incorporated outside of the United Kingdom) over property situated inside the United Kingdom was required to be registered.

Registration was effected at Companies House in the United Kingdom. The United Kingdom legislation applied to security arrangements such as mortgages over real estate and assignments of insurances and reinsurances taken out in the London market, adding a further formality and cost to the transaction.

The good news is that, in a matter of weeks, that legislation will no longer apply. There will not be a requirement to register mortgages or charges created by overseas companies over property situated in the United Kingdom with a creation date on or after 1 October 2011. There are no changes to the registration requirements for English companies.

For more information, please contact:

Mark Adams

Melanie Henry