Bahrain client updater

October 2011

Contacts

Introduction

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 reviews the new arbitral rules issued by the International Chamber of Commerce, enhancements to the Basel II framework for banking supervision and its implementation in Bahrain, a suite of less well known FIDIC contracts and foreign ownership restrictions on corporates in Bahrain.

Litigation and dispute resolution

ICC Rules of Arbitration

The International Chamber of Commerce (ICC) has revised its Rules of Arbitration. The new Rules come into force on 1 January 2012 and take into account current requirements and developments in arbitration practice and procedure, as well as developments in information technology. Other amendments have also been made to ensure that the arbitral process is conducted in an expeditious and cost-effective manner.

For more information, please contact:

Adam Vause or Patrick Bourke.

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Construction and real estate

The Other Colours in the FIDIC Rainbow

Most of the Federation Internationale des Ingenieurs-Conseils (FIDIC) standard form contracts,, namely the Red Book (build only), Silver Book (design and build / EPC turnkey), Yellow Book (design and build / electrical and mechanical) and Green Book (small value, short form contracts), are generally well understood in the regional construction market. However, FIDIC also has four additional contracts, the White Book (for consultancy services), the Blue Book (for dredging and reclamation works), the Gold Book (for design, build and operate projects) and the Pink Book (the Multilateral Development Bank edition). These standard forms serve to extend the scope of the FIDIC suite and cover a greater range of projects and methods of procurement. They are, however, less common and on the whole less well understood than their predecessors.
Joanne Emerson Taqi recently presented on these lesser known FIDIC contracts at a session of the Project Management Institute (Arabian Gulf Chapter) and Joanne and Hugh Murray will shortly have an article published on this topic in Gulf Construction magazine which provides an insight into the use, context and particular issues arising in relation to each of these newer FIDIC forms.

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

Joanne Emerson Taqi or Hugh Murray.

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Banking

Enhancements to Basel II Framework and their implementation in Bahrain

The Basel Committee issued three papers in July 2009. Those papers made revisions to Pillar 1 (capital requirements), Pillar 2 (supervisory review) and Pillar 3 (market discipline) of Basel II. Revisions included standardised approaches to securitisations, changes to market risk capital charges and new disclosure requirements. In February 2011 a fourth paper was issued, containing stress testing guidance and minor adjustments to the market risk framework.
The deadline for implementation of the above is the end of this year. The Central Bank of Bahrain (CBB) proposes to implement the changes in the December 2011 updates to the CBB Rulebook. The CBB has recently opened a consultation with all retail and wholesale conventional and Islamic banks in Bahrain concerning the required revisions to the CBB Rulebook. The consultation opened on 25 September 2011 and will close on 27 October 2011.

For more information, please contact:

Mark Adams or Melanie Henry.

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Corporate finance

Foreign ownership restrictions in Bahrain

Bahrain has a unique place in the business community in the Middle East - permitting foreign ownership for most activities and imposing restrictions only for certain categories of activities. Foreign ownership restrictions in Bahrain fall into two main categories - those relating to land ownership and those relating to the commercial activity intended to be carried on by the relevant business.

Restricted business activities can be found using the Ministry of Industry and Commerce (MoIC) “negative list” which is located on their website. The negative list identifies various activities reserved solely for Bahraini ownership (for example, car rental, operation of cinema halls etc.) and those where a majority shareholding must be owned by a Bahraini national or company (for example, trade and retail). However, the MOIC should be contacted at the outset in relation to each activity intended to be undertaken by any business to determine the up to date position and requirements for additional comments. It is also possible to obtain special exemption from the strict application of these restrictions where circumstances permit.

For more information, please contact:

Adrian Woodcock or Rayhana Sheikh Kapadia.

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