Bahrain client updater

Publication January 2016


Introduction

Welcome to 2016 and another edition of the Norton Rose Fulbright Bahrain updater.

Our aim is to provide a brief summary of events and legal issues of interest to our Bahrain based clients which have taken place during the course of 2015.

This edition includes:

  • News regarding the successful signing of the Bahrain LNG Terminal project
  • Recent marketing events hosted by Norton Rose Fulbright
  • Recent changes to the New Labour Law
  • Indications of deregulation in the business sector

1. Bahrain LNG Terminal signing ceremony

A combined team of lawyers based in London and Bahrain, led by Joanne Emerson Taqi and Nick Prowse, advised The National Oil and Gas Authority (NOGA) and The Oil & Gas Holding Company (nogaholding) on the Bahrain LNG Terminal project, a strategic addition to the country’s import capacity for liquefied natural gas.

The project was awarded to a consortium of three companies: Samsung C&T, Teekay LNG Partners, and Gulf Investment Corporation, and will be owned and operated under a 20-year agreement starting 15 July 2018.

Nick Prowse commented: “This is a major strategic project for the Kingdom of Bahrain and the first LNG venture for the country. We are delighted to have been a part of this innovative project, helping to secure energy supply for the future of the country. We congratulate all involved.”

Joanne Emerson Taqi further added: “The LNG terminal will form a vital part of the energy infrastructure of Bahrain – it will give the country security of supply that it needs to meet its demand for natural gas to fuel large industrial projects and to generate power and water for the population.”

The LNG import terminal is to be located in Bahrain's Hidd industrial area. It will have an initial capacity of 400 million ft3/d, with the potential to double this capability in future.

2. Lifting of Secondary Sanctions against Iran

On January 16, 2016, the United States and the European Union lifted nuclear related “secondary sanctions” against Iran.

The secondary sanctions which have been lifted involve financial and banking- related sanctions, sanctions involving insurance or underwriting services, sanctions surrounding Iran’s energy and petrochemical sectors, sanctions involving Iran’s shipping and shipbuilding sectors, sanctions involving Iran’s transactions in gold and other precious metals as well as in graphite, raw, or semi-finished metals, sanctions on the sale, supply, or transfer of goods and services in Iran’s automotive sector, and sanctions on any associated services with each of the aforementioned.

U.S. persons, including U.S. corporations and U.S. financial institutions are still prohibited from dealing with, or carrying out any transactions, with Iran. Additionally, any transactions that are processed through the U.S., including with the direct or indirect involvement of a U.S. person, continue to be prohibited.

Please keep an eye out for our detailed spotlight articles on implications of the lifting of these secondary sanctions which will be circulated shortly.

3. ACCME Networking Event

Norton Rose Fulbright Bahrain hosted a networking event in conjunction with the Association of Corporate Counsel Middle East chapter (ACCME) at the Capital Club, Manama. John C. Boehm, Jr. (partner) and Paul Lockyer (senior associate) also attended representing Mohammed Al-Ghamdi Law Firm in association with Norton Rose Fulbright, our associate firm in Riyadh.

The event enabled corporate counsel from several private and public sector companies to come together to discuss the current business climate, with a particular focus on Bahrain and Saudi Arabia. This provided all concerned with a useful insight into the main legal and economic factors affecting our clients and their businesses in the region, allowing us to better serve their needs in the coming year.

If you wish to know more about the ACCME, please contact manager@acc-middleeast.com.

4. Recent changes to the New Labour Law

Bahrain’s New Labour Law, which became effective from September 2012, supported Bahrain’s efforts to align with international labour law standards. The New Labour Law showed a very “pro employee” approach by granting employees better working conditions, by recognizing women’s rights in the workforce, by implementing non-discriminatory practices, and by providing a new mechanism for resolving labour disputes more quickly than before.

2015 saw some amendments to this legislation. Perhaps the most significant of these was the introduction of Law 37/2015, amending Article 110. According to this amendment, if the establishment is downsizing its activities, or if there is a replacement of the production system in a way that will affect the number of the workforce, an employer is obliged to give preference to Bahraini national workers. The Ministry must still be informed of the reason for the dismissal at least 30 days before the employees are notified of the mass layoff. In the case of a partial closure of the business, the Bahraini worker who is as similarly qualified and experienced as an expatriate employee must be preferred for retention ahead of the expatriate employee. However, Dr. Jehad Al Fadhel, the member of the Shura Council responsible for proposing the amendment, said that it is up to a company to decide what course of action is best for their business. Employers have expressed concerns that this new amendment could lead to unfair dismissal claims if the contract of a Bahraini employee is terminated before that of an expatriate employee, potentially resulting in substantial compensation payments to the aggrieved party which may even exceed the compensation due versus a “no cause” dismissal. Of similar concern, the amendment does not explicitly require that the relevant Bahraini and expatriate employees hold the same job title or work in the same department.

5. Indications of deregulation within business sector

Towards the end of last year, there were indications that the Bahraini Government was planning reforms to promote further deregulation within the Bahraini business sector.

Such proposals included new legislation in areas such as Industrial Land Law, Commercial Registration, Commercial Company Law, and Bankruptcy Law. The last three of these is particularly significant given the multi-layered regulatory structure for incorporating and amending the bylaws and commercial feature of Bahrain entities, concerning Commercial Registration and Commercial Company legislation as well as the outdated nature of the Bahrain bankruptcy regime. An update to this legislation could facilitate greater fit for purpose regulation without unnecessary bureaucracy.

A new virtual Commercial Registration system may be introduced, allowing for a simpler, better interface between the Government and potential business owners, and enabling companies to begin operating in Bahrain without delay. This streamlined process would reduce the number of requirements for a company to be established. By way of example, no particular “commercial activity” would need to be specified, and the applicant would not need to have a special qualification linked to that activity to incorporate the business. The importance of giving people the freedom to operate from anywhere at any time also seems to have been emphasized, with suggestions that the need for a fixed address for the purpose of Commercial Registration would also be removed.  It is not clear, however, when or if such changes are to come into force.

The proposals are seemingly aimed at encouraging the growth of small and medium sized enterprises (SMEs) within Bahrain, which until now have found it difficult to establish themselves within the region. There seems to be a general shift in emphasis towards tourism, and a desire to encourage further growth in this sector as oil prices remain low.  


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