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BAHRAIN If, however, as is provided for under the legislative decree, another set of arbitration rules or other sets of arbitration rules are promulgated, the material scope of the BCDR-AAA rules will be constricted. When it comes to challenging awards arising from classic BCDR-AAA arbitrations, it is noteworthy that the list of grounds is so short that it does not expressly include lack of arbitrability and the improper composition of the arbitral tribunal. The explanation is probably that these two grounds are nonetheless bases upon which a challenge can be made, but they are simply assimilated to aspects of jurisdiction. As has been noted, the arbitral tribunal’s jurisdiction can be challenged before the Bahrain Court of Cassation. It seems clear that this includes post-award challenges to jurisdiction. It is also possible that the composition of the arbitral tribunal is treated as a matter of jurisdiction, as under English arbitration law, whereas arbitrability is treated as a matter of public policy. An award’s repugnance to public policy is indeed a stipulated ground of challenge. Much the better approach, practically if not conceptually, is to treat lack of arbitrability as a matter of jurisdiction and not public policy, so that it can be raised at an early stage, and there is no need to wait till the award to attack it. The exclusion of challenges: how does it work? Perhaps the most important issue arising from the legislative decree is how its exclusion of all challenges to the award in an agreed (classic) arbitration functions. The English translation of the relevant provision (article 25 of the legislative decree) says the exclusion applies when “the parties have agreed in writing to choose a foreign law concerning the dispute”. The question is what law is being referred to: the law applying to the arbitration clause, the substantive law, the procedural law, or even the lex arbitrii more broadly? The original Arabic is apparently of no greater determinacy, by accident or design. The law applicable to an arbitration agreement is of little significance in attaching an arbitration to a legal order. Moreover, it serves the precise and circumscribed purpose of aiding the interpretation of the arbitration clause. It therefore seems unlikely that the choice of a foreign law to govern the arbitration clause determines whether or not the right to challenge an award is excluded. As for the law of the contract – that is, the law applicable to substantive matters – this is functionally distinct and isolated from aspects of the award which might cause a state to make a challenge available. In arbitration there is notably little concern with the substantive accuracy of the award, which is why appeals on the merits are almost universally excluded. This too, then, is unlikely to be the law referenced in the exclusion clause. It would be incoherent to read the provision as referring to a choice of lex arbitrii in a broad sense – since, if none of the Bahraini lex arbitrii applies then the legislative decree, with its exclusionary rule, does not itself apply. Götaverken What the legislator may be contemplating in excluding parties’ jurisdiction to review arbitral awards in this way is the Paris Court of Appeal’s line of thinking in the famous Götaverken decision of 21 February 1980. In that decision the Paris court refused to accept jurisdiction to review an ICC award rendered in Paris on the basis that there was nothing linking the arbitration to France (the stipulated place of arbitration being insufficient for these purposes). According to the court, it is only when French law is the law of the arbitration proceedings (la loi de la procédure arbitrale) that French Perhaps the most important issue arising from the legislative decree is how its exclusion of all challenges to the award in an agreed arbitration functions courts will accept jurisdiction to review arbitral awards. The mere choice of France as the place of arbitration creates no more than a rebuttable presumption that French law is the law of the arbitration proceedings. It is true that it does not necessarily follow from the parties’ choice of place of arbitration that they have selected the law of that place to govern the arbitration. Indeed, the text of the New York Convention (article V(e)) seems to make a distinction between the two. To admit and apply this distinction, however, sacrifices the legal predictability that comes from equating the place of arbitration and the law governing the proceedings. If the law excluding review has been understood correctly in this article, Bahrain appears not to be plagued by this concern. Unless the parties expressly stipulate a foreign law to govern their arbitration, then it is assumed, from their choice of Bahrain as the place of arbitration, that Bahraini law governs the procedure. Therefore actions for review of the award lie with the Bahraini court. Review available somewhere else? Götaverken raises a second concern relating to the Bahraini exclusion of review of awards. If a foreign law may be chosen to govern an arbitration proceeding taking place in Bahrain, how much Bahraini arbitration law will continue to apply? And at what point do you cease to apply one and start to apply the other? Because only the (written) choice of a foreign law to govern the arbitral proceedings will exclude Bahraini review of the award, it will almost always be the case that review will be available at the place of that foreign law, as well as at the enforcement stage. Consequently, this provision of the legislative decree does not appear straightforwardly to exclude all review of arbitration awards as Belgian law automatically did for a time, and as parties to Swiss arbitration can still do by unambiguous agreement. Moreover it does not appear possible, under this Bahraini provision, to exclude some but not all grounds of review – unless, for example, the parties chose Swiss law to govern their arbitration and then expressly excluded certain grounds of review under Swiss arbitration law. BCDR-AAA: THE ENDURING IMPACT? What is most striking about the new Bahraini instruments relating to arbitration is how confidently and maturely they embrace the quintessential non-interventionism of modern arbitration. Comparisons will certainly be made with the DIFC-LCIA system, and it is true that there are similarities. In both cases, Gulf states have created structures which will deliver expertise on the practical workings of state-of-the-art modern arbitration. In Dubai, there is the immediate advantage of the finest judicial supervision of arbitrations and review of arbitration awards available around the globe. In Bahrain, on the other hand, experienced local judges will continue to supervise classic arbitrations by agreement, and will only review awards proceeding from them if there is no exclusion of all review at the place of arbitration because of a certain detachment of the award from the Bahraini legal order. Local Bahraini judges will also benefit from deciding substantive commercial matters alongside leading international lawyers. And it appears that, in reviewing statutory arbitration awards, they will also gain familiarity with the process of reviewing arbitral awards – because of the similarities between this procedure and modern review of arbitration awards upon agreement. Perhaps, ultimately, it will be this that has the most enduring constructive impact in the country. 28 Volume 5 • Issue 1
Brazil breaks traditional stance on BITs BRAZILIAN BITS In its recent Brazil focus (Volume 4, issue 6 ) GAR explained how Brazil has traditionally given investment treaties a wide berth. Since then, we’ve learnt that Brazil has started negotiations with Chile for a treaty to protect and promote mutual investments. Alison Ross reports Brazil hasn’t signed a BIT in nearly 20 years. But, early in 2010, that changed. In an interview for Global Arbitration Review, Welber Barral, foreign trade secretary at Brazil’s Ministry of Development, Industry and Foreign Trade, confirmed that meetings have taken place between Brazilian and Chilean officials to discuss something that very much resembles a BIT, as part of a series of negotiations on expanding Chile’s engagement with the Mercosur free-trade agreement and guaranteeing social security benefits for those who cross the border to work. Barral said that the “precise contours” of the treaty are yet to be agreed but it will ensure “stable and predictable rules” to govern investments. In other words, it will work like a BIT. Change in attitude Suzana Medeiros Blades, an associate in the international arbitration group of Arnold & Porter LLP in Washington, DC, who closely follows Brazil’s stance on BITs and has co-written an article with partner Jean Engelmayer Kalicki on the topic, is enthusiastic about the development. But, she says, it remains to be seen whether Brazil will abandon its traditional reluctance towards investment arbitration and accept an investorstate arbitration clause, or insist on a state-state arbitration clause following Mercosur’s dispute settlement model. A state-state clause would mean that disgruntled investors in either country must rely on their government to bring a claim on their behalf – a system that does not differ greatly from looking to the government for diplomatic protection. Nevertheless, Blades says the negotiations mark a positive change in Brazil’s traditional attitude to BITs that coincides with increased investment flows between the two countries and President Lula’s drive to strengthen ties with other Latin American countries. As a country that has a good record of complying with treaty obligations, she says, Brazil no doubt sees Chile as the perfect partner for a treaty. Brazil’s state-run energy producer Petrobras, in particular, has made significant investments in Chile in the past year – including the acquisition of ExxonMobil’s stakes in Esso Chile Petrolera and associated companies. Brazil also reportedly wants Chile to invest more in the ethanol industry and Brazilian technology companies. Chile, for its part, has investments in Brazil worth some US$8.4 billion. Brazil’s BIT record Although Brazil signed BITs with several countries – including Chile – in the early 1990s, it has yet to ratify any of them. Brazil is also one of the few countries in Latin America that has still to sign the ICSID Convention. Chile, in contrast, has signed and ratified both the convention and some 50 BITs containing investor-state arbitration provisions. BITs: which way will Brazil go? Global Arbitration Review 29
Page 1 and 2: New arbitration options in Bahrain
Page 3: BAHRAIN COMMENTARY STATUTORY ARBITR

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