Category: Uncategorized

New Amendments to Commercial Registry Law

Ministry of Industry and Commerce (MOIC) has implemented two new Ministerial Orders under the amended Commercial Registry Law No. 27 of 2015 (the “Commercial Registry Law”), aiming to streamline registration, licensing, and reinstatement processes for businesses. These updates simplify delegation requirements, introduce flexible renewal options, and reduce the financial impact of delayed registrations.

The recent amendments are presented in two orders, each addressing specific aspects of the Commercial Registry framework:

– Ministerial Order No. 62 of 2024: This order revises the Implementing Regulations of the Commercial Registry Law, initially set out in 2016 and amended in 2018. It introduces simplified requirements for authorizing representatives in registration submissions and allows annual renewal options for activities requiring longer approval timelines, such as factories and hospitals.

– Ministerial Order No. 63 of 2024: This order revises the financial penalties for delays in renewing commercial registrations, with a newly structured penalty system and a cap to limit financial liability.

Under the amended Article 6, Paragraph 2, registered entities can now delegate registration submissions more easily. Instead of requiring an official power of attorney, recognized professional bodies and employees of the registrant can submit authorizations using a standard form. This adjustment is expected to reduce administrative burdens, streamline processing, and lower associated costs.

To encourage timely compliance, Article 10 mandates that registrants obtain necessary licenses within one year of registration or face automatic deletion. Notifications for such deletions will be issued via the Ministry’s online portal. However, for industries with inherently longer approval timelines—such as manufacturing and healthcare—annual renewal is now possible if valid reasons and fees are submitted.

Ministerial Order No. 63 of 2024 introduces a revised penalty structure for delays in renewing registrations. This structure not only encourages timely compliance but also caps total penalties to reduce financial strain on businesses. The new fee system is as follows:

• First Year of Delay: BHD 10 per month
• Second Year of Delay: BHD 20 per month
• Third Year of Delay: BHD 30 per month
• Beyond Three Years: BHD 500 per year, with a maximum total cap of BHD 5,000

The cap on financial penalties is particularly beneficial for businesses facing prolonged delays, as it reduces the risk of significant cumulative fees.

Effective as of October 17, 2024, these amendments reflect Bahrain’s commitment to modernizing and adapting its commercial regulatory framework. By streamlining delegation requirements, offering annual renewals for complex registrations, and capping penalty fees, these new orders provide businesses with greater flexibility and clarity in managing their commercial registrations.

New Regulatory Framework for Authorized Distributors

The Ministry of Industry and Commerce (“MOIC”) has implemented significant regulatory changes under Ministerial Order No. 29 of 2024, which establishes new conditions for authorized distributors of trademarked products and services. This order introduces a more formal framework for distribution agreements, focusing on increasing transparency, legal protections, and market structure in Bahrain’s distribution sector.

The new regulation defines who can act as an authorized distributor. Only Bahraini-owned businesses, with at least 51% of local ownership, are eligible to apply. This rule ensures that distribution activities largely benefit Bahrain-based entities. However, there is room for flexibility, as MOIC may approve exceptions for businesses that do not meet the ownership threshold. These exceptions are likely to be evaluated on an induvial case basis.

A critical aspect of the new order is its provision allowing trademark owners to appoint more than one authorized distributor. This can help multinational brands establish a broader market presence in Bahrain, as multiple distributors can simultaneously promote and sell the same trademarked goods, increasing competition and availability.

The distinction between authorized distributors and commercial agents is another key point under the new regulation. Distributors operate more narrowly, focusing on product sales and distribution, while agents typically have a broader scope, often involving negotiations, brand representation, and customer support services. Agents may also work under profit-sharing or commission models, and they are governed by the Commercial Agencies Law, whereas authorized distributors fall under the Commercial Registry Law. This distinction is essential for businesses when deciding how to structure their relationships with third parties.

To ensure compliance with the order, all distributors are required to formalize their distribution agreements with trademark owners by October 18, 2024. This includes updating their commercial registration to reflect the new designation of “Authorized Distributor” under ISIC No. 4699. Additionally, these agreements must be registered with the MOIC’s Authorized Distributor Registry via the Sijilat platform. Failure to comply could result in legal penalties or loss of distribution rights, as this framework aims to regulate the market more effectively and provide legal certainty for both distributors and trademark owners.

Q&A: Competition 2024 – Bahrain

1. What is the name of the main regulator/ regulators governing competition in Bahrain?

The Promotion and Protection of Competition Law No. 31 of 2018 (the “Competition Law”) states that a public authority for the promotion and protection of competition in Bahrain must be established (the “Authority”). The Authority shall have juridical personality with financial and administrative independence and is subject to the oversight of the Minister of Industry and Commerce.

As of today, the Authority is yet to be formed. Therefore, the Consumer Protection Directorate of the Ministry of Industry and Commerce is currently acting in its place until the Authority is formed.

2. What is market concentration under the Competition Law?

Market concentration occurs when there is a shift in the market that is attributed to several undertakings made by a company. The circumstances where market concentration is established are any (i) mergers, whether fully or partially, of two or more previously independent companies, (ii) acquisitions which leads to direct or indirect control of another company, whether fully or partially, or (iii) the establishment of a joint venture that undertakes all duties of a single independent company. In relation to acquisitions that establish market concentration, such transactions may be taken between companies, or an individual and a company.

3. What is a dominant market position under the Competition Law?

Companies may be deemed to have a dominant position in the market position due to their economic presence and strength, whereby such dominance may enable the company to prevent effective competition. Abuse of its position in the market may directly or indirectly hinder the other players in the market, such as competitors and even consumers. Therefore, the Competition Law regulates companies who have dominant positions in the market and sets out prohibitions to ensure fair competition.

4. What are the prohibitions under the Competition Law?

A company with a dominant position in the market cannot act or refrain from acting in a manner that constitutes an abuse of its dominant position. The following actions or inactions taken individually by the company or collectively with other companies are prohibited under the Competition Law:

1. 1. to directly or indirectly impose selling or purchasing prices, or any other trade conditions;
   2. to limit, production, markets, or technical development, to an extent that is detrimental to consumers;
   3. to apply dissimilar conditions with respect to prices, quality of products, and other terms of business, in any type of contracts and agreements concluded with consumers or suppliers of equivalent legal positions;
   4. to conclude contracts relating to certain products that are subject to the acceptance of obligations which, by nature or commercial usage, have no link to the subject of the original contract, agreement, or transaction; or
   5. to refrain, with no legitimate reasoning, from (i) concluding purchase or sale contracts of any products with any company, (ii) selling of products at a price lower than its actual cost, or (iii) to completely suspend a transaction to eliminate competing companies from continuing their business.

A Breakdown of Bahrain’s New International Commercial Court

Bahrain introduced Royal Decree Law No. 9 of 2024, establishing the Bahrain International Commercial Court (BICC). The purpose is designed to enhance Bahrain’s position as a premier hub for international commercial dispute resolution. In this article we explore the key aspects of the new law and its anticipated impact.

The BICC is a newly formed independent legal entity with exclusive jurisdiction over international commercial disputes. It aims to streamline complex cases and provide a specialized forum for resolving commercial disagreements efficiently. The court can adjudicate cases based on parties’ agreements, even in situations where other judicial bodies may lack jurisdiction.

Jurisdiction: International and Arbitration-Related Disputes

The BICC’s jurisdiction is broad, covering:

– International Commercial Disputes: These include disputes where one party, a transaction, or obligations are connected to a foreign jurisdiction. The scope includes sectors such as goods, services, distribution, construction, banking, insurance, and joint ventures.

– Arbitration-Related Disputes: This includes provisional measures, appointment of arbitrators, and recognition or annulment of arbitration rulings.

The court’s jurisdiction is triggered either through explicit agreements or implied consent, and these agreements are treated independently from other contractual terms. This ensures that the BICC’s jurisdiction cannot be contested even if the broader contract is disputed.

Efficient Dispute Resolution and Legal Representation

The BICC will operate under clear procedural regulations established by the Court Council. These regulations ensure consistency in dispute resolution. Importantly, both Bahraini and non-Bahraini attorneys can represent parties, allowing for flexibility in both Arabic and non-Arabic proceedings. This opens the door to international legal collaboration and ensures accessibility for global litigants.

Immediate Enforcement of Rulings

Rulings made by the BICC are enforceable immediately, without the need for additional guarantees. However, the court retains discretion to suspend enforcement if there is a risk of significant harm or if an appeal seems likely to succeed, ensuring a balance between enforcement and fairness.

The creation of the BICC signals Bahrain’s commitment to becoming a leading destination for international commercial arbitration and litigation. The court is expected to attract international businesses by offering a reliable legal framework. While there may be concerns over the use of English in legal proceedings, the benefits of a globally inclusive court far outweigh the challenges.

Q&A: Data Protection 2024 – Bahrain

 

1. What legislation and agency govern data protection?

The Personal Data Protection Law No. 30 of 2018 (the “Law”) governs data protection in the Kingdom of Bahrain, whereby Article 27 of the Law establishes the Personal Data Protection Authority (the “Authority”).

2. What rights do individuals in this jurisdiction have to request access to personal data relating to them? Are there any set time limits, procedures or administrative requirements?

Pursuant to Article 17 of the Law, individuals have the right to be informed of data concerning them upon their request, and the right to request the rectification of such data. These rights must be briefed to the individual upon the registration of their data.

Furthermore, Article 23 of the Law grants individuals the right to lodge a request to rectify, block or erase the personal data relating to them if the data is inaccurate, incomplete, outdated or if the data is in breach of the Law. In such circumstances, the response to the request must be within a period of 10 working days from the date of receipt of the request. Subsequently, any third party, to whom the data was disclosed, must be notified of the rectification, erasure or blockage within 15 days.

3. What are the main principles those keeping personal data must comply with?

As stipulated under Article 3 of the Law, personal data that is processed must be in compliance with the following:

• • Fair and lawful processing of personal data.
  • Collected for specific, explicit and legitimate purposes and is not processed further in a way incompatible with the purpose for which it was originally collected.
  • Adequate, relevant and not excessive collection or further processing of personal data in relation to its purpose.
  • Accurate, correct and up to date.
  • Storage of personal data must permit the identification of the individual once the purpose of collection or further processing was achieved.

4. How is personal data classed?

There are two classifications of data pursuant to the Law:

Personal Data:

Personal Data is defined as “any information in any form concerning an identified individual, or an individual who can, directly or indirectly, be identified by reference, in particular, to his or her personal identification number, or by reference to one or more factors specific to his or her physical, physiological, intellectual, cultural, economic, or social identity.  In determining whether an individual is identifiable, all the means that the data controller or any other person uses or may have access should be taken into consideration”.

Sensitive Personal Data:

Sensitive Personal Data is defined as “any personal information revealing –directly or indirectly- about an individual’s race, ethnical origin, political or philosophical opinions, religious beliefs, affiliation to union, personal criminal record, or any information in relation to his health or sexual status”.

Considering the above, the main difference between the classifications is the scope of the data, whereby personal data concerns general information regarding an individual and sensitive personal data is specific to an individual’s race, origin, religion, etc.

5. What are the penalties for non-compliance?

In accordance with Article 55 of the Law, failure of the violating party to stop the unlawful act or to remove reasons or effects thereof, within the prescribed period stipulated in the Law, may result in the following resolutions issued by the Authority against the violating party:

• • Withdrawal of the authorization granted under Article 15 of the Law, regarding automatic processing approvals, if the unlawful act is with respect to such authorization.

• • Imposing a daily penalty to force the violating party to stop the unlawful act. The penalty will not exceed BHD 1,000 per day in the event of a first-time violation. However, the penalty may reach up to BHD 2,000 per day if there is a recurrence of the first violation within 3 years.

• • Imposing an administrative penalty which will not exceed BHD 20,000.

Any criminal offences will be referred to the Public Prosecution by the Authority.

6. What are the rules around consent to use personal data in marketing?

As stipulated under Articles 19 and 20 of the Law, processing personal data for the purposes of direct marketing is permissible according to the Law. However, the individual whose personal data is collected or processed must be informed of the right to submit an objection to direct marketing. Such objection must be free of charge.

In such event, direct marketing must be ceased within 10 working days from the date of receipt of the request. The individual must also be notified, free of charge, within 10 working days if:

• • the request has been approved;
  • the request has been partially approved, along with the reasons thereof and the extent of approval; or
  • the request has been rejected, along with the reasons thereof.

7. How does the law around data retention work? Are there any specific requirements on security and encryption?

Pursuant to Article 3 of the Law, personal data must not be retained in a form which permits identification of the individual whose data has been collected or further processed. Moreover, if the personal data is for the purpose of historical, statistical or scientific use, it must only be stored in an anonymous form whereby such personal data cannot be associated with the individual. If such anonymity is not possible, the identity of the individual must be encrypted.

Q&A: Money Laundering 2024 Bahrain

 

1. What are the main laws governing money laundering in this jurisdiction?

In Bahrain, the primary legislation governing money laundering includes:

Legislative Decree No. 4 of 2001 regarding the Prohibition and Combating of Money Laundering and Terrorism Financing, as amended over time (“AML Law”). Amendments include:

• • Law No. 54 of 2006
  • Law No. 25 of 2013
  • Legislative Decree No. 36 of 2017
  • Legislative Decree No. 57 of 2018
  • Legislative Decree No. 29 of 2020

Ministerial Order No. 173 of 2017 concerning Obligations related to the Procedures for the Prohibition of and Combating Money Laundering and Terrorism Financing in the Business of Persons Registered in the Commercial Register and the Audit Registry in Bahrain, as amended by Ministerial Order No. 108 of 2018.

2. How is money laundering defined?

Money laundering is defined as any act aimed at concealing the illicit origin of funds. This includes disguising or making the proceeds of criminal activity appear legitimate, as well as transferring, converting or using such funds to avoid detection and legal consequences.

3. What are the main differences between money laundering legislation in this jurisdiction and that in other major jurisdictions?

Bahrain is recognized as a leader in anti-money laundering practices within the Gulf Cooperation Council (GCC). It adheres to international standards through its full membership in the Financial Action Task Force (FATF) and is a founding member of the regional MENA-FATF, hosting its secretariat. Compared to other major jurisdictions, Bahrain aligns with FATF recommendations but may have specific regulatory nuances and enforcement practices unique to its legal and economic context.

4. Are there any specific secondary regulations issued by agencies covering this area?

There are specific secondary regulations issued by the Central Bank of Bahrain (CBB). The CBB’s Rulebook provides detailed guidelines and requirements for financial institutions. In addition, Bahrain has the Financial Intelligence National Centre (FINC) which oversees compliance and enforcement of anti-money laundering regulations.

5. Do particular professions and industries have any specific duties to guard against money laundering? Under what laws or regulations are they governed?

Financial Institutions: Governed by AML Law and the CBB Rulebooks.

Real Estate Agents: Governed by Resolution No. 3 of 2019 from the Real Estate Regulatory Authority (RERA) regarding the obligations for anti-money laundering in real estate activities.

Jewelry Dealers: Governed by the AML Law and Ministerial Order No. 173 of 2017 including specific guidelines issued by the Ministry of Industry and Commerce (MOIC).

Legal Professionals: Governed by Ministerial Order No. 14 of 2021 issued by the Ministry of Justice, Islamic Affairs, and Waqf, which outlines AML and combating financing terrorism  obligations for legal offices.

Accountants and Auditors: Governed by AML Law.

6. What are the penalties for money laundering? Are there any specific penalties for particular professions or industries?

Penalties for money laundering in Bahrain include imprisonment, fines and asset forfeiture. The severity of the penalties varies based on the nature and scale of the offence.

In accordance with the AML Law, penalties for crimes related to terrorism financing and money laundering are stringent. For terrorism-related offenses, individuals can face life imprisonment or at least ten years, plus fines between 100,000 and 500,000 Bahraini Dinars. The same penalties apply for receiving or managing property connected to terrorism. Attempting these crimes incurs the same punishment. Money laundering offenders may be imprisoned for up to seven years and fined up to 1,000,000 Bahraini Dinars. If the crime is committed through an organized group, using institutional power, or to disguise illicit funds as lawful, the minimum prison term is five years and fines no less than 100,000 Bahraini Dinars. Confiscation of property is also mandated. Legal entities are fined and face property confiscation, while minor offences related to these crimes result in imprisonment up to two years or fines up to 50,000 Bahraini Dinars. Violations of regulatory provisions incur up to three months’ imprisonment or fines up to 20,000 Bahraini Dinars. Exemptions from penalties apply for those who report crimes before authorities are aware.

7. Are there specific offences for concealing, converting, or transferring criminal property? How is criminal property defined?

Yes, there are specific offences related to concealing, converting or transferring criminal property as outlined in Article 2(2)(b) of the AML Law. These actions are considered money laundering if they are undertaken to make the source of the property appear lawful. The law defines criminal property as any proceeds of crime whose nature, source, location, method of disposal, movement or ownership is concealed. This applies to individuals who know, believe, or have reason to believe that such proceeds were obtained from criminal activities or participation in such crimes.

Criminal property is defined as any asset derived from illegal activities, including funds obtained through crimes such as drug trafficking or fraud.

8. What are the most common defences for money laundering?

Common defences against money laundering charges may include demonstrating a lack of knowledge or intent, showing that the accused did not know the funds were criminally derived, or proving adherence to due diligence procedures to prevent involvement in money laundering activities.

9. What sort of practical checks would a business be expected to carry out to prove they are not an accomplice to a money laundering offence?

Financial Reports: Ensure audited reports are prepared by licensed auditing firms, especially for those with annual income exceeding 10,000 Bahraini Dinars.

Training: Participate in training programmes related to combating money laundering and terrorist financing.

Due Diligence: Implement robust KYC and due diligence procedures in relation to clients.

10. Does the amount involved impact the offence?

Yes, the amount involved can impact the severity of the offence. Larger amounts may lead to more serious charges and penalties, reflecting the higher risk and potential impact of the illicit activity.

11. Are specific checks required with businesses based or operating in specific jurisdictions?

Yes, it is mandatory for all legal persons holding CR to avoid dealings and relationships with individuals or entities listed on international or domestic sanction lists. Entities are also required to educate their staff on this subject. Any suspicion related to these individuals or entities must be reported immediately, including any suspicious transactions.

 

Passenger Rights: Flight Cancellations or Delays

On 19 July 2024 a major information technology outage was triggered by a global cybersecurity firm, CyberStrike, causing widespread disruptions to Microsoft customers. Banks, media companies, airlines and numerous other industries experienced the ‘Blue Screen of Death’ on their Windows operating system. As a result of a faulty routine software update, worldwide flight delays and cancellations gave rise to legal concern among air passengers. Questions regarding compensation and alternative flights regulations highlighted the differences between aviation laws in the various affected jurisdictions.

This article will outline passengers’ rights in relation to flight cancellations and delays pursuant to the Implementing Regulations of the Civil Aviation Law promulgated by Decision No. 21 of 2013 (the “Aviation Implementing Regulations”).

A chapter in the Aviation Implementing Regulations is dedicated to passenger rights, applicable to passengers arriving and departing from Bahrain, aircraft operators, Bahrain International Airport and other parties involved. Specifically, Articles 49 and 50 of the Aviation Implementing Regulations stipulate the rights of passengers in relation to flight cancellations and delays respectively.

Flight Cancellations

Generally, the aircraft operator must limit the number of cancelled flights without compromising the safety and security of its passengers.

In the circumstance that a flight cancellation is imminent, the aircraft operator must inform its passengers. Cancelled flights which were informed to passengers 14 days prior to the flight date exempt the air operator from requirements of care, support and compensation to its passengers, however flight ticket reimbursement is mandatory. In the circumstance that the aircraft operator informs its passengers of the flight cancellation within the 14 days prior to the flight date, the passenger has the right to (i) an alternative flight, (ii) reimbursement of the full ticket value, or (iii) reimbursement of the value of the remaining flight.

Passengers may opt for alternative flights, hence forgoing their right to compensation. In such case, the cost of the passenger’s stay in Bahrain will be borne by the aircraft operator if necessary and meals must be provided until the new date of travel. If the flight is cancelled for unexpected reasons after the passenger arrived at the airport, and such passenger chose an alternative flight, the passenger has the followings rights:

1. The cost difference must be paid by the aircraft operator if the alternative flight ticket of a higher-class or the cost of the new ticket is higher than the original ticket.
2. Compensation from the aircraft operator if the alternative flight ticket is of a lower-class.

Flight Delays

Similar to flight cancellations, the aircraft operator must ensure that all measures are taken to limit the number of delayed flights and to reduce the duration of the delay without compromising the safety and security of passengers.

The passengers must be notified of the delay prior to the original take-off time, and all notifications must include the new take-off time. If the new take-off time cannot be determined, the passengers must be compensated by 15 units of special drawing rights (equivalent to approximately BHD 7.400) for each hour of delay which may reach up to 100 special drawing rights units (equivalent to approximately BHD 49.800). Special drawing rights (“SDR”) are international reserve assets created by the International Monetary Fund, where the SDR unit is the value of a currency.

Moreover, if the new take-off time cannot be determined, the aircraft operator must provide the following forms of care to its passengers:

1. Refreshments at the start of the first hour of the original time fixed for departure.
2. A hot meal if the delay period is expected to be 3 hours or more from the original time fixed for departure. Alternatively, the passenger has the right to 15 SDR units (equivalent to approximately BHD 7.400) instead of the hot meal.
3. A hotel reservation if the expected delay exceeds 8 hours from the original time fixed for departure. Alternatively, the passenger has the right to 50 SDR units (equivalent to approximately BHD 24.900) instead of the hotel reservation.

The worldwide cyber outage led to more than 7,000 flight cancellations globally, creating a massive impact on the aviation industry. This occurrence may be deemed as an extraordinary circumstance, also known as force majeure, since the flight cancellations and delay were not foreseeable and out of the control of the air operator. In such cases and in some jurisdictions, passenger compensation is not granted. However, the Aviation Implementing Regulations in Bahrain explicitly provide compensatory rights to passengers in the cases of force majeure, which include the abovementioned rights stipulated under Articles 49 and 50 of the Aviation Implementing Regulations.

New Financial Regulations for Commercial Entities

Introduction to Ministerial Order No. 43 of 2024

The Ministry of Industry and Commerce (MOIC) recently issued Ministerial Order No. 43 of 2024 (the “Order”), introducing new regulations to enhance financial transparency and promote electronic payment methods among commercial entities in Bahrain.

Bank Account Requirements for Commercial Entities

The Order  mandates every commercial entity operating in Bahrain to establish and maintain a dedicated bank account with a licensed bank within Bahrain. This account will be used exclusively for all financial transactions related to commercial activities, including cash transactions, bank transfers and electronic payments. Even if a commercial entity operates through multiple branches, it is required to maintain a single bank account. The Order stipulates that all commercial entities must offer electronic payment options to facilitate transactions.

Applicability and Scope of the Order

The Order applies to all commercial entities registered under Bahrain’s Commercial Registry Law No. 27 of 2015, as amended (“CR Law”). This includes individual establishments, commercial companies (excluding limited partnership companies) and branches of foreign companies.

Penalties for Non-Compliance

Failure to comply with the Order may result in penalties outlined in Article 20 of the CR Law, including:

• Suspension of commercial registration for up to six months;
• Daily administrative fines ranging from BHD 1,000 for first-time offenses and up to BHD 2,000 for subsequent offenses within three years, with a total fine of up to BHD 50,000;
• A lump-sum administrative fine of up to BHD 100,000; and/or
• Striking off the commercial register.

Implementation Timeline

The Order will come into effect on 13 December 2024, six months after its publication in the Official Gazette.

In conclusion, the Order represents a significant step by the MOIC in modernizing financial practices. The Order aims to enhance transparency and efficiency in financial transactions by mandating dedicated bank accounts and promoting electronic payment options.

Overview of Cloud Computing: Data Embassies and Jurisdiction

The rapid adoption of cloud computing is fundamentally altering the management of data and resources. Cloud computing is empowering infrastructures of business operations, expanding their potential to grow without the usual costs or risks.

What is Cloud Computing?

Simply put, cloud computing grants a faster and more flexible method for individuals, businesses or the government to store and access data from anywhere at any time, as long as the internet is accessible. Files usually stored on hard drives can be saved on the cloud, ensuring quick and easy access to any file with enhanced security measures.

The delivery of computing services over the internet is not only constricted to data storage; networking, computing power, computer system resources and other technological benefits are additional rewards of cloud computing services. The overall aim is to ease the flow of information, ensuring on-demand access, business continuity and scalability.

How is Cloud Computing Regulated in Bahrain?

Cloud computing is regulated for the public and private sectors in Bahrain. The Cloud-First Policy provides a framework for the adoption of cloud technology for the public sector and various laws regulate cloud computing in the private sector, directly and indirectly, such as the Cloud Computing Services to Foreign Parties Law No. 56 of 2018 (the “Cloud Computing Law”) and the Personal Data Protection Law No. 30 of 2018.

(For more information regarding the Cloud-First Policy, please refer to a previously written article by Zu’bi & Partners linked here).

This article will provide an overview of the Cloud Computing Law as it relates to data embassies, governing laws and the jurisdiction of data.

What is a Data Embassy?

Hosting servers and storing data outside the physical space of an entity may lead to jurisdiction issues, specifically when considering cross-border cloud computing services that are located in a different country to the customer.

The concept of data embassies was initially established by the government of Estonia which underwent a series of cyberattacks rendering various public authorities and banks inoperable. Subsequent to the cyberattacks, a bilateral agreement was signed between Estonia and Luxembourg to establish Estonia’s data center in Luxembourg, deeming the country the first data embassy location internationally. As such, Estonian data is stored physically through cloud computing in Luxembourg, and yet the law and jurisdiction of the data remain governed by Estonia, similar to how foreign embassies work.

 

The Cloud Computing Law

The Kingdom of Bahrain took a step further and regulated cloud computing and data embassies for the private sector through the Cloud Computing Law, the purpose of which is to encourage foreign parties to use and invest in cloud computing services of data centers located in Bahrain.

Similar to the data embassy in Luxembourg, customers to cloud computing service providers (“Service Providers”) in Bahrain are subject to the governing law and exclusive jurisdiction of the country in which the customer is (i) domiciled, (ii) constituted, or (iii) established (“Foreign Country”). Thus, the competent courts and public authorities of the Foreign Country will have the power to issue binding orders executable on Service Providers in Bahrain. The legislation obliges the Service Providers to inform the Attorney General of Bahrain if an order is issued against the Service Provider from a competent court or public authority in a Foreign Country.

Resolution No. 67 of 2021, as amended, specifies the Foreign Countries that are included in the provisions of the Cloud Computing Law. These countries include, but are not limited to, the United States of America, the United Arab Emirates, the Kingdom of Spain, the Federative Republic of Brazil and others.

Cloud computing technologies are developing at an accelerated pace, providing enhanced cybersecurity, on-demand accessibility and economies of scale. The simultaneous growth of legislation we are witnessing today is crucial to avoid disputes, mitigate risk and protect the rights of all parties involved.

Inheritance Law in Bahrain: An Overview

Inheritance law in Bahrain is a crucial aspect of the nation’s legal framework, intricately tied to its cultural, religious, and social values. The laws governing inheritance are primarily based on Islamic Sharia, which significantly influences the distribution of assets upon an individual’s death. This article provides a detailed exploration of Bahrain’s inheritance law, its key principles, and its practical implications.

Islamic Foundation of Inheritance Law

Bahrain, like many other countries in the Gulf Cooperation Council (GCC), derives its inheritance laws from Islamic Sharia. The fundamental principles of Sharia regarding inheritance are aimed at ensuring a fair distribution of the deceased’s estate among heirs, preventing disputes, and protecting the rights of vulnerable family members.

Key Principles of Inheritance Under Sharia

1. Fixed Shares: Under Islamic law, certain relatives are entitled to fixed shares of the deceased’s estate. These shares are predetermined and cannot be altered by a will. The primary beneficiaries typically include spouses, parents, and children. For instance, a wife is entitled to one-eighth of her deceased husband’s estate if they have children, and one-fourth if they do not. Conversely, a husband receives one-fourth of his deceased wife’s estate if they have children, and one-half if they do not.
2. Male and Female Heirs: Islamic inheritance law prescribes that male heirs generally receive twice the share of female heirs. This principle is based on the traditional role of men as financial providers in Islamic societies. For example, a son would inherit twice as much as a daughter.
3. Residue Distribution: After the fixed shares are allocated, the remaining estate (if any) is distributed among the residuary heirs (Asabat). These are typically the closest male relatives, such as sons, brothers, and uncles. Daughters and other female relatives may inherit from the residue if there are no male residuary heirs.
4. Exclusion and Inclusion Rules: Certain relatives can exclude others from inheriting. For instance, if the deceased has sons, their brothers (the deceased’s uncles) are typically excluded from inheritance.

Bahraini Civil Law and Inheritance

While Sharia forms the backbone of inheritance law in Bahrain, the Bahraini Civil Code also plays a significant role, especially in cases involving non-Muslims and expatriates.

1. Wills and Testaments: Bahraini law permits individuals to draft wills, but these wills must comply with Sharia principles if the deceased is Muslim. For non-Muslims, the Bahraini Civil Code allows more flexibility in drafting wills, enabling them to distribute their assets according to their personal wishes, provided they comply with local laws.
2. Inheritance for Non-Muslims: Non-Muslims residing in Bahrain can apply their home country’s inheritance laws to their estates. This provision ensures that expatriates can maintain their cultural and legal practices concerning inheritance.
3. Court Procedures: The Sharia courts handle inheritance cases for Muslims, ensuring that the distribution aligns with Islamic principles. For non-Muslims, civil courts oversee the process, applying the relevant laws based on the deceased’s nationality and personal law preferences.

Practical Implications and Challenges

1. Dispute Resolution: Inheritance disputes can arise due to misunderstandings of Sharia principles or disagreements among heirs. Bahrain’s legal system provides mechanisms for dispute resolution through both Sharia and civil courts, ensuring fair adjudication based on established legal principles.
2. Estate Planning: Effective estate planning is essential to ensure a smooth transition of assets and to minimize potential disputes. For Muslims, this involves understanding Sharia principles and potentially drafting a will within those constraints.

 

Recent Developments and Future Outlook

Bahrain continually seeks to modernize its legal framework to balance traditional values with contemporary needs. Recent legal reforms aim to streamline inheritance procedures, enhance transparency, and reduce litigation. These efforts reflect Bahrain’s commitment to maintaining a robust legal system that respects Islamic principles while accommodating the diverse needs of its population.

1. Digitalization of Legal Processes: Bahrain is investing in the digitalization of its legal processes, including inheritance procedures. This modernization aims to improve efficiency, reduce bureaucratic delays, and enhance access to legal resources for citizens and residents.
2. Public Awareness Initiatives: The Bahraini government and legal institutions are increasingly focusing on public awareness initiatives. These initiatives aim to educate citizens and expatriates about their rights and obligations under inheritance laws, promoting better estate planning and reducing potential conflicts.

Conclusion

Inheritance law in Bahrain is a complex but well-structured system rooted in Islamic Sharia and complemented by the Bahraini Civil Code. Understanding these laws is crucial for both Bahraini citizens and expatriates to ensure the fair and legal distribution of assets upon death. As Bahrain continues to evolve its legal framework, the balance between tradition and modernity remains a cornerstone, ensuring that the principles of justice and fairness prevail in the realm of inheritance.