The Legal System of the Kingdom of Bahrain (Bahrain)

By Abdulla Al Doseri, Essa Jawahery, and Rawan Kamal

Abdulla Al Doseri, Essa Jawahery, and Rawan Kamal of Elham Ali Hassan & Associates, Lawyers and Legal Consultants (EAH Law), Kingdom of Bahrain.

Published November/December 2024

(Previously updated by Abdulla Al Doseri and Essa Jawahery in May/June 2018)

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1. Introduction

Bahrain (meaning “two-seas” in Arabic) is an island situated east of the Kingdom of Saudi Arabia in the Arabian Gulf; Bahrain is connected to the Kingdom of Saudi Arabia by a causeway (a mere fifteen-minute drive away). Although Bahrain is small in relative geographical size (the third smallest nation in Asia), Bahrain punches above its weight in the region in terms of economic, social, and political reform. The capital is Manama.

Previously a protectorate of Great Britain, Bahrain gained independence in 1971. The Al Khalifa family is the constitutional monarch of Bahrain, and Al Khalifa led the first post-oil economy in the Gulf. Since the late 20th Century, Bahrain has invested in the infrastructure, education, healthcare, housing, banking, and tourism sectors. The World Bank recognizes Bahrain as a high-income economy.

Bahrain’s legal system is based on civil law, customs, and Shari‘a (Islamic jurisprudence). The system mostly derives from the legal system of Egypt, which is based on the legal system of France.

Worker’s rights (unions), women’s rights (equality), freedom of religion, minority rights, freedom of movement, and business rights are safeguarded constitutionally and by the King. Public education, health care, and housing are guaranteed by the state. There are generally no corporate or income taxes in Bahrain. Political societies, non-governmental organizations (NGOs), and charities can be formed pursuant to Bahrain law.

This paper addresses the separation of powers between the King, the Legislature, the Judiciary, and the Executive Branch and provides an overview of the development of the country.

2. The King

The King of Bahrain enjoys an array of powers. He is the head of state and the protector of the legality of the government and the supremacy of the Constitution and law; in this regard, he appoints the Prime Minister, his Council, and the Advisory Council of the legislative branch. He can dissolve Parliament upon royal decree, and he alone ratifies laws. He is the decider on matters of foreign policy. He appoints diplomatic servants in other states and international organizations, and he ratifies international treaties. The King is the Supreme Commander of the Armed Forces, where he is empowered with the ability to declare war to defend the kingdom. Moreover, his influence in the judiciary is reflected in his chair at the Higher Judicial Council, his appointment of judges, and his ability to grant royal amnesty to individuals.

3. The Legislature

The bicameral legislative branch is comprised of two councils with forty members each: the Advisory Council and the Chamber of Deputies (Parliament). Together, the two form the National Council, which is designated with specific powers. The King appoints members of the Advisory Council, whilst members of Parliament are voted for in general elections by their constituencies. Both men and women are able to vote and participate, and they both have the right to be appointed and elected.

The process of legislating is as follows: initially, draft laws are submitted by the government to Parliament, which has the right to amend, approve, or reject the laws. The draft is then submitted to the Advisory Council, which has the right to propose amendments, approve, or reject the draft before returning it to Parliament for the second time, and the process is repeated, thereafter. If the Advisory Council and the Parliament disagree twice on any draft law, the National Council shall convene, and the passing of the bill will be successful if voted for by the majority present. A successful bill is submitted to the Prime Minister within two weeks, who passes it over to the King for ratification. A bill will only come into force upon ratification by the King; however, in the case that the King has not returned the same for reconsideration within a period of six months, it will be deemed ratified.

Concerning the checks and balances borne from the ideas of Montesquieu’s separation of powers, the legislative branch in Bahrain has some power in holding the government accountable. Parliament may submit written biddings to the government on public matters, and the government must respond within six months. In the case that the government cannot comply with the same, it must state the reasons for noncompliance. Moreover, upon the request of at least five members of Parliament, a topic regarding government policy may be submitted for interpellation.

Parliament is also empowered with the ability to pass a motion of no confidence regarding a minister following an interpellation addressed to him. A submission by ten members thereof allows the motion to be put forward for deliberation. Should Parliament vote by a two-thirds majority in favour of the motion, a vote of no confidence in a minister would result in his/her dismissal. Although the question of confidence in the Prime Minister cannot be raised by Parliament, a submission by ten of its members with the approval of the majority may be referred to the National Council stating that they can no longer cooperate with him. If two-thirds of the members of the National Council decide that they cannot cooperate with the Prime Minister, the matter shall be submitted to the King for settlement. The King either relieves the Prime Minister of his office and appoints a new Council of Ministers or dissolves the Parliament.

4. The Judiciary

The Constitution of Bahrain guarantees the independence of the judiciary. The judicial system is divided into Criminal Courts, Civil Courts, and Shari’a Courts. The Criminal Courts deal with criminal matters being prosecuted by the Public Prosecution (an individual cannot file a criminal case directly against another, a complaint must be filed with the Public Prosecution, and the prosecution, after investigating, decides whether to prosecute a case).

The Civil Courts have jurisdiction over civil, commercial (with specialist judicial committees for labor disputes and rent disputes), and administrative disputes, along with personal affairs regarding non-Muslims. The Shari’a Courts hear cases regarding family law and Islamic personal affairs (including inheritance). The highest appellate court that lies atop each division of the judiciary is the Court of Cassation (Supreme Court). The ministries and other public bodies do not enjoy immunity, and any concerned person before the judiciary can petition any decision or order.

The Constitutional Court was set up following the promulgation of the Constitution of 2002. Its responsibility is to ensure the compliance of the laws with the Constitution and to protect the rights provided therein. The Constitution recognizes the Military Courts of Bahrain as having jurisdiction over the Bahrain Defense Force, the National Guard, and the General Security Forces.

The courts of Bahrain are administratively headed by the Higher Judicial Council, which is designated with the task of ensuring the coherent functioning of the courts. It recommends the nomination of judges, who are then appointed by a royal decree. The King chairs the Council and other members consist of the Chairman of the Court of Cassation, the Attorney General, and at least five members from the judiciary appointed by royal decree for a membership of three years.

For high-value commercial claims, the Bahrain Chamber for Dispute Resolution (BCDR) was established in 2009, with a judiciary arm and an arbitration arm.

The BCDR has exclusive judicial jurisdiction over economic, financial, and investment disputes that are in excess of 500,000 Bahraini dinars, and that relate to international commercial disputes, disputes that involve a local bank or a Central Bank of Bahrain licensee, or disputes between commercial companies incorporated in Bahrain in accordance with the Bahrain Commercial Companies Law. The BCDR offers speedy and just means for dispute settlement beyond Civil Courts with two judges appointed by the Higher Judicial Council and a third-panel member from the BCDR roster (normally a lawyer or specialist). The BCDR awards can only be challenged at the Court of Cassation.

5. The Executive Branch

The executive government is comprised of the Council of Ministers appointed by the King. Each minister is in charge of his designated governmental body, i.e. ministry, which is responsible for the execution of certain governmental policies independently or in collaboration with other agencies. The Council of Ministers is led by the Prime Minister who ensures the execution of their various functions, supervises performance, and coordinates between the ministries for a coherent government. The deliberations of the Council of Ministers are secret, and the King may attend and chair its meetings. Ministers are entitled to pass ministerial orders as regulations to the laws passed by the legislative branch.

6. Development

6.1. Education

Before World War I, Quran schools were the only form of education in Bahrain. However, with the increasing influence over political and social change after the war, Bahrain’s formal education system was established in 1919, exclusive to males. In 1928, Bahrain became the first Gulf State to establish formal education for females. The educational system developed rapidly and by 2010, literacy rates among those between the ages of fifteen and twenty-four were at 98.16%.

Education is regulated and directed at all levels by the Ministry of Education, which implements national educational policies. The ministry primarily directs the public school system, which is free of charge, and draws up its curriculum. Government funding for education was valued at BHD 337.5m in 2016. Law No. 27 of 2005 codified the compulsion for education for those between the ages of six and fifteen. Nevertheless, enrolment in schools significantly and fundamentally surpasses that age group.

Additionally, fifteen private universities are operating in Bahrain and four public universities. The Higher Education Council (HEC) is designated with the task of providing and regulating a policy framework for higher education institutions. The council strives to provide students with opportunities for specialized studies and encourage research to contribute to the knowledge of humanity.

6.2. Development (Women’s Rights)

In the year 2001, the Supreme Council for Women (SCW) was established by a decree of the King. Though not a ministry in itself, it works in conjunction with governmental institutions and ministries to promote women’s rights. The objective of the SCW under the National Plan for the Advancement of Bahraini Women is to empower women, promote their participation, create equal opportunities for the sexes, and advance their quality of life. The Council reviews public policies relating to women and submits suggestions thereto to the concerned governmental body. The Council also reviews legislation that concerns women’s rights in different aspects of life, from commercial matters to familial issues, and proposes amendments to them.

Bahrain has been a signatory to the Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW) since June 18, 2002, and it took effect on July 18, 2016.

The current Parliament has eight female representatives, and the Advisory Council has ten appointed to it. In 2004, Bahrain saw the first female minister taking on the position of the Minister of Health. The nation has witnessed a gradual, but progressive advancement in the empowerment of women in both public and private posts.

6.3. Health

The Ministry of Health is in charge of policy-making, promoting health, and ensuring effective and efficient usage of resources. It provides free healthcare accessible to the whole population. In 2015, the Ministry’s expenditure was valued at BHD 286.5m, eight percent of the government’s total budget. The kingdom has nine public hospitals, sixteen public health centers, sixteen private hospitals, and 300 private clinics.

Due to the state investment in the health care system, life expectancy is at seventy-nine years, and the infant mortality rate is at 6/1000 (2015). The National Health Regulation Authority (NHRA), established in 2010, is a governmental institution that works alongside the MoH. It is responsible for regulating the provisions of healthcare and licensing healthcare providers, which was previously designated to the MoH. However, following the lead of other developing states, it was seen to be more appropriate and beneficial to have a separate body responsible for the regulation and licensing of healthcare providers, which is in charge of policy-making and managing the efficacy of resources. The NHRA sets appropriate policies and standards compliant with international practice, guarantees their compliance, and ensures the fitness of physicians and healthcare providers.

6.4. Customs

The Customs Affairs Directorate (CAD) is responsible for regulating and supervising the flow of goods into and out of Bahrain. It is a subordinate body of the Ministry of Interior, which is the nation’s public safety and law enforcement institution. Bahraini laws, Gulf Cooperation Council (GCC) laws, and international agreements regulate the CAD. Bahrain is a member of the World Trade Organization’s agreements of Rule of Origin and Trade Facilitation, the Harmonized System Convention, and the Istanbul Temporary Admission Convention. The objective of the CAD is to facilitate business and trade while protecting the nation from detrimental goods. There are limited restrictions on imports, of which weapons, narcotic substances, and drones are examples.

6.5. The Economy

6.5.1. The Central Bank

The economic system established by Bahrain has been regarded as one of the most prosperous in the region. The Central Bank of Bahrain (CBB) operates as the implementer of monetary policy, the regulator of the banking sector, and the government’s fiscal manager. The CBB was set up in 1973, shortly after Bahrain had gained independence from the UK. It is governed by the Central Bank of Bahrain and the Financial Institutions Law 2006, which modernized and simplified preceding legislation on financial services. Furthermore, it fully addressed penalties on statutory offenses, such as insider trading, and expanded the CBB’s powers in regulating the market. The CBB has issued a series of comprehensive rulebooks that govern banks and other licensees. This ensures that its licensees conduct business according to the ideal standards that meet the Basel Accords. The local currency of Bahrain is the Bahraini dinar (BHD), which is pegged to the United States Dollar (USD); the conversion rate is 0.376 BHD = 1 USD.

6.5.2. The Economic Development Board

To advance investment and development in the economic sector of Bahrain, the King established the Economic Development Board (EDB) in the year 2000. It is a public agency responsible for creating and carrying out strategies and supporting initiatives to generate an attractive investment climate in the country. It focuses on both the economic appeal to foreign investors and the development and growth of local companies. The EDB is chaired by the Crown Prince and includes members from both the public and private sectors working abreast. It has been successful in strengthening the performance of the nation’s economy. In terms of the future, the EDB strives to achieve the aims of the Economic Vision 2030, which was launched in 2008 by the King. The goal for 2030 is set for the further development of the economy alongside the principles of sustainability, fairness, and competitiveness.

6.5.3. Diversification of the Economy

The economic policy since the late 20th century in Bahrain has been the liberalization of the economy, with the goal of its diversification due to its limited petroleum and natural gas reserves. The Ministry of Oil supersedes the activities and responsibilities of the National Oil and Gas Authority (NOGA), which was abolished in 2021. The Ministry of Oil, through its various subsidiaries and agencies, such as Bapco Energies (formerly National Oil and Gas Holding Company (Nogaholding)), drives initiatives focused on advancing energy security, a diversified energy mix, and climate action commitments for a sustainable future for the Kingdom. The Ministry of Oil pushes to optimize the utilization of natural resources and achieve the highest returns thereof. It has also endeavored to engage in renewable energy projects and work on energy conservation. The contribution of the Ministry of Oil, through its various arms, along with the EDB and other governmental bodies, provides the state with a sustainable economy liberated from dependence on fossil fuels. Financial technology (FinTech), including cryptocurrencies, is the latest industry that Bahrain is hoping to become a dialogue hub for through initiatives of the Central Bank of Bahrain and the Economic Development Board.

6.5.4. Multinational Trade

Bahrain is business-friendly and encourages an international presence and trade. On an international front, the state is a member of the Greater Arab Free Trade Area and has free trade agreements with the United States, the European Free Trade Association, and Singapore. It is an attractive nation for foreign and multinational corporations to operate in as it offers complete foreign ownership of companies in many sectors, does not generally impose a requirement for local sponsorship, and provides relief from taxation because of its fiscal policy. Additionally, foreigners are permitted to own real estate in designated areas in Bahrain.

Taxation is limited in Bahrain. Only companies involved in the oil and gas sectors are subject to corporate tax at the standard rate of 46% on the net profits. In addition, Bahrain imposes Value Added Tax (VAT) at the standard rate of 10%. Furthermore, Bahrain has introduced a 15% Domestic Minimum Top-Up Tax (DMTT) in 2024, on the profits of Bahraini subsidiaries of large multinational enterprises (MNEs), which shall take effect as of 1 January 2025, marking the Kingdom’s first general profit tax beyond the oil and gas sector. Such changes are enforceable pursuant to Decree No. (11) of 2024 regarding the Implementation of Tax on Multinational Enterprises, in which it defines the rules and procedures regulating the implementation of DMTT on MNEs with annual global revenues exceeding EUR 750 million.

6.6. In the International Arena

Bahrain is a signatory to many international treaties and conventions, enabling the state to operate in accordance and compliance with international standards and facilitating cooperation with other states. Bahrain is a dualist state, and therefore, international treaties are not directly incorporated into domestic law. Nevertheless, upon the ratification of a treaty by the King, the same is referred to the legislative branch to translate international treaties into national laws. Bahrain has bound itself to the most significant progressive treaties and conventions supporting the integration of the highest standards of trade, commerce, human rights, and peace agreements.

Bahrain is a member of the United Nations, the World Trade Organization, the World Health Organization, the Red Cross, the G77, the Arab League, and the Gulf Cooperation Council (GCC), among other international organizations. The GCC created a Unified Economic Agreement, which eased the movement of people and goods between state boundaries, and expedited trade between its nationals. Citizens of member states have equal rights to the citizens of a particular state when engaging in commercial activities.

Moreover, Bahrain is a member of the Riyadh Convention, which enables member states of the Arab League to enforce foreign judgments and arbitral awards of other member states within their jurisdictions. This provides for consistency in the region and negates the costs for multinational corporations in dispute to seek separate judgments from each member state’s courts. Bahrain is also a signatory to the New York Convention on Recognizing and Enforcing Foreign Arbitration Awards, and it has fully promulgated the Model Arbitration Law into local legislation.

Furthermore, Bahrain is a signatory to the Apostille Convention, one of few in the region. This is essential for the international cooperation of states by enabling a member state to legalize documents for the international recognition of other member states. By ratifying the convention, Bahrain has become much more accessible to foreign businesses and expats.

Additionally, Bahrain has been a member of the Permanent Court of Arbitration, which allows member states, private parties, and international organizations to resort to arbitration when disputes arise from international agreements, allowing the abatement of conflict and the promotion of cooperative resolution.

Being a member state of the GCC, the Arab League, the Organization of Islamic Cooperation, the UN, and other international organizations, Bahrain has been able to continuously and exponentially modernize and develop in line with the international community.

7. Notable Legislation

  • Anti-Money Laundering Law (2001) – on the prevention and punishment of money laundering offenses.
  • Bahrain Stock Exchange Law (1987) – establishing the national stock exchange and regulating its functions.
  • Central Bank of Bahrain and Financial Institutions Law (2006) – providing the rules and regulations for the CBB and its licensees.
  • Civil Code (2001) – primarily concerned with the Law of Obligations. It regulates the rights to enter into agreements and the creation and dissolution of contracts, leases, mortgages, and pledges, as well as other forms of agreements.
  • Cloud Computing Law (2018) – establishes a legal framework that facilitates and encourages foreign parties’ use of cloud computing services through data centers in Bahrain.
  • Law of Commerce (1987) – concerns commercial conduct.
  • Commercial Agencies Law (1992) – with respect to the establishment and execution of commercial agencies.
  • Commercial Companies Law (2001) – regulating and setting out the rules for the establishment and conduct of commercial companies.
  • The Constitution (2002) – establishing the social, economic, civil, and political rights of citizens and the powers of the state.
  • Consumer Protection Law (2012) – guaranteeing the rights of commercial consumers.
  • Copyrights Law (2006) – governing the rules of intellectual property.
  • Corporate Governance Code (2022) – establishes corporate governance principles and requirements to be adopted by commercial companies.
  • Criminal Procedures Code (2002) – providing regulations on criminal proceedings.
  • Dispute Resolution Law (2009) – establishing the Bahrain Chamber for Dispute Resolution.
  • Education Law (2005) – regulating the educational system and guaranteeing access to learning.
  • Electronic Communications and Transactions Law (2018) – on the use and validity of electronic records and electronic signatures.
  • Labour Law (2012) – concerns the rights of employers and employees, entitlements, employment contracts, and Social Insurance.
  • Lease Law (2014) – regulating landlord and tenant relationships and agreements.
  • National Oil and Gas Authority Law (2006) – establishing NOGA and providing its functions.
  • Parliamentary Elections Law (2002) – on exercising political rights of citizens.
  • Personal Data Protection Law (2018) – on the protection of personal data.
  • The Penal Code (1976) – governing criminal offenses and their sanctions.
  • Property Development Law (2017) – on property development and establishing a regulatory authority to oversee the same.
  • Public Health Law (1975) – on ensuring the protection of public health and safety.
  • Trade Secrets Law (2003) – governing the rules of intellectual property.
  • Value Added Tax Law (2018) – imposing an indirect tax on taxable goods and supplies at the standard rate of 10%.
  • Tax on Multinational Enterprises (DMTT) Law (2024) – imposes a 15% tax on profits of Bahraini subsidiaries of large multinational enterprises with annual global revenues exceeding EUR 750 million.

A comprehensive database for all Bahraini legislation and ministerial regulations, except a few, can be found in Arabic on the Legislation & Legal Opinion Commission’s website.

Legislation and government regulations in Bahrain are published in the Official Gazette. The Official Gazette is uploaded weekly in Arabic via the website of the Ministry of Information Affairs.

Also, similar laws and regulations can be found on the websites of the various Ministries, each providing PDF links to the relevant laws and regulations about it. The Ministries have English versions of their websites and, more often than not, provide English translations of laws and regulations. In Bahrain, English translations of laws are provided for practical purposes. However, it is crucial to note that should a discrepancy arise between the Arabic and English texts, the Arabic prevails.

8. Sources