Security For Costs In Bahrain Tribunals
1. Legal Framework in Bahrain
(a) Bahrain Arbitration Law
- Legislative Decree No. 9 of 2015
- Based on the UNCITRAL Model Law on International Commercial Arbitration
(b) Statutory Basis
- Article 17 → Tribunal’s power to order interim measures
👉 Security for costs is treated as a type of interim measure
2. What is Security for Costs?
Definition:
An order requiring a party (usually the claimant) to:
Provide financial security (e.g., bank guarantee, deposit) to cover potential legal costs of the opposing party.
3. Purpose of Security for Costs
(A) Protect Respondent
- Ensures recovery of costs if claim fails
(B) Prevent Abuse
- Discourages frivolous or speculative claims
(C) Maintain Procedural Fairness
- Balances risks between parties
4. Tribunal’s Power in Bahrain
(A) Broad Discretion
Tribunals may order security for costs if:
- Parties have not excluded such powers
- Circumstances justify protection
(B) Source of Power
- Derived from:
- Interim measures provisions
- Tribunal’s inherent procedural authority
5. Conditions for Granting Security for Costs
Though not codified, tribunals in Bahrain follow internationally accepted standards:
(1) Financial Inability of Claimant
- Risk claimant cannot pay adverse costs
(2) Merits of the Claim
- Weak or speculative claims more likely to trigger order
(3) Conduct of Parties
- Bad faith or abusive behavior
(4) Risk of Non-Recovery
- Cross-border enforcement difficulties
(5) Balance of Fairness
- Must not stifle genuine claims
6. Forms of Security
Tribunals may order:
- Bank guarantees
- Cash deposits
- Third-party guarantees
7. Enforcement Issues
(A) Tribunal Orders
- Binding but lack direct enforcement power
(B) Court Assistance
- Bahraini courts may:
- Support enforcement
- Issue corresponding orders
8. Judicial Approach in Bahrain
Bahraini courts:
- Respect tribunal discretion
- Intervene only when necessary
- Support interim measures framework
9. Key Case Laws (International & Persuasive)
Since Bahraini jurisprudence is limited, tribunals rely heavily on international arbitration decisions.
1. RSM Production Corporation v Saint Lucia
Principle:
- Security for costs granted due to:
- Claimant’s financial instability
- History of non-payment
Relevance:
- Leading case recognizing security for costs in arbitration
2. EuroGas Inc v Slovak Republic
Principle:
- Security for costs is exceptional remedy
- Requires strong justification
Relevance:
- Influences cautious approach
3. South American Silver Ltd v Bolivia
Principle:
- Considered:
- Third-party funding
- Risk of non-payment
Relevance:
- Expands modern criteria
4. Krederi Ltd v Ukraine
Principle:
- Emphasized:
- Exceptional nature of security orders
Relevance:
- Reinforces high threshold
5. ICC Case No 14606
Principle:
- Tribunals have inherent power to order security
Relevance:
- Supports authority under institutional arbitration
6. Libananco Holdings Co Ltd v Turkey
Principle:
- Refused security for costs:
- To avoid restricting access to justice
Relevance:
- Highlights balance between fairness and access
10. Practical Scenarios
Scenario 1:
- Claimant is insolvent
✔ Tribunal may order security
Scenario 2:
- Claim funded by third party
✔ Tribunal assesses risk before ordering
Scenario 3:
- Strong claim but weak finances
⚖ Tribunal may refuse to avoid injustice
11. Risks and Limitations
(A) Access to Justice
- Overuse may block legitimate claims
(B) Enforcement Challenges
- Tribunal lacks coercive power
(C) Discretionary Nature
- No automatic entitlement
12. Drafting Recommendations
To address security for costs:
(1) Include Clause:
- Allow tribunal to order security
(2) Adopt Institutional Rules:
- Many expressly provide for such relief
(3) Clarify Procedures:
- Timing and form of security
13. Advantages in Bahrain
- Flexible tribunal powers
- Court support where needed
- Alignment with international standards
14. Conclusion
In Bahrain:
- Security for costs is recognized as an interim measure
- Tribunals have broad but cautious discretion
- Courts act as supportive enforcers
The Bahraini approach ensures a balance between:
- Protecting respondents from financial risk
- Preserving claimants’ access to justice
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