2023 Investment Climate Statements: Bahrain

Policies Towards Foreign Direct Investment

The GOB has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing FDI is a top GOB priority. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a sponsor or local business partner. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding or death/inheritance. There are no restrictions on repatriation of capital, profits or dividends, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46 percent. The Bahrain Economic Development Board (EDB), charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, ICT, financial services, tourism, health, and education sectors. As a reflection of Bahrain’s openness to FDI, the EDB won the 2019 United Nations Top Investment Promotion Agency in the Middle East award for its role in attracting large-scale investments. U.S. investors have never alleged any legal or practical discrimination against them based on nationality.

In January 2021, the U.S. Commerce Secretary and the Bahraini Commerce Minister signed an MOU to establish the United States Trade Zone (USTZ) in Bahrain. Located near Bahrain’s port, aviation, and logistics facilities, the USTZ will enable U.S. companies to own and operate full turnkey industrial manufacturing, logistics, and distribution facilities in a unified commercial zone to access the wider GCC market. In February 2022, the Bahraini government allocated a small land plot and organized an expedited groundbreaking ceremony to formally open the USTZ to accommodate initial U.S. company interest. In March 2023, the Bahraini government announced the first public tender to install critical infrastructure, including roads and sewer lines. Another tender to install the USTZ’s electrical systems is expected by the end of 2023.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB permits foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. The GOB imposes only minimal limits on foreign control, and the right of ownership and establishment of a business. The Ministry of Industry and Commerce (MoIC) maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic pilgrimage, clearance offices—such as expeditors and document clearance companies—and workforce agencies. The U.S.-Bahrain FTA outlines all activities in which the two countries restrict foreign ownership.

U.S citizens may own and operate companies in Bahrain, though many such individuals choose to integrate influential local partners into the ownership structure to facilitate quicker resolution of bureaucratic issues such as labor permits, issuance of foreign visas, and access to industrial zones. The most common challenges faced by U.S firms are those related to bureaucratic government processes, lack of market information, customs clearance, and preregistration requirements to bid on local tenders.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted a Trade Policy Review of Bahrain in November 2021.

Business Facilitation

The CBB’s regulatory sandbox allows local and international FinTech firms and digitally focused financial institutions to test innovative solutions in a regulated environment, allowing successful firms to obtain licensing upon successful product application.

The MoIC operates the online commercial registration portal “Sijilat” ( www.sijilat.bh ) to facilitate the commercial registration process. Through Sijilat, local and foreign business owners can obtain a business license and requisite approvals from relevant ministries. The business registration process normally takes two to three weeks, from start to finish, but can take longer if a business requires specialized approvals. In practice, some business owners retain an attorney or clearing agent to assist them through the commercial registration process.

In addition to obtaining primary approval to register a company, most business owners must also obtain licenses from the following entities to operate their businesses:

• MoIC
• Electricity and Water Authority
• The Municipality in which their business will be located
• Labour Market Regulatory Authority
• General Organization for Social Insurance
• National Bureau for Revenue (Mandatory if the business revenue exceeds BD 37,500, or $99,734)

To incentivize foreign investment in Bahrain’s targeted sectors and investment zones, the GOB provides industrial lands at reduced rental rates; customs duty exemptions for industrial and manufacturing projects, including imports of raw material, plant machinery equipment, and spare parts; and a five-year exemption of the “Bahrainization” recruitment restriction.

Outward Investment

The GOB neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

In 2018, the GOB issued a competition law, a personal data protection law, a bankruptcy law, and a health insurance law to enhance the country’s investment eco-system. The Law of Commerce (Legislative Decree No. 7, passed in 1987) addresses the concept of unfair competition and prohibits acts that would have a damaging effect on competition. Companies also are forbidden from undertaking practices detrimental to their competitors or from attracting the customers of their competitors through anti-competitive means. There is no official competition authority in Bahrain and the country has yet to institute comprehensive anti-monopoly laws or an independent anti-corruption agency.

Bahrain’s industrial sector is dominated by state-controlled companies such as Aluminum Bahrain (ALBA), Bahrain Petroleum Company (BAPCO), and Gulf Petrochemical Industries Company (GPIC). De facto monopolies also exist in some industries led by individuals or family-run businesses.

The GOB uses International Financial Reporting Standards (IFRS) as part of its implementation of Generally Accepted Accounting Principles (GAAP). IFRS are used by domestic listed and unlisted companies in their consolidated financial statements for external financial reporting.

Bahrain adopted International Accounting Standard 1 (IAS 1) in 1994 in the absence of other local standards. Non-listed banks and other business enterprises use IASs in the preparation of financial statements.

The 2001 Bahrain Commercial Companies Law requires each registered entity to produce a balance sheet, a profit-and-loss account and the director’s report for each financial year. All branches of foreign companies, limited liability companies and corporations, must submit annual audited financial statements to the Directorate of Commerce and Company Affairs at the MoIC, along with the company’s articles and /or articles of association.

Depending on the company’s business, financial statements may be subject to other regulatory agencies such as the Bahrain Monetary Agency (BMA) and the Bahrain Stock Exchange (banks and listed companies).

Bahrain encourages firms to adhere to both the International Financial Reporting Standards (IFRS) and Bahrain’s Code of Corporate Governance. Bahrain-based companies by and large remain in compliance with IAS-1 disclosure requirements.

There are no informal regulatory processes managed by non-governmental organizations or private sector associations.

According to the World Bank, the GOB does not have the legal obligation to publish the text of proposed regulations before their enactment but bills that are discussed by Parliament may be reported in the local news. The text of the proposed regulations is publicly available one day, two weeks or thirty days after it is published in the Official Gazette. Bahrain, therefore, ranks among the countries with low rule-making transparency.

Bahrain’s laws can be drafted or proposed by the Cabinet or originate in the bicameral National Assembly, comprised of an elected, lower house Council of Representatives (COR) and an appointed, upper house Consultative Council (Shura). The independent Legislation and Legal Opinion Commission drafts legislation based on the proposals. The King’s signature is required to ratify any laws following parliamentary approval; laws are in force once published in the Official Gazette. The King may issue royal orders and royal decrees that are immediately effective once issued. For matters deemed urgent, the King can also issue decree-laws when the COR is in recess. These decree-laws must be approved by both chambers with no changes within a month of the COR resuming session, or they are considered null. GOB ministers and heads of agencies are authorized to issue regulations that pertain to the administration of their respective bodies.

Bahrain is a member of the GCC, which created a Unified Economic Agreement to expedite trade and the movement of people and goods within GCC borders.  The GCC has also adopted several unified model laws, such as the GCC Trademark Law.  Bahrain is a signatory to the Apostille Convention and is a member of the Permanent Court of Arbitration.  It is a dualist state, therefore, international treaties are not directly incorporated into its law and must be approved by the National Assembly and ratified by the King.

Commercial regulations can be proposed by the EDB, MoIC, Cabinet, or COR. Draft regulations are debated within the COR and Shura Council. The Bahrain Chamber of Commerce and Industry board of directors may raise concerns over draft legislation at committee meetings or send written comments for review by Members of Parliament; bills are otherwise not available for public comment. The Cabinet issues final approval of regulations.

The e-Government portal and the Legislation and Legal Opinion Commission website list laws by category and date of issuance. Some laws are translated into English. The National Audit Office publishes results of its annual audits of government ministries and parastatals.

International Regulatory Considerations

As a GCC member, Bahrain has agreed to enforce GCC standards and regulations where they exist, and not to create any domestic rules that contradict established GCC-wide standards and regulations.  In certain cases, the GOB applies international standards where domestic or GCC standards have not been developed.  Bahrain is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade. Bahrain ratified the Trade Facilitation Agreement (TFA) in September 2016 through Law No. 17 of 2016.

Legal System and Judicial Independence

Bahrain’s Constitution defines the Kingdom as a sovereign, independent, Arab Muslim State. Article 2 of the Constitution states that Islamic Sharia (Islamic law) is the main source of law; however, general matters and private transactions are governed mainly by laws derived from international law. Three types of courts are present in Bahrain: civil, criminal, and family (Sharia) courts. The civil court system consists of lower courts, courts of appeal, and the Court of Cassation – the highest appellate court in the Kingdom, hearing a variety of civil, criminal, and family cases. Civil courts deal with all administrative, commercial, and civil cases, as well as disputes related to the personal status  of non-Muslims. Family courts deal primarily with personal status matters, such as marriage, divorce, custody, and inheritance.

High-ranking judges in Bahrain are often from affluent, merchant families or may be non-Bahraini citizens. On January 19, 2022, the king appointed nine English-speaking foreign judges and legal experts to the Court of Cassation, all of whom are commercial arbitration specialists. Bahraini law borrows elements from European or other Arab states’ legal codes.

Bahrain has a long-established framework of commercial law. English is widely used, and in April 2007, the government permitted international law firms to be established in Bahrain. Several well-known international (including U.S.) law firms, working in association with local partners, are authorized to practice in Bahrain and provide expert legal services nationally and regionally. These firms provide services such as commercial and financial consultancy in legal matters. Fees are charged according to internationally accepted practices. Non-Bahraini lawyers can represent clients in Bahraini courts.

Investors report general satisfaction with government cooperation and support. Foreign competitors have occasionally perceived that legal interpretation and application varied between ministries and was influenced by influential local business interests or the stature and connections of an investor’s local partner. Such departures from the consistent, transparent application of regulations and the law are uncommon.

The GOB is eager to develop its legal framework. The U.S. Department of Commerce’s Commercial Law Development Program (CLDP) has conducted training and capacity-building programs in Bahrain for years, in cooperation with the National Assembly; Ministry of Justice, Islamic Affairs, and Endowments; Supreme Judicial Council; Bahrain Chamber for Dispute Resolution; Judicial and Legal Studies Institute; and MoIC.

Judgments of foreign courts are recognized and enforceable under local courts. Article nine of the U.S.-Bahrain BIT outlines the disposition of U.S. investment cases within the Bahraini legal system. The most common investment-related concern in Bahrain has been the slow or incomplete application of the law. Although some international law and human rights monitoring organizations have collected anecdotal evidence pointing to a lack of transparency, the judicial process in civil courts is generally considered fair, and cases can be appealed.

Laws and Regulations on Foreign Direct Investment

The U.S.-Bahrain BIT provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation and national treatment, the right to make financial transfers freely and immediately, the application of international legal standards for expropriation and compensation cases, and access to international arbitration. The BIT guarantees national treatment for U.S. investments across most sectors, with exceptions of a limited list of activities, including ownership of television, radio or other media, fisheries, real estate brokerages, and land transportation. Bahrain provides most-favored nation or national treatment status to U.S. investments in air transportation, the purchase or ownership of land, and the purchase or ownership of shares traded on the Bahrain Bourse.

The national treatment clause in the BIT ensures American firms interested in selling products exclusively in Bahrain are no longer required to appoint a commercial agent, though they may opt to do so. A commercial agent is any Bahraini party appointed by a foreign party to represent the foreign party’s product or service in Bahrain.

Bahrain generally permits 100 percent foreign ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors or business partners. Wholly foreign-owned companies may be set up for regional distribution services and may operate within the domestic market provided they do not exclusively pursue domestic commercial sales. Private investment (foreign or Bahraini) in petroleum extraction is permitted.

Expatriates may own land in designated areas in Bahrain. Non-GCC nationals, including Americans, may own high-rise commercial and residential properties, as well as properties used for tourism, banking, financial and health projects, and training centers.

Bahrain issued Bankruptcy Law No. 22 in May 2018 governing corporate reorganization and insolvency. The law is based on U.S. Chapter 11 insolvency legislation and provides companies in financial difficulty with an opportunity to restructure under court supervision.

Below is a link to a site designed to assist foreign investors to navigate the laws, rules, and procedures related to investing in Bahrain: http://cbb.complinet.com/cbb/microsite/laws.html 

Competition and Anti-Trust Laws

The GOB issued Competition Law No. 31 in July 2018 to prevent the formation of monopolies or the practice of anti-competitive behavior. This law makes it easier for new businesses to enter existing markets and compete with significant players.

MoIC’s Consumer Protection Directorate is responsible for ensuring that the law determining price controls is implemented and that violators are punished.

Expropriation and Compensation

There have been no expropriations in recent years, and there are no cases in contention. The U.S.-Bahrain BIT protects U.S. investments by banning all expropriations (including “creeping” and “measures tantamount to”) except those for a public purpose. Such transactions must be carried out in a non-discriminatory manner, with due process, and prompt, adequate, effective compensation.

Dispute Settlement

ICSID Convention and New York Convention

Bahrain uses multiple international and regional conventions to enhance its commercial arbitration legal framework. Bahrain is a party to the UNCITRAL Model Law on International Commercial Arbitration, the New York Convention, the International Centre for the Settlement of Investment Disputes (ICSID), and the GCC Convention for Execution of Judgments, among others. These conventions and international agreements established the foundation for the GCC Arbitration Centre, and the Bahrain Chamber for Disputes & Resolution (BCDR). Bahrain’s Constitution stipulates international conventions and treaties have the power of law.

Investor-State Dispute Settlement

Article 9 of The U.S.-Bahrain BIT provides for three dispute settlement options:

1. Submitting the dispute to a local court or administrative tribunals of the host country.
2. Invoking dispute-resolution procedures previously agreed upon by the foreign investor or company and the host country government; or,
3. Submitting the dispute for binding arbitration to the International Center for Settlement of Investment Disputes (ICSID) or, the Additional Facility of ICSID, or ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or any other arbitral institution or rules agreed upon by both parties.

Bahrain Chamber for Dispute Resolution Court

The Bahrain Chamber for Dispute Resolution (BCDR) Court was established by Legislative Decree No. 30 of 2009. It operates in partnership with the American Arbitration Association (AAA). BCDR’s casework emanates from disputes brought before the BCDR Court and BCDR’s international arbitration wing, BCDR-AAA.

The BCDR Court administers disputes in excess of 500,000 Bahraini Dinars (approximately $1.3 million) in which at least one party is a financial institution licensed by the Central Bank of Bahrain, or the dispute is of an international commercial nature.

Since its establishment in 2010, BCDR has administered more than 350 cases under its jurisdiction as a court with monetary claims totaling over $6.2 billion.

In February 2022, the Minister of Justice clarified the use of travel bans against insolvent debtors (individuals and companies). The new Enforcement Law  in Civil and Commercial Matters 22/2021 stated that the insolvent debtor must disclose any owned assets, within seven days from the beginning of the judicial proceedings. Companies can settle their debts within 21 days. The justice ministry said it would coordinate with debt collectors from the private sector to expedite the enforcement process.

BCDR-AAA International Arbitration Center

BCDR-AAA is an international arbitration center with jurisdiction over disputes with respect to which the parties have agreed in writing that the BCDR-AAA Arbitration Rules shall apply.

As of December 2020, BCDR-AAA registered 17 cases under its jurisdiction as an international arbitration center, one in 2013, one in 2015, three in 2016, five in 2017, two in 2019, and five in 2020. Of these cases, only seven are ongoing: one that was filed in 2017 and one filed in 2019, five that were filed in 2020. The remainder were awarded or settled.

Bahrain Chamber for Dispute Resolution
Suite 301, Park Plaza
Bldg. 247, Road 1704
P.O. Box 20006
Manama, Kingdom of Bahrain
Tel: + (973) 17-511-311
Website: www.bcdr-aaa.org 

The United Nations Conference on Trade and Development (UNCTAD) reported that Bahrain faced its first known Investor-State Dispute Settlement (ISDS) claim in 2017. The case involved investor claims over the CBB’s 2016 move to close the Manama branch of Future Bank, a commercial bank whose shareholders included Iranian banks. Bahrain and Iran are party to a BIT. UNCTAD reported another investor-state dispute case involving Qatar Airways in 2020.

International Commercial Arbitration and Foreign Courts

Arbitration procedures are largely a contractual matter in Bahrain. Disputes historically have been referred to an arbitration body as specified in the contract, or to the local courts. In dealings with both local and foreign firms, Bahraini companies have increasingly included arbitration procedures in their contracts. Most commercial disputes are resolved privately without recourse to the courts or formal arbitration. Resolution under Bahraini law is generally specified in all contracts for the settlement of disputes that reach the stage of formal resolution but is optional in those designating the BCDR. Bahrain’s court system has adequately handled occasional lawsuits against individuals or companies for nonpayment of debts.

Bahrain Law No. 9 of 2015 promulgating the Arbitration Law (the “New Arbitration Law”) came into effect on August 9, 2015. The law provides that the UNCITRAL 1985 Model Law with its 2006 amendments on international commercial arbitration (the “UNCITRAL Law”) will apply to any arbitration, taking place in Bahrain or abroad, if the parties to the dispute agreed to be subject to the UNCITRAL Law.
The GCC Commercial Arbitration Center, established in 1995, serves as a regional specialized body providing arbitration services. It assists in resolving disputes among GCC countries or between other parties and GCC countries. The Center implements rules and regulations in line with accepted international practice. Thus far, few cases have been brought to arbitration. The Center conducts seminars, symposia, and workshops to help educate and update its members on any new arbitration-related matters.

GCC Commercial Arbitration Center
P.O. Box 2338
Manama, Kingdom of Bahrain
Arbitration Boards’ Secretariat
Tel: + (973) 17278000
Email: case@gcccac.org 
Website: http://www.gcccac.org/en/ 

Bankruptcy Regulations

The GOB enacted its original bankruptcy and insolvency law through Decree by Law No. 11 in 1987.  In May 2018, the GOB issued and ratified Law No. 22, updating the original legislation. Modeled on U.S. Chapter 11 legislation, the law introduces reorganization whereby a company’s management may continue business operations during the administration of a case. The Bankruptcy Law also includes provisions for cross-border insolvency, and special insolvency provisions for small and medium-sized enterprises that were further amended in July 2020 and enhanced creditors rights and expediting liquidation proceedings. The Bahrain credit reference bureau, known as “BENEFIT,” is licensed by the CBB and operates as the credit monitoring authority in Bahrain.

Environmental, Social, and Governance Disclosure

As part of a wider effort to promote sustainability and transparency in Bahrain’s capital market, Bahrain’s national stock market, the Bahrain Bourse (BHB), announced in 2020 new Environmental Social & Governance (ESG) reporting guidelines for listed companies . The voluntary reporting guidance aims to assist listed companies to integrate ESG issues in their reporting cycle and better meet the demands of institutional investors for material ESG information. The ESG reporting guidance encourages listed companies to disclose a set of 32 ESG metrics and indicators in alignment with the recommendations of the Sustainable Stock Exchanges (SSE) initiative and the World Federation of Exchanges, Global Reporting Initiatives (GRI) standards, and the United Nations Sustainable Development Goals. The guidance explains the key regional and international drivers for adoption of ESG reporting, the importance of ESG reporting, the ways to report on ESG, and emphasizes Bahrain Bourse’s efforts in promoting sustainability.

Investment Incentives

The GOB offers a variety of incentives to attract FDI. The Bahrain EDB, the Bahrain Logistics Zone (BLZ), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP), U.S. Trade Zone (USTZ), and labor development fund Tamkeen offer incentives to encourage FDI. Some examples of incentives include assistance in registering and opening business operations, financial grants, exemption from import duties on raw materials and equipment, and duty-free access to other GCC markets for products manufactured in Bahrain.

Foreign Trade Zones/Free Ports/Trade Facilitation

Khalifa bin Salman Port, Bahrain’s primary commercial seaport, provides a free transit zone to facilitate the duty-free import of equipment and machinery. The GOB has developed two main industrial zones, one to the north of Sitra and the other in Hidd. The Hidd location, known as BIIP, is adjacent to a logistics zone, known as BLZ. Foreign-owned firms have the same investment opportunities in these zones as Bahraini companies.

MoIC operates BIIP, a 2.5 million square-meter, tax-free zone located minutes from Bahrain’s main Khalifa bin Salman port. Many U.S. companies operate out of this park. BIIP is most suited to manufacturing and services companies interested in exporting from Bahrain. The park offers manufacturing companies the ability to ship their products duty free to countries in the Greater Arab Free Trade Area. BIIP has space available for potential investors, including some plots of vacant land designated for new construction, and some warehouse facilities for rental. BIIP offers several incentives for international companies, including: competitive land-lease rental rates starting at $2.66 sqm/year; competitive utility costs; 100 percent foreign ownership; corporate and income tax exemptions; duty-free access to the GCC and U.S. markets; 5 percent customs duty exemption on raw materials, plant machinery, and spare parts imported for manufacturing; grants for funding, machinery, training, and employment; and a five year exemption from hiring Bahraini nationals.

BLZ is a boutique logistics park. Regulated and managed by the Ports and Maritime Affairs at the Ministry of Transportation and Telecommunications, BLZ offers local and international companies a base from which to operate in a customs-bonded area to export products and services to the northern Gulf and GCC markets. The park accommodates logistics companies engaged in:

• Third-party logistics (3PL) and freight forwarding services.
• General and specialized storage and distribution activities for re-export purposes.
• Value-added logistics services such as component assembly, packing and packaging, labeling, testing and repair, mixing, weighing and filling, and other light manufacturing activities.

BLZ offers several incentives for international companies, including: competitive land-lease rental rates starting at $11 sqm/year; 100 percent foreign ownership; corporate and income tax exemptions; 12-month grace period on utility payments for water, sewage, electricity, and telecommunication services.

A 1999 law requires investors in industrial or industry-related zones to launch a project within one year from the date of receiving the land, and development must conform to the specifications, terms, and drawings submitted with the application. Changes are not permitted without approval from MoIC.

In February 2022, MoIC inaugurated the USTZ to attract U.S. companies to build, own, and operate full turnkey industrial manufacturing, logistics, and distribution facilities in a unified commercial zone that will facilitate streamlined access to the wider GCC market. MoIC expects the USTZ to include many of the same land lease discounts, customs exemptions, and other incentivized features as the BIIP and BLZ.

Performance and Data Localization Requirements

Companies in Bahrain are obliged to comply with so-called “Bahrainization” employment targets, under which the Labour Market Regulatory Authority (LMRA) mandates that a certain percentage of each company’s employees are Bahraini nationals. Companies may contact LMRA to determine the “Bahrainization” rate, which differs based on sector, or use a calculator to determine the rate: http://lmra.bh/portal/en/page/show/193 . The applicable Bahrainization rate is mandatory across a company’s corporate structure. Per Cabinet Resolution Number 27 of 2016, LMRA announced that companies unable to comply with the rates would only be eligible to apply for new work permits and sponsorship transfers by paying an additional annual fee of BD 250 ($663) per non-Bahraini worker. LMRA may apply fines to companies that do not comply with “Bahrainization” requirements.

The GOB introduced the National Employment Program initiative in 2019 to enhance Bahraini nationals’ employment through trainings and qualification programs. The program, in its two versions, worked on replacing expat employment with Bahraini nationals in several occupations, mainly, in the health, education, and telecommunication sectors.

The GOB issued Law No. 1 in March 2019 amending Article 14 of the Private Health Establishments Law, which gives priority to recruiting qualified Bahraini physicians, technicians, and nursing staff in private health establishments.

There is no excessively onerous visa, residence, work permit, or similar requirement inhibiting the mobility of foreign investors or their employees in Bahrain. Americans and citizens of many other countries can obtain a two-week visa with relative ease upon arrival in Bahrain or online. Bahrain also offers American citizens a five-year, multiple-entry visa, if required.

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses; no product localization is enforced, and foreign investors are not obliged to use domestic content in goods or technology. There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers, on American investments.

There are no special performance requirements imposed on foreign investors. The U.S.-Bahrain BIT forbids mandated performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. Foreign and Bahraini-owned companies must meet the same requirements and comply with the same environmental, safety, health, and labor requirements. Officials at the Ministry of Labor, LMRA, and MoIC supervise companies operating in Bahrain on a non-discriminatory basis.

The CBB regulates financial institutions and foreign exchange offices. Foreign and locally owned companies must comply with the same rules, policies, and regulations.

There are no requirements for foreign IT providers to turn over source code and/or to provide access to surveillance.

Bahrain enacted Law No. 30 of 2018 with respect to Personal Data Protection on July 12, 2018. The nationwide Data Protection Law, which went into force on August 1, 2019, promotes the efficient and secure processing of big data for commercial use and provides guidelines for the effective transfer of data across borders.

Real Property

The GOB enforces property rights protections for land and homeowners. Most land has a clear title. Ownership of land is highly concentrated among royal family members; certain areas may be closed to Bahraini investors as well as expatriates. Foreign firms and GCC nationals are permitted to purchase land in certain areas in Bahrain. Non-GCC nationals can acquire high-rise commercial and residential properties in designated areas. Foreign investors may purchase property to operate businesses in various fields of business including, but not limited to, manufacturing, tourism, banking and financial services, education and training, design, and advertising.

Foreign investors may own commercial property in the following geographic areas:

• Ahmed Al-Fateh (Juffair) district
• Hoora district
• Bu Ghazal district
• Seef district
• Northern Manama, including the Diplomatic Area, where the main international corporations are located

Foreign investors may own residential property in the following tourist areas:

• Durrat Al Bahrain
• Riffa Views
• Amwaj Islands
• Bahrain Financial Harbor
• Bahrain Bay
• Reef Island
• Diyyar Al Muharraq
• Some areas in Saar

Most of the new development projects in Bahrain permit expatriates and international investors to own houses, buildings, outlets, or freehold apartments.

Legally purchased property cannot revert to other owners, even if such property is unoccupied.

Intellectual Property Rights

Bahrain is not included in the 2023 United States Trade Representative (USTR) Special 301 List or the Notorious Markets List. Bahrain does not track or report on seizures of counterfeit goods.

Under the U.S.-Bahrain FTA, the GOB committed to enforce intellectual property rights (IPR) protections. Bahrain signed the Berne Convention for the Protection of Literary and Artistic Works, Patent Cooperation Treaty, Nice Agreement, Madrid Agreement, Budapest Treaty, Trademark Law Treaty, and the Paris Convention for the Protection of Industrial Property in 1996. The GOB ratified revised legislation in 2006 to implement Bahrain’s obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The GOB has passed laws related to IPR to bring Bahrain’s local laws into compliance with its Paris Convention commitment, and in anticipation of acceding to the Singapore Treaty on the Law of Trademarks and the Locarno Agreement on establishing an international classification for industrial designs, and the International Patent Classification (IPC). Bahrain has acceded to the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty. Bahrain ratified Law No. 31 on the Protection of New Plants Varieties in 2021 and is expected to accede to the International Union for the Protection of New Varieties of Plants in 2023.

The GOB has made progress in reducing copyright piracy and there are few reports of significant violations of U.S. patents and trademarks in Bahrain. The GOB’s copyright enforcement campaign began in late 1997 and was based on inspections, closures, and improved public awareness. The campaign targeted the video, audio, and software industries with impressive results. Commercially pirated video and audio markets have been mostly eliminated. However, audio, video, and software piracy by end-users remain problematic. There are no technology transfer requirements that force firms to share or divulge technology through compulsory licensing to a domestic partner, nor are firms required to undertake research and development activities in Bahrain.

Intellectual property regulations and applications are overseen by the Ministry of Industry and Commerce.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ . The Embassy’s webpage also offers a link to local lawyers, some of whom specialize in IPR and/or patent law: https://bh.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Resources for Intellectual Property Rights Holders:

Aisha Salem-Howey
Patent Attorney
Intellectual Property Attaché for the Middle East & North Africa
U.S. Department of Commerce U.S. Patent & Trademark Office
U.S. Embassy Abu Dhabi
Aisha.Salem-Howey@trade.gov 

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ 

Capital Markets and Portfolio Investment

Consistent with the GOB’s liberal approach to foreign investment, government policies facilitate the free flow of financial transactions and portfolio investments. Expatriates and Bahraini nationals have ready access to credit on market terms. Generally, credit terms are variable, but often are limited to 10 years for loans under $50 million. For major infrastructure investments, banks often offer to assume a part of the risk, and Bahrain’s wholesale and retail banks have shown extensive cooperation in syndicating loans for larger risks. Commercial credit is available to private organizations in Bahrain but has been increasingly crowded out by the government’s local bond issuances.

In 2016, the GOB launched a new fund designed to inject greater liquidity in the Bahrain Bourse, worth $100 million. The Bahrain Liquidity Fund is supported by several market participants and acts as a market maker, providing two-way quotes on most of the listed stocks with a reasonable spread to allow investors to actively trade their stocks. Despite these efforts, the market remains small in comparison to others in the region.

The GOB and the CBB are members of the IMF and fully compliant with Article VIII.

Money and Banking System

The CBB is the single regulator of the entire financial sector, with an integrated regulatory framework covering all financial services provided by conventional and Islamic financial institutions. Bahrain’s banking sector remains healthy with well capitalized banks, and sufficient liquidity to ensure a healthy rate of investment. Bahrain remains a financial center for the GCC region, though many financial firms have moved their regional headquarters to Dubai over the last decade. The GOB continues to drive innovation and expansion in the Islamic finance sector. In 2022, Bahrain ranked second in the MENA Islamic finance market and placed fourth globally, according to the ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI).

Bahrain has an effective regulatory system that encourages portfolio investment. The CBB has fully implemented Basel II standards and is attempting to bring Bahraini banks into compliance with Basel III standards. Bahrain’s banking sector includes 89 banks, of which 30 are retail banks, 59 are wholesale banks, 17 are branches of foreign banks, and 13 are locally incorporated. Of these, nine are representative offices, and 16 are Islamic banks.

There are no restrictions on foreigners opening bank accounts or corporate accounts. Bahrain is home to many prominent financial institutions, among them Citibank, American Express, and JP Morgan Chase. Ahli United Bank is Bahrain’s largest bank with total assets estimated at $41.9 billion as of December 2021.

Bahrain implemented the Real-Time Gross Settlement (RTGS) System and the Scripless Securities Settlement (SSS) System in 2007 to enable banks to carry out their payment and securities-related transactions securely on a real time basis.

In 2017, Bahrain became the first in the GCC to introduce fintech “sandbox” regulations that enabled the launch of cryptocurrency and blockchain startups. The same year, the CBB released additional regulations for conventional and Sharia-compliant financing-based crowdfunding businesses.  Any firm operating electronic financing/lending platforms must be licensed in Bahrain under the CBB Rulebook Volume 5 – Financing Based Crowdfunding Platform Operator.  In February 2019, the CBB issued cryptocurrency regulations.

Foreign Exchange and Remittances

Foreign Exchange

Bahrain has no restrictions on the repatriation of profits or capital and no exchange controls. Bahrain’s currency, the Bahraini Dinar (BD), is fully and freely convertible at the fixed rate of USD 1.00 = BD 0.377 (1 BD = USD 2.659). There is no black market or parallel exchange rate. There are no restrictions on converting or transferring funds, regardless of whether they are associated with an investment.

Remittance Policies

The CBB is responsible for regulating remittances, and its regulations are based on the Central Bank Law ratified in 2006. Foreign workers comprise most of the labor force in Bahrain and many remit significant quantities of funds to their countries of origin. Commercial banks and currency exchange houses are licensed to provide remittances services.

Commercial banks and currency exchange houses require two forms of identification before processing a routine remittance request, and any transaction exceeding $10,000 must include a documented source of the income. Bahrain enables foreign investors to remit funds through a legal parallel market, with no limitations on the inflow or outflow of funds for remittances of profits or revenue. The GOB does not engage in currency manipulation tactics.

The GCC is a member of the Financial Action Task Force (FATF). Bahrain is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF) which is headquartered in Bahrain. Participating countries commit to combat the financing of terrorist groups and activities in all its forms and to implement FATF recommendations.

Sovereign Wealth Funds

Bahrain established a sovereign wealth fund, Mumtalakat, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly BD 6.7 billion ($18 billion) as of 2021, issues an annual report online. The annual report follows international financial reporting standards and is audited by external auditing firms. By law, subsidiaries of Mumtalakat are audited and monitored by the National Audit Office. Mumtalakat regularly receives high rankings in the Linaburg-Maduell Transparency Index, which specializes in ranking the transparency of sovereign wealth funds. However, Bahrain’s sovereign wealth fund does not follow the Santiago Principles.

Mumtalakat holds majority stakes in several firms. Mumtalakat invests 62 percent of its funds in the Middle East, 30 percent in Europe, and eight percent in the United States. The fund is diversified across a variety of business sectors including real estate and tourism, financial services, food and agriculture, and industrial manufacturing. Although most investments are focused on developing economic growth for Bahrain, just under a quarter represent domestic investment in Bahraini businesses.

Mumtalakat acts more like an active asset management company than a sovereign wealth fund, including by taking an active role in managing SOEs. Most notably, Mumtalakat has been instrumental in helping Gulf Air, Bahrain’s state-owned airline, restructure and contain losses. A significant portion of Mumtalakat’s portfolio is invested in 29 Bahrain-based SOEs.

Mumtalakat did not directly contribute to the State Budget through 2016. However, beginning in September 2017, Mumtalakat annually contributed $53 million to the State Budget, which was increased to $106 million in the 2021-2022 State Budget.

Privatization Program

The GOB has been supportive of privatization as part of its Economic Vision 2030, and advocates for increased foreign investment as a means of driving private sector growth. The GOB’s decision to privatize the telecommunications sector in the early 2000s is an example of incentivizing private sector growth in Bahrain. In 2018, the GOB began to privatize some government administered medical services, such as pre-employment screenings. It has also begun the process of privatizing other support services at GOB medical facilities, such as transportation, cleaning, laundry, textiles, maintenance, and security.

In May 2019, the GOB loosened foreign ownership restrictions in the oil and gas sector, allowing 100 percent foreign ownership in oil and gas extraction projects, under certain production-sharing agreements.

Additional Resources

Department of State

• Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/).
• Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/).
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/).
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises (https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/).
• Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/).

Department of the Treasury

• • OFAC Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions ).

Department of Labor

• • Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  ).
  • List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods ).
  • Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab ).
  • Comply Chain ( https://www.dol.gov/ilab/complychain/ ).

Climate Issues

Bahrain’s Vision 2030 outlines measures to protect the natural environment, reduce carbon emissions, minimize pollution, and promote sustainable energy. Bahrain’s Ministry of Electricity and Water Affairs designs energy efficiency policies and promotes renewable energy technologies that support Bahrain’s long-term climate action and environmental protection ambitions. Endorsed by Bahrain’s Cabinet, the National Energy Efficiency Action Plan (NEEAP) and the National Renewable Energy Action Plan (NREAP) set national energy efficiency and national renewable energy 2025 targets of 6 and 5 percent, respectively, with the NREAP target increasing to 10 percent by 2035. In November 2021, Bahrain released an updated Nationally Determined Contribution (NDC) plan which outlined a series of new environmental targets. Bahrain also announced its ambitions to reach Net Zero by 2060, although it has not put into place policies, programs, or incentives to implement or enforce national carbon reduction targets.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

General Directorate of Anti-Corruption & Economic & Electronic Security
Ministry of Interior
P. O. Box 26698, Manama, Bahrain
Hotline: 992

Contact at “watchdog” organization:

Dr. Hussain al-Rubaie
President
Bahrain Transparency Society
P.O. Box 26059
Adliya, Bahrain
Phone: +973 39642452