50 Defining Moments of 2025: Part 7
THE AUTHOR:
Joseph Chedrawe KC, Independent International Arbitrator
This article is part of “Middle East Arbitration: 50 Moments That Shaped 2025,” a series exploring 50 significant developments in international arbitration across the Middle East. Spanning the UAE, Saudi Arabia, Qatar, Bahrain, and beyond, the series highlights key judicial decisions, legislative reforms, and institutional developments that shaped the region’s evolving arbitration landscape in 2025.
Bahrain Ratifies First BIT with UAE
On 13 March 2025, the Kingdom of Bahrain ratified a new Bilateral Investment Treaty (“BIT”) with the United Arab Emirates. The treaty, signed on 11 February 2024, was ratified by Bahrain through Law No. (10) of 2025 and entered into force on 8 May 2025 following ratification by both parties.
Among other features, the BIT: extends the definition of “Investor” to include sovereign wealth funds; makes the definition of “Investment” asset-based requiring a contribution of capital, an expectation of profit, and an assumption of risk; carves out concessions for the exploration and exploitation of natural resources from its scope of protection; and clarifies that a “mere breach of a contract” does not constitute a breach of the treaty itself (Article 1, definition of “Investment” and “Investor”; Article 2, scope, excluding concessions for exploration and exploitation of natural resources; Article 20(2), breach of contract not constituting breach of treaty).
The BIT provides for standard investor protections, including Fair and Equitable Treatment (“FET”), National Treatment, and Most-Favored-Nation (“MFN”) status (Article 3, Fair and Equitable Treatment; Article 4, Most Favoured Nation; Article 5, National Treatment). It protects against expropriation unless the measure is for a public purpose, non-discriminatory, and includes prompt and effective compensation (Article 7(1), expropriation protections requiring public purpose, non-discrimination, legal procedures, and prompt, fair and effective compensation). The treaty also clarifies that a state is not precluded from adopting measures for legitimate public policy objectives, such as public health or environmental protection (Article 8, general exceptions for legitimate public policy objectives including public health and environmental protection).
The BIT also includes provisions for cooperation on digital commerce, data privacy, and cybersecurity (Article 6(1), cooperation on digital commerce, data protection, data privacy, cyber security, intellectual property rights, consumer protection, electronic documents and signatures). It also features a “denial of benefits” clause, which allows a state to deny treaty protections to an investor that is owned or controlled by persons from a non-Contracting State or that restructures itself to gain treaty access (Article 10(1), denial of benefits to legal persons owned or controlled by persons from a non-Contracting State).
For dispute resolution, investors may refer a dispute to ICSID arbitration after a six-month negotiation period, though there is a three-year limitation period on claims, and the BIT prohibits a party from enforcing an award until 120 days after its issuance or after any annulment proceedings are completed (Article 13, investor-state dispute settlement, including six-month negotiation period, ICSID arbitration, three-year limitation period, and 120-day stay on enforcement). The BIT covers investments existing at its entry into force as well as future investments, though it excludes disputes that predated that date (Article 2, temporal scope, covering investments existing at entry into force and future investments, excluding disputes predating entry into force).
Bahrain First in Middle East to Ratify Hague Choice of Court Convention
On 1 July 2025, the Kingdom of Bahrain became the first jurisdiction in the Middle East to ratify the 2005 Hague Convention on Choice of Court Agreements.
The Convention establishes an international framework for the recognition and enforcement of exclusive jurisdiction clauses (Convention of 30 June 2005 on Choice of Court Agreements, Preamble; “The States Parties to the present Convention, Desiring to promote international trade and investment through enhanced judicial co-operation, Believing that such co-operation can be enhanced by uniform rules on jurisdiction and on recognition and enforcement of foreign judgments in civil or commercial matters…”). The treaty is based on three principles. First, the court designated in an exclusive choice of court agreement must, with limited exceptions, hear the case (Art. 5(1)-(2); “(1) The court or courts of a Contracting State designated in an exclusive choice of court agreement shall have jurisdiction to decide a dispute to which the agreement applies, unless the agreement is null and void under the law of that State. (2) A court that has jurisdiction under paragraph 1 shall not decline to exercise jurisdiction on the ground that the dispute should be decided in a court of another State.”). Second, any court in another member state that was not chosen by the parties must dismiss or stay the proceedings (Convention of 30 June 2005 on Choice of Court Agreements, Art. 6; “A court of a Contracting State other than that of the chosen court shall suspend or dismiss proceedings to which an exclusive choice of court agreement applies unless – a) the agreement is null and void under the law of the State of the chosen court; b) a party lacked the capacity to conclude the agreement under the law of the State of the court seised; c) giving effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy of the State of the court seised; d) for exceptional reasons beyond the control of the parties, the agreement cannot reasonably be performed; or e) the chosen court has decided not to hear the case.”). Third, a judgment rendered by the chosen court must be recognized and enforced in all other Contracting States (Art. 8(1)).
This enforcement must be done without any review of the merits of the case (Art. 8(2)). Enforcement can only be refused on a few limited grounds, such as if the judgment was obtained by fraud or if its recognition would be “manifestly incompatible with the public policy” of the enforcing state (Art. 9(d)-(e)).
Other commercial jurisdictions that are party to the treaty include the United Kingdom, the European Union, and Singapore (See, Status Table: Convention of 30 June 2005 on Choice of Court Agreements). The Convention’s scope is specific: it applies only to exclusive choice of court agreements in international civil and commercial matters and excludes several areas, including arbitration, consumer and employment contracts, and insolvency proceedings (Arts. 1(1), 2(1)-(2), and 2(4)).
Bahrain Launches International Commercial Court and Signs ICSID and PCA Agreements
On 5 November 2025, Bahrain announced the opening of the Bahrain International Commercial Court (“BICC”), with Professor Jan Paulsson as President and Sir Christopher Greenwood KC as Deputy President.
Through a partnership with Singapore, BICC judgments may be appealed to the International Committee of the Singapore International Commercial Court (“SICC”). The BICC was established to handle international commercial disputes where parties have agreed to its jurisdiction (Royal Decree Law No. (9) of 2024, Article 5; “The Court shall have exclusive jurisdiction to adjudicate the following disputes upon agreement of the parties to refer to its jurisdiction… a. International commercial disputes… b. Disputes related to arbitration, including: 1. Provisional and precautionary measures related to any arbitration. 2. Appointment of arbitrators. 3. Consideration and annulment of arbitration rulings…”). Its scope includes disputes involving goods, services, distribution, and commercial agencies as well as jurisdiction over arbitration-related matters, including arbitrator appointment and interim relief (Article 10(a)). The BICC allows proceedings in English and representation by foreign lawyers (Article 11(a)(4), Article 18(b)).
On 21 February 2025, Bahrain’s Council for the Development of International Commercial Dispute Resolution Mechanisms entered into a MoU with the International Centre for Settlement of Investment Disputes focused on facilitating dialogue and knowledge-sharing in investment dispute settlement.
On 17 June 2025, Bahrain executed a Host Country Agreement with the Permanent Court of Arbitration (“PCA”), which established a PCA office in the kingdom, the first in the Middle East.
SCC Arbitration Institute Releases Official Arabic Translation of its Rules
On 13 January 2025, the Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”) released an official Arabic translation of its 2023 Arbitration Rules and 2023 Rules for Expedited Arbitrations.
The SCC joins other leading arbitral institutions with official Arabic versions of their rules, including DIAC, CRCICA, arbitrateAD, QICCA, SCCA, SIAC, LAMC, the ICC and the ICDR.
US Appeals Court Overturns Lower Court and Affirms DIFC-LCIA Clause
On 27 January 2025, in Baker Hughes Saudi Arabia Co. Ltd. v. Dynamic Industries, Inc., a U.S. Appeals Court affirmed a DIFC-LCIA arbitration clause, reversing a lower court judgment that had found the agreement unenforceable after the DIFC-LCIA’s dissolution in 2021 (p. 2).
The arbitration clause provided for disputes to be “finally resolved by arbitration under the Arbitration Rules of the DIFC-LCIA” (p. 6). The district court ruled that Dubai Decree No. 34 of 2021 had abolished the DIFC-LCIA, making the designated forum unavailable and the “forum-selection clause” unenforceable (p. 8).
The Fifth Circuit found that the district court had erred and focused too narrowly on the availability of the named institution (p. 2). It held that the “dominant purpose” of the agreement was clearly to arbitrate disputes, not to litigate, and that the specific designation of the DIFC-LCIA was not “integral” to that primary intent (p. 22).
The Court pointed to the subcontract’s dispute resolution provisions, which identified mediation and arbitration, and “never mention[ed] litigation” (p. 6). The agreement had also provided for an alternative arbitration pathway in Saudi Arabia, which the appellate court said demonstrated that the DIFC-LCIA was not the exclusive, or an indispensable, forum (p. 23).
The Court of Appeals held that, where the primary intent is to arbitrate, and the chosen forum is unavailable, the Federal Arbitration Act empowers the court to appoint a substitute arbitrator to ensure the agreement is upheld (p. 22).
The case was remanded with instructions for the district court to “consider whether the DIFC-LCIA rules can be applied by any other forum […] If so […] compel arbitration […] If not […] consider whether to otherwise compel arbitration in Saudi Arabia…” (p. 29).
English High Court Interprets “Investment” in India-UAE BIT
On 20 June 2025, the English High Court in Ras Al Khaimah Investment Authority v Republic of India [2025] EWHC 1553 (Comm) set aside an arbitral tribunal’s ruling that it lacked jurisdiction. (para 2). The judgment arose from a challenge under Section 67 of the Arbitration Act 1996, and clarified the interpretation of “investment” and “measures applied directly to an investment” under the India-UAE Bilateral BIT (paras 2, 6, 7).
The dispute stemmed from a claim by the Ras Al Khaimah Investment Authority (“RAKIA”) concerning a bauxite mining and aluminum project in Andhra Pradesh, India (para 1). RAKIA’s investment was structured through shares in an Indian joint venture company, ANRAK Aluminium Ltd., as well as cash contributions and a pledge of its shares (para 85).
The project failed after the Government of Andhra Pradesh took measures, including issuing Government Order GOM 44, which led to the cancellation of the project’s critical Bauxite Supply Agreement (“BSA”) (para 52). The tribunal had concluded it lacked jurisdiction, adopting an interpretation of the BIT which would limit arbitration to disputes arising from “Measures… applied directly to the Claimant’s investment” (para 65). The arbitral tribunal found that the state’s actions (like cancelling the BSA) were applied directly to the joint venture company, ANRAK, but not directly to RAKIA’s investment, which it defined as its shares in ANRAK. In the tribunal’s view, RAKIA’s investment was only affected indirectly (para 65).
Mr Justice Robin Knowles of the Commercial Court disagreed with the tribunal’s ruling, holding that the tribunal’s analysis, which relied on the separation of corporate personality, was incorrect. (para 105). Stating that, in the context of the BIT, “the lens is different” (paras 105, 107), he concluded that the state’s actions were a “binding action” that was “targeted at the investment” as a whole, namely, “the proposed establishment of an Alumina and Aluminium Industry” (paras 96, 111, 112).
The Court therefore rejected the tribunal’s approach, noting that it would effectively exclude one of the most common methods of structuring foreign investment from the treaty’s protection: “Standing back, the Tribunal’s analysis would in practice mean that a major form of investment structure fell outside the compass of the BIT without apparent reason for that choice” (para 116).
Canadian Court Rejects DIFC-LCIA Clause Challenge and Enforces DIAC Award
On 3 July 2025, in InFrontier AF LP v. Rahmani, an Ontario court enforced a DIAC arbitral award and rejected a challenge that the underlying arbitration clause was invalid due to the 2021 dissolution of the DIFC-LCIA (paras 1, 3, 71). The judgment found that the parties were bound by the new DIAC Arbitration Rules (paras 30-31).
The dispute stemmed from a 2020 Loan Agreement guaranteed by the respondent (para 6). That agreement’s arbitration clause required any dispute to be “finally settled by arbitration… under the Rules of Arbitration of the DIFC-LCIA” (para 17). Dubai Decree No. 34 had dissolved the DIFC-LCIA, with disputes filed after the decree to be directed to DIAC (paras 34-35). InFrontier commenced a DIAC arbitration in 2023, and the case proceeded under the DIAC Arbitration Rules. (8-9). The Final Award was issued on 2 August 2024 (para 1).
The respondent in the arbitration challenged the arbitral award under Article V(1)(d) of the New York Convention on the basis that the “arbitral procedure was not in accordance with the agreement of the parties” (para 16). The respondent’s argument was that the parties had agreed to the DIFC-LCIA Rules, not the DIAC Arbitration Rules, and that Dubai Decree No. 34 could not unilaterally change their private contract (paras 19, 23).
The Court rejected this argument, noting the Preamble to the DIFC-LCIA Rules, which it said bound the parties to: “…such amended version of those rules as the DIFC-LCIA Arbitration Centre may have adopted hereafter to take effect before the commencement of the arbitration…” (para 30).
The Court found that Article (8)(c) of Dubai Decree No. 34, which kept the DIFC-LCIA Rules in force “until the new DIAC rules… are approved,” effectively made the new DIAC Arbitration Rules the superseding “amended version” (paras 41, 45). Relying on Dubai Decree No. 34, the Court held that the DIAC Arbitration Rules “became an amended version of the DIFC-LCIA Arbitration Rules and, therefore, as provided for in the Preamble, the parties… are taken to have agreed” to be bound by them (para 47).
The Court also dismissed the respondent’s public policy arguments, noting that Dubai Decree No. 34 did not amend an arbitration agreement without the consent of the parties but rather triggered a change the parties had already consented to in the Preamble (para 60). The Court also dismissed the respondent’s challenges to procedural fairness, including an allegedly “compressed schedule,” finding the arbitrator had given reasons for her procedural decisions and had not acted unfairly (para 70).
ICSID Tribunal Dismisses UAE Claim for Lack of Jurisdiction
On 28 July 2025, an ICSID tribunal dismissed a claim brought by a Kenyan contractor against the United Arab Emirates, ruling that the dispute fell outside the scope of the BIT between the UAE and Kenya (Spentech Engineering Limited v. United Arab Emirates, ICSID Case No. ARB/24/16, Award, 28 July 2025, paras 223-241, 269).
The dispute arose from construction contracts awarded to Spentech Engineering Limited (“Spentech”) by the UAE Embassy in Mogadishu, Somalia (para 49). The projects involved the construction of a hospital (the Sheikh Zayed Hospital), an army barracks (the Hodan Project), and work on the Embassy itself (para 51). All construction sites were located within the territory of Somalia (para 52).
Spentech commenced arbitration proceedings in April 2024, alleging breaches of the BIT, including non-payment for work done, seizure of property, and detention of its CEO (paras 60, 62).
The UAE raised a preliminary objection under ICSID Arbitration Rule 41, arguing that the claim was manifestly without legal merit (para 25). The UAE posited that the BIT only protects investments made “in the territory” of the host state, and since the construction works were performed entirely in Somalia, Spentech’s activities did not qualify as a protected “investment” (para 130).
In an award dated 28 July 2025, the ICSID tribunal accepted the UAE’s objection, holding that, under settled international law, the premises of a diplomatic mission are not part of the territory of the sending State (para 227). Therefore, the tribunal concluded that the UAE Embassy in Mogadishu is part of the territory of Somalia, not the UAE. The tribunal also rejected Spentech’s argument that additional activities in the UAE (such as project meetings or sourcing materials) could establish an investment in the UAE (para 237).
