Enforcement of Judgments and Foreign Court Judgments in Civil Proceedings

Overview

Bahrain comprehensively overhauled its enforcement regime in 2021 with the introduction of Bahrain Decree-Law No. 22/2021 On the Promulgation of the Execution Law in Civil and Commercial Matters (the “Execution Law”).

Bahrain Decree-Law No. 22/2021 enhances and consolidates enforcement procedures in Bahrain, repealing Chapter 8 of Bahrain Decree-Law No. 12/1971 On the Issuance of the Civil and Commercial Procedures Law, which previously governed execution procedures in Bahrain, and bringing together rules relating to the enforcement of domestic and foreign judgments, and those relating to arbitral awards and corporate insolvency procedures.

Practical Guidance

Identification of Assets

One of the most important issues when bringing civil proceedings, particularly in respect of those seeking a monetary remedy, is the identification of assets that would be available for enforcement.

It is sensible to conduct such an exercise at an early stage, preferably in advance of the issuance of proceedings, and for this to be refreshed regularly, in order that precautionary measures can be taken should it appear that assets are being dissipated, for example by way of injunctive relief through the court of urgent matters.

Information regarding a party’s assets is not generally publicly available from the ministries in Bahrain (e.g., the Survey & Land Registration Bureau for property), however, there are a number of other ways in which information regarding assets may be identified.

Websites such as www.sijilat.bh maintain a register of companies and agencies with basic commercial information such as company names, registered addresses, dates of corporate registration and current trading status. Whilst information such as company accounts, articles of association and charges over company assets and properties are not available without specific request, Sijilat does provide the total paid-up capital figure, the shareholders and their respective shareholdings, together with the identity of the ultimate beneficial owner.

The courts are also available to assist in identifying assets. Parties to proceedings in Bahrain may apply to the court for an order for the disclosure of documents defined in a specific request, although it should be noted that the party making the request must demonstrate to the court that it has a legitimate interest in the documents for the purpose of its case. Once such an order for disclosure is made, a party will then be able to obtain information relating to assets registered to another party.

Once enforcement procedures have been commenced, the execution court will request confirmation of the judgment debtor's assets from each of the relevant government entities, including the Central Bank of Bahrain (which will, in turn, contact those financial institutions licensed by it). This would usually include any sums held in accounts, vehicles and property.

Finally, a judgment debtor facing enforcement proceedings is obligated to disclose the whereabouts of assets sufficient to repay the debt. If the judgment debtor’s assets are insufficient, they must then disclose all their assets, including those held by third parties.

Judgment types

Generally, judgment will be obtained in civil proceedings in Bahrain following the issuance and prosecution of a case to a final hearing (either at first instance or on appeal) in one of Bahrain’s civil courts: the Small Claims Court; the High Civil Court; the Higher Court of Appeal; the Bahrain Chamber for Dispute Resolution court; the Court of Cassation; and the Court of Urgent Matters.

Other types of judgment are, however, available, although these are subject to the discretion of the judge/the court. For example, default judgment can be applied for where a defendant has been summoned but fails to appear before the court without a valid reason, and summary judgment is available where it appears that there is no valid reason for bringing or defending the claim, although both of these are again up to the discretion of the judge/the court.

Judgments/orders for interim relief/measures are also available, for example: the appointment of guardians/custodians/judicial receivers over assets; attachments over bank accounts, properties and other assets, such as shares; preservation orders; freezing orders; orders to prevent assets being removed from the jurisdiction; and other restrictions on individuals, such as travel bans.

Enforcement of domestic judgments

1. General provisions

A judgment creditor must notify the judgment debtor of the execution of the judgment prior to commencing enforcement proceedings (article 19 of Bahrain Decree-Law No. 22/2021). This provides the judgment debtor with time to make payment of the judgment debt, which will generally be preferable to the judgment creditor, and often to the judgment debtor too.

There may, of course, be circumstances where there is a real risk of dissolution of assets, in which case the judgment creditor might apply to the Court of Urgent Matters for an attachment/freezing order, if it has not already obtained such an order, in order to preserve assets that may otherwise be dissipated.

In some circumstances, the court may issue a judgment with a declaration of provisional execution with guarantee at the request of a party, such as judgments issued in possessory actions, evictions of tenants, payment of wages and salaries, and the performance of urgent repairs (article 12 of Bahrain Decree-Law No. 22/2021).

Where the judgment debtor does not voluntarily satisfy the judgment, then formal enforcement steps will need to be taken. The minimum period from notification of the judgment to the commencement of enforcement procedures is seven days (article 19 of Bahrain Decree-Law No. 22/2021).

The first step in commencing enforcement procedures is for the judgment creditor to make an application to the court of execution (article 21 of Bahrain Decree-Law No. 22/2021). Applications for enforcement should be made to the execution court together with a request seeking confirmation of the assets held by the debtor from the relevant ministries in Bahrain.

The applicant should file with the court of execution: a copy of the judgment and an ID card, if an individual; an execution copy and a ratified copy of the verdict of the final court judgment (which may differ to the above if there has been an appeal); and a power of attorney, if there is a lawyer acting for the judgment creditor.

Upon acceptance of the application by the execution court, attachment procedures are then triggered automatically (article 29 of Bahrain Decree-Law No. 22/2021). The execution court will request confirmation of the debtor's assets from the relevant government entities, including the Central Bank of Bahrain (which will, in turn, contact the financial institutions). The execution court will then attach/freeze assets up to the value of the judgment debt. If there are no liquid assets, the court will seize property and sell it at auction to settle the judgment (article 33 of Bahrain Decree-Law No. 22/2021).

In addition, the judgment debtor must give disclosure of its assets, up to the value of the judgment debt, within 7 days of notification on them that execution procedures have commenced (article 24 of Bahrain Decree-Law No. 22/2021).

In the event that the value of their assets is less than that of the judgment debt, they must give disclosure of all of their assets, including those that may be held by others on their behalf, and those that they may benefit from in the future. This is a continuing obligation, and where a debtor’s circumstances change, they must give updated disclosure within seven days of that change.

If the judgment debtor can prove that the value of their assets exceeds the judgment debt, then they may request that execution is levied against specific assets only (up to the value of the judgment debt), and that the attachments against the remainder of their assets are lifted, as long as the speed of the execution measures are not affected by this (article 30 of the Bahrain Decree-Law No. 22/2021).

Most assets can be attached in Bahrain, including movable and immovable property, but certain specific assets cannot be enforced against, such as: public property or state-owned property; assets of foreign embassies and diplomatic bodies that enjoy diplomatic immunity; government support and social subsidies provided to the judgment debtor; wages and salaries of employees; property belonging to an individual or a company that is necessary for the judgment debtor to continue working;
and the personal dwelling of the judgment debtor’s family (article 15 of Bahrain Decree-Law No. 22/2021).

If the judgment debtor fails to pay the judgment debt within ten days of notification, the judgment creditor can request the court of execution to either impose a fine on the judgment debtor, or to force them to satisfy the judgment (article 25 of Bahrain Decree-Law No. 22/2021).

However, if the judgment debtor can prove that specific performance is not possible, or where the judgment debtor enters into reorganisation and bankruptcy procedures under Bahrain Law No. 22/2018 On the Issuance of the Reorganisation and Bankruptcy Law, then the execution procedures will be immediately stayed (article 28 of Bahrain Decree-Law No. 22/2021).

If the judgment debtor’s assets are not sufficient to satisfy the judgment debt, then the execution judge may issue an order that that fact be recorded on the judgment debtor's credit report, until either the judgment debt is settled or the expiry of seven years (article 42 of Bahrain Decree-Law No. 22/2021).

2. Provisions specific to commercial companies

There are specific provisions that apply to companies licensed in accordance with Bahrain Decree-Law No. 21/2001 On the Issuance of the Commercial Companies Law (articles 44-48 of Bahrain Decree-Law No. 22/2021).

Commercial companies have a period of twenty-one days from the date of the filing an application for execution against them in which to settle the judgment debt. If settlement is not reached within this time, then the judgment debtor must on the next day give full disclosure of its financial position, together with documentary evidence, to prove whether or not the judgment debtor is able to satisfy the judgment debt. Where the value of the judgment debtor’s liabilities exceed its assets, it must enter into reorganisation and bankruptcy procedures under the Reorganisation and Bankruptcy Law within fifteen days from the day following the expiry of the settlement time limit and the obligation to give disclosure.

If disclosure is not given by the judgment debtor, or the disclosure requirements have not been completed, or procedures are not taken in accordance with the Reorganization and Bankruptcy Law, the execution court will proceed with the execution procedures set out above.

3. Provisions specific to financial institutions

There are also specific provisions that apply to financial institutions licensed under Bahrain Law No. 64/2006 On the Issuance of the Central Bank of Bahrain and Financial Institutions Law (the “CBBFIL”) (articles 49-50 of Bahrain Decree-Law No. 22/2021).

Where a judgment debtor is a financial institution licenced by the Central Bank of Bahrain (the “CBB”), enforcement procedures will be referred to the CBB for determination under Bahrain Law No. 64/2006.

Whilst the relevant procedures to be applied by the CBB under Bahrain Law No. 64/2006 are outside the scope of this Practice Note, the end result will, effectively, be the same as that for commercial companies: either the judgment debt will need to be paid or formal insolvency procedures will be implemented (under the specific administration/liquidation provisions of Bahrain Law No. 64/2006).

Enforcement of foreign judgments

1. Recognition of foreign judgments

Bahrain is a signatory to a number of bilateral and multilateral recognition treaties, including the Riyadh Arab Agreement forJudicial Cooperation 1983^{[1 p.7]} (the Riyadh Convention) and the Gulf Cooperation Council Convention for the Execution of Judgments, Delegations and Judicial Notifications 1995^{[2 p.7]} (the GCC Convention).

In general, the Bahraini courts will enforce foreign judgments without requiring prior recognition proceedings where the judgment originates from a country that is also a signatory to one of these treaties.

Of particular note is that regional enforcement within the GCC countries is well utilised, pursuant to the Riyadh and GCC Conventions, so a judgment of, for example, the UAE courts, is likely to be automatically recognised in Bahrain.

Article 1 of the GCC Convention provides that each of the GCC countries will "…execute the final judgments issued by thecourts of any member state in civil, commercial and administrative cases and the personal affairs cases in accordance with the procedures as provided under this agreement, provided that the court that issued the judgment has the jurisdiction in accordance with the international jurisdiction as applicable in the member state where the judgment is required to be executed or has the jurisdiction in accordance with the provisions of this agreement".

Article 32 of the Riyadh Convention requires the competent judicial body to establish that the judgment complies with the provisions of the Riyadh Convention and confirm this in its judgment. The competent body will then order appropriate measures to be taken to give the judgment the same enforceable status as it would have had if it had been made by the courts of that country.

Where reciprocal recognition is not established via treaty between Bahrain and the foreign country, the enforcement of foreign judgments will still generally be possible, albeit that an application must first be made to the Bahraini High Civil Court for recognition of the foreign judgment (article 16 of Bahrain Decree-Law No. 22/2021). Such an application will essentially be a fresh claim in which the court may choose to re-examine the issues that were the subject of the original dispute should the defendant submit a defence.

2. Enforcement of foreign judgments

As set out above, Bahrain will enforce judgments both from jurisdictions with which it would receive reciprocal enforcement of Bahraini judgments and those for which successful recognition proceedings have been brought in the Bahraini High Civil
Court.

Applications for execution orders in respect of a foreign judgment from a non-reciprocal country must also be made to the High Civil Court before that judgment can be submitted to the execution court.

Prior to an execution order being made, the court must establish that:

• The courts of the Kingdom of Bahrain are not competent to hear the case in respect of in the dispute in which the court
  judgment or order was passed and that the foreign courts which passed it are competent in accordance with the
  international rules of jurisdiction prescribed in the laws thereof.
• The litigants in the case in respect of which the judgment was issued were duly summoned and properly represented.
• The judgment or order has become final in accordance with the law of the court that passed it.
  The judgment or order does not conflict with a judgment or order previously passed by the courts of the Kingdom of
  Bahrain and does not provide for anything which constitutes a breach of public order or morality.

(Article 16 of Bahrain Decree-Law No. 22/2021)

With regards to the methods for enforcement of foreign judgments, all judgments capable of being enforced in accordance with the Bahrain Law requirements are treated the same for the purpose of enforcement, and the procedures to be followed will therefore mirror those set out in respect of domestic judgments above.

Challenging enforcement

The role of the execution court is to enforce judgments, and not to operate as a quasi-appeal court (article 22 of Bahrain Decree-Law No. 22/2021). That being said, there does exist some limited avenues to challenge the enforcement of a judgment (both domestic and foreign, which are, as explained above, treated the same for the purposes of enforcement).

If there appears to be any element of a judgment that is practically unenforceable, an execution court judge must not offer any opinion as to resolution and instead must seek clarification of the relevant section in writing from the trial judge (article 23 of Bahrain Decree-Law No. 22/2021).

Where the court has issued a decision to sell property by public auction, this decision may be appealed to the High Civil Court within fourteen days, and the judgment issued in the appeal may then be subject to appeal to the Court of Cassation, each on the following grounds:

• the sale concerns property that is not owned by the judgment debtor;
• it is impermissible to sell the property by law;
• there are competing rights over the property equal to or exceeding its value; and/or
• other funds exist that could be used to repay the entire judgment debt and that this would not prejudice the speed of
  execution and would guarantee the full payment of the debt.

The procedures for selling the property by public auction may not commence until after the judgment becomes final (article 34 of Bahrain Decree-Law No. 22/2021).

In addition, a party against whom an attachment order is made, together with interested parties, may file a grievance with the execution court where:

• the attachment concerns property not belonging to the judgment debtor in whole or in part;
• there are competing rights over the attached property for the same or a higher amount;
• it is illegal to proceed with the sale of the attached property; and/or
• the amount of the attachment exceeds the prescribed amount.

Similarly, an interested party may also file a grievance against a decision regarding the sale of property being enforced against and the distribution of the amounts recovered to judgment creditors.

Such grievances must be filed within seven days of receiving notification of the order intended to be challenged (article 37 ofnBahrain Decree-Law No. 22/2021).

Decisions issued by the execution court in respect of such grievance claims can then be appealed to the High Civil Court within seven days. Such appeals are on a summary basis and the court will hear these appeals by deliberation without summoning the parties unless it deems it appropriate to summon them. The decision of the High Civil Court on such appeals shall be deemed final (article 38 of Bahrain Decree-Law No. 22/2021).

Such appeals operate to stay the enforcement of a judgment until the determination of the appeals, except for attachment procedures which may proceed pending the determination of the appeals (article 39 of Bahrain Decree-Law No. 22/2021).

Related Content

Legislation

• Bahrain Decree-Law No. 22/2021 On the Promulgation of the Execution Law in Civil and Commercial Matters
• Bahrain Decree-Law No. 12/1971 On the Issuance of the Civil and Commercial Procedures Law
• Bahrain Law No. 22/2018 On the Issuance of the Reorganisation and Bankruptcy Law
• Bahrain Decree-Law No. 21/2001 On the Issuance of the Commercial Companies Law
• Bahrain Law No. 64/2006 On the Issuance of the Central Bank of Bahrain and Financial Institutions Law

International Regulations

• Riyadh Arab Agreement for Judicial Cooperation 1983^{[1 p.7]}
• Gulf Cooperation Council Convention for the Execution of Judgments, Delegations and Judicial Notifications 1995^{[2 p.7]}

This article was first published by LexisNexis. Please click here to read the article.