Bahrain
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. The respondent is prohibited from dealing with the assets referred to in the freezing order (within the jurisdiction) until a specified time (for example, a further hearing, judgment or payment), or further order of the Court. The jurisdiction of the Bahrain Courts is domestic only. Bahrain Courts do not have jurisdiction in cases filed against individuals who are resident or domiciled in Bahrain, but who are not citizens, with regard to real estate out of Bahrain.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. Examples include orders for the freezing of commercial registration, the freezing of properties and the freezing of moveable assets. The Court may also issue a travel ban. Confidential information in respect of client assets may be disclosed by the Central Bank of Bahrain and/or other financial institutions pursuant to a Court order.
3. Briefly what is the relevant legal test?
The applicant must show that it has serious grounds for the belief that the respondent will abscond or smuggle assets abroad or dispose of them with the intention of obstructing or delaying any order or decision issued against the respondent.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant makes an application to the Court setting out the reasons for the application and the basis on which the freezing order should be handed down. The application can be made without notice and the respondent can challenge the order after the event, assuming it is made. The applicant must file the underlying claim against the respondent within eight days of the application for the freezing order.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
No, this is not automatically required. However, the Court may require a surety (for example, someone to be responsible for paying compensation to the respondent) in certain circumstances.
6. Can it be sought against third parties?
Yes, any parties to the underlying litigation can be made parties to the freezing order. Third parties not parties to the freezing order or underlying litigation cannot generally be bound. Financial institutions holding the assets of the respondent will be instructed by the Court to comply with the order and third parties notified of the order are required to ensure that it does not knowingly assist the respondent in breaching the terms of the freezing order.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible assets located in Bahrain.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes. This is at the discretion of the Court.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes. Freezing orders may be awarded by an arbitral tribunal as an interim measure.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, including prior to commencing the underlying claim, during substantive proceedings, or following judgment to assist with enforcement. Where a freezing order is granted prior to commencing proceedings, substantive proceedings must be filed within eight days of the freezing order being granted, or the order shall be lifted.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Yes. Freezing orders shall not extend to the clothing, belongings and dwelling of the respondent and their family, or the tools, furniture and other movables necessary for the respondent to carry out their profession, unless these have been provided as security for a debt. In addition, only a quarter of the respondent’s fixed gross wages or salary (or other revenue necessary to support themselves and/or their family) may be frozen. Where the respondent is a corporate, all moveable and immoveable assets may be subject to the freezing order, with the exception of furniture and books required for the company to carry on business and the salaries of employees.
12. What happens after a freezing (or equivalent) order is granted?
Third parties holding assets subject to the freezing order must be notified and provided with a copy of the freezing order within eight days of its authorization by the Court. Where an order has been made on an ex parte basis, the applicant must file an application for formal recognition of the validity of the freezing order (which takes place at a hearing) with the Court within fifteen days of the granting of the order, or the order shall be considered void. The respondent is able to attend this hearing. After considering the freezing order, the Court may void or extend such order pending the commencement of substantive proceedings, judgment or execution.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The applicant pays the administrative costs of obtaining the freezing order, which is determined according to the amount of the underlying substantive claim. The Court may order that such costs be borne by the respondent upon conclusion of the substantive proceedings should the basis of the application be founded.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
Any interested party in the freezing order may file a complaint to the Court within seven days of being notified of it, in a number of circumstances. Circumstances include where the assets subject to the freezing order are not in their possession or are not owned by the respondent, where rights (such as those of other creditors) exist over the frozen assets in an amount equal to or exceeding the value of the amount to be frozen and where any costs associated with the freezing order have been unfairly incurred by the third party.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent who disobeys or obstructs the implementation of a freezing order may be held criminally liable, fined and/or have their assets seized. A third party may only be held liable where they knowingly help or permit the respondent to breach the terms of the order.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
No.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, however this is subject to the laws of the relevant jurisdiction.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Yes, freezing orders issued in a foreign jurisdiction may be executed under the same conditions in Bahrain provided the following conditions have been satisfied:
(i) the correct Court to hear the underlying dispute was the foreign Court, and not the Courts of Bahrain;
(ii) the party or parties subject to the order are properly represented in the foreign jurisdiction;
(iii) the order has been formally validated in accordance with the laws of the Court that issued it;
(iv) the order does not conflict with an order previously issued in Bahrain and does not contravene Bahraini public order or morals.
Contacts
Eleanor Grace Livingstone Junior Partner Zu'bi & Partners Manama, Bahrain elivingstone@zubipartners.com www.zubipartners.com Noor Al Taraif Junior Partner Zu'bi & Partners Manama, Bahrain naltaraif@zubipartners.com www.zubipartners.com
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