BAHRAIN Law and Practice Contributed by: Mohamed Shaban, Mohsin Al Alawi and Qassim Al Fardan, Hassan Radhi & Associates
1.3 Dispute Resolution Strategy and Outcomes
In the absence of an effective choice, Article 17 gen- erally applies the law of the parties’ common habitual residence or, where there is no common habitual resi- dence, the law of the place where the contract was concluded, unless the circumstances indicate the application of another law. The parties may also select different laws for severable parts of the same contract. The parties’ choice remains subject to Bahraini pub- lic policy and any overriding mandatory provisions. In consumer insurance contracts, the choice of law may not deprive the consumer of mandatory protec- tion available under the law of the consumer’s habit- ual residence. Party autonomy is therefore generally broader in reinsurance and other negotiated commer- cial policies than in retail or consumer insurance. 2.2 Jurisdiction and Forum Selection Jurisdiction clauses in insurance contracts are con- sidered under the general principles of Bahrain Civil and Commercial Procedures Law. The court will first determine whether Bahraini jurisdiction exists under the statutory rules governing international jurisdic- tion. A contractual forum clause will be considered within that framework and cannot confer jurisdiction where the matter falls outside the court’s competence or displace any exclusive or mandatory jurisdiction prescribed by law. In ordinary domestic insurance policies, it is uncom- mon for the parties to select the courts of another country. The insured, the risk and the insurer are usu- ally connected with Bahrain, and disputes are ordi- narily submitted to the Bahraini courts. Where par- ties wish to exclude court proceedings, an arbitration clause is generally more common than a foreign court jurisdiction clause. Foreign jurisdiction clauses are more frequently encountered in reinsurance, marine, aviation and other substantial commercial risks involving an inter- national reinsurer or a policy based on an international market wording. In those cases, the clause should be clear and consistent with the governing-law provi- sion, the service-of-process arrangements and any dispute-resolution provisions appearing in the under- lying policy or reinsurance contract.
In general insurance disputes, insurers commonly seek to assess the claim through an internal claims team, a loss adjuster or an external technical expert before deciding whether to reject, settle or partial- ly admit it. Where the exposure can be reasonably quantified, insurers often prefer an early commercial settlement to prolonged litigation. This enables the insurer to control defence costs, establish a definite reserve and avoid the uncertainty associated with court-appointed expert evidence. Insureds may also favour settlement where coverage is reasonably clear but the principal disagreement concerns quantum. Formal proceedings are more likely where the parties disagree on a fundamental coverage issue, the validity of an exclusion, causa- tion, allegations of non-disclosure, or a substantial difference between competing valuations. Motor insurance is more structured because the compulsory third-party and comprehensive motor policies, together with their claims procedures, have been standardised by the Central Bank of Bahrain. The CBB also maintains a formal complaints process for unresolved insurance complaints. Early settlement generally reduces legal and expert costs, but it may not be appropriate where the dispute raises an issue affecting a wider portfolio of policies. In such cases, an insurer may prefer to obtain a judicial determination rather than establish an adverse com- mercial precedent through repeated settlements. 2. Jurisdiction and Choice of Law 2.1 Choice of Law in Insurance Contracts Insurance and reinsurance contracts are not subject to a separate conflict-of-laws regime in Bahrain. The applicable law is determined under Law No 6 of 2015 on Conflict of Laws in Civil and Commercial Matters with a Foreign Element. Party autonomy is generally recognised. Article 4 allows the parties to select the applicable law, includ- ing international trade law and commercial customs.
12 I NSURANCE L I T IGATI O N 2026
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