WT/TPR/S/74 Trade Policy Review
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II. TRADE POLICY REGIME:   FRAMEWORK AND OBJECTIVES
(1) GENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK
(i) Overview
1. The State of Bahrain is a constitutional monarchy, headed by the Amir, with an
executive-cabinet form of government and a sepa rate judiciary.  Since August 1975, when the
National Assembly was dissolved by the Amir, Bahrain has been directly governed by the Executive.The Amir and Cabinet jointly exercise legislative authority, with advice from the Consultative
Council appointed in 1992.  Government is conducted by Amiri Decree through the Cabinet, although
much of the day-to-day governing is carried out by the Cabinet.  Political parties are not permitted,
but citizens may petition the Amir to redress their grievances;  a majlis (audience) is held regularly by
the Amir at which he listens to the views of citizens and accepts petitions for his intervention indealing with various problems.  Officials of Bahrain's municipalities hold local versions of the majlis.
1
(ii) The Executive
2. In accordance with the Constitution adopted in 1973, executive authority in the State of
Bahrain lies jointly with the Amir, who is the Head of State and also Supreme Commander of the
Bahrain Defence Force, and the Cabinet.2  The office of Amir passes from father to eldest son unless
the Amir designates one of his other sons to succeed him.3  The Amir appoints the Prime Minister,
and the ministers upon recommendation by the Prime Minister.
3. In practice, the head of the Cabinet, the Prime Minister, serves as head of the Government.4
The Ministers are directly responsible to the Amir, who exercises power through them.  The Cabinet
currently consists of 17 members, including the Prime Minister.  The responsibilities of the Cabinet
include formulating and executing government policy, and supervising the functioning of the
ministries.  The Amir presides over Cabinet meetings.  The Prime Minister, who supervises thefunctions and procedures of the Cabinet, is responsible for the implementation of the Cabinet's
decisions and their coordination between the various ministries, and ensuring that their functions are
integrated.  Cabinet resolutions may only be passed when the majority of its members are present and
with the approval of the majority of those present.   Cabinet resolutions are submitted to the Amir for
ratification in cases where an Amiri Decree is required.
5
4. At the regional level, Bahrain is divided into four administrative governorates, comprising the
capital, Manama, the island of Muharraq, and the Northern and the Southern governorates.  This
subdivision, established in 1996, was designed to improve the delivery of government services and
the accountability of officials.  An Amiri Decree in April 1998 divided Manama into 15 regions, each
with its own Mukhtar, or mayor.  The mayors are ap pointed directly by the Minister for the Interior.6
                                                     
1 Library of Congress (undated a).
2 Article 32(b) of the Constitution.
3 Article 1(b) and (c) of the Constitution;  this clause of the Constitution is not subject to amendment
(Article 104(c)).
4 Library of Congress (undated b).
5 Examples of cases in which an Amiri Decree is required include the appointment of the
Prime Minister, the Deputy Amir, acceptance of the Cabinet's resignation, formation of the Cabinet,establishment of the Consultative Council, and any other events provided for in the Constitution or the Law.
6 Economist Intelligence Unit (1999).Bahrain WT/TPR/S/74
Page 15
(iii) Legislature
5. Since 1975, following the dissolution of the National Assembly, legislative power in Bahrain
has been vested in the Amir in participation with the Cabinet.  On 16 December 1992 a 30-member
government-appointed Consultative Council was established to advise the Government on proposed
legislation.7  In late 1996, the membership of the Consultative Council was expanded to 40 members,
and the Council was granted the right to comment on most government policy.8
6. Bills are submitted to Cabinet by the relevant ministries, or by the Amir, and, following
advice from the Consultative Council and a decision in Cabinet, are submitted for approval and
ratification by the Amir.  Once a bill is signed by the Amir, it becomes a Legislative Decree and must
be published in the Official Gazette  within two weeks of its promulgation, coming into effect
one month after its publication, unless a specific provision to extend or reduce the period is includedin it.
9  Laws, in general, are not retroactive.  Regulations necessary for the execution of laws, or that
deal with public order, health, organization of public services, and administration are also
promulgated by Amiri decree.10
7. The Constitution is the highest law in the land, followed by laws, Amiri decrees and orders,
Prime Ministerial decrees and orders, and Administrative orders.
(iv) The Judiciary
8. The legal system in Bahrain is based primarily on national legislation;  if no statutory
provision is applicable, the judge may derive the basis of his judgement from the provisions of
Islamic Law (sharia).  In the absence of sharia provisions, rules of custom, followed by principles of
natural law, justice and good conscience, may be applied.  Under the Constitution, the judiciary is an
independent and separate branch of government.  The highest judicial authority is the Court of
Cassation;  the Amir retains the power of pardon.11  Provision is also made in the Constitution for a
Supreme Council of the judiciary to supervise the functions of the courts and the offices relating
thereto12;  the draft law to form the Supreme Council is currently in the final stages of promulgation.
The Law Courts Directorate in the Ministry of Justice and Islamic Affairs, deals mainly with
procedural affairs and responsibilities of the courts.13  Judges are appointed by, and may be removed
from office through, Amiri Decrees following advice from the Minister of Justice and Islamic Affairs.
9. Bahrain has a unified judicial system with dual courts, consisting of civil courts and sharia or
Islamic courts.  Sharia courts deal primarily with personal matters (including marriage, divorce and
inheritance).  There is a Sharia Court of Appeal, and appeals beyond the jurisdiction of this Court are
dealt with by the Supreme Court of Appeal.  The ci vil court system consists of lower civil courts,
high civil courts, the High Civil Court of Appeal  and the Court of Cassation.  Decisions taken by
the sharia courts and the civil courts may be appealed at the High Court of Appeal, which is the
highest appellate court in the country.
                                                     
7 Economist Intelligence Unit (1999).
8 Articles in the Constitution relating to civil liberties and the Assembly's re-election have been
suspended since 1975.
9 Article 106 of the Constitution.
10 Provided they do not conflict with any law (Article 39 of the Constitution).
11 Library of Congress (undated c).
12 Article 102(b) of the Constitution.
13 Ministry of Justice and Islamic Affairs (undated).WT/TPR/S/74 Trade Policy Review
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10. According to the authorities, WTO-related decisions and rules may be challenged in a
domestic court of law.
(2) DEVELOPMENT AND ADMINISTRATION OF TRADE POLICY
(i) Policy formulation and implementation
11. Responsibility for trade policy formulation lies with the Ministry of Commerce in
coordination with other ministries and trade-related bodies including the Supreme Council ofPetroleum.  An inter-ministerial committee headed by the Minister of Commerce is to be established
soon, to discuss trade-related issues in light of the current trade environment.
12. Trade policy is implemented by the Ministry of Commerce and other relevant ministries
depending on the sector involved.  Another agency closely associated with trade policy
implementation is the Bahrain Promotions and Ma rketing Board (BPMB).  The BPMB is chaired by
the Minister of Commerce, and its board members includes "highly ranked" individuals representing
both private and public sectors.  Its main areas of concern are promoting Bahrain's products abroad
and attracting inward investment in targeted areas.
(ii) Main trade laws
13. Under Bahraini law, trade treaties, once ratified and decreed by the Amir, and subsequently
published in the Official Gazette,  become part of national law, and supersede any national legislation,
despite constitutional provisions that may contradict it.
14  The Uruguay Round Agreements became
part of Bahrain's laws, after Amiri Decree No. 7 of 1994 was passed and ratified by the Amir on
12 July 1994.
14. The year 1995 marked Bahrain's founding me mbership of the World Trade Organization
(WTO) and the formulation of a new open-market policy.  It was found that the effectiveness of the
Ministry of Commerce in implementing the new policy depended upon the legal framework;  in thiscontext, several laws needed to be reviewed or amended.  New legislation to harmonize national laws
with Bahrain's international commitments, including fo r intellectual property rights, is currently being
drafted.
15. Bahrain's main trade-related laws include the Tariff, the Customs Handbook (which is to be
replaced by Gulf Cooperation C ouncil (GCC) Regulations starting January 2001), the Commercial
Company Law No. 25 of 1975 and amendments, a nd the Commercial Registration Law of 1961
(Table II.1).  The Commercial Company Law has recently been reviewed with the aim of improving
transparency, and is currently being finalized.
16. The State of Bahrain notified the WTO that it has no laws or decrees related to import
licensing, although there are restrictions on imports of  certain items (Chapter III(2)(iv));  and that it
has no laws or regulations relating to preshipment inspection or to the WTO Agreement on
Safeguards.  Bahrain has notified its legislation on copyright (Legislative Decree No. 10 of 1993) to
the WTO as well as its decision to accede to the Berne Convention for the protection of Literary and
Artistic Works in October 1996 (Chapter III(4)(vi)).
                                                     
14 Article 37 of the Constitution.Bahrain WT/TPR/S/74
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Table II.1
Main trade-related laws in Bahrain
Laws Issue
Customs Tariff Tariff
Customs Handbook (to be replaced by GCC regulations in
January 2001)Customs regulations; import and export restrictions;  rules of
origin
Ministerial Decree No. 10/1976 Trade restrictions for explosives
Commercial Company Law No. 25 of 1975 as amended,
Commercial Registration Law of 1961; Commercial Agency LawCompany law and registration of companies
Legislative Decree No. 14 Foreign investment in services
Ministerial Order No. 4 of 1995 Classification of service activities allowed under Legislative
Decree No. 4
Legislative Decree No. 13 of 1991 Foreign investment in limited-liability or joint-stock companies
Amiri Decree No. 16 of 1985 Standards and metrology
Ministerial Order No. 6 of 1992 General safety requirements of products and their fitness for
purpose
Legislative Decree No. 20 of 1983 Sanitary and phytosanitary regulations
Legislative Decree No. 10/1993 Copyright
Bahrain Patents, Designs and Trade Marks Regulations, 1955;
Legislative Decree No. 22 of 1977Patents and industrial designs
Ministerial Order No. 12 of 1993;  Legislative Decree No. 10 of
1991Trade marks
General Tenders Regulations Government procurement
Source: Government of Bahrain.
(3) TRADE POLICY OBJECTIVES
17. Bahrain believes that trade policy plays an important role in the overall goal of accelerating
economic growth, improving external competitiv eness, and creating employment opportunities for
Bahrainis.  Bahrain's economy is relatively open and import tariffs are applied on a
non-discriminatory basis, with the exception of trading partners belonging to the GCC.  Moreover,
since joining the WTO, Bahrain has been working towards amending its laws in order to bring theminto conformity with its WTO obligations.
15  It is important to note, however, that to the extent that
Bahraini legislation is not in accord with its WTO obligations the WTO Agreement is definitive, i.e.
treaty obligations supersede national legislation and are admissible in national courts.
18. Foreign investment has been liberalized, encouraging inward investment and transfer of
technology, which Bahrain believes to be a key factor in its development and industrial diversificationgoals.  Its sectoral trade and development objectives include concentrating on small and
medium-sized industries, giving priority to industries utilizing high technology, developing financial
and commercial services and specialized tourism activities, and developing Bahrain into a regional
training centre.
19. Bahrain grants at least most-favoured-nation (MFN) treatment to all WTO Members and
non-members.  The authorities strongly favour trade liberalization through the multilateral framework.
Bahrain holds that the rules-based multilateral system will cause less disruption to international trade
as a result of unilateral action and allow the integration of the least developed and developing
countries into the world economy.  Its membership of the WTO would, it believes, also send a strong
message to potential foreign investors about Bahrain's commitment to a rules-based system.
                                                     
15 WTO document MTN.TNC/MIN(94)/ST/12, 12 April 1994.WT/TPR/S/74 Trade Policy Review
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20. At the same time, regional agreements such as under the GCC and with the Greater Arab
Free-Trade Area (GAFTA) are also being pursued because Bahrain believes that regionalization
would help rather than hinder the globalization of the world economy.  In this context, Bahrain has
expressed hope that the GCC Secretariat would be granted observer status in the WTO.16
21. Bahrain has also expressed a number of concerns about its own difficulties in implementing
the Uruguay Round Agreements, as well as the dangers of marginalizing developing and leastdeveloped economies.  Implementation of some of its obligations resulting from the Uruguay Round
Agreements, despite having a transitional period, has proven difficult.  In this regard Bahrain has
requested technical assistance from the WTO and asked Members to consider granting an extension of
the deadline for developing country members for agreements whose transitional periods have
expired.
17  More recently, at the WTO Ministerial Conference in December 1999, Bahrain warned
about the possible marginalization of developing and least developed countries and suggested that
positive steps be taken to allow these countries to benefit from an equitable share of international
trade while allowing them the discretion to liberalize their economies according to their development
needs.
22. With regard to WTO negotiations on agricultural liberalization, Bahrain believes it imperative
that the decision on measures concerning possible negative effects of the reform programme on least
developed and net food-importing developing countries and, in particular, the clause relating to the
provision of technical and financial assistance to these countries, is fully implemented.  Other issues
of concern include the WTO Agreement on Trade-Related Investment Measures (TRIMs), where
Bahrain believes developing countries should be given another opportunity to notify their existing
TRIMs to the WTO and to maintain these according to their development needs;  and negotiations on
an agreement on government procurement, which Bahrain believes should be built upon the work ofthe working group on transparency in government procurement, and should not prevent parties from
applying existing national policies and domestic procurement procedures.
18  Bahrain has also
supported the work of the working groups on investment and competition policy and suggested that
they should continue operating under their present mandates.
(4) TRADE AGREEMENTS AND ARRANGEMENTS
(i) The World Trade Organization
23. A contracting party to the GATT since 13 December 1993, Bahrain deposited its instrument
of ratification of accession to the WTO on 27 July 1994 and became a founding Member of the WTO
on 1 January 1995.  Bahrain was not a party to any of the Tokyo Round Agreements.  As a developing
country Member of the WTO, Bahrain had a transition period to implement some of its commitmentsunder various WTO agreements.  Bahrain notified its intention to use the transition period for the
WTO Agreement on Customs Valuation and has subsequently requested an extension for a further
three years (Chapter III(2)(i)(c)).  Bahrain also noti fied its intention to use the transition period for the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
24. Bahrain's status of notification requirements, as of mid July 2000, is shown in Table II.2.
                                                     
16 WTO document WT/MIN(96)/ST/110, 12 December 1996.
17 WTO document WT/MIN(98)/ST/2, 18 May 1998.
18 WTO document WT/MIN(99)/ST/52, 1 December 1999.Bahrain WT/TPR/S/74
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Table II.2
Status of selected notification requirements to the WTO, 1995 to 15 July 2000
WTO Agreement Description of requirement Periodicity Most recent notification
Agriculture
(Art. 18.2)Domestic support Annual G/AG/N/BHR/2, 22.8.1997
Agriculture
(Art. 10 and 18.2)Export subsidies Annual G/AG/N/BHR/1, 22 .8.1997
Anti-dumping
(Art. 18.5)Laws and regulations Once by March 1995, then
changesG/ADP/N/1/BHR/1, 3.6.1997
Anti-dumping
(Art. 16.4)Anti-dumping actions taken Semi-annual G/ADP/N/59/Add.1, 19.4.2000
Subsidies and Countervailing
Measures
(Art 32.6)Laws and regulations Once by March 1995, then
changes–
Subsidies and Countervailing
Measures
(Art. 25.11)Countervailing duty actions
takenSemi-annual G/SCM/N/56/Add.1, 27.4.2000
Subsidies and Countervailing
Measures
(Art. 25.1);  GATT 1994
(Art. XVI:1)Notifications of subsidies Annual G/SCM/N/38/BHR, 26.7.2000
Safeguards
(Art. 12.6)Laws and regulations Once by March 1995, then
changesG/SG/N/1/BHR/1, 12.6.1997
Rules of Origin (Article 5 and
Annex II.4)Preferential and non-
preferential rules of originUpon entry into force –
Technical Barriers to Trade
(Art. 15.2)Laws and regulations Once –
Technical Barriers to Trade
(Annex 3C)Acceptance of Code Once, then changes G/TBT/CS/N/80, 18.9.1997
Technical Barriers to Trade Technical regulations Ad-hoc G/TBT/Notif.00/2, 22.12.1999
Preshipment Inspection
(Art. 5)Laws and regulations which
put the Agreement into forceOnce, then changes G/PSI/N/1/Add.6, 6.6.1997
Import Licensing Procedures
(Art. 1.4(a) and 8.2(b))Laws and regulations relevant
to import licensingOnce, then changes G/LIC/N/1/BHR/1, 13.6.1997
Import Licensing Procedures
(Art.  7)Questionnaire on import
licensingAnnual –
GATT 1994
(Art. XXVIII:5)Modification of schedule G/MA/102, 7.2.2000
GATT 1994
(Art. 17(4)(a))State Trading Once by 30 June 1995, then
annual–
GATS
(Art. III:4 or IV:2)Notification of an enquiry
pointOnce, then changes S/ENQ/48, 26.9.1997
TRIMs (Art. 6.2) Publications in which TRIMs
may be foundOnce, then changes –
TRIPS (Art. 63.2) and Decisions
of the TRIPS Council of
21.11.1995 (IP/C/2-5)Laws and regulations Once, then changes IP/N/1/BHR/2, 18.7.2000
IP/N/1/BHR/3, 18.7.2000
TRIPS
(Art. 69)Notification of contact point
for technical cooperationOnce, then changes IP/N/3/Rev.2/Add.6, 31.7.1997
Table II.2 (cont'd)WT/TPR/S/74 Trade Policy Review
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WTO Agreement Description of requirement Periodicity Most recent notification
TRIPS
(Art. 65.2 and 65.4)Transitional period Once IP/C/10, 15.7.1997
TRIPS
(Art. 70.8)Laws and Regulations Once –
TRIPS
(Art. 70.9)Exclusive marketing rights Once –
Decisions of the Contracting
Parties (BISD31S/12;BISD31/S/222;  BISD32S/12;
BISD32S/93)Notifications of quantitative
restrictionsOnce, then changes G/MA/NTM/QR/1/Add.4,
18.9.1997
Agreement on the implementation
of Article VII of the GATT 1994,
(Art. 20.1)Transitional period  for the
application of the Customs
Valuation AgreementOnce WT/LET/149, 11.7.1997
Agreement on the implementation
of Art. VII of the GATT 1994,
Annex III, para. 1Extension of transitional
period for the application ofthe Customs Valuation
AgreementG/VAL/W/57, 3.1.2000
Source : WTO documents.
25. Bahrain has not been involved in dispute settlement with WTO Members or with
non-members.
(ii) Regional agreements
(a) Free-trade agreements in the Middle East and North Africa
26. The Unified Economic Agreement among the Countries of the Gulf Cooperation Council
(GCC)19, a Customs Union signed on 25 May 1981 and currently in force, was notified to the GATT
under the enabling clause, on 11 October 1984.  The GCC Charter defines the objectives of the Union
as coordination, integration, and cooperation in all economic, social, and cultural affairs.  Areas
covered include trade, industry, investment a nd finance, transport, communications, and energy.20
Specific objectives include freedom of movement of people and capital, abolition of customs duties,
uniform minimum customs tariff, technical cooperation, harmonization of banking regulations, andfinancial and monetary coordination, including attempts to establish a common currency.
21  Since
1981, GCC integration has passed through several stages (Table AII.1).22  In September 1998, GCC
customs officials approved a unified customs law and customs duty rates for some 2,000 products;
customs duty rates for some 26 items were to be discussed in 1999.23  A number of changes in
Bahrain's tariff have already been made in preparation for the customs union.  These include
elimination of duty on essential goods and fruit, from 5% and 7%, respectively (Chapter III(2)(ii)).
The customs union is expected to be completed by 2005.
27. The Greater Arab Free-Trade Area (GAFTA), signed on 19 February 1997, and in force since
1 January 1998, is expected to eliminate all trade barriers among its members24, by end-2007.  The
                                                     
19 The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
20 UNCTAD (1996).
21 Cooperation Council for the Arab States of the Gulf (General Secretariat) (undated) .
22 UNCTAD (1996).
23 Dow Jones Newswires,  29 September 1998.
24 The GAFTA members are:  the GCC countries, Eg ypt, Iraq, Jordan, the Lebanon, Libya, Morocco,
Palestine, Somalia, Sudan, Syria, Tunisia, and Yemen.Bahrain WT/TPR/S/74
Page 21
establishment of the GAFTA commenced in January 1998, through the reduction of customs duties, at
a rate of 10% annually.  Twelve countries have thus far implemented the agreement while Sudan,
Somalia, Palestine, the Lebanon, Libya, and Yemen have not yet started implementing reductions in
customs duties.  The GAFTA has not been notified to the WTO.
(b) Free-trade agreements in Europe
28. Discussions for the establishment of a free-trade area are under way between the GCC and the
European Union (EU).  This would build on the Cooperation Agreement sign ed between the EU and
the GCC members in 1988 and in force since 1 January 1990.  Further developments in these
discussions are linked to the completion of a customs union between GCC Members.
(c) Other agreements
29. Bahraini exports are granted preferential access under the Generalized System of Preferences
(GSP) by a number of countries, including Belaru s, Bulgaria, Canada, Czech Republic, EU, Japan,
New Zealand, Norway, Russian Federation, Slovakia, Switzerland, and the United States.25
(iii) Bilateral agreements
30. Bahrain has signed bilateral trade agreements with Egypt (1994), Iraq (1982), Jordan (1976),
Syria (1996), Tunisia (1975).  Major exports covere d by these agreements are aluminium, plastics,
and petrochemicals, while major imports include food, furniture, and clothing.  Other trade and
economic agreements exist with Australia (1979), Bangladesh (1992), China (1990), Greece (1967),
India (1983), Republic of Korea (1984), Russia (1999), Turkey (1991), and the
United Kingdom (1991).  The authorities are currently negotiating bilateral trade agreements with
Bosnia Herzegovina, Cyprus, Egypt, Gabon, Kazakhstan, Kenya, Lebanon, Pakistan, Poland,
Romania, Thailand,and Yemen.
(5) FOREIGN INVESTMENT REGIME
(i) Introduction
31. A major factor in Bahrain's policy to encourage economic diversification has been the
adoption of a generally liberal investment policy , providing attractive investment opportunities for
foreign investors.  Consequently, the Commercial Company Law, the main legal reference on foreign
investment, has been revised over the years in order to allow increased foreign participation in localcompanies.  As of 1991, Bahrain allows up to 100% foreign equity ownership of new industrial
ventures, and the establishment of representative offices or branches of foreign companies without the
participation of local sponsors.  Export-oriented sectors have been the main focus of this policy.
Foreign ownership is also allowed in companies li sted on the Bahrain Stock Exchange (BSE).  The
Government is in the process of accelerating investment liberalization in the financial sector toimprove its attractiveness to international investors.  Foreign investment in petroleum extraction is
permitted through exploration and production-sharing agreements with the Government of Bahrain;
private investment in refining activities is permitted.  In addition, founders of newly established
companies, irrespective of their nationality, may not transfer or trade their shares for the first three
years under Ministerial Resolution 10 of 1999.
                                                     
25 Information as of 1996.WT/TPR/S/74 Trade Policy Review
Page 22
(ii) General legal framework
32. Bahrain does not have a specific law on investment, but provisions for investment are
included in the Commercial Company Law (Decree 25 of 1975).
33. Since 1977, foreign investors have been able to incorporate 100% offshore companies with all
of the characteristics of an onshore company, but under the proviso that all activities are conducted
outside the State of Bahrain.  Legislative Decree No. 13 of 1991, provides for the establishment oflimited-liability companies (WLL) or joint-stoc k companies with up to 100% foreign equity
ownership, provided activities undertaken are either new industrial investments (Table II.3), or where
the company is established as the regional center for distribution of its own goods and services
(Table II.4).  The Commercial Company Law, however , always provided discretion to allow for the
participation  of non-Bahrainis, where it was believed to be in the interests of the national economy,and, in particular, where specific expertise, knowledge or financing was required.
26  T h e  r a t e  o f
foreign ownership allowed depends on the legal vehicle adopted and, to some degree, on the nature of
the activity.  Article 110 of the Commercial Company Law allows foreign companies based in
Bahrain, licensed investment funds, and foreign companies with branches in Bahrain, to acquire and
trade in the shares of joint-stock companies up to a maximum limit of 49%.
Table II.3
Rate of foreign ownership allowed in different types of companies(Percentage)
Type of companyRate of foreign
ownership allowedBanking/insurance
activity allowedLocal operations
allowedSponsor required
Exempt company (offshore) resident 100 yes no no
Exempt company (offshore)
non-resident100 no no no
A joint stock company (closed) 100cyescyes no
Representative office 100 yes yes no
Company with limited liability (WLL) 100 no yes no
Branch office 100 no yes yesb
Joint stock company (public) 49ayes yes no
Partnership 49 no yes no
Simple commandite company 49 no yes no
a Although the Law states that "all … partners of joint-stock companies must be Bahraini nationals" it provides that "some partn ers
... may be non-Bahraini ... if and when the need for foreign capital or expertise arises".
b Branches of foreign companies must have a sponsor, who is engaged in the same line of business.  However, if the branch is
being established as a regional distribution centre for the goods and/or services of the foreign company (Table II.4), there ar e no
such sponsorship requirements.
c 100% ownership is restricted to industrial companies, or in the case of service companies where Bahrain is used as the centre for
regional distribution of the goods or services (Table II.4).  (Ministerial Resolution No. 4 of 1995).
Source: Bahrain Promotions and Marketing Board (undated), Formalities for company registration .
                                                     
26 Under Article 278 of the Commercial Company Law, incorporation of closed joint-stock and
limited-liability companies wholly owned by non-Bahrainis is allowed, with prior approval from the Minister ofCommerce.Bahrain WT/TPR/S/74
Page 23
Table II.4
Services in which foreign investment may be permitteda
Service activities
1. Re-assembly, packaging and shipping of products produced by the company
2. Use of bonded areas for storage of products for re-distribution and to cater to the needs of regional and local agents for th ese
products
3. Support services for products produced by the company
4. Commercial Project Development Consultants
5. Highly specialized scientific laboratories
6. Highly specialized technical services, such as centralized services for computer companies and the preparation and marketing of
their programs
7. Liaison and monitoring of distribution activities in the region of the parent company's goods or services
8. Specialized international management services in areas such as hotels, restaurants, shopping centres, real estate, tourism
projects, etc.
9. Consultancy services
10. Cable and telecommunication services
11. International courier services for goods such as currencies, precious metals, documents, parcels, samples, etc.
12. Educational and vocational training services
13. Services in the field of publication, promotion, and advertisement of goods and services
14. Medical services
15. Specialized international exhibition organizers
16. Services in the field of organization of international conferences and specialized scientific seminars and shows
17. Industrial support service centres, such as large workshops providing specialized maintenance, reconditioning, and repairing, a s
well as the fabrication and galvanization of steel
18. Maintenance of sophisticated industrial instruments
19. Organizations, such as funds, international agencies, etc, the nature of which is regional commercial support
20. Any other economic activity for which a resolution is issued by the Minister of Commerce
a Foreign investment is permitted for services associated with new industrial companies or where the company is established in
Bahrain as the regional centre for the distribution of its own services.
Source: Government of Bahrain.
34. Since 1999, efforts to develop investment further have included Resolution No. 1 of 199927
and Amiri Decree No. 10 of 1999, which permit foreigners (whether or not based in Bahrain) to own
and trade in the shares of joint-stock and limite d-liability companies;  GCC citizens may own up to
100% of the total equity while non-GCC nationals may own up to 49%.  The Minister of Commerce
may increase this percentage for foreigners from non-GCC countries through a resolution.  In
addition, Resolution No. 1 of 1999 lifted residency requirements and a maximum limit of 1% of total
equity per individual foreign investor.28  Bahrain Flour Mills Co. and Delmon Poultry Co. were
exempted from the provisions of this resolution.
35. A new Commercial Company Law, currently being drafted, proposes to allow all foreigners
to deal in the shares of joint-stock compan ies and to own any type of company other than
limited-liability and joint-stock companies currently permitted by the law.
36. According to the authorities, to date there have been no applications to establish Bahraini or
foreign-owned companies in Bahrain that wish to compete with existing government-owned or
                                                     
27 Amending Resolution No. 11 of 1994.
28 Under a law adopted in 1994, individual expatriates who have been living in Bahrain for at least
three years may buy up to 1% of the shares in any publicly listed Bahraini corporation.WT/TPR/S/74 Trade Policy Review
Page 24
parastatal companies, or that could be a danger to public health or other aspects of general welfare.
The Company Law, as such, does not prevent the establishment of such companies.
37. All investment in retail trade activities is subject to government approval and may only be
carried out by companies or partnerships in which a Bahraini national controls at least 51% of the
equity.  Sales in Bahrain of foreign-produced products are mainly carried out by Bahraini agents, and
in any case, commission must be paid to the Bahraini  agent.  Procedures for obtaining retail licences
have been streamlined, and, according to the authorit ies, all the necessary formalities can usually be
completed within one week.
38. In general, foreigners, other than nationals of the other five GCC States, may not own land or
real estate in Bahrain.  Foreign-owned banks may own their own premises, and expatriates who retire
in Bahrain after long-term employment there, may,  on a case-by-case basis, own their own residence
in Bahrain.  According to the authorities, the Go vernment has recently resolved to permit foreigners
resident in Bahrain to own property, and is in the process of establishing the rules for this.
39. To increase Bahrain's attractiveness to foreign investors, the Government is considering the
possibility of allowing all foreign investors to own property in Bahrain, including real estate;  and to
allow non-GCC nationals to own up to 100% of fi rms listed on the Bahrain Stock Exchange (BSE).
Bahrain signed a bilateral investment treaty with the United States in September 1999, which obliges
the BSE to allow up to 100% foreign ownership no later than January 2005.29
40. There are no restrictions on investment abroad by Bahraini nationals.
41. The process of investment approval for foreign investors has, according to the authorities,
been streamlined considerably since 1995.  At present, under the Commercial Registration Law of
1961, all commercial activities, including foreign investment, must be registered with the Ministry of
Commerce.  In addition, a licence may be required from other ministries depending on the activity.  Inthe case of an industrial activity, a licence from the Ministry of Oil and Industry is required before the
Ministry of Commerce issues the commercial registration certificate.  The process of obtaining a
licence from the Ministry of Oil and Industry requires the submission of an industrial licence
application form, along with supporting documents.  The application is submitted to the licensing
section of the Industrial Development Directorate (IDD).  The IDD reviews the application andreports to the Industrial Licensing Committee which, if approval is granted, issues a temporary licence
for three months.  The applicant must then obtain a plot of land from the Industrial Areas Directorate
or from the private sector, and will be assisted in obtaining approval from the Central Municipal
Council, the Ministry of Health, the Environmental Protection Committee and the Civil Defence and
Fire Services Directorate.  The final licence issued after this process is valid for one year, although ifcommercial registration is obtained from the Ministry of Commerce, this licence does not need
renewal.  If this is not the case, the licence holder must justify his failure in starting the project to the
Ministry of Oil and Industry or any other relevant ministry, following which the licence is renewed
for another year.  Where a specific licence is required from another agency, such as the Bahrain
Monetary Authority for banks, then that other licence is also required to be renewed annually.However, if the other agency is only providing an approval, then renewal is only required through the
Ministry of Commerce.
42. According to the authorities, in practice the process of obtaining approval from the Ministry
of Commerce and any of the other ministries runs in parallel, with either Ministry acting as a
one-stop-shop depending on the first point of contact.  In an effort to improve the process further, the
Ministry of Commerce is developing a new comput erized process of approvals, which would allow
                                                     
29 U.S. Department of Commerce (undated).Bahrain WT/TPR/S/74
Page 25
for applications to be reviewed and processed th rough the internet, thereby cutting down the approval
time.  The authorities expect that the new system, when it is deployed, should be able to process all
such applications within one working day on production of all the required documents.
(iii) Incentives
43. Bahrain has no personal, corporate, or withholding tax.  There are also no restrictions on
capital and profit repatriation and on foreign exchange.  In addition, investors' products manufacturedin Bahrain have duty-free access to GCC Member States markets.  Bahrain also provides a well
developed infrastructure with good transportation and communication facilities.
44. The Government of Bahrain provides assistance to investors through rebates on electricity
and land rental.  Companies must hire a specified percentage of Bahraini employees (Chapter I(1)(ii)).
(iv) International agreements
(a) Bilateral investment agreements
45. Bahrain has signed bilateral investment protection agreements with China (June 1999);  Egypt
(September 1997);  Malaysia (June 1999);  Moro cco (April 2000);  the United Kingdom (October
1991);  and the United States (September 1999).  Bilateral agreements are currently being negotiated
with Algeria;  Bulgaria;  the Comoros;  Czech Republic;  France;  Germany;  India;  Indonesia;
Kazakhstan;  Pakistan;  the Philippines;  Poland;  Romania;  Russian Federation;  South Africa;
Sudan;  Syria;  Thailand;  Tunisia;  Turkey;  and Yemen.
46. In 1985, Bahrain and the United States signed an agreement regarding activities in Bahrain by
the Overseas Private Investment Corporation (OPIC), allowing the OPIC to extend such facilities as
investment insurance, reinsurance, and investme nt guarantees, to private investors from the
United States interested in doing business in Bahrain.
(b) Double taxation agreements
47. Bahrain has signed double taxation agreements with China;  Egypt;  France;  Malaysia;  and
Morocco.  Agreements are currently being negotiated with Algeria;  Czech Republic;  Germany;
Hong Kong, China;  India;  Indonesia;  Ir an;  Jordan;  Kazakhstan;  Lebanon;  Nepal;
the Netherlands;  Pakistan;  the Philippines;  Poland;  Romania;  Russian Federation;  Sudan;  Syria;
Switzerland;  Thailand;  Tunisia;  Turkey;  Uganda;  the United Kingdom;  the United States;  Yemen;and Zimbabwe.