Using an agent or distributor
The U.S.-Bahrain FTA and Bilateral Investment Treaty (BIT) ensure American companies no longer need to appoint a local commercial agent, though they may opt to do so. A commercial agency arrangement enables foreign investors to access the market without having to establish a direct presence in Bahrain. A commercial agent is any Bahraini party appointed by a foreign party to represent the foreign party’s product or service in Bahrain. Local law governs the relationship, whether the relationship is structured as a distributorship, sales agency, or otherwise. As in other Gulf countries, regular, personal contact is the key to success in trade relationships.
A company’s office qualifies as a regional office if the company services even one additional GCC country from the office. Bahraini law does not require foreign companies to hire a local agent or partner to establish a regional office in Bahrain. Nevertheless, U.S. companies setting up regional offices typically find it useful to have a relationship with a local representative, particularly to navigate the local bureaucracy.
The law governing the relationship between a Bahraini agent and foreign principal is the Commercial Agencies Law promulgated by Legislative Decree No. 10 of 1992 and its Implementing Regulations, Ministerial Order No. 2 of 1993. The law was amended by Legislative Decree No. 8 of 1998 and Legislative Decree No. 49 of 2002 (also known as the ‘Agency Law’).
Establishing a local office
Companies wishing to open an office in Bahrain must first register at the Bahrain Investors’ Center (BIC), located in the Bahrain Financial Harbor in Manama. Operated by the MoICT, the BIC is a “One-Stop Shop” where representatives from all the different ministries involved in the registration of a business, as well as representatives from financial institutions, legal entities, and telecommunication companies, come together to support registrants. Some commercial activities such as tourism, entertainment, schools, nurseries (daycare), and training institutions, however, may require approval from other government agencies.
MoICT’s Domestic Trade Affairs Directorate regulates all commercial licenses and activities in Bahrain. MoICT’s Commercial Registration (CR) Department issues commercial licenses, collects registration fees, processes CR applications, publishes announcements in the official gazette, and provides counseling services to potential investors.
Applicants may obtain a commercial license application form from the BIC in the Bahrain Financial Harbor, or electronically from MoICT’s website: www.sijilat.bh
Bahrain Investors’ Center
Bahrain Financial Harbor
PO Box 2210
Manama, Kingdom of Bahrain
The demand for U.S. franchises remains strong in Bahrain, particularly in the fast food, restaurant, and retail sectors. More than one hundred U.S. franchise restaurants and outlets operate in Bahrain, with new ones opening regularly. Many major brands are present in Bahrain, among them: Apple Bee’s, Baskin Robbins, Buffalo Wild Wings, Burger King, Caribou Coffee, Chili’s, Cheesecake Factory, Dairy Queen, Domino’s, Dunkin Donuts, Elevation Burger, Five Guys, Fuddruckers, the Great American Bagel Co., Hardee’s, IHOP, Kentucky Fried Chicken, Krispy Kreme, Little Caesar’s, McDonald’s, Nestle Toll House, Papa Johns, P.F. Chang’s, Pizza Hut, Starbucks, Subway, TCBY, Texas Chicken, Texas Roadhouse, Tony Roma’s, and ZPizza. Although Bahrain’s market seems to be very receptive to new franchising opportunities, it is a competitive medium with a varity of local and international franchises and many of them utilize broadly popular internet and app-based food delivery services, including Talabat and Carriage, to advertise and compete.
Bahraini firms are eager to establish new market opportunities and are interested in investing in foreign franchise concepts. Most franchisees finance their franchise purchases through bank loans, personal savings or family investment funds. Local businesses increasingly view franchising as an opportunity to establish additional consumer-oriented businesses. The franchise market is growing rapidly in several sectors, among them fast food and restaurants, hospitality, automotive services and spare parts, high-end fashion, and convenience stores.
The Bahraini government has yet to develop a specialized body of legislation to regulate franchising activities. Franchise agreements are governed by standard commercial laws. Bahrain’s legislation for regulating patents and trademarks constitutes the most specialized body of commercial laws that apply to franchising activities. Bahrain is a member of the World Trade Organization (WTO) and has ratified the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. The Bahraini government has brought its national laws and regulations into compliance with the principles of both these agreements. Bahrain is also a member of the World Intellectual Property Organization (WIPO) and a signatory of the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property. Registered patents are valid for 15 years, renewable for and additional period of five years. Trademark registration is valid for ten years.
The Investment and Technology Promotion Office in Bahrain, operating under the UN Industrial Development Organization (UNIDO), has been promoting franchising as a model for helping grow small and medium-sized enterprises (SMEs) and attracting local and foreign investment. A major step towards reaching this objective has been the establishment of the Franchise Association for the Middle East (FAME), co-founded by the OECD MENA Investment Center and the Lebanese Franchise Association (LFA).
Bahrain is ranked fourth globally in the number of internet users with a penetration rate of 98.6 percent and easy access to social media and online platofrms have helped create an active medium for marketing businesses online. However, traditional advertising methods remain active, such as printed ads in local newspapers and magazines, fairs and exhibitions, signboards and billboards. Advertising is also possible on Bahraini television and radio. Many businesses distribute flyers in residential neighborhoods. It is also possible to advertise via text messaging on cellular networks. The major mobile phone service providers are Batelco, STC, and Zain. Bahrain regularly hosts trade shows, which provide good opportunities to market to importers and distributors.
The demand for joint ventures and licensing opportunities remains strong in Bahrain. The infrastructure, ICT, electricity, water, tourism, training and education sectors have been privatized and are important growth sectors in the economy.
American companies are attractive to Bahraini partners due to their brand recognition and potential opportunities for technology transfer.
Bahrain’s Commercial Companies Law permits joint ventures between parties. A joint venture agreement must specify the parties’ rights and obligations and determine the division of profits and losses. There are no other specific formalities for parties to enter into a joint venture (such as registration). Joint ventures in Bahrain have no corporate identity. Since all business activity in Bahrain must be conducted through a company or an individual establishment, third parties have recourse against a company or individual establishment, not directly against the joint venture.
In practice, individuals from a foreign company and a local business who want to engage in a joint venture are likely to set up a new company. Establishing a limited liability company is the most popular business vehicle for this purpose. The parties’ relationship is governed by the constitutional documents of the new company, in particular the memorandum of association. However, some parties also draw up additional agreements to govern their relationship. These are enforceable only to the extent that they are not contrary to the laws of Bahrain.
The Commercial Section of U.S. Embassy Manama helps match American and Bahraini firms looking to form joint ventures in both the local and regional market.
Major global express delivery companies, such as DHL, FedEx, UPS, ARAMEX, Sky Net, and others, operate in Bahrain. Transit times vary but for packages shipped from the United States to Bahrain, the average time is two to three days, not including the customs clearance process. Customs procedures and requirements are standard and can be found on the Bahrain Customs website at www.bahraincustoms.gov.bh.
Due diligence is essential to avoid fraud. Any legitimate business in Bahrain will operate under a valid Commercial Registration (CR), with a validity date of less than two years. All U.S. companies should check a company’s CR before doing business with them through the Government of Bahrain’s Commercial Registration Portal, www.sijilat.bh. The U.S. Commercial Service also provides a fee-based due diligence service for U.S. companies, called International Company Profile (ICP). For more details, contact:
U.S. Embassy Manama – Commercial Section
P.O. Box 26431
Manama, Kingdom of Bahrain
Tel: (973) 1724-2700
Fax: (973) 1725-6717