Contracts are necessary for business
Businesses enter into contracts all the time.
They enter into contracts with their own employees. They make agreements with suppliers and manufacturers. They join forces with service providers. They might hire freelancers or outsourcing firms. They might even enter into contracts to do business with government entities.
Whatever the specific case may be, in a strong and healthy business environment, a sufficient legal system to enforce these contracts is vital.
This is why before you invest or start a business or even enter into a contract with businesses from a country, you should pay close attention to how well that country does in enforcing contracts. This type of information is not necessarily easy to find. Luckily for you, we have decided to use the data from the Doing Business Report 2020 for Bahrain to help you understand how well contracts are enforced in the country of Bahrain.
Enforcing contracts for businesses in Bahrain
Bahrain ranks 59th in the world for enforcing contracts, with a score of 63.8. This is different to its performance in Taxes, where it ranks 1st in the world with a perfect score of 100.
But that doesn’t in any way means that the performance in the topic of enforcing contracts is not good for Bahrain. In fact, it outperforms the vast majority of the 190 countries that are evaluated through the Doing Business report.
But what exactly are the factors that contributed to the score received by Bahrain for enforcing contracts?
Time to reach settlement of a contract dispute in Bahrain
The report conducted a case study to attain this data. In the case the data is drawn from, a settlement of just over 16,000 BD from the Bahrain Hugh Court, 5th Circuit is found to take 635 days.
This is a bit higher than the average across the MENA, which lands at 622 days. And it is even higher than the average across high-income economies (as recognised by the OECD), which lands at 589.6 days. This is clearly not an area that Bahrain and its systems excel in.
However, it must be kept in mind that this data is from a single case study and your experience may be different.
Cost of settlement of contract dispute in Bahrain
The cost of settlement is measured in terms of the percentage of the claim that it adds up to.
Bahrain does fairly well in this category, with 14.7% of the settlement going to the costs of reaching it. This is significantly lower than the MENA average, which lands at 24.7%. Bahrain also outperforms the aforementioned OECD high-income economies in this category, with their score landing at a high 21.5%.
To compare it to its closest neighbours, Bahrain’s cost of settlement is far lower than that of the gulf country of Qatar, which takes up 21.6% of the settlement as costs. It is also significantly better than Jordan, a non-gulf Arab country whose cost is as high as 31.2%.
Quality of judicial processes to settle contract disputes in Bahrain
This category measures the quality of the judicial process as a whole while enforcing contracts.
The country scores a solid 9 (out of 18) in this category, performing better than the region of MENA which scores a weaker score of 6.6. But it falls behind the OECD high-income countries’ performance, which is scored at 11.7%.
The absence of a small claims court, in particular, hurts the country’s performance in this category of the report.
The overall consensus on enforcing contracts for businesses in Bahrain
There are clearly some other countries that are better at enforcing contracts for businesses than Bahrain.
But it still performs admirably and is found to be better than most other countries in MENA in the most important metrics and categories. If you are looking at entering into business in MENA or the GCC, Bahrain is easily among your best options in terms of enforcing contracts.
Couple that with exceptional performance in some key categories like Taxes, and strong performance in several areas which we discuss extensively through our articles, and you have the perfect country for entering into business in the region.
What should you do next to do business in Bahrain?
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