Bahrain Ratified the UAE Bilateral Investment Treaty: Advancing Gulf Economic Integration

Bahrain ratified the UAE Bilateral Investment Treaty, making its investor protections legally enforceable, while also strengthening cross-border investment security. The treaty enhances legal certainty in sectors like finance, tech, and real estate, marking a key step toward deeper economic integration and regional alignment on investment standards in the Gulf region.

By Yanyan Shang

On March 10, 2025, Bahrain ratified the Bahrain–UAE Bilateral Investment Treaty (BIT), formally titled the Investment Protection Agreement (IPA), originally signed in February 2024. This ratification marks a crucial legal milestone for the Gulf region, transforming a diplomatic agreement into a binding treaty with enforceable protections for cross-border investors.

The move signals a shared commitment by both nations to deepen regional integration, enhance investor confidence, and build a transparent, rules-based investment environment in line with global standards. The treaty’s entry into force is not just a formality—it enables tangible legal guarantees for businesses, making it a strategic tool for attracting foreign direct investment (FDI) and fostering economic collaboration across key sectors.

Why the ratification matters

While the treaty’s signing in 2024 indicated diplomatic alignment, its ratification is what gives the agreement legal force. Once both parties ratify such a treaty, its provisions become fully binding under international law. Bahrain’s ratification completes this process, bringing clarity and predictability to the legal framework governing UAE-Bahrain investments.

This shift from political intent to legal obligation is critical for FDI. It ensures that treaty protections can be invoked in courts or through arbitration, which is particularly important for sectors like infrastructure, energy, finance, and digital trade, where long-term capital commitments require regulatory stability.

Key provisions of the Bahrain–UAE BIT

Now fully operational, the treaty offers a comprehensive suite of protections to investors from both countries. These include:

• Promotion of investments: Under Article 2, both Bahrain and the UAE pledge to actively encourage bilateral investment flows, subject to each nation’s laws and regulatory frameworks. This establishes a government-level commitment to facilitating cross-border investment activity.
• Fair and equitable treatment: Article 3 ensures that investments will receive fair, equitable, and non-discriminatory treatment. This provision protects investors from arbitrary or politically motivated interference in their business operations.
• Most-Favored-Nation (MFN) treatment: Investors from either country are entitled to treatment no less favorable than that accorded to investors from third countries. This levels the playing field and ensures competitive equality in the market.
• National treatment: Article 5 guarantees that foreign investors will be treated the same as domestic investors, except in specified sectors such as public procurement and subsidies, where certain exemptions apply.
• Digital trade and innovation: A standout feature of the treaty is its forward-looking Article 6 on digital trade, which encourages cooperation in areas such as cybersecurity, IP rights, and technical standards. This is particularly relevant as both Bahrain and the UAE aim to position themselves as leaders in the digital economy.
• Protection against expropriation: The treaty restricts expropriation to cases serving legitimate public interest and mandates prompt, effective, and fair-market-value compensation.
• Loss compensation: In the event of war, civil unrest, or similar disruptions, investors from either country are guaranteed compensation on par with that provided to domestic or third-country investors.
• Free transfers of capital: Article 9 provides for unrestricted transfers of investment-related payments—including profits, dividends, and proceeds from liquidation—in freely convertible currencies.
• Dispute resolution: The treaty outlines clear procedures for investor-state dispute resolution under international arbitration forums such as the International Centre for Settlement of Investment Disputes (ICSID) or other mutually agreed mechanisms.

Implications for doing business in Barhain and in the UAE

Boosting investor confidence in strategic sectors

By formalizing these protections, the BIT significantly improves the legal environment for cross-border business operations. It reduces regulatory and political risks that often deter investment, particularly in sectors like finance, real estate, and technology, which are sensitive to legal uncertainty.

The availability of international arbitration further strengthens investor trust, offering a clear path for recourse in the event of disputes and enhancing the overall attractiveness of both Bahrain and the UAE as investment destinations.

A catalyst for regional integration

The ratification aligns with the broader economic diversification goals of both Bahrain and the UAE, which are actively working to reduce dependence on hydrocarbons and expand into high-value sectors. The treaty reinforces each country’s ambition to be a regional hub for investment and innovation.

It also reflects growing momentum toward Gulf-wide economic integration, as countries across the GCC move to harmonize investment laws and adopt best practices to attract global capital. The Bahrain–UAE BIT may set a precedent for future bilateral or multilateral agreements within the region.

Moreover, this ratification builds upon a history of cooperation between the two countries, including previous memoranda of understanding (MoUs) and joint ventures in sectors such as logistics, manufacturing, and fintech.

Key takeaways

• Bahrain’s ratification of the UAE BIT marks the treaty’s official entry into force, establishing enforceable investor protections and arbitration mechanisms.
• The treaty enhances legal certainty, aligning with global norms and supporting cross-border business growth in critical sectors such as technology, real estate, and finance.
• It demonstrates a shared commitment to regional economic integration and legal modernization, serving as a model for future investment agreements in the Gulf.

As both nations move forward with closer economic collaboration, this treaty lays the legal and institutional foundation for a more integrated, and investor-friendly Gulf economy.

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