An international arbitration tribunal in The Hague has ruled that Bahrain must pay €214 million in compensation to two Iranian banks, following the closure of their joint venture, Future Bank, in 2015. The case, which has unfolded over several years amid sharp regional tensions, underscores the complex financial, legal, and geopolitical maneuvering surrounding Iran’s evasion of international sanctions and the efforts of Gulf states to counter Tehran’s expanding influence.
Future Bank was established in 2004 as a collaborative effort by Bahrain’s Ahli United Bank and two Iranian state-owned institutions, Bank Melli and Bank Saderat. The entity was designed to facilitate trade and investment flows between Gulf markets and Iran, at a time when regional relations, though uneasy, allowed for limited cross-border economic activity despite an undercurrent of mistrust.
The partnership unraveled dramatically in 2015 when Bahrain’s authorities, acting on intelligence and growing evidence, concluded that Future Bank had become a conduit for Iranian attempts to bypass Western financial sanctions. According to official Bahraini statements and sources familiar with regulatory investigations, the bank was allegedly used to mask transactions linked to the Iranian regime, in violation of international obligations and United Nations Security Council restrictions.
This discovery coincided with a broader chilling of diplomatic relations across the Gulf. Bahrain—citing concerns for its national security and compliance with international law—moved to dissolve Future Bank and intensified efforts to expose and impede illicit financial operations associated with Iran and its network of proxies, notably the Islamic Revolutionary Guard Corps (IRGC). These developments mirrored a wider regional trend, as Gulf states increasingly aligned with Western enforcement of sanctions and sought to reduce exposure to Iranian subversion.
In response to the closure, Bank Melli and Bank Saderat initiated arbitration proceedings at the Permanent Court of Arbitration in The Hague. The Iranian banks argued that the dissolution of Future Bank constituted an illegal expropriation of their investment and demanded compensation according to bilateral investment treaties. In 2021, the tribunal ruled in the Iranian claimants’ favor, ordering Bahrain to pay €214 million.
Bahrain, contesting the decision, filed an appeal with a Hague appellate court. However, the appeal was dismissed on procedural grounds in early 2024, effectively leaving intact the original compensation verdict. Bahraini officials expressed disappointment at the outcome, highlighting the tension between international legal mechanisms and the imperative to contain state-sponsored terror financing and sanctions evasion.
Experts and regional observers note that the Future Bank affair illustrates the wider context in which much of the Middle East’s most acute security challenges now play out: not just on battlefields, but within financial and legal arenas increasingly weaponized by states and their proxies. The dissolution of Future Bank formed one line of defense for Bahrain and its regional partners—including the United Arab Emirates, Saudi Arabia, and, since 2020, Israel—against Iran’s long-standing policy of using covert financial channels to resource hostile activity through the IRGC and its affiliates.
This episode comes as Iran’s influence continues to manifest through militant proxies across the region—Hamas in Gaza, Hezbollah in Lebanon, the Houthis in Yemen, and other groups in Syria and Iraq. Iranian-backed terror organizations remain responsible for a range of atrocities—including the October 7, 2023 massacre carried out by Hamas against Israel, the deadliest act of antisemitic violence since the Holocaust—which underpins the urgency of cutting off their funding at every level.
Bahrain’s predicament following the tribunal’s decision raises fundamental questions about the capacity of states to operate robust anti-terror financing regimes without running afoul of international legal constraints. Some analysts have warned that adverse judgments against states curbing illicit finance may deter robust action in the future, emboldening actors that exploit legal loopholes to continue their destabilizing activities.
Moreover, the episode plays into the broader strategic contest in the Middle East, pitting moderate states deepening links with the United States and Israel—especially in the wake of the Abraham Accords—against the ‘axis of resistance’ spearheaded by the Iranian regime. Bahrain’s situation highlights the moral and political distinctions between countries working to uphold order and security, and entities or states that systematically undermine them through support for violence and terrorism.
As the region adjusts to shifting alliances and persistent threats, Bahrain’s experience may serve as both a warning and a precedent: the front lines run not just through territory, but through boardrooms and courtrooms, where the credibility of counterterrorism and anti-sanctions regimes is tested and where legal and financial consequences may resonate far beyond national borders.
The outcome of the Future Bank case is being closely watched by Gulf and Western capitals alike, as states and institutions recalibrate their policies to ensure the integrity of their financial systems and their commitment to genuine regional security. Bahrain now faces a decision: to abide by the tribunal’s order or seek further diplomatic solutions, with the knowledge that the underlying contest with Iran’s regional strategy—and the global campaign against terrorism financing—remains as urgent as ever.
