Bahrain has hired a US law firm to tackle a complaint filed by the US's largest trade union, threatening the kingdom's bilateral trade agreement with the world's largest economy.
Sorini, Samet & Associates, based in Washington, has been hired to fight allegations that Bahrain was in violation of the terms of its free-trade agreement with the US by dismissing hundreds of workers from mostly public-sector jobs in the wake of unrest in the country this year.
The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) has asked the US government to terminate its free-trade agreement with Bahrain, which came into force in 2006.
The AFL-CIO's submission is the most outspoken threat yet by an international trade union to the economy of Bahrain, an American ally and the base for the US navy's Fifth Fleet.
In a letter to the US Labor department, Jeffrey Vogt, the deputy director of AFL-CIO, urged the Obama administration to withdraw from the bilateral agreement.
"The US simply should not provide preferential trade agreement to a country that has and continues to engage in well-documented widespread and serious violations of human rights, including labour rights, of its citizens and residents," Mr Vogt said.
The administration has said it will review the complaint against Bahrain but it is seeking more information about whether Bahrain's actions violate the terms of that pact. It will make a public report in the next six months, Bloomberg News reported.
The Bahrain government "is of the view that there has been no information presented in the submission of the AFL-CIO … that would constitute a violation of Bahrain's obligations under the free-trade agreement", Bahrain's foreign ministry said in an e-mailed statement to The National. The union's submission "cannot be considered as helpful", the statement added. "What is now most important for Bahrain is to move forward on the national political dialogue process that will begin in July."
Simon Williams, HSBC's chief economist for the Gulf, said if the free-trade agreement (FTA) was jeopardised, it would be a "blow to the kingdom's longer term growth prospects".
"There are already some pretty tough headwinds for Bahrain as it seeks to restart its economy after a very difficult six months. The FTA is one of the key means by which Bahrain can draw long-term capital into its economy."
Bahrain, whose FTA with the US includes protections for labour, has come under increasing international pressure to reinstate hundreds of dismissed staff who took part in protests at the height of nationwide strikes that began in February.
The US is Bahrain's largest trading partner in terms of exports of mostly petroleum products, aluminium and textiles, and the fourth largest in terms of imports, according to Bahrain's finance ministry.
Total bilateral trade between the two countries was worth about US$1.8 billion (Dh6.61bn) in 2009, according to the latest figures from the US-Bahrain Business Council.
Some market players, however, have played down the impact of an end to the FTA.
"The much more important impact for Bahrain is its increasing dependence on the GCC and particularly its neighbour, Saudi Arabia," said Farouk Soussa, the chief economist at Citi's Middle East unit.
An aid package from the GCC, pledged in March, is expected to pump $1bn into the economy every year for the next 10 years.
The submission by the AFL-CIO is not a lawsuit and does not involve court proceedings, said Andrew Samet, the co-founder of Sorini, Samet & Associates, whose signature appears on the contract signed with Bahrain's government.
"We are assisting the government of Bahrain … [with a submission from the AFL-CIO that] includes a request that the US government terminate the FTA, as well as certain allegations of violations of the labour chapter obligations of the FTA," Mr Samet said, without disclosing further details.
Bahrain's government imposed a three-month state of emergency on March 15 to restore national security, which culminated in the dismissal of hundreds of public-sector workers from their jobs.
An investigation called by Bahrain's government this month ruled that hundreds of these dismissals were illegal. More than 500 dismissed workers were said to have been reinstated, but AFL-CIO and other trade unions allege this has not taken place.
A source close to Bahrain's labour ministry said 767 cases had been under review, but that this did not represent the more than 1,000 people who have been dismissed from their jobs.
Tim Noonan, a spokesman for the International Trade Union Confederation, another organisation that has been lobbying for the reinstatement of Bahraini staff, said the events of the past few months had undone years of progress for Bahrain. "Bahrain was a stand-out place where there was real progress on labour law. But it is unacceptable to sack people for legitimate activity [taking part in protests]," he said.
Mr Noonan added Bahrain had denied unemployment insurance, a statutory right, to those who had been dismissed.
The International Labour Organization, based in Geneva, has also been vocal in its objection to the sackings in Bahrain and "other repressive measures" throughout the upheaval. The UN agency has repeatedly urged the country to reinstate workers who were fired after striking in support of pro-democracy protests.