Fry the onions in a heavy pot or deep frypan (with a lid) for about 5 minutes until golden. Add the garlic and fry for 1 minute, add the chicken and fry until brown, 3 to 4 minutes.
Season with paprika and cumin and stir in. Turn up the heat and pour in the sherry. Cook until the alcohol evaporates then stir in the water, saffron and bay leaf. Bring to a boil, then reduce the heat to very low, put on the lid and simmer gently for about 30 minutes, stirring occasionally.
Take off the lid and simmer the sauce until it thickens, about 15 minutes. Turn off the heat and season with salt, pepper and parsley.