1. Sterilize jars, and prepare lids.
2. While jars are boiling, combine first 5 ingredients in a large stainless steel saucepan; bring to a boil. Add garlic; bring to a boil, and boil 4 minutes. Remove from heat.
3. Place 1 bay leaf in each hot jar. Using a slotted spoon, divide garlic and halved chiles (discard remaining halved chile) evenly among hot jars, packing tightly and leaving 1/4-inch headspace; cover with hot pickling liquid, leaving 1/4-inch headspace. Seal and process jars, processing 10 minutes.
4. Remove jars from water, and let stand, undisturbed, at room temperature 24 hours. To check seals, remove the bands, and press down on the center of each lid. If the lid doesn't move, the jar is sealed. If the lid depresses and pops up again, the jar is not sealed. Store properly sealed jars in a cool, dark place up to 1 year. Refrigerate after opening.