Doing Business In... 2021

Last Updated July 13, 2021

Kuwait

Law and Practice

Authors



ASAR Legal is Kuwait’s leading corporate law firm, with a strong network of contacts throughout the MENA region. Its work cuts across various sectors and includes IPOs, capital markets, M&A, banking and finance, real estate, government projects, securities, taxation, construction, corporate and commercial matters, franchising, commercial litigation and arbitration. The firm has multilingual capabilities, including being able to provide services in English, Arabic and French. Its clients include a number of significant public and private sector entities based in Kuwait, Bahrain and elsewhere in the world (including in the United States, Europe and elsewhere in the GCC). ASAR is also regularly retained by leading international law firms and has won numerous awards for legal services rendered.

Kuwait is a civil law jurisdiction and the judiciary of Kuwait is structured in three levels: the Court of First Instance, the Court of Appeals and the Court of Cassation. The structure of the judicial system is briefly as follows.

The Court of First Instance

The Court of First Instance is made up of several circuits/divisions, each with its separate jurisdiction. These divisions/circuits include the Small Claims/Summary Court, the Administrative Court, the Civil and Commercial Government Court, the Civil and Commercial Court, the Labour Court, the Court of Rent, the Criminal Court, the Court of Personal Matters and the Court of Minors’ Affairs.

The Court of First Instance also has three important support divisions: the Authentication Department (which authenticates signatures, etc), the Experts Department (which reviews any technical and complicated matters that the court may refer to it, etc) and the Execution Department.

The Court of Appeals

The jurisdiction of the Court of Appeals is generally limited to the review of issues being appealed from the Court of First Instance, but it is empowered to make a de novo review of appealed cases as well. The Court of Appeals regularly conducts trials de novo. Judgments rendered in the Court of Appeals are final, except for those appeals taken to and accepted by the Court of Cassation.

The Court of Cassation

The Court of Cassation may be viewed as the supreme court of Kuwait. It has final jurisdiction over matters relating to the proper application, interpretation and enforcement of Kuwaiti law, and rectifies procedural and substantive defects committed by the courts below it. The Court of Cassation is divided into commercial, civil and criminal divisions, and its judgments are typically respected and followed, even though they are not legally binding on the lower courts (ie, Kuwait is a civil law jurisdiction without binding court precedents).

Certain restrictions may apply, depending on the nature and extent of the foreign investment being made (including in relation to foreign ownership limitations).

As a general premise, but subject to certain limited exceptions, Articles 23 and 24 of Law No 68 of 1980 (the Commercial Code) require that foreign entities conducting business in Kuwait do so either through a local agent or through a Kuwaiti "partner" (typically facilitated through the establishment of a Kuwaiti company with Kuwaiti or GCC participants owning at least 51% of the capital).

One of the exceptions to the conduct of business rules noted above is the establishment of a company or branch under Law No 116 of 2013 (the Foreign Direct Investment Law – FDIL). The primary purpose of the FDIL is to improve the overall investment climate in Kuwait with respect to foreign investors, and to encourage foreign investment in Kuwait by offering certain benefits to foreign investors (owning up to 100% of a Kuwaiti entity, tax credits, etc). The Kuwait Direct Investment Promotion Authority (KDIPA) was also established under the FDIL, and has regulatory oversight over matters relating to the FDIL. To obtain an investment licence from KDIPA, the prospective foreign investor must satisfy the criteria set out under Article 29 of the FDIL (see 2.2 Procedure and Sanctions in the Event of Non-compliance).

Certain activities are excluded from benefiting under the FDIL but these are narrowly defined activities relating to certain sectors, such as the extraction of petroleum and natural gas, security and investigative services and the manufacture of fertilisers.

GCC individuals and GCC companies wholly owned by GCC nationals may also establish branches of their businesses in Kuwait and/or own more than 51% of the shares of a Kuwaiti company (see Ministerial Resolutions No 141 of 2002 and No 237 of 2011 – the GCC Exemption). Except in limited instances, GCC nationals are afforded the same rights to establish and to do business in Kuwait as Kuwaiti nationals.

Any approvals that may be required will depend on the nature of the investment and how it will be made. As a general premise, the following may be of significance.

Requirements to Open a Wholly GCC-owned Company under the GCC Exemption

GCC nationals and GCC companies wholly owned by GCC nationals may take advantage under the GCC Exemption to open a Kuwaiti company or a Kuwaiti branch of their operations. The process and timing will vary, depending on various factors such as the desired corporate form and the relevant activities to be undertaken.

During the establishment process, the authorities will also seek to confirm that the relevant investor is a GCC national or a GCC company wholly owned by GCC nationals. This is typically evidenced by the relevant identification documents in the case of GCC nationals (ie, the passport of the GCC national, etc) and/or the constitutional documents of the GCC company (including the shareholder details). See also 3.2 Incorporation Process for details of the process generally followed to establish certain Kuwaiti companies.

Requirements to Open a Branch under the GCC Exemption

Foreign investors must satisfy the following conditions in order to open a branch under the GCC Exemption.

  • The relevant GCC entity must be wholly owned by GCC nationals, whether directly or indirectly. If at any time a non-GCC shareholder acquires an interest in the relevant GCC entity, the Ministry of Commerce and Industry (MOCI) may cancel the branch licence.
  • The relevant GCC entity must have been in existence for at least three years before the submission of the branch establishment application to the MOCI.
  • The activities of the relevant GCC entity must be permitted in the GCC region, and the Kuwaiti branch activities must be covered under the relevant GCC entity’s licensed activities.
  • The establishment of a GCC branch in Kuwait should be completed within one to two months from the date all required documents are submitted to the MOCI. Generally, the documents required for submission are the MOCI establishment application form, the constitutional documents of the foreign entity and the details of its partners/shareholders. The identification documents must be attested and legalised at the Kuwaiti Embassy in the country of issuance and then attested and legalised in Kuwait before being submitted to the MOCI.

Requirements to Obtain an Investment Licence from KDIPA

To qualify for an investment licence under the FDIL, the foreign entity has to satisfy certain special requirements set out in the FDIL and its executive regulations. Key in this regard, the foreign entity has to demonstrate that its activities will benefit Kuwait as a whole and satisfy the criteria set out in Article 29 of the FDIL (that the activities will result in the transfer of technology, modern methods of governance and practical/technical experience to Kuwait; create employment opportunities and training for national labour; enhance the use of national products, etc).

The steps to obtain the investment licence are as follows.

  • Application Request – the submission of the application request is the first formal step in the application to be licensed under the FDIL. The application request should briefly summarise the proposed investment/project that the foreign party wishes to undertake in Kuwait under the FDIL. Once the application request is finalised and submitted, KDIPA will review the application and will typically respond to the applicant within a week regarding the success of the preliminary application.
  • Formal Application – if KDIPA believes that the investment/project as set out in the application request complies with and addresses the points required under the FDIL, the applicant will proceed to the second stage of the application process. As part of this process, the applicant will have to submit an application form appropriate to the vehicle it will use to pursue the project.
  • Consultation – KDIPA and the relevant applicant discuss and consult on the application and the supporting documents (which will include a business study/plan); KDIPA may require additional information on particular aspects of the project that should be addressed.
  • Consideration – once the application and business study are finalised and formally submitted along with the attested, legalised and translated constitutional documents of the applicant, KDIPA is to respond to the applicant within 30 days regarding the success or failure of the application.
  • KDIPA Approval and Investment Licence – if the application is approved, the necessary formal steps to give effect to the investment/project are put in place, and an investment licence is issued by KDIPA following the completion of the incorporation process and the issue of the trading licence by the MOCI. If the application is rejected, a written explanation will be given. The applicant may challenge this decision within 30 days.

Certain commitments may be required by KDIPA in order for it to issue an investment licence, as set out under 2.2 Procedure and Sanctions in the Event of Non-compliance. Such commitments are typically agreed on the basis of the relevant business plan. If the agreed commitments are not adhered to, this may have an impact on the investor’s licence and the benefits being enjoyed under the FDIL.

See 2.2 Procedure and Sanctions in the Event of Non-compliance.

Law No 1 of 2016 (the Companies Law) provides for several types of companies that may be established. The more common forms used by foreigners when investing into Kuwait are the Single Person Company (SPC) or the With Limited Liability Company (WLL).

SPCs and WLLs are largely subject to similar rules/regulations, with a significant difference being that an SPC may only have a single shareholder while a WLL is required to have between two and 50 shareholders. If an SPC has more than one shareholder, it is automatically converted into a WLL. WLLs are the most common form of corporate entities established by foreign parties in Kuwait.

The objects of a SPC/WLL have to be selected from a pre-approved list issued by the MOCI. An entity is not authorised to undertake activities that are not consistent with its objects as listed in its memorandum of association (MOA). The minimum required share capital of a SPC/WLL is currently KWD100 per licensed activity, which will be cumulative: the minimum share capital of each registered object (ie, licensed activity) will be added together to reach the required minimum share capital of the relevant SPC/WLL. The capital amount is usually dependent on the objects selected and approved by the MOCI for inclusion in the MOA of the SPC/WLL.

The liability of shareholders of an SPC/WLL is limited to the extent of their share capital contribution in the company. However, in relation to an SPC, the owner may also be liable for the debt of the SPC if the shareholder:

  • liquidates the SPC in a mala fide manner before its expiry or the realisation of its objectives; or
  • does not separate the financial rights and obligations of the SPC from its other activities to the prejudice of bona fide third parties.

Investors may also establish a Kuwaiti Joint Stock Company (KSC). There are two types of KSCs: Public Joint Stock Companies (KSCPs) and Closed Joint Stock Companies (KSCCs). KSCCs are more common than KSCPs but, given that KSCs are subject to certain additional taxes (such as Zakat and contributions to the Kuwait Foundation for Advancement of Science) and increased regulation, and have greater minimum capital requirements compared to an SPC/WLL (the minimum required capital is KWD10,000 for KSCCs and KWD25,000 for KSCPs), investors prefer to establish SPCs/WLLs unless the particular project requires a KSC. SPCs/WLLs are also easier to set up and administer, are subject to less stringent regulations and are relatively cheaper to establish and operate than a KSC. In light of this, what follows in this chapter does not address issues in relation to KSCs, focusing instead on SPCs/WLLs.

As a high-level summary, in order to incorporate an SPC/WLL an application must be made to the MOCI on a standard Arabic application form accompanied by the required documentation/information. This is submitted online to the MOCI through its website. Certain information will have to be provided as part of the online application, including the names of the shareholders/manager, the capital amount, the manager’s authority, the company name, etc.

The MOCI should provide its approval regarding one of the proposed names. The online application should thereafter be referred to the Ministry of the Interior (the MOI) for its approval regarding the partners and manager of the SPC/WLL. After obtaining the MOI’s approval, the MOA of the company should be signed by all partners (or their representatives) before the Notary Public at the Ministry of Justice. Following the signing of the MOA, the MOCI will issue a certificate confirming the registration of the SPC/WLL on the Commercial Registry.

Once the above is complete, a second online application should be submitted to the MOCI in connection with the issuance of the SPC’s/WLL’s trading licence. At this point, the lease agreement and rent receipt of the SPC’s/WLL’s premises should be submitted to the MOCI. During this process, the approvals of the Municipality and Fire-Fighting Administration should also be obtained, whereafter the trading licence should be issued for the SPC/WLL. Additional approvals may also be required, depending on the business of the SPC/WLL.

The incorporation of the SPC/WLL should take approximately four weeks (from the date all required documentation and information is submitted), provided that no substantial changes are made to the standard MOA proposed by the MOCI.

Companies are subject to various ongoing reporting/disclosure obligations after establishment. While the particular obligations will depend on the company itself and the activities it undertakes, examples of what may be required include:

  • the registration of changes of management with the MOCI, as well as any amendments to a company’s constitutional documents;
  • financial statements must be submitted to the MOCI annually for review/approval;
  • any change in the shareholding (and, in certain cases, that of the ultimate beneficial shareholder) must be registered with the MOCI; and
  • if the company is licensed under the FDIL, KDIPA will require ongoing disclosures evidencing compliance with commitments made during the licensing process.

An SPC is managed by its owner but such owner may appoint one or more managers to manage the company on its behalf. A WLL is managed by one or more managers (and not by a board of directors, which are typically charged with managing KSCs). Managers can be of any nationality, but must have a Kuwait Civil ID card and be a resident of Kuwait.

The MOA of the company sets out the powers of the managers. In the absence of any provisions regarding the powers of the managers, the managers have the full power to act on the SPC’s/WLL’s behalf (it is common to provide in the MOA that the manager has full authority to act on behalf of the WLL) but this can be restricted in the company’s MOA or by the ordinary general meeting of the partners. In relation to a WLL, if the manager is named in the MOA, his/her termination/replacement should be approved by an extraordinary general meeting. The manager would be considered an employee of the company and hence his/her relationship with the company would be subject to Law No 6 of 2010 (the Labour Law).

Managers are jointly liable towards the company, the partners and third parties for breaches of the law or the MOA, or for mismanagement (Article 105 of the Companies Law).

Generally speaking, all employers/sponsors in the private sector in Kuwait are required to comply with the provisions of the Labour Law regarding matters such as working hours, overtime, rest days, sick leave, annual leave, holidays, etc, and other statutory benefits, regardless of whether or not such benefits have been waived in an employment contract. In this regard, the Labour Law provides for the minimum rights for employees in Kuwait, but employment contracts can provide for more beneficial rights.

The Ministry of Social Affairs and Labour (the MOSAL) regulates employment matters in Kuwait and issues regulations, which should be complied with by employers/sponsors in addition to those in the Labour Law (eg, in respect of the minimum wage). While the Labour Law provides for certain express protections for unions and collective bargaining arrangements, in practice these are quite rare and are typically only seen in certain sectors where Kuwaitis, rather than foreigners, form the majority of the sector’s workforce.

As with elsewhere in the world, the COVID-19 pandemic continues to have a significant impact on business in Kuwait. While certain laws have been promulgated to reduce the impact of the pandemic (mandating closures, working hours, etc), there has not been an express and formal amendment to the Kuwaiti labour laws as of the time of writing.

As businesses struggle to survive, businesses owners are reconsidering their options under existing laws. In seeking relief, businesses are increasingly relying on the general principles of law to assist in mitigating the harmful consequences of the pandemic. Significantly, there has been increasing reliance on the principles under the Civil Code in relation to force majeure and that of undue hardship caused by unforeseen circumstances; this is in the context of seeking relief not only from employment obligations but also from contractual obligations generally. In the absence of any precedent (the absence of which is understandable given the novelty of the circumstances and the closure of the courts for a significant portion of 2020), it is not possible to definitively opine on whether such arguments by employers (ie, regarding force majeure and undue hardship caused by unforeseen circumstances) will be successful in overcoming the minimum protections provided by the Labour Law.

The employment contract is used to obtain the necessary work permits, residence visas and any other government approvals required for an employee, and the Labour Law sets out the basic information required to be included in employment contracts. According to Article 28, the employment contract should be in writing (although an employment relationship can be evidenced through all means of proof), and must include the contract date (both the date of conclusion and the date of validity), the wage payable and the duration of the contract (if a fixed-term contract). The employment contract must also be filed with the MOSAL.

The duration of an employment contract can either be fixed (ie, for a specific period) or indefinite. Depending on the applicable duration, this affects notice periods to be afforded prior to termination, end-of-service benefits payable upon conclusion of the contract, etc.

As a general premise, Article 64 of the Labour Law provides that employees are not to work more than eight hours per day or 48 hours per week, except as specified in the Labour Law. Article 66 stipulates that workers may work overtime if the necessity arises, provided that the overtime work does not exceed two hours a day, three days a week, 180 hours a year or 90 days a year. Workers are entitled to a 25% increase on their original remuneration for the period of overtime worked, and employers must maintain overtime records detailing the dates, overtime hours and wages.

Employees are also afforded certain rest periods under the Labour Law. In this regard, during the month of Ramadan, the working hours should not exceed 36 hours per week (Article 64). In addition to public holidays, employees are entitled to a one-hour break after working for five consecutive hours (Article 65) and to at least one 24-hour rest day every six days (Article 67). If employees are required to work on a rest day or holiday, then employers must pay such employee an additional 50% for rest days or an additional 100% for holidays, and must afford the employee an alternative rest day/holiday, as applicable.

Kuwait is not an employment at will jurisdiction. Under Article 41(a) of the Labour Law, an employer may terminate the services of an employee without notice, compensation or benefit if the employee has committed a mistake that resulted in a significant loss for the employer, if the employee obtained employment through cheating or fraud, or if the worker divulged secrets related to the establishment that caused or would have caused real losses.

Article 41(b) provides that employers may dismiss an employee (subject to the payment of the employee's end-of-service benefits) if said employee:

  • has been found guilty of a crime that relates to honour, trust or morals;
  • has committed an act against public morals at the work site;
  • has assaulted one of his/her colleagues, his/her employer or deputy during work or for a work-related reason;
  • breached or failed to abide by any of the obligations imposed on him/her by contract or under the Labour Law; or
  • is found to have repeatedly violated the instructions of the employer.

Employees also have the right to terminate their employment contracts without notification and shall be entitled to their end-of-service benefits if:

  • the employer does not abide by the terms of the contract or the provisions of the law;
  • the employee was assaulted by either the employer or his/her deputy;
  • continuing work will endanger his/her safety and health pursuant to the decision of the medical arbitration committee at the Ministry of Health;
  • the employer or his/her deputy committed an act of cheating or fraud with regard to work conditions upon signing the contract;
  • the employer has accused the worker of committing a punishable act and the final verdict acquitted him; or
  • the employer or his/her deputy commits an act against the employee that violates public morals (Article 48).

If the term of the work contract is not specified (ie, an indefinite term contract), both parties have the right to terminate by providing three months’ prior notice of termination (assuming the employee is paid on a monthly basis – this notice period is one month for contractors paid on another basis (Article 44)). In relation to fixed-term contracts, Article 47 of the Labour Law provides that where the contract is unlawfully terminated prior to the expiry date, the terminating party shall compensate the other party for damages suffered, provided that the amount of compensation does not exceed the remuneration of the worker for the remaining period of the contract. The damage suffered is typically determined in light of trade custom, the nature of the work and the unexpired portion of the contract. All amounts due to the other party may be deducted from the value of the compensation.

Except in limited instances (eg, termination under Article 41(a) of the Labour Law), employees are generally entitled to certain end-of-service benefits following the conclusion of the relevant employment relationship. In this regard, according to Article 51 of the Labour Law, employees paid on a monthly basis are entitled to 15 days' salary for each of their first five years of service and 30 days' salary for each subsequent year. Other employees (eg, employees paid on a commission basis or an hourly, daily or weekly basis, etc) are entitled to ten days' salary for their first five years of service with the employer and 15 days' salary for each subsequent year. The total end-of-service indemnity is based on the latest monthly salary (including all regular, customary and ordinary payments made to the employee, such as regular benefits, allowances and grants) and should not exceed one and a half years’ salary. Other factors that affect the calculation of the end-of-service benefits include whether the employee was on a fixed-term contract, the term of employment and whether the employee may have resigned.

Articles 98 to 132 of the Labour Law address employees’ rights to organise/form unions, collective employment contracts and collective labour conflicts. Such issues are rarely encountered in practice unless an employment field is populated primarily by Kuwaiti employees, and such arrangements are by no means mandatory.

Article 109 of the Labour Law requires employers to provide their employees with copies of all laws and regulations relating to their rights and duties. Additionally, Article 35 of the Labour Law requires employers to inform employees in advance of the penalties to which they may be subject.

Natural persons are not generally subject to tax in Kuwait. As such, no taxes are typically payable in the context of an employment relationship. However, with respect to the employment of Kuwaiti nationals, such persons and their employers are subject to the Social Security Law of Kuwait and are obliged to make certain social security contributions (ie, 9.5% of the employee’s salary from the employee and 10.5% from the employer).

Under Decree Number 3 of 1955 (the Tax Law), each corporate body carrying on business in Kuwait should pay tax on its Kuwait operations. In practice, tax is imposed on non-Kuwaiti corporate bodies only. However, GCC nationals and corporate bodies incorporated within GCC countries are granted the same treatment as Kuwaiti companies, and are thus not presently subject to income tax. Kuwaiti and non-Kuwaiti individuals are not subject to income tax.

The Department of Income Tax (DIT) also seeks to tax foreign corporate bodies in their capacity as shareholders in a Kuwaiti company by taxing their percentage interest. The DIT would likely seek to apply the same practice to foreign corporate shareholders of GCC companies operating in Kuwait and/or where a foreign corporate shareholder appoints an individual nominee to hold its shares in a Kuwaiti company on its behalf.

While, strictly speaking, there is currently no "withholding" tax in Kuwait, there is a requirement under the Tax Law for government agencies and private entities in Kuwait to notify the DIT of all contracts entered into by them, and to retain 5% of the contract value (in practice, this is achieved by retaining 5% of all payments made to the counterparty) until the counterparty provides a tax clearance certificate. This procedure is sometimes loosely referred to as a tax withholding, but it is in essence a retention to secure the satisfaction by the counterparty of its Kuwait income tax obligations and not a tax as such.

While it has not yet done so, Kuwait is expected to introduce a 5% value added tax (VAT) in line with a GCC Framework Agreement on VAT that was signed in 2016. As briefly mentioned in 3.1 Most Common Forms of Legal Entities, KSCs may be subject to additional taxes (Zakat, etc) as compared to other corporate forms such as WLLs.

Given the restricted scope of taxes in Kuwait (relatively low flat tax rates, etc), there is limited scope for additional tax credits and incentives.

It is of particular significance, however, that several tax credits are provided to parties operating under the FDIL. These tax credits are related to the commitments made to KDIPA and are set out below (with the figures given being the set percentage/multiplier value for calculating annual benefits).

  • Technology Transfer: specialised equipment cost – 20% of the value of the specialised equipment cost.
  • Creating Job and Training Opportunities for Kuwaiti Nationals:
    1. total expenditure on salaries paid to Kuwaiti employees – five times the annual salaries paid to the Kuwaiti employees in excess of the percentage covered under the applicable laws; and
    2. total number of Kuwaiti employees – KWD36,000 for each Kuwaiti employee.
  • Expenditure on training of Kuwaiti employees – ten times the annual expenditure on training of Kuwaiti employees.
  • Utilisation of Local Resources:
    1. rental of the local head office of the investment entity – equivalent to the value of the annual contracts with local suppliers;
    2. contracts with local suppliers (especially including SMEs) for the provision of local products and services – equivalent to the value of the annual contracts with local suppliers; and
    3. raw material and other material from local sources – double the annual value of inputs used from local sources.

Also of significance is Article 8 of the executive regulations to the Tax Law, which provides that the profits accrued by corporate bodies from trading on the Kuwait Stock Exchange are exempt from taxation.

While there is no express rule restricting tax consolidation, the Tax Law provides that every taxpayer must file an income tax declaration (Articles 1 and 8 of the Tax Law) and this rule is applied in practice by the DIT.

The Tax Law does not expressly address thin capitalisation (where a company is primarily financed by debt rather than equity) or the tax consequences thereof; however, it is of possible significance that Executive Rule No 38 provides that the DIT may scrutinise financial costs/expenses to detect whether a taxable transaction has occurred (considering, amongst other things, the necessity of loans/interest in relation to loans from banks and related parties, and the surrounding documents, inter-group interest charges and interest paid in relation to foreign financing). Executive Rule No 38 provides as follows (informal translation).

First: Bank Interest

The interest locally paid on bank facilities and loans used in the main activity of the incorporated body shall be accepted after ensuring the necessity of the loan and also the supporting documents. The interest on the loans utilised in financing the capital operations shall be capitalised and added to the asset value.

All interest charged by the head office for its current account in the incorporated body’s branch in the State of Kuwait shall be discarded. The same applies to the interest charged by the agent.

The interest paid abroad shall be discarded unless it is proved that such interest has been paid for loans and bank facilities to finance the incorporated body’s activities in the State of Kuwait.

Second: Letter of Guarantee’s Commission Paid Abroad

This commission shall be allowed if it is only paid to a foreign bank to issue a letter of guarantee from a local bank and the letter of guarantee is related to a taxable project in Kuwait. Commissions related to a letter of guarantee where the revenue is not taxable shall not be allowed.

Save for certain limited guidance in the executive regulations (see Article 5) and the Executive Rules, little is expressly provided in the tax laws/regulations on how taxes should be treated between a branch and its head office.

That being said, Executive Rule No 38 does provide that no interest charged by a head office in relation to its account with the Kuwaiti branch shall be deductible. In practice, however, such interest charges may be allowed if the Kuwaiti tax authorities are satisfied that the interest is a legitimate charge that relates to a Kuwaiti project. Also of significance, Executive Rule No 49 provides that the tax authorities may inspect intergroup transactions to ensure that such transactions are not concluded for illegal tax purposes. Executive Rule No 49 goes on to provide that each entity is responsible for its own taxes but that, in special cases, related entities can be treated differently after consulting with the tax authorities.

It is also understood that, in practice, the DIT applies limits on the deductibility of expenses incurred outside Kuwait in relation to a head office, related entities and third parties to varying degrees. The following are provided as examples.

  • Costs of imported materials to be resold in Kuwait – deductions cannot exceed 85-95% of the related value.
  • Design costs incurred outside of Kuwait – deductions cannot exceed 75-85% of the related value.
  • Foreign consulting expenses – deductions cannot exceed 70-80% of the related value.

Depending on an entity’s status (ie, whether it is a head office, a related party or a third party), the applicable deduction allowed may be greater or lower within the range provided.

See 5.6 Transfer Pricing regarding the scrutinisation of related party transactions. Where there are reasonable grounds to believe that a taxpayer will not comply with its tax obligations, Article 35 of the executive regulations to the Tax Law empowers the DIT to make preliminary attachments (and potentially seek to dispose of the assets) and to ban the relevant management of the taxpayer from travelling. The following may also be of possible relevance.

  • See 5.2 Taxes Applicable to Businesses in relation to the 5% tax retention required to be made from payments being made to counterparties.
  • Under Executive Rule No 57, the authorities can institute precautionary attachments when:
    1. the Tax Department becomes aware that the taxpayer intends to leave the country forever;
    2. the Tax Department becomes aware that the taxpayer intends to cease its activity; or
    3. the Tax Department learns that the taxpayer intends to dispose of its assets with the aim of evading the tax due.
  • Under Article 36 of the executive regulations to the Tax Law, if the final and payable taxes and penalties are not paid on the required date, the Tax Administration may approach the courts to attach the property of the taxpayer (including such assets of the taxpayer as may be in the possession of a third party). With respect to penalties, Article 34 of the executive regulations to the Tax Law provides that a penalty of 1% per month (calculated on the taxes due) shall be imposed for failing to submit a tax return as from when the tax return was meant to be filed, and a further 1% per month (calculated on the taxes due) for failing to actually pay taxes as from when the tax was due to be paid.

Under Article 44 of the executive regulations to the Tax Law, the Tax Administration may cancel any agreement or procedure the intention of which is tax avoidance.

Kuwait has recently overhauled its competition regulatory regime. In this regard, a new Competition Law (No 72 of 2020) was promulgated during November 2020. The Competition Protection Authority (the CPA) has been tasked with implementing the Competition Law and regulating competition matters generally in Kuwait. The CPA issued new implementing regulations, which were published during July 2021 (under CPA Resolution 14 of 2021) and give further effect to the Competition Law. The Competition Law and its implementing regulations have brought about a number of significant changes to M&A, which should be accounted for going forward. 

When acquiring or merging with another business, certain reporting obligations and approval requirements arise in the context of what is considered to be an “economic concentration”. Such economic concentration is defined under the Competition Law to include “a permanent change of control in the relevant market, arising by way of merger or acquisition”. Such control may also be exercised in concert with other persons, whether directly or indirectly. 

Article 10 of the Competition Law provides that such economic concentration is deemed to be present in the following instances:

  • the merger of two or more persons or parts of their businesses that results in control or an increase of control;
  • the acquisition of direct or indirect control over another one or more persons through acquiring, amongst other things, assets, equities, usufruct and/or shares; or
  • the existence of a partnership between two or more persons that leads to a permanent and independent economic or commercial activity, whatever the legal form or activity that is practised.

Article 10 of the Competition Law has been drafted in broad terms and is largely duplicated in the implementing regulations.  However, the definition of what is to be considered an economic concentration provides that there should also be a change of control of a particular market. Also of significance, while the previous and now repealed Competition Law (No 10 of 2007) provided that control would be established where  a person (or group of persons), directly or indirectly, controls 35% or more of a particular market, this has not been carried over into the current Competition Law or its implementing regulations. However, Article 12 of the Competition Law does provide that such reporting obligations would be triggered where the value of the underlying registered assets or annual sales in Kuwait subject to the economic concentration exceeds certain thresholds, which are to be issued by the authorities. While a similar provision has been included in the implementing regulations, the actual thresholds themselves remain outstanding.

Given the outstanding information and the novelty of the Competition Law (and its implementing regulations), there is a lack of precedent and guidance from the authorities on how economic concentration and control over a market would be applied in practice. The COVID-19 pandemic has also contributed to a number of delays in the manner in which the authorities conduct their affairs and which has no doubt impacted on the issue and the implementation of rules and procedures affecting competition. While the CPA has not rigorously implemented requirements under the competition laws in the past, it has recently begun taking a more active approach in applying the requirements under the Competition Law.

As indicated in 6.1 Merger Control Notification, the Competition Law provides that the participants of an economic concentration situation are required to obtain the approval of the CPA before completing such economic concentration. A CPA application is required only if the relevant registered assets or annual sales in Kuwait exceed certain thresholds, which are to be issued by the authorities (and which remain outstanding at the time of writing).

The application to be submitted to the CPA should include confirmation of the payment of an administration fee in an amount equal to 0.1% of the paid capital or the aggregate value of the assets of the relevant persons in Kuwait, whichever is less, subject to a maximum KWD100,000. The CPA should then examine the application to determine the possible negative consequences of the economic concentration on free competition. Given the timelines afforded to the CPA in evaluating such application, this process may take a number of months to complete.

The Competition Law guarantees the freedom of exercising economic activity in a manner that does not affect free competition for all in Kuwait. The Competition Law also contains a general prohibition on acting in an anti-competitive manner (by stating that all agreements, practices, etc, that are harmful to free competition are prohibited), and elaborates on particular agreements/practices that are restricted. The Competition Law provides that it shall apply to all acts perpetrated abroad that affect competition in Kuwait.

The Competition Law has introduced the concepts of horizontal relationships and vertical relationships into Kuwaiti law.

Persons are in a horizontal relationship when they are on the same production/distribution level in a particular market, whereas a vertical relationship exists when they are on different levels of a production or distribution chain of a particular market.

In a horizontal relationship, parties are restricted from:

  • setting the prices of products, either directly or indirectly, whether by increasing, decreasing, fixing the price or imposing any commercial restrictive requirements relevant to the sale or distribution of commodities or the provision of service or any other form contrary to ordinary market forces;
  • dividing the product markets according to areas, volume of sales or purchases or products being sold in any other manner;
  • fixing the quantity of production, distribution or sale for commodities or determining a specific method or means for the provision of service;
  • restricting the technical development or investment in connection to the production, distribution or sale of a commodity or provision of a service; and
  • colluding in submitting bids or offers for the sale, purchase or provision of any commodity.

Significantly, the Competition Law provides that the CPA is to provide further guidance on what is permitted/restricted in relation to persons in vertical relationships; such guidance remains outstanding.

See 6.1 Merger Control Notification and 6.3 Cartels.

Law No 71 of 2013 (the Patent Law) addresses patent protection issues in Kuwait. Although the Patent Law does not expressly define the word "patents", Article 3 provides what should not be considered as a patent, including:

  • discoveries, scientific theories, mathematical methods and computer programs;
  • schemes, rules and methods of doing business, practising pure mental activities, and playing a game;
  • plants and animals and the biological processes used to produce plants or animals, with the exception of microbiology processes and the products of these processes; and
  • methods for treating the human or animal body surgically or therapeutically, and methods of diagnosing disease applied to the human or animal body, with the exception of products that are used in any of these methods.

This Law does not protect plant varieties and animal species.

According to Article 15, patents are valid for a period of four years, but can be renewed for cumulative periods of up to 20 years.

At present, the Patent and Trademark Office (PTO) processes applications for industrial designs, while other patent applications are directed to the GCC Patent Office in Riyadh, Saudi Arabia. A registration in the GCC Patent Office in Riyadh, when approved, may be enforced in Kuwait.

An owner or rights holder of a patent, a drawing, a design or a utility model may file a complaint under the Patent Law to protect their rights. During a civil or criminal lawsuit, a rights or title holder may ask the court to issue an order to take precautionary measures (which may include the seizure of the contravening goods and the equipment and machines used for committing the offence). Where necessary, the order issued for taking such measures may require the appointment of an expert and other court officers to assist in its execution.

Unlike under Law No 13 of 2015 (the TM Law – see 7.2 Trade Marks) and Law No 75 of 2019 (the Copyright Law – see 7.4 Copyright), which specifically allow a rights or title holder to seek an order from a Kuwait court for the enforcement of precautionary measures prior to the filing of a substantive infringement action (and on an ex parte basis when necessary) to prevent patent infringements and violations, the Patent Law grants such a right only after the substantive claim for patent infringement or violation of the Patent Law has been filed.

The 1970 Patent Cooperation Treaty (as amended) (PCT), an international patent law treaty, is also of significance, and was ratified by the State of Kuwait on 9 September 2016. The PCT makes it possible to seek patent protection for an invention simultaneously in a number of countries by filing an "international" patent application; such an application may be filed by anyone who is a national or resident of a contracting state with the national patent office of the contracting state or, at the applicant's option, with the International Bureau of WIPO in Geneva. However, it should be noted that the PCT application does not itself result in the automatic granting of a patent, and the granting of a patent is at the discretion of each national or regional authority. In other words, a PCT application establishes a filing date in all contracting states but must be followed up on by entering into national (or regional) efforts to obtain one or more patent registrations.

Trade mark protection is regulated under the TM Law, which is largely based on a treaty between the various GCC states. The TM Law defines "trade marks" as "Anything which takes a distinct form or style in the form of names, words, signatures, letters, symbols, numbers, titles, stamps, drawings, graphs, inscription or combination of same, or any signs or group of signs if used or intended to be used to distinguish such products or services of an organisation or entity relevant to such products or services from products or services of other entities or to indicate the performance of a service or to control or check such products or services" (informal translation).

Trade marks, service marks, logos and trade names may be registered in Kuwait under the TM Law in accordance with international classification standards, except those relating to certain prohibited items (ie, alcohol and pork products) and certain restricted activities (such as gambling). These registrations are valid for up to ten years from submission of the application for registration, and may be renewed for similar periods. When foreign marks are to be used in Kuwait, the owner thereof is typically recommended to consider registering them locally in accordance with the TM Law as this affords the mark owners more protection than when the marks have not been registered.

In case of an infringement of a registered trade mark, the remedies available to the trade mark owner under the TM Law include:

  • filing a criminal action (see Articles 2, 3 and 4 of the TM Law);
  • seeking injunctive relief, which may take the form of confiscating infringing items, impounding the tools used in infringing the mark and/or the destruction of unlawful marks and property (see Article 40 of the TM Law);
  • if the infringing party manages to register the infringing mark, filing a case to de-register the trade mark of the infringing party (see Articles 22 to 24 of the TM Law);
  • seeking damages (see Article 41(1) and (2) of the TM Law); and
  • filing an application with the Customs Department to prevent the entry of counterfeit goods (see Article 38 of the TM Law).

Of significance, a complainant should file a substantive action with the relevant court within 20 days of the granting of a precautionary order/injunctive relief.

Industrial designs are also protected in Kuwait (but not separately defined, strictly speaking) under Law No 4 of 1962) (the Patent, Designs and Industrial Models Law). In this regard, Article 35 of the Patent, Designs and Industrial Models Law provides that "any arrangement of lines or any type of figure, whether coloured or uncoloured, designed for use in industrial production by a mechanical, manual or chemical process shall be considered a design or industrial model" (informal translation). Although industrial designs are regulated similarly to patents, they are subject to certain different rules. For example:

  • the initial protection period for industrial designs is ten years from the application date;
  • industrial designs may be renewed for one further period of five years; and
  • industrial models are registered with the PTO on the Register of Designs and Industrial Models.

The Copyright Law governs copyright issues and defines a "work" as "any creative literary, artistic or scientific work of whatever kind, expression, importance or purpose" (informal translation), and provides for the protection thereof. Article 23 of the Copyright Law provides that copyright protections will typically endure for the lifetime of the author and for 50 years after the author’s death; additional considerations may apply, depending on the nature of the work and the author involved (joint works, juristic entities, etc). Certain limited exceptions from the copyright protection are provided for (copying short portions for educational purposes, etc).

A party seeking to protect its copyright does not need to register the copyright locally in order for it to be granted protection under the Copyright Law; however, it may wish to apply and file a request with the Kuwait National Library (KNL) to deposit works sought to be protected in order to enhance the ability to evidence the author’s entitlement to copyright protection. The KNL is authorised to accept applications for the deposit of works from authors or creators, their descendants or their official representatives. Only one classification of work will be allowed for each application. If the material is accepted for deposit, the KNL will classify the material and issue a certificate indicating the serial number, the date of deposit and an international classification.

Under Article 35 of the Copyright Law, a complainant may petition a court to grant interim relief (an order restricting the publication, presentation, performance or copying of the work for a certain period of time, seizure of the revenue generated from the exploitation of the work, etc) when there is a violation of any rights stipulated under the Copyright Law. Significantly, a complainant should file a substantive action with the relevant court within 15 days of the granting of the interim relief.

While certain laws protect trade secrets (eg, the Companies Law restricts directors from sharing company secrets) there is no formal registry for such information. While a database can enjoy protection under the Copyright Law depending on its nature, the authorities have not issued a directive as to the basis on which software is protected. Depending on the type/format of the software, possible arguments can be made that it should be protected under copyright or as a patent. In this regard, the Copyright Law expressly provides for the protection of "computer programs" but, as provided above, the Patent Law states that patents "shall be granted in accordance with the provisions of this Law for any new invention which is utilisable in industry, whether it concerns a new industrial product, original industrial process and techniques or a new application of know industrial process or techniques" (informal translation), and it is conceivable that certain software could also satisfy this language in the Patent Law.

While data protection is dealt with in various laws, Kuwait does not have a single and comprehensive data protection law as such. In the modern context, data protection issues are primarily addressed in Articles 32-36 of Law No 20 of 2014 (the Electronic Transactions Law).

Under the Electronic Transactions Law, data may only be collected/utilised with the consent of the data subject. The parties that collect the data are legally required to state the purpose of the data collection and to limit collection/use of the data to the scope of such stated and approved purpose. Data subjects (or authorised representatives thereof) may request to view their data that has been collected, and data collectors are obliged to respond to data subjects’ requests. Parties that collect/use data are obliged to secure such data against loss, damage, disclosure, etc, and should regularly verify the accuracy of the data and amend such data as necessary. Data subjects may request that their data be deleted or amended if it is untrue or inaccurate.

Companies that are doing business "in" Kuwait are typically required to abide by Kuwaiti laws, regardless of whether or not they have a physical presence in Kuwait; such laws include the Electronic Transactions Law. While this is decided on a case-by-case basis, the likelihood of the foreign entity being subject to Kuwait’s laws increases according to the strength of the link between the activities of the foreign entity and Kuwait.

There is no particular agency in Kuwait that is specifically charged with and dedicated to enforcing Kuwaiti data protection rules. The agency that may have jurisdiction will depend on the specific data protection rules that are being contravened. However, all issues under the Electronic Transactions Law (including its data protection provisions) are regulated by the Kuwaiti Communication and Information Technology Regulatory Authority (CITRA).

With respect to business reforms in 2021 and beyond, there have been certain developments in relation to e-commerce activities. A draft e-commerce bill is currently under consideration; although certain registration requirements are being contemplated (ie, in relation to e-commerce transactions within Kuwait), little is publicly known about the bill as yet. In parallel with this, the authorities have recently issued a number of laws and regulation that impact on data privacy, and more are understood to be in the pipeline. These laws/regulations will impact not only e-commerce but also how businesses in general treat the information of their customers, employees and contractors. 

As an aside, Bankruptcy Law No 71 of 2020 has been passed by the Kuwait Parliament, assented to by the Emir of Kuwait, and published in the Kuwait official gazette on 25 October 2020 and will come into effect as of 25 July 2021, together with its regulations.

ASAR Legal

Salhiya Complex
Gate 1
3rd Floor
Mohammad Thunayan
Al-Ghanim Street
Kuwait City

+965 2292 2700

+965 2245 3597

asar@asarlegal.com www.asarlegal.com
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HFW in association with Attorney Rula Dajani is the only international law firm in Kuwait, and has two permanent partners and seven other lawyers. The team in Kuwait includes in-house court advocates, with rights of audience before all levels of the Kuwaiti courts. The Arabic-speaking litigation team drafts its own pleadings, and advocates routinely represent clients at court hearings, including at the Court of Cassation. The firm includes lawyers specialising in aviation, construction, energy, insurance and shipping, complemented by a balanced blend of corporate, commercial and disputes practitioners. HFW Kuwait is registered with the Kuwait Direct Investment Promotion Authority and is authorised to assist foreign investors in establishing a wholly foreign-owned corporate presence in Kuwait. The corporate team advises both local and foreign clients on general corporate and commercial transactions and regulatory matters, including due diligence work, negotiating joint ventures, franchise and agency agreements, and employment matters.

The Main Forms of Business Structure

Foreign businesses may carry out business and operations in Kuwait through the appointment of a Kuwaiti agent or by participating in the ownership of a Kuwaiti entity. The Kuwait Companies Law (Law No 1 of 2016) sets out the various forms that such an entity may take, with the most common forms of company being a closed shareholding company (KSC), a limited liability company (WLL) and a single person company (SPC).

A foreign entity may not establish or own a company in Kuwait unless it has a Kuwaiti partner or partners, and provided that such Kuwaiti partner(s) owns at least 51% of the capital of the company.

GCC nationals (ie, nationals of the six member States of the Gulf Cooperation Council Countries: the United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain) and GCC companies that are fully owned by GCC nationals/companies are afforded the same treatment as Kuwaiti nationals. Such GCC individuals/companies can own up to 100% of a Kuwaiti company, with some exceptions pertaining to certain commercial activities.

Foreign entities typically appoint an agent if they wish to carry out business in Kuwait on a temporary, time-limited or project-by-project basis, without the need to establish a physical presence on the ground. As the process of establishing an agency arrangement involves just registering the agency agreement with the Ministry of Commerce and Industry, it is more expedient and cost-effective than establishing a Kuwaiti corporate entity. Commercial agencies are regulated by Law No 13 of 2016 along with the general provisions of the Commercial Law, which addresses different types of agency arrangements.

It is also possible to establish a joint venture under a contract representing an association between two partners (eg, a Kuwaiti partner and a foreign partner). Joint ventures have no registration requirements and no legal personality. However, the business should not be conducted in the name of the joint venture itself.

Kuwaiti corporate entities typically take the form of limited liability companies or shareholding companies, particularly if foreign investors or shareholders are involved. A limited liability company (WLL) has at least two shareholders and provides limited liability to its shareholders. With the exception of banking and insurance activities or the investment of funds for third party accounts, a WLL is the most common legal structure adopted in Kuwait by foreign investors.

The foreign investor often participates in the ownership of a WLL pursuant to a nominee arrangement with a Kuwaiti nominee. The foreign investor will ordinarily hold legal title of up to 49% of the shares in the WLL, with the 51% being registered in the name of a Kuwaiti nominee. A scheme of arrangement is put in place with the Kuwaiti nominee in the form of a sponsorship agreement, whereby the Kuwaiti nominee agrees and acknowledges that it holds the shares on behalf of and for the benefit of the foreign investor. Powers of Attorney and other documents are put in place to effectively transfer financial and management control to the extent legally possible to the foreign investor. Whilst these arrangements are used regularly, there remains uncertainty about the extent of enforcement thereof. As such, foreign investors are recommended to exercise caution when selecting the proposed nominee.

Kuwait Direct Investment Promotion Authority

To create a more accommodating environment for foreign investment, Kuwait introduced the Direct Investment Promotion Law, Kuwait Law No 116/2013, allowing foreign investors to fully own corporate entities established in Kuwait under a licence granted by the Kuwait Direct Investment Promotion Authority (KDIPA). This licence is granted subject to criteria set out under the Direct Investment Promotion Law.

Foreign businesses established in Kuwait can assume any of the legal forms permitted under the Direct Investment Promotion Law, including setting up a company branch, establishing a representative office for marketing purposes, or forming a limited liability company, which can be 100% foreign owned. Except for a list of commercial activities for which a foreign investment licence cannot be obtained (which constitute what is commonly referred to as the Negative List), foreign businesses can establish corporate entities that can undertake most types of business activity in Kuwait.

KDIPA offers various incentives to foreign investors, such as exemptions from customs duties and taxes for up to ten years, land facilitation and the benefit of bilateral treaties, in addition to securing 100% foreign ownership.

Taxes

There is no corporate tax on Kuwaiti corporate entities or entities that are incorporated in other GCC member countries; due to treaties ratified by Kuwait, corporate entities established in GCC countries are treated as Kuwaiti entities for corporate tax purposes. All other foreign entities carrying out business in Kuwait are subject to corporate income tax of 15% on their share of profits. There is no personal income tax imposed on individuals who are shareholders in Kuwait entities. In addition, Kuwaiti authorities do not impose restrictions on the repatriation of profits.

Kuwait has entered into double taxation treaties with a number of countries, which provide certain tax exemptions to international investors seeking to do business in Kuwait.

Exchange Control

There are no significant restrictions on foreign currency movements, except for safeguards to combat money laundering as stipulated and strictly implemented by the Central Bank of Kuwait (CBK).

Therefore, capital, equity, dividends, loans, interest, profits, royalties, fees and savings are freely remittable by foreign investors through banks, investment companies and currency exchange companies, albeit strictly monitored by the CBK.

Data Protection

In Kuwait, there is no single, standalone piece of legislation dedicated to data protection, nor is there an agency tasked specifically with the regulation and governance of data protection (contrary to some of the more comprehensive legislative regimes existing in other jurisdictions).

Kuwaiti legislation does not provide a formal definition or classification of "personal data".

The legislation governing individual data protection rights relates to personal data and information (personal data) that is in electronic form. These rights are governed by Kuwait Law No 20/2014 (the Electronic Transactions Law), Law No 12 of 2020 in relation to the right to review details and information (Law No 12/2020) and its Executive Regulations issued by the Minister of Justice Resolution No 62 of 2021.

There is also a series of provisions in various pieces of Kuwaiti legislation relating to data protection. These supplementary provisions address issues of confidentiality and disclosure within the specific context addressed by the legislation. However, in addition to "other personal data", Article 32 of the Electronic Transactions Law makes specific reference to data and information on employment, social status, medical conditions and financial position. These references are, however, not exhaustive or exclusive in terms of what is covered within the scope of protected personal information. Other personal data or information provided or acquired during the course of commercial transactions or business relationships would also fall under the scope of protection, as would the contents of communications through telecommunication networks or the post service.

Anti-Competition

The Competition Protection Agency was established in 2012 by virtue of Competition Law No 10 of 2007 and aims to set out a competition regime that provides a healthy environment of creating equal business opportunities amongst companies that would lead to encouraging innovations and efficiency and create lower prices and a variety of choices for consumers.

A new competition law came into force in late 2020 that has taken into consideration the development in business in the local, regional and global markets, and addressed the deficiencies in the previous law by adopting international anti-competition standards. The new law differentiates between horizontal and vertical transactions/agreements, which were not addressed in the previous law, creating more clarity on the prohibited transactions.

Employment

Employment relations are regulated by the Kuwait Labour Law No 6 of 2010 as amended for the private sector, the Oil Sector Labour Law No 28 of 1969 as amended for oil sector workers, and the Government Sector Labour Law No 18 of 1960, as amended for the public sector.

The Labour Law is a very detailed piece of legislation that covers all aspects of employment relations, including the formation of the employment contract and its termination, working hours, working days, notice requirements, all kind of leave (annual, sickness, maternity and others) and employees' entitlements upon termination of the employment relationship. The law sets out the minimum statutory rights of the employees that cannot be contracted out of by the agreement of the parties (employer and employee), nor waived.

The Labour Law provides that employees should be protected from physical hazards and occupational diseases in the workplace. Thus, employers are required to take the necessary precautions to protect their employees’ welfare in line with the regulations specified in the Labour Law.

Visas and Work Permits

Work permits

In order to work in Kuwait, a work permit must be obtained from the Public Authority for Manpower; the employer is responsible for issuing such work permit. Upon the issuance of the work permit, the employee will be able to obtain his/her residency visa for a period similar to the period of the work permit, which can be granted up to three years. GCC nationals can work in the State of Kuwait without the need to obtain a residence visa.

Business visas

Business visas are issued to foreigners to enable them to travel to Kuwait for a limited time – eg, to attend business meetings or conferences. The visa is issued based on an application submitted by a local Kuwait company acting as the sponsor of the visitor, and shall be granted for a period of 30 days.

Intellectual Property

Kuwait is a member of the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO). It is also a signatory of the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property.

In addition to its membership in international organisations on the protection of intellectual property, Kuwait protects intellectual property rights by virtue of a variety of local and GCC laws – ie, GCC Trademark Law, Copyrights Law, and GCC Patent Law. In the past few years, Kuwait has witnessed a development in protecting intellectual property rights, and has adopted new laws and regulations to reform its copyright regime, including in the area of enforcement.

Public Tenders

A new Public Tenders Law was introduced in Kuwait in 2016 (Law No 49/2016), to keep pace with the change in the requirements of the administrative departments and with the government's adoption of economic policies aimed at attracting foreign investors to Kuwait. The law allowed foreign companies to bid directly for government projects and provided an exclusion from the application of article 24 of the Commercial Law, which requires foreign companies to do business in the State of Kuwait through a Kuwaiti Agent.

Although the Public Tenders Law provides that foreign investors do not need an agent to bid, the foreign investor/bidder may in practice still need to appoint a Kuwaiti agent/sponsor in the execution phase of the project to sponsor its employees for residence visa purposes to enable them to execute the project in Kuwait.

The Public Tenders Law in its current form has allowed foreign investors to identify and pursue business opportunities in Kuwait prior to engaging with any local entity and incurring unnecessary costs.

Real Estate

Generally, it is not permissible for companies that are part owned by non-Kuwaiti partners to own land in Kuwait. An exception to this rule is granted to joint venture companies with non-Kuwaiti partners (which are not intended to deal in real estate), which may be permitted to own land/real property as deemed necessary to achieve their commercial purpose, upon the issuance of a decree granting this right.

The government is the owner of industrial lands/areas in the State of Kuwait, under the supervision of the Public Authority for Industry (PAI), which is the primary sector regulator responsible for the development of the Kuwait national industrial strategy. Licences to usufruct and utilise industrial lands are granted to Kuwaiti individuals and companies duly established in Kuwait, or to GCC nationals or companies. In this respect, Kuwait companies that are fully owned by foreigners and established through KDIPA will be eligible to apply for industrial lands upon obtaining the required licences and approvals from KDIPA.

HFW

Arraya Center, Tower 1
23rd Floor, Office No 1
Abdulaziz Hamad Al Saqer Street
Sharq
P.O. Box 944, Safat 13010
Kuwait

+965 2206 6777

+965 2206 6788

rula.dajaniabuljebain@hfw.com www.hfw.com/Kuwait
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ASAR Legal is Kuwait’s leading corporate law firm, with a strong network of contacts throughout the MENA region. Its work cuts across various sectors and includes IPOs, capital markets, M&A, banking and finance, real estate, government projects, securities, taxation, construction, corporate and commercial matters, franchising, commercial litigation and arbitration. The firm has multilingual capabilities, including being able to provide services in English, Arabic and French. Its clients include a number of significant public and private sector entities based in Kuwait, Bahrain and elsewhere in the world (including in the United States, Europe and elsewhere in the GCC). ASAR is also regularly retained by leading international law firms and has won numerous awards for legal services rendered.

Trends and Development

Authors



HFW in association with Attorney Rula Dajani is the only international law firm in Kuwait, and has two permanent partners and seven other lawyers. The team in Kuwait includes in-house court advocates, with rights of audience before all levels of the Kuwaiti courts. The Arabic-speaking litigation team drafts its own pleadings, and advocates routinely represent clients at court hearings, including at the Court of Cassation. The firm includes lawyers specialising in aviation, construction, energy, insurance and shipping, complemented by a balanced blend of corporate, commercial and disputes practitioners. HFW Kuwait is registered with the Kuwait Direct Investment Promotion Authority and is authorised to assist foreign investors in establishing a wholly foreign-owned corporate presence in Kuwait. The corporate team advises both local and foreign clients on general corporate and commercial transactions and regulatory matters, including due diligence work, negotiating joint ventures, franchise and agency agreements, and employment matters.

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