Areej Hamada, founder of Kuwaiti law firm Legal
challenges group, looks at the bridges Kuwait has been building
with its largest trading partner, China, and how it has
modernised its foreign investment rules
The State of Kuwait has close historical ties with China
that have steadily consolidated over the years in political,
economic, investment, commercial and cultural aspects. Kuwait
is was the first Gulf country to have diplomatic relations with
Investment in Kuwait is articulated around its strategic
position in the North Arabian Gulf region, which has ensured
its transformation into one of the world's prominent financial
and trade centres within an economic and commercial passage
that is free and safe for the region. Kuwait is linking this to
Chinese initiatives and the Kuwaiti leadership is keen to
advance Chinese-Kuwaiti exchange in several areas.
Kuwait's political leadership is very interested in
developing bilateral partnership and cooperation with Chinese
investors based on mutual benefit and joint economic and trade
cooperation, all of which will deepen bilateral relations. At
the political level, Kuwait plays a pivotal role in the Middle
East under the leadership of His Highness the Amir Sheikh Sabah
There are also political goals related to China's recent
investment activities, to foster cooperation, coordination and
consultation in order to build a link between China's Belt and
Road Initiative (BRI) and Kuwait's Strategic Vision 2035. The
aim is to turn Kuwait into a global economic and financial
centre by linking the Silk City Project and the project to
develop five islands in northern Kuwait with the BRI.
Easing the flow of foreign investment
Kuwait has shown significant interest in promoting foreign
investment in particular through the enactment of a specialised
law to regulate foreign investment (Law No. 116 of 2013
concerning the Promotion of Direct Investment in the State of
Kuwait), which also established a specialised authority. This
authority acts as an executive economic arm of the State of
Kuwait and plays several roles including, without limitation,
attracting and promoting foreign direct investment (FDI) to
Kuwait that adds value and incentivises innovation. In
addition, this authority undertakes a regulatory procedural
role to facilitate the work of foreign investors and receives
and approves applications for investment licences. As well as
granting incentives in accordance with the criteria stipulated
by the provisions of Law 116, the law encourages cooperation
between the relevant authorities that continue to facilitate
foreign licensed projects.
Law 116 covers the main approval considerations for foreign
investment. Article 12 stipulates that an application for an
investment licence must be submitted by an investment entity in
accordance with the following – the applicant must
- A Kuwaiti company as stipulated by the Kuwaiti Commercial
Companies Law No. 25 of 2012, which includes the following: a
one person company; joint stock company; limited liability
company; professional company; holding company; solidarity
company; limited partnership company; partnership limited by
shares; joint-venture company. A foreign investor's share may
be up to 100% of its capital, provided the company is
established for the purpose of direct investment.
- A branch of a foreign company licensed to
operate within Kuwait for the purpose of direct investment.
The competent minister shall issue a decision clarifying the
bases and rules regulating the relationship between the
foreign company's branch and the official bodies in respect
of the transactions necessary for its operation.
- A representation office, whose objective
is to study the markets and the possibility of production
without engaging in any commercial activity or the activity
of commercial agents.
Article 15 of Law 116 stipulates that the approval of a
foreign investor licence application will take place within 30
days of the date of submission of the application, subject to
fulfilling all the data requirements, documents and conditions
specified by the authority. If the application is rejected, the
decision must be in writing and justified and the applicant has
the right to appeal within 30 days. This is considered a
decision to reject the appeal pursuant to Article 16 of the
An administrative unit, called the "single window", was
established to facilitate the FDI process Kuwait pursuant to
Article 17 of the law. This Unit includes commissioners from
the governmental bodies related to the procedures for licensing
investment entities and ensures proper completion of
transactions within the 30-day time period set by the law . The
applicant is also entitled to appoint a qualified consultancy
firm, which must have authority approval.
China is Kuwait’s largest trading partner,
with bilateral trade totalling $187 billion in
As for expropriation, Article 19 of the law states that: "No
investment entity licensed under the provisions of this law may
be subject to requisition or expropriation except for public
utility in consideration for a compensation equivalent to the
economic value of the expropriated project at the time of
expropriation. Such value is to be estimated based on the
economic condition prior to occurrence of any threat of
expropriation and the compensation value shall be paid
immediately after issuance of that decision".
Article 20 regulates the transfer of ownership by giving the
investor the right to transfer, renounce or dispose of its
ownership of the licensed investment entity, in whole or in
part, whether the transfer is in favour of the foreign investor
or a Kuwaiti investor. In case of a transfer of ownership, the
new owner or transferee will replace the original owner in the
respective rights and duties.
With respect to the merger process, under Article 21 the
approval of the Board of Directors of the Kuwait Direct
Investment Promotion Authority is needed for the merger of two
or more investment entities based upon a joint request. The new
entity resulting from the merger process becomes a legal
successor to the merged entities and replaces them with respect
to the rights and obligations, subject to a decision by the
Ministry of Commerce and Industry concerning the procedures,
conditions and terms of the merger. The investor may also,
under the provisions of Article 22, transfer its profits or
capital produced from disposition of its shares or equity in
the investment entity.
Merger or acquisition processes are considered significant
tools in the economic process, but there are some obstacles and
challenges, most notably relating to the legal environment in
Kuwait when companies a looking for clarity in the merger
process. Thus, there must be specific conditions for the merger
process in addition to the current routine procedures that
limit the merger in Kuwait. Nevertheless, Kuwait is looking
forward to the enactment of a set of modern and sophisticated
economic laws in the future.
Kuwait has given considerable attention to competition
regulation. Specialised Law No. 10 of 2007 was recently amended
by Law No. 2 of 2012 regarding the protection of competition,
as guaranteed by the Kuwaiti Constitution on freedom of
competition. Accordingly, the Competition Protection Authority
(Authority) was established by the Kuwaiti government to
oversee the functioning of the markets in Kuwait and to promote
competition in the Kuwaiti markets in an orderly manner under
local and domestic laws, regulations and procedures; as well as
international agreements and treaties. In addition, the
Authority seeks to prevent harmful practices and monopolistic
China is Kuwait's largest trading partner, with bilateral
trade totalling $187 billion in 2018, which represented a 55.1%
year-on-year increase. Kuwait is also the ninth largest
supplier of crude oil to China, with China importing 23.21
million tons of crude from Kuwait in 2018, a per annum increase
of 27.23%, worth $11.9 billion by the end of 2018, a per annum
increase of 68.48%. Furthermore, the number of engineering
contracting projects executed by Chinese companies in Kuwait
reached 120 projects worth $21.6 billion. All of this reflects
the degree of practical cooperation between the two countries,
which has yielded fruitful results in trade, energy,
telecommunications, infrastructure and finance.
In order to facilitate the operation of the vehicles related
to Chinese investment, the Kuwait Investment Office was
inaugurated as a branch of the General Authority for Investment
to serve as a key terminal through which Kuwaiti investments
pass through Asia. The State of Kuwait is the first foreign
country to be granted this licence by China, again reflecting
the deeply rooted ties between the two countries.
There are several recent cooperation agreements between
Kuwait and China, most of which focus on Sino-Kuwaiti economic
cooperation. These include, for example, a memorandum on the
establishment of a mechanism for electronic cooperation and
e-commerce; a cooperation protocol in the defence industry; an
MoU to encourage direct investment and promote international
trade; the memorandum of cooperation on the BRI; and finally a
memorandum of cooperation to secure credit exports. These
initiatives all mutually benefit China and Kuwait, promote a
common interest and pursue the consolidation of a strategic
With regards to restrictions on foreign investment, although
there is complete flexibility, investments cannot be contrary
to law and order, public morals and Islamic religious
There are however some minor restrictions on foreign
exchange that foreign investors must familiarise themselves
- The maximum limit for cash transfer is about KD3,000
(approximately $10,000), while the maximum limit for an ATM
debit card-to-bank transfer is KD40,000.
- There is no ceiling limit for transfers between banks,
but they are conditional on proving the source of funds.
- Kuwait enjoys free movement of capital and
profits abroad if the source of funds is a legitimate and
- When a cash in excess of KD3,000 is
brought into Kuwait in foreign currency, the source of the
money must be confirmed and the documents proving the origin
of the funds must be confirmed by the customs of the foreign
country. Once the investor arrives in Kuwait, it must obtain
another approval from Kuwait's customs.
Pursuant to Kuwait's economic laws, as well as the Direct
Investment Promotion law, Kuwaiti courts are the competent
judicial authority to settle foreign investor disputes, unless
there is a clear and direct agreement to choose arbitration,
whether local or international.
The Kuwaiti judiciary is a fortress for the protection and
preservation of the rights of its citizens and foreigners.
Kuwait has a fair and independent judiciary that deserves
praise and appreciation for its landmark judgments in all the
branches of law inscribed in the Books of History of Kuwait.
The State of Kuwait is established on the principle of
constitutional legitimacy, through its Constitution and its
concern for the rule of law in society. The Constitution has
established a judicial authority operated by the courts in the
name of the Amir of the State, for which the Constitution
guarantees full independence. In accordance with the
Constitution, judges, in administering justice, are not subject
to any authority to enforce the rules of justice and equity,
given that "justice is the basis of rule" and to safeguard and
guarantee the rights and liberties.
With the new economic re-birth of Kuwait, a specialised
law has been enacted to promote and attract FDI
Kuwaiti courts of all types and degrees exercise their
functions in resolving disputes where the right of litigation
is guaranteed to each and every person based on the procedures
and controls set forth by the law for exercising such right.
There is the Court of First Instance (the Plenary Court); the
Court of Appeal in its various circuits, which considers the
challenges of appeal filed before it; and the Supreme Court
(the Court of Cassation), which is competent to adjudicate
appeals against the judgments rendered by the Court of Appeal
filed on basis of valid legal grounds.
The legislature has been keen to establish the
Constitutional Court to adjudicate disputes over the
constitutionality of the laws. Several judicial rulings have
been rendered to the effect of invalidating some laws. By
virtue of the procedures set forth by the law, the Court
ensures facilitation of the litigation process in order to
achieve security and stability in Kuwait. The Ministry of
Justice in Kuwait has a number of e-services that help
facilitate litigation through the Kuwait Courts e-portal, where
a lawsuit can be filed electronically and followed up without
the need for personal follow-up within the courts.
It is preferable to seek the services of local law firms, as
they are more familiar with the legal and executive
As for the matter of enforcement of foreign judgments, this
is regulated by Article 199 of Law No. 38 of 1980 which
promulgates the Code of Civil and Commercial Procedures. The
law authorises the execution of judgments and orders rendered
by a foreign country in Kuwait, in accordance with the
conditions prescribed in that foreign country to implement
those judgments rendered in Kuwait. An enforcement order must
be filed before the Plenary Court. The enforcement order may
not be executed until after the verification of the
- The judgment or order is rendered by a competent court in
accordance with the laws of the issuing country.
- The parties to a litigation subject to a
foreign judgment have been duly invited to attend and be
legally represented in the sessions.
- The judgment or order acquires force of
res judicata in accordance with the laws of the issuing
- The judgment does not conflict with a
judgment or order previously rendered by a court in Kuwait,
and does not contain anything contrary to morals or public
order in Kuwait.
These provision will also apply to arbitral awards rendered
in a foreign country. However, the arbitral award shall be made
in a way that permits arbitration under Kuwaiti law and is
enforceable in the country in which it was rendered, subject to
Article 200 of the same law.
Moreover, documents approved in a foreign country may be
ordered for enforcement in Kuwait under the same conditions
stipulated in the law of that country for the enforcement of
the approved documents in Kuwait. As stated in Article 202 of
the aforementioned law and the reverse also applies, with
international treatment based on the principle of reciprocity
with regard to Kuwaiti judicial rulings.
With the new economic re-birth of Kuwait, a specialised law
has been enacted to promote and attract FDI. Law No. 116 of
2013 included several benefits for foreign investor in Kuwait,
which are detailed under in Article 27:
- Exemption from income tax or any other
taxes for a period not exceeding 10 years from the date of
actual operation of the licensed investment entity.
- Exemption for every expansion of the
licensed investment entity in accordance with the provisions
of this law from the same taxes set forth in the previous
paragraph for a period not less than the period of exemption
granted to the original investment entity, from the date of
commencement of production or actual operation of that
- Any foreign investor under the direct
investment system in Kuwait will be exempt – in
whole or in part – from taxes, customs duties or any
other charges, which may be imposed on the imports required
- Machinery, tools, equipment, means of transport and
other technological devices.
- Spare parts and maintenance supplies for the items
- Commodities, raw materials for partially manufactured
goods and packing and packaging materials. The investor
may not perform any kind of disposition, by either sale,
exchange or assignment, of these materials, nor may it
use them for purposes other than the purpose for which it
was imported before five years after date of its
notification of exemption from fees has elapsed.
- Use of land and property allocated to the Authority or
under its supervision or management.
- Permission to use any foreign labour necessary for the
Article 29 of the law specifies the procedures for applying
for these benefits, according to which the foreign investor
must submit an application to the Kuwait Direct Investment
Promotion Authority for all or some of the benefits. The
application will be reviewed by the Authority to ascertain
whether the terms and conditions have been fulfilled, subject
to the following criteria:
- The volume and quality of products and
- The need of the local and GCC markets for
direct investment and its contribution to economic
- Transfer and resettlement of technology,
modern management methods and advanced practical experience
to the State of Kuwait.
- Increase of national exports.
- Positive environmental yield.
- Contribution to the development of areas that lack to
- The extent to which services are provided
to the community outside the framework of the project or the
economic activity being carried out.
- Seeking technical, professional and consultancy services
of a national character.
- Creation of job opportunities for national
employment and provision of training thereon.
- Use of national products.
With regard to double taxation, Kuwait and China have
concluded an agreement aiming to avoiding double taxation
between the two countries and prevent evasion with respect to
income and capital taxes. There are several other agreements
between China and Kuwait concerning investment, trade, sports,
education, economy, diplomatic passports, air transport, oil
and gas, and public works.
Founder, Legal challenges group - boutique
Kuwait City, Kuwait
T: +965 996 50888
Areej Hamada is the president of Legal challenges
group. She has 20 years of legal experience, which
includes 13 years in the banking sector, where she was
most recently assistant director of the legal
department at Ahli United Bank.
Areej specialises in commercial, civil,
administrative and arbitration law. She is a restricted
arbitrator in the Kuwait Chamber of Commerce and
Industry and a member of the Women's Socio-Cultural
Association; Kuwaiti Lawyers Association; Chinese
European Arbitration Centre; Inter-Pacific Bar
Association (IPBA); Union Internationale de Avocats
(UIA); and International Bar Association (IBA).
Areej has experience in the public and private
sector. She is a former chair of the economic committee
of the Kuwait Association of Lawyers and has conducted
several published studies covering topics such as
cyber-crime, electronic media law and Kuwait's
industrial legal environment. She has also worked on an
initiative to establish a specialised stock exchange
for small and medium enterprises. Areej obtained her
bachelor of laws from Kuwait University in 1997.