The Sino-Kuwaiti partnership
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The Sino-Kuwaiti partnership

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Kuwait Tower City Skyline glowing at night, taken in Kuwait in December 2018 taken in hdr

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

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 China.

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 Al-Ahmad Al-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 be:

  1. 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.

  2. 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.

  3. 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 same law.

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 2018

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 irregularities.

Investment vehicles

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 partnership.

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 constants.

There are however some minor restrictions on foreign exchange that foreign investors must familiarise themselves with:

  1. 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.

  2. There is no ceiling limit for transfers between banks, but they are conditional on proving the source of funds.

  3. Kuwait enjoys free movement of capital and profits abroad if the source of funds is a legitimate and legal source.

  4. 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.

Settling disputes

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 procedures.

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 following:

  1. The judgment or order is rendered by a competent court in accordance with the laws of the issuing country.

  2. The parties to a litigation subject to a foreign judgment have been duly invited to attend and be legally represented in the sessions.

  3. The judgment or order acquires force of res judicata in accordance with the laws of the issuing court.

  4. 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.

Tax structures

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:

  1. 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.

  2. 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 expansion.

  3. 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 as follows:

    1. Machinery, tools, equipment, means of transport and other technological devices.

    2. Spare parts and maintenance supplies for the items mentioned above.

    3. 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.

  4. Use of land and property allocated to the Authority or under its supervision or management.

  5. Permission to use any foreign labour necessary for the investment.

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:

  1. The volume and quality of products and services provided.

  2. The need of the local and GCC markets for direct investment and its contribution to economic diversification.

  3. Transfer and resettlement of technology, modern management methods and advanced practical experience to the State of Kuwait.

  4. Increase of national exports.

  5. Positive environmental yield.

  6. Contribution to the development of areas that lack to projects.

  7. The extent to which services are provided to the community outside the framework of the project or the economic activity being carried out.

  8. Seeking technical, professional and consultancy services of a national character.

  9. Creation of job opportunities for national employment and provision of training thereon.

  10. 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.

About the author



Areej Hamada

Founder, Legal challenges group - boutique law firm

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.

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