New Arbitration Law: 18 Pillars to Expedite Dispute Resolution and Strengthen the Investment Environment
The new Arbitration Law defines arbitration as a legal mechanism for resolving disputes outside the courts, whereby the parties to a legal relationship agree to submit any dispute arising between them to a single arbitrator or an odd number of arbitrators, selected from among those possessing expertise and impartiality, to render a final and binding award with the force of a judicial judgment. Under the law, arbitration is distinguished by the speed of dispute resolution, the specialization of the decision-makers, as well as the confidentiality and flexibility of the procedures, which are tailored to the nature of commercial transactions.
Reasons for Enactment
The enactment of the new law came amid the fragmentation of arbitration rules in Kuwait, which were previously scattered between Chapter Twelve of the Civil and Commercial Procedure Law of 1980 and the Judicial Arbitration Law of 1995. These provisions were drafted in an era that differs from the current reality of arbitration.
The new law comprises 15 chapters, 108 substantive articles, and 6 enacting provisions. According to the law’s foundational principles, previous legislation did not regulate arbitration centers or provide for oversight of them, nor did it address interim and protective measures prior to the constitution of the arbitral tribunal, let alone keep pace with modern technological means.
Practical application also revealed prolonged arbitration timelines, the non-recognition of procedures for appointing arbitrators and resolving disputes arising from arbitration, with the appointment of an arbitrator in some cases taking nearly a year.
Accordingly, the new law was enacted to consolidate arbitration rules into a single piece of legislation, align with best international practices, and provide a modern, commercially attractive arbitration environment that supports the state’s aspiration to become a financial hub.
The Law’s Foundations
The Law is built on 18 pillars, distributed across articles addressing various aspects of arbitration. These include substantive provisions and procedural rules, and the Law repeals two previous statutes in this field.
Among the matters covered by its provisions, as outlined in the pillars, are the arbitration agreement and its independence, its effect on the court’s jurisdiction, non-arbitrable matters, the appointment and impartiality of arbitrators, interim and protective measures, the rendering and confidentiality of the arbitral award, electronic arbitration, sources of funding for arbitration, the enforceability and execution of the award, challenges to the award, the licensing and oversight of arbitration centers, arbitration in contracts involving state entities, judicial arbitration, and the establishment of a dedicated arbitration administration and national registers.
The Law specifies that the arbitration agreement must be in writing and independent; a verbal agreement is insufficient. However, electronic messages and references to a standard contract containing an arbitration clause constitute valid written form. The arbitration clause remains valid even if the underlying contract is found to be void or is rescinded.
The Law also regulates the effect of the arbitration agreement on the court’s jurisdiction. If a lawsuit is filed despite the existence of an arbitration agreement, the court shall rule that it lacks jurisdiction if a party so requests at the outset. Filing the lawsuit does not, however, suspend the arbitration proceedings.
The Law defines non-arbitrable matters, prohibiting arbitration in disputes where settlement is not permitted, such as personal status matters and criminal offenses, while allowing arbitration over financial rights arising from such matters.
Regarding the appointment of arbitrators, the Law sets specific deadlines. If the parties fail to agree on an arbitrator, the President of the Court shall appoint one from the register of accredited arbitrators within 15 days. An additional 15-day period is provided, after which the appointment decision becomes final and non-appealable.
The Law emphasizes the arbitrator’s impartiality and the duty of disclosure. An arbitrator must have no interest in the dispute and is required to inform both parties of any circumstance that may raise doubts about their impartiality throughout the arbitration process. A party may request the arbitrator’s recusal for serious reasons within short deadlines, without suspending the arbitration proceedings, to prevent such requests from being used as a means of delay.
The Law introduces a system for interim and protective measures, allowing parties to seek them if there is a risk that the goods in dispute will be sold or that assets will be disposed of. The decision on such measures must be issued within 15 days and is binding upon issuance.
The Law also sets a deadline for rendering the arbitral award. The award must be issued within the period agreed upon by the parties; failing that, it must be rendered within 12 months from the completion of the arbitral tribunal, extendable by six months. An award issued after the expiration of this period is void unless the parties agree otherwise.
The Law mandates the confidentiality of arbitration proceedings. Briefs, documents, and deliberations are to remain confidential, and the award may not be published without the written consent of all parties. Anyone who discloses arbitration secrets is subject to imprisonment or a fine.
In the area of electronic arbitration, the Law permits holding sessions via video conferencing, exchanging briefs and documents, and signing electronically, granting these actions the same legal effect as in-person proceedings.
The Law also requires the parties to disclose the sources of funding for arbitration costs, thereby preventing a party from being funded by a hidden third party with an interest that could affect the arbitrators’ impartiality.
Regarding the enforceability and execution of the arbitral award, the award is deposited with the court. The President of the Court issues an order for its execution after verifying that it does not violate public policy or contradict a previous judgment, without re-examining the merits of the dispute.
The Law limits challenges to the arbitral award to a single action for annulment before the Court of Appeal, to be filed within 30 days and for exclusively specified reasons, including the absence of an arbitration agreement or the award being based on fraud or forgery. The court must decide the case within six months by a final judgment. Filing the action does not suspend execution unless for serious reasons.
The Law also provides for the resolution of the merits of the dispute upon a ruling of annulment. If the Court of Appeal rules the award void, it shall itself decide the merits of the dispute, rather than sending the parties back to the beginning of the litigation.
The Law regulates the licensing and oversight of arbitration centers. An arbitration center may only be established with a license from the Ministry of Justice, along with approval of its bylaws and fee schedule. The licensing application must be decided within 60 days. Anyone who opens a center without a license or impersonates an accredited arbitrator is subject to imprisonment for up to one year and a fine of up to 30,000 dinars.
The Law also limits the arbitrator’s liability, exempting them from responsibility for ordinary errors, to encourage qualified individuals to accept arbitration assignments. The arbitration center does not bear liability for the arbitrator’s errors, as it manages the arbitration process but does not decide the dispute.
In contracts involving state entities, the Law makes arbitration optional. State entities are not bound by arbitration and may include it in their contracts only after consulting the Legal Opinion and Legislation Administration and obtaining the approval of the Council of Ministers or the relevant minister, depending on the type of contract. If a contract concluded by a state entity contains an arbitration clause, jurisdiction over the dispute lies exclusively with the judicial arbitration tribunal.
Contracts of the Petroleum Authority and its companies are subject to the decisions of the Supreme Petroleum Council.
The Law retains the system of judicial arbitration, where the tribunal consists of three judges and arbitrators chosen by the parties. It sits at the Court of Appeal, and its award must be issued within six months. Judicial arbitration is optional for individuals and private companies if they agree to it, and mandatory in disputes over state entity contracts containing an arbitration clause, in disputes between state entities and their wholly owned subsidiaries, and among such subsidiaries.
The Law also provides for the establishment of a dedicated arbitration administration within the Ministry of Justice, responsible for maintaining the registers of accredited arbitrators and licensed centers, and overseeing both ad hoc and institutional arbitration.
Expected Impact
According to the explanatory paper, the new law provides market participants—including traders, contractors, project owners, and investors—with four clear guarantees in the event of a dispute: a defined timeframe for each step of the arbitration process; specialized expertise in the selection of the arbitrator; confidentiality of transactions; and streamlined procedures through remote hearings, electronic documentation, and a single avenue for appeal, replacing the previous three-tier judicial system.
The law also preserves the option for parties who prefer judicial resolution over arbitration. Under the judicial arbitration system, disputes are adjudicated by a panel chaired by a judge and comprising judges and arbitrators selected by the parties, thereby combining the credibility of the judiciary with the speed of arbitration.
Faster Arbitration
The new law aims to make arbitration in Kuwait faster by setting deadlines for each procedural step, and safer by establishing a single legal framework and a single appeal route. It also ensures the neutrality of arbitrators and the licensing of arbitration centers, while keeping pace with technological developments through remote hearings and electronic signatures. This provides a clearer and less complex framework for resolving disputes.
