Regulations to Strengthen State Entity Contracts
A new arbitration law decree was issued in Kuwait to regulate state contracts and attract investment.
Translated by Qiyas from النهار — Original source
Decree-Law No. 120 of 2026 concerning the issuance of the Arbitration Law has been promulgated. This law establishes an integrated national arbitration system that expedites proceedings through fixed timelines and simplified procedural orders, safeguards public funds by imposing strict controls on the arbitration of contracts concluded by state entities, and provides arbitrators with limited liability and investors with restricted grounds for appeal and swift resolution. It also regulates arbitration institutions under prudent oversight, positioning arbitration in Kuwait as a specialized, efficient, and reliable form of justice, serving as a key pillar of the country’s economic development.
The explanatory memorandum for the aforementioned decree-law, which comprises 108 articles distributed across 15 chapters, stated that the state’s continued implementation of its developmental policies aimed at transforming Kuwait into an attractive financial and commercial hub for investment necessitates a modern arbitration environment that inspires confidence among market participants. It added that this law was drafted as a comprehensive, standalone arbitration legislation that draws upon the best stable international systems while preserving the distinctiveness of the Kuwaiti legal system.
The memorandum highlighted that recent years have witnessed profound transformations in arbitration systems and their applications, with countries successively enacting modern, independent arbitration laws and establishing arbitration centers that attract major disputes and associated legal and financial services. In contrast, the Kuwaiti system remained governed by provisions that no longer suffice to meet the demands of the modern era.
It further explained that the construction of the accompanying law was based on several foundations, including subjecting arbitration in contracts concluded by state entities to controls that safeguard public funds without closing the door to arbitration for them; introducing a system for interim and conservatory measures under a title consistent with national procedural terminology; subjecting arbitration centers to a licensing and oversight system managed by a specialized department within the Ministry of Justice, which maintains registers for arbitrators and centers; and incorporating judicial arbitration into this law, whereas it previously existed under separate legislation, thereby unifying the reference framework for arbitration in the state and keeping pace with modern technological means in all arbitration proceedings.
According to the explanatory memorandum, the law included necessary definitions to ensure consistent application and distinguished between ad hoc arbitration, which is organized by the parties themselves without the supervision of an arbitration institution, and institutional arbitration, which is administered by arbitration centers in accordance with their rules. This distinction carried legal effects in several provisions. The law also defined the scope of its application based on a dual criterion: a territorial criterion, under which all arbitrations seated in Kuwait are subject to its provisions, and a voluntary criterion, allowing parties to an arbitration conducted abroad to agree to be bound by its provisions, all without prejudice to effective international conventions in the state and to mandatory provisions of the law.
Regarding the highly important issue of arbitration in disputes arising from contracts concluded by state entities, the law established a graduated system that balances the encouragement of investment with the protection of public funds.
Chapter Four of the law addressed arbitration procedures in Articles 22 to 40. Article 22 obliged the arbitral tribunal to respect fundamental principles of litigation, observe public policy, and manage proceedings efficiently without delay or unnecessary expenses, while treating the parties equally. Article 23 granted parties the freedom to choose the procedures, including referral to the rules of any arbitration center within or outside Kuwait; in the absence of agreement, the tribunal would select what it deemed appropriate within the framework of the law’s provisions.
