Decree-Law Issued on Arbitration Law: Regulations for Arbitrating State Entity Contracts - Sarmad

(KUNA) – On Tuesday, Decree-Law No. 120 of 2026 concerning the issuance of the Arbitration Law was promulgated. This law establishes an integrated national arbitration framework 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, limits arbitrators’ liability to ensure their confidence, restricts grounds for appeal to ensure swift resolution, and regulates arbitration institutions under prudent oversight. Consequently, arbitration in the State of Kuwait becomes a specialized, effective, and reliable form of justice, serving as a 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 instills confidence in market participants. It added that this law was drafted as a comprehensive, independent arbitration legislation that draws upon the best stable international systems while preserving the distinctiveness of the Kuwaiti legal system.

It was noted that recent contracts 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.

The memorandum explained that the accompanying law is built 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. It also introduced a system for interim and conservatory measures with a title consistent with national procedural terminology, subjected arbitration centers to a licensing and oversight system managed by a specialized department within the Ministry of Justice, established registers for arbitrators and centers, and incorporated 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 according to their rules. This distinction carries specific legal effects in several provisions.

Furthermore, the law defined the scope of its application based on a dual criterion: a territorial criterion, under which all arbitrations seated in the State of 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. This is without prejudice to applicable international conventions in the state and mandatory legal provisions. One article addressed the highly important issue of arbitration in disputes arising from contracts concluded by state entities, establishing 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, adhere to public policy, and manage proceedings efficiently without delay or unnecessary costs, 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.

The memorandum indicated that Article 14 of the law stipulates penalties in Articles 100 to 105, making this law one of the earliest arbitration laws in the region to include a comprehensive penal chapter. This chapter is based on a clear premise: criminal protection is established solely to safeguard the regulatory framework of arbitration, public confidence in it, and the confidentiality of its proceedings, without extending in any way to the judicial work of arbitrators, whose liability remains purely civil in cases of fraud or gross negligence. This approach avoids undermining the standing of the host state as an arbitration venue, as demonstrated by comparative legal experience.

The law concluded with Article 15, which contained the final provisions in Articles 106 to 108. It entrusted the competent administration for arbitration at the Ministry of Justice with matters concerning both ad hoc and institutional arbitration. Specifically, it assigned this administration the task of establishing registers for arbitrators and registers for arbitration centers, as well as carrying out other duties assigned by law and implementing decisions issued by the Minister of Justice. A ministerial decision shall be issued to regulate these registers, specifying the rules, conditions, and fees for registration and deletion. Thus, the state’s tools for overseeing the arbitration system are fully established, ensuring supervision that regulates rather than restricts, and controls rather than obstructs.