Judicial Oversight of Arbitration in State Contracts
The issue of arbitrating state contracts (particularly Build-Operate-Transfer contracts, known as BOT) is one of the most contentious legal matters in the Kuwaiti legislative and judicial landscape.
This raises a fundamental and critical question: Does the state, as a public authority, have the power to delegate an arbitral body (which may be foreign) to resolve disputes concerning its assets and major development projects? Or does the sovereignty of the Kuwaiti national judiciary remain an impenetrable fortress that cannot be relinquished under the pretext of encouraging investment?
From both theoretical and practical perspectives, contemporary economic realities compel states to modernize their legislative frameworks to include arbitration clauses as a fundamental guarantee for attracting foreign capital. Investors are often wary of the national judiciary of the state party to the contract and seek a neutral and expedient forum.
However, the Kuwaiti legislator, followed by the Court of Cassation, has adopted an extremely cautious stance that balances these economic requirements with the protection of public funds and the state’s public order.
This critical tendency is evident when examining Article 2 of the Kuwaiti Public Tenders Law and the established judicial trends, which impose strict restrictions on including arbitration clauses in administrative contracts and state property contracts. In many cases, prior approval from the Council of Ministers or the competent authorities is required. While this legislative restriction protects the state from being caught off guard by international arbitral awards that might burden the public treasury, it represents, from a critical perspective, a bureaucratic obstacle that limits the state’s flexibility in concluding large-scale and rapid investment deals.
Furthermore, the oversight exercised by the Kuwaiti judiciary through the “action for annulment of arbitral awards” serves as an effective tool for re-evaluating arbitration outcomes. The Kuwaiti judge does not remain a passive observer but holds the authority to strip any arbitral award of its enforceability if it suffers from procedural defects or contravenes Kuwaiti public order—a flexible concept that encompasses the fundamental principles of the state’s economy and justice.
Based on the foregoing, we conclude that the Kuwaiti approach to arbitration in state contracts is neither entirely closed nor fully open, but rather a delicate zone of balance.
While the modern trend advocates for easing procedural restrictions to grant greater flexibility to investment contracts, maintaining the authority of the national judiciary as a final reference point remains an indispensable safety valve to ensure that the state’s sovereignty and economic assets are not undermined under the guise of private justice.
Saud Mattar Al-Zoubi
College of Business Studies - Law Major
