The American Business Council – AmCham Kuwait (ABCK-AmCham Kuwait) in collaboration with the German Business Council Kuwait, and Al Tamimi & Company, the largest law firm in the region, recently hosted an informative webinar on the most recent updates to laws and regulations in Kuwait, specically those that have an impact on businesses in the country.,
The keynote speaker at the informative and enlightening webinar was Partner and Co-Head of the Kuwait Office of Al Tamimi & CO Philip Kotsis. He started the discussion with a general overview of various laws that the public has had a keen focus on since the start of the global COVID pandemic, including the labor law, rent/lease law, force majeure issues, and the issuance of visas/work permits.
“Despite much discussion and rumor over the course of the summer, wholesale changes to the labor law (such as relief to employers regarding salary reduction and leave time) were not introduced. However, we did see efforts to assist Kuwait companies by providing aid to cover the salaries of Kuwaiti employees during the pandemic period,” said Mr. Kotsis.
On the recent amendments to the rent/lease law, Mr. Kotsis said that besides providing relief to tenants in relation to the payment of rent during the lockdown period, the courts were also given the discretion to determine the method and timing of rent payments in order to strike an equitable balance between lessor and lessee.
On the law regarding force majeure, Mr. Kotsis said that though it was not affected, legal practitioners were starting to see claims being brought before the courts involving force majeure and exceptional circumstances. “However, it will likely be some time before we see how these laws are applied in connection with the pandemic, as the cases will take to work their way through the court system,” said the legal firm’s co-head.
However, the two laws on which Mr. Kotsis spoke at length were the new bankruptcy law and the competition law. “The new bankruptcy law is of importance because prior to this there was no specialized law to tackle this issue. Though bankruptcy provisions were included in the financial stability law, it was not often relied on as most people in Kuwait have historically opted to resolve such situations through mutual agreement between debtors and creditors,” said Mr. Kotsis
He added, “Businesses, debtors and creditors have all welcomed the new law as a major step forward, as it streamlines and modernizes the bankruptcy provisions. The law attempts to de-stigmatize business failure and will hopefully have a positive impact on various aspects of business culture in Kuwait. Moreover, it will boost foreign investor confidence when they see that a structure is in place to effectively tackle this situation. The bankruptcy law allows for avoiding bankruptcy proceedings through agreement with creditors or through restructuring plans. The law will also apply to every natural person in Kuwait, merchant companies, local companies, as well as branches of foreign companies operating in Kuwait. It will authorize experts to help companies work these issues out between creditors and debtors.
“In addition, the new law calls for the establishment of a specialized bankruptcy court, which is a major step, as for the first time in Kuwait there will now be a separate court for bankruptcy cases. Generally, the concept of specialized courts is welcomed by the legal community, because having such courts will give litigants more access to experts who can take care of the issues at hand, and will at the same time, alleviate some of the burden from the general courts. “
Regarding the enforceability of judgements issued by the court, Mr. Kotsis said these include commencing liquidation procedures, notifying the concerned parties, disclosing decisions on the Kuwait stock exchange if it is a listed company, and instructing the debtor to disclose it on their website, unless the judge decides that the other methods of disclosure are sufficient.
In addition to these, the new law calls for preventative settlement and financial restructuring. Through preventive settlement, the debtor is provided with the option to avoid insolvency and keep control of the company by reaching an agreement with the creditors. The settlements are subject to creditor approval, however, once approved by the bankruptcy court, the decisions become enforceable on all creditors, regardless if they did not vote in favor of the restructuring or did not participate in the process.
He also mentioned that there will be an implementation of bankruptcy trustees, who will have oversight over bankruptcy procedures, along with a bankruptcy investigator, who will have oversight on the trustee and the company to ensure that all is going according to plan, and there will also be a bankruptcy commission that will be established under the Ministry of Commerce and Industry that will be applied to state owned companies.
Mr. Kotsis concluded his presentation with a discussion of the new competition law, which was recently published. This law regulates new areas of the competition practices that were not regulated previously. In addition to revising provisions under the old law, one major change codified under the new law is the introduction of vertical and horizontal competition practices.
He went on to state that the new law applies to any practice that takes place in Kuwait and outside of Kuwait that may restrict, harm, or negatively affect the freedom of competition in Kuwait. The new law clearly defines the areas of activities that are not subject to the law, for example, government-owned companies as may be decided by the council of ministries.
Horizontal and vertical relationships and their effect on competition are now more clear. For example, under horizontal relationships activities such as price fixing, fixing the volume of production and sale of goods, manipulating bids and tender prices through agreement or through price fixing, and restricting the technical development or investment of producing, selling, buying of distributing goods and services, will be targeted for strict regulation and oversight by the new law through the Competition Protection Authority. In terms of vertical relationships, the law prohibits agreements between principals and agents that may restrict or apply unfair competition practices in the market.
Finally, Mr. Kotsis indicated that the Competition Protection Authority will now have broader discretion and authority to decide whether certain activities fall within the scope of the law. And, in terms of mergers and acquisitions, the 35 percent control threshold has been removed, with a focus on the effect of the merger/acquisition on the market on a case by case basis, as opposed to a general threshold standard.
Read more: TimesKuwait