Kuwait to open representative office of GCC Commercial Arbitration Centre

by DLA Piper

In a move that will enhance its attractiveness for foreign investment, Kuwait recently ratified an agreement with the Gulf Co-operation Council (GCC) Commercial Arbitration Centre to establish a representative office in Kuwait.

The Agreement will take effect only once the Kuwait government notifies the Centre that it has completed various constitutional procedures and administrative tasks, including allocating the Centre with facilities out of which it can operate. While this process may take some time, Kuwait's ratification of the Agreement helps to improve its status as an arbitration-friendly jurisdiction.

Commercial arbitration in Kuwait

International commercial arbitration in Kuwait is still developing.  Unlike some of its regional neighbours, such as Bahrain and the United Arab Emirates (particularly in the form of the Dubai International Financial Centre), Kuwait has neither enacted a comprehensive procedural arbitration law nor established adequate English-friendly international arbitration facilities.

The current arbitral regime in Kuwait provides for a system which allows for both judicial (i.e., arbitration by judges) and private arbitrations to be conducted.  However, both types of arbitration are currently limited in terms of scope and application.  For example, pursuant to recent legislative amendments, judicial arbitration in Kuwait is limited to matters not exceeding KD 500,000, with proceedings conducted in Arabic and limited to matters of Kuwaiti law.

While Kuwait does currently have an institutional arbitral body in the form of the KCCI Commercial Arbitration Centre (KCAC), and other specialised bodies have been established with expertise in particular areas which have their own arbitration rules and committees, proceedings tend to deal with local law issues and are dominated by local or Arabic speaking parties. The result is that proceedings are usually conducted in Arabic.  There are very limited resources and support services currently available for English speaking parties.

The establishment of the new Centre will help to make Kuwait's arbitration system more accessible for foreign parties, particularly for those parties with an English speaking background.  It will also offer the regional and international business community an alternative private forum to the KCAC for the resolution of commercial disputes.

The GCC Arbitration Centre

The Charter of the Centre was adopted by leaders of the member-states of the GCC (i.e., Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) in December 1993. Its Rules came into effect in 1994 and, in March 1995, the Centre opened its doors and began to accept references.

Article 2 of the Centre's Charter provides that it is empowered:

"to examine commercial disputes between GCC nationals, or between them and others, whether they are natural or juristic persons, and commercial disputes arising from implementing the provisions of the GCC Unified Economic Agreement and the Resolutions issued for the implementation thereof if the two parties agree in a written contract or in a subsequent agreement on arbitration within the framework of this Centre."

The Centre is headquartered in Bahrain. The representative office to be opened in Kuwait will be the first such office that the Centre has opened outside of Bahrain.

The Centre is currently increasing its efforts to appeal to international businesses. While the Centre's Rules and Charter have been published in English, its website is currently only available in Arabic. However, in July 2013, Bahrain News Agency reported that the Centre is in the process of revamping its website in order to ensure that the information it contains is available in English as well as Arabic. The new website is due to go live in 2014 and will be accompanied by the launching of the Centre's accounts on social media networking sites such as Facebook, Twitter and Instagram.

What does the establishment of the Centre in Kuwait mean?

In this firm's experience, the Centre is capable of the effective management and resolution of disputes in both English and Arabic.  The establishment of the Centre's representative office in Kuwait will therefore offer an effective alternative to KCAC arbitration for parties who have agreed in writing to resolve their disputes within the Centre's framework.

More broadly, establishing the Centre may be viewed as a further step in Kuwait's initial efforts to modernize its arbitration system and make it more accessible to foreign parties.

However, there is still a distance to go.  For example, Kuwait has not adopted a comprehensive arbitration law (i.e. based on the UNCITRAL Model Law) and the governing arbitration law in Kuwait is currently the applicable provisions contained in the Kuwait Civil and Commercial Procedure Code.  However, it is to be hoped that the opening of the Centre's representative office in Kuwait may encourage further reform and the modernization of Kuwait's laws on arbitral procedure to bring them into line with internationally accepted norms, which will further improve the landscape for doing business in Kuwait.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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