By Nawara Fattahova
KUWAIT: The American Business Council-AmCham Kuwait (ABCK-AmCham Kuwait), in collaboration with German Business Council Kuwait and Al-Tamimi and Company, hosted an informative webinar recently on the most recent updates of Kuwaiti laws and regulations. This webinar included useful legal information on recently issued laws and regulations, with the bankruptcy law and the new competition law being the main topics.
Philip Kotsis, Partner and Co-Head of the Kuwait Office at Al-Tamimi and Company, started the discussion with a general overview of various laws that have been in focus since the start of the global COVID-19 pandemic, starting with the labor law, rent/lease law, force majeure issues and the issuance of visas/work permits.
Kotsis mentioned that both legal practitioners and businesses were anticipating significant changes this summer to various laws due to the pandemic; however, there has not been as much movement as expected. Despite much discussion and rumors over the course of the summer, wholesale changes to the labor law (such as relief for employers regarding salary reduction and leave time) were not introduced. “However, we did see efforts to assist companies by providing aid to cover Kuwaiti employees’ salaries during the pandemic,” he said.
Kotsis spoke about the ban on transferring work permits from the government to the private sector, and the halt on the issuance of new visas for incoming employees. He briefly touched upon the recent amendments to the rent/lease law, including providing relief to tenants with regards to the payment of rent during the periods of time that the government ceases business in Kuwait, and that the courts would have discretion in determining the method and timing of such payments in an effort to strike an equitable balance, given the effects of the pandemic.
In terms of force majeure, the law was not affected; however, legal practitioners are starting to see claims being brought before the courts involving force majeure and exceptional circumstances. “But it will likely be some time before we see how these laws will be applied in connection with the pandemic as the cases work their way through the court system,” he said.
Kotsis then spoke about the new bankruptcy law, which was recently published. Due to the fact that there was no prior independent and specialized bankruptcy law, this legislation has become a crucial and welcome introduction for businesses, debtors and creditors. Despite the issuance of the financial stability law, and the bankruptcy provisions set forth in Kuwait’s commercial law, Kuwait did not witness a significant use of the bankruptcy system, as historically most of these situations were resolved through consensual discussions between debtors and creditors.
The new law is a major step forward as it streamlines and modernizes bankruptcy provisions. There is a clear desire to see companies attempt to emerge from these distressed situations, and there is an attempt to de-stigmatize business failure. This will hopefully have a positive impact on various aspects of business culture in Kuwait, and will help investors outside Kuwait to see that a structure has been put in place, which may attract more foreign investors.
Kotsis specified that the law calls for the establishment of a specialized bankruptcy court, which is a major step, as there will be a specialized court for the first time in Kuwait. The new law also establishes guidelines for the implementation of bankruptcy trustees who can oversee a bankruptcy filing, specialized bankruptcy investigators who will work with the bankruptcy court and trustees to ensure the rights of all parties involved and prevent abuse of the system. A separate bankruptcy commission established under the ministry of commerce and industry will also be set up to oversee bankruptcy filings of state-owned entities.
Kotsis concluded his presentation with a discussion of the new competition law, which was recently published. This law regulates new areas of 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.
“The new law applies to any practice that takes place inside or outside Kuwait that may restrict, harm or negatively affect freedom of competition in Kuwait. The new law clearly defines the areas of activities that are not subject to the law – government-owned companies for example – that may be decided by the Council of Ministries,” he added.
Horizontal and vertical relationships and their effects on competition are now clearer. “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 though price fixing, and restricting technical development or investment in producing, selling, buying or 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,” explained Kotsis.
Finally, he 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. With regards to 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.
During the question and answer session, Kotsis restated that the competition law applied to most sectors except for those sectors specifically exempt in the law, such as public utilities, and state-owned entities regulated by the Council of Ministries.