Reaffirms the Prohibition on Non-Kuwaitis Conducting Commercial Activities in Kuwait Without a Kuwaiti Partner Holding at Least 51% of the Capital

The claim was founded on the principles of equivalent performance and unjust enrichment, following the absolute nullity of the subcontracting agreement for contravening public order. The court held that the agreement was void for violating the prohibition set out under Article 23 of the Kuwaiti Commercial Law No. 68 of 1980, which restricts non-Kuwaitis from  performing commercial activities in Kuwait unless they act through a Kuwaiti partner or partners holding no less than 51% of the total capital of the  firm. The court further affirmed that contracting activities fall within the scope of commercial activities.

Although the underlying agreement was deemed void, the court nevertheless held that the contracting company could not retain the benefit of the works performed without paying the corresponding value. Accordingly, the court  ruled the company pay the client the amount due based on unjust enrichment and as an equivalent performance for the benefit it had received.

This judgment is significant as it reaffirms two important legal principles: first, that non-Kuwaitis may not personally conduct contracting or other commercial activities in Kuwait in breach of the statutory ownership requirements; and second, that the invalidity of a contract does not permit one party to unjustly benefit from works performed by another without compensation.

The  defense team in this case was led by Partner Attorney Mr. Hassan Al-Mousawi, together with Legal Consultant Mr. Al-Tayeb Ali and Attorney Mr. Ali Al-Mutairi.

In light of this judgment, non-Kuwaiti contractors are advised to avoid entering into contracting agreements in their personal capacity, as such agreements may be deemed void. Contracting arrangements should instead be executed through a duly licensed company in which Kuwaiti ownership represents at least 51% of the capital, in compliance with Kuwaiti law.

Practical Guidance to Avoid Similar Disputes in Kuwait

1. Document the contractual relationship in writing before commencing work
   The agreement should clearly define the nature of the arrangement, whether it is based on a lump-sum price or measured quantities, together with the scope of works, payment mechanism, and supporting documents required to prove completion.
2. Verify the legal capacity of the contracting party
   Before assigning contracting works, parties should ensure that the contractor or service provider holds the proper license and legal capacity to conduct commercial or contracting activities in Kuwait.
3. Avoid relying on verbal arrangements or undocumented payments
   Parties should retain work orders, quantity surveys, invoices, payment vouchers, correspondence, and handover records, as such documents may become decisive evidence in the event of a dispute.