Kuwait

Ahmad Saleh
GLA & Company, Sharq

1. What is your jurisdiction?

The State of Kuwait.

2. Are the FIDIC forms of contract used for projects constructed in your jurisdiction? If yes, which of the FIDIC forms are used, and for what types of projects?

Yes, FIDIC forms are often utilised in the State of Kuwait for construction projects, including the largest governmental projects such as the Al Zor Refinery Project. The FIDIC Red Book is the most common form used; however, certain provisions are often included, removed or amended to ensure compliance with Kuwaiti laws and regulations, such as the use of subcontractors and agents to carry out work on a particular project. Other forms used include the Conditions of Contract for Plant and Design-Build (Yellow Book) and the Conditions of Contract for EPC/Turnkey Projects (Silver Book).

As for other megaprojects and public-private partnership (PPP) works, a list of standard contract conditions is published on the Central Agency for Public Tenders (CAPT) website. This shows conditions that must be included in build-and-operate contracts, consultancy agreements, bids and tenders, subcontractors’ agreements and design contracts.

It is critical to note that, while standard contracts are commonly used, Kuwaiti law may differ in the interpretation and enforcement of standard contractual provisions as compared with Western jurisdictions such as the United Kingdom or the United States.

3. Does FIDIC produce its forms of contract in the language of your jurisdiction? If no, what language do you use?

While FIDIC does produce forms in Arabic, English language versions are more commonly used in Kuwait. That being said, Arabic is the ultimate binding language between the parties where disputes are heard before the State of Kuwait judiciary.

4. Are any amendments required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what amendments are required?

Certain provisions in standard FIDIC forms may be deemed unenforceable, such as time bar provisions for bringing forth claims against an opposing party. Other provisions may be interpreted and applied differently as compared with other jurisdictions depending on the nature of the case.

Further, contracts governed by the laws of the State of Kuwait inherently include rights and obligations that may not be etched in writing, such as obligations to perform a contract honourably and in good faith. The Kuwaiti Civil Code, Law No 67 of 1980, includes an entire section of provisions dedicated specifically for contracts for works which may conflict or override provisions otherwise standard in FIDIC form contracts, such as the right to claim compensation for variations, the amount of liquidated damages a party may be entitled to, or the limitation on a project owner’s right to terminate works. Certain provisions of the Civil Code may be contracted out of, while others, such as the obligation to perform a contract in good faith, may not.

5. Are any amendments common in your jurisdiction, albeit not required, in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what (non-essential) amendments are common in your jurisdiction?

In Kuwait, FIDIC-based contracts are usually crafted in a way that is more favourable to the project owner, such as entitling the project owner to terminate for convenience, limiting indemnification provisions, and providing the project owner with substantial flexibility to
initiate changes.

Common provisions that are often amended in particular are provisions concerning the dispute resolution method, reasons for and effects of termination, the appointment or use of subcontractors or agents, offset obligations on the contractor and tax withholdings.

6. Does your jurisdiction treat Sub-Clause 20.2.1 of the 2017 suite of FIDIC contracts as a condition precedent to Employer and Contractor claims?

While this ultimately depends on facts and the court’s interpretation, Kuwait appears to take the approach of denying requests to enforce provisions that bar a claim on the basis of a failure to satisfy notice requirements. The Kuwait judiciary has taken the position that contractual provisions that contradict express provisions of Kuwaiti law on the time to initiate a claim cannot be waived before such right arises, ie at the time of entering into the contract.

7. Are dispute boards used as an interim dispute resolution mechanism in your jurisdiction? If yes, how are dispute board decisions enforced in your jurisdiction?

Dispute boards have been seen in Kuwaiti construction contracts but are not favoured given the expense and non-binding nature. Where they do exist, while parties are bound to follow the dispute resolution process agreed to in their contract, the resulting recommendation is usually non-binding.

8. Is arbitration used as the final stage for dispute resolution for construction projects in your jurisdiction? If yes, what types of arbitration (ICC, LCIA, AAA, UNCITRAL, bespoke, etc) are used for construction projects? And what seats?

Arbitration is heavily used in construction contracts. While this was also the case for government projects, today most Kuwaiti government projects stipulate the Kuwait judiciary as a final means of resolving disputes. Prior to its abolishment, parties often utilised DIFC–LCIA arbitration; however, ICC and LCIA appear to be the most popular types of arbitration. Seats are almost always in a neutral jurisdiction such as the United Arab Emirates, London, New York, or elsewhere.

9. Are there any notable local court decisions interpreting FIDIC contracts? If so, please provide a short summary.

There is no system of precedent in Kuwait and thus prior decisions are generally non-binding. However, one interesting case that could be applied to provisions of a FIDIC contract is that of Commercial Bank of Kuwait v Kharafi Business Machine WLL (Commercial Bank of Kuwait). In Commercial Bank of Kuwait, the Court of Cassation ruled that a contractual provision that barred contractual claims after a period of two years was unenforceable, stating:

‘Article (118) of the Commercial Law demonstrates that legislature has determined, for vendors’ liabilities to each other arising from their relevant commercial transactions, a limitation time limit of ten years commencing from the maturity date. In addition, according to clause (22) of the Agreement, the contracting parties agreed on waiver of the right to institute proceedings claiming for an entitlement under the applicable Agreement after lapse of two years from the cause of action; nevertheless, this time limit is fixed in violation of law, particularly, Article (118) of the Commercial law, applicable to the claimed for entitlement subject hereof, stipulating that the time limit for an entitlement arising from a commercial transaction shall be ten years. Thus, the parties’ agreement on waiver of the right to institute proceedings within a time limit different from the time limit prescribed by the said Article is invalid on the grounds of violation of Article (453.1) of the Civil Code.’ (unofficial English translation).

The Court explained that:

‘No waiver of right to raise a plea of limitation may be made before having the right to such plea is established, but a waiver may be made afterwards. Furthermore, no other time limit may be agreed on in violation of the one fixed by law, because, in any event, determination of such time limit is a matter closely related to the public policy and may not be left to the discretion of individuals.’ (unofficial English translation).

10. Is there anything else specific to your jurisdiction and relevant to the use of FIDIC on projects being constructed in your jurisdiction that you would like to share?

While FIDIC forms are widely used, it is important to understand the likely interpretation and application of such forms in the relevant construction project. It is recommended to always seek advice from local counsel on a construction contract governed by or carried out in the State of Kuwait to ensure that the contract is legally and practically written, and can be carried out in the manner intended and understood by the parties.