Kuwait is instituting reforms with the aim of becoming the trade centre of the Middle East, but only a handful of global firms have grasped the nettle
Although the Arab Spring had relatively little impact on Kuwait, of all the Gulf Cooperation Council (GCC) countries it came off worst from the world economic crisis. According to data compiled by the International Monetary Fund, Kuwait’s economy grew by only 5.7 per cent in 2011.
In spite of this, there are plenty of international law firms that have identified the county’s potential and are confident that legislative changes will create new opportunities for foreign investors.
In a bid to revitalise the economy, in February 2010 Kuwait’s parliament approved a four-year KD31bn (£71bn) development plan to transform the country into the financial and trade centre of the Middle East by 2035. This strategy involves updating legislation, most recently resulting in revisions to the country’s capital markets and PPP laws.
As DLA Piper Middle East managing partner Abdul Aziz Al-Yaqout explains, his firm has been busy trying to bring local banks and institutions up to date with the
most recent legislation. DLA Piper operates in Kuwait through its joint venture partnership with local firm (NEN) Al Wagayan Al Awadhi & Al Saif. The Kuwaiti DLA Piper team has been advising the Kuwait Capital Markets Authority (CMA) on the privatisation of the Kuwait Stock Exchange (KSE).
While the revisions have their limitations, Al-Yaqout notes that it is a good start. “There’ve been some huge changes and, although they only go so far, it’s the beginning of a process of transparency and governance, so it’s the first step in the right direction,” he says.
Although a relative newcomer to PPP, Kuwait has initiated a number of projects in the power, health, transportation and telecoms sectors.
“Kuwait’s going to open up and there are some major projects going on, so the revision of several laws will expand opportunities,” says Leigh Hall, regional manager at SNR Denton’s Middle East operations.
SNR Denton and its Kuwaiti associate firm International Legal Group, is advising the government’s Partnerships Technical Bureau and Ministry of Communications on plans to upgrade the national fixed-line telephone system to an all-fibre, superfast broadband network.
But lawyers note that political turmoil has hampered its development.
“There have been plans to invest substantial amounts in feasibility studies and new projects, but problems and disagreements between the successive governments and parliaments have been an obstacle to progress,” says SNR Denton partner Stuart Cavet, who is based in Abu Dhabi and who handles a number of deals in Kuwait.
Mixing with the locals
There are currently few international firms resident in Kuwait and, like DLA Piper and SNR Denton, any entrant is required to form an association with a local firm.
In 2009 UAE firm Al-Tamimi & Company launched a Kuwait office after forming a joint venture with local lawyer Yaqoub Al Munayae. Stephenson Harwood entered into a joint venture partnership with Kuwaiti outfit Al Ruwayeh & Partners (Asar) in 1991, and in 1997 they formalised an association agreement. Asar and Stephenson Harwood together have acted on a number of high-profile deals, including advising Global Investment House and Evercore International on a $1.7bn (£1.1bn) debt restructuring.
Asar corporate partner Sam Habbas highlights that strong relationships are a central plank to success in the Kuwaiti market.
“International firms have learnt that they need to have an established Kuwaiti client base,” says Habbas, “as well as tie-ups with established Kuwaiti law firms that have the local legal and market knowledge.”
Legislative reform designed to inject energy into Kuwait’s economy has kick-started a number of projects in several industry sectors. International law firms, however, have so far been slow to respond to the developments.