KUWAIT CITY, Aug 22: Following a recent ban by the Ministry of Commerce and Industry on expatriates holding Article (18) residency from owning or managing companies in Kuwait, the issue has resurfaced with a new case involving Gulf companies seeking to establish operations in the country.

Al-Rai has learned from reliable sources that the Ministry of Commerce recently rejected a Gulf company’s request to open a branch in Kuwait. The rejection was based on the fact that the company’s ownership structure includes non-Gulf shareholders. According to Ministerial Resolution No. (237) of 2011, Gulf companies must be fully owned by Gulf citizens to open branches in Kuwait.

In response, the Gulf company submitted a letter to the Ministry objecting to the decision. The company argued that the Ministry’s position contradicts the Unified Economic Agreement between Gulf states, ratified by Law No. (2003/5). This agreement mandates equal treatment for Gulf citizens in any member state. Despite this, the Ministry insisted on its stance, leading the company to seek a legal opinion from the Fatwa and Legislation Department.

The company maintains that it holds a Gulf license and should be treated as a Gulf entity. It argues that the majority of its owners are Gulf nationals and that, according to the law and agreements, it should enjoy the benefits accorded to Gulf legal persons. The company also points out that foreign companies are generally permitted to establish branches in Kuwait.

The company argues that the requirement for Gulf ownership is no longer valid for several reasons:

1. Legal Conflict: The company contends that the Ministry’s requirement is not supported by law. Article (3) of the Unified Economic Agreement states that Gulf citizens must be treated equally in member states. The company believes it should benefit from this agreement, which should take precedence over the Ministry’s decision.
2. Reciprocity Principle: The company argues that the Ministry’s decision violates the principle of reciprocity, as the home country of the applicant company does not impose similar restrictions on Kuwaiti companies.
3. Outdated Regulation: The company claims that Ministerial Resolution No. (237) of 2011 is outdated. It cites Law No. (1) of 2024, which amended Article (24) of the Commercial Law to allow foreign companies to establish branches in Kuwait without requiring a local agent.
4. Kuwait’s Economic Policy: The company highlights that Kuwaiti legislation now supports opening markets to all investors, regardless of nationality. The explanatory memorandum for the new law emphasizes attracting foreign investors as a key state goal.

After extensive discussions between the company and Ministry officials, the case has been referred to the Assistant Undersecretary for Legal Affairs in the Ministry’s Coordination and Follow-up Department. Additionally, the file has been sent to the Head of the Fatwa and Opinion Department, the Companies and Commercial Licenses Sector, and the Cases and Contracts Department for a final legal opinion. These departments are tasked with determining the validity of both the company’s and the Ministry’s positions.