Arbitration in Kuwait: Study of Current Practices and Suggestions for Improvements

Abstract

In the construction industry, disputes are inevitable. Contract disputes result from conflicting contract documents, changes to the original scope of work, or breaches of contract. Arbitration is the preferred alternative dispute resolution method in international construction contracts because it saves time and money and prevents litigation under foreign laws. Western contractors and investors fear entering into contracts with Middle Eastern owners and government entities, especially when a contract stipulates the application of local national laws and jurisdiction. Furthermore, questions regarding foreign contractors’ rights and the validity of certain contractual provisions for dispute resolution in local courts and their ability to use arbitration to resolve disputes need to be addressed. This paper examines the concept of arbitration as an alternative dispute resolution method and its application in the Kuwaiti construction industry. The paper focuses on Kuwaiti arbitration law, examines current procedures under this law, critiques pitfalls in the law, and recommends a real arbitration system for the state of Kuwait. Data show that the use of litigation to resolve cases far exceeds arbitration. The average number of disputes resolved annually using judiciary arbitration is 4.5, which does not exceed 0.39% of all cases resolved using domestic arbitration and litigation for the years 2006–2011. The average number of disputes resolved using international arbitration with one party from Kuwait is 6, which represents a percentage of international arbitration to litigation that does not exceed 0.55% for the years 2006–2011. The average number of disputes resolved using international arbitration with all parties from Kuwait is 5.33, which represents a percentage of international arbitration to litigation that does not exceed 0.46% for the years 2006–2011. The average number of disputes resolved using litigation is 1,156.67 for the years 2006–2011. The time needed to resolve a dispute using litigation was an average of 5.5 years; however, the average time needed to resolve disputes using judiciary arbitration was 8.84 months. The average time needed to resolve a conflict is 3–6 months. Most cases in Kuwait are resolved using litigation. Statistics obtained for this study show a very limited use of domestic and international arbitration when compared with litigation, which indicates a need to enhance current legislation and practices related to arbitration in Kuwait.