‘Kuwaiti law does not recognise unregistered deals’

Labeed Ameen’s firm specialises in cross-border disputes

Labeed Abdal Mohammed Ameen is a lawyer with his own private practice. He has a Masters in Law from Kuwait University. His firm handles both civil and criminal cases, with an especial focus on commercial cases involving Multi National Companies and cross-border commercial disputes.When the disputes are cross border, it is a bit involved. “We have a team of special lawyers to handle such cases to coordinate between the laws of the two countries and build up a strong strategy for defense.” IrregularitiesLabeed and his team have to be conversant with the laws of the countries where the disputing parties belong, and have to be constantly updated to be on par with the changes in the laws. When asked to recall some of his most interesting cases, a host of legal battles came rushing to his mind. Recently there was a case filed by a plaintiff in the UAE against a Kuwaiti subcontracting company. The dispute was regarding construction materials imported by the company from the plaintiff, and some alleged irregularities in the transaction. Labeed built up a strong case for his Kuwaiti client and won the case.
Kuwait is a big economy and the companies here have many multi-national deals. In another instance, a local company got into a legal confrontation with importers in India and China. It was over payments for pipes and other materials bought for construction works in the oil industry. PartnershipLabeed’s word of advice for businesses and entrepreneurs in Kuwait is firstly that they have to be aware of their legal responsibilities. “Make sure you register your company and all agreements related to your business.”
In the case of a foreign partnership, where a Kuwait company is functioning as an agent, there is what is called an agent agreement which needs to be registered according to the format given by the ministry. Most companies don’t register their agreements in which the terms of profit sharing and other details of the business are mentioned.
Kuwaiti law does not recognize any unregistered deals or agreements. This advice holds good for the foreign business community in Kuwait as well.
In Labeed’s experience, he has seen many foreign entrepreneurs entering into agreements that are actually inimical to their interests. They do this without being fully aware of the law or its ramifications. In such instances, he advices entrepreneurs to seek legal help before signing into any agreement. Loan sharks pose another challenge to entrepreneurs, who often find themselves strapped for cash and are on the look out for financiers. It is this scenario the unscrupulous loan sharks take advantage of. Labeed’s advises businessmen to be wary of such loan sharks and to borrow money only from credible financiers, from the right channels.
SponsorsSome foreign entrepreneurs enter into business agreements with Kuwaiti sponsors without registering the agreement documents, says Labeed. “Initially, the partners are very close and there is a tendency to trust one another. Agreements are made merely in spoken words, and nothing is put in black and white.”However, the lawyer adds, when the business is up and running and when the partners begin to see real money, their true colors begin to emerge. “The foreign partners are short changed with the sponsor going down on his promises.”
Then there is what is called Side Agreements, or Sleeping Partner Agreements. Under this, an entrepreneur offers his skills to a company for a share in the profits. Such agreements are almost never registered, and more often than not end up in legal wrangling.
In cross-border disputes, Labeed does not always represent the Kuwaiti side. Even foreign parties appoint Labeed to fight their case in Kuwait. Recently, a Swiss company sought the legal help of Labeed to sue a Kuwaiti commercial agent, who was authorized by the Swiss firm to market a food product in Kuwait. The agent did not fulfill the target as specified in the agreement. “The Swiss company approached us to terminate the contract and appoint a new agent for them. The former agent, meanwhile, went to the court claiming compensation, and we are now defending our client.”Labeed advises foreign entrepreneurs to be active in commercial forums of their respective communities, as these organizations will be in touch with their embassies and the Commercial and Economic Council, which can provide due guidance in business matters.
By: Valiya S. Sajjad

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