I overview

Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. The discovery of oil in 1934 fundamentally transformed the country's economy. Kuwait's enormous oil reserves and substantial quantities of natural gas have provided the base for an economic presence of worldwide significance. According to the World Bank, Kuwait is the fourth richest country in the world per capita.2 This would also make Kuwait the second richest Gulf Cooperation Council (GCC) country per capita. Oil wealth has stimulated trade in Kuwait across all sectors including service industries. The Kuwaiti government has used its oil revenues to build the country's major infrastructure (including ports, roads, airports, seawater distillation plants, power stations and modern government office buildings). The public has also been served by the large-scale construction of public works, numerous free public services, and highly subsidised public utilities.

However, the continuing decline in oil prices, the acknowledgment of the benefits and need of the expertise available in the private sector and the increasing worldwide advocacy for cleaner fuels (and the corresponding drop in reliance on fossil fuels), has led the government of Kuwait to engage in various efforts in an attempt to diversify Kuwait's economy, as is the case with the other members of the GCC whose economies are also heavily reliant on oil revenues. These efforts have included the government's promotion, support and engagement in public private partnership projects.

Government policy

In 2017 the Kuwaiti government unveiled its plans to transform the country into a regional financial and cultural hub by 2035 through the Kuwait National Development Plan, branded 'New Kuwait',3 which sets the nation's long-term development strategies. One of the strategies is the restructuring of the role played by the state so as to allow more private sector participation. Accordingly, the government has adopted various forms of cooperation between the public and private sector and, in particular, PPPs. In line with this policy, Kuwait has continued in its quest to procure more public-private partnership (PPP) projects following its success with the Az Zour North Phase I IWPP Project.4

With respect to the PPP legal regime, the Kuwaiti government enacted Law No. 7 of 2008 regarding the Regulation of BOT Operations and Similar Systems (the BOT Law) in 2008, which was essentially the first specialised law on the books regulating PPPs. However, the BOT Law was repealed and replaced by Law No. 116 of 2014 Concerning Partnerships between the Public and Private Sectors (the PPP Law) and its executive regulations.5 The PPP Law was developed as an improvement to the BOT Law as the Kuwaiti government's response to the difficulties and loopholes experienced by the investors, lenders and procuring entities as a result of the implementation of the BOT Law. The PPP Law is currently the general law that sets the guidelines for the procurement and implementation of PPPs on government-owned land across the sectors.

Before enacting the PPP Law, the government had enacted Law No. 39 of 2010 regarding the establishment of Kuwaiti Joint Stock Companies, which would undertake the construction and implementation of electrical power and water desalination plants (the IWPP Law). The IWPP law was subsequently amended by Law No. 28 of 2012 and Law No. 19 of 2015. While the IWPP Law specifically regulates power and water desalination PPP projects, the provisions of the PPP Law continue to apply to IWPP projects to the extent a particular matter is not specifically addressed by the IWPP Law.

The development of the PPP legal regime is further evidence of the government's support and strategy in developing PPPs.


The year 2019 saw the Ministry of Finance announce in February 2019 that it was planning to amend the PPP Law, with the first draft of this amendment submitted to the Fatwa and Legislation Department, following which the draft was to be submitted to the Cabinet and then Parliament. It is understood that the amendments mainly aim to reduce the amount of time required for projects to reach financial close.

Following numerous attempts to do so, KAPP finally announced on 15 September 2019 to Kuwaiti citizens, the distribution of its shares in Shamal Az-Zour Al-Oula Power and Water Company KSCP, the Az Zour North IWPP project company (the Company). KAPP holds 50 per cent of the Company's issued shares, subscribed for on behalf of the Kuwaiti citizens in the initial capital subscription in 2013. Following the completion of the construction and the initiation of operations, KAPP, as mandated by the PPP Law, invited Kuwaiti citizens to subscribe for and buy shares in the Company. The number of shares to be distributed is 550 million shares (equivalent to 55 million dinars at 100 fils per share). The subscription period was set for 60 days to run between 1 October 2019 to 29 November 2019.6 Following completion of the IPO, 50 per cent of the Company's shares will be owned by Kuwaiti citizens. The remaining 50 per cent of the Company's shares will remain distributed between the Kuwaiti government (10 per cent) and the private sector (40 per cent). The Kuwaiti government, represented by the Kuwait Investment Authority and the Public Institution for Social Security, holds a 10 per cent share of the Company's share capital distributed equally between them. The consortium of the French company Engie (formerly GDF Suez), Sumitomo Corporation of Japan and Abdullah Hamad Al-Saqer & Bros. Co. of Kuwait, owns 40 per cent of the Company's capital. The Company is planning to list on the Boursa Kuwait stock exchange once the 550 million shares have been distributed. This project continues to be the government's flagship and most successful major PPP.

Although smaller in overall value, Kuwait's other successful public-private partnership project is in the healthcare sector. In an effort to address the need for quality medical care for the expatriate population in Kuwait, the government initiated a health programme through the establishment of what would be a private company. The Health Assurance Hospitals Company (Dhaman) is committed to building three hospitals and 15 clinics to provide healthcare for expatriate residents in Kuwait. In 2013 Arabi Holding Group, a private company won a 26 per cent stake in Dhaman, which was auctioned by the country's sovereign wealth fund. In December 2016, Dhaman signed a 162 million dinars (US$535.9 million) deal with China Metallurgical Group Corporation to build two hospitals to serve insurance-paying expatriates, who account for 70 per cent of Kuwait's 4.4 million population. The contract includes the design, equipment and maintenance of the two hospitals, which will provide 600 beds. A number of Dhaman's clinics opened and started operating in 2019.7

Another public-private partnership success story is the Kuwait International Airport's Terminal 4 project. While the Directorate General of Civil Aviation (the DGCA) in conjunction with the Ministry of Public Works procured the construction of the terminal through a construction contract it signed with the Turkish Genghis Company and Al Oula in 2016, the DGCA then signed an operations and management agreement with Incheon International Airport Corporation (IIAC) of Korea to operate this terminal. The terminal was inaugurated in July 2018 by His Highness the Amir of Kuwait and commercial flights started in August 2018. August 2019 therefore marked the first anniversary of the operation of Terminal 4 by IIAC. The 55,000 square metre terminal has the capacity to accommodate 4.5 million passengers per year and is providing over 200 jobs to Kuwaiti citizens and contributes US$60 million annually to state revenues. The chairman of the DGCA also stated that it was projected that the revenues of Terminal 4 would likely reach 100 million dinars in its first five years of operation.8

The year 2019 also saw the completion of the privatisation of Kuwait's stock exchange – Boursa Kuwait Securities Company (BKSC). The Capital Markets Authority completed the privatisation of BKSC with the 50 per cent public offering in December 2019, which had been preceded by the successful sale of 44 per cent of the company to strategic investors in February 2019. Ninety-four per cent of BKSC is now owned by private investors. The remaining 6 per cent of the company is owned by Kuwait's Public Institution for Social Security. The privatisation of BKSC was another project sanctioned by the Kuwait government to strengthen its position as a regional financial centre and give the private sector a stronger role in the Kuwait economy. The stake sale comes ahead of the potential inclusion in 2020 of Kuwaiti equities into the MSCI main emerging markets index, a move that could trigger billions of dollars of inflows from passive funds. The BKSC privatisation programme was mandated by Article 33 of Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Amendments and was rolled out in two phases.9

Following the signing of the Letter Agreement by the Preferred Bidder and the government of Kuwait represented by the Ministry of Public Works in the Umm Al Hayman Wastewater Project, the incorporation of the Project Company was initiated and completed with the signing of the company's constitutive documents in November 2019. The Project Company, called the Umm Al Hayman Waster Water Treatment Company KSCP, was fully constituted by 9 December 2019, then held its constitutive general assembly in December 2019. The project documents were signed on 23 January 2020 and it is hoped that financial close will be achieved by the first quarter of 2020.

Unfortunately the Az Zour North Phase II and Al Khariran IWPP Phase I projects, which had been cancelled by KAPP in 2017 and re-procured as Az Zour North IWPP Phase II and III and Al Khairan Phase I jointly in 2018, were cancelled again.


As there have been no amendments to the PPP Law in the past year, the general framework of the procurement of PPPs under the PPP Law in Kuwait remains largely the same.

i Types of public-private partnership

PPP projects under the PPP Law are essentially procured on a build, operate and transfer (BOT) basis. That said, variants of PPP models may be used, including design–build–operate–transfer or design–finance–build–operate–transfer. Essentially, a concession10 is granted to a successful investor, as defined in the PPP Law, to finance, build, operate and transfer the project and its assets to the state upon the expiry of the agreed term. The PPP Law, however, also envisions the use of service and management contracts.11

The type and structure of the PPPs is further provided for in the definition of the PPP model in the PPP Law, which provides as follows:

Public Private Partnership Model: a model whereby a private Investor invests in State-owned real estate property – if required – in one of the projects procured by the Authority [i.e., KAPP] in collaboration with one of the Public Entities after signing an agreement with the Investor to implement or build or develop or operate or rehabilitate a service or an infrastructure project, and to provide financing thereto and operate or manage and develop the project, for a specified term, after which the project shall be transferred to the State; the foregoing shall be carried out in one of two forms: 1) the implementation of the project in consideration for fees – for services or works performed – to be paid to the Investor by the beneficiaries or by the Public Entities who have entered into an agreement with the Investor, and whose objectives are in compliance with the project or by both the beneficiaries and the Public Entities; and 2) the purpose of the project is for the Investor to implement a project with strategic importance to the national economy and to exploit it for a specified term. In both cases, the Investor shall pay a fee for the use of any State-owned real property allocated for the project.

While Article 10 of the PPP Law provides the type of the PPP model to be procured, the mechanisms for the procurement and the implementation of the project are to be determined based on the approval of the Higher Committee and in accordance with the provisions of the PPP Law; it does not elaborate on the different types of PPP models.

The principal features of the PPP models contemplated by the PPP Law are that:

  1. the project would be located on state-owned real estate property (if required);
  2. the project would be procured by KAPP in collaboration with a public entity;12
  3. a PPP agreement would be signed between the public entity and the private investor to implement, build, develop, operate or rehabilitate a service or an infrastructure project and to provide financing thereto and operate or manage and develop the project;
  4. the project would be for a specified term, after which the project and its assets should be transferred to the state;13 and
  5. the investor would receive consideration for provision of the services or works required under the PPP agreement.

Additional features of the PPP model structure under the PPP Law include:

  1. a public joint-stock project company that will undertake the PPP project will be incorporated by KAPP (for projects valued above 60 million dinars);
  2. pursuant to Article 13 of the PPP Law, the shares of such project company will be distributed as follows:
    • no less than 6 per cent and no more than 24 per cent of the share capital shall be allocated to the public entities entitled to acquire such shares;
    • no less than 26 per cent of the share capital shall be allocated to the successful investor for subscription in accordance with the PPP Law, taking into account the percentage of shares allocated to the initiative proposer under Article 20 of the PPP Law; and
  3. 50 per cent of the share capital shall be allocated for subscription through an initial public offering to living Kuwaitis listed in the register of the Public Authority for Civil Information on the date of the invitation to pay the price of the shares;
  4. the procurement of these projects will be governed by the PPP Law and its Executive Regulations rather than the Public Tenders Laws that would otherwise regulate government projects;14 and
  5. any consortium that is awarded the project is required to establish one or more consortium companies in accordance with Kuwaiti law. Such company will hold the shares of the successful investor in the project company if a public joint stock company is incorporated. If none is required, then such company will undertake the project.

Where the total cost15 of the project does not exceed 60 million dinars, the successful investor16 will have to establish a project company, but such company will not be required to be a public joint stock company with its shares distributed as per Article 13 of the PPP Law. Similarly, where a project is considered to be of special nature, and whose total cost does not exceed 250 million dinars, the successful investor will not have to establish a public joint stock company.

In light of the specific language of Article 34 of the PPP Law, which exempts companies formed under the PPP Law from the nationality requirements provided for under the Commercial Code,17 it is clear that the foreign ownership restrictions provided for under the Commercial Code should not apply to a project company established for purposes of executing a PPP project under the PPP Law. This would mean that a project company and the consortium companies established under the PPP Law may have foreign shareholders owning more than 49 per cent of its share capital. Additionally, once the company is listed on the Kuwait Stock Exchange, its shares may be freely bought by non-Kuwaitis, which may result in the majority of the company being owned by non-Kuwaitis.

The PPP Law also contemplates projects being procured as a result of unsolicited proposals or initiatives18 submitted to the government. If such a proposal is accepted by the Higher Committee, the project would follow the regular PPP procurement procedures; however, the proposer of such initiative would have his, her or its costs reimbursed by the project company, and would receive a 5 per cent advantage over other bidders if he, she or it participates in the procurement process. Additionally, if the project is implemented through a public joint stock company, a percentage not exceeding 10 per cent of the shares of the project company, deducted from the successful investor's percentage, will be allocated to the proposer.

ii The authorities

The Higher Committee

Articles 2 and 3 of the PPP Law provide for the establishment of the Higher Committee for Public-Private Partnership Projects (the Higher Committee) and determine its competences and authorities. The Higher Committee is comprised of:

  1. the Minister of Public Works, the Minister of Commerce and Industry, the Minister of Electricity and Water, and the Minister of Municipality;
  2. the Director General of the Public Authority for Environment;
  3. KAPP's Director General, as member and rapporteur;
  4. three experienced specialists appointed by the Council of Ministers from among the civil servants; and
  5. a representative of the relevant public entity sponsoring the PPP project, who shall be invited to meetings without having a voting right.

The competences of the Higher Committee now include: setting the general policies for projects and initiatives of strategic importance to the national economy; approving requests of public entities for the procurement of PPP projects; proposing PPP projects to public entities; identifying public entities that shall participate in the procurement of the projects; approving the requests for the allocation of land necessary for the project; approving studies and concepts of PPP projects; approving the successful investor based on KAPP's recommendation; approving the PPP agreements to be executed by the public entity and deciding upon the request of the contracting public entity for contract termination (including for public interest).

Ministry of Finance

The decisions of the Higher Committee are only effective upon their approval by the Minister of Finance. Additionally, the Minister of Finance is required to present to the Council of Ministers an annual report on all the projects that have been executed or implemented in accordance with the provisions of the PPP Law and to forward a copy of this report to the National Assembly.19

Kuwait Authority of Public-Private Partnership Projects

Articles 4, 5 and 6 of the PPP Law provide for the establishment of the Kuwait Authority of Public-Private Partnerships Projects (KAPP) and determine its competencies and the scope of its authority. KAPP's competences include:

  1. assessment and completion of feasibility studies;
  2. development of the mechanism for the submission and evaluation of initiatives;
  3. development of contract templates;
  4. incorporation of the project companies;
  5. follow up on implementation of PPP agreements; and
  6. overcoming obstacles on implementation and proposing project incentives.

Public entities

These are the government entities that participate in the PPP projects and are defined by the PPP Law as any government entity, ministry, department or any public entity with a supplementary or independent budget that enters into an agreement with a private investor to carry out a project in pursuance of the PPP model and in compliance with the provisions of the PPP Law, or that participates by investment in the project company by owning shares in the project company established for the implementation of the PPP project.

iii General requirements for PPP contracts

Article 35 of the PPP Law and Article 26 of the Executive Regulations to the PPP Law provide a list of the matters that should be incorporated into all projects contracts. These include but are not limited to:

  1. the nature and scope of works and services that shall be executed by the project company and the terms and conditions of such execution;
  2. technical, environmental, financial and safety conditions of the project;
  3. the ownership of the project's funds and assets, the obligations of the parties in respect of handing over the project and the terms and conditions of transfer of ownership at the end of the project;
  4. allocation of responsibility for obtaining licences, permissions and approvals;
  5. each party's financial obligations and its relation to the financing of the project;
  6. the price of products or fees for the service provided;
  7. regulation of the right of the public entities to amend terms of construction, maintenance, operation and other obligations of the project company;
  8. the events of termination of the agreement including for public interest;
  9. the distribution of risks in the event of amendment of laws, accidental events and force majeure, and determination of compensation as the case may be;
  10. the contract term, and the term of the investment period, construction and preparation or completion of development works; and
  11. the dispute resolution mechanism.

Article 36 provides that the public entity shall be able to amend the terms and conditions of construction, equipment, development and other works and fees for services provided for in the contract. However, such amendments may only be made in compliance with the terms of the contract and with the approval of the Higher Committee.

Article 39 of the PPP Law provides that while the PPP agreements should in principle be drafted in Arabic, the same article states that it may also be drafted in a foreign language (e.g., English) subject to the approval of the Higher Committee.

The Fatwa and Legislation Department and the State Audit Bureau are two government departments that play a crucial role in conclusion of the PPP agreements. They must both approve the agreements before they are executed.


Article 9 of the PPP Law provides that procurement under the PPP Law will be exempted from the application of the Public Tenders Laws. Instead, the PPP Law and its executive regulations shall regulate the procurement and award procedures for such PPP agreement.

Accordingly, the rules and procedures for the submission of proposals, the technical and financial evaluation, the selection of the competent authority to undertake such evaluation, the procedures for opening the envelopes, the documents that would be submitted within each envelope and the pre- and post-qualification procedures are all derived from the PPP Law and its Executive Regulations.

i Expressions of interest

The expression of interest (EOI) is the first step of the procurement process by which KAPP will gauge the interest of investors in the project and determine whether to proceed. The EOI should be published in the Official Gazette, local and international media (as considered necessary) and on KAPP's website. The announcement should include a summary of the project and its objectives, the proposed location of the project, if any, the rules for submitting a response to the EOI and any other information or conditions related to the project.

The EOI is then followed by the qualifications stage. Once approved by the Higher Committee, KAPP in coordination with the relevant public entity should publish the invitation for qualification (RFQ) for the project. The announcement shall be made in the Official Gazette, in at least two daily Kuwaiti newspapers in Arabic and English, other local or international media (as required) and by publication on KAPP's website. Every investor interested in bidding for a project is required to prove his or her capability (qualifications) to perform the project and to perform his or her obligations if the project is awarded to him or her.

Companies may bid individually or as a consortium and will be evaluated by the Competition Committee20 based on the criteria developed by KAPP and the procuring public entity. The results of the evaluation have to be approved by KAPP and the Higher Committee, following which they shall be announced.21

ii Requests for proposals and unsolicited proposals

The concerned public entity in cooperation with KAPP will prepare the project offering documents (RFP) in compliance with the PPP Law and present the same to the Higher Committee for approval. The public entity and KAPP may seek the assistance of local and international consultants to review and prepare the RFP. Pursuant to Article 22 of the Executive Regulations of the PPP Law, the RFP should contain the following:

  1. instructions to the bidder;
  2. reference conditions including the technical and financial conditions and specifications of the project and the basis of awarding the project;
  3. a confidentiality agreement;
  4. the contract form and language, including the draft partnership contract and the lease contracts of the plot, if any;
  5. the letter agreement if the project is awarded to a consortium and the substitution contract for the replacement of the investor in the event of the latter's failure to perform its obligations; and
  6. any other conditions or documents in agreement with the nature of the project.

Articles 23 and 24 of the Executive Regulations further elaborate on the contents of the RFP.

The announcement of the availability of the RFP (which can be purchased by the qualified bidders) shall be made in the Official Gazette, in at least two daily Kuwaiti newspapers in Arabic and English, other local or international media (as required) and by publication on KAPP's website.

The instructions to the bidders will, among other things, include the instructions for submission of the response to the RFP. This will include the deadline for submission and the guidelines on the preparation of the same. The response will typically include two envelopes; one for the technical proposal and another one for the financial proposal.

The Competition Committee shall evaluate the technical proposal on the basis of the criteria provided for in the RFP, prior to considering the financial proposal. KAPP shall notify the investors whose technical proposals are accepted and those excluded. The Competition Committee shall then hold a public meeting to open the financial envelopes of the qualified investors. Such investors shall be invited to the envelope opening session. A representative of the relevant public body shall also be invited to attend such session.

Unsolicited proposals

Private individuals and entities are permitted to submit 'initiatives' to KAPP for consideration. Initiatives are defined as:

[A]n innovative and creative concept of a PPP Project, unprecedented in the State of Kuwait, approved by the Higher Committee, based on a comprehensive feasibility study and submitted by the concept proposer to the Authority, providing an economic return or social benefits in line with the State's strategy and development plan.

Accordingly, the initiative must be submitted with respect to an innovative or unprecedented concept and with a comprehensive feasibility study. If the initiative is approved, the entity that submitted the initiative would be entitled to the reimbursement of the cost of the feasibility study and preferential treatment should they participate in the tender, as further discussed above.

iii Evaluation and grant

The Competition Committee shall evaluate the financial proposal on the basis of the criteria provided in the RFP, and shall prepare an evaluation report of both the technical and financial proposals. KAPP shall notify the preferred bidder of their status and the concerned public body of the name of the preferred bidder. KAPP shall also notify the other investors of their ranking and will release their bid bonds except for the preferred bidder's and the second-ranked bidder.

KAPP shall then invite the preferred bidder to negotiate the details, reservations or explanations contained in the submitted bid. In all events, such negotiations should not involve any contractual conditions considered in the RFP as non-negotiable conditions or that constitute a material deviation according to the project offering documents. There should also be no amendment to the technical and financial conditions based on which the bid is provided.

If negotiations with the preferred bidder are unsuccessful, KAPP and the public entity may initiate negotiations with the second-ranked bidder. If an agreement is reached with the preferred bidder (or the second-ranked bidder), and upon approval of the Higher Committee of the recommendation to select such bidder as the winning investor, the bidder shall be invited to sign the Letter of Agreement22 and then the project contract with the relevant public body and KAPP.


i Payment

Article 27 of the PPP Law provides that the Executive Regulations will, among other things, provide the detailed formulae based on which the investor will collect fees for services rendered.

Articles 27 and 28 of the Executive Regulations envisages in this regard that either the project company would collect fees from the public for the services it is rendering or the public entity would pay to such project company for the services it renders. In this regard, Article 27 provides that the PPP agreement should include the rules on the basis of which the project company may collect fees for the services provided or the works carried out, in both or any of the following methods:

  1. through the public body, against:
    • providing a service in compliance with the agreed performance standards;
    • the use of service or infrastructure provided by the partnership project;
    • the minimum expected demand on the service or infrastructure provided by the partnership project;
    • completion of specific milestones in respect of the performance, operation or providing the infrastructure, provided that they are consistent with the applicable time schedule to execute the project; or
    • achieving such internal return rate as determined in the project offering documents; or
  2. through the users of the service or infrastructure, other than the public bodies, in accordance with the mechanism of calculating the consideration set forth under the partnership contract.

Article 28 of the PPP Law goes on to provide that the PPP agreement should determine the method of calculating the consideration to be charged by the project company for the service or infrastructure according to the nature and requirements of the partnership project. Upon determining such consideration, the following rules and principles should be taken into account:

  1. the prices of the services and works performed through the partnership project should be appropriate in considerations of the level of their quality;
  2. the consumers' interest and the prices of similar services and works (where applicable);
  3. achievement of an appropriate financial return on the investment made;
  4. the inflation rates; and
  5. any support provided by the state to the project.

Similarly, the state may collect certain fees from the project company for use of the assets provided by the public body and the land allocated for the project.

ii State guarantees

There are no state guarantees per se offered to the investors or to the project company to guarantee payment by the state to the investors or project company other than the contractual obligations and undertakings that the public entity entering into the PPP agreements (on behalf of the government of Kuwait) agrees to and is therefore bound by.

Additionally, while public and private assets of the state may not be subject to attachment, there are no restrictions under Kuwaiti law that protects government bodies and entities from being sued before the courts. Accordingly, the public entity's counterparty to a PPP agreement may be sued for their breach of a PPP agreement. However, third parties, if successful, may not attach the assets of the state of Kuwait to enforce a judgment issued in their favour.

That said, the critical nature of the public services offered under the PPP models, investment in the project company by state entities, the shares held by Kuwaiti citizens and the remedies offered for non-payment under the PPP agreement should offer some comfort to the investors of the government's commitment to pay for the services rendered.

Also at issue is the fact that PPP agreements are considered to be administrative contracts. Accordingly, such PPP agreements would not be considered purely commercial agreements but rather administrative agreements. The question which would then arise is what would be the implications of such characterisation under Kuwaiti laws. In this regard, we note that while Article 169 of the Kuwait Constitution provides for administrative disputes to be settled by special courts (i.e., administrative courts) and Law No. 20 of 1981 establishes the administrative court circuit in the Court of First Instance23 as required, the Kuwaiti legal system, however, does not contain a specific administrative law nor does it have a permanent administrative court; as such, it will be difficult to draw on precedents to understand the impact of defining a PPP agreement as an administrative agreement.

The absence of local precedents opens the door to arguments based on jurisprudence and various theories of administrative law largely developed in other civil law jurisdictions and all largely in favour of the government.24 An example of such unusual prerogatives is the government's right to terminate the agreement at any time for public interest, and in certain circumstances probably without compensation. In our view, such a risk should be remote under the PPP Law, which provides25 for the payment of a fair compensation in the event of termination of the PPP agreement for public interest. Therefore, even though PPP agreements are considered to be administrative contracts, they should be governed by the PPP Law – a special law promulgated to regulate PPP agreements.

iii Distribution of risk

Risk allocation in PPPs is undertaken in Kuwait as a process of allocating the responsibility of managing a particular risk to a particular participant (best placed to manage, control and mitigate such risk). In general, an attempt is made to have project-related risks allocated to the investor and non-project related risks to the state, while certain other categories of risk may be shared (e.g., force majeure). A few examples of risks and their allocation and mitigation follow below.

Design risk

Design risk is the possibility that the investor's design may not achieve the required output specifications.

This can be mitigated through clear output specification, consultation with and review by the public entity.

This risk is typically allocated to the investor.

Availability risk

The availability risk is the possibility that the services to be provided by the investor do not meet the output specification of the public entity.

This may be mitigated by having clear output specifications, performance monitoring and penalty deductions for non-performance.

This risk is typically allocated to the investor.

Force majeure risk

The force majeure risk is the possibility of the occurrence of certain unexpected events that are beyond the control of either party.

These can be mitigated through the careful definition of force majeure to exclude risks that can be insured against and that can be dealt with more adequately by other mechanisms such as relief events.

Such risks are typically shared.

Environment risk

Environment risk pertains to the possibility of liability for losses caused by damage to the environment.

This can be mitigated by the bidder undertaking a thorough due diligence of the project site and the public entity procuring independent surveys of the project site.

If the damage is caused by the construction or operation activities of the project company during the project term, this will be the investor's risk. If the damage is not attributable to the activities of the investor, this risk lies with the public entity.

iv Adjustment and revision

As a general rule, no modification or amendment to the PPP agreement once finalised and signed will be valid unless it is in writing and has been signed by both parties.

That said, Article 36 of the PPP Law provides that the public entity may amend the terms of the PPP agreement, the project company's rights and obligations including the consideration paid for the services. It may do so when public interest so requires, but within the limits agreed upon in the agreement, and after the approval of the Higher Committee. This is, however, without prejudice to the right of the project company to compensation for any adverse effect of such amendment.

v Ownership of underlying assets

With respect to the ownership of assets under the PPP regime, Article 18 of the PPP Law provides in part that the PPP agreements shall determine the assets that are to be owned by the investor among the assets of the PPP project, and shall also determine any state-owned assets allocated to the project for the term of the PPP agreement. There are, therefore, potentially three categories of assets: those belonging to the project company; those belonging to the investor; and those belonging to the state. This is relevant, particularly in respect of the security package that would be available to be granted by the investor to the lenders, as further discussed below.

Upon expiry of the PPP agreement, the ownership of the project and facilities shall be transferred to the state along with any and all related assets at no cost, excluding the assets owned by the investor as set out in the PPP agreement. Such assets belonging to the investor may only be transferred to the state if paid for by the state. The PPP agreement is also required to regulate the transfer of the project to the state.

vi Early termination

Pursuant to Article 19 of the PPP Law, the Higher Committee may approve the (early) termination of a PPP agreement at the request of KAPP or the public entity for reasons based on public interest, provided that the Higher Committee justifies its decision and demonstrates the benefits of such termination and provides an estimate of the fair compensation to be paid to the investor in accordance with the PPP agreement.

Kuwait has, to date, only closed on one PPP project under the new PPP Law regime and there are, therefore, no examples yet of early termination of PPP agreements.

Termination may be based on the default of either the project company or the public entity, or as a result of a prolonged force majeure event. The consequences of termination based on such defaults are provided for in the various PPP agreements. These may include the right of the public entity to purchase the project for the price determined in accordance with the PPP agreement (a different price is typically provided for termination as a result of the project company default, the public entity's default or force majeure event).

If the termination is because of the project company's default, the public entity may call on the performance guarantees provided by the project company.

The project is then handed over to the public entity (including all buildings and fixtures, all raw materials, consumables and spare parts, all governmental authorisations, all warranties of equipment, and all contracts and agreements, etc., needed to continue the project), which would take over construction or operation of the project pending the identification of an alternative contractor or operator.


Funding for the PPP projects is raised in a combination of ways, including equity and loans taken out by the investors and the project company. Article 23 of the PPP Law lists the assets that can and those cannot be used as security by the project company and investor, and these are provided for as follows:

  1. the investor and the project company may not sell or mortgage the (state) land on which the project is located;
  2. the investor and the project company may mortgage and create security interest on any assets owned by the investor and the project company from among the assets comprising the project;
  3. the investor and the project company may create security interest in favour of lenders over any amounts payable to them (i.e., proceeds) for services they provide under the PPP agreements or income earned from the project on any other aspect;
  4. the investor may mortgage its shares in the project company or the consortium companies to finance the project (only after the approval of the Higher Committee); and
  5. with the approval of the Higher Committee, the finance documents may contain terms permitting the creditors or lenders, in the case of a breach of the financing terms by the investor, to own the mortgaged shares or request their sale.

The law further provides that the amount borrowed (i.e., the debt taken on) should not be more than that stipulated in the project's documents.

Cross-border finance has been available for PPPs in Kuwait and investors have sourced funding from both international and local banks and financial institutions.

The exchange risk (i.e., the possibility that exchange fluctuations will affect the envisaged costs of imported inputs required for the construction or operation of the projects) is considered an investors' risk and is dealt with primarily by the investor having hedging instruments put in place.


There have been a number of grievances submitted to the grievance committee established under the PPP Law. These have generally been decided on in a timely manner and decisions have been in favour of both the government or KAPP and the investors in certain instances. The general view is that the grievance committee has been competent in its decision-making and has endeavoured to follow due process in reaching its decisions. This, we believe, has given some confidence to investors with respect to addressing issues they may have pertaining to the procurement process.


While the government has a number of smaller successfully operating public-private partnership projects, there remains only one major PPP project that has been successfully closed under the PPP Law (i.e., the Az Zour North IWPP Phase I).

The Az Zour North Phase II and Al Khariran IWPP Phase I projects, which had been cancelled by KAPP and reprocured as Az Zour North IWPP Phase II and III and Al Khairan Phase I jointly were unfortunately cancelled again. It is yet to be seen if these projects will be retendered and what structure the government intends to adopt for these much needed power projects.

The Um Al Hayman Waste Water Project continues to progress, and it is hoped financial close will be achieved in the first quarter of 2020. The KABD Municipal Solid Waste Project stalled following a number of regulatory and other issues raised by the State Audit Bureau that remain unresolved.

The Ministry of Finance has also announced that it plans to amend the PPP Law. It is understood that the main amendments will result in the reduction of the time taken for the major PPP projects to reach financial close, which should hopefully result in more projects progressing much more quickly through the procurement process.

The PAHW has continued with the procurement process of the mixed-use real estate development investment opportunities structured as PPPs that it launched in 2018. While it is clear that the PAHW would like to partner with the private sector in these projects, it is yet to be seen what legal structure these projects will take given the combinations of laws that will be at play.

As evidenced in the procurement documents being issued by KAPP, the government is developing its experience in structuring and procuring PPP projects, and this should hopefully translate into smoother, shorter and more efficient procurement processes.


1 Ibrahim Sattout and Akusa Batwala are partners at ASAR – Al Ruwayeh & Partners.

2 World Bank, International Comparison Program database. https://data.worldbank.org/indicator.

5 Provided for in Decree No. 78 of 2015.

8 Arab Times, Tuesday 17 September 2019.

10 Concessions may also take the form of long-term contractual arrangements, whereby the private party completely takes over all aspects of the management and operations of an existing facility from a public entity. This may include building, maintenance, specified rehabilitation and capital investment in facility upgrades and enhancements as well as raising capital for such upgrades and enhancements. The private party pays agreed concession fees to the public entity for the rights attending the concession. The public entity may also require a share of profits from its partner.

11 Article 30 of the PPP Law concerns procurement of management services for projects that have been transferred to the state at the end of PPP agreements.

12 A public entity is defined in Article 1 of the PPP Law to include any government, Ministry or Department, or any public entity with a supplementary or an independent budget, that enters into an agreement with a private investor to carry out a project in pursuance of the PPP model and in compliance with the provisions of the PPP Law or that participates in the investment through a portion of the shares of the public joint stock company established for the implementation of the PPP project.

13 Pursuant to Article 18 of the PPP Law, the term of the investment in projects procured in accordance with the PPP Law shall not exceed 50 years. However, the term of investment for projects procured under the IWPP Law is 40 years pursuant to Article 1 of the IWPP Law.

14 Article 9 of the PPP Law expressly exempts projects procured under the PPP Law from the application of the Public Tenders Law.

15 Total cost is defined in Article 1 of the PPP Law as the total capital expenditure for implementing the project or preparing it for operation to determine the method according to which the PPP project shall be procured.

16 The successful investor is defined by the PPP Law as the preferred investor with whom the negotiations successfully lead to a final agreement for the implementation of the PPP project.

17 Law No. 68 of 1980 as amended.

18 Initiatives are defined as an innovative and creative concept of a PPP project, unprecedented in the state of Kuwait, approved by the Higher Committee, based on a comprehensive feasibility study and submitted by the concept proposer to KAPP, providing an economic return or social benefits in line with the state's strategy and development plan.

19 Article 33 of the PPP Law.

20 Defined in Article 1 of the Executive Regulations of the PPP Law as the joint team formed by a KAPP Resolution, subject to the approval of the Higher Committee, for each project, for the review, study and preparation of the project documents and papers, and the evaluation of the technical and financial bids leading to the awarding of the project. In addition to KAPP employees, the team shall include representatives from the public entities concerned with the project.

21 It is, however, possible for the Higher Committee to combine the RFQ stage with the request for proposal (RFP) stage.

22 One of the contract documents signed by the public entity, KAPP and the winning investor or bidder, which is accompanied by the final contract documents as agreed thereon, including conditions precedent for specific and preparatory obligations for the validity and enforceability of the PPP contract.

23 The administrative courts will be composed of three judges, which shall include one or more chambers.

24 For example, it is well established before administrative courts in civil law countries that defining an agreement as an administrative contract would entail that the government enjoys certain exorbitant or unusual prerogatives or rights derogating from the generally applicable rules of law (whether under the civil code or the commercial code).

25 Article 19 of the PPP Law.