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THE LEGAL 500 > EVENTS > The changing role of in-house lawyers in Kuwait

The changing role of in-house lawyers in Kuwait

For The Legal 500’s first visit to Kuwait, we wanted to speak to general counsel about the issues they are facing in the local market. It was, we were warned, an unwise move. The Kuwait-based law firms we met in the run up to this roundtable discussion told us it would never work in a country where GCs are few in number, professionally disengaged and rarely involved in the substance of a matter. They were wrong.

A lively and well attended discussion saw representatives of some of the biggest Kuwaiti family-owned businesses - Alghanim Industries, MH Alshaya, Action Group Holdings – joined by representatives of a range of domestic and multinational businesses. Some of the region’s more eminent in-house leaders – including Dr Galal Wafaa of the National Bank of Kuwait (NBK) – were also present to discuss market trends.

Kuwait’s in-house community may be small, but many of the GCs present had little prior interaction with their peers. David Bligh-Smith, general counsel of Kuwaiti-owned multinational retailer MH Alshaya, told us that after 12 years in Kuwait his interaction with other GCs in the country was limited to a single discussion, and even that followed a chance encounter on an international flight. As Saud Al-Motawa, senior counsel at Kuwait Foreign Petroleum Exploration Company (KUFPEC), noted: ‘In Kuwait we do not have the infrastructure to have discussions as in-house counsel. We pay even higher membership fees than private practice lawyers but yet we are not represented – it is time for us to speak as a group in defence of our interests.’

Since oil was first discovered in Kuwait in 1938, the ruling family has made sure every Kuwaiti enjoys a comfortable standard of living. It has, however, led to certain comical effects. The attempt to monitor workplace attendance via finger print sign-in system has led to a thriving industry in replica silicone fingers. As one attendee put it: ‘The fundamental issue we all face in Kuwait is that government employees cannot be fired and there is no accountability. Half of them do not show up for work, the other half seems to have permission to leave at lunch time.’

The discussion opened with participants reflecting on how these bureaucratic structures influenced their roles as GCs.

Santiago Lucero, Alghanim Industries: In-house lawyers in Kuwait are often faced with a certain level of ambiguity. This can be part of the fun, since you have to challenge yourself intellectually, but it can also be frustrating. Areas of the law you wish were clear are sometimes not, while areas that need to be flexible might occasionally be rigid. Thus even though it is essential to be well-versed in local laws, it is equally important to be mindful of the potential pitfalls in their implementation and to find creative solutions within the limits of what is legally permissible.

Yasser Hassaan, Mudon Ahlia Real Estate: That is because the people you are dealing with on the front desk of the Ministry of Commerce and other government ministries do not have a legal background. Until you are referred to the legal department there will be delays. We need to see qualified lawyers on the front desk as a first point of contact. It is not our laws that are deficient, it is the skills to implement them effectively. The problem therefore is one of capacity building. The individual who actually applies the law must be skilled.

Dr Galal Wafaa, National Bank of Kuwait (NBK): This will not help because, fundamentally, the problem Kuwaiti institutions face is a lack of empowerment, not a lack of capacity. Most people below management level do not feel they have the discretion to act without risking a secure bureaucratic career. They are scared to make a decision and there is always recourse to a higher level employee and a demand for approval.

Julien Bergerat, Kuwait Petroleum International (KPI): This is not specific to Kuwait. Across the Gulf Cooperation Council (GCC) you will encounter government staff who do things in a certain way because they think management wants them to. You could be making a rational proposal to them, you could even be supported by law, but unless they hear from their manager they will not change course. The problem is you need enough wasta [influence] to reach a senior manager.

Saud Al-Motawa, Kuwait Foreign Petroleum Exploration Company (KUFPEC): If we lack the capacity or the proper infrastructure to implement the laws then the solution is to dispense with the laws. Of course we need to develop the infrastructure and improve the level of employees at the various ministries, but it will take at least a decade to make these improvements. In the interim we need to reduce the number of laws tying up business.

Dr Galal Wafaa: Once, at the Ministry of Commerce, we were blocked from taking a certain action on legal grounds. We showed the government agent an article in the bylaws that proved he was wrong. He looked at the laws and said, ‘Oh, you are correct, but as this is the first time we have encountered this type of matter I can do nothing to allow it.’ The problem is not the regulations but how to apply them efficiently.

Saud Al-Motawa: I had a similar experience when I was working at Kuwait Petroleum Corporation (KPC). I wanted to obtain a renewed commerce certificate from the Ministry. The undersecretary told me the document I was trying to renew was a forgery. After a long bureaucratic correspondence we discovered that the undersecretary was not aware that KPC, which is a government body, could be registered as both a government and a commercial entity. We are not talking about incompetent people or the state deliberately putting up barriers, the problem is that the information government agents need to follow the law efficiently is not available.

Dr Galal Wafaa: Many of us represent companies owned by the state yet we have struggled with the state. I sympathise with private entities trying to conduct business in Kuwait. They must face even bigger challenges than we do.

Julien Bergerat: There are some very basic problems we face. For example, there is no official English translation of the corporate laws. Yes, this is an Arabic-speaking country, but it is an Arabic-speaking country that employs a large number of non-Arabic speakers.

Amr Wageeh, Kuwait Direct Investment Promotion Authority (KDIPA): The issues are well-known and the State of Kuwait is fully behind initiatives to make things better. There are real efforts to improve things. There is an agenda for reform and an action plan to address these problems. For the first time in Kuwait there is an authority – KDIPA – responsible for streamlining the investment environment and increasing the ease of doing business. KDIPA’s mission is to raise awareness of the significance of investment and the ease of doing business to the country’s future. We look at everything from ease of access to electricity to the time taken to issue and renew licences. Every time Kuwait is demoted by an international ranking we make a note of it on our national agenda and speak to the ministry in charge.

Saud Al-Motawa: The mere existence of KDIPA shows we lack the proper infrastructure for foreign investors. I would also say these government initiatives miss the point. We have seen a lot of government support for start-ups in Kuwait. That is great, but starting a business is easy. In this country, the difficulty is continuing it efficiently. That is a difficulty caused by bureaucracy.

Amr Wageeh: Last year, the Ministry of Commerce launched the Kuwait Business Centre, which will act as a one-stop-shop for businesses to make enquiries. It has appointed and trained new personnel and implemented new IT systems for applying and renewing licences. This has helped overcome the fear of making decisions because it is now very clear what the process is. Once you upload your documents and meet the requirements you can take your licence.

Joe Saliba, United Real Estate: Business itself must accept some of the responsibility too. Companies here are not really keen on the new corporate governance rules, especially the rules of the Capital Markets Authority (CMA). Most try to circumvent whatever rule is implemented and elaborate outside the scope of the text so they can implement whatever decision they want.

Dr. Mohammed Al-Noor, Action Group Holdings: We cannot say there are no problems with the laws themselves, however. Take the current bankruptcy regime, which was implemented in 1980, I believe. There is a new draft law but there is still no equivalent to Chapter 11 bankruptcy in the US. Almost four decades have passed since Kuwait introduced its current legislation and the country is still discussing whether or not to move toward a US-style approach to bankruptcy. Businesses do not want to wait nearly half a century for a very necessary law to be introduced.

Yasser Hassaan: I have worked in many countries and I would say we are being unfair. Kuwait has a strong legal environment. It is easy to get your rights here, there is strong rule of law and unlike other countries in the region we have execution and enforcement of judgements. I do not think this is the worst environment to work in.

Dr Galal Wafaa: Yes, problems aside Kuwait has the best legal system in the GCC. Even though Dubai seems to be progressive it is not where Kuwait is.

Saud Al-Motawa: Well I beg to differ. We might agree it is one of the better legal systems in the region but I think we need to set our sights much higher than that. High standards and ambition made Kuwait a shining star in the region – we need to recapture some of that spirit. In terms of legislation and the infrastructure to implement that legislation, I think we need to take more of the US and UK approach to things. Most of our international counterparts are based on common law principles so we may as well adopt the legal infrastructure to deal with that.

Dr Galal Wafaa: The distinction between common law and civil law systems is now purely academic. Even the US and UK have trade regulations. The issue is not the regulation but how to apply these regulations. There is no inherent problem with following the civil law, but there is a concomitant responsibility to ensure that the system is regulated effectively so businesses do not have to wait for months to clear up whether or not the activity they are proposing is legal.

Saud Al-Motawa: In that sense I agree. The proliferation of regulations is quietly observed on a global basis and there has been a codification of laws and directives in many leading jurisdictions. Further, the leading international regulatory bodies police the market on both a formal and informal level. In the financial markets, for example, the Securities and Exchange Commission (SEC) governs various capital markets through directives while also issuing circulars and sharing information on how the regulations are to be interpreted.

The Legal 500: In the absence of clear guidance from the relevant ministries, are external firms able to help you navigate the laws and regulations?

Dr. Mohammed Al-Noor, Action Group Holdings: Generally we struggle to get good advice from our firms. We need advice from bilingual lawyers who understand both the Kuwaiti laws and international business practices. We also want to work with lawyers who understand the group’s business, but finding external firms prepared to put in the extra resources to do this is tricky.

Hania Farah, NBK: Kuwait just does not have the capacity or need for such large firms that you get in Dubai. Commercially, it is not feasible for international firms to operate in this market because businesses will not pay their fees.

Saud Al-Motawa: In the Industrials sector I need a firm with a proper environmental law department, but none of the Kuwaiti firms have this. As a result we must rely on international firms, but then they do not understand the on-the-ground realities of Kuwait. The fragmented nature of the Kuwaiti market makes it impossible for international firms to survive and difficult for domestic firms to develop specialist skills in particular practices.

Hussain Al Ghareeb, Meshari Al Osaimi: It is a chicken and egg problem. The economics of law firms in Kuwait do not lend themselves to specialisation but if the work comes then law firms will specialise in it. Look at the development of capital markets law, for example. The CMA has just undertaken one of the largest legislative works in recent history and that kind of regulatory push will lead to a shift in law firms themselves. That will create a different market dynamic for law firms themselves. Law firms will have to make critical decisions about the direction they wish go in.

The Legal 500: Have these same issues made it difficult to recruit the right talent in-house?

David Bligh-Smith: Attracting and retaining lawyers can be a huge challenge. Alshaya is a family-owned company that values trust, loyalty, and long service. We want people who want to commit to being in Kuwait for a long time. I have been here 12 years and I have a number of long-standing team members, so clearly it is possible to get that level of commitment. However, when it comes to recruiting people we can find it difficult in the local market. It is even difficult to encourage people to relocate from Dubai. I tend to go to London mostly for my international team. We have been very creative in building a remote working team and we have a great Arabic team but finding Kuwaiti lawyers who are bilingual and want to work in business is difficult.

Hania Farah, NBK: Kuwait University does not focus on English or French, so we do not see a lot of interning here with businesses trying to build a relationship with students or graduates. Students themselves are interested in working in-house but they need to work at a firm first to get a grounding in Kuwaiti law.

Saud Al-Motawa: I do not believe the Kuwaiti market nurtures the set of skills we are looking for in the manner that we hope for. For example, if you lose a good colleague it can take three or four years to find a replacement. That is why most businesses prefer to hire from abroad. It is not that Kuwaitis lack the right skills, but rather that they do not have the infrastructure that will enable them to build the right skills.

Participants:

  • Amr Wageeh, Senior Legal Counsel, Kuwait Direct Investment Promotion Authority (KDIPA)
  • Faisal Al-Rayes, Assistant General Manager and Counsel for International Legal Affairs, National Bank of Kuwait (NBK)
  • Hania Farah, General Counsel for International Affairs, at NBK.
  • Dr Galal Wafaa, Head of Legal department and General Counsel, at NBK.
  • Soheir El-Banna, Senior Lawyer, at NBK.
  • Farida Al-Naqeeb, Assistant to General Legal Counsel, at NBK.
  • Khaled Al Najjar, Senior Llegal Counsel, at Huawei.
  • Ming Xu, ‎Regional Legal Counsel & General Counsel for Kuwait/Qatar, Huawei.
  • Hussein Saleh, Head of Legal, Alargan International Real Estate Company.
  • Hussain Al-Ghareeb, Lawyer, Meshari Alosaimi Law Firm.
  • Bahij Hamwi, Senior Legal Counsel, The International Investor Company.
  • Julien Bergerat, Senior Legal Counsel, Asia/Middle East, Kuwait Petroleum International (KPI, also known as Q8).
  • Hessa Al Twaijri, Legal Manager, Petrochemical Industries Corporation.
  • Hassan Al Yassen, Petrochemical Industries Corporation.
  • Yasser Hassaan, Legal Director, of Mudon Ahlia Real Estate Company.
  • David Bligh-Smith, General Counsel, MH Alshaya.
  • Dr. Mohammed Al-Noor, Chief Legal Officer & International Advisor, Action Group Holdings.
  • Joe Saliba, Chief Legal & Compliance Officer, GC of United Real Estate Co (URC).
  • Santiago Lucero, Senior Director – Legal, Alghanim Industries.
  • Saud Al-Motawa, Senior Legal Counsel, Kuwait Foreign Petroleum Exploration Company (KUFPEC).

Please scroll down to view pictures of the event.