Judicial Principles on Inheriting Industrial Plots in Kuwait

The transfer of usufruct rights over industrial plots from the original beneficiary to his heirs constitutes one of the complex legal issues in the State of Kuwait, particularly in light of the absence of an explicit legislative provision that determines the legal nature of this right and its fate after death.

The Court of Cassation has addressed this issue, establishing a set of fundamental judicial principles that resolved the controversy surrounding it. This analysis aims to illuminate the reasoning underlying the two judgments rendered in Civil Appeals Nos. 950 and 968 of 2012, and the judgment rendered in Civil Appeal No. 2531 of 2017, which constitute fundamental precedents for understanding the legal nature of industrial plots and the usufructuary’s right therein.

The Legal Nature of Industrial Plots: Private Property, Not Public Property

The Court of Cassation established a principle stipulating that industrial plots owned by the state are not considered public property, but rather are classified as part of the state’s private assets.¹ This principle is justified on the grounds that these plots lack the element of ‘allocation for public benefit,’ which distinguishes public property. Since they constitute private property, they are subject to the provisions of private law regarding their exploitation and management¹, and the relationship between the state and the beneficiary constitutes a contractual relationship governed by a lease contract or temporary license for usufruct.¹

This legal characterization of industrial plots constituted the cornerstone for rejecting the claim brought by one of the heirs who sought the partition of the usufruct right or its sale by public auction. Had the plots constituted public property, they would have been inalienable and immune from attachment, which would align with the court’s final determination; however, their characterization as private property compels the court to examine more thoroughly the inherent nature of the right itself.

The Distinction Between Personal Rights and Real Rights: The Essence of the Ruling

The Court of Cassation accorded paramount importance to the distinction between these two types of rights; whereas a real right (such as the usufruct right stipulated in Article 944 of the Civil Code) constitutes a direct right over property that grants its holder the authority to use and exploit it without interference from the owner ¹, a personal right requires intervention from the lessor or owner for its exercise to be possible.¹

Accordingly, the court established that the usufructuary’s right in the industrial plot constitutes a personal right rather than a real right.¹ The plot is leased to the parties pursuant to a lease contract, and their rights therein are constrained by the contractual terms and contingent upon obtaining permission or authorization from the General Authority for Industry.¹ Consequently, the provisions governing joint ownership cannot be applied to such rights, whether through partition in kind (by division and allocation) or partition by liquidation (by sale at public auction), as these provisions apply exclusively to joint real rights.¹

The court also affirmed that the buildings erected by the usufructuary on the plot do not confer upon him a real right thereto, but rather their fate remains tied to the contract, whereby these structures revert to state property without compensation upon the termination or rescission of the contract.¹ This principle prevents any attempt to claim ownership of the buildings separately from the usufruct right, and confirms that the fundamental obligation of the heirs is to preserve the unity of the leased property.

Transfer of Right by Inheritance: Co-tenancy in Obligation Rather Than in Ownership

Upon the death of the usufructuary, the usufruct right in the plot transfers to his heirs “in co-tenancy”.¹ However, the court clarified that this co-tenancy does not constitute “co-tenancy in a real property right”, but rather “co-tenancy in obligation”.¹ This solidarity among multiple lessees is implicitly derived from the contractual terms, even where not expressly stipulated.¹

The court based this conclusion on the fact that the plot was leased to the heirs collectively without allocating a specific area to each heir individually, and all were jointly liable for the rent.¹ This joint liability renders the contractual obligation indivisible vis-à-vis the State. Consequently, the heirs may not seek partition of the plot in kind or its sale, as this would result in fragmentation of the leased property and division of their joint obligation, thereby creating multiple contractual relationships with the State without contractual basis or its consent.¹

Based on these considerations, the court rejected the request to sell the usufruct right by public auction, affirming that this act constitutes a waiver of the lease right that was not stipulated in the contract ¹, and that it also contravenes Law No. 105 of 1980 concerning the State Property System, which did not authorize the offering of industrial plots or usufruct rights therein for sale by public auction, as the right granted to them is usufruct only.

State Obligation and Determination of Inheritance Shares

The judicial rulings did not explicitly establish the existence of an obligation upon the General Authority for Industry to transfer usufruct rights to heirs on a mandatory basis.¹ Rather, they demonstrated that its role is to “acknowledge” such rights, as evidenced when the Director General of the Authority issued a certificate acknowledging their right in the plot.¹ This clarifies that the heirs’ right constitutes an inherited right derived from their predecessor based upon an existing contract, rather than a right granted de novo by the Authority.

As for the inheritance shares designated for the heirs, the accompanying judicial rulings did not address their particulars. The plaintiff sought thedistribution of the sale proceeds among them, each according to his respective entitlement” ¹, which presupposes the existence of the statutory shares without the court having specified them. This is attributable to the fact that the determination of statutory inheritance shares falls within the jurisdiction of personal status courts, rather than within the competence of the civil court that adjudicated the dispute concerning the nature of the inherited right and its susceptibility to partition or alienation.

Summary of the principle

These judicial rulings constitute a decisive legal precedent, establishing clear principles regarding the legal nature of state-owned industrial plots, resolving the jurisprudential debate concerning the nature of the usufructuary’s right thereover, and confirming it as a personal right to which the provisions of joint ownership do not apply. Furthermore, they established a definitive framework governing the transfer of such rights to heirs, affirming that their obligations toward the state constitute joint and indivisible liabilities, thereby precluding any claim for partition of the plot or its alienation. This judicial precedent indicates the necessity of finding consensual solutions among heirs for the joint management of the plot, away from judicial proceedings that have proven ineffective.