Debt Collection in Kuwait

Debt collection in Kuwait begins with a legal and financial assessment of the debtor, the debt documents, the debtor’s commercial activity, available assets in Kuwait, pending court cases, existing judgments, enforcement risks and possible objections to the claim. For a foreign creditor, this assessment is especially important where the debt arises from an international contract, unpaid invoices, supply of goods, services, shareholder relations, financing, electronic correspondence or a judgment issued outside Kuwait. The strategy depends not only on the amount of the debt, but also on whether the claim is documented, due and suitable for a payment order, whether the debtor has attachable assets, and whether enforcement may require asset inquiries, precautionary measures or recognition of a foreign judgment.

If the debtor is commercially active, has no unresolved enforcement history that makes settlement unrealistic, and the creditor has enough evidence to prove the debt, the first practical step is usually structured out-of-court communication. This stage helps clarify the debtor’s position, confirm whether the debt is disputed, preserve evidence of demand and prepare the file for court proceedings if payment is not made.

This stage involves out-of-court debt collection in Kuwait through documented settlement communication with the debtor. The creditor may propose payment of the debt, a repayment schedule, return of goods, transfer of the debt to a third party, exchange of services or goods, or another lawful commercial settlement that preserves the creditor’s position.

Interaction with the debtor begins after sending a demand through appropriate communication channels, which may include mail, email, telephone or instant messengers where the circumstances of the relationship allow it. The purpose of this stage is to establish contact with the person who can make a payment decision, record the debtor’s response, identify objections, and determine whether the case can be resolved without litigation.

If structured negotiation does not lead to payment or settlement, or if the debtor ignores communication, disputes the debt without sufficient grounds, transfers assets, faces other enforcement actions or shows signs of insolvency, the creditor should proceed to the appropriate legal route: ordinary court proceedings, a payment order, recognition and enforcement of an existing foreign judgment, compulsory enforcement or bankruptcy-related measures.

Before initiating judicial collection, the creditor should assess the limitation period. Under Kuwaiti civil law, the general limitation period for civil claims is 15 years, while specific categories of claims may be subject to shorter special periods. The limitation defence is applied by the court when the debtor relies on it. The running of the limitation period may be affected by procedural actions taken by the creditor and may also be interrupted if the debtor expressly or implicitly acknowledges the debt. An implied acknowledgement may arise, for example, where the debtor provides security for the creditor’s claim.

After interruption, the limitation period begins to run anew. This makes written acknowledgements, partial payments, security arrangements, settlement correspondence and procedural steps important for preserving the creditor’s recovery position.

Kuwaiti law provides for judicial debt collection through ordinary court proceedings and through a payment order where the claim meets the legal requirements. In cases where there is a real risk that the debtor may transfer assets, conceal funds or make enforcement more difficult, the court strategy may also include precautionary measures, including attachment of assets or other interim relief available under Kuwaiti procedural rules.

The ordinary judicial procedure begins with the filing of a statement of claim with the court. The court registry then registers the claim on the day of filing in the appropriate register and sets a date for the hearing. The original and copies of the statement are given to the bailiff to notify the defendant and then returned to the registry.

The defendant must submit his documents and a memorandum of defense no later than the second hearing. The period for appearing in court is five days, but if necessary, this period can be reduced to two days.

If the plaintiff and defendant appear in court on their own initiative and present their dispute, the court has the right to immediately consider the claim and make a decision, if possible. Otherwise, another hearing is scheduled. The court secretary must complete the process of registering the case in the journal after collecting the fee.

During the hearing, the court first tries to reconcile the parties. If reconciliation is not achieved, the judge orders that the oral statements of the parties or their representatives on the demands and objections be recorded in the minutes of the hearing. After considering the parties’ positions, weighing the evidence, and hearing the arguments, the court will conclude the trial and make a decision either at that hearing or at a subsequent hearing.

If the defendant fails to appear at the initial hearing or requests more time to arrange legal representation, the court will adjourn the hearing for a period of one to three weeks. Courts generally do not adjourn a hearing more than once for the same reason. Therefore, if the defendant fails to appear at the hearing several times without good cause, the court will evaluate the merits of the claim and either dismiss the claim or enter a default judgment.

A payment order is used to collect a specific monetary debt, with or without legal interest, where the creditor’s right is due, documented and suitable for this accelerated procedure. Before applying for a payment order, the creditor must serve a payment demand on the debtor and grant at least 10 days for payment. The demand may be delivered by registered mail or by modern electronic communication methods approved by the Ministry of Justice. The application is then filed with supporting documents proving the debt and the notification of the debtor.

The petition must be filed in two identical copies and contain the details of the claim.

If the court finds the petition justified, it shall issue the order within three days of filing. Otherwise, the court shall refrain from issuing the order and schedule a hearing before the competent court. In this case, the creditor must notify the debtor of the hearing and of the content of the petition.

The debtor must be notified of the payment order within six months from its issuance. Otherwise, the order is considered null and void. The debtor may submit a reasoned grievance within 10 days from notification of the order, and the grievance is reviewed by the Court of First Instance under the applicable procedural rules. If no grievance is filed within the required period, the payment order acquires enforceable effect according to the law.

In commercial debt disputes, electronic records and electronic signatures may be relevant where the creditor relies on email correspondence, electronic messages, electronic payment records, digital confirmations or electronically signed documents. Kuwait’s Electronic Transactions Law gives legal effect to electronic records and protected electronic signatures in civil and commercial transactions when the statutory conditions are met. This is useful for creditors whose evidence is partly digital, especially where the debtor confirmed an order, accepted delivery, approved invoices, acknowledged payment obligations or made electronic transfers.

A decision of the Court of First Instance may be appealed to the Court of Appeal within 30 days of the date of the contested decision where an appeal is available under the procedural rules. After the 2025 amendments, some lower-value claims may become final without ordinary appeal depending on the value and type of the case. A decision of the Court of Appeal may be challenged before the Court of Cassation within 60 days where cassation is legally available, including where the claim value exceeds KWD 30,000 or the claim is unassessed. Filing an appeal does not automatically stay enforcement.

However, the court may, at the request of the applicant, stay the execution of the decision if enforcement is likely to cause serious damage and the grounds for appeal are sufficiently weighty to justify suspension. A decision of the Court of Cassation is final and cannot be further appealed.

For an international creditor, the recovery route may also depend on whether there is already a final foreign court judgment against the debtor or against assets located in Kuwait. Recognition and enforcement of foreign judgments in Kuwait is governed by the Civil and Commercial Procedures Law and requires the Kuwaiti court to verify conditions such as reciprocity, jurisdiction of the foreign court, proper notification and representation of the parties, finality of the judgment, absence of conflict with an existing Kuwaiti judgment, and compliance with Kuwaiti public order and morals. After the foreign judgment is granted enforceable effect in Kuwait, it may be enforced through the same enforcement mechanisms used for Kuwaiti judgments.

After the court decision comes into legal force, the creditor should initiate enforcement proceedings. The decision can be presented for enforcement within 15 years.

Within the framework of enforcement, the creditor’s claims may be satisfied by attachment and debit of funds from the debtor’s bank accounts, attachment and sale of movable and immovable property, attachment of securities, attachment of company shares, and attachment of the debtor’s property or receivables held by third parties. Recent Kuwaiti enforcement reforms have strengthened the role of the Enforcement Department by allowing inquiries into the debtor’s assets held by government authorities, banks, investment companies, clearing agencies and other entities, including information on assets, rights, bank balances, transferred property and persons who received assets from the debtor after the debt arose.

At the creditor’s request, the Enforcement Department may also seek measures against a defaulting debtor who has the ability to comply with a final judgment or enforceable order but fails to do so. These measures may include a travel ban, detention or both, subject to the conditions set by the Civil and Commercial Procedures Law. Detention may not exceed six months. Where the debtor is a legal entity, the detention order may be directed against the person directly responsible for non-compliance with the enforcement decision. The court or enforcement judge may also consider a grace period or instalments where the legal conditions for such treatment are met.

An alternative option for recovery from a company, trader or entrepreneur is the debtor’s bankruptcy or insolvency-related procedure under Kuwait Bankruptcy Law No. 71 of 2020. The modern bankruptcy framework in Kuwait is not limited to liquidation. It also includes preventive settlement and financial restructuring, which may be relevant where the debtor’s business can still continue but its debts need to be reorganized. A creditor may rely on bankruptcy-related measures where the debtor has stopped making payments, has a deficit in its financial position, or its business is no longer sustainable.

Kuwait Bankruptcy Law established a specialized Bankruptcy Court and a framework involving bankruptcy administration, trustees, auditors and other court-supervised participants. For a creditor, this means that bankruptcy may serve different purposes depending on the debtor’s condition: verification of claims, supervision of the debtor’s assets, participation in restructuring, liquidation of assets, or challenge of transactions that harmed the creditor body.

At this stage, if the debtor’s assets are insufficient to fully satisfy creditors’ claims, it is possible to challenge transactions made with the intention of causing harm to creditors or transactions that unfairly reduced the debtor’s estate.

The following transactions or actions may be declared invalid if they were made by the debtor within three months preceding the date of suspension of payments: donations or gifts, with the exception of small gifts; any transaction in which the debtor’s obligations are clearly disproportionate to the obligations of the other party; repayment of debts before their maturity in any way different from the usual procedure for repayment of this type of debt; encumbrance of any type of property with additional collateral to secure an existing debt, unless this is justified by business considerations; any transactions if they caused damage to creditors and if the person involved in the transaction knew or should have known that the debtor had suspended payments or was in a state of financial insolvency.

The limitation period for claims to cancel the above transactions and actions expires one year from the date of publication of the decision to initiate bankruptcy proceedings. As a result of the cancellation of such transactions, the value transferred out of the debtor’s estate may be restored, which can increase the liquidation estate available to satisfy creditors’ claims and cover the costs of the bankruptcy procedure. The bankruptcy framework also contains consequences for dishonest conduct after the opening of bankruptcy proceedings, including liability risks for persons involved in concealing books, misappropriating company assets or interfering with the proper administration of the bankruptcy estate.

If you need support with debt collection in Kuwait, Grandliga can assist at all key stages of the recovery process: debtor and document assessment, structured settlement communication, preparation of a court strategy, payment order proceedings, ordinary litigation, recognition and enforcement of a foreign judgment, compulsory enforcement, asset-related measures and bankruptcy-based recovery. The appropriate route is selected after reviewing the debt documents, debtor status, available assets, limitation period and the procedural stage of the claim.

# DEBT COLLECTION AGENCY KUWAIT

04.11.2024

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