The Role of Law in Attracting Foreign Investment

Flexible financial laws that keep pace with global economic developments, both in their technical and regulatory aspects, create a safe and stable environment for both local and foreign investments. Enacting compatible laws forms the cornerstone of enhancing investor confidence, thereby driving the wheel of investment in the country.

Kuwaiti legislation plays an indispensable role in building an investment environment conducive to foreign investments, starting with the capital market, which is a fundamental element in supporting the national economy, encouraging investment, and providing financing for various projects. It is well-known in the field of economics that for capital markets to perform efficiently and transparently, a legal environment is required to protect the rights of all parties, ensure fair market regulations, and sustain confidence in the market.

Upon reviewing Kuwaiti laws related to the capital market, it is evident that they not only protect local investors but also aim to attract foreign investors. Numerous regulations have been amended to facilitate the entry of foreign investors into the market and provide them with legal protection, thereby enhancing Kuwait’s position as a leading regional financial center.

The Capital Markets Authority Law No. 7 of 2010 and its amendments represent the primary legislative framework regulating the Kuwaiti capital market. Under this law, the Capital Markets Authority (CMA) was established as an independent regulatory body tasked with organizing the market, overseeing financial activities, and ensuring compliance with relevant laws and regulations.

Amendments to the law have strengthened investor protection by enhancing transparency and disclosure. Listed companies are now required to periodically disclose their financial statements and immediately report any material information that could impact share prices, enabling investors to make informed decisions based on accurate data. The law also criminalizes the exploitation of non-public information for investment gains, imposing stringent penalties on those found guilty of such practices. Additionally, it includes mechanisms to ensure transparency in share offerings and prevent market manipulation or misleading promotions.

Regarding grievance and litigation procedures, the Capital Markets Authority Law provides a clear mechanism for investors to file complaints and grievances either through the CMA or the specialized Capital Markets Court, which adjudicates disputes related to the stock exchange.

A significant aspect emphasized by Kuwaiti law is the protection of small-scale investors and the prevention of absolute dominance by major investors in the market. This is achieved through strict oversight of fictitious buy and sell orders and monitoring of investment funds to ensure their management adheres to professional standards that safeguard investors’ funds.

We commend the efforts in financial education and raising investment awareness through programs launched by the CMA, which empower individuals to understand the risks associated with investment.

Undoubtedly, investment and financial operations require continuous development of the governing legal framework, both within and outside the stock exchange, to align with international standards and technological advancements. This supports the state’s developmental goals in this regard, reinforcing Kuwait’s status as a prominent player in the financial sector.

Written by:

Abdulrahman AlHouti | Dar AlMuhama