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Legislative gap in the Competition Protection Law Judgment of unconstitutionality of Article 34, Clause 1
5 min 13 sec Written by
m.abouakl@tamimi.com
Introduction
The Kuwaiti legislature issued Competition Protection Law No. 72 of 2020 with the aim of protecting the Kuwaiti market from practices that negatively affect competitiveness in the Kuwaiti market, such as agreements and interference in determining the size of a particular market or its prices. Believing in the pivotal role of this law, the legislator has included a provision that allows the Disciplinary Board of the Competition Protection Authority to impose financial penalties on companies that commit any of the violations listed in Articles 5 to 8, including, for example, entering into agreements to fix product prices, divide the market, or stabilise production quantities, and undertaking any action that would disrupt, restrict, or prevent competition in the Kuwaiti market. The legislator has specified these financial penalties in clause (1) of Article (34), stipulating that they shall not exceed 10% of the total revenue achieved by the offending company during the previous financial year.
The wording of this article has caused several problems in its practical application, prompting a number of interested parties to challenge the constitutionality of this specific clause, which was reviewed by the Constitutional Court and ruled unconstitutional as detailed below.
Constitutional Court ruling
The plaintiffs filed a direct appeal challenging the constitutionality of clause (1) of Article 34 of the Kuwaiti Competition Protection Law on the grounds that the penalty is disproportionate to the violation, as it imposes a financial penalty of 10% of the value of the previous fiscal year’s revenues. The revenue generated during the financial year may be the result of the violation or the result of legitimate commercial operations, and therefore it is not reasonable to punish the violating company for all of its activities, both those that violate the law and those that do not. In addition, the aforementioned clause is ambiguous and difficult to apply if the violating company has suffered losses and has not generated any revenue. Finally, the aforementioned clause does not specify precisely which previous financial year is meant: is it the financial year preceding the material element of the offence, or the financial year preceding the issuance of the disciplinary council’s decision?
Based on the foregoing, the Constitutional Court concluded in its ruling No. 5 of 2023, issued on 5 February 2025, that: “The unconstitutionality of clause (1) of Article (34) of Law No. (72) of 2020 on the protection of competition insofar as it imposes financial penalties not exceeding ten per cent (10%) of the total value of the revenue achieved by the person concerned during the previous financial year in the event of a violation of the provisions of Articles (5), (6), (7) and (8) of this law, and rejected the appeal with regard to the remaining articles challenged.”
Impact of the ruling
The legislator has given legal authority and specificity to the rulings of the Constitutional Court, due to the importance of its role in monitoring laws and ensuring their validity under the constitution accepted by the State of Kuwait, its government and its people. Therefore, the rulings of the Constitutional Court in general, and the aforementioned ruling in particular, are binding on all, meaning that they are binding on all bodies, institutions, and courts at various levels, including the Disciplinary Council and the Competition Protection Authority, in accordance with Article 1 of Law No. 14 of 1973 on the establishment of the Constitutional Court. This is in addition to the effect of the ruling, which is binding on all bodies and courts to take the necessary measures to apply the aforementioned ruling of the Constitutional Court to existing disputes and matters, and even to settle their effects with regard to the past, as expressly stipulated in Article 6 of the aforementioned law.
The Kuwaiti Court of Cassation has upheld and emphasised the two aforementioned rules in numerous rulings, repeatedly ordering various courts to implement the rulings of the Constitutional Court in cases before them at the time of the ruling, as well as to annul administrative decisions based on articles that have been ruled unconstitutional, even with retroactive effect. These include Appeal No. 93 of 2009, Administrative, in the session of 2 November 2010, and Appeal No. 529 of 2004, Administrative, in the session of 19 December 2006.
Legislative vacuum
Perhaps the most significant effect of the Constitutional Court’s ruling mentioned above is the legislative vacuum it has left behind, which has abolished the penalties for violating Articles 5 to 8 of the Competition Protection Law. Since the aforementioned ruling was handed down, Article 34(1) has become null and void, and its unconstitutionality applies to cases currently being heard and investigations conducted at the time of the ruling, as well as retroactively to rulings that have been issued and penalties that have been decided by the Disciplinary Council. In addition to the contemporary and retroactive effects of the ruling that we discussed when talking about the effect of the ruling, there is also a future effect, which is the absence of penalties in the event of violation of Articles 5 to 8 of the Competition Protection Law.
However, it must be taken into account that the violations stipulated in the aforementioned articles are of the nature of continuing offences, in which the state of illegality continues and its effects are renewed throughout the period of the agreement stipulated in Articles 5 to 8 ( ). Therefore, if the legislator issues a new article to avoid the constitutional flaw in Article 34(1) and it enters into force, it will apply to agreements that were made prior to the entry into force of the law and continued until its entry into force. This is not affected by the argument that criminal laws do not have retroactive effect, in accordance with the constitutional rule set out in Article 179 of the Constitution, because the material effects of the offence are renewed, as we have already mentioned.
Conclusion
Constitutional Court Ruling No. 5 of 2023, dated 5/2/2025, which ruled that Article 34(1) of the Competition Protection Law is unconstitutional, has retroactive and contemporary effects that necessitate the withdrawal of the ruling’s effect on administrative decisions prior to and contemporary with the ruling issued by the Disciplinary Council, as well as judicial rulings pending to annul the aforementioned decisions. In addition to the future effect represented by the legislative vacuum in the absence of financial penalties for violating Articles 5 to 8 of the law, while a new article replacing the article ruled unconstitutional will apply to violations that began before the new article came into force and continued until its entry into force.
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