By: Nader Al-Awadhi, Senior Partner

In general, Kuwait laws allows for the assignment of contracted rights. However, prior to an assignment being effective, it must be properly served on the debtor under the underlying agreement. Also, Article 375 of the Civil Code states that:

“In case of several assignments of the same right, the assignment which becomes effective before the others against a third party shall have preference.”

Based on the above, there are three (3) separate issues that need to be addressed to ensure proper execution and perfection.

First, upon execution, the assignee will need to walk the assignment contract into the Execution Department of the Kuwait Courts. The Execution Department will then serve the assignment along with a notice to the debtor. Upon said service, the assignment becomes effective against the debtor in accordance with Section 366 of the Civil Code. Any other attempted service on the debtor would be considered null and void for purposes of Section 366.

Second, the concern on priority is whether the assignor assigns his rights in the underlying contract to more than one party. To alleviate this risk and establish beyond a reasonable doubt the date of assignment and corresponding priority rights, the assignee needs to walk the assignment contract into the Department of Date Stamping – Ministry of Justice (“MOJ”), which will then stamp the official date on the assignment. In the event that two or more assignees that are disputing their priority rights in the assignment, then the assignment which contains the earlier official date stamp issued by the MOJ will take priority in accordance with Section 375 of the Civil Code.

Third and finally, there are two distinct manners of executing the Assignment Contract. Under the first manner, it is executed privately and without notarization. In the second scenario, the parties can execute and notarize the same before the MOJ. The benefits of execution and notarization before the MOJ relate mainly to granting the assignment contract the power which enables the assignee, in the event of default, to enforce the said contract directly before the Enforcement Department without any need to file a law suit regarding the substance of the debt. However, one should still seek to obtain the execution wording to fulfill enforcement requirements.