Contact Us

New Court Precedent – Court of Cassation Nullifies Loan Guarantee

A favourable judgment issued by the Court of Cassation (the Supreme Court of Kuwait) in favour of a guarantor nullifying a corporate guarantee issued to a lender bank on the ground that the guarantee was executed though a “general” power of attorney. The Kuwaiti law requires a “specific/Special” and not “general” power of attorney in certain matters and actions including any guarantee. This effectively means that the amount of the guaranteed debt must be specified in the power of attorney and aims to protect the issuer of the power of attorney from any uncertainty as to the limits of the guarantee compared to the guaranteed obligations. The conclusion of the court ruling conforms and concurs with the standard position Al-Hossam Legal have always taken when advising banks and financial institutions. With our position confirmed by the highest court in Kuwait, our clients do not need to make any changes in their lending procedures. However, the judgement is a concern to banks and the Kuwait Banking Association. Many lenders must revisit their documentation and lending procedures. 

Leave a Comment