Kuwait’s New PAI Dispossession Rules: Why Classification Matters

Not Every PAI Plot Is At Risk: Why Classification Matters

The Minister of Commerce and Industry, in his capacity as Chairman of the Board of the Public Authority for Industry (“PAI”), has issued Ministerial Resolution No. 8 of 2026 concerning the rules and procedures for the dispossession of plots, sites and units supervised by PAI (the “Resolution”). The Resolution was issued on 5 May 2026 and published on 10 May 2026 in the Official Gazette, Issue No. 1790, with effect from the date of publication.

The title of the Resolution is broad, and on a first reading it may appear to apply equally to every plot, site and unit supervised by PAI, including industrial plots, service plots, craft plots, commercial plots, sand quarry sites, gravel storage sites, car scrap sites and craft units. That reading is not entirely accurate. The Resolution is drafted in a way that can cause confusion, but the grounds the Resolution specifically enumerates for dispossession are directed at industrial plots. For other categories of plots and sites, the Resolution largely points back to the separate previous ministerial resolutions that already regulate those activities.

The message is simple: do not assume that every PAI-supervised plot is now subject to the same dispossession risk. The first and most important question is what type of plot you hold. An industrial plot, a service plot in an industrial zone, and a service, craft or commercial plot outside an industrial zone may each be treated differently. The legal classification of the plot, its location, the activity carried out on it, the allocation decision, the usufruct contract and any PAI approvals will determine the actual level of risk.

This matters in particular for subleasing and third-party use. The Resolution identifies leasing, granting usufruct rights or disposing of an industrial plot without complying with the law and regulations as grounds for dispossession. However, service, craft and commercial plots are subject to their own regulatory framework. For example, Ministerial Resolution No. 32 of 2023 permits subleasing of service, commercial and craft plots outside industrial zones in accordance with the applicable regulations, while subleasing service plots within industrial zones requires prior PAI approval.

Accordingly, the Resolution should be read less as a threat to all PAI plot holders, and more as an enforcement and procedural framework for dispossession orders. Its impact lies in the procedure: the grievance period, suspension of enforcement where a grievance is filed on time, evacuation timelines, possible extension period and escalating penalties for delayed handover. The risk is real, but it is not one-size-fits-all.

SCOPE OF THE RESOLUTION

The Resolution purports to apply to plots, sites and units supervised by PAI. However, it does not create identical dispossession grounds for all of these categories. It draws an important distinction between:

• Industrial plots, where the Resolution sets out specific grounds for dispossession; and
• Service, Craft, Commercial and other plots/sites, where the Resolution refers back to the grounds contained in the separate ministerial resolutions regulating those activities.

GROUNDS FOR DISPOSSESSION

The Minister, or his delegate, may issue an order for dispossession of an industrial plot in the cases set out under the law or executive regulations. The Resolution identifies the following grounds:

• Obtaining the industrial licence or industrial plot by submitting false or misleading information, or by using unlawful methods;
• Suspending production for six months, reducing production, or changing production capacity without a justification accepted by PAI;
• Failing to register the industrial project in the industrial register, or failing to notify the competent department of changes to registered information;
• Using the plot for a purpose other than the purpose for which it was allocated;
• Leasing the plot, or part of it, to a third party;
• Granting a third party usufruct rights over the plot, or part of it;
• Disposing of the plot to a third party in any manner without complying with the law and executive regulations;
• Breaching environmental protection, safety or industrial security rules, or any term of the contract with PAI; and
• Expiry of the temporary allocation period.

SERVICE, CRAFT AND COMMERCIAL PLOTS

For service, craft and commercial plots, the position is different. The Resolution does not set out a complete standalone list of dispossession grounds for these plots. Instead, it provides that dispossession is to be carried out in accordance with the grounds set out in the ministerial resolutions regulating those plot categories.

This is why classification matters. A service, craft or commercial plot outside an industrial zone may have a different treatment from a service plot located inside an industrial zone.

Article 1 of Ministerial Resolution No. 7 of 2023 issued the executive regulations of Council of Ministers Resolution No. 141 of 2023, concerning allocation allowances for industrial, craft, service and commercial plots, as well as the service fees and charges imposed by PAI defines service, craft and commercial plots as non-industrial plots located within designated service, craft and commercial zones, where storage, commercial or craft activities are carried out under licences issued by the Ministry of Commerce and Industry, PAI or other competent authorities. These zones include:

• Shuwaikh;
• Al Rai;
• East Ahmadi;
• Al Mirqab;
• Fahaheel; and
• Al Mustaqbal (formerly known as Kuwait Free Trade Zone)

Ministerial Resolution No. 32 of 2023 then sets out the framework for service, craft and commercial plots under PAI supervision. It applies to such plots irrespective of their location, whether in service, craft or commercial areas or within industrial areas. Article 9 of the above resolution is particularly important because it permits the beneficiary/usufruct holder to sublease service, commercial and craft plots located outside industrial zones, in accordance with the applicable regulations. However, subleasing service plots inside industrial zones require PAI’s prior approval. The subtenant may carry out the activities permitted to the original beneficiary, provided that the applicable conditions and requirements are observed.

This confirms that third-party occupation, subleasing and operational use arrangements should not be analysed in the same way across all PAI-supervised plots. For industrial plots, unauthorised leasing or granting usufruct rights may itself be a ground for dispossession. For service, craft and commercial plots, the position is more nuanced and depends on the plot’s location, the applicable ministerial resolution, the permitted activity, the underlying usufruct contract and whether prior PAI approval is required.

DISPOSSESSION PROCEDURE

PAI may begin the dispossession process one month after the dispossession order is published in the Official Gazette. The competent department or committee must then:

• Notify the concerned party through PAI’s approved communication channels, requiring evacuation and handover of the plot, site or unit free from occupancies within one month from notification;
• Prepare a recovery report confirming the status of the plot, site or unit and the date on which PAI takes possession;
• Close the plot, site or unit and appoint security guards if necessary;
• Notify the relevant PAI departments to take the required steps within their respective areas of responsibility; and
• Refer the matter to PAI’s legal affairs department if the concerned party fails to hand over the plot, site or unit voluntarily.

If the matter is referred to legal affairs, PAI may pursue court proceedings seeking eviction, handover, payment of outstanding amounts, and continued usufruct charges until actual evacuation and delivery.

NEW PENALTIES FOR LATE HANDOVER

The Resolution introduces escalating penalties for delay in handing over a withdrawn plot after the applicable deadline. The monthly penalty is calculated by reference to the annual usufruct charge as follows:

The penalty applies from the day after the handover deadline expires and continues until actual handover. Any part of a month is treated as a full month.

For sand quarries and craft units, the Resolution imposes a separate daily penalty of KWD 100 per day, calculated from the day after expiry of the handover deadline until actual handover.

IMPLICATIONS FOR BUSINESSES

Companies occupying any PAI-supervised plots should not treat the Resolution as a general statement that all plots are immediately exposed to the same risk. Companies should therefore review:

• Whether the plot is industrial, service, craft, commercial or another regulated site;
• Whether the plot is located inside or outside an industrial zone;
• Whether the actual use of the plot matches the allocation purpose and licences;
• Whether any part of the plot has been leased, subleased, licensed, shared or made available to third parties;
• Whether any subleasing or third-party occupation is permitted under the applicable ministerial resolution and supported by PAI approval where required;
• Whether there are any unapproved changes to activity, production capacity or production status;
• Whether industrial register information is fully updated, where applicable;
• Whether environmental, safety and industrial security requirements are being met;
• Whether all usufruct charges and other PAI dues are paid; and
• Whether the contract with PAI contains specific provisions on the fate of buildings, structures, machinery and movables upon dispossession.

The Resolution is important, but it should not be read as a blanket dispossession threat to every PAI plot holder. Its grounds are focused on industrial plots, while other plot categories remain tied to their own frameworks.

For most businesses, the first step is not to panic. It is classification. Identify the plot type, confirm the applicable regulatory framework, check whether the actual use matches the approved purpose, and review any subleasing or third-party occupation arrangements before assuming that the Resolution applies in the same way to every plot.