Kuwait Court of Cassation principle number 144

Summary: - Banks. Institutions whose business is accepting deposits for use in banking operations, such as accepting deposits, opening documentary credits and granting loans. Implication. Money exchange companies are prohibited from engaging in such activities. Rationale. Banks play an important role in the country’s economy. - Shares. The right to trade them. A fundamental right of their owner. He may not be deprived of it. - Trading shares pursuant to the contract concluded between the parties to the appeal. Not included among the prohibited banking operations specified by Article 54 of the Currency and Central Bank Law, provided for by the Commercial Law, or regarded by custom as being of that nature. Implication. That contract is not void. The challenged judgment’s conclusion that this contract is void on the ground of its contravention of the error applicable to institutions other than those registered with the Central Bank concerning receipt of funds for investment. A violation of the law and an error in its application that led it to give the relationship between the parties to the contract an erroneous legal characterization, rendering it defective and requiring its cassation. Rule: It is established that a share confers on its owner fundamental rights of which he may not be deprived and which may not be infringed. These rights are human or citizen’s rights that the public authority must respect, foremost among them the right to trade shares by sale, purchase and assignment. That being so, the operations of selling and purchasing shares formed the basis on which the investment contract supporting the action, dated 14/2/2006, was drawn up, bearing the respondent’s signature, which the latter did not deny, and providing for trading shares by sale and purchase on various stock exchanges by the respondent. Since this trading was not included among the banking operations specified by Article 54 of the Currency and Central Bank of Kuwait Law, provided for in the Commercial Law, or regarded by custom as being of that nature, which the law prohibited from being practiced except by institutions taking the form of companies, the aforementioned contract is not void, particularly since the law guaranteed freedom to trade shares by sale, purchase or assignment. Since the challenged judgment departed from this view and concluded that the said contract was void for contravening the prohibition on institutions other than those registered with the Central Bank receiving funds for investment,, it violated the law and erred in its application, which led it to give the relationship between the appellant and the respondent an erroneous legal characterization and to award the respondent the amount claimed on the basis of the rules governing restitution of payments not due. It is therefore defective in a manner requiring its cassation.