Page 102 - Historical Summaries (Persian Gulf - Vol II) 1907-1953

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the Saudi Arabian share of the Zone having broken down (paragraph 108 above),
wrote to the Ruler stating that they understood that there was no impediment to
their working on the islands of Kubbar, Qaru and Umm al Maraclim as they
belonged wholly to Kuwait.!'*1) The Ruler was asked at once not to permit the
company to operate on these islands until the matter had been further examined.
Both the Foreign Ollice and the Political Resident were of the opinion that rights
in these islands had already been granted to the Kuwait Oil Company although
they were not specitically mentioned in their concession nor shown in the maps
attached to it. The Ruler informed the American Independent Oil Company that
the islands were not included in their Neutral Zone concession but also asserted that
they were not included in the Kuwait Oil Company’s concession. Much
controversy followed and representatives of the American Independent Oil
Company submitted aflidavits that the Ruler had informed them orally but
categorically that the islands were included in their concession. They complained
of the action of the political authorities in the Gulf and their complaint was mildly
supported by the United States Embassy in London. In February 1949 the
Kuwait Oil Company wrote to the Ruler’s representative claiming that their
concession covered not only the three islands but the sea-bed as well. The Ruler
rejected this claim, but in March gave them 91 days in which to adduce proof
of it. They forwarded to him a voluminous report on the subject by Professor
Lauterpacht but he refused to change his mind and on September 22, 1949, with
the approval of His Majesty’s Government he granted a concession for the islands
to the American Independent Oil Company. The concession agreement^52) was for
a period of 60 years and covered the three islands and their territorial waters. The
company were obliged to begin geological exploration within six months and to
drill within three years. No payment appears to be due to the Shaikh under the
agreement until oil is discovered. The royalty is fixed at 2J dollars per ton and
the Ruler is promised 15% of the shares of a subsidiary company to be formed
to work the concession. The company agreed that the concession should
terminate if it was decided as a result of arbitration proceedings that the Kuwait
Oil Company had a prior right to exploit the petroleum resources of the islands
and that they would indemnify the Shaikh for any damages for which he might
become liable to the Kuwait Oil Company in such circumstances. The Political
AgreementC”) which was signed on September 21, 1949, followed the lines of that
for the Neutral Zone (paragraph 107 above). Authority was granted for a copy of it
to be given to the Ruler in 1950,(2'4) but it does not appear that he was asked to take
cognisance of its terms, probably because they do not include any provision for
the termination of the concession. In November the Kuwait Oil Company
informed the Ruler’s representative that they wished to refer their dispute over oil
rights in the islands to arbitration under Article 18 of their concession. They
announced the name of their arbitrator and asked that the Ruler should also
nominate one. The Ruler never made a nomination and his lawyer tried to argue
that it was contrary to Islamic law that he should submit to arbitration but in the
settlement reached with the Ruler at the end of 1951 (paragraph 95 above) the
Kuwait Oil Company formally abandoned their claim.
112. The American Independent Oil Company had not started work on the
islands up to the end of 1953. The requirement that they should begin drilling
within a fixed period was regarded as in abeyance pending the settlement of the
Kuwait Oil Company’s claim to the islands, but the Ruler’s representative wrote
to them on November 27, 1951 to the effect that the Ruler regarded the relative
provisions of their concession agreement as being in force from that date.(2“) In
December 1953 the Political Agent informed the Ruler that there was no
objection to his authorising the company to start work on the islands but the Ruler
is perhaps unlikely to do this until he is sure that the Saudis no longer claim a half
share in the islands of Qaru and Umm al Maradim (paragraph 62wabove).

(d) Kuwait Sea-bed
113. Before the last war the Kuwait Oil Company made a move towards
extending their concession beyond the limits of Kuwait territorial waters
(=*') Tel. from Kuwait to P.R. C26 of November 23, 1948 (E 15110/72/91 of 1948).
n No. 8 n. o.a.c.
(”a) No. 9 II. O.A.C.
(”4) F.O. to Kuwait. EA 1535/7 of Mav 24. 1950.
(”*) Kuwait to F.O. 1082/7 of June 7. 1954 (EA 1537/10 of 1954).
46639 N 2