DECISION ON THE STATUS OF KUWAIT UNDER THE MINERAL LEASING ACT OF 1920

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00364R000400590037-7
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 7
• Document Creation Date: December 20, 2016
• Document Release Date: December 13, 2007
• Sequence Number: 37
• Publication Date: December 29, 1982
• Content Type: REPORT

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OFFICE OF THE SECRETAPY
WASHINGTON, D.C. P :. - DEC 2 9 1962
DECISION ON THE STATUS OF KUWAI!1
UNDER THE MINERAL LEASING ACT OF
1920 (30 U.S.C. S 181 et se q.)
On July 8. 1982, the' Department of the Interior requested public
comment on the laws, customs and regulations of Kuwait to assist
the Department in making a determination on the status of that
country under section 1 of the Mineral Leasing Act of 1920, 30
U.SiC. S 181. 47 Fed. Reg. 29720. The comment period was ex-
tended by notice published on August 16, 1982. 47 Fed. Reg.
35559. This inquiry will determine the eligibility of citizens
of Kuwait to own interests, through stock ownership, stock holding
or stock control, in leases?and permits issued pursuant to the
Mineral Leasing Act of 1920, 30 D.S.C. S 181 et se q. ("the Act?),
and the Mineral Leasing Act for Acquired Lands, 30 U.S.C. S 351
et se g. The minerals in question are deposits of oil, gas,
coal, sulphur, phosphate, potassium, sodium, oil shale and gilso-
nite owned by the United States and subject to disposition under
the Act as well as oil or gas transportation pipeline rights of
way issued under the Act.
1. Section 1 of the Act
Section 1 of the Act authorizes leasing of lands and disposi-
tion of identified minerals to citizens of the United States,
associations of such citizens, domestic United States corpora-
tions and, in certain circumstances, municipalities and ?
other governmental entities. Citizens of foreign countries
may invest in leases and permits issued pursuant to the Act
only through the stock of domestic United States corporations.
Section 1 limits this right of investment in the following
manner:
Citizens of another country, the laws, customs
or regulations of which deny similar or like
privileges to citizens or corporations of this
country, shall not by stock ownership, stock
holding, or stock control, own any interest in
any lease acquired under the provisions of this
Act.
II. Public Comments
In response to the request for public comments, the Department
received 391 comments. The vast majority of the commenters
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did not provide information concerning the laws, customs or
regulations of Kuwait. Rather, most were quite brief and ex-
pressed general opposition to oil and gas development in certain
parts of the country, or to any investment in the domestic oil
and gas industry by citizens of Kuwait and other "OPEC" nations,
or to both. In short, these comments were conclusory and did
not provide factual information that would be helpful in analyzing
the; laws, customs, and regulations of Kuwait. Several commenters
argued that since Kuwait has nationalized its oil industry, it
obviously denies similar or like privileges to citizens of this
his
country. There commenters were either unaware of or opposed this Department's long-staring interpretation and application
of section 1 of the Act that nationalization does not by itself
render a nation non-reciprocal. These comments also were not
helpful in providing information to analyze the status of Kuwait.
One commenter provided a detailed analysis of section 1 and
Kuwait law. This commenter argued that the legislative history
and prior administrative interpretations of section 1 of-the Act
support the proposition that foreign citizens should not be dis-
qualified unless the foreign country in questiontiepose t Uuu ir ied
able or discriminatory restrictions on oppors
States citizens to invest in the mineral resources of the foreign
country. It further argued that in 1919 Congress contemplated
develop their
leaving oil producing countries free
exploitation policies provided the United States. The commenter concluded that citizens of
Kuwait should not be disqualified under section 1 of the Act.
No comments were received from other government agencies.
In addition to the comments, the cfileserincludinggni-
ficant volume of information in Departmental information on Kuwait law provided by the Government of Kuwait
through the Department of
III. Standard of Review
In his memorandum to the Secretary of February 2, 1982, the
Associate Solicitor, Energy and Resources, identified three
custoinmdetermis and a
standards under which the
foreign country. are toYzed
laws, customs and regulations of a foreign country deny
similar or like privileges to citizens of the United States.
These standards resulted r?n'a eadministrationtofysectiongl,
legislative history and Departmental tof the Act beginning in 1920.
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Under the first standard identified by the Associate Solicitor,
the Department must find that the foreign country allows
stock participation by United States citizens 'in corpor4tions
which, in turn, are not precluded or unreasonably restricted
from participating in the foreign country's mineral resources
on its public lands because of the United States citizen's
stock ownership. If,. the foreign country prohibits stock
ownership, the Department applies the second standard todetermine whether the foreign country allows other opportunities
for investment or participation in the mineral resources on
its public lands. In the event the foreign country restricts
investment or participation in its mineral resources to
state-owned entities, the Department must, under the third
standard, determine whether discrimination exists against
citizens or corporations of'the United States.
IV. The Laws, Customs and Regulations of Kuwait
The laws,-customs and regulations discussed below are those
applicable to exploration and development of mineral resources
in Kuwait and to stock ownership, stock holding and stock
control in that country by citizens and corporations of the
United States.
Laws
The 1962 Constitution of the State of Kuwait.
Article 21 of the Constitution decrees that all natural
resources and derivative revenues are the property of the,
State. Article 152 authorizes the granting of concessions
for exploitation of natural resources only by a law and for
a limited period." There is no restriction in the Constitu-
tion on the ability of aliens to hold or to invest in such
concessions.
Law No. 19 of 1973 concerning the Conservation of Petroleum
Resources.
This law authorizes the Government of Kuwait to issue regula-
tions governing all aspects of petroleum exploration and
development.
Decree Law No. 6 of 1980 establishing the Kuwait Petroleum
Corporation.
This law established the Kuwait Petroleum Corporation (KPC),
which is wholly owned by the Government of Kuwait. KPC,
through a subsidiary, owns the sole outstanding concession
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for the exploration and development of hydrocarbon substances
found in Kuwait, except for one concession in the offshore C
area jointly administered by Kuwait and Sandi 4rabia.
is chartered to engage in all phases of tht hydrocarbon??in-
dustry, including exploration, development and transportation
(Article 3). KPC is authorized in carrying out these purposes
to participate with other companies and to establish companiesdin
partnership with others (Article 5). Decree Law No. 6 as
the Government-owned shares of various companies involved in
hydrocarbon activities in Kuwait to KPC (Article 8).
Law No. 15 of 1960 (of Commercial Companies)
This law allows foreign participation in commercial acti-
vities within the country of Kuwait through partnerships and
joint stock companies, provided that 51% of the capital hold-
ings is owned by Kuwaiti citizens. This law also authorizes
the formation of joint ventures with no limitation on citizen-
ship. This law is the only expression of Kuwait policy with
regard to foreign investment brought to the attention of the
Department. The Department understands that outside the
scope of Law No. 15, a foreign corporation may directly engage
in commercial actiico~sionamustaemployha1Ruwaiticagent.
stances the foreign Porat
Customs and Regulations
The prevailing custom in Kuwait has been to consolidate all
oil and gas activity under the ownership of the Government
and, since 1980, in the Kuwait Petroleum'Corporation vKPC).
foby the nt
This consolidation included the acquisition
reig companies
of concession rights previously granted regngcompand
and their subsequent assignment to KPC.
company continues to operate offshore in the area under the
joint administration of Kuwait and Saudi Arabia. RPC KPCi has
has
not exercised its authority to engage in joint
with foreign companies nor has the Government of Kuwait
issued any new concewsi~iss~ockholderscareacurrentlyminvolved
no companies with Ru a
in oil and gas activities with RPC or through new concessions. any cus However, there is no eiidence Unitedt5tatesrcftizensn
discriminates against
v. Analysis
From our understanding oto the
explore
of Kuwait, a concession Plore
These
resources may be issued
issuedtto anventitytorganizedtunder Law
concessions would
No. 15 or to foreign entities. In some instances, foreign
entities are required to conduct business in Kuwait through
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plicable to oil and gas.
Kuwaiti agents. Other than in the offshore point administra-
tion area, the only entity currently authorized to conduct
oil and gas activities is the Kuwait Petroleum Corporation
(KPC), which is a state-owned company. KPC is authorized by
law to join with others to conduct these activities, presumably
with or through an entitr~ondoebusiness directlySinrKuwait.-
a foreign entity authorized joint participation pro
At present, KPC has not engaged in any j
jets.
Under Law No. 15, United States citizens may own up to 49% contai of the stock in a Kuwaiti crPor~h~?~ctivitieslofaa corporation
no limitation or restriction
which has stockholders who are citizens of thUnited States.
partici-
Such corporations may, if the opportunity i
pate independently or with the Kuwait Petroleum Corporation
(KPC) in any phase of the hydrocarbon industry. Similarly,
United States citizens may engage in joint ventures independently
or with KPC, if the opportunity is presented. The 49% limitation
ck or
is not an unduly harsh or restriWhile thistrequirementomay
partnership capital ownership.
alter the opportunity for economic return to the United States
icipationinvestment
stockholder, and thus b` akfactor
illusory orcmeaning-
it does not render the Itocpartan l less. This limitation is similar to the Coralike prawiwhich
the Secretary found does not deny similar on of under section 1 of thYe~itsstatuslof Canadaruary 2,
1982, concerning the reciprocity
Finally, no discrimination existsaunder the law of Kuwait'
against citizens of the United
.by the Government of No callowitizensuchs
in KPC because the law of
ment. Moreover, we have ctivitiescwithacompanies ownedebyln
any joint participation a
United c*m*Panies
Kuwaiti citizens to thLizens exclusion
of o the of
whole or 'in part by ci lica to
the laws, customs and regulations of Kuwait are app
all private investment in mineral resourcestizens of , whetherthethaUnit
tecl
investment is by citizens of K, u country.
States, or by citizens of any other co rmat The Department received no comments
of Ruwaitow thiregardctoning
the laws, customs or regulations
minerals other than oil and gas which differ from those ap-
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The restriction on foreign ownership ihadf two pdzQoses~. federal
onshore mineral leases and permits
it was designed to avoid foreign retaliation against, aid to.
discourage foreign discrimat1oftthEnUnitednSxates.
minerals by citizens and corporations 11 11919).
H.R. Rep. No. 398, 66th Cong. , 1st Sess., p.
Second, it was inteifded to prevent
exportationeofedomestic mineral
uncontrolled and unchecked romote the
resources. Id. The Act itself was intended to
and sodium
minting of coal, phosphate, oil, oil shale,. gas,
ne2 of the
on the public domain." 41 Stat. 437. Insection
Act, 30 U.S.C. S 189, Congress empowered the Y and reg prescribe necessary and necessary to
the purposes of this Act."
From the earliest time, the Department has focused on the
issue of the effect of innetheeability UnitedthatStacorporationtes
on
in foreign corporations
to participate in the mineral r{heuinterortto Sforeign c ecretary~oft~?
~., letter from Secretary of
State dated October 19, 192he Conlssionalsdebatesonlsectionn,
which originally arose in t 9re
1 (discussion among Congressmen Snell, Sinn ttaand Evans, 58
Cong. Rec. 7526-7529 (1919)), was ratified in from
the Deputy Solicitor to the Legal Advisor for 23 .and
Business Affairs, Department Solicitor emphasized that
1974. In this letter, the Deputy
the citizenship of an individual _
of Great1Britain1 Afternt
to investment in the coal resources finding that the British government had nationalized the
British coal industry and that no private participation, British
or foreign, .was allowed, the Deputy Solicitor concluded that
this did not constitute lcitizenstunderesectionti ofs
qualify investment by British
the Act. The laws, customs, aneulo ionsequ RUw3is imply
do not prohibit private (and foreign,
s development esource
vestment and participation in mineral
regarding the,
1974 r
unlike the assumption made
law of Great Britain.
VII. Decision
and
The above analysis demonstratlagainstscitizens
regulations of Kuwait do not discriminate
of the United States. No evidence exists that a company has
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mits subject to section 1 of the Act.
been denied participation in mineral resoutccs,of Kuwait
since the adoption of Decree Law No. 6 becilfuse citizens?bf
the United States held an interest.
Based on the facts described above, the laws, customs and regu-
lations of Kuwait do not deny similar or like privileges to
citizens or corporations of the United States within the meaning
of section 1 of the Mineral Leasing Act of 1920, 30 U.S.C. S 181.
Therefore citizens and corporations of Kuwait may, through stock
ownership, stock holding or stock control in corporations of the
United States, own interests in federal mineral leases and per-
Date: /Z-A' :-'$L-
SACITo
As i ant Secretary--Land-and
Aa'ter *esources
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