a. the planning for the work anticipated on the return of the oil fields of Kuwait to KOC;
b. the work performed to extinguish the well-head fires that were burning upon the withdrawal of Iraqi forces from Kuwait;
c. the initial sealing of the wells to stop the flow of oil and gas; and
d. the making safe of the wellheads so that work on the reinstatement of production could be started.
"... without prejudice to the remainder of the claims which will be made by KOC (e.g., in respect of the damage to, and destruction of facilities such as gathering centres, pipeline systems, tank farms and export terminals), or indeed to those claims which will be made by others involved in the oil and petrochemical industries in Kuwait."
"[C]opies of neither the accounts which have been examined, nor of the supporting invoices, have been attached to the [Accountants'] Report. However, that documentation has been retained by KOC and can be produced if required by the Commission. Indeed, the same is true of any other documentation to which the Commission might wish to refer, but which has not been submitted in conjunction with the WBC Claim. KOC is mindful of the considerable documentary burden with which the Commission and the Panels appointed by it will have to contend in considering claims by those other than KOC or the other companies involved in the oil industry in Kuwait. Potentially, the whole of the documentation which could be submitted in support of the WBC Claim alone, quite apart from further claims which KOC will submit, is vast and could not feasibly be dealt with other than on a computerised basis. KOC, together with their consultants and legal advisers, have therefore devoted considerable thought to the types and depth of documentation to be submitted in conjunction with the WBC Claim. Clearly a balance had to be struck."
(Emphasis in original.)
"a)  postpone the hearing scheduled to take place in this case from 29 July to 1 August 1996 until the... matter of financing the legal defence of Iraq is resolved by the Governing Council;
"b)  determine that [the Panel] requires 'time in excess of that available under article 38(d)' of the Provisional Rules for Claims Procedure to complete the review of the WBC Claim in the sense of the Governing Council decision of 13 December 1995 Concerning Further Procedures for Review of Claims Under article 38 and, once the Governing Council has decided the Request with respect to financing, to grant additional time to Iraq for preparing the legal defence in the WBC Claim in its totality; and
"c)  request the Governing Council for any guidance required under the Provisional Rules for Claims Procedure to take the aforementioned decisions."
" In its first Procedural Order dated 27 November 1995..., the Panel classified the WBC Claim as an 'unusually large or complex claim' within the meaning of article 38 (d) of the [Rules]. The Panel notes that decision 35 of the Governing Council of 13 December 1995..., to which Iraq refers in its Procedural Request, was made after the issuance by the Panel of its first Procedural Order. In view thereof, and based on consultations by the Panel concerning the preparation of decision 35, it is clear that this Panel has at this time no power, under that decision, to extend the time period available to it for completing its report and recommendations to the Governing Council. Therefore, the Panel is not in a position to grant Iraq's request [cited in paragraph 19 (a), supra].
" Under the Rules, the Panel is required to submit its report and recommendations to the Governing Council not later than 27 November 1996. Even a short postponement of the oral proceedings would disrupt the Panel's workplan and prevent it from submitting its report and recommendations within the above time limit. Therefore, the Panel is not in a position to grant Iraq's request [cited in paragraph 19 (b), supra].
" In light of the above, the Panel finds that there is no need to address Iraq's request [cited in paragraph 19 (c), supra]."
"In 1991, KOC paid the total firefighting costs relating to Wafra, being KD 512,292 (US$1,767,407). As a result of investigations made by KOC in response to Question 65.1 raised by the Panel in its earlier Procedural Orders..., KOC can confirm that 50 percent of the firefighting costs in relation to Wafra were in due course charged to [SAT]. This took place after preparation of the Accountants' Report and was not known to Touche Ross. SAT was charged and has duly paid these amounts (KD 265,279) through the regular monthly reconciliations made in the Wafra Joint Operation accounts and the parties' settlement thereof. KOC therefore asks the Panel to treat the WBC Claim as revised by a reduction in the sum of KD 265,278 (US$883,703)."
(Emphasis in original.)10
"KOC is responsible for all exploration, drilling and crude oil and gas production in Kuwait and the Divided Zone. Its activities extend from maintenance of the oil fields and extraction of the oil, right through to its export. Thus, KOC owns and operates all of the crude oil production facilities, the pipelines, the crude oil storage facilities, and the crude oil export terminals. It does not sell oil or gas. On the contrary, it produces for the State, the owner of the oil, but is paid for doing so by KPC, which recovers the cost in its overall accounting with the Ministry of Oil."
"[T]he State of Kuwait sells the crude oil and gas produced by KOC to KPC, which then either re-sells it on the international market or has it refined in Kuwait by Kuwait National Petroleum Corporation (K.S.C.) ('KNPC') for eventual re-sale. The financial arrangements between the State of Kuwait, KPC and KOC are as follows: ownership of the State's crude oil passes to KPC by way of sale, KPC paying a Transfer Price for it. The Transfer Price is agreed between KPC and the Ministry of Oil, the intention being that the Transfer Price should reflect international market levels. However, the price is subject to adjustment to take account of costs of production, transportation and export. It is KPC, as the seller of all crude oil, refined products and processed gas products into the export and local markets, who receive and retain the prices realised thereby. KPC therefore generates profit by selling crude oil or products at prices which exceed the sum of the adjusted Transfer Price paid to the State and the refining, marketing, selling and transportation costs. The State's earnings are represented by the adjusted Transfer Price received from KPC less the production costs of KOC, which are reimbursed to KOC via KPC."
"... [t]he principal objectives of Al-Awda, as the project was conceived, were to establish distribution and supply of oil products to the domestic market, both to the population and to utilities providers, particularly the power stations--in short, to keep Kuwait afloat; to establish sufficient limited production by the refineries to enable the domestic market to be supplied without having to import fuel; to establish limited production of crude oil; to put out whatever facilities fires there might be; to provide support for the well blowout control ('WBC') effort; and to provide whatever infrastructure might be needed to enable these and other objectives to be carried out."
"It is tempting to say that it is self evident that all reasonable endeavours were made to keep the costs of the WBC Exercise to a reasonable level. Certainly there was every incentive to do so, granted the huge economic losses being suffered as a result of the occupation and ensuing hostilities, and no reason to do otherwise. Equally, however, it has to be recognised that the chaotic and dangerous conditions in Kuwait inevitably resulted in some premium element being included in, e.g., rates for expatriate personnel provided by contractors, and there must also have been an element of premium charging attempted by contractors because of the overwhelming urgency of KOC's need. Nevertheless, in negotiating its contracts KOC bargained hard and with considerable success.... Furthermore, purchases made through Bechtel were virtually always made on the basis of competitive tendering..., and were only made after approval by KOC. Furthermore, it will be seen from... the Touche Ross Report that they, who have had the opportunity of gaining first-hand knowledge of the accounting and cost-control systems operated by KOC and Bechtel, and who have examined a number of the contracts, have themselves come to the conclusion that the costs claimed were properly controlled and were in fact incurred."
"Although there was substantial infrastructure damage, it was a good deal less than the worst-case scenario which we had envisaged in the planning stage. For example, there were sufficient port facilities which could be operated, subject to being cleared of mines; the main airport was usable; the airport refuelling facilities were substantially intact; and a proportion of the country's filling stations were operable. On the other hand, the extent of the well blowout problem was far greater than any of us had envisaged. This meant that the first priority was to control the burning and gushing wells."
"• Sea water supplied to [the firefighters and their support teams] rose to a maximum of 25 million gallons a day, with a total of 1.5 billion gallons of water being supplied;
"• To supply this water over 400 kilometres of pipeline was laid;
"• A total of 353 water lagoons, each with a capacity of at least 250,000 gallons, were excavated, lined and filled with water to support the firefighters. This project alone required 50 man years of labour (assuming a 10 hour day seven days week);
"• 280 kilometres of special access ways constructed into wellhead areas through areas either impassable or covered by lakes of oil;
"• To support this construction effort over 1.8 million cubic metres of gatch (a sand and gravel mix) was excavated and hauled into the oil fields;
"• A total of 538 aircraft and 78 sea vessels were used to ship over 186,000 tonnes of equipment into Kuwait. On any given day as many as three sea vessels and two air cargo planes were being unloaded;
"• Over 5,800 individual pieces of equipment were mobilised representing one of the largest non-military vehicle fleets in the world;
"• Over 68 square miles of land was cleared of over 20,000 pieces of unexploded ordnance;
"• Accommodation for in excess of 10,000 personnel was either built or refurbished. Six full service dining halls provided 3.5 million meals for a daily average of about 27,000 meals."
"It will be clear from the evidence available to the Commission that KOC is, in effect, a cost centre funded by KPC and therefore, ultimately, by the Ministry of Oil. The WBC Claim has been made by KOC because it is the entity which initially met the costs when incurred. The Ministry of Oil had to provide the funding for KOC to pay for the WBC exercise (as it does for all of KOC's operations); otherwise KOC would have had to borrow the funds. This is the normal funding mechanism used within Kuwait's Oil Sector, and does not affect the decision that KOC is the appropriate party to make this claim."
"Iraq was accused to have set fire in the Kuwaiti oil wells during the withdrawal of the Iraqi troops. This accusation was unfounded. A long time before that accusation was made, the coalition bombing resulted in many fires in the area of Kuwait. This is a well-known fact. An international research team visited Iraq between 23 August and 5 September 1991 and interviewed the Assistant Manager of the Basrah Refinery who advised the team that the refinery was set on fire as a result of the coalition air raids which started on 17 January 1991. On 23 February 1991, [t]he Government of Iraq denied its responsibility for any fire. Iraq's Revolutionary Command Council (RCC) invited the Security Council to conduct an inquiry to ascertain the degree of damage, civil and military, resulting from the coalition bombing in Kuwait. The Security Council rejected the invitation. On the same day, the Rumaila oil field was set on fire due to the coalition bombing using napalm bombs."
"From 2 August 1990 until 17 January 1991 when the coalition bombing started there was not a single fire on the Kuwaiti oil wells. This means that intervening events took place and broke the chain between the cause and the result whether the causation was factual or legal. This can be substantiated by the fact that no well fire was seen before the allied bombing."
"The Panel notes that the provision cited by the Claimant, subparagraph (c) of paragraph 21 of Governing Council decision 7, is part of section II of that decision, entitled 'Criteria for processing claims of corporations and other entities,' and that the WBC Claim has been brought by KOC, a corporation.
"The Panel further notes that paragraph 35 of Governing Council decision 7, which is part of section III of that decision, entitled 'Criteria for processing claims of governments and international organizations,' provides that 'payments are available with respect to direct environmental damage and the depletion of natural resources, as a result of Iraq's unlawful invasion and occupation of Kuwait.' Sub-paragraph (a) of paragraph 35 further specifies that '[t]his will include losses or expenses resulting from... [a]batement and prevention of environmental damage, including expenses directly relating to fighting oil fires and stemming the flow of oil in coastal and international waters;....' (Emphasis added.)
"It appears to the Panel that, according to its wording, subparagraph (a) of paragraph 35 of Governing Council decision 7 was specifically intended to apply, inter alia, to the type of losses or expenses for which compensation is being sought in the WBC Claim.
" Question 2.1 : In view of the above, can the Claimant clarify the submission of the WBC Claim as a category 'E' (corporate) claim? 
" Question 2.2 : More particularly, what is the Claimant's understanding of the relationship between sub-paragraph (c) of paragraph 21 and sub-paragraph (a) of paragraph 35 of decision 7?"
"KOC agrees with the Panel's further assessment that the WBC Claim may be characterised as a claim for 'losses or expenses resulting from... abatement and prevention of environmental damage, including expenses directly relating to fighting oil fires and stemming the flow of oil.' The WBC Claim arises from KOC's expenses incurred in fighting and extinguishing the oil fires.
"KOC considers that the types of compensable loss expressly referred to by the Governing Council in decision 7, rev 1, were not intended to be exhaustive, but to comprise illustrations of the types of situation which may give rise to compensable losses, so long as the principal jurisdictional criterion is established: being the basic statement of Iraq's liability contained in paragraph 16 of UNSC resolution 687 (1991).
"[I]n its categorisation of the various types of payments referred to in decision 7, rev 1, the Governing Council was making a procedural distinction, not--it is submitted--a substantive one. Corporations such as KPC can fall into both 'E' and 'F' categories for the purposes of decision 7, rev 1. The fact that paragraph 35 of decision 7, rev 1 is appended to the latter part of the decision dealing with 'F' Claims owes more to the evolution of the drafting of the decision than to any deliberate policy of the Governing Council to exclude claimants from being compensated for such losses. Such a policy would have been inconceivable (and beyond the powers of the Governing Council ordained by the Security Council by UNSCR 692)."
(Emphasis in original.)
"... an agreement was reached [between the Ministry of Oil and KPC] such that part of the costs charged to the Ministry resulting from the Iraqi invasion would be repaid over a period of thirty six months. The repayment takes the form of a monthly deduction from the costs of crude oil charged by the Ministry to the Corporation. At the year end 29 instalments were outstanding amounting to some KD 160 million."
"The WBC Claim has been made by KOC because it is the entity which initially met the costs when incurred. The Ministry of Oil had to provide the funding for KOC to pay for the WBC exercise (as it does for all of KOC's operations); otherwise KOC would have had to borrow the funds. This is the normal funding mechanism used within Kuwait's Oil Sector, and does not affect the decision that KOC is the appropriate party to make the claim. The financial arrangements in place in Kuwait's Oil Sector will ensure that there is no duplication of compensation and KOC confirms that neither any other Oil Sector entity nor the State of Kuwait/Ministry of Oil has made a claim to the UNCC for the costs included in the WBC Claim."
"KOC seeks reimbursement of the costs of fighting the oil fires on its own behalf... KOC was the Oil Sector company responsible for bringing the damaged oil wells under control and expended the sums underlying this claim. The costs of the firefighting were charged as extraordinary costs in the KOC accounts. The costs of fighting the oil fires were thus KOC's direct loss. As the operator of all Kuwait's onshore oil fields, it was essential for KOC to oversee and organise the WBC exercise. It was inevitable, therefore, that KOC would pay these costs, since it owns the facilities in the oil fields, and has responsibility for oil production and all operations in the field. KOC was thus the only organisation able to direct and manage the well blowout control exercise and make the payments for the work in question. After the task of extinguishing the fires was completed, KOC was the only organisation with the knowledge and records necessary to prepare and present this claim.... Strictly, in summary, KOC makes the WBC Claim on its own behalf and not on behalf of the State."
"All KOC's expenses are met in due course by its parent company, KPC, under the arrangements in place between the companies. The extraordinary losses suffered by KOC (and by other Oil Sector Companies) as a result of Iraq's invasion and occupation, would have caused KPC, the parent company, to be insolvent. Exceptional measures were taken to deal with this situation, and certain specific sums were borne by the Ministry of Oil, and are thus at present carried by the Government.  In due course, these exceptional charges will need to be resolved. This will depend on many factors. Meanwhile, it is accepted within the Oil Sector that all payments by way of compensation will be credited to whichever body is carrying the loss at the time.  To the extent that costs included in the WBC Claim are at present borne by either KPC or the Government of the State of Kuwait, KOC... has no entitlement to retain compensation awarded by the UNCC in respect of such costs."
"... [KOC] is the only entity within Kuwait which has made a claim in respect of the costs included in the [WBC Claim]. No claim for these costs has been submitted by [KPC], or by the Ministry of Oil or, indeed, by any other entity in Kuwait. Accordingly, there is no risk of the UNCC awarding compensation in relation to any other claim which could potentially duplicate compensation awarded in respect of the [WBC Claim]."
"... the bombing was an interrupting event between Iraq's entry and the result, namely the oil well fire, rendering the damage or loss indirect, thus it makes the subject matter fall outside the jurisdiction of paragraph 16 of the Security Council's Resolution 687 and the requirements established by the Governing Council of the UNCC."
"In considering the claims, Commissioners will apply Security Council resolution 687 (1991) and other relevant Security Council resolutions, the criteria established by the Governing Council for particular categories of claims, and any pertinent decisions of the Governing Council. In addition, where necessary, Commissioners shall apply other relevant rules of international law."
"These payments are available with respect to direct environmental damage and the depletion of natural resources as a result of Iraq's unlawful invasion and occupation of Kuwait. This will include losses or expenses resulting from:
"(a) Abatement and prevention of environmental damage, including expenses directly relating to fighting oil fires and stemming the flow of oil in coastal and international waters;
"... [t]he decision to pull Iraqi forces out of Kuwait was issued swiftly and immediately. This decision did not refer to any firing of wells at the final stages of withdrawal. On the contrary the destruction and fire of oil wells occurred because of coalition bombing and bombardment, whether by direct hits or shrapnel, before the date of withdrawal."
"A devastating assessment of the war damage to oil wells and other oil installations in Kuwait has emerged from the first on-the-spot report by returning Kuwaiti oil officials. According to initial surveys by the Kuwaiti Oil Company (KOC), the producing arm of the Kuwait Petroleum Corporation (KPC), all Kuwait's producing oil wells have been set ablaze or otherwise damaged by Iraqi sabotage or allied bombing.
"Mr. Musab al-Yasin, KOC General Superintendent for Oil Reservoirs, told Reuters on 1 March: 'Our provisional assessment is that they have damaged every producing well. Our feeling from checks our personnel have done so far is that all the wells have been exploded.' Wells that had not caught fire when blasted by Iraqi explosives had been badly damaged and were spouting crude oil. Some wells had been destroyed by allied bombing, he said, but the vast majority had been blown up by occupying Iraqi forces. Mr. Yasin and other KOC officials were being interviewed at the Ahmadi oil complex in Kuwait.
"KOC executives were quoted as saying that allied bombing had set fire to as many as 34 wells, and had also caused varying degrees of damage, from minor to total loss, to some 13 out of 18 important oil gathering centers in the country."
"The Government of Iraq would also like to stress the fact that somebody working for the interest of Iraq's enemies planted explosives in order to incriminate Iraq and throw the responsibility of the firing of the oil wells on the Iraqi Armed Forces which we categorically deny. These explosives could have easily been picked up and planted by Iraq's enemies and this is not an unexpected act from this category of individuals, especially under such circumstances. This could also be an act committed in order to shift the accusation from the coalition forces whose bombing and shelling led to the firing of the wells in the first place."
"The Commission is not a court or an arbitral tribunal before which the parties appear; it is a political organ that performs an essentially fact-finding function of examining claims, verifying their validity, evaluating losses, assessing payments and resolving disputed claims. It is only in this last respect that a quasijudicial function may be involved. Given the nature of the Commission, it is all the more important that some element of due process be built into the procedure. It will be the function of the commissioners to provide this element.
"The processing of claims will entail the verification of claims and evaluation of losses and the resolution of any disputed claims. The major part of this task is not of a judicial nature; the resolution of disputed claims would, however, be quasi-judicial. It is envisaged that the processing of claims would be carried out principally by the commissioners. Before proceeding to the verification of claims and evaluation of losses, however, a determination will have to be made as to whether the losses for which claims are presented fall within the meaning of paragraph 16 of resolution 687 (1991), that is to say, whether the loss, damage or injury is direct and as a result of Iraq's unlawful invasion and occupation of Kuwait."
"Report of the Secretary-General pursuant to paragraph 19 of Security Council resolution 687 (1991)" (S/22559), para. 7, pp. 9-10.18
|KOC costs||Amount (US$)|
|International firefighting and support|
|KOC - Al-Awda costs||Amount (US$)|
|Project management and related services||145,839,509|
|Jebel Ali staging area||3,246,186|
"The KOC costs were relatively straightforward for the purpose of the claim. The relevant costs were incurred under a number of specific contracts made by, or for the benefit of, KOC specifically for the WBC exercise. Although the sums involved were significant, the limited number of payees of these costs meant that the records were straightforward.... [A]ll the costs incurred to these contractors in respect of their work falling within the WBC exercise had been paid and recorded by 30 September 1992. This was 10 months after the date on which the last oil well was brought under control. However, examination of the records revealed that all the expenses to these contractors had been paid and recorded by the end of July 1992, save for certain costs incurred in respect of 'post-capping,' the final part of the WBC exercise.
"... [t]he financial system run by Bechtel under their project management contract with KOC was necessarily more elaborate, and became more so as the initial Al-Awda phase of the recovery project became Al-Tameer at the end of 1991. The various parts of the project were separately coded (Level 1); and the relevant components of each part were given a supplementary code (Level 2). In addition, each type of expense had a separate coding system (Level 3), many of which transcended the level 1/2 code allocation. The financial system maintained full records of cost control, and was termed throughout by the acronym: COCO (costs and commitments)."
"... it was impossible for [the Accountants]--even if it had been feasible--to have de-constructed the COCO records so as to identify every last payment incurred specifically and exclusively for WBC purposes. Instead, they used the structure of these existing records, identifying those costs codes which were mainly or exclusively intended to record WBC costs, but excluding other parts of the records which might also have included WBC costs which it would have been impractical to separate out."
(Emphasis in original.)
W Firefighter support
E Construction equipment
B Project management and related services
S Support facilities
J Jebel Ali staging area
"(a) all such concurrent activities themselves are the result of the illegal Iraqi invasion and occupation, so if not included in this claim would in any event be included in the claims to be made in respect of reinstatement;
"(b) any such apportionment would be subjective; and
"(c) there is no practical way that such apportionment can be made in respect of the cost of capital equipment."
"... [w]hilst it might be possible to estimate the emphasis of the work by reference to the direct labour costs associated with each project, the fact that costs incurred in other projects are also claimable means that to the extent that they do not relate to WBC is unimportant as the effect ultimately is only under which head a valid claim can be made and not if it can be made. The WBC effort was the principal task on the return to Kuwait. Accordingly it seems appropriate to consider all of the support in the period of the WBC work as part of the WBC claim. This methodology removes the need to create an arbitrary allocation of these costs between this and other heads of claim.
"[The cut-off date of 30 November 1991] is, by its nature, an estimate, as it is quite possible that some of the WBC costs will not have been recorded as commitments prior to 30 November 1991. It is thought to be a reasonable date as the last fire was extinguished on 6 November 1991 and there was an inevitable time lag in processing the paperwork which would mean that costs relating to 6 November 1991 will have taken some time to be input into the system. The impact of any error in this cut-off is likely to be one of claiming costs in a different part of the claim and not of either over- or underclaiming."
(Emphasis in original.)
|Type of||KOC (US$000)||KOC - Al-Awda||Total (US$000)|
"... [t]his is because most of the equipment continued to be used in the Al-Tameer, reconstruction project. As the Al-Tameer project also relates primarily to activities for which separate claims are being made, any credit given for residual value at this stage would give rise to an addition to the other claims. Further KOC are presently assessing the extent of surplus equipment following the WBC Exercise and the completion of the majority of the Al-Tameer project. This exercise will enable a more realistic evaluation of the residual value, after the equipment has ceased to be used on claimable activities, to be made.
"Any residual value of capital items after the full reinstatement of the facilities of KOC is completed, or expected to be completed, will be included as a deduction to later claims for the reinstatement of assets when the residual value can better be estimated."
|Source||Value claimed||Value tested||Percentage|
"As independent accountants we have examined the costs of the WBC Exercise in the total sum of $951,631,000 and have carried out such tests on the costs and on the systems used for recording these costs as we consider necessary.
"We are satisfied that:
"• the costs claimed have been incurred and are properly claimable as a direct result of the illegal Iraqi invasion and occupation;
"• the systems used have properly recorded the costs incurred and that they have been competently operated."
"It is common practice in the international accounting system to indicate those costs that must be amortized during the total time period of the assets working life. What must be paid is the depreciation installment for the actual period during which these assets have been used.
"The overwhelming majority of the equipment and other assets which were purchased were used for various purposes having no relation to the firefighting efforts, so there is no guarantee assuring that the cost of the above mentioned equipment and assets will not be included in other claims.
"All what has been stated clearly leads to artificial increase in the claimed amounts without any foundation.... Capital expenditure must be excluded and presented in an independent claim...."
"KOC is not presently in a position to provide the Panel with the information requested.  The assets in question were acquired necessarily in response to the destruction of Kuwait's infrastructure for which Iraq is responsible. Those assets which had a value at the end of the WBC exercise remained in use for the purpose of the reinstatement exercise. Only to the extent that there was any residual value available for KOC's continuing operation of the oil fields was it necessary to give credit against the costs incurred. Any value struck in November 1991 would have been the starting point for computing additional costs incurred in the Physical Assets Claim. Thus, there is no difference in the overall compensation claimed.
"KOC's expert consultants for the Physical Assets and Related Damage Claim have adopted a reasonable approach to estimate the residual value of these assets at a more realistic stage of KOC's reinstatement of its property and operations, following liberation from Iraq.
"Because KOC is the Claimant in respect of both WBC and the Physical Assets Claim, there is no possibility of double compensation. Credit has been given for the residual value of the assets in the context of the Physical Assets Claim in which no costs were claimed for the acquisition of those assets."
a. Al-Awda, which began with liberation and effectively ended with the capping of the last burning well on 6 November 1991;
b. Al-Tameer, which in practice began on completion of Al-Awda and continued until 30 June 1993;26 and
c. Phase III, an unofficial designation for the period which began in July 1993 and will continue until completion of KOC's restoration work.
|Project management and related services||145,839,509|
|Jebel Ali staging area||3,246,186|
|International firefighting and support services contractors||US$206,879,412|
"The rental and purchase of equipment relates to equipment brought in by the firefighters in order to perform their work. This purchased equipment... is included on the Bechtel management department's register of assets. This total being the $36,014,000 [purchased equipment for firefighters] and the $570,000 included in paragraph 4.2 [purchased equipment for support services contractors] (together $36,584,000) is significantly greater than the capital figure of $25,991,000... because it includes loose tools and consumable equipment used to control the flow of oil from the wellheads which have not been capitalised by the AMD."
"The other costs are the costs of contractors not allocated between the cost headings identified above. They are in respect of charges for services but do contain other equipment related costs not separately analysed on the face of the contractors invoice. As such the costs do not relate to costs of a different nature to the analysed costs, it is just that they are not analysed by the contractor in the submission of their invoice."
"In respect of post-capping costs, which are the responsibility of the Drilling department, all invoices received from contractors are sent to the Drilling department who perform the above checks as well as controlling the work performed by post-capping contractors. They are also responsible for analysing post capping costs separately from other drilling costs. They then pass the invoices on to the next stage in the controlling and recording process."
"Provided that the losses meet the criteria for compensation defined by UNSCR 687 and the decisions of the Governing Council, and provided there is no duplication, there is no legal distinction between the costs included in one Oil Sector claim or another. KOC has defined the WBC Claim to include all those costs which it incurred, directly or indirectly, in putting out the oil fires and bringing the flow of hydrocarbon fluids from the wells under control.
"Post-capping is a continuation of the process of making the wellhead safe.... The well blowout control exercise involved gaining access to fires, extinguishing them, stemming the flow of oil and gas by capping and then post capping was necessary to make the wells permanently safe and under control.
"Logically, therefore, post capping costs may be included as part of this claim because they were a necessary conclusion to the WBC exercise. Legally they are justified, regardless of their categorization, because they are plainly costs incurred as a direct result of Iraq's detonation of Kuwait's oil wells.
"The post capping exercise was not complete at the time of preparing the WBC Claim, and that is the prime reason why a portion of the costs was deferred to the Physical Assets Claim (although it is justifiable to include such costs within that claim also, because post capping work was also a prelude to reinstating KOC's physical assets in the oil fields).
"From an accounting point of view, the inclusion of these costs is a mere matter of definition: the costs were included as part of the well blowout control process. As the post capping work was incomplete at the time of preparing the claim, and rather than estimating the total post capping costs at that time yet to be incurred and including an estimate as part of the claim, it was acknowledged that a more exact figure (and therefore more appropriate level of compensation) would be achieved by including the balance of the post capping costs in a later claim. The most logical claim in which to include the balance was the Physical Assets and Related Damage Claim."
|Cost heading/ Analysis||Total amount||Total capital expenditure||Capital allocation||Total revenue expenditure||Common cost allocation||Rejections||Amount compensable|
|firefighting and support services contractors||[para. 142]32||[para. 143]||[para. 144]||[paras. 161-63]|
|Post capping||25,654,763 [para. 142]||-||-||25,654,763||-||-||25,654,763|
|[para. 142]||[para. 159]||[paras. 161-63]|
|KOC - Al-Awda||costs||Amount (US$)|
|Project management and||related services||145,839,509|
|Jebel Ali staging area||3,246,186|
"... is separate from the cost control department and as such does not use the same cost definitions--its requirements being of a different nature from those of the cost control department. For this reason it is not possible to perform a direct reconciliation between capital expenditure per the AMD and capital expenditure per the cost control department."
a. The excavation, lining and filling of the lagoons;
b. The provision of vast quantities of water to the firefighting teams;
c. The laying of the pipelines to supply the water;
d. The construction of the special access ways into the wellhead areas; and
e. The loading and unloading of the aircraft and cargo vessels.
"These costs are those such as salary, overtime, travel, sick pay, and accommodation that Bechtel has charged to KOC for the work it has undertaken in organizing the majority of the Al-Awda and Al-Tameer projects.
"This cost heading includes the costs associated with the personnel required to operate the Jebel Ali staging area... as this was part of the Project Management function. The role of Bechtel was not just one of project management and these costs relate to all the roles played by Bechtel personnel and contract personnel supporting them. They include personnel costs incurred in relation to functions such as procurement, construction, project control, design engineering, security, special projects, safety and so on."
a. Support for all manual and non manual workers such as the provision of accommodation (both the building of temporary camps for thousands of manual workers and the refurbishment of apartments and houses which had been ravaged by the occupying troops). This area of cost incorporates the cost of an ocean liner that was anchored in the Shuaiba Port to supplement scarce accommodation facilities in Kuwait post liberation;
b. The provision of meals for the personnel employed;
c. Office construction, maintenance, and operation;
d. The provision and stocking of a 40 bed semi-permanent field hospital;
e. The refurbishment of offices so that the organisational back-up for the project could be based in Kuwait;
f. The refurbishment or construction, as appropriate, of light and heavy machine workshops and the stocking of these workshops, to service and repair the fleet of vehicles working on the project;
g. The provision of extensive warehousing facilities, carpentry yards, fabrication shops for fabrication of both major and minor items to be used in the WBC Exercise;
h. The construction or refurbishment, as appropriate, of filling stations and fire stations; and
i. Site improvements, including explosive ordnance disposal.
"The installations monitored and controlled by Bechtel in the communications area during the Al-Awda project included a temporary PABX system, a limited trunk radio system, and a satellite communication link capable of reaching countries throughout the world; data communication outside Kuwait being provided through the satellite link. Also, the telephone and data communication services were provided in and around the Ahmadi industrial area."
"In the immediate aftermaths of the liberation, temporary communication facilities were essential for the WBC exercise, and were accordingly installed. These facilities became largely redundant at the conclusion of the WBC exercise. The associated costs fell within the criteria defining the WBC Claim as properly 'belonging' to the WBC Claim.
"Complete reconstruction of KOC's communications system was necessitated by the extent of damage and destruction resulting from the invasion and occupation. A new system was required and installed. The costs of the new system were allocated between the various segments of the Physical Assets Claim. These costs are distinct from the costs included in the WBC Claim."
"The Jebel-Ali staging area, in the United Arab Emirates, was arranged and administered by Bechtel as a delivery, organization and collection point, for material, equipment, and supplies which had been ordered for the task which faced them. This staging post enabled items to be received and prepared in the period when it was not possible to enter Kuwait. It continued to function when Kuwait was liberated as the remaining communications, airport, and seaport in Kuwait were either inadequate for the task or were too dangerous to be used until all had been thoroughly checked for ordnance."
a. rental payments for warehousing and office space;
b. refurbishment of office facilities where appropriate and the installation of office equipment;
c. provision of computer facilities to effect management of the staging area; and
d. communications costs such as telephone and fax."
"Subsequent review has shown that the Jebel-Ali staging area was set up specifically to permit the mobilisation of manpower, equipment and services for the well blow-out activities and initial rehabilitation of basic facilities in Kuwait. Kuwait's ports having been destroyed or made useless by Iraqi forces, the most urgent task in the weeks during which the Jebel-Ali staging area was in use was to control the well-head fires; and the overwhelming use made of the facilities was for this purpose. A small proportion of the plant and equipment being trans-shipped through facilities in Dubai might have been for other emergency needs in Kuwait; but the full cost of the Jebel-Ali staging area was borne by KOC, and this cost is included exclusively in this WBC Claim, and not in any other claim."
|Cost heading/ Analysis||Total amount||Total capital||Capital allocation||Total revenue expenditure||Common cost allocation||Other allocations||Amount compensable|
|support||[para. 165]||[para. 174]||[para. 174]||[para. 175]|
|equipment||[para. 165]||[para. 179]||[para. 179]||[para. 181]|
|management||[para. 165]||[para. 183]||para. 187]||para. 188]|
|facilities||[para. 165]||[para. 193]||[para. 193]||[n.38]||[para. 194]||[para. 192]||[para. 195]|
|[para. 165]||[para. 198]||[para. 199]||[para. 200]|
|[para. 165]||[para. 206]||[para. 207]||[para. 207]||[para. 207]||[para. 208]|
|staging area||[para. 165]||[paras. 168, 213]||[para. 213]||[para. 214]||[para. 214]||[para. 215]|
|Total||708,112,779 [para. 165]||343,706,651||(268,091,188)||364,406,128||(47,470,487)||(994,435)||391,556,669|
|Analysis||Amount claimed||Capital allocation||Common cost allocation41||Amount compensable|
"... to the extent that any support and/or common costs paid to Bechtel by KOC might have been allocable to Wafra, none of those costs were charged by KOC to SAT--nor will they be, so that KOC will continue to bear the full loss."
|Analysis||KOC costs||KOC - Al-Awda||Global||Total|
|KOC firefighting team||(2,804,390)||-||-||(2,804,390)|
|Wafra indirect costs||-||-||(250,000)||(250,000)|
a. The Claimant KUWAIT OIL COMPANY (the "Claimant"), on behalf of Kuwait's public oil sector as a whole, is to be paid the amount of US$610,048,547 as compensation for the costs incurred in the execution of the Well Blowout Control Exercise as a direct result of Iraq's invasion and occupation of Kuwait;
b. The Claimant, on behalf of Kuwait's public oil sector as a whole, is to be paid interest on the principal amount specified in paragraph 233 (a), supra, as of 15 October 1991, pursuant to Governing Council decision 16;
c. The claim for the costs incurred in connection with the work performed by the Claimant's own firefighting team, in the amount of US$2,804,390, is rejected;
d. The claim for the indirect costs incurred in fighting oil-well fires in the Wafra oil field, in the amount of US$250,000, is rejected;
e. The Claimant may amend its Physical Assets and Related Damage Claim, filed with the UNCC on 27 June 1994, to include 78 percent of capital expenditure claimed in the present Claim, in the amount of US$237,047,168, which amount cannot properly be verified in the present Claim;
f. The Claimant may amend its Physical Assets and Related Damage Claim, referred to in paragraph 233 (e), supra, to include 78 percent of KOC - Al-Awda costs claimed under the heading "Freight," in the amount of US$51,317,043, which amount cannot properly be verified in the present Claim;
g. The Claimant may amend its other claims, identifying such claims and the amount to be allocated to each such claim, to include 20 percent of common KOC costs claimed under the headings "Sundries/legal costs" and "Sundries/consulting costs" and common KOC - Al-Awda costs claimed under headings "Project management and related services," "Support facilities," "Communications" and "Jebel Ali staging area," in the total amount of US$48,254,079, which amount cannot properly be verified in the present Claim; and
h. The Claimant may amend its Removal of Unexploded Ordnance Claim, filed with the UNCC on 30 July 1993, to include the KOC - Al-Awda costs relating to the removal of unexploded ordnance claimed under the heading "Support facilities," in the amount of US$994,435, which amount cannot properly be verified in the present Claim.