Britain Spurns Kuwaiti Vow Not to Enlarge Stake in BP

The Kuwait Investment Office, the investment arm of the Kuwaiti government, said Tuesday that it signed legal documents pledging to limit its stake in British Petroleum Co. to its current 21.68% level.

However, Trade Secretary Lord Young refused to accept the documents and returned them on grounds that they would be prejudicial in a review of the stake by the Monopolies and Mergers Commission, the Department of Trade and Industry said.

The commission, which currently is reviewing the Kuwaiti holding in BP, is expected to decide by Sept. 2 whether the stake is anti-competitive or against the national interest.

Young is to decide what action to take in light of the commission’s findings.

The London-based Kuwaiti office said it also pledged not to exercise voting rights representing more than 14.9% of the oil giant’s shares.

The office also promised not to use its stake “to further any other commercial or political interest of Kuwait.”

Legally Binding

In addition, the office agreed not to seek representation on BP’s board and not to oppose the election of any BP board members proposed by the board.

The Kuwaiti office’s law firm, Stephenson Harwood, said the pledges were designed to make legally binding the assurances that the office already has given to the British government about its BP stake.

“In order to put beyond doubt that it regards itself as bound by the assurances already given, the state of Kuwait has entered into binding covenants, intended to be enforceable by the British government in the British courts, which confirm that its interest in BP is that of an investor only,” Stephenson Harwood said.

The Kuwaiti office stressed that the legal documents were signed “entirely on its own initiative” and not under pressure from the British government or commission.

The office began acquiring the stake in British Petroleum piecemeal after the government sold off its remaining 31.5% stake in the oil company last fall. The 7.5 billion-pound, or $13 billion, share sale coincided with the stock market crash, which depressed the market price of the oil company’s stock.