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Deep Seabed Mining: U.S. Interests and the
U.N. Convention on the Law of the Sea

James E. Mielke

Specialist in Marine and Earth Sciences
Science Policy Research Division

April 7, 1995

95-471 SPR

SUMMARY

On July 29, 1994, the United States signed the Agreement Relating to the Implementation of Part XI of the United Nations Convention on the Law of the Sea of 10 December 1982. This agreement substantially reforms the seabed mining provisions of the 1982 Convention, which the United States found objectionable. In signing the Agreement, President Clinton accepted provisional application of it which enables the United States to participate in the International Seabed Authority (ISA) and its organs and bodies. On November 16, 1994, the U.N. Law of the Sea Convention entered into force without accession by the United States. The President has submitted to the Senate the 1982 Convention with Annexes and the 1994 Agreement with Annex for its advice and consent for ratification (Treaty Doc. 103-39). The Agreement and the Convention with their respective Annexes are to be taken together as a single, legally binding instrument and, in the event of inconsistency between them, the Agreement is to prevail. Implementing legislation to bring U.S. law into conformity is expected. The treaty document was referred to the Senate Committee on Foreign Relations late in the 103d Congress and awaits committee action in the 104th Congress.

 

BACKGROUND

A long-standing objective of U.S. ocean policy has been a widely accepted, comprehensive treaty on ocean law. Beginning with the First U.N. Conference on the Law of the Sea in the 1950s, which resulted in four Conventions that the United States supported, and the Second U.N. Conference in 1960, which failed to reach agreement on the breadth of the territorial sea, the United States has pursued this objective. With many newly independent nations arising in the post colonial era, the United States has sought to balance its interests in navigational freedoms as a major maritime power, its interests in protecting and preserving the ocean resources adjacent to its shores, and in protecting the marine environment. To promote these objectives, in the late 1960s and early 1970s the United States became a major promoter of the Third U.N. Conference on the Law of the Sea. It was during this time that the prospect of deep seabed mining emerged and became a new factor in ocean management.

1982, after a 10-year negotiating effort, the U.N. Convention on the Law of the Sea was concluded. The Convention accomplished many of the objectives of U.S. ocean policy (see CRS Issue Brief IB95010). These included agreement on a 12-mile breadth for the territorial sea and 200-mile exclusive economic zone; freedom of passage in straits, territorial seas, exclusive economic zones, and through archipelagoes; and a far-reaching environmental accord including vessel source and land-based ocean pollution. These agreements fully support the U.S. interests in commercial navigation, military movement, leasing policy over mineral resources on the continental shelf, and diverse fisheries management issues.

However, the United States chose not to sign the Law of the Sea (LOS) Convention in 1982 because of significant fundamental problems regarding the regime for mineral resource development in the deep seabed area beyond national jurisdiction as detailed in Part XI and Annexes III and IV of the Convention. Part XI defined the deep seabed area beyond national jurisdiction; Annex III established the basic conditions of prospecting, exploration and exploitation; and Annex IV created the Enterprise or operating (mining) arm of the Seabed Authority.

Among the objections to the seabed mining regime were that it was based on a controlled centrally planned economic model that preempted free-market private enterprise, and it did not give the United States and other states with major economic interests in seabed mining a voice in decision-making commensurate with their interests. In particular, the United States was not guaranteed a seat on the Council, the decision-making body governing the deep seabed regime, and the membership of that body would be dominated by developing countries. Furthermore, seabed mining provisions could be amended and become binding on the United States without our consent, and future revenues from the deep seabed could be distributed to national liberation movements over our objections.

The United States also objected to the requirement that seabed mining applicants would have to turn over one-half of their mine site to the Seabed Authority to be developed by its operating arm, the Enterprise, and transfer technology to the Enterprise or possibly to developing countries. In addition, the regime established production controls over certain minerals, discriminatory economic advantages to the Enterprise, and a system of annual payments that could severely reduce the commercial viability of seabed mining for market-economy enterprises.

As stated by President Reagan, "While most provisions of the draft convention are acceptable and consistent with U.S. interests, some major elements of the deep seabed mining regime are not acceptable."(1) In pointing out that the United States has a strong interest in an effective and fair Law of the Sea, the President listed six objectives with respect to seabed mining that, if further negotiations could fulfill, the Administration would support ratification of the Convention. The six objectives identified by President Reagan were a seabed regime that would:

· Not deter development of any deep seabed mineral resources to meet national and world demand;

· Assure national access to these resources by current and future qualified entities to enhance U.S. security of supply, to avoid monopolization of the resources by the operating arm of the international authority, and to promote the economic development of the resources;

· Provide a decision-making role in the deep seabed regime that fairly reflects and effectively protects the political and economic interests and financial contributions of participating states;

· Not allow for amendments to come into force without approval of the participating states, including, for the U.S., the advice and consent of the Senate;

· Not set other undesirable precedents for international organizations; and

· Be likely to receive the advice and consent of the Senate, e.g. the convention should not contain provisions for the mandatory transfer of private technology and participation by and funding for national liberation movements (2)

Further negotiations at the time did not meet these objectives and when the Convention was opened for signature in December 1982, the United States and other industrialized countries did not sign or announced that they would not ratify the Convention without significant changes to the parts that dealt with seabed resources beyond national jurisdiction.

Beginning in 1990, a series of consultations were initiated under the auspices of the United Nations Secretary-General in order to restructure the seabed mining regime and make it more acceptable to the industrialized nations. By 1993, when it became apparent that the Convention would receive the required number of signatures to enter into force, the negotiations to modify the seabed mining regime intensified. This effort resulted in the Agreement Relating to the Implementation of Part XI of the UN LOS Convention. This Agreement was adopted on July 28, 1994. The Agreement and the Convention with their respective Annexes are to be taken together as a single legally binding instrument and, in the event of inconsistency between them, the Agreement is to prevail.

Since more than the required number (sixty) of states had already ratified the Convention, which would enter into force on November 16, 1994, the Agreement contains liberal conditions for its provisional application. Without such a provision, the Law of the Sea Convention would have entered into force with its seabed mining provisions unchanged. With a large number of states, including industrialized states, accepting provisional application, the expectation is that Part XI will be implemented from the outset in accordance with the new Agreement and with representative participation in decision-making organs.(3) Provisional application will terminate on November 16, 1998, if the Agreement has not entered into force because a sufficient number of industrialized states have not become parties.

While the Convention required sixty ratifications or accessions to enter into force, it was able to reach that number primarily through its acceptance by developing countries. The Agreement, on the other hand, will enter into force when only forty states establish their consent to be bound by it, but there are two additional requirements: (1) this group must include at least seven states representing "pioneer investors" (originally Belgium, Canada, China, France, Germany, India, Italy, Japan, the Netherlands, the Russian Federation, the United Kingdom, and the United States, later joined by a group of Eastern European and other states); and (2) at least five of these states must be developed states (i.e. states willing to pay a large share of the expenses of the Authority) .(4)

The changes set forth in the Agreement are deemed by the Clinton Administration to meet the objections of the United States. Consequently, the United States signed the Agreement and accepted provisional application of it for the United States. On October 7, 1994, President Clinton transmitted the LOS Convention and the Agreement relating to the Implementation of Part XI of the Convention to the Senate for its advice and consideration of ratification (Treaty Doc. 103-39).

The Agreement fundamentally changes the seabed mining regime of the Convention and addresses each of the U.S. concerns. According to the Treaty Document, the Agreement provides the United States and other countries with major economic interests, adequate influence over future decisions on possible deep seabed mining.(5) In particular, the new Agreement. guarantees a seat on the Council for "the State, on the date of entry into force of the Convention, having the largest economy in terms of gross domestic product." (That state is the United States.) It also provides for the administration of the seabed mining regime to be based on free-market principles drawing on established rules on international trade. This would appear to satisfy the U.S. objective of nondiscriminatory access to deep seabed mineral resources on the basis of reasonable terms and conditions.

The Agreement scales back the structure of the organization to administer the mining regime and links the activation and operation of institutions to the actual development of concrete interest in seabed milling. More fundamentally, it alters Part XI to provide the United States the ability to veto decisions related to budget and finance in the Finance Committee and decisions in the Council related to adoption of rules and regulations to amend the deep seabed mining regime as well as decisions related to the distribution of royalties.(6) Furthermore, with support of two other industrialized countries, the United States could block decisions on other substantive issues.

The Agreement replaces the centralized economic planning approach contained in Part XI with market-oriented principles and eliminates the production control and mandatory technology transfer provisions. The Agreement also provides for grandfathering of seabed mine site claims established on the basis of the exploration work already done by U.S. companies with arrangements "similar to and no less favorable than" the best terms granted to previous claimants. Provisions regarding consideration of potential environmental impacts of deep seabed mining are also strengthened in the Agreement.

QUESTIONS FOR CONSIDERATION

The preceding section reviewed the 1982 U.S. objections to the seabed mining provisions of the U.N. Convention on the Law of the Sea and summarized provisions of the 1994 Agreement that reportedly accommodate those objections. The following are some issues that may arise in questioning how adequately the Agreement satisfies U.S. concerns and concerns of ocean mining interests as the Senate considers ratification of the Convention and Agreement.

1. According to Treaty Document 103-39, the provisions of the Agreement and Part XI shall be interpreted and applied together as a single instrument and in the event of any inconsistency, the Agreement shall prevail. While this may be adequate in the case of clear inconsistencies, it is less clear as to what might prevail should differences of interpretation arise. This uncertainty would appear unlikely to lend confidence to prospective investors in ocean mining. The question arises as to what assurances there are that an interpretation or "rules" are not going to change after a mining operation is underway or a commitment to invest large sums of money has been made.

2. While the Agreement and Annex establish a decision-making process that primarily relies on consensus and also allows the United States to block adverse actions, the process of market economy corporate decision making frequently requires decisions in a timely manner in order to minimize costs or enhance revenues. Congress may wish to inquire as to what extent the consensus or blocking process is able to provide for a timely decision when needed.

3. The Convention continues to provide for the creation of the Enterprise, the operating arm (mining company) of the Seabed Authority. While the Agreement and Annex do not eliminate the Enterprise (or the requirement that a miner give half of its mine site to the Enterprise and developing countries), they remodel it by: (1) requiring a future decision by the Executive Council to make it operational; (2) subjecting it to the same requirements as other commercial enterprises; (3) eliminating the requirement that parties to the Convention fund its mining activities; (4) providing that it operate through joint ventures with other commercial enterprises; and (5) eliminating provisions that would compel other commercial enterprises to provide it with technology. How likely is the Enterprise to become operational? To what extent are the requirements providing the Enterprise with free, fully-explored mine sites consistent with subjecting it to the same terms and conditions as other commercial enterprises? How firm is the assurance that technology will be acquired from seabed miners by the Enterprise under "fair and reasonable commercial terms" when the miners have to seek permits and approvals that could possibly be delayed or withheld as a means of leverage or other political pressures brought to bear?

4. Although there is some precedence for the United States to accept provisional application of a treaty or agreement prior to ratification, the question arises as to what unstated implications this might have on the ratification process. How will provisional application affect provisions of U.S. law such as the Deep Seabed Hard Mineral Resources Act (P.L. 96-283)? Is it likely such questions will arise in a practical context before December 1998?

5. It has been pointed out that there appears to be no mechanism for mining investors to participate directly in any dispute settlement mechanism. A miner must request its government to act in its behalf. This raises the concern that there may be times when the U.S. Government, for reasons of policy or diplomacy, might not wish to do so, leaving the private mining entity without redress.(7) To what extent is this a likely scenario?

Footnotes

1 Statement by the President. U.S. Policy and the Law of the Sea, Jan. 29, 1982 and White House Fact Sheet accompanying the Presidential Statement, Department of State Bulletin, Mar.1982, p.54-55.

2 Ibid.

3 Oxman, Bernard H. The 1994 Agreement and the Convention. In Law of the Sea Forum: The 1994 Agreement on Implementation of the Seabed Provisions of the Convention on the Law of the Sea, American Journal of International Law, v.88, no 4, p.688.

4 Sohn, Louis B. International law Implications of the 1994 Agreement. In Law of the Sea Forum: The 1994 Agreement on Implementation of the Seabed Provisions of the Convention on the Law of the Sea, American Journal International Law, v.85, no.4, p. 698.

5 U.S. Congress. Senate. United Nations Convention on the Law of the Sea, with Annexes, and the Agreement Relating to the Implementation of Part XI of the United Nations Convention on the Law of the Sea, with Annex. Treaty Doc. 103-39, U.S. Govt. Print. Office, Washington, 1994, p. vii.

6 U.S. Senate. Committee on Foreign Relations. Current Status of the Convention on the Law of the Sea. Hearing, 103rd Cong., 2d sess., Aug.11, 1994. U.S. Govt. Print. off., Washington, 1994, p.13. (5. Hrg. 103-737.)

7 Hoyle, Brian J. Statement before the House Committee on Merchant Marine and Fisheries Subcommittee on Oceanography, Gulf of Mexico and the Outer Continental Shelf, Hearing on the Law of the Sea Treaty and Reauthorization of the Deep Seabed Hard Mineral Resources Act of 1980, Apr.26, 1994.