Preparatory Commission agrees on procedures for registering pioneer investors in deep sea-bed mining.

Preparatory Commission agrees on procedures for registering pioneer investors in deep sea-bed mining

A formula for registering the firstgroup of potential investors in deep sea-bed mining has been agreed on by the Preparatory Commission for the International Sea-Bed Authority and the International Tribunal for the Law of the Sea.

A highlight of the Commission's activitiesduring its second 1986 session (New York, 12 August-5 September), the understading marked another step towards implementing resolution II of the 1982 United Nations Conference on the Law of the Sea, which established a special regime for protecting investments in future deep sea-bed mining.

The agreement ended a two-year effortto resolve overlapping claims of France, Japan and the Soviet Union, three of the four potential "pioneer investors" identified in resolution II. The "pioneer investor" category gives a State or group of States exclusive rights to explore an ocean area and priority in authorization for commercial production. Under the agreement, specific portions of the north-east Pacific Ocean would be reserved upon registration for France, Japan and the Soviet Union, while India, the fourth pioneer applicant, which had no conflicting claims, would be given exclusive rights to an area in the Indian Ocean.

France, Japan and the Soviet Unionagreed that, upon registering as pioneer investors, parts of their application areas which overlap with potential applicants would be relinquished for possible future applications by four consortia whose components come from Belgium, Canada, the Federal Republic of Germany, Italy, Japan, the Netherlands, the United Kingdom and the United States.

The understanding provided timetablesand mechanisms for registering the first group of pioneers, and allowed for similar treatment to be given other potential applicants. The right to apply for registration as a pioneer investor was ensured for any developing country that has signed the United Nations Convention on the Law of the Sea and satisfies the registration requirements. (Six ratifications or accessions are required for entry into force; as of September 1986, the Convention had received 32 ratifications from a total of 159 signatories.)

Under Resolution II, to qualify asa pioneer investor, an aplicant must have spent at least $30 million on seabed activities as of 1 January 1983; developing countries were given until 1 January 1985 to qualify.

According to the agreement, agroup of all or several socialist States of Eastern Europe have the right to apply for one pioneer area until the Convention enters into force.

The formula resulted from extensiveconsultations under Preparatory Commission Chairman Joseph S. Warioba (United Republic of Tanzania) and Acting Chairman I. G. Jhingran (India). Mr. Jhingran told the Commission on 5 September that by recognizing the rights of pioneer investors, the agreement would give "practical effect" to the new regime for deep seabed mining under the Convention.

"The Preparatory Commission is ofthe view that there can only be one regime for deep sea-bed mining and that is the regime contained in the Convention", he said. "It is the hope and expectation of all of us here that everyone will eventually work within that regime for the sake of peace and good order in the oceans and the security of the rights of all those who are interested in deep sea-bed mining."

In a closing statement on behalf ofthe Group of 77 developing countries, Jose Luis Jesus (Cape Verde) said the Group had made "painful" concessions that "two or three years ago would have been unthinkable", in the belief that such action would remove the obstacles to implementing the pioneer system.

"It is in the interest of all nations notto undermine the Law of the Sea Convention", he stressed. "We all have national interests, and the interests of all nations deserve equal protection. We are better off with the Convention, whatever its shortcomings, than without it."

Philippe Kirsch (Canada), speakingon behalf of the potential applicants for pioneer-investor status, said the current session of the Preparatory Commission had been the most difficult and demanding so far, but also the most fruitful.

Ole Lowe (Denmark), on behalf ofthe "Friends of the Convention", affirmed their strong commitment to implementation of resolution II and to early registration of pioneer investors.

Igor Kolossovsky (Soviet Union) expressedappreciation for the progress made regarding implementation of resolution II and supported the idea that the Convention on the Law of the Sea provided the only regime for exploration and exploitation of the deep sea-bed.

The special regime to regulatepreparatory investment in pioneer activities was set up in response to concerns of some Western industrialized countries, whose consortia had already undertake exploration, research and development work relating to polymetallic nodules.

States or entities registered aspioneer investors--a consortium, to qualify, must have a "certifying state" which has signed the Convention--will be entitled to explore allocated portions of the International Sea-Bed Area, but may not exploit a site commercially until the Convention comes into force. They will also be guaranteed priority over all others but the Enterprise, the Authority's sea-bed mining arm, when applying for authorization for commercial production. At the same time, pioneer investors will undertake obligations in behalf of the Enterprise, including exploration, training and transfer of technology.

Sea-Bed Authority: The plenary ofthe Commission, in addition to working on registration of pioneer investors, continued preparing rules of procedure for the Assembly, the Council of the International Sea-Bed Authority and its organs.

The Assembly, made up of all partiesto the Sea Law Convention, will be responsible for setting general policy and electing the Director-General of the Enterprise, the 15 members of its Governing Board, and the members of the Council. The 36-member Council, as the Authority's executive body, will approve work plans for deep sea-bed mining and control activities in the sea-bed area. Its membership will represent regional interest and major interest groups, including the largest consumers or net importers of sea-bed minerals, sea-bed mining investors, and land-based producers.

The plenary completed a first readingof the rules of procedure of the Legal and Technical Commission, a Council organ that will review and make recommendations on applications for mining contracts. A major issue left pending was the procedure to be followed in electing members. (The Convention stipulates that elections be carried out on the basis of "equitable geographical representation" and with due account to special interests.)

The East European Socialist Statesintroduced amendments that would require "equal geographical distribution" in the election of members, while an amendment of the West European States would require that 8 of the 15 Commission members be nominated by the eight States most heavily involved in deep sea-bed mining.

The plenary also began a first readingof the rules of procedure of the Economic Planning Commission, another organ of the Council. That body is to review trends in, and factors affecting, supply, demand and prices of minerals derived from the sea-bed area. It will also examine any situation likely to have an adverse effect on the economics of developing land-based mineral producers, and will propose a system of compensation or other adjustment measures for developing States that suffer adverse effects from activities in the international sea-bed area.

The Commission focused on theresponsibility of Commission members to maintain the confidentiality of information they gleaned as a result of work with the economic panel. Western countries introduced an amendment to the rules that would hold individual members financially liable for disclosure of any confidential information.

Special Commissions

Land-based producer States: SpecialCommission 1--on land-based producer States--asked the Secretariat to prepare working papers on the expected impact of sea-bed production on the mineral market, and on the legislative history of Convention provisions dealing with a system of compensation and/or compensation fund.

The Special Commission, chairedby Hasjim Djalal (Indonesia), has been entrusted with the preparation and study of measures to assist developing land-based producer States most likely to be adversely affected by sea-bed mining. Under Acting Chairman Lusi Giotto Preval Paez (Cuba), it focused much of its discussion at the session on whether establishing a compensation fund would help those states. The Group of 77, which introduced a specific proposal for establishment of such a fund, said that although the Sea Law Convention did not specifically call for a fund, it was clear that some type of compensation system must be established to satisfy certain of its provisions.

Western European and other countriesargued that establishment of a compensation fund was not boligatory under the Convention and that other measures of assistance might be more appropriate. A number of those delegations said the economic environment in which sea-bed mining would be profitable--i.e. higher prices for minerals--would in fact lead to increased profits for the land-based producers because of their lower production costs.

A paper introduced by the EuropeanEconomic Community (EEC) stated that sea-bed mining was unlikely to take place in the near future, as the current low price of the minerals to be extracted did not make such activity economically viable. It would, therefore, be premature to recommend specific remedial measures at this stage, EEC members said.

Enterprise: Special Commission2--concerned with preprations for the early entry into effective operation of the Enterprise--made some of progress in its work during the session, according to its Chairman Lennox Ballah (Trinidad and Tobago).

He said the Special Commission appearedto be moving towards three sets of recommendations: those that concern basic administration, management and procedural maters that would permit the Enterprise to function as any other commercial entity; those that address implementation of resolution II of the Sea Law Convention concerning such matters as pioneer investors' obligations in training Enterprise personnel; and those that relate to options and costs for the first operation of the Enterprise.

The Commission is to take up trainingquestions first at its 1987 spring session, including the establishment of policies and procedures for a training programme and the question of cooperating institutions.

It also decided to consider structuralquestions relating to the Enterprise, including a recommendation to establish an initial "nucleus" Enteprise before the Law of the Sea Convention enters into force. In addition, the Commission will discuss policies governing internal administration and management of the Enterprise, including administrative, financial and personnel issues. Operational options will also be on the agenda.

The Commission welcomed an offerby Colombia to produce a model of a joint venture for prospecting, exploration, exploitation, processing and marketing of metals from the sea-bed.

In the absence of consensus on assumptionsfor sea-bed mining, the Commission agreed to create a Chairman's advisory group to monitor economic conditions for sea-bed mining and perhaps pursue pre-feasibility work. The group is to be made up of experts from Australia, Brazil, China, the EEC, Kenya, Uganda, the Soviet Union and any other countries wishing to participate.

Mining code: Special Commission3--charged with preparing a mining code encompassing rules, regulations and procedures on prospecting, exploration and exploitation of polymetallic nodules in the international sea-bed area--conducted a preliminary examination of draft regulations dealing with the financial terms of mining contracts. Chairman Jaap W. Walkate (Netherlands) said the Commission had made "good progress" in a "constructive atmosphere".

The articles examined related tocomplex procedures for determining payments made by a contractor to the Authority. The Chairman reviewed the positions taken in discussion of the draft, and said that all views would be taken into account in preparing his report after the first reading of the rules was completed. If time permitted at the next session, the Commission is to discuss a text on financial incentives.

Law of the Sea Tribunal: SpecialCommission 4--entrusted with making all arrangements to establish the Tribunal, which will deal with disputes between sea-bed miners--completed its second reading of revised draft rules of procedure for the Tribunal.

In discussing the procedure forprompt release of vessels detained by States Parties to the Convention, a number of Western countries urged the Commission not to limit the amount of bond that would have to be posted by the entity or State requesting the release of the vessel. (The draft rules call of limiting the bond to the commercial value of the vessel.)

Eastern European Socialist Statesargued for retaining a provision that would allow State-owned vessels operated for commercial purposes to be released upon guarantee of the operating State.

The Commission, chaired by GunterGoerner (German Democratic Republic), also noted informal consultations on the future seat of the Tribunal, and deferred discussion of the matter pending further consultations among the regional groups. The Third United Nations Conference on the Law of the Sea designated Hamburg, Federal Republic of Germany, as the site, but the question has been reopened by a number of States which say that the Preparatory Commission must prepare for the possibility that the Federal Republic of Germany may not be a party to the Convention when it comes into force.

A progress report by the FederalRepublic of Germany on preparations for housing the Tribunal (LOS/PCN/SCN.4/L.6) indicates that a piece of land in Hamburg has been reserved for it, and that plans have been drawn up for a modern building complex to complement the historic villa already on the site.

A working paper setting out issuesrelating to the headquarters agreement the Tribunal will eventually conclude with the host State was circulated to Commission members for discussion at the spring 1987 session. It identifies privileges and immunites that would be enjoyed by Tribunal members and experts appointed by the Tribunal, as well as by parties to disputes, counsels and advocates, witnesses and the Tribunal staff.