Preparing for sea-bed regime: an agreement on claims procedures.

The most significant achievement of the latest session of the Preparatory Commission for the International Sea-Bed Authority and for the International Tribunal for the Law of the Sea, which met in Geneva from 13 August to 5 September, was an agreement on procedures for the resolution of overlapping claims among those parties intending to carry out pioneering activity on the international sea-bed.

The deadlock which had carried over from the Commission's earlier session in March-April 1984 in Kingston, Jamaica was finally resolved in the last days of August, when Chairman Joseph S. Warioba (United Republic of Tanzania) reported that an agreement had been reached among applicants for registration as pioneer investor on the procedure for dealing with situations in which the geographical areas claimed by pioneer investors overlapped each other. The agreement, which included a series of cut-off dates, clears the way for the Commission to consider the applications already made by France, India, Japan and the Soviet Union. What now remains is for the Commission to adopt rules for the registration of pioneer investors. Chairman Warioba said that at the Commission's next session (Kingston, 11 March-5 April 1985), it would complete the consideration of the draft rules and adopt them.

another important issue for the 93 delegations gathered in Geneva, other than the question of overlapping claims, was a "provisional understanding on deep sea-bed matters" signed between seven Western States and Japan. Concluded on 3 August, only a few days prior to the Geneva session, the action was questioned by the Group of 77, the Eastern European socialist countries, and China. The criticism was that the provisional understanding appeared to be an effort to create a parallel regime other than that provided for by the Third United Nations Conference on the Law of the Sea, which adopted the United Nations Convention on the Law of the Sea. The Western States and Japan defended their action.

Despite the differences, however, there was a measure of pragmatic understanding among the delegations of the need to get ahead with pressing work. By the time the delegates headed home, the Commission had managed to move ahead on each of the items entrusted to it.

Besides the question of the pioneer investors regime, which is most immediate because it deals with the interim period before the Convention comes into force, the plenary of the Commission also continued the task of preparing regulations for the functioning of the International Sea-Bed Authority. It has so far finished a first reading of 82 out of 111 draft rules of procedure of the Assembly, which will be the primary organ of the Authority.

Work also progressed in the Commission's four subsidiary bodies. Special Commission 1 was engaged in the exercise of how to identify the mineral-producing developing countries likely to be affected by sea-bed mineral production, and what measures could be taken to minimize the negative consequences.

Special Commission 2 discussed the establishment of the Enterprise, which is to be the sea-bed mining arm of the Authority. Much of its work centred on the obligation of the pioneer investors and States which back them to provide the Enterprise with funds, technology and trained personnel. The Special Commission also discussed the start-up requirements for the Enterprise and briefly dealt with its operational options, such as whether the Enterprise should independently carry out mining, processing and marketing operations, or wether it should go in for joint ventures.

Special Commission 3, which has the task of preparing a sea-bed mining code for the exploration and exploitation of the international sea-bed, decided that the code should strive for a balance between the interests of the Authority to retain "effective control" of the international sea-bed area and the interests of the mining enterprises to successfully carry out their own commercial operations.

Special Commission 4 began an article-by-article reading of the draft rules of procedure for the International Tribunal for the Law of the Sea secretariat. It completed a first-reading of 30 out of the 134 draft rules.

Background to the Session

The United Nations Convention of the Law of the Sea was adopted on 30 April 1982, after nine years of negotiation, by the Third United Nations Conference on the Law of the Sea. The task of drawing up detailed rules and procedures for the sea-bed mining regime under the Authority and for the Tribunal was given to the preparatory Commission, which was established by the Final Act of the Conference, adopted together with the Convention. (For a more detailed background of the Commission and the work of its previous sessions, see the UN Chronicle, No.4, 1984.)

All States that have signed the Convention are members of the Commission. It is to function as a preparatory body till the end of the first session of the Authority's Assembly, which will be the primary organ of the Authority. The Assembly will meet one year after the sixtieth ratification of or accession to the Convention is received. So far more than 150 States have signed and 14 of them have ratified the Convention.

Pioneer Investors

The special regime for pioneer investors was created by the Conference so that countries and enterprises which were technologically capable of carrying out mining activity on the sea-bed would have reason to continue their pioneering work. By adopting Resolution II of the Final Act, the Conference established a special regime to protect the preparatory investment made by such countries and enterprises, which were to be called pioneer investors. Registration with the Commission as a pioneer investor would entitle a State or entity to explore -- but not exploit -- a selected area of the international sea-bed, and give it priority over others when applying to the Authority for commercial production at a later date.

The main disagreement during the spring session in Kingston lay in the interpretation of the provision in Resolution II which requires prospective pioneer investors to ensure that, "before making applications to the Commission . . . that areas in respect of which applications are made do not overlap one another or areas previously allocated as pioneer areas". The Soviet Union, which together with India had already applied for registration, said that the Commission must forthwith consider its application. Some Western States and Japan maintained that the Commission was not prepared to receive applications because the possible overlapping of claims between the various parties had not been resolved, and the rules for registration had not been finalized by the Commission. They also insisted that even those States which had not signed the Convention -- such as the Federal Republic of Germany, the United States and the United Kingdom -- should be allowed to participate in resolving conflicts over boundaries. The Soviet Union objected to this, stating that the Commission would then be opening a back door to non-signatories of the Convention.

An important aspect of the interim regime that was pending before the Geneva session, other than the question of overlapping claims, was the obligation of pioneer investors towards the Enterprise. Paragraph 12 of Resolution II calls for certain undertakings by registered pioneer investors and their certifying States so as to ensure that the Enterprise will have the funds, technology and the expertise necessary for it to begin viable and competitive operation when it comes into existence.

Three groups are eligible, according to Resolution II, to register as pioneer investors. The first group comprises four States -- France, India, Japan, and the Soviet Union -- or their private or public enterprises. All these four States have signed the Convention and hence are entitled to apply to register for pioneer activity. India and the Soviet Union had already submitted their applications, and the Commission received applications from France and Japan during the Geneva session.

The second group is made up of four consortia whose components come from one or more of eight states: Belgium, Canada, the Federal Republic of Germany, Italy, Japan, the Netherlands, the United Kingdom and the United States. In order to be a pioneer applicant, a consortium will have to be certified by a State which has signed the Convention. The four consortia are: the Kennecott Consortium, Ocean Mining Associates, Ocean Management Incorporates, and Ocean Minerals Company.

The third group of those eligible to apply is made up of developing countries or their enterprises, providing they have signed the Convention.

Applications by France and Japan: On 3 August and 21 August respectively, the Governments of France and Japan submitted applications for the registration as pioneer investors of their enterprises. The French enterprise is the Association francaise pour l'etude et la recherche de nodules (AFERNOD) and the Japanese company is Deep Ocean Resources Development Co. Ltd. (DORD). The applications stated that there was no overlapping of the claims among the prospective pioneer investors, except with regard to the Soviet enterprise (the Southern Production Association for Marine Geological Operations).

Both countries insisted that their applications for registration did not indicate a change in their position regarding the implementation of Resolution II. They will considered that the Commission should not examine applications unless overlapping conflicts have been resolved and the rules for the registration of applications have been adopted.

Understanding on the FRG question: During the session, the Federal Republic of Germany had raised a problem regarding those eligible to register as pioneer investors under paragraph 1 (a) of Resolution II. The paragraph as it stands restricts the first group of prospective pioneering States of France, India, Japan and the Soviet Union. Enterprises from the Federal Republic of Germany would be able to participate only as part of the second group of four consortia. Even then, to be eligible as a certifying State of a consortium, the Federal Republic of Germany would have to sign the Convention before the last day of signature, which is 9 December 1984. Japan, on the other hand, is eligible to participate as part of both the first and second groups.

During the last day of the Conference, Chairman Warioba read out an understanding which he said had been agreed upon by all parties. "Assuming that the total number of pioneer areas allocated under that paragraph will not exceed four areas", his statement read, "and provided that the Federal Republic of Germany signs the Convention, the Preparatory Commission recognizes the importance of finding a solution to this problem in a manner consistent with the objectives and conditions of Resolution II. The Preparatory Commission would consider this problem at its next session. This understanding in no way affects the rights that have been conferred under Resolution II."

The provisional understanding: On 3 August 1984, seven Western Governments (Belgium, France, Federal Republic of Germany, Italy, Netherlands, United Kingdom, United States) and Japan concluded the "provisional understanding regarding deep sea-bed matters". They took this action following an agreement between six sea-bed mining consortia, with components from each of the eight countries, which had resolved overlappings between areas they intended to work in. The enterprises among whom the agreement was reached were the four consortia included in the second group of eligible pioneer investors under resolution II, and DORD and AFERNOD.

In more or less identical communications addressed to the Chairman of the Preparatory Commission, the Governments of France, Japan and the Netherlands stated that their understanding had been concluded in order to assure at a governmental level the agreement reached among the consortia. The inter-governmental understanding sought to discourage new mining authorizations which would overlap mine sites allotted to the other enterprises. The three Governments stated that the agreement fulfilled in part the requirement of Resolution II to resolve overlapping claims and was fully compatible with the Convention on the Law of the Sea.

According to the provisional understanding, the eight State parties undertook not to issue authorizations to enterprises for areas which were also claimed by other applications, or which had been authorized to other enterprises. The parties would, in processing applications, determine whether they complied with requirements under national law and thereafter determine the applicants' eligibility for the issuance of authorization.

The parties agreed to consult together prior to the issuance of any authorization to enterprises, or before themselves engaging in deep sea-bed operations, or seeking registration for an area. To the extent permissible under national law, they agreed to maintain the confidentiality of information, such as commercial information or geographical coordinates, received from each other. Disputes arising from the interpretation or application of the agreement would be settled by appropriate means, such as through recourse to binding arbitration.

Additional States might, with the consent of all the parties, be invited to accede to the agreement. The agreement was "without prejudice to, nor does it affect, the positions of the Parties, or any obligations assumed by any of the Parties, in respect of the United Nations Convention on the Law of the Sea". No authorization would be given for exploitation of the "hard mineral resources" of the deep sea-bed before 1 January 1988.

Those who criticized the provisional understanding in the Preparatory Commission held that it was deliberately vague and that it was phrased in such a way that it could be used as a permanent agreement. In a statement, the Chairman of the Group of 77 expressed "regret and concern" at the provisional understanding. The agreement constituted an unacceptable attempt to engage in deep sea-bed activities under reciprocally recognized national legislation of the signatory States, "which seem to arrogate to themselves the powers of the International Sea-bed Authority to authorize sea-bed operations". The understanding went "beyond the resolution of conflicts arising from overlapping claims, by including provisions regarding exploration and exploitation of the sea-bed resources". The Group regarded the agreement as "wholly illegal" and as having no basis for creating legal rights.

Supporting that viewpoint, the Chairman of the group of Eastern European socialist countries was of the view that the provisional understanding was in fact a "mini-treaty". So far as was known, the agreement was drawn up at the initiative of the United States. It was an agreement between the world's eight leading capitalist States to substitute for the rules elaborated by the Convention their own standards permitting them to act without control in exploring and exploiting the resources of the deep sea-bed. The conclusion of the illegal agreement could only be described as a deliberate challenge to the Preparatory Commission.

In response to the criticism, the leader of the Netherlands delegation, speaking on behalf of the other seven States, said that the provisional understanding was wholly legitimate. It essentially concerned conflict resolution and did not contain an alternative to the sea-bed regime contemplated by the Convention. The understanding followed the basic principle of international law that States should settle their conflicts by peaceful means, he added.

The Eastern European socialist countries submitted for consideration a draft resolution which would have had the Commission reject the provisional understanding as illegal and incompatible with the Convention. Due to the lack of time in Geneva, the sponsors did not insist on a vote on the draft and deferred a decision to the March session in Kingston.

Claims Procedures

Despite the discussion sparked by the provisional understanding, the Commission was able to move ahead and address the substantive issues on its work programme.

Intensive consultations carried out by Mr. Warioba led to the Chairman's statement on 31 August (LOS/PCN/L.8) announcing the understanding, which contained a series of cut-off dates, as well as the procedure to be followed in order to resolve possible conflict with respect to overlapping claims among the first group of applicants (including all those which would submit applications by 9 December 1984). All applicants had agreed to meet on 17 December to exchange co-ordinates of areas claimed in their respective applications. Any conflict in the areas would be resolved through negotiations, which would begin no later than 11 January 1985. Those negotiations are to be completed by 4 March and the parties must report to the Chairman by 8 March 1985. (The Commission's session in Jamaica is scheduled to open on 11 March.)

According to the understanding, the Commission would strive to complete the rules for the registration of pioneer investors so that they can be adopted by the Commission immediately after it meets at its next session. Following the adoption, the first group of applications would be considered and registered simultaneously if they conform to the rules and if there is an absence of conflict.

The United Kingdom stated in a letter to the Chairman dated 24 September that while it had participated in the consultations on conflict resolution, it was not party, nor had it accepted or acquiesced in, the understandings announced by the Chairman. The United Kingdom maintained that the issue of conflict resolution could only be satisfactorily resolved by agreements which encompass all parties which may be affected by overlapping on any particiulater site.

The Commission was unable to complete consideration of the draft rules on the registration of pioneer investors prepared by the secretariat (LOS/PCN/WP.16/Rev. 1). The draft lays down rules for the submission of applications by pioneer investors, the confidentiality of data submitted with the applications, and the creation of a group of technical experts to study them. The Commission provisionally adopted some segments of the draft and deferred action on others. Chairman Warioba, in his closing statement in Geneva, said that at its next session the Commission "will complete the consideration of the draft rules on pioneer investors and adopt them".

The Commission's plenary also has the task of preparing rules, regulations and procedures on the administrative, financial and budgetary matters for the various organs of the Authority. Besides the Enterprise, the Authority will consist of an Assembly, a Council and a Secretariat.

In Geneva, the Commission continued a rule-by-rule examination of draft rules of the procedure of the Assembly (LOS/PCN/WP.20) begun earlier. In compiling the draft rules, the secretariat relied on the rules of procedure of the General Assembly as well as those of the Conference on the Law of the Sea. The Commission has now completed a first reading of 82 of the 111 draft rules.

Land-Based Producers

Special Commission 1 is studying the problems likely to be encountered by "developing land-based producer States" once commercial production of minerals is begun in the international sea-bed area. Its work involves the identification of those developing countries likely to be affected by the exploitation of polymetallic nodules, the problems that might be encountered by those States, and measures that could minimize the difficulties they face. The Preparatory Commission is to submit its recommendations on these matters to the Authority when it is established.

In conducting its work, the Special Commission based itself on a working paper submitted by the secretariat (LOS/PCN/SCN.1/WP.2). Since the Special commission at its last session decided to concentrate on polymetallic nodules, the working paper profiles the four metals which are most likely to be extracted from the nodules (cobalt, copper, manganese and nickel). It discusses the importance of those metals to the economies of some developing countries and presents data on the world production, consumption, exports and imports of the metals.

An examination of the relevant mineral industries showed that, overall, the prospects were not bright. For example, the copper industry was facing a challenge from recycling and substitution. Developing countries were among the major producers and exporters of copper, while the major consumers were developed countries, some of whom were potential sea-bed producers.

The high growth rate achieved by nickel in the past was unlikely to be equalled in the future. Nickel from sea-bed nodules would compete with the developing countries' supply. Land-based reserves of cobalt in developing countries were large, and any new production from sea-bed nodules would have a great impact on the market.

The Special Commission also discussed the remedial measures to assist those countries which would be affected. While in the earlier session the emphasis had been on possible compensatory measures, other measures were given equal importance in Geneva. These were: structural adjustment assistance to the affected developing land-based producer States, assistance for the maintenance of viable production and export capacity, promotion of trade, commodity agreements, buffer stocking and commodity development measures. Participants also emphasized fostering an indigenous industrial base in the developing countries themselves, increasing trade among the developing countries, acquisition of technology, and diversification of the economies of developing countries.

The Special Commission, aware of the importance of timely and reliable statistics for its work, asked the Secretariat to continue to collect, process and update them.

The Enterprise

The mandate of Special Commission 2 concerns the "early entry into effective operation of the Enterprise", and the taking of certain steps on behalf of the Enterprise, which can only function after the Convention comes into force. As an organ of the Authority responsible for carrying out mining activities in the international sea-bed area, the Enterprises is expected to be financially independent and to operate on sound commercial principles. It may undertake exploration, exploitation, transport, processing and marketing activities, either on its own or through joint arrangements with other entities.

So that the Enterprise will not fall behind the pioneer investors during the interim period before the Convention comes into force, the Conference on the Law of the Sea adopted Paragraph 12 of Resolution II of the Final Act, imposing obligations on pioneer investors and certifying States which would benefit from the interim regime. The obligations are to ensure that the necessary funds, technology and expertise will be avaiable to the Enterprise when it begins operations in competition with others in the international sea-bed area.

In Geneva, the Special Commission had before it two working papers prepared by the Secretariat on start-up requirements and preparatory measures for the Enterprise, and on the possibility of joint ventures (LOS/PCN/SCN.2/WP.2 and WP.3).

The secretariat paper on preparatory measures states that by a conservative estimate, the Enterprise would need an initial staff of 30, including senior managers, engineers, scientists and a lawyer. It would take nearly two years to put the initial core staff into place. After its plan of work was approved by the Authority, the Enterprise could negotiate to acquire technology, let out contracts, enter into legal agreements, and raise the financing required. "Under favourable conditions, the Enterprise would start to function in the third year after entry into force of the Convention and would be ready to enter the pre-investment stage of operations in the fifth year", according to the secretariat paper.

The Commission had a responsibility under Resolution II to exercise judgement as to the likely future pace of activities by registered pioneer investors, and to anticipate the likely operational decisions of the management of the Enterprise. If there was evidence that pioneer investors were moving swiftly towards commercial exploitation, the Commission would need to consider taking action on behalf of the Enterprise.

Elaborating on the contents of the Secretariat's paper, Satya Nandan, Special Representative of the Secretary-General on Law of the Sea Matters, stressed the need to establish a consultative mechanism involving the Preparatory Commission, the pioneer investors and the certifying States, in order to assure their cooperation during the preparatory period. He also spoke of the need to have a senior management team in place as soon as possible in order to expedite the planning work. The year before the entry into force of the Convention would be crucial for the establishment of the Enterprise, the said.

In discussing the start-up requirements for the Enterprise, the Special Commission decided that there was a need for a detailed technical examination and a need to plan an elaborate structure and organization for the Enterprise. As in its previous session, the Special Commission emphazied the need to establish the Enterprise "with a minimal and flexible arrangement that would enable it to respond to favourable operating circumstances".

During the earlier session in Kingston, the Special Commission's Chairman had stated that "given the state of the world's mineral market, a joint venture appeared to be the most feasible for the first project of the Enterprise". At the Geneva session, while the possibility of a joint venture was not ignored, delegations emphasized the need to examine other operational options, such as the Enterprise carrying out operations in the international sea-bed area directly.

The Sea-bed Mining Code

The sea-bed mining code, which Special Commission 3 has the task of drafting, is to be a day-to-day working instrument of the Authority. It will be a set of rules, regulations and procedures on exploration and exploitation of minerals from the sea-bed. The physical uncertainties and the uniqueness of sea-bed mining are special features which would have an impact on the content of regulations. While some of the rules could be drafted now, others would depend upon technical and practical experience that remains to be gained. Since the dredging of nodules from the sea-bed is very different from mining on land, national regualtory practice provides little guidance to the Special Commission.

The Special Commission has agreed that the regulations to be elaborated should be flexible in their application, but still provide for stability. They should strike a balance between the interests of the Authority to retain "effective control" over the international sea-bed area and the interests of the operator to successfully complete its operation. There was also general support for the idea that the mining code should be comprehensive, containing regulations which could be read independently of the Convention and its annexes.

In Geneva, Special Commission 3 worked on the basis of a background paper prepared by the secretariat on exploration and exploitation of the sea-bed (LOS/PCN/SCN.3/WP.1). In particular, it discussed the question of applications for Authority approval of work plans of entities ready to begin work on the sea-bed.

The body faced no difficulties regarding the right to apply to the Authority for approval of plans of work for activities in the sea-bed. The right could be exercised by the Enterprise, State Parties, or natural or juridical persons which possess the nationality of State Parties or are effectively controlled by them. There was no agreement, however, on the method of submission of applications by private enterprises. While some delegations maintained that those entities could only apply through their respective Governments, others said that keeping in mind the difference in economic systems, non-state entities should be allowed to submit their applications directly.

Law of the Sea Tribunal

The Preparatory Commission has been asked to make practical arrangements for the establishment of the International Tribunal for the Law of the Sea, which is to deal with disputes relating to all aspects of the Law of the Sea. The Commission's recommendations will be submitted to a meeting of State Parties to the Convention. The Tribunal, which is to have its seat in Hamburg, the Federal Republic of Germany, is a vital part of a comprehensive dispute-settlement mechanism envisaged by the Convention. It will have to begin work as soon as possible after the Convention comes into force.

During the previous session, Special Commission 4 had requested the secretariat to prepare a set of draft rules of procedure for the Tribunal and asked that the rules of the International Court of Justice should be followed as closely as possible, except in cases where there were no clear precedents in the rules of the Court.

In Geneva, Special commission 4 had before it a set of 134 draft rules (LOS/PCN/SCN.4/WP.2) submitted by the secretariat. The draft is divided into the four parts: the composition and functioning fo the Tribunal and its registry, the proceedings in disputes, the organization and functioning of the Sea-Bed Disputes Chamber (which would function as a "court within a court"), and advisory proceedings.

The Special Commission began an article-by-article reading of the draft rules and completed a first reading of the first draft rules 1-30, which deal with the membership of the Tribunal and its various organs, election of its President from among the members, the Sea-Bed Disputes Chamber and the special Chambers.