April 28, 1981

April 28, 1981 | Backgrounder on Energy and Environment

The Law of the Sea Treaty: A Review of the Issues

(Archived document, may contain errors)

138 April 28, 1981 THE LAW OF THE SEA TREATK A REVIEW OF THE ISSUES INTRODUCTION On March 9, 1981, the Third United Nations Conference on the Law of the Sea reconvened in New York City, anxious to complete seven years of delicate seabed negotiations. Before this tenth session began, however, the Reagan Administration announced its intention to extend negotiations through the u pcoming session in order that a full Ilpolicy review by the United States Government1' could be conducted.

The U.S. decision to continue negotiations is, in part, a response to criticisms raised by the public and private sector which question the ability o f the treaty to adequately defend vital U.S. economic interests in deep seabed mining as well as to protect sensitive technology necessary in accessing mineral nodules from the ocean floor. Additionally, critics have charged that the proposed text appears to contradict fundamental free market principles advocated by the United States, while favoring least-developed and Socialist bloc countries with capital'and political advantages over Western signatories.

The current negotiations, therefore, are in a stat e of diplomatic flux over the decision by the United States to extend the seabed talks but the current session is moving ahead under the direction of T.T.B. Koh of Singapore, elected as president of this session on March 13, 1981.

The purpose of this pape r is to briefly review past negotia tions and examine the basic controversies involving the current Law of the Sea Convention Text as prepared by the Ninth Session of the Third United Nations Conference on the Law of the Sea held last summer .in.Geneva, S w itzerland Participating nations have registered concern 2 BACKGROUND The earliest U.N.-sponsored Conference on the Law of the Sea was'held in 1958 under the direction of the International Law Commission. of seabed mineral exploitation, recognizing the fre e dom of states to explore and to exploit the seabed and subsoil in all areas seaward of territorial waters.'I1 This conference dealt principally with the question The legal discussion surrounding deep seabed exploitation began in earnest with a 1967 propos al by the Maltese ambassador to the U.N, requesting that the issue of deep seabed regulation be included on the agenda of the General Assembly.

The Note Verable submitted by the ambassador warned that uncontrolled exploitation of the seabed would lead to e ventual militarization of the ocean floor and allow the more technologic ally advanced nations greater access to the seabed at the expense of their less-developed counterparts that the ocean's floor and its wealth was the "common heritage of all mankind a nd, therefore, should be protected by international treaty from division among the states.

The primary desire of the United States at this time was to stave off the mounting wave of llcreeping jurisdiction'l the expanding claims of coastal states to increa singly larger terri torial jurisdictions seaward. Continued expansion threatened the closure of over one hundred vital straits to free passage, thereby disrupting customary law regarding freedom of the seas Malta further proposed Resolution 2467, passed o n December 21, 1968, officially established the Standing Committee on Peaceful Uses of the Seabed and the Ocean Floor Beyond the Limits of National Jurisdiction.

This Committee was charged with insuring that exploitation of the ocean's floor 'Ishould be carried out for the benefit of mankind as a whole taking into account the special interests of the developing countries If 2 The Committee was further instructed t o investigate and study the means whereby the ocean's wealth could be successfully accessed and developed. This mandate has largely been abandoned as the ongoing economic and political debate between the developed nations of the "Northll and the less-devel o ped nations of the tlSouthlf has superseded the desire for an open development of the ocean floor Theodore G. Kronmiller Oceanic and Atmospheric D.C., 1979 p. 19 U.N. Resolution 2467 as The Lawfulness of Deep Seabed Mining, The National Administration, De p artment of Commerce, Washington quoted in Kronmiller, p. 25 3 On December 17, 1970, the General Assembly of the United Nations voted 106 to 7, with 6 abstentions, to convene an official Law of the Sea Conference charge'd with: a broad range of related iss u es including those concerning the regimes of the high seas, the continental shelf, the territorial seas international straits fishing and conservation of the marine environment, the prevention of pollution and the [promotion] of scienti- fic research 3 Ov e r the next eleven years, the conference became clearly polarized between the bloc of developing nations the Group of 77 and the industrially developed nations of the West. This diplomatic struggle centered around the previously introduced notion of mankin d 's Ifcommon heritage" to the resources of the ocean's floor. The South maintained that the more technologically advanced nations of the North would I'disinherit'l the less-developed nations through exclusive exploitation of the seabed. Conse quently the I l disadvantagedll countries favored the establish ment of a deep seabed authority empowered to oversee and regulate every aspect of seabed development, insuring that profits be transferred to the developing nation The United States and other developed count r ies have constant ly reaffirmed the notion of "common heritage," but have insisted that access to the seabed be assured for both public and private mining interests, arguing that the free market system must be al lowed to operate on the ocean's floor unfe ttered.by artificial quotas and production constraints.

Throughout three separate conferences, issues of discussion have been couched in terms of the greater North-South debate.

Though both sides have sought compromises throughout, the Reagan Administrati on's decision to forestall further negotiations reflects the concern expressed by many that the current agreement makes too many concessions to the Third World at the expense of developed nations.

GUARANTEED ACCESS The United States is critically deficien t in domestic supplies of manganese, nickel and cobalt materials vital in the production of steel, and consequently important to the nation's economy and security. Traditional land-based sources of these precious minerals are politically unstable and subj e ct to increased inter national demand, causing shortages and ever-increasing prices U.N. Resolution 2750 as quoted in Kronmiller, p. 42 See Third United Nations Conference on the Law of the Sea, Official Records 1974 Art. 20, in Kronmiller, p. 54. 4 Indee d, current producers may exhaust all known land-based supplies of these minerals within the next fifty years.

The deep seabed regime currently under consideration does not guarantee U.S. access to these vital mineral resources and may ultimately deny their availability. The International Sea-Bed Authority would have sole responsibility in administering mining rights, a decision-making process which is likely to be highly politici~ed Consequently, a state's ability to secure mining plots is in direct relati o n to its position of influence in the Assembly and among its members.6 clause in the Assembly effectively eliminates any veto from the developed nations, thereby casting "serious doubt on assured access by developed states It7 The current one vote-one nat i on Secondly, the principal appendage of the Authority, the Enterprise, would operate in direct competition with private and state companies in a parallel system, further inhibiting free access to seabed minerals The Enterprise shall be the organ of the Au t hority which shall carry out activities in the Area directly pursuant to article 153, paragraph 2( a as well as transportation, processing and marketing of minerals recovered from the Area (art 170, para. 1 This dual structure would appear to encourage co mpetition between the Enterprise and the private mining sector, but in reality it acts to ensure the,Enterprise's competitive superiority.

The Enterprise would operate under Convention authority, making it the beneficiary of mandatory transfers of technolo gy and funds from the states and the inevitable recipient of political and economic favoritism vis-a-vis its institutional relationship with the Sea-Bed Authority (art 144, art. 171, para a Additionally, the countries of the Third World have intro- I duce d and supported placing a production ceiling on the amount of seabed minerals which may be extracted from the ocean's floor art 151, para. 2(b This plank of the Convention text is aimed at protecting land-based mineral producers, but it also ensures contin ued U.S. dependence on foreign supplies of strategic minerals by blocking open access to the seabed. Finally, the The International Sea-Bed Authority is the organization through which deep seabed mining would be administered and regulated.

Convention on The Law of the Sea-Informal Text, 2 September, 1980, Section 5, articles 156-158 (hereafter referred to as the DCLOS).

The Assembly would be the supreme legislative organ of the Authority to which all signatories belong. See DCLOS, articles 159 and 160 John Breaux, "The Diminishing Prospects for an Acceptable Law of the Sea Treaty," Virginia Journal of International Law, Winter 1979, Vol. 2, p 259 See the Draft 5 text prevents any'exploitation of non-manganese nodules until a comprehensive regime can be agr eed upon in the.distant future art. 151, para 3 and 4 In effect, the Group of 77 wishes to deny developed nations access to any additional mineral resources until an agreement satisfactory to the Third World can be construc ted.

It is questionable, therefore, whether the current Convention text protects the United States' and other developed nations right of access to the minerals of the seabed, now or in the future.

MANDATORY TECHNOLOGICAL TRANSFERS At the fifth session of the Conference, held in New York during 1976, Secretary of State Henry Kissinger agreed to the transfer of technology to the Sea-Bed Authority on three condi tions 1. That the United States be guaranteed access to the seabed and the mineral nodules thereon 2. IISuitable representation" in the Authority and its 3 various decision-making bodies be assured.

Production controls on deep sea mining be eliminated from the convention text.8 Kissinger warned at that time that the United States is many years ahead of any other [country] in the tec hnology of deep seabed mining, and we are in all respects prepared to protect our interests. If the seabeds are not subject to international agreement the United States can and will proceed to explore and mine on its Though Kissinger's conditions were lar g ely ignored, the notion of technological transfer was seized upon by the South and made a precondition to any development of the seabed. Repre sentatives of the Third World maintain that mandatory transfers of technology are necessary if the poorer countr i es are to share in a Law of the Sea Honorable Henry A. Kissinger, Secretary of State, Before the Foreign Policy Association, U.S. Council of the International Chamber of Commerce and U.N. Association of the U.S.A., New York City, April 8, 1976 (State Depa r tment Press Release No 162, April 8, 1976) as quoted in Kronmiller p. 72 A Test of International Cooperation," Address by the Ibid -9 P. 73. 6 the resources of the sea. More importantly, inexpensive technolo gical transfers are a vital component of the LO S agreement itself and underpin the developing world's plan for a "New International Economic Order If The North maintains that seabed technologies would be 'made available to Third World nations through the international market- place. Even so, the U.S. d e legation has conceded mandatory transfers to the Enterprise with the stipulation that seabed technologies not be made directly available to the developing nations (art 144, para. 2(b However, Third World and Eastern Socialist-bloc countries, through their participation in and control of the Authority will have indirect access to all trans ferred technologies, far below the market price. It is unclear therefore, how these transfers can be made 'Ion fair and reasonable termsff as stipulated by the United Sta t es under the current agreement and still protect producer rights of proprietorship (art 144, para. 2(b Additionally, the nature of mandatory transfers would have a profoundly negative impact on technological development in the seabed field, thereby underm ining a major U.S. interest in the development and protection of such high level technologies.

Finally, any mandatory transfer of technology in the regime would have a long-range and pervasive impact on future dealings with Third World countries in other, non-seabed related areas.

The Group of 77 considers technology to fall within the common heritage of mankind and hence all nations "have the right of access to technology in order to improve the standard of living of their people 1111 Any agreement by the United States to such an open-ended technological transfer sets the stage for a gradual eroding of the right to protect and competitively market highly valuable technologies in the future. Such a precedent could prove costly to the U.S. due to the nation ' s economic reliance on technological development and foreign sales, and could undermine the negotiating position of the United States in similar conferences in the future i PRODUCTION CEILINGS It is in the interest of land-based producers to seek limits o n the amounts of minerals which may be extracted from the ocean's lo l1 See Susan P. Woodard, "The Third World: New Realities and Old Myths,"

Backgrounder No. 114, The Heritage Foundation, March 18, 1980, p 5. See United Nations Conference on Trade and Development, Report of the Intergovernmental Group of Experts on an International Code of Conduct on Transfer of Technology on its Fifth Session , Annex I, U.N. Document TD/AC. 1/15 (1978), Preamble, art. 2 (hereinafter cited as Code), as quoted in Breaux, p. 263. 7 floor. Less-developed, primary producers fear that uncontrolled seabed mining would have a significant impact on their economies as ma rkets for mineral commodities .became more competitive, and sales to previously larger consumer-states fall off.

Mandatory production ceilings run contrary to stated U.S objectives for several reasons: first, availability of vital minerals would be artific ially limited, leaving the notion of guaranteed access seriously flawed. Second, with a reduced number of mine sites available, selection would be left to the Authority; the selection would then be highly politicized and weighted in favor of Third World n a tions (arts. 148, 159, 160 161, 162 Third, the maintenance of international production ceilings in this area could set a precedent on raw material production quotas contrary to U.S. interests. As the largest consumer of raw materials in the world, the Uni ted:.States could face artificial shortages of other important resouk'ces as producers attempt to manipulate the market to their advantage.

By severely restricting the amount of minerals which may be removed from the seabed, the United States will not be a ble to make significant advances toward global resource independence the U.S. will institutionalize its continued dependence on Third World and potentially unstable producers of strategic minerals Rather With the number of mine sites limited by the produc t ion ceiling, applicants will inevitably be screened and selected by the Authority based on criteria slanted in favor of the Third World. The "effective participation of developing states" is to be ensured by the Authority and the selection of mining sites and contractors would reflect that directive, thereby running contrary to the U.S.-held policy of unrestricted access to the seabed art. 148).

Thirdly, the instituting of international production ceilings in the seabed regime sets a potentially dangerous precedence which may have spillover effects in other, non-seabed areas.

There is little to support the notion that the seabed regime will be viewed as a unique international agreement by the Third World.

To the contrary, developing nations view the seabe d regime as a legitimate precedence on which to base demands for similar multi national agreements in other areas.12 l2 Richard G. Darman, "Precedential Implications of a Deep Seabed Mining Regime," Testimony before the Subcommittee on Oceanography of the U.S House of Representatives, Committee on Merchant Marine and Fisheries August 17, 1978 p. 5. a GOVERNING THE SEABED REGIME One of the most questionable aspects of the proposed conven tion is the Treaty's system of governance. The basic ideological econo mic battle between the North and South which permeates the negotiations becomes most apparent in this portion of the accord.

The developing nations of the world view a realignment of political power as absolutely essential in bringing about the New Interna tional Economic Order Much of the current leader ship of the Third World maintains that representation based on economic or technological contributions should be rejected and that a "true democracyll among nations should take its place.

The North is willi ng to provide poorer nations with economic assistance through bilateral aid, but remain opposed to any com pulsory measures as imposed by an international regime. In par ticular, developed nations do not favor a binding agreement at the international leve l which would reduce their sovereign political power vis-a-vis the South or remove the opportunity to Ifvetoil unfavorable policies contrary to their national interests.

The Law of the Sea conference text proposes establishment of a bicameral system within the Authority: an Assembly made up of all participating states and an Executive Council chosen among the Assembly and representing the various political/economic geographic groups found within the Assembly (art. 158, para 1 As outlined in article 159, th e Assembly will operate on a one member-one vote basis with decisions made by a two-thirds majority of the members present and voting (art. 159, paras. 5 and 6 The Assembly, as the sole organ of the Authority consist ing of all the members, shall be consid e red the supreme organ of the Authority to which the other principal organs shall be accountable (art 160, para. 1 The Assembly is empowered to elect the members of the Council set policy for the Authority and its operating appendage, the Enterprise, as we l l as determine the IIAssessment of the contribu tions of members to the Authority based upon the scale used for the regular budget of the United Nationsif (art 160, para l(a e The United States and its allies will face a body dominated by countries of the Third World without the opportunity to exercise any veto power (as is the case currently in the United Nations while at the same time providing a majority of the technology and a large share of the capital necessary to operate the Authority and the Enterp rise.

Representation on the Council, which acts as the executive chamber of the Authority, is clearly designed to benefit Third 9 World and Socialist-bloc countries at the expense of the developed world. The United States is not guaranteed a permanent seat on the Council, but must compete with the other developed nations for representation, seriously jeopardizing Western attempts at collec- tive action on the Council members 1 2 3 4 5 The Council membership is elected out of the Assembly body and divided i n to four categories of representation totaling 36 Four members from among the eight states which invested the largest amounts of capital, Ilincluding at least one nation from the Eastern (Socialist European region Four members from among the largest consum ers of land-based raw materials to be derived from seabed mining, Itand in any case one state from the Eastern Socialist) European region."

Four members from among the major exporters of the affected minerals, including two developing nations whose economy is heavily dependent on the affected minerals Six members from among the developing States."

Eighteen members selected geographically to include Africa, Asia, Eastern Europe (Socialist Latin America, Western Europe, and othersll (art 161 para. 1 Clearly, the United States and other developed nations are disproportionately underrepresented vis-a-vis the developing and Socialist-bloc nations tion is codified by the Treaty and will continue unchanged into the future. By failing to secure permanent represent a tion on the Council, the United States has agreed to provide capital and technology to an organization in which it will be unable now or in the future, to exert proportional influence This distorted formula of representa Equally disturbing is the automati c review to be conducted fifteen years from 1 January of the year in which the earliest commercial production commences...Il (art. 155, para 1, 2 The purpose of this review conference is to ascertain whether the policies initiated in the previous fifteen y ears have successfully achieved the goals of the convention as interpreted by the Assembly.

If not, the Assembly is empowered to revise the system of seabed management, binding upon all parties by a two-thirds majority vote of the Members (art 155, para. 4 Not only is this poten tially disastrous for the United States and its allies, but it sets an international precedence by eliminating the right of preemptive veto and encroaches on the doctrine of national sovereignty 10 This proposed system of governanc e fails to provide the United States with adequate representation in either of the two governing bodies and endangers future U.S. access to vital sea bed minerals.

ECONOMIC REDISTRIBUTION THROUGH THE AUTHORITY President Boumedienne of Algeria officially voiced the Third The intent World's call for a '!New International Economic Order" at the Sixth Special Assembly of the United Nations in 1974 of this Innew ordert1 i s to facilitate a global redistribution of wealth from the developed nations of the North to the less developed nations of the South through the restructuring of present international political, commercial and economic organi zations, giving the poorer na tions preferential treatment as well as access to advanced technologies and commodities protection.

The proposed Law of the Sea text is viewed by nations of the Third World as the primary vehicle through which this redistribu tion of wealth may be initiate d. In 1974, at the U.N. Conference on the Law of the Sea, Colombia maintained The International Authority should be a democratic body responsible for bridging the gap between the rich countries and the poor countries and establishing a fairer and more jus t system of international relations Annex 111, art 13, para. 2 As outlined in Annex 111, Article 12, the Draft text requires private companies to provide the Enterprise with a large amount of entry capital, filing fees, and a substantial annual Ilfinancial contributioni1 for every year the particular company operates on the seabed A fee shall be levied for the administrative cost of processing an application for a contract of exploration and exploitation and shall be fixed at an amount of 50,000 per applica tion A contractor shall pay an annual fixed fee of $1 million from the date of entry into force of the contract Annex 111, art. 13, para. 3).

In addition, the Authority is empowered to tax the profits of these private mining concerns up to seventy percent of net profits during the second year of operation; these funds would ear marked to finance Enterprise operations c0nducted.h tandem with deve'loping countries (Annex 111, art. 13. para. 4 The Group of 77 maintains that these transfers are the means throu g h which the notion of common heritage of the seabed may be protected by allowing all states "fair and equal" access to the ocean floor thus avoiding any technical or economic advantage by the developed 11 nations. In reality, these transfers represent a m ajor step for ward in the Third World's quest for .an arbitrary redistribution of global wealth.

The system of taxation as outlined by the text could have serious repercussions for the United States in several areas.

First, the excessive use of corporate taxes by the Authority may discourage private development of the seabed floor, jeopardizing U.S. access to the strategic minerals found in the ocean and perpetuating the nation's dependence on unstable foreign sources tax provisions is extremely dangerous .

Authority to tax U.S. companies operating on the seabed will have a spillover effect in non-seabed development areas .where the Third World has a growing interest, such as the Antarctic and outer space Secondly, the international precedence set by the Tr eaty's Allowing the Seabed Third, by codifying the right of an international organization to tax private companies, the Western concept of the free market is seriously jeopardized and may lead to similar taxation proce dures in other U.N. bodies like UNES CO and WHO, two organizations dominated by the Third World which have considered similar taxation schemes.

ACHIEVING L.O.S. GAINS The current Law of the Sea proposal contains several positive aspects with regard to protection of navigation rights through i nternational straits, setting territorial limits at twelve mile's and establishing economic zones to 200 miles. Additionally, the Treaty provides for a cooperative international fisheries regime aimed at safeguarding and conserving migratory and endangere d species as well as providing protection for marine mammals and other components of the fragile marine environment.13 The above benefits can be equally obtained through bilateral relationships with the affected nations or by negotiating specific agreement s through the U.N. General Assembly or existing organiza tions such as the U.N. Environmental Programme, the International Civil Aviation Organization, and the Inter-Governmental Marine Consultive Organization to name a few. To base approval of the Treaty o n fears of losing few benefits while accepting a number of potentially harmful provisions would be ill-advised and possi bly worse than no treaty at all l3 See DCLOS text, Parts 11-VI1 and XIII-XIV 12 CONCLUSION The proposed Law of the Sea Convention is a n ambitious attempt to administer, regulate and adjudicate two-thirds of the earth's surface, with correspondingly profound impact on the nations' commercial, environmental, and defense communities. As such, it deserves a careful review by the new Administ ration.

The present Treaty text contains a number of benefits, but At a time when continued access to strategic minerals is does not justify the disadvantages accrued through its implementa tion. questionable, the United States should support a regime whic h encourages fair and open exploitation of the seabed floor rather than one which penalizes private investment and development.

Moreover, the political and economic implications of the agreement will have a long-term, negative effect on the United States' growing relationship with the countries of the Third World An international agreement on seabed mining is necessary and long overdue not outweigh the future implications of an agreement unfairly constructed in favor of one portion of the international co m munity at the expense of another But the risk of losing this particular treaty does Any precedence set in the Law of the Sea negotiations may have sweeping impact on other, non-seabed related negotiations in the future It would be naive to assume that a c oncessionary approach to the Third World by the United States would be viewed as unique to the Law of the Sea. Rather, it may set the tone of international negotiations for years to come.

Guy M. Hicks Policy Analyst

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