Regulating ‘The Area’

2010 Photo Michael LODGE

Deputy to the Secretary-General and Legal Counsel at the International Seabed Authority, Michael Lodge, looks at the roadmap to developing a regulatory and fiscal framework for exploitation of the seabed beyond national jurisdiction, known as ‘the Area’.

Deep seabed mining (DSM) is a rapidly emerging frontier activity both in marine areas under national jurisdiction and beyond national jurisdiction. Under the 1982 United Nations Convention on the Law of the Sea (UNCLOS), the seabed beyond national jurisdiction, comprising some 54% of the global ocean floor, is known as ‘the Area’ and is subject to a special legal regime, whereby DSM in the Area is regulated through the International Seabed Authority (ISA).

The ISA is a unique international institution. It is the only international organisation established to administer a part of the global commons on behalf of mankind as a whole for the common good. It was established in response to an idealistic vision whereby the mineral wealth of the deep seabed could be shared by all countries, whether developed or developing, coastal or landlocked, as the common heritage of mankind. Not surprisingly, the realisation of such an idealistic vision has taken many years to bring to fruition and in some ways remains a work in progress.

UNCLOS entered into force in 1994. Since then, the ISA has established a comprehensive legal framework covering prospecting and exploration for three different types of mineral resources found in the deep seabed: polymetallic nodules, polymetallic sulphides and cobalt-rich crusts. The framework consists of regulations which set out the rules under which claims may be made, standard clauses for exploration contracts, which are designed to encourage due diligence in the conduct of exploration activities, and detailed technical guidelines and recommendations to assist contractors to comply with their contractual obligations.

Significantly…the majority of investment over the past five years has been from the private sector.

Based on this framework, the ISA has approved 27 contracts for exploration covering areas of the seabed in excess of 1.2 million km². Nineteen of these contracts have been approved since 2011, with eight having been approved since 2014 alone. Contractors represent States Parties to UNCLOS, state enterprises and private sector entities. Significantly, however, the majority of investment over the past five years has been from the private sector.

The next phase in developing the mineral resources of the Area is to develop a regulatory and fiscal framework for exploitation. An internationally competitive and efficient regulatory regime for exploitation is critical for potential investors to be able to make informed decisions to guide future investments in the DSM sector. Anticipating this, in 2014 the ISA embarked upon a process of stakeholder consultation on the development of a regulatory framework for mineral exploitation (the so-called ‘exploitation code’), culminating in the issue of two key consultation documents – the Draft Framework for the Regulation of Exploitation Activities and a Discussion Paper on the Financial Terms of Exploitation Contracts in March 2015. These documents, together with input from a workshop on mineral exploitation in the Area held in Singapore in June 2015, as well as the responses of stakeholders, were discussed during the twenty-first annual session of the ISA held in Kingston, Jamaica, in July 2015.

The key outcome of that meeting was agreement on a list of seven priority deliverables for the development of an exploitation code over the next 12-18 months. Most importantly, it was agreed that a ‘zero draft’ of the regulations for exploitation, including standard contract terms, should be produced by an expert working group by February 2016. This ‘zero draft’ is considered essential in order to provide a higher degree of legal certainty to facilitate investment decisions and define key exploitation rights, contract duration, size of permitted exploitation areas and related obligations, including basic environmental obligations. It was also agreed to develop a financial and economic model based on proposed business plans in order to help identify choices and options for financial terms and payment mechanisms during the exploitation phase.

In terms of environmental priorities, the key deliverables include the development of an environmental impact assessment process and a strategy for the development of regional environmental management plans. Recognising that adaptive management is a key tool for environmental protection, the ISA was requested to provide a discussion document identifying current policy options and key challenges for adaptive management, as well as a study of key environmental terms and definitions, such as “serious harm”.

(The) ‘zero draft’ is considered essential in order to provide a higher degree of legal certainty to facilitate investment decisions.

Other areas highlighted as priority deliverables include the development of a fully-costed data management strategy and technical implementation plan, as well as a preliminary study of the legal issues associated with international responsibility and liability.

In establishing these priority deliverables, the ISA noted that a complete exploitation code would need to evolve over time as more data and information become available, particularly in the areas of risk assessment and management and the progressive development of internationally recognised industry standards and practices. The latter in particular were recognised as being fundamental to the orderly development of a sustainable DSM industry and its regulation.

Finally, the ISA emphasised a continued commitment to transparency and stakeholder engagement in all aspects of the development of the exploitation code.

For more information, visit isa.org.jm.