The Area, and the Parallel System of Mining

That is the parallel system in one sentence: two tracks running side by side. Track one is the Enterprise, mining for mankind. Track two is States and their sponsored companies, mining for themselves under contract with the Authority.

Why it was designed that way. The developing States wanted all mining done by the Enterprise, so that the benefits went to everybody. The industrialised States, which had the technology and the capital, wanted access for their own companies. Neither would accept the other's model, and the parallel system was the compromise: both, at once, on terms that fund the first from the second.

Article 153(3) to (6) carry it out: activities are conducted in accordance with a formal written plan of work drawn up in accordance with Annex III and approved by the Council after review by the Legal and Technical Commission; the plan of work has the form of a contract for entities under paragraph 2(b); and the Authority exercises the control over activities necessary to secure compliance.

Article 155 provides for a review conference and article 158 for the organs.

The banking system: Annex III article 8

This is the device that makes the parallel system work, and it is the provision to know by name.

Annex III article 8, Reservation of areas. Each application, other than one submitted by the Enterprise or by other entities for reserved areas, shall cover a total area, which need not be a single continuous area, sufficiently large and of sufficient estimated commercial value to allow two mining operations. The applicant shall indicate the coordinates dividing the area into two parts of equal estimated commercial value and submit all the data obtained by him with respect to both parts; for polymetallic nodules the data must relate to mapping, sampling, the abundance of nodules and their metal content. Within forty-five days of receiving the data the Authority shall designate which part is to be reserved solely for the conduct of activities by the Authority through the Enterprise or in association with developing States, and that designation may be deferred for a further forty-five days if an independent expert is asked to assess whether all the required data have been submitted. The area designated becomes a reserved area as soon as the plan of work for the non-reserved area is approved and the contract is signed.

Read what that actually requires. The prospector does the surveying, at his own cost. He must find enough for two operations, not one. He must split it into halves of equal estimated commercial value, and he must hand over all his data on both halves. And the Authority, not the prospector, chooses which half is reserved. Every incentive to reserve the poorer half is removed, because the applicant does not get to pick.

Annex III article 9, activities in reserved areas: the Enterprise may decide whether to carry out activities in a reserved area, and if it does not, the developing State that applied, or a person sponsored by it, may.

The other Annex III provisions. Article 3 covers prospecting, exploration and exploitation; article 4 the qualifications of applicants; article 5 the transfer of technology; article 6 the approval of plans of work; article 10 preference and priority among applicants; article 11 joint arrangements; article 12 activities carried out by the Enterprise; article 13 the financial terms of contracts; article 17 the rules, regulations and procedures of the Authority.

The principles of exploitation

Article 150 sets out the policies relating to activities in the Area: they shall be carried out so as to foster healthy development of the world economy and balanced growth of international trade, and to promote international cooperation for the overall development of all countries, especially developing States, with a list of objectives including the development of the resources of the Area, orderly and safe development, expansion of opportunities for participation, and the protection of developing countries from adverse effects on their economies.

Article 151 deals with production policies, article 152 with the exercise of powers and functions by the Authority, requiring it to avoid discrimination while permitting special consideration for developing States.

Article 187 gives the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea jurisdiction over disputes concerning activities in the Area, and articles 186 to 191 set out its composition and powers, including the giving of advisory opinions at the request of the Assembly or the Council.

The 1994 rewrite

The part of the story that explains why the Convention took twelve years to enter into force.

The objection. Part XI as adopted in 1982 required mandatory transfer of technology, imposed production limits to protect land-based producers, gave the Assembly wide powers on a one-State-one-vote basis, and obliged States Parties to fund the Enterprise. The industrialised States, which held the technology and would have paid, refused to ratify, and without them the regime could not work.

The solution. The Secretary-General convened informal consultations from July 1990, and they produced the Agreement relating to the Implementation of Part XI of the United Nations Convention on the Law of the Sea of 10 December 1982, adopted on 28 July 1994 and in force on 28 July 1996. It consists of ten articles dealing mainly with procedural matters, and an Annex which is where the substance is.

What it changed. It provided that the Agreement and Part XI are to be interpreted and applied together as a single instrument, and that in the event of inconsistency the Agreement prevails. It removed the mandatory transfer of technology. It replaced the production limitation with market principles. It made the Enterprise operate initially through joint ventures rather than as an independent miner, and relieved States Parties of the obligation to fund it. And it strengthened the Council against the Assembly and introduced decision-making by chambered voting, giving the industrialised States a practical veto in the Council on questions of substance.

How to describe it accurately. The 1994 Agreement did not amend the Convention, because the Convention cannot easily be amended. It is a separate treaty that governs the application of Part XI and prevails over it. That is a striking piece of treaty engineering and it is worth naming as such, since [Termination and Suspension of Treaties] and the amendment provisions in [Making a Treaty: From Full Powers to Entry Into Force] show how hard the direct route would have been.

What survived. The non-appropriation rule in article 137, the common heritage principle in article 136, the Authority, the parallel system, and the banking mechanism in Annex III article 8. What was removed was the redistributive economics, not the structure.

India's position

India is a registered pioneer investor, and this is the fact that makes the topic concrete for an Indian student rather than theoretical. India holds an exploration area in the Central Indian Ocean Basin for polymetallic nodules under contract with the Authority, and it is one of the small number of States that have invested in deep seabed exploration over decades. The parallel system's second track, States Parties acting in association with the Authority under article 153(2)(b), is the track India is on.

A worked example

A company incorporated in State VV, and sponsored by State VV, surveys the deep ocean floor at its own expense and identifies a field of polymetallic nodules.

May it simply mine? No. Article 153(1) requires activities in the Area to be organised, carried out and controlled by the Authority on behalf of mankind as a whole, and article 153(2)(b) allows a sponsored national of a State Party to act only in association with the Authority.

What must it apply for? A plan of work, drawn up in accordance with Annex III and approved by the Council after review by the Legal and Technical Commission, taking the form of a contract under article 153(3).

What must the application cover? Under Annex III article 8, a total area sufficiently large and of sufficient estimated commercial value to allow two mining operations, not one.

What must it hand over? The coordinates dividing the area into two parts of equal estimated commercial value, and all the data it has obtained on both parts, including, for nodules, mapping, sampling, abundance and metal content.

Who picks the half that is reserved? The Authority, within forty-five days, extendable by another forty-five if an independent expert is asked whether all required data were submitted. The company does not choose, which is what stops it reserving the worthless half.

Who mines the reserved half? The Enterprise, or the Authority in association with developing States; and under Annex III article 9, if the Enterprise decides not to, a developing State that applied or a person sponsored by it may.

What does State VV owe as sponsor? Responsibility to ensure that activities are carried out in conformity with Part XI, under article 139, together with liability for damage caused by a failure to do so.

If a dispute arises with the Authority? The Seabed Disputes Chamber of the International Tribunal for the Law of the Sea has jurisdiction under article 187.

Would any of this have applied in 1985? In form yes and in substance no. Part XI as adopted in 1982 was rewritten by the 1994 Agreement, which prevails in the event of inconsistency, so the mandatory technology transfer and the production limits the company would have faced no longer apply.

Distinctions table

What it does NOT mean

The parallel system is not a choice between two regimes. Both run at once, and the second funds the first.

The applicant does not choose which half is reserved. The Authority designates it within forty-five days, on the applicant's own data.

The 1994 Agreement did not amend the Convention. It is a separate treaty applied together with Part XI as a single instrument, prevailing where they are inconsistent.

The common heritage principle was not abandoned in 1994. Articles 136 and 137, the Authority, the parallel system and the banking mechanism all survived; the redistributive economics did not.

Deep seabed mining is not yet happening commercially. Exploration contracts exist, including India's; production does not, which is why so much of this machinery is untested.

Limits and criticism

The Enterprise has never operated. The 1994 Agreement made it work initially through joint ventures and relieved States of the obligation to fund it, so track one of the parallel system, the track that mines for mankind, exists on paper and not at sea.

The 1994 rewrite reversed a bargain. The developing States accepted Part XI's economics in exchange for the rest of the Convention, and then had to accept the removal of those economics as the price of the Convention entering into force at all. Whether that was realism or a lesson about who sets the terms is a fair question for an essay.

The environmental questions were not settled in 1982 and are the live ones now. Article 145 requires the necessary measures to ensure effective protection of the marine environment from harmful effects, and what those measures are, for an ecosystem that is barely surveyed, is the central controversy in the Authority's current work on exploitation regulations.

Quick revision

Article 156 and 157: the International Seabed Authority, the organisation through which States Parties organise and control activities in the Area. Organs: Assembly (159 to 160), Council of thirty-six (161 to 165) with the Legal and Technical Commission and Finance Committee, Secretariat (166 to 169), and the Enterprise (170, Annex IV).

Article 153, the parallel system: activities organised, carried out and controlled by the Authority on behalf of mankind as a whole, and carried out (a) by the Enterprise and (b) in association with the Authority by States Parties, State enterprises or sponsored natural or juridical persons. Plans of work take the form of a contract, approved by the Council after review by the Legal and Technical Commission.

Annex III article 8, the banking system: every application must cover an area large enough and valuable enough for two mining operations, divided into parts of equal estimated commercial value, with all data on both; the Authority designates the reserved part within 45 days, extendable by 45; it becomes reserved when the plan of work for the other part is approved and the contract signed. Annex III article 9: the Enterprise, or a developing State, works the reserved area.

Articles 150 to 152: policies, production and the exercise of the Authority's powers. Articles 186 to 191: the Seabed Disputes Chamber.

The 1994 Implementation Agreement, adopted 28 July 1994, in force 28 July 1996: applied with Part XI as a single instrument and prevailing on inconsistency; removed mandatory technology transfer, replaced production limits with market principles, made the Enterprise work through joint ventures, relieved States of funding it, and strengthened the Council with chambered voting.

India is a registered pioneer investor with an exploration area in the Central Indian Ocean Basin.

Test yourself

1. What is the parallel system?

The scheme in article 153(2) by which activities in the Area are carried out on two tracks at once: by the Enterprise, which is the Authority's own mining organ acting for mankind as a whole, and, in association with the Authority, by States Parties, State enterprises or natural or juridical persons possessing the nationality of States Parties or effectively controlled by them, when sponsored by such States. All of it is organised, carried out and controlled by the Authority on behalf of mankind as a whole under article 153(1), and the second track operates through plans of work in the form of contracts approved by the Council.

2. Why was the parallel system adopted?

Because neither side would accept the other's model. The developing States wanted all deep seabed mining done by the Enterprise so that the benefits of the common heritage went to everybody. The industrialised States, which held the technology and the capital, wanted access for their own companies and would not fund an international monopoly. The parallel system runs both models simultaneously, and the banking mechanism in Annex III article 8 makes the commercial track supply the sites for the international one.

3. Explain the banking system.

Under Annex III article 8, every application other than one by the Enterprise or for a reserved area must cover a total area, not necessarily continuous, sufficiently large and of sufficient estimated commercial value to allow two mining operations. The applicant must indicate coordinates dividing it into two parts of equal estimated commercial value and submit all the data he has obtained on both parts, which for polymetallic nodules must relate to mapping, sampling, abundance and metal content. Within forty-five days the Authority designates which part is reserved solely for activities by it through the Enterprise or in association with developing States, extendable by a further forty-five days if an independent expert is asked to assess the data. The reserved area takes effect when the plan of work for the non-reserved area is approved and the contract signed. Because the Authority and not the applicant chooses, the applicant has no incentive to bank the worthless half.

4. What did the 1994 Agreement change, and what did it leave alone?

It removed the mandatory transfer of technology, replaced the production limitations designed to protect land-based producers with market principles, provided that the Enterprise should operate initially through joint ventures and relieved States Parties of the obligation to fund it, and strengthened the Council against the Assembly with chambered voting that gives the industrialised States a practical veto on questions of substance. It left alone the common heritage principle in article 136, the non-appropriation rule in article 137, the Authority itself, the parallel system in article 153, and the banking mechanism in Annex III article 8. What was removed was the redistributive economics; the structure survived.

5. What is the relationship between the 1994 Agreement and the Convention?

The Agreement did not amend the Convention. It is a separate treaty, adopted on 28 July 1994 and in force on 28 July 1996, consisting of ten articles and an Annex in which the substance sits. It provides that its provisions and Part XI are to be interpreted and applied together as a single instrument and that in the event of any inconsistency the Agreement prevails. That device was used because amending the Convention directly would have been extremely difficult, and because the Convention could not enter into force in a form the industrialised States would ratify.

6. What obligations does a sponsoring State have?

Article 139 makes States Parties responsible for ensuring that activities in the Area, whether carried out by them, by State enterprises or by natural or juridical persons of their nationality or under their effective control, are carried out in conformity with Part XI, and provides for liability for damage caused by a failure to carry out that responsibility. That is why article 153(2)(b) requires sponsorship at all: the sponsoring State is the point at which the international system reaches a private company, and the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea has jurisdiction over disputes concerning activities in the Area under article 187.