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Coming soon? Updates on the Latest Round of Negotiations of the Draft Deep-sea Mining Regulations: Environmental Considerations

On March 29, 2024, the International Seabed Authority’s (“ISA”) Council concluded the first part of its 29th Session continuing the negotiations and drafting of the Exploitation Rules, Regulations and Procedures (“RRPs”) for the deep seabed. Whilst some sections of the RRPs are starting to present a clear framework for future Contractors, notably with respect to the application process and review of the Plan of Work, other parts of the draft RRPs remain alarmingly incomplete and ambiguous. This article explores some of the topics relating to environmental considerations recently discussed by the ISA Council.

As background, the ISA, the autonomous international organisation established under the 1982 United Nations Convention on the Law of the Sea (“UNCLOS”), has been working on developing regulations for the exploitation of mineral resources in the Area since 2014.1 Our prior coverage of the deep seabed regulatory framework can be found at “Pivotal Year for Deep-sea Mining” and “Deep-sea Mining: Running out of time?”

Royalty mechanism

Currently, the draft RRPs provide for four main fees/costs that Contractors will be required to cover. There is a one-off application fee which is made when the application for a Plan of Work is submitted (draft Regulation 86). In addition, from the effective date of the Exploitation Contract and for the term of the Exploitation Contract (and any renewal of said Exploitation Contract), Contractors will need to pay an annual reporting fee (draft Regulation 84) and an annual fixed fee (draft Regulation 85). The mechanisms for the calculation of these annual fees have not yet been disclosed (or prepared). Finally, Contractors will be required to pay a royalty to the ISA from the date of commencement of Commercial Production “in respect of the mineral-bearing ore sold or removed without sale” (draft Regulation 64). The commencement of Commercial Production is currently defined as the moment when: (i) Contractors engage in Sustained Large-scale Recovery operations, i.e., operations which yield a quantity of materials sufficient to indicate that the principal purpose is large-scale production rather than production intended for information-gathering, analysis or the testing of equipment or plant; and (ii) Contractors have complied with certain requirements set out in the RRPs (for example providing an Environmental Performance Guarantee (draft Regulation 26) and a Feasibility Study (draft Regulation 25) to the ISA).

Whilst the concept of royalties is familiar, the ISA Council has discussed integrating into the system of the royalty mechanism environmental externalities. Environmental externalities are, put simply, the negative consequences on nature and biodiversity that result from human activity. Pricing environmental externalities allows ISA to account for and consider the long-term and/or indirect effect of a specific activity or project, such as greenhouse gas (GHG) emissions, waste, air pollution, and water pollution. In the context of the activities in the Area, one of the main concerns is the lack of data concerning the ecosystems within the Area, and therefore their valuation. It is important for any integration of environmental externalities in the royalty mechanism that there should be transparent and exhaustive data to support the valuation of any externalities identified by the ISA. There is, however, an additional concern. Environmental externalities consider the negative effects on the subject environment, in this case the deep seabed. Yet, the deep-sea mining industry is particular, in that there isn’t a single technology or one single method of recovering polymetallic nodules. There are a number of different collection methods being developed concurrently, which based on their specific designs, will have different impacts on the seabed fauna and sediment plumes. For this reason, instead of one universal tax for environmental externalities integrated into the royalty mechanism, it might be more practical and workable for pricing of the environmental externalities to be assessed during the review of the Plan of Work and determined in relation to the specific environmental impacts of the Contractor’s chosen technology.

Environmental considerations in the draft RRPs

Environmental considerations are central to the developments of the draft RRPs. Different actors are entrusted with different roles. First, the development of the draft exploitation (and exploration) RRPs is one way for the ISA to fulfil its duty under Article 145 of UNCLOS to develop the relevant rules for the protection of the marine environment. Second, the Contractors are required to apply the precautionary approach. Specifically, the Plan of Work must “give full effect to the precautionary principle” (draft Regulation 13(4)(e)). Third, the ISA, Sponsoring States, Contractors, and port States are also required to take necessary measures to apply the precautionary approach (draft Regulation 44).

The precautionary principle or approach is widely recognised in the international community.2 Its principal elements are also largely agreed: the need for environmental protection; the presence of threat or risk of serious damage and the principle that a lack of scientific certainty should not be used to avoid taking action to prevent that damage.3 Whilst it is more tangible for the ISA to take into account the precautionary principle when developing and applying the RRPs, the inclusion of the principle in the review process of an application for a Plan of Work adds some uncertainty. As mentioned above, the Commission (another organ of the ISA, tasked with reviewing applications), will need to consider whether the Plan of Work “gives full effect to the precautionary principle” (draft Regulation 13 or 13 Alt). There is however little consensus, or guidance, as to what giving full effect to the precautionary principle means from a Contractor’s perspective, and the principle has been the subject of criticism when used as the basis for regulatory frameworks. The practical application of the precautionary principle can include a wide range of measures, which will depend on the Contractor’s operations and the Sponsoring State’s requirements under national law. Furthermore, it is also unlikely to be a one-size-fits-all approach, as the proposed approach or measures will be technology/collection method-dependent.

Whilst the deep-sea mining community continues to monitor the development of the exploitation RRPs, some of the proposed regulations will require clarificatory language in the RRPs or separate non-binding guidance. Given the long timeframe provided to the Secretary-General and the Commission to review Plans of Work (over a year),4 it is essential that the Contractors and other applicants are given clear guidelines on the required contents of the applications.

1 The Area refers to the seabed and ocean floor and subsoil thereof, beyond the limits of national jurisdiction. UNCLOS, Part 1, Article 1.

2 See for example Convention on Biological Diversity (adopted 5 June 1992, entered into force 29 December 1993) 1760 UNTS 79, preamble; United Nations Framework Convention on Climate Change (adopted 9 May 1992, entered into force 21 March 1994) 1771 UNTS 107, article 3(3); Cartagena Protocol on Biosafety to the Convention on Biological Diversity (adopted 29 January 2000, entered into force 22 September 2003) 2226 UNTS 208, preamble paragraph 4, articles 1, 10(6), 11(8).

3 Sands, P. & Peel, J. (Eds). (2012). Principles of international environmental law, third edition. Cambridge University Press.

4 Draft Regulations 9 to 15.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.