Diving into the unregulated Deep Sea
Two years ago, the Pacific Island State of Nauru triggered a key treaty provision under the 1994 Implementation Agreement to UNCLOS, which required the International Seabed Authority (ISA) to finalise regulations governing deep seabed mining (DSM). The catch? The treaty provision required the ISA to finalise the regulations within 2 years. In the absence of a concluded mining code, States would be permitted to apply for exploitation licences.
On 9 July 2023, time ran out. Despite the deadline elapsing, and prolonged negotiations, there has been no adoption of exploitation regulations. So, what happens now?
In the absence of finalised regulations, States now have a green light to apply for exploitation licences (as opposed to exploration licenses). Though no applications have been received by the ISA to date, it remains unclear whether the ISA will permit mining to begin, despite the “two-year rule” expiring. A decision rendered by the ISA Council on 21 July 2023 reiterates that “commercial exploitation of mineral resources in the Area should not be carried out in the absence of Rules, regulations and procedures… relating to exploitation”.
Countries likely to lead the charge on exploitation include Nauru, India, Russia and Norway. Each is already exploring options for DSM, such as in the Indian Ocean which promises a bounty of nickel and cobalt. However, other States, including many who already hold exploration licences, are not as supportive. To date, 21 States have taken a position against DSM, including the Moratorium Alliance of Fiji, the Federated States of Micronesia, Palau and Samoa. The divergence of opinion stems from the fact the deep sea is one of the least explored territories on Earth, on one hand holding immense ecological significance that should not be prejudiced, and on the other hand, significant opportunities to access critical minerals necessary for the energy transition.
How the environmental impacts of DSM will be assessed, not much is publicly known. The ISA’s draft regulations on exploitation of mineral resources in the Area, which (in the absence of finalised regulations) govern applications for mining exploitation licences, require a “Plan of Work” which demonstrates an “effective protection of the Marine Environment, including biological diversity and ecological integrity”. It obligates States to provide an Environmental Impact Statement (EIS) to the ISA as a step on the path toward an exploitation licence. The EIS is to be prepared in accordance with applicable guidelines, standards and best practice – amorphous terms which provide little clarity to the market.
Amidst the ever-changing landscape of the energy and natural resources market, DLA Piper’s commitment to ESG places us as a leading advisor to both Sovereign States and clients in the international mining and mineral resources sector, including on unique issues like DSM. For further information, please contact Gitanjali Bajaj.