The shift to clean energy has been driving a huge increase in the requirements for critical raw materials. International energy analysts consider that mineral demand for use in electric vehicles and battery storage is a major force, expected to grow at least thirty-fold by 2040.[1]
The automotive industry is concerned that there are insufficient resources on land to ensure adequate supplies of the minerals needed to make the battery cathodes and anodes. The deep seabed beyond national jurisdiction is rich in polymetallic nodules, mineral concretions containing four essential battery metals - cobalt, nickel, copper and manganese. The enormous quantities of nodules on the deep seabed (around 21 billion tonnes in the Clarion-Clipperton zone alone) are seen as a potential solution to the disruption in critical raw materials supply chains. The Area falls under the regulatory framework established by the United Nations Convention on the Law of the Sea (UNCLOS), and more specifically Part XI of UNCLOS and the 1994 Agreement relating to the Implementation of Part XI of UNCLOS (the "Part XI Agreement). The International Seabed Authority (ISA) is responsible for elaborating on the rules and regulations, and considering and approving plans of work for activities in the Area.
Over the last decade, the ISA's executive organ, the Council, has been working to elaborate and adopt rules, regulations and procedures (RRPs) for exploitation activities in the Area. Despite mounting international pressure, the Council has failed to finalise the RRPs for exploitation by the deadline of 9 July 2023, following the trigger of a "two-year rule" to complete the RRPs by Nauru in 2021. The second part of the much anticipated 28th session of the Council concluded on 21st July 2023 without any further resolution on the RRPs for exploitation activities. The "two-year rule" provides that, should this situation arise, i.e. if the RRPs for exploitation are not finalized within two years of it being invoked, the Council "shall nonetheless consider and provisionally approve" a plan of work for exploitation activities.
International law
Given it is unlikely that the RRPs for exploitation activities will now be completed before July 2024,[2] the pressure is now on the Council to provide a clear steer on how it will "consider and provisionally approve" plans of work. This obligation is enshrined in paragraph 15(c) of the Annex to the Part XI Agreement (Subparagraph (c)). Undoubtedly aware of this, the Council adopted two decisions at the end of its latest session: one decision setting out the new timeframe for the completion of the RRPs, and the other stating that, if an application for an exploitation licence is submitted before the exploitation regulations have been adopted, it will consider as a matter of priority the understanding and application of Subparagraph (c).[3]
Subparagraph (c) has been termed a "legal loophole" as it allows companies to apply for plans of work for exploitation activities in the absence of RRPs, thus bypassing any opposition to exploitation activities holding back the completion of RRPs. However, the wording of Subparagraph (c) is very high-level and does not provide any guidance on: (i) the precise meaning of "consider and provisionally approve"; or (ii) the procedure and criteria for such consideration and provisional approval. As a result, there has been intense debate within the Council and the international community as to the proper interpretation of the Council's obligation.
In March 2023, the Council adopted a decision whereby it concluded that Subparagraph (c) did "not impose an obligation on the Council to automatically approve a pending application for a plan of work."[4] The same decision also noted that the Legal and Technical Commission (LTC), an independent expert subsidiary organ involved in the approval process for plans of work, did not have any obligation to make recommendations regarding a plan of work.[5] However, the Council's current position on Subparagraph (c) suggests there is much more disagreement within the Council on its powers and the correct interpretation of Subparagraph (c), which would render an immediate and practical use of this "legal loophole" unlikely.
The first area of disagreement is whether the Council has a legal basis to postpone the consideration, and/or the provisional approval of a pending application of a plan of work under Subparagraph (c) and the circumstances in which it might do so.
The delegations which found that the Council does have a legal basis to postpone focused on the requirement to ensure compliance with the Council's obligations under UNCLOS. The consideration and provisional approval of a plan of work needs to be based on, inter alia, the provisions of UNCLOS. Therefore, for those delegations, if the Council cannot ensure compliance with UNCLOS because all ramifications from consideration and/or approval of a plan of work cannot currently be assessed, the Council should decide to postpone the consideration or provisional approval of a pending application.
The primary concern is the UNCLOS provisions related to the protection of the marine environment. The delegations argue that there is a substantial lack of scientific knowledge as to the negative impacts of deep seabed mining on the environment, and thus compliance with those provisions is currently impossible. Furthermore, the same delegations are concerned that the absence of an agreed form for the provisionally approved plan of works would require the Council to postpone consideration and refer the question to the International Tribunal for the Law of the Sea (ITLOS).[6]
Louise Woods, Partner, Vinson & Elkins (left) and Elena Guillet, Associate, Vinson & Elkins
On the other hand, a number of delegations argue that the provisions of UNCLOS and the Part XI Agreement do not expressly provide for any postponement of the consideration or provisional approval of a pending application for a plan of work under Subparagraph (c). They also argue that postponing consideration and/or provisional approval until the exploitation regulations are finalised is contradictory to the stated purpose of Subparagraph (c), which is to be triggered in the event "the Council has not completed the elaboration of the rules, regulations and procedures relating to exploitation within the prescribed time"[7] (emphasis added).
The second area of disagreement relates to the guidelines or directives that the Council may give the LTC for the purpose of reviewing a plan of work. The Council's delegations generally agree that Article 163(9) of UNCLOS applies, which provides that "[e]ach Commission shall exercise its functions in accordance with such guidelines and directives as the Council may adopt." However, that is of little help, as the delegations disagree on which guidelines or directives the Council may give the LTC.
Guidance lacking
One particular concern is whether the Council is allowed to issue guidelines or directives to the LTC requesting it to refrain from making specific recommendations for approval or disapproval if the RRPs on exploitation have not been completed. However, a number of delegations did accept that the Council could issue guidelines and directives to the LTC to clarify certain criteria the LTC should take into account and/or the procedures to be followed to consider and provisionally approve a plan of work, whilst the RRPs on exploitation have not been approved. More precise guidance on which criteria need clarifying was not agreed between the delegations.
This divergence of opinions within the ISA's Council on the application of Subparagraph (c) is likely to act as a deterrent against applications for plans of work. This is another setback for an industry that has already carried out exploration work and performed successful pilot nodule collection tests last year,[8] and continues to develop and invest in nodule collection systems to be installed on vessels. Indeed, the Metals Company announced on 1 August 2023 a revised timeline for its application for a plan of work.[9] Rather than applying now for consideration and/or provisional approval under Subparagraph (c), the Metals Company prefers to delay and submit its application for an exploitation contract in July 2024,[10] the current end of the revised timeline of meetings proposed by the Council, by which time RRPs are expected to be agreed upon.
There are, however, no guarantees that the Council will have completed the RRPs for exploitation by the end of July 2024. Companies will not be able to delay eternally their plans for production, and will therefore be faced with the uncertainty of applying for a plan of work for exploitation activities under Subparagraph (c).
[1] See IEA (2021), The Role of Critical Minerals in Clean Energy Transitions, IEA, Paris. Accessible at: https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions, License: CC BY 4.0.
[2] During the second part of the ISA's Council 28th session, the Council adopted a decision recognizing its failure to meet the deadline and a roadmap for the completion of the exploitation regulations. The proposed roadmap would provide for three further Council meetings in November 2023, March 2024 and July 2024. See ISBA/28/C/24.
[4] See ISBA/28/C/9, paragraph 5.
[5] See ISBA/28/C/9, paragraph 3.
[7] Section, paragraph 15(c) of the Annex to the Part XI Agreement.
[8] See First Nodules surface after 4 kilometre journey, Allseas, 12 October 2022. Accessible at: https://allseas.com/news/first-nodules-surface-after-4-kilometre-journey/.
[9] See TMC Announces Corporate Update on Expected Timeline, Application Costs and Production Capacity Following Part II of the 28th Session of the International Seabed Authority, The Metals Company website, 1 August 2023. Accessible at: https://investors.metals.co/news-releases/news-release-details/tmc-announces-corporate-update-expected-timeline-application/.
[10] Id. It is worth noting that the Metals Company's subsidiary NORI has reserved its right to submit an application under Subparagraph (c).
EXPLORATION
Legal uncertainties muddy the waters for deep-sea mining's future
There continue to be no guarantees on deep-sea mining's future
Clarity on exploration work would at least be a start
The shift to clean energy has been driving a huge increase in the requirements for critical raw materials. International energy analysts consider that mineral demand for use in electric vehicles and battery storage is a major force, expected to grow at least thirty-fold by 2040.[1]
The automotive industry is concerned that there are insufficient resources on land to ensure adequate supplies of the minerals needed to make the battery cathodes and anodes. The deep seabed beyond national jurisdiction is rich in polymetallic nodules, mineral concretions containing four essential battery metals - cobalt, nickel, copper and manganese. The enormous quantities of nodules on the deep seabed (around 21 billion tonnes in the Clarion-Clipperton zone alone) are seen as a potential solution to the disruption in critical raw materials supply chains. The Area falls under the regulatory framework established by the United Nations Convention on the Law of the Sea (UNCLOS), and more specifically Part XI of UNCLOS and the 1994 Agreement relating to the Implementation of Part XI of UNCLOS (the "Part XI Agreement). The International Seabed Authority (ISA) is responsible for elaborating on the rules and regulations, and considering and approving plans of work for activities in the Area.
Over the last decade, the ISA's executive organ, the Council, has been working to elaborate and adopt rules, regulations and procedures (RRPs) for exploitation activities in the Area. Despite mounting international pressure, the Council has failed to finalise the RRPs for exploitation by the deadline of 9 July 2023, following the trigger of a "two-year rule" to complete the RRPs by Nauru in 2021. The second part of the much anticipated 28th session of the Council concluded on 21st July 2023 without any further resolution on the RRPs for exploitation activities. The "two-year rule" provides that, should this situation arise, i.e. if the RRPs for exploitation are not finalized within two years of it being invoked, the Council "shall nonetheless consider and provisionally approve" a plan of work for exploitation activities.
International law
Given it is unlikely that the RRPs for exploitation activities will now be completed before July 2024,[2] the pressure is now on the Council to provide a clear steer on how it will "consider and provisionally approve" plans of work. This obligation is enshrined in paragraph 15(c) of the Annex to the Part XI Agreement (Subparagraph (c)). Undoubtedly aware of this, the Council adopted two decisions at the end of its latest session: one decision setting out the new timeframe for the completion of the RRPs, and the other stating that, if an application for an exploitation licence is submitted before the exploitation regulations have been adopted, it will consider as a matter of priority the understanding and application of Subparagraph (c).[3]
Subparagraph (c) has been termed a "legal loophole" as it allows companies to apply for plans of work for exploitation activities in the absence of RRPs, thus bypassing any opposition to exploitation activities holding back the completion of RRPs. However, the wording of Subparagraph (c) is very high-level and does not provide any guidance on: (i) the precise meaning of "consider and provisionally approve"; or (ii) the procedure and criteria for such consideration and provisional approval. As a result, there has been intense debate within the Council and the international community as to the proper interpretation of the Council's obligation.
In March 2023, the Council adopted a decision whereby it concluded that Subparagraph (c) did "not impose an obligation on the Council to automatically approve a pending application for a plan of work."[4] The same decision also noted that the Legal and Technical Commission (LTC), an independent expert subsidiary organ involved in the approval process for plans of work, did not have any obligation to make recommendations regarding a plan of work.[5] However, the Council's current position on Subparagraph (c) suggests there is much more disagreement within the Council on its powers and the correct interpretation of Subparagraph (c), which would render an immediate and practical use of this "legal loophole" unlikely.
The first area of disagreement is whether the Council has a legal basis to postpone the consideration, and/or the provisional approval of a pending application of a plan of work under Subparagraph (c) and the circumstances in which it might do so.
The delegations which found that the Council does have a legal basis to postpone focused on the requirement to ensure compliance with the Council's obligations under UNCLOS. The consideration and provisional approval of a plan of work needs to be based on, inter alia, the provisions of UNCLOS. Therefore, for those delegations, if the Council cannot ensure compliance with UNCLOS because all ramifications from consideration and/or approval of a plan of work cannot currently be assessed, the Council should decide to postpone the consideration or provisional approval of a pending application.
The primary concern is the UNCLOS provisions related to the protection of the marine environment. The delegations argue that there is a substantial lack of scientific knowledge as to the negative impacts of deep seabed mining on the environment, and thus compliance with those provisions is currently impossible. Furthermore, the same delegations are concerned that the absence of an agreed form for the provisionally approved plan of works would require the Council to postpone consideration and refer the question to the International Tribunal for the Law of the Sea (ITLOS).[6]
Louise Woods, Partner, Vinson & Elkins (left) and Elena Guillet, Associate, Vinson & Elkins
On the other hand, a number of delegations argue that the provisions of UNCLOS and the Part XI Agreement do not expressly provide for any postponement of the consideration or provisional approval of a pending application for a plan of work under Subparagraph (c). They also argue that postponing consideration and/or provisional approval until the exploitation regulations are finalised is contradictory to the stated purpose of Subparagraph (c), which is to be triggered in the event "the Council has not completed the elaboration of the rules, regulations and procedures relating to exploitation within the prescribed time"[7] (emphasis added).
The second area of disagreement relates to the guidelines or directives that the Council may give the LTC for the purpose of reviewing a plan of work. The Council's delegations generally agree that Article 163(9) of UNCLOS applies, which provides that "[e]ach Commission shall exercise its functions in accordance with such guidelines and directives as the Council may adopt." However, that is of little help, as the delegations disagree on which guidelines or directives the Council may give the LTC.
Guidance lacking
One particular concern is whether the Council is allowed to issue guidelines or directives to the LTC requesting it to refrain from making specific recommendations for approval or disapproval if the RRPs on exploitation have not been completed. However, a number of delegations did accept that the Council could issue guidelines and directives to the LTC to clarify certain criteria the LTC should take into account and/or the procedures to be followed to consider and provisionally approve a plan of work, whilst the RRPs on exploitation have not been approved. More precise guidance on which criteria need clarifying was not agreed between the delegations.
This divergence of opinions within the ISA's Council on the application of Subparagraph (c) is likely to act as a deterrent against applications for plans of work. This is another setback for an industry that has already carried out exploration work and performed successful pilot nodule collection tests last year,[8] and continues to develop and invest in nodule collection systems to be installed on vessels. Indeed, the Metals Company announced on 1 August 2023 a revised timeline for its application for a plan of work.[9] Rather than applying now for consideration and/or provisional approval under Subparagraph (c), the Metals Company prefers to delay and submit its application for an exploitation contract in July 2024,[10] the current end of the revised timeline of meetings proposed by the Council, by which time RRPs are expected to be agreed upon.
There are, however, no guarantees that the Council will have completed the RRPs for exploitation by the end of July 2024. Companies will not be able to delay eternally their plans for production, and will therefore be faced with the uncertainty of applying for a plan of work for exploitation activities under Subparagraph (c).
[1] See IEA (2021), The Role of Critical Minerals in Clean Energy Transitions, IEA, Paris. Accessible at: https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions, License: CC BY 4.0.
[2] During the second part of the ISA's Council 28th session, the Council adopted a decision recognizing its failure to meet the deadline and a roadmap for the completion of the exploitation regulations. The proposed roadmap would provide for three further Council meetings in November 2023, March 2024 and July 2024. See ISBA/28/C/24.
[3] See ISBA/28/C/25.
[4] See ISBA/28/C/9, paragraph 5.
[5] See ISBA/28/C/9, paragraph 3.
[6] See Co-Facilitators' Second Briefing Note to the Council on the Information intersessional dialogue established under Council decision ISBA/27/C/45 and Council Decision ISBA/28/C/9, 7 July 2023. Accessible at: https://www.isa.org.jm/wp-content/uploads/2023/07/Co-Facilitators-Second-Briefing-Note.pdf.
[7] Section, paragraph 15(c) of the Annex to the Part XI Agreement.
[8] See First Nodules surface after 4 kilometre journey, Allseas, 12 October 2022. Accessible at: https://allseas.com/news/first-nodules-surface-after-4-kilometre-journey/.
[9] See TMC Announces Corporate Update on Expected Timeline, Application Costs and Production Capacity Following Part II of the 28th Session of the International Seabed Authority, The Metals Company website, 1 August 2023. Accessible at: https://investors.metals.co/news-releases/news-release-details/tmc-announces-corporate-update-expected-timeline-application/.
[10] Id. It is worth noting that the Metals Company's subsidiary NORI has reserved its right to submit an application under Subparagraph (c).
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