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The Enterprise: An expendable triumph
The deep seabed and its resources The Enterprise: an expendable triumph ----The developing countries scored an outstanding diplomatic success when they secured provisions in the Draft Convention for setting up an organ of the International Authority to engage in commercial activities in the international area. If in negotiations concessions are made to one party in exchange for concessions desired by the other, #en these concessions should normally be expected to address the real interests of the parties concerned, especially if concessions involve costs, so #at the benefits of mutual concessions would be equal. In the negotiation on the question of the system of exploitation, however, the concession to set up this organ-the Enterprise-was made by the industrial countries even though it did not safeguard or achieve any concrete interest of the developing countries or those of a number of individual developing countries, thus bringing about benefits to them. The industrial countries, because they misjudged the mood of the developing countries, failed to recognize that, though united and eloquent, the mounting pressure for a unitary system of exploitation reflected only the highest common factor for agreement among themselves and not a substantive interest from which a benefit or advantage could be derived. Had they seen that the system of exploitation proposed by developing countries did not reflect or promote any widely shared national or ideological interests, the industrial countries could have avoided the undertaking to set up the Enterprise. --__ The unitary system of exploitation, under which all activities in the International Area would be carried out directly by the International Authority, was founded primarily on socialist ideology. Although this ideology was not widely shared by the developing countries, it provided in the absence of any real shared interest a convenient basis for their unity - which was essential for the achievement of their individual political and economic interests. These were related to domestic issues such as those. concerning the delimitation of the territorial sea and the exclusive economic zone, rather than to issues in the International Area. Secondly, and rather more importantly, the question of the system of exploitation, while a highly sensitive one to industrial countries, was of far less importance to developing countries. The developing countries hoped that, by proposing a system incompatible with that desired by the industrial countries on so central a question, they would be able to obtain far-reaching
concessions in respect of their various concerns in exchange for concessions on the system of exploitation. However, the unity of the developing countries was fragile. Their ideological, political, economic and strategic interests were not only widely different, but also divergent and even incompatible. Ideologically, there was no common political philosophy that inspired each of the developing wuntries equally. Their individual govemments reflected different political philosophies, varying from one extreme of the political spectrum to the other. It would be too simplistic to assume that they supported any one ideology and that it could provide a convincing basis for their unity. Some wanted to achieve domestic targets such as the extended limits of national jurisdiction while others, in particular the non-coastal developing states, pursued contrary aims. Several developing countries linked the negotiations at the Conference with the aims of the NorthSouth dialogue; in particular, those
elements of it which were central to international commodity policy designed to regulate prices and supplies. Others, more suspicious of the efficacy of such measures, used the dialogue as a lever to obtain concessions regarding their pragmatic aims. The objective of some developing countries was negative. It was to deny access to industrial countries to the International Area, to make them dependent and consequently to exert a greater leverage on them. This objective was not necessarily shared by other developing countries, especially those whose resource needs were similar to those of industrial countries and by those whose economic and political systems were integrated with, and dependent upon, the industrial wuntries. Many did not attach much importance to the economic interests, especially when it was clear that the disposable wealth arising from the exploitation of mineral resources from the International Area excluded petroleum and fish as these would not be located in the Area. With regard to production, the economic interests were incompatible. The objective of land-based producing countries was to minimize commercial exploitation of the international area while that of other developed countries was to increase commercial exploitation with a view to maximizing the income generated from such exploitation. Consequently, the developing wuntries as a group did not have a single comprehensive substantive interest. However, they concealed this by focusing on the generalities of the NorthSouth dialogue which, as it lacked any specificity with regard to operational mechanisms, was vague enough to provide a superficial basis for their unity. One of the key issues in that dialogue was the control of the supply of raw materials. By associating policies with regard to production from the Intemational Area with that issue in the North-South dialogue, the developing countries conveyed wnvincingly the impression that they were united in their attempt to achieve the unitary system of exploitation, and that it reflect-
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ed a deep substantive interest to which they were all ideologically committed as evidenced by their common positions in that dialogue. The success of their approach was dependent on their ability to act collectively. In view of their diverse real interests, this was doubtful. Nonetheless, the industrial countries saw in their approach a serious threat to their key interests as they did not question the assumptions on which that approach was based. They thought that as the developing countries would constitute a majority in an International Authority constituted on the principle of the equality of states they would act collectively to adopt policies which would have adverse economic effects on industrial countries while not having similar consequences on their own economies. One such policy related to the regulation of production from the International Area. They thought that the developing countries would link the availability of supplies with concessions in respect of other concerns of irnportante to them rather than to regulate production in accordance with world resource needs. Therefore, the industrial countries opposed the position. They did not examine the feasibility of collective action or the underlying reasons for the system of exploitation proposed by the developing countries. Had they done so, the outcome of the negotiation on this question could have been different and might not have included the commitment to linamze the Enterprise. The developing countries saw clearly the paramount importance of the question of the system to industrial countries. They foresaw correctly that, as the systems proposed by developing countries and by the industrial countries were mutually exclusive, the industrial countries to whom this question was fundamental would, in an attempt to resolve it within the framework of a convention, link it with other more relevant interests of developing counties. Such a linkage would be favourable to the achievement of those interests. They recognized that the industrial countries preferred a legal system under which they would engage in commercial operations in the International Area to the alternative of uniMARINE POLICY July 1981
lateral exploitation, at least until all efforts at negotiations were exhausted. This would induce them to make concessions in other areas in order to ensure that the system of exploitation met their key concerns. The conclusion of their analysis was, therefore, that solidarity was a prerequisite for the attainment of their substantive national interests. As the special-interest groups reflecting these national interests were diverse and even incompatible, they would not be sufficiently influential and would not provide a basis for unity on which depended the attainment of their various national interests. The unitary system, though ideological in practice, was not unfavourable to any of their concrete interests. If the unitary system were not established, it would not endanger such interests and if established but did not operate efficiently, it would not adversely affect them because of their limited interest in the supplies of the mineral concerned. Consequently, it provided a convenient basis for their unity without damaging their national interests, despite its ideological implications.
Credibility The impression that they supported the unitary system on the grounds of principle and national interest was reinforced by the rhetoric of a number of resolutions that developing countries had proposed in various international fora. Apart from resolutions urging interdependence among developing countries with a view, at least by implication, to weakening their links with industrial countries by measures to control supplies of raw materials to those countries and to change the pattern and structure of international trade, resolutions on the Establishment of the New International Economic Order and the Charter of Economic Rights and Duties of States, and on the Integrated Programme for Commodities at UNCTAD IV, added credibility to the impression that deep interests of the developing countries were involved. A better examination of these issues would have revealed that the operational implications of such resolutions were limited and that the
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real interests of developing countries were not compatible with them. Such an examination would have dampened the credibility of the proposal for the unitary system. At that stage no attempt was made to undertake one. The system of exploitation preferred by the industrial countries was known as the licensing system. Under it, a qualified entity sponsored by a state party to the Convention would be authorized to engage in commercial activities in the International Area. As the entity would be subject to the domestic laws of the sponsoring state, that state could ensure that the supplies of the minerals from the International Area would be available. Policies regarding supplies would not be subject to the decisions of international authority except as laid down in the Convention. The practical implication of this policy of the industrial countries would be to raise the level of self-sufficiency of the sponsoring state in respect of these minerals. The industrial countries accorded a very high priority to this issue. Because of the critical importance of the availability of raw materials to them they were not prepared to submit issues regarding this question to a legal competence outside their national jurisdictions as would be required under the unitary system of exploitation. The socialist countries of Eastern Europe, whose ideology apparently inspired the unitary system of exploitation, did not draw a parallel between state control and control by a body composed of states because there was no international equivalent to national interest, as did some developing wuntries. These. countries were also not prepared to submit their national interests to a decision making procedure which would not have guaranteed their interests. Thus, the system of exploitation proposed by the developing countries and that proposed by the industrial countries were mutually exclusive. The options to resolve the conflict arising from incompatible proposals on the system of exploitation depended on whether it was conceived by the industrial countries as a goal in itself or as a means of achieving a wide variety of goals.
The Enterprise: an expendable triumph
There were four options: (a) accept the proposal of the developing countries for a unitary system and manipulate the decision making procedures of the International Authority (this would not have been difficult in light of the fact that developing countries would not have acted collectively); (b) address the underlying concerns of individual developing countries, especially their pragmatic concerns, with a view to dissolving their coalition based essentially on ideological grounds which were not shared; (c) reject the proposal and insist on, and enforce, the right of access of states to the International Area; and (d) propose a compromise which includes a right of access of individual states to engage on equal terms alongside an internationally controlled organ in the commercial activities in the International Area. The last option was preferred by the industrial countries. Looking back, it is difficult to see why the industrial countries did not detect the fragility of the coalition among developing countries as they were aware that it was based on alliances that did not reflect overlapping individual interests. On the contrary, the disparate ideological, political and economic interests were held together by a policy of little substantive interest beyond achieving a wide variety of national interests which were individual but could not be attained individually. However, the industrial countries treated the question as a goal in itself and consequently made no attempt to address these individual interests, particularly those concerning the International Area such as the level of production, the financial terms of contract and the question of technology transfer in a meaningful and resourceful manner which was only subsequently evident. Had they done so earlier, it is probable that the fragile coalition might have fallen apart before it found a shared principle on which to support the unitary system of exploitation. Having misjudged the proposal for the unitary system as a goal in itself, the industrial countries devoted their efforts during the first four years of the Conference exclusively to this interpretation of the question. Retrospectively, the appropriate question for
these countries to have raised would have been why the developing wuntries posed the question of who should exploit the International Area. Analysis should have pointed to the possibility that an answer to that question would not address the disparate and even conflicting interests of the developing countries in an appropriate way. Instead, the industrial countries rejoined with the question of how the International Area should be exploited, with the intention that mutually agreed answers would respond to their interests and thus avoid the confrontational question of who should exploit it. The effect of devoting that effort to of exploitation and the system neglecting to address the underlying reasons was counterproductive. It provided a cohesive stimulus to the fragile coalition. The concrete national interests were seemingly overtaken by the ideological interests. This direction was encouraged by the international economic scene at the time, which was dominated by confrontation between the South and the North and the ideological undertones of that confrontation which encouraged a politically orientated leadership of the South. This resulted in an oversimplification of the economic issues, which led to the withdrawal of countries with direct commodity interests from a central role. Consequently, even those developing countries whose interests were essentially of a political and economic nature were led to support the unitary system of exploitation in principle or at least gave that impression because of their commitments at global negotiations. The principal reason for the misjudgment of the mood of developing wuntries was connected with the reaction of industrial countries to the actions of the oil exporting countries and to the militancy of raw material exporting countries. This militancy was evidenced by the intensive activity of developing countries in international fora. Between 1974 and 1976 there were no less than three controversial instruments dealing with international trade _ on the Establishment of the New International Economic Order, the Charter of Economic Rights and
Duties of States, and the Integrated Programme for Commodities. In addition to these resolutions, various other Declarations at Algiers, Manila and Arusha were calling upon developing countries to form producer associations with a view to the adoption of policies similar to those adopted by OPEC. Another reason for the misjudgement was that the first substantive interest in respect of the International Area that was clearly articulated was one dealing with production policies. In this question, too, the background was more disturbing than the substance. At first the developing wuntries supported the interests of the developing producing countries on the ground of their North-South solidarity, at the time they did not perceive the conflict of interests involved nor did the industrial countries adequately and convincingly point to it. The conflict of interests would have arisen because developing producing countries would want to limit production from the International Area to minimize the effect of competitive sources of supply, while the interests of other developing countries would be in the maximization of income from the optimum level of exploitation of the resources located in the International Area required to meet that income objective. Nor did the industrial countries draw attention to the fact that exploitation in the International Area would not compete with production from developing countries except in the case of one mineral (cobalt) but more generally with production from developed countries.
Polarization This united thrust of the developing countries, despite the conflict of interests, reinforced the judgement of the industrial countries what the system was a goal in itself and the aim of that system was to regulate supplies. This led to the reaction of industrial countries to promote national policies which would raise the level of self-sufficiency. Only the licensing system accorded with those policies. Having reinforced the coalition of developing countries by providing them with a shared principle which in turn aggravated the fears of industrial
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countries, the polarization of positions fueled by incompatible principles resulted in a deadlock. It was mainly the need to resolve this deadlock that created the Enterprise as part of a system of exploitation that was called the parallel system. Under this system, qualified entities sponsored by states parties and the Enterprise would be authorized to engage in commercial operations in the International Area subject to the provisions of the Convention. Subsequent reexamination of the commodity issue contirrned that ‘commodity power’ of raw materials exporting developing countries was exaggerated and that in respect of many raw materials such power was limited. Several of these countries had other interests to which they accorded different or even higher priorities, thus making it less likely that they would act collectively in respect of a particular raw material interest, especially when competing interests were involved. There were also alternative sources of supply for many of these raw materials and the possibilities for substitution, advances in technology and productivity also limited the scope of ‘commodity power’. As to the sources of supply, the potential for retaliatory measures posed a threat to collective commodity action. Thus, a more detailed examination revealed that actions similar to those adopted by the oil exporting counties would not be feasible in respect of every raw material. As for the minerals from the International Area (cobalt, copper, nickel and manganese), a reevaluation of the availability, and the security of the sources, for supplies revealed that land-based reserves were adequate to meet cumulative world consumption for the next three decades or even more and that those reserves were located mainly in countries whose interests were not dissimilar to those of consuming countries. Consequently, the industrial countries were able to adopt a more flexible approach to the question of the system provided that a minimum security to obtain supplies from the International Area was preserved. This flexible approach was reinforced by two other considerations. These were the longer-term perspectives MARINE POLICY July1981
regarding the need for assured supplies from the International Area and the commitments to the New International Economic Order. Projections of world consumption and world supply pointed to the need for supplies of minerals from the International Area to supplement landbased reserves only in the very long term. Thus, although in the short term their approach could be more flexible, it should not prejudge the eventual system or, as a result of the short-term approach, prevent setting up a system which would guarantee their interests in secure sources of supply. The parallel system would conform with this requirement.
Monopoly The second consideration was the commitment of the industrial countries to the New International Economic Order. In respect of raw materials the New Order emphasized the interdependent character of trade relations between developing and industrial countries. The industrial countries were not convinced that the objective of developing countries was to foster such interdependence. Their objective as it appeared to industrial countries was to organize a monopoly of raw material exporting developing countries so that they could raise costs for industrial countries disproportionately, in view of the fact that the exporting developing countries would have a relatively lesser interest in exporting these raw materials than the industrial countries would have importing them. They were prepared, however, to devise a regime for the International Area in the spirit of the New Order in order to derive some political advantage from working in that spirit - which they were thought to obstruct - provided that their interests were safeguarded. Before they came to that conclusion, based on the evaluation of the real needs for the minerals from the International Area and the relevant time perspectives of that need, they showed considerable flexibility with regard to certain specific interests such as the level of production from the International Area and the financial contributions of entities sponsored by states
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to an international authority. This flexibility softened the attitude of the interest-related developing countries. Furthermore, approaches in respect of maritime boundaries of coastal states had also reached a broad measure of agreement which encompassed the national interest of developing coastal states. However, overtaken by events, a package consisting only of substantive concessions in respect of those national interests would not resolve the deadlock as the ideological interest had gained considerable momentum which made it difficult for the interest-related developing countries to back down. Consequently, the industrial countries proposed a package including a concession to the unitary system of exploitation. The package consisted of an undertaking to set up, finance and transfer technology to the Enterprise in addition to concessions to those national interests. This comprehensive package tended in stages to expose the diverse interests to developing countries which, as they achieved their aims in respect of those interests, became less interested in the question of the system. This was greatly reinforced with the achievement of the interests of developing coastal states in respect of their national interests with which also the package was linked. The interest in the unitary system of exploitation which by accident they shared being partially implemented, these countries could - without loss of credibility - focus on matters of greater priority to them. Consequently, the interest in the system of exploitation waned and it was left to the ideologically committed to finalize the negotiations on the Enterprise, the compromise which resolved the question of the system of exploitation. The undertaking to set up the Enterprise included an undertaking to finance one integrated operation of, and transfer technology to, the Enterprise so that it could begin operation at about the same time as qualified entities sponsored by states. The currently (1980) estimated cost of an integrated operation which includes the stages of mining of manganese nodules, their transport and refining, amounts to one billion dollars. The capital cost would be contributed by states parties to the 255
The Enterprise: an expendable triumph/Demion
Convention on a scale based on the UN scale of assessment of contributions to the regular budget of the UN, ad justed to take account of non-member states who might become parties to the Convention. The contribution would be in the form of interest-free loans and debt guarantees in equal proportions. The governing board of the Enterprise would be based on the principle of equitable geographical representation. As an organ of the International Authority the Enterprise would be subordinated to it. However, to ensure that the Enterprise would operate as a commercial undertaking, the Convention provides for a degree of autonomy. The centres of power - the states through geographical representation, the International Authority and the Enterprise by virtue of its autonomy - could interact to saddle the Enterprise with incompatible goals and unclear channels of responsibility, undermining its commercial viability. The identification of the pragmatic national interests related to the International Area of developing countries, the imaginative, resourceful and timely responses to those interests and the evaluation of the realism and feasibility of ‘commodity power’ at an early stage of the Conference would have enabled countries to industrial propose measures that would have been directly relevant to the different and even conflicting interest groups and thus not provide a stimulus to the fragile consensus on which they based the unitary
Decision Seabed --
making in the ISA
system of exploitation. These measures would not have included proposals for setting up the Enterprise. Nor would the real and substantive concerns of the New International Economic Order require the setting up of an Enterprise at a cost of one billion dollars when it addresses no real need nor safeguards national interests of a large number of developing countries. The cost is substantial, especially in relation to development assistance and basic human needs - objectives closely linked to the New International Economic Order. The cost amounts to approximately 25% of the bilateral assistance of industrial countries members of the Development Assistance Committee of the OECD to lowincome countries in 1980 and is also more than a third of the annual development credits of the International Development Association for 1979/&X0. In the course of international negotiations on such critical questions and concerns, perspectives tend to blur and immediate issues take on exaggerated importance. Incremental concessions irrelevant to basic political or economic needs seem the only option in multinational negotiations to avoid deadlock. The eventual aim appears to be one of minimizing the costs of such concessions once made. Looking back at the negotiations on the system of exploitation, a similar conclusion cannot be resisted. Because they misjudged the cleverly concealed mood of the developing countries, the industrial
P. N. Kirthisingha Geneva Switzerland
making in the International Authority
Delegates to UNCLOS Ill, in drafting a charter for a kind of international institution to control the resources of the deep seabed constituting the ‘common heritage of mankind’, have had to face and find a way of reconciling the antagonism between the ‘sovereign equality of states’ and the proportional representation of economic interests. This article briefly describes the manner in which this has been achieved.
Sovereign equality is a widely invoked doctrine under which all states ‘have equal rights and duties and are equal members of the international community, notwithstanding differences of
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countries were compelled to undertake to set up and finance the Enterprise as a means of resolving a deadlock that was not warranted by conflicting substantive interests. After undertaking to finance the Enterprise these countries set about minimizing the cost of that undertaking and, as the interest in the question waned, they were able to settle at financing one integrated operation of the Enterprise. But there was a related benefit. At the review conference, the parallel system would be evaluated on the results of the operations of both statesponsored entities and the Enterprise. The evaluation would be based on experience and consequently ideological pressures would be minimized, which would not have been possible if the Enterprise had not been set up. The industrial counties were confident that qualified entities sponsored by them would out-perform the Enterprise and thus ensure that in the succeeding decades, when supplementary sources were required, a system which guaranteed to safeguard their interests would be proven and be established as an integral part of any future system of exploitation that might be set up by the review conference. The cost of setting up the Enterprise may prove to be the price of that security.
an economic, social, political, or other nature’. ’ As applied to decision making in international organizations, it means ‘one state - one vote’. For the Third World delegates who gathered at
Caracas in 1974 at the first substantive session of the Law of the Sea Conference, the doctrine had been given renewed sanctity by a United Nations Resolution proclaiming a ‘New International Economic Order’ (NIEO) under which international cooperation for development would be ‘on the basis of sovereign equality and the removal of the disequilibrium that exists between [developed and developing countries] .‘* Among the ‘fundamental principles’ enunciated by this Resolution were three pertinent to the exploitMARINE POLICY July 1981
concessions in respect of their various concerns in exchange for concessions on the system of exploitation. However, the unity of the developing countries was fragile. Their ideological, political, economic and strategic interests were not only widely different, but also divergent and even incompatible. Ideologically, there was no common political philosophy that inspired each of the developing wuntries equally. Their individual govemments reflected different political philosophies, varying from one extreme of the political spectrum to the other. It would be too simplistic to assume that they supported any one ideology and that it could provide a convincing basis for their unity. Some wanted to achieve domestic targets such as the extended limits of national jurisdiction while others, in particular the non-coastal developing states, pursued contrary aims. Several developing countries linked the negotiations at the Conference with the aims of the NorthSouth dialogue; in particular, those
elements of it which were central to international commodity policy designed to regulate prices and supplies. Others, more suspicious of the efficacy of such measures, used the dialogue as a lever to obtain concessions regarding their pragmatic aims. The objective of some developing countries was negative. It was to deny access to industrial countries to the International Area, to make them dependent and consequently to exert a greater leverage on them. This objective was not necessarily shared by other developing countries, especially those whose resource needs were similar to those of industrial countries and by those whose economic and political systems were integrated with, and dependent upon, the industrial wuntries. Many did not attach much importance to the economic interests, especially when it was clear that the disposable wealth arising from the exploitation of mineral resources from the International Area excluded petroleum and fish as these would not be located in the Area. With regard to production, the economic interests were incompatible. The objective of land-based producing countries was to minimize commercial exploitation of the international area while that of other developed countries was to increase commercial exploitation with a view to maximizing the income generated from such exploitation. Consequently, the developing wuntries as a group did not have a single comprehensive substantive interest. However, they concealed this by focusing on the generalities of the NorthSouth dialogue which, as it lacked any specificity with regard to operational mechanisms, was vague enough to provide a superficial basis for their unity. One of the key issues in that dialogue was the control of the supply of raw materials. By associating policies with regard to production from the Intemational Area with that issue in the North-South dialogue, the developing countries conveyed wnvincingly the impression that they were united in their attempt to achieve the unitary system of exploitation, and that it reflect-
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ed a deep substantive interest to which they were all ideologically committed as evidenced by their common positions in that dialogue. The success of their approach was dependent on their ability to act collectively. In view of their diverse real interests, this was doubtful. Nonetheless, the industrial countries saw in their approach a serious threat to their key interests as they did not question the assumptions on which that approach was based. They thought that as the developing countries would constitute a majority in an International Authority constituted on the principle of the equality of states they would act collectively to adopt policies which would have adverse economic effects on industrial countries while not having similar consequences on their own economies. One such policy related to the regulation of production from the International Area. They thought that the developing countries would link the availability of supplies with concessions in respect of other concerns of irnportante to them rather than to regulate production in accordance with world resource needs. Therefore, the industrial countries opposed the position. They did not examine the feasibility of collective action or the underlying reasons for the system of exploitation proposed by the developing countries. Had they done so, the outcome of the negotiation on this question could have been different and might not have included the commitment to linamze the Enterprise. The developing countries saw clearly the paramount importance of the question of the system to industrial countries. They foresaw correctly that, as the systems proposed by developing countries and by the industrial countries were mutually exclusive, the industrial countries to whom this question was fundamental would, in an attempt to resolve it within the framework of a convention, link it with other more relevant interests of developing counties. Such a linkage would be favourable to the achievement of those interests. They recognized that the industrial countries preferred a legal system under which they would engage in commercial operations in the International Area to the alternative of uniMARINE POLICY July 1981
lateral exploitation, at least until all efforts at negotiations were exhausted. This would induce them to make concessions in other areas in order to ensure that the system of exploitation met their key concerns. The conclusion of their analysis was, therefore, that solidarity was a prerequisite for the attainment of their substantive national interests. As the special-interest groups reflecting these national interests were diverse and even incompatible, they would not be sufficiently influential and would not provide a basis for unity on which depended the attainment of their various national interests. The unitary system, though ideological in practice, was not unfavourable to any of their concrete interests. If the unitary system were not established, it would not endanger such interests and if established but did not operate efficiently, it would not adversely affect them because of their limited interest in the supplies of the mineral concerned. Consequently, it provided a convenient basis for their unity without damaging their national interests, despite its ideological implications.
Credibility The impression that they supported the unitary system on the grounds of principle and national interest was reinforced by the rhetoric of a number of resolutions that developing countries had proposed in various international fora. Apart from resolutions urging interdependence among developing countries with a view, at least by implication, to weakening their links with industrial countries by measures to control supplies of raw materials to those countries and to change the pattern and structure of international trade, resolutions on the Establishment of the New International Economic Order and the Charter of Economic Rights and Duties of States, and on the Integrated Programme for Commodities at UNCTAD IV, added credibility to the impression that deep interests of the developing countries were involved. A better examination of these issues would have revealed that the operational implications of such resolutions were limited and that the
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real interests of developing countries were not compatible with them. Such an examination would have dampened the credibility of the proposal for the unitary system. At that stage no attempt was made to undertake one. The system of exploitation preferred by the industrial countries was known as the licensing system. Under it, a qualified entity sponsored by a state party to the Convention would be authorized to engage in commercial activities in the International Area. As the entity would be subject to the domestic laws of the sponsoring state, that state could ensure that the supplies of the minerals from the International Area would be available. Policies regarding supplies would not be subject to the decisions of international authority except as laid down in the Convention. The practical implication of this policy of the industrial countries would be to raise the level of self-sufficiency of the sponsoring state in respect of these minerals. The industrial countries accorded a very high priority to this issue. Because of the critical importance of the availability of raw materials to them they were not prepared to submit issues regarding this question to a legal competence outside their national jurisdictions as would be required under the unitary system of exploitation. The socialist countries of Eastern Europe, whose ideology apparently inspired the unitary system of exploitation, did not draw a parallel between state control and control by a body composed of states because there was no international equivalent to national interest, as did some developing wuntries. These. countries were also not prepared to submit their national interests to a decision making procedure which would not have guaranteed their interests. Thus, the system of exploitation proposed by the developing countries and that proposed by the industrial countries were mutually exclusive. The options to resolve the conflict arising from incompatible proposals on the system of exploitation depended on whether it was conceived by the industrial countries as a goal in itself or as a means of achieving a wide variety of goals.
The Enterprise: an expendable triumph
There were four options: (a) accept the proposal of the developing countries for a unitary system and manipulate the decision making procedures of the International Authority (this would not have been difficult in light of the fact that developing countries would not have acted collectively); (b) address the underlying concerns of individual developing countries, especially their pragmatic concerns, with a view to dissolving their coalition based essentially on ideological grounds which were not shared; (c) reject the proposal and insist on, and enforce, the right of access of states to the International Area; and (d) propose a compromise which includes a right of access of individual states to engage on equal terms alongside an internationally controlled organ in the commercial activities in the International Area. The last option was preferred by the industrial countries. Looking back, it is difficult to see why the industrial countries did not detect the fragility of the coalition among developing countries as they were aware that it was based on alliances that did not reflect overlapping individual interests. On the contrary, the disparate ideological, political and economic interests were held together by a policy of little substantive interest beyond achieving a wide variety of national interests which were individual but could not be attained individually. However, the industrial countries treated the question as a goal in itself and consequently made no attempt to address these individual interests, particularly those concerning the International Area such as the level of production, the financial terms of contract and the question of technology transfer in a meaningful and resourceful manner which was only subsequently evident. Had they done so earlier, it is probable that the fragile coalition might have fallen apart before it found a shared principle on which to support the unitary system of exploitation. Having misjudged the proposal for the unitary system as a goal in itself, the industrial countries devoted their efforts during the first four years of the Conference exclusively to this interpretation of the question. Retrospectively, the appropriate question for
these countries to have raised would have been why the developing wuntries posed the question of who should exploit the International Area. Analysis should have pointed to the possibility that an answer to that question would not address the disparate and even conflicting interests of the developing countries in an appropriate way. Instead, the industrial countries rejoined with the question of how the International Area should be exploited, with the intention that mutually agreed answers would respond to their interests and thus avoid the confrontational question of who should exploit it. The effect of devoting that effort to of exploitation and the system neglecting to address the underlying reasons was counterproductive. It provided a cohesive stimulus to the fragile coalition. The concrete national interests were seemingly overtaken by the ideological interests. This direction was encouraged by the international economic scene at the time, which was dominated by confrontation between the South and the North and the ideological undertones of that confrontation which encouraged a politically orientated leadership of the South. This resulted in an oversimplification of the economic issues, which led to the withdrawal of countries with direct commodity interests from a central role. Consequently, even those developing countries whose interests were essentially of a political and economic nature were led to support the unitary system of exploitation in principle or at least gave that impression because of their commitments at global negotiations. The principal reason for the misjudgment of the mood of developing wuntries was connected with the reaction of industrial countries to the actions of the oil exporting countries and to the militancy of raw material exporting countries. This militancy was evidenced by the intensive activity of developing countries in international fora. Between 1974 and 1976 there were no less than three controversial instruments dealing with international trade _ on the Establishment of the New International Economic Order, the Charter of Economic Rights and
Duties of States, and the Integrated Programme for Commodities. In addition to these resolutions, various other Declarations at Algiers, Manila and Arusha were calling upon developing countries to form producer associations with a view to the adoption of policies similar to those adopted by OPEC. Another reason for the misjudgement was that the first substantive interest in respect of the International Area that was clearly articulated was one dealing with production policies. In this question, too, the background was more disturbing than the substance. At first the developing wuntries supported the interests of the developing producing countries on the ground of their North-South solidarity, at the time they did not perceive the conflict of interests involved nor did the industrial countries adequately and convincingly point to it. The conflict of interests would have arisen because developing producing countries would want to limit production from the International Area to minimize the effect of competitive sources of supply, while the interests of other developing countries would be in the maximization of income from the optimum level of exploitation of the resources located in the International Area required to meet that income objective. Nor did the industrial countries draw attention to the fact that exploitation in the International Area would not compete with production from developing countries except in the case of one mineral (cobalt) but more generally with production from developed countries.
Polarization This united thrust of the developing countries, despite the conflict of interests, reinforced the judgement of the industrial countries what the system was a goal in itself and the aim of that system was to regulate supplies. This led to the reaction of industrial countries to promote national policies which would raise the level of self-sufficiency. Only the licensing system accorded with those policies. Having reinforced the coalition of developing countries by providing them with a shared principle which in turn aggravated the fears of industrial
MARINE POLICY July 1981
The Enterprise:
countries, the polarization of positions fueled by incompatible principles resulted in a deadlock. It was mainly the need to resolve this deadlock that created the Enterprise as part of a system of exploitation that was called the parallel system. Under this system, qualified entities sponsored by states parties and the Enterprise would be authorized to engage in commercial operations in the International Area subject to the provisions of the Convention. Subsequent reexamination of the commodity issue contirrned that ‘commodity power’ of raw materials exporting developing countries was exaggerated and that in respect of many raw materials such power was limited. Several of these countries had other interests to which they accorded different or even higher priorities, thus making it less likely that they would act collectively in respect of a particular raw material interest, especially when competing interests were involved. There were also alternative sources of supply for many of these raw materials and the possibilities for substitution, advances in technology and productivity also limited the scope of ‘commodity power’. As to the sources of supply, the potential for retaliatory measures posed a threat to collective commodity action. Thus, a more detailed examination revealed that actions similar to those adopted by the oil exporting counties would not be feasible in respect of every raw material. As for the minerals from the International Area (cobalt, copper, nickel and manganese), a reevaluation of the availability, and the security of the sources, for supplies revealed that land-based reserves were adequate to meet cumulative world consumption for the next three decades or even more and that those reserves were located mainly in countries whose interests were not dissimilar to those of consuming countries. Consequently, the industrial countries were able to adopt a more flexible approach to the question of the system provided that a minimum security to obtain supplies from the International Area was preserved. This flexible approach was reinforced by two other considerations. These were the longer-term perspectives MARINE POLICY July1981
regarding the need for assured supplies from the International Area and the commitments to the New International Economic Order. Projections of world consumption and world supply pointed to the need for supplies of minerals from the International Area to supplement landbased reserves only in the very long term. Thus, although in the short term their approach could be more flexible, it should not prejudge the eventual system or, as a result of the short-term approach, prevent setting up a system which would guarantee their interests in secure sources of supply. The parallel system would conform with this requirement.
Monopoly The second consideration was the commitment of the industrial countries to the New International Economic Order. In respect of raw materials the New Order emphasized the interdependent character of trade relations between developing and industrial countries. The industrial countries were not convinced that the objective of developing countries was to foster such interdependence. Their objective as it appeared to industrial countries was to organize a monopoly of raw material exporting developing countries so that they could raise costs for industrial countries disproportionately, in view of the fact that the exporting developing countries would have a relatively lesser interest in exporting these raw materials than the industrial countries would have importing them. They were prepared, however, to devise a regime for the International Area in the spirit of the New Order in order to derive some political advantage from working in that spirit - which they were thought to obstruct - provided that their interests were safeguarded. Before they came to that conclusion, based on the evaluation of the real needs for the minerals from the International Area and the relevant time perspectives of that need, they showed considerable flexibility with regard to certain specific interests such as the level of production from the International Area and the financial contributions of entities sponsored by states
an expendable
triumph
to an international authority. This flexibility softened the attitude of the interest-related developing countries. Furthermore, approaches in respect of maritime boundaries of coastal states had also reached a broad measure of agreement which encompassed the national interest of developing coastal states. However, overtaken by events, a package consisting only of substantive concessions in respect of those national interests would not resolve the deadlock as the ideological interest had gained considerable momentum which made it difficult for the interest-related developing countries to back down. Consequently, the industrial countries proposed a package including a concession to the unitary system of exploitation. The package consisted of an undertaking to set up, finance and transfer technology to the Enterprise in addition to concessions to those national interests. This comprehensive package tended in stages to expose the diverse interests to developing countries which, as they achieved their aims in respect of those interests, became less interested in the question of the system. This was greatly reinforced with the achievement of the interests of developing coastal states in respect of their national interests with which also the package was linked. The interest in the unitary system of exploitation which by accident they shared being partially implemented, these countries could - without loss of credibility - focus on matters of greater priority to them. Consequently, the interest in the system of exploitation waned and it was left to the ideologically committed to finalize the negotiations on the Enterprise, the compromise which resolved the question of the system of exploitation. The undertaking to set up the Enterprise included an undertaking to finance one integrated operation of, and transfer technology to, the Enterprise so that it could begin operation at about the same time as qualified entities sponsored by states. The currently (1980) estimated cost of an integrated operation which includes the stages of mining of manganese nodules, their transport and refining, amounts to one billion dollars. The capital cost would be contributed by states parties to the 255
The Enterprise: an expendable triumph/Demion
Convention on a scale based on the UN scale of assessment of contributions to the regular budget of the UN, ad justed to take account of non-member states who might become parties to the Convention. The contribution would be in the form of interest-free loans and debt guarantees in equal proportions. The governing board of the Enterprise would be based on the principle of equitable geographical representation. As an organ of the International Authority the Enterprise would be subordinated to it. However, to ensure that the Enterprise would operate as a commercial undertaking, the Convention provides for a degree of autonomy. The centres of power - the states through geographical representation, the International Authority and the Enterprise by virtue of its autonomy - could interact to saddle the Enterprise with incompatible goals and unclear channels of responsibility, undermining its commercial viability. The identification of the pragmatic national interests related to the International Area of developing countries, the imaginative, resourceful and timely responses to those interests and the evaluation of the realism and feasibility of ‘commodity power’ at an early stage of the Conference would have enabled countries to industrial propose measures that would have been directly relevant to the different and even conflicting interest groups and thus not provide a stimulus to the fragile consensus on which they based the unitary
Decision Seabed --
making in the ISA
system of exploitation. These measures would not have included proposals for setting up the Enterprise. Nor would the real and substantive concerns of the New International Economic Order require the setting up of an Enterprise at a cost of one billion dollars when it addresses no real need nor safeguards national interests of a large number of developing countries. The cost is substantial, especially in relation to development assistance and basic human needs - objectives closely linked to the New International Economic Order. The cost amounts to approximately 25% of the bilateral assistance of industrial countries members of the Development Assistance Committee of the OECD to lowincome countries in 1980 and is also more than a third of the annual development credits of the International Development Association for 1979/&X0. In the course of international negotiations on such critical questions and concerns, perspectives tend to blur and immediate issues take on exaggerated importance. Incremental concessions irrelevant to basic political or economic needs seem the only option in multinational negotiations to avoid deadlock. The eventual aim appears to be one of minimizing the costs of such concessions once made. Looking back at the negotiations on the system of exploitation, a similar conclusion cannot be resisted. Because they misjudged the cleverly concealed mood of the developing countries, the industrial
P. N. Kirthisingha Geneva Switzerland
making in the International Authority
Delegates to UNCLOS Ill, in drafting a charter for a kind of international institution to control the resources of the deep seabed constituting the ‘common heritage of mankind’, have had to face and find a way of reconciling the antagonism between the ‘sovereign equality of states’ and the proportional representation of economic interests. This article briefly describes the manner in which this has been achieved.
Sovereign equality is a widely invoked doctrine under which all states ‘have equal rights and duties and are equal members of the international community, notwithstanding differences of
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countries were compelled to undertake to set up and finance the Enterprise as a means of resolving a deadlock that was not warranted by conflicting substantive interests. After undertaking to finance the Enterprise these countries set about minimizing the cost of that undertaking and, as the interest in the question waned, they were able to settle at financing one integrated operation of the Enterprise. But there was a related benefit. At the review conference, the parallel system would be evaluated on the results of the operations of both statesponsored entities and the Enterprise. The evaluation would be based on experience and consequently ideological pressures would be minimized, which would not have been possible if the Enterprise had not been set up. The industrial counties were confident that qualified entities sponsored by them would out-perform the Enterprise and thus ensure that in the succeeding decades, when supplementary sources were required, a system which guaranteed to safeguard their interests would be proven and be established as an integral part of any future system of exploitation that might be set up by the review conference. The cost of setting up the Enterprise may prove to be the price of that security.
an economic, social, political, or other nature’. ’ As applied to decision making in international organizations, it means ‘one state - one vote’. For the Third World delegates who gathered at
Caracas in 1974 at the first substantive session of the Law of the Sea Conference, the doctrine had been given renewed sanctity by a United Nations Resolution proclaiming a ‘New International Economic Order’ (NIEO) under which international cooperation for development would be ‘on the basis of sovereign equality and the removal of the disequilibrium that exists between [developed and developing countries] .‘* Among the ‘fundamental principles’ enunciated by this Resolution were three pertinent to the exploitMARINE POLICY July 1981