Book page 84-85

BASIC CONDITIONS OF PROSPECTING,  EXPLORATION AND EXPLOITATION

Section: Annex III -  LINK: Full Text

Basic conditions for a deep-sea mining contract will be the regulations of this Annex, supplemented by the particular rules, regulations, and procedures to be adopted by the Authority[1] and which are now under consideration by the Preparatory Commission[2]. In general, activities in the Area may be undertaken by the organ of the Authority, the Enterprise (see next chapter), or by others, who can be a state party or its nationals, including state enterprises an natural or Juridical persons[3]. Sponsorship of a state party is obligatory for the latter[4]. The basis for mining rights is a contract to be concluded between the Sea-Bed Authority and the applicant[5]. The Authority is to approve applications, provided that they are in accordance with the uniform and non-discriminatory requirements set forth in the regulations of the Authority and consistent with the Convention[6]. Each application is to indicate one or more areas which in total are sufficiently large to allow two mining operations[7]. Half of the indicated area is to be reserved for the Enterprise (or for developing states), it is the responsibility of the Authority to designate which within forty five (ninety) days[8]. When on the basis of such an application a contract has been concluded, the part for the Enterprise is known as a reserved area, and the contractor has exclusive rights for the other part[9]. The application is to be based on a plan of work[10], which must include the applicant's pledge[11] to (a) accept rules, regulations, and Authority decisions, (b) accept the control of the Authority[12], (c) fulfil the contract in good faith, and (d) comply with provisions for transfer of technology The financial terms of the contract are regulated and provide for application and minimum annual fees and a production charge (but negotiations over financial terms are not completely excluded)[13].  The contractor has the option of paying a flat-rate "socialist" production charge of 5% annually of commercial production for the first decade and 12% annually thereafter or a "capitalist" charge, described in great detail, based on a combination of a percentage of production and a share of net proceeds[14].  These two modes of contribution were established out of deference to the two economic systems of East and West.  A contractor's calculations should take two basic conditions into account (a) the mining site is to be of sufficient estimated value and of a size to satisfy the objective[15], and (b) the contractor is obligated to obtain a production authorization before he commences work[16]. A production authorization establishes a fixed amount of nickel which may be recovered from mining operations under the contract[17]. A general production ceiling is to be fixed annually[18], which is of importance when selection is made among applicants for a production authorization[19]. (General production ceiling less amount of production authorizations issued equals possible amount for new production authorizations.)

[1] AIII, Art. 17,   [2] RI, Art. 5, Subpara. (g),    [3] Art. 153, Subpara. 2 (b); AIII, Art. 3, Para. 1,   [4] AIII, Art. 4, Para. 1&3,   [5] AIII, Art. 3, Para. 5,    [6] Art. 153, Para.1; AIII, Art. 3, Para. 4; AIII, Art. 6, Para. 3,

[7] AIII, Art. 8;   AIII, Art. 17, Subpara. 2 (a),    [8] AIII, Art. 8 ; (Art.9, Para. 4),     [9] AIII, Art. 8-9; 16,     [10] AIII, Art. Art. 3, Para. 3; AIII, Art. 6,     11] AIII, Art.4, Para.6 ,    [12] e.g., AIII, Art. 17, Subpara. 1(b)(viii),     [13] AIII, Art. 13, Para . 1, 2-4,    [14] AIII, Art. 13, Para . 5-6,

[15] AIII, Art. 8; AIII, Art. 17, Subpara. 2(a),   [16] Art. 151, Subpara. 2 (a),     [17] Art. 151 Subpara. 2 (b),    [18] Art. 151, Para. 4-7,     [19] AIII, Art. 7,   [20] Art. 144; AIII, Art. 5,    [21] AIII, Art. 15; AIII, Art. 17, Subpara.1(b)(xi),    [22] AIII, Art. 18 [23]  AIII, Art.22, Art. 139

A transfer of technology to the Enterprise or to developing countries takes place only if required by the Authority, if the technology is used to carry out activities in the Area, and if such technology is not available on the open market, the contractor must then make the technology available on reasonable terms and conditions[20]^. Training programmes may be established as contractual conditions or as regulations[21]. The contract may be suspended or terminated only if a contractor persistently and wilfully violates fundamental terms of the contract or ignores final dispute settlement decisions, and monetary penalties may be imposed instead[22]. Both the contractor and the Authority are liable for wrongful acts or omissions for which they are responsible[23].   

][1] AIII, Art. 17,   [2] RI, Art. 5, Subpara. (g),   [3] Art. 153, Subpara. 2 (b); AIII, Art. 3, Para. 1,   [4] AIII, Art. 4, Para. 1&3,   [5] AIII, Art. 3, Para. 5,   [6] Art. 153, Para.1; AIII, Art. 3, Para. 4; AIII, Art. 6, Para. 3,    [7] AIII, Art. 8;   AIII, Art. 17, Subpara. 2 (a),   [8] AIII, Art. 8 ; (Art.9, Para. 4),    [9] AIII, Art. 8-9; 16,    [10] AIII, Art. Art. 3, Para. 3; AIII, Art. 6,    [11] AIII, Art.4, Para.6 ,   [12] e.g., AIII, Art. 17, Subpara. 1(b)(viii),    [13] AIII, Art. 13, Para . 1, 2-4,   [14] AIII, Art. 13, Para . 5-6,   [15] AIII, Art. 8; AIII, Art. 17, Subpara. 2(a),   [16] Art. 151, Subpara. 2 (a),    [17] Art. 151 Subpara. 2 (b),   [18] Art. 151, Para. 4-7,    [19] AIII, Art. 7,   [20] Art. 144; AIII, Art. 5,   [21] AIII, Art. 15; AIII, Art. 17, Subpara.1(b)(xi),   [22] AIII, Art. 18,    [23]  AIII, Art.22, Art. 139

[23] AIII, Art. 22; Art. 139