U.S. should reject UNCLOS because of its revenue sharing agreements
By ratifying UNCLOS, the U.S. would be subjecting its resource extraction industries to control by the United Nations. Furthermore, these industries would be assessed a royalty fee on these resources that the International Seabed Authority would redistribute to other states, possibly counter to U.S. national security interests.
The Treaty proposes to create a new global governance institution that would regulate American citizens and businesses, but which would not be accountable politically to the American people. Some of the Law of the Sea Treaty's proponents pay little attention to constitutional concerns about democratic legislative processes and principles of self-government, but I believe the American people take seriously threats to these foundations of our nation.
The Treaty creates a United Nations-style body called the "International Seabed Authority." "The Authority," as UN bureaucrats call it in Orwellian shorthand, would be involved in all commercial activity such as mining and oil and gas production in international waters. It is to this entity that the United States, pursuant to the Treaty's Article 82, would be required to transfer a significant share of all royalties generated by American companies royalties that would otherwise go to the U.S. Treasury for the benefit of the American people.
Over time, hundreds of billions of dollars could flow through the "Authority" with little oversight. The United States could not control how those revenues are spent. Under the Treaty, the Authority is empowered to redistribute these so-called "international royalties" to developing and landlocked nations with no role in exploring or extracting those resources. It would constitute a massive form of global welfare, courtesy of the American taxpayer. It would be as if fishermen who exerted themselves to catch fish on the high seas were required, on the principle that those fish belonged to all people everywhere, to give a share of their take to countries that had nothing to do with their costly, dangerous and arduous efforts.
Were seabed mining ever to thrive, a transparent system for recognizing mine sites and resolving disputes would be helpful. But the Authority's purpose isn't to be helpful. It is to redistribute resources to irresponsible Third World governments with a sorry history of squandering abundant foreign aid.
This redistributionist bent is reflected in the treaty's call for financial transfers to developing states and even "peoples who have not attained full independence or other self-governing status"-code for groups such as the PLO. Whatever changes the treaty has undergone, a constant has been Third World pressure for financial transfers. Three voluntary trust funds were established to aid developing countries. Alas, few donors have come forward to subsidize the participation of, say, sub-Saharan African states in the development of ocean mining. Thus, the Authority has had to dip into its own budget to pay into the funds.
[ Page 9 ]
Voting in the ISA so far gives no reason for optimism. Electing members to the dominant Council has proven to be no easy task, with substantial disagreement over membership criteria and political horse- trading.9 For instance, in 1996 there were 22 candidates for 15 seats on the Legal and Technical Commission. But the Council, rather than select from this pool, simply expanded the membership to 22. Five years later there were 24 candidates in the election, so the Council again increased the size of the panel. During the 2004 election for ISA Secretary-General, substantial pressure was applied to the three candidates who were apparently trailing to withdraw to avoid having a contested election.10
The revised treaty retains the ISA’s ability to impose production controls. Negotiators excised provisions that set a convoluted ceiling on seabed production, but they preserved Article 150, which, among other things, states that the ISA is to ensure “the protection of developing countries from adverse effects on their economies or on their export earnings resulting from a reduction in the price of an affected mineral, or in the volume of exports of that mineral.”
[ Page 11 ]
Royalty rate “To Be determined.” Neither the convention nor the 1994 Agreement establishes the mining royalties that U.S. companies would be required to pay to the Authority. As originally drafted, the convention required mining companies to pay a “production charge” royalty ranging from 5 percent to 12 percent of the value of the processed metals. In the alternative, companies could pay a combi- nation of a production charge and a share of the net proceeds from the sale of the processed metals.70 In any event, each company must pay the Authority a minimum of $1 million per year once commercial produc- tion has commenced.71
The 1994 Agreement revised the convention’s specific royalty range and minimum payment scheme,72 but the 1994 revisions left more questions than answers. essentially, the 1994 Agreement left the seabed mining compensation scheme “to be determined” with the notion that the details would be negotiated within the Authority at some future date when commercial production is imminent. That date has not yet arrived, even though UNCLOS was adopted 30 years ago, and the Authority has yet to begin drafting regulations to establish the financial obligations of mining companies to the Authority.
Thus, if the U.S. accedes to the convention, it will be making an uninformed decision based on incomplete information. The 1994 Agreement refers only to a vague “system of payments” that U.S. mining companies would be required to pay to the Authority, stating that “Consideration should be given to the adoption of a royalty system or a combination of a royalty and profit- sharing system.”73
[ Page 7 ]
Land-based mineral producers are generally opposed to the very idea of seabed mining. Yet they, as well as the “developing States Parties, representing special interests,” such as “geo- graphically disadvantaged” nations, each have their own chamber and, thus, a de facto veto over the ISA’s operations.30 Thus, the voting power of such groups essentially matches that of America. Moreover, the qualification stan- dards for miners are to be established by “con- sensus,” essentially unanimity, which could give land-based producers as much influence as the United States. The possession of a veto provides them with an opportunity to extract potentially expensive concessions—new limits on production, for instance, or increased redis- tributionist payments under the treaty—to let the ISA function. Unfortunately, once the Authority asserts jurisdiction over seabed mining, potential producers would be hurt by a deadlock.
[ Page 24 ]
If our supposed legal gains from the treaty are in fact losses, what of the acknowledged economic losses? These are admittedly less severe than those proposed in 1982, but they are still unjustifiable and, worse, capable of expansion as the ISA gets into its stride. Thus, if the U.S. wished to drill or mine on the continental shelf beyond a 200-mile limit, it would have to provide a percentage of its revenue, rising from 1 to 7 percent annually, to the Deep Seabed Authority established by the ISA to superintend such commercial exploita- tion. As Frank Gaffney of the Center for Security Policy has vainly tried to explain to U.S. corporations, a company wishing to mine the deep sea has an obligation to set aside an area where the ISA can develop its own mining with financial and technologi- cal assistance from its commercial rival. The ISA is itself obliged by its UNCLOS charter to ensure that the seabed resources are used for the general benefit of mankind. What this means in practice is that the ISA would provide economic assistance to what have been described as “developing countries which suffer serious adverse effects on their export earnings” from deep-sea-bed mining. In other words, nations and companies that engage in com- mercial mining must subsidize their rivals and competitors.