CYIL vol. 8 (2017)

CYIL 8 ȍ2017Ȏ THE ISSUES OF SOVEREIGNTY AND OWNERSHIP IN RESPECT TO THE SEAǧBED … should not impose major administrative costs on the Authority or on a contractor . Consideration should be given to the adoption of a royalty system or a combination of a royalty and profit- sharing system. If alternative systems are decided upon, the contractor has the right to choose the system applicable to its contract. Any subsequent change in choice between alternative systems, however, shall be made by agreement between the Authority and the contractor. These broadly set rules are the basis for the Legal and Technical Commission and the International Seabed Authority to draw up the regulations for the exploitation of the resources of the Area. The Working Draft Regulations and Standard Contract Terms on Exploitation for Mineral Resources in the Area prepared on behalf of the Authority was submitted by the Legal and Technical Commission 30 in July 2016. All members of the Authority and all concerned parties should comment on the proposal by November 2016, so that the Secretariat could prepare the material for the Authority conference in January 2017. The draft regulations contain, in comparison with the Regulations on prospecting and exploration, a detailed, elaborate list of terms used and their definitions. Definitions cover pages 79-84 of the draft, which indicates how much importance is given to the terms and their circumscription in the future regulation. The definition of “ commercial production ” is especially important. It means production where an operator engages in sustained large scale recovery operations which yield a quantity of materials sufficient to indicate clearly that the principal purpose is large-scale production rather than production intended for information gathering, analysis or the testing of equipment or plant. The terms exploitation and exploitation activities are also defined. Exploitation and exploitation activities are defined more precisely than in the Regulations on prospecting and exploration. These activities mean the recovery for commercial purposes of the Resources in the Area and the extraction of minerals therefrom, including the construction and operation of mining, processing and transportation systems, for the production and marketing of metals and all other activities, including Exploration in the Contract Area and other steps preparatory to Commercial Production, as well as the decommissioning and closure of operations, necessary or expedient to carrying out a Contractor’s rights and obligations under a Contract. As far as the length of exploitation contract is concerned, Draft Regulation 14 Paragraph 1 expects the initial period not to exceed 20 years. A shorter period as applicable to the expected economic life of the exploitation activities of the resource category set out in the mining plan. Contractors shall have the option to renew the exploitation contract for periods of not more than 10 years. It is supposed that the length of exploitation contract will vary depending on the individual minerals. The Draft contains a number of other issues including the financial aspects of the contracts, and so on. According to Section 8 of the Annex of the Agreement of 1994, the fee for processing applications for approval of a plan of work limited to one phase, either the exploration phase or the exploitation phase was set at US$ 250,000. In 2012, however, the Authority increased the fee for the plan of exploration work to US$ 500,000. The Authority argued that the administrative costs for processing an application are higher than US$ 250,000. It is not likely that the amount for the plan of exploration work would ever be lower, it is more likely

30 Report on Working Draft Regulations and Standard Contract Terms On Exploitation for Mineral Resources In the Area (http://bit.ly/29MBDSS) issued by the Legal and Technical Commission on 14 July 2016 and for comment by 2 November 2016 (cited on 18. 7. 2016).

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