A JOINT VENTURE AGREEMENT FOR SEABED MINING

A JOINT VENTURE AGREEMENT FOR SEABED MINING

STUDIES IN TRANSNATIONAL LAW OF NATURAL RESOURCES Published for the Institut für Ausländisches und Internationales Wirtschaftsrecht, Frankfurt am Main VOLUME 5 GÜNTHER JAENICKE, ERICH SCHANZE, WOLFGANG HAUSER A JOINT VENTURE AGREEMENT FOR SEABED MINING 1981 Springer-Science+Business Media, B.V.

STUDIES IN TRANSNATIONAL LAW OF NATURAL RESOURCES Published for the Institut fuer Auslaendisches und Internationales Wirtschaftsrecht, Frankfurt am Main VOLUME 5 CIP-Kurztitel der Deutschen Bibliothek: Jaenicke, Günther: A joint venture agreement for seabed mining / Günther Jaenicke; Erich Schanze and Wolfgang Häuser. - Frankfurt am Main: Metzner; Deventer, The Netherlands: Kluwer 1981. (Studies in transnational law of natural resources; 5) NE: Schanze, Erich; Hauser, Wolfgang; GT. ISBN 978-94-017-4346-4 DOI 10.1007/978-94-017-4344-0 ISBN 978-94-017-4344-0 (ebook) 1981 Springer Science+Business Media Dordrecht Originally published by Kluwer B.V. Deventer, The Netherlands in 1981 Softcover reprint of the hardcover 1st edition 1981 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the publisher. Reference subjects: 1. Corporation law - Joint ventures. 2. Contract law - Investment contracts. 3. Public international law - Law of the sea. 4. Public international law - Concessions. 5. Public international law - dispute settlement. 6. Natural Resources. 7. Economics - Mineral industries. Bibliography: p. 120.

Preface The Third Uni ted Nations Conference on the Lawof the Sea is preparing rules far the establishment of an international legal regime governing the exploration and exploitation of the resources of the international seabed. The Draft Convention on the Law of the Sea (Informal Text) of 27 August 1980 which has so far been the result of the negotiations during the preceding sessions of the Conference, provides for a so-called "parallel system" under which an international "Enterprise" as weil as national private or state-owned companies will be granted access to the resources of the international seabed under the control of an International Seabed Authority. The Draft Convention also envisages the condusion of joint venture agreements between the international Enterprise and national companies or consortia, and encourages such cooperation through granting various incentives. Such joint ventures will probably play an important part in making the international Enterprise operative in the early years of its existence. At the Conference concerns have been expressed whether and when the Enterprise as a newcomer would be in a position to start seabed mining and to compete effectively with the national companies. The Draft Convention provides for a number of ways and means to enable the Enterprise to develop its technological and financial capabilities for deep sea mining as early as possible. Among them, the entrance of the Enterprise into joint ventures with experienced national companies, which have already developed the necessary technology, seems to us a most promising avenue to this end. It may further be expected that co-operation between the Enterprise and the national companies which have already been active in this new technological field, will prove mutually advantageous in the long run. The legal relationship between an international Enterprise and national companies under an international legal regime as contemplated by the Conference will be a new development, and poses specific legal problems that need further analysis and doser examination. It is the purpose of the following study to identify these problems and to demonstrate that joint ventures between the Enterprise and national companies can be formed in such a way as to pay regard to the special and legitimate interests ofboth sides and to offer good prospects for a viable working. T 0 focus on these problems and to propose possible, though not necessarily final solutions, our study contains a draft of a joint venture agreement with a commentary attached to its provisions. We hope that this approach will stimulate 5

further discussion and elaboration of the subject. In preparing a proposal for a joint venture agreement on seabed mining, the authors were able to draw on the results of research undertaken at the Institut für Ausländisches und Internationales Wirtschaftsrecht (Institute for Foreign and International Trade Law) in Frankfurt. Since 1974 the Research Group " Transnational Law of Natural Resources" at the Institute has analysed agreements between host countries and transnational mining companies and has concentrated on hard mineral mining agreements in developing countries. On the basis of this research it appeared sensible to proceed to the new field of seabed mining for an analysis of the extent to which organizational experience of re cent land-based mining could be utilized in devising the legal framework for a mining venture under the forthcoming regime of the international seabed. The study was originally prepared at the request of the Minister of Economics of the Federal Republic of Germany and completed in December 1979. For the present publication we have taken account of a number of valuable comments which we have received from representatives of developing countries and the mining industry and from colleagues in the academic field. Wehave also reconsidered some issues in the light of the textual changes in the Draft Convention on the Law of the Sea of 27 August 1980, und updated the text accordingly. For the convenience of the reader we have attached the relevant: provisions of the Draft Convention, and we have also added a select bibliography for further orientation. We owe debts of gratitude to the many who gave advice, contributed data and commented on the various versions of the text. Frankfurt am Main, January 1981 Günther Jaenicke Erich Schanze Wolf gang Hauser 6

T able of Contents Preface... 5 Diagrams and T ables... 8 1. Introduction........................................... 9 2. Scenario of the Agreement... 11 2.1. Institutional Arrangements.............................. 11 2.1.1. Organs of the Authority... 11 2.1.2. Interests and Influences................................. 12 2.1.3. The System ofexploitation under the Draft Convention.... 13 2.2. T echnical and Economic Assumptions.................... 14 3. Special Assumptions for the Agreement................... 16 3.1. Mining in Reserved Area............................... 16 3.2. Operational Orbit of the Joint Venture Agreement... 16 4. Main Legal Features of the Agreement.................... 20 4.1. Interlinked Triangular Solution... 20 4.2. Diversification of Decision-Making Mechanisms and Conflict Resolution... 21 4.3. Incorporation of the Operating Company................. 23 4.4. Capital Formation... 24 4.5. Control... 25 4.5.1. Board of Directors... 26 4.5.2. General Investment Plan............................... 26 4.5.3. Managing Director... 26 4.5.4. General Training Program Supervisor..................... 27 4.6. Revenue Distribution................................... 27 4.7. Transfer oftechnology................................. 33 5. Manganese Nodule Mining Agreement Text and Comments... 37 Appendix One: Draft Convention on the Law of the Sea (Informal Text) of 27 August 1980 (A/CONF. 62IWP. lo/rev. 3) - Excerpts -... 93 Appendix Two: Select Bibliography... 120 About the Authors... 127 7

Diagrams and T ables 1. Operating and Controlling Entities Involved in Manganese Nodule Mining & Processing... 18 2. Relationships in Reserved Area... 21 3. Relationships in Non-Reserved Area... 21 4. Capital Formation of Operating Company... 25 5. Revenue Splitting Model... 31 6. Monetary Flows within and from the Operating Company... 32 8