INFORMAL TEXT FOR MINING CODE GIVEN TO SEABED COUNCIL; FINANCIAL REGULATIONS EXAMINED

Press Release
SEA/1631

INFORMAL TEXT FOR MINING CODE GIVEN TO SEABED COUNCIL; FINANCIAL REGULATIONS EXAMINED

(Received from International Seabed Authority.)

KINGSTON, 16 August -- An informal revision of regulations prepared for the draft mining code for exploration for polymetallic nodules in the deep seabed was presented this afternoon to the Council of the International Seabed Authority, meeting in Kingston.

The Secretary-General of the Authority, Satya N. Nandan, introduced the informal papers today at a formal meeting. They are based on informal consultations that the Council held last week. The Council will take up the revised text during a second reading later this week, after it is available in all official languages.

Earlier, at its morning and afternoon meetings, the Council read through a draft of the financial regulations that are to govern the financial management of the Authority. After reviewing the 14 regulations and an annex on auditing terms of reference, the Council agreed to await a revised text based on the outcome of the discussion.

This discussion centred on such issues as the proposed two-year financial period, the handling of a reference to provisional members, the wording used to define the Finance Committee's role in the budgetary approval process and the management and investment of the Authority's funds.

The Council is expected to take up the rules of procedure of the Legal and Technical Commission at its next meeting, at 3 p.m. tomorrow, 17 August.

Proposed Changes to Mining Code

The informal revision of the draft mining code on exploration for polymetallic nodules in the international seabed area, placed before the Council this afternoon, was prepared by the secretariat together with the Council President, in the light of comments and proposals made last week during informal meetings of the Council. The revised text covered results from the Council's first reading of a draft originally submitted last August by the Legal and Technical Commission. It reproduces 13 of the 33 regulations; the others had been discussed last August. Also circulated today was an informal revision of annex 4 to the regulations, containing standard clauses for exploration contracts between the Authority and seabed mining entities.

The code will be the Authority's first endeavour to flesh out seabed mining provisions contained in the Authority's governing instruments, the 1982 United Nations Convention on the Law of the Sea and the 1994 Agreement relating to the Implementation of Part XI (seabed provisions) of the Convention.

The revisions were introduced today by Secretary-General Nandan, who said that because there was no agreement on some of the proposals made last week, they were not included in the revised text. He highlighted a number of the changes, including the following:

-- A new paragraph, taken from the former preamble, states that the regulations may be supplemented by others, "in particular on the protection and preservation of the marine environment".

-- Many definitions were removed from the text, if they were already defined in the Law of the Sea Convention.

-- If a contractor sought to extend its plan of work for exploration, it must apply to the Authority not later than six months before the current plan expired.

-- Training programmes for personnel of the Authority and of developing countries, to be provided by contractors, "shall provide for full participation by such personnel in all activities covered by the contract".

-- Any adjustments in the contractor's programme of work would require approval by the Council after agreement between the contractor and the Secretary-General.

-- If a State sponsoring a contractor terminates its sponsorship, it should inform the Secretary-General of the reasons.

-- A new paragraph binds contractors to take "precautionary measures to anticipate, prevent or minimize adverse impacts on the marine environment arising from its activities in the [international seabed] Area as far as reasonably possible using the best available technology". Precautionary measures are defined as meaning that, "where there are threats of serious or irreversible damage to the marine environment, lack of full scientific

certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation".

-- If a contractor applies for exploitation rights, it must set aside "impact reference zones" and "preservation reference zones" to aid in assessing the impact of seabed activities. Mr. Nandan explained that this provision had been moved into the regulations from the standard contract clauses.

-- In the event of an incident causing or likely to cause serious environmental harm, the duration of any immediate response by the Secretary-General would be limited to 90 days or until the Council acted, whichever came first.

-- A new paragraph says that nothing in the regulations shall affect the right of coastal States to act, consistent with the Convention, to prevent, mitigate or eliminate grave and imminent danger to their coastline or related interests from pollution or other hazardous occurrences. Although this provision reproduced elements from the Convention, Mr. Nandan said, the revised text did not include a number of other proposals on the rights of coastal States, on which there had not been general agreement. It was therefore up to the Council to decide the question.

-- Another new clause would authorize the Secretary-General, upon notification by coastal States of an environmental incident, to take temporary measures if he had "clear grounds for believing that serious harm to the marine environment is likely to occur". Mr. Nandan explained that this would ensure that no action would be taken on frivolous grounds, while retaining the Secretary-General's power to exercise judgement.

-- A new regulation requires contractors to notify the Secretary-General if they found "an object of an archaeological or historical nature", in which case they would be bound to "take all reasonable measures to avoid disturbing such object".

-- On confidentiality of information supplied to the Authority by contractors, Mr. Nandan said several changes reflected proposals by the United States. Among them is a new paragraph specifying that the Authority could use such data only as necessary for and relevant to the effective exercise of its powers and functions. Also, data would be confidential for 10 years after an expiration contract expired, and would remain confidential if the contractor engaged in exploitation. A further change, from another source, provides that data would not be considered confidential if they related to "protection and preservation of the marine environment and safety, other than equipment design data".

-- A new regulation would authorize the Commission to issue "recommendations of a technical or administrative nature for the guidance of contractors". The Council could request a change in such recommendations if it found them inconsistent with the intent and purpose of the regulations.

-- Finally, the text adds a paragraph stating that any final court decision relating to the rights and obligations of the Authority or contractors shall be enforceable in the territory of each State party to the Convention.

In general comments after the Secretary-General's introduction, Mexico and Chile objected to the omission of proposals that they and others had made during the first reading. Mexico observed that among the proposals was the idea that action to protect the marine environment could be based on the criterion of "harmful effects" rather than that of "serious harm" as stated in the original text. This would be consistent with the wording in Article 145 of the Convention. Nor did the revised text include the Mexican proposals concerning emergency orders by the Council.

Chile, France and Greece also expressed disappointment at the exclusion of their recommendations.

Financial Regulations

The draft financial regulations (ISBA/4/C/L.3) which the Council examined today at its morning and afternoon meetings had been submitted by the Finance Committee, which worked on the text between March 1997 and August 1998. Once the Council has approved the regulations, they go before the Assembly for final adoption.

The first point raised this morning concerned draft regulation 2, which states: "The financial period shall consist of two consecutive years, the first of which shall be an even year." Japan voiced concern about a possible inconsistency between this clause and article 172 of the Law of the Sea Convention, which calls for an annual budget. It suggested that consistency could be achieved if a two-year projection of expenses was presented in the form of two separate annual budgets. Japan proposed an addition to regulation 3, concerning the budget, as follows:

"The Assembly shall consider and approve the budget of the following financial period submitted by the Council, on the understanding that the annual portion of the budget will be appropriated every year prior to the date of commencement of each respective portion, in accordance with the provisions of the Convention."

The Republic of Korea agreed that a two-year budget period, while allowing the Council to devote more time to other important issues during the sessions of the Authority, was not strictly in keeping with the Convention. Several other speakers urged that the provision be clarified to retain the advantage of budgetary planning over a two-year period while adhering to the annual budget required by the Convention.

After the Japanese proposal was circulated in writing this afternoon, and in the absence of further comment, the Council President, Charles Manjang D'Awol (Sudan), said he took it that the proposal was agreed.

Also on regulation 2, Chile, supported by Ghana, proposed that the Authority's financial year should be defined to correspond to the calendar year. No objection was voiced to this idea.

The Council Secretary, Michael W. Lodge, said in response to comments by Council members that the secretariat would not be in a position before next year to submit budgetary proposals spanning two years. The proposed budget that the Council and Assembly are to examine later during this session covers the year 2000.

Differing views were expressed regarding a clause in regulation 1 defining "members" of the Authority to include provisional members. Some delegations felt that, as the Authority no longer had provisional members since last November, when that category had expired, the reference should be deleted. Others, such as Australia, Cameroon, Italy, Namibia and the United Kingdom, noted that as the financial obligations of provisional members to the Authority were still valid, omitting a reference to them in the financial regulations could create problems in processing any payments they might make. Jamaica and the Council Secretary pointed out that under the provisions of international law and the 1994 Agreement on the seabed, all former provisional members remained liable in any case to fulfil the obligations incurred during their membership.

In regard to regulation 3, dealing with the budget process, Argentina and Chile asked that the proposed budget be circulated to members of the Authority at least 45 days prior to the opening of the Council session, instead of 30 days as stated in the draft.

Some delegations wanted this regulation to state clearly that the Council and Assembly, and not the Finance Committee, must have the final say in decision-making regarding the budget. The existing text states that budgetary decisions by the Assembly and Council "shall be based on the recommendations of the Finance Committee". China and Jamaica called for more flexibility in the wording, by replacing the phrase "shall be based on" by "shall take into account". The observer of the United States and others preferred the original wording, noting that it was based on a provision of the 1994 Agreement stating that "Decisions of the Assembly or the Council having

financial or budgetary implications shall be based on the recommendations of the Finance Committee".

On regulation 5, covering the provision of funds, Japan proposed an amendment to enable the Authority to establish floor and ceiling (maximum and minimum) rates in the scale of assessments governing members' contributions to the budget. The Russian Federation said the scale of assessments should be determined by the Authority and not based on the United Nations scale, as the draft specified.

On regulation 6 governing the various funds of the Authority, Italy and the Republic of Korea proposed an addition to a paragraph relating to the economic assistance fund that the Authority is authorized to establish to aid developing land-based producer States whose economies are determined to be seriously affected by the production of seabed minerals. They wanted the text to indicate that the amount of the fund would be established "after having covered the administrative expenses" of the Authority, in line with a provision in the 1994 Agreement authorizing such a fund.

The Russian Federation, supported by Senegal, urged that the regulations should also cover contributions made in kind.

At the afternoon meeting, Chile raised an objection to a clause in regulation 8 on custody of funds, giving the Secretary-General full authority to designate the bank in which the funds of the Authority should be kept. Chile felt that, in the interest of greater transparency, the Secretary-General should be guided in his decision by the Council. China and Mexico supported this view, but several others, such as Austria, Ghana, New Zealand, Senegal and the United Kingdom, opposed it, on the ground that the infrequency of Council sessions made that course of action impractical. The Council Secretary explained that large payments received by the Authority were often placed in high-interest-bearing term deposits until the funds were needed.

Chile also objected to a provision in regulation 9 on investment of funds, allowing the Secretary-General, in consultation with an investment counsellor, to make long-term investments of moneys in trust funds, reserve and special accounts. Although he agreed with Senegal that the Secretary-General had to be free to act quickly on good opportunities for short-term investments, he felt that long-term investments were another matter entirely, and any investment counsellor dealing with such matters would have to be approved by the Council. The Russian Federation supported this position.

On regulation 10, which deals with internal control, Senegal wanted the Secretary-General to be authorized to make provision for writing off losses. Ghana supported this view, but on condition that write-offs be considered together with the auditor's report, and be subject to the Finance Committee's consideration.

Italy, commenting on regulation 12 dealing with audit, proposed that the independent auditor to be appointed by the Assembly should be specially experienced in auditing international organizations. On other aspects of this regulation, Austria urged a greater role for the Council in appointing the auditor, while Chile preferred that the Secretary-General be made responsible. Senegal pointed out that the regulations did not specify the appointment procedure.

* *** *