A race to the bottom (of the sea)

The International Seabed Authority (ISA), countries and companies alike, race to finalise regulations over deep sea mining.

With experts estimating that the global clean energy sector’s demand for rare earth elements and lithium will grow by 40% and 90% in the next two decades, there has been an increased focus on the largely unchartered territory of Deep Seabed Mining (DSM). DSM involves extracting three different mineral deposits – Seafloor Massive Sulphides, Polymetallic Manganese Nodule, and Cobalt-rich Crust – from the seafloor at depths of 500 to 5000 m. The nodules which are mined through DSM may be rich in minerals such as: silver, gold, copper, manganese, lithium, cobalt, and zinc.

The increasing interest in DSM comes with increasing concern of its untested and unknown environmental implications and the need for the development of international rules and regulations to ensure resource exploitation does not cause undue environmental harm. Under UNCLOS and the 1994 Implementation Agreement, the ISA has been tasked with developing regulations to manage the exploitation of these mineral resources. This process has been ongoing since 2014. These regulations must balance the commercial interests of multinationals, the social and economic interests of the countries where the resources are being exploited, and the protection and preservation of the marine environment. However over the past year, questions and public concern have been raised over the role and autonomy of the ISA in balancing those interests, with some countries such as New Zealand, Spain, Germany and Costa Rica calling for a ‘precautionary pause’ on any future exploitation activities until sufficient environmental protection is ensured through the regulations.

So why is this suddenly urgent? The Pacific island nation Nauru, is pushing for the regulations to be finalised imminently so that exploitation activities by license holder ‘The Metals Company’, can begin as early as 2024. To speed up the process, Nauru has triggered a treaty provision under the 1994 Implementation Agreement, requiring the ISA to finalise the regulations within 2 years – expiring in July this year. This move has been described as nuclear, however it is uncertain whether the ISA will adhere to the deadline. While the ISA has awarded 31 exploration contracts for the deep sea, no exploitation should occur until regulations are finally agreed. This raises the question: is a rushed job better than none?

In today’s volatile energy and natural resources market, DLA Piper’s ESG focus in the mining and mineral resources industry makes us well positioned to understand, anticipate and advise on industry challenges like those presented by DSM.

Gitanjali Bajaj

Partner & Co-Head of International Arbitration, Asia Pacific

Gitanjali.Bajaj@dlapiper.com

Alex Jones

Partner & Global Co-Chair, Energy and Natural Resources

Alex.Jones@dlapiper.com

Stephen Webb

Partner & Head of Energy Sector, Asia Pacific

Stephen.Webb@dlapiper.com