Back to Basics: Contract Law and the ISA Exploitation Regime

"In July 2016 the International Seabed Authority (the “ISA”) released a first working draft of its mineral exploitation regulations as well as the standard contract terms for mineral resources in the Area, for which stakeholder input was sought in late 2016. In January of 2017 the ISA released a discussion paper on environmental matters related to these draft regulations. The ISA is now in the process of further developing its draft exploitation regulations and standard contract terms to ensure that seabed mining is carried out in an environmentally sound way for the common benefit of mankind.As the regulator of the “Area”, the ISA can draw lessons from onshore mining regulators and offshore petroleum regulators for their experiences in legislative drafting to smoothly and safely oversee project development, implementation, and closure. However, one of the unique challenges that the ISA faces in regulating private industry is its status as an international organization and not a sovereign nation, which results in a significantly different legal relationship between the regulator and the regulated. The result is that the exploitation contract is the sole legal connection between the mining proponent and the regulator for the exploitation phrase of the project.Accordingly, in the regulatory development process, the ISA must carefully consider which rights and obligations are set out in the exploitation contract versus the regulations. This decision will dictate the flexibility the ISA will have to modernize the conduct required of mining proponents in response to changing best practices in the industry, technological progress, and advances in the understanding of the marine ecosystem. As the first working draft of the exploitation regulations sets out an initial contract period of twenty years, it is crucial for the ISA to carefully consider the rights, obligations, and procedures it agrees to in the exploitation contract, as unilateral amendment will not be possible after contract execution."