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MINING GETS THE SHAFT IN LAW OF THE SEA TREATY
Mining Affairs Forum By Ken Thornberg Dec 2009/Jan2010
President after president has opposed America’s support of the U.N. Convention on the Law of the Sea, The Law of the Sea Treaty (Treaty) until now. President Obama’s administration has changed directions and gone public about its support. It makes one wonder what has changed, why the U.S. Senate has not ratified it by now, and why its impact will not hurt mining and other interests as much as it would have in the past. That is what our topic is for this issue, one of the most important topics I’ve written on for this industry.
The Past
In 1982, President Reagan said about the treaty, “Those extensive parts dealing with navigation and overflight and most other provisions of the convention are consistent with U.S. interests…Our review recognizes, however, that the deep seabed mining part of the convention does not meet U.S. objectives.”
The president was right. The prior treaty, if ratified by the U.S., would have mandated that U.S. corporations that wanted to mine any mineral—oil, natural gas, gold, silver, etc.—from the “Area” (the deep oceans more than 200 miles from shorelines) would have to get permission from a U.N entity called the “Enterprise,” and permission could be denied to anyone for most any reason! Also, to get permission from the U.N., companies would be required to give to the Enterprise for its use—and possible dissemination—any and all new technologies that it (or any other company) had developed to access the minerals, including mining equipment, robotic technology, new submarine technology, etc. So much for competitive advantage and making money off patents and intellectual property rights! I can see some jaws dropping, but hey, we are not near to being done yet!
If you did get permission to mine, the Enterprise would set a limit on the quantity of material that could be mined. It would then take possession of the minerals and sell them (global government authority), keep a cut for itself (global tax), and finally give the corporation a share of the profits (global socialism). Are you impressed yet? Well, things are actually worse than this. Did you have any clue that our president was willing to pass this scam on to American business?
Pretending to “Fix” It
In order to build support from America, something the U.N. deemed absolutely necessary (since we are the ones with the technology and enterprise to mine it), an addendum was added and a snow job ensued telling everyone that there was no reason to not pass the treaty any longer. That is a lie.
Today if a firm was able to pay the $250,000 application fee, they could probably meet the technical and legal hurdles to get permission from the International Seabed Authority (Authority). Still, if 2/3 of the Authority’s Council voted no, forget it. Let’s see what they allegedly fixed and go deeper into some of its worst parts.
Mining Rights
Even though the treaty today no longer blatantly demands that the Enterprise be given intellectual property rights for new technologies in return for exploration and mining rights, it does say, “The Enterprise…shall seek to obtain such technology on fair and reasonable commercial terms and conditions on the open market, or through joint-venture agreements;…[but] if the Enterprise or developing States are unable to obtain deep seabed mining technology, the Authority may request all or any of the contractors and their respective sponsoring State or States to cooperate with it in facilitating the acquisition of deep seabed mining technology…on fair and reasonable commercial terms and conditions, consistent with the effective protection of intellectual property rights…” I could go on, but you get the idea. In layman’s terms, this means the Enterprise or a developing state can offer to purchase new technologies from companies for what they consider to be “fair and reasonable.” If the companies refuse the offer, all countries who have signed the treaty must work to obtain the new technology for the U.N. affiliates and the companies are stuck receiving the “fair and reasonable” price anyway. So much for an Addendum to make it palatable! Here is the key when looking at this realistically: Read the word “cooperation” as “coercion.” Gee, if you refused, what would the Council say next time you filed a new application to mine in another area? Does it take a rocket scientist to figure this one out? The only technology which is off limits is military technology and little mining technology is going to be considered “military” in nature by the U.N.
Not only must technological wherewithal be supplied to the U.N. affiliates at fire sale prices, but companies must train foreigners in their use “by providing opportunities to personnel from the Enterprise and from developing States for training in marine science and technology and for their full participation in activities in the Area.” At their cost, of course. Free. Oh well, so much for competitive advantage for any patents, etc. held!
Oh, there’s more. Just because you have a chance to explore for minerals does not mean they will be given permission to access the minerals they find!!!! Sorry. From the treaty: “Prospecting may be conducted simultaneously by more than one prospector in the same area or areas,” and the Authority decides who that will be. Based upon the conditions, which I won’t go into here, it appears as if it will usually be companies from countries who are not our friends! You as the mining company have no choice in the matter. Surprise.
Believe it or not, even gold found by a shipwreck explorer will be turned over to the U.N. entity for “redistribution” to “benefit all mankind.” Any antiquity will fit that description according to the treaty.
Mining the Minerals
There’s more. The section dealing with “profit-sharing” has allegedly been fixed too. Has it? Of course not. The original treaty said the Enterprise was responsible for transporting, processing and marketing of minerals recovered from the Area. The Authority would have taken it upon itself to promote the growth, efficiency and stability of markets for those commodities produced from the minerals derived from the Area, at prices remunerative to producers and fair to consumers. In other words, it amounted to price-fixing.
The only thing missing now are the production caps and trend lines to support the price-fixing formula. No replacement has been designed, leaving it open for the possibility that the Enterprise would demand an even larger piece of the pie. It is a “matter to deal with at a later date.” Oh, that’s assuring! Why pass a treaty with questionable gaps supported by the biggest socialist enterprise in the world—the U.N.? Plus, there is still an annual fee (though this fee has yet to be determined, once more a mystery). Under the revised treaty, the Enterprise would still take title to the minerals after they are mined, process them, sell them, and give the company a cut!! Incredible? And, if you’ve noticed the trend, the company’s share of the proceeds is unknown as of yet. Says the treaty, “The rates of payments under the system shall be within the range of those prevailing in respect to land-based mining of the same or similar minerals in order to avoid giving deep seabed miners an artificial competitive advantage or imposing on them a competitive disadvantage.? Yeah, sure…
Real Life Example
Let’s give an example and see how this works. You’re a business owner who has risked everything to mine ocean diamonds. According to the treaty, you would be forced to hand the rough stones over to the Enterprise, made up of people from mostly Third World nations (the “have-nots”). They would either immediately sell them or would have them cut and polished and then sold. You would wait for your share of the proceeds of the sale of the diamonds, having no idea how long it will be until you will get paid or how much you will get paid. You don’t know the end weight of the gems after the U.N. cuts them, so you can’t hazard a guess as to how much money the stones should fetch, nor do you accurately know the color, clarity, and flaws of the stones. In fact, you don’t even know for certain if you will get paid at all because you don’t know what type of safety system will be set up to protect the diamonds from theft. And you don’t know if these Enterprise folks will put a few of the stones in their pockets for all their trouble. After all, this is to benefit the poor people of the world! There are all kinds of opportunities for fraud in each and every step of this system. How many honest businessmen would want to be involved with such a regulatory regime? Remember the oil-for-food fiasco? And the sex-for-food scandals in Africa? Why, that’s your new business partner, so why be concerned?
To add to the concern, there is no remedy if something goes wrong. All you can do is complain to the same organization that you believe is ripping you off, or to its sister organization, “The Seabed Tribunal for the Law of the Sea.” Isn’t that re-assuring? There is virtually no way for even a sovereign country to investigate fraud at the U.S. affiliates, let along a company doing so. The wording of the treaty provides nearly blanket immunity to the U.S. affiliates. Now, the Authority can “waive” immunity if it wishes. Yeah, if you believe in tooth fairies. Says the treaty, “The property and the assets of the Authority (read that as to what you’ve handed over to them from your mining efforts) shall be immune from search, requisition, confiscation, expropriation, or any other form of seizure by executive or legislative action.” That about covers it, don’t you think? To be fair, I must add that the Enterprise can be sued in a sovereign state; however, the assets and property it holds are immune! Doesn’t that make you feel better? It would take a pretty stupid criminal to get caught when you can’t seize the goods he stole to prove your case!
Oh yeah…the Dictators
It gets worse! The Agreement says, “Designation of a reserved area for the Authority…shall take place in connection with approval of an application plan of work for…exploration and exploitation.” What this means, of course, is that when a company discovers minable minerals that it wants to attempt to recover, it must supply the location of a second, commercially profitable area to mine! This is almost laughable. Then the Authority will take one of those areas for its own use (area they deem most profitable) and allow the company to mine the other. The “other” entity would be either the Authority itself or working with it as part of a joint endeavor with a company, a developing state, or an individual in a developing state. And you have done all the work to set them up. For free, of course. Absolutely nothing related to that new venture has been defined, of course, to continue our broken record. In case you’ve read the news the past ten years or so, you know that developing nations are run by dictators and strong men: the Robert Mugabe and Hugo Chavez types. The chances of graft would be greater than 100% if we could exceed that number.
When the Authority provides assistance to developing nations, the assistance will be provided “where appropriate, in cooperation with existing global or regional development institutions which have the infrastructure and expertise to carry out such assistance programs.” That would be like the IMF, the World Bank, etc. If it wasn’t for our present director of the Federal Reserve bailing out the IMF with $500 million of our tax dollars to give away recently, it would probably fade away. To show its track record of helping the poor, note that Africa had 10% of its population in the 1970s in the category of “poverty.” Today that number has risen to over 70%. These programs are designed for corruption and failure. Even former French President Jacques Chirac admitted that only one-third of international disbursements go towards fighting poverty. You can guess where the rest goes. All that this program would do is help guarantee that criminal and amoral leaders would stay in office.
Flawed Purpose of the Treaty
The Law of the Sea Treaty is based upon the idea that there is a static amount of wealth in the world and that the best way to help the poor around the world is through penalizing successful nations like America and redistributing wealth through benevolent leaders who have worldwide clout. A free market system, which most Americans wish to see continue, is what creates wealth and all of the world benefits as a result. Wealth redistribution hurts the poor—it doesn’t lift them up. Nothing beneficial is created from handouts. That is why the Obama economic stimulus plan is and will continue to fail—government produces nothing but the sale of ink on phony money. The U.N. and its financial entitles are a virtually unaccountable group of handpicked individuals who answer to the bureaucratic elites who put them into power. Why should they do what is in the best interest of the middle class and poor? They haven’t so far, so why should things change now?
An article written for the Council on Foreign Relations by Scott Borgeson gave us a very good reason to support the treaty: virtually all other developed countries have done so and not signing it would “tarnish America’s diplomatic reputation at a critical moment in international relations.” Isn’t that too bad? From my counts in the U.N., we seldom if ever get half the membership supporting an American vote that supports freedom anyway. Why jump off a cliff because others have already done so? Since when should our nation seek to give in to the collectivist path when it should take a noble path and become unpopular once in awhile? As my wife and I travel around the world, there is not one person who has not agreed with the following statement--not one: “As America goes, so goes the world.” They say that, even knowing the tremendous growth of Red China and other Third World nations. They know.
It’s time to let our Senators know we vigorously oppose this treaty. It’s time to stop allowing the rich to get richer and the poor, poorer. We’ve seen this goal in the administration’s policies and that is why president Obama has supported such a poorly written treaty. Mining companies will become one of the most egregious losers in this scenario. The industry must speak up and speak up now, or it will be too late.
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