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COMMISSION OF THE EUROPEAN COMMUNITIES

                           C0MC94) 305 final

                           Brussels, 13.07.1994

                           94/0182 (ACC)

       COMMUNICATION FROM THE COMMISSION TO THE COUNCIL

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**on the results of the**

**informal consultations held by the UN Secretary General**
**to seek universal acceptance of the 1982 UN Convention**
**on the Law of the Sea;**

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                 Proposal for a
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**94/0182 (ACC)**

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                COUNCIL DECISION

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concerning the signing by the European Community of the Agreement relating to the

implementation of Part XI of the 1982 United Nations Convention on the Law of the
Sea and the provisional implementation by the Community of that Agreement and of

Part XI of the Convention

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            (presented by the Commission)

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**I. INTRODUCTION**

The Convention, which has so far been ratified by 61 states, all of them developing countries
except Iceland, former Yugoslavia and Malta, will enter into force on 16 November, one year
after the sixtieth ratification.

The industrialized nations have not ratified (some, notably Germany, the United Kingdom and
the United States, have not even signed the Convention) because they consider that Part XI
establishes dirigiste, bureaucratic and extremely costly arrangements for deep seabed mining.
The developing countries' view, on the other hand, is that Part XI paves the way to a new world
economic order.

The only reasons for the developing countries' recognition of a need to amend the deep seabed
mining arrangements in order to make the Convention universally acceptable are the political and
economic changes of recent years and the financial burdens which they would otherwise have
had to shoulder without the industrialized world.

Mr Pérez de Cuéllar, the UN Secretary-General, accordingly took the initiative in 1990 of calling
together a number of the states with an interest in the matter to determine which aspects of
Part XI were causing the industrialized nations the most problems and to seek compromise
solutions.

Ths second phase of the consultations was open to all the countries with an interest in the matter
and to the Community.

This ended on 3 June of this year with the production of a draft Resolution and a draft Agreement
on the implementation of Part XI.

The vast majority of the delegations in attendance expressed their satisfaction, with only the
Russian Federation differing in its view on the grounds that a number of its proposals had been
rejected by the delegations of the Group of 77.

The draft Resolution and Agreement will be referred for adoption to the 48th UN General
Assembly, which will be reconvened from 27 to 29 July for the purpose. The Agreement will be
open for signing immediately after adoption.

Under the terms of the Convention, signed by the Community on 7 December 1984, the
Community cannot sign the agreement without a majority of the Member States first having
signed it themselves (see Article 3 of the Agreement, Article 305(1 )(f) of the Convention and
Article 2 of Annex IX to the Convention).

**\ -**

**II.** **EVALUATION OF THE DRAFT RESOLUTION AND DRAFT AGREEMENT (1)**

**1.** **Introduction**

1.1. When signing the United Nations Law of the Sea Convention, on December 7, 1984, the
European Community made the following statement:

_On signing the United Nations Convention on the Law of the Sea, the European_
_Economic Community declares that it considers that the Convention constitutes, within_
_the_ _framework of_ _the_ _Law of_ _the_ _Sea, a major effort in the codification and progressive_
_development of_ _international_ _law in the fields to which its declaration pursuant to Article_
_2 of Annex IX of_ _the_ _Convention refers. The Community would like to express the hope_
_that this development will become a useful means for_ _promoting_ _co-operation and stable_
_relations_ _between_ _all countries in these fields._

_**The Community,**_ _**however,**_ _**considers that significant provisions of Part XI of the**_
_**Convention are not conducive to the development of**_ _**the**_ _**activities to which that Part**_
_**refers in view of the fact that several Member States of**_ _**the**_ _**Community have already**_
_**expressed their position that this Part contains considerable deficiencies and flaws**_
_**which require rectification. The Community recognises the importance of the work**_
_**which remains to be done and hopes that**_ _**conditions**_ _**for the implementation of a sea**_
_**bed mining regime, which are generally acceptable and which are therefore likely to**_
_**promote activities in the international sea bed area can be**_ _**agreed.**_ _**The Community,**_
_**within the limits of**_ _**its**_ _**competencies, will play**_ _a_ _**full part in contributing to the task of**_
_**finding satisfactory solutions.**_

_A separate decision_ _on_ _formal confirmation will have to be taken at a later stage. It will_
_be taken in the light of_ _the_ _results of_ _the_ _efforts made to attain a universally acceptable_
_Convention._

1.2. Other industrialised countries, in particular those interested in the exploitation of the seabed, made similar declarations.

1.3. **The Preparatory Commission for the International Sea-Bed Authority and the**
**International Tribunal of the Law of the** Sea has proved to be the adequate framework
for the elaboration of rules, regulations and procedures, as long as these were of a
technical and "neutral" nature, but not for rectifying the "deficiencies and flaws".

(1) Drawn up by the Commission and approved in New York on 2 June 1994 by the members of the
working party on the Law of the Sea in their personal capacities.

2

1.4. At the end of the eighties, it became apparent that the Convention had been ratified
almost exclusively by developing States (with the exception of Iceland and Yugoslavia)
and that the industrialised countries in East and West would not ratify it as long as the
sea-bed mining regime remained unchanged. A number of important political and
economic changes affecting international relations in general that had taken place since
the adoption of the Convention led the United Nations Secretary General to make a new
effort in order to achieve the universal acceptability of the latter.

1.5. He invited a limited number of developing and industrialised States with a particular
interest to **"Informal Consultations"** where eight elements of Part XI were identified as
representing the major reasons for which industrialised States have not ratified or acceded
to, the Convention:

Costs to States Parties
Enterprise
Decision making procedures of the Authority
Review Conference
Transfer of Technology

Production Limitation
Compensation Fund
Financial Terms of Contract

1.6. After nearly four years, the consultations - which since the beginning of 1992 had been
open to all interested States and to the European Community - have led to agreements on
all the eight identified issues and on the establishment of a subsidiary organ of the
Authority to deal with financial matters (Article 162, paragraph 2(y) of the Convention),
the "Finance Committee".

1.7. In the last phase of the consultations, the participating delegations were also able to agree
on the legal form to be given to the results of the negotiations, i. e. on the drafting of an
**Agreement relating to the implementation of Part XI of the Convention.** The
solutions to the eight identified problems and the provisions on the establishment of the
"Finance Committee" form an annex to the agreement. The first section, dealing with the
problem of "Costs to States Parties" contains also provisions concerning "institutional
arrangements".

**2.** **THE IMPLEMENTATION AGREEMENT**

2.1. The Agreement is a legally binding instrument which modifies the provisions of Part XI
of the Convention. It prescribes that the provisions of the Agreement and Part XI shall be
interpreted and applied together as a single instrument. In the event of any inconsistency
between the two texts, the provisions of the Agreement shall prevail.

2.2. The Agreement reconciles the Interests of those States among them the European
Community and its Member States - which until now have refused to ratify, or to accede
to, the Convention because of its sea-bed mining regime, and of those States which have
already ratified, but which have accepted, in order to achieve its universal acceptance, to
modify certain provisions of Part XI, as long as the principle of the Area and its resources
being the common heritage of mankind is reaffirmed and as there is a clear indication that
the States which had refused the original mining regime, will accept the modified
Convention.

The provision concerning provisional application will avoid, to the extent possible, a
situation whereby different Member States might, at least temporarily, apply different
versions of the Convention: From the entry into force of the Convention, and until the
entry into force of the Agreement, the latter shall be applied provisionally

by all States which have voted in the United Nations General Assembly for its
adoption and which have not expressively notified the depository before the entry
into force of the Convention that they will not do so;

by States which have signed the Agreement and have not notified the depository
that they will not apply it provisionally;

by the States which have acceded to the Agreement.

This does not exclude that States which have voted against the adoption of the Agreement
or which have not been represented at the meeting of the General Assembly may apply
the un-modified Convention. But there is no doubt that the Agreement will obtain the
consent of virtually all States which were represented at the "Informal Consultations" and,
in particular, of the developing countries among them, which have already ratified the
Convention and which have indicated, by their presence, their interest in the sea-bed
mining regime.

2.3. States can express in different forms their consent to be bound by the Agreement
(Articles 4 and 5). The _simplified procedure_ allows governments of States which have
already ratified the Convention to give their consent tacitly if they wish to do so. The
other forms are, as usual, signature not subject to ratification, ratification and accession.
For the European Community, The procedure of the Convention concerning the _formal_
_confirmation by_ "international organisations" (Annex DC, Article 3) applies.

2.4. The Agreement enters into force 30 days after the date, when 40 States have established
their consent to be bound, provided such States include at least seven "Pioneer Investor"
States (Resolution n, paragraph 1(a) 2) among, of which at least five must be
industrialised States. This gives the developing States the assurance that the
modifications of Part XI to which they have agreed, have produced the intended result,
that is the acceptance of the Convention by industrialised States.

2.5. For the same reason, the Agreement prescribes (Article 7, paragraph 3) that the
provisional application shall terminate on 16 November 1998, that is four years after the
entry into force of the Convention, if at that time the conditions mentioned in paragraph 4
have not been fulfilled.

2 ) among them: Belgium, Germany, France, Italy, the Netherlands and the UK

**2.6.** **Conclusion**

**The Agreement and its provisions concerning the provisional application will give**
**the industrialised countries which have not yet ratified the Convention** **full** **access**
**to the organs of the Authority and leave them sufficient time, until 15 November**
**1998,** **to complete their internal ratification or accession procedures. On the other**
**hand, the developing States which already ratified, will have satisfactory**
**guarantees that the concessions they have made in the course of the consultations,**
**will be compensated by the universal acceptability which the Convention will now**
**enjoy.**

**3.** **THE ANNEX TO THE IMPLEMENTATION AGREEMENT**

**3.1.** **COSTS TO STATES PARTIES AND INSTITUTIONAL ARRANGEMENTS**

**3.1.1.** **COSTS TO STATE PARTIES**

**3.1.1.1.** **The Provisions of Part XI of the** **Convention**

The International Sea-Bed Authority and it's Secretariat, as defined by Part XI of the
Convention, has been criticised as being bureaucratic, "dirigiste", interventionist and
extremely costly. Industrialised countries in general and the Community and its
Member States in particular could not accept

      - certain provisions of Part XI which impose very high financial obligations upon the
States Parties, especially the obligation to make available to the Enterprise, in the
form of long-term interest-free loans, 50% of the funds _necessary to explore and_
_**exploit one**_ _**mine**_ _**site, and to**_ _**transport,**_ _**process and market the minerals recovered**_
**...** _**and to meet its initial**_ _**administrative**_ _**expenses,**_ _**and**_ _**the**_ **obligation to contribute to**
the _Compensation Fund_ for the assistance to affected developing land-based
producers (see chapters 3.2 and 3.7 below);

     - that a complete Authority with all subsidiary organs and a large Secretariat be
established immediately after the entry into force of the Convention, that is at least
fifteen years before the first commercial operation might begin and before many of
the Authority's competencies will have to be exercised.

**3.1.1.2.** **The Implementation Agreement**

The Agreement recognises that after the entry into force of the Convention, the
activities of the Authority will be limited as long as sea-bed mining is not
economically viable. Therefore, the setting up and the functioning of the various
organs and subsidiary bodies shall be based on an evolutionary approach and on costeffectiveness. The Agreement identifies precisely the activities on which the Authority
shall concentrate in the period before the approval of the first plan of work for
exploitation.

The Agreement establishes a Finance Committee (Section 9) whose recommendations
the Assembly and the Council have to take into account in all decisions on financial
matters. Decisions by the Finance Committee on questions of substance shall be taken
by consensus (see chapter 3.9 below). Until the Authority is self-financing, the
membership of the Committee (of 15 members) shall include the five largest
contributors (USA, Japan, Germany, Russia, France) to the administrative budget of
the Authority.

In addition, the provisions of Sections 2 and 7 of the Agreement eliminate all financial
obligations resulting from the establishment of the Enterprise and a "Compensation
Fund" (see chapters 3.2 and 3.7 below).

Finally, the Agreement prescribes that registered pioneer investors may request
approval of a plan of work for exploration within 36 months of entry into force of the
Convention and that the fee of US$ 250'000 paid pursuant to Resolution II shall be
deemed to be the fee relating to the exploration phase. The Agreement also establishes
the principle of non-discrimination between arrangements for registered pioneer
investors and arrangements for States or entities which have requested from the
Authority approval of a plan of work.

**3.1.1.3.** **Evaluation**

**The costs to States Parties have been considerably reduced for three** **reasons:**

**• During the** **long** **period before the exploitation of the Area becomes**
**economically viable, the Authority will have** **only** **a limited number of**
**functions. The principle of the evolutionary approach** **should** **assure that**
**during this time, the number and duration of meetings of the Assembly and**
**the Council** **will** **be extremely reduced, that subsidiary bodies** **will** **only be set**
**up if needed and that the Secretariat** **will** **be very small, as its tasks are**
**precisely enumerated. The council, acting under the "chamber voting** **system"**
**(see chapter** **3.3** **below) and assisted by the "Finance Committee" (chapter 3.9**
**below) will watch over the stict application of the principle of cost-**
**effectiveness.**

**• Even after this initial period, the functions of the authority** **will** **be significantly**
**more limited than they would have been under the original Part XI because**
**the Agreement has "de-bureaucratised" the Authority: Functions which would**
**have caused the establishment of large services in the Secretariat (e.g. the**
**production limitation system and the administration of a "Compensation**
**Fund") are replaced by less bureaucratic provisions.**

**• Finally, the financially most dangerous provisions of the Convention -**
**concerning the funding by the States Parties of the first mine site of the**
**enterprise (see chapter 3.2 below) and of a "Compensation Fund"** (see chapter
3.7) - **are definitively eliminated.**

**3.1.2.** **INSTITUTIONAL ARRANGEMENTS**

**3.1.2.1.** **The Implementation Agreement**

3.1.2.1.1. Provisional Membership

The Agreement might enter into force before all States, and in particular before all
sponsoring States have accomplished their ratification or accession procedures. The
Agreement therefore provides for the possibility that such States continue to be
members of the Authority on a provisional basis or, for the period between the 15
November 1996 and the 16 November 1998, may request the Council to grant such a
continued membership.

**An** approved plan of work for exploration, if sponsored by at least one State
provisionally applying the Agreement, shall terminate if such a State ceases to apply
the Agreement (Article 7) and has neither become a member on a provisional basis nor
a State Party.

3.1.2.1.2. Rights and obligations of members of the Authority on a provisional basis

Such members shall apply Part XI and the Agreement in accordance with their national
or internal law and annual budgetary appropriations and shall have the same rights and
obligations as other members, including the obligation to contribute to the
administrative budget of the Authority (see paragraph 3.1.2.1.3 below) and the right to
sponsor an application for a plan of work for exploration.

If such a member has failed to comply with its obligations, its membership on a
provisional basis shall be terminated.

3.1.2.1.3. Provisional funding of the Authority through the UN budget

Until the end of the year following the year during which the agreement enters into
force, the administrative expenses of the Authority shall be met **through** the UN
**budget,** subject to a decision of the General Assembly (Paragraph 7 of **the** draft UNGA
resolution contains such **a** decision).

3.1.2.1.4. Rules, regulations and procedures

The provisions of Article 162, paragraph 2 (o)(ii) of the Convention, indicating the
matters for which the Authority shall adopt rules, regulations and procedures, is
extended to the provisions of the Agreement relating to the Enterprise, transfer of
technology, production policy and financial terms of contract. If the Council has not
completed the rules, regulations and procedures relating to exploitation within the
prescribed time, it shall consider and in case approve provisionally a plan of work for
exploitation.

**3.1.2.2.** **Evaluation**

**The provisional financing of the administrative expenses of the Authority**
**through the UN budget resolves problems of such States which for constitutional**
**reasons can not contribute to the budget of an international organisation without**
**having acceded to it.**

**The provisions on the adoption of rules, regulations and procedures take into**
**account that detailed provisions related to many aspects of sea-bed mining can**
**not be adopted before the economic, technological and environmental conditions**
**of sea-bed mining are better known, that is at a time when commercial operations**
**might take place in a near future.**

**The system of "membership on a provisional basis" gives States with complicated**
**or long ratification procedures the assurance that they can continue to be a**
**member of the Authority on a provisional basis after the entry into force of the**
**Agreement until 15 November 1998.**

**3.2.** **THE ENTERPRISE**

**3.2.1.** **The Provisions of Part XI of the Convention and of Annex IV**

The Establishment of the Enterprise has been considered, at the time of the adoption of
the Convention, by many developing States to be the first emanation of the "New
International Economic Order". For the same reasons, the "parallel system" has been
criticised in Western industrialised States as incompatible with their economic system,
because it created an international "State company ".exposed through the Authority to
political interference, was to be financed by extremely high contributions from the
States Parties, and enjoyed many privileges in relation to its competing contractors,
e.g. prospecting of the reserved Area at the expense of its competitors, cost-free
financing of the first mining operation, exemption for an initial period of ten years
from payments to the Authority, immunity from seizure, attachment or execution
before a final judgement against it, right to obligatory transfer of technology from its
competitors. It was also pointed out that the Enterprise whose economic activity was
limited to a single sector, i.e; sea-bed mining, would be extremely vulnerable to the
volatility of the world commodity markets.

3.2.2. **The Implementation** Agreement

As sea-bed mining will not become viable for at least fifteen years, the activities of the
Enterprise will mainly consist in monitoring trends and developments and assessing
data. Therefore, at the beginning, its functions will be performed by the Secretariat of
the Authority.

The Enterprise shall conduct its initial operations through joint ventures. Only upon
the approval of a plan of work for exploitation for another contractor, or in the case of
an application for a joint venture with the Enterprise shall the Council consider its
functioning independently of the Secretariat. If a joint venture accords with sound
commercial principles, the Council shall decide such independent functioning.

States Parties will be under no obligation to finance any of the operations of the
Enterprise, including those under its joint venture arrangements.

All obligations applicable to contractors shall also be applicable to the Enterprise.

A contractor which has contributed a particular area to the Authority as the _reserved_
_Area_ shall have the right of first refusal to enter into a joint venture with the Enterprise
or, if the Entereprise does not submit an application for a plan of work within 15 years
of the commencement of itrs independent functioning, the contractor may apply for a
plan of work for that area with the Enterprise as a joint venture partner.

**3.2.3.** **Evaluation**

**It has been argued, also within the European Union, that the Enterprise as such**
**is not compatible with the principle of the market economy. On the other hand, it**
**is still for many developing countries the symbol of the principle of the** _**common**_
_**heritage of**_ _**mankind.**_

**The Agreement has maintained the Enterprise but has eliminated those of its**
**elements which are not compatible with a world market economy: Even when it**
**will be allowed to function independently of the Secretariat, the Enterprise will**
**not be more than a kind of semi-autonomous body for the administration of the**
**Authority's own mineral resources.**

**Formally, the Agreement prescribes** **only** **that the Enterprise shall conduct its**
**initial mining operations through joint ventures. But even in the long run, it will**
**not be in a position to finance an independent operation because the States**
**Parties are not obliged to fund a mine site of the Enterprise and the developing**
**countries, in particular land-based producers, will not want it to accumulate for**
**such** **a purpose** **all** **the profits resulting from joint ventures instead of transferring**
**them to the Economic Assistance Fund or using them for other development aims.**

**The Agreement assures non-discrimination between the Enterprise and other**
**operators.**

**As the Enterprise will not function independently from the Secretariat before sea-**
**bed mining becomes viable, the principle of cost-effectiveness is respected.**

**For these reasons, the provisions of the Agreement concerning the Enterprise are**
**acceptable.**

**3.3.** **DECISION MAKING**

**3.3.1.** **The Provisions of Part XI of the Convention**

As in the case of the United Nations, the membership of the Sea-Bed Authority will
include a large number of very small developing countries, whose individual financial
contributions are limited to 0,01% of the budget. In conformity with the principles of
sovereignty and equality of States, all States Parties are represented in the Assembly
which takes its decisions on questions of substance by a two-thirds majority.

The Convention does not sufficiently counter-balance these principles by the
recognition that decisions of the Authority will affect very important financial and
economic interests of certain categories of States and that these legitimate interests can
not unconditionally be subject to majority decisions.

**10**

The existence of specific interests is recognised in the provisions concerning the
Council, which assure a minimum representation of the groups of consumers,
investors, land-based producers and developing countries with special interests.
However, as the 36-member Council takes its decisions on questions of substance by a
two-thirds or, in some cases, a three-quarter's majority, any of the groups can be easily
overruled (This does not only concern the interests of industrialised countries: those of
developing land-based producers might also be put in jeopardy).

As far as the interests of the Member States of the European Union are concerned, this
could happen in the case of decisions on financial matters, on the regulation and
administration of sea-bed mining, on the Enterprise and, possibly, on certain aspects of
commodity policies.

**3.3.2.** **The Implementation Agreement**

     - As a general rule, decision-making in the organs of the Authority should be by
consensus. If all efforts to reach a decision by consensus have exhausted, decisions
by voting shall be taken under the following conditions:

     - The provisions concerning the voting in the **Assembly** remain unchanged.
However, decisions on any matter for which the Council has also competence or on
any administrative, budgetary or financial matter, shall be based on the
recommendation of the Council. If the Assembly does not accept the
recommendation, it shall return the matter to the Council which has to reconsider it
in the light of the views expressed by the Assembly.

      - **In** the **Council,** four chambers are established:

1. four members representing the largest consumer States, including the largest
consumer of the Eastern European region (Russia) and the State having the
largest economy on the date of entry into force of the Convention (USA);

2. four members representing the eight largest investors;

3. four members representing the land-based producers, including at least two

developing States;

4. the developing States elected as the six developing States with special
interests and those elected according to the principle of equitable
geographical distribution.

**ii**

**The Council takes decisions on questions of substance (ifconsensus could not be**
**reached) by a two-thirds** **majority,** **provided that they are not opposed by a**
**majority in any** **of the** **Çhamfrerç.**

**Decisions by the Assembly or the Council having financial orbudgetary**
**implications shall be based on the recommendations of** **the** **Finance Committee.**

**3.3.3.** **Evaluation**

**The Chamber voting system excludes the possibility that a single State might**
**paralyse by a veto the decision-making of the Council but it protects the main**
**interest** **groups by giving them a collective veto power.**

**The fourth category of Council members (developing countries with special**
**interests), being defined on the basis of criteria not related to sea-bed mining,**
**could not be recognised as a Chamber. It was therefore agreed to form a larger**
**Chamber of all developing States represented in the Council (except the**
**developing countries represented in the first three Chambers). This provision will**
**have no practical effect because a two-thirds majority decision against the**
**developing States is virtually impossible.**

**The fact that the decisions of the Assembly on all important matters shall be**
**based on the recommendations of the Council makes the latter the central organ**
**of the Authority** **and** **assures that interests of minorities are** **also** **protected in the**
**Assembly.**

**The obligation to base decisions by the Assembly or the Council having**
**financially or budgetary implications on the recommendations of the Finance**
**Committee, gives additional protection to the interests of the Member States**
**which** **will** **be among the main contributors to the budget of the Authority.**

**The interest of Member States of the Community to have access to the first two**
**Chambers is taken into account: The United States are not defined as a member**
**of the "Western European States and Others Group" (WEOG), so that a**
**candidature from a Member State can not be opposed with the argument that the**
**WEOG is already represented. As the USA can also choose to belong to a**
**Chamber other than the first, there will be more flexibility for the representation**
**of Member States in the first Chamber. Furthermore, the principle of rotation**
**shall apply.**

**12**

**3.4.** **REVIEW CONFERENCE**

**3.4.1.** **Part XI of the Convention**

**The** Convention provides for a conference which, fifteen years after the earliest
commercial operation, shall review the whole system of exploration and exploitation
of the Area. It shall make every effort to reach agreement by consensus but, in the end,
can adopt, by a three-fourths majority of the States Parties, amendments to the system.
Amendments shall enter into force _for all States Parties_ after ratification or accession
by three fourths of the States Parties.

The Review Conference has been criticised by industrialised States for the same
reasons as the decision making procedures: It allows the majority to disregard the
interests of minority groups .

The industrialised States have also stressed the constitutional problems caused by the
fact that an amendment could become applicable law in their countries, after the
ratification by three fourths of the States Parties, even if their own parliaments or
governments have not approved it.

**3.4.2.** **The Implementation Agreement**

The provisions relating to the Review Conference shall not apply. In place of the
Conference, the Council may at any time recommend to the Assembly to undertake a
review of the sea-bed mining regime. The resulting amendments will be subject to the
normal treaty amendment procedures of the Convention (Articles 314-316).

The Agreement does not modify Article 316, paragraph 5 which provides for the entry
**into force of such amendment** _**for all States Parties one year following the deposit of**_
_**instruments**_ _**of**_ _**ratification**_ _**or**_ _**accession**_ _**by three fourths of**_ _**the States**_ _**Parties.**_

**3.4.3.** **Evaluation**

**The new procedure offers more protection for minority interests. The**
**recommendation of the Council to the Assembly is more than just an invitation to**
**undertake a review of the sea-bed mining** system; **the Council can specify**
**precisely what kind of amendments it deems necessary. If the Assembly does not**
**agree, it has to refer the matter back to the Council.**

**By the consensus principle and, as the last resource, by the chamber voting**
**system in the Council, the interests of the industrialised countries** **will** **be**
**protected throughout the procedure.**

**13**

**The entry into force for all States Parties after the ratification of the amendment**
**by three quarters of the States Parties results from the fact that Part XI of the**
**Convention not only establishes rights and obligations between the States Parties**
**(as in other Parts of the Convention), but creates a comprehensive regulatory and**
**administrative system for the exploitation of the Area. Such a system can not**
**function if it is not applied in a uniform way (not withstanding the provision of**
**Article 155, paragraph 5, that amendments** _**shall not affect rights acquired under**_
_**existing contracts).**_

**3.5.** **TRANSFER OF TECHNOLOGY**

**3.5.1.** **Part XI and Annex III of the Convention**

According to Annex III, Article 5, in every contract for exploration or exploitation, the
contractor shall undertake to make available to the Enterprise (or to developing States
which have applied for a contract), on fair and reasonable commercial terms, the
technology which it intends to use in the Area and which it is legally entitled to
transfer. The contractor shall also undertake to obtain a written assurance from the
owner of technology which it intends to use in the Area, that the owner is ready to
make that technology available to the Enterprise or developing States. If this assurance
is not obtained, the technology in question shall not be used by the contractor.

Such obligations are considered in industrialised countries as an infringement of
intellectual property rights and as incompatible with the principles of a market
economy.

3.5.2. **The Implementation agreement**

As the Enterprise will conduct its operations through joint ventures, the provisions of
Annex HI, Article 5 have become obsolete. The Agreement therefore stipulates that
they shall not apply. Article 144 of the Convention - which also deals with the transfer
of Technology but which does not impose particular obligations upon the contractors remains in force.

**3.5.3.** **Evaluation**

**The Implementation Agreement abolishes the principle of obligatory transfer of**
**technology. If the provisions of Article 144 should ever be applied - which is**
**unlikely as the activities of the Enterprise** **will** **always be limited to joint ventures**

**- the chamber-voting system in the Council will protect the interests of the**
**industrialised States.**

**The provisions of the Agreement are therefore acceptable.**

**14**

**3.6.** **PRODUCTION POLICY**

**3.6.1.** **The** **Provisions** **of Part XI to the** **Convention**

Article 151, paragraph 4 provides for a _production ceiling_ for any year of a 25 year
long _interim_ _period._ The ceiling limits sea-bed production to 60% of the growth rate of
world nickel production, calculated on a trend line based on the most recent 15 year
period.

Calculations based on such a period can not take into account new factors and, as the
development since the adoption of the Convention in 1982 has already shown, produce
results that do not reflect the realities of the market. The production limitation system
was supposed _to_ protect the developing land-based producers of the four minerals
contained in the manganese nodules. However, it discriminates against sea-bed
production, protecting all land-based producers, in industrialised as well as in
developing States. In fact, production in industrialised countries would profit more
from the system than developing countries: Of the four metals, only cobalt is produced
mainly (74%) in developing States, whereas the figures for the other three are 45%
(copper), 28% (manganese) and 27% (nickel) respectively.

On the other hand, the system does not protect the developing cobalt producers, which
are most likely to be hurt by sea-bed mining, as a single maritime mining operation
will produce more then 20% of the present world consumption.

**3.6.2.** **The Implementation Agreement**

The implementation agreement replaces the _production limitation_ system of Part XI by
rules for a **production policy based on the present and future provisions of the**
**relevant codes of GATTAVTO.** In particular, it refers to the **GATT definition of**
**permitted and non-permitted** subsidies. It imposes upon land-based and sea-bed
producers the obligation not to discriminate between minerals derived from the Area
and from other sources and not to give preferential access for such minerals.

States Parties, which are **parties to the GATTAVTO shall have recourse to the**
**dispute settlement procedures of these agreements.** However, where one or more
parties to a dispute are not parties to the GATTAVTO, the dispute settlement
procedures set out in the Convention shall apply. This provision is not entirely
satisfactory, as it allows non-GATT institutions to interpret GATT rules, but it is
unavoidable, because the dispute settlement procedures of the GATTAVTO can only
be applied among parties to these agreements.

**15**

If a determination is made under the GATTAVTO that a State Party has engaged in
subsidisation which is prohibited or has resulted in adverse effects to the interests of an
other State Party, the latter, if it is a party to the GATTAVTO agreements, shall have
the choice to take appropriate steps under the GATT provisions or to request the
Council of the Sea-Bed Authority to take appropriate measures.
Under the new production policy system; **it will not only be prohibited for States**
**Parties to give non-permitted subsidies, but** **also** **for contractors to** **accept** **them.**
The acceptance of such subsidies shall constitute a violation of the fundamental terms
of the contract. A State Party may request the Council to take measures against such a
contractor. The sponsoring State and the contractor have recourse to the dispute
settlement procedures of the Sea-Bed Dispute Chamber of the International Tribunal
for the Law of the Sea.

3.6.3. **Evaluation**

**The reference to the GATT provisions assures fair competition between land-**
**based and sea-bed producers as** **well** **as among the sea-bed producers. The fact**
**that the dispute settlement procedures of the GATTAVTO can only be applied** **if**
**all parties to a dispute are parties to these agreements is a consequence of the**
**GATT procedures. It is regrettable but unavoidable that in a limited number of**
**cases,** **GATT provisions might have to be interpreted by the Council of the**
**Authority and by the Sea-Bed Dispute Chamber of the International Tribunal**
**for the Law of the** Sea. **But as** sea-bed **mining will not become economically viable**
**before at least fifteen years, it is quite likely that** **all** **potential sea-bed producer**
**States will have acceded to the WTO before the start of the first commercial**
**operation.**

**3.7.** **ECONOMIC ASSISTANCE**

**3.7.1.** **The Provisions of Part XI of the Convention**

Articles 151, paragraph 10 and 171 (f) provide for a _Compensation Fund_ to assist
developing countries that suffer serious adverse effects resulting from a reduction in
the price of an affected mineral or in the volume of exports of that mineral, if such
reduction is caused by sea-bed mining. The European Community and its Member
States have always maintained, in the discussions on the Law of the Sea Convention as
well as in other fora, that compensation funds are not an incentive for the adaptation to
new economic circumstances but favour the maintenance of non-competitive
production and; therefore, would necessarily not be of a temporary nature.

**16**

To administer a compensation fund, the Authority, even assisted by a large and
expensive bureaucracy, would not have the necessary expertise to help an adversely
affected land-based producer with the development of alternative economic activities
outside the mining sector.

**3.7.2.** **The Implementation Agreement**

The Agreement replaces the _Compensation Fund_ by an **Economic** **Assistance Fund**
from which the Authority shall provide assistance to affected developing land-based
producer States **in co-operation with existing global or regional development**
**institutions** that have the necessary expertise.

The Fund shall be established from a portion of **funds from the Authority which**
**exceed those necessary to cover the administrative** expenses. Only payments from
contractors, including the Enterprise, and voluntary contributions shall be used.

**3.7.3.** **Evaluation**

**The provisions of the Implementation Agreement reflect fully the positions taken**
**by the Community and its Member States.**

**3.8.** **FINANCIAL TERMS OF CONTRACT**

**3.8.1.** **Part XI and Annex III of the Convention**

The financial burdens imposed on the contractor are a strong disincentive for sea-bed
mining. The payments to be made to the Authority are higher than those imposed on
**land-based** producers. This discourages the industry to develop the necessary marine
mining technology and to engage in sea-bed mining as long as land-based resources,
even of a low degree of productivity, are available.

The imposition of a considerable _production charge_ i. e. payments to be made to the
Authority whether the mining operation has reached the stage of profitability or not,
does not take into account the high costs caused by the development and the initial
operation phase of the mining equipment.

**17**

**3.8.2.** **The Implementation Agreement**

The provisions of Annex III Article 13, paragraph 3 to 10, of the Convention shall not
be applied. The Agreement does not replace them by another regime but prescribes a
list of principles which will form the basis for the rules, regulations and procedures to
be adopted by the Authority at a later stage (see paragraph 3.1.2.1.4 above).The system
of financial payments shall be

      - fair both to the contractor and the Authority;

     - within the range of payments prevailing in respect of land-based mining;

     - transparent and not impose major administrative costs on the Authority or
contractor.

**3.8.3.** **Evaluation**

**The principles for the rules regulations and procedures, to be adopted by the**
**Authority, correspond to the demands made by the industrialised States. Taking**
**into account the chamber-voting system to be applied in the Council, the**
**provisions** of **the Agreement are acceptable.**

**3.9.** **THE FINANCE COMMITTEE**

**3.9.1.** **Part XI of the Convention**

Article 162, paragraph 2 (y) obliges the Council, to establish a _subsidiary organ for the_
_**elaboration of**_ _**draft**_ _**financial rules, regulations and procedures**_ **relating to financial**
matters.

**3.9.2.** **The Implementation Agreement**

The Agreement establishes a "Finance Committee" which shall not only elaborate draft
rules, regulations and procedures, but also make recommendations for all activities of
the Authority having administrative and budgetary implications.

**3.9.3.** **Evaluation**

**The** Finance **Committee as established by the Agreement will assure - in**
**combination with the chamber-voting system in the Council - the respect of the**
**principle** of **cost-effectiveness by the Authority.**

**18**

**4.** **CONCLUSION**

**4.1.** **The "flaws and deficiencies" of the sea-bed mining regime which the Community**
**had criticised on 7 December 1984 when signing the Convention, have been**
**eliminated. They are either replaced by completely satisfactory provisions of the**
**Implementation Agreement or will be replaced at a later stage by the Authority**
**through rules, regulations and procedures, based on criteria laid down in the**
**agreement and to be adopted under the chamber voting system.**

**4.2.** **The Community and its Member States have since long accepted the principle of**
**"Common Heritage of Mankind". It was only the translation of this principle**
**into a bureaucratic and interventionist system that they could not accept. Some of**
**the old language will remain in Part XI and related Annexes but without any**
**undesirable consequences of** **a** **political, economic or operational nature.**

**4.3.** **The Agreement has made the Convention "universally acceptable". It reflects to**
**a large extent the positions expressed many times by the Community and its**
**Member States.**

**4.4.** **The Agreement shall be adopted, as an annex to a resolution, by the members of**
**the United Nations General Assembly. The European Community, not being a**
**member of the General Assembly, will not be** **able** **to participate in the adoption**
**and to express by its vote the position that the Agreement is in conformity with**
**the results of the "informal consultations" in which the Community has actively**
**participated.**

**4.5.** **However, the possibility of signing the Agreement immediately after its adoption**
**offers the** **occasion** **for such an endorsement. According to Annex IX, Article 2 to**
**the Convention, the Community may only sign the Agreement if a majority of its**
**Member States are signatories of it. For the Community to be able to sign the**
**Agreement immediately after its adoption, it would therefore be necessary that at**
**least a majority of the Member States do so simultaneously.**

**4.6.** **As the "flaws and deficiencies" of Part XI have now been removed, it is in the**
**interests of the Community and its Member States to strengthen the universal**
**applicability of the Convention by ratifying, or acceding to, it rapidly. It would**
**have a significant political effect, if** **all** **Member States and the Community would**
**emphasize this common intention by jointly and simultaneously signing** **the**
**agreement at that date.**

**III.** **ACTION PROPOSED**

1. Like the other parts of the Convention, Part XI deals with matters which fall partly
within the sphere of competence of the Member States and partly under that of the
European Community. For the reasons already explained, the Commission considers
that the Agreement should be signed by the Community and its Member States
immediately after adoption at the 27 to 29 July session of the UN General Assembly.
The Community and the Member States (to the degree that their constitutions permit)
should then begin implementing the Agreement provisionally on 16 November of this
year, when the Convention enters into force.

2. When it signed the Convention on 7 December 1984, the Community made a
declaration in accordance with Article 2 of Annex IX (participation of international
organizations) "specifying the matters governed by (the) Convention in respect of
which competence (had) been transferred to (it) by its States members". It pointed out
its responsibility for commercial policy, including issues of unfair trade, in connection
with the content of Part XI.

3. The legal basis for the signing of the Agreement is Article 113 of the EC Treaty.
Because the matter of provisional implementation relates only to Part XI of the
Convention, Article 113 also provides the legal basis for that measure.

4. Since several Member States have indicated that they intend to ratify the Convention
and the Agreement rapidly, the Commission will provide as soon as possible (in draft
form) formal confirmation and a declaration on competences, in accordance with
Article 5 of Annex DC to the Convention. This will give Parliament enough time to
draw up its opinion and enable the Community to give formal confirmation once the
majority of the Member States have ratified or acceded to the Convention and the
Agreement.

5 The Commission accordingly requests the Council to adopt the attached Decision.

**20**

Annex

**94/0182 (ACC)**
**Proposal for a Council Decision of**

concerning the signing by the European Community of the Agreement relating to the

implementation of Part XI of the 1982 United Nations Convention on the Law of the
Sea and the provisional implementation by the Community of that Agreement and of

Part XI of the Convention

**The Council of the European Union,**

Having regard to the Treaty establishing the European Community, and in particular
Article 113 thereof,

Having regard to the proposal from the Commission,

Whereas the Agreement stemming from the informal consultations held by the United
Nations Secretary-General has made the Convention on the Law of the Sea universally
acceptable;

Whereas the Member States have made clear their intention to sign and, to the degree
that their constitutions allow, provisionally implement that Agreement,

**HAS DECIDED AS FOLLOWS:**

**Article 1**

1. **The** Agreement relating to the implementation of Part XI of the 1982 United Nations
Convention on the Law of the Sea shall be signed by the Community and its Member
States together immediately after its adoption by the United Nations General
Assembly.

2. The President of the Council is hereby authorized to designate the person empowered
to sign the Agreement.

3. The text of the Agreement is attached.

**Article** 2

The Agreement referred to in Article 1 and Part XI of the 1982 United Nations
Convention on the Law of the Sea shall be implemented provisionally from
16 November 1994.

Done at

**For the Council,**

**21**

**UNITED**
# **NATIONS A**

**General Assembly**
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                                  Distr.

                                 GENERAL

                                 A/48/950

                                 9 June 1994

                                 ORIGINAL: ENGLISH

Forty-eighth session
Agenda item 36

                  LAW OF THE SEA

        Consultations of the Secretary-General on outstanding
        issues relating to the deep seabed mining provisions
        of Çhe United Nations Convention on the Law of the Sea

              Report o£ tte Secretary-General

                    CONTENTS

                                  Paragraphs Page

REPORT OF THE SECRETARY-GENERAL 1-28 2

                    Annexes

 I. Draft resolution and draft Agreement relating to the Implementation
   of Part XI of the United Nations Convention on the Law of the Sea

   of 10 December 1982 8

II. Informal Understanding to be read by the President of the General
   Assembly at the time of the adoption of the resolution 32

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`94-24482 (E)` `150694` _15/06/94_

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              REPORT OF THE SECRETARY-GENERAL

1. In July 1990 the Secretary-General, Mr. Javier Pérez de Cuéllar, took the
initiative to convene informal consultations aimed at achieving universal
participation in the United Nations Convention on the Law of the Sea. The
Secretary-General stressed the importance of securing general acceptance of the
United Nations Convention on the Law of the Sea, an instrument which represented
many years of negotiations and which had already made a significant contribution
to the international legal maritime order. He pointed out that though he would
continue to encourage all States which had not done so to ratify or accede to
the Convention, it had to be acknowledged that there were problems with some
aspects of the deep seabed mining provisions of the Convention which had
prevented some States from ratifying or acceding to the Convention.

2. He noted that in the eight years that had elapsed since the Convention was
adopted certain significant political and economic changes had occurred which
had had a marked effect on the regime for deep seabed mining contained in the
Convention. Prospects for commercial mining of deep seabed minerals had receded
into the next century, which was not what was envisaged during the negotiations
at the Third United Nations Conference on the Law of the Sea. The general
economic climate had been transformed as a result of the changing perception
with respect to the roles of the public and private sectors. There was a
discernible shift towards a more market-oriented economy. In addition, the
Secretary-General made mention of the emergence of a new spirit of international
cooperation in resolving outstanding problems of regional and global concern.
These factors were to be taken into account in considering the problems with
respect to deep seabed mining. 1/

3. Thus began a series of informal consultations under the aegis of the
Secretary-General on outstanding issues relating to the deep seabed mining
provisions of the United Nations Convention on the Law of the Sea.

4. These informal consultations took place in the years 1990 to 1994, during
```

`which 15 meetings were convened.` _2/_ `They can be conveniently divided into two`
```
phases. The first phase was devoted to the identification of issues of concern
to some States, the approach to be taken in examining them and the search for
solutions. During the second phase more precision was given to the results
reached so far,- additional points were raised for consideration and participants
directed their attention to an examination of consolidated texts embodying these
solutions and on the procedure whereby they might be adopted.
                         '*

The first phase

5. During the initial part of this phase the consultations identified nine
issues as representing areas of difficulty: costs to States parties; the
Enterprise; decision-making; the Review Conference; transfer of technology;
production limitation; compensation fund; financial terms of contract; and
environmental considerations. After examining the various approaches that might
be taken in the examination of these issues, there was general agreement on an
approach which enabled participants to examine all the outstanding issues with a

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**aMduMMWWJMWM^HSMWd^^**

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                                       Page 3

view to resolving them and to decide how to deal with those that might remain
unresolved.

6. Participants then began to review all of these issues seriatim. This
review was based on information notes compiled by the Secretariat containing
background information, questions that needed to be addressed and possible
approaches for the resolution of these issues.

7. In the course of six informal consultations held during the years 1990 and
1991, participants completed the consideration of all the outstanding issues
relating to the deep seabed mining provisions of the United Nations Convention
on the Law of the Sea. It can fairly be said that a certain measure of general
agreement was emerging on these issues.

8. The results of the Secretary-General's informal consultations held in 1990
and 1991 were set out in the summary of informal consultations conducted by the
Secretary-General on the law of the sea during 1990 and 1991, dated
31 January 1992, and in an information note dated 26 May 1992. These results
fell under two categories. First, general agreement seemed to have been reached
on relatively detailed solutions on: costs to States parties, the Enterprise,
decision-making, Review Conference and transfer of technology. Secondly, with
respect to production limitation, the compensation fund and financial terms of
contract it was generally agreed that it was neither necessary nor prudent to
formulate a new set of detailed rules for these items. Accordingly, for those
items the information note set out general principles to be applied when
commercial production of deep seabed minerals was imminent.

The second phase

9. In 1992 I continued the informal consultations initiated by my predecessor.
During this phase the consultations were open to all delegations. Some 75 to 90
delegations attended these meetings. In the first three rounds of this phase,
consideration was given to the nine issues in order to give more precision to
the results reached so far in the consultations. Additional points were
submitted for consideration on the following issues: costs to States parties;
the Enterprise; decision-making; Review Conference; and transfer of technology.
During these consultations it was decided to remove the issue of environmental
considerations from the list of issues, since it was no longer considered to be
a controversial issue in the context of deep seabed mining.

10. At the informal consultations held on 28 and 29 January 1993, it was
generally felt among participants that the stage had been reached when a text
based on a more operational approach should be prepared in a form which could be
the basis of an agreement.

11. In accordance with this request, an information note dated 8 April 1993 was
prepared. This information note contained two parts :

   (a) Part A dealt with various procedural approaches with respect to the
use to be made of the results of the consultations. The four approaches could
be summarized as follows:

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   (i) A contractual instrument such as a protocol amending the Convention;

   (ii) An interpretative agreement consisting of understandings on the
      interpretation and application of the Convention;

  (iii) An interpretative agreement on the establishment of an initial
      Authority and an initial Enterprise during an interim regime
      accompanied by a procedural arrangement for the convening of a
      conference to establish the definitive regime for the commercial
      production of deep seabed minerals when such production became

      feasible;

   (iv) An agreement additional to the Convention providing for the transition
      between the initial phase and the definitive regime, in particular,
      the Authority would be mandated to develop solutions for issues still
      outstanding on the entry into force of the Convention;

   (b) Part B set out an operationally directed formulation of the results

reached so far in the consultations. It was divided into two sections:

   (i) Arrangements following the entry into force of the Convention;

   (ii) Draft texts concerning the definitive deep seabed mining regime.

12. The procedural approaches were reviewed during consultations held on 27 and
28 April 1993. Certain basic elements emerged from the review of these
approaches. It was generally agreed that, whatever approach might be adopted,
it must be of a legally binding nature. It was also pointed out that a duality
of regimes must be avoided. Finally, as the position of States which have
ratified or acceded to the Convention must be respected, it was considered
useful to examine the role that the notion of implied or tacit consent might
play in protecting their positions.

13. For the next round of consultations, held from 2 to 6 August 1993, an
information note dated 4 June 1993 was circulated which updated parts A
arid B (i) of the information note of 8 April 1993 to reflect the observations
made during the previous round of consultations. During the course of this
round of consultations a paper dated 3 August 1993 prepared by representatives
of several developed and developing States was circulated among delegations as a
contribution to the process of the consultations. It was understood that the
paper, which was commonly known as the "boat paper", did not necessarily reflect
the position of any of the delegations involved, but that it was considered to
provide a useful basis for negotiation.

14. Thereafter, while addressing the substantive issues contained in the
information note dated 4 June 1993, delegations also made cross-references to
the relevant portions of the "boat paper". That paper was divided into three
parts: (i) a draft resolution for adoption by the General Assembly; (ii) a
draft Agreement relating to the Implementation of Part XI of the United Nations
Convention on the Law of the Sea; and (iii) two annexes. Annex I contained the
agreed conclusions of the Secretary-General's consultations and annex II was
entitled "Consequential adjustments".

                                             /. • •

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15. At the last round of consultations held in 1993 (8-12 November),

participants had before them three documents: the information note dated

4 June 1993; a new version of the "boat paper" consolidating the two annexes to

the original paper into one; and a paper entitled "Agreement on the

Implementation of Part XI and Annexes III and IV of the United Nations

Convention on the Law of the Sea", submitted by the delegation of Sierra Leone.

At this November meeting participants completed the review of all the items

contained in the information note dated 4 June 1993. After having completed

consideration of those issues, delegations embarked upon a renewed examination

of the issue of "Costs to States parties and institutional arrangements", but

this time based essentially on the "boat paper".

16. On 16 November 1993, the Convention on the Law of the Sea received its

sixtieth instrument of ratification or accession, which means that, in

accordance with its terms (article 308), it will enter into force on

16 November 1994. The General Assembly itself invited all States to participate

in the consultations and to increase efforts to achieve universal participation
```

**`in the Convention as early as possible.`** _**3/**_ **`The imminent entry into force of the`**

```
Convention introduced a sense of urgency to the informal consultations.

17. During the first round held in 1994 (31 January-4 February), the

consultations examined a revised version of the "boat paper", dated

November 1993. This revision took into account the discussions which had taken

place during the Secretary-General's informal consultations held in

November 1993. The work of the current round of consultations focused on some

crucial issues:

    (a) Decision-making, in particular the question of the relationship

between the Authority and the Council, and the question as to which group of

States in the Council should be considered chambers for the purposes of

decision-making in the Council;

    (b) Whether the administrative expenses of the Authority should be met by

assessed contributions of its members, including the provisional members of the

Authority, or through the budget of the United Nations ;

    (c) The issue of provisional application of the Agreement and of

provisional membership in the Authority.

During this round of consultations progress was made on the latter two issues.

A revised version of the document submitted by the delegation of Sierra Leone

was submitted to this round of consultations.

18. The second round of the Secretary-General's informal consultations in 1994

was held from 4 to 8 April. The meeting had before it a further updated version

of the "boat paper" entitled "Draft resolution and draft Agreement relating to

the Implementation of Part XI of the 1982 United Nations Convention on the Law

of the Sea", dated 14 February 1994.

19. Participants undertook an article-by-article review of the draft Agreement.

Attention was then focused on the two most important issues facing the

consultations: decision-making in the Council, and the Enterprise. These

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issues, which lay at the heart of the consultations, proved most difficult to

resolve. From the outset of the consultations it was evident that these issues

could only be resolved in the final stages of this process, when a clearer
picture of the results of the consultations had emerged. With respect to
decision-making the debate was directed at the system of chambered voting, in
particular whether the categories or groups of States, mainly developing States,
should be treated as chambers for the purposes of decision-making in the
Council. The discussion on the Enterprise centred on the type of mechanism
which would trigger the commencement of its operations as well as its functions.

20. Revisions were made to the draft Agreement in the light of the debates on
the various issues. This in fact was a unique feature of this round of
consultations, reflecting the urgency of the situation. The revisions related
to provisional application of the Agreement; provisional membership in the
Authority; the treatment of the registered pioneer investors; and production
policy.

21. Based on these revisions, the draft resolution and draft Agreement relating
to the Implementation of Part XI of the United Nations Convention on the Law of
the Sea were revised in their entirety and a revised text was issued on
8 April 1994, the last day of the meeting.

22. During this round of consultations, according to many delegations,
significant progress was achieved. It appeared that solutions were found to
several important issues, including decision-making, the Enterprise and the
treatment of the registered pioneer investors. However, not all the issues were

resolved in this round of consultations.

23. The last meeting of the Secretary-General's consultations was held from
31 May to 3 June 1994. The primary purpose of this final round of consultations
was the harmonization of the text in the various language versions of the draft
resolution and draft Agreement relating to the Implementation of Part XI of the
1982 United Nations Convention on the Law of the Sea. The meeting had before it
the draft resolution and draft Agreement dated 15 April 1994 which was revised
on the basis of discussions in the previous round of consultations and a
corrigendum to the document dated 23 May 1994. Two documents (SG/LOS/CRP.1 and
SG/LOS/CRP.2), containing suggested amendments of a drafting nature prepared by
the Secretariat, were also submitted to the meeting in order to facilitate the
process of harmonizing the language versions of the text.

24. The first part of the meeting addressed the substantive issues that were
still pending, and solutions were found for some of those issues. Delegations,
however, continued their search for solutions on matters relating, inter alia,
to the treatment of the registered pioneer investors and the issue of
representation in the Council. The second part of the meeting was devoted to
the task of harmonizing the language versions of the draft resolution and draft
Agreement. The final part dealt with the decisions to be taken with regard to
the convening of a resumed forty-eighth session of the General Assembly to adopt
the draft resolution and draft Agreement.

25. At the close of the meeting, delegations were presented with a revised text
(SG/LOS/CRP.1/Rev.l), dated 3 June 1994. That document elicited a few drafting

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comments which are reflected in the text of the draft resolution and draft

Agreement relating to the Implementation of Part XI of the United Nations

Convention on the Law of the Sea of 10 December 1982, contained in annex I to

the present report. A proposed solution to the question of the issue of

representation in the Council is to be found in the informal understanding

contained in annex II.

26. At the conclusion of the informal consultations the delegation of the
Russian Federation made a statement reserving its position in view of the fact
that a number of proposals it had made had not been reflected in the draft
Agreement. In reply, it was pointed out that all proposals made by delegations
or groups had been thoroughly examined without exception but that it had not
been possible to accept every one of them.

27. The consultations then indicated that Member States wished to convene a

resumed forty-eighth session of the General Assembly of the United Nations from
27 to 29 July 1994, for adoption of the resolution. They further wished that,
after the adoption of the resolution, the Agreement would be immediately opened
for signature.

28. I wish to recall that the objective of the consultations was to achieve
wider participation in the Convention from the major industrialized States in
order to reach the goal of universality. Accordingly, it is with satisfaction
that I report to the General Assembly that these consultations, initiated by my
predecessor and continued by me, have led to a result which in my view could
form the basis of a general agreement on the issues that were the subject of the
consultations. In the light of the outcome, I consider that I have fulfilled my

mandate.

   i/ See A/45/721 and A/46/724.

```

_**2/**_ **`Informal`** **`consultations were held on the`** **`following`** **`dates`** **`:`**
```
19 July 1990; 30 October 1990; 25 March 1991; 23 July 1991; 14 and
15 October 1991; 10 and 11 December 1991; 16 and 17 June 1992; 6 and
7 August 1992; 28 and 29 January 1993; 27 and 28 April 1993; 2-6 August 1993;
8-12 November 1993; 31 January-4 February 1994; 4-8 April 1994; and 31 May
3 June 1994.

   3_/ General Assembly resolution 48/28.

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                      ANNEX I

        Draft resolution and draft Agreement relating to the
        Implementation of Part XI of the United Nations

        Convention on the Law of the Sea of 10 December 1982

                   I. INTRODUCTION

   This is a revised version of document SG/LOS/CRP. 1/Rev.l of 3 June 1994.

It incorporates the changes made during the last meeting of the final session of
the informal consultations, held on 3 June 1994. In addition to a few purely
editorial corrections, the changes are:

```

`(a) Page` _B._ `article 10`

```
      At the end of the article, add the following

         IN WITNESS WHEREOF, the undersigned Plenipotentiaries, being duly
      authorized thereto, have signed this Agreement.

         DONE AT NEW YORK, this .. . day of July, one thousand nine hundred

      and ninety-four.

   (b) Page 20, section 6, paragraph 1 (d), line 2

      Delete those derived

   (c) Page 20, section 6, paragraph 1 (d) (ii), line 1

      Delete to markets

   (d) Page 22, section 8. paragraph 1 (e), line 1

      Delete financial

   (e) Page 23, section 8, paragraph 3, last line

      Delete for each phase.

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       II. DRAFT RESOLUTION FOR ADOPTION BY THE GENERAL ASSEMBLY

   The General Assembly.

   Prompted by the desire to achieve universal participation in the United
Nations Convention on the Law of the Sea of 10 December 1982 (hereinafter
referred to as "the Convention") 1/ and to promote appropriate representation
in the institutions established by it.

   Reaffirming that the seabed and ocean floor and subsoil thereof, beyond the
limits of national jurisdiction (hereinafter referred to as the "Area"), as well
as the resources of the Area, are the common heritage of mankind, 2/

   Recalling that the Convention in its Part XI and related provisions
(hereinafter referred to as "Part XI") established a regime for the Area and its

resources,

   Taking note of the consolidated provisional final report of the Preparatory
Commission for the International Seabed Authority and for the International
Tribunal for the Law of the Sea, 3_/

   Recalling its resolution 48/28 of 9 December 1993 on the law of the sea,

   Recognizing that political and economic changes, including in particular a
growing reliance on market principles, have necessitated the re-evaluation of
some aspects of, the regime for the Area and its resources.

   Noting the initiative of the Secretary-General which began in 1990 to
promote dialogue aimed at achieving universal participation in the Convention,

   Welcoming the report of the Secretary-General on the outcome of his
informal consultations, including the draft of an agreement relating to the
implementation of Part XI,

   Considering that the objective of universal participation in the Convention
may best be achieved by the adoption of an agreement relating to the
implementation of Part XI,

   Recognizing the need to provide for the provisional application of such an
agreement from the date of entry into force of the Convention on
16 November 1994,

   1/ Official Records of the Third United Nations Conference on the Law of
the Sea, vol. XVII (United Nations publication, Sales No. E.84.V.3), document
A/CONF.62/122.

   2/ General Assembly resolution 2749 (XXV); article 136 of the United

Nations Convention on the Law of the Sea.

   3/ LOS/PCN/130 and Add.l.

                                             /..

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   I. Expresses its appreciation to the Secretary-General for his report on

the informal consultations;

     2 - Reaffirms the unified character of the United Nations Convention on

the Law of the Sea of 10 December 1982;

   3. Adopts the Agreement relating to the Implementation of Part XI of the

United Nations Convention on the Law of the Sea of 10 December 1982 (hereinafter

referred to as "the Agreement"), the text of which is annexed to the present

resolution;

   4. Affirms that the Agreement shall be interpreted and applied together
with Part XI as a single instrument;

   5. Considers that future ratifications or formal confirmations of or

accessions to the Convention shall represent also consent to be bound by the
Agreement and that no State or entity may establish its consent to be bound by
the Agreement unless it has previously established or establishes at the same
time its consent to be bound by the Convention;

   6. Calls upon States which consent to the adoption of the Agreement to
refrain from any act which would defeat its object and purpose;

   7. Expresses its satisfaction at the entry into force of the Convention
on 16 November 1994;

   8. Decides to fund the administrative expenses of the International
Seabed Authority in accordance with section 1, paragraph 14, of the annex to the

Agreement;

   9. Requests the Secretary-General to transmit immediately certified
copies of the Agreement to the States and entities referred to in article 3
thereof, with a view to facilitating universal participation in the Convention
and the Agreement, and to draw attention to articles 4 and 5 of the Agreement;

   10. Also requests the Secretary-General to open the Agreement for
signature in accordance with article 3 thereof immediately after its adoption;

   II. Urges all States and entities referred to in article 3 of the
Agreement to consent to its provisional application as from 16 November 1994 and
to establish their consent to be bound by the Agreement at the earliest possible
date;

   12. Also urges all such States and entities that have not already done so
to take all appropriate steps to ratify, formally confirm or accede to the
Convention at the earliest possible date in order to ensure universal
participation in the Convention;

   13. Calls upon the Preparatory Commission for the International Seabed
Authority and for the International Tribunal for the Law of the Sea to take into
account the terms of the Agreement when drawing up its final report.

                                             /.-•

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        III. DRAFT AGREEMENT RELATING TO THE IMPLEMENTATION OF

            PART XI OF THE UNITED NATIONS CONVENTION ON THE

            LAW OF THE SEA OF 10 DECEMBER 1982

   The States Parties to this Agreement.

   Recognizing the important contribution of the United Nations Convention on

the Law of the Sea of 10 December 1982 (hereinafter referred to as "the

Convention") to the maintenance of peace, justice and progress for all peoples

of the world,

   Reaffirming that the seabed and ocean floor and subsoil thereof, beyond the
limits of national jurisdiction (hereinafter referred to as "the Area"), as well
as the resources of the Area, are the common heritage of mankind,

   Mindful of the importance of the Convention for the protection and
preservation of the marine environment and of the growing concern for the global

environment,

   Having considered the report of the Secretary-General of the United Nations
on the results of the informal consultations among States held from 1990 to 1994
on outstanding issues relating to Part XI and related provisions of the

Convention (hereinafter referred to as "Part XI"),

   Noting the political and economic changes, including market-oriented

approaches, affecting the implementation of Part XI,

   Wishing to facilitate universal participation in the Convention,

   Considering that an agreement relating to the implementation of Part XI

would best meet that objective,

   Have agreed as follows:

                     Article 3,

                 Implementation of Part XI

1. The States Parties to this Agreement undertake to implement Part XI in
accordance with this Agreement.

2. The Annex forms an integral part of this Agreement.

                     Article 2

          Relationship between this Agreement and Part XI

1. The provisions of this Agreement and Part XI shall be interpreted and
applied together as a single instrument. In the event of any inconsistency

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between this Agreement and Part XI, the provisions of this Agreement shall

prevail.

2. Articles 309 to 319 of the Convention shall apply to this Agreement as they

apply to the Convention.

                     Article 3

                     Signature

   This Agreement shall remain open for signature at United Nations
Headquarters by the States and entities referred to in article 305,
paragraph 1 (a), (c), (d), (e) and (f), of the Convention for 12 months from the
date of its adoption.

                     Article 4

                  Consent to be bound

1. After the adoption of this Agreement, any instrument of ratification or
formal confirmation of or accession to the Convention shall also represent
consent to be bound by this Agreement.

2. No State or entity may establish its consent to be bound by this Agreement
unless it has previously established or establishes at the same time its consent
to be bound by the Convention.

3. A State or entity referred to in article 3 may express its consent to be
bound by this Agreement by:

   (a) Signature not subject to ratification, formal confirmation or the
procedure set out in article 5;

   (b) Signature subject to ratification or formal confirmation, followed by
ratification or formal confirmation;

   (c) Signature subject to the procedure set out in article 5; or

   (d) Accession.

4. Formal confirmation by the entities referred to in article 305,
paragraph 1 (f ), of the Convention shall be in accordance with Annex IX of the

Convention.

5. The instruments of ratification, formal confirmation or accession shall be
deposited with the Secretary-General of the United Nations.

                                         /..

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                                           Page 13

                     Article 5

                  Simplified procedure

1. A State or entity which has deposited before the date of the adoption of
this Agreement an instrument of ratification or formal confirmation of or
accession to the Convention and which has signed this Agreement in accordance
with article 4, paragraph 3 (c), shall be considered to have established its
consent to be bound by this Agreement 12 months after the date of its adoption,
unless that State or entity notifies the depositary in writing before that date
that it is not availing itself of the simplified procedure set out in this

article.

2. In the event of such notification, consent to be bound by this Agreement
shall be established in accordance with article 4, paragraph 3 (b) .

                     Article 6

                   Entry into force

1. This Agreement shall enter into force 30 days after the date on which

40 States have established their consent to be bound in accordance with

articles 4 and 5, provided that such States include at least seven of the States
referred to in paragraph 1 (a) of resolution II of the Third United Nations
Conference on the Law of the Sea (hereinafter referred to as "resolution II")

and that at least five of those States are developed States. If these
conditions for entry into force are fulfilled before 16 November 1994, this

Agreement ! shall enter into force on 16 November 1994.
              i

2. For each State or entity establishing its consent to be bound by this
Agreement after the requirements set out in paragraph 1 have been fulfilled,
this Agreement shall enter into force on the thirtieth day following the date of

establishment of its consent to be bound.

                     Article 7

                 Provisional application

1. If on 16 November 1994 this Agreement has not entered into force, it shall
be applied provisionally pending its entry into force by:

   (a) States which have consented to its adoption in the General Assembly of
the United Nations, except any such State which before 16 November 1994 notifies
the depositary in writing either that it will not so apply this Agreement or
that it will consent to such application only upon subsequent signature or
notification in writing;

   (b) States and entities which sign this Agreement, except any such State
or entity which notifies the depositary in writing at the time of signature that
it will not so apply this Agreement,
                                             /...

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   (c) States and entities which consent to its provisional application by so

notifying the depositary in writing;

   (d) States which accede to this Agreement.

2. All such States and entities shall apply'this Agreement provisionally in

accordance with their national or internal laws and regulations, with effect
from 16 November 1994 or the date of signature, notification of consent or

accession, if later.

3. Provisional application shall terminate upon the date of entry into force
of this Agreement. In any event, provisional application shall terminate on
16 November 1998 if at that date the requirement in article 6, paragraph 1, of
consent to be bound by this Agreement by at least seven of the States (of which
at least five must be developed States) referred to in paragraph 1 (a) of

resolution II has not been fulfilled.

                      Article 8

                     States Parties

1. For the purposes of this Agreement, "States Parties" means States which
have consented to be bound by this Agreement and for which this Agreement is in

force.

2. This Agreement applies mutatis mutandis to the entities referred to in
article 305, paragraph 1 (c), (d), (e) and (f), of the Convention which become
Parties to this Agreement in accordance with the conditions relevant to each,

and to that extent "States Parties" refers to those entities.

                     Article ?

                      Depositary

   The Secretary-General of the United Nations shall be the depositary of this

Agreement.

                                                /...

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                     Article 10

                   Authentic texts

   The original of this Agreement, of which the Arabic, Chinese, English,
French, Russian and Spanish texts are equally authentic, shall be deposited with
the Secretary-General of the United Nations.

   IN WITNESS WHEREOF, the undersigned Plenipotentiaries, being duly
authorized thereto, have signed this Agreement.

   DONE AT NEW YORK, this . . . day of July, one thousand nine hundred and
ninety-four.

                                             /...

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                      ANNEX

        SECTION 1. COSTS TO STATES PARTIES AND INSTITUTIONAL

               ARRANGEMENTS

1. The International Seabed Authority (hereinafter referred to as "the
Authority") is the organization through which States Parties to the Convention
shall, in accordance with the regime for the Area established in Part XI and
this Agreement, organize and control activities in the Area, particularly with a
view to administering the resources of the Area. The powers and functions of
the Authority shall be those expressly conferred upon it by the Convention. The
Authority shall have such incidental powers, consistent with the Convention, as
are implicit in, and necessary for, the exercise of those powers and functions
with respect to activities in the Area.

2. In order to minimize costs to States Parties, all organs and subsidiary
bodies to be established under the Convention and this Agreement shall be
cost-effective. This principle shall also apply to the frequency, duration and
scheduling of meetings.

3. The setting up and the functioning of the organs and subsidiary bodies of
the Authority shall be based on an evolutionary approach, taking into account
the functional needs of the organs and subsidiary bodies concerned in order that
they may discharge effectively their respective responsibilities at various
stages of the development of activities in the Area.

4. The early functions of the Authority upon entry into force of the
Convention shall be carried out by the Assembly, the Council, the Secretariat,
the Legal and Technical Commission and the Finance Committee. The functions of
the Economic Planning Commission shall be performed by the Legal and Technical

Commission until such time as the Council decides otherwise or until the

approval of the first plan of work for exploitation.

5. Between the entry into force of the Convention and the approval of the
first plan of work for exploitation, the Authority shall concentrate on:

   (a) Processing of applications for approval of plans of work for
exploration in accordance with Part XI and this Agreement;

   (b) Implementation of decisions of the Preparatory Commission for the
International Seabed Authority and for the International Tribunal for the Law of
the Sea (hereinafter referred to as "the Preparatory Commission") relating to
the registered pioneer investors and their certifying States, including their
rights and obligations, in accordance with article 308, paragraph 5, of the
Convention and resolution II, paragraph 13;

   (c) Monitoring of compliance with plans of work for exploration approved
in the form of contracts;

                                             /...

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    (d) Monitoring and review of trends and developments relating to deep

seabed mining activities, including regular analysis of world metal market

conditions and metal prices, trends and prospects;

    (e) Study of the potential impact of mineral production from the Area on

the economies of developing land-based producers of those minerals which are

likely to be most seriously affected, with a view to minimizing their

difficulties and assisting them in their economic adjustment, taking into

account the work done in this regard by the Preparatory Commission;

    (f) Adoption of rules, regulations and procedures necessary for the

conduct of activities in the Area as they progress. Notwithstanding the

provisions of Annex III, article 17, paragraph 2 (b) and (c), of the Convention,

such rules, regulations and procedures shall take into account the terms of this

Agreement, the prolonged delay in commercial deep seabed mining and the likely

pace of activities in the Area,
    (g) Adoption of rules, regulations and procedures incorporating applicable

standards for the protection and preservation of the marine environment;

    (h) Promotion and encouragement of the conduct of marine scientific

research with respect to activities in the Area and the collection and

dissemination of the results of such research and analysis, when available, with

particular emphasis on research related to the environmental impact of

activities in, the Area;

    (i) Acquisition of scientific knowledge and monitoring of the development

of marine technology relevant to activities in the Area, in .^particular

technology relating to the protection and preservation of the marine

environment ;

    (j) Assessment of available data relating to prospecting and exploration;

    (k) Timely elaboration of rules, regulations and procedures for

exploitation, including those relating to the protection and preservation of

the marine environment.

6. (a) An application for approval of a plan of work for exploration shall be

considered by the Council following the receipt of a recommendation on the

application from the Legal and Technical Commission. The processing of an

application for approval of a plan of work for exploration shall be in

accordance with the provisions of the Convention, including Annex III thereof,

and this Agreement, and subject to the following:

    (i) A plan of work for exploration submitted on behalf of a State or

      entity, or any component of such entity, referred to in resolution II,

      paragraph 1 (a) (ii) or (iii), other than a registered pioneer

       investor, which had already undertaken substantial activities in the

      Area prior to the entry into force of the Convention, or its successor

       in interest, shall be considered to have met the financial and

      technical qualifications necessary for approval of a plan of work if

       the sponsoring State or States certify that the applicant has expended

                                                  /-.
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      an amount equivalent to at least US$ 30 million in research and

      exploration activities and has expended no less than 10 per cent of

      that amount in the location, survey and evaluation of the area

      referred to in the plan of work. If the plan of work otherwise

      satisfies the requirements of the Convention and any rules,

      regulations and procedures adopted pursuant thereto, it shall be

      approved by the Council in the form of a contract. The provisions of

      section 3, paragraph 11, of this Annex shall be interpreted and

      applied accordingly;

   (ii) Notwithstanding the provisions of resolution II, paragraph 8 (a), a
      registered pioneer investor may request apprdval of a plan of work for
      exploration within 36 months of the entry into force of the
      Convention. The plan of work for exploration shall consist of
      documents, reports and other data submitted to the Preparatory
      Commission both before and after registration and shall be accompanied
      by a certificate of compliance, consisting of a factual report
      describing the status of fulfilment of obligations under the pioneer
      investor regime, issued by the Preparatory Commission in accordance
      with resolution II, paragraph 11 (a) . Such a plan of work shall be
      considered to be approved. Such an approved plan of work shall be in
      the form of a contract concluded between the Authority and the
      registered pioneer investor in accordance with Part XI and this
      Agreement. The fee of US$ 250,000 paid pursuant to resolution II,
      paragraph 7 (a), shall be deemed to be the fee relating to the
      exploration phase pursuant to section 8, paragraph 3, of this'Annex.
      Section 3, paragraph 11, of this Annex shall be interpreted and
      applied accordingly;

  (iii) In accordance with the principle of non-discrimination, a contract

      with a State or entity or any component of such entity referred to in
      subparagraph (a) (i) shall include arrangements which shall be similar
      to and no less favourable than those agreed with any registered
      pioneer investor referred to in subparagraph (a) (ii) . If any of the
      States or entities or any components of such entities referred to in
      subparagraph (a) (i) are granted more favourable arrangements, the
      Council shall make similar and no less favourable arrangements with
      regard to the rights and obligations assumed by the registered pioneer
      investors referred to in subparagraph (a) (ii), provided that such
      arrangements do not affect or prejudice the interests of the
      Authority;

   (iv) A State sponsoring an application for a plan of work pursuant to the
      provisions of subparagraph (a) (i) or (ii) may be a State Party or a
      State which is applying this Agreement provisionally in accordance
      with article 7, or a State which is a member of the Authority on a
      provisional basis in accordance with paragraph 12;

    (v) Resolution II, paragraph 8 (c), shall be interpreted and applied in
       accordance with subparagraph (a) (iv).

                                         /••

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   (b) The approval of a plan of work for exploration shall be in accordance

with article 153, paragraph 3, of the Convention.

7. An application for approval of a plan of work shall be accompanied by an

assessment of the potential environmental impacts of the proposed activities and

by a description of a programme for océanographie and baseline environmental

studies in accordance with the rules, regulations and procedures adopted by the

Authority.

8. An application for approval of a plan of work for exploration, subject to
paragraph 6 (a) (i) or (ii), shall be processed in accordance with the
procedures set out in section 3, paragraph 11, of this Annex.

9. A plan of work for exploration shall be approved for a period of 15 years.
Upon the expiration of a plan of work for exploration, the contractor shall
apply for a plan of work for exploitation unless the contractor has already
done so or has obtained an extension for the plan of work for exploration.
Contractors may apply for such extensions for periods of not more than
five years each. Such extensions shall be approved if the contractor has made
efforts in good faith to comply with the requirements of the plan of work but
for reasons beyond the contractor's control has been unable to complete the
necessary preparatory work for proceeding to the exploitation stage or if the
prevailing economic circumstances do not justify proceeding to the exploitation

stage.

10. Désignâtion,of a reserved area for the Authority in accordance with
Annex III, article 8, of the Convention shall take place in connection with
approval of an application for a plan of work for exploration or approval of an
application for a plan of work for exploration and exploitation.

11. Notwithstanding the provisions of paragraph 9, an approved plan of work for
exploration which is sponsored by at least one State provisionally applying this
Agreement shall terminate if such a State ceases to apply this Agreement
provisionally and has not become a member on a provisional basis in accordance
with paragraph 12 or has not become a State Party.

12. Upon the entry into force of this Agreement, States and entities referred
to in article 3 of this Agreement which have been applying it provisionally in
accordance with article 7 and for which it is not in force may continue to be
members of the Authority on a provisional basis pending its entry into force for
such States and entities, in accordance with the following subparagraphs:

   (a) If this Agreement enters into force before 16 November 1996, such
States and entities shall be entitled to continue to participate as members of
the Authority on a provisional basis upon notification to the depositary of the
Agreement by such a State or entity of its intention to participate as a member
on a provisional basis. Such membership shall terminate either on
16 November 1996 or upon the entry into force of this Agreement and the
Convention for such member, whichever is earlier. The Council may, upon the
request of the State or entity concerned, extend such membership beyond
16 November 1996 for a further period or periods not exceeding a total of
two years provided that the Council is satisfied that the State or entity

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concerned has been making efforts in good faith to become a party to the

Agreement and the Convention;

    (b) If this Agreement enters into force after 15 November 1996, such

States and entities may request the Council to grant continued membership in the

Authority on a provisional basis for a period or periods not extending beyond

16 November 1998. The Council shall grant such membership with effect from the

date of the request if it is satisfied that the State or entity has been making

efforts in good faith to become a party to the Agreement and the Convention;

    (c) States and entities which are members of the Authority on a

provisional basis in accordance with subparagraph (a) or (b) shall apply the

terms of Part XI and this Agreement in accordance with their national or

internal laws, regulations and annual budgetary appropriations and shall have

the same rights and obligations as other members, including:

    (i) The obligation to contribute to the administrative budget of the

       Authority in accordance with the scale of assessed contributions;

   (ii) The right to sponsor an application for approval of a plan of work for

       exploration. In the case of entities whose components are natural or

       juridical persons possessing the nationality of more than one State, a

       plan of work for exploration shall not be approved unless all the

       States whose natural or juridical persons comprise those entities are

       States Parties or members on a provisional basis ;

    (d) Notwithstanding the provisions of paragraph 9, an approved plan of

work in the form of a contract for exploration which was sponsored pursuant to

subparagraph (c) (ii) by a State which was a member on a provisional basis shall

terminate if such membership ceases and the State or entity has not become a

State Party;

    (e) If such a member has failed to make its assessed contributions or

otherwise failed to comply with its obligations in accordance with this

paragraph, its membership on a provisional basis shall be terminated.

13. The reference in Annex III, article 10, of the Convention to performance

which has not been satisfactory shall be interpreted to mean that the contractor

has failed to comply with the requirements of an approved plan of work in spite

of a written warning or warnings from the Authority to the contractor to comply

therewith.

14. The Authority shall have its own budget. Until the end of the year

following the year during which this Agreement enters into force, the

administrative expenses of the Authority shall be met through the budget of the

United Nations. Thereafter, the administrative expenses of the Authority shall

be met by assessed contributions of its members, including any members on a

provisional basis, in accordance with articles 171, subparagraph (a), and 173 of

the Convention and this Agreement, until the Authority has sufficient funds from

other sources to meet those expenses. The Authority shall not exercise the

power referred to in article 174, paragraph 1, of the Convention to borrow funds

to finance its administrative budget.

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15. The Authority shall elaborate and adopt, in accordance with article 162,
paragraph 2 (o) (ii), of the Convention, rules, regulations and procedures based
```

`on the principles contained in sections 2, 5,` _€,_ `7 and 8 of this Annex, as well`
```
as any additional rules, regulations and procedures necessary to facilitate the
approval of plans of work for exploration or exploitation, in accordance with
the following subparagraphs:

   (a) The Council may undertake such elaboration any time it deems that all
or any of such rules, regulations or procedures are required for the conduct of
activities in the Area, or when it determines that commercial exploitation is
imminent, or at the request of a State whose national intends to apply for
approval of a plan of work for exploitation;

   (b) If a request is made by a State referred to in subparagraph (a) the
Council shall, in accordance with article 162, paragraph 2 (o), of the
Convention, complete the adoption of such rules, regulations and procedures
within two years of the request;

   (c) If the Council has not completed the elaboration of the rules,
regulations and procedures relating to exploitation within the prescribed time
and an application for approval of a plan of work for exploitation is pending,
it shall none the less consider and provisionally approve such plan of work
based on the provisions of the Convention and any rules, regulations and
procedures that the Council may have adopted provisionally, or on the basis of
the norms contained in the Convention and the terms and principles contained in
this Annex as\ well as the principle of non-discrimination among contractors.

16. The draft rules, regulations and procedures and any recommendations
relating to the provisions of Part XI, as contained in the reports and
recommendations of the Preparatory Commission, shall be taken into account by
the Authority in the adoption of rules, regulations and procedures in accordance
with Part XI and this Agreement.

17. The relevant provisions of Part XI, section 4, of the Convention shall be
interpreted and applied in accordance with this Agreement.

                SECTION 2. THE ENTERPRISE

1. The Secretariat of the Authority shall perform the functions of the
Enterprise until it begins to operate independently of the Secretariat. The
Secretary-General of the Authority shall appoint from within the staff of the
Authority an interim Director-General to oversee the performance of these
functions by the Secretariat.

   These functions shall be:

   (a) Monitoring and review of trends and developments relating to deep
seabed mining activities, including regular analysis of world metal market
conditions and metal prices, trends and prospects;

                                                                                                                                                      / - • 
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   (b) Assessment of the results of the conduct of marine scientific research

with respect to activities in the Area, with particular emphasis on research

related to the environmental impact of activities in the Area;

   (c) Assessment of available data relating to prospecting and exploration,

including the criteria for such activities;

   (d) Assessment of technological developments relevant to activities in the

Area, in particular technology relating to the protection and preservation of

the marine environment;

    (e) Evaluation of information and data relating to areas reserved for the
Authority;

    (f) Assessment of approaches to joint-venture operations;

    (g) Collection of information on the availability of trained manpower;

    (h) Study of managerial policy options for the administration of the
Enterprise at different stages of its operations.

2. The Enterprise shall conduct its initial deep seabed mining operations
through joint ventures. Upon the approval of a plan of work for exploitation
for an entity other than the Enterprise, or upon receipt by the Council of an
application for a joint-venture operation with the Enterprise, the Council shall
take up the issue of the functioning of the Enterprise independently o f the
Secretariat of\the Authority. If joint-venture operations with the Enterprise
accord with sound commercial principles, the Council shall issue a directive
pursuant to article 170, paragraph 2, of the Convention providing for such
independent functioning.

3. The obligation of States Parties to fund one mine site of the Enterprise as
provided for in Annex TV, article 11, paragraph 3, of the Convention shall not
apply and States Parties shall be under no obligation to finance any of the
operations in any mine site of the Enterprise or under its joint-venture
arrangements.

4. The obligations applicable to contractors shall apply to the Enterprise.
Notwithstanding the provisions of article 153, paragraph 3, and Annex III,
article 3, paragraph 5, of the Convention, a plan of work for the Enterprise
upon its approval shall be in the form of a contract concluded between the
Authority and the Enterprise.

5. A contractor which has contributed a particular area to the Authority as a
reserved area has the right of first refusal to enter into a joint-venture
arrangement with the Enterprise for exploration and exploitation of that area.
If the Enterprise does not submit an application for a plan of work for
activities in respect of such a reserved area within 15 years of the
commencement of its functions independent of the Secretariat of the Authority or
within 15 years of the date on which that area is reserved for the Authority,
whichever is the later, the contractor which contributed the area shall be

                                             /.-•

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entitled to apply for a plan of work for that area provided it offers in good

faith to include the Enterprise as a joint-venture partner.

6. Article 170, paragraph 4, Annex IV and other provisions of the Convention

relating to the Enterprise shall be interpreted and applied in accordance with

this section.

                SECTION 3. DECISION-MAKING

1. The general policies of the Authority shall be established by the Assembly

in collaboration with the Council.

2. As a general rule, dec is ion-making in the organs of the Authority should be

by consensus.

3. If all efforts to reach a decision by consensus have been exhausted,
decisions by voting in the Assembly on questions of procedure shall be taken by
a majority of members present and voting, and decisions on questions of
substance shall be taken by a two-thirds majority of members present and voting,
as provided for in article 159, paragraph 8, of the Convention.

4. Decisions of the Assembly on any matter for which the Council also has
competence or on any administrative, budgetary or financial matter shall be
based on the recommendations of the Council. If the Assembly does not accept
the recommendation of the Council on any matter, it shall return the matter to

the Council for further consideration. The Council shall reconsider the matter

in the light of the views expressed by the Assembly.

5. If all efforts to reach a decision by consensus have been exhausted,
decisions by voting in the Council on questions of procedure shall be taken by a
majority of members present and voting, and decisions on questions of substance,
except where the Convention provides for decisions by consensus in the Council,
shall be taken by a two-thirds majority of 'members present and voting, provided
that such decisions are not opposed by a majority in any one of the chambers
referred to in paragraph 9. In taking decisions the Council shall seek to
promote the interests of all the members of the Authority.

6. The Council may defer the taking of a decision in order to facilitate
further negotiation whenever it appears that all efforts at achieving consensus
on a question have not been exhausted.

7. Decisions by the Assembly or the Council having financial or budgetary
implications shall be based on the recommendations of the Finance Committee.

8. The provisions of article 161, paragraph 8 (b) and (c), of the Convention
shall not apply.

9. (a) Each group of States elected under paragraph 15 (a) to (c) shall be
treated as a chamber for the purposes of voting in the Council. The developing
States elected under paragraph 15 (d) and (e) shall be treated as a single
chamber for the purposes of voting in the Council.

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   (b) Before electing the members of the Council, the Assembly shall

establish lists of countries fulfilling the criteria for membership in the

groups of States in paragraph 15 (a) to (d). If a State fulfils the criteria

for membership in more than one group, it may only be proposed by one group for

election to the Council and it shall represent only that group in voting in the

Council.

10. Each group of States in paragraph 15 (a) to (d) shall be represented in the
Council by those members nominated by that group. Each group shall nominate
only as many candidates as the number of seats required to be filled by that
group. When the number of potential candidates in each of the groups referred
to in paragraph 15 (a) to (e) exceeds the number of seats available in each of
those respective groups, as a general rule, the principle of rotation shall
apply. States members of each of those groups shall determine how this
principle shall apply in those groups.

11. (a) The Council shall approve a recommendation by the Legal and Technical
Commission for approval of a plan of work unless by a two-thirds majority of its
members present and voting, including a majority of members present and voting
in each of the chambers of the Council, the Council decides to disapprove a plan

of work. If the Council does not take a decision on a recommendation for

approval of a plan of work within a prescribed period, the recommendation shall
be deemed to have been approved by the Council at the end of that period. The
prescribed period shall normally be 60 days unless the Council decides to
provide for a longer period. If the Commission recommends the disapproval of a
plan of work «or does not make a recommendation, the Council may nevertheless
approve the plan of work in accordance with its rules of procedure for
decision-making on questions of substance.

   (b) The provisions of article 162, paragraph 2 (j), of the Convention

shall not apply.

12. Where a dispute arises relating to the disapproval of a plan of work, such
dispute shall be submitted to the dispute settlement procedures set out in the

Convention.

13. Decisions by voting in the Legal and Technical Commission shall be by a
majority of members present and voting.

14. Part XI, section 4, subsections B and C, of the Convention shall be
interpreted and applied in accordance with this section.

15. The Council shall consist of 36 members of the Authority elected by the
Assembly in the following order:

    (a) Four members from among those States Parties which, during the last
five years for which statistics are available, have either consumed more than
2 per cent in value terms of total world consumption or have had net imports of
more than 2 per cent in value terms of total world imports of the commodities
produced from the categories of minerals to be derived from the Area, provided
that the four members shall include one State from the Eastern European region
having the largest economy in that region in terms of gross domestic product and

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the State, on the date of entry into force of the Convention, having the largest

economy in terms of gross domestic product, if such States wish to be

represented in this group;

   (b) Four members from among the eight States Parties which have made the

largest investments in preparation for and in the conduct of activities in the

Area, either directly or through their nationals;

   (c) Four members from among States Parties which, on the basis of
production in areas under their jurisdiction, are major net exporters of the
categories of minerals to be derived from the Area, including at least two
developing States whose exports of such minerals have a substantial bearing upon
their economies;

   (d) Six members from among developing States Parties, representing special
interests. The special interests to be represented shall include those of
States with large populations, States which are land-locked or geographically
disadvantaged, island States, States which are major importers of the categories
of minerals to be derived from the Area, States which are potential producers of
such minerals and least developed States;

   (e) Eighteen members elected according to the principle of ensuring an
equitable geographical distribution of seats in the Council as a whole, provided
that each geographical region shall have at least one member elected under this
subparagraph. For this purpose, the geographical regions shall be Africa, Asia,
Eastern Europe, Latin America and the Caribbean and Western Europe and Others.

16. The provisions of article 161, paragraph 1, of the Convention shall not
apply.

               SECTION 4. REVIEW CONFERENCE

   The provisions relating to the Review Conference in article 155,
paragraphs 1, 3 and 4, of the Convention shall not apply. Notwithstanding the
provisions of article 314, paragraph 2, of the Convention, the Assembly, on the
recommendation of the Council, may undertake at any time a review of the matters
referred to in article 155, paragraph 1, of the Convention. Amendments relating
to this Agreement and Part XI shall be subject to the procedures contained in
articles 314, 315 and 316 of the Convention, provided that the principles,
regime and other terms referred to in article 155, paragraph 2, of the
Convention shall be maintained and the rights referred to in paragraph 5 of that

article shall not be affected.

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               SECTION 5. TRANSFER OF TECHNOLOGY

1. In addition to the provisions of article 144 of the Convention, transfer of

technology for the purposes of Part XI shall be governed by the following

principles :

    (a) The Enterprise, and developing States wishing to obtain deep seabed

mining technology, shall seek to obtain such technology on fair and reasonable

commercial terms and conditions on the open market, or through joint-venture

arrangements ;

    (b) 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 by the

Enterprise or its joint venture, or by a developing State or States seeking to

acquire such technology on fair and reasonable commercial terms and conditions,

consistent with the effective protection of intellectual property rights.

States Parties undertake to cooperate fully and effectively with the Authority

for this purpose and to ensure that contractors sponsored by them also cooperate

fully with the Authority;

    (c) As a-general rule, States Parties shall promote international

technical and scientific cooperation with regard to activities in the Area

either between the parties concerned or by developing training, technical

assistance and scientific cooperation programmes in marine science and

technology and the protection and preservation of the marine environment.

2. The provisions of Annex III, article 5, of the Convention shall not apply.

                 SECTION 6. PRODUCTION POLICY

l. The production policy of the Authority shall be based on the following

principles :

    (a) Development of the resources of the Area shall take place in

accordance with sound commercial principles;

    (b) The provisions of the General Agreement on Tariffs and Trade; its

relevant codes and successor or superseding agreements shall apply with respect

to activities in the Area;

    (c) In particular, there shall be no subsidization of activities in the

Area except as may be permitted under the agreements referred to in

subparagraph (b). Subsidization for the purpose of these principles shall be

defined in terms of the agreements referred to in subparagraph (b) ;

    (d) There shall be no discrimination between minerals derived from the

Area and from other sources. There shall be no preferential access to markets

for such minerals or for imports of commodities produced from such minerals, in

particular:

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   (i) By the use of tariff or non-tariff barriers; and

   (ii) Given by States Parties to such minerals or commodities produced by
their state enterprises or by natural or juridical persons which possess their
nationality or are controlled by them or their nationals;

   (e) The plan of work for exploitation approved by the Authority in respect
of each mining area shall indicate an anticipated production schedule which
shall include the estimated maximum amounts of minerals that would be produced

per year under the plan of work;

   (f) The following shall apply to the settlement of disputes concerning the
provisions of the agreements referred to in subparagraph (b):

   (i) Where the States Parties concerned are parties to such agreements,
      they shall have recourse to the dispute settlement procedures of those

      agreements ;

   (ii) Where one or more of the States Parties concerned are not parties to
      such agreements, they shall have recourse to the dispute settlement
      procedures set out in the Convention;

    (g) In circumstances where a determination is made under the agreements
referred to in subparagraph (b) that a State Party has engaged in subsidization
which is prohibited or has resulted in adverse effects on the interests of
another State Party and appropriate steps have not been taken by the relevant
State Party or States Parties, a State Party may request the Council to take
appropriate measures.

2. The principles contained in paragraph 1 shall not affect the rights and
obligations under any provision of the agreements referred to in
paragraph 1 (b), as well as the relevant free trade and customs union
agreements, in relations between States Parties which are parties to such

agreements.

3. The acceptance by a contractor of subsidies other than those which may be
permitted under the agreements referred to in paragraph 1 (b) shall constitute a
violation of the fundamental terms of the contract forming a plan of work for
the carrying out of activities in the Area.

4. Any State Party which has reason to believe that there has been a breach of
the requirements of paragraphs 1 (b) to (d) or 3 may initiate dispute settlement
procedures in conformity with paragraph 1 (f ) or (g) .

5. A State Party may at any time bring to the attention of the Council
activities which in its view are inconsistent with the requirements of
paragraph 1 (b) to (d).

6. The Authority shall develop rules, regulations and procedures which ensure
 the implementation of the provisions of this section, including relevant rules,
 regulations and procedures governing the approval of plans of work.

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7. The provisions of article 151, paragraphs 1 to 7 and 9, article 162,

paragraph 2 (q), article 165, paragraph 2 (n), and Annex III, article 6,

paragraph 5, and article 7, of the Convention shall not apply.

                SECTION 7. ECONOMIC ASSISTANCE

1. The policy of the Authority of assisting developing countries which suffer

serious adverse effects on their export earnings or economies resulting from a

reduction in the price of an affected mineral or in the volume of exports of

that mineral, to the extent that such reduction is caused by activities in the

Area, shall be based on the following principles:

    (a) The Authority shall establish an economic assistance fund from a

portion of the funds of the Authority which exceeds those necessary to cover the

administrative expenses of the Authority. The amount set aside for this purpose

shall be determined by the Council from time to time, upon the recommendation of

the Finance Committee. Only funds from payments received from contractors,

including the Enterprise, and voluntary contributions shall be used for the

establishment of the economic assistance fund;

    (b) Developing land-based producer States whose economies have been

determined to be seriously affected by the production of minerals from the deep

seabed shall be assisted from the economic assistance fund of the Authority;

    (c) The Authority shall provide assistance from the fund to affected

developing land-based producer States, where appropriate, in cooperation with

existing global or regional development institutions which have the

infrastructure and expertise to carry out such assistance programmes;

    (d) The extent and period of such assistance shall be determined on a

case-by-case basis. In doing so, due consideration shall be given to the nature

and magnitude of the problems encountered by affected developing land-based

producer States.

2. Article 151, paragraph 10, of the Convention shall be implemented by means

of measures of economic assistance referred to in paragraph 1. Article 160,

paragraph 2 (1), article 162, paragraph 2 (n), article 164, paragraph 2 (d),

article 171, subparagraph (f), and article 173, paragraph 2 (c), of the

Convention shall be interpreted accordingly.

             SECTION 8. FINANCIAL TERMS OF CONTRACTS

1. The following principles shall provide the basis for establishing rules,

regulations and procedures for financial terms of contracts:

    (a) The system of payments to the Authority shall be fair both to the

contractor and to the Authority and shall provide adequate means of determining

compliance by the contractor with such system;

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    (b) The rates of payments under the system shall be within the range of

those prevailing in respect of 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;

    (c) The system should not be complicated and should not impose major

administrative costs on the Authority or on a contractor. Consideration should

be given to the adoption of a royalty system or a combination of a royalty and

profit-sharing system. If alternative systems are decided upon, the contractor

has the right to choose the system applicable to its contract. Any subsequent

change in choice between alternative systems, however, shall be made by

agreement between the Authority and the contractor;

    (d) An annual fixed fee shall be payable from the date of commencement of

commercial production. This fee may be credited against other payments due

under the system adopted in accordance with subparagraph (c) . The amount of the

fee shall be established by the Council;

    (e) The system of payments may be revised periodically in the light of

changing circumstances. Any changes shall be applied in a non-discriminatory

manner. Such changes may apply to existing contracts only at the election of

the contractor. Any subsequent change in choice between alternative systems

shall be made by agreement between the Authority and the contractor;

    (f ) Disputes concerning the interpretation or application of the rules and

regulations based on these principles shall be subject to the dispute settlement

procedures set out in the Convention.

2. The provisions of Annex III, article 13, paragraphs 3 to 10, of the

Convention shall not apply.

3. With regard to the implementation of Annex III, article 13, paragraph 2, of

the Convention, the fee for processing applications for approval of a plan of

work limited to one phase, either the exploration phase or the exploitation

phase, shall be US$ 250,000.

                SECTION 9. THE FINANCE COMMITTEE

1. There is hereby established a Finance Committee. The Committee shall be

composed of 15 members with appropriate qualifications relevant to financial

matters. States Parties shall nominate candidates of the highest standards of

competence and integrity.

2. No two members of the Finance Committee shall be nationals of the same

State Party.

3. Members of the Finance Committee shall be elected by the Assembly and due

account shall be taken of the need for equitable geographical distribution and

the representation of special interests. Each group of States referred to in

section 3, paragraph 15 (a), (b), (c) and (d), of this Annex shall be

represented on the Committee by at least one member. Until the Authority has

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sufficient funds other than assessed contributions to meet its administrative

expenses, the membership of the Committee shall include representatives of the

five largest financial contributors to the administrative budget of the

Authority. Thereafter, the election of one member from each group shall be on

the basis of nomination by the members of the respective group, without

prejudice to the possibility of further members being elected from each group.

4. Members of the Finance Committee shall hold office for a term of five

years. They shall be eligible for re-election for a further term.

5. In the event of the death, incapacity or resignation of a member of the

Finance Committee prior to the expiration of the term of office, the Assembly

shall elect for the remainder of the term a member from the same geographical

region or group of States.

6. Members of the Finance Committee shall have no financial interest in any

activity relating to matters upon which the Committee has the responsibility to

make recommendations. They shall not disclose, even after the termination of

their functions, any confidential information coming to their knowledge by

reason of their duties for the Authority.

7. Decisions by the Assembly and the Council on the following issues shall

take into account recommendations of the Finance Committee:

    (a) Draft financial rules, regulations and procedures of the organs of the

Authority and the financial management and internal financial administration of

the Authority;

    (b) Assessment of contributions of members to the administrative budget of

the Authority in accordance with article 160, paragraph 2 (e), of the

Convention;

    (c) All relevant financial matters, including the proposed annual budget

prepared by the Secretary-General of the Authority in accordance with

article 172 of the Convention and the financial aspects of the implementation of

the programmes of work of the Secretariat;

    (d) The administrative budget;

    (e) Financial obligations of States Parties arising from the

implementation of this Agreement and Part XI as well as the administrative and

budgetary implications of proposals and recommendations involving expenditure

from the funds of the Authority;

    (f) Rules, regulations and procedures on the equitable sharing of

financial and other economic benefits derived from activities in the Area and

the decisions to be made thereon.

8. Decisions in the Finance Committee on questions of procedure shall be taken

by a majority of members present and voting. Decisions on questions of

substance shall be taken by consensus.

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9. The requirement of article 162, paragraph 2 (y), of the Convention to
establish a subsidiary organ to deal with financial matters shall be deemed to
have been fulfilled by the establishment of the Finance Committee in accordance
with this section.

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                     ANNEX II

        Informal Understanding to be read by the President of

        the General Assembly at the time of the adoption of

                    the resolution

   Once there is a widespread participation in the International Seabed
Authority and the number of members of each regional group participating in the
Authority is substantially similar to its membership in the United Nations, it
is understood that each regional group would be represented in the Council of
the Authority as a whole by at least three members.

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**ISSN 0254-1475**

**COM(94) 305 final**

## **DOCUMENTS**

##### **EN 11**

**Catalogue number : CB-CO-94-322-EN-C**

**ISBN 92-77-71561-8**

**Offîce** **for** **Official Publications** **of** **the European Communities**

**L-29&5** **Luxembourg**