241 



two firms flying the same national flag, it can be resolved through some form 

 of bidding mechanism, similar to the arrangement for established and enforced? 



If such a rule could be established, there would be further difficulties in terms 

 of the effect on rate of output. As pointed out earlier, a single operation is likely 

 to produce such large quantities of metals as to affect the market for these 

 commodities. A firm, in considering whether or not to enter the industry, would 

 obviously take this into consideration. But the magnitude of output of a single 

 unit would mean that a slight error in judgment could have widespread effects. 

 Furthermore, a performance requirement, if it could be established, would 

 create incentives to produce more rapidly than might be justified economically. 

 That is, the possibility of future returns might well tempt nations to stake 

 claims and operate them even though present returns were unsatisfactory. It 

 would be difficult to set up and enforce rules to prevent these consequences 

 without adopting some form of international authority. 



Assuming that there is an international rule established that falls short of an 

 international authority, the flag nation approach faces a more intransigent 

 difficulty in meeting the test of acceptability. This depends, as Mr. Ely points 

 out, in how other nations "sense an interest of their own in the outcome." 

 The assertion of jurisdiction — of sovereign rights — over segments of the sea 

 floor by a few developed and technologically advanced nations, together with 

 rules that effectively prevent the less developed nations from asserting similar 

 claims, is not likely to be widely accepted. The few developed nations might be 

 able to enforce this approach simply by exercising their power, just as the 

 Soviet Union and the United States claimed and maintained exclusive rights 

 to large areas of the ocean for the testing of nuclear weapons. But this power 

 can only be exercised at certain cost. As indicated above, the developed nations 

 may be unwilling to bear this cost. If, however, they are, they would have to 

 be willing to assume greater and greater costs of enforcement as the value of the 

 minerals of the sea floor increase and the incentives grow for the appropriation 

 of exclusive rights. 



INTERNATIONAL REGIME 



The final alternative — that of an international regime — is, I think, more likely 

 to be acceptable over the long run and more likely to protect the interests of the 

 exploiting firms and permit economically efficient operations. Whether or not it 

 will be feasible will depend upon our ability to develop the required institutions. 

 It is assumed in this paper, that these institutions can best be developed under 

 the auspices of the United Nations, since this is the one public international 

 body that comes closest to meeting the requirements. But note that the criteria 

 of efficiency and acceptability do not require a United Nations agency. Some other 

 international body might work just as well. The United Nations has been selected 

 because it exists and because it can, I think, be used advantageously for this 

 purpose. 



To achieve an international regime, the UN authority must acquire jurisdic- 

 tion over the resources on and under the sea floor. This jurisdiction must permit 

 it to grant and protect exclusive rights of entrepreneurs. The authority must 

 also have the ability to tax or extract rent or royalty payments for the use of 

 the resources. And it must be given the ability to utilize or distribute these 

 revenues in an acceptable manner. Furthermore, some boundaries for the juris- 

 diction of the authority must be established, just as they must be established 

 under a flag nation approach. It is suggested that these boundaries be as en- 

 compassing as is feasible, in order to permit the widest possible exploitation 

 under a single I'egime. 



As a basis for discussion, I will sketch out some suggestions and ideas for the 

 operation of such a regime. The individual entrepreneur, from whatever nation, 

 would bid for the exclusive right to explore and exploit a certain area for a 

 specified resource. This bid might be expressed in terms of royalty payments ; 

 i.e., the entrepreneur would agree to pay a certain percentage of the gross reve- 

 nue from the operation. Other mechanisms might also be possible, such as a 

 bid on percent of net revenue, or on a cash bonus payable in installments." 

 For high risk operations, such as manganese mining, the initial bids would ob- 

 viously be very small. It would not be enough to deter exploitation, and, over 

 the long run, would be no greater than the payments that the exploiting firm 

 would be expected to make under the flag nation approach. Some requirement for 

 performance within a certain period of years should be invoked in order to pre- 



" Kpp Dnvid B. Brooks, "Doop Sp;i ^[anf,'Mnosp Nodules: From Scientific Phenomenon to 

 World Resource" (forthcoming paper to be presented at the Law of the Sea Institute, 

 June 27, 1967). This is an excellent discussion of institutional conditions necessary for 

 deep sea mining. 



