Furthermore, so long as a single nation has 

 exclusive access to certain mineral resources, a 

 bidding procedure tends to perform the function 

 of the price system. It tends to allocate the 

 resources to the most efficient operator and, at the 

 same time, to eliminate the possibility that the 

 operator will earn a return on capital that is above 

 the competitive level. The bidding procedure will 

 induce the competing applicants to increase their 

 bids to the point where any such excess is 

 eliminated and will accrue to the benefit of the 

 United States.''* 



However, as certain minerals are sought at 

 greater and greater depths, the costs of exploration 

 and evaluation' ' ' may become so high as to deter 

 these activities. To achieve the objectives of the 

 Marine Resources and Engineering Development 

 Act, the panel recommends that the Secretary of 

 the Interior shall be authorized to apply the most 

 suitable government policy to encourage such 

 exploration and evaluation. 



Although not aimed at locating mineral re- 

 sources, the mapping and geological survey pro- 

 gram outlined by the Panel on Basic Science and 

 Research'^" will aid substantially in the explora- 

 tion of such resources. The International Panel 

 recommends, further, that the Secretary of the 

 Interior shall be authorized to waive the competi- 

 tive bidding procedure if he determines that this 

 step is necessary to encourage exploration and 

 exploitation of mineral resources in particular 

 areas of the deep seas and is otherwise in the best 

 interests of the United States. 



In situations in which competitive bidding is 

 employed, the United States shall register a claim 

 to explore on behalf of the responsible qualified 



Seezd. at 62-63. 



"Exploration" refers to the "geographically broad 

 surveys leading, by progressively nairowing the search, to 

 the location of mineral occurrences of possible economic 

 importance." "Evaluation" refers to the "detailed investi- 

 gation of mineral occurrences or deposits, in order to 

 discover their nature, to establish the quantity and tenor 

 of the contained economic minerals, to determine how 

 best they may be exploited, and generally to take into 

 account all other factors affecting their economic devel- 

 opment." "Production" refers to "all the operations 

 relating to extraction, beneficiation and transport of the 

 minerals discovered." Report of the U.N. Secretary- 

 General, Marine Science and Technology, Survey and 

 Proposals, U.N. Economic and Social Council, Forty-fifth 

 Session, Agenda item 12, U.N. Doc. E/4487, April 24, 

 1968, at 81. 



120 



See Report of Panel on Basic Science. 



business entity that first applies therefor. It shall 

 subsequently have the registered claim to explore 

 converted into a claim to exploit on behalf of the 

 responsible qualified business entity that bids the 

 highest cash bonus (or percentage of profits) 

 therefor. It may be that the entity on whose 

 behalf the claim to explore is registered will not be 

 the entity on whose behalf the claim to exploit 

 will be registered. But as recommended above, the 

 State Registrant will be authorized to substitute 

 any responsible qualified business entity for the 

 entity on whose behalf the claim to explore was 

 originally registered. 



In situations in which competitive bidding is 

 not employed, the United States shall register a 

 claim to explore on behalf of the responsible 

 qualified business entity that first applies therefor. 

 Upon discovery, the claim to explore shall be 

 converted into a claim to exploit on behalf of that 

 same entity. 



(iii) If the claim sought to be registered per- 

 tains to an area of the deep seas beyond its 

 intermediate zone, the United States shall not use 

 competitive bidding but shall adopt the same 

 policy of "first come, first registered," that will 

 guide the International Registry Authority. It shall 

 register a claim to explore on behalf of the 

 responsible qualified business entity that first 

 applies therefor. Upon discovery, the claim to 

 explore shall be converted into a claim to exploit 

 on behalf of that same entity. 



Our concern here is to prevent a "flag-of- 

 convenience" problem from arising. No such prob- 

 lem can arise in the intermediate zone because 

 only the coastal State will have access to its 

 mineral resources. But this problem would arise if 

 the United States used competitive bidding in deep 

 sea areas beyond the intermediate zone, to which 

 all other nations also have access. Explorers and 

 exploiters would then have an incentive to request 

 other nations, which may not charge so much 

 therefor, to register claims on their behalf. Simi- 

 larly, under our recommendations, if any other 

 State charged for registering claims beyond the 

 intermediate zone, explorers and exploiters would 

 have an incentive to request the United States to 

 register claims on their behalf. 



The United States might forbid its nationals- 

 and foreign business entities controlled by them— 

 to have any other nation register claims on their 

 behalf. But this would establish a most undesirable 



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