mineral resources of all the deep seas. They "would be secure against nationalization or increased taxes 

 and royalties, and insulated from the vagaries of political climate (e.g., in the Middle East, or in Nigeria 

 today)."" 



(6) Furthermore, this framework will make it possible to solve one of the principal problems that 

 may arise in connection with the commercial exploitation of manganese nodules. Because the capital 

 costs of such exploitation are likely to approximate at least $100 million and technological requirements 

 will be high, as will be the risks, the number of producers will probably be small in the foreseeable 

 future. To earn a satisfactory return on his investment, the producer will have to control a large area, 

 estimated from at least 1 ,000 square miles up to 30,000 square miles. Particular sites are likely to vary 

 greatly in value because of wide differences in the density of the nodules on the seabed, their metallic 

 content, the depth of water in which they lie, the topography of the floor, etc. Competition for access 

 to the more valuable sites may be severe. The estimated reasonable scale of production of even a single 

 enterprise will be very large— so large as to cause significant reductions in the prices of manganese, cobalt 

 and nickel. Two or three producers would have even greater effect. In the short-run, these few producers 

 would have difficulty in controlling the rate of output in relation to the market for their products. 



The United Nations agency, however, would have authority to limit the number of entrants and 

 thereby prevent excessively rapid rates of output that would depress prices and revenues to all 

 producers. 



(7) The proposed framework would also contribute effectively to the solution of the problem of 

 conflicting uses because the United Nations agency would have power to withhold areas from 

 exploration and exploitation in the interest of more important conflicting uses, a step no nation would 

 be willing to take unilaterally. 



(8) For all these reasons, it is finally argued, the proposal would be most acceptable to the nations of 

 the world. 



b. The panel has given this alternative its most careful consideration. Many of the arguments in its 

 favor are persuasive, but the panel concludes that it would be unwise to accept this alternative because it 

 would not accomplish its aims. 



(1) The auctioning to the highest bidder of exclusive rights to explore and exploit the mineral 

 resources of particular areas of the bed of the deep seas is the heart of the proposal. We do not think this 

 procedure is likely to result in the most economically efficient operations or minimize conflict and 

 rivalry among nations. Nations are likely to bid for political, technological, prestige or security reasons 

 or for purposes of economic warfare. Such bidding would raise the prices of the resources in question 

 wholly apart from cost considerations, yet it should be a world objective to make the resources available 

 to mankind at the lowest possible prices. Furthermore, since some bidders may be States and others may 

 be private entrepreneurs, it is difficult to see that economic rationality would necessarily be reflected in 

 their competitive bidding. 



(2) These difficulties would be compounded if the United Nations agency undertook to limit entry 

 in order to forestall too rapid increases in output and decreases in price, because then the bidding for the 

 initial licenses would become fiercer. Moreover, limiting entry alone would not accomplish the hoped-for 

 objectives unless the supply brought to market by the limited number of producers was also regulated. 

 Under the assumed conditions, mineral prices could be prevented from becoming unduly depressed only 

 by an international monopoly (created by the exclusive operation of a single international agency or the 

 auctioning of exclusive rights to explore and exploit manganese nodules on the beds of all the deep seas 

 to a single high bidder) or an international cartel composed of two or more producers licensed by the 

 United Nations agency. Neither of these alternatives is desirable, but a cartel is to be preferred over a 

 monopoly. The cartel "solution" will be available, if needed, under the international legal-political 

 framework which the panel recommends and which does not authorize any international agency to 

 auction licenses or limit entry. 



27 



Henkin, supra note 38 to Chaptei 3, at 65. 



VIII-97 



