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Legal regime of joint development and management zones

Geographical scope

The geographical scope of joint development and management zones is also very varied. A 1960 Agreement between Austria and Czechoslovakia, dealing with common land deposits of natural gas and oil, does not refer to a particular geographical area but to a certain deposit the extent of which would be determined by the States Parties, being a mixed Technical Commission empowered to calculate the resources in situ. (Austria-Czechoslovakia 1960; Lagoni 1988)

In most cases, however, precise geographical areas are defined in connection with resources. The Norwegian-United Kingdom Agreement of 1976 on the Frigg Field gas reservoir defines the area by both geographical and geological factors, eventually extending to other gas-bearing strata from which the resource can flow into the area. (Norway-United Kingdom 1976; Manin 1978; Lagoni 1988) Geographical coordinates are also utilized in the Abu Dhabi-Qatar 1979 Agreement (Abu Dhabi-Qatar 1969), the Bay of Biscay 1974 Convention between France and Spain (France-Spain 1974), the 1981 Iceland-Norwegian Agreement relating to Jan Mayen (Iceland-Norway 1981), and the Malaysia-Thailand 1979 Memorandum of Understanding (Malaysia-Thailand 1979).

Some other agreements use different geographical approaches. The Ems-Dollard 1960 Treaty between the Federal Republic of Germany and The Netherlands (Federal Republic of Germany-The Netherlands 1962) has established a joint development zone in the Ems Estuary, divided by a provisional line into two subzones, one for each country. Nine subzones are identified in the Japan-Korea 1974 Agreement on the joint development of areas of the continental shelf (Japan-Korea 1974). The Bahrain-Saudi Arabia 1958 Agreement establishes a joint development area which lies entirely in the Saudi Arabian continental shelf (Bahrain-Saudi Arabia 1958). In spite of the partition of the Neutral Zone between Kuwait and Saudi Arabia in 1965, the coordinated exploitation of the whole area was kept, thus, extending the continental shelf six miles offshore (Kuwait-Saudi Arabia 1965; Lagoni 1988). Iran and Sharjah have established a joint regime for the disputed island of Abu Musa (Iran-Sharjah, 1971). Saudi Arabia and Sudan established a "Common Zone" in areas of the seabed and subsoil beyond the 1000-metre depth lines in the Red Sea (Saudi Arabia-Sudan, 1974).

While not strictly a joint development regime, Australia and Papua New Guinea agreed on a complex delimitation scheme which, among other features, sets up a protected zone where mining is prohibited and makes other arrangements in different areas (Australia-Papua New Guinea 1978). A highly complex "Zone of cooperation", defined by geographical coordinates and divided into three areas, has been established by Australia and Indonesia in the East Timor continental shelf area (Australia-Indonesia 1989). Indonesia and Viet Nam have discussed eventual arrangements for the Natuna Sea area. (Valencia 1986)

It should also be kept in mind that such cooperative arrangements can cover broad geographical areas. The 1920 Spitzbergen Treaty, for example, relates to the archipelago in terms of land areas and the territorial sea, a matter of controversy being its extension to the continental shelf areas. The 1988 CRAMRA Convention encompasses the whole of the Antarctic continent and surrounding continental shelf areas. This means that the geographical scope of any such arrangement need not be restricted to a given deposit or specific area but can extend to broad regions of land and marine spaces.

Exploration and exploitation arrangements

The arrangements relating to the exploration and exploitation of natural resources in joint development areas range from rather simple schemes of cooperation to highly complex and structured systems of jurisdiction and revenue sharing.

The Austria-Czechoslovakia Agreement is based on the very simple principle that each party exploits its share of resources in proportion to the size of the deposit on its side of the boundary, under the conditions laid down by the Technical Commission. The Bahrain-Saudi Arabia Agreement stipulates that exploitation shall be carried in the manner decided by the latter government, but it shall grant one-half of the net revenues to Bahrain, an approach which is, of course, related to the fact that the whole area lies on the Saudi continental shelf; accordingly, sovereignty and administration of the area are not affected by the agreement. (Lagoni 1988) Between Abu Dhabi and Qatar there is also the principle of equal sharing of royalties, profits and fees, but the exploitation is undertaken under the terms of a concession granted by Abu Dhabi. In the Ems Estuary area both Germany and The Netherlands exercise jurisdiction and apply their laws and regulations in the respective subzones, but they may grant concessions under their domestic law for the whole joint development zone; the concessionaires, whose rights and obligations are spelled out in detail, are entitled to an equal share of the oil and gas recovered from the whole area, the expenses being allocated in proportion to the share. (Barberis 1975) In the Iran-Sharjah understanding a single concessionaire exploits the oil resources of Abu Musa, who shall pay one-half of the stipulated amounts directly to each government.

A different and more complex approach is that which provides for the "unitization" of the deposit which is to be exploited as a single unit. (Woodliffe 1977) In this regard, the Frigg Field Agreement provides that each government will require its licensees to enter into an agreement with the licensees of the other party in order to appoint a "Unit Operator." The agreement also regulates the free movement of persons and material, safety, inspections, taxation, transfer of rights and other matters, but does not affect the rights and jurisdiction of each party. Kuwait and Saudi Arabia have retained their joint and undivided equal rights over the resources of the partitioned neutral zone, what has been appropriately described as a "functionally limited condominium." (Lagoni 1988) Joint exploitation is undertaken in this context while prior oil concessions remain in force; freedom of access and movement, safety, and taxation are also governed by the Agreement. Bolivia and Chile agreed last century on a short-lived condominium for the exploitation of resources extending to large areas on both sides of the agreed land boundary.

Other situations do not involve unitization but rely on a joint-venture approach. In the case of France and Spain each government retains its sovereignty and jurisdiction over the respective area of the joint zone, providing for joint ventures between the companies operating in each sector and the export of the resources recovered from the sector of one State to the other State. Also in the Jan Mayen case there is a provision for "joint venture contracts," with the possibility of a State Party participating in the activities which take place in the sector of the other Party with a share of 25 per cent in conjunction with governmental or non-governmental companies or else directly between the States concerned; some activities of exploration are to be undertaken by the Norwegian Petroleum Directorate at its own expense. The Japan-Korea Agreement provides for concessionaires of both parties, who shall enter into an "operating agreement" and shall have equal share of the resources; the laws and regulations that apply are those of the Party whose concessionaire is designated "operator" in a given subzone.

Another quite different approach is that which entrusts an international organization or Commission with the basic decisions relating to exploration and exploitation. Saudi Arabia and Sudan have established one such Commission for the exploitation of metalliferous deposits in the Indian Ocean, which grants licences and concessions, supervises exploitation and determines the applicable law. Also Malaysia and Thailand have established a Joint Authority which assumes all rights and responsibilities on behalf of the parties in relation to exploitation of the area, including the terms applicable to these activities; the Understanding contains a number of rules on criminal jurisdiction and related issues. (Valencia 1986; Valencia and Miyoshi 1986)

The most elaborate scheme yet undertaken is that between Australia and Indonesia relating to the Timor Gap. The Zone of Cooperation is divided into Areas A, B. and C. In the first of such areas the rights and responsibilities of the two States regarding exploration and exploitation of petroleum shall be exercised by the Ministerial Council and the Joint Authority, the operations being carried out by means of production-sharing contracts. In Areas B and C, each State has the primary responsibility respectively, with the obligation to notify the other party of the production agreements entered into and to pay the other party 10 per cent of the income tax collected. The Ministerial Council is the body in charge of policy orientation, while the Joint Authority is the entity in charge of management of exploration and exploitation with all necessary powers to this effect. Detailed clauses govern surveillance, security, search and rescue, air traffic, surveys, research, marine environment and other matters. Unitization is also provided for deposits extending across the boundaries of Area A. The criminal law of each party applies to its nationals or residents, but the law applicable to production-sharing contracts is specified in each contract. A petroleum-mining code, a model production-sharing contract, and a taxation code are annexed to the Treaty, providing with great detail for the organization of contracts and operations. (Prescott 1989; Willheim 1989)

It has been reported that Argentina and Chile have recently discussed the establishment of a large ecological joint zone in the disputed areas of the Patagonian boundary line, including ice-fields, which would be managed by a Joint Authority. Such an eventual solution has not met, however, with general support. Among the multilateral schemes, the Spitzbergen Treaty provides for a simple solution based on the recognition of Norwegian sovereignty and the granting of mining rights to all the parties to the Treaty on an equal basis. In this arrangement there is no unitization nor joint-venture cooperation, but individual operations. To a limited extent Norwegian law applies. (Ostreng 1977) The CRAMRA Convention, on the other hand, is extremely elaborate, both in terms of the procedures for opening areas for exploration and exploitation and in relation to the content of the Management Schemes, which shall embody the rights and obligations of the operators. Joint ventures are also encouraged and a highly complex institutional machinery is set up to manage the system as a whole. The interests of claimants, non-claimants, and the international community are accommodated within this Convention. The applicable international law to mining operations has been substantially developed in this framework, having transformed Antarctica into the biggest joint development and management zone ever devised. (Orrego Vicuņa 1988)

Institutional machinery

A good number of joint development zones include some form of institutional machinery and provisions for the settlement of disputes. Most are rather simple schemes. The Austria-Czechoslovakia Agreement provides for a mixed Technical Commission, the decisions of which are considered to be accepted by the parties unless there is an objection within a month; disputes which are not settled in the Commission or by diplomatic means can be submitted to arbitration. A Consultative Commission has also been established for the Frigg Field, but the most important decisions are taken by the governments; the settlement of disputes also follows the pattern of Commission intervention, negotiation, or submission to an Arbitral Tribunal. (Utton 1968) The Kuwait-Saudi Arabia Agreement has a joint permanent Committee, with settlement of disputes referred to friendly means, the Arab League, and the International Court of Justice. The France-Spain joint zone relies only on consultations between the parties and the settlement of disputes by means of negotiation or arbitration. The Iceland-Norway Agreement provides for a Conciliation Commission for the settlement of disputes. In the Germany-Netherlands case there is provision for arbitration, while the question of delimitation can be submitted to the International Court of Justice.

As mentioned above, a few agreements contain highly elaborate institutional arrangements. The Saudi Arabia-Sudan Red Sea Agreement provides for a powerful Joint Commission, which can determine the boundaries of the zone, grant licences and concessions, supervise the exploitation, and determine the applicable law; disputes can eventually be submitted to the International Court of Justice. The Japan-Korea agreement also establishes a Joint Commission entrusted with important powers, including recommendations for the settlement of disputes between concessionaires, and the negotiation or referral to arbitration of interstate disputes.

The Malaysia-Thailand Agreement, like the Australia-Indonesia Treaty, establishes a very powerful Joint Authority which assumes the rights and responsibilities of the parties in the described zone of cooperation. This Authority is an international organization with legal personality, which manages the aggregate of activities in the area, including the terms of contracts. The settlement of disputes is to be undertaken only by means of consultation and negotiation; the latter Treaty, however, provides for binding commercial arbitration for production-sharing contracts.

CRAMRA has also provided for a very elaborate and complex institutional arrangement, which proved necessary not so much in relation to the management of exploration and exploitation as to the need to accommodate different national interests, with particular reference to the role of claimants and non-claimants of sovereignty. A Meeting of States Parties, the Commission, Regulatory Committees, and Advisory Committee, and a Secretariat are called to intervene in the management of this regime. Decision-making is also very elaborate as is the distribution of powers between the institutions and between the latter and the participating States Parties. A binding procedure for the settlement of disputes leads to arbitration or the International Court of Justice.

Ocean boundaries and joint development zones

Most of the existing joint development zones have been devised in order to deal one way or the other with the question of boundaries or competing claims of sovereignty and jurisdiction. In the case of existing boundaries such arrangements prevent the infringement of rights of either party which could otherwise be the result of exploitation from the opposite side. (Lagoni 1988) In other cases such arrangements will facilitate the actual delimitation of a boundary by separating from it the issue of underlying resources, which will be bought under a joint regime. (Lagoni 1988) Still a few such zones are established while delimitation is pending in order to facilitate the activities of exploration and exploitation and overcome jurisdictional difficulties. (Lagoni 1988)

The fact that many deposits of natural resources extend across national boundaries has led to important developments in the law applicable to such situations in terms of the organization of the exploitation under cooperative or unitized arrangements. (Lagoni 1979; Onorato 1968) Article 4 of the 1965 agreement between Norway and the United Kingdom has provided a model clause for resource deposits of this kind, requiring the parties to seek agreement on the most effective manner to undertake exploitation and the manner in which the proceeds should be apportioned. Such a clause is contained today in numerous agreements and it has also, in part, inspired Article 142 of the Law of the Sea Convention, requiring due regard to the interests of coastal States when activities in the seabed area relate to deposits lying across the limits of national jurisdiction, eventually entailing liability. (Lagoni 1988)

The issue of resource deposits has often been raised in the litigation of ocean boundaries before international courts and tribunals, but so far it has not carried particular weight in the adjudication of such disputes.

The expanding role of joint zones: a conclusion

Joint development and management zones have thus far accomplished a useful role in relation to the exploration and exploitation of deposits connected with boundaries between States, with the process of agreeing on a delimitation, and with situations where delimitation is pending. There is a trend here which is likely to continue in view of the fact that such arrangements provide a management tool in situations which otherwise would lead to disputes and confrontations.

Although such zones have been mainly devised in relation to nonliving resources, there is no reason to prevent their utilization with respect to other uses of the sea. In point of fact, some of the most recent agreements have included clauses on cooperation regarding living resources, the environment, scientific research, search and rescue, and other issues. This may well be an area of expansion for such zones in the near future.

The most promising development, however, lies in the expanding geographical scope of joint development zones. First, the Spitsbergen Treaty, to a limited extent, and second, CRAMRA in a very broad dimension, have proven that such a concept can well apply to large geographical regions, whether it be an archipelago, a whole continent, or the immense area of the oceans composing the Southern Ocean. Both land and maritime areas are brought under such concept in these instances. Regional seas as a whole and other situations could well benefit from these precedents in the future. The geographical expansion is also related to the establishment of comprehensive regimes under international law for the management of such large areas. Again, CRAMRA provides a most illustrative example of both substantive and procedural rules to this effect. The ensuing accommodation of interests not only takes into account those that are at the heart of given disputes, but to an increasing extent those of the broader international community as well. Coastal and non-coastal States participate on equal footing in this regime, including its maritime dimension. This innovative approach is certainly a major development of international law.

Both the law and the practice discussed in this chapter reveal that there is ample ground for cooperation and understanding in the context of agreed joint regimes, even in situations of disputed claims. The decisive issue is that participating states may derive comparable benefits from such arrangements.


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