Saturday, September 1, 2007

LOST Subjects the U.S. to Needless Litigation and Regulation

A key consideration for American enterprises interested in doing business on or over the world’s oceans is achieving stability and predictability with respect to such activities. The question is: Will the Law of the Sea encourage such conditions? Or will it introduce significant new uncertainties and instabilities likely to prove inimical to the profitable operations sought by such enterprises?

The Proponents’ Claims:

LOST puts into place rules, regulations and an effective international mechanism for managing and enforcing them that will be highly conducive to business. The fact that many corporate leaders in the oil and gas, maritime, trade, mining and related industries are strongly backing the Treaty attests to the accuracy of this assessment. Furthermore, the Deep Seabed Hard Mineral Resources Act prohibits U.S. companies from deep sea mining unless an international legal regime such as LOST is in place.

The Facts:

  • The Law of the Sea’s charter, its socialist and unaccountable bureaucracy and mandatory dispute resolution mechanism ensure that U.S. businesses will be burdened – perhaps critically so, not advantaged, by this accord. This assessment is not a matter of conjecture. It is borne out by an examination of the regulations already adopted by the Treaty’s agencies.

  • For example, the ISA’s Regulation 30 dictates that “The contractor [e.g., a mining, oil or gas operation in “the Area”] shall continue to have responsibility for any damage arising out of wrongful acts in the conduct of its operations, in particular damage to the marine environment.” In the hands of hostile arbitrators acting in league with environmental activists, such language could prove devastating to the business in question.

  • This is particularly the case since LOST applies (among other places in ISA Regulation 31) what is known as the “precautionary principle,” a legal tenet according to which a company or country must guarantee that a proposed action will not cause any environmental harm before it can proceed. As a practical matter, this means that a given business activity can be banned without any scientific proof of harm or cost-benefit analysis.

  • In fact, LOST’s requirement to “protect the marine environment” would arguably impose stricter environmental requirements than those currently imposed by the federal government through the Clean Air Act or Clean Water Act.

  • Joining LOST could also expose U.S. businesses to legal action in the United States. If the United States joins LOST, it will be helping to establish the precautionary principle as international law. Such a validation would expose the country and its corporations to lawsuits under the Alien Tort Claims Act, an American law that allows foreign nationals to sue in U.S. courts for violations of international law (in this case, the Luddite precautionary principle).

  • Moreover, LOST tribunals have jurisdiction over any dispute dealing with an international agreement related to the purposes of LOST, including protection of the marine environment. LOST could therefore be a “back-door” for other countries to impose on the U.S. requirements of countless other treaties that it has not joined.

  • LOST also recognizes various international bodies that develop international standards – standards to which the U.S. has not agreed. Joining LOST could compel the United States to accept what are essentially EU scientific and environmental standards, to the detriment of American businesses and their competitiveness.

  • Even if American businesses can get past the various environmental, legal and regulatory impediments in order to exploit the deep seabeds’ natural resources, they would be subjected to what amount to taxes in various forms, including in all likelihood, revenue-sharing on the proceeds of their operations in “the Area.” LOST’s authorities can be expected to insist on intrusive and onerous monitoring of corporate books in order to satisfy themselves that the Treaty’s mandate to redistribute wealth is not being shortchanged.

  • The claim that the Deep Seabed Hard Mineral Resources Act prohibits U.S. companies from deep seabed mining absent U.S. ratification of LOST is false. The purpose of the Act was to facilitate ocean mining in ackowledgement of the absence of ratification of LOST, not to defer to LOST on the subject.

  • In short, LOST creates a global regulatory regime that will not only be unstable and unpredictable. It can be counted upon to be inimical to American corporations to the extent that it exposes them to further regulation and possible litigation, some of which will likely be based on treaties and principles to which the United States has not agreed.

  • Corporate executives who have expressed their support for the Law of the Sea Treaty will be held accountable by their shareholders for having done so, seemingly on the basis of the most superficial understanding of this accord and without the due diligence expected of them.

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