Remarks on Brazil’s decision to terminate its sponsorship for its State company in contract with the International Seabed Authority

      In September 2020, the Interministerial Commission for the Resources of the Sea (CIRM) issued Resolution 18/2020. It states the “importance of the immediate withdrawal of Brazil’s sponsorship and of the termination of the […] contract” the Geological Survey of Brazil (Companhia de Pesquisa de Recursos Minerais [CPRM], a State-owned company) had signed to explore for cobalt-rich ferromanganese crusts in the Rio Grande Rise in the South Atlantic Ocean. [1] The due process still needs to be followed: the International Seabed Authority’s (ISA) Secretary-General must be notified and the termination takes effect only six months after the date of receipt of the notification unless the notification specifies a later date. [2]

      This decision was considered strategically necessary because on December 7th, 2018, Brazil submitted to the Commission on the Limits of the Continental Shelf (CLCS) an extension of its continental shelf which encompasses the area envisaged for in the contract. [3] Furthermore, CIRM’s Resolution 17/2020 considered that “a coastal State can exercise them [its rights over the extended continental shelf] even before its limits are declared final and binding.”[4] That was reaffirmed in Resolution 18/2020. This viewpoint took into account the customary legal rule enshrined in the UN Convention on the Law of the Sea (UNCLOS), Article 77 (3), according to which “the rights of the coastal State over the continental shelf do not depend on occupation, effective or notional, or any express proclamation.” [5]

      Both resolutions may raise important legal questions. First, this text will address Brazil and its company’s possibilities of terminating the sponsorship and the contract, respectively, –– and the legal consequences. Then, the efforts will be on the analysis of the understanding expressed in Resolution 17/2020. Finally, on the two previous topics, the contingencies regarding dispute settlement will be briefly approached.

      The Exploration Contract between CPRM and the Authority is, to a large extent, inspired in the ISA Regulations on Prospecting and Exploration for Cobalt-rich Ferromanganese Crusts in the Area, which contains standard clauses for the Exploration Contract. Section 19 provides for the contractor’s “right to renounce its rights and terminate this [the] contract without penalty, provided that the Contractor shall remain liable for all obligations accrued prior to the date of such renunciation and those obligations required to be fulfilled after termination in accordance with the Regulations.” Accordingly, there is no secondary obligation, responsibility, stemming from the termination of the contract. Similarly, under Regulation 31, the Sponsor State may follow the procedure mentioned in the first paragraph and, again, it does not have any secondary obligation stemming from the termination of sponsorship.

      Hence, the decision to terminate the sponsorship and the contract should not, per se, come with unexpected surprises. Furthermore, according to the X Sectorial Plan for Resources of the Sea, which defines the Brazilian maritime policy for 2020-2023, the information subsidizing the 2018 submission was gathered mainly by the CPRM, which had contracted with the Authority. [6] As a consequence, the Sectorial Plan determines that the “Cobalt-rich crusts in the Rio Grande Rise   Project” (PROERG) is now under the competence of the  LEPLAC Action –– the national action for the continental shelf. On the other hand, the PROAREA Action –– the national action that provides information to guide Brazil’s decisions regarding the Seabed Area –– will turn its attention to the Polymethalic Sulphides in the Mid-Atlantic Ridge Project (PROCORDILHEIRA). This is in line with Brazil’s goal to pursue a leadership role in the Equatorial and South Atlantic Ocean area –– maintaining cooperation with the Authority and excellence in deep-sea research. [7]

      Concerning Resolution 17/2020, the Brazilian position is appropriate. Considering the Law of the Sea Convention, Article 76 (8), “the limits of the shelf established by a coastal State on the basis of these recommendations shall be final and binding.” In the present case, because Brazil is waiting for the outcome of its 2018 submission, its continental shelf extension is not “final and binding”, especially for third States. Until it becomes final and binding, third States can challenge, on the basis of Article 76, the outer limits established by Brazil. [8] Moreover, since there is no question of delimitation involving the Brazilian continental shelf –– the Article 76 (10) caveat –– [9], this reasoning remains unaltered: only on the grounds of Article 76 may the outer limits established by Brazil be challenged. [10]

      On Brazil’s exercise of its rights on the outer continental shelf, even before its limits are final and binding, there is little discussion. According to Suzette Súarez, also based on Article 77 (3), “in theory, the non-submission or late submission of the particulars of the outer limits by a coastal state to the Commission should not adversely affect that state’s rights.” [11], Basing the establishment of the outer limits on the Commission’s recommendation would only make them final and binding to parties to UNCLOS. Therefore, a contrary recommendation by the Commission does not deprive the Coastal State of its right to determine the outer limits of its continental shelf –– still subject to challenge by other States, under Article 76.

      Lastly, a few words are necessary on the settlement of possible disputes arising out of these decisions. Regarding the relations between the Authority, on the one side, and Brazil and CPRM, on the other, the Regulations, regulation 42, (and the standard clauses contained therein, section 25) refer to Part XI, Section 5, UNCLOS.  This would be an option to the Authority if Brazil and/or CPRM do not comply with their pending obligations. As to challenging the outer limits established by Brazil, UNCLOS does not provide the Authority with any alternative on adjudicatory bodies. Other States could even challenge through Part XV, but it is not entirely clear whether there would be legal standing (or interest). [12]

      Nonetheless, the paragraph above is merely speculative –– and highly unlikely to become relevant. Brazil values its good relationship with the Authority and even intends to sponsor the CPRM in another contract. In addition, the South American giant takes the Commission’s recommendations very seriously, having revised its submissions three times and acquired some expertise in the subject. That has given Brazil a privileged position in cooperation opportunities with South American neighbors, such as Uruguay and Argentina, African partners, such as Namibia, Angola, and Mozambique, and Portugal, regarding the extension of their own continental shelves. [13]

      Brazil’s decision to terminate the sponsorship and the contact with the ISA seems to be in accordance with its law-abiding position, within the limits and possibilities of its regional power. It indeed uses the law of the sea in its favor to advance its maritime interests. Actually, for a while now, the Law of the Sea has been an important asset in Brazil’s seapower arsenal.

 

This text was written by Eduardo Cavalcanti de Mello Filho, an intern at the Brazilian Institute for the Law of the Sea, under the supervision of Felipe Kern Moreira, Director of the Institute.

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[1] Available at: <https://www.in.gov.br/web/dou/-/resolucao-n-18-de-15-de-setembro-de-2020-281063723?fbclid=IwAR3SXWc3HC5EC8c1vJklrcCr4_ZHwpSoLJv6dyc6AYWhU2N_qeNEsMzRjCQ>. Access on 28th Oct. 2020

[2] Regulations on Prospecting and Exploration for Cobalt-rich Ferromanganese Crusts in the Area, Regulation 31. Available at: <https://isa.org.jm/files/files/documents/isba-18a-11_0.pdf>. Access on 28th Oct. 2020.

[3] See note 1

[4] Available at: <https://www.marinha.mil.br/secirm/sites/www.marinha.mil.br.secirm/files/documentos/atas/resolucao-17-2020.pdf>. Access on 28th Oct. 2020

[5] INTERNATIONAL COURT OF JUSTICE. North Sea Continental Shelf Case, Judgment, ICJ Reports 1969, para. 19.

[6] COMISSÃO INTERMINISTERIAL PARA RECURSOS DO MAR. X Plano Setorial para os Recursos do Mar. Brasília, 2020, p. 10.

[7] ibid., p. 24

[8] INTERNATIONAL LAW ASSOCIATION. Legal Issues of the Outer Limits of the Continental Shelf. Berlin Conference, 2004, p. 23

[9] ”The provisions of this article [76] are without prejudice to the question of delimitation of the continental shelf between States with opposite or adjacent coasts.”

[10] Of course, this affirmation is dependent on the rules of international law that bind the relevant States. The ILA Report (see note 8, p. 30) suggests that “the rules concerning continental shelf entitlement and outer limits contained in article 76 of the Convention have attracted broad support in State practice, also from States that have not signed or ratified the Convention” and that “a difference between article 76 and customary international law is that in the latter case there does not exist an obligation (or right) to make a submission to the CLCS concerning the outer limits of the continental shelf.” A “right” because it could be in the coastal State’s interests to have its outer limits final and binding.

[11] SÚAREZ, Suzette. The Outer Limits of the Continental Shelf: Legal Aspects of their Establishment. Heidelberg: Springer, 2008, p. 215.

[12] In theory, third States may have legal standing and interest, since they have some high seas freedoms that could be affected by the extension of the coastal State’s continental shelf –– to lay submarine cables and to build artificial islands, for instance ––, not to mention the potential use made of the Seabed Area through the Authority. Actually, regarding the Area, because it is a common heritage of mankind, there is an underlying collective interest in its integrity, affected by the extension of the continental shelf. These possibilities can be found, respectively, in Articles 42 and 48, the International Law Commission’s Draft Articles on the Responsibility of States for Internationally Wrongful Acts.

[13] MACHADO, Luiz Alberto Figueiredo. A plataforma continental brasileira e o direito do mar: considerações para uma ação política. Brasília: FUNAG, 2015, pp. 102-119