This intervention is given on behalf of The Ocean Foundation as well as DSCC.
This provision raises the possibility of a contract being pledged as security, and therefore of the mortgagor stepping in the place of the contractor or selling the contract: then the provisions ensuring the suitability of the contractor in Draft Regulation 13 are pointless. Anybody could then be doing the mining. Further, if a contract can be pledged as security, that could render any financial security meaningless, as the only real asset could be the contract itself: a circular outcome that further brings into question where, in what format, and in how much money would actually be set aside to fulfill various Contractor obligations under the Regulations.
No public participation would have addressed the technical and financial fitness of the owner of the contract and effective control would be rendered meaningless.
Being able to transfer contracts in this way for purely financial reasons could enable a whole new contractor to carry out activities in the Area.
To be specific: we noted last week that Tongan contractor TOML was bought by DeepGreen, yet the due diligence on technical and financial appropriateness was only done for Nautilus, which was by that stage in liquidation.
Thank you, on behalf of Oceans North and DSCC, we welcome the comments from PEW, and wish to comment further. We consider DR 23 to be a dangerous provision, as it allows an entity other than the assessed applicant to carry out mining. There is no residual discretion to refuse a transfer even though the identity of the contractor is very important. Currently DR 23 (paragraph 7) reads the LTC “shall recommend approval of the application” if criteria are satisfied. There is no discretion. It would be unacceptable that a whole different contractor should step into the previous contractor’s shoes, so to speak, automatically after the mining application has been predicated on the assessment of the identity of the applicant under DR 13.
This is a critical provision about change in control. The discussions here must be aligned with the discussions of effective control in the institutional working group. We have three points about this draft regulation 24.
Firstly, controlling interest is not defined in paragraph 1 and must be discussed in the context of the Institutional Working Group.
Secondly, currently as drafted in paragraph 3 the Secretary-General would have full power to determine whether the contractor will have the financial capability to meet its obligations under the exploitation contract.
Thirdly, even if the Secretary-General does decide to notify the Commission, the only consequence under paragraph 4 is that the Commission shall submit a report of its findings and recommendations to the Council. In other words, there are no consequences to a change in control: this goes to the heart of both effective control and the assessment of the contractor.
Contractors should not be required to start commercial mining. There could be many reasons a contractor chooses not to start mining, including concerns or lack of information on the environmental effects of any mining.
Indeed, TMC itself stated in a recent US Securities and Exchange Commission SEC filing that, and I quote, “Operations in the CCZ are certain to disturb wildlife and may impact ecosystem function. Impacts on CCZ biodiversity may never be completely and definitively known”.
This lack of knowledge underlines why a moratorium on deep-sea mining is essential.
Paragraph 3 would require the contractor to suspend production whenever such reduction or suspension is required to protect the Marine Environment from harm or to protect health and safety. We read this as additional to emergency orders to require the contractor to take action before any such measures.
But as discussed in other working groups, the threshold of serious harm is too dangerous. The applicable standard should be to protect the marine environment from any harm as required by Article 145.