TRANSACTIONAL: Corporate/London: Maritime Boundaries: UNCLOS and disputes over the right to explore and develop offshore reserves and the effect on the oil and gas industry

by King & Spalding

Despite the 1982 United Nations Convention of the Law of the Sea (UNCLOS) providing nations with a 200 mile offshore area (an “Exclusive Economic Zone) for exploiting maritime reserves, international waters remain contested.

Disputes are to be expected within the context of, on the one hand, diminishing reserves and the security of supply and, on the other hand, the discovery of new oil and gas deposits. The desire of states to affirm rights over offshore areas they believe they are entitled to control often results in overlapping claims to maritime areas and disputes over the delineation of maritime boundaries. Disputes typically arise when the Exclusive Economic Zone within which it enjoys exploration rights over natural resources overlaps with other states, since it is for those states to delineate (in good faith) the maritime boundary in such a scenario.

Recent disputes over national rights to certain parts of the seas include those between China and Japan over the Senkaku/Diaoyu islands in the East China Sea and also in the eastern Mediterranean, where there is history of competing claims overlapping as between Greece and Turkey, Israel and the Palestinian Authority, and Egypt and Israel.

Over 150 governments and the European Union are currently signatories to UNCLOS, which relies upon national legislation to implement its provisions (though not all signatories have ratified UNCLOS). Most notably, the United States (which criticised profit-sharing provisions with regard to deep seabed mining as being against the principles of free-market capitalism), Israel, and Turkey are not signatories.

In most cases resolution of disputes is sought through the interpretation of UNCLOS and negotiation, although other factors, as set out below, come into play in the resolution of such disputes. Signatories to UNCLOS may bring disputes to the International Tribunal for the Law of the Sea or the International Court of Justice or utilise international arbitration under UNCLOS. The availability of impartial adjudicators to resolve border disputes allows states to come to a satisfactory conclusion through structured, legal processes. Past cases of disputes also lead to the development of UNCLOS jurisprudence and provide useful precedents for future dispute resolution. The transformation of complex, sometimes hostile geo-political and military disputes into legal matters for judicial review and acceptance by both parties at the tribunal’s determination is at an unprecedented level and is highly encouraging.

There are however, some arguments that UNCLOS has in fact developed confusing jurisprudence and that it was prepared with only the Atlantic Ocean in mind and is not a suitable formula for disputes in other seas. Moreover, as mentioned above, not all states involved in maritime boundary disputes are signatories to UNCLOS. Some of these non-signatory states which have negotiated agreements on the delimitation of their Exclusive Economic Zone with other countries (for example, Israel negotiated such an agreement with Cyprus in 2010), which suggests that certain UNCLOS principals are potentially recognised by non-signatory states.

Of course, the disproportionate economic, political, and military capabilities of certain states means there is insufficient and unequal access to legal and bureaucratic means that can be used to maximize the gains of sophisticated advocacy in relation to UNCLOS. Economically and militarily weaker states need to learn to use the UNCLOS rules strategically and effectively to their advantage. Whilst UNCLOS and international law can serve as a guide to the resolution of maritime boundary disputes, nation states ultimately need to engage their political will to reach a satisfactory conclusion.

With an uncertain UNCLOS landscape, when looking to invest in disputed, or potentially disputed maritime territory, companies should ensure that (i) they are aware of, and fully understand, any political risks involved and (ii) they seek information as to how to safeguard their interests appropriately. Seeking diplomatic protection from their home state, and use of the contractual frameworks such as unitization agreements and Bilateral Investment Treaties (an agreement setting out the terms for private investment by nationals and companies of one state in another state) might be among the options.

Dominique Askew

  Dominique  Askew
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Anthony Long
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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