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Problem #3: A step in the direction of international taxing authority. The Convention contains an ill-advised revenue-sharing provision that is applied to income derived from oil and gas production outside the EEZ. The general bias in the Convention, as I indicated earlier, is in favor of the redistribution of seabed resources. This bias is codified in the area of oil and gas revenues. The U.S. will be forced to pay a contribution to the International Sea-Bed Authority created by the treaty based on a percentage of its production in the applicable area beyond the 200-mile limit.
While he asserted the argument against this revenue-sharing provision was unconvincing, State Department Legal Advisor William H. Taft IV acknowledged it was an argument that could be made in the course of October 21, 2003 testimony before the Senate Foreign Relations Committee. Mr. Taft understates the problem. By any reasonable definition, this provision would for the first time allow a U.N.-affiliated international authority to impose a tax directly on the U.S. for economic activity. At least, I am unaware of any precedent for this kind of international taxing authority.
Shoring up the state system, as recommended by former Secretary of State Shultz, means that international institutions should be funded by the voluntary contributions of their member states. The extent to which these international institutions are allowed access to independent streams of revenue is the extent to which they will seek to obtain governing authority at the expense of the state system. While the revenue-sharing provision related to oil and gas production in the Convention is a relatively modest step in this direction, it is still a step in the wrong direction.
Problem #2: Unnecessary limitations on the exploitation of resources. The Convention was drafted at time when the failed policies of state control over resources to meet demands for the redistribution of those resources were in vogue. Specifically, Article 140 of the Convention states that all activities outside the jurisdictional waters of individual states “be carried out for the benefit of mankind” while “taking into particular consideration the interests and needs of developing States.” These international waters and the accompanying seabed are defined as those outside the 200-nautical-mile exclusive economic zone (EEZ) the treaty leaves within the jurisdictional control of participating states.
It is unclear why the U.S. should accept a treaty that is so explicitly biased against its interests when it comes to the access to resources. This is particularly so when this bias reflects a policy preference for the redistribution of resources that the world abandoned over a decade ago. The world economy is now organized around the requirements of the market. As elsewhere, the application of market principles regarding the exploitation of sea-based resources will ensure the effective and efficient use of those resources. U.S. adherence to the Convention, therefore, would represent a step backward.
Proponents of the Convention acknowledge the far-reaching political and legal ramifications of U.S. adherence to the treaty. University of Virginia School of Law Professor John Norton Moore, a supporter of the Convention who testified before the Senate Foreign Relations Committee on October 14, 2003, stated that he sees it as a means for fostering the rule of law in international affairs. In fact, he states that adherence to the Convention is “one of the most important law-defining international conventions of the Twentieth Century.”
This is quite an assertion. In fact, it is the most troubling aspect of the Convention because the conduct of international relations for centuries has been a more a political than a legal process. Unacknowledged in the language about fostering the rule of law in international relations is the reality that in this particular case it entails subordinating the powers of the participating states to the dictates of an international authority. When it comes to the essential powers for the conduct of international relations, the use of force, and the exercise of diplomacy, they are not readily divisible but they are readily transferable. The Convention is a vehicle for transferring these essential powers from the participating states to the international authority established by the treaty itself. It represents the establishment of the rule of law over sovereign states more than it is establishing a rule of law made by them.
Problem #1: Loss of Sovereignty. Traditionally, treaties, with only narrow exceptions, have been defined as formal agreements between and among sovereign states that help define their relations to each other as sovereign states. They are inherently political agreements. The option to change such relations and the concomitant power to discontinue adhering to the terms of a treaty is solely the prerogative of the sovereign.
First and foremost, the Convention represents a departure from that tradition. It establishes institutions with executive and judicial powers that in some instances are compulsory. For example, Section 4 of the Treaty establishes the International Sea-Bed Authority. The authority basically is given the power to administer to the “area” under the jurisdiction of the treaty, which includes all the world’s oceans and seabed outside national jurisdiction. This is a granting of executive powers to the authority that supersedes the sovereign power of the participating states. Of even greater concern, Part XV of the Convention establishes dispute settlement procedures that are quasi-judicial and mandatory. Once drawn into this dispute settlement process, it will be very difficult for the U.S. extricate itself from it.
We support joining the Convention because it is in our national interest--both in our national security and our economic interests. The Chamber has a long and proud history of supporting America's national security interests including playing an instrumental role in mobilizing America's industrial might to fight and win World Wars I and II. It is in this tradition that we support approving the Law of the Sea Treaty.
Becoming a party to the Treaty benefits the U.S. economically by providing American companies the legal certainty and stability they need to hire and invest. Companies will be hesitant to take on the investment risk and cost to explore and develop the resources of the sea--particularly on the Extended Continental Shelf (ECS)--without the legal certainty and stability accession to LOS provides. The benefits of joining cut across many important industries including telecommunications, mining, shipping, and oil and natural gas.
LOS will continue to form the basis of maritime law with or without our accession. Our national interests are best protected by being an active participant in this process. Joining the Convention will provide the United States a critical voice on maritime issues--from mineral claims in the Arctic to how International Seabed Authority (ISA) funds are distributed.
Many opponents present a false option to LOS that does not exist: that the United States can enjoy the benefits of LOS without joining it. In reality, only by joining can the U.S. reap the full economic and national security benefits of the Convention. Like any agreement, LOS isn't perfect. But its benefits far outweigh the costs of continuing to stand on the sidelines. The Chamber and the business community do not fear adverse rulings under the Convention so much as we fear being left behind by our global competitors.
Contrary to some opponents' claims, joining the treaty promotes American sovereignty. LOS strengthens our sovereignty by codifying our property claims in the Arctic and on our ECS. Remaining outside of the Convention undercuts our sovereignty by not allowing us to advance and protect our property claims through the process utilized by every other major global power. the chamber's support for the law of the sea convention.
Given their importance to global networks and the world economy, there must be an appropriate legal framework based upon global cooperation and the rule of law to protect submarine cables. The Convention provides this necessary framework in 10 provisions applicable to submarine cables, going beyond existing international law to provide a comprehensive international legal regime for submarine cables wherever they are – whether in territorial seas, in Exclusive Economic Zones (or “EEZ”), on continental shelves, or on the high seas. Once the Convention is ratified, the United States government will be able to insist on compliance by other nations with these protections. Several recent events underscore the urgent need for a clear and unambiguous framework for protecting this vital communications infrastructure.
First, some nations have attempted to encroach on the ability of U.S. operators to participate effectively in the deployment, maintenance and repair of undersea cables. To oppose these types of foreign encroachments or restrictions effectively, the U.S. must have a seat at the table where it can enforce the Convention’s freedoms to lay, maintain, and repair undersea cables.
Second, ratification of the Convention will also help U.S. companies better contend with disruptions to undersea cable service. For example, in March 2007, large sections of two active international cable systems in Southeast Asia were heavily damaged by commercial vessels from Vietnam and taken out of service for about three months. More than 106 miles of cable were removed from the seabed and repaired, at a cost of more than $7 million. It would have been very helpful if the United States, Verizon and other affected U.S. companies had been able to use the Convention to compensate cable owners, arbitrate disputes over service disruptions, and deter future violations.
Fiber-optic submarine cables are the lifeblood of U.S. carriers’ global business. Aside from our land-based connections with Canada and Mexico, more than 95 percent of U.S. international traffic – voice, video, Internet and data – travels over 38 submarine cables, each the diameter of a garden hose. Without these cables, current satellite capacity could carry only 7 percent of the total U.S. international traffic.
Fiber-optic submarine cables are the international digital trade routes of the 21st century. And thus, any disruptions to the submarine cable global network can have significant impact on the flow of digital information around the world, with severe consequences for the world economy. As one official from the Federal Reserve noted in referring to submarine cable networks, “When the communication networks go down, the financial sector does not grind to a halt, it snaps to a halt.”i
Third, the Convention will also help the United States government and international companies respond when countries attempt to unlawfully require licenses or permits before submarine cables can be laid or repaired. As an example, Verizon is one of the co-owners of the Europe India Gateway submarine cable system, which passes over the continental shelf claimed by Malta but never enters Malta’s territorial seas. Even though the Convention allows for such transit without interference by coastal nations, Malta’s Resources Authority has threatened legal action if the submarine cable operators do not obtain a license and pay a fee. Not only do these fees add unforeseeable costs on existing undersea cable systems, they raise the specter of coastal nations imposing similar requirements for the sole purpose of raising revenue at the expense of the cable owners. By signing on to the Convention, the U.S. will have the discretion to add its diplomatic efforts in the ongoing dispute with Malta and enforce the treaty’s expressly stated freedom to lay and maintain submarine cables in international waters without tolls, taxation or fees levied by coastal States.
Once the U.S. is a party to the Convention, Verizon and other U.S. telecommunications companies can work with the appropriate U.S. agencies to enforce, when necessary, the freedoms to lay and repair cables on the continental shelf and the EEZ – saving millions of dollars over the life of a cable system, improving the reliability of our critical infrastructure, and putting U.S. companies on a level playing field for operating international cable systems.
If the Congress fails to act to ratify the Convention, U.S. companies will continue to operate at a disadvantage vis-a-vis our global counterparts, indeed having to work through our international providers and their respective governments to seek protection of their submarine cable infrastructure under the Convention.