Under LOSC, Annex III, Article 4(3), natural and juridical persons must satisfy two requirements in order to be eligible to carry out such activities. First, they must either be nationals of a State Party or effectively controlled by it or its nationals. Second, they must be ‘sponsored by such States’. As the ITLOS Seabed Disputes Chamber states, the notion of ‘sponsorship’ is a key element in the system for the exploration and exploitation of the resources of the Area set out in the Convention. The obligations of sponsoring States are of particular importance to implement relevant rules and obligations with regard to the activities in the Area. According to the Seabed Disputes Chamber, obligations of sponsoring States can be divided into two principal categories, namely, ‘responsibility to ensure’ and ‘direct obligations under the LOSC and other relevant instruments’.
First, ‘responsibility to ensure’ aims to establish a mechanism through which the rules of the LOSC concerning activities in the Area become effective for sponsored contractors who find their legal basis in domestic law. This obligation may be characterised as an obligation of ‘conduct’, not of ‘result’, and as an obligation of ‘due diligence’. In the words of the Chamber, ‘the ‘due diligence’ obligation ‘to ensure’ requires the sponsoring State to take measures within its legal system and that the measures must be ‘reasonably appropriate’.
Second, sponsoring States are obliged to implement ‘direct obligations’ which include:
(i) The obligation to assist the Authority in the exercise of control over activities in the Area,
(ii) The obligation to apply a precautionary approach,
(iii) The obligation to apply best environmental practices,
(iv) The obligation to take measures to ensure the provision of guarantees in the event of an emergency order by the Authority for protection of the marine environment,
(v) The obligation to ensure the availability of recourse for compensation in respect of damage caused by pollution, and
(vi) The obligation to cooperate with the Authority in the establishment and implementation of programmes for monitoring and evaluating the impacts of deep seabed mining on the marine environment.
Furthermore, sponsoring States must take necessary and appropriate measures in order to fulfil their responsibility under the LOSC, in particular Article 134, Annex III and the 1994 Agreement. The existence of such laws, regulations and administrative measures is a necessary requirement for compliance with the obligation of due diligence of the sponsoring State and for its exemption from liability. Such measures should also be in force for the whole time that a contract with the Authority is in force, and should be kept under review so as to ensure that they meet current standards and that the contractor meets its obligations effectively without detriment to the common heritage of mankind.
Finally, some mention must be made of the liability of sponsoring States. From the wording of Article 139(2) of the LOSC, the Seabed Disputes Chamber considered it evident that liability arises from the failure of the sponsoring State to carry out its own responsibilities; and that the sponsoring State is not liable for the failure of the sponsored contractor to meet its obligations. Thus application of strict liability is ruled out. An issue to be examined here involves the relationship between the liability of the contractor and that of the sponsoring State. In this regard, the Chamber took the view that liability of the sponsoring State arises from its own failure to carry out its responsibilities, whereas the contractor’s liability arises from its own non-compliance. Both forms of liability exist in parallel. The Chamber thus clearly rejected residual liability of sponsoring States.
According to this position, however, there is the risk that a contractor will not meet its liability in full due to its financial limitations and, as a consequence, compensation for the damage will not be fully covered. In response, the establishment of a fund within the Authority would seem to be required.