Over holocene times, many of the worldly concern ’ s limit disputes have arisen from, or have been exacerbated by, economic elements, in detail the discovery of hydrocarbons. Both farming and maritime boundary disputes can have a significant affect on the international investment decisions of commercial actors and the political and economic development of a State. A feature of many, if not the majority of, boundary disputes is their longevity. A premier model is the quarrel between Venezuela and Guyana over a mineral-rich area of land which began between the US and Britain in the nineteenth hundred and was revived last class following the discovery of anoint off the coast of the challenge district .
Why are sovereignty disputes relevant to commercial actors ? A State exercises single jurisdiction over its district, and enjoys sovereign rights over consort natural resources. Investors who intend to explore and hopefully exploit natural resources need to know which State exercises sovereignty or sovereign rights over the relevant district or maritime space and on what footing, and therefore which State has the exclusive autonomous correct to grant concessions in sexual intercourse to that district. Unresolved competing maritime claims besides have the likely to undermine an investing .
| As well as the legal risks associated with commercial dealings with a State that does not have rights over the relevant area or resources, there are also important political, commercial and potentially reputational risks to consider. |
From a State perspective, the satisfactory resolution of a boundary quarrel can unlock the economic likely of natural resources. The being or even spectre of a territorial or nautical boundary challenge can undermine the State ’ sulfur ability to exploit those resources.
In brief: types of dispute and methods of resolution
A dispute may exist in relation to the condition of a territory itself ( for example, as to sovereignty over the Falklands/Malvinas ), or in relation back to territorial areas where sovereignty is disputed between two or more neighbor States ( as was the case on the border between Cameroon and Nigeria ). Sovereignty disputes over territory on estate can frequently lead to relate maritime limit disputes, including where claims to maritime rights cover the lapp maritime areas ( as is the case between Thailand and Cambodia in the alleged Overlapping Claims Area ) .
In accord with the UN Charter, disputes between States, including as to sovereignty over territory or maritime rights, must be resolved by passive means. UNCLOS specifies a number of passive means by which disputes are to be settled. Whilst classically, disputes between States have been referred to the International Court of Justice ( the ICJ ), the principal discriminative organ of the United Nations, nautical limit disputes may additionally be referred to an ad hoc court established under Annex VII of UNCLOS, or to the International Tribunal for the Law of the Sea ( the ITLOS ), established under UNCLOS. Disputes may besides be submitted to arbitration pursuant to a treaty ( for exemplar, the ongoing arbitration between Timor-Leste and Australia ) or other particular agreement. Of course, even once a quarrel has been submitted for resolution to a quarrel resolution body, the proceedings may take a issue of years to complete and, as discussed promote below, have the electric potential to disrupt ongoing exploration or other commercial action in the region .
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EXAMPLES OF FORMAL DISPUTE RESOLUTION: ICJ : Somalia five Kenya ; Costa Rica v Nicaragua UNCLOS : Barbados v Republic of Trinidad & Tobago, Guyana five suriname ITLOS : Bangladesh five Myanmar ; Ghana /Ivory Coast ad hoc : Eritrea/Yemen |
States may reach a resolution of disputes without recourse to a decision-making body, with the consequence of their agreement enshrined in a limit treaty. indeed, the expectation of mutually beneficial economic co-operation may provide sufficient incentive to bring both sides to the negociate postpone. however, the settlement action may be long and changeable. For case, in 2015 India and Bangladesh ultimately implemented a land limit agreement which had been signed in 1974. Further, interpretation or execution of an agreement or treaty, or even a judgment of the ICJ or an external court, may lead to far disputes .
Where a quarrel concerns the exercise of the right to self-government, the resolving power may be achieved by constitutional means and within the model of the territorial integrity of the relevant State ( eg, the secession of the Republic of South Sudan which was achieved by referendum after years of conflict ). however, in some cases such disputes may be resolved by non-constitutional means, as was the case of Eritrea ’ s war of independence from Ethiopia. Any resolution may be temp and will depend, in any shell, upon external recognition of the new State .
“Provisional arrangements of a practical nature” – Joint Development Zones
Pending resolution of a dispute, States are encouraged by UNCLOS to make “ every attempt to enter into probationary arrangements of a virtual nature ”. accordingly, whilst a permanent wave agreement may take many years to accomplish, States may however be able to reach an agreement to establish a Joint Development Zone ( or JDZ ) which will enable them to explore and develop the natural resources within the quarrel territory. Under JDZ agreements, the States suspend their disputes over sovereignty, formalize the conditions for growth and agree to the share of returns. The terms of JDZs change, but the two States often co-operate to hold licensing rounds on a joint basis unless they have devolved their sovereign and regulative rights and powers to a joint development authority ( as is the case in the Nigeria/Sao Tome JDZ ). The establishment of a JDZ can be a positivist step which provides more security for commercial stakeholders, albeit that there may remain certain points of doubt. For exercise, the duration of the joint development agreement may be unclear or adequate to of variation. There may besides be a lack of clarity as regards treatment of hydrocarbons which straddle the bound of the JDZ into the recognized autonomous territory or maritime master of one of the States in the absence of an international unitization agreement .
Key issues for commercial stakeholders
The economic reality is that opportunities for activity in quarrel territories can not be ignored. however, the risks are complex.
The position under international police with deference to an opportunity offered to explore or develop a field is a primary coil consideration. For model, an IOC considering a license or concession opportunity needs to assure itself regarding the extent to which the State in interview is able to grant those rights. There may be competing claims to sovereignty over the district in question. Further, the claim of a State in relative to a district may be questionable in light of other claims. These claims may be those of another State, or the district concerned may be non-self govern. A maritime boundary may not have been established and the sphere in motion may be discipline to competing entitlements and overlapping claims .
Some of these same considerations apply even if the rights are not derived directly from a State. For model, when looking at farm-in opportunities, it is authoritative to make sure that the championship to the original petroleum agreement is validly granted as a matter of external law, otherwise any further rights derived from it are potentially unenforceable .
The fact that an oil or flatulence concession has been granted by a particular State is not in itself determinant of the reign of that State over that territory or boundary line of a maritime boundary. Nor can it be relied upon to justify the allowance or switch of probationary lines of boundary line. The now reproducible case law of external courts and tribunals is that the presence of such concessions is merely relevant where it evidences or was based upon the universe of some express or silent agreement between the States relating to the rights over the area in interrogate .
The flipside of the encouragement in UNCLOS to enter into probationary arrangements is the universe of a similar exhortation to make every feat “ not to jeopardize or hamper the reach of the final agreement ”. This standard has been invoked where concessions have been granted by one State in disputed areas. In this context, a court considering competing claims may interfere substantially with exploration or other commercial activity in challenge areas, if a risk of irreparable damage or prejudice to one of the party ’ second rights can be established as resulting from that activeness .
For case, in the Aegean Sea Continental Shelf character between Greece and Turkey, Greece sought an order from the ICJ which would have put a stop to exploration activity and relate scientific research that had been granted by Turkey under a concession. In the event, the ICJ dismissed Greece ’ randomness application on the basis that there was no irreparable prejudice. In a more recent exercise, a numeral of concessionaires were facing possible disturbance survive year when a extra chamber of the ITLOS considered the request of Ivory Coast for probationary measures to stop drill in the context of a territorial dispute with Ghana. The especial chamber ordered Ghana to prevent any new drill in the challenge sphere and to monitor strictly, and prevent the dissemination of, non-public information from past, ongoing or future exploration activities which could be used to the detriment of Ivory Coast .
Putting aside the fact that investing treaties may be of identical circumscribed value in protecting against such legal risks, investors besides need to consider the risks of reputational wrong attendant to investing where there exists a dispute as to sovereignty or maritime legal power. In particular, commercial bodily process in, or associated with, an area in which the basis of a territorial claim is controversial can lead to considerable criticism and broader occupation impacts. Shareholders can react in a high profile and negative way to activities in areas of challenge, with pension funds dropping investments. oil companies have besides been on the receiving end of civil claims in their home jurisdictions, based on allegations relating to activities in areas subject to historic and ongoing disputes. such claims frequently make unpalatable allegations, for case referring to corruption of government officials in connection with the investment and collateral fund, and therefore facilitation of breaches of international law .
far hazard management issues for an investor include the potential for regular flare-ups in place fierce conflict. indeed, possession of vegetable oil or gasoline fields and related installations can often become a focus in civil conflict, particularly in areas where sovereignty is disputed. Fighting or other military attention may lead to impermanent cessation of production .
consequently, for those invested in disputed district or areas of overlapping maritime claims, the impingement of escalating conflict and/or increasing political tensions at State to State degree, is significant in many ways. In this context, it is difficult for a commercial party to avoid taking some screen of function in a State to State dispute in which private actors, of course, have no stand. however, as described below, a timid approach is necessary .
Involvement of commercial actors in boundary disputes
In its award in the investor-State arbitration between RSM and Grenada the court observed that it “ must highlight how uncommon it is to have a private commercial party … directly involved in maritime boundary negotiations between sovereign states. ” This observation is broadly accepted : sovereignty over district is one of the basic characteristics of being a State. Boundary negotiations are normally highly confidential and diplomatically sensitive. third parties have no stand in validate resolution of boundary disputes and, as the same court noted, “ [ p ] rivate, alien oil companies are rarely involved in sensible and delicate matters such as maritime boundary negotiations because of the high potential for conflicts of interest ” .
private actors must therefore keep sight of whose boundary challenge it is. excessive or inappropriate influence in discussions between States concerning their boundaries can have a deleterious impression and actually cave efforts between those States to reach an amicable resolving power. That said, where revenue-generating action ( for exercise, the exploitation of hydrocarbons or, indeed, even fishing ) is hindered by ongoing limit disputes, commercial actors can put foster coerce on, and provide motivation from States to reach a solution where possible. commercial actors may therefore play a careful but legitimate role in trying to bring States in concert to put an end to developmental “ chill ” and achieve the convinced benefits of resolution of a limit dispute.
Key points for States in the realisation of economic benefits and the resolution of disputes
The necessitate to exploit resources can provide the drift to tackle sovereignty and maritime boundary issues head on. The key to establishing such claims is readiness. A State will need solid legal, technical and political advice on the merits and disadvantages of different courses of action and how to achieve a peaceful method of quarrel resolution. The economic motivation of a State will of class be relevant – for example, a State ’ mho precedence may be the short to medium term exploitation of resources, over and above a permanent decision of a limit .
It will be authoritative to consider the applicable jurisprudence, including to investigate whether there have been any previous relevant agreements, their telescope and their status. The expertness of a State ’ s team should extend to geography and ( for maritime claims ) hydrography, and diachronic and anthropological probe may besides be imperative. fundamental to creating a strong position, whether in negotiations or in the context of formal dispute resolution proceedings, will be readiness and the domination of all this information in concert to create a coherent legal and technical argument as to the State ’ second rights .
particularly where there are promise riches of hydrocarbon discovery and exploitation, disputes as to sovereignty over district and nautical boundaries are unlikely to decline. As we go to press, for example, the quarrel between Ghana and Ivory Coast continues before the ICJ, and nautical boundary disputes continue to rumble on the Aegean Sea, involving Cyprus, Greece, Turkey and in some areas, Syria. Herbert Smith Freehills ’ Public International Law practice has considerable experience in advising both States and commercial clients on issues concerning challenge territory, boundary line of boundaries and the emergence of new States. For example, we were the first firm to commence an Annex VII arbitration under UNCLOS ( Barbados v Trinidad and Tobago ) and our specialists have been involved in a number of early disputes between States ( including Eritrea/Yemen and Bangladesh ’ second disputes with India and with Myanmar ), and between States and anoint companies .
| For further information on investment protection, see INVESTMENT PROTECTION: PROTECTING INVESTMENTS IN A VOLATILE WORLD in Issue 1 of Inside Arbitration. |
