Response to Greenpeace report

Greenpeace published a report titled “In Deep Trouble” on Dec. 9th, 2020, with the following thesis:

“This report will focus on how mineral exploration of the deep sea, a global commons, has become monopolised by a concentrated number of private companies headquartered in the Global North, working through subsidiaries, shell companies and subcontractors in a bid to maintain the illusion that deep sea mining can be a global public good. Though very few developing nations are involved in the ISA exploration contracts, those that are stand exposed to liabilities and risk from the opaque and complex corporate structures of their foreign private contractors. What’s more, negotiations for a financial pay-out are politically wrought and increasingly dominated by cutting a deal serving the interests of private company shareholders in the Global North.”

DeepGreen compiled and sent back to Greenpeace the following response:

Dear Ms. Casson,

We acknowledge the receipt of your letter offering us an opportunity to respond or comment on your findings for the upcoming publication by Greenpeace International (Greenpeace or GP) on deep-sea mining.

We have structured our response into two sections:

  • Overall comment on the main thesis of your report
  • Corrections of false and misleading claims.
On intent behind private company-developing sponsoring state relationship

Greenpeace appears to fundamentally misunderstand the nature of the relationships between a private contractor and a Sponsoring State for the purposes of an ISA Exploration Contract. The intent behind this relationship was perhaps best articulated in the following statement made by the previous Secretary General of the ISA, Nii Allotey Odunton, at the UN General Assembly in 2011:

“Another first for the Authority was the approval of two applications by private sector interests, sponsored by developing States, for plans of work for exploration for polymetallic nodules in the so-called reserved areas. The Council approved applications by Nauru Ocean Resources Inc., sponsored by the Republic of Nauru, and by Tonga Offshore Mining Ltd., sponsored by the Kingdom of Tonga. Not only are these the first applications for exploration licences in the international Area by genuinely private-sector entities, but also they are the first applications to have been made for reserved areas, on the basis of sponsorship by developing States.

This is a tremendously important development. I would like to remind the Assembly that the original purpose behind the parallel system of exploitation as set out in the Convention was to provide developing States with a practical and realistic means of participating in seabed mining, either in their own right or through the Enterprise. The effect of the 1994 Agreement was to delay, perhaps indefinitely, the establishment of the Enterprise, leaving developing States with few options to actively participate in seabed mining given the huge financial risks involved. The only realistic option for most developing States therefore is to form partnerships with commercial interests that have
access to the financial capital and technology that are necessary to conduct deep sea exploration. This is exactly what has happened in the case of Nauru and Tonga. This could not have happened, however, unless the private sector had sufficient confidence in the regulatory system that has been developed by the Authority over the past 15 years to make such an investment in the first place.

I wish to congratulate Nauru and Tonga, as well as their commercial partners, on being the first developing States to participate in exploration in the Area. I also believe that all members of the Authority may congratulate themselves on having, at least to this point, developed a regulatory system that respects the careful balance of interests reflected in Part XI of the Convention whilst at the same time providing sufficient incentives and security of tenure to enable the private sector to invest in developing the common heritage of mankind. I believe that these developments are encouraging both for the Authority and for member States, who will be the ultimate beneficiaries from seabed mining.”

The main component of the global public good that could be created by developing the polymetallic nodule resource in the Area is supplying critical minerals for the global transition off fossil fuels at a fraction of environmental and social costs associated with metal production from conventional land ores. Done responsibly, a common heritage resource can be transformed into a global stock of metal that can be used by current and future generations indefinitely into the future. The fact that the exploration and exploitation of this common heritage resource can take place under the sponsorship by and benefit streams channeled to the developing nations is an important contribution to equitable development.

Without investment in this industry from private sector companies such as ours, Pacific Island Nations like Nauru, Kiribati and the Kingdom of Tonga would not otherwise have an opportunity to participate in the benefits of this new resource opportunity to diversify and develop their economies. Until recently, deep-sea exploration was carried out only by the rich industrialised countries, further increasing the potential for global wealth disparity. In the 2000s, Pacific Small Island Developing States (PSIDS) with limited mineral resources on land began to recognize the importance of joining these other states to become involved in the nascent seafloor minerals industry. The developing States’ participation and benefits were made possible by UNCLOS and private companies willing to take on the commercial and technical risk.

On how our relationships with developing Sponsoring States came about

Nauru/NORI

  • Nauru does not have significant resources on land to drive future economic and social development, nor does it possess known mineral resources in its Exclusive Economic Zone (EEZ). This differentiates Nauru from many other PSIDS and puts it at a further disadvantage in terms of future development opportunities. Importantly, the little resources Nauru does have on land have been virtually exhausted by a century of careless phosphate mining carried out predominantly by Germany, Australia, Great Britain and New Zealand.
  • In 2011 Hon. Dominic Tabuna, Nauru’s then Minister for Commerce, Industry and Environment stated:“Nauruans, like most other Pacific Island people, have always relied on the ocean for our livelihood. With limited land-based resources, we must look at innovative ways that the ocean can continue to sustain our people and expand our economies, such as by accessing deep-sea minerals…Given Nauru’s history with mining, evolving to deep-sea mining seems a natural progression. But we will take the experience of the environmental impacts of land-based mining, along with our ancestors understanding of the need to sustainably harvest our ocean’s resources, to ensure that deep-sea mining will be an environmentally better alternative.”
  • In many respects, it would be easier for NORI to be sponsored by other countries, particularly given the Republic of Nauru is not known for attracting large-scale financial investment. However, we believed that if we could show that it is possible for Nauru to be involved in pioneering this new industry, then it would give confidence to other developing countries to follow, helping to realize a core tenet of the United Nations Convention on the Law of the Sea (UNCLOS) of inclusive development.
  • Contrary to the false claims throughout your findings, NORI has been a private entity from its inception (it was never owned by the government of Nauru). Since the commencement of the Sponsorship Agreement with Nauru, NORI and Nauru have shown an overriding caution and concern for ensuring that this project works to benefit and protect the Republic of Nauru. The project was put on hold for several years so that an Advisory Opinion could be sought from the International Tribunal for the Law of the Sea (ITLOS) specifically regarding Sponsorship responsibility. If it wasn’t for NORI and Nauru bringing this issue to the ISA Council, that Advisory Opinion would never have been sought, and this important development and safeguard in the international legal framework would never have occurred.

 

Kiribati/Marawa

  • After hearing about NORI’s project with the Republic of Nauru, representatives of the Republic of Kiribati approached DeepGreen requesting that DeepGreen consider working with the Republic of Kiribati as well in its endeavour to become involved in the seafloor minerals industry.
  • Whilst many countries rely upon mineral resources to underpin their national economies, Kiribati is geologically disadvantaged and does not possess any significant economic mineral deposits on land. As such it is looking to the seafloor to alleviate the economic vulnerability of its limited mineral resource base and secure a sustainable future.
  • Kiribati’s interest in this project was summarized by Hon. Tinian Reiher (Minister of Fisheries and Marine Resources Development) in his address to the Council at the ISA’s 18th Annual Session in Kingston, Jamaica: Polymetallic nodules were first discovered in the waters of Kiribati during the 1960s, and it is recognized that deep sea minerals will play an important role in meeting Kiribati’s future development objectives. Kiribati’s interest in deep sea polymetallic nodules has been reflected in Kiribati’s national development plans from as early as the 1980s. The State’s specific interest in the exploration activities occurring in the Clarion Clipperton Zone is a natural consequence of the CCZ extending into Kiribati’s own Exclusive Economic Zone. The ISA Contractor/Reserved Area blocks are situated only approximately 80 nautical miles from Kiribati’s EEZ boundary; making Kiribati the closest State to these ISA blocks. Indeed, the polymetallic nodule belt in Kiribati waters is an extension of the deposits found in the CCZ, and increasing the knowledge of the minerals and environment in the CCZ will simultaneously increase Kiribati’s knowledge of the minerals and deep sea environment within its own EEZ. This application is therefore considered of National Significance to the Republic of Kiribati. By joining other states in the deep sea exploration effort in the CCZ, Kiribati intends to advance its knowledge of deep sea polymetallic nodules as well as contribute to the advancement of scientific knowledge in the international seabed area.”
  • As highlighted in Minister Reiher’s statement, polymetallic nodules have been a part of Kiribati’s national development plans since the 1980s. For decades Kiribati has been looking for a private sector partner to come along who was willing to take the risk and invest in this industry with Kiribati.

 

Tonga/TOML

  • We acquired TOML from Nautilus in Q1 2020.

Your report appears to insinuate that Nauru, Kiribati and Tonga were strong-armed or even bribed into participating in this industry. This suggestion is false and can be easily dispelled by engaging directly with the developing sponsoring states, instead of relying on unsubstantiated claims by third parties. We have zero tolerance for bribery or similar illegal conduct, and our work to date has been reviewed by the international community through submissions to the International Seabed Authority (ISA), and active global stakeholder engagement including recent international workshops on NORI’s environmental and social impact assessment program. We invest heavily in ocean science programs and in our long-term partnerships with Pacific Island nations.

Your report also portrays the involvement of various partners and sub-contractors from the Global North as nefarious. Exploration of the nodule resource, deep-sea environmental impact assessments and technology development (for offshore nodule collection and onshore nodule processing) require significant capital. To bring together international financing and pioneer new technologies across multiple disciplines involves building trust-based alliances with companies and entities from around the world. This is simply the reality of developing such large-scale international projects—we can’t do it alone.

Selected corrections of false and misleading claims

Given the limited amount of time given to us to respond, we focused our attention on the most material errors. The below response is not to be construed as a tacit confirmation that all of your findings not addressed below are accurate. We are prepared to give you a line-by-line correction but would require more time to provide it.

 

GP claims DG responses

“Despite now holding three exploration contracts sponsored by Pacific Island nations, it appears that none of DeepGreen’s all-male board of nine Directors and none its 18 staff, bar two country managers, are nationals of Pacific Islands or based in the Pacific Islands.”

 

Correction:

ISA Exploration Contracts are held by NORI, TOML and Marawa.

“Former Nautilus CEO David Heydon set up DeepGreen in 2011 with the support of Gerard Barron, and was DeepGreen’s original CEO, remaining a NORI director.”

 

Corrections:

  • Gerard Barron was not involved in setting up DeepGreen. He provided seed funding.
  • David Heydon is not a NORI director.

“There does not appear to have been any public announcement from Nauru about NORI ownership transferring from the State to DeepGreen, and the sale price for that transaction is not known.”

 

False premise:

NORI was a private sector entity from the outset and was never owned by the State.  NORI’s ISA Exploration Contract is sponsored by Nauru.

Refer the statement above by previous Secretary General of the ISA, Nii Allotey Odunton, at the UN General Assembly in 2011: “Another first for the Authority was the approval of two applications by private sector interests, sponsored by developing States…. Not only are these the first applications for exploration licences in the international Area by genuinely private-sector entities.”

 

“Notes from the 2011 Deep Sea Minerals stakeholder workshop in Nauru also suggest limited involvement on behalf of the Nauru government with the ISA contract.”

 

False premise:

The ISA Exploration Contract was signed between NORI and the ISA and contains standard terms as detailed in the ISA Polymetallic Nodule Exploration Regulations.

 

The Republic of Nauru was a witness to the ISA contract because the contract was not between Nauru and the ISA, rather it was between NORI and the ISA.

 

“This appears at odds with Barron’s portrayal that NORI “pioneered a pathway for developingstates to directly participate in marine mineral development from the international seabedarea.”

False claim:

Barron’s statement is accurate. NORI did pioneer such a pathway, and this fact has been recognised by the ISA as well as Nauru itself. Nauru is directly participating through its sponsorship of the NORI Exploration Contract.

 

“The article quotes a public official in Kiribati, stating: “The way they are approaching our government is by saying: there is a lot of benefit; there is a lot of money which you need for adaptation. And that’s just for the exploration alone where they check out where your minerals sit. They are putting those dollar signs to the heads of governments and the other ministers and tell them that they benefit from it.” 11 The academic observes: “The practical development of a future DSM [deep sea mining] industry in Kiribati has taken a rather fraudulent course. In the absence of a DSM policy and outdated legislation, predatory investors … attained survey and exploratory leases by bribing high ranking officials, both with respect to areas within national jurisdiction as well as Kiribati’s sponsorship area in the Clarion-Clipperton Fracture Zone (CCFZ)”.

 

False and libelous claim:

The academic article Greenpeace cites provides no citation, evidence or other documentation that could substantiate Mr Mallin’s allegations of bribery or illicit conduct in relationship to deep-sea mining leases involving the Republic of Kiribati and the Clarion Clipperton Zone.

Neither DeepGreen nor any of its subsidiaries has ever been informed of any investigation by any authority into any allegations of misconduct at any time, and we have no knowledge of any allegations of this kind. We categorically deny the allegations and reiterate the fact that this academic article has published a libellous accusation that is unfounded and without evidence, lacking citations customary for such extraordinary claims.

DeepGreen has sent a cease and desist notice to the original publisher of the article where this quote first appeared and expect it to be retracted.

The Kiribati Government approached us, not the other way around, and we have a zero-tolerance policy for bribery or similar illegal conduct.

Following Nauru’s sponsorship of NORI, the Kiribati Government expressed an interest to become involved in seafloor polymetallic nodule exploration in the CCZ.

In June 2011 the first regional workshop of the SPC-EU Deep Sea Minerals Project was held in Nadi, Fiji. Many Pacific Island States attended the meeting to learn about Deep Sea Mineral opportunities and how their State could benefit from the new industry.

The SPC-EU Deep Sea Minerals Project was a joint venture between the EU and the Pacific Community aimed at “helping Pacific Island countries to improve the governance and management of their deep-sea minerals resources in accordance with international law, with particular attention to the protection of the marine environment and securing equitable financial arrangements for Pacific Island countries and their people.”

The June 2011 SPC-EU Deep Sea Minerals Project workshop piqued the interest of many Pacific Island States, and later that month a Kiribati representative met with SPC to discuss how Kiribati could participate in deep sea mining opportunities in the international seabed area.

Following the meeting between Kiribati and SPC, the Kiribati representative requested SPC/SOPAC to contact us to gauge whether there was commercial sector interest in partnering with Kiribati.

Subsequently, SPC contacted us stating that Kiribati had asked them to gauge our interest in working in partnership with the Government of Kiribati to secure an ISA exploration license and carry out exploration in the CCZ.

“There are a few clues which point to DeepGreen being involved from the beginning of Marawa’s incorporation. Firstly, at the signing of the contract between the ISA and Marawa in New York on 19 January 2015, although not mentioned by name, Gerard Barron seems to be included in two pictures. Barron became DeepGreen CEO in July 2014. Secondly, Gerard Barron told the ISA Council in February 2019 that “not long after NORI became an ISA Contractor, Nauru’s Pacific Island neighbor, Kiribati, reached out to us and asked if DeepGreen could also partner with them. In 2015, Marawa Research, a state-owned company, signed an exploration contract with the ISA.” DeepGreen documents state that “2015 – Marawa Area rights acquired by DeepGreen, sponsored by Kiribati.”

 

False claims:

  • Gerrard Barron did not become the CEO until 2017.
  • Kiribati approached DeepGreen to assist in becoming involved in seafloor mineral exploration in the CCZ. Mineral exploration is expensive and involves putting capital at risk, as there are no guarantees that projects will be developed and provide a financial return. Without companies like DeepGreen willing to partner and invest with countries like Kiribati, these PSIDS would not otherwise have the opportunity to participate.

Greenpeace is wrong to try and push a false narrative of secrecy and innuendo.

 

“Switches in contractor control, such as the transfer of NORI from State ownership to private foreign ownership, and TOML’s change of ownership, twice, have not been reported to the ISA”

 

False claims:

  • NORI has never been owned by the State of Nauru, it has been a private sector entity from its inception. No change of control has taken place since NORI’s inception.
  • The ISA was notified regarding the change of TOML’s ownership.

 

“A key question is whether the laws of sponsoring States effectively bind the operator who is actually carrying out activities in the deep sea. Tonga and Nauru’s laws bind the DeepGreen subsidiaries – although this might not mean much if TOML and NORI, as shell companies, have minimal assets in Tonga and Nauru respectively.”

False claims:

  • TOML and NORI are not shell companies.
  • Both TOML and NORI hold key assets (ISA Exploration Contract, Sponsorship Agreement), employ staff and administer local work programs.

 

“It’s possible that TOML and NORI could simply enter liquidation, leaving Tonga and Nauru respectively holding the liability.”

Misleading claim:

In 2010, at NORI’s & Nauru’s request, the ISA sought an advisory opinion from the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea (the Chamber) on issues pertaining to Sponsoring State responsibility.

The Chamber confirmed

  1. that Sponsoring States do not have strict liability, and
  2. that in order for the Sponsoring State’s liability to arise, there must be a causal link between the failure of that State to meet its responsibilities and the damage caused by the sponsored contractor.

Paragraph 139 of the Advisory Opinion states that “The Chamber, however, would like to point out that liability for damage of the sponsoring State arises only from its failure to meet its obligation of due diligence. This rules out the application of strict liability”.

Paragraph 181 of the Advisory Opinion states: “Article 139, paragraph 2, first sentence, of the Convention refers to “damage caused”, which clearly indicates the necessity of a causal link between the damage and the failure of the sponsoring State to meet its responsibilities… the Chamber is of the view that, in order for the sponsoring State’s liability to arise, there must be a causal link between the failure of that State and the damage caused by the sponsored contractor.”

As a result, in the unlikely event that an ISA Contractor breaches the ISA’s rules and regulations and causes damage in the international seabed area, the Sponsoring State is only liable if ALL of the following has occurred:

  1. Damage has been caused by a failure of the ISA Contractor to comply with its obligations; AND
  2. The Sponsoring State has failed to carry out its due diligence obligations; AND
  3. It has been proven that there is a causal link between the failure of the Sponsoring State to carry out its responsibilities and the damage caused by the ISA Contractors’ activities.

 

“Questions have been raised over the viability of mining Marawa’s contract area, sponsored by Kiribati but acquired by DeepGreen. It doesn’t appear that DeepGreen has done a study of the Marawa contract in the same way they have for the NORI or TOML contract areas. Despite appointing Country Managers for Tonga and Nauru this year, DeepGreen do not appear to have appointed a counterpart for Kiribati. If the Marawa contract area would not turn a profit, Kiribati may derive no direct benefits from this arrangement.”

 

False claims:

  • As is mandatory for all ISA Contractors, Marawa reports annually to the ISA on its work program that shows the exact scope of work conducted by DeepGreen on the Marawa Area to date.
  • Kiribati has already derived direct benefits from its relationships with DeepGreen through training, scholarships and capacity building, as well as material investment in exploring Marawa Area where exploration contract is held by the Kiribati state-owned entity.
  • If the Marawa contract area would not turn a profit, all the risk and 10s of millions of dollars in exploration costs will be carried by DeepGreen.

 

“The private companies dominating deep sea mining exploration also exert a heavy influence over the international negotiations determining the future of the seabed, lobbying governments to urgently finalise rules that would allow for full-scale mining exploitation to begin, with a financial regime that would maximise any corporate profits.”

 

False claim:

Development of the ISA’s regulatory regime for deep-sea mining is a global effort and private companies are but one of many stakeholders participating in this open and transparent process. Contrary to Greenpeace’s statement, no private company involved with an exploration contract has formal observer status which allows for commenting on the Exploitation Code negotiations during ISA Council meetings whereas numerous NGOs and Civil Society groups are afforded observer status and regularly participate and make formal statements and interventions during ISA Council meetings.

 

“If NORI is now a DeepGreen subsidiary then Nauru is no longer an owner of NORI”

 

False conjecture:

As detailed above, NORI was not owned by the State.