Cross-border unitization and joint development agreements: an international law perspective.

A first position advocates the application of the "prior appropriation rule, i.e., the rule that the first to undertake extraction has the right to exploit the whole deposit." (101) Called the "rule of capture" (102) under the municipal law of the United States, this principle would result in competitive drilling, with consequent economic and physical waste of resources.

A second position is represented by Juraj Andrassy who suggests that in the absence of an agreement on cooperation or production sharing of common deposits between nations, the rule of sovereignty over the subsoil applies. (103) It follows that, in order to avoid the problems that competitive drilling would raise, special rules applicable to these deposits should be developed. (104)

A third position argues for cooperation and against competitive drilling, as this is considered by some to be contrary to international law. Julio Barberis contends that the interplay of the following principles and obligations provide a response to the management of common deposits under international law:

* The principle of territorial integrity, which would be violated by unauthorized mining beyond the boundary line;

* The obligation not to cause material damage to another state; and,

* The obligation to exchange information and consult another state on issues relevant to common deposits, an obligation based on United Nations General Assembly (UNGA) Resolutions. (105)

William Onorato also contends that the cooperation rule should apply to these deposits, albeit on different grounds. (106) Fundamental tenets of Onorato's position are as follows:

* States possess a mutual right of disposal over cross-border petroleum deposits;

* The nature of such a right is that of "an affirmative, vested interest in situ;" (107)

* Unilateral exploitation of such deposits is a deviation from the existing international legal norms;

* Exploitation of those deposits must proceed only by mutual agreement between the relevant states; (108) and,

* As there is no developed rule of international law governing the development of common deposits, the application "by analogy" of de facto cooperation rules that are used in respect of other natural resources with similar physical properties of fluidity and mobility, such as water, should proceed. (109)

Jean-Pierre Bouvet observes two phases in the development of this position. (110) In the first stage, the analysis is focused on identifying whether a general rule of international law applicable to "fluid" resources exists. (111) In the second stage, the analysis shifts from the use of analogy to reliance on emerging international practice, which, according to the author, has been reflected in the increasingly common inclusion of clauses in maritime boundary delimitation treaties that oblige two states to cooperate in the exploitation, and apportionment of benefits from any common deposits. (112) Lagoni notes that this practice is "extensive and virtually uniform" and "may be a step in the emergence of a customary rule of international law that would require States to cooperate in the exploration and exploitation of common deposits of liquid minerals." (113)

III. IS THERE AN OBLIGATION TO COOPERATE UNDER CUSTOMARY INTERNATIONAL LAW?

Following from the last position described above, the key question relevant to our analysis is whether there is an obligation to cooperate with regard to common petroleum deposits under customary international law. If there is no international convention or crystallized rule of customary international law on the subject, the legal basis of a general international obligation to cooperate requires the analysis of secondary sources of international law. These secondary sources, although less authoritative, include U.N. instruments like UNGA resolutions, relevant international conventions, international case law, and the writings of the experts. (114)

The general principle of cooperation between states sharing natural resources is enshrined in some UNGA resolutions that were passed following the failure of the 1972 Stockholm U.N. Conference on the Human Environment to accept similar provisions. (115) On December 13, 1973, UNGA adopted Resolution 3129 on "[c]o-operation in the field of the environment concerning natural resources shared by two or more States." (116) It drew attention to the need to establish "adequate international standards for the conservation and harmonious exploitation of natural resources common to two or more States," with such cooperation being developed "on the basis of a system of information and prior consultation...." (117) This was supported by Article 3 of the 1974 Charter of Economic Rights and Duties of States, Resolution 3281, which provides that: "In the exploitation of natural resources shared by two or more countries, each State must co-operate on the basis of a system of information and prior consultations in order to achieve optimum use of such resources without causing damage to the legitimate interest of others." (118) It is important to note that even though this passed by a large margin, most of the OECD states either voted against or abstained from this resolution. (119)

Following the actions of the UNGA and its underlying environmental theme, the United Nations Environmental Program drafted principles in 1978 that encouraged states sharing natural resources to cooperate in the equitable utilization of shared natural resources as well as to avoid, to the maximum extent possible, the adverse environmental effect of such utilization. (120)

Although the UNGA resolutions stress cooperation, by their very nature, they do not create obligations of a legal character. (121) It could, however, be argued that this is indicative of the international community's willingness to be guided by the principles contained in the resolutions. This general obligation to cooperate is stressed in the 1982 UNCLOS. (122) In a reference to joint development within the continental shelf and EEZs, the Convention sets forth "the States concerned, in a spirit of understanding and co-operation shall make every effort to enter into provisional arrangements of a practical nature and, during this transitional period not to jeopardize or hamper the reaching of the final agreement. Such arrangements shall be without prejudice to the final delimitation." (123) UNCLOS provides for the possibility of a provisional arrangement relating to an undelimited area prior to the conclusion of final delimitation; however, the courts have interpreted "every effort" to mean that attempts at negotiation should have taken place, but stressed that this did not imply a successful negotiation. (124) This indicates that this provision, though strongly commending provisional arrangements such as JDZs, cannot serve as a source of legal obligation on states to develop jointly.

Article 123 of UNCLOS indicates: "States bordering an enclosed or semi-enclosed sea should co-operate with each other in the exercise of their rights and in the performance of their duties under this Convention." (125) In the conservation and management of marine natural resources, the principle of regional cooperation with respect to semi-enclosed seas can be regarded as a "progressive development towards fulfilling the general requirement to cooperate." (126) Nonetheless, there are some factors in Article 123 that detract from its potential binding nature in connection with the duty to cooperate. (127) The wording of Article 123 of the UNCLOS is exhortatory rather than obligatory, and does not contain any specific and legally enforceable obligations. (128) Also, the requirements for cooperative efforts fail to specify or make any reference to exploitation of common petroleum reservoirs. (129) Nevertheless, this cooperative principle serves as a useful analogy to cooperative development of common petroleum reservoirs. (130)

Article 142 of UNCLOS contains another provision, which concerns the analogous situation of resource deposits lying across the boundary between the area, defined as "the sea-bed and ocean floor and subsoil thereof, beyond the limits of national jurisdiction," and an area that is subject to national jurisdiction. (131) It establishes explicit guidelines for the conduct of interested parties. Activities within the area of such deposits "shall be conducted with due regard to the rights and legitimate interests of any coastal State across whose jurisdiction such deposits lie." (132) Again, it calls for a system of prior notification and consultation to avoid infringement of rights and interests: "In cases where activities in the Area may result in the exploitation of resources lying within national jurisdiction, the prior consent of the coastal State concerned shall be required." (133)

The economic interest of states is also a compelling reason for cooperation in the joint development of common reservoirs that straddle international boundaries. A state may be interested in a cooperative approach because it prevents its neighboring states from unilaterally extracting petroleum from the common petroleum reservoir. Another motivating factor for a state could be the objective of lowering their extraction costs and achieving maximum production rates. (134) States may also be incentivized to cooperate in situations where it is the only viable way to protect their sovereign rights to the petroleum in place, without prejudicing their rights against one another. (135) There seems to be sufficient motivation for states to seek a cooperative solution to joint exploration and development of cross-boundary petroleum resources. (136)