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

In many cases, cross-border unitization has been, or will be in the future, a practical implementation of an existing obligation of the two states to cooperate in the exploitation of a common deposit that is incorporated in the relevant delimitation treaty. The first example of an international agreement containing a commitment regarding cooperative development of straddling petroleum reservoirs is the delimitation agreement between United Kingdom and Norway in 1965. (137) Since that time a "resource-deposit clause" has been incorporated in most delimitation and JDZ treaties, though the form can vary significantly and, generally, it does not explicitly refer to unitization. (138) In the U.K.-Norway delimitation treaty it is stipulated that if any petroleum deposit crosses the boundary between the two states, and such deposit is exploitable from either side wholly or partly, the two states are obliged to seek to reach an agreement in order to exploit and apportion the reserves most effectively. (139)

The North Sea continental shelf has several examples of cross-border unitization agreements. The first example is the 1976 unitization treaty between the United Kingdom and Norway for the Frigg gas field. (140) Subsequent agreements for the Murchison and Statfjord fields, (141) signed in 1979, were largely based on the Frigg Agreement. (142) Until relatively recently, the only other example of a cross-border unitization in the North Sea was the Markham field agreement of 1992, between the United Kingdom and the Netherlands. (143) There are also instances of cross-border unitizations in other parts of the world.

In order to remove the need for a field-specific treaty to cover every cross-border unitization and to facilitate other aspects of cross-border cooperation, the U.K. and Norway signed a Framework Agreement in 2005 that provides the basis for subsequent cross-border unitizations between the two states. (144) Since then, two fields, Blane and Enoch, have been unitized under the terms of this agreement. (145)

Although the global trend with regard to exploitation of cross-border deposits is in favor of cooperative development, the rule of customary international law requiring unitization is not yet established. Unitization is a specialized form of cooperative development where a strong degree of political consensus is a prerequisite for its implementation. (146) While there is the existence of a procedural requirement to cooperate under international customary law, cross-border unitization and joint development are among several possible legal outcomes. (147) International law cannot compel a state to accept the idea of unitization with regard to exploitation of common petroleum deposits if the state is not willing to do so.

In spite of the increase in international practice in concluding bilateral joint petroleum development agreements, there is no legal obligation for states to cooperate and agree to develop a disputed area jointly. (148) Therefore, the concept of joint petroleum development cannot be considered international customary law. (149) At best there is a general obligation to consult and negotiate about a provisional arrangement pending final delimitation. (150) It therefore remains the prerogative of each state to choose whether to consent to a joint petroleum development agreement. Nonetheless, several international cases decided before the ICJ and the international tribunals have also strongly recommended JDZs. (151) Furthermore, increasing international practice demonstrates that it is viewed as a viable legal alternative to the maritime boundary delimitation process, at least as a "provisional arrangement of a practical nature." (152) These agreements can now be found in many different parts of the world including the North and South Atlantic, the Middle East, East and Southeast Asian regions, West Africa, and the Caribbean.

A. International Case Law

1. The North Sea Continental Shelf Cases

The 1969 ICJ decision of the North Sea Continental Shelf Cases is very important, as it establishes fundamental principles of maritime boundary delimitation in international case law. The North Sea Continental Shelf Cases, and particularly Judge Jessup's separate opinion, are illustrative of the judicial response to the issues of delimitation and cross-border petroleum deposits. The Court referred to the possibility of the parties deciding on "a regime of joint jurisdiction, user, or exploitation for the zones of overlap or any part of them." (153)

Prior to this case, a partial delimitation of the continental shelf had been in effect by agreements between Denmark, Netherlands, and Germany, on the basis of equidistance from the nearest points on the baselines of the territorial seas of those states. (154) An agreement could not be reached on the remainder of the boundaries because of differences over the rules to be applied. (155) The Netherlands and Denmark asserted that due to lack of agreement between the parties, and absent special circumstances, the principle of equidistance should be used. (156) The equidistance principle determines the continental shelf boundaries by means of an equidistant line or a median line, where every point on such line is the same distance from the baselines from which the breadth of the territorial seas for each of the impacted states is measured. (157) Germany responded that the equidistance method would not lead to a just and equitable solution and delimitation should be governed by equitable principles. Such principles, they argued, would provide a "just and equitable share" of the available continental shelf, in proportion to the length of its coastline and extending out to the central point of the North Sea. (158)

The ICJ left the final solution of delimitation to the parties and limited itself to providing criteria that the parties should take into account during negotiations including "the physical and geological structure, and natural resources, of the continental shelf areas involved." (159) The Court further stated that the parties should resolve their differences by agreement, "or failing that by an equal division of the overlapping areas, or by agreements for joint exploitation, the latter solution appearing particularly appropriate when it is a question of preserving the unity of a deposit." (160) The Court also stated that it "[did] not consider that unity of deposits constitute[d] anything more than a factual element which it is reasonable to take into consideration in the course of the negotiations for a delimitation." (161) The Court did recognize that any delimitation agreement should leave to each state the portion of the continental shelf that constituted a natural prolongation of its territorial land to the extent possible. (162) Even at this early stage of resolving transboundary issues, the Court appeared to recognize the need to preserve the unity of the deposit for the economical and efficient exploitation of petroleum resources. However, it was not sufficient to be classified as a special circumstance, which would necessitate an alteration of the boundary delimitation. (163)

After considering the U.K.-Norway Continental Shelf Agreement of 1965 and the Supplementary Agreement to the Treaty Concerning Arrangements for Co-operation in the EMS Estuary, (164) the Court noted:

To look no farther than the North Sea, the practice of

States shows how this problem has been dealt with, and

all that is needed is to refer to the undertakings entered

into by the coastal States of that sea with a view to

ensuring the most efficient exploitation or the

apportionment of the products extracted. (165)

The ICJ also held that joint exploitation agreements were "particularly appropriate when it is a question of preserving the unity of a deposit" in areas of overlapping, but equally justifiable, claims. (166) Judge Jessup, in a separate opinion, (167) noted that agreements in the Persian Gulf, unlike the North Sea and Ems Estuary agreements, provided for joint exploitation or profit sharing in areas where the international boundaries were undetermined, or had recently been agreed upon, subject to the conclusion of arrangements for joint interests. (168) In his view, the principle of joint exploitation might have a wider application in agreements on overlapping areas of the continental shelf that are disputed--that is, yet to be delimited--especially where interested states have equally justifiable claims. (169) He also observed, "[C]learly the principle of co-operation applies to the stage of exploration as well as that of exploitation." (170)

Ong suggests that these observations, being obiter dictum, can only be regarded as "an endorsement of such arrangements." (171) However, for a relatively new concept, like cross-border unitization or joint development, these pronouncements "serve to 'aid the identification of rules created by states" (172) and thereby "contribute to 'the general principles of law recognized by civilized nations' on this subject." (173)

2. The Iceland/Norway Conciliation Recommendations on the Continental Shelf Area Between Iceland and Jan Mayen Island