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Sea of Investment: ‘Titanic’ of International Investment Law meets ‘Iceberg’ of the UNCLOS
Anil, A, (2026) Sea of investment: ‘Titanic’ of international investment law meets ‘iceberg’ of the UNCLOS Centre for Inclusive Trade Policy, Working Paper 034
Published 14 May 2026
CITP Working Paper 034
Abstract
As the global imperative to transition toward net-zero economies intensifies, competition for critical minerals has escalated, drawing attention to the largely untapped resources of the deep seabed. Under the United Nations Convention on the Law of the Sea (UNCLOS), the deep seabed and its resources are designated the “common heritage of mankind”. However, the International Seabed Authority’s (ISA) regulatory framework for exploitation remains underdeveloped, thereby creating significant potential for conflict within international law between parties with competing interests. In particular, an underexamined issue has been the interface of international investment law with deep seabed mining. This paper examines the intersection of international investment law and the UNCLOS regime in this context, highlighting the potential legal challenges arising from deep seabed mining projects in regions such as the Clarion-Clipperton Zone — as illustrated by Nauru’s sponsorship of The Metals Company. In doing so, it demonstrates that the prevailing investment law regime risks creating premature limits on a state’s authority to regulate based on environmental concerns, threatening the environmental stewardship objectives central to the UNCLOS regime. It focuses specifically on three issues: the threshold question of whether deep seabed mining qualifies as a protected investment; the asymmetry between UNCLOS obligations and the dispute settlement access available to sponsoring states and investors respectively; and the implications of this asymmetry for sponsoring state regulatory authority and environmental governance.
By identifying a fundamental misalignment between investment law’s emphasis on regulatory stability and UNCLOS’s requirements for adaptive environmental management, the paper demonstrates that current international legal frameworks are inadequately designed to govern commercial activities in areas designated as the common heritage of mankind. In doing so, it points to the urgent need for legal and institutional reform before commercialization of the deep seabed forecloses the opportunity to achieve it.
Non Technical Summary
The world’s push toward clean energy has created an urgent demand for critical minerals. As land-based sources of these minerals face increasing competition, attention has turned to the deep seabed, which contains vast untapped deposits. The ocean floor–beyond any country’s borders–is emerging as the next frontier for mineral extraction, with commercial mining ventures already in advanced stages of exploration.
Under international law, the deep seabed belongs to no single country. The United Nations Convention on the Law of the Sea (UNCLOS) designates it the “common heritage of mankind”, a legal concept reflecting the idea that these resources should be managed responsibly, for the benefit of all people, including future generations, and all countries. The International Seabed Authority (ISA), created by UNCLOS, is the international body responsible for regulating deep seabed activities, including mining. However, its rulebook for commercial exploitation remains incomplete, and commercial pressure to begin mining is already outpacing the development of adequate legal safeguards.
This paper identifies a serious and underexamined legal problem arising from this situation. Two bodies of international law, the law of the sea and international investment law, are pulling in opposite directions, and the consequences could be significant for environmental protection, for small developing nations, and for the coherence of international law itself.
On one side, UNCLOS places demanding environmental obligations on the countries that sponsor deep seabed mining companies. These sponsoring states, currently mostly small Pacific island nations, must ensure that the companies they authorise comply with environmental standards. Critically, these obligations are not fixed. As scientific understanding of deep-sea ecosystems evolves, sponsoring states are required to continuously strengthen their oversight and tighten their regulations accordingly. This adaptive approach to environmental governance is central to what UNCLOS demands.
On the other side, international investment law protects foreign investors from government actions that interfere with their business interests. If a government changes its regulations in ways that harm the investment, the investor may be able to sue for compensation, even where the change was made for entirely legitimate environmental reasons. The mere risk of facing such a compensation claim can deter governments from taking regulatory action they are otherwise legally required to take. This phenomenon, known as regulatory chill, lies at the heart of this paper’s concern.
The tension is made worse by a structural gap in UNCLOS itself. When a dispute arises between a mining company and its sponsoring state, the company has no direct right to bring a claim against that state within the UNCLOS dispute settlement system. This forces such disputes into investment arbitration under investor-state dispute settlement (ISDS), a forum designed to adjudicate investment disputes. The result is that the legal system inadvertently privileges investor rights over the environmental governance goals that UNCLOS was designed to achieve.
The paper examines this problem through the experience of Nauru, a small Pacific island nation that has sponsored a subsidiary of The Metals Company, a Canadian mining corporation. Nauru’s situation illustrates the dilemma with particular sharpness. As a low-lying island state on the frontline of climate change, Nauru has powerful reasons to take a cautious approach to deep seabed mining. Yet the sponsorship agreement it has signed contains investor protection provisions that constrain its regulatory freedom. If Nauru were to modify or withdraw its sponsorship in response to environmental concerns, it could face compensation claims potentially exceeding its entire national income or GDP. For a small, resource-constrained nation with limited capacity to fight complex international legal battles, the mere prospect of such liability is enough to deter it from taking the regulatory steps its environmental obligations demand.
This dynamic is not unique to Nauru. Any state sponsoring deep seabed mining faces the same structural tension between its environmental duties and its exposure to investment claims. As commercial mining moves closer to reality, these pressures will only intensify. States may find themselves unable to fulfil their environmental obligations without triggering ruinous legal liability, while the common heritage principle, the foundational idea that the deep seabed belongs to humanity, risks being hollowed out by commercial interests.
The paper concludes that international law, as currently designed, is not equipped to govern commercial activity in areas such as the deep seabed. The conflict between investment law’s insistence on regulatory stability and UNCLOS’s requirement for adaptive environmental management is not merely a technical legal problem; it reflects a deeper failure of the international legal order to keep pace with the realities of deep seabed mining. Addressing this failure, whether through new legal arrangements, reformed arbitration practices, or stronger ISA regulations, is urgent. Once commercial deep seabed mining begins in earnest, the window to build a coherent and balanced legal framework may close permanently.
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