Blue frontier – Taming the Wild West of the High Seas

WELCOME TO RUFFER

All-weather investing

Seeking consistent positive returns.

Come rain or shine.

Ruffer provides investment management services for institutions, pension funds, charities, financial planners and individual investors.

London

Ruffer LLP
80 Victoria Street
London SW1E 5JL

Directions | Map +44 (0)20 7963 8100

Paris

Ruffer S.A.
103 boulevard Haussmann
75008 Paris, France

Directions | Map +33 (0)1 88 45 02 54

New York

Ruffer LLC
300 Park Avenue
New York NY 10022

Directions | Map +1 917 947 3003

Edinburgh

Ruffer LLP
31 Charlotte Square
Edinburgh EH2 4ET

Directions | Map +44 (0)131 202 1602

Olive Hefferman

30 May 2024

Olive Heffernan is an award-winning science journalist who writes about oceans and climate change. Her work has been published in Nature, WIRED, National Geographic, Guardian, and Scientific American, among other outlets. Olive was founding Chief Editor of the research journal Nature Climate Change. In 2019, she joined the faculty of Johns Hopkins University as an adjunct lecturer. Her first book, THE HIGH SEAS: Ambition, Power and Greed on the Unclaimed Ocean, will be published in May.

Since the early seventeenth century, the majority of the planet's seas and oceans has been legally outside national control. The result: maritime powers have plundered their resources and polluted their habitats at will. Now, a recently signed treaty aims to protect marine environments and divide the oceans’ natural bounties more equitably. But will it be too little too late?

A remote realm, out of sight and free from oversight, the high seas are the wild west of our planet. This unruly frontier has long harboured opportunists, rogues and outcasts, from the early explorers who first navigated these waters to the pirates who assailed them. Forbidding and mysterious, the high seas have been the backdrop of countless human triumphs and tragedies – of exploration and discovery, of storms, shipwrecks and lives lost. Even today, the high seas occupy a place of myth and legend in our collective consciousness.

Far less appreciated is that the high seas are a legal entity. They are that vast swathe of ocean beyond national control, usually starting 200 nautical miles from land.¹Our largest earthly commons, the high seas cover 43% of the surface of our planet²and 95% of its available habitat.³What that means, in broad terms, is that almost half of our planet is an unclaimed ocean whose resources we are free to pillage or protect.

Almost half of our planet is an unclaimed ocean whose resources we are free to pillage or protect.

To date, we’ve largely chosen the former. We’ve plundered the offshore ocean and used it as a dumping ground for our most noxious waste. Here, lax enforcement and apathy have become the status quo. But if the high seas are a free-for-all, open to rampant abuse, one event, in particular, sealed their fate.

It began on a February morning in 1603, when the crew of a huge Portuguese merchant ship, the Santa Catarina, were suddenly woken by a loud crash on the deck. Anchored at the entrance to the Singapore Straits, at the south-eastern tip of the Malay Peninsula, the 1,500-ton carrack was heavily laden with goods from China and India, including large quantities of musk, silk, earthenware and human captives to be sold as slaves. That night’s anchorage had been a final stop-over en route to Macau, where the Santa Catarina would collect yet more riches before sailing back to Portugal with its cargo.⁴

Yet as dawn broke, the crew of the Santa Catarina found themselves under attack by Dutch admiralty sailors, who ransacked and seized the vessel, sailing it to Amsterdam to auction its valuable contents. Viewed as an act of piracy by the Portuguese, the incident led to a fierce rebuttal by the Dutch, who claimed they were acting in self-defence: the Portuguese, they argued, were unfairly monopolising the open ocean, an area they considered so vast with resources so bountiful that no single nation could either appropriate or exhaust it. The Dutch reasoning led to a rewriting of international law, and a recognition that the high seas are a global commons.⁵

It has since become all too obvious that our vast, deep ocean is neither inexhaustible nor immune to our presence. It is, to the contrary, incredibly fragile and increasingly under threat.⁶One quarter of marine species are already at risk of extinction, and roughly 60% of marine space is suffering from growing cumulative impacts.⁷Fishing takes place alongside shipping, military exercises, scientific research, and oil and gas exploration, in seas that are warming and awash with plastic and may soon be subjected to deep-sea mining or large scale carbon storage to alleviate climate warming.

With the high seas governed by a liberal access regime, there has been no global law to curb our offshore expansion or to protect life in these waters. But that is now set to change. In March 2023, UN member states secured a historic deal to protect the high seas. Twenty years in the making, the High Seas Treaty has now been signed by 80 nations, and while it still requires ratification by signatory states – a process that may take several years – it will fundamentally change our relationship with the offshore world.⁸This treaty heralds a new era that will strike a better balance between the use and protection of this half of our planet.

A new ocean era

Currently, just 1% of the high seas are off limits to extractive industry, inside a marine protected area (MPA).⁹Yet scientists say that we need to set aside at least 30% of ocean space, and manage the rest in a way that is fair and sustainable, if we are to avoid a further collapse of global fisheries and stem the loss of marine biodiversity. ¹⁰

In December 2022, almost 200 nations committed to protecting 30% of the ocean by 2030. 11 Until now, nations have had the legal right to create MPAs within their own waters, including their territorial seas, which typically extend up to 12 nautical miles from land, and exclusive economic zones (EEZs), which typically extend 200 nautical miles from land and give them first rights on mineral and fishery resources. ¹²

Creating marine reserves in international waters, however, has been rather more difficult. A few small MPAs exist on the high seas, but only one is deemed effective. Created in 2016, the Ross Sea MPA, in Antarctica’s Southern Ocean, covers 600,000 square miles, making it 1.5 times the size of the largest national park on land. A total of 432,000 square miles, or 72%, of its icecovered waters are strongly protected. ¹³

Without a legal mechanism to create new MPAs in international waters like the Ross Sea reserve, the 30% goal would be impossible to achieve. The High Seas Treaty provides that mechanism. As part of the deal, nations agreed on a process for creating a network of MPAs that will be interconnected and representative of the diversity of marine life and habitats on the high seas. The treaty will give UN member states the authority to propose new MPAs, and a science-led council will then evaluate, and approve or reject, them. Crucially, new MPAs can be created by a majority vote, without consensus.

But even if 30% of ocean space is protected, conservationists maintain that we must manage the remaining 70%, and its resources, sustainably. One way to achieve this, agreed as part of the High Seas Treaty, is to assess any likely harm from new activities. There is precedent here. Currently, on land and in coastal waters, new commercial activities have to undergo an environmental impact assessment (EIA) to weigh up any benefits against potential harm to wildlife and to ecosystems.

On the high seas, only some pursuits are regulated in this way. It wasn’t until 2006 that bottom trawling – one of the most destructive fishing practices – needed an EIA. Even now, open-water farming and the disposal of space waste, for instance, do not need to consider environmental harm to the high seas. Conservationists want to see emerging offshore interests – such as new fisheries, open-ocean carbon storage or even seasteading – tightly regulated. The new treaty should make it mandatory for these activities to undergo a strict review before getting the green light. This will do little to change the status quo of resource extraction on the high seas, but it will likely force us to consider, more carefully, how we use this space and whether pursuits such as deep sea mining or open ocean carbon storage should proceed.

These decisions are unfolding at a unique point in human history, when atmospheric greenhouse gas concentrations have reached levels not seen on earth for 3 million years. ¹⁴Each year, the ocean soaks up roughly a quarter of the emissions we pump into the air. It’s also absorbed 90% of the extra heat we’ve generated in the past 50 years. ¹⁵The depths of the high seas, in particular, are our greatest buffer against climate change. But the ocean can only continue as our ally if it remains healthy. Our choices matter.

Sharing the spoils

The history of the high seas is not only a story of exploitation. It’s a story of inequality. Wealthy empires – China, Spain, Portugal, Britain, the Netherlands – sent the first fleets of vessels across the unknown ocean in search of new lands and resources. Many formed mega-corporations, such as the Dutch East India Company, tasked with ensuring that their wealthy elites had a constant supply of luxury goods. Textiles, silks, jewels, coffee and spices all flowed in abundance from abroad.

This imbalance continues to the present day. Currently, 90% of patents on natural products are owned by corporations or institutions in the global north, with 90% of the source material coming from the global south. 16 In the past three decades, ocean exploration has been a luxury afforded to wealthy nations, most notably the US, the UK, Canada, Japan, Australia, Russia and Germany. Considering the cost of a research expedition can run to several hundreds of thousands of dollars, and millions in some cases, not to mention the investment required to build icebreakers or to develop new technologies such as deep-sea submersibles and sophisticated lab equipment, it’s clear that only very few nations can afford to be involved.

Currently, 90% of patients on natural products are owned by corporations or institutions in the global north, with 90% of the source material coming from the global south.

One ambition of the High Seas Treaty has been to remedy the inequality between countries that can afford to explore and use the high seas, by agreeing to build capacity in developing nations, including the transfer of technology. In practical terms, this could amount to training for scientists or opportunities to take part in high seas research expeditions.

But the High Seas Treaty goes further in addressing past inequalities. One aspect of the deal is a global agreement to share genetic code from marine creatures. Negotiations on this issue were fraught with tension because, under the existing UN Convention on the Law of the Sea (UNCLOS), genomes sourced from the high seas arguably belong to no one – or everyone. Historically, world powers – including the UK, the EU, the US and Japan – with the technology and financing to scour the high seas in search of new products argued for the right to patent and solely profit from these resources. They wanted to maintain the liberal access regime of the free seas.

Developing nations, including African and Caribbean countries, argued that genomes collected on the high seas are common heritage and that profits, and other benefits such as data derived from the use of these resources, should be shared. In securing the treaty, nations resolved this thorny issue, and agreed that marine genetic resources belong to all of humanity. A portion of the profits from their commercialisation must therefore be pooled once the treaty is enforced. ¹⁷

Drugs from the deep

But why, you might wonder, would anyone care to own the genome of a marine creature found lurking in the ocean’s depths? Since the 1950s, scientists have discovered roughly 34,000 compounds from marine organisms – animals, plants and microbes – with commercial potential. ¹⁸ Some of these discoveries have led to successful products with a wide variety of applications: a deepsea microbe has an important role in the development of a biofuel;¹⁹ a gene sequence from a marine microbe has been found to boost the omega-3 content of rapeseed oil;²⁰ and a fish antifreeze protein – as delicious as that sounds – is now being used to improve the texture of ice cream.²¹

Most success stories have been in drug development. The first approved treatment for HIV, sold as azidothymidine (AZT), was derived from a sea sponge, as was remdesivir, the first treatment for seriously ill covid-19 patients.²² Halaven, an anti-cancer drug that has annual sales of over $300 million, also has its origin in a sea sponge.²³ With the global marine biotechnology industry expected to reach a valuation of $6.4 billion in 2025, there is growing interest in the commercial potential of new discoveries from remote, extreme environments on the high seas – whether from the deep abyss of the Pacific Ocean or the ice-covered Arctic.²⁴

With the signing of the High Seas Treaty, there is a genuine opportunity.

The new treaty will present challenges for those collecting high seas genomes and using them to develop patents, be they research scientists or private corporations. There will be regulatory hurdles, but also more interest and activity. One reasonable expectation is that there will be new requirements to document the collection and storage of physical samples taken from the high seas, as well as an obligation to make genetic information from samples easily and freely accessible in digital format online.

Pharmaceutical and chemical industries acquiring high seas genetic material for use in patented products will need to understand the origin of the source material and will need to do due diligence in ensuring its collection and use is fully compliant. A comparable example might be the onus on large retailers such as Walmart or Waitrose to ensure that the seafood they sell has been harvested legally and without the use of forced labour.

The pay-off for adherence to these rules will be increased social standing among consumers, an important consideration in a world where corporations’ sustainability standards are under scrutiny. Indeed, it is conceivable that future products derived from the high seas, whether antibiotics or skin cream, could be subjected to external ethical review and offered appropriate labelling for compliance. With the signing of the High Seas Treaty, there is a genuine opportunity, right now, to expand deep sea discovery and to explore ocean genomes as a sustainable, lucrative and equitable enterprise to benefit humanity.

Taming the wild west

The high seas are often considered a lawless realm. The truth, however, is rather more nuanced. A suite of organisations, bodies and codes of conduct oversee specific activities offshore. For instance, the International Seabed Authority, an autonomous UN body, governs the nascent industry of deep-sea mining; the International Maritime Organisation (IMO) regulates shipping; 17 regional bodies oversee high seas fishing; and the International Cable Protection Committee (ICPC) governs the use of international telecommunications and power submarine cables.

One crucial provision of the High Seas Treaty, and a compromise in getting it passed, is that it can’t undermine these authorities or restrict their activities. New, but not existing, fisheries, for example, would need to assess their environmental impact. The treaty can, however, nudge these sectors towards greater environmental compliance in the longer term.

Of existing high seas activities, shipping is the most tightly regulated. But it, too, operates under its own rules, which become laxer, and less frequently enforced, with distance from the land. In part, this is because monitoring and enforcement is easier close to shore. Complicating matters is the fact that, on the high seas, flag states – the primary authority for vessels at sea – enforce various levels of adherence to international regulations. At the extreme end are ‘open registers’, states that will register vessels from any nation looking for benefits such as lower tax rates and looser compliance with safety and environmental standards. According to one analysis, as much as 73% of the global fleet is flagged to a country other than that of the vessels’ beneficial ownership.²⁵ When it comes to environmental protection, this is concerning. It becomes even more so when one considers the international shipping fleet is ageing, posing a growing threat to the ocean.

As much as 73% of the global fleet is flagged to a country other than that of the vessels' beneficial ownership. When it comes to environmental protection, this is concerning.

Let’s take, as an example, an environmental incident in international waters. The flag state of the vessel should, in theory, be held responsible, but this doesn’t always happen in practice. A case in point is the Sanchi oil spill, to date the worst tanker spill of the twenty-first century. The incident happened on the afternoon of 6 January 2018, when the oil tanker Sanchi – flagged to Panama, owned by Iranians and crewed by Iranians and Bangladeshis – collided with the Chinese cargo vessel CF Crystal 185 miles off the coast of Shanghai, in the East China Sea. The tanker caught fire, exploded and sank to the seabed, killing all 32 of its crew and spilling over 100,000 tons of condensate, a light, highly combustible crude oil. While most of the condensate burned off, some entered the ocean, creating a slick the size of Paris on the high seas.²⁶ In the aftermath, an investigation concluded that both Sanchi and CF Crystal failed to keep look-out. While all parties involved agreed to take measures to avoid a similar incident in the future, no one was held accountable for the lives lost or the environmental damage.

With the new treaty, shipping companies will come under mounting pressure to ensure their fleet is seaworthy.

With the new treaty, shipping companies will come under mounting pressure to ensure their fleet is seaworthy, whether by changing their design or operations or both. There will be more scrutiny of flag states to check that their vessels are fit for purpose and trained by competent staff. There will likely be changes to international shipping routes too, to accommodate newly designed MPAs on the high seas. The High Seas Treaty comes at a time when the global shipping fleet is also facing the need decarbonise. In addressing the dual challenge of protecting the climate and the ocean, the sector has a historic opportunity to adapt, and to chart a course for a more sustainable future.

For the time being, the fate of the high seas still hangs in the balance. But in redressing our ‘out of sight, out of mind’ relationship with the offshore ocean, the new treaty is an exciting opportunity to consider how we can use our ocean in ways that protect the planet and benefit the majority. It is humanity’s first serious attempt to tame the wild west of our planet, that blue frontier of the high seas.

Olive Hefferman

1 Rothwell et al (2015), The Oxford Handbook of the Law of the Sea
2 Carnegie Endowment for International Peace (2023), The High Seas Treaty is an Extraordinary Diplomatic Achievement
3 United Nations
4 Van Ittersum (2003), Hugo Grotius in Context: an Heemskerck’s Capture of the Santa Catarina and its Justification in De Jure Praedae, 1604–1606
5 Nellen (2015), Hugo Grotius: A Lifelong Struggle for Peace in Church and State, 1583–1645
6 Jouffray et al (2020), The Blue Acceleration: The Trajectory of Human Expansion into the Ocean
7 Halpern et al (2019), Recent pace of change in human impact on the world’s ocean
8 United Nations Treaty Collection
9 O’Leary et al (2019), A Blueprint for Ocean Protection
10 Ibid
11 European Commission
12 Rothwell et al (2015), The Oxford Handbook of the Law of the Sea
13 Brooks et al (2021), The Ross Sea, Antarctica: A highly protected MPA in international waters
14 CNN
15 Ramirez-Llodra et al (2011), Man and the last great wilderness: human impact on the deep sea
16 Hickel et al (2022), Imperialist appropriation in the world economy: Drain from the global South through unequal exchange, 1990-2015
17 Heffernan (2020), Why a landmark treaty to stop ocean biopiracy could stymie research
8 Ibid
19 Girguis and Holden (2012), On the Potential for Bioenergy and Biofuels from Hydrothermal Vent Microbes
20 New York Times
21 Naing and Kim (2019), A brief review of applications of antifreeze proteins in cryopreservation and metabolic genetic engineering
22 Heffernan (2023), Stemming the Threat of Biopiracy on the High Seas
23 Ibid
24 Smithers report on The Future of Marine Biotechnology to 2025
25 Inomics
26 Chen et al (2020), Marine oil spill pollution causes and governance: A case study of Sanchi tanker collision and explosion

This article first appeared in The Ruffer Review 2024

Past performance is not a guide to future performance. The value of investments and the income derived therefrom can decrease as well as increase and you may not get back the full amount originally invested. Ruffer performance is shown after deduction of all fees and management charges, and on the basis of income being reinvested. The value of overseas investments will be influenced by the rate of exchange.

The views expressed in this article are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument, including interests in any of Ruffer’s funds. The information contained in the article is fact based and does not constitute investment research, investment advice or a personal recommendation, and should not be used as the basis for any investment decision. References to specific securities are included for the purposes of illustration only and should not be construed as a recommendation to buy or sell these securities. This document does not take account of any potential investor’s investment objectives, particular needs or financial situation. This article reflects Ruffer’s opinions at the date of publication only, the opinions are subject to change without notice and Ruffer shall bear no responsibility for the opinions offered. This financial promotion is issued by Ruffer LLP, which is authorised and regulated by the Financial Conduct Authority. Read the full disclaimer.

Ruffer Review

Getting to the bottom of the dollar

Today, the dollar reigns supreme as the world’s principal reserve currency. But how did it reach this position? And how long can it stay there?

9 mins | Gemma Cairns-Smith

Read

Green Line

Things can only get better?

June 2024: A recovery in the relative fortunes of the UK stock market has been predicted many times before, but almost always based solely on valuation grounds. But are there additional catalysts that could take the UK market from laggard to leader?

4 mins | Steve Russell

Read

Ruffer Review

The Adventures of a Capitalist

Mark Twain’s literary career was brilliant and lucrative. Whilst similar success eluded him in business, his literary public admired his ambition, a reflection of the age.

9 mins | Rory McIvor

Read

London

Ruffer LLP
80 Victoria Street
London SW1E 5JL

Directions | Map +44 (0)20 7963 8100

Paris

Ruffer S.A.
103 boulevard Haussmann
75008 Paris, France

Directions | Map +33 (0)1 88 45 02 54

New York

Ruffer LLC
300 Park Avenue
New York NY 10022

Directions | Map +1 917 947 3003

Edinburgh

Ruffer LLP
31 Charlotte Square
Edinburgh EH2 4ET

Directions | Map +44 (0)131 202 1602

Your privacy matters

Blue Frontier – Taming the Wild West of the High Seas