The Legal and Geopolitical Risks of U.S. Non-Ratification of UNCLOS and Its Impact on Blue Economy Investments

The blue economy-encompassing maritime infrastructure, energy, and resource extraction-is increasingly central to global economic and geopolitical strategies. Yet, the United States' non-ratification of the United Nations Convention on the Law of the Sea (UNCLOS) has created a unique set of legal and geopolitical risks for its participation in this domain. These risks are particularly acute in the energy and maritime infrastructure sectors, where asset allocation strategies must now navigate a fragmented regulatory landscape and intensifying international tensions.

Legal Risks: Exclusion from Global Governance and Regulatory Uncertainty

The U.S. refusal to ratify UNCLOS excludes it from the International Seabed Authority (ISA), the body governing mineral extraction in areas beyond national jurisdiction (ABNJ). This exclusion means U.S. companies cannot obtain ISA-recognized licenses for seabed mining, a critical frontier for securing rare earth elements and other minerals essential to the energy transition according to a congressional report. Instead, the U.S. relies on the 1980 Deep Seabed Hard Mineral Resources Act (DSHMRA), which allows the National Oceanic and Atmospheric Administration (NOAA) to regulate seabed mining in ABNJ. However, this unilateral approach is legally contentious. Critics argue it undermines the principle of the "common heritage of humankind" enshrined in UNCLOS and risks litigation from environmental groups or foreign stakeholders.

The absence of a finalized ISA regulatory framework further complicates matters. While the ISA's mining code remains under negotiation, U.S. firms like The Metals Company (TMC) have pursued DSHMRA licenses, creating a de facto regulatory split between U.S. and international standards. This fragmentation raises concerns about environmental oversight and the long-term viability of seabed mining projects, which are already fraught with technological and ecological uncertainties.

Geopolitical Risks: Tensions and the Erosion of Multilateral Norms

The U.S. stance on UNCLOS has also strained relations with key allies and competitors. By bypassing the ISA, the U.S. challenges the legitimacy of a multilateral governance system that most nations accept. This has prompted warnings from the ISA and criticism from countries like China, which views U.S. unilateralism as a destabilizing force in global ocean governance. Meanwhile, the Trump administration's 2025 Executive Order 14285, which accelerated seabed mineral exploration, has been interpreted as a direct affront to the UNCLOS framework, potentially exacerbating geopolitical rivalries in resource-rich regions like the Clarion-Clipperton Zone.

Compounding these tensions is the BBNJ Agreement, which entered into force in January 2026. This new treaty mandates environmental impact assessments and marine protected areas in ABNJ, directly conflicting with U.S. efforts to prioritize resource extraction. The U.S. non-ratification of UNCLOS leaves it with limited leverage to shape the BBNJ's implementation, further isolating it from the global consensus on ocean conservation.

Strategic Asset Allocation: Navigating a Fractured Landscape

Institutional investors and private equity firms are recalibrating their strategies to mitigate these risks. One approach is to diversify into U.S. maritime infrastructure projects within the Exclusive Economic Zone (EEZ), where regulatory clarity is higher. For example, the Department of the Interior's streamlined permitting process for offshore mineral exploration has attracted capital seeking stable returns.

Another strategy involves partnerships with countries that have ISA-approved licenses. Firms like TMC have applied for exploration permits in the Cook Islands' EEZ, leveraging local regulatory frameworks to sidestep U.S. legal ambiguities. This approach aligns with broader trends in private equity, where investors prioritize jurisdictions with predictable governance to hedge against geopolitical volatility.

However, these strategies are not without trade-offs. The reliance on U.S. EEZ and allied nations' EEZs limits access to the richest mineral deposits in ABNJ, where competition from China and other ISA members is intensifying. Moreover, the environmental risks of seabed mining-such as habitat destruction and sediment plumes-remain unresolved, prompting some investors to adopt cautious, long-term horizons which are already fraught with technological and ecological uncertainties.

Conclusion: Balancing Sovereignty and Global Interests

The U.S. non-ratification of UNCLOS has created a paradox: while it seeks to secure critical minerals for national security and energy infrastructure, its unilateral policies risk eroding the very international norms that underpin stable resource governance. For asset allocators, the challenge lies in balancing short-term gains from domestic and allied jurisdictions with the long-term risks of regulatory fragmentation and geopolitical backlash. As the BBNJ Agreement and ISA's mining code take shape, the U.S. may find itself increasingly at odds with a rules-based system it helped design but refuses to join-a dilemma that will shape blue economy investments for years to come.