APPLICATIONS OF RIGHTS-BASED MANAGEMENT

Management Infrastructure for Rights-based Fishing - D. L. Burke
Legal Planning for Management of Fisheries Using Property Rights - W. Palmer
The Administration of Fisheries Managed by Property Rights - M. Edwards
Administration of Enforcement Mechanisms for Rights-based Fisheries Management Systems - S. Crothers
Fisher Participation in Rights-based Fisheries Management: The New Zealand Experience - M. Harte

Management Infrastructure for Rights-based Fishing - D. L. Burke

Policy & Economics Branch, Dept. of Fisheries & Oceans, P.O. Box 1006
Dartmouth, NS, Canada B2Y 4T3
<BurkeL@mar.dfo-mpo.gc.ca>

1. INTRODUCTION

The commercial exploitation of fishery resources must be carefully managed if sustainable outcomes are to be achieved. This can be done through regulatory measures or through the use of appropriate access rights and the use of market forces. The infrastructure needed to enable management to be effective must perform a number of essential functions. In general the functions are similar whether the management regime is based primarily on governmental regulation of the fisheries, or if the functions depend on an appropriate regime of access rights and market forces. However, the nature of the functions and the infrastructure needed to implement them differs between (a) regulatory and (b), rights based systems (See, e.g. Christy 2000).

This paper describes the generic functions of a fisheries management system and the infrastructure required to implement, and support, a rights-based management system using individual transferable quotas (ITQs). This paper should be read in association with those of Edwards (2000) and Crothers (2000).

2. THE FUNCTIONS OF A FISHERIES MANAGEMENT SYSTEM

The infrastructure needed to support fisheries management must undertake seven distinct high-level, but interrelated, service functions. Figure 1 shows these functions in a networked view that demonstrates the main functional relationships between them. The boxes are labelled with the names of the management functions. The arrows describe the main services that are exchanged between the service functions. The arrows indicate the direction in which the services flow.

This description of fisheries management focuses on “function” rather than on “organisational form”. Subsequent consideration can be given as to where and how the functions are actually provided. The seven functions are described further as follows:

Strategic Policy Planning: This function establishes the policy and planning parameters within which the fisheries will be conducted. This includes the development of legislation and regulations, the creation and support of institutions and the objectives and strategies to be applied in fishery management plans.

Fishery Operational Planning: This function supports the development of seasonal harvesting plans for each fishery. A plan can apply to one or more stocks, one or more fleet sectors and the licence or rights-holding fishers who have access to them. It defines quotas, specifies catch quantities in terms of total allowable catches (TACs), fishing seasons, fishing areas, input controls, reporting requirements and other parameters and administrative requirements related to the harvesting activity.

These two planning functions are informed by two main research activities; one of these functions focuses on the human aspects of the fishery, the other on the marine ecosystem and more specifically on the condition of the fishery resources targeted for exploitation.

Socio-Economic Research and Analysis: This function conducts research on the performance of fishing enterprises and the industry as a whole. It addresses all aspects of the economic, social and business climate, in the country and abroad that could affect the fisheries at a strategic or fishery-specific level. Thus, it should provide timely and accurate analysis of the consequences of the different management options.

Resource Research and Analysis: This function is responsible for undertaking research on marine resources and their ecosystems to develop an understanding of the dynamics of ecosystem, how the operate the and methods used, and needed, to assess the status of the fisheries resources. It provides regular evaluations of the status of marine resources (stocks), makes recommendations on amounts that may be harvested and assesses the impact on the resources of various fisheries management and conservation measures.

The last three functions are operational in nature.

Fishing Entitlements: This function supports the requirements of the need for fishers and vessel owners to register and be licensed for entitlements to fish and receive fishing rights or allocations in accordance with seasonal harvesting plans. This includes transfers of those rights or entitlements and any resulting revocation or suspension of entitlements.

Catch and Effort Monitoring: This function provides timely, accurate data related to the use of entitlements and the fulfilment of harvesting plans.

Protection and Enforcement: This function monitors compliance with the country's legislation and management plans and takes necessary action against violators. It includes the adjudication of guilt and the imposition of penalties.

Figure 1: Service functions of fishering management system

All of the functions are required for an effective management system. Some of the functions have organisational implications but this is not to say that they need be provided by any particular single organisation or by the public sector. Some of the functions will be performed in whole or in part by public agencies, some by private companies, or by the fishers/right holders themselves.

3. IMPLICATIONS OF ITQ MANAGEMENT FOR THE FUNCTIONS

3.1 Strategic policy planning

This function involves the ultimate responsibility for management of marine resources. It lies at the interface between rights-holding harvesters, other stakeholders, the political process that must approve the management regime and the infrastructure that delivers the other management functions.

Strategic Policy Planning must articulate the objectives for management and secure consensus on those objectives from all stakeholders with an expressed interest in the protection or use of resources. It must also develop the legal base (legislation and regulations) needed to pursue the objectives. Once that is in place, the function must approve a framework of policies and practices to guide operational planning and must, as a minimum, guarantee the integrity of the remainder of the management system. It must also insure that the management infrastructure is adequately funded from general taxes, directed taxes or cost recovery so as to perform its tasks.

The political, socio-economic, and resource characteristics determine the management complexities that this function must address. The most straightforward situations are found in unitary states solely that manage resources within their EEZ. Here, a single level of government has clear and undiminished jurisdiction and control. Administrative and management complexity increases when the state is involved in the management of stocks shared with other management regimes such as straddling stocks. Further, federations with national and provincial levels of government often share jurisdiction over resources, and other areas of law, affecting resource management such as taxation, safety, trade etc. This results in more complex consultative and decision-making processes with consequential longer time frames needed to ensure management actions.

ITQ systems are seldom adopted in a theoretically pure form. Many choices are made to tailor the systems to fit the conditions of the resources and the broader socio-economic and political realities of the fishery. The policy choices made in design will depend on the objectives selected for management. Generally, the strongest form of property rights with the fewest constraints on the operation of markets will maximise the long-term economic productivity of the fishery. Access rights that most resemble other forms of real property best serve to integrate fisheries into the national economy. This facilitates the ability to raise capital, to organize fishing enterprises in the most efficient manner, and to transfer responsibility and cost of management to industry. A system with weaker, or stinted, access rights supplemented with regulations to achieve certain social or demographic objectives will operate at a lower level of efficiency. For example, while unfettered transferability maximises the benefits of ITQs, some control or limitations are often placed on quota markets to limit concentration of quota ownership, to restrict foreign ownership or to place geographical limits on trade of the rights. These constraints may reduce the efficiency in achieving other desirable outcomes.

Many of the policy issues are discussed in other papers presented in this volume. They include the characteristics of the access right - Duration (perpetuity or limited term), Exclusivity (freedom from interference), Quality of title (security), and Transferability (freedom to lease or sell), the taxing of resource rents, the recovery of management costs and the manner of denomination of rights, in fixed tonnage or proportional shares.

The legal framework provides the authority to implement policy. Authorities are required to create property rights, to recover costs or collect rents and to make regulations or operational policy. Legislation also clarifies the delegation of responsibility and authority for management to a department, a management agency or right holders as required. Fish rights are, in reality, access rights rather than allocations of physical property. They are defined quantitatively and are dependent on information to define their limits and quantify their use. The effectiveness of an ITQ management system is dependent on the integrity of the information systems that support it. There is an overriding requirement for data (including commercially sensitive data) that are accurate, complete, and are made available in a timely manner for management purposes. This obligation must be specified in legislation. The legislation must also describe the nature of the enforcement regime and the roles of enforcement officers, the judiciary and any special tribunals.

ITQs are typically used to manage commercial fishing, but in some fisheries the interests of other groups have to be considered. Aboriginal or indigenous peoples may have a customary or food claims. Artisanal, or “traditional”, users may have longstanding dependencies that require protection. A broader “public right to fish”, which often takes the form of the recreational access, is a feature in many fisheries. Though possible, it is usually difficult to accommodate these other users with individual quotas. Large numbers of low intensity users can tax, and exceed, the administrative capacity of ITQ systems. To overcome this, shares of the TAC can be allocated to these groups or to co-operatives that represent them. These shares must be subtracted from the TAC leaving the remainder as a Total Allowable Commercial Catch (TACC) for ITQ holders.

The decision rules required for setting annual total allowable catch (TACs) limits should be enshrined in policy. This usually involves the use of a limit reference point that constrains the minimum level permitted for the biomass of the stock. A conservation policy can specify target exploitation rates that vary depending upon the resource status. It could include re-building measures for overexploited stocks, contain principles to be applied to protect associated or dependent species, and contain principles to be applied to protect habitats. Many jurisdictions are now making efforts to incorporate the use of ecosystem objectives and to applying the precautionary approach when setting exploitation limits.

ITQ systems require a high level of support from the participating rights holders. Most jurisdictions that now use ITQ management have applied a gradual approach to their introduction beginning first in fisheries that have a high likelihood that this management approach would be successful. Single species fisheries with relatively few vessels that are easily monitored are good candidates to begin with. Success with these fisheries provides a base for extending the system. The policy and legal framework should provide for this approach by, for example, identifying ITQ management as the preferred, or even the recommended, system but not the only one. Experience suggests that the imposition of an ITQ system on a fishery increases the risk of management failure.

Most jurisdictions that manage fisheries will have much of the institutional capacity to support the strategic policy planning function in a department or ministry. They would also draw on the two research functions described below. But, other relevant stakeholders must be involved. The introduction of a rights-based management system requires leadership and a considerable investment of political capital to make the main policy choices and support them with appropriate legislation and regulations. This process can take several years depending on circumstances and complexity of the fisheries. Many of the rights-based systems currently in place were initiated in times of crisis when the need for fundamental change in management rose to the top of the political agenda and considerations of administrative costs were accorded secondary importance.

A structured approach should be taken to consultation with stakeholders. It is best to separate the policy and governance issues from operational issues in so far as is possible. Broad stakeholder involvement is appropriate for the governance issues that must be resolved at the strategic level. Operational issues should be referred to the operational planning function where rights holders and local, or immediate, stakeholders can resolve them. Separating issues this way allows meaningful agendas to be set so the protagonists can bring value and closure to the topic. Separation also promotes efficiency and reduces transaction costs.

While it is best to have a comprehensive policy framework in place prior to implementation of ITQ systems, it is not uncommon to launch an ITQ program with many policy issues unresolved. The policy function will require a greater infusion of resources when a new system is being introduced but there is an ongoing requirement for the function to maintain a relevant strategic perspective and policy framework over time.

3.2 Resource research and analysis

Fisheries management requires a biological understanding of the targeted populations, their relationship with the environment, and the impacts of fishing upon them. This information is especially critical where the level of exploitation is high. Many countries maintain an appropriate institutional capacity in the marine sciences and invest in acquiring the information needed for research. Some countries use input control systems that do not require the setting of catch limits, but the need for such information remains.

The focus of research is typically on understanding the biological and environmental processes and the results of applying input controls. If global, or olympic (i.e. those involving a rave among the participants to maximize their share), quotas are used in management, analytical stock assessments are required to produce TACs. ITQ systems make analytical assessments essential, indeed they often increase the demand for assessments by requiring TACs to be set for new fisheries or updated more frequently in established fisheries.

Stock assessment is that part of marine biology which focuses on the dynamics of exploited populations. It includes studies of biological and population processes such as growth, reproduction, recruitment and mortality. Stock assessment describes the past and present status of fish stocks and forecasts future trajectories of stocks under different exploitation scenarios. In addition to its direct applications for fisheries resource conservation, stock assessment sheds light on population processes and provides information on key components of marine ecosystems for incorporation into broader management models so contributing to the broader scientific endeavour. Stock assessment primarily focuses on the individual population, but complete understanding of populations requires that they be considered in a broader context: meta-population structures, species interactions (predation, competition, etc.) and variations in conditions in marine environments (water temperature, primary productivity, water current changes, etc). While the focus is generally on exploited populations, the techniques of stock assessment can be applied to non-exploited populations, for example in work on endangered species.

Stock assessments are the result of teamwork. These teams bring together scientists from a variety of disciplines, from fishing gear experts to biologists, geneticists to statisticians. Fishermen, the harvesting industry and other interested stakeholders can also play an important role in data collection, facilitating scientific fieldwork, undertaking research, data interpretation and decision-making. In this way, the broadening of stock assessment science modifies practices, and opens new communication channels for discussing assessment results.

Stock assessment and related research includes a wide variety of initiatives aimed at monitoring fisheries and fish stocks, at evaluating the status of marine resources and at assessing the impact of human activities (in particular, harvesting) on these resources. Typically, stock assessment initiatives include:

i. fundamental research on biological characteristics (e.g. stock unit definition), fish growth, migration, recruitment processes, etc., and research on new approaches or survey techniques

ii. the monitoring of resources through various survey techniques

iii. the sampling of commercial catches

iv. an assessment function, which includes such activities as analysing data, constructing and running models of population dynamics, conducting risk analyses and writing scientific and technical reports on resource status

v. scientific peer review, which includes a well-defined process to review scientific data and analyses, and to communicate results or conclusions

vi. an advisory function, which includes providing information on specific questions related to the management of resources either on demand or through participation in committees or regular meetings of advisory bodies and

vii. an administrative function.

In conclusion, ITQs are likely to affect the resource research and analysis function in a number of important ways. Improved linkages between research, management and the fishing industry will develop. Industry will increasingly contribute to stock assessments and participate in peer reviews of the management process. Science-industry co-operation often extends to the provision of vessels for research surveys, to the conduct of complementary industry surveys, fishing programs to establish biomass trend indexes, habitat mapping, and the provision of improved catch and effort data from the industry. This all will reduce what are otherwise expensive survey costs.

3.3 Socio-economic and research analysis

The setting of a socially beneficial fisheries policy is as much an economic as a biological problem. In general, with respect to the strength and influence of the two research functions, most countries make substantial investments in understanding what controls their living marine resources through natural science research. They invest far less in research on the human dimension that would produce sustainable use practices. Accordingly, the capacity of this function within management agencies can be relatively low, but none-the-less important.

This situation is often reflected in the lack of available economic data for analyses and because of insufficient resources, difficulties are usually encountered collecting it. In most fishery management jurisdictions a voluntary disclosure policy is followed. But, this brings poor results when seeking commercial information from fishermen and the fishing industry who often perceive the provision of such information as a 'lose-win' affair rather than a win-win one.

Among the basic economic information that needs that must be continuously collected and regularly tabulated are:

i. costs and earnings of enterprises

ii. the asset and liability structure (balance sheets) of the fisheries companies

iii. the industrial structure (ownership, vertical and horizontal integration of the fishing industry, labour, and other contracts, etc.)

iv. commodity flows

v. input and output prices

vi. fishing effort and the use of inputs by fishery and fleet segments and the nature of the fishing fleet and processing capital.

ITQs systems create new demands for socio-economic analysis because of the need to understand and evaluate the changes to how the fishery operates that adoption of a property-rights management approach brings. Security of access allows the restructuring of the harvest sector; security of supply permits similar changes in the processing and marketing chain. ITQs unlock the forces of efficiency that rationalise excess capacity and disrupt the status quo. Effects include loss of employment, changes in income levels and population losses in fishing communities. Changes due to efficiency and improved productivity are not always welcome in the fishery and political pressure to mitigate these impacts may grow, especially when obvious discrepancies arise between those who have access to public resources and those who are excluded. The long history of fishery resources as common property gives political and cultural weight to this resistance.

The skills required in this function include those of fisheries economists, econometricians, mathematical modellers, accountants, computer scientists, sociologists and legal experts.

3.4 Operational planning

This function develops annual harvest plans for fisheries. The plans apply to one or more stocks and the licence holders who have access to them. Some jurisdictions without ITQs use fishery plans in their management system. Developing plans on a meaningful scale can provide a forum for dialogue and negotiation between licence holders, researchers and the resource managers. This is especially needed where the fisheries are diverse and geographically distributed.

Where fishing plans are used with ITQs, they translate the annual TAC/TACC into quotas for the respective participants for the fishing season. They also provide an efficient way to fine tune other management measures such as gear restrictions, fish size, biologically-based closed areas etc., and to engage licence holders in the selection of other appropriate measures of self-control. Feedback to the strategic planning function is used to secure needed changes to the regulatory or policy framework. Operational plans should identify sensitive or vulnerable issues that have to be addressed through targeted enforcement activities.

The operational planning function plays an important role in the introduction of ITQ systems if the policy and legal framework provide for a phased fishery by fishery approach to change. The formation of relatively homogenous groups with exclusive access to specific stocks, or with fixed allocations in shared stocks, creates conditions that are favourable for stronger access rights. When fisheries are organised to this point, the licence holders themselves often seek individual quotas. The licensed participants in such a fishery are often able to agree on a formula for the initial allocation or negotiate individual shares without undue administrative intervention. This is satisfactory provided that the interests of all eligible rights holders are considered.

There is a need for fishing plans in mature ITQ systems as the planning process facilitates collective action on management. They can also help launch other measures such as resource enhancement initiatives that require co-ordinated action. The use of ocean space is intensifying and competing user effects are become an increasingly consideration in planning the operations of fisheries. This can result in demands for the control of competing uses to protect fisheries or the restriction of fisheries in certain areas to permit the activities of other uses. New processes in coastal zone and or, ocean use management are now evolving. Horizontally integrated planning bodies are likely to emerge to resolve such use conflicts. Planning should occur on an “ecosystem” basis though practical administrative considerations, including political and jurisdictional boundaries, will influence or define these areas. Annual fishing plans will have to fit into this structure and will probably do so through a nested approach by which species plans are incorporated into the fisheries sector level and are combined with plans from other users (aquaculture, seafloor cable or pipeline routing activities, areas protected for the conservation of bio-diversity, etc.).

Fishery operational planning should be supported by a secretariat. Each individual fishery requires the support of a “fisheries manager”. This might occupy a person part-time for a small fishery or full-time for a complex fishery. The fishery manager will co-ordinate the inputs from research, enforcement, the fishing industry and other user groups to develop the operational fishing plan. The fishery manager is also responsible for securing approval of any plan and of the regulations needed to implement it.

3.5 Management of fishing entitlements

Most fishery licensing systems are designed to perform simple administrative tasks such as recording the ownership of licences and vessels, and maintaining data on the physical characteristics of the vessels, etc. However, property rights registry systems require more functionality and rigour.

A quota registry must convert the annual TAC/TACC to an annual catch limit by weight (kilograms or tonnes) for the individual right-holders. The registry must be connected to the catch monitoring system in order to track the use of quotas held and support in-season leasing and long term sales of quota by right-holders. The registry must also accommodate suspensions or penalties imposed against a licence. If the ITQs are long term and secure they may serve as collateral in capital markets. They may also have a high standing in the adjudication of civil matters where property is involved.

If rents or cost recovery are a feature of the programme, the registry will play an important revenue collection service. In order to support these functions the registry must be dynamic and be interconnected with information systems used to support other management functions.

The costs of building, maintaining and operating the information systems needed for a registry can vary significantly depending on the complexity of the situation. A single species fishery with few participants can be simple to handle. However, a system that must support a multi-species fisheries with full property rights that also serves to register encumbrances for purposes of security and supports active in-season and permanent quota trading, will require a sophisticated computerized system that may cost millions of dollars to develop and use.

The skills required to operate a registry are administrative and commercial. They include computer scientists, information managers and individuals with a comprehensive understanding of the workings of the fishery.

3.6 Catch effort monitoring

Monitoring and data collection are often the weak link in catch managed fisheries. In global or 'olympic' quota systems, catches are often estimated based on sampling, on partial reports or other catch projections. Fleet quotas can be deemed caught and the fishery closed on the basis of these estimates. This is not the typical case in ITQ systems where the individual must have the confidence that he will be able to catch to his quota or otherwise dispose of the uncaught quota to another fisher. A poorly monitored ITQ has no integrity, the declared quota would never be caught. Further, there would be no incentive to buy quota to cover one's operations if the catch were, in effect, unrestricted.

ITQ systems require rigorous record-keeping and mandatory reporting and disclosure rules. Trip-by-trip monitoring is also adviseable. This includes requirements to report departures from ports for fishing, reporting the time of vessel arrival before landing of the catch following a fishing trip, and other information on fishing activities. This is particularly necessary where larger and more sophisticated vessels are involved. In most circumstances, dockside verification of landings by an independent party third party is also advised. Monitoring costs will depend on the size of the fleet and the number and distribution of landing ports. Industry behaviour (time of landing, port chosen, etc.) will also affect these costs. A direct form of cost recovery for the monitoring service can have a significant effect in restraining the costs for these activities.

High-grading and discarding is often identified as a problem in ITQ systems, particularly in multi-species fisheries. The problem should be approached with a combination of penalties and incentives to minimize the practice. A general prohibition against discarding of any species at sea simplifies monitoring and a prosecution should occur when discarding is detected. This combined with high penalties for violators will help insure that all of the catch is landed so it can be monitored and be debited against the annual catch quotas. Flexible trading rules to allow fishers to lease or purchase quota to match actual catch reduces the need to discard and will encourage compliance with the management plan. End of year 'overcatch' and carryover rules for uncaught quota will also minimise the incentive to discard to match landed catches to the portfolio of quota that is owned.

Some fisheries require the use of at-sea observers to deter discarding. This has to be considered particularly in multi-species fisheries with difficult by-catch problems. Observer coverage might be required for a specific time of year or throughout the year in some fisheries. Some at-sea monitoring requirements can be aided by new technologies. Satellite tracking can locate vessels in real time and can be particularly useful where fishing areas have to be monitored, e.g. when they have been closed. Increasingly, new computer and communication technologies permit information to be maintained in electronic logs while vessels are fishing and allow these data to be transmitted in real time so facilitating monitoring of the fishery and fishing operations.

The monitoring function must record data on catches against quota that is held. This information must be tracked through the quota registry. The institutional skills required for the monitoring function include the ability to identify the various species of fish in the catch and the capacity to produce the reports required by the monitoring system. Marine observers, particularly at-sea monitors, can perform the dual roles of serving as biological technicians who sample the catch for information needed in assessments as well as recording details of fishing operations, such as bycatches and discards.

3.7 Enforcement

Many fisheries jurisdictions use a game approach to enforcement. In an ITQ system, there is a need to target and deter the activity of illegitimate fishers, or poachers, who have no access rights. There is also a requirement to focus efforts on illegal activity by right-holders. This includes enforcing rules against discarding, fishing in closed areas, enforcing gear restrictions and other technical measures. The increased use of information technology and satellite tracking can reduce costs and increase effectiveness in this regard, especially for some at-sea needs.

The most important enforcement task is to insure that fish landings do not occur outside of specified monitoring channels and that no collusion occurs between fishers, fish buyers and monitors to undermine the integrity of the system. Because of the importance of catch reports there is usually a need to re-focus enforcement resources away from technical measures to this task. More sophisticated investigative methods are required. This means that skill in audits and commercial crime detection should be added to the enforcement team. Joint action between fishery enforcement, Coast Guard, police, defence forces, and tax authorities are needed for some investigations.

Violators must be judged by appropriate tribunals and penalized if found guilty. Specialized administrative tribunals established for the fishery sector which follow the rule of law can be used to adjudicate certain offences by right holders. They can be more effective because of their understanding of the fishery law and the speed with which they can operate. Otherwise regular court systems are used to assess guilt and apply penalties. Offences by non-right holders may have to be adjudicated by the regular court system. Tickets, fines and surrender of quota can be effective deterrents for many offences and for encouraging compliance with reporting requirements. The overall effectiveness of enforcement is reliant on the deterrent effect of meaningful penalties for transgressions, so more serious offences such as large scale fraud should attract heavy fines or even complete forfeit of vessels and quota. Industry self-interest in protecting property can be enhanced by awareness and participation in the judicial process.

4. COSTS AND BENEFITS OF EFFICIENT MANAGEMENT

The cost of operating a fisheries management system varies considerably from country to country. An efficient, low costs system would be 5% (or less) of the ex-vessel value of the fishery, a high cost system could reach 15% of its value. So the management costs for a $100 million fishery could range from $5 to $15 million. The distribution of these costs over the seven management functions is also highly variable among countries and over time. The following distribution is provided as a general guide intended only to relate the relative complexity of the functions:

Strategic policy planning	< 5% of the ex-vessel value
Fishery operational planning	< 5%
Socio-economic research and analysis	> 5%
Resource research and analysis	> 30%
Fishing entitlements	< 10%
Catch and effort monitoring	< 15%
Protection and enforcement	> 30%
Total	100%

With respect to the overall cost, even 5% may seem a high price to pay for management but this must be considered against the benefits. Fishery resources are able to provide a sustainable flow of benefits to a nation’s economy. The differences in the level of those benefits between good and poor management are significant. Failure to adequately set and apply appropriate levels of harvest could reduce the annual productive capacity of fish stocks by 50% or more due to over-exploitation - the fishery may even be closed and at that same time welfare benefits paid to the unemployed fishermen. In addition, the failure to apply a suitable management regime to the fleet results in an industry structure that is more costly than it needs to be. Efficient regimes harness market forces so that rational economic decisions by the licence owners lead to “right sizing” of fleet capacity and the adoption of a long-term perspective on resource conservation and use. ITQ regimes do this. Regimes that do not cope with the common property problem encourage unnecessary investment and are wasteful economically. They also pose a threat to the biological sustainability of resources. A system that does not deal adequately with the “common property problem” can add 20% or more of non-productive costs to the industry. The cost of poorly managed fishery can be high! Good management has significant pay back ratio.

Although the potential benefits of good management far exceed the costs, even at the 15% level, the objective is to implement the most cost-effective management. A relatively concentrated fishery will have lower management costs. However, there are many influences that tend to increase costs. Existing management systems are often well established and withdrawing existing services and paying off the associated staff with the introduction of a new management regime is not easy. A complex political environment with national and provincial interests adds to costs. New methods and systems have to be developed to support management functions. These conditions tend to increase the costs of introducing an ITQ system. In the longer term, as industry is restructured and systems mature management costs can be reduced.

Most of the initial revenues for management is likely to come from public funds. Thus, it is reasonable that these management costs be recovered from industry. This practice should be introduced as soon as it is feasible. User charges are most effective if they can be used to ration or otherwise discipline the use of the services demanded. The obvious risk of using this approach is that some management functions will be under-subscribed if users are required to pay for them.

There are a number of ways to collect revenues. User charges can be applied at the point they are incurred or be billed on an annual basis. Management costs can be levied through a fee collected through licence charges. (A licence fee can also be used to recover rent.) The experience in jurisdictions where the responsibility and costs of an ITQ management system have been transferred to fishing industries is that the value of effective management is increasingly recognized and industry comes to regard good management as an investment.

5. AN EXAMPLE OF AN ITQ IMPLEMENTATION

This example describes the introduction of a new ITQ system for a fleet following the approval of a policy framework. The system must be applied to all major species targeted by the fleet or the fishing pressure will shift from the managed stocks to those other species that are of most commercial value. The ITQ system for other fleets and fisheries can be put in place over a longer time period. The first consideration is the definition of the boundaries of ITQ and the species to be included.

The second consideration is the definition of the criteria for the initial allocation of the quota. The eligibility rules must be clearly defined and be decisive. The sharing formula for species traditionally exploited is usually based on historical performance within fleets, following an initial allocation amongst fleets that is based on policy considerations. The reference period for historical performance should be short enough to reflect the most recent situation. For developing fisheries on under-exploited species where the historical performance may be less relevant, other criteria such as investment in the industry, or vessel characteristics, need to be defined. A fair formula needs to be developed that can deal with irregular participation by vessels during the reference period relevant to the calculation of historical performance such as using the best 4 years of a 5 year reference period.

Although management measures such as mesh size regulations and closed areas should become less important following the implementation of ITQs, existing regulations of this type should be maintained for at least a few years. However, rules which encourage the discarding of small fish should not be retained. Vessels should be allowed, or required, to land undersized fish that would be debited at some discounted rate, from their quota.

A final point is the need to review other laws or regulations that may interfere with or affect the implementation of ITQs. Points of potential concern are: appeal procedures for those who feel that their cases are mishandled by the administration accounting procedures in relation to the trading of quotas taxation of quota as a property rights to enforce the ITQ system and access to information on fishing practices. It may be necessary to enact new laws and, or, regulations to resolve conflicts of an administrative nature.

6. CONCLUSIONS

Fisheries management is an expensive activity but one that is essential for the sustainability of fisheries. Introduction of an ITQ system has implications for all seven fishery management functions. Introducing a new management regime takes time and setting the policy framework to support secure access rights in fisheries can take several years. Reaching agreement on individual shares and implementing ITQs in a specific fishery can add a year to the process. Introducing new monitoring regimes and developing sophisticated information systems to support ITQ management can also take one to two years. Thus, it can take up to five years to introduce a new fisheries management system. However, once the basic infrastructure is in place new fisheries can be introduced to ITQ management more quickly.

The third consideration is the allocation process itself. An “Allocation Committee” needs to be formed to oversee the one-time task of preparing and actually performing the allocation. The allocation of quota shares must be transparent and all industry participants in the fishery must be treated justly. The Committee should include representatives of government, the right-holders (vessel owners and fishermen) and be supported by technical experts. The process involves the following steps:

i. information gathering on historical performance and other selected criteria
ii. publishing of the criteria and consultation
iii. initial allocation and feedback from right-holders and
iv. final allocation.

One of the main differences between management regimes relates to the responsibility for the management functions. Regulatory systems are by their nature, command and control systems with the regulator accepting most of the responsibility for management. Rights based systems rely on enlightened self-interest to a greater degree. Right-holders who have a greater vested interest in the resource are motivated to take more responsibility for management. This has a significant impact not only on the ability to recover costs but also on the responsibility for performing the functions. In most ITQ systems management functions are enhanced through increased participation of right-holders. This is particularly the case in operational planning, in the research functions, and through the creation of new private sector delivery options for the registry and monitoring functions. There is also greater tendency to comply with the rules and increased support for the enforcement function to protect valuable access rights.

7. LITERATURE CITED

Christy, F. 2000. Common Property Rights: An Alternative to ITQs. In: Use of Property Rights in Fisheries Management, FAO Fisheries Technical Paper 404/1, pp. 118-135. FAO, Rome.

Crothers, S. 2000. Administration of Enforcement Mechanisms for Rights-Based Fisheries Management Systems. In: Use of Property Rights in Fisheries Management, FAO Fisheries Technical Paper 404/1, pp. 89-94. FAO, Rome.

Edwards, M. 2000. The Administration of Fisheries Managed by Property Rights. In: Use of Property Rights in Fisheries Management, FAO Fisheries Technical Paper 404/1, pp. 75-88. FAO, Rome.

Legal Planning for Management of Fisheries Using Property Rights - W. Palmer

Australian Fisheries Management Authority
P.O. Box 7051, Canberra, ACT 2601, Australia
<Bill.Palmer@AFMA.gov.au>

1. INTRODUCTION

Legal planning for the use of property rights is a function of the legal system that applies in the relevant country. Major considerations are:

i. Is the country a federation or a unitary state?
ii. Does it have a written or unwritten constitution?
iii. What is the nature of its fisheries legislation - merely an outline or prescriptive?

At common law the right of the public to fish in the sea has been established for many centuries. The right to fish includes the right to take away fish. There is no absolute property in living fish; in their natural state they are regarded as being in the same position as wild animals and not goods or chattels. The Crown was not the owner of fish in the sea except in England in respect of whales and sturgeons taken in certain places. The general position therefore was that, until reduced to possession, no title in them was acquired.

All had access to fisheries with the result that no one had a right that had any value as property. This common law position was applicable both in countries in which British common law applied and was the position under Australian common law.

At first the steps to overturn the common law were tentative with much fisheries legislation providing that licences to fish would be granted on request. Such rights held little value as property but over time more restrictive provisions to protect the stocks were introduced, which started to give licences some value. In the Commonwealth sphere the first restricted entry fishery dates back to 1963. However, outside of restricted fisheries, licences continued to be granted merely on application until 1985 when a freeze on further fishing licences was imposed.

The effect of fisheries legislation is to overturn the common law and to deprive the general public of its rights to exploitation. What was formerly in the public domain was converted, with the passage of fisheries management legislation, into the “exclusive but controlled preserve”¹ of those who hold licences under that legislation.

¹ Harper v Minister for Sea Fisheries (1989) 168 CLR 314 at 325.

Even when the Fisheries Management Act 1991 was introduced and came into effect there was still a reluctance to use the term property notwithstanding that the legislation provided for secure long-term access rights. I can only put this down to fears of misinterpretation, managers having one view of what property rights meant and industry having another.

While fishers and fisheries managers were coming to terms with the new emphasis on property rights, a new element came into the equation with first the High Court Mabo² decision and the subsequent passage of the Native Title Act 1993. Henceforth there was a new form of property rights based on indigenous rights to be considered in management decisions.

² Mabo v The State of Queensland (No.2)(1992) 175 CLR 1.

2. THE COMMONWEALTH APPROACH TO MANAGING FISHERIES USING PROPERTY RIGHTS

The Australian Fisheries Management Authority (AFMA) is the Commonwealth statutory authority with responsibility for managing fisheries on behalf of the Commonwealth. To those unfamiliar with the Australian federal system, a brief outline is given in Appendix 1 of this paper.

The Fisheries Administration Act 1991 and the Fisheries Management Act 1991 establish a comprehensive regime under which fisheries may be managed using property rights. At one extreme such a right may be a short-term, non-transferable permit, while at the other it may be a long-term, secure and transferable right, which, even when the management plan under which it was created ceases, may continue as an option in the event of a subsequent management plan being determined for that fishery.

Under the Fisheries Administration Act 1991, AFMA has functions which, among others, include:

i. to devise management regimes in relation to Australian fisheries

ii. to consult and co-operate with the industry and members of the public generally in relation to its activities

iii. as provided by an associated law (the Fisheries Management Act 1991)

(a) establish and allocate fishing rights
(b) establish and maintain a register of fishing rights
(c) undertake functions relating to plans of management and
(d) such other functions as are conferred under the Management Act.

The Management Act provides that AFMA must either pursue or take account of the following objectives in carrying out its functions:

i. efficient and cost-effective fisheries management

ii. management consistent with the principles of ecologically sustainable development and the exercise of the precautionary principle

iii.. maximising economic efficiency

iv. accountability to the fishing industry and to the Australian community

v. achieve government targets in relation to the recovery of the costs of AFMA

vi. ensure that the living resources of the AFZ are not endangered by over-exploitation

vii. achieve optimum utilisation of the living resources of the AFZ and

viii. implement measures adopted in pursuit of above objectives, and not inconsistent with the preservation, conservation and protection of all species of whales.

Recent amendments to the Management Act to enable Australia to ratify the United Nations Fishstocks Agreement include a further objective of:

ix. ensuring that management measures in the AFZ implement Australia’s obligations under international agreements.

There is another aspect however to the pursuit of the objectives: that considerations of fairness and equity do have a role and there is a legal duty to treat persons fairly in the exercise of discretionary powers which has been described as “subject to the requirements of good management, discrimination between one group ... and another does not arise; to ensure that there are no favourites and sacrificial victims.”³

³ Regina v IRC (1983)AC 617, at 651.

The Management Act provides for two types of property rights which may be classified as short term and long term.

The short term right is a permit granted under Section 32 of the Management Act for periods of up to 5 years. The long term rights are statutory fishing rights (SFRs) under Section 22 which are created under management plans determined under Section 17.

Although the AFMA is moving towards, and is required by legislation to determine management plans for all fisheries, it has for several years managed a number of fisheries under a permit system with an administrative form of property rights. Although not specifically recognised in the legislation, it has been accepted by Courts and Tribunals and as commercial reality by industry and financiers. AFMA and industry accept that these are basically interim arrangements pending the determination of management plans and the granting of SFRs.

5. NATURE OF STATUTORY FISHING RIGHTS

Section 21 of the Fisheries Management Act provides for a wide variety of statutory fishing rights under a plan of management which include:

i. a right to take a particular quantity of fish, or to take a particular quantity of fish of a particular species or type, or a proportion of the fishing capacity, from, or from a particular area in, a managed fishery

ii. a right to engage in fishing in a managed fishery at a particular time or times, on a particular number of days, during a particular number of weeks or months, or in accordance with any combination of the above, during a particular period or periods

iii. a right to use a boat or particular type of boat or boat of a certain power or particular equipment in a managed fishery for purposes stated in a plan of management and

iv. any other right in respect of fishing in a managed fishery.

The section also provides that SFRs may need to be held in combinations before fishing can take place and a specific right need not be referrable to an amount of gear, or fish that can be taken, using a single right.

The Act also provides that:

i. the right is subject to obligations imposed under a management plan

ii. the fishing right will cease to have effect if the plan of management for

iii. the fishery is revoked (but note discussion of SFRs options below) the fishing right may be cancelled under the Act

iv. no compensation is payable if the right is cancelled, ceases to have effect or ceases to apply to a fishery (acquisition of property is discussed in Section 7 below) and

v. the right may have a specified life or otherwise remains in effect for the duration of the plan under which it was created.

i. They are provided for under management plans. Section 20 of the Management Act provides that a management plan may be amended or revoked provided that the same procedures as used in determining the plan are followed. This means that SFRs are susceptible to change should a management plan be varied. An example of this was in the Northern Prawn Fishery in which the management plan has been amended to substitute SFRs based on gear for SFRs based on boat size and engine power.

ii. Should a management plan be revoked then the Management Act also provides that those who held rights under the revoked plan will receive preferential treatment in the granting of SFRs under a subsequent Plan.

iii. Where the subsequent plan is the same, or substantially the same as the former plan of management, the former holder will be granted an option to acquire SFRs with the same proportional share in the fishery as held under the former plan.

iv. Where the new plan has some features in common with the former plan, the former holding must be taken into account in any subsequent allocations under the new plan.

6. THE REGISTER

Details of SFRs are recorded in a statutory Register which also records third party interests. The Register is merely a record of third party interests and does not give that interest any effect or validity that it does not otherwise have. Any transactions relative to an SFR must involve all parties with a recorded interest in that right. Where a third party has an interest in an SFR it is the responsibility of that party to ensure their interests are protected by recording that interest in the Register.

AFMA does not recognise interests unless recorded in the Register.

7. WHAT ARE PROPERTY RIGHTS?

7.1 Characteristics

The literature refers to property rights in terms of “strong” and “weak” and refers to “strong” rights as generally having the characteristics of being:

i. long term
ii. capable of precise definition
iii. transferable
iv. secure both from an owner’s and potential mortgagee’s point of view
v. part of an overall management regime and
vi. having an exclusivity from those that do not hold the right.

7.2 How fisheries managers view property rights

Fisheries managers are generally not interested in “strong” or “weak” property rights as such but in how the holding of such property rights will modify a fisher’s behaviour so that goals of fisheries management may be achieved.

It is generally agreed that poorly-managed fisheries tend towards the undesirable states of resource over harvesting and economic inefficiency. It is also generally accepted that lack of effective property rights in fisheries is the underlying source of these conservation and economic difficulties.

Managers are interested, however, if the property right becomes so strong that it inhibits the ability to change management arrangements in response to resource conservation requirements. Managers may also need to become interested if rights develop a separate identity as a form of general property rather than as a specific form of property linked to fishing.

7.3 The fisher’s perspective

Fishers have a different perspective. To them property rights mean an asset that is safe from the whim of managerial or political changes, that can be used and relied on, and upon which long term decision-making can be based.

There is, perhaps, an increasing subset of property rights in Commonwealth fisheries becoming increasingly noticeable because they are being held by investors. No longer is the fishing right being seen solely as a right with which to fish but as a store of wealth for which personal fishing is only one option. The right is available for short, or long term lease, and depending on the level of management levies, may simply be held dormant for capital gain. Financial institutions have a similar perspective to fishers so that loans made to fishers are made on the basis of the security of property rights so that the loans have a maximum protection.

7.4 The Courts’ perspective

Ultimately it is left to the Courts to decide what are property rights and what is the nature of those rights. Past Court decisions are a guide as to how Courts may consider a particular case before them but unless the case is specifically on the point at issue, past decisions might be distinguished from the one at hand. Even when the point at issue may appear to have been the subject of an earlier Court decision, a different composition of the Court might yield a different result.

Generally the Courts take a more pragmatic view of property rights with a concept of property that is broad and probably includes any valuable right or interest that has a reasonable degree of stability and ascertainably. Assignability is not a necessary characteristic of property rights but the capacity to be assumed by other parties is an indicator that an interest is “property”.

Within this position however, the Courts have recognised that rights may be subject to the statute under which they were created and accordingly under that statute may be diminished or varied, the extent to which this is possible depending on the provisions of the statute. For example, the Management Act specifically empowers the AFMA to vary conditions on fishing concessions, and such variations could enhance or diminish the value of that right. As referred to in Section 5 above on the discussion of the nature of SFRs, the management plans under which they are created are subject to amendment, which, in the example of the Northern Prawn Fishery, will alter the nature of the SFR.

The Court has rejected the view that a right that is wholly a creature of Commonwealth law is, in all cases, inherently susceptible to modification or diminution by a later Commonwealth Act.⁴

⁴ Commonwealth v WMC Resources Ltd (1998) 194 CLR 1.

The indigenous population have a different perspective. To them there is no distinction between land and sea and “land” including the sea extends as far as the eye can see and ownership rights indicate individual and group responsibility for maintaining and looking after the land and its resources.

7.6 Legal considerations

Apart from general considerations of compliance with legislation in the context of litigation, the question of the nature of fishing rights is relevant to a provision of the Constitution that relates to the acquisition of property. Claims under the Native Title Act 1993 and the ongoing litigation about the nature of native title offshore are also relevant.

7.7 The constitutional position

Section 51(xxxi) of the Constitution of the Commonwealth provides:

“51 The Parliament shall....... have power to make laws.......with respect to:-

(xxxi) The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws.”

The scheme was challenged and in Minister for Primary Industries and Energy v Davey⁵ the Court was able to assume that hull units issued under the Northern Prawn Fishery Management Plan made under the Fisheries Act 1952 were property for the purposes of s.51(xxxi) so the Court did not have to specifically address the issue. However statements by their Honours indicated that they would probably have taken that view had it been necessary to decide the issue whether units were property.

⁵ (1993) 119 CLR 108.

i. the extinction did not confer any proprietary right or equivalent benefit on any person (it affected all fishers the same way, even though some were in a better position to survive than others), and it did not confer any proprietary benefit on the Commonwealth and

ii. the NPF Plan provided that units were issued subject to the Plan which was defined as meaning the plan as amended from time to time, so that extinction by means of an amendment to the Plan was something to which units were inherently liable.

In Mabo the High Court of Australia:

i. rejected the doctrine that Australia was terra nullius at the time of European settlement

ii. held that the common law of Australia recognises a form of native title that reflects the entitlement of the indigenous inhabitants of Australia in accordance with their laws and customs, to their traditional lands and

iii. held that native title is extinguished by valid government acts that are inconsistent with the continued existence of native title rights and interests.

The existence of native title offshore was not specifically recognised in the Mabo decision nor in the subsequent Native Title Act although this Act does provide a process in relation to acts in offshore places. In the absence of specific recognition it has been left to the Court to decide the nature and extent of offshore native title.

In Yarmirr and others v The Northern Territory and others⁶ (known as the Croker Island Case) a single judge of the Federal Court held.

i. native title exists in relation to the sea and seabed within the claim area

ii. the native title rights and interests do not confer possession or occupation, use and enjoyment of the sea and sea-bed within the claimed area to the exclusion of all others and

iii. the native title rights and interests that the Court considers to be of importance are the rights and interests of the common law holders, in accordance with and subject to their traditional law and customs to

a) fish, hunt and gather within the claimed area for the purpose of satisfying their personal, domestic or non-commercial communal needs including for the purposes of observing traditional, cultural, ritual and spiritual laws and customs and

b) have access to the sea and sea-bed within the claimed area for all or any of the following purposes:

· to exercise all or any of the rights and interests referred to above

· to travel through or within the claimed area;

· to visit and protect places within the claimed area which are of cultural or spiritual importance and

· to safeguard the cultural and spiritual knowledge of the common law holders.

iv. the native title rights and interests of the common law holders in relation to the sea and sea-bed within the claimed area may be affected by rights and interests in relation to the sea and sea-bed within the claimed area validly granted or which may exist or which may hereafter exist pursuant to the laws of the Commonwealth or the Northern Territory (e.g. fisheries laws).

⁶ (1998) 156 ALR 370.

The Full Court of the Federal Court has heard argument and a decision may be handed down before the end of 1999. As the test case for offshore native title it seems likely that the Croker Island case will ultimately be decided by the High Court.

9. WHY DO COMMERCIAL FISHERS LITIGATE AGAINST MANAGEMENT ARRANGEMENTS?

One thing that can be said without doubt is that litigation is always expensive and even when a case is heard before a Court in which costs are awarded against the loser, the winner is certain to be out of pocket. In tribunals where each party carries their own costs, costs can still reach crippling levels and I am aware of one Administrative Appeals Tribunal Case where costs are estimated at some A$750 000. And this is in a matter where, on paper, the right would be described as “weak”.

The primary reason for litigation is that fishing rights are valuable property worth fighting for. They may be valuable and tradeable in themselves or there may be the expectation that the holding of a right now, which on paper may be “weak”, may fulfil the requirements for the granting of a “stronger” right at a later date. There may also be other reasons for litigation such as defending a particular lifestyle, which has intangible benefits.

10. WHAT IS LEGAL PLANNING?

10.1 A process

Legal planning is a process that ensures that management arrangements comply with the requirements of fisheries and other relevant legislation such as environmental, regulatory impact and native title. In regard to property rights the major aspect of legal planning is to ensure that the management arrangements do not result in an acquisition of property within the Constitutional sense. Legal planning should also ensure that management arrangements are fair and equitable.

10.2 Why do we need legal planning?

Legal planning is needed simply to minimise the chance of a successful legal challenge, which although it may be brought by an individual, may have the potential to bring down complex management arrangements with resulting chaos in the fishery.

The AFMA spends considerable sums each year in the defence of management arrangements and averages approximately 8-10 cases per year before the Administrative Appeals Tribunal. However, even though the record of the AFMA has been good, the existence of litigation casts uncertainty over management arrangements until they are resolved. An Administral Appeals Tribunal case, at best, is unlikely to be concluded in under six months and generally takes 12-18 months to be resolved.

10.3 How has emergence of property rights affected managers?

The major impact of property rights has been to impose greater discipline. Management systems now have to be planned with an eye to potential legal challenge in which the courts will scrutinise the arrangements and strike down those which are contrary to the legislation or that do not meet requirements of fairness and equity.

The most celebrated example of this was the case of Austral Fisheries v Minister for Primary Industries and Energy⁷ in which the Federal Court struck down the allocation provisions in the South East Trawl (ITQ) Management Plan 1991 because it found that the allocation formula was “irrational” and “capricious”. In that case allocations were partly based on a formula under which the proportions of total catch taken each year by an operator over a period were averaged regardless of total catch for any year. This meant that a person who took for example 50% of the catch in a year when total catch was 100 units was treated more favourably than a person who took 25% of the catch when the total catch was 1000 units.

⁷ (1992) 37 FCR 463.

10.4 How does the AFMA undertake legal planning?

10.4.1 Legal advice

Perhaps the first step is to recognize that lawyers cannot be avoided. If they are not involved in the development of management arrangements then the likelihood is increased that those arrangements will be challenged and lawyers will definitely be involved at the end.

The AFMA has adopted the practise of seeking legal advice at all stages of the development of management arrangements. The AFMA has in-house lawyers who provide advice. However advice is sought also from external sources and from specialists in particular fields such as administrative and constitutional law. In the Northern Prawn Fishery amendments referred to previously, advice was sought in-house, from the Australian Government Solicitor, from a private solicitor and from a Queens' Counsel.

10.4.2 Allocation issues

The allocation process with management arrangements involving property rights is crucial because any dissatisfaction is likely to trigger a legal challenge.

Establishing well-defined, divisible, secure and transferable fishing concessions is a major factor in the pursuit of AFMA’s ecologically sustainable development, economic efficiency and cost-effective management objectives. However, it is recognised that continually changing the method of allocating fishing concessions will weaken them and make effective fisheries management difficult. Accordingly, AFMA has taken the approach that the fishing concessions that exist in a fishery at the time that the new management arrangements are proposed, are the ones that will be considered in any new allocation required by the move from old management regime to another.

Therefore AFMA’s approach to allocation of new fishing concessions is to ensure that:

i. such changes are consistent with, and support the pursuit of, AFMA’s legislative objectives and

ii. any differential economic impacts of allocations on individual fishing concession holders are minimised unless they are justifiable with respect to AFMA’s objectives.

Evidence exists which suggests that operators will have greater confidence in allocation outcomes where they result from an independent assessment of the fishery and individual's circumstances. A central principle in the development of an allocation system which is, and is seen to be, fair and credible is receipt by the AFMA Board of advice which has been based on an independent assessment. To achieve this, both the recommended basis of the allocation and any exceptions that must be highlighted are undertaken at arms-length from the AFMA management and the AFMA Board.

Independent Allocation Advisory Panels (AAPs) have been established in relation to Commonwealth fisheries to provide advice to the AFMA Board on the most appropriate allocation system within a defined fishery, or between defined fisheries. An AAP is advisory in nature and ultimate decisions are made by the AFMA Board.

Panels have been established for a number of fisheries and typically membership comprises:

i. a retired judge as chairman
ii. an economist and
iii. an industry member without any connection to the particuliar fishery.

To date the AFMA has used AAPs process to advise on allocation decisions in the Northern Prawn Fishery, Eastern Tuna and Billfish Fishery, Southern Shark Fishery, Bass Strait Scallop Fishery and the South East (Non-Trawl) Fishery. The approach has not prevented all appeals, but it has generally been well received by both managers and industry.

10.4.3 The role of management

Legal planning and the use of AAPs are only one aspect of the development of management arrangements. The arrangements are the responsibility of fisheries managers, with lawyers and AAPs being only additional tools to ensure the soundness of those arrangements.

As a general rule the AFMA has adopted a partnership approach and recognizes that a variety of people have an involvement or interest in the sustainable management of Commonwealth fisheries and in the marine resources and environment which sustain them. Co-operation is embodied in the partnership approach and the AFMA actively involves a range of interested parties, including fisheries managers, scientists, fishing operators, environmental/conservation and recreational fishing interests, the post-harvest sector and other interested stakeholders, in the process of developing and implementing fisheries management arrangements. Central to the partnership approach is the establishment and operation of Management Advisory Committees (MACs) or Consultative Committees (CCs) for each major Commonwealth fishery.

MACs and CCs are AFMA's main point of contact with stakeholder groups in each fishery and play a vital role in helping AFMA to fulfill its legislative functions and effectively pursue its objectives. MACs and CCs also provide advice to AFMA on issues such as fisheries management arrangements, research, compliance and management costs.

AFMA also consults with the Australian Seafood Industry Council (ASIC) which is declared under legislation as the representative industry body for Commonwealth fisheries. During the year, ASIC was consulted on the development and review of AFMA's Corporate Plan. A Liaison Committee, comprising ASIC, AFMA and the Fisheries and Aquaculture Branch (FAB) of the Department of Primary Industry and Energy (DPIE), meet on a quarterly basis to discuss broad policy and operational issues.

11. CONCLUSION

Managers and fishers have a common interest in stable management arrangements that achieve the goals of resource sustainability and economic efficiency. It appears that such goals are more likely to be achieved in a system in which fishers have effective property rights, but the introduction of such systems is likely, at best, to be unsettling, and, at worst, to result in chaos unless adequate planning has accompanied the change. Even challenges which are successfully defended will further delay implementation of new management arrangements, to the detriment of all.

The aim of management must be to take industry along with it in granting property rights and, recognising that change cannot please everyone, ensure that arrangements are legally sound and will withstand concerted challenge. However, any property right by definition implies some exclusivity and those excluded are unlikely to accept any allocation system that is not seen to be fair and equitable.

Appendix 1

The Australian Federal System and jurisdictional matters

Australia is a federation in which the states and the central government (the Commonwealth) share responsibilities for fisheries management. Unlike some other areas of government activity there need not be any overlap between the responsibilities of each level of government. The states (and the Northern Territory) have management responsibility from the low-water mark out to 3 nautical miles while the Commonwealth has responsibility from 3 miles to the outer limit of the Australian EEZ. But, by arrangement, the Commonwealth and States may exchange responsibilities so that in some cases the Commonwealth may manage fisheries under Commonwealth law into the low-water mark while in other cases a State may manage a fishery extending out into the EEZ. It makes sense that a fishery occurring in waters of both a State and the Commonwealth be managed by that State, while migratory species and straddling stocks be managed by the Commonwealth. The Australian Fisheries Management Authority is the Commonwealth statutory authority charged with the Commonwealth’s fisheries management responsibilities.

The particular relevance of the federal system to acquisition of property issues is that the provision of the Constitution only relates to the Commonwealth and its agencies. State Constitutions do not have similar provisions and although some States may have laws which have a similar effect, these do not have the same force as a Constitutional guarantee.

Appendix 2

AFMA objectives

The Management Act provides:

“3(1) The following objectives must be pursued by the Minister in the administration of this Act and by AFMA in the performance of its functions:

a) implementing efficient and cost-effective fisheries management on behalf of the Commonwealth; and

b) ensuring that the exploitation of fisheries resources and the carrying on of any related activities are conducted in a manner consistent with the principles of ecologically sustainable development and the exercise of the precautionary principle, in particular the need to have regard to the impact of fishing activities on non-target species and the long term sustainability of the marine environment; and

c) maximising economic efficiency in the exploitation of fisheries resources; and

d) ensuring accountability to the fishing industry and to the Australian community in AFMA's management of fisheries resources; and

e) achieving government targets in relation to the recovery of the costs of AFMA.

(2) In addition to the objectives mentioned in subsection (1), or in section 78 of this Act, the Minister, AFMA and Joint Authorities are to have regard to the objectives of:

a) ensuring, through proper conservation and management measures, that the living resources of the AFZ are not endangered by over-exploitation; and

b) achieving the optimum utilisation of the living resources of the AFZ; but must ensure, as far as practicable, that measures adopted in pursuit of those objectives must not be inconsistent with the preservation, conservation and protection of all species of whales.”

Appendix 3

Nature of statutory fishing rights

Section 21 of the Fisheries Management Act 1991 provides:

21(1) For the purposes of this Act, each of the following rights is a separate statutory fishing right:

(a) a right to take a particular quantity of fish, or to take a particular quantity of fish of a particular species or type, from, or from a particular area, in a managed fishery;

(b) a right to a particular proportion of the fishing capacity that is permitted, by or under a plan of management, for, or for a part of, a managed fishery;

(c) a right to engage in fishing in a managed fishery at a particular time or times, on a particular number of days, during a particular number of weeks or months, or in accordance with any combination of the above, during a particular period or periods;

(d) a right to use a boat in a managed fishery for purposes stated in a plan of management;

(e) a right to use particular fishing equipment in a managed fishery;

(f) a right to use, in a managed fishery, fishing equipment that is of a particular kind, of a particular size or of a particular quantity or is a combination of any of the above;

(g) a right to use a particular type of boat in a managed fishery;

(h) a right to use a boat of a particular size or having a particular engine power, or of a particular size and having a particular engine power, in a managed fishery;

(i) other right in respect of fishing in a managed fishery.

Appendix 4

Types of statutory fishing rights (SFRs) granted or to be granted

i. Great Australian Bight Trawl Fishery - the right is for use of a boat for trawling in the area of the fishery.

ii. Southern Bluefin Tuna - the right is to take a proportion of an annual total allowable catch (TAC).

iii. Northern Prawn Fishery - a combination of two rights is required, one right is to use a boat in the fishery and the other is the right to use the requisite number of hull/engine power units applicable to the size of the boat. The management plan for this fishery has been amended to replace the hull/engine power units with “gear” rights under which each right is a right to use a specified length of net headrope in the fishery.

iv. South East Trawl Fishery - rights in this fishery are currently being granted. Rights are again a combination with a boat SFR which allows access to the fishery and the right to take non-quota species and quota rights which allow the take of a proportion of the TAC of quota species.

The Administration of Fisheries Managed by Property Rights - M. Edwards

Ministry of Fisheries
PO Box 1020, Wellington, New Zealand
<Edwardsm@fish.govt.nz>

1. INTRODUCTION

This presentation reviews¹ some of the issues that arise in the implementation and operation of transferable quota systems and includes surprises, regrets, experiences and lessons. I draw largely on New Zealand’s experience, but introduce some information from other jurisdictions. New Zealand is a useful model to examine because the system of transferable property rights is comprehensive and includes most major fisheries.

¹ The view expressed in this paper do not necessarily reflect those of the Ministry of Fisheries, New Zealand.

Fisheries managers try to achieve a range of biological, economic and social objectives including:

i. the greatest sustainable yields from fishery resources
ii. maintenance of a healthy associated aquatic environments
iii. optimising economic return and efficiency in commercial fisheries and
iv. provision for good social and cultural outcomes.

Property rights features such as perpetuity, security, exclusivity, and transferability increase the value of the right and influence behaviours that might be expected from the owner including positive husbandry, incentives to invest and improve return and compliance with obligations. These features also increase economic and social benefits by allowing for industry rationalisation, while providing returns, increase economic efficiency.

Fishery property rights can be attenuated for a variety of reasons - these can be grouped into two categories - those related to achieving sustainability and those concerned with utilisation or allocative issues (Table 1).

Table 1: Factors that attenuate property rights

Sustainability	Utilisation/allocation
Catch-limits	Tenure
Size limits	Aggregation limits
Area	Minimum quota holdings
Season	Foreign ownership
Methods and gear	Area
	Transferability

The presentation below groups issues related to transferable quota system into functional areas of implementation and administration as follows:

i. selling the concept
ii. sustainability
iii. enforcement
iv. administrative services
v. catch against quota
vi. allocation
vii. social and economic objectives
viii. integrating rights and
ix. rents and costs of management.

Fishery managers considering introducing a property rights based system must first sell the concept. Successful implementation of an amended management system will be assisted by a good understanding and acceptance by those affected. The discussion and consultation process needs to include all individuals and groups with a stake in the management of fisheries. Fishery stakeholders include:

i. vessel owners
ii. crew
iii. processors
iv. fishing communities
v. fishery managers
vi. environmental groups
vii. recreational fishers and
viii. indigenous fishers.

The benefits of Individual Transferable Quota - ITQ - type regimes, as seen by the fishing industry include:

i. reduced competition and ability to spread effort over the entire year with consequent market advantages

ii. predictability of income and reduced economic risk

iii. retirement security through ownership of an asset

iv. benefits for resource conservation and

v. revenue maximisation by optimising labour and gear configurations.

For commercial fishers, the advantages may be offset by features of the implementation or operation of a property rights based system, e.g.:

1. reduction in total catch
2. rationalisation of participants
3. increases in administrative charges and reporting obligations and
4. partial charges for allocation or tendering of access.

From an administrator's perspective, ITQs were derived to address common fisheries management issues that other sorts of regimes had failed to address including the race for fish, stock depletion and over-capitalisation. Depending on the effectiveness of the incumbent regime, a government should be interested in addressing those concerns and achieving greater benefits including those of:

i. increased efficiency and economic return
ii. encouragement for investment
iii. better controls to ensure sustainability - ITQs help restrain catch within limits
iv. the longer term advantages of the incentive to improve stock husbandry
v. prospects for improved voluntary compliance
vi. incentives for collective action provided by the allocation of rights and
vii. the ability to explicitly provide for non-commercial stakeholders.

General economic circumstances may assist in achieving co-operation. ITQs were implemented in New Zealand because the domestic inshore fishery had reached a crisis with many species severely depleted, substantial fleet over-capitalisation and declining economic performance. Even though most fishers acknowledged the crisis it took perseverance through 2-3 years of intensive consultation by fishery administrators through working committees, public meetings, publications and articles to gain a reasonable consensus. Agreement within the government was assisted because the economic philosophy of the Quota Management System (QMS) was consistent with the government’s public sector reform. Industry consensus was also assisted because an ITQ like system had been tried through the enterprise allocations in the deepwater species. This gave companies some experience with the benefits of owning quotas. But such consultations can be lengthy - reaching agreement on the long term management framework for the surf clam and quahog fishery on the United States’ Atlantic coast took 12 years.

There are considerable benefits in developing the proposed regime in conjunction with stakeholders. They must be fully involved and obtain partial, if not, total “ownership”. The advantages of doing this include:

i. better understanding of intent
ii. assistance with resolving issues
iii. higher levels of voluntary compliance and
iv. lower costs (for government and industry).

3.1 Operational elements

The issue of sustainability includes the following sub-topics:

i. species to include
ii. definition of management areas
iii. setting catch-limits
iv. adjustment assistance
v. other sustainability objectives and
vi. what should be reported.

A fundamental question is which species to include or exclude. New Zealand initially included 27 species which represented 83% by weight of commercial finfish taken in 1985. This total has subsequently increased to 40 species. The inclusion of economically important stocks and single species target fisheries is relatively obvious. However costs and administrative complexity rise for species that are components of a mixed fishery.

Economic issues arise in issuing quota for less important species taken, because of the high monitoring and enforcement costs, and of difficulties due to species variability and low profitability. However, it can be difficult to ensure sustainability of species outside quota. And there is a need to record accurate catch information - this has proved to be an advantage of the QMS as it enables analysis of likely yields in the absence of a fishery-independent stock assessment. This has been evident in recent introductions to quota management in New Zealand. As the catch data for species outside the QMS were poor - setting initial catch-limits was speculative.

This section examines one of the categories of species that administrators might consider for inclusion in a transferable quota system. Short lived, highly variable species provide a dilemma. They are difficult to set catch-limits for, because there is usually minimal relationship between catch and subsequent recruitment to the fishery. This calls into question the benefits of their introduction into the system. Arrow squid is an example in New Zealand. Catch has not been constrained by TACs set well in excess of harvests in most years. But fishermen have had some of the benefits of ITQs - allocation of an asset, security of access and reduced competition, and they have not sought the exclusion of the species.

Other examples in New Zealand are red cod and flatfish - both relatively short lived and fast growing. Their catch-limits were set initially at the highest recorded catch and most have not been altered. In retrospect, catch has been controlled to a great extent by the economics of fishing for these relatively low value species and the constraint of quota for other bycatch species in their catch mix. However, the high quotas have created problems through fishers attempting to take all the quota they own of these species and thereby taking other species in excess of the quota.

On balance, the benefits of inclusion in the QMS seem to have outweighed the disadvantages, but a restricted access regime for low value, low volume species without sustainability concerns may be adequate, provided disincentives are applied for catching associated quota species. Recent New Zealand legislation has introduced the ability to adjust TACs upward in-season. This allows more realistic long term TACs to be set, as upward adjustment can take into account the appearance of good year-classes.

3.3 Definition of management areas

The determination of management areas has economic and biological implications for managers and industry. A greater level of sub-division than is necessary increases administrative cost, particularly those associated with reporting and monitoring. However, it is important for resource sustainability to attempt to spatially manage different stocks of species, where this can be done. It is probably better to err on the conservative side for at least two reasons:

i. the prevention of serial depletion in very large QMAs which can have socio-economic as well as biological impacts and

ii. it is relatively easy to combine areas, but contentious with industry to sub-divide. As industry becomes more organised and acts collectively, voluntary subdivisions can be developed.

It is critical that initial catch-limits are set carefully as they are one of most contentious issues in a quota management system. To achieve both biological and economic goals, catch-limits must be set prudently to avoid stock depletion. New Zealand’s early exploitation of orange roughy fisheries provides an example of inadequate information due to insufficient research, overestimation of yield for a newly discovered offshore species and a subsequent slow management response to better information.

A related issue is the need to protect the government from liability for compensation for decisions on catch-limits and related issues necessary for sustainability, including protection of the environment. It is important that these decisions are not constrained by financial or litigatious considerations - without precluding review on reasonableness and fairness grounds.

Some of the features of New Zealand's catch-limit setting process that work well include:

i. an open and transparent stock assessment and TAC setting process with participation by all stakeholders that produces better science and increased acceptance of the outcomes

ii. specific environmental principles in the legislation that aid prudent TAC decisions and

iii. working with industry on a programme to adjust catch-limits in situations of limited information using additional industry-funded research and monitoring.

Output controls are not the only mechanism that can ensure sustainability. The western Australian rock lobster fishery successfully uses effort-control in the form of pot limits to control harvests. Other mechanisms may work well for particular circumstances - such as territorial use rights, or TURFs, for sessile species.

3.5 Adjustment assistance

ITQs are often implemented because of resource depletion. This may raise related financial implementation issues by the mid-1980s. The primary stimuli for changes infisheries management in New Zealand were the depletion most inshore fisheries and overcapitalisation of the industry. This resulted in the need to rationalise catch-capacity upon the introduction of the QMS. In New Zealand major reductions in catch of up to 83% for some stocks were necessary. They were achieved by government purchase of initial allocations of quota at a fixed price - initially by voluntary sales by the industry. The goal was to ensure a reduction in catch that could not be eroded (for example by increased capacity of vessels if a vessel buyback scheme were implemented). The mechanism was effective and enabled individuals to decide to remain in the fishery near to historical levels of catch, sell out or restructure their operations. In circumstances where voluntary quota reductions were insufficient, pro rata administrative reductions were made across all quota holders. In the course of this restructuring in 1986 the government paid out about $NZ62 million (8% of the annual value of production of the fishery at that time!).

3.6 Other sustainability objectives

Although catch-limits can be successfully employed to ensure sustainable harvests of commercially sought species - in most cases further controls will be necessary to ensure the sustainability of future harvests. They may include:

i. gear restrictions to reduce environmental degradation

ii. mechanisms to minimise incidental catch of non-target species including rare and endangered species of mammals, birds, fish, invertebrates

iii. mechanisms to ensure sustainability of catch for stocks not in the quota system and

iv. protection of juvenile fish and spawning and nursery areas.

Another output-control mechanism that works effectively is the imposition, supported by a high level of observer coverage of a limit on total sea lion incidental mortality in the New Zealand squid fishery. This is similar to the individual dolphin mortality limits applied in the eastern Pacific tuna fishery.

3.7 Reporting requirements

Reported information is the lynchpin of a quota system. Reporting requirements need to be carefully determined to fulfil management objectives, including those of enforcement, monitoring and biological information needs. Important components are likely to be areas, species taken, fishing methods, position and time of deployment plus other information needed for catch and effort analysis.

New Zealand is currently suffering the consequences of not requiring the reporting of all species taken, including those species outside the quota system. This information is critical in setting catch-limits where directed-research is prohibitively expensive. The burden of comprehensive reporting can be eased through user-friendly reporting mechanisms, whether paper based or, increasingly, electronic. These mechanisms should be evaluated carefully together with industry.

4. ENFORCEMENT

It is crucial that sufficient investment be made to establish adequate monitoring and enforcement programmes that have the confidence of industry. These programmes underpin the success of the scheme because non-compliance affects the attainment of biological, economic and social objectives. The enforcement arm of the management agency will also need to amend its function and possibly its structure. Iceland, for example, set up a specific enforcement agency, with registered weigh-stations in every harbour.

In a well-developed property rights based system the enforcement agency may have a more complex role than an open access regime with input controls because of the additional constraints on fishers, and the complexity monitoring data. Enforcement difficulty increases with the geographic extent of the fishery, with larger numbers of fishing units, with the number of landing or sale points and with high-value markets for unprocessed products.

In New Zealand the quota management system (QMS) focuses on monitoring product flow, surveillance and targeted investigations, audit and enforcement operations to collect evidence where offences are detected. The approach taken was the same that other agencies use in cross-referencing catch-landing reports with licensed fish receivers, processors and distributors. This is analogous to the registered dealers who have the exclusive right to purchase fish, common in ITQ programmes. This enables enforcement to be largely land-based using accounting and auditing techniques. A similar shift to an emphasis on shoreside monitoring took place with the implementation of transferable quota in the surf clam and quahog programme on the United States’ Atlantic coast.

Although the enforcement agency will have a changed role, in regimes where input controls are complex or difficult to enforce they are important for the efficacy of the regime, through compliance can be difficult and expensive. It is difficult to compare the relative costs of enforcement in open access management relative to ITQ regimes without careful comparison of the effort applied and the degree of compliance.

ITQs can facilitate self-compliance because fishers have an enhanced long term interest in the state of the resource. Compliance with the enforcement regime will be enhanced by fairness as well as equity and involvement of affected stakeholders in programme design. If the objectives of the regime are understood there will be a higher degree of compliance.

5. ADMINISTRATIVE SERVICES

5.1 Setting the framework

This section considers some of the issues needed in the implementation of an administrative system. A rights-based framework will involve more complex administrative and greater monitoring, which will need to be designed carefully to keep costs at tolerable levels.

5.2 Establishing the rules

To implement the operational framework needed for a transferable quota system, additional rules will need to be prescribed and the government will need funds to build the amended systems. Recent experience in New Zealand suggests that the benefits of specifying these rules as standards and specifications rather than a prescriptive legislation or regulations. The resulting flexibility reduces unnecessary costs to the government and industry from making minor adjustments as well as better providing for outsourcing of functions by government where appropriate.

5.3 Components of administration

The design of the administrative system needed to support a rights-based regime will depend on the features of the system, but there are common core components (Figure 1).

In the New Zealand model, the central component of the administrative system is the record of the participants in a fishery authorised by a license or permit. This registry can be expanded to provide for registration of the vessels they use. Assuming the management system focuses on limiting catch to control total harvest, the registry can be linked to the system which records fishers' catch. The application of catch-limits at a collective level will require reporting mechanisms.

Transitional mechanisms will be needed for allocation of the entitlement. In order to limit catch by individual fishers to control total harvest, the registry can be linked to the system that records fishers' catches and matches them to the entitlement held, triggering enforcement action if necessary. The integrity of this system will require the tracking of fish, from catch at sea, to landing point, and, as required, to a licensed receiver, processor, distributor, exporter or point of sale. This will require a comprehensive documentation system, and is a substantial cost in the administration of a property rights based system.

The registry of the entitlements can be extended to record transfers of quota between fishers, and mechanisms to administer constraints such as limits on aggregation, caveats or suspensions. These elements of the system will need to be integrated to respond to management decisions to amend TACs, for example. Revenue management forms a further functional group linked to quota holdings, catch and transactions undertaken.

Figure 1: Components of quota system.

5.4 Staff and resources

The staff, budget and other resources involved in setting up a quota management system are highly dependent on the current regime and the system that is being implemented. Some points that arise from the New Zealand experience of implementing ITQs are discussed below.

Enforcement: The numbers of staff in the enforcement area (about 100) did not change despite the substantial increase in the scope and nature of their activities. This was achieved by restructuring their function dramatically - from a high level of contact with the fishing industry and a focus on reporting and regulatory issues - to a more centralised agency with a focus on audit, investigation, surveillance and use of information systems with a focus on fraud and serious offences while retaining capacity for direct enforcement activity against black-marketing and poaching.

Administrative services: The number of staff involved in administrative servicing and information technology increased markedly from less than ten to around 80 due to the increased complexity of the systems. Staff numbers remained at those levels until 1995 when a centralisation of staff reduced levels by 15%. One reason for continuing high staff-levels is the need to service an increasingly unstable computer system, overdue for replacement, with consequent high overhead cost per transaction. The number of staff needed for the implementation of a similar administrative system today would be dramatically reduced by technology not available in the mid-1980s.

Research: Staff levels in research also increased, although not markedly. However, the focus of research altered significantly from a large proportion of pure research to a more direct service to the needs of a system that supported the setting of commercial catch-limits.

With the changes in organisation design from an input-based, or restricted access system, there will be an increase in complexity of administration and other major changes for the management agency to accommodate the change in its focus. Retraining is likely to be necessary along with redeployment of enforcement staff.

The establishment of quota management in New Zealand coincided with a period of public sector restructuring that separated functional components of organisations. This lead to the separation of policy, management and compliance from administration and research. This specialisation avoided potential conflicts of interest but has generally worked well with perhaps some issues of co-ordination between parts of the agency.

There is certainly value in separating management decisions on catch-limits, made on the basis of social, economic and biological considerations, from the science-based yield assessments which should be developed objectively in isolation from their commercial implications. The separation of the administration section in New Zealand has aided outsourcing of this function.

5.6 Input controls

ITQs are usually considered because current management is not achieving objectives. One would expect that with the implementation of ITQs, New Zealand would have found some input controls dating back decades to be largely irrelevant. But, some issues addressing allocation between sectors and environmental effects of fishing, for example, still need to be addressed. However, almost no regulatory input controls have been revoked. Iceland has experienced a similar problem with its bureaucratic process and regulations are not reduced under an ITQ system.

These regulations add to the cost of enforcement. Surprisingly, in New Zealand it is the industry that has resisted recent attempts at rationalisation of some input-control regulations. This appears to be because they are associated with the “social structure” of the industry and sunk-investment related to those controls. I believed that the incentives of cost recovery along with the rationalisation of management controls in fisheries plans may provide a long term solution. However, a better approach might be to revoke unnecessary input-controls simultaneously with the implementation of ITQs.

5.7 Catch against quota - multispecies fisheries

The basis of ITQ regimes is that catch should balance quota held and, therefore not exceed in total the sustainability limit. This is straightforward in single-species target fisheries. However in mixed-species fisheries, the ratio of quota held may not match species taken due to a range of factors such as variability in the marine ecosystem and poor quota portfolio selection. Other factors include changes in the abundance, rates of productivity and distribution of species.

The degree of unpredictability in catch can lead to overfishing, highgrading and dumping. Some suggest this means ITQs are not useable in mixed species fisheries. Thus, it is important to be pragmatic, and therefore flexible.

The regime in New Zealand includes a number of features to recognise the unpredictability in catch. These are:

i. retrospective monthly balancing with civil penalties

ii. an annual right to carry forward up to a 10% deficit or surplus

iii. quota transfers augmented by registered leases and 'fishing on behalf' arrangements

iv. catch outside quota could be surrendered to government for no financial return, but are not dumped and

v. bycatch trade-off schemes.

Dumping of quota species is prohibited in New Zealand, except for certain circumstances of fish waste from processing at sea, discarding diseased fish, dumping to protect the safety of the vessel, or where required by regulations of undersize fish. Under quota management systems fishery operators have incentives to maximise returns where there are price differentials for size or quality of fish, or dump fish in order to continue fishing for a preferred species - high grading. This phenomenon is difficult to detect or prove. Some initial problems in New Zealand appear to have been reduced by high-profile enforcement and discussions with industry. Fishermen have expressed genuine concern about the damage to the resource (and their property right) and prefer to address the problem by improving handling and fishing techniques.

Reduced discards have been observed after the implementation of tradeable quota in other fisheries, such as the surf clam and ocean quahog programme and the Alaskan halibut and sablefish fisheries. One explanation is that the industry has a greater ability to time and target a catch of higher value. Conversely, Iceland has an ongoing problem with overcatch of TAC and discards at sea in its cod fishery. Governments, including New Zealand, have also established industry-funded observer programmes that can be used to help address problems.

To provide for trading, New Zealand allows a multiplicity of mechansims including trading of quota, leasing, sub-leases, and arrangements to fish against others' quota. These have created high administrative complexity and costs. It is hoped this will be resolved with the implementation of the Annual Catch Entitlement (ACE) concept. This will separate the quota share right in perpetuity from the entitlement to take catch annually. At the beginning of each fishing year, each tonne of quota owned permits one tonne of ACE for that species, valid for that year and freely transferable. This is analagous to the cage tags system used for annual allocations in the surf clam and ocean quahog programme on the United States’ Atlantic coast and the yearly quota coupons used for South Atlantic wreckfish. The rationale is to increase willingness to vary the TAC by separating the catch entitlement from the long term quota right.

By the early 1990s, through various additions directed at creating a flexible but workable system, New Zealand had created a very complex and expensive set of administrative systems, including civil and criminal penalties. Trading of quota, probably the best mechanism to aid balancing, was impeded by:

i. a lack of transparency in the market
ii. an unwillingness to trade because of potential later exposure to prosecution and
iii. relatively high transaction charges for trading.

i. monthly retrospective balancing regime with modest civil penalties

ii. suspension of the permit for non-payment of ACE (beyond a minimum)

iii. end of the year additional, and higher, civil penalty for any outstanding overcatch

iv. 10% carryforward for uncaught ACE is provided

v. industry funded and

vi. public catch and ACE register aids trading by establishing who has available catching rights.

Although multispecies fisheries create problems, these exist any regime where catch of a species is limited. ITQs highlight the problem by accurately recording catch by individuals. There is arguably a better way to manage these problems by providing for transferability and flexibility.

5.8 Quota busting

Quota busting is a problem for ITQ fisheries, and is evident in some high-value fisheries in New Zealand. The need to monitor catch of each quota holder adds to the difficulty for enforcement. The approach taken in New Zealand has been to cross-reference catch-landing reports from returns submitted by licensed fish receivers. Where discrepancies occur, investigations are done. Thus, enforcement is largely land-based using accounting and auditing techniques. The perception is that this has been largely successful assisted by flexibility in the balancing regime and a reasonable degree of industry support. In many, but not all rights-based regimes, catch-limits are exceeded less frequently after implementation of transferable quota regimes.

5.9 Misreporting

The key administrative component of managing catch is the database that records catch against quota for individual fishermen. The system must have a high degree of accuracy with errors minimised because the data forms the basis for enforcement. Major under-reporting or failure of the administrative system has not been an issue in New Zealand, but maintenance of an aging administrative computer has increased costs in recent years.

5.10 Underfishing

Underfishing was substantial in the early years of the QMS. There are a range of potential reasons, but it was most likely due to the constraining effect of possessing insufficient ITQ for another species in the catch mix. There has been much less under-catch in recent years as fishers developed improved strategies to take quota.

6. ALLOCATION

6.1 Basis for allocation

An initial and critical issue to administrators and fishers is the basis for allocation of the right. The most common approach is to allocate quota to those who have reported catch-history over a qualifying period. Other approaches include equal allocation, lotteries, priority ranking and auctions. In 1986 New Zealand used the average of the best two of three catch-history years so that all participants fished under the same conditions, and to take into account periods when a fisher may have been disadvantaged by illness or vessel repair, etc. While this is a common strategy, if one allows fishers to choose their best year, the total catch histories will exceed the average yield in any year and will need to be prorated.

For the 1986 introductions, New Zealand also allowed appeals on initial allocations, which were heard by a statutory authority. With the potential to get increased allocation of a valuable property rights, the cases developed to support appeals were varied and in some cases imaginative. Retrospectively, a number of faults in the process were identified:

i. difficulty of applying “commitment and dependence” criteria
ii. the statutory authority was expensive
iii. large number of appeals took years to hear
iv. fisheries administrators were tied up as expert witnesses
v. substantial inflation of some catch-limits and
vi. nullified government expenditure in buying out catch-history prior to allocation

6.2 Eligibility

The most common approach is to allocate quota to fishers, individuals or companies, who have reported their catch-history. However, there are reasons to recognise that others are involved in the fishery. This has been a particular issue in some United States’ fisheries. Allocations can also be made to skippers, crew or processors involved in the fishery, or communities rather than individuals. For example crew, often on catch-based remuneration, who have risked lives and incomes, although perhaps not their capital, could be