RESPONSIBILITIES AND RIGHTS-BASED MANAGEMENT - Chairman: John Nicholls, Fisheries Western Australia, Perth

Why Recover Costs? Cost Recovery and Property Rights in New Zealand - N. Wyatt
Fisher Obligations in Co-Managed Fisheries: the Case for Enforcement - J.P. McKinlay and P.J. Millington
Enforcement and Compliance of ITQs: New Zealand and the United States of America - W.J. Nielander and M.S. Sullivan

Why Recover Costs? Cost Recovery and Property Rights in New Zealand - N. Wyatt

N. Wyatt
Ministry of Fisheries
PO Box 1020, Wellington, New Zealand
<[email protected]>

1. INTRODUCTION¹

¹ The views in this paper are those of the author and not necessarily those of the Ministry of Fisheries or the New Zealand Government.

My thesis is that the outcome will not depend on the existence of cost-recovery so much as the principles underlying the regime. States may use cost-recovery to achieve a number of objectives:

i. Efficiency (e.g. to motivate rights-holders to demand cost effective services)

ii. Equity (e.g. to reduce subsidies to the fishing industry)

iii. Fiscal (e.g. to help balance the Government's books)

iv. Social (e.g. to maintain employment levels in coastal communities) and

v. Compensation (e.g. to obtain a portion of the value of the resource for the owners).

2. A HISTORY OF COST RECOVERY

New Zealand introduced a cost-recovery regime in 1994. Prior to that only a "resource-rental" had been charged generating approximately $NZ20 million per annum. Two central components of the Government's decision to increase the returns from fisheries were a desire to ensure that the fisheries industry fairly bore the costs imposed by commercial exploitation of the fishery and a desire for the community to receive a return from the use of the fishery resource.

The first of these desires was to be achieved by recovering from the industry all expenditure that arose as a consequence of the existence of commercial fishing. In addition, costs that were jointly shared between the commercial and non-commercial sectors would be fully recovered from the industry "in recognition of the degradation of non-commercial values as a result of commercial exploitation". (New Zealand Officials Committee 1993) This became known as the "avoidable cost" principle. It seems most closely related to the "equity" objective noted above, with the recovery of joint costs containing a measure of the "compensation" objective. It was estimated at the time that this would recover $NZ53 million. The second desire would be achieved by retaining the resource-rentals of $NZ20 million although these were subsequently dropped.

Under the current Fisheries Act 1996, decisions on both fisheries management measures (e.g. setting the Total Allowable Catch) and the nature and extent of fisheries services (e.g. stock assessment research) are made by the Minister on an annual basis. Costs are recovered according to a regulation setting out the proportion of the costs of each activity carried out by the Ministry of Fisheries that is to be met by the Crown. There is no rationale given for the proportions in the regulation; they appear to be the result of a "gentlemen's agreement" between the Government and the industry made some years ago.

In practice, the nature and extent of fisheries services are generally determined so as to keep the total cost to both taxpayers and the fishing industry within reasonable bounds, current costs are close to $NZ23 million and $NZ39 million respectively. In other words, fisheries services and cost-recovery decisions are now made primarily to meet fiscal constraints. Further, the fisheries management decisions are made through a statutory process that was separate from decisions on fisheries services. Thus, there was little association between fisheries management decisions and the costs recovered from commercial rights-holders.

There has been little evidence to suggest a marked improvement in the cost-effectiveness of fisheries management in New Zealand resulting from cost-recovery. The industry assures the Government that it is not doing any better, while the Ministry does not collect the sort of information that might be used to judge how effectively it is managing. And alas, there has been an increase in hostility between the Government and the industry. Both sides have also incurred high costs in the consultation and decision-making processes. Consultation on the nature and extent of fisheries services is increasingly driven by cost-recovery rather than by fisheries-management considerations as the industry lobbies for more taxpayer-funded services and fewer industry-funded services. The industry, after all, does not see any close link between the costs faced by rights-holders and the benefits they receive from the services provided, which are still determined by the needs of the Government rather than the needs of rights-holders.

3. REVIEWING THE COST RECOVERY REGIME

There have been several reviews of the cost-recovery regime in recent years. These have focussed more on such issues as whether the "avoidable cost" principle is better or worse than the "attributable cost" principle, under which rights-holders are charged according to the benefits that the Government considers they have received from fisheries services. The reviews have focussed less on how the services to support property rights might be more cost-effectively managed.

A recent amendment (Fisheries Amendment Act 1999) to the Fisheries Act 1996 has improved some aspects of the cost-recovery regime. It removed the separate statutory process for determining fisheries services and removed the recovery of costs of services already purchased by rights-holders. It also provided a number of principles that were to underpin any future rules for the recovery of costs, which could then be set under regulation.

The principles contained in the amended Fisheries Act are (slightly paraphrased):

i. if a service is provided at the request of an identifiable person, that person must pay a fee for the service

ii. the costs of services provided in the general public interest, rather than in the interest of an identifiable person or class or person, may not be recovered

iii. the costs of services provided to manage or administer the harvesting or farming of fisheries resources must, so far as is practicable, be attributed to those who benefit from harvesting or farming the resources

iv. the costs of services provided to avoid, remedy or mitigate the risk to, or an adverse effect on, the aquatic environment or its biological diversity, must so far as practicable, be attributed to those who cause the risk or adverse effect and

v. the Government may not recover the costs of services provided by another organisation to which it has delegated responsibility for the service.

In developing new rules for splitting the costs of fisheries services between the Government and the industry, the Government was concerned that the rules would also be consistent with imminent Treasury guidelines for cost-recovery in the public sector. The Treasury guidelines for setting charges in the public sector were published in early 1999 (New Zealand Treasury 1999). Six objectives for cost-recovery were identified that addressed efficiency, equity and fiscal issues:

i. encouraging decisions on the volume and standard of services demanded, consistent with (a) the efficient allocation of resources generally and (b) the outcomes the government is seeking

ii. minimising the cost of supply over both the short and long-term when capital costs are significant

iii. keeping transaction costs low, and keeping evasion of user charges at acceptable levels

iv. reducing reliance on funding from general taxation (with its associated costs)

v. dealing equitably with the taxpayer, those who benefit from the output, and, or, those whose actions give rise to the output and

vi. looking for new ways to lower costs and find appropriate providers.

When the Ministry of Fisheries looked at this "checklist" of objectives, it realised that the objectives relating to efficiency could not be applied, because the Government made all the decisions. The Government established a Joint Working Group, made up of officials from the Ministry of Fisheries and the Treasury and representatives of the fishing industry to develop a proposal for new rules for splitting the costs of fisheries services between the Government and the industry. The rules were to be consistent with the principles in the amended Fisheries Act, the Treasury guidelines and an earlier Government decision on the core roles of the Government and of rights-holders in fisheries management.

The core roles of the Government were considered to be:

i. to ensure sustainability

ii. to meet the Crown's Treaty of Waitangi and international obligations

iii. to enable efficient resource use in the fisheries sector including the better specification of the rights of recreational fishers and aquaculturalists so they are comparable to the rights of commercial and customary fishers and

iv. to ensure the integrity of fisheries management systems including criminal enforcement, setting standards and specifications, monitoring and auditing fisheries management plans and the delivery of services in consultation with rights-holders, environmentalists and the general public.

4. REFORMING THE COST RECOVERY REGIME

The Joint Working Group quickly realised that looking at the cost-recovery rules in isolation would not address the fundamental problems of the cost-recovery regime. Two reforms were necessary: first, to the way in which decisions were made on the purchase of fisheries services, and second, how the costs of those services were to be split.

The Government should continue to purchase, or provide, the services that are its core responsibility, but rights-holders should be allowed to purchase other non-core services at their own expense so long as the services delivered satisfy the quality standards that allow the Government to deliver on its core mandate. While non-core services are purchased, or provided, by the Government, their costs should be recovered from rights-holders to enable them to make rational decisions as to whether they could more cost-effectively purchase the non-core services. They are in a better position to make this judgement than the Government is. The Government should fund the provision of core services, including policy advice, supporting international arrangements, criminal enforcement and prosecutions. It is the party that determines the precise nature and extent of those services. Recovering some of the costs of core services would leave the Government open to industry pressure to scale down the provision of those services which were cost recovered, and to pressure on Treasury to scale down those services not cost recovered.

The Joint Working Group's recommendations thus fell into two groups: (a) changes to the processes under which services are determined and delivered and (b) new cost-recovery rules reflecting the changes to the processes. The new cost-recovery rules and the amended levies calculated from them are now in the process of being put into effect. Reforming the way in which service purchase decisions are made could prove a bigger challenge. Bureaucracies that have developed around centralised decision-making can find it difficult to change their focus. But a start has been made; the Ministry of Fisheries has begun a review of its own systems and processes to see whether they need to be re-aligned to meet the demands of the new environment.

5. CONCLUSION

Cost-recovery is not, in itself, a solution to fisheries management problems. It may even make things worse. If one believes that governments are best at managing fisheries, cost-recovery has little to commend it. Resource-rentals may be a preferable approach in these circumstances. If a government receives revenue for the use of a resource and meets its own management costs from that revenue it will have some incentive to control the costs, as it gets to keep the remainder.

If one believes that rights-holders are better at managing fisheries, cost-recovery can be a useful tool, but only if the objective of the cost-recovery regime implemented is to enable rights-holders to manage their rights effectively. The worst of all worlds is the one in which the Government manages fisheries and recovers the costs from rights-holders. Government then has no incentive to manage efficiently. This is the world from which New Zealand has begun to emerge.

6. LITERATURE CITED

Kaufmann, B. and G. Geen 1997. Cost-recovery as a fisheries management tool, Marine Resource Economics, 12, 57-66.

New Zealand Officials Committee 1993. Report to Ad Hoc Ministerial Fisheries Review Committee.

New Zealand Treasury 1999. Guidelines for setting charges in the public sector.

Fisher Obligations in Co-Managed Fisheries: the Case for Enforcement - J.P. McKinlay and P.J. Millington

J.P. McKinlay* and P.J. Millington**
* Fisheries Western Australia, WA Marine Research Laboratories
PO Box 20, North Beach, Perth W.A. 6020
<[email protected]>
** Fisheries Western Australia
Locked Bag No.39, Cloisters Square Post Office, Perth W.A. 6850
<[email protected]>

1. INTRODUCTION

Fisheries management is a difficult juggling act between protecting resource sustainability, ensuring equitable resource access between competing user groups and promoting economic efficiency in exploitation of the resource. How to best achieve these objectives continues to be a topic of vigorous debate (Hannesson 1996; Stephenson and Lane 1995, Caddy 1999), but most analysts agree that formal or informal property rights go a long way toward ameliorating the problems of open access to common resources, particularly with regard to resource over-exploitation and non-compliance with fishery rules. Much of this paper focuses on the relative merits of input controls (restrictions on effort) versus output controls (catch quotas)¹. National fisheries resources in Australia, like many developed countries worldwide, are generally regulated by one or both of these approaches, namely (a) access rights - typically access is granted to particular fishing areas or to specific stocks, through licensing systems and (b) harvesting rights - quota systems allow particular fishers to remove specific amounts of fish from a stock, also through licensing systems.

¹ Other types of property rights, such as territorial use rights, privatisation of use rights, and community property rights are not considered in this paper; see Symes (1998) for a review of these regulatory systems.

Proponents of catch quotas suggest this management system optimises economic efficiency and fosters resource stewardship among fishers (Hannesson 1996). They claim that allocating a proportion of the total allowable catch² among a limited number of fishers protects the value of capital investment in the fishery. This most often takes the form of individual transferable quotas (ITQs) (Grafton 1996), although other systems involving individual transferable effort units have been used in Western Australia (WA) fisheries for more than three decades (Bowen 1994). Other approaches, such as the share-based fishing-rights system in the New South Wales fisheries of Australia (Young 1995), are emerging. Catch quota approaches are thought to be important because many poorly-managed input systems of management have resulted in over-capitalisation, over-fishing, and the collapse of fisheries world-wide, typically because proper attention was not given to latent effort and efficiency increases. Responsible resource-use is apparently better engendered under ITQs since fishers own a continuing right to harvest a specific amount of fish, and as such will fish responsibly to ensure the ecological health of their resource. For instance, Walters and Pearce (1996) suggest that ITQ's, particularly when rights are long-term, encourage fishers to participate in the research and enforcement processes since their input is reflected in the future value of the catch. Others criticise the use of catch quotas, arguing that the often deleterious social consequences that such systems have on fishing-dependent communities are unacceptable (Rennie 1998, Davis 1996). Fishers themselves are often critical of quota management for this reason, claiming that market-driven allocation of property rights inevitably leads to rationalisation and concentration of ownership that progressively forces "traditional" fishers from the industry (McCay 1995, Charles 1992). This is important, since it would appear prima facie that responsible resource-use under ITQs is most likely to occur among owner-operators, and may not be as easily encouraged among contract skippers who hold no property rights themselves. Fishers also often lament that fisher competence becomes secondary under ITQs, although it is questionable whether the incentive to compete amongst one another is removed, possibly leading to increased incentives to under-report catch. Evidence for increased compliance with conservation measures under ITQs appears mixed, with practices such as high-grading, discarding, and under-reporting of catches common in some fisheries (McCay 1995, McCay et al. 1995, Grafton 1996, Rennie 1998). The misreporting of commercial catch may have serious consequences for determining biologically appropriate TACs (Walters and Pearce 1996).

² The total allowable catch (TAC) is determined from biological information, but is often greatly influenced by socio-political circumstances (Hutchings et al. 1997).

³ This also presupposes that quotas are set on the basis of near-perfect biological information and that they may be adjusted in a timely fashion as updated biological information is obtained.

This paper therefore seeks to address the issue of responsible resource-use among fishers and fisher involvement in the enforcement process in rights-based fisheries. We do not presuppose that effort controls or quota management necessarily engenders more or less resource stewardship, but rather that under any management system small numbers of fishers will regularly break regulations regardless of real or perceived incentives for resource conservation. We examine the role of compliant fishers, who usually form the majority in any fishery, in assisting with the enforcement of regulations within their fishery. Fisher organisations frequently advocate increased management responsibility for their members, but seldom extend this request to the realm of enforcement. Increased management involvement for the fishing industry also brings responsibilities, one of which is a need for fishers, individually and collectively, to participate in the enforcement of rules within their fishery. We outline ways in which fisher-involvement in enforcement should be encouraged, around the management table and on the water. We draw many of our examples from our experience with the Western Australian rock lobster fishery, but the ideas we advocate could apply to many input or output controlled fisheries.

2. THE WESTERN AUSTRALIA ROCK LOBSTER FISHERY

2.1 Overview

The Western Australian rock lobster (Panulirus cygnus) fishery is Australia's most valuable single-species fishery, with annual commercial catches currently ranging between 9000 and 13000t for a ex-vessel value of $A200-$A300 million. In 1997/98 this corresponded to around 39% of the total value of Western Australian fisheries production, and approximately 11% of the total value of national fisheries production (ABARE 1998). The fishery is estimated to have a total capitalisation of $A2 billion, with market values for individual fishing operations of $A2 and $A3 million. Live lobster exports to Japan, Taiwan, and China account for the majority of the value of the catch (Marec Pty Ltd 1997).

The fishery is managed as a limited-entry individual transferable effort fishery; i.e. individuals control rights to use a certain number of lobster pots, and these may be bought and sold among existing fishery participants. There are currently no direct output controls in the form of an annual TAC, the management instead controls the exploitation rate to ensure escapement of animals to maintain the breeding-stock. Additional management measures comprise a variety of restrictions, including closed seasons, spatial closures, limits on the total number of pots fished by an individual fisher, gear restrictions, size-limits on lobster, and breeding-stock protection. Many of these restrictions also apply to recreational fishers. In the 1998/99 season there were around 600 licensed commercial vessels fishing a total of 56 800 pots over 1600km of coastline. There is a substantial recreational sector of approximately 32 000 licensed participants, with annual catches of 5-10% of total commercial landings. Recreational fishers may dive, or use up to two pots to take rock lobster, with a maximum daily catch limit of 8 lobsters per licence-holder. Entry to the commercial fishery has been limited since 1963 (Hancock 1981), and there are currently no restrictions on entry to the recreational fishery.

The management measures for the rock lobster fishery have largely succeeded in limiting fishing pressure so that the latent effort has been removed and the fishery is biologically sustainable. Declining breeding-stock indices and predictions of environmentally driven low puerulus-stage settlement in the early 1990s prompted the introduction in 1993/94 of a management plan designed to boost breeding-stock levels. These changes were designed to increase egg production to the level it was in the late 1970s and early 1980s (i.e. about 25% of the estimated virgin levels), and indications are that this target has largely been achieved (Donohue 1998). The fishery is economically sustainable, with resource-rents maintained at around $A30 million annually (Lindner 1994). In 1995/96 the commercial rock lobster fishery began operating on the basis of partial cost-recovery from license fees, with full cost-recovery expected to be implemented by 2001/02. Enforcement costs are currently around $A2 million per year, accounting for approximately 50% of the total costs recovered from industry. Research accounts for the second largest expenditure at 20-30% of total costs (Fisheries WA 1999).

2.2 Co-management

In recent years fisher participation in the management process has become commonplace in many fisheries around the world (Wilson et al. 1994, Nielsen and Vedsmand 1999). Australian fisheries are no exception, with the establishment of many fisheries of management advisory committees comprised of representatives from major resource stake-holders, the management authority and relevant scientific bodies. In Western Australia stakeholder membership of these committees is drawn mainly from the commercial catching and processing sectors, with some representation from the recreational sector of the fishery. Advisory committees are usually charged with making recommendations about issues affecting the fishery to the government Minister responsible for fisheries. Although final responsibility rests with the Minister, to a large degree management advisory committees steer the future direction of many of the management, research and marketing activities in their fishery.

There is a long history of industry participation in management of the Western Australian rock lobster fishery. In 1966 the Fisheries Act was amended to establish the Crayfish Industry Advisory Committee, an expert body charged with providing advice and recommendations about matters affecting the rock lobster fishery⁴ (Anon 1968). This committee comprised a Chair (appointed by the Minister), fisher representatives, scientific advisors, and one person to represent interested parties not engaged in the commercial fishing industry. Over the last 30 years this committee has undergone many changes to bring it to its present form, the Rock Lobster Industry Advisory Committee (RLIAC). The RLIAC was established under the Fish Resources Management Act 1994, and is an expertise-based statutory advisory committee with a membership of eight commercial fishers, two rock lobster processors, the Executive Director of Fisheries WA (plus one other staff member) and an expert in recreational fishing. Fisheries WA research and management personnel are granted observer status at RLIAC meetings to provide advice, as is a representative from the Western Australian Fishing Industry Council. An independent Chair is appointed by the Minister and a full-time Executive Officer runs the day-to-day business. The RLIAC itself establishes a number of sub-committees, each chaired by a RLIAC member, which include additional industry and Fisheries WA representation. These include the Marketing Research, Finance, Compliance and Research Subcommittees.

⁴ Prior to 1966 a Fishermen's Advisory Committee, which included rock lobster industry representatives, provided advice on all Western Australian fisheries to the Minister responsible for fisheries.

'to primarily provide advice for the sustainability of the rock lobster resource, taking into account the social, economic and other implications of its advice on the benefits or otherwise derived from the fishery.'

2.3 Enforcement and compliance

The fishery operates over a wide geographic area ranging between latitudes 21°°44'S and 34°°24'S. Most commercial and recreational fishing occurs within 60 and 2 nautical miles of the coast. Fisheries WA employs a total of 85 fisheries officers to service the State's fisheries and of these, 45 officers are actively involved in enforcing rock lobster regulations. Fisheries Officers use three large patrol vessels (greater than 20m), 8 small patrol vessels (up to 8 m), and make trips aboard commercial fishing vessels. At-sea inspections mainly check for gear and licence breaches while land-based inspections check catch composition. A Special Investigations unit of between five and ten officers investigates serious fisheries offences.

Compliance with fisheries regulations is generally high (Donohue 1998), although for some fishery rules the extent of non-compliance is difficult to measure with confidence. One reason for high compliance, at least with respect to catch regulations, is that more than 90% of commercial catches are processed through rock lobster processing factories. Since there are only a limited number of processing factories it is relatively easy for fisheries personnel to monitor a large proportion of the total catch. Another reason for high compliance is the "three strikes" regulations. These rules enable the licences of fishers to be suspended for serious fisheries offences, with the possibility of complete licence-cancellation for three serious offences ("black marks") in a 10 year period. The high value of rock lobster licences means this law provides a substantial deterrent against serious breaches of fishery regulations. Gray (1999) speculates that the generally high levels of prosperity in the fishery may also reduce the incentive to fish illegally. While we agree this is likely the case for many fishers, there are also a small but significant number who may be poorly capitalised, mediocre fishers, or contract fishers working for smaller profit margins than owner-operators. Incentives to break fishery rules are likely to remain for these operators. Recreational fishers or "shamateurs" (unlicenced illegal operators) undertaking illegal fishing activity, are not considered here except to note that commercial fishers have little hesitation in reporting such activity to enforcement personnel.

A research initiative to assess how compliance within the fishery may be improved through optimising enforcement activity is currently in progress. The objectives of the project are to: (a) examine spatial and temporal trends in non-compliant activity; (b) determine factors which may deter or encourage non-compliant behaviour; (c) develop performance indicators to allow the success of enforcement services to be monitored through time; and, (d) determine stakeholder perceptions about enforcement and compliance. The fishing community is generally supportive of this project, part of the funding for which is provided by industry.

3. FISHER INVOLVEMENT IN ENFORCEMENT

3.1 Main constraints

Traditional fisheries management operates on a "command and control" model of governance (Dubbink and van Vliet 1996); i.e. management authorities attempt to regulate fishing processes by means of legal and administrative means. This approach has long been considered inadequate, primarily because it does not foster an environment where fishers feel they have part-ownership of management decisions (Jentoft 1989, Nielsen and Vedsmand 1997). Jentoft (1989) suggests that the legitimacy of any regulatory scheme is subject to at least four constraints:

i. Content of the regulations: greater legitimacy occurs when fishers perceive regulations to coincide with their view of the issues

ii. Distributional effects: the more equitably regulations are imposed, the greater their legitimacy

iii. Formulation of the regulations: the more that fishers are involved in developing regulations, the more legitimate the regulatory process will be regarded and

iv. Implementation of regulations: regulations will be considered more legitimate when fishers are involved in their implementation and enforcement.

3.2 Commercial fishers reporting illegal activity

Let's start with a story.

At a compliance committee meeting between managers, fishers and compliance personnel a report was presented detailing an investigation that had uncovered substantial out-of-quota fishing in the valuable red herring⁵ fishery. The reaction from fisher representatives on the committee, which included several well-respected fishers of considerable influence in the fishing community, was one of "Well done! Bravo! But we could have told you about those guys years ago."

⁵ The red herring fishery is an imaginary fishery on a sea far-far away. On a more serious note, during research for this paper similar stories were reported to the authors by several Australian compliance managers.

⁶ Our experience has shown that commercial fishers will freely inform on recreational fishers they suspect of breaking regulations, and vice versa. Recreational fishers also seem willing to inform on other recreational fishers breaking regulations; in fact, most illegal activity reported to Fisheries WA personnel falls into this category.

First, people illegally fishing can, and do, go to great lengths to hide their activities (Anderson 1989). This may be helped by the fact that a fishery often ranges over vast geographic areas, but is serviced by a relatively small number of enforcement officers and vessels. Recent technological advancements assist those engaged in illegal fishing to avoid detection; powerful vessels allow fishers to range over greater distances, satellite telephones provide secure channels for communication and radar forewarns fishers of approaching vessels well before visual contact is made. Advances in fish finding technology in the Western Australian rock lobster fishery present particular problems for policing gear restrictions. Differential GPS allows fishers to place and retrieve gear with high precision. The consequence of this is that lobster pots are often placed in small, dispersed clusters of less than five pots, instead of the more traditional method "lines" of 20-30 pots. The implications for enforcement of gear restrictions, such as carrying out pot-counts, are obvious.

It is in this climate that enforcement officers must police fisheries regulations. It is not realistic to expect effective enforcement of regulations by means of random checks of fisher activity. While random checks are necessary for measuring overall compliance rates within a fishery, to a large extent enforcement effort must be targeted at known or suspected offenders (i.e. "intelligence" driven). These are usually fishers suspected of regularly breaking fisheries regulations, and as such are likely to have a greater deleterious effect (at least on an individual level) on the management goals for the fishery, compared with those who only occasionally or opportunistically break regulations. It is also likely that targeting, catching and prosecuting known offenders sends an important deterrent message to other fishers (Sutinen 1996). Targeted enforcement operations can only be initiated, however, with access to information about illegal activities and the fishing community is best placed to provide information about how and where illegal activity is occurring.

A second reason why fishers should provide enforcement personnel with information about illegal fishing is a practical one, namely cost-effectiveness. Enforcement, especially at-sea enforcement, is costly, and in Australia up to 90% of all enforcement expenses in cost recovered fisheries are met by industry (Sutinen 1994). This has led to increasing industry pressure for enforcement groups to justify their expenditure. An obvious way for industry to ensure that enforcement expenditure is used efficiently is to assist enforcement groups to effectively target their effort. It is perhaps ironic that the same fishers who claimed prior knowledge of "those guys" in the red herring fishery are also these charged with assessing the legitimacy of compliance budgets and expenditure.

How then can fishers be encouraged to report illegal activity undertaken by other commercial fishers? Experience in the rock lobster fishery has shown that commercial fishers are most likely to report illegal activity when they perceive other fishers to be "taking money directly from their pockets" (such as poaching lobster from other fishers' pots), or when they perceive illegal activities to be detrimental to the sustainability of the resource. Fortunately, almost all rules in the rock lobster fishery are designed to protect against these exact circumstances; i.e. to protect fair and equitable access to the resource and to protect the biological sustainability of the fishery⁷. If we accept this premise, then a priori it seems reasonable that, at least for rules which are perceived as legitimate, fishers can be convinced that it is in their interests to report on fishers they know break the rules. We suggest six practical ways in which this can be encouraged:

i. Codes of conduct for ethical fisher behaviour. Fishers who hold access rights to a fishery are responsible for the maintenance of a public resource and should be subject to the same ethical standards as the public officials who are seen to more directly manage it. Codes of conduct for ethical fisher-behaviour in a range of "scenario" situations should be developed in conjunction with fisher representatives. Such a code would: (a) serve as a "plain english" interpretation of fishery rules in a variety of circumstances; and, (b) help establish the legitimacy of fishery rules by providing context to their interpretation. It is also desirable that similar codes of conduct be developed for all stake-holders in a resource (e.g. recreational fishers).

ii. Education on the legitimacy of regulations. Many fishers make subjective judgments about what constitutes "bad behaviour" among their peers - fishers deem some offences less important than others and may not consider particular offences worthy of reporting. Through education, fishers must be made aware that the cumulative effect of many small breaches of regulations may indeed endanger the sustainability of the resource and ultimately threaten their own livelihoods.

iii. Illegal activity "hotlines". Management agencies should establish mechanisms for fishers to easily report any illegal activity they witness. In Western Australia we have established the Fishwatch program, a 24 hour toll-free telephone service set up to receive public information about illegal fishing activity; such programmes have subsequently been adopted in most other Australian states. Internet reporting provides another method that is likely to become increasingly accessible for fishers. For example, an Australian fishing company (Austral Fisheries) and the Tasmanian Conservation Trust have established a website to monitor illegal fishing for Patagonian toothfish in the Southern Ocean.

iv. Rewards for information. In many law enforcement contexts, agencies offer rewards for the provision of information leading to the successful prosecution of offenders. Rewards are usually staggered to be commensurate with the severity of the offence and the magnitude of the penalty. In New South Wales, for instance, industry-funded rewards of up to $A500 may be paid for information leading to the conviction of persons undertaking illegal rock lobster fishing.

v. Foster good relations between fishers and fisheries officers. Good relations based on mutual trust and respect between fishers and fisheries officers is perhaps the most important mechanism for encouraging fishers to volunteer information about illegal activity. This is best engendered by one-to-one contact, and should not be restricted to those situations where fishers are inspected to check their compliance with fishery rules. A simple "Hello, how's it going?" on the wharf goes a long way. Such a strategy is enhanced by maximising the time spent by fisheries officers in the field and reducing their administrative burden.

vi. Effective administration and legislation. Central to the issue of commercial fishers reporting illegal activity is the effectiveness of the administrative and legal environment in which they do so. Fishers must feel confident that the information they provide will be acted on promptly, with concern for issues of confidentiality, and that the legal system is capable and willing to impose realistic sanctions. (See also Section 4 below: Management agency responsibilities).

⁷ We do not suggest that all rules in all fisheries are implemented for these reasons, rather, that a majority of regulations in the rock lobster fishery have been enacted to ensure distributional justice and biological sustainability.

Legal action, although obviously necessary for serious fisheries offences, must be considered an undesirable outcome. Legal sanctions are often costly to impose, liable to fail because of minor technicalities, and variable in their effectiveness (Franzoni 1998). For example, judicial discretion exercised by different magistrates sometimes leads to quite different findings for similar offences. Courts often do not appreciate the seriousness of fisheries crimes, especially in high-value fisheries such as the WA rock lobster fishery⁸. Fishers themselves lament the fact that prosecutions often result in penalties that are not commensurate with the potential gains to be made from illegal activities. Another problem is that court proceedings are often lengthy, resulting in a loss of immediacy between crime and punishment. For many in the fishing community such delays are perceived as inaction on the part of the management agency and the potential deterrent value of prosecution is diminished as a result.

⁸ In Western Australia it has been suggested that one solution to this problem might be to establish Fisheries Tribunals with magistrates who have specialist knowledge of fisheries law.

In the case of Fisheries WA, the discretionary powers of the Executive Director allow some scope for a peer review process, although to date such proceedings have usually occurred after a judicial decision to decide additional administrative penalties (e.g. "black marks"). There has been strong opposition from fishers (and their representatives) against participating in such proceedings. The argument against involvement has centred around the fact that fishers feel peer review may create conflict within fishing communities, and that undesirable pressure may be brought to bear on fishers serving on such committees. While these are legitimate concerns, in an environment of co-management, the onus falls upon fishers (the majority of whom are honest) to take collective responsibility to ensure such pressure is not brought against members of disciplinary committees. Nonetheless, to address these concerns we propose two mechanisms which may alleviate fisher anxiety about serving on disciplinary committees:

i. Retired fishers may be suitable candidates to participate in peer-review situations. They often maintain an active interest in their fishery, have the respect of existing fishers, but are independent of fisher organisations and management. Representatives should be chosen on the provision that they no longer hold a financial interest in the fishery.

ii. A number of fisher representatives could be chosen from different regions of the fishery. If a fisher caught conducting illegal fishing is brought before the disciplinary committee, then the representative from that area of the fishery could act as an observer only, or be excluded from the process altogether. The case would then be heard and determined by fishers from areas other than the region of the fishery where the offence took place.

3.4 Involvement in compliance working groups

The National Fisheries Compliance Committee (1999) has a stated commitment to collaborate with fisheries stake-holders to develop and implement fisheries policies and laws. They also support co-management of fisheries through Management Advisory Committees, the membership of which can be held accountable for meeting duties and obligations as stake-holder representatives. In the Western Australian rock lobster fishery it is the RLIAC Compliance Subcommittee which operates as the compliance working group for the fishery. This subcommittee is responsible for reviewing enforcement budgets, assessing the compliance implications of changes to fishing rules and alerting the enforcement manager to trends in compliance. Involving fishers in this process is beneficial in a number of respects. High levels of voluntary compliance may be encouraged when fishers are involved in designing fisheries laws and compliance planning, since fishers are more likely to be responsive to self-developed regulations than rules imposed from an autonomous management agency (Jentoft 1989). Many fisheries have in place regulations which are difficult to enforce (Hemming and Pierce 1997), but equally fishers may have difficulty complying with some rules. This may occur when rules are developed without regard to the realities of the fishing process. At best, rules perceived as flawed may be pushed to the limit; at worst they will be openly ignored (Kesteven 1987). Involvement in formulation of rules therefore gives fishers the opportunity to contribute in developing rules with the practicalities of fishing foremost in mind.

Members of the RLIAC and its subcommittees are encouraged to report to industry, Fisheries WA and other interested parties on issues under its consideration. There is also a clear imperative for RLIAC to solicit industry input on alternate courses of action under consideration. The reasons and rationale behind committee recommendations are conveyed to representative groups by way of a Chair's Summary, most usually distributed to the fishing community as a newsletter after each RLIAC meeting. In these reports it is important to inform the fishing community about the discussions - the compromises and trade-offs - which lead to the final formulation of a decision or new rule. It is this process, perhaps more than any other, that makes or breaks the fishing community's perceived legitimacy of rules. It is also important that fisher representatives do not paint the management agency as the "bad guys" when unpopular decisions must be made. If fishers are part of the decision-making process, they should be equally accountable for difficult decisions that must be made in a fishery. If legitimate reasons exist for deciding on a particular course of action, then these reasons need to be put reasonably, but strongly, to fishers.

The attitudes and perceptions of fishers toward management, compliance and enforcement are vital to the effectiveness of any regulatory effort (Clay and McGoodwin 1995). It is important to know why fishers choose to break fisheries laws and it is not sufficient to rely solely on the information supplied by fisher representatives on management committees. Industry surveys to ascertain views on management measures and attitudes toward other stake-holder groups should be undertaken on a periodic basis to monitor trends over time. The effectiveness of education programmes can often only be measured in this way. By carrying out surveys of this kind management authorities can foster interest in group support - people like to have their opinions canvassed on issues they see as important to their livelihood. The fact alone that fishers are surveyed indicates a willingness on the part of management and enforcement to take notice of opinions. Finally, as well as the "why", surveys of this kind provide enforcement agencies with some of their most useful information regarding the who, how, where, and extent of illegal activity. In the Western Australian rock lobster fishery we have recently undertaken a compliance survey of 4000 recreational fishers, and are currently developing surveys for commercial skippers and crew, participants in the processing sector of the fishery, selected retailers and fisheries officers themselves.

4. MANAGEMENT AGENCY RESPONSIBILITIES

4.1 Responsiveness

Encouraging fishers to participate in enforcing fisheries law imparts certain responsibilities on management agencies. Governments need to ensure that supporting legislation and policy is provided so that fisher involvement in enforcement is encouraged and supported.

Fisheries enforcement services must make every effort to ensure they are responsive to information about illegal activities reported to them by the fishing community, both in terms of direct action and feedback to those providing the information. This should operate on a formal basis by reporting the results of investigations to Management Advisory Committees, but also on an informal basis between Fisheries Officers and the individual fishers who report the activity. Fishers in the rock lobster fishery have recently criticised Fisheries WA on this point, and we are currently implementing feedback mechanisms to ensure that all information received is acted on in a timely manner and that those involved are advised of the outcomes. There is also a responsibility to consult with fishers on priorities for patrolling activities and about the existence of problem areas within a fishery. This make good sense since it is usually fishers who are best informed about the nature and extent of illegal activities in a fishery. Priorities should be directed to those illegal activities commonly perceived as deleterious to the sustainability of the fishery.

4.2 Confidentiality

We believe that individual fishers have a responsibility to speak out when they hear of other fishers who are breaking regulations. In turn, fisheries agencies have a responsibility to ensure fishers may do so in a climate that is safe and free from recrimination. This is not always an easy task, but is greatly assisted by ensuring that information received from fishers is treated as strictly confidential. Most government agencies who rely on the receipt of information which would otherwise not be obtained except under circumstances of confidentiality have the power to suppress the source of such information. The rationale is that, if the flow of information was to cease, the effective operation of the agency may be prejudiced. This is true for investigations into fisheries crime, and agencies should ensure that appropriate legislation is in place to ensure confidentiality, both during inquiries and in any subsequent legal proceedings. Tasmania's illegal fishing telephone hotline service provides an interesting example. Tasmanian Fisheries offer monetary rewards for information leading to successful prosecutions of fisheries offences, however informants do not have to identify themselves in order to participate in the reward scheme; they are simply assigned a number and are able to collect any reward which may result from their information on this basis.

Enforcement agencies also have a "duty of care" to ensure they deal with confidential (and often anonymous) information in responsible ways. That is, information, and especially anonymous information, should be treated cautiously until such time as enforcement officers can independently determine the validity (or otherwise) of the intelligence received. Informants sometimes make mistakes about what constitutes illegal activity, either by misinterpreting events they have witnessed or by relying on circumstantial evidence. Malicious accusations, with no basis in fact, are also possible. Fisheries officers should ensure that when investigating suspected offenders they do so without prejudice.

4.3 Judicial process

Enforcement programmes should undertake all reasonable steps to inform stake-holders of their legal obligations and the consequences of not meeting them. But at the end of the day, they must be prepared to prosecute those who willfully break the law. Fishers must believe that if they cheat there is a reasonable chance they will be caught and, if caught, that prosecution will be successful. It is also important that deterrent penalties are larger than the gains made through illegal activity, taking into account the probability of detection and successful prosecution (Beddington et al. 1997). In the case of the rock lobster fishery, monetary sanctions are typically a nominal penalty, plus court costs, plus a fine (if applicable) approximately ten times the value of the illegal catch. Sanctions should also be dependent on the offenders' history, since this provides an additional deterrent not to repeatedly violate fishery laws.

Management agencies need to ensure that the judiciary is well educated with regard to the deleterious consequences of fisheries crime, which is itself a subset of "environmental crime". This requires a recognition on the part of magistrates that the judgments they make affect not simply the individual who has committed the crime, but also the wider fishing (and non-fishing) community and in turn the sustainability of the resource. To be effective, criminal sanctions must not only punish the individual, they should also deter others from engaging in similar activities. This point cannot be stressed enough; the legitimacy of fishery rules, and the willingness of honest fishers to report on those they know to be breaking regulations, hinges on fisher confidence in the legal system to adequately deal with fisheries crime. There must also be a willingness for fishers, fisheries officers and police to cooperate in ensuring that fishers who report fisheries crime are not unduly harassed or victimised in their communities.

Finally, it is important to inform fishers about the nature of successful prosecutions. Advertising successful prosecutions educates fishers about the types of penalties received for particular fisheries offences, and deters others from committing similar acts. It can also serve as a "shaming" penalty, as is the case for Western Australian fisheries where detailed outcomes (including names) of successful prosecutions are published in a quarterly magazine, Western Fisheries.

5. CONCLUSION

We have advocated increased management responsibility for fishers, particularly in the area of fisheries enforcement. In the Western Australian rock lobster fishery access is pursuant to a limited-entry management plan within which catch-shares are indirectly allocated through pot-holdings. There is the possibility of strengthening these access-rights, thereby ensuring for fishers continuity of access should management plans be amended or revoked. However, we feel that if fishers wish for greater security of access and increased devolution of management responsibility in general, it is important they demonstrate a responsible attitude toward compliance with, and enforcement of, fisheries rules. Fishers should be involved in the formulation, and assist in the implementation, of fisheries rules on both an individual and collective basis. In a real sense a lot of what we have discussed centres around explaining to the fishing community the legitimacy of fishery rules. This flow of information should operate both ways. Managers and scientists need to educate fisher representatives about the scientific and management processes; fishers, for their part, need to educate managers and scientists about the realities of the fishing process and how this affects compliance with fishery rules. It is perhaps in this exchange of information that the true value of co-management may be found. We have suggested three mechanisms for increasing fisher involvement in the enforcement process: (a) encouraging fishers to help enforcement staff by providing information about illegal activities; (b) participating in peer review of fishery offences; and (c) involvement in compliance working groups. These processes will only be effective, however, if management agencies can ensure appropriate administrative and legislative structures exist to encourage and support fisher involvement in enforcement.

6. ACKNOWLEDGMENTS

This research was funded by Fisheries Research and Development Corporation (Australia) (Project Number: 98/156) and the commercial rock lobster industry in Western Australia. The support and advice given by Nic Caputi, John Looby, and Bruce Webber is gratefully acknowledged. Thanks are also extended to those national compliance managers, fisheries officers and professional rock lobster fishers who provided us with their insights into the strengths and weaknesses of enforcement activities in Australia. A small part of this work is drawn from a presentation by the senior author to the 26^th Australasian Fisheries Law Enforcement Conference in May 1999.

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Enforcement and Compliance of ITQs: New Zealand and the United States of America - W.J. Nielander and M.S. Sullivan

W.J. Nielander and M.S. Sullivan
Fisheries Management Consultancy International, Ltd
116 Interlake Blvd, Lake Placid, Fla. 33852, USA
<[email protected] >
<[email protected]>

1. INTRODUCTION

In the two decades since 1980 fisheries management on the international stage, has undergone an unprecedented transformation of a legal and practical nature. During this period fisheries have been principally administered under a régime of national exclusive economic zones provided for in the 1982 United Nations Convention on the Law of the Sea¹. The advent of expanded fisheries jurisdiction, however, has not been the solution hoped for and the period has been noted for rising catches in low value species, soaring industry costs and overcapitalisation and growing management complexity².

¹ Part V, Articles 55-57, UN Doc A/CONF 62/122 21 ILM 1261.

² The State of World Fisheries and Aquaculture, FAO, 1995, pgs 8, 50-53. The picture remains largely unchanged in the latter part of the 1990's, though the expansion of fishing fleets is slowing. The State of World Fisheries and Aquaculture, FAO, 1998, pgs 7 & 14.

³ Currently, three Federal ITQ programmes operate in the United States: surf clam and ocean quahog in Mid-Atlantic and New England waters; wreckfish along the South Atlantic coast; and halibut and sablefish off Alaska.

⁴ By the Fisheries Amendment Act 1986, inserting various new provisions into the Fisheries Act 1983.

⁵ Neher P., Arnson R. & Mollet N., 1989, Rights Based Fishing, NATO Advanced Science Institutes Series, Kliwer Academic Publishers, pg 1 and Boyd R. & Dewes C., 1992. Putting Theory Into Practice: Individual Transferable Quotas in New Zealand Fisheries, Society and Natural Resources, Vol 5, pg 179-198.

2.1 New Zealand

2.1.1 The New Zealand context

New Zealand's ITQ system, as introduced in 1986, was structured along a traditional model of defined "rules" set out in statute and subordinate regulations. When detected, non-compliance with those "rules" was to be met by financial/economic sanctions imposed by both the Courts and the empowering statute itself. Aspects of New Zealand's political and legal environment are extremely important in understanding how New Zealand was able to introduce a statutory and regulatory-based system of complex rules and requirements that has been readily amenable to "police" and "forensic" style enforcement methodologies.

2.1.2 Criminal law model of fisheries legislation

To enforce regulatory standards governing economic activities, New Zealand and other British common law countries have historically tended to use a criminal law legal model which sets out rules of acceptable and prohibited behaviour with criminal penalties for that prohibited behaviour. The criminal law has, however, been adapted to the demands of regulatory environments by way of a number of legal devices. These include alteration to traditional requirements relating to burdens and standards of proof. These devices are designed to simplify the task that agencies responsible for enforcing the "rules" might otherwise face in trying to establish matters that are within the unique knowledge of the offender or occur in circumstances that are difficult or costly to supervise.

Under New Zealand fisheries legislation offences are of strict liability in nature⁶. There are specified defences provided which the offender is required to prove on the balance of probabilities⁷. In addition, there is an array of various evidential presumptions and certification provisions, which greatly simplify the task of the Ministry in proving specific factual issues⁸. The 1986 ITQ legislation, when introduced, contained offences of a rather simplistic nature and relatively low maximum penalties (up to a maximum of $NZ10 000). The Act did, however, retain the traditional emphasis in Commonwealth fisheries legislation on forfeiture of illegal fishing gear and vessels in addition to quota. Unlike other jurisdictions, however, forfeiture under the New Zealand legislation was an automatic consequence of conviction and not at the discretion of the Court. The Courts, however, retained a residual discretion to make "non-forfeiture" orders in the event that they found there to be "special reasons relating to the offence"⁹. After conviction, the legislation vested a discretion in the Minister of Fisheries to redeem forfeit property, on such terms and conditions as the Minister saw fit¹⁰.

⁶ See s105(1) Fisheries Act 1983 and s240 Fisheries Act 1996.

⁷ See s105(2) and s105A Fisheries Act 1983 and s241 & s245 Fisheries Act 1996.

⁸ Eg see s102 to s103A and s106 to s106A of the Fisheries Act 1983 and s111, s193, s195 and s248, s249 of the Fisheries Act 1996.

⁹ s107B Fisheries Act 1983 - "A special reason is one that is not found in the common run of cases. While not necessarily categorised as "exceptional" or "extraordinary", it is one that may properly be characterised as not ordinary or common or usual". Basile v Atwill [1995] 2 NZLR 537, 539 (CA).

¹⁰ s107C Fisheries Act 1983. For a comprehensive examination of the legal nature and operation of forfeiture provisions under New Zealand and Fisheries legislation, see Sullivan M S, Forfeiture of Fishing Vessels in Australia and New Zealand, MLAANZ Journal, 14(1), 39-.

i. the increase in maximum penalties to $NZ250 000

ii. the introduction of forfeiture as a minimum penalty

iii. the reclassification of forfeitable offences into 3 distinct categories and

iv. the introduction of more specific statutory guidelines in the exercise of the Minister's discretion to redeem forfeit property.

¹¹ Particularly by the Fisheries Amendment Act 1990 (1990 No 29).

The forfeiture provisions continue to distinguish between property and quota. The level of forfeiture, similar to the Fisheries Act 1983, is directly linked to the nature of the offences and the maximum penalties imposed. The forfeiture of quota, however, is limited to the most serious category of offences¹². The most significant change is the substitution of the discretion previously vested in the Minister to redeem forfeit property, with a provision that persons with registered interests in quota or legal or equitable interests in property that is forfeit to the Crown may apply to the Court within 35 days of the date on which the forfeiture occurred, for relief from forfeiture¹³.

¹² s255 Fisheries Act 1996.

¹³ s256 Fisheries Act 1996. Section 256, however, sets out the factors that the Court must consider before it may order relief from forfeiture. The Court is required to determine whether the person making application has an interest in the property or quota and whether the interest was created solely or principally for the purposes of avoiding an application of the Act in respect of forfeiture. No order may be made under this provision unless the Court is satisfied that it is necessary to avoid manifest injustice.

Critical to the viability of this criminal law model in ITQ management has been the fact that all New Zealand fisheries, unlike the United States (as well as Australia and Canada), are administered by a central government; this avoids the complications arising from state and federal jurisdictions. This has allowed for the adoption of relatively cohesive administrative procedures underpinning the ITQ system in New Zealand and a unified enforcement/monitoring strategy. In addition, the ITQ system has, until recently, been exclusively managed by the Ministry of Agriculture and Fisheries (MAF) and its successor, the Ministry of Fisheries (MOF) (hereinafter collectively referred to as "the Ministry").

Because of the uni-cameral nature of its Westminster Parliamentary style of government, combined with the absence of an entrenched written constitution and Bill of Rights¹⁴, New Zealand has been able to more effectively limit the extent of the rights of participants in the fishing industry to be free from random inspection, search and entry to premises and equip fishery officers with a range of powers that in any other context would be considered excessive¹⁵.

¹⁴ The rights and freedoms in Part II of the New Zealand Bill of Rights Act 1990 are not constitutionally entrenched and may be over-ridden by an ordinary enactment but, in interpreting an enactment, a consistent meaning is to be preferred to any other meaning. Ministry of Transport v Noort, Police v Curran, [1992] 3 NZLR 260. In recent times, however, the New Zealand Court of Appeal has been adopting a more restrictive view of the application of the Bill of Rights Act. See further, Schwartz H, The Short Happy Life and Tragic Death of the New Zealand Bill of Rights, New Zealand Law Review, Part II 1998, pgs 259-311.

¹⁵ However, even in jurisdictions which have entrenched constitutional Bill of Rights, such as Canada and the United States, where the Act under which a search is exercised, or order to produce is made, is "regulatory" then lower standards are exacted. See Thomson Newspapers v Canada (1990) 67 DLR (4th) 161 (SCC), and Lovgren v Byrne, 787 F2d 857 (3^rd Cir 1986).

i. all (except the power to seize) may only be exercised at reasonable times and

ii. none of these powers may be exercised in respect of a private dwelling house or Maori reservation without written authorisation of the Court.

¹⁶ s79 Fisheries Act 1983.

2.2 The United States

2.2.1 The US context

In the United States, enforcement of fishery management regulations is primarily processed under the Magnuson-Fishery Conservation and Management Act 1976 (Magnuson - Stevens Act), that was considerably amended in 1996. Under the Magnuson-Stevens Act, the primary tool for imposition of fines is through an administrative process by the Department of Commerce and National Oceanic and Atmosperic Administration. However, the Magnuson-Stevens Act also provides for permit sanctions, forfeiture of vessels and quota, and jail time for specific fraudulent acts. In addition, there is federal criminal legislation, such as the Lacey Act and general criminal code that is also used in prosecutions relating to fisheries violations, and particulary, ITQ violations.

2.2.2 Magnuson-Stevens Fishery Conservation and Management Act 1996 - Civil Law System

The penalties under the Magnuson-Stevens Act for violation of various prohibitions can result in a civil penalty not exceeding $US100 000 for each violation. Each day of a continuing violation constitutes a separate offense. In addition, not only may an owner or operator be fined for violations, the fishing vessel used in the commission of the Act is liable in rem for any civil penalty assessed for such violation, and may be proceeded against in the United States District Court. The penalty constitutes a maritime lien on the vessel, which may be recovered in an action in rem, and the District Court of the United States having jurisdiction over the vessel¹⁷.

¹⁷ 16 U.S.C. §1858(d).

i. revoke any permit with respect to such vessel or person, with or without prejudice to the issuance of subsequent permits

ii. suspend such permit for a period of time considered by the Secretary to be appropriate

iii. deny such permit or

iv. impose additional conditions and restrictions on any permit issued to or applied for by such vessel or person under the Act....¹⁸

¹⁸ 16 U.S.C. §1858(g).

¹⁹ 16 U.S.C. §1859(a).
²⁰ 16 U.S.C. §1859(b).

i. Publication of present levels of penalties within specified bands for specified violations.

ii. Issuing of infringement notices directly from the fisheries officers for lower level violation.

iii. Proceedings are commenced by way of a notice of violation action (NOVA for unpaid infringement notices and more serious violations) similar in concept to a statement of claim. These NOVAs are issued by the agencies' attorneys directly.

iv. As the proceedings are civil in nature they may be compromised by way of settlement before hearing. Agreements may also be reached that relate to future compliance with rules or restriction of activities, which have the force of any civil settlement.

v. Additional sanctions such as permit revocation or suspension, banning, forfeiture of property used in the commission of the violation may also be sort, but are imposed only at the discretion of the Court.

vi. If the matter goes to hearing before an administrative law judge, it does so under civil procedural rules. Hearsay evidence is applicable (evidence being evaluated in terms of its weight as opposed to strict rules of admissibility).

vii. A defendant may appeal the decision of the administrative law judge to the United States District Court.

2.2.3 Nature and power of fisheries officers

The National Marine Fisheries Service has fisheries offices and special agents in each of its six regions and central headquarters in Silver Springs, Maryland, USA. An Enforcement Officer serves as a uniformed officer performing routine inspection, patrol and surveillance duties to detect illegal activity with respect to a variety of fishery and wildlife conservation laws. A Special Agent is responsible for initiating and conducting full-scale investigations of alleged criminal and civil violations under the various under the various fish and wildlife laws. This involves interrogating suspects and interviewing witnesses; conducting searches and seizures with and without warrants; securing and serving search warrants; making arrests; inspecting records and documents; developing evidence for the orderly presentation to United States Attorney and other legal officers; testifying in court; preparing detailed written reports such as witness briefs and trial books and carrying out undercover operations. Special Agents are usually responsible for ITQ investigations.

Whether a fishery officer or special agent, or other state or federal officer authorized by the agency or cooperating agreement, each such officer or agent has the powers as enumerated under the Magnuson Act. These powers enable him, with or without a warrant or other process, to:

i. arrest any person, (on reasonable cause) committing an act prohibited by the Act

ii. board, search or inspect, any fishing vessel which is subject to the provisions of the Act

iii. seize any fishing vessel used or employed in the violation of any provision of the Act and

iv. seize any fish taken or retained in violation of any provision of the Act²¹.

²¹16 USC 1861(b) 1996.

The Lacey Act²² provides that it is unlawful for any person to import, export, transport, sell, receive, acquire, or purchase any fish or wildlife or plant taken or possess in violation of any law, treaty, or regulation of the United States or in violation of any Indian Tribal law, as well as in violation of any state or foreign law.

²² 16 USC 3372(1998).

If a particular fisheries offence is of such serious nature, the agency (at its discretion) may bring the matter to a United States Attorney's office for prosecution under applicable criminal laws. A different set of procedures than those available in civil and administrative matters apply to criminal matters, such as criminal grand jury indictments and related search and seizure warrants.

Under the United States Criminal Code²³, it is unlawful for anyone to knowingly and willfully:

i. falsify, conceal, or cover up by any trick, scheme or device a material fact

ii. make any material false, fictitious, or faudulent statement or representation or

iii. make or use any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry²⁴.

²³ 18 USC 1001 (1998).
²⁴ 18 USC 1001(a) (1998).

2.2.6 Forfeiture

In addition to civil or criminal penalties, a fishing vessel and its gear may be subject to forfeiture under the Magnuson-Stevens Act²⁵. Any fishing vessel used, and any fish (or the fair market value thereof) taken or prohibited by the Act shall be subject to forfeiture to the United States. Such forfeiture must be undertaken in the United States District Court. Therefore, a civil enforcement action under the Magnuson-Stevens Act and a forfeiture action are separate actions undertaken in two distinct courts or tribunals.

²⁵ 16 USC 1860 (1996).

3. NEW ZEALAND EXPERIENCE: THE ITQ SYSTEM IN OPERATION

3.1 Introduction of ITQ

The ITQ system introduced in New Zealand in 1986 had six primary components:

i. the establishment of Quota Management Areas (QMAs) and setting of Total Allowable Catches (TACs) for those areas the

ii. allocation and issuing of ITQs and the maintenance of a registry relating to the subsequent holding and leasing of that quota

iii. a requirement that fish must be caught under the authority of quota²⁶ and information must be furnished in returns to the New Zealand authorities in order to enable them to monitor how much fish has been caught against that quota

iv. except in limited circumstances, the sale of fish by commercial fishermen is limited to Licensed Fish Receivers (LFRs) who are subject to stringent regulatory and record-keeping controls

v. reliance on self-policing by industry participants with wide enforcement powers conferred on Government officers to conduct random checks and the provision of heavy penalties for taking or possession of fish otherwise than in accordance with the law where no defences are available and

vi. the introduction of a resource-rental based on the quantity of quota held²⁷.

²⁶ The requirement to have quota prior to fishing has now been abandoned under the new provisions of the Fisheries Act 1996 as recently provided by s27 to s29 of the Fisheries Act 1996 Amendment Act 1999 (No 101).

²⁷ Resource-rentals have subsequently been abandoned and replaced by the cost-recovery régime under Part VII of the Fisheries Act 1983 and Part XIV of the Fisheries Act 1996.

²⁸ s62 and s63 Fisheries Act 1983.
²⁹ s57 Fisheries Act 1983.
³⁰ s63(4) and s89 Fisheries Act 1983.

Throughout the mid 1980s, during which the policy governing the introduction of the ITQ system was developed, there was considerable debate in New Zealand over how best to monitor and enforce the requirement that catch taken matched the quota held³¹. In resolving this issue, policy makers noted that New Zealand fisheries and the fishing industry had a number of characteristics, which needed to be taken into account. These were:

i. strong industry support for the introduction of the ITQ

ii. an Exclusive Economic Zone (EEZ) that was relatively isolated and with few transboundary problems or fishstocks

iii. an export-oriented fishing industry

iv. a single fisheries management enforcement jurisdiction

v. a value-added tax (GST) on all goods and services including fish and fish product³²

vi. a well-established commercial (catch/processing marketing) sector

vii. the significant number of vertically integrated fishing/processing/marketing companies in the commercial sector and

viii. the diverse number and remoteness of many landing points used by the catching sector.

³¹ Crothers G T, Manager Fisheries Compliance, MAF Fisheries Establishment Advisory Group, Briefing on Fisheries Law Enforcement, November 1993, pgs 10-11.

³² The requirement for businesses to maintain basic accounting records for GST purposes meant that additional requirements to detail sales and purchases of fish would not constitute a significant additional burden on the fishing industry, thereby making a record intensive system more feasible.

³³ Briefing on Fisheries Law Enforcement, supra note 31.

³⁴ In recent times the debate concerning dockside monitoring has resurfaced in New Zealand and was taken up and supported by the Fisheries Task Force in its report to the Minister of Fisheries, April 1992, pg 68. As a result, s300 of the Fisheries Act 1996, which came into force on 1 October 1996, makes provision for regulations to be made for the purposes of dockside monitoring. To date no regulations have been promulgated under this section. Whether dockside monitoring becomes a significant aspect of fisheries management in New Zealand is doubtful, however. An independent report commissioned by the NZ Fishing Industry Board indicated that such a programme could cost upwards of $NZ70 to $NZ100 million per annum, depending on the number of authorised landing ports. Briefing on Fisheries Law Enforcement, supra note 31, pg 12.

³⁵ Briefing on Fisheries Law Enforcement, supra note 31, p. 11.

3.3.1 The role of records and returns

A unique aspect of the ITQ system introduced in New Zealand is the reliance placed on, and the inter-relating nature of, the record-keeping and reporting requirements imposed on the participants in the industry. In addition, the New Zealand system adopts a partial "honesty box" approach, whereby the fishing industry was given the principal task of ensuring it complied with the legal requirements of the ITQ. To this end requirements were imposed on the various participants in the fishing industry to produce a series of cross-referencing returns furnished to the Ministry. The essential documents are the various types of Catch Landing Returns (CLRs)³⁶, Quota Management Reports (QMRs) and Licensed Fish Receiver Returns (LFRRs). The specific purpose of these documents was to enable the New Zealand authorities to monitor the flow of fish against quota holdings for the respective QMAs³⁷.

³⁶ Apart from a few limited exceptions, catch landing returns were not originally part of the documentary flow originally incorporated into the ITQ system. Catch landing data was retained in a log maintained by the master of the vessel and produced on demand by a fishery officer.

³⁷ The QMR is furnished monthly by the actual quota holder. That document allows the Ministry to monitor which were fish taken against quota. The LFRR is furnished monthly by Licensed Fish Receiver (LFR), the fish processors, and allows the Ministry to monitor the actual product flowing through the system against the fish recorded in the QMRs and the CLRs. The CLRs are furnished at the end of a fishing trip or monthly (depending on the type of fishing operation) by the commercial fishermen who actually catch the fish. The principal function of the CLRs is to enable the Ministry to ensure that all fish taken are actually recorded, determine what species were targetted, what species are caught, areas the fish was taken from, the date the fish was taken, which quota the fish was caught against, and to which LFR the fish was landed to.

³⁸ A "Dealer in fish" is essentially a person engaged in the wholesaling or retailing of fish who is not a LFR or a commercial fishermen. Refer r2 of the Fisheries (Recordkeeping) Regulations 1990.

³⁹ Under the Fisheries (Licensed Fish Receivers) Regulations 1997.

An essential component of the ITQ system introduced in 1986 was the provision relating to licensing of fish receivers and prohibition on commercial fishers selling fish to persons who are not licensed or deemed to be licensed under regulations made under the Act⁴⁰. Other persons not authorised under the Act are also prohibited from acquiring or possessing fish for the purposes of sale unless the fish is obtained from a person authorised under the Act to be in possession of fish for the purposes of sale.

⁴⁰ The legislation provides a limited exemption for traditional "wharf sales". Refer s67(2) Fisheries Act 1983.

⁴¹ Under the Fisheries (Licensed Fish Receivers) Regulations 1997.

⁴² Under the Fisheries (Recordkeeping) Regulations 1990.

3.4.1 Monitoring and data-fouling

At the time of the introduction of the ITQ in New Zealand it was recognised that specific enforcement/compliance problems could undermine the integrity of the system⁴³.

⁴³ Undated anonymous MAF discussion document in possession of writer.

3.4.2 High-grading and overfishing

High-grading or discarding lower quality fish was also seen as a particular problem in any system that constrained output rather than input. Of all the potential problems, however, it was the issue of discrepancies between the mix of quota holdings held by fishermen and the actual catch in the net that most concerned policy managers. The threat from direct overfishing of stocks due to seasonal variations and the vagaries of fishing itself was also recognised and was to be dealt with by the implementation of a device called "overs and unders"⁴⁴.

⁴⁴ In effect, in any fishing year a fisherman underfished his quota he could carry over 10% of his entitlement to the following year and fish that quota in addition to the quota he had available in the subsequent year. Conversely, in the event a fisher took up to 10% more fish under the authority of his quota in any year, that amount would be subtracted from the following year's entitlement.

3.5.1 Initial enforcement teething problems

Notwithstanding the early confidence of the Ministry that the flexibility of the ITQ system would resolve most issues, soon after its introduction in 1986 problems began to surface. In particular, a number of enforcement/compliance problems developed which had not been fully foreseen.

Bycatch and fish without quota

One of the principal problems related to bycatch and fish taken in excess of quota holding. This problem had its origins in the fact that at the time of allocating quotas on the basis of catch histories the legislation allowed fishermen to include fish that had been bycatch of target species. Under the New Zealand ITQ system, however, all quota, whether it was target or bycatch, could subsequently be targetted for creating effectively a "bycatch of bycatch" problem. In addition, so as to prevent wastage of fish and high grading of quota, fishers were prohibited under the 1986 legislation from dumping quota species at sea⁴⁵. To provide a defence and prevent abuse of the system, fishers were able to obtain an immunity from prosecution for taking or possessing fish other than under the authority of quota if, as soon as practical after landing the fish, they surrendered the fish to the Ministry⁴⁶.

⁴⁵ s28ZB Fisheries Act 1983.

⁴⁶ s88(1)(c) Fisheries Act 1983 as it then was (now substantially reproduced in s105A(1)). The potential problems with bycatch fishing and high-grading of fish had been identified as issues of major concern by industry and MAF personnel in the extensive interviews conducted by C.M. Dewes (1987), shortly after the introduction of the ITQ.

⁴⁷ For a more detailed description of the system that evolved, see Clark et al 1988, supra note 5, pgs 141-142.

Combined with the bycatch problem, the system of under and over fishing rights and how they attached to parcels of quota that were freely tradable under the New Zealand system became a logistical nightmare to administer. Disputes and differences of interpretation began to arise between the Ministry and fishers as to the exact nature and extent of available catching rights held by individuals. These issues made enforcement of restrictions on overfishing extremely difficult except in cases where the activity was particularly gross in nature.

Fishing on behalf

The legislation introduced in 1986 did not specifically deal with the issue of whether persons other than the quota holder could take fish under the authority of that person's quota. Following the introduction of the ITQ system in 1986, particularly as a consequence of the rationalisation of quota holdings into the hands of more efficient and larger fishing operators and companies, the practice of fishing on behalf of quota holders began to grow⁴⁸. In effect, those individual fishers who either held insufficient amounts or no quota at all became contract fishers for those who held the quota. The nature of these arrangements was frequently informal and unwritten, giving rise to major difficulties in the New Zealand authorities determining who were legitimate fishers and who were not.

⁴⁸ The adoption of a practice of authorising persons to fish quota on the owner or lessee's behalf led to a situation where fishery officers were unable to properly enforce the ITQ system and accordingly s28ZA(2) was inserted into the Fisheries Act 1983, requiring written notification of such arrangements to be furnished to MAF before fishing took place; Memorandum to Group Director, MAFisheries, 22 May 1992.

New Zealand's ITQ was based around ten principal QMAs. While there were variations on these areas used in respect of different species, the basic principle remained that ITQs were allocated to fishers on the basis of their catch histories in that QMA and that the total of ITQ allocated equated to the commercially allowable and sustainable catch for that QMA.

With the introduction of the ITQ system in 1986, fishery officers began to detect examples of area mis-reporting in respect of certain QMA/species combinations. These combinations usually involved high value species (such as orange roughy, silver warehou or snapper) in which there were substantial differences between QMAs as to abundance and costs of catching quota. While most cases arose in the context of adjacent QMAs, the most notorious example of this type of offending arose in the context of "Operation Roundup" in 1990⁴⁹.

⁴⁹ Refer infra note 56.

As a result of these and other technical problems the ITQ within a short time was subject to a major series of amendments by way of the Fisheries Amendment Act 1990. The principal amendments relevant to the enforcement of the ITQ were:

i. the introduction of a deemed value system⁵⁰

ii. the introduction of a series of complex defences allowing for the retrospective counting of fish against quota or subsequent purchases of quota or payment or payment of a deemed value⁵¹

iii. a limited ability to create definitive quota balances⁵² and

iv. the introduction of a requirement to furnish the New Zealand authorities with advance notice of the terms under which persons were authorised to take fish on behalf of other holders of quota⁵³.

⁵⁰ s28ZD of the Fisheries Act 1983 made provision for the payment by fishers of an amount previously set by the Director-General in respect of fish landed otherwise than under the authority of or in excess of appropriate quota.

⁵¹ s105 and s105A Fisheries Act 1983.

⁵² s28ZCA Fisheries Act 1983.

⁵³ s28ZA Fisheries Act 1983.

Subsequently, the Fisheries (Satellite Vessel Monitoring) Regulations 1993 were also passed to tackle the problem of area mis-reporting. As a result, after the 1 April 1994, an automatic location communicator had to be carried and operated on board foreign-licensed fishing vessels, foreign-chartered fishing vessels capable of engaging in trawling for fish and New Zealand fishing vessels exceeding 43 metres in overall length and capable of engaging in trawling for fish.

3.5.3 Refocusing of compliance group

Although the need to change the enforcement emphasis under a ITQ system from traditional (game warden/sea-borne) enforcement to that of monitoring quota/product flows had been foreseen early on, it was not until 1988, some two years after the introduction of the 1986 Amendment Act, that MAF restructured its fisheries enforcement group in order to come to grips with the significant change in the enforcement environment under the ITQ.

In addition to restructuring the organisation of fisheries enforcement, significant numbers of the then-serving enforcement personnel were made redundant and replaced by experienced enforcement personnel, principally from other agencies such as Police and Customs. The change in skill-mix of enforcement personnel was also accompanied by a change in enforcement methodology. Under the ITQ system, enforcement effort has primarily become land-based, focusing on auditing paper trails, detecting illicit landings by means of random inspections/covert land-based observations and initiating targeted investigations based on intelligence gathering (including the use of informants). Most of the pre-ITQ sea based enforcement capability has been disposed of and only two small inshore patrol vessels have been retained. Most of the sea-borne surveillance in the EEZ is now done by the New Zealand Air Force (in terms of area restrictions) and on-board observers (in terms of transhipment supervision). MAF also introduced a centrally-based team of dedicated accountants. In addition to undertaking a scheduled number of random audits of fishing and LFR companies each year, this unit provided MAF with specialist forensic accountants who assisted in investigating, preparing and presenting evidence in complex quota-fraud cases.

To complement the introduction of new investigative skills fisheries enforcement officers were divided into two categories, surveillance and investigations. Surveillance officers, who constituted the visible uniformed presence in the field, were charged with the day to day enforcement of fisheries laws and other targeted field enforcement operations. While there was in practice some overlap and even joint operations with surveillance teams, fisheries investigators were primarily deployed in undertaking longer term/intensive investigations. Their model is similar to that found in most modern police forces incorporating uniformed and investigative, detective divisions.

MOF has largely persisted with the enforcement structures and methodologies it inherited from MAF in 1995. In addition to rationalising the number of compliance regions from three to two, however, the most significant change introduced by the Ministry of Fisheries has been the introduction of the Serious Offences Unit (SOU) based in Wellington. The SOU was a reaction to the demands placed on enforcement personnel in conducting and running large-scale complex quota-fraud cases and the difficulties in budgeting and resourcing such investigations. The SOU maintains a core compliment of three full time investigators and additional staff whose main focus is large-scale ITQ offences. But they also assist district offices in similar-type investigations.

3.5.4 Nature of offending confronted

New Zealand's experience with the ITQ system since its introduction has shown that output-constrained fisheries management systems, backed up by adequate record-keeping and reporting requirements, enable fisheries enforcement personnel to successfully pursue unlawfully-taken product past the catching stage. Under the previous input-management régimes in New Zealand, the majority of controls related to constraints on fishing effort rather than the product caught. Such provisions inevitably required direct surveillance and detection of the offence at the time the fish were taken in contravention of the law. What output constraints that existed prior to the introduction of the ITQ, were not adequately supported by documentary requirements under the relevant legislation at the time.

Contrary to observations made by several writers⁵⁴, the introduction of ITQs in New Zealand has clearly been accompanied by a significant increase in the level and scope of offending detected and prosecuted compared to pre-ITQ⁵⁵. As was expected, the introduction of the ITQ in New Zealand created a range of economic incentives for some in the industry to cheat the system. What was not expected, perhaps, was the scale and extent of the "quota frauds" that has since been confronted.

⁵⁴ See Boyd R. & Dewes C., 1992 supra note 5 at 185-186; Clarke I. et al, 1988 supra note 5 at p138.

⁵⁵ This observation is based on the writer's extensive personal experience in prosecuting and defending fisheries offences since 1984. Prior to the introduction of the ITQ in 1986, fisheries prosecutions were infrequent and almost exclusively minor in nature (excepting foreign fishing vessel cases). Following the introduction of the ITQs in 1986, there has been a major expansion in both the number and scale of fisheries prosecutions culminating in a series of gigantic prosecutions in the early 1990s. This expansion has also been reflected in a number of reported and unreported decisions originating from the District Court, High Court and Court of Appeal.

⁵⁶ The epitome of complex frauds encountered by MAF since the introduction of the ITQ in 1986 is the series of inter-related investigations and prosecutions dealt with between 1991 and 1994 known under the collective title "Operation Roundup". "Operation Roundup", which commenced in 1991 by way of covert surveillance of Wellington and Napier wharf fronts, resulted in the detection of a series of large-scale on-going conspiracies to defraud the Quota Management System established in 1986. In the principal case involving landings by the fishing vessel Perseverance, the systems used by the fishing and LFR company to defeat the constraints imposed by the ITQ were multi-faceted and, for the period charged, involved a total of 574t of orange roughy misdeclared as cardinal fish or not declared at all. A more recent example of a large-scale ITQ prosecution was Ministry of Fisheries v Abel Fisheries Ltd, unreported, DC Wellington, CRN 7085005665 et al., 23/02/98, involving 5 chartered Russian fishing vessels and several hundred of misdeclared and under-recorded quota.

⁵⁷ This was certainly the experience of the writer in the time he served as a Prosecutor with MAF Fisheries, and has been confirmed from practical experience since commencing private practice. Attempts to defeat the ITQ system, such as that at the centre of "Operation Roundup", strike at the property rights and investment that most legitimate fishers have under the system and there has been a very clear pattern in New Zealand of growing Industry rejection of those who set out to "cheat the system".

⁵⁸ Prior to the introduction of the ITQ system, MAF's annual direct enforcement budget was in the realm of $NZ12 to $NZ13 million per annum. MAF's 1993-94 operating budget showed direct enforcement costs remained at similar dollar levels. The total 1993-94 cost of fisheries enforcement being $NZ16.4 million (MAF $NZ10.9, Prosecution $NZ2.5 and Defence $NZ3.0).

⁵⁹ There has been a partial reversal of this trend with the opening of a single one-man station in New Plymouth in 1997.

⁶⁰ For example, Challenger District was reduced in 1988 from 16 fishery officers to 12 fishery officers (including a DCM and investigators). In 1999, this number has been further reduced to 7.

Deemed values and bycatch fisheries

As expected, New Zealand authorities have encountered major difficulties in dealing with the problem of bycatch and target fish taken in excess of quota. The legislative solutions introduced in 1990, particularly the deemed value scheme, do not appear to have alleviated the problem. These systems appear unable to keep pace with the inevitable market fluctuations in values of various species or to be sufficiently precise to overcome what are significant regional and district variations in port prices or variations in the value of fish dependant on the state of processing.

In addition, the difficulty in proving what was legitimate bycatch or relabelled target fish has meant that, in the absence of an admission of targetting or extreme or gross offending, prosecutions undertaken for such offences have largely failed. This has led to recent amendments to the Fisheries Act 1996 (not yet in force) which remove distinctions between target and bycatch fish and substitute a revised deemed value system in conjunction with end of year balancing⁶¹.

⁶¹ Refer provisions of Fisheries Act 1996 Amendment Act 1999 No 101.

The computerised monitoring system using data-input from the various cross-checking returns does not appear to have been particularly successful in operation. In a report to the OECD Committee in 1995, MOF claimed that while the ITQ system does provide incentives for fishers to overstate catches in non-ITQ species and understate ITQ species, "the system of cross-checks which operates through monitoring of LFR records and returns deters such practices"⁶². No evidence was offered in support of that statement whereas an independent review of the New Zealand ITQ commissioned by the Canadian Government concluded that the system appears to have been captured by the enormity of the data-entry required and the day-to-day operational requirements of the quota-registry system and in fact little actual monitoring of the quality and implications of the data received and processed is done⁶³.

⁶² OECD Committee Report, Ministry of Fisheries, 1995, p 45.

⁶³ Meltzer E, Report on the ITQ prepared on behalf of the Canadian Government: Enforcement under New Zealand Fisheries Quota Management System, Department of Fisheries and Oceans, 1991.

"... compounded by reason of the fact that the defendants continually reported what they were doing to MAF which accepted the information for monitoring purposes but did not initially analyse it. If the information had been analysed by MAF at an early stage the offending would have been detected at an early stage and the magnitude of it substantially diminished"⁶⁵.

⁶⁴ For example, see the various "Operation Roundup" cases, MAF v Basile [1995] 1 NZLR 712, MAF v William Rose Trawling Ltd, 21/02/94, High Court, Napier, Hill v MAF, 17/012/91, Judgment No 3, Holland J, HC Christchurch, MAF v Dong Won Fisheries Co Ltd, 04/04/91, Heron J, High Court, Wellington, Roach v Kidd, 12/10/92, McGechan J., H.C. Wellington, Aston v MAF, 11CRNZ 478, MAF v Lima, unreported, HC Auckland, Ap 146/93, 103, 26/08/93, Fisher J., and Ministry of Fisheries v Abel Fisheries Ltd, unreported, DC Wellington, CRN 7085005665 et al., 23/02/98.

⁶⁵ MAF v Wellington Trawling Company Limited and Basile, Unreported, DC Napier, 14/11/94, Hole DCJ.

4. RECENT AND FUTURE DEVELOPMENTS IN NEW ZEALAND ITQ SYSTEM

4.1 The changing incentives: proportional quota and cost-recovery

In August 1991 the Minister of Fisheries began a comprehensive review of the QMS and fisheries management by appointing an independent Task Force to make recommendations on the future development of fisheries legislation and associated structures in New Zealand⁶⁶. Although the Task Force delivered its report in April 1992, it was not until late 1994 that legislative and policy initiatives were forthcoming.

⁶⁶ Sustainable Fisheries, Report of the Fisheries Task Force April 1992, pg iv.

⁶⁷ s107EB to s107ED Fisheries Act 1983.

⁶⁸ The often-cited example of this is the Challenger Scallop Enhancement Company and the Southern Scallop Fishery in Nelson, which operates its own compliance contracts and compliance manager.

⁶⁹ Ministry of Fisheries, Compliance Strategic Plan, 1997-2002.

4.2 Legislative changes

In 1994 a new Fisheries Act was introduced into the New Zealand Parliament that significantly changes the operation of the ITQ system with much greater reliance on economic incentives and civil penalties. After the Bill was rewritten, the new Fisheries Act 1996 Act took a more traditional approach to fisheries management, largely abandoning the civil penalty/retrospective balancing approach. The one particular innovation that did survive into the Fisheries Act 1996 was the decision to separate the core quota-share in the fishery from the actual right to harvest a certain quantity of fish. The harvesting right, which is annually derived from the quota right will be a separately trade right known as Annual Catch Entitlement (ACE). As a result of growing concerns with the prescriptive nature of the 1996 Act and the complexity of implementing some of its provisions, recent amendments to the Act have re-introduced the civil penalty/annual balancing approach abandoned under the 1994 Bill.

Although the Fisheries Act 1996 has been passed, the Fisheries Act 1983 remains in force and has continued to be the primary Act. This state of affairs appears likely to continue for some time. The 1996 Act is being brought into force in incremental stages as supporting systems, procedures, forms, and regulations are developed to support it. While the 1996 Act contains some fundamentally new approaches to ITQ management in New Zealand, including some refinements to penalties and forfeitures imposed for offences under the Act and regulations, it largely persists with the Criminal Law/Government enforcement and compliance model of the ITQ system that was adopted in 1986.

5. THE UNITED STATES' EXPERIENCE

5.1 General enforcement issues

Enforcing the FMP regulations of any sort has proven to be a difficult challenge. A 1987 study by NOAA of the MFCMA raised the enforcement issue in the following terms:

"In certain fisheries there is said to be widespread cheating on regulations. This is, to put it plainly, stealing valuable US property from law-abiding fishermen, the public owners, and from the taxpayer by increasing enforcement cost and diminishing revenues from unreported income. These unlawful practices seriously undermine the fundamental objectives of conservation and fair allocation. There are a number of contributing factors, including economic pressure, perception that risk of getting caught and punished is less than the rewards of violation, the respect of peers for large catches, inadequate funding, and a lack of understanding of the value of the management régime. Whatever factors contribute to these practices, it is plain that more aggressive and effective steps must be taken to discourage them"⁷⁰.

⁷⁰ Department of Commerce, NOAA Fishery Management Study 18 (30/06/87).

⁷¹ 16 USC sec 1858(g). And see Sutinen, Rieser and Gauvin 1990.

⁷² See 16 USC sec 1853(c); 50 CFR sec 611.9 (1978).

⁷³ 16 USC sec 1857(1)(I).

ITQ shareholders have increased interest in fishery enforcement by the NMFS personnel who monitor ITQ landings since this enforcement effort protects the value (and possibly the size) of their future share in the fishery. Elements of the fishing industry advocate 100% observer coverage for all fishing vessels in ITQ programmes. Quota shareholders have an incentive to report on each other, since cheating directly harms individual quota holders. Additional incentives to report can be created by pooling quota shares revoked from cheaters and reallocating them to the remaining quota holders. The fear of losing ITQ shares, temporarily or permanently, may also provide an incentive that encourages compliance with regulations in ITQ fisheries. However, this is complicated by determinations of who is responsible for the illegal activity - those operating the vessel, the vessel owner, or the ITQ shareholder⁷⁴.

⁷⁴ Buck, Eugene H., Individual Transferable Quotas in Fishery Management, Report for Congress, September 1995.

5.2 Performance assessment: surf clam and ocean quahog fishery and the wreckfish fishery

In the surf clam and ocean quahog fishery, administration and enforcement costs have plummeted since the ITQ programme began. Before the ITQ programme, enforcement costs in this fishery were exceptionally high because unusually stringent management regulations were in effect - the Coast Guard closely monitored the number of trips and fishing hours of each individual vessel. Now extensive monitoring is no longer necessary; dockside monitoring alone is considered adequate. There have been no surf clam or ocean quahog enforcement cases in several years. This is also attributed to the fact that the resource is not overfished and there are a limited number of quota holders⁷⁵.

⁷⁵ Telephone conversation with NOAA General Counsel Enforcement Attorney, North East Region, Charles Juliand, November 8, 1999.

⁷⁶ Telephone Conversation with Assistant Executive Director of the South Atlantic Fisheries Management Council, Greg Waugh, November 8, 1999. Also see paper.

There have been several cases prosecuted in the Alaska IFQ Halibut and Sablefish Programme in Alaska⁷⁷. These cases, for the most part, have consisted of fishermen falsifying reporting by either under-reporting their catches or reporting catches from one area when the catches occurred in other areas. When IFQ violations occur in Alaska, the enforcement agency has several options available for prosecution. The violation may be brought under the civil administrative procedure of the Magnuson Act by issuance of a Notice of Violation and Assessment (NOVA) by the agency attorneys. In addition to a NOVA, the catch and vessel may be forfeited in a United States District Court. Forfeiture cases are filed on behalf of the Agency by the United States Attorney's office.

⁷⁷ Telephone Conversation with Stephen Meyer, Special Agent in Charge, Alaska Region, November 8, 1999.

⁷⁸ United States v. Tomeny, 144 F.3d 749 (11^th Cir. 1998).

6. SUMMARY

The Quota Management System introduced into New Zealand in 1986 has proved to be a qualified success. On the economic front, it has provided through the allocation of "property rights in the form of ITQs" a means of both allowing the free transfer of catching rights that has led to economic rationalisation of the industry and provided a "real" asset against which investments can be secured. The New Zealand experience has highlighted the validity of some the concerns that had been expressed concerning the introduction of ITQ based quota management systems. Quota-busting, data-fouling and bycatch/overfishing have proved difficult issues to deal with. Whether these problems prove to be inherent in the ITQ model or simply a consequence of how it was implemented may well be determined in the next decade as New Zealand continues to review the basic structure of its QMS.

On the enforcement side, the New Zealand experience has been that a system based on output-constraints supported by a paper-based trail of records and documents has significantly improved their ability to detect and prosecute illegal fishing activity by doing away with the need to be present at the commission of the offence. New Zealand has a number of advantages that have enable such a system to work effectively. New Zealand is isolated from other states were illegal fish might be landed. In addition it has no federal/state jurisdiction complications and has been able to impose strict record keeping/licensing requirements on the participants in the industry that may not be possible in other jurisdictions. There continue to remain real issues as to the overall cost-effectiveness of the current police/forensic model used to enforce the system and whether, and to what degree, this model can be complemented or supplanted by a much greater emphasis on Industry itself implementing and enforcing the majority of ITQ "rules" through self-regulation.

In both the United States and the New Zealand some of the issues that continue to need addressing include:

Nature and levels of non-compliance

Developing better methods of evaluating whether levels of offending have decreased or increased, altered in nature or scope, or even whether the level and type of offending constitutes a threat to the overall efficacy of ITQs. A great deal of speculation is still involved in estimating the current levels of offending and their significance or impact. In addition, there is an on-going need to determine or measure the effectiveness of current enforcement/compliance strategies vs alternative approaches⁷⁹.

⁷⁹ In New Zealand the MOF has made substantial attempts to commence such a process (Sutinen 1996).

Notwithstanding the enormous financial and physical resources that have been committed to the cross-checking/record-based approach of the New Zealand QMS, both by government and stakeholders, there has never been a satisfactory analysis undertaken as to the efficacy of the system. Nor has any critical assessment been made of the fundamental premise on which the system was predicated, that it actually contributes to the effective enforcement and monitoring of the ITQ.

Nature of core enforcement/compliance skills required

Better strategic analysis of compliance methodologies that might be employed is needed. In New Zealand there is strong support among industry groups for a move away from the police-based model of law enforcement towards a more administrative and co-operative compliance methodology. Even within the Ministry of Fisheries in New Zealand there is an ongoing debate between those advocating the random compliance model (the Dockside monitoring/fishery officer on the wharf) and those supporting the targeted enforcement model (multi-disciplinary/paper trail investigative).

Administrative costs vs front line delivery

Development of effective operational auditing procedures to determine whether the current levels of expenditure on compliance are efficiently targeted at the priority/critical areas, the effectiveness of different delivery mechanisms employed by the compliance groups and the ratios of overheads/management relative to field expenditure are needed. Compliance expenditure is often dictated by historical budgeting practices and the prevailing skills of local staff and managers.

7. LITERATURE CITED

Boyd, R. and C.M. Dewees 1992. Putting Theory Into Practice: Individual Transferable Quotas in New Zealand Fisheries, Soc. Nat. Resour. 5(2) pp.179-198.

Clark, I., P. Major and N. Mollet 1988. The Development and Implementation of New Zealand's ITQ Management System. Rights Based Fishing. Eds. P.A. Neherand et al. p.117-147.

Dewees, C.M. 1989. Assessment of the Implementation of Individual Transferable Quotas in New Zealand's Inshore Fishery, N. Am. J. Fish. Mgt, 9(2). pp.131-139 (see pp135-136).

Sutinen J.G. 1996. Foundations of Compliance Strategy: A Framework for Policy, Report to the Compliance Business Unit, July 1996.

Sutinen, J., A. Rieser and J. Gauvin 1990. Measuring and Explaining Noncompliance in US Fisheries, 21(3), Ocean Devt & Intl Law pp335-372. Ministry of Fisheries, Compliance Strategic Plan, 1997-2002.