[This copy contains detailed critique of concepts as they occur in the document.]
Letter from :
Hon John Luxton,
Minister of Fisheries
8 Dec 1997
Dear Mr Howard
Thank you for your letter of 4th November 1997 raising a number of concerns about the Fisheries Act 1996 and its implications. The Ministry of Fisheries has considered your concerns in detail and I wish to make the following comments.
Fisheries Act 1996 Penalty Regime
The penalty regime in the Fisheries Act 1996 is based on the concept of strict liability for most offences. Intent is irrelevant for the purposes of establishing proof of offence. This approach is compatible with much regulatory law where the intent is to control behaviour to achieve a behavioural 'norm'. [This assumes that the fisher has control of the outcome of their behaviour. In the case of fishing - no-one knows exactly what they will catch until it is caught. I have been fishing on days when I caught none of the stock I was intending to catch, and a boatload of something I didn't expect. Fishing is inherently variable, at a level beyond the ability of any fisher to control. Any legal structure which fails to acknowledge this fundamental reality has no chance of getting voluntary compliance.] The exceptions to this are for a number of serious mens rea offences that are directed at high value black market fraud offences and incur a high penalty to deter and punish such offending.
However, liability is not 'absolute'. In common with other regulatory law the Act provides defences that allow an offender to avoid punishment if the person's behaviour is considered to not justify punishment.
In particular section 241 provides a general defence to any offence under the Act, (except mens rea offences). In essence the defendant must show that:
The second part of the defence requires an understanding of what could/should have been done to avoid the conduct that is proscribed. Therefore it requires an understanding of the likely or possible consequences of behaviour. [It is this bit about likely or possible that is the killer. All outcomes are possible, and all have a substantial probability. Is it sufficient to cater for events that are likely to occur in a week, or a month, or a year, or once every 2 years, or once every 5 years, or once every 10 years? What is reasonable? ] It implicitly requires the fisher to know what is likely to happen, in order to modify their behaviour to ensure that undesirable consequences do not occur. [Having been a fisherman myself for 16 years, I can state categorically that it is impossible to predict what you will catch on any given shot. You can predict quite well (within 20%) what a group of 6 or 8 fishers will catch in a given area on a given day, but not who will catch what to within 50%.] Any examination of a fisher's behaviour will therefore require analysis of what was possible in terms of controlling outcomes. [If you take an approach that matches the reality if fishing, it completely negates the original assertion - that fishers can control the outcomes of their behaviour. On a day by day basis they cannot. Over a year they have much more chance - probability starts to work in their favour as the sample size increases. Only people who have never experienced the reality of fishing could possibly make such an assumption.]
Fisheries Act 1996 ACE Balancing Regime
I agree with your inference that the current administrative regimes are costly and inefficient. [That was your inference. My statement was that they were administratively complex, but they do give the operational flexibility to allow people to go about the business of fishing in practice, without always ending up in court. Inefficient in this context depends very much on one's viewpoint.] The introduction of a single generic harvesting right called an Annual Catch Entitlement (ACE) is designed to reduce much of the complexity in the current system for the balancing of catch against quota that is caused by at least seven different permutations of the catching right. [As the original designer - I can state categorically that it was introduced to simplify the administration of under and over fishing rights. The purpose of ACE was to give administrative simplicity while preserving operational flexibility. We have lost both. ACE was to be a retrospective balancing regime. It isn't as formulated in the 1996 legislation. As formulated in the 1996 Act it has timing complexities which are every bit as complex as the ITQ/Lease/FAAQ/CAAQ/Surrender/DV system we currently have, without any of the operational flexibility. It is quite literally the worst of both worlds.]
The new balancing regime is based around the principle that all catch must be covered by ACE. This is absolutely fundamental - and the key to an underlying concept of the QMS - that a control on the total removals of each stock should be applied to ensure sustainability. I agree that within this constraint a flexible and practical administrative scheme should be in place. [Here is where we have conflict currently, but we have a way out, if we restore the ability to move ACE between years on a limited basis. No other mechanism exists to achieve operational flexibility while preserving the need to balance catch with ACE. Failure to do this will cause collapse of the Quota Management System.]
The balancing regime in the new Act takes into account the variability in many mixed species fisheries, in that the composition of the catch by species cannot be predicted precisely. Where particular problems are evident in restraining catch to the limits, or in single species target fisheries, the operator will need to balance by 15 days after the end of the month. A qualified defence is provided if the fisher can show that the contravention was an accident, outside their control and they took reasonable precautions. [One line of argument I have heard from officials is that fishers always have the control to stop fishing if they don't have ACE for one stock they could expect to catch. Try running this past a fisher and he is quite likely to throw you off the wharf (quite justifiably in my opinion). Requiring fishers to use only ACE from the current year to balance has nothing to do with sustainability issues.] But for the majority of species a less restrictive regime will provide up until the end of the fishing year to obtain catch entitlements with incentives to balance through short term financial penalties. This recognises the variability in catch, introduces considerable flexibility in comparison to the current scheme which is based around monthly balancing, and therefore enhances the tradability of the catching right. [Nonsense. This recognises only that there are problems in being able to acquire ACE from the market. It does nothing to address changes in absolute tonnage taken in any year. It doesn't allow unused ACE from a bad year to be carried forward to a good year. It doesn't allow accidental catch taken near the end of a year to be balanced against the next year's catch. It makes absolutely zero allowance for changes in abundance. It assumes that every year everyone will catch exactly their quota in all species and no more. There is no basis in reality for such an assumption. Any inspection of catch records will show that catch is highly variable. The market currently works because the risk involved in leasing or faaqing unwanted quota to someone else is low. Under the 1996 Act the risk of trading away ACE that you might need later is very high (section 71).] The Ministry advises me that there is a degree of predictability in catch mixes. [Degree of predictability yes, certainty no. The difference is huge. If the average rainfall for a farm were 120cm, and the regional council set a minimum of 80% of the average, is it reasonable to make every farmer a criminal in years of drought? No. No more is it reasonable to make fishers criminals because their profession has variability which makes "bureaucratic certainty" impossible. The rules must produce sustainability and cater for the reality of fishing. The 1996 Act does not.] Where catches are outside this 'norm', the Act provides appropriate defence provisions. [What is you definition of the norm. The bell curve is very wide. In many cases it is impossible to predict catch on any given day to within 50% more than 90% of the time. That means that most people will have events where the catch they get is at least 5 times what they expected at least once a year. If that happens to them on their best day of the year (catch rate wise) and that day is near the end of the year, then they have no hope of meeting it. Fishing with nets, lines or pots is inherently unpredictable. Until harvesting technologies allow us to select exactly which fish we take (like paua divers), they will remain unpredictable.]
The balancing regime was set to achieve a number of principles that were discussed with industry groups in consultative meetings:
[I draw a distinction between discussion and dictation. Some of these principles were not discussed with industry in the sense of listening to and considering reasoned argument. Officials refused to enter into any substantive discussion of the need to exceed TACCs on an annual basis. That right was removed without any reasoned argument being provided. That single actions threatens to collapse the QMS.]
2. Enhance the value of individual property rights in the stock (linked to incentives for husbandry) through:
3. A system that:
Considerable work was put in to develop a scheme that achieved the objectives outlined above including months of discussion with industry and considerable time in the Select Committee. [See comments above. There never was any argument (as in discussion) for or against the idea of never exceeding TACCs on an annual basis - it was an article of faith inspired by the previous minister. It has no biological foundation. Knowing many of the select committee personally, and talking to them outside the committee room, 3 expressed the sentiment that they did not understand most of the Act, and they relied totally on the advice of officials. There was just too much detail in the Act, and "the wood got lost behind the trees". Many people put a lot of effort into the review. I made many submissions, including the original ACE paper, and many follow-ups. My original allocation of 1 hour to speak to select committee was reduced to 8 minutes, during which time I covered only one of the 7 major concerns. It was, in the end, too rushed, and no coherent agreed "big picture" existed between the Ministry, the Industry, and other stakeholder groups. Each was fragmented, with their own barrow to push. We have all lost because of it.] I am therefore reticent about making any changes to the regime without very careful consideration. [With that I heartily agree. Open and reasoned consideration and debate is required to get agreement from all parties. Your ministry must participate in that debate actively if it has any chance of success.]
I am aware of concern from industry - but as yet have not received detailed alternative proposals that will satisfy the key objectives [Key objectives, as stated, cannot be satisfied. They are incompatible with reality. I would like a car that could fly, do 0-100 km per hour in 2.5 seconds, and be powered by rooftop solar cells - but reality wont let me. Until the objectives are workable, they will not be satisfied.]. You discuss some elements of a scheme called 'Associated Species Balancing'. I will be interested to receive more detail on this scheme, but an initial concern is the inference that ACE for that stock, or an associated stock could be used to balance some time after catching. [That is the weakness of the scheme, which is balanced by the feedback into the TACC setting process. Best avoided if possible, but only possible if inter year balancing of catch with ACE is allowed.] I know that the bycatch trade-off (BCTO) scheme is an element of the balancing regime in the Act, but it has the flaw that no amount of ACE for an associate species will compensate for the over-catch and unsustainable removals from another species. That said, it is recognised that if the BCTO scheme is effectively applied, it can result in attenuated fishing by having fishers off the water sooner, and in that way mitigate sustainability issues. [Associated species balancing adds a layer of operational simplicity to the BCTO scheme, but is otherwise conceptually very similar - an evolution from it, with many of it's strengths and weaknesses.]
The balancing regime also has revised criteria for setting deemed values levels that removes the current element of providing an incentive to land catch. [It also fundamentally changes deemed values. They are no longer an alternative to ACE, merely a bond.] It was determined that to be effective deemed values could not achieve this objective and provide an effective disincentive to over-catch because those objectives conflicted. [This is true. What few people have yet realised is that Deemed Values are operationally useless under the 1996 Act, because of Section 71. If anyone uses deemed values without subsequently acquiring ACE, they move to the section 71 ACE before fishing regime. Thus Deemed Values do not provide a method of covering catch, and are at best simply a bond - and as a bond it doesn't really matter at what level they are set, provided the level is above the ACE trading price.] It was recognised that this could [will] increase incentives to dump, but the increased flexibility of the annual balancing regime [which doesn't exist. The 1996 Act is orders of magnitude less flexible (from an operational perspective) than the 1983 Act. Under the 1983 Act Unders, Overs, CAAQs, FAAQs, retrospective leases, surrender, and payment of Deemed Value all gave operational flexibility to land fish without being prosecuted. Under the 1996 Act payment of Deemed Value only delays the prosecution 1 year (because of the effects of Section 71), therefore the only method of avoiding prosecution is to cover catch with ACE from the current year. For all fishers at some time that will prove to be impossible, and they will run foul of the law. The law is bad. The 83 Act was in theory a real-time balancing system that required fishers to have quota rights before fishing, but the exceptions and defences available make it a very flexible retrospective balancing regime in practice. Fishers deal with the practical, not the theoretical.], and a more fluid market in ACE should mitigate those issues [the market for key bycatch stocks will be anything but fluid, as it will mean life or death to operators in practice. The 1996 Act is unstable in a mathematical sense, as well as being impractical and unjust.]. If necessary, targeted observer coverage on a cost recovered basis can be used to address dumping issues in particular fisheries. [No small vessel can afford cost recovery observers, most barely manage to support a single family.]
As I have noted in recent meetings with the industry I will be interested to receive alternative proposals for a balancing regime. I have asked that industry document these proposals, gain the consensus of other stakeholders and provide a fully documented proposal to my Ministry [Doing this without the active involvement of your ministry is doomed to failure, as they will not agree with it, and they have the final say in the advice they give to select committee]. I have indicated that the Ministry should make resources available to consider the industry's proposal early in 1998. Therefor I suggest you contact the trade associations and other stakeholders with a view to working with them in developing and documenting the proposal. [I have done this. But unless we gain support from your Ministry about changes to core principles - any work on detail is doomed to failure. To date no such discussion or agreement has been forthcoming.]
Definition of Maximum Sustainable Yield
Your letter also comments on the key principle that each stock should be managed to achieve the maximum sustainable yield (MSY) and suggests that this should be calculated instead for a group of associated stocks.
In reaching a conclusion that MSY was the appropriate legislative goal for fisheries management there was considerable debate within the scientific community, the Ministry and with other Government departments and stakeholder groups.
Many alternatives were considered. Managing at some environmental bottom line, for example 20% B0, was seriously discussed, but problems of risk and the lack of information for the majority of fish stocks meant this course of action was not pursued. For some specific fish stocks, particularly those for which we have a reasonable level of information, there are reference points that would theoretically be better to apply to maximise yield or achieve other management objectives. However, the conclusion reached is that there is no better reference point that could be applied generally. This has been acknowledged in other fora, and MSY is the most commonly used reference point in international law, for example in the United Nations Convention on the Law of the Sea. [True as far as I goes. I was not suggesting something other that MSY, simply a change in definition of what MSY is. The change proposed would be more in line with the thrust of the UN Convention on the Law of the Sea approach to ecosystem management.]
In their considerations the previous Minister and the Select Committee clearly rejected the industry proposal that in mixed species fisheries one stock could be fished down in order to maximise the yield of another stock. I am not of a mind to relitigate that fundamental principle. [A reality check is probably a good idea at this point. In most cases the uncertainties associated with the numbers used are at least as large as the numbers themselves. Until we have hard accurate numbers on abundance and age classes any discussion of single species versus ecosystem MSY is academic.] Clearly there would be real risks to the sustainability of fish stocks [If we have the hard numbers referred to earlier, then no - this is false. If we are confident about the numbers, the age profiles, and the productivity, then in most cases individual stocks can be sustainable well below their single species MSY, and we can look at setting MSY for the ecosystem which encourages harvesters to develop more selective technologies, but acknowledges the level of selectivity in current systems. We do not have that level of science at present, but could have soon, with a little innovation in tagging and recovery programs]. In many cases the first indication of a problem is a drastic decline in catch as more modest trends are masked by expected variability and changes in fishing practices. [See last comment - better science would negate this, but would involve some major innovation in science practice.] The well publicised collapse of many fish stocks throughout the northern hemisphere, some quite well studied and intensively managed, also provides a signal to decision makers. [A detailed look at most of those collapses will show that in most cases it was the administrators (politicians) who failed to act on advice from fishers, not the other way around. Our ITQ system as an output control doesn’t suffer from the inherent weaknesses of input controls used in most of the collapsed fisheries. The politics of those collapses is also interesting to look at. We have the option of creating something to lead the world here - the 1996 Act as it stands is a great leap backwards.] Overall, the Government decided, despite acknowledging that higher yields could be generated in some situations, that the best interests of the country would be served by a legislative goal that minimised risk and was widely applicable. [This is itself a high risk strategy. As technology develops to the point that such selectivity is possible, having a legislative impediment to its implementation could be very costly to the country. At current rates of development, the science may be with us before the 1996 Act is implemented. Much better to allow for the development as it become feasible, as such a legislative lead would actually be a major incentive for investment in science. The current system has little or no incentive to invest in science, as it is likely to reduce TACCs.]
Fisheries research contracted by the Ministry of Fisheries became fully contestable on 1 October 1997. The Minister of Fisheries determines the nature and extent of the fisheries research services that will be commissioned in any given year. The Ministry runs a competitive tendering process to determine who will be successful in carrying out this research. The Minister welcomes science providers to submit tenders that employ innovative, cost effective approaches to carrying out research. [The problem here is the prescriptive nature of research. For maximum innovation the research requirements need to be expressed at the highest level possible, and tenders then evaluated on their merit. Similarly in any other field of endeavour.]
The Ministry has contracted projects that utilise remote data capture techniques for a number of years. An example of this is the acoustic survey technique being employed to estimate the abundance of hoki, southern blue whiting, orange roughy, and oreos. The development of the acoustic technique is seen as a major advance on the more traditional trawl survey techniques for these species. In addition, the Foundation for Research, Science and Technology has continued to fund a project on remote sensing of fisheries. The results of this work have been used to understand the distribution and abundance patterns of a number of fish species, particularly tunas and other pelagics. [And neither of these is the remote tag & release of fish that I referred to, where fish are measured, tagged, and released at the depth they normally live. The tags of a type that go under the skin, and can be detected and read electronically at processing sites.]
Fisheries Act 1996 Implementation
Greater efficiencies will come about in the short term and the long term from moving the responsibilities of certain services, subject to audited standards and specifications, from the Crown to contestable service providers. [Again, only if those standards and specifications are kept at the very highest level. If providers are forced to do things as the Ministry has done them, then there is no room for efficiency gains, and all we have done is add a layer of auditing to the costs.] You are correct in your assumption that a move to transferring responsibilities for certain services to rights holders may require some amendments to section 296 of the Fisheries Act 1996.
You have also identified that the Fisheries Act 1996 has a prescriptive nature. Although some revisions may be needed to move towards a more high level approach, it is unlikely that fisheries legislation would become, at least in the first instance, as high levelled as you have indicated. [Some significant movement towards high level is absolutely required if we are to make any progress.]
Hon John Luxton
Minister of Fisheries
The Ministers letter brings out a larger number of issues:
While true that some of the principles were discussed with industry, they were never agreed. Failure to reach agreement on these principles threatens any hope of voluntary compliance or effective management, and is the single largest threat to sustainability. The key principle of covering Catch only with ACE from the current year was never under discussion at any forum I attended. It was always defended as the untouchable principle. I have never seen any document, or heard any argument that gave a valid rational basis for this principle.
Any attempt to produce an alternative proposal without an ongoing interaction with the Ministry to produce a common understanding is doomed to failure (as the 1996 Act fails because the Ministry failed to get agreement on fundamental principles). This is not a trivial task, and requires an openness, responsiveness and transparency that is alien to both Ministry and industry.
Hard information on fisheries is scant in most instances, and uncertainties on TACCs can amount to thousands of tonnes per annum; while fishers face harsh penalties for taking one fish too many of the wrong species. These two facts do not sit well with natural justice or voluntary compliance.
There is insistence that TACCs be not exceeded on an annual basis, while most populations of fish consist of adults of many ages (with the noted exception of squid and flats - neither under threat), and a little flexibility in using ACE of adjacent years has no significant sustainability issues. The carrying forward of unused ACE without penalty (fish in the bank/sea), or paying a penalty (interest fee) to borrow against next year's ACE is a legitimate tool to foster voluntary compliance. A limit on what is reasonable flexibility could be quantified such that the flexibility forward (20%) and back (open but with high fee) is not large and the rolling average catch (say 3 year) catch would be unlikely to exceed 110% of the TACC. Exceeding that 110% average in any 3 year period would trigger a review of over-catch penalty payments in the first instance, carry forward rights in the second instance, and TACC review in the third.
Fisheries administration in New Zealand is approaching the point of collapse.
The ITQ system as introduced in 1986 has been a huge success in practical terms, with major recoveries in most threatened stocks, and sound business and management decisions in most cases. Administrative complexities, and the industry's tendency to litigate to resolve issues, has led to a conservative and inwardly focussed Ministry, intent on minimising risk to itself, and incapable of understanding the threat it poses to the industry as a whole.
The review which started in 1991 to simplify the Fisheries Act has instead focused almost exclusively on reducing risk to the Ministry administrators. The 1996 Act is highly prescriptive, and without agreed principles. If implemented it will create major civil unrest, and threatens to completely collapse the QMS. This would be a disaster for all involved.
It is not too late to resolve these issues, but it is getting very close to too late.
We require commitment and communication now, at a level we have not previously experienced.
14 Jan 1998 - Ted Howard