FISHING INDUSTRY NEWS ARTICLE ~ FEBRUARY 2014


FRAP 2013 – “THE WEIGHTING GAME”

There has already been much written about the fishing rights application process of 2013 (FRAP 2013) and we anticipate much more will be written regarding this process over the next year (including the content of High Court affidavits).

As most in the fishing industry will be aware, long term fishing rights were recently allocated in 8 different sectors under the FRAP 2013 process.

Controversy has surrounded FRAP 2013. The issues behind such controversy can be summarised into broad categories:

  • The consultation/policy/application invitation period;
  • The announcement/publishing of decisions;
  • Operations pending outcome of appeals; and
  • The merits of the decisions taken.

The previous long term rights allocation process ended approximately 8 years ago. Lessons should have been learnt and institutional knowledge gained from the positives and negatives achieved in the previous process. Fishing rights in the fishing industry are key to the catching operations of vessels, on land processing operations and thereafter marketing/exporting operations of the resulting product.

Although the previous long term rights expired at the end of December 2013, the industry operations and the businesses within which they are contained do not simply start when the right is allocated and end when the fishing right expires. These businesses are ongoing and require continuity to sustain themselves particularly with regard to the jobs created by such businesses.

The objects and principles contained in Section 2 of the Marine Living Resources Act (MLRA) recognise that the Minister in exercising powers under the act (including the power of allocating fishing rights) must have regard to certain objectives and principles (which are firmly entrenched in these sustainable fishing businesses). Examples of such objectives and principals are:

  • the need to achieve optimum utilisation of Marine Living Resources; and
  • the need to utilise marine living resources to achieve economic growth, human resource development, capacity building and employment creation.

In fact the rights allocated in terms of the MLRA are referred to as “commercial” fishing rights. The Oxford dictionary defines the word “commercial” as primarily interested in or done for financial profit.

As such, there is a legislative imperative that the process surrounding the allocation of commercial fishing rights must be conducive to ongoing commerce in the fishing industry. Without the ongoing commerce there would be no fishing industry to speak of and the other objectives of the MLRA and its policies, such as transformation and catch performance, would be academic.

Despite many associations and interested parties expressing their concern to DAFF during 2013 regarding the time constraints of the future allocation of rights and the appeals relating thereto, FRAP 2013 simply started to late with insufficient time for proper consultation on material issues relating to policy, criteria, effort and application forms. The result of this has been that the initial decisions have been rushed with the following possible negative implications:

  • The Delegated Authority not applying his mind properly to applications;
  • The Delegated Authority relying too much on the processing and screening of applications by service providers;
  • The service providers in turn making errors in data capturing and in the screening of applications;
  • Detailed reasons letters with score sheets not being sent to applicants immediately after the decisions have been made so that they can exercise their rights to appeal.
  • Insufficient thought and analysis being carried out with regard to the selection of allocation criteria and the weighting thereof;
  • Departmental infrastructure not in place to deal with the proper announcement and communication of decisions and reasons so that applicants are placed in a position to exercise their right to appeal;
  • Inconsistency in the manner in which applications are dealt with from sector to sector

From a commercial point of view due to the fact that DAFF has only announced the initial decisions on the day of expiry of the previous rights, the situation presents itself where previous commercial fishing rights holders operating commercial businesses who have been declined a further right cannot continue with their enterprise pending the outcome of the appeal procedure. The allocation of rights should have been done much sooner to allow for the appeal procedure to run its course prior to the expiry of the previous rights – the allocation of rights only ends at the conclusion of the appeal stage. What has resulted is a chaotic run on the Department to grant urgent exemptions to previous rights holders pending the outcome of their appeals. The need for such exemptions has been exacerbated by the fact that this time of the year is prime fishing time in many of the sectors in question.

With regards to appeals, the sending of decision letters and score sheets and the provision of proper reasons for decisions has been lacking for many unsuccessful applicants yet the Department has nominated the 21st of February as the date for submissions of appeals. This is simply an administratively unfair procedure in that unsuccessful applicants are in effect being denied the right to appeal as they do not have sufficient reasons for the decisions taken.

In addition in certain sectors there have been many new entrant applicants granted fishing rights. This begs the question whether there insufficient rights held back for appeal purposes. If all the new entrant applicants activate their permits and commence fishing on their fishing rights, and the unsuccessful applicants are all successful on appeal one doubts there will be sufficient rights to accommodate all these new entrants and the successful appellants. The process should have provided for provisional allocations to new entrants pending the outcome of appeals. This part of the process should have been carefully constructed. Again DAFF were warned of these consequences many times prior to the commencement of FRAP 2013.

As regards the merits of the decisions taken we are still in the middle of the appeal process and it is anticipated that there may be litigation (depending on whether agrieved applicants have the financial backing to pursue this expensive route). However looking at the criteria relied on for scoring applicants and the weighting granted, one wonders whether the decisions on the merits are fair and correct taking into account the objectives of the MLRA the general and sector policies.

Firstly, for new entrants and existing rights holders the same criteria and weighting were applied.

Secondly, the Department set % score for applicants as a pass mark to be allocated a right. By far the biggest controversy with regard to the criteria and weighting is the fact that investment was not a relied on as a criteria where as in previous rights allocation processes investment featured as a vital criterion. Thus in trying to achieve the bench mark score one was not given credit for investment. This of course can lead to many anomalies such as an existing black owned rights holder in another sector being allocated a fishing right as a new entrant, whereas a black owned operator in the sector in question who has a catch performance (on another person’s fishing right) , investment in his own vessel in the sector  together with employment of crew and who relies fully on the sector  does not get granted a right.

It is submitted that investment in a vessel should have been a key criterion in this allocation process as it was in previous allocation processes.

At part C of the General Policy one of the main cross cutting policy considerations for the allocation of a right was investment in a vessel nominated to harvest a resource. The relevant section states: “Investment in a vessel nominated to harvest the resource and in other fixed assets will be recognised as long as that investment demonstrates a genuine intention to share the risk of participating in the sector”

Furthermore, each of the sector policies specifically has an objective to promote investment in vessels. Also the specific balancing criteria referred to in the sector policies highlights investment in the fishery as a criterion which will be considered.

Despite investment being highlighted as of paramount importance in the previous general policy, in the previous sector specific policies, in  previous rights allocation processes (which would have encouraged current rights holders to invest and create job opportunities), and despite investment again being referred to as a key criterion in the current general and sector policies, it has been disregarded in FRAP 2013.

With investment in vessels and factories follows job creation in those vessels and factories. As these are commercial fishing rights underpinned by commercial businesses, investment is the key and should have been a strong scoring criterion in this allocation process as it has been in the past.

It is submitted that should the applications of successful and unsuccessful applicants be viewed in detail together with their scoring sheets, many anomalies and irrationalities will emerge – this begs the question whether those appealing and challenging their own decisions will have the opportunity to view other applications and score sheets as this is where the resulting irrationality will evidence itself.

DAFF’s decision to ignore investment completely in this allocation process would appear to fly in the face of the recently published Promotion and Protection of Investment Bill of 2013. This bill is to provide for the legislative protection of investors and the protection and promotion of investment as well as to achieve a balance of rights and obligations that apply to all investors. In terms of this bill investments include assets such as moveable and immoveable property e.g. vessels and factories.

The appeals process is currently in disarray as a deadline of the 21st of February 2014 has been set but many unsuccessful rights holders have yet to receive reasons letters/adequate reasons or score sheets and are not in a position to appeal. This deadline will have to be extended otherwise the appeal process will be rendered administratively and substantively unfair. Should the Department extend the date on which appeals may be lodged they will in turn have to extend any exemptions granted pending the outcome of the appeal process.

Despite the above controversy and issues with FRAP 2013 the harsh reality is that the survival of this process will ultimately depend on the financial ability of those aggrieved by it to challenge it to the highest level. But at the moment we are in the midst of the “weighting” game.