NEWSFLASH – Judgment in Oceana Section 21 Challenge

On the 2nd of June 2011 the Honourable Judge Cleaver handed down judgment in the Western Cape High Court in the matter of Oceana Group Limited and one other vs The Minister of Agriculture, Forestry and Fisheries, and 3 others. Due to tight time constraints and the need for industry to be aware of this judgment, a more detailed unpacking of this decision will follow in the near future.

In brief, Oceana challenged the legality of the Section 21 Transfer Policy published by the Department on the 31st of July 2009, alternatively they challenged the legality of certain paragraphs contained in the transfer policy.

The core provision in the policy upon which Oceana based their case was in paragraph 2.9 which reads as follows: “for the purposes of a transfer of a commercial fishing right the level of transformation will be assessed on the basis of ownership and management control.”

Oceana’s case was that by referring only to “ownership and management control” in the transfer policy the Minister was ignoring the other elements of the BBBEE codes of good practice which the Minister was obliged to take in account.

In reaching its decision the court summarised the various provisions applying to the allocation of fishing rights as set out in the Marine Living Resources Act and in the General Policy for the allocation of fishing rights. Thereafter the court discussed in detail the relevant sections of the BBBEE Act/codes and in particular Section 10 thereof.

According to Oceana’s argument, the BBBEE codes of good practice were not in application at the time of allocation of the long term fishing rights but now had come into force and therefore the Minister was obliged to apply such codes in terms of Section 10.

Section 10 states that “every organ of State and Public Entity must take into account and, as far as is reasonably possible apply any relevant code of good practice…..”.

The Minister argued that in the case of the transfer of fishing fights it is not “reasonably possible” to apply the BBBEE codes and that if this was done it would lead to serious practical problems and may be detrimental to the transformation progress already achieved in the industry.

The Minister raised 4 main grounds to substantiate the argument that it would not “be reasonably” possible to apply the codes with regard to the transfer of fishing rights. The court in turn accepted these grounds as being applicable.

In summary the court’s reasoning was that to apply a different system of measuring transformation than that applied during the allocation of the same rights would in all probability undermine the long term rights process and the progress made to date with transformation. In addition it may create new and difficult practical problems. In this regard the Judge stated as follows: “it maybe that when new licences come to be issued again in due course, the fishing industry will have been sufficiently transformed to allow the codes to take pride of place, but time will tell.”

Of vital importance to industry is that the court clarified that the policy had to be applied flexibly by the Minister and each application for transfer would be judged on its own merits. Therefore issues such as jobs and sustained economic growth could be taken into account when decisions were made.

Other arguments were also dealt with in the judgment but this article deals with the main challenge and the court’s decision thereon.

In closing then, if one is contemplating a transfer of a right, the key focus should remain on the effect that the transfer will have on black ownership and management. If black ownership and management is being reduced then this will have to be counter balanced by submitting strong arguments on how other aspects of transformation will be promoted i.e. job creation, investment, corporate social investment, employment equity, etc.

The key issue now going forward is getting the Department to deal with Section 21 applications so that the industry can receive decisions; appeals can be logged if necessary and the process taken forward one way or another.

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