Sunday, September 6, 2009

Policy on the Transfer of Commercial Fishing Rights

In July 2009, the Minister of Water and Environmental Affairs published her government's final position on the transfer of commercial fishing rights in South Africa. In terms of the Marine Living Resources Act, 1998 (MLRA) fishing rights - once allocated to a specific legal or natural person - are not transferrable or saleable. To transfer a fishing right from one person to another requires the permission of the Minister under section 21(2) of the MLRA. So what of this policy document?

Its farcical. Its farcical because the total rationale and purpose of the policy is centred around the need to further transform the fishing industry and to consolidate the number of right holders and effort. The policy attempts to create a number of pre-defined scenario hierarchies as to which transfer application is more likely to succeed. The decision as to whether a right should be transferable must be based having regard to the principles under section 2 of the MLRA. Section 2 of the MLRA remains the definitive set of rules as to who is entitled to be allocated a fishing right. The decision-making processes cannot be limited to a selection of the objectives (see for example the Constitutional Court decision in Bato Star v The Minister of Environmental Affairs and Tourism, 2004 (4) SA 490 (CC)).

Further, it is our view that section 21(2) is an outdated anachronism. Once allocated, fishing rights should be tradable and saleable, thus ensuring that only the most efficient and committed stay in the business. Paper quotas and empowerment fronts can be removed entirely because efficiency and competition will simply not allow such expensive fronts to continue, especially in the current economic climate. Feike has long proposed a gradual and trial-based approach to implementing an independently transferable quota system for certain preselected fisheries, such as the Patagonian toothfish and KZN Prawn Trawl sectors.

It ignores some basic laws. The policy interestingly grants the Minister powers she never had under section 21(2), section 2 or section 18 of the MLRA. Firstly, the policy stipulates that where there is a sale shares in a company (unless the company is a listed company) or a sale of members' interest in a close corporation, and the sale results in a change of control (which is not defined), then a transfer of right application must be lodged. As section 21(2) speaks to a transfer of a fishing right, any attempt by this policy to regulate the sale of shares or members' interest is ultra vires the authority of the Minister and accordingly unlawful. Feike's advice to right holders intending to sell equity in their business - regardless of the quantum - is to proceed with the sale (subject to the usual regulatory approvals such as competition commission approval that may required, for example). No permission from MCM or its Minister is required. Why listed companies are conveniently excluded and under what legal authority is not explained. The policy is also unclear about whether this convenient exemption applies to privately owned right holder subsidiaries of public entities.

Secondly, the policy also confers upon the Minister the power to "monitor whether any large right holders (not defined) act in a manner contrary to fair competition practices". This is a most odd provision and confirms two things. First, the entire policy may be invalid in law as it is a policy promulgated contrary to the provisions of section 85(2)(b), which makes national policy development the prerogative of Cabinet. In other words, had this policy made its proper way through Cabinet first, the Minister of Trade and Industry would have surely objected to the attempt by the Minister of Water and Environmental Affairs to usurp the powers granted to the Competition Commission and Tribunal. Second, the Competition Commission is empowered by the legislature under the Competition Act of 1998 for the investigation, control and evaluation of restrictive practices, abuse of dominant positions, and mergers. MCM and the Minister of Water and Environmental Affairs simply have no authority to meddle in such complex commercial determinations.

It is our view that the "policy" on the transfer of commercial fishing rights should never have seen the light of day in its current form. There is no doubt that should it be challenged, a court of law will set the "policy" aside. Simply pick your ground of review.

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