by
L.C. Christy and G. Moore
Legal Office
FAO, Rome
Although some countries have claimed extended fisheries jurisdiction for over a generation, most claims are more recent, and most countries are still in the process of formulating their policies toward fisheries in their extended zones. One of the basic elements of such policies is the attitude toward foreign participation in the fisheries of the zone. There are three broad choices open to the coastal State: to prohibit or discourage any foreign participation, to grant access to wholly-foreign operations (licensing), to permit foreign access only in associations with national partners (joint ventures) or national operations (over-the-side sales).
These most be seen as broad categories, not as uniquely defined choices. None of them is truly exclusive; even a policy to exclude foreign participation will have exceptions dictated by the need for foreign inputs and markets, the presence of immigrant foreigners, the difficulty of defining and controlling the activities prohibited to foreigners. Nonetheless, each of the three might properly be described as the dominant policy of a coastal State toward foreign participation in fisheries.
1. LIMITING FOREIGN PARTICIPATION
Several countries have, officially at least, no foreign participation in fisheries under their jurisdiction and others seem bent on eliminating foreign participation to the extent possible. The ostensible reason for such a policy is to improve catches and opportunities for national fishermen.
Reducing foreign fishing can have a beneficial effect in several ways, but whether the benefits will be realized and whether they wilt exceed the costs are complex questions which will have very different answers in different fisheries. In a crowded, homogenous fishery, the exclusion of some (foreign) fishermen is likely to improve catches for those (local) fishermen that remain. The effect may be nullified if new fishermen then enter the fishery, but even so there may be benefits through increased employment, local procurement and marketing. Where there are fisheries on related stocks, reduction of effort on one stock may have unpredictable effects, even reducing availability of the other stock. Where the fishery is lightly exploited, reducing foreign fishing may have no discernible effect on local catches, although it would normally increase opportunities to expand local effort.
Whether or not reduced foreign fishing improves national fisheries, it may be very useful in avoiding conflict between different gear and different groups of fishermen. In the typical gear conflict, it is the local fishermen who are most likely to suffer losses, so the government's interest in reducing conflicts is quite clear. Even where there are no competitive or conflicting effects of foreign fishing, it may be strongly disliked by national fishermen. A government may thus have good political reasons for reducing foreign fishing or at least making it less vivable.
Foreign fishing is normally seen as a source of revenue and other benefits, against which any adverse effects on local fishing must be weighed. In some cases, however, the costs of administering and policing foreign fishing may make it unattractive regardless of effects on local fishing. Vigorous exclusion would itself impose costs of policing; a state might well decide to pursue no active policy, neither allowing foreigners to fish nor expending any effort to prevent them. This is not a rare law enforcement policy.
As there may be benefits in excluding foreign fishing, there are also dangers. The most serious one is where a country does not have the capacity to meet its fishing targets (whether in terms of yield, profit or other factors). Excluding foreigners would then imply expanding national effort, frequently into new fisheries and unfamiliar techniques.
Many countries find they possess few of the elements for such a development, beyond the resource itself. They thus confront the need to create economic organizations, import equipment, learn techniques, train personnel and find markets. Any one of these is a heavy burden, and attempting them all at one can easily lead to commercial disaster. Thus the advantage of a gradual phasing out of foreign fishing to make way for a gradual development of local fishing.
Even where a country is not lured into unprofitable ventures, total exclusion of foreigners may restrict opportunities to utilize unconventional resources, take advantage of fluctuations in abundance, complement local skills. Flexible arrangements with foreigners can be a buffer that allows fisheries management to respond relatively quickly to changing circumstances. Since it cannot always be predicted when and how foreigners might be used in a fishery, it is wise to avoid rigid prohibitions in fishing legislation, even where there is a general policy of exclusion.
2. ACCESS ARRANGEMENTS
Access arrangements for foreign fishing may be governed by bilateral agreements, licences, contracts or some combination of the three. They may provide for foreign fishing as such or for some form of association. (Considerations peculiar to joint ventures and other associated arrangements are discussed below; in this section it is assumed that the fishing operation is entirely foreign).
(a)
Bilateral agreements
Bilateral agreements have been categorized according to purposes as: phase-out agreements; reciprocal fishing agreements; commercial licensing agreements; and framework agreements for joint ventures. Phase-out agreement are by definition transitional and need not detain us. Reciprocal fishing agreements have greater long-term importance. Many fisheries are effectively internationalized by the coastwise movements of fishermen, who sometimes acquire a semi-local status. In other cases, seasonal or other factors make it economic to use the same fleet in the waters of two countries. Where such conditions pertain and political factors are favourable, the utility of reciprocal fishing agreements is clear. Actually reaching and implementing an agreement is not so easy, however. The two sides may not gain equally in the exchange; there may be difficulty defining the vessels eligible to benefit from the agreement; there may simply be too much friction and too little trust to allow the agreement to work.
Commercial licensing may or may not be based on a bilateral agreement, and in fact it may or may not even involve an actual licence, but we shall retain the term "licensing" for non-reciprocal access by wholly foreign fishing operations. An agreement governing such access has the potential advantages of gaining flag state co-operation in compliance control, which may be enhanced by a regional network of harmonized agreements, and of providing for transfer of non-cash benefits (such as training) from the flag state. Agreements also facilitate the allocation of surplus under the Convention on the Law of the Sea, which is essentially conceived in terms of inter-state obligations. It should be noted that agreements between coastal States and non-governmental fishing associations are also commonly used, both instead of and in addition to state-to-state agreements. The licence itself is normally issued by the coastal State under its national legislation, but this is not always the case. Some are issued by flag-state associations under an agreement, others are more in the form of contracts between the coastal State and the licensee, based on no specific legislation.
(b)
Commercial licensing
The main issue of commercial licensing is not the form, but whether to have it or not. The great advantage of commercial licensing arrangements is that they can be set up quickly, the terms can be renegotiated relatively easily and frequently, and they can be discontinued when necessary. This provides an opportunity to adjust the amount and nature of fishing effort without social and economic dislocations in the local fishing community.
Financially, commercial licensing represents the least risk. It provides a known and steady income which comes off the top of the operation (i.e., is not susceptible to financial manipulation through hidden profit taking) and is not subject to commercial risks. It is a rent paid directly to the coastal State government and can be used for development or other purposes at that government's discretion. Where foreign fishermen have a comparative advantage, this could be determinative. A related advantage is that the coastal State's financial commitment is minimal whereas development of national capacity normally requires capital.
Commercial licensing has some, though fewer, long-term or developmental uses. If proper catch reporting systems are in force, it can provide essential information on the resources available for fisheries development, through the only real trial - commercial fishing. Local development provisions can also be built into commercial licensing arrangements, through training and technology transfer requirements, the employment of local crew members on licensed vessels and requirements, such as local landing and processing of catch, designed to spur the development of local processing industries or the supply of protein to local markets.
The main disadvantages of commercial licensing are a corollary of its low-risk, low-cost, high-flexibility advantages. Even where development provisions are a condition of licensing, the unsubstantiality of the arrangement counsels against great expectations. A longer-term licence could be the basis for greater stability and commitment, but in that case a coastal State would probably expect more participation by locals - one of the kinds of association described below.
Another disadvantage of commercial licensing is the possible failure to receive the advantages: the fishermen may cheat, may not pay, may not report their catches accurately. The costs of controlling this tendency may significantly reduce the net benefits to the coastal State. Of course against this consideration must be balanced the cost of enforcing a ban on foreign fishing. For many countries, accepting reduced benefits and incurring less enforcement costs represents a net advantage.
3. ASSOCIATION WITH NATIONALS
There are a variety of arrangements under several legal forms that associate foreign fishing interests with coastal State citizens and entities. These include equity joint ventures, joint operations with or without profit-sharing, charters, over-the-side sales and others yet to be identified. All of these can be used in combination with each other and disguised as each other. National policies, however, frequently distinguish between joint ventures - which may qualify as local - and other arrangements which may or may not have any special status.
(a)
Joint ventures
For a long time joint ventures have been favoured by developing countries as a means of developing their own fishing industries. They have also, perhaps more commonly, resulted from foreign fishermen's seeking access in the face of measures to limit foreign fishing. If a local company or a certain percentage of local ownership is required, a company can be established or a partner found. Other joint ventures have been formed in fisheries - as in other sectors - for financial, commercial or technical reasons that had little to do with government policy.
The attractions of joint ventures to coastal countries are inherent in the motivations for their formation (as in the drawback of their use to evade restrictions on foreign fishing). As a means of development, the joint venture allows the coastal country to participate according to its capacities in an industrial enterprise without having first to master the technical and managerial skills needed to run it. The capacities of local managers and technicians may be increased as a result, allowing gradually greater participation. Industrialized countries stand to benefit in the, same way, if to a lesser extent, since all of their fisheries are not equally advanced technically or commercially. This is especially so for resources with particular market requirements.
The developmental objective is not inconsistent with another advantage of joint ventures -complementarity. The different skills, costs, markets of two countries or companies may be combined to maximum advantage. This is easily seen where a country can offer resources, shore facilities and low-cost labour, and a foreign company possesses capital, management and market access.
The drawbacks of joint ventures may be as great as the hopes placed in them. The greatest is risk, both commercial risk, which is generally high in fishing, and the risk of financial manipulation by the dominant partner. Both risks are especially significant to developing countries, which can least afford losses and have generally less sophistication in preventing them. Experience with industrial development assistance in the industrialized countries shows, however, that they too can be the victims of misplaced confidence.
(b)
Other forms of association
This is an open category, covering at least three kinds of arrangement. One, typified by joint fisheries operations, involves foreign vessels fishing under foreign control. A middle category comprises foreign contractual services, including chartering of vessels, to a national company. Finally, there are arrangements typified by over-the-side sales whereby foreign interests conduct ancillary operations but do not participate in the actual catching of fish.
To the extent that these hybrid arrangements allow complementary skills and resources to be combined to mutual advantage, they must be seen as beneficial to both the coastal State and foreigners. This is easily seen in - but not limited to - over-the-side sale of products Without an attractive local market. These offer an especially interested possibility for development of artisanal fishermen in response to favourable world markets.
A reason for coastal State recognition of foreign association with nationals lies in its inevitability. It is very difficult in the modern world to exclude all foreign participation in fishing, and as soon as some foreign equipment, financing, technicians or markets became involved, it is very difficult to define "fishing" in such a way that foreigners cannot evade restrictions on their activities. They can buy company shares, enter long-term contracts, acquire processing plants, and do other perfectly legitimate things that have the effect of placing them in the fishery. There is an advantage, therefore, in a policy that recognized this and aims at setting the most beneficial conditions.
There are two principal disadvantages with these miscellaneous forms of association. One is that the foreigner will be attracted by the most profitable aspects of an operation, assuming the marketing role, for example, and leaving catching to the locals. Even where the balance between the parties is fair, the coastal State may suffer from the loss of national value added. For example, even if chartering foreign boats is cheaper for the fisherman, it reduces the sales of local shipyards.
The second disadvantage of these arrangements, in common with joint ventures, is their use to evade measures designed to limit foreign and favour local fishing. Local ownership requirements are easily evaded through the use of straw men and creative charter, sales and financing agreements. This in turn allows foreigners to benefit from favourable conditions that might be intended for nationals. With the difficulty of completely excluding foreigners, the only two responses are either to equalize conditions for everyone or to maintain a continual watch.
There are several different approaches a coastal State can take to regulating such a heterogeneous category. One is to deal with it as a whole by defining "fishing" or "foreign investment" very broadly and then regulating all of their manifestations. Within such an approach different positions can be taken toward different kinds of arrangements or individual judgements can be made in each case. The disadvantage of this approach is that it creates a considerable administrative burden. It may, however, be the most appropriate in a relatively small country where even modest investments would affect important national interests.
A more common method is to regulate not in terms of the category, but of particular elements of fishing. Typically these would be the definition of "fishing" or "fishing boat" and the definition of nationality. Thus if "fishing" only includes catching, foreign mother-ship operations would be possible, but not if fishing includes catching, transporting and processing. If the nationality of a fishing boat is defined by the nationality of its operator, it may be possible to charter a foreign-owned boat and fish on local terms. If nationality is defined in terms of the owner, skipper and place of construction, chartered and even purchased foreign vessels would fall under the category of foreign.
The disadvantage of depending on prior definitions is that they are too static. As soon as a regulated element is defined, arrangements are invented to circumvent it. And if the definition is tight enough it may then prevent arrangements that would be mutually beneficial. But this is probably unavoidable in regulating a major industry.
4. CHOOSING THE POLICY
It is evident from the foregoing discussion that any coastal State's policy toward foreign participation in its fisheries will depend on a combination of factors that is likely to be unique, both to the state and to the time. Each state therefore faces the necessity of developing its own policy and of constantly up-dating it. Nonetheless, there are some principles that seem to have more general application.
One is that the calculation of costs and benefits is complex. This is largely based on the proposition, examined at greater length in the paper by Gulland, that there is likely to be a significant interaction between foreign and local fisheries, even when they seem to be concentrated on different stocks. The problem is compounded by the fact that different fishermen and governments are all likely to have different combinations of fishery objectives, which are not easily weighed on the same scale.
Another general principle is the need for a flexible policy to meet changing circumstances. Resource situations may be poorly known or variable or both; the fishery will change in response to general economic developments as well as to the resource situation; both local and foreign fishermen will alter the situation further by reacting to the fishery policy itself. To the extent these factors dominate any fishery, policy would tend to favour those forms of foreign participation that are easiest to control and to eliminate where necessary. Where there is enough stability to favour long-term development, more stable forms of foreign participation might be enlisted in aid of it. The necessity of longer-term guarantees for longer-term investments does not, however, eliminate the need for continually up-dating the policy.
In all but very simple situation, coastal States will probably find that there is a use for all of the forms of foreign participation as well as for its exclusions from some fisheries. Where resources are unexplored or very lightly exploited, commercial licensing might be the best way to use them while learning about them. Where local fishermen are unable to dispose of catches for lack of processing or marketing facilities, arrangements with foreign companies for either shore- or ship-based processing may be the answer. Where a qualified local partner and other conditions exist for a major commitment to a particular venture with a suitable foreign partner, a joint venture can be the right form.
