Proceedings of the Standing Senate Committee on
Fisheries
Issue 11 - Evidence
OTTAWA, Thursday, October 1, 1998
The Standing Senate Committee on Fisheries met this day at 8:30 a.m. to consider the questions of privatization and quota licensing in Canada's fisheries.
Senator Gerald J. Comeau (Chairman) in the Chair.
[English]
The Chairman: Before we introduce our witness this morning, I would like to inform the committee that we have a new clerk. Many of you will know Barbara Reynolds who has been around the Hill for many years. Barbara has now moved to the Senate and will be the clerk of our committee. On behalf of all committee members, I would extend a warm welcome to her. We all know of your efficient work, and we are pleased you have joined our group.
Today we continue our study of the questions of privatization and quota licensing in Canada's fisheries. This morning we have as a witness Professor Phillip M. Saunders, an associate professor at Dalhousie Law School and at the School of Resource and Environmental Studies at Dalhousie, and a Research Fellow at the Centre for Foreign Policy Studies. Professor Saunders teaches maritime and environmental law, international fisheries law, judicial remedies, international advocacy and torts. He has also researched the legal aspects of individual quotas.
Professor Saunders we appreciate you taking time out of your busy class schedule to assist our committee this morning. I understand that you had to do some schedule juggling this morning and we appreciate that you did find time to assist our committee in its study of this very important subject. Professor Saunders, the floor is yours.
Professor Phillip M. Saunders, Associate Professor, Dalhousie Law School and School for Resource and Environmental Studies: Mr. Chairman, I very much appreciate the opportunity to speak to the committee and perhaps answer some questions. I do not profess to be an expert on economics and other aspects of ITQs and related matters of privatization, but I believe that important legal issues arise respecting privatization and ITQs that require us to use caution in approaching these matters. I am glad to see that a committee is taking the time to review this in detail.
I know you have heard the background of ITQ approaches and where they fit in the legal notion of property rights and fisheries. I will speak briefly about the claims that are made for these approaches and what the benefits are supposed to be. I will also have a few comments on the validity of those claims and perhaps voice some doubts about some of them. Finally, if not conclusions, I have perhaps cautionary notes because I do not think we are yet ready to draw conclusions on all of these matters.
With respect to the background, it is important to remember that the use of ITQs and other forms of quota management do not really stand on their own as something completely new or different in theory from other management approaches to fisheries. In essence, most management approaches proceed from two central assumptions based on ideas about the legal status of fisheries resources. The first assumption is that fish are common property, a common property resource owned by no one until they are caught, which has been true in Canada and other common-law jurisdictions. The second assumption is, if left unregulated, individual, competitive behaviour will inevitably result in the destruction of that resource because of the lack of private property and conservation incentives. Therefore, we can either make it private property, which has often been politically unpalatable, or we can take regulatory steps to mimic the effect of private propertyon making decisions that take into account the effect on the resource.
Most fishery management schemes are tied up in one way or another in trying to replicate the effects of ownership as opposed to common property. Whether we restrict the number of entrants, impose quotas, allocate quotas, impose trip limits or have enterprise allocations, all of these are generally for the same reasons, but some are distinguishable because, rather than just attempting to restrict capacity or methods, they have moved towards assigning property or quasi-property rights in a fishery.
Enterprise allocations, in the past especially, were not full property rights as we understand personal property or freehold property, but if we think of property as a bundle of rights, then clearly these things have characteristics of property. The most important characteristics in this context, the characteristics of property, would be exclusivity. This means that you have exclusive possession, that you can exclude others from the use, that there will be some set, maximum duration, or a permanent duration, that there will be security of tenure, that you are secure in your knowledge of your ownership, and finally, alienability, that is, the right to sell or transfer, dispose of that right as you wish.
Enterprise allocations and other forms of quota have some of those characteristics, but usually there is a fair bit of restriction on the ability to alienate, sell, transfer the resource free of restriction. There may also be time limits.
What ITQs really represent in the broader context is a further step along a continuum towards full property rights, even if they are not full property rights. Generally, depending on the scheme, there have not been full or absolute property rights where these have been implemented, but it is more like property than an enterprise allocation or a quota. The key seems to be alienability, that is the ability to sell or transfer even though it is not free of all restrictions. Therefore, an ITQ holding or right is not fully private property. I believe most responsible proponents of ITQs would reserve some ultimate regulatory power in the hands of government to remove or reduce those quotas if necessary. If not, in my view, this is an extremely dangerous idea.
You may require them to be subject to conservation restrictions so that they can, ultimately, be taken away, but this does not mean they are not property. For example, even our land, within the constraints of the law, can be taken away by expropriation. The duration of ITQs may be limited. It is a matter to be settled. To whom they can be transferred might be limited. I will return to that point.
An ITQ is still a form of property. It is not property in the fish, but a property right in the quota itself. There is an important distinction. It is a question of how much like private property you want it to be. You have more or less permanency; you have more or less power of alienability. The key for the industry is probably whether it serves the functions of property that they need it to serve: Can you get a loan on the basis of this? Can you find a willing buyer for this property because the security of tenure is good enough? Can you enforce a contract of sale? If this scheme is structured properly, the answer to most of these questions would be yes.
Other quotas and systems are in operation. In fact, with respect to other quotas under management regimes, cases do indicate that quotas can be treated as property for the purpose, for example, of sale of goods.
If that is what they are -- just a step further towards property but not necessarily all the way, what claims are made for these approaches? Presumably, we would only move towards the creation of quasi-property rights of this type, remembering that it goes against several hundred years of legal development,because we perceive that there are some particular advantages to be gained in management. What has been claimed for this approach varies from individual to individual.
It breaks down into some key issues: First, increased efficiency from an industrial sense, as with enterprise allocations to some extent. It is claimed that the utilization of capital and labour is more efficient. It is deployed on the logic of the industry and marketplace rather than on some bizarre regulatory structure which everybody immediately circumvents. As well, as claimed by Dr. Lane who appeared before this committee, it allows better long-term planning of investment activity. I will also return to that point.
Administrative efficiency is the second broad claim -- that it is easier for managers to deal with this type of system. There tend to be fewer players because of eventual concentration and accumulation of the ITQs. Probably more important, you are not trying so much to regulate how and when they do their work, which reduces the need for micro management. At least, that is the claim. Others would say that there is still the incentive to circumvent the regulations, of course, because it is a quota system.
I do not want to spend my time on these two purported advantages. Other people have appeared from government and elsewhere who I think are more competent to deal with them. Rather, I want to look mainly at the final type of claim, the benefit that is seen for ITQs, that when you increase the property-like characteristics of these allocations, you promote sustainability and conservation.
There are at least three general arguments put forward in this regard. The first is that you may reduce overcapacity. A smaller number of rights-holders trying to operate more efficiently on a guaranteed resource allocation will supposedly reduce the capital input and thus reduce the overcapacity, the by-product of the industrial efficiency argument noted above. The second argument is that a more enforceable approach will actually be enforced. This is better than more stringent guidelines which may not be enforced at all, so that improves conservation. Third is the argument, made most strongly by Dr. Lane before this committee, that individual rights-holders will look after the resource more carefully to protect their investment, to protect what they own. This is more of a psychological claim -- that it results in a change in attitude and a change in levels of responsibility.
What is the validity of these claims? I want to raise a few questions about the claims first, to be negative for a moment, though I would stress I am not entirely negative about the idea. First, in general, contrary to the assertions of this as a simple matter of fact, it is not all that obvious that ITQs or other property-based approaches automatically deliver these benefits or that they will deliver them in all situations.
Focussing on overcapacity to start with, the assumption may be made that overcapacity is the sole or major problem. In some presentations, from reading through the transcripts, I notice that overcapacity is occasionally equated with the numbers of people in the fishery, and that is just not so. At least in some cases, it is possible that other problems may be as important, such as habitat destruction, gear technology, climate change, and the interaction with the natural cycle of a resource. We may have identified the problem as a lack of property rights and therefore we find we must solve it by the use of property rights and improvement of those property rights, but this conclusion is wrong if the assumption is wrong. It looks as if we are wandering around with a hammer and everything starts to look like a nail.
Furthermore, even if overcapacity is the main problem, what does that mean? It is important here to remember that overcapacity in the context of the fishery is not some single, absolute number. It conveys a couple of things. First, it conveys a relationship of the capacity to the resource, a resource that fluctuates over time. Garrett Hardin's famous analysis of the tragedy of the commons was predicated on an essentially static resource in which the only variable that m(null)attered was the amount of exploitation that occurred. Clearly, in fisheries, the resource fluctuates on its own, partly caused by the interaction with human exploitation, but partly not. Therefore, you may get the capacity down to a level that you want and you find that next year it is too much because the resource is not static. It is a relationship, not an absolute.
Are ITQ holders any less likely to put pressure on the minister not to decrease their allocations when this happens than groups of quota holders would be? The alternative, if you make these long-term or permanent ITQs, may be that the minister cannot reduce capacity when it has to be done, and then there is no solution to the overcapacity problem.
My second point is that type of capacity is important. Our first thought here tends toward the size and type of vessel. That is important, obviously, but there is another problem. Simple calculations of capacity may not be enough, partly because of the fluctuations over time, but also because we need to look at the types of owners and the structure of the enterprises. Is the impact of capacity the same when a vessel is owned by a small, perhaps more flexible enterprise, as when it is owned by a publicly traded corporation, for example? Could you argue that there might be greater pressure to demonstrate consistent returns on investment quarter after quarter in a corporation? If so, then this becomes a much more continuously applied form of capacity, and the time element is important. Such a type of capacity or such an enterprise is unable to deal with the inevitable downturns imposed by the nature of the resource and cycle of the resource. That is at least a possibility.
What about enforceability? I have not too much to say on this topic but I would say yes, in theory. However, there may be two problems. The first is that saying this approach may be more enforceable than the current system does not answer the whole question. We need to step back and decide whether the gains in enforceability could be obtained in ways other than the use of property rights. Second, the question of what you are enforcing is still important. Unless you are willing to sacrifice all pretence of conservation, there is a need for some ultimate regulatory control. This must include an ability, at minimum, to reduce ITQs in response to the natural cycle of a resource. Even if you get all your numbers right on the capacity, on the reproduction of the resource, as we have learned, that resource can still be affected by unexpected environmental or other factors necessitating a reduction.
That raises the question of political enforceability, one that we have had in the past and one that may get worse under such a system. Take as an example a very high concentration of ITQ ownership in a vertically integrated company that holds those ITQs. The system does not have to be that way, but if it is, what kind of pressure can that one interest bring to bear on a minister to avoid a decrease, necessary though it may be from a conservation standpoint? When the threat may be to shut down an entire community or group of communities at once, how enforceable is that in reality?
Finally, there is the shift-in-attitude question, the psychological aspect. Although it is often cited as a simple fact, including in some presentations, this is problematic because it is speculative even in the individual context. I think it is necessary to raise a couple of points as to where these instruments may be more or less effective with respect to the shift in attitude, the responsibility idea.
In particular, I return again to the context of publicly traded corporations. Assume that we have an accumulation and assume that it ends up in a larger corporation. How on earth can we claim that a corporation with executives in one place, shareholders in another, and a board of directors and employees, operates with the same psychological motivations to its property as we identify with an individual? Corporations may be persons in law, but that is all.
What is the corporation's motivation? Well, it will vary. It may include, for financial reasons, protecting its capital asset. That is important, but it is much more than that. It is subject, for example, to the whims of the stock market. Nowadays, with the rapidity of trading and the impact that is quickly imposed on a company, it could be argued that corporations are under pressure to turn a profit on a quarterly basis, quarter after quarter after quarter, or suffer the consequences, even if that should conflict with the cycle of a resource that cannot sustain that pressure all the time.
Return on investment is really the key to an assessment of many corporations' actions. Hypothetically, they could be quite willing to destroy a resource and, as a by-product, a community, and move on to something or somewhere new so long as the return on investment is appropriate.
By way of example, remember that there have been land-based extractivee resources like mining, and perhaps to a lesser extent forestry, that have had fully or almost fully private property rights in the resource already. In the logic of a corporation, because of the nature of the business, on occasion they have proven themselves willing to wipe out a resource or abandon and destroy a community once an investment has paid itself off. That is their responsibility to the shareholders. We cannot be certain that the fishery would be different.
On the other hand, the motivation and time horizon for an individual in a community, or perhaps the community itself, may be based on something longer than a financial quarter, because they intend to stay.
By way of conclusion, ITQs or other property-based solutions may be appropriate in some places and in some contexts but not others. If unrestricted, accumulation and concentration may eliminate some of the key benefits that could be obtained. By way of argument, it may be most beneficial where these ITQs are most restricted in terms of transferability. For example, perhaps keep it within a community. Keep the size of enterprises small enough that the ownership notion and the responsibility notion mean something. Try to restrict accumulation, which eliminates the possibility of local level management, which is another benefit which has potential.
They might be best in particular types of fishery, based on experience, more static resource, clams, for example, or a more static fishery method as for herring may be more successful. They seem to be more amenable to the notions of property because of their static nature.
Next, you need to carefully consider the causes of the problem you are trying to address. ITQs may deal with property rights but lack of those property rights may not be the only problem. They have to be sure that lack of property is the primary or only cause.
In assessing experience with ITQs in other places and in Canada, I would say: wait a bit. Often, these things are proclaimed as a success and a cure-all before the long-term evidence is in. I was reading an article, written in 1988, on the massive success from a conservation standpoint of enterprise allocations in the East Coast of Canada. It took us a number of years on the East Coast to really destroy a fishery. There is evidence coming in now, at least from one of the New Zealand cases, that the long-term effect, once the resource goes through a full cycle, may be different. Be certain the conditions are the same for the success story as they are for the proposed application in Canada.
Next, in assessing the contribution of ITQs to sustainability, we need to define sustainability as something more than efficiency. We need a sustainable industry; we need a sustainable community; and we need a sustainable resource. Not all participants will mean the same thing when they use the word "sustainable".
Finally, beware of claims, I would argue, that a simple change in legal relationships to the resource will solve problems with natural resource management. Cleverly crafted legal obligations, whether related to the total allowable catch or quotas, will not force the resource to behave in predictable, amenable ways which suit a business plan. That is at the root of the problem. It worries me when I hear that one of the key advantages of an ITQ is that it will enable industry to plan over the longer term for its investments. This was put forward by one previous speaker. My response to that would be that it might let them pretend to plan their investment but, unless someone convinces the fish to cooperate, that planning is largely an illusion.
The Chairman: Thank you for your presentation, Professor Saunders. This was an area of our study on which we needed more elaboration and, indeed, you have done just that this morning. Your presentation is very timely as well because, at our next meeting on October 20 we will be talking with people from New Zealand who have gone all the way to full privatization of their resource. Your testimony this morning will help us prepare for the types of questions we will want to pose to them at that time.
Having said that, we will go on to members of our committee. Senator Stewart will lead off the questions.
Senator Stewart: I agree with you, senator, that the analysis of the nature, at law, of individual quotas is extremely helpful. We are all, I am sure, grateful to Professor Saunders for having provided us with that.
I have a special reason for being thankful, and that is that I have argued in this committee that the issuance of a license to fish lobsters, for example, has an aspect of propriety about it, so that individual transferable quotas is not an entirely new approach to fisheries. What you have said this morning shows how complicated the concept of property is.
Toward the conclusion of your remarks, you focussed briefly but succinctly on the argument that individual transferable quotas will encourage natural resource management. What concerns me is the problem of the by-catch. The quota may be for one species, but what about the by-catch? Would the individual transferable quota be likely to promote better natural resource management in the area of the by-catch problem than general quotas, community quotas, for example?
Mr. Saunders: That is an excellent question, senator. My response would be no, I do not think it does. When I was trying to state the positive case for the management benefits, I was, in a sense, trying to make some of the arguments with which I might not necessarily agree to set out the groundwork. The question of the circumvention of the regulations, even under an ITQ, is a similar problem to any quota: You have a quota and your interest is in obtaining that particular species. That is what you do primarily. The by-catch problem is a serious one.
There are two points: One is that it illustrates this idea that you have to identify what the underlying management problem is before you decide whether this is a solution. Second, it would promote the argument that these may be more appropriate in certain types of fisheries where by-catch is less likely, such as the static sorts of fisheries where by-catch is not as big an issue. I would agree with you, and I add those points.
Senator Stewart: Now I have a different, a much more general and, perhaps, more difficult question. It deals with the relationship between a society on the one hand and industrialization on the other. Have you thought of the implications for society in Nova Scotia, Prince Edward Island, New Brunswick, and Newfoundland, of introducing the factory model, the industrial model? We are seeing it happen in agriculture with bigger farms, larger herds, in fact, increased milk production. Three or four farms are doing what 20 or 24 did formerly. One wonders how far one wants to go in this direction.
Carry the same analysis over to fishing. Does society exist for the market or do we use market approaches for the benefit of society? Is the means, or one of the means, becoming the end under our general approach and, specifically, under our approach to individual transferable quotas?
Mr. Saunders: Senator, I will put the caution out first that I do not proclaim to be an expert in economics and sociology, but I will give you my opinion, which is the opinion of someone who comes from a small community in this region. Ultimately, what this debate should be about is the sustainability of the society that we are trying to live in on the East Coast. It is a society with its own way of life. Simply focussing on a particular form of sustainability, which I think at times has been the case, the sustainability of an industry or an enterprise within an industry, is too narrow a view of sustainability. Professor Charles has done some work in this area, the notion that: When you are dealing with what has been a public resource, why do you not consider the public cost that might go along with the particular management approach to it?
If we are looking at an unrestricted, unregulated approach to ITQs, the argument is there that we move to what you call the "factory model". I believe that one of the by-products of that model is the destruction of small communities, and that the rest of society pays for that external cost that the industry does not in some ways. I do not think that is the way to go.
The argument back is that hard-nosed business reality requires you to do it the other way. I do not think that is right, either, partly for the reasons I have suggested that it does not take into account the fluctuation over the long term, the inevitable fluctuation of a resource no matter what management regime we try to impose on it. A smaller, more diverse and flexible industry may in fact be more efficient in the very long term. Over the short term, it does not appear that way because it is much more efficient to go out and take an awful lot more and get it to market a lot more quickly, but that is not necessarily true over the long term if the product of that activity is essentially to destroy the resource or effectively destroy it.
Senator Robertson: Professor Saunders, your explanation this morning has made my thinking clearer on the issue of property rights, the quota holdings. In many instances the quota holdings are used as collateral on loans and might even be divided in a divorce settlement. The DFO takes the position that the fishing permit is a privilege authorizing its holder, subject to the discretion of the minister, to participate in a given fishery. It is not a grant of property, either in the fishery or in the fish. It does not privatize the resource. They seem to have a rather clear idea or picture of this.
If you were measuring the legal status of fishing licences on a percentage basis, 1 to 100, what percentage would allocate to a property right? What percentage would you allocate to privilege? DFO always backs away from saying that it is a property right. I am not saying they are wrong in this, but it is very confusing.
Mr. Saunders: You are right, it is confusing. You have had previous hearings that dealt with instruments such as the Magna Carta. I am trying to avoid mention of the Magna Carta. My students always glaze over when I do, but I must, however, refer to it in this context. It established the fundamental position on which DFO bases its position, which is that there will be no grant of property in fisheries post Magna Carta. We do not have to worry about the pre-Magna Carta period. Post Magna Carta, there will be no grant in fisheries by the executive, by the Crown, but the legislature, by clear and explicit act, could grant such a right.
The position that a license to fish is simply a privilege may be overstating it. For practical purposes, they go beyond that because there are some administrative restraints and administrative law covering what fairness should be employed in revoking one.
Furthermore, some licenses, to my understanding, can be bought and sold. Once it can be bought and sold, it is much more like property. I would say something that can be bought and sold is moving towards 50 per cent property, although I do not like assigning percentages.
When you move towards an ITQ, you go beyond a licence. You are into an identifiable entitlement. Depending on how you structure it and how you structure the minister's capacity to remove it, because all of that has to come from statute, it is more or less property. The forms in which it has been used would constitute well over half property. The key thing for each holder of a licence, a quota, or an enterprise allocation is if it is property for the purposes that the holder needs it to be property. If the holder needs a bank loan can it be used as collateral? Can it be sold to his neighbour? If he wants to keep somebody else out of this fishery, will it do that? Those are really the questions that define whether a particular one is, or is not, a property.
When you move to such things as the herring fisheries, it starts to look much more like property, but simple fishing licenses, a general commercial fishing license, is at the lower end of the scale.
Senator Robertson: Professor Saunders, have you worked with the government on the proposed new fisheries bill or are you a consultant with DFO?
Mr. Saunders: No, not at all.
Senator Robertson: Then you may not be able to assist me in answering my next question. We were told by a member of the House of Commons that the public right to fish will be taken away by this new fisheries act. It is heading in that direction. Are you familiar enough with the proposed fisheries legislation to respond to that statement?
Mr. Saunders: I am to a certain extent. I think DFO would probably take something like this line, and Professor Wildsmith has written in this area. The public right to fish exists and cannot be abrogated by any means other than the legislature taking action. To say it is taken away is, in a sense, incorrect because it was only ever a public right to fish subject to the actions of the legislature in regulating it legitimately. There are legal arguments out there now, and I believe there is a case before the courts, that to act by administrative fiat would clearly be the Crown acting without explicit legislative authority, and that is an abrogation of the public right to fish which is permissible since the Magna Carta. I suspect that issue will be determined in court.
The problem that arises in the legislation -- and, partly, this is a political debate -- is how far you go in assigning discretion to the minister to assign or not assign these rights or to take them away. I would suspect there could be an argument made that, if the minister had too much discretion to act, essentially, as the executive to take away the public right to fish, the legislature had not acted explicitly to do it itself and that, rather the Crown was responsible for this. That would really have to go to a court.
The Chairman: Before we go to our next question, I would like to continue somewhat along this line with the question of quasi-property or property.
Let us take a hypothetical example. Suppose an ITQ holder were to precipitate a court action in order to determine once and for all whether the property he or she holds is a property right. This person might wish to sell the licences, the ITQ or IQ or EA, to a foreign firm because it commands a higher price. Suppose the minister were to say, "No, it cannot be done because we do not want it to be done". Suppose this person were to take this matter to court and say, "This is my private property. I have a right to do whatever I deem appropriate." We know that DFO is very sympathetic to the concept of ITQs, and some would suspect that there is DFO sympathy towards full recognition of ITQs as property rights.
I might give a few examples of that. Recently, there were some DFO press releases calling ITQs permanent. On two occasions, I have seen DFO calling ITQs permanent assignments. It sounds very much like a property right to me.
Most individual quotas started out as being IQs and very quickly wound up as ITQs. Again, it goes along the continuum of property rights.
I would like to point out that, most recently, with the minister's announcement of a panel to look into the question of partnering, a press release indicated that there was general support from stakeholders to the concept of partnering. That came as somewhat of a surprise to me. They went on to say that the problem is not with the concept of partnering but with the way the partnering will be applied. Again, that came as a slight surprise to me. I will not go into the full details of how the press release went into this subject. In any event, I think some questionable statements were made.
Let us get back to our hypothetical case of someone taking the minister to court. In your estimation, what might happen? I know I am putting you in a bit of a bind on this. I will pose another question if you cannot respond to that.
If this court action were successful on the part of the ITQ holder, what would happen if he were successful? Would his property not come under provincial jurisdiction and at that point the federal government would no longer have any say in how this person executes his license?
Mr. Saunders: Although admittedly speculative, Mr. Chairman, it is an excellent question. On the first point of whether he transfer in an unrestricted way, for example, to a foreign party, depends completely on what restrictions are placed on the transferability in the legislation. It is important to remember that, although there may be a property right in the quota, and there is, it derives from a grant in the legislation or else it cannot exist because of the nature of fisheries in common law.
If the system is properly structured to restrict transfers, and how those transfers can be made and where those transfers can be made, it is still a form of property, but it is not unrestricted transferability. If there are no restrictions, then I think somebody presenting a challenge in that sort of circumstance might have a very good case that there is nothing to prevent them from selling the right that they have, which may be limited in other ways, if that limitation is not there.
On the question of the application of provincial law, again, there is a fine distinction to be drawn here. The federal government or the federal legislature creates the right. It may be subject to provincial law if it is treated as property in provincial law under a "Sale Of Goods Act", for example. That is a good example. If so, then, yes, within the province it is being treated as a piece of property that may trade. That does not remove the federal interest in it, however, through its jurisdiction over fisheries.
Legislatures do not bind subsequent legislatures, no matter how permanent they say these matters are. If the federal government had the capacity to remove the ITQ, then ultimately the federal legislative power over the fishery would still be the dominant power. My initial interpretation of this is that the additional right that they have in provincial law is, in a way, tangential to what has been granted them at the federal level. That would be an appropriate way to look at it. It does not trump the federal jurisdiction.
The Chairman: I return to the concept of writing into the legislation some kind of limit on transferability. You are probably quite aware that there was, supposedly, a 2-per-cent limit on transferability of quota licenses in Nova Scotia on the ITQ fleet. You might wish to look up what this number actually turned out to be at the end of the day. It is quite different from the 2-per-cent limit.
Having said that, we will go on to Senator Butts' question.
Senator Butts: Welcome, professor. You have shed a lot of light on our problems. Since you are a guest of this committee, I hate to try to put you in a corner with my question. I am thinking of the continuum, common property and private property. I would like to know, if I went out of this room now, would it be fair for me to say you are more on the side of private property or ITQs, or you are in favour of ITQs so long as they do not belong to big corporations, or you are more on the side of common property?
Mr. Saunders: There are many sides there.
Senator Butts: I have given you three options, plus, perhaps, none of the above.
Mr. Saunders: I believe that common property is a useful option that is often unfairly attacked. The common property systems can be properly managed. I have worked in a number of other countries, even in the land-based alternative. A number of years ago I worked in rural Botswana where the problem was overgrazing of the land. The solution was to privatize some of the common grazing land. It did not work. The problem was not the overgrazing, it was all sorts of other factors that led to it, and some of the common property was, in fact, well managed.
I am in favour of common property where it works because I think it can sustain communities. I am in favour of ITQs where they make sense, but not where they do not. I am in favour of restrictions on ITQs to ensure that they end up in the hands of the people who will most reflect the kind of management control that we want exerted. I guess the danger here on both sides is becoming ideological about it. It is possible to become dead set against ITQs because they appear to be privatization. It is possible to become absolutely in favour of them because of the concept of the golden road to riches ahead. Both positions are wrong. It is a matter of practicality, not ideology. Sometimes ITQs can work. Many times, I do not think they will.
One of the senators at an earlier hearing used the phrase that DFO's position seemed to be heading towards: "Dam the torpedoes, full speed ahead". To continue the military analogy, I think it is also in danger of being along the lines of "ready, fire, aim", and I just would like to take a little time so that we can "aim".
Senator Butts: Your comment is helpful. The worry I have is that, if I wait to see if they work, then I will be gone. Would you be in favour of community quotas and would they avoid some of the objections you have with the ITQs?
Mr. Saunders: Yes, I have been in favour of properly applied community quotas. I think they work best on fisheries that are geographically contained, where there are local, traditional areas where people fish. Certainly, in Nova Scotia, people know where they are allowed to fish, whatever DFO said. Community rights are very important rights to build on. I will admit, however, that it is easy to be romantic about this and there are blocs and interests within the smallest community that can lead to the same types of problems. It is not a panacea, but I do think that a community-based approach is, ultimately, more in tune with the way this part of the country works.
Senator Butts: When does common property cease to exist? Is there a line in the sand?
Mr. Saunders: No. This is a good question, and it is one of the toughest questions that has arisen. I have looked at this in the past. I have done work in Southeast Asia and elsewhere on common property fisheries and compared them in some literature that looked at northeastern United States and Nova Scotia where it was said that there has been common property, in the sense of real community property as opposed to unrestricted access. When we say "common property", we tend to think of absolutely unregulated, unrestricted access. You could argue that many of the fisheries on this coast, at least, never had unrestricted access even before government regulation. They were always owned by somebody, to some degree, and the communities knew that very well.
There is a difference between community ownership of an area or a resource and absolute common property with unrestricted entry by anybody, even outsiders. I think that many people felt that common property and the fishery was destroyed with licensing systems when they first emerged. I do not think that was ever the case. I think these have operated at an informal level, community-owned fisheries, up until the present day. This is evidenced by some people pointing guns at each other in the last year on this coast. That is an unfortunate manifestation, but it is a manifestation of what lies underneath.
Senator Stewart: Mr. Chairman, since we have a genuine expert in the legal aspects of this problem, we should take full advantage of his appearance. I have two or three questions which are quite closely related to the legal regime which applies in this case.
Senator Comeau asked a question about whether or not, as a result of an extreme introduction of individual transferable quotas, so that this could be regarded as property or pretty close to property, that property would become subject to the legislative authority of the provincial legislatures as against the Parliament of Canada. It is a very simple question.
I know that many cases have gone to the Judicial Committee of the Privy Council on the meaning of the word "property" as used in section 92 of the Constitution Act, 1867. Surely, there must have been a case, not necessarily to the Privy Council but to the Supreme Court of Canada, dealing with precisely this question? If so, what was the case?
Mr. Saunders: I am not a property law expert in the constitutional sense. I am not aware of a case. I can certainly check with my colleagues, but in discussing this with some of them beforehand, the understanding was that it is not necessarily a conflict, that a piece of property which has emerged out of a federal legislative relationship can be dealt with at provincial law, which is the purpose of Sale of Goods Acts and other legislation.
However, that does not remove the federal jurisdiction over it unless, of course, the federal jurisdiction extended to regulating matters such as the transfer. I think it is clear from the general constitutional law that the federal jurisdiction over that legislative head is still intact, so long as they exercise it.
If the two are not in conflict and the province is validly operating in its jurisdiction over property and civil rights and the federal government has not entered the field, then it is not interfering with the federal legislation. In that case I do not see that there is necessarily a conflict. Conflict would arise if the federal government, for example, imposed a restriction on the transferability and a provincial act tried to remove that restriction. In that case, I think it is clear that the federal legislation would be paramount.
Senator Stewart: It would be good to know if there has been such a case.
To go to another legal question, earlier, when you referred to the Magna Carta, you said that one of the effects of the Charter was to say that private property in fisheries was subject not only to limitations imposed by the Crown but was subject to limitations and conditions imposed by the legislature. That brings me to ask the question: Do you know where the introduction by the Department of Fisheries and Oceans of the ITQ concept, and the realization, the activation, of that concept, was authorized by the Parliament of Canada?
Mr. Saunders: The partnership issue is problematic and is now before the courts. The Fisheries Act gave sufficient authority to create the kinds of quotas and other things that we have had in the past. I think it is arguable there could have been a challenge, but I think ultimately the legislature, if it were challenged, could act to remedy it.
A more current aspect of this is the idea that pushing the partnership arrangements as an administrative matter, pushing them to the point of property and restricting the public right to fish in that way, may be an unacceptable abrogation of that public right to fish. I think that is where the issue lies.
Senator Stewart: You say there may well be authorization for the department to proceed in this way in the Fisheries Act. When was the Fisheries Act changed so as to make it possible for the DFO to argue -- not conclusively, of course -- that they have the right to do this?
Mr. Saunders: I could not give you the dates but the regulations count in this as well. I believe most of that was done by regulation, primarily during the 1970s and 1980s as the system altered during that period.
Senator Stewart: Mr. Chairman, the reason I am asking this question is that I have said in this committee that, within his area, the Minister of Fisheries has more power than any other minister of the Crown. That may be inevitable, but I am very uneasy about blanket language being used in statutes. It realize that it has to be done in certain cases, but I have wondered again and again, if the House of Commons or the Senate had stated that what they were doing was authorizing the minister to bring in individual quotas, would that have been acceptable? Would they have bought it? Would they not have rejected that clause of the bill? I think they would have.
The Chairman: We might want to do a little research. I am glad you raised this matter, senator. We might want to review some of the comments that were made at that time regarding this absolute discretion and power that we handed over to an individual and his assistants.
Senator Perrault: Mr. Chairman, Professor Saunder's presentation has been very enlightening. I am from the West Coast where we have our share of problems. They are not precisely the same as East Coast challenges, but they are there.
You said in your remarks, professor, that we must get the fish to cooperate. Surely, the basic problem throughout the world, is an increasing diminution in valuable food fishery species.
This past week on the West Coast, David Suzuki issued a report which was really a doomsday scenario, saying that the valuable fish species are disappearing and will continue to disappear unless we take remedial action of some sort. It pointed out that the ozone layer thinning is affecting plankton and food for the fish. I know it is not precisely on the subject on which you came here to enlighten us, but are you similarly concerned about the world catch of protein-rich fish?
Mr. Saunders: Senator, I think that is precisely part of the point. What I was actually saying was that it is an illusion to think that we are going to get the fish to cooperate with long-term plans. That is the problem. I know this is oversimplification, but the difficulty that we have been facing world-wide is, when we try to make a fluctuating, unpredictable natural resource conform to a plan that we need because somebody needs a five-year loan or somebody needs a ten-year loan, it does not work.
This lack of predictability is not through any fault of scientists or anybody else. Many of them will tell you just how unpredictable these things are in reality, that all of these factors that come into play in a fishery make it naturally an unpredictable resource to some extent. Yet, everything that we have tried to do since the negotiations over the Law of the Sea Convention in the late 1960s into the 1970s has been tied into the notion that you can look forward, set a total allowable catch, and that everybody can be happy, that you really can have it all. It does not work that way.
What we need is adaptability and flexibility. Sometimes that makes it more difficult, for example, for larger enterprises that must plan over a longer period of time. Part of what happened with the northern cod was that people planned on the basis of a quota. "Quota" is not a fish.
Senator Perrault: They were ignoring the vagaries of the whole situation.
Mr. Saunders: There is a certain amount of King Canute in all of this, that if we play something just right, bad things will not happen, but it does not work that way.
Senator Perrault: That is very well put. On the West Coast, for example, it has been said that three major factory ships could take the total haul of B.C. salmon annually. However, you also have people who want to maintain their way of life. They want to maintain the small fishing community where fisheries was really the basis of the economy. Perhaps we are going through a profound change.
Mr. Saunders: We may be, but we may change back. I like the idea of small communities because I believe people should be able to choose their way of life. Beyond that, I think that ultimately, because of this need for flexibility and resilience, a small community and small fishery in some fisheries may be the one that actually survives because it is more capable of pulling back from the resource than a heavily capitalized fishery when that is necessary.
Senator Perrault: That is very helpful.
The Chairman: Professor, on behalf of the committee, we thank you for your presentation this morning. It has been most enlightening. You have added many elements that were missing from our presentations to date. We welcome any closing comments you may have.
Mr. Saunders: Thank you for this opportunity. I really believe that the discussions you are engaged in are absolutely critical to what DFO is going to be doing for the next several years.
The Chairman: The committee agrees. We will certainly have some comments to make about the direction that this seems to be heading.
The committee adjourned.