Preserving the Independence of the Inshore Fleet in Canada's Atlantic Fisheries

Public Consultations - Charlottetown, PEI - January 22, 2004
Draft Summary

Overall Summary of the Session

• Strong support for strengthening owner-operator and fleet separation policies although many remained open to flexibility especially to deal with intergenerational transfers and tax issues.
• Many concerns on individual licensing matters. Some participants wanted to know specifically what DFO would do if it were aware that a licence was part of a “trust agreement”.
• Some noted that “trust agreements” allow for some tax advantages plus sharing of the business with family members. There seemed to be strong support for the creation of “family corporations”.
• Support for equal treatment of fishers with other small businesses in Canada and the need to provide means for fishers to more easily access financing so that “trust agreements’ are not the only option. Some discussion around using a licence as collateral.
• Other issues raised included the need for additional enforcement in PEI, caution against a BC-like model on the East Coast, the need for community management, moving DFO resources out of Ottawa to the regions and some discussion of regional differences within DFO.

Summary of formal written presentations

• This is a critical issue and it is important that those who could be affected by new measures should have every opportunity to put their views forward.
• Inshore fleets contribute to the health and prosperity of rural communities throughout the Province of Prince Edward Island. The fishing industry, as a whole, makes a significant contribution to the provincial economy. There are 1,300 licensed core fishermen and approximately 6,000 others directly involved in the industry. The total value of fish landings was approximately $170 million in 2002. The fishery contributes approximately $350 million a year to the provincial economy. With fish products making up about 35% of food exports from the province, this makes a significant contribution to the balance of trade.
• The inshore fleet is the lifeblood of the fishery on PEI. Preserving and protecting the vitality and independence of inshore fleets and the people who own and operate them is of utmost importance to this province.
• We must ensure that the spirit and intent of the existing commercial fisheries licensing policy be protected and strengthened. That spirit and intent is reflected in the owner-operator and fleet separation policies. Taken together, these two policies are the pillars on which the strength and independence of the inshore fleet is based. Anything that erodes these pillars is not acceptable.
• According to the Fisheries Act, and as ruled by the courts, those holding legal title to a fishing licence can also enter into a trust agreement with a third party to confer a beneficial interest. Trust agreements are in contravention of the spirit and intent of the owner-operator and fleet separation policies as they allow a third party to control the use of the licence. They must be eliminated.
• Trust agreements, in addition to seriously compromising the independence of the inshore fleet, also run counter to a core objective of the Atlantic Fisheries Policy Review – to create the circumstances for inshore fishermen to become more self-reliant, more economically viable and more self-sustaining in the long term - we must ensure that this is fulfilled.
• DFO should pursue a regulatory solution to the issue of trust agreements. No other approaches appear to be evident. In granting a licence, the federal Minister needs to ensure that both the legal title and beneficial interest are being conferred. They should be inseparable and by inter-twining them this will help protect the independence and viability of inshore fishermen.
• The need for trust agreements would be reduced if the purchase of a licence were more within the financial means of new entrants. The PEI Government, in the most recent Speech from the Throne, announced that consideration will be given to the ways and means of helping new entrants become established in the fishery. This would not only reduce the prospect of trust agreements, but also will promote self-reliance and independence among fishermen.
• We support the policies that are currently in place and feel that changes that in any way diminish their intent would be troublesome. Designation of a qualified operator with a long term attachment to the industry would be one such example of changing the intent of the owner-operator policy.
• If we are to truly achieve the objectives of a more independent and self-reliant inshore fleet, we need a fisheries management approach that is fair and equitable to all fishermen. A healthy, well-managed fishery is the foundation of the viability and independence of inshore fishermen.
• Regrettably, management decisions, such as the recently announced tuna fleet quotas, are neither fair not equitable. They do not provide the basis for the level of confidence that fishermen need if they are to manage their operations more effectively. The sharing of the resource, whether it be shrimp, snow crab, tuna or whatever, must be fair and equitable to all inshore fishermen. Unless and until we have a more fair and equitable management approach in all aspects of the fishery, we will continue to face issues involving the independence of the inshore fleet here in the province.
   
• We believe the preservation of the owner-operator and fleet separation policies are essential to our survival, and we have taken steps to preserve it. In 1982, the bona fide licensing policy was developed to put fishing licences in the hands of full time fishermen. It has been used as a model in other jurisdictions as they strive towards the new concept of professionalization.
• These concepts are all linked. The concept of an owner-operator is dependent upon a separation of the fleets. The bona fide licensing policy is dependent on having owner-operators. Professionalization is largely a marriage of these ideas with a view to the future.
• These policies ensure the wealth generated from fisheries, a public resource, is widely shared among rural coastal communities which continue to be a vibrant part of the Canadian mosaic. The wealth of the oceans belongs to the people of Canada and the privilege of harvesting it has been granted to those who live next to it, trusting the Department of Fisheries and Oceans to ensure its conservation and sustainability. Atlantic inshore fishermen care about having this wealth continue for generations to come in the same way their fathers and grandfathers cared for them.
• We are not sure why anyone would want to tamper with these policies that have sustained this part of the world for generations. We have heard all the corporate buzz words such as global competitiveness – what does that mean? Does it mean we must harvest every last life from the ocean and destroy future generations of fish and the sea bottom that sustains life – we certainly have the technology to do this now. If this is the point, Canada’s fisheries managers can be proud of what has been done on the West Coast where almost total control of the fisheries resource is in the hands of the corporate sector, communities are being destroyed, as are the livelihoods of the once successful inshore fishermen.
• We are concerned that the preservation of the owner-operator policy is even being questioned as a policy option. It is not an option but rather the least that can be done to preserve this part of the world. We call upon the Minister of Fisheries and Oceans to issue a clear, unambiguous statement to clear the air, such as “I support the owner-operator and fleet separation policies and will take action against those who attempt to tamper with it”.
• Canadians support Atlantic Canada and its people. Canadians want a rich and viable fishery that will last and realize that this will only happen if the political will exists to make this happen. The destruction of the inshore fishery has happened in BC despite the Cruikshank report and others who predicted it.
• The erosion of the owner-operator and fleet separation policies is underway in Atlantic Canada. This erosion is rampant in the Scotia-Fundy Region and is now rearing its head in the Gulf. We only learn about trust agreements when they go bad and roll into court. No one knows how many trust agreements are out there or how many of them are owned by corporate interests.
• We have listened to those to advocate greater flexibility in the owner-operator policy. Some are confusing a valid concern about the cost of intergenerational transfers with opening loopholes to the policy. Let there be no doubt that the fishermen of Atlantic Canada do support both the owner-operator and fleet separation policies and we look to DFO to plug the existing loopholes and enforce these policies.
   
• There should be no attempt to do away with or water down the owner-operator and fleet separation policies for the <65 foot fleet. The owner-operator policy has enough built-in flexibility, such as the 30-day vacation period and other replacement rules to allow fishermen to meet their enterprise needs.
• The owner-operator and fleet separation policies were put in place to keep fishing licences in the hands of fishermen to make sure that they got a better price for their fish. Allowing processors or other interests to buy up fishing licences will only mean one thing: corporate control and the demise of our coastal fishing communities.
• Instead of trying to eliminate these types of policies, DFO should be plugging the loopholes that allow processors, lawyers and others to buy up lobster, snow crab, tuna and other valuable inshore licences through under-the-table deals. Because of these deals, non-fishermen now own most of the bluefin tuna licences in Scotia-Fundy and processors are buying up and controlling more and more lobster licences.
• If things are left as they are it is only a matter of time before processors control enough licences to start dictating the price of lobster and other species. There will no longer be individual fishermen – there will just be company men – and we will have taken major steps backwards.
• Over the last 30 years independent inshore fishermen have built up their fleets to a point where they are now the most important industries in most coastal communities. This was possible because the owner-operator and fleet separation policies kept more money in the pockets of inshore fishermen and in their communities.
• DFO’s top-down (Ottawa to water) approach, combined with the incestuous relationship between the large corporate fishing fleets and the Department’s political masters has justified the truly deserved distrust of the fishing community.
• Over the years I have called for a community-based cooperative co-management system of fisheries; many of my colleagues share the same sentiments and have called for change.
• I have been consistent in my view that “no one fishes for crab, salmon or lobster in the Rideau Canal” – yet there are 1,600 people working for DFO in Ottawa. These positions must move to the resource as soon as effectively possible.
• The only reason DFO receives $1.5 billion in taxpayers money is for the protection of fish and fish habitat. To say that the Canadian taxpayer is getting value for money would be questionable at best. There has been a litany of problems in the Department both before and after the merger with Coast Guard, from bureaucratic sycophants to distrust with the scientists in the Department, to a lack of protected areas for fish stocks.
• An example of this is Sable Gully – with more than six years of advocacy work to get this area protected, the Sable Gully has still not been properly designated as a Protected Area, meaning that it should be off-limits to fishery and oil and gas activity. Yet oil and gas leases can be issued within a few months. And allowing seismic testing within the inshore waters to proceed when the test data has been inconclusive – is this not going against DFOs precautionary principle?
• It would be a critical error to withdraw from the fleet separation policy. A change in this policy would see the transfer of a public resource into the hands of fewer and fewer corporations, eventually leading to control of our natural resources from outside our borders.
• If the Department believes that “it is important that the vibrant small business community of inshore fleets continues to contribute to the health and prosperity of hundreds of coastal communities”, then it is imperative that we reverse the move to large corporative stewardship of our fisheries, and we have to act now.
• We must not allow our resource to be drained by the big fish; if we do not move away from this trend, the experience of 22,000 farm families forced to leave their livelihood in 2001 will be the fate facing our independent fishing families. Already we have witnessed over 40,000 people out-migrating from Newfoundland and Labrador, many of them from the fishing industry.
• Our Atlantic fishing industry has sustained First Nations people for thousands of years. This independent management system successfully adapted to the influx of Europeans 400 years ago. Our lobster fishery, historically a great independent industry is facing challenges that many believe will force this industry to follow the way of the family farm.
• Trust agreements, the price and transfer of licences, combined with our current taxation system seem to be designed to break the successful independent spirit that has been the backbone of our Atlantic fisheries communities for so long.
• Independent fishermen deserve to stay in business and continue to sustain this resource for their families as they have for many years. The Federal and Provincial governments must assist individual fishermen wherever possible to maintain their presence within the Canadian fishing industry.

Following presentations by registered speakers, a round table discussion of the issues raised in the discussion document was held. The following is a summary of that session.

Open Discussion – Trust Agreements, Owner-Operator and Fleet Separation Policies

• We always hear the call to “plug the loopholes” – while this is fine as a concept, it is hard to see how DFO can do it – and I don’t hear any suggestions on how it could be done.

• While we are not resource users, but we do represent them; next time it would be nice to get some notification of consultations such as this in advance. DFO did a poor job of advertising this session.

• Prince Edward Island may not be reflective of other areas - here the problem of lawyers and processors controlling licences is not much of a problem. Trust agreements are used here for a number of business reasons, including allowing for capital gains exemptions, income splitting, and estate planning, which makes it logical that fishers want to incorporate for these same reasons. There is nothing wrong with trust agreements as long as they are controlled by fishermen themselves (and their families); restrictions can be put on the agreements with processors to ensure that fishermen retain control of the licence.

• We are all looking for an answer to how to keep people in coastal communities; when the real issue is a declining fish population with too many fishermen chasing too few fish.

• It is no longer viable for old fishermen to stay in the fishery and we need to get fishers out of the fishery soon. We really need policies and programs that allow for fleet rationalization to allow people to exit the fishery and others to enter. Currently, costs of starting a fishing enterprise are prohibitive - the young can’t afford to buy in –so who is going to keep the communities going?

• We need to reverse the trend towards corporate fisheries, and allow families to form family-run fishing corporations.

• ITQs are one way of keeping an independent fishery, but there needs to be a limit on the amount of quota associated with a licence to prevent quota concentration, which is essentially the same as licence concentration.

• Whatever DFO decides to do, it should act quickly and settle this issue.

• If we decide to pursue changes to legislation, because of the process that must be followed, there will be more consultations – has DFO considered the timeline? This will not happen quickly.

• In PEI we have seen major cuts in enforcement, including the loss of the DFO patrol boat. DFO needs to re-consider these decisions and look at all aspects of the fishery. Take the lobster plan for instance - increasing carapace size and releasing females are significant conservation measures which need to be protected by DFO.

• DFO will have to clarify its position on existing trust agreements; and whether or not it will transfer a licence if a trust agreement is already in place. DFO must realize that there are thousands of these agreements out there and, while DFO does not recognize these agreements, they do exist in many forms, and DFO will have to acknowledge the difference between a licence holder and the beneficial owner of a licence.

• While trust agreements are not a problem in PEI, we should keep a close eye on what is happening in Nova Scotia where processors have gone to licence holders, provided funding for the licences and soon began directing the operation. Today some Nova Scotia processors hold as many as 40-50 licences. First, you find crew members being pirated off owner-operator run vessels then, you will see the price you get for your lobsters going down.

• Trust agreements are good for lawyers and accountants but not for an independent inshore fleet which is why we must retain the owner-operator and fleet separation policies.

• The issue of trust agreements is a valid one, but let’s not treat it as a dirty word. You need some control, that’s all; as long as the beneficial interest and legal title are inseparable, there is no problem. The licence holder, by signing a trust agreement, to hold the licence in a corporation, will benefit from tax savings, estate planning and the capital gains exemption. This makes sound business sense - the licence holder retains control of the licence and receives the same fiscal treatment as other small businesses.

• There is always bad news from Scotia-Fundy. There are two cases in the Gulf now in court; DFO has interceded where the policy has been contravened so there are things we can do. One solution is to ensure that CCRA allows fishers to be on an equal footing with other small businesses.

• The licence belongs to the Crown; if the Crown is aware that a trust agreement is in place, they can act; DFO should be asking whether or not a licence is under a trust agreement before issuing or transferring it.

• DFO has been acquiring licences for native fishers. In some of these cases, these licences were part of a trust agreement, and in others fishers were advised and encouraged to incorporate and sign a trust agreement with the corporation so that the licence could be transferred and the fisher pay less tax.

• We talk about an Atlantic policy but there are major policy differences among the regions. In the Gulf they discourage trust agreements; in Nova Scotia they almost encourage them. With such profound differences in interpretation and application of policies, how can we ever deal with these issues?

• We could explore partnership agreements between related parties, rather than trust agreements. Many trust agreements have existed for a number of years for a number of good reasons; DFO will have to carefully consider the repercussions of trying to turn back the clock.

• There are many fishers getting ready to retire and others looking to buy into the fishery. Financing of licence purchases is a major issue as the Credit Union is the only financial institution that will take a licence as collateral. It is understandable that a fisher wants to get the best price possible for his licence as he does not have a pension fund – trust agreements can be helpful for intergenerational transfers and as a means for a fisher to exit the fishery with enough money to retire on. This should be taken into consideration in whatever decision DFO makes.

• Getting financing is one thing, getting a loan from a processor is different – the difference being that the processor will direct the use of the licence. If the processor only finances the operation, this should be no different than obtaining money from a bank or credit union. But fish buyers and processors are not into the business of financing without strings attached; when they get involved, it is usually for personal gain.

• The issue of trust agreements all boils down to an issue of financing, and the terms attached to that financing.