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OCEAN LAW ADVERSE effects and arbitrated compensation BY JUSTINE INNS I f the bulk of the recent reforms to aquaculture legislation were fairly uncontroversial, plenty of discussion has been generated by the new provisions for arbitrated compensation of quota owners impacted by undue adverse effects (UAEs) since they were unveiled by the Minister of Fisheries, Phil Heatley, in early August. In the fi rst part of a two-part article, we look at what has and hasn't changed about the UAE regime. There are now four distinct phases in the UAE process. A new option is for an applicant for a resource consent in respect of aquaculture activities to attempt to negotiate a "pre-request aquaculture agreement" with quota owners in respect of any fi sh stock potentially affected by the proposed activities. Such an agreement can be concluded at any point up until the consent is granted and the relevant regional council asks the chief executive of the Ministry of Fisheries to undertake a UAE assessment in relation to it. A pre-request agreement must include the owners of at least 75 percent of any fi sh stock, though the aquaculture applicant will have to pay any compensation provided in it to all the quota owners. The effect of an agreement is to exclude the relevant fi sh stock or stocks from consideration in a UAE assessment. The second stage, assuming no pre-request agreement has been reached, is the assessment of the effects of the proposed aquaculture activity on fi shing by the chief executive of the Ministry of Fisheries. The requirements for this assessment have not changed signifi cantly. The ministry will now have only 20 working days (rather than six months) to undertake that assessment, excluding any period during which it is undertaking consultation. Consultation will no longer be mandatory, though it's diffi cult to imagine the ministry making a decision without opting to consult – if only to buy time! The more signifi cant change to the UAE test itself – removing effects on the sustainability of fi sheries resources from the assessment, and limiting it to effects on fi shing – actually occurred in the 2004 reforms, though it has not yet been implemented. A UAE decision by the chief executive can be challenged through a judicial review, but the alternative of appealing it to the High Court has been removed. The consequences of the UAE decision have not changed. There are essentially three possible outcomes: The chief executive determines the aquaculture activities will not have a UAE on fi shing, in which case the aquaculture applicant can start their aquaculture activities in accordance with their resource consent. The chief executive determines that the aquaculture activities will have a UAE on customary or recreational fi shing, in which case the relevant resource consent is cancelled in its totality, or in respect of those areas specifi ed by the chief executive. The chief executive determines that the aquaculture activities (over the whole or a part of the area) will have a UAE on commercial fi shing, in which case the resource consent (or the relevant part of it) can't be exercised unless the holder of it lodges an aquaculture agreement or a compensation declaration. So, if a UAE is found to be likely, the third step – assuming the resource consent holder wants to proceed – is for them to attempt to reach an aquaculture agreement with affected quota owners. Again, this mechanism was introduced in the 2004 reforms but is yet to be tested. It requires the consent holder to obtain the agreement of owners of at least 75 percent of the quota impacted by any UAE, and the consent of the High Court on behalf of any non-consenting quota owners. The level of agreement required has been decreased from 90 percent under the 2004 rules, though, given the degree of concentration of ownership of several key inshore species, it remains to be seen how material this change might be in practice. The consent holder has six months to attempt to negotiate an aquaculture agreement (or agreements), though this period can be extended by three months if the consent holder can satisfy the chief executive of MFish that they have taken reasonable steps to obtain the consent of all relevant quota owners, but require further time to obtain all the necessary consents. If an agreement is lodged with MFish within the prescribed time, the consent holder is given the all-clear to exercise their resource consent. If no agreement can be reached, the consent holder has the option of requesting an arbitrator determine what level of compensation they must pay quota owners before they can exercise their resource consent. And that is where things get really interesting … To be continued. Justine Inns is a partner at Oceanlaw. She spent more than a decade as an advisor to various iwi (tribes), including several years with Ngai Tahu. 14 New St, Nelson. PO Box 921, Nelson 7040. T +64 3 548 4136. F +64 3 548 4195. Freephone 0800 Oceanlaw. Email justine.inns@oceanlaw.co.nz www.oceanlaw.co.nz 10 ■ NZ AQUACULTURE ■ NOVEMBER/DECEMBER 2011