28N Rights Proceedings

What is the 28N rights issue?

The introduction of the QMS and 28N rights

The Quota Management System (QMS) was introduced in 1986 and originally operated as a fixed tonnage regime. Under this regime the Crown bore the fiscal risk and reward of changes in the TACC for each stock. If the TACC for a stock went up, the new quota was allocated to the Crown who could sell it. If there was a TACC reduction the Crown would buy back the quota and pay full market rate compensation to the quota holders, determined by arbitration if necessary.

At the dawn of the QMS, many fisheries were heavily overfished and significant catch reductions were required to ensure they remained sustainable. It became evident that the amount of quota allocated to quota holders based on catch histories now exceeded what was deemed to be the sustainable limit for the fishery at the time.

In response to this, the Government offered quota holders two options:

take a cash payout which corresponded to the reduction in their catch; or

Rather than taking an immediate payout, quota holders could receive a deferred entitlement to future quota. This means the quota holder would wait and see if the TACC increased again, in which case their lost quota would be restored back to them at no cost. This was known as 28N rights (section 28N of the Fisheries Act 1983).

If the TACC went up and there were unredeemed 28N rights in the fishery, the new quota would go, free of charge to the 28N rights-holders. The free allocation meant the Crown was required to forego the revenue it would otherwise have gained from selling the quota, but in doing so it was slowly paying back the compensation debt it assumed through the 28N rights regime, when catch levels were reduced in 1986.

At this time, 28N rights were benign for other quota holders. If TACC went up, some operators might receive new quota free of charge, but existing quota holders lost nothing, apart from the opportunity to purchase quota if they wished. The only party that suffered actual loss was the Crown in the form of foregone revenue.

Settlement quota

Under the 1989 interim settlement the Crown transferred four tranches of roughly 2.5% of existing fishing quota to Māori which was later enshrined as part of the 1992 settlement. The total transferred was approximately 10% of existing fishing quota. This quota along with a subsequent allocation of 20% of quota in new species entering the QMS, is known as settlement quota.

Change from fixed tonnage to proportional tonnage system and its impact on 28N rights

The QMS changed to a proportional tonnage system in 1990. Instead of having a fixed tonnage system where the Crown had to compensate quota holders when TACC was reduced and sell the quota when TACC was increased, quota became proportional with each owners share set by the amount of quota held when the new system came into operation. The regime provided for proportional increases and decreases in TACC without compensation or cost. The Crown shifted the fiscal risk, administrative burden and contingent liability from itself to the other quota holders.

Under the new proportional system, when a TACC was increased in a fish stock where 28N rights had been issued, the Crown would simply allocate all the TACC to the 28N rights holders up to their entitlement. Existing quota holders did not reap the benefit of increases in TACC until the 28N rights were exhausted. Any remaining TACC was then distributed on a proportional basis to the remaining quota holders. The effect of this, which was disguised by the fact that everyone was getting increased TACC, was that the original proportionality of quota holdings, including the 10% of settlement quota, was being gradually eroded. The new allocation came at the expense of existing quota holding rather than the Crown.

Change to proportional share system and its impact on 28N rights

The Fisheries Act 1996, which came into force in 2001 introduced a proportional quota share system with a fixed 100 million shares for each fish stock. This change has compounded the 28N rights issue, as when 28N rights are triggered the Crown takes settlement quota shares away from quota holders, without compensation, and passes them onto 28N rights holders creating a permanent loss in shares.

In the event there is a TACC increase in a fishery with outstanding 28N rights, normal quota is just as susceptible as settlement quota to be taken for the satisfaction of 28N rights.

Updates on 28N rights litigation

20 September 2024

The hearing into the declaratory judgment proceedings was held on 8-10 July 2024 in the Wellington High Court.

Following the hearing week in July, we asked the Crown to work with us to find a way to protect the SNA8 settlement quota while allowing the TACC increase to go ahead this year (assuming the Minister would decide to increase the TACC), but the Crown declined to engage with us. This led to us filing an application for interim orders against the Crown.

On 29 July 2024, Te Ohu Kaimoana filed an interlocutory proceeding for interim orders against the Crown to not take any steps that would result in the loss of settlement quota, without putting protections in place to make sure the settlement quota is not permanently lost before the Court decides on Te Ohu Kaimoana’s substantive claim.

High Court declined interim orders but sent strong warning to the Crown

On 4 September the High Court issued its judgment on our interim orders application. The Court “with some regret” declined our application for interim orders, primarily because of concerns about the impact on the industry and the economy if the foreshadowed SNA8 TACC increase was delayed.

The Judge however made some strong statements about our case and the Crown’s conduct.

The Court observed that “any increase in the SNA8 TACC will result in the permanent loss, without compensation, of quota shares Māori received as part of the settlement” and this would be due to a “statutory relic, originally enacted to allow the repayment of private debts the Crown incurred when its set up the QMS 40 years ago” [6].

The Court acknowledged that if it finds that the Crown is in breach of the Settlement, then redress will need to be addressed, recording that “the breach, if there is one, has been going on for more than 30 years. If Te Ohu’s case is ultimately successful, [counsel for the Crown] is right to note that a comprehensive response will be required. There will be much to put right, including any further losses that occur between now and final resolution of the claim.” [80]

The Court intends on rejecting the Crown’s jurisdictional objections re section 9 of the Treaty of Waitangi (Fisheries Claims) Settlement Act 1992 (Settlement Act) excluding the Court’s from inquiring into any claims regarding commercial fishing post settlement. The Court observed that section 9 “protects the Crown from further Treaty-based commercial fishing claims, outside the scope of the settlement. The purpose of the Settlement Act was to facilitate and implement the settlement; it was not designed, as the Crown appears to contend, to allow the Crown to breach its obligations with impunity” [72]-[73].

The Court rejects the Crown’s argument that Te Ohu Kaimoana is time barred from bringing a claim under the Limitation Act 2010because it “is not a claim for damages. The Limitation Act does not apply. In any event the Crown’s breach, if there is one, is a continuing act; its obligations under the settlement are as binding on the Crown today as they were in 1992. It is, I am bound to say, regrettable that the Crown would seek to avoid judicial scrutiny of a highly arguable breach of its settlement and Treaty obligations by claiming Māori waited too long to bring their case, especially as the then-Minister essentially threw the issue to the courts in 2020” [74].

The Court “regard the merits of Te Ohu’s case as strong. While I have not yet reached a final view, Te Ohu has argued persuasively that the gradual repossession of settlement assets is incompatible with an agreement designed to meet the Crown’s obligations under the Treaty, and to provide Māori with a lasting stake in New Zealand’s commercial fisheries” [75].

The Court also put the Crown “on notice” regarding the very real possibility that Te Ohu Kaimoana’s substantive case may succeed. “It would be unwise for the Crown to ignore the possibility Te Ohu Kaimoana will ultimately be successful. Te Ohu has presented a very strong case. It follows that the Crown should at least be alert to the possibility of a declaration that the progressive loss of settlement quota breaches both the settlement and the Treaty, in a way which has resulted in long-term unfairness and harm to Māori. If that declaration is eventually made, [counsel for Te Ohu Kaimoana] is right to note that every fresh redemption of 28N rights will compound the breach. The Crown should consider itself on notice that that outcome, either in this Court or elsewhere, is a distinct possibility” [84].

While the above observations from the Court provide helpful clarity on the Court’s direction of thinking regarding our substantive case, Te Ohu Kaimoana remains disappointed that Māori stand to lose a substantial, and valuable, block of their settlement quota if the Minister ignores the comments from the Court and increases the SNA8 TACC without putting protections in place to preserve the settlement quota. Depending on the size of the increase the Minister selects, Māori stand to lose between 20 and 29 per cent of SNA8 settlement quota through the operation of 28N rights unless protections are put in place. This will compound the harm Maori have sustained since we first began losing settlement quota through the operation of 28N rights in the 1990s.

Te Ohu Kaimoana is now awaiting the High Court’s decision on its substantive case. If you have any questions or comments, please contact our General Counsel Brianna Boxall via email at: brianna.boxall@teohu.māori.nz

9 February 2024

The declaratory judgment proceedings filed by Te Ohu Kaimoana last October have been set down for hearing, on 8 to 11 July 2024 in the Wellington High Court.

The Court has also set a timetable for the exchange of evidence: Te Ohu Kaimoana’s evidence was filed in December, and the Crown’s evidence is due to be filed in March. The Court has not given permission for the evidence to be published ahead of the hearing so this can’t be distributed at this time.

6 October 2023

On Monday 2 October, Te Ohu Kaimoana filed a declaratory judgement proceeding against the Crown (Attorney General and Minister of Oceans and Fisheries) to address its failing under Te Tiriti o Waitangi to address the 28N rights issue.

The proceeding, filed at the High Court, claims that loss of settlement quota through 28N rights amounts to confiscation, and seeks a declaration that the Crown is in breach of the Fisheries Settlement. It also seeks a declaration that the Crown must compensate for settlement quota lost as a result of 28N rights.

28N rights confiscations have been recognised as occurring since the early 2000s.

Since 2018, Te Ohu Kaimoana has issued proceedings to injunct and judicially review regulatory decisions made by the Minister that have triggered 28N rights issues through increases to TACCs (Total Allowable Commercial Catch) for a number of different stocks (species).