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How Lootus Teine OÜ and MFV Lootus OÜ obtained their fishing opportunities

In the last few days of July a lot of attention was paid by the media, led by the Äripäev newspaper, to how Lootus Teine OÜ and MFV Lootus OÜ obtained their fishing opportunities in international waters regulated by the Northwest Atlantic Fisheries Organisation (NAFO) and the North East Atlantic Fisheries Commission (NEAFC) between 2000 and 2005 and the legality of this.

 Given that factual errors have been made and misleading conclusions have been drawn in the reporting of the story, the Ministry of the Environment will herein explain the true facts and principles of the issuance of fishing opportunities, which have also been explained to Äripäev’s journalists.

The Ministry of the Environment issued commercial fishing permits until the end of 2005, at which time this right was transferred to the Ministry of Agriculture. The Ministry of the Environment distributed fishing opportunities among applicants in accordance with paragraph 16 subsection 3 of the (then) valid Fishing Act. In the distribution of fishing opportunities the ministry was guided solely by the relevant legal acts – internationally regulated fishing rights allocated to the state for different species of fish could not be designated by the minister or the ministry alone, but through negotiations with the regional representations of international fishing organisations and, after accession to the European Union, with the Council of Europe.

According to our records, fishing permits were first issued to MFV Lootus in 2000 for the fishing of Norway haddock, Greenland halibut and unregulated species of fish, including ray fishing, in waters regulated by the Northwest Atlantic Fisheries Organisation or NAFO. At the time, vessels sailing under the Estonian flag could fish for Norway haddock in these waters as part of the block quota row (the quota allocated to several countries collectively) established by NAFO, which represented the common fishing quota allocated to Russia, Lithuania, Latvia and Estonia. Vessels sailing under the Estonian flag could fish for Greenland halibut as a block quota from the “Others” row on the block quota table (member states to whom individual quotas had not been allocated for these species) established by NAFO, and moreover could fish for unregulated species of fish, including rays, in unlimited amounts. Since Estonia’s quotas in block quota fishing were not able to be determined separately, all vessels sailing under the Estonian flag were able to fish these quotas for as long as the quotas remained exhaustible in NAFO. That is why no quotas were designated separately for companies at the domestic level for the fishing of these species.

A new wording of paragraph 16 subsection 3 of the Fishing Act came into effect in 2001 in accordance with which fishing opportunities had to be distributed among applicants on the basis of ‘historical fishing rights’, which in effect constituted the fishing opportunities actually used in the waters in question in the three years prior to the year of distribution of the fishing opportunities. In the case of block quotas (Norway haddock, Greenland halibut et al in NAFO) it was not possible to determine Estonia’s fishing quota separately and no distribution of fishing quotas among domestic companies for these occurred. The quotas could be fished until their exhaustion in NAFO by all vessels and companies who had submitted an application to do so which met the requirements of Regulation no. 412 of the Government of the Republic of 12 December 2000.

In 2001 Lootus Teine OÜ also began fishing for deep water species (deep water sharks, roundnose grenadier, black scabbard and Spanish ling) in waters regulated by the North East Atlantic Fisheries Commission (NEAFC). At the time such fishing was not regulated in NEAFC, which meant that vessels sailing under the Estonian flag could fish for these species in unlimited amounts. Therefore no distribution of fishing quotas among domestic companies occurred for these species either.

Since MFV Lootus OÜ and Lootus Teine OÜ’s vessels were still only fishing for block quotas and unregulated species of fish in 2002 and these fishing opportunities were not able to be determined separately for Estonia, there was no distribution of fishing opportunities between these companies on the basis of historical fishing rights in that year. All vessels sailing under the Estonian flag could fish for block quotas until the quotas were exhausted in NAFO and NEAFC provided that they had submitted an application to do so; and they could fish for unregulated species in unlimited amounts.

The situation in NAFO with the fishing of Norway haddock, Greenland halibut and rays and in NEAFC with the fishing of deep water species was similar in 2003, with Estonia being allocated no separate quota for the fishing of these species and thus no quota distribution among domestic companies for these species occurring. Lootus Teine OÜ and MFV Lootus OÜ fished for these species exclusively.

In 2004 Estonia was allocated its own separate fishing quotas for Norway haddock by NAFO. Since negotiations between Russia, Latvia, Lithuania and Estonia regarding the division of the Norway haddock block quota in NAFO had previously been successful, NAFO confirmed the distribution scheme and determined, as of 2004, the fishing quotas for these countries. NAFO established a limit of 5000 tonnes on the fishing of Norway haddock for all member states, with no NAFO nation permitted to exceed it. Since, in a sense, the block quota remained in NAFO for the fishing of the species, it was not possible to determine Estonia’s share alone of the 5000 tonnes, which would have been guaranteed to the country as part of the 1571 tonne quota share designated to it. Therefore no decision was taken in NAFO to distribute fishing opportunities among companies for the fishing of Norway haddock. In 2004 NEAFC introduced limits on catches of deep water species, in accordance with which member states (Estonia among them) were required to restrict the amounts they fished or number of days they fished for these species to the level of the preceding few years. Estonia, as a member of NEAFC, restricted its number of fishing days, and given that the level in previous years had been a maximum of 163 days, this was also established by NEAFC as the domestic limit for the fishing of deep water species. Since Lootus Teine OÜ was the only company in NEAFC fishing for deep water species, they received 100% of the fishing opportunities in accordance with the Fishing Act.

In 2005 Estonia was also allocated its own quota for Greenland halibut by NAFO, as the block quota was distributed among countries by NAFO as part of the “Others” quota row, by which Estonian vessels had been fishing. In accordance with historical fishing, the catches made by Estonia, Latvian and Lithuanian vessels in NAFO were allocated to the European Union quota, since these countries had joined the European Union and were therefore required to withdraw from NAFO. An internal division occurred within the European Union based on the catches of these countries as part of this quota.

Since Estonia was now being allocated its own separate quota for the fishing of Greenland halibut by NAFO, it was distributed among domestic companies in accordance with paragraph 16 subsection 3 of the Fishing Act and based on the fishing results of the 3 years preceding the distribution. This saw MFV Lootus obtaining 23.3% of the total quota; Lootus Teine OÜ 45.2%; and AS Reyktal 31.5%. 2005 was also the year in which Estonia was allocated ray fishing opportunities by NAFO for the first time. To that point the species had remained unregulated, but in 2005 NAFO began to regulate it with fishing quotas. Vessels sailing under the Estonian flag had fished for ray historically, which is why Estonia also received a fishing quota. When the quota was first established it too was distributed domestically in accordance with the Fishing Act. Given that MFV Lootus OÜ and Lootus Teine OÜ had been the only companies in NAFO to fish for ray, these companies were allocated 100% of the quota.

The Ministry of the Environment confirms that all fishing opportunities were issued in accordance with the relevant regulations of the Republic of Estonia and the European Union.

In 2006 the fishing quota allocated to Estonia for the fishing of deep water species was reduced by NEAFC by almost ten times in accordance with a regulation issued by the Council of the European Union in 2004. Lootus Teine OÜ’s fishing volumes therefore also decreased.

REGULATIONS ON THE DISTRIBUTION OF FISHING OPPORTUNITIES BY YEAR:

Until the end of 2000 the distribution of commercial fishing opportunities was subject to paragraph 16 subsection 3 of the Fishing Act in the following wording:

If fish resources or international agreements do not enable an individual who has carried out commercial fishing in certain waters to be provided with the catch volume or number of fishing resources, days or vessels applied for (hereafter referred to as fishing opportunities), fishing opportunities shall be distributed among applicants in a way that preserves the ratio of fishing opportunities actually used in the waters in question in the previous year. In granting fishing opportunities to companies launching commercial fishing the fishing opportunities of the individual who has carried out commercial fishing may only be reduced with the written agreement of the individual.

At the beginning of 2001 an amendment to paragraph 16 subsection 3 of the Fishing Act came into effect and this provision of the act became valid in the distribution of fishing opportunities in the following wording:

If the permitted fishing opportunities do not allow applications for fishing permits to be fully satisfied, the fishing opportunities shall be distributed between the applicants so that 90 percent of the opportunities are divided between applicants who fished on the same waters for the previous three years, ensuring that the proportion of the fishing opportunities acquired legally by each applicant for the same waters during the previous three years remains the same in relation to the fishing opportunities acquired legally by other individuals for the same waters during the previous three years (historical fishing rights). 10 percent of the fishing opportunities shall be sold at auction, where the starting price of a fishing opportunity shall be the price of a fishing right determined on the basis of paragraph 15 subsection 1 of this act.

Regulation no. 412 of the Government of the Republic of 12 December 2000, “List of documents to be submitted when applying for commercial fishing permits, procedure for the issuing, invalidation and termination of fishing rights, and fishing right permit forms”, in which the method for the distribution of fishing opportunities among applicants was illustrated, was established in order to implement this provision of the act.

At the beginning of 2003 a further amendment to paragraph 16 subsection 3 of the Fishing Act came into effect and this provision of the act became valid in the distribution of fishing possibilities in the following wording:

If the permitted fishing opportunities of waters do not allow applications for fishing permits to be fully satisfied, the fishing opportunities shall be distributed among applicants who have legally acquired fishing rights for the same waters during the previous three years, except for fishing for sprats and Baltic herring, in which case the fishing opportunities shall be distributed among applicants who have been fishing on the same waters during the previous three years. Upon division, it shall be ensured that the proportion of the fishing opportunities acquired legally by each applicant for the same waters during the previous three years remains the same in relation to the fishing opportunities acquired legally by other individuals for the same waters during the previous three years (historical fishing rights). Fishing opportunities which arise after the distribution of fishing opportunities shall be sold at auction, where the starting price of fishing opportunities shall be the price of a fishing right determined on the basis of paragraph 15 subsection 1 of this act. This means that the auction of 10% of fishing opportunities was invalidated.

Paragraph 16 subsection 3 of the Fishing Act currently appears in the following wording:
“If the permitted fishing opportunities of waters do not allow applications for fishing permits to be satisfied fully, the fishing opportunities shall be divided between the applicants who have legally acquired fishing rights for the same waters during the previous three years, except for fishing for sprats and Baltic herring, in which case the fishing opportunities shall be divided between the applicants who have been fishing on the same waters during the previous three years. Upon division, it shall be ensured that the proportion of the fishing opportunities acquired legally by each applicant for the same waters during the previous three years remains the same in relation to the fishing opportunities acquired legally by other persons for the same waters during the previous three years (historical fishing rights). Fishing opportunities are deemed to be acquired if they are entered in the permit and are paid for or the fishing permit is collected, if payment of the fee is not required. Upon calculation of historical fishing rights, the right to fish acquired pursuant to subsection (6) of this section shall also be taken into consideration. Upon calculation of historical fishing rights, the fishing rights which the applicant has transferred pursuant to subsection (6) of this section or waived pursuant to subsection (7) of this section shall not be taken into account. Fishing opportunities which have arisen additionally after the division of fishing opportunities shall be divided on the basis of the historical fishing rights determined pursuant to this subsection if the permitted fishing opportunities do not allow applications for fishing permits to be satisfied fully. If the permitted fishing opportunities are divided pursuant to applications, fishing opportunities which have arisen additionally shall be divided in the order in which the issuer of permits receives applications submitted according to the requirements. Fishing opportunities are deemed to arise upon establishment thereof pursuant to paragraph 13 subsection 3 of this act.”