1. INTRODUCTION
Wild fish from the oceans are a vitally important, internationally shared and traded food resource. Officially reported landings from marine fisheries worldwide currently amount to nearly 80 million tonnes per year, and the global marine fishing fleet is thought to include approximately 4.6 million vessels.Footnote 1 Combined with aquaculture and inland fisheries, it has been estimated that marine fisheries assure the livelihoods of 12% of the world’s population.Footnote 2 It is, however, troubling that this global industry and the health of the marine ecosystems that support it are currently under threat. Illegal, unreported and unregulated (IUU) fishing activitiesFootnote 3 are undermining efforts by fishers and industry stakeholders worldwide to manage ocean resources sustainably, efficiently, and fairly.
Though incredibly difficult to assess, it has been estimated that illegal and unreported catches amounting to between 11 and 16 million tonnes (valued at between US$10 and 23.5 billion) are made worldwide each year.Footnote 4 Illegally caught fish may gain access to global seafood markets and recent investigations have indicated that, in 2011, illegal and unreported catches represented between 20 and 32% (US$1.3 to 2.1 billion) of wild-caught seafood imports into the United States (US).Footnote 5 The coastal waters of West Africa have been identified as a hotspot for illegal fishing activity, to the extent that if total reported catches were to be integrated with estimated illegal and unreported catches, they would be 40% higher than they currently are.Footnote 6
Efforts to reduce or eliminate IUU fishing traditionally involve monitoring, control and surveillance (MCS) activities by government agencies of coastal or flag states (i.e., the country under which a vessel is registered).Footnote 7 MCS may entail the tracking of vessel movements and monitoring of vessel activities through the use of vessel monitoring systems (VMS), onboard observers and aerial or at-sea surveillance activities.Footnote 8 The physical inspection of catch, gear and documentation may also help to ensure fishing vessels abide by all applicable laws.Footnote 9 Port states can take action through the inspection and/or detention of visiting vessels, and access of IUU catches to markets can be blocked.Footnote 10 Efforts within the private sector have also emerged, with the aim of discouraging IUU fishing through the use of traceability and labelling schemes.Footnote 11 Lastly, the efforts of several non-governmental organizations (NGOs) have uncovered valuable information for the authorities and the public, lending assistance towards arrests and raising general awareness about IUU fishing and related issues.Footnote 12 Vessels implicated in IUU fishing activities include not only those designed primarily for catching fish, but also vessels such as fuel supply ships and refrigerated cargo vessels (‘reefers’) which help to distribute IUU catches.Footnote 13 As such, organizations and governments around the world recognize and penalize vessels of many types for involvement in IUU fishing activity, and IUU vessel lists may include vessels of a variety of sizes and designs.
Furthermore, in recent decades a number of international agreements, whether legally binding or merely aspirational, have implicitly or explicitly addressed IUU fishing. Of great relevance are the non-binding FAO International Plan of Action to Prevent, Deter and Eliminate IUU Fishing of 2001 (IPOA-IUU),Footnote 14 and the binding FAO Agreement on Port State Measures to Prevent, Deter and Eliminate IUU Fishing (PSMA).Footnote 15 The IPOA-IUU has led to the formal adoption and implementation of dedicated legislation, such as European Union (EU) Regulation (EC) No. 1005/2008 (EU IUU Regulation).Footnote 16 This Regulation includes, inter alia, measures for blocking access to EU markets at EU ports for blacklisted vessels recognized for their involvement in IUU fishing, or for vessels registered under countries that have a poor reputation for cooperating with international efforts to deter and eliminate IUU fishing.Footnote 17 Similarly, the PSMA requires parties to the Agreement to close their ports and deny services to vessels that have engaged in IUU fishing, and to prohibit the landing of illegally caught fish.Footnote 18 As the PSMA is international and legally binding on states parties, there is great potential for this arrangement to bring about meaningful and long-lasting positive change to the global fishing industry, provided that it is widely ratified and enforced by participating states.Footnote 19
Alternative strategies for addressing IUU fishing can potentially be found outside the more traditional sphere of direct policy reform. It has been suggested that IUU fishing is primarily an economic activity and that those who engage in such activities are likely to do so for as long as the profits outweigh the costs.Footnote 20 Nevertheless, both tangible and intangible motivations may influence individual decisions whether or not to comply with fishing regulations, and these may include moral obligations as well as social influence.Footnote 21 Thus, the costs associated with the risk of apprehension for IUU fishing – which may, for example, include monetary fines and/or social consequences – should be considered along with the expected benefits when devising compliance strategies.Footnote 22 Measures that may render IUU fishing activities unprofitable may include actions aimed at reducing revenues, increasing operating costs, and increasing the cost of the risks of engaging in IUU activities.Footnote 23
Like any other medium to large-scale business, one suspects that IUU vessel owners or operators may seek financial services – in particular, liability insurance cover – in order to maintain profitability or reduce exposure to risk and accidental losses. Insurance cover moreover is required for larger fishing vessels under the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (Bunkers Convention).Footnote 24 It could be suggested, therefore, that restricting access to liability insurance, which is often provided by protection and indemnity (P&I) clubs, for vessels suspected of involvement in IUU fishing might well help to combat IUU fishing. This article analyzes the following two main issues.
∙ Is there empirical evidence to suggest that vessels suspected of involvement in IUU fishing encounter little difficulty in obtaining liability insurance (which effectively enables them to access ports freely around the world)?
∙ If so, what practical and legal steps can be taken to reduce the prospect of such vessels obtaining liability insurance, in particular if there are indications that they are regularly involved in IUU fishing?
To this end, the empirical study which demonstrates that those involved in IUU fishing have no serious difficulty in obtaining liability cover will be presented in the following section. In Section 3, deficiencies in current underwriting practices that allow IUU vessels to obtain liability cover with ease will be discussed and suggestions made as to how the current system can be improved. In Section 4, it will be argued that to ensure a change in the current practices of liability insurers, the best solution will be the reform of EU or domestic legislation and putting insurers under a clear positive obligation to refuse cover to those involved in IUU fishing.
2. EMPIRICAL STUDY
An empirical study conducted during 2014 and 2015 confirms that vessels suspected of having involvement with IUU fishing had no serious difficulty in finding liability insurance cover.Footnote 25 For the purposes of the study, 94 fishing vessels of 1,000 gross tonnes or higher, officially listed or suspected to be involved in IUU fishing, were identified. They were identified by screening information provided online by:
(a) INTERPOL;
(b) nine Regional Fisheries Management Organizations (RFMOs) – namely, the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR), the Inter-American Tropical Tuna Commission (IATTC), the International Commission for the Conservation of Atlantic Tunas (ICCAT), the Indian Ocean Tuna Commission (IOTC), the Northwest Atlantic Fisheries Organization (NAFO), the North-East Atlantic Fisheries Commission (NEAFC), the South East Atlantic Fisheries Organization (SEAFO), the South Pacific Regional Fisheries Management Organization (SPRFMO), and the Western and Central Pacific Fisheries Commission (WCPFC);
(c) the EU;
(d) Greenpeace International;
(e) the Environmental Justice Foundation (EJF);
(f) various national and/or regional government authorities; and
(g) news articles.
Once the list of vessels had been compiled and supplementary descriptive information gathered, liability risk insurers were contacted. Their websites were screened for information relating to vessels currently under their coverage. It transpired that 31 providers of liability insurance had a searchable database containing vessel information, accessible from their website. Between August 2014 and May 2015, all vessels on the list compiled were then searched for within all 31 databases; each time one was found, the identity of the associated insurer was recorded. Vessels can typically be searched for by either International Maritime Organization (IMO) ship identification number or name. When a vessel was listed without an IMO number and a match was retrieved searching solely on the basis of a vessel’s name, the insurer was recorded only if the listed owner, year of build, gross tonnage and/or flag state also matched and other listed details did not contradict the match.
The results of the study are shown in Table 1.
Table 1 Numbers of IUU Vessels (1,000 GT or greater) Found on Liability Insurers’ Databases
* A single vessel was found on two insurers’ websites.
The study reveals that at least 47.9% of fishing vessels (of 1,000 gross tonnes or more) known for their involvement in IUU fishing had secured liability insurance. These vessels were associated with a total of 14 liability insurers. The study shows also that an appreciable number of the vessels that had purple notices issued in respect of them by INTERPOL – requesting international cooperation in obtaining information that could lead to an arrest – were associated with one particular insurer. These results confirm the original hypothesis that IUU fishing is not yet an issue that is being addressed adequately by insurers, and thus that the insurance sector inadvertently facilitates IUU fishing. The rest of this article discusses underwriting and legal measures that could be taken to reduce the availability of liability insurance for vessels suspected of involvement in IUU fishing.
3. UNDERWRITING PRACTICES
There are two main providers of liability insurance for large fishing and support vessels (such as reefers). Such vessels might be entered in a P&I clubFootnote 26 or insured in the commercial market, although the cover provided by commercial insurers is likely to be more restricted and possibly costlier for the assured.Footnote 27 All P&I clubs based in the United Kingdom (UK) provide that their rules are subject to English law (including 8 of the 13 clubs that are part of the International Group of P&I Clubs). Considering that the vast majority of vessels worldwide are entered into UK-based P&I clubs, English insurance law has global reach and implications for assureds worldwide.Footnote 28 Thus, the discussion below is carried out essentially from the perspective of English law.
3.1. No Cover for Loss Arising when Involved in IUU Fishing
The empirical study described above shows that, in practice, the owners of fishing vessels which have had previous involvement in IUU fishing activities have little difficulty in obtaining liability insurance from the market, in particular from P&I clubs. This is despite the fact that if such a vessel incurs liability while involved in IUU fishing, the law would preclude recovery in most instances.Footnote 29 This is because the rules of most, if not all P&I clubs expressly exclude liability if a loss or fine is incurred as a result of illegal activities. For example, Rule 31 of the Shipowners’ Mutual P&I Club stipulates that ‘[t]here shall be no right of recovery of any claim from the Association if it arises out of or is consequent upon an insured vessel carrying contraband, blockade running or being employed in an unlawful trade or engaged in illegal fishing’.Footnote 30 Interestingly, the club rules do not expressly stipulate under which law illegality should arise but P&I representatives interviewed as part of this study were strongly of the view that illegality arising under international law or a national law with which the vessel was closely connected would suffice for the purposes of this exclusion.Footnote 31 In fact, most club rules extend the exception to avoid liability to cases where directors of the club consider that the adventure is ‘improper’.Footnote 32 On that basis, a voyage that is illegal under international law or the national law of a foreign state is likely to be treated as ‘improper’ by the directors.Footnote 33
The position is unlikely to be different in the context of commercial liability policies, even though most of these policies would not contain an express exclusion of this nature. This is because under such policies, the claim of the assured is still fairly likely to fail, on the basis that engaging in IUU fishing would almost certainly amount to a breach of the implied warranty of legality contained in section 41 of the Marine Insurance Act 1906. This section stipulates that ‘[t]here is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner’. As regards an insured vessel involved in IUU fishing activities with the knowledge and consent of the assured, there would be a clear breach of this warranty. It is reasonably clear that illegality under this section includes illegality under the law that applies to the contract, namely, English lawFootnote 34 (including international conventions that have been implemented in English law).Footnote 35 It might also include illegality under the law of the vessel’s flag state and the law of any state in the exclusive economic zone (EEZ) of which the vessel was fishing, by analogy with the rule that English law will not enforce any contract involving the commission in a given jurisdiction of an act that is illegal in that jurisdiction.Footnote 36
At this juncture, it is worth examining whether the introduction of the Insurance Act 2015Footnote 37 will alter the analysis carried out above. Under section 10, the remedy for breach of a marine warranty is suspension of the cover for the duration of the breach. It follows that if a vessel is involved in IUU fishing, cover will be suspended during this period. It might be argued that in so far as a loss of liability had no connection with the illegal fishing (for example, a fire in the engine room), then section 11 could apply. This provision allows an assured to claim despite a breach of warranty if the claimant proves that the warranty was aimed at reducing the risk of loss of a particular kind, or a loss occurring at a particular location or time, and that the non-compliance could not have increased the risk of the loss that actually occurred in the circumstances in which it did occur. However, this is unlikely. Section 11 is not applicable to warranties that serve the purpose of delineating the cover as a whole. It is respectfully suggested that this is the case here. The main function of the warranty of legality under the Marine Insurance Act 1906 is to assist underwriters in the risk assessment process by determining the limits of the cover. In case of its breach, the risk assessment undertaken by the insurer at the outset is in tatters. For that reason, there is no room for the application of section 11 in this context. A contrary solution would reduce the role this warranty is expected to play, affording an assured a potential lifeline in cases where the insured adventure is performed in an illegal fashion under his control. The authors are strongly of the view that such an outcome would be inconsistent with public policy.
3.2. Recovery for Loss Arising when the Vessel is not Involved in IUU Fishing
The prospects of recovery under a liability policy or P&I cover are bleak if a vessel with previous involvement in IUU fishing activities incurs a liability, even when she is not involved in IUU fishing at the time. Assuming that the liability insurance is subject to English law, the assured is expected to disclose all material circumstances relating to the risk when applying for P&I membership or seeking commercial insurance. Under section 7(3) of the Insurance Act 2015 ‘a circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms’.Footnote 38 Naturally, if the vessel in question has previously been involved in IUU fishing activity and detained or fined, one would expect this to be a ‘material circumstance’ which would have to be disclosed to a club or a commercial insurer at the time of making an application to obtain insurance cover.Footnote 39
In the case of non-disclosure, the insurer could potentially avoid the policy later when he discovers failure on the part of the assured to make a fair presentation, as long as he demonstrated either that he would not have entered into the contract on any terms had he known the true state of affairs, or that the assured had acted deliberately or recklessly.Footnote 40 One lifeline for the assured in such a case would be to argue that there was no obligation to disclose the detention or fine on the basis that such facts were presumed to be known by the insurer.Footnote 41
Presumed knowledge would be a plausible argument if the detention or fine had been made public in a press release or could be found by a simple search of the relevant databases, which are easily available to insurers.Footnote 42 Another plausible argument would be that no duty exists under the Act to disclose matters covered by a warranty. Hence, in the presence of the implied warranty of illegality in the policy, it would be superfluous to disclose the matters concerning IUU fishing in which the vessel was engaged prior to the contract.Footnote 43 Although this looks promising at first sight, it is likely that such an argument would not succeed because concealing previous fines and/or convictions associated with IUU fishing would in all probability be a material fact that relates to the moral hazard of the assured.Footnote 44
3.3. Cancellation of Cover Following Engagement in IUU Fishing
A P&I club could cancel the cover if it becomes aware of a vessel being involved in illegal activities, even though at that stage no liability has been incurred. According to the rules of some clubs, such cancellation is automatic if the vessel is involved in an illegal activity. For instance, Rule 25(2)(j) of Gard (2016) indicates that ‘[t]he Member shall … cease to be covered by the Association in respect of any Ship entered by him (…) if the Ship, with the consent or knowledge of the Member, is being used for the furtherance of illegal purposes’.Footnote 45 A similar stance may well be taken by a commercial liability insurance provider.
3.4. The Role of Liability Insurance
The legal analysis thus far demonstrates that an assured engaged in IUU fishing activities will find it difficult to enforce its liability cover for a variety of reasons. One might, therefore, wonder what kind of contribution the availability of such insurance makes to the business affairs of those involved in IUU fishing. It may be that the primary motivation of those obtaining insurance is not to secure cover that provides protection against potential liabilities, but rather to have a certificate to satisfy compulsory insurance requirements under international liability regimes such as the Bunkers Convention 2001. Certificates enable the owners of vessels involved in IUU fishing to carry out their trade, as without such a document their vessels are subject to detention by the relevant port authority.Footnote 46
If the process is indeed driven by the need for certification, then the fact that a large number of vessels, which had previous involvement in IUU fishing or were suspected of being involved in such practices, manage to secure liability cover with ease – and, in most instances, without any qualification in coverFootnote 47 – affirms the assumption that liability insurers inadvertently contribute to the problem of IUU fishing. This possibly arises because the underwriting process of liability insurers lacks thorough risk assessment analysis. Those who are more cynical might even suggest that liability insurers are tempted to offer cover to such vessels on the basis of a superficial risk assessment in the knowledge that they would be able to deny liability under the policy if and when such liability arose.
The authors have no evidence to suggest that risk assessment carried out by liability insurers with regard to fishing vessels is inadequate or slapdash. In fact, most P&I clubs pride themselves on their commitment to conducting their business based on ethical, legal and transparent standards.Footnote 48
The real question, therefore, is how risk assessment processes can be amended to flag up problems of IUU fishing. It would, for example, focus the minds of assureds seeking cover if a specific question at the proposal stage were put to them concerning fines paid and detentions incurred as a result of IUU fishing activities within the last five years. There is, however, no guarantee that such a question would engender the required disclosure, especially if the purpose of seeking liability insurance was merely to satisfy the compulsory insurance requirements of international liability regimes.
Perhaps a more effective measure could be to establish an international organization specifically charged with raising awareness in the sector of IUU fishing activities and, for example, introducing a tailor-made website or database to record data about IUU fishing, searchable by anyone, including liability insurers. The maritime industry has engaged in a similar initiative to tackle piracy and armed robbery at sea with the establishment of the International Maritime Bureau Piracy Reporting Centre, based in Kuala Lumpur, which immediately identifies any trends and shifts in patterns of piracy and armed robbery activities, alerts all concerned parties, and maintains an interactive map illustrating piracy hotspots.Footnote 49 The Centre is funded purely by donations. There is no reason why a similar initiative could not be developed to tackle IUU fishing. The successful implementation of such an initiative would require the continuous and timely supply of data to populate the database, especially from RFMOs. However, RFMOs currently experience a number of political, operational and financial challenges that might impact on their ability (and desire) for collecting and sharing data on IUU fishing.Footnote 50 The EU publishes a list of vessels involved in IUU fishing,Footnote 51 the data used to form this list being obtained from various RFMO IUU vessels lists. However, the EU needs to rely on the cooperation and efficiency of various RFMOs. Since the EU IUU list is usually updated once a year, there could be a time delay between a vessel appearing on the list of a particular RFMO and on the EU IUU list. It is submitted that, if established, an independent body could collect and update this data regularly, making it available for the public and insurance sector.
The measures suggested above would certainly assist liability insurers at the underwriting stage in denying coverage to those likely to engage in IUU fishing activities. Alternatively they could qualify the coverage offered so that those planning to engage in IUU fishing could be deterred. However, it is submitted that in order to incentivize liability insurers to engage in a more robust underwriting process, such steps might not be sufficient. The authors opine that legal measures outside insurance law are vital. The following section reviews how the existing legal regime could be amended to achieve this objective. We are aware that even if such steps are taken, this will not eliminate the possibility that an insured vessel might be involved in IUU fishing activity. However, with the changes proposed, liability insurers will be required to undertake a more robust risk assessment exercise than is currently carried out. This would place them in a position to deny coverage to vessels which are blacklisted for their involvement in IUU fishing, or to impose restrictions when there is sufficient ground to suspect involvement in IUU fishing, which could deter vessels from engaging in such activities in the future.
Finally, it should be stressed that although the analysis above is based on principles of English insurance law, similar outcomes would follow under alternative contemporary jurisdictions. For example, under clause 3-16 of the Nordic Marine Insurance Plan of 2013,Footnote 52 the insurer will not be liable ‘for loss which results from the ship being used for illegal purposes, unless the assured neither knew nor ought to have known of the facts at such a time that it would have been possible for him to intervene’.Footnote 53 By virtue of the same provision, the insurer may cancel the insurance by giving 14 days’ notice if the assured fails to intervene without undue delay after becoming aware of the illegal activity. Also, given that the Marine Insurance Act 1906 has formed the basis of marine insurance legislation in New Zealand,Footnote 54 Australia,Footnote 55 India,Footnote 56 Hong Kong,Footnote 57 Canada,Footnote 58 and Singapore,Footnote 59 the analysis above holds for fishing vessels insured under any of these legal regimes.
4. CONTROLLING IUU FISHING: THE EU DIMENSION
The EU plays an active role in the fight against IUU fishing because it considers it an activity with wide social and economic, as well as environmental, repercussions. IUU fishing ‘depletes fish stocks, destroys marine habitats, distorts competition, puts honest fishers at an unfair disadvantage, and weakens coastal communities, particularly in developing countries’.Footnote 60 As such, the EU has implemented a sophisticated system of controls and leads the discussions for identifying global best practices. It is the firm view of the authors that prohibiting the provision of insurance cover for vessels involved, or suspected to be involved, in IUU fishing activities should become an integral part of the European regulatory framework. The remainder of this article explains why insurance regulation needs to clearly form part of the European IUU fishing regime and examines to what extent, if any, the existing legal system prohibits the provision of insurance to IUU vessels and their fishery products. It then explores how a full prohibition could be achieved, and argues that this could happen with minimal disruption to the current legal regime.
4.1. EU IUU Regulation: ‘From the Net to the Plate’
The original philosophy of the EU was to regulate what could be called the ‘sharp end’ of IUU fishing – namely, ‘the monitoring, control and surveillance of activities occurring at sea and the identification of IUU operators’.Footnote 61 However, it soon transpired that this approach resulted in a fragmented, reactive system of controls, mainly because it left untreated the root causes of IUU fishing and the financial gains for those involved. Reflecting international consensus, the EU decided in 2007 to expand the scope of its legal framework to ‘all fishing and related activities linked to IUU practices (harvesting, transhipment, processing, landing, trade, etc.)’.Footnote 62 The objective of this expansion was to secure the entire supply chain or, evocatively put, to ‘address … these activities … from the net to the plate’.Footnote 63 As a result, two European regulations have been implemented to address IUU fishing proactively.Footnote 64 A detailed examination of this legal framework is outside the scope of this article, although any issues that are relevant to our empirical studyFootnote 65 will be covered.
The centrepiece of the EU legal framework is the EU IUU Regulation,Footnote 66 which establishes ‘a Community system to prevent, deter and eliminate illegal, unreported and unregulated … fishing’.Footnote 67 Its geographical scope of application is wide: it applies ‘to all IUU fishing and associated activities carried out within the territory of Member States to which the Treaty applies, within Community waters, within maritime waters under the jurisdiction or sovereignty of third countries and on the high seas’.Footnote 68
One of the main deterrents employed by the EU IUU Regulation is the creation of the following two blacklists:
(a) a list of (EUFootnote 69 and third country) fishing vessels that are identified by the Commission as engaging in IUU fishing;Footnote 70 and
(b) a list of non-cooperating third countries (NCTCs)Footnote 71 – i.e., countries which fail to discharge their duties under international law as flag, port, coastal or market states, or do not take action to control IUU fishing.Footnote 72
The former list, which also includes fishing vessels blacklisted by RFMOs,Footnote 73 is published in the Official Journal of the European Union and is supposed to be updated every three months.Footnote 74 The latter list is published in the same journal and is updated regularly, without the EU IUU Regulation specifying the frequency of the updates.Footnote 75
Articles 37 and 38 of the EU IUU Regulation provide for the measures to be imposed on blacklisted vessels and NCTCs respectively, and prohibit a number of fishing-related activities.Footnote 76 Additionally, the Regulation sanctions the following commercial activities:
∙ third country IUU fishing vessels are prohibited from being chartered or purchased by European operators;
∙ they are not to be supplied in ports with provisions, fuel or other services; and
∙ the exportation of European vessels to NCTCs is prohibited.
It is fair to say that with these measures the objective is to prevent vessels involved in IUU fishing activities from operating within EU waters.
This is not, however, the end of the story. The EU IUU Regulation further attempts to bring into its scope commercial activities that support IUU fishing. Article 39(1) states that EU nationals shall neither support nor engage in IUU fishing as operators or beneficial owners of blacklisted fishing vessels. Furthermore, Article 40(1) provides that EU nationals shall be encouraged by Member States to ‘notify any information pertaining to legal, beneficial or financial interests in, or control of, fishing vessels flagged to a third country which they hold and the names of the vessels concerned’. At the same time, the Regulation prohibits selling or exporting any fishing vessels to operators, managers and/or owners of blacklisted vessels.Footnote 77 This prohibition is supplemented by a restriction on granting community funds to these operators. Here, the objective is to prevent EU nationals from engaging in IUU fishing activities or making commercial gains from such activities.
The EU IUU Regulation, in Chapter IX, creates the following three offences, or serious infringements:Footnote 78 (i) engaging in IUU fishing as defined in Article 3;Footnote 79 (ii) conducting business directly connected to IUU fishing;Footnote 80 and (iii) falsifying or using false documents referred to in the Regulation.Footnote 81 If a natural or legal person is suspected of having committed or is caught in the act of committing any of these offences, the Member State is required to start an immediate investigation and take immediate enforcement measures.Footnote 82 The actual administrative and criminal sanctions are left to the discretion of the Member State,Footnote 83 with a list of recommended accompanying measures included in Article 45.Footnote 84 The EU IUU Regulation provides that the measures imposed by the Member State in the application of Article 44 are to strive to strike a balance between depriving the perpetrators of any economic benefits and the legitimate right to exercise a profession.Footnote 85 With respect to England and Wales, the relevant penalties are found in section 10 of the Sea Fishing (Illegal, Unreported and Unregulated Fishing) Order 2009,Footnote 86 which imposes a fine on any person found guilty of conducting business directly connected with IUU fishing, without making provision for a prison term.Footnote 87 Article 47 of the EU IUU Regulation clarifies that legal persons can also be held liable for serious infringements in addition to or instead of the natural persons ‘who are perpetrators, instigators or accessories in the infringements concerned’.Footnote 88
The EU IUU Regulation clearly focuses on IUU vessels and predominantly purports to contain the dissemination of the IUU fishery products via the supply chain. The prohibitions against chartering such vessels and selling vessels to blacklisted operators are steps in the right direction as they aim to cut off the perpetrators’ financial supply. Yet, it is doubtful that they are sufficient to deter investment in such activities. The fact that the relevant provisions are not clear on the matter raises the question whether the EU IUU Regulation covers the provision of insurance to IUU vessels. This is the main point of discussion in the following section.
4.2. Insurance and the EU IUU Regulation
The EU IUU Regulation makes no express reference to insurance. Can its provisions be interpreted to prohibit the provision of insurance to IUU vessels and related activities? This is possible, though perhaps not immediately obvious. Firstly, the measures imposed against blacklisted vessels and NCTCs are described exhaustively in Articles 37 and 38 of the EU IUU Regulation. They do not include providing insurance. The reference to ‘other services’ in Article 37(6) evidently relates to the remainder of the provision, which does not permit the supply of these vessels ‘with provisions, fuel’ in EU ports. This, too, suggests that insurance is excluded from the scope of Article 37(6).
It might be argued that Article 39(1) of the EU IUU Regulation (‘Nationals subject to the jurisdiction of Member States … shall neither support nor engage in IUU fishing, including by engagement on board or as operators or beneficial owners of fishing vessels included in the Community IUU vessel list’) should be construed to include a prohibition on providing insurance. Could it be concluded that those who provide insurance for vessels involved in IUU vessels support such activities within the meaning of this article? If this is the accurate construction, Member States have authority to ‘take appropriate action, subject to and in accordance with their applicable laws and regulation’.Footnote 89 A similar argument could be made to the effect that insuring a blacklisted vessel is an activity that is ‘directly connected to IUU fishing’ under Article 42(1)(b).
It is submitted that while both arguments are ambitious, the first is plausible under an expansive interpretation of the Regulation. The expression ‘support … IUU fishing’ can more easily be argued to apply to insurance as the word ‘support’ potentially has a wider meaning than ‘directly connected to’. It certainly covers beneficial owners of blacklisted vessels, as they stand in a direct legal relation to the fishing vessels, and opens up the possibility that the provision could be extended to cover insurers, as well as other financial institutions that lend to or invest in the businesses that partake in IUU fishing. Given that ‘support’ does not equal ‘control’, a presumption of control over the activities of the IUU fishers may not be needed for this provision to apply. Therefore, it is certainly plausible that insurers could be treated in a similar way to beneficial owners, although they have little, if any, control over the activities of the vessels. The fact that insurance supports IUU fishing activities indirectly might be sufficient to bring this activity within the scope of the Regulation, even if such inclusion was not contemplated by the drafters of the Regulation.
The expression ‘directly connected to IUU fishing’ must be interpreted by reference to the overarching philosophy of the Regulation – namely, to regulate the supply chain from the net to the plate. Liability insurance is not ‘directly connected to IUU fishing’. It covers the liability exposure of the vessels’ owners, providing support to IUU fishing in a remote, indirect manner. The prohibition in the EU IUU Regulation is reserved for activities that have an immediate impact on IUU fishing. These activities are to be identified by reference to the remainder of Article 42(1)(b) – namely ‘the trade in/or the importations of fishery products’. Admittedly, Article 42(1)(b) does not describe the prohibited activities in an exhaustive manner. Yet, the listed activities colour the interpretation of the expression ‘directly connected to IUU fishing’, with liability (and hull) insurance falling outside its scope. It is possible that cargo insurance over IUU fishery products falls into this prohibition as it relates to the transit of goods. Still, a purposive interpretation would suggest that any type of insurance is excluded from the scope of this article.
Despite the possibility of construing Article 39 in an expansive fashion to include liability insurers, the penalties imposed in Articles 37 and 38 (actions in respect of blacklisted vessels and NCTCs), as well as in Articles 43, 44 and 45 (immediate enforcement measures and sanctions) are not suitable for infringements concerning insurance. They primarily target the vessel and its unlawful proceeds rather than the providers of ancillary services. For example, the EU IUU Regulation provides that the relevant fines for serious infringements are to be calculated by reference to the value of the fishery products.Footnote 90 This is hardly a reasonable or fair threshold for calculating the fine against insurers.
The exclusion of insurance from the scope of fisheries regulation is also reflected in Article 4(31) of Regulation (EU) No. 1380/2013 on the Common Fisheries Policy (as amended),Footnote 91 which retains in force Article 90(1) of Regulation (EC) No. 1224/2009.Footnote 92 This provision adds three ‘dissuasive sanctions’ for serious infringements under Article 42(1) of the EU IUU Regulation.Footnote 93 The reason behind this addition was the persistence of IUU fishing as a result of the ‘non-deterrent level of sanctions for serious infringements of those rules laid down in national legislation’.Footnote 94 Still, such sanctions are closely related to the fishing activities of the vessel, for example, by prohibiting ‘(a) the non-transmission of a landing declaration or a sales note when the landing of the catch has taken place in the port of a third country; (b) the manipulation of an engine with the aim of increasing its power’.Footnote 95 Not surprisingly, neither Regulation refers explicitly to the role of insurance or purports to bring insurance within its scope of application.
The same is true for the IUU Fishing Order. Section 9(7) of the Order mirrors the Regulation by providing that ‘it is an offence for a person to conduct business directly connected to IUU fishing, within the meaning of Article 42(1)(b) of the Council Regulation’. There is nothing to suggest that the interpretation of the expression ‘directly connected’ in the Order should be different from that in the Regulation. The explanatory memorandum to the Order states that one of the aims of the EU IUU Regulation is to widen the scope of enforcement via the fishery supply chain.Footnote 96 In that respect, the Order clarifies that this provision captures activities emanating from the supply chain. Having said that, it is possible that the references to ‘ancillary operations’ and ‘ancillary activities’ in sections 12 and 13 respectively can be and are given a broad interpretation to cover insurance.
In light of this analysis, it is the view of two of the authors of this article that the EU IUU Regulation offers some basis of support for an expansive interpretation of related or ancillary activities that would cover insurance, but the connection between the IUU regulatory regime and insurance is tenuous at best.Footnote 97 The Regulation deals with the supply chain, and the clear inclusion of insurance has not been considered.
4.3. Reasons for Not Including Insurance Prohibition in the Relevant Legislation
If the provision of insurance is not clearly within the scope of the EU IUU fishing framework, should this change?
The EU Commission recently published an evaluation of the application of the EU IUU Regulation.Footnote 98 The report focuses on the supply chain, with the Commission commenting that the ‘industry now pays increased attention to all components of the supply chain in order to ensure that only legally caught fishery products enter the EU’.Footnote 99 Most importantly, the report states that ‘the Commission has become aware of a number of practical issues that could be addressed in order to enhance the effectiveness of the IUU Regulation’.Footnote 100 However, insurance does not seem to be in the Commission’s sights. Instead, the proposed measures expand existing arrangements: for example, they recommend the creation of an electronic catch certificate scheme, the continuing provision of technical aid to third countries with regard to IUU fishing, and the improvement of international ocean governance.Footnote 101
The EU’s approach towards insurance is not unique. The prevailing tendency among drafters of domestic IUU fishing legislation is to avoid insurance-specific prohibitions.Footnote 102 The authors believe this to be a short-sighted approach, which fails to address the problem of IUU fishing in a proactive, holistic manner. This trend is not based on an evidence-based decision on the role of insurance in IUU fishing. On the contrary, the evidence examined below suggests that insurance has a major role to play in the fight against IUU fishing.
In that respect, the IPOA-IUU is illuminating. One of its recommendations is to impose trade measures ‘to ensure that … insurers … are aware of the detrimental effects of doing business with vessels identified as engaged in IUU fishing … and … measures to deter such business. Such measures could include … legislation that makes it a violation to conduct such business’.Footnote 103 At the same time, the IPOA-IUU goes a step further and recommends measures to notify and deter (compliant) fishers from dealing with insurers that are ‘doing business with vessels identified as engaged in IUU fishing’.Footnote 104
The Organisation for Economic Co-operation and Development (OECD) further supports the imposition of insurance-related measures. In a comprehensive report on the economics of IUU fishing, the OECD argues that IUU legislation should aim to reduce the revenues while increasing the costs of IUU operators.Footnote 105 One recommended means of increasing costs is by restricting their access to insurance services, as ‘[r]ecent examples suggest that such measures may be efficient in some situations, at a relatively limited cost’.Footnote 106
The recommendations in both reports raise the question of why the insurance-related recommendations failed to find their way into relevant legislation. The likely reason is that trade measures, including those of an insurance-related nature, traditionally have been viewed as secondary measures that can be applied only if other measures have proven unsuccessful to prevent, deter and eliminate IUU fishing, and they can be deployed only after prior consultation with interested states.Footnote 107 In that respect, it is likely that the explicit implementation of insurance-related measures has been postponed and ultimately overlooked.
EU legislators may have expanded the supply chain-related measures in the mistaken belief that underwriters would react to such expansion by not dealing with companies suspected of IUU fishing. It may have been hoped that prohibiting the insuring of IUU fishing activities would be imposed as a de facto measure by the insurance market. However, our empirical study demonstrates that this is not the case. At present, the safeguards imposed by insurers in their policies and insurance law are not sufficient to deter owners of IUU vessels from using insurance as a way of protecting their commercial activities. Furthermore, the availability of liability insurance presents another advantage for the operators of IUU fishing vessels in that it enables them to have the necessary insurance certificates to be able to access ports around the world. Without such certificates, the operational capacity of such vessels would be restricted, with a severe impact on the commercial viability of such operations.
4.4. An Insurance-Related Amendment to the EU IUU Regulation
The fact that at least 47.9% of fishing vessels over 1,000 tonnes suspected of being involved in IUU fishing activity have secured liability cover is a serious impediment to the fight against IUU fishing.Footnote 108 There is little doubt that the existing supply-related measures have reduced the levels of IUU fishing. Yet, the evidence suggests that the problem is far from eradicated, or even controlled,Footnote 109 as both the IPOA-IUU and the OECD suggest that cutting the insurance supply will further reduce IUU fishing by impeding the operation of IUU vessels.
The EU is in a privileged position in that it has a comprehensive set of IUU fishing regulations. As a result, there is no need to reinvent the wheel. The EU IUU Regulation can be amended, subject to the prior consultation requirement of the IPOA-IUU, to explicitly incorporate insurance-related measures and thereby eliminate room for debate on how, or to what extent the Regulation applies to the provision of insurance. Article 11(1)(d) of Regulation (EU) No. 267/2012,Footnote 110 which prohibits any ‘financial assistance’ for the transport of petroleum products of Iranian origin, can be used as a roadmap. As such, a future amendment of the relevant EU IUU Regulation might read as follows:
It shall be prohibited to provide insurance and reinsurance with regard to: i) vessels included in the Community IUU vessel list; ii) fishing vessels flying the flag of countries included in the list of non-cooperating third countries; and iii) the importation, exportation, purchase, or transport of fishery products obtained from vessels in paras i) and ii) above.
At the same time, the sanctions provided in the EU IUU Regulation could be amended to reflect the extension of its scope to insurers. This would be an extensive prohibition, as it covers hull and liability insurance (i) and (ii), as well as cargo insurance (iii). We strongly argue that such a wide provision is essential for the measure to have a positive effect. As a concession, the prohibition would not cover vessels issued with alerts under Articles 23 and 24 of the EU IUU Regulation, unless they have officially been ‘named and shamed’ via the two blacklists. An expansion to cover such vessels might be part of a further amendment to the Regulation once it is established that the original prohibition has begun to take effect in practice. The aims of the suggested amendment are twofold:
∙ explicitly barring any access to European insurance markets for the owners/operators of IUU vessels and/or owners/traders of IUU fishery products; and
∙ providing insurers with an unambiguous legal argument to change their underwriting practices and (it is hoped) to take awareness measures along the lines of those proposed in Section 3 of this article.
It is likely that insurers will raise the issue of the costs of adapting to the suggested prohibition. Yet, it is expected that any increase in the cost of doing business for insurers would be minimal as, firstly, the two blacklists of the EU IUU Regulation are publicly available and frequently updated and, secondly, insurers have already developed sophisticated compliance procedures to deal with the wide range of political sanctions that are in force around the world. If insurers are able to establish due diligence procedures to comply with the labyrinth of political sanctions, compliance with the IUU blacklists is unlikely to be found challenging.
5. DOMESTIC LEGISLATION POST-BREXIT
On 23 June 2016, the UK population voted to leave the EU, with the decision causing quite a stir on both sides of the English Channel. At the time of writing there is little to suggest whether we will witness a ‘hard’ departure where neither party will have full access to each other’s markets, or a light version based either on the model of the so-called ‘fax democracy’ usually associated with Norway or the Swiss ‘à la carte’ model.Footnote 111
In the case of IUU fishing, it is expected that the (relatively small) British catch fisheries industry will exercise disproportionate political pressure to ‘renegotiate quota shares, as well as access arrangements’ on a bilateral basis, cognizant of the fact that ‘it is not politically or legally possible just to ring-fence most of our fish resources’.Footnote 112 The European Union (Withdrawal) Bill (once enacted) will incorporate the EU IUU fishing regulations into UK law. This development aims to provide legal certainty and stability in the immediate aftermath of Brexit as it ensures that the current EU laws on IUU fishing, including the IUU Fishing Order, will continue to apply uninterrupted. Still, in the long term the British government will be required to develop a domestic scheme of monitoring, preventing and sanctioning IUU fishing. In that respect, it is expected that Norway will be used as an example of a country that enjoys independence over its fishery policy while being part of the European Economic Area.
This presupposition overlooks the fact that Norway has been a pioneer in the fight against IUU fishing, having established its own blacklist of vessels since 1994.Footnote 113 For the UK, following the Norwegian example would reinvent the wheel as it would require, among other things, the drafting of blacklists, the funding of research to ensure the continuing development of measures against IUU fishing, and the conclusion of bilateral agreements with third countries (including the EU) on catch certificates. Creating such a framework is feasible, yet it would require substantial funds and legislative time without strengthening the fight against IUU fishing. The end result will be the creation of yet another regime that will impede the flow of information among the various stakeholders and reduce the effectiveness of the measures. Fragmentation is never the answer to combating criminal activities, especially when they are perpetrated at the international level; it is not surprising then that the trend is towards the international harmonization of the measures against IUU fishing.
The authors believe that a sensible course of action is to isolate the issue of IUU fishing from the political negotiations over the EU Common Fisheries Policy. It is a technical issue, which requires a level of cooperation and information exchange that is unlikely to ensue from the political minefield of the negotiations over border controls. In that respect, it is to be hoped that, despite the unfavourable current political climate,Footnote 114 a sui generis solution can be achieved whereby the UK remains an integral part of the EU IUU fishing measures, development and funding.
Our insurance-related recommendation, on the other hand, is not expected to be adversely affected by Brexit, irrespective of the form it may take. Any prohibition to insure IUU vessels can be incorporated into English law with minimal disruption. Considering the international clientele of British-based insurers and P&I clubs, we consider that even a strictly domestic prohibition would contribute to the prevention of IUU practices worldwide. At the same time, it would send a strong message to the EU and the rest of the world that insurance should not be overlooked in the war against IUU fishing.
6. CONCLUSION
So far, various legal measures have been taken to tackle IUU fishing activities within the EU and worldwide. There is no denying that these measures have yielded positive results. However, this article demonstrates that the war is far from over. It is evident from the empirical study carried out that those involved or suspected to be involved in IUU fishing have no difficulty in obtaining liability insurance, which enables them to carry out their activities. We argue that changes in underwriting practices are desirable to ensure that liability insurance coverage is denied to those vessels with a history of IUU fishing activities. However, without the explicit backing of law that will force liability insurers to decline cover for such vessels, it will prove a greater challenge to incentivize insurers to change their current practices. Such a change should be relatively easy to implement even in the context of EU law, which is rather fragmented in the manner in which it deals with IUU fishing. At the national level, however, it should be relatively easy to implement changes in the relevant legislation to explicitly prohibit insurance providers from offering insurance cover for vessels involved in IUU fishing on a regular basis. Even in the case of the UK leaving the EU, such measures could be taken unilaterally.
The concluding message of this article is clear: in order to combat IUU fishing, a holistic approach is needed. Explicitly prohibiting insurance companies from providing liability cover to those involved in IUU fishing activities on a regular basis can, and should be, incorporated into this approach. This would not eliminate IUU fishing altogether as it is possible that fishing vessels with no previous record of IUU fishing might be opportunistically involved in such activities after obtaining liability insurance cover. However, improved clarity in interpretations of and changes to relevant legislation will certainly make it more difficult for regular offenders to obtain liability cover with ease and no qualification, and thus put a restriction on their ability to operate.
