Russia making steps towards civilized market for fishing rights transfer

The recent auction sale of transferrable right of quota share is to give the beginning to civilized fishing quota market in Russia, according to Head of Legal department FFA (Federal Fisheries Agency) Eugene Kats, reports www.megafishnet.com.

In an interview with FISHNEWS, he explained that natural resources rights turnover is legally regulated in a special way.  According to article 129 of Russian Federation Civil Code, natural resources can be alienated or transferred from one legal entity to another in a special way described in proper laws on natural resources.

Law on Fishery contains a number of ways to transfer the fishing rights.  Most common situation is that during a company's reorganization the quota is transferred to its legal successor.  Until recently it was the only real way of quota share transfer.

According to Russian fishery law, fishing rights transfer from one user to another is possible basing on auction results.  "For a long time the mechanism couldn't work for various reasons" - said Mr. Kats - "this year Rosrybolovstvo (Russia's Federal Fisheries Agency) ran an auction to sell fishing rights in the nation's Pacific Fisheries Basin.  At the auction were sold quotas on squid, saury, and herring.  The auction was arranged as a service of FFA to fishing companies, so all the revenue was transferred to the previous quota user.  The auction is the start of civilized quota market in Russia, establishing statistic base for quota shares, and this will help development of quotas as security."

Even so, there are restrictions of quota turnover under the current legal base.  There is no legal way to transfer fishing rights belonging to individual entrepreneurs (sole traders), just for legal (incorporated) entities. 

Another problem - the Law doesn't allow to use bankruptcy mechanisms, i.e. it's impossible to transfer fishing rights during sale of all the debtor's property.

Legal barriers make other problems, one of them has to do with so-called "réntier" companies - those who have quota shares, but have no vessels or fishing gear.  When the quotas were distributed for the first time in 2003 those companies received their shares, and since then will pass the rights to other companies in various ways not using real production facilities.  Eugene Kats says, about 10-20% of quota shares were distributed to companies who have neither vessels nor shore fishing gear.

"However, both the situation and its scale are changing, - believes the Rosrybolovstvo official, - and this indicator is moving down. Shares are moved to more efficient companies by merging companies.  Together with unscrupulous quota owners, who live by leasing quotas there are others, including fair companies who came across legal problems.  Some quota owners have no vessels, but are members of large holdings and amalgamations, where production facilities are concentrated in some parts of the holdings and are available for exploitation by all the members of the group.  Our legislation allows building business in such a way, minimize taxation and enjoy the privilege of the single agricultural tax".

Note.- The single agricultural tax (SAT) considerably simplifies administration by substituting the profit tax, VAT (with some exceptions like one under Customs Code), corporate property tax and single social tax.  SAT is levied at a soft rate of 6% on the income less costs.