Incentive effect of joint and several liability in fishery cooperatives on regulatory compliance

Abstract

AbstractCooperative‐based catch share systems can be implemented such that the members of the same fishery cooperative are jointly and severally liable for not exceeding collectively assigned fishing rights. In practice, this means that a regulator can take away catch privileges from an entire cooperative that overruns its collective quota, effectively creating a penalty much larger than what could be recovered with an individual fine. Fishery cooperatives then typically implement their own internal compliance regime that includes monitoring and penalties. This article first reviews compliance practice in cooperative‐based catch share systems by examining the commonalities and differences in the way compliance regimes are structured (observation and reporting requirements, penalty scheme, internal enforcement authority and indemnification mechanisms) in a number of internal agreements from fishery cooperatives in North America and in Europe. Based on our review of cooperatives and the literature on compliance, we discuss how incentives to comply may be different for an individual fisherman operating in a fishery cooperative where joint and several liability applies as compared to an individual fishing quota baseline situation without fishery cooperative. Our review suggests that, from the regulators’ point of view, joint and several liability can increase the level of compliance for a given enforcement expenditure. However, the regulator cannot rely solely on cooperatives to carry out controls and must ensure that the cooperatives themselves have an interest in setting up an effective monitoring system and will enforce sanctions within the cooperative.