How Spain, Russia and other countries cheat the world out of billions of dollars in fish

Are these Chinese fishing vessels flag-hopping in Peruvian waters?
Are these Chinese fishing vessels flag-hopping in Peruvian waters?
Image: Reuters/Mariana Bazo MB
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The world’s illegal fishermen never had it so good.

Fishermen operating outside international law catch somewhere in the range of $10 billion to $23.5 billion (pdf) in fish each year. And their incentives are only growing. As the world’s seas run out of fish—and as demand continues to increase—prices have climbed:

In chart at left, “capture total” refers to wild catches. Chart at right reflects marine catches in total tonnage, 1950-2010.
In chart at left, “capture total” refers to wild catches. Chart at right reflects marine catches in total tonnage, 1950-2010.
Image: Norwegian Fish Council (left); UN Food and Agriculture Organization (right)

Scarcity caused by overfishing also drives up costs for fishermen. Having depleted fishing stocks in their own waters, vessels must now sail farther and trawl deeper. That requires more time, labor, fuel—and money.

Another reason overfishing is making catching fish harder: Governments limit how much of their fishing stock can be fished. Since overfishing already costs $50 billion a year, according to the World Bank, international regulatory groups set caps on how many fish of major species can be caught. Countries must then report their catches to the United Nations’ Food and Agriculture Organization (FAO) to ensure that everyone’s sticking to the plan.

Skirting those laws means avoiding limits on what you can catch—practices referred to as IUU—illegal, unreported and unregulated fishing. And because enforcement is often lax, IUU fishing comes with a very low level of risk and a very high reward. One of the best tricks to pull this off is ”flag-hopping” (pdf, p.53).

The big business of flag-hopping

More formally known as using “flags of convenience” (FOC), the practice of flag-hopping involves Country A allowing a vessel from Country B to sail under Country A’s flag, for reasons explained further below. Flag-hopping is a time-honored way of slashing operating costs and dodging taxes and home-country regulations, but the practice has picked up in recent years in part because of overfishing.

Flag-hopping vessels bring in roughly 15% of global fishing industry earnings each year. Some of that comes at the expense of legal fishermen—often those living in poor countries—who lose out on catches in their own territorial waters. Because FOC vessels seldom report their catches to the country whose flag they’re sailing, they can exceed fishing quotas without restrictions. Even the ships that do adhere to country quotas end up overfishing, since the quotas are typically designed to wring maximum economic value out of a given species without collapsing its population. As a result, the booming FOC trade is pushing many fish populations closer to collapse than most people realize.

“Flags of convenience” for sale

There are many reasons, both legal and illegal, for Country A and Country B to flag hop. Country A’s motives are fairly straightforward. It pockets a fee for licensing a fishing vessel to fly its flag. Many countries have “open registries” that let foreign vessels rent the right to sail under their flag. Countries like Panama, Liberia, Malta and the Marshall Islands have led the way. Around 56.6% of the world’s merchant ships are flagged to suggest they belong to one of those four countries (pdf, p.63), according to CIA data, despite the fact that those countries constitute a combined 0.12% of the world population. Even Bolivia and Mongolia have gotten into the lucrative FOC business, despite not having any shores for docking ships.

It’s also extremely easy to register as an FOC; with a few minutes and a credit card, anyone can license their very own flag of convenience from any country with an “open registry” here.

Here’s a look at how the overall FOC shares have trended (this includes other types of shipping vessels):

Image for article titled How Spain, Russia and other countries cheat the world out of billions of dollars in fish

The low risks and high rewards of flag-hopping to fish

Country B’s vessels flag hop for various reasons. Non-fishing ships typically want to duck taxes or their home country’s labor laws, a common practice for cruise ships wanting to boost profit margins.

Some fishing vessels flag hop to cut costs, too. But as fish become scarcer, more fishing vessels are flag-hopping to evade international laws (pdf, p.53) about overfishing, since FOC countries generally don’t take part in regional fisheries agreements or bilateral deals. Also, FOCs make it notoriously difficult to identify the actual owners of the ship (pdf, p.28)—and even harder to punish them. Even if the real owners are identified, the country whose flag the vessel sails under is legally responsible according to international law, and “open registry” countries almost always shirk enforcement obligations.

Pillaging other countries’ coastlines

Poor countries that can’t afford well-staffed coast guards suffer the most from flag-hopping. Researchers estimate that illegal fishing vessels cost developing countries between $4.9 billion and $11.3 billion in each year (pdf, p.53), at a minimum.

With little threat of enforcement, there’s no reason to report fish caught illegally and risk hitting the quotas of those governments. Recent research led by Daniel Pauly, a scientist at the University of British Columbia, found that even though China purports to have the biggest distant-water fishing fleet in the world, it reported only 386,000 tons of fish caught per year from 2000-2011. The researchers estimated that China was catching more than 12 times what it reported.

Chinese fishing vessels were trawling in the territorial waters of more than 90 countries, according to the report, many in which China reported no catch. The discovery explained why the numbers of many species remained persistently low, despite fishery quotas designed to boost their numbers. Many of these vessels were fishing illegally under another country’s flag.

The scientists estimated that West Africa—where coast guards are notoriously understaffed—experienced some of the worst overfishing by Chinese ships:

China’s take.
China’s take.
Image: PEW Charitable Trusts

China isn’t the only flag-hopping culprit, nor is it the worst. The Environmental Justice Foundation found that some 12% of large-scale fishing vessels licensed with the top 13 FOC countries were of EU origin—and that only accounts for the ones that the researchers could identify. Illegal fishing by foreign vessels costs West African countries some $1.5 billion in lost trade for domestic fishermen each year, and accounts for nearly 40% of the region’s catch.  Guinea’s fishing industry, which employs 80,000 people and contributes 4% of its GDP, loses $105 million ever year to illegal fishing vessels, according to the Environmental Justice Foundation.

In East Africa, Mozambique’s government says illegal fishing of prawns and tuna caused $67 million in trade losses last year. Southeast Asian countries also suffer considerably; Indonesia says it loses $3 billion a year to illegal fishing.

The floating frozen markets for fish laundering

To evade enforcement, flag-hopping vessels participate in “transshipping,” or transferring illegal catches to other boats known as “reefers.” Reefer vessels have vast refrigerators in which they can store huge caches of fish for long periods between ports. Fishing vessels sell their fish to the reefers in exchange for fuel and food, which is a service reefers offer to both legal and illegal fishing vessels to help them avoid expensive journeys back to their home ports.

At least 700 reefers are currently sailing under another country’s flag—around 70% of them under the colors of Panama, Liberia or the Bahamas, reports the EFJ (pdf, p.17):

Image for article titled How Spain, Russia and other countries cheat the world out of billions of dollars in fish
Image: Environmental Justice Foundation

From ships of convenience to ports of convenience

Reefers take the hodgepodge of fish from various other ships and sell them at a premium, usually at “ports of convenience.” In other words, reefers launder illegally caught fish, which makes tracing the origin of the fish they sell extremely difficult. ”High sea transshipment is a big problem now,” says Pauly. “We have no idea how much transshipment [catches] there are and they are the key enabling mechanism of IUU fishing.”

The most well-known port of convenience for the European market is the Spanish port of Las Palmas, on the Canary Islands. EJF says that 400,000 tonnes of fish are traded in the Las Palmas market each year, though the port has to some extent recently stepped up enforcement. Port Louis in Mauritius is also an illicit fishing haven.

Thanks to scant regulation, China is also emerging as a “port of convenience,” says Pauly. ”The Russian far east is where there’s a huge amount of illegal fishing,” he tells Quartz. “The IUU market is more open to developing countries due to [trade status] and thus China is a laundering place for fish from Russia.”

The main flag-hopping culprits

As mentioned above, the EU has the most flag-hopping fishing vessels, about half of which are Spanish (pdf, p.6). Some of that flag-hopping is done to avoid taxes and labor laws, which is legal, but a good proportion isn’t. Exact numbers aren’t available, but there’s a steady stream of anecdotal evidence. EU vessels cleared to sell their catches in Europe were recently implicated in illegal fishing in the Gulf of Guinea, sailing under flags of convenience. Taiwan is also a big FOC fan, as are South Korea and Japan. Here’s a look at the biggest FOC countries, but keep in mind that these countries’ FOC vessels aren’t all fishing vessels:

Image for article titled How Spain, Russia and other countries cheat the world out of billions of dollars in fish

And here’s a look at how global depletion of fish stocks, via this interactive map:

Image for article titled How Spain, Russia and other countries cheat the world out of billions of dollars in fish

As you can see, many of the main culprits are those countries that have already pillaged their own fishing stocks. And, sailing under flags of convenience, they’re now rapidly doing the same to everyone else’s.