8 FSM Intrm. 353

Once the party moving for summary judgment presents a prima facie case of entitlement to summary judgment, the burden shifts to the non-moving party to produce evidence showing that a genuine issue of material fact remains for resolution. The non-moving party may not rely on unsubstantiated denials of liability to carry its burden, but must present some competent evidence that would be admissible at trial to demonstrate that there is a genuine issue of fact, and that there is enough evidence supporting its position to justify a decision upholding its claim by a reasonable trier of

When analyzing provisions of the FSM Constitution, a court must look first to the actual words of the Constitution. Where the words are clear and permit only one possible result, the court should go no further. Only where the words of the Constitution are not clear is it necessary to consult other sources. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 362-63 (Pon. 1998).

If a court finds that the words of the Constitution are not clear or do not permit only one possible result, the court should next consult the Journal of the Constitutional Convention to ascertain the intent of the framers in drafting that language. If these two sources are dispositive, the court may not look to any other source. If the Constitution's language considered together with the legislative history is not dispositive, the court should look to interpretation of comparable language in other constitutions and to custom and tradition for guidance. Given the continuity of elected representation in the early FSM Congresses, some weight may be given as well to early Congresses' understanding of constitutional provisions. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 363 (Pon. 1998).

Article I, section 1 of the Constitution defines the FSM's national boundaries, and section 2 defines the states' boundaries in the event marine resources revenues should accrue to the state wherein the resources are found, but the Constitution's framers did not intend to confer ownership of marine resources, or revenues derived from such resources, when they defined the state boundaries. Offshore marine resources, and the division between national and state power with respect to these resources, are addressed in other articles of the Constitution. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 367-68 (Pon. 1998).

Article IX, section 2(m) of the FSM Constitution expressly grants to the FSM Congress the power to regulate the ownership, exploration, and exploitation of natural resources beyond 12 miles from island baselines. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 368 (Pon. 1998).

The framers intended that the constitutional language delegating governmental functions to the FSM national government be strictly and narrowly construed and not used to excessively and unduly expand the power of the central government, but they did not intend that the general grant of power be ignored, with the effect of denying to the central government the power necessary to deal with problems which are national in scope. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 369 (Pon. 1998).

Although article IX, section 2(m) of the Constitution does not expressly state how revenues derived from regulatory activities in the EEZ should be distributed, the FSM Congress constitutionally is empowered to collect and distribute fishing fees as implied or incidental to the express grant of power in article IX, section 2(m), and that discretion over the ultimate division or appropriation of the fishing fees rests with the FSM national government. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 369-70 (Pon. 1998).

Each of the express powers delegated to the national government in Article IX of the FSM Constitution include the full authority for the national government to enact legislation and engage in activities necessary to exercise that express power. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 371 (Pon. 1998).

The express grant of power to the national government to regulate the ownership, exploration, and exploitation of natural resources, implicitly includes the power of the national government to collect revenues that are generated as a result. Thus, the national government has the authority to enact legislation related to offshore marine resources, including legislation related to collection and distribution of revenues derived therefrom. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 371 (Pon. 1998).

The Constitution must be interpreted so as to give effect to each provision, because interpretations which strip constitutional clauses of substance and effect run against the norms of constitutional interpretation, and are greatly disfavored. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 371 (Pon. 1998).

To empower the national government to regulate ownership and exploitation of fishery resources within the EEZ, without the power to collect and distribute revenues derived from these regulatory functions, would violate the intention of the Constitution's framers and unduly limit the national government in the exercise of its exclusive power over natural resources in the area beyond 12 miles from the island baselines. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 371 (Pon. 1998).

Since the national government has the express authority to regulate the ownership, exploration, and exploitation of fishery resources in the EEZ, the power to promulgate legislation which generates revenue from the regulation of these resources and provides for collection and distribution of such revenue, is incidental to or implied in the express grant. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 371 (Pon. 1998).

the practice of distributing fishing fees from the EEZ to the districts, or states, was to bring certain provisions of the Fishery Zone legislation into conformity with the provisions of the FSM Constitution and the powers granted to the national government under the Constitution. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 371-74 (Pon. 1998).

That the states currently are dissatisfied with the national government's power over the fishing fees does not change the constitutional division of powers that each of the states agreed to when it ratified the FSM Constitution and entered the Federated States of Micronesia. The states clearly delegated all power over offshore fishing resources beyond 12 miles from their baselines to the national government in the Constitution. Thus, the FSM has the power to collect and distribute the fishing fees under article IX, section 2(m). Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 374 (Pon. 1998).

The national government's authority to collect and distribute the fishing fees derived from the FSM EEZ is indisputably of a national character and beyond the ability of a single state to control because of the numerous national powers which the national government is required to exercise in order to effectively regulate and control the FSM EEZ and because the individual states are incapable of regulating and controlling the EEZ. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 374-75 (Pon. 1998).

Management and control of the FSM's fishing resources in its EEZ requires the national government to exercise its exclusive treaty powers under article IX, section 2(b) of the FSM Constitution. The FSM national government has specific international rights, and has undertaken specific international obligations, with respect to its EEZ under certain treaties. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 375 (Pon. 1998).

The process of determining the appropriate level of the fishing fees, the best method to collect the fishing fees, and ultimately how to distribute the fishing fees, is indisputably of a national character. Thus the national government, not the states, has the power to collect and distribute the fishing fees. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 375 (Pon. 1998).

The Judicial Guidance Clause requires that courts utilize the following analytic method. First, if a constitutional provision bears upon an issue, that provision will prevail over any other source of law. Second, any applicable Micronesian custom or tradition must be considered, and the court's decision must be consistent therewith. If there is no directly applicable constitutional provision, or custom or tradition, or if these sources are insufficient to resolve all issues in the case, then the court may look to the law of other nations. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 377 (Pon. 1998).

Certain issues are not of a local or traditional nature, and not amenable to determination based upon custom and tradition, such as issues related to business ventures in the FSM by non-citizens, foreign shipping agreements, and international extradition. Fishing fees derived from commercial fishing contracts, and collected primarily from foreign companies pursuant to agreements negotiated by the MMA are transactions and behaviors that are also distinctly non-customary and non-local. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 377 (Pon. 1998).

Traditional claims of exclusive ownership of marine resources have been recognized only in areas immediately adjacent to an island or submerged reef. Claims involving custom and tradition were recognized by the Constitution's drafters, but were restricted to areas within lagoons and near reef areas. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 377 (Pon. 1998).

Issues related to the EEZ cannot be determined by relying on custom and tradition, as the commercial value of the EEZ to the Federated States of Micronesia was first realized when the nation acceded to the Law of the Sea Convention. While the rights of individual Micronesians, families and clans to living marine resources under particular circumstances might be amenable to determination by custom and tradition, the states' legal entitlement to share in fishing fees derived from commercial fishing ventures, extending to 200 miles from island baselines, is not. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 378 (Pon. 1998).

The MMA can establish fees and other forms of compensation in foreign fishing agreements, which can include compensation in the field of refinancing, equipment and technology relating to the fishing industry, but no particular measure is set for the fishing fee in the FSM Code. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 380 (Pon. 1998).

The following factors are relevant to determining whether fishing fees are taxes: 1) the source of the levy ) whether the entity imposing the tax is legislative or administrative; 2) the effect of the levy on the general public ) whether the assessment is imposed upon a broad or narrow class; 3) the means by which the levy is made ) whether it is voluntary, and produces a benefit to the payor which is commensurate with the payment; and 4) the relationship between the levy and government costs ) whether the revenue generated bears a relationship to the costs of the government in administering the particular program. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 382-83 (Pon. 1998).

Cases distinguishing between taxes and fees often examine the source of the levy as an indicator of whether the particular payment should be considered a tax or a fee. An assessment imposed directly by the legislature is more likely to be a tax than one imposed by an administrative agency. The classic tax is imposed by a legislature upon many, or all citizens; the classic regulatory fee is imposed by an agency on those subject to its regulation. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 383 (Pon. 1998).

Courts also consider whether a governmental levy is directed at the general public, or whether it is imposed on a discrete subsection of the public, in distinguishing between a tax and a fee. An assessment imposed on a broad class of parties is more likely to be a tax than one imposed on a narrow class. One distinguishing characteristic of a fee is that the public agency normally may exact a fee for a grant which, presumably, bestows a benefit on the applicant, not shared by other members of society. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 383 (Pon. 1998).

Another distinction between a tax and a fee is whether the levy is exacted voluntarily in exchange for a benefit to the payor. Taxation is a legislative function, and Congress, which is the sole organ for levying taxes, may act arbitrarily and disregard benefits bestowed by the Government on a taxpayer and go solely on ability to pay, based on property or income. A fee, however, is incident to a voluntary act, e.g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 384 (Pon. 1998).

One characteristic of a fee is that it must be no greater than the government's costs, but in considering costs it is appropriate to consider the government's "real cost," which is not limited to the government's actual expenditures. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 384 (Pon. 1998).

A fee for use of property which is controlled by the government is not necessarily a tax, because the government is entitled to receive the benefits of its property just like any private landowner. As a sovereign, the government levies taxes, but as property owner it may charge fees for the use of its property. These fees are paid by choice and in exchange for a particular benefit, the use of government property, just as rents are freely paid for the use of private property. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 385 (Pon. 1998).

The level of fishing fees is set at a measure of the value of the asset to the payor, a percentage of the value of the estimated weighted catch. The measure of the value of the service to the payor can be an appropriate measure for a fee. That the value received by the government exceeds the cost of

administration is not dispositive when a valuable resource is being removed from the government's control by fishing fees payors. The government is entitled to compensation for its asset like any private property owner. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 385-86 (Pon. 1998).

The FSM national government has the exclusive right to harvest living marine resources in its EEZ, just as it has the exclusive right to harvest offshore mineral resources. As the holder of this exclusive right, the national government is allowed to dispose of this resource and receive revenue in return. Under the Convention on the Law of the Sea, each nation is entitled to exploit its marine resources to the extent it is able to achieve a maximum sustainable yield. When the FSM does not fully exploit its own resources, it is entitled to compensation at the appropriate market rate from foreign fishing vessels which it allows to fish in its waters. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 386 (Pon. 1998).

The FSM Constitution contains a provision by which the net revenues from offshore mineral resources are to be divided equally between the states and the national government, FSM Const. art. IX, § 6. There would be no need to specify the division of income from such resources if such revenues were taxes to be automatically divided under article IX, section 5. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 386 (Pon. 1998).

Counsel's conversations with persons involved in drafting the Constitution are hearsay, especially when there is no competent evidence in the record, or in the Constitutional Convention Journal, to support counsel's assertion. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 386 n.27 (Pon. 1998).

Revenues from natural resources are not taxes. The constitutional definition of tax was not meant to include amounts received by the national government from disposal of natural resources over which it has control. Chuuk v. Secretary of Finance, 8 FSM Intrm. 353, 386-87 (Pon. 1998).

This matter came before the Court for a hearing on the parties' cross motions for summary judgment on December 16, 1997. On September 23, 1997, plaintiffs, the four states of the Federated States of Micronesia ("the States"), filed a motion for summary judgment, alleging that certain fees collected by the government of the Federated States of Micronesia from the issuance of fishing permits ("Fishing Fees") legally belong to the States under the Constitution of the Federated States of Micronesia and under Micronesian custom and tradition. Alternatively, the States seek summary judgment on the ground that the Fishing Fees constitute a tax, and that the States are thus entitled under the FSM Constitution to receive 50% of the amount collected.

On November 17, 1997, defendants filed an opposition to plaintiffs' motion for summary judgment and filed their own cross-motion for summary judgment. Defendants argue that, because the FSM Constitution grants the national government the exclusive power to regulate ownership and exploitation of offshore marine resources in the FSM, and Fishing Fees are not taxes, plaintiffs' claims fail as a matter of law. On April 8, 1998, plaintiffs filed a Notice of Supplemental Authority, and

The States first claim that they are the owners of offshore fishing resources in the FSM Exclusive Economic Zone2 because traditional and customary practices of the Micronesian people vest ownership of offshore fishing resources in the island community adjacent to those waters. The States contend that this right to ownership is supported by the Article I, Sections 1 and 2, and Article VIII, Section 2 of the FSM Constitution. Thus, the States request a declaratory judgment that they are legally entitled to the Fishing Fees collected by the FSM, which are derived from the sale of permits to vessels which take these resources from the EEZ.

The States also claim that, even if the FSM is found to have control over offshore fishing resources in the EEZ under the FSM Constitution, the States are nevertheless legally entitled to 50% of the Fishing Fees because these revenues are "taxes." Under Article IX, Section 5 of the FSM Constitution, not less than 50% of all national tax revenue is to be paid into the treasury of the State where the tax is collected.

The FSM answered the Second Amended Complaint on September 30, 1996. The FSM denies that the national government has any legal obligation to pay to the States any of the Fishing Fees collected by the FSM. The FSM asserts that Article IX, Section 2(m), Article VIII, Section 1, and Article XII, Section 1 of the FSM Constitution grant the FSM Congress the exclusive power to appropriate the Fishing Fees. The FSM also denies that the Fishing Fees are taxes.

The States argue that they are entitled to receive all Fishing Fees collected by the FSM because the FSM Constitution vests in the States ownership of all of the marine resources contained within their respective State boundaries. They assert that the FSM Constitution implicitly recognizes State

The States also argue that the FSM Constitution reserves ownership of the marine resources to the States, because ownership of these resources is not expressly delegated to the national government in Article IX of the Constitution. Article IX delineates the exclusive powers of the national government. The States argue that, although Article IX, Section 2(m) of the FSM Constitution grants to the FSM Congress the power "to regulate the ownership, exploration, and exploitation of natural resources . . . beyond 12 miles from island baselines," this provision does not affect the States' rights to ownership of offshore fishery resources and fees generated therefrom. FSM Const. art. IX, § 2(m).

To support their position, the States rely on the legislative history of certain statutes related to the establishment of fishery zones and the distribution of revenue from offshore fishing resources. They assert that this legislative history, discussed in greater detail below, demonstrates that, when the FSM Constitution was written and ratified,3 the drafters of the legislation recognized that the States owned the offshore fishery resources within the FSM under the Constitution. The States also argue that the structure and composition of the Micronesian Maritime Authority ("MMA"), the FSM agency empowered to negotiate and conclude fishing agreements and regulate fishing within the EEZ, demonstrate the historical recognition that the States are the owners of offshore fishery resources.

Finally, plaintiffs argue that, under Micronesian custom and tradition, the closest State has always been considered to own the adjacent offshore fishery resources. Because nothing in the FSM Constitution challenges or changes this traditional concept of ownership, each State owns the resources within the ocean surrounding that State, extending to the outermost boundary of that State.

In the alternative, the States claim that, even if the FSM is found to have control over offshore fishery resources in the EEZ, the States are still entitled to 50% of the Fishing Fees because these revenues are "taxes." Under Article IX, Section 5 of the FSM Constitution, not less than 50% of that tax revenue is to be paid into the treasury of the State where the tax is collected. Plaintiffs argue that the Fishing Fees are characteristic of a tax, because they are based upon the average weighted catch of boats with fishing permits and primarily are designed to generate revenue for general government purposes.

Defendants argue that the FSM Constitution does not clearly confer upon either the States or the national government ownership of the fishery resources in the EEZ. Thus, defendants argue, it is necessary to look at the Constitutional Committee Reports and the Journal of the First Constitutional Convention4 to determine whether the States or the national government is legally entitled to Fishing

Defendants assert that statements made in the Constitutional Convention Committee Reports demonstrate that plaintiffs' arguments based upon provisions in Article I of the FSM Constitution are misplaced. Article I, which defines the boundaries of the States as being contiguous with the boundaries of the FSM, does not vest ownership of resources within State boundaries in the States as plaintiffs argue. Article I, Section 1 merely defines the national territory of the FSM by reference to these State (then District) boundaries and does not establish State ownership of resources in the EEZ.

Defendants also argue, based upon the Constitutional Convention Committee Reports and FSM case law, that control of the EEZ is of such an indisputable national character to be beyond the power of the States to control. Defendants argue that any limited ownership of the EEZ must be by the national government rather than the states, and that "ownership" of the resources in the EEZ cannot be separated from the regulatory powers vested in the national government under Article IX, Section 2(m) of the Constitution.

Regarding Micronesian custom and tradition, defendants assert (1) that there are factual issues which preclude summary judgment, (2) that the question of ownership of the marine resources within the EEZ is not an issue that is amenable to determination by relying on custom and tradition, and (3) that the States are not entitled to assert ownership rights to offshore fishery resources on behalf of State residents.

In response to plaintiffs' argument that Fishing Fees are taxes under Article IX, Section 5 of the FSM Constitution, defendants argue that Fishing Fees are revenues from the sale of national assets, and should be treated in the same manner as revenues from any other property disposed of by the national government, and should not be considered a tax. Defendants also argue that designating the Fishing Fees a "tax" would render them an unconstitutional tax because they are not uniform, and that the States have no right to a portion of taxes which are unlawfully collected. In the alternative, defendants argue that legislation related to Marine Resources, found in Title 24 of the FSM Code, is regulatory in nature, and that the Fishing Fees are therefore regulatory fees rather than taxes.

Under FSM Civil Rule 56, a motion for summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FSM Civ. R. 56(c); Adams v. Etscheit, 6 FSM Intrm. 580, 582 (App. 1994); Kyowa Shipping Co. v. Wade, 7 FSM Intrm. 93, 95 (Pon. 1995); Kihara Real Estate, Inc. v. Estate of Nanpei, 6 FSM Intrm. 48, 52 (Pon. 1993). Once the party moving for summary judgment presents a prima facie case of entitlement to summary judgment, the burden shifts to the non-moving party to produce evidence showing that a genuine issue of material fact remains for resolution. Kyowa Shipping Co., 7 FSM Intrm. at 95; Urban v. Salvador, 7 FSM Intrm. 29, 31 (Pon. 1995); FSM v. Ponape Builders Constr., Inc., 2 FSM Intrm. 48, 52 (Pon. 1985). The non-moving party may not rely on unsubstantiated denials of liability to carry its burden. Urban, 7 FSM Intrm. at 31. It must present some competent evidence that would be admissible at trial to demonstrate that there is a genuine issue of fact, and that there is enough evidence supporting its position to justify a decision upholding its claim by a reasonable trier of fact. Id.; Alik v. Kosrae Hotel Corp., 5 FSM Intrm. 294, 295 (Kos. 1992).

When analyzing provisions of the FSM Constitution, a court must look first to the actual words

[8 FSM Intrm. 363]

of the Constitution. Tafunsak v. Kosrae, 7 FSM Intrm. 344, 347 (App. 1995). The court should consider all provisions of the Constitution, because different sections may relate to the same subject matter, giving the specific provision questioned added meaning. Id. at 347. Where the words are "clear and permit only one possible result, the court should go no further." FSM v. Tipen, 1 FSM Intrm. 79 (Pon. 1982). Only where the words of the Constitution are not clear is it necessary to consult other sources. Tafunsak, 7 FSM Intrm. at 347; Robert v. Mori, 6 FSM Intrm. 394, 397 (App. 1994).

After reviewing the words of the Constitution, if the court finds that the words are not clear or do not permit only one possible result, the court should next consult is the Journal of the Constitutional Convention to ascertain the intent of the framers in drafting that language. Tafunsak, 7 FSM Intrm. at 347; Robert, 6 FSM Intrm. at 397; Tipen, 1 FSM Intrm. at 83. If these two sources are dispositive, the court may not look to any other source. Tafunsak, 7 FSM Intrm. at 347. If the language of the Constitution considered together with the legislative history is not dispositive, the court should look to interpretation of comparable language in other constitutions and to custom and tradition for guidance. Seymour v. Kosrae, 3 FSM Intrm. 537 (Kos. S. Ct. Tr. 1988). Given the continuity of elected representation in the early FSM Congresses, some weight may be given as well to early Congresses' understanding of constitutional provisions. Robert, 6 FSM Intrm. at 399.

The FSM national government collected several million dollars in Fishing Fees between 1979 and 1996. Plaintiffs' Motion for Summary Judgment at 3 n.2 ("Pl. Mot."); Pl. Exs. A, B.5 The Fishing Fees were collected from companies, mostly foreign, pursuant to Foreign Fishing Agreements ("FFA's") negotiated by the Micronesian Maritime Authority ("MMA"). Certain Fishing Fees collected are based upon "5% of the weighted average of the estimated landed value of the estimated catch" by the permitted boats of tuna and tuna-like species. See Pl. Mot., Exs. C, D, E (Sample Agreements) & G (Compilation of Terms of FFA's); Def. Mot., Ex. 3. However, Fishing Fees can be higher or lower than 5%, depending on certain factors, like rebates or special treaties. Sometimes rebates are provided to companies with permits to fish in the FSM based upon other benefit considerations.6 Agreements with the United States are different because they are negotiated through the Forum Fisheries Agency and include provisions for distribution of the resulting Fees among the nations who are members of that Agency. Pl. Mot. at 6. Agreements with Japanese companies are also different, as those agreements use a "per-vessel-per-trip" method for calculating Fees.

This claim also involves interpretation of the FSM Constitution and is purely a legal issue. Thus, again, both parties rely primarily on the language of the FSM Constitution, the Journal of the Constitutional Convention, legislative enactments and legislative history, and case law from various jurisdictions.

Plaintiffs submit excerpts from the report of the Joint Committee on the Law of the Sea of the Congress of Micronesia (1973) and a report entitled Micronesian Navigation, Island Empires and Traditional Concepts of Ownership of the Sea, which was submitted to the Fifth Congress of Micronesia in 1974. These reports acknowledge that there are submerged reefs and shallow areas in Micronesia, some more than 100 miles from the nearest island, where traditional ownership and use rights are recognized. Plaintiffs also cite other articles and reports to attempt to demonstrate that Micronesians traditionally have recognized that ownership of ocean resources is determined by proximity to an island)that rights in the ocean and to its resources belong to the closest island or atoll. See Pl. Mot. at 12-13.

With their reply brief ("Pl. Rep."), plaintiffs submit affidavits by Fredrick Ramp, who prepared the Micronesian Navigation report, and Emensio Eperiam, the Pohnpei State Historic Preservation Officer. In his affidavit, Mr. Ramp explains the process he used to prepare the Micronesian Navigation report, which included interviewing a number of traditional leaders in Micronesia. Mr. Eperiam avers that the people of Pohnpei "have a tradition that the resources of the ocean extending well beyond the distance of 12 miles from the reefs surrounding the islands of Pohnpei, and including resources up to the distance of 200 miles, are owned by the peoples of Pohnpei, traditionally." Aff. of Emensio Eperiam para. 5.

In response to plaintiffs' arguments based on custom and tradition, defendants submit that issues of fact preclude a determination of this matter on summary judgment. Defendants present the affidavit of Dr. Rufino Mauricio, the National Historic Preservation Officer, that disputes claims made by plaintiffs.8

Plaintiffs submit a number of documents in an attempt to demonstrate that Fishing Fees have the characteristics of a tax. First, plaintiffs submit sample FFA's and a chart compiling the terms of a number of FFA's to support their contention that the Fishing Fees, like taxes, are based upon set formulae, usually five percent of the weighted average of the estimated landed value of the estimated catch. Pl. Mot., Exs. C, D, E, G. Plaintiffs also submit a letter, dated August 13, 1990, from Peter Sitan, then the Executive Director of the MMA, to Feliciano Perman, Chairman of the Pohnpei State Legislature Finance Committee, which explains how Fishing Fees are set and collected. Pl. Mot., Ex. F. In addition, plaintiffs submit affidavits executed by Gerson Jackson, a member of the MMA board, and Fredrick Ramp, an attorney who served as counsel for the FSM in negotiating access fee agreements for MMA up until 1983. Both affiants state that the Fishing Fees are generally set at 5% of the value of the estimated landed catch. Pl. Mot., Affidavits of Gerson Jackson ("Gerson Aff.") and Fredrick Ramp ("Ramp Aff.").

Plaintiffs also submit a letter, dated January 23, 1997, from the Secretary of the FSM Department of Finance to Assistant Attorney General Carole Rafferty, setting out the yearly amount of Fishing Fees collected by MMA from 1990-1996. Pl. Mot., Ex. A. Finally, plaintiffs submit the 1994 MMA Annual Report, which details the amount of Fishing Fees collected by MMA from 1979-1994, and the annual MMA operating budget from 1979-1994. Pl. Mot., Ex. B. Plaintiffs assert that these exhibits demonstrate that the purpose of the Fishing Fees, like a tax, is to raise revenue for general governmental purposes.

In response, defendants submit an affidavit dated November 21, 1997, from Bernard Thoulag, currently the Executive Director of MMA. Mr. Thoulag attests that Fishing Fees are all individually negotiated, and currently range from 5% to 11% of the estimated landed catch. Def. Mot., Ex. 1. In addition, defendants rely on statements in Plaintiffs' Exhibit F, the letter from the former MMA Director, Peter Sitan, that Fishing Fees are negotiated and are based upon considerations other than the value of the estimated catch. Finally, defendants submit sample FFA's to demonstrate that the agreements are individually negotiated because they are written in the form of contracts, and set forth non-uniform terms. Def. Mot., Ex. 3.9

connecting the islands of the archipelago are internal waters regardless of dimensions, and jurisdiction extends to a marine space of 200 miles measured outward from appropriate baselines, the seabed, subsoil, water column, insular or continental shelves, airspace over land and water, and any other territory or waters belonging to Micronesia by historic right, custom, or legal title.

Each state is comprised of the islands of each District as defined by the laws in effect immediately prior to the effective date of this Constitution. A marine boundary between adjacent states is determined by law, applying the principle of equidistance. State boundaries may be changed by Congress with the consent of the state legislature involved.

Plaintiffs assert that the term "internal waters," used in Section 1, unambiguously confers sovereignty over, or ownership of, offshore marine resources to the States. The States assert that "it naturally follows" from drawing the marine boundary between the States in Section 2, that the waters and resources on one side of that boundary belong to the State whose islands are on that side, and the water and resources on the other side belong to the State whose islands are on the other side. Pl. Mot. at 7. The States also assert that, since Article I, Section 1 refers to the waters connecting the archipelagic states as "internal waters regardless of dimension," the Constitution confers on the States the greatest possible sovereign ownership: that these waters and their resources are owned by the States in the same sense that lakes, rivers, streams and their resources are owned. Pl. Mot. at 9.

Defendants disagree that Article I vests ownership of offshore marine resources in the States. They assert that the fact that the Constitution defines the boundaries of the States as being contiguous with the boundary of the FSM does not itself serve to vest ownership of resources within these boundaries in the States. Defendants base their argument upon statements made in the Constitutional Convention Committee Reports. Standing Committee Report ("SCREP") No. 9 of the Constitutional Convention, prepared by the Committee on General Provisions, states: "It is the intent of the committee that [the equidistance boundary method to define the boundaries between the states] be utilized to establish fair and equitable marine boundaries in the event marine resources revenues should accrue to the state wherein the resources are found." SCREP No. 9, II J. of Micro. Con. Con. 776-77 (emphasis added). Defendants argue that this language indicates that the framers of the FSM Constitution intended to provide an equitable method of distributing marine resource revenues only if revenue were to be shared. Defendants contend that this refutes plaintiffs' claims that the framers recognized States' ownership of resources within the EEZ. Def. Mot. at 12-13.

Further, defendants argue that Section 1 of Article I defines the national territory rather than establishing State ownership of resources in the EEZ. Use of the term "internal waters" in Article I, Section 1, means that the waters between islands of the archipelagic states are internal to the FSM, rather than internal to any particular state. Also, defendants point out that the Law of the Sea Convention, to which the FSM acceded, alters this definition of "internal waters." Since the definition of the FSM's territory is subject to limitations imposed by international treaty obligations assumed by the Federated States of Micronesia, defendants argue that the Constitution cannot confer on the States

Defendants rely on the decision in Federated States of Micronesia v. Ting Hong Oceanic Enterprises Co., Crim. Case No. 1994-502, to further support their claims that the EEZ is within the jurisdiction of the national government, rather than any state. In FSM v. Ting Hong, the trial court determined that the crimes charged in that case, which occurred 60 miles SSW of the island of Pulusuk, did not require application of 11 F.S.M.C. 106 or FSM Criminal Procedure Rule 18, which provide for the trial of an offense in the state in which that offense was committed. Defendants assert that this decision supports the proposition that states do not own resources in the EEZ, because the court in Ting Hong stated that the elements of the crimes charged occurred "in the FSM's EEZ and not within any state of the FSM." FSM v. Ting Hong Oceanic Enterprises, 7 FSM Intrm. 578, 579 (Pon. 1996).

This Court finds that, read in its entirety, the plain language of Article I is ambiguous as to ownership of offshore marine resources. While Section 1 of Article I clearly defines the boundary of the nation of Micronesia with respect to the outside world, it does not clearly discuss the ownership of offshore fishery resources as between the States and the national government.

Section 2 of Article I defines the marine boundaries between the States using the principle of equidistance. This definition also does not, by its terms, confer ownership of the resources within the defined boundaries. The Court finds that Section 2 is therefore also ambiguous with respect to ownership of offshore marine resources. Thus, it is appropriate to consult the Journal of the Constitutional Convention to learn what the framers intended when they adopted these provisions. Tafunsak, 7 FSM Intrm. at 347; Robert, 6 FSM Intrm. at 399.

SCREP No. 9 states that Article I of the Constitution is intended to define the territory of Micronesia precisely enough to avoid controversy with neighboring nations. SCREP No. 9, II J. of Micro. Con. Con. at 776. The Committee Report further states that the intention of Article I is to "insure Micronesian ownership of the resources in the waters, seabed, and subsoil to a distance 200 miles out from the archipelagic baselines." Id. (emphasis added). Viewing Article I, Section 1 in light of the expressed intent of the framers)to define the national boundary, rather than state boundaries)this provision does not support plaintiffs' position that the term "internal waters" is being used in relation to State rights of ownership of offshore fishery resources. Plaintiffs do accurately characterize "internal waters" as a term recognized under international law to refer to waters wholly within the boundaries of a country.11 The term is intended to establish exclusive sovereign ownership of such waters. However, Article I, Section 1 establishes that the nation as a whole, the Federated States of Micronesia, not the individual States, is entitled to such sovereignty and control.

The Court also finds persuasive the language in SCREP No. 9, in which the Committee on General Provisions states that it is "the intent of the Committee that [the use of mean distances between the outermost islands of the states] be utilized to establish fair and equitable marine boundaries in the event marine resource revenue should accrue to the State wherein the resources are

found." SCREP No. 9, II J. of Micro. Con. Con. at 777 (emphasis added). The Committee on General Provisions clearly did not contemplate whether the States or the national government were entitled to the revenues from marine resources; it merely intended to provide a method for allocating such revenues among the States if the States were deemed to be entitled to such revenues at some point in the future.12

The States assert that the court must conclude that the States own all of the marine resources under Article I Section 2 because the plain and unmistakable meaning of the word "boundary" is that it divides ownership between political units.13 But, plaintiffs' argument regarding the "plain and unmistakable" meaning of the word "boundary" is not persuasive. The Journal of the Constitutional Convention makes it clear that the framers of the Constitution did not intend to confer ownership of marine resources, or revenues derived from such resources, when they defined the State boundaries in Article I, Section 2.

The Court must consider all provisions of the Constitution, because different sections may relate to the same subject matter, giving the questionable provision added meaning. Tafunsak, 7 FSM Intrm. at 347. When Article I is read in conjunction with other provisions of the FSM Constitution, as discussed in further detail below, it is apparent that the drafters of the Constitution intended to address offshore marine resources, and the division between national and state power with respect to these resources, in other Articles of the Constitution.

Article VIII sets forth the respective powers of the national and State governments. Under Article VIII, Section 1, any power expressly delegated to the national government, or a power of such an indisputably national character as to be beyond the power of a state to control, is a national power. FSM Const. art. VIII, § 1. Article VIII, Section 2 states that any power not expressly delegated to the national government, or prohibited to the states, is a state power. FSM Const. art. VIII, § 2.

Article IX, Section 2(m) of the FSM Constitution then expressly grants to the FSM Congress the power "to regulate the ownership, exploration, and exploitation of natural resources . . . beyond 12 miles from island baselines." FSM Const. art. IX, § 2(m). Plaintiffs assert that Article IX, Section 2(m) is not an express delegation of ownership of living marine resources. Plaintiff's argue that since the Constitution only expressly grants the national government the power to regulate, not exercise

The FSM responds by arguing that Article IX, Section 2(m) is an express delegation of authority to the national government to collect and disburse the Fishing Fees at its discretion. In the alternative, defendants argue that the power to collect and disburse the Fishing Fees is a power that is of such an indisputably national character as to be beyond the power of a state to control under Article VIII, Section 1. Thus, defendants argue that no power over the EEZ residually passes to the States under Article VIII, Section 2, even absent an express delegation of power to the national government in Article IX.

The first issue that the Court must determine is whether the FSM Constitution expressly delegates to the national government the power to collect and control revenue from the marine resources in the EEZ pursuant to Article IX, Section 2(m). If the Court determines that there has been no express delegation of power in this section of the Constitution, the issue is whether the power to collect and control revenue from the marine resources in the EEZ is an "indisputably national" power.

The Journal of the Constitutional Convention provides the Court with guidelines to follow when analyzing whether a particular power has been expressly delegated to the national government under Article IX, or whether it is a power that residually remains with the States. SCREP No. 33 states, with respect to the enumerated powers which the Committee on Governmental Functions believed should be delegated to the FSM national government:

We intend that the language of this article be strictly and narrowly construed. Your Committee contemplates that this language will be interpreted by the highest court of the national court system. Your Committee does not wish that court to distort the meaning of this article by using it to excessively and unduly expand the power of the Central Government.

SCREP No. 33, II J. of Micro. Con. Con. at 817. However, the Committee also states: "Nor does your Committee intend that the general grant of power be ignored, with the effect of denying to the Central Government the power necessary to deal with problems which are national in scope." Id.

The line between national and state power in a particular area of government is not always clear, and must be carefully and thoughtfully drawn. With these considerations in mind, the Court addresses the arguments of the parties concerning the division of power between the State and national governments as it relates to the Fishing Fees.

First, the Court must look to the plain language of Article IX, Section 2(m). This Court previously found that this section expressly lists regulation of offshore resources beyond 12 miles from island baselines as an exclusive power of the national legislature. See FSM v. Kotobuki Maru No. 23 (I), 6 FSM Intrm. 65, 69 (Pon. 1993). However, the issue in the instant case relates to legal entitlement to Fishing Fees derived from offshore fishery resources. The Court finds that Article IX, Section 2(m) of the Constitution does not expressly state how revenues derived from regulatory activities in the EEZ should be distributed. Thus, the Court will consult the Journal of the Constitutional Convention for further guidance, as well as legislation adopted by the Interim Congress of the Federated States of

The Constitutional Convention Committee Report addressing Offshore Natural Resources discusses offshore fishery resources and offshore mineral resources under the same heading. The Report clearly states that "regulatory authority over both mineral and fishery resources beyond 12 miles of an island ought to rest in the national government." SCREP No. 33, II J. of Micro. Con. Con. at 819. In reaching this conclusion, the Report stated that the Law of the Sea was likely to recognize resources jurisdiction up to 200 miles beyond the island reefs, and that exploitation of such resources would involve negotiations with nationals of other countries. Id. Also in support of vesting power in the national government, the Report states that a rational, organized plan of regulation of the offshore area requires consistency and uniformity among the States. Id.

The Report clearly defines the obligations of the national government with respect to revenues obtained from exploitation of mineral resources; however, it is silent regarding fishery revenues. See SCREP No. 33, II J. of Micro. Con. Con. at 819. Based upon the Standing Committee Reports, which direct that the specifically enumerated national powers in the FSM Constitution be strictly construed, and based on legislation that was enacted around the time that the FSM Constitution was drafted and ratified, and the legislative history of that legislation, this Court must and does conclude that the drafters of the Constitution did not intend that the Fishing Fees be divided between the States and the national government in the same manner that revenues derived from offshore mineral resources are divided.

Rather, the Court concludes that the FSM Congress constitutionally is empowered to collect and distribute the Fishing Fees as implied or incidental to the express grant of power in Article IX, Section 2(m), and that discretion over the ultimate division or appropriation of the Fishing Fees rests with the FSM national government.

According to the Report of the Standing Committee on Governmental Functions, related to the enumerated powers granted to the national government under Article VIII, Section 1 of the FSM Constitution: "There are . . .express powers which set forth the basic relationship between the state and national governments by delegation to the national government of a number of broad grants of power such as `national defense,' `foreign affairs,' `interstate commerce,' etc." SCREP No. 33, II J. of Micro. Con. Con. at 814. One of the broad, or major, powers that is delegated to the national government in Article IX, Section 2(m) is Offshore Natural Resources. SCREP No. 33, II J. of Micro. Con. Con. at 814. The Report proceeds to explain, with respect to all express powers that are delegated to the national government, that: "These broadly stated express grants of power contain within them innumerable incidental or implied powers." Id. at 814-15 (emphasis added). The Report provides examples of "incidental" or "implied" powers as follows:

For example, the Committee Proposal grants the national government the express power to establish a postal system . . . . But the Committee's proposal does not expressly state that the national government shall also have the power to issue stamps, build post offices, hire employees to deliver mail, or prescribe major or minor penalties for stealing mail. The Committee intends that such incidental powers be implied within the express grant of power . . . .

Id. at 815. Thus, the framers of the Constitution intended that each of the express powers delegated to the national government in Article IX of the FSM Constitution include the full authority for the national government to enact legislation and engage in activities necessary to exercise that express power.

This Court must conclude that the express grant of power to the national government in Article IX, Section 2(m), "to regulate the ownership, exploration, and exploitation of natural resources," implicitly includes the power of the national government to collect revenues that are generated as a result. Thus, the national government has the authority to enact legislation related to offshore marine resources, including legislation related to collection and distribution of revenues derived therefrom. To hold otherwise would eviscerate Article IX, Section 2(m) insofar as it relates to offshore fishery resources.

This Court must interpret the Constitution so as to give effect to each provision, "because interpretations which strip constitutional clauses of substance and effect run against the norms of constitutional interpretation, and are greatly disfavored." Tafunsak, 7 FSM Intrm. at 347 & n.4. To empower the national government to regulate ownership and exploitation of fishery resources within the EEZ, without the power to collect and distribute revenues derived from these regulatory functions, would violate the intention of the framers of the Constitution and unduly limit the national government in the exercise of its exclusive power over natural resources in the area beyond 12 miles from the island baselines. Id.; see also Kotobuki Maru No. 23 (I), 6 FSM Intrm. at 69.

As Standing Committee Report No. 33 states, the power of the national government to "establish a postal system" includes the power to "issue stamps, build post offices, hire employees to deliver mail, or prescribe major or minor penalties for stealing mail," even though these powers are not stated with specificity. SCREP No. 33, II J. of Micro. Con. Con. at 815. As an example, revenue streams necessarily are generated from stamps and penalties paid to the national government, and the Constitution is silent as to how these revenues are to be distributed. Yet, the Standing Committee Report recognized that Congress must be vested with the power to enact legislation to collect, and distribute or dispose of, this revenue in order to effectively establish a postal system. The same is true with respect to the exercise of other express national powers. Since the national government has the express authority to regulate the ownership, exploration, and exploitation of fishery resources in the EEZ, the power to promulgate legislation which generates revenue from the regulation of these resources and provides for collection and distribution of such revenue, is incidental to or implied in the express grant.

Absent any other provision of the FSM Constitution or legislative enactment to the contrary, the Court cannot find any basis to compel the national government to distribute Fishing Fees to the States. This conclusion is supported by a review of fishery resource legislation enacted around the time that the FSM Constitution was drafted and adopted, as well as the legislative history of that legislation.

Plaintiffs argue that the intent of the framers was to recognize State ownership of offshore fishery resources. This argument is based, in part, on the fact that each district which eventually became a State of the Federated States of Micronesia used to receive revenue from fishing conducted within that district. Thus, it is necessary to review the historical treatment of Fishing Fees and other offshore resource revenues in order to evaluate plaintiffs' argument.

Legislation which was enacted by the Interim Congress of the Federated States of Micronesia in the years immediately following the Micronesian Constitutional Convention included provisions by which the national government distributed revenues from Fishing Fees back to the districts in which the fish were caught. Congress has amended this legislation several times in the intervening years. Pursuant to legislation currently in force, the national government is required to share with the States revenues derived from fines or forfeitures under 24 F.S.M.C. 510, but not Fishing Fees.14 The States argue that legislation which was in force immediately following the Micronesian Constitutional Convention most clearly sets forth the intent of the framers and of the districts that ratified the FSM Constitution. Plaintiffs maintain that the framers intended to recognize State ownership of offshore fishery resources throughout the EEZ. See Pl. Mot. at 15-19.

However, this Court's review of this legislation compels the conclusion that the framers intended to vest complete control of the EEZ in the national government, and that the legislation which terminated the practice of distributing Fishing Fees from the EEZ to the districts, or States, was intended to conform such legislation to the powers granted to the national government under the Constitution.

The Congress of Micronesia enacted Public Law 7-71 in August 1977, and it became law in October 1977. Entitled "Fishery Zones Jurisdiction," it defined the Territorial Sea (to a distance of 3 mi. from island baselines), the Exclusive Fishery Zone (3 mi. to 12 mi. from island baselines), and the Extended Fishery Zone (12 mi. to 200 mi. from island baselines).15This legislation recognized the sovereignty of each district (now State) over the entire 200 mile zone surrounding the islands of the district. In Section 58, the Act stated that "[i]t is self-evident that any island or group of islands which achieves separate sovereignty through separation from the remaining districts of Micronesia will thereby attain sovereign rights to its sea area." Pub. L. No. 7-71, § 58 (7th Cong. of Micro., 1st Spec. Sess. 1977). The Act also provided that: "After the payment of operating and other expenses of the [Micronesian Maritime] Authority, the fees collected by the Authority . . . for foreign fishing in the territorial sea or fishery zones of Micronesia shall be returned to each district in proportion to the catch harvested by foreign fishermen in that district." Id. § 206 (emphasis added).

Thus, the legislation enacted immediately following the Constitutional Convention required the national government to distribute to each district all of the revenue from within the entire fishery zones within that district, up to 200 miles from the island baselines, as the Act does not distinguish between the "Exclusive" fishery zone and the "Extended" fishery zone. Section 205 of Public Law 7-71, relating to fines and forfeitures, directed that such revenues be used first to cover administrative expenses of the MMA, and then to develop marine resources. Id. § 205.

In 1978, after the States ratified the FSM Constitution, Sections 205 and 206 were amended. The new Section 205 directed that all fines and forfeitures "be divided on a 50/50 basis between the state affected and the [MMA]." The new Section 206 provided that fees from the portion of the foreign

catch within the Territorial Sea and the Exclusive Fishing zone (within 12 miles from the island baseline) of a State, "as mutually determined by the State and the [MMA]," be deposited in the General Fund of the State. It provided that "the remainder [fees generated without the 12 mile zone and within the 200 mile zone] shall be deposited in the General Fund of the Interim Congress" of the FSM, or its successor. Pub. L. No. IC-3, §§ 17, 18 (Intrm. Cong., 1st Sess. 1978). The States argue that the intent behind this legislation was not to vest ownership of the Fees in the national government, but to insure that all moneys received by the national government were first deposited in the FSM General Fund as required by Article XII, Section 1 of the FSM Constitution.16

However, the language of the amendment itself, along with the legislative history of Public Law No. IC-3, compels the conclusion that Congress intended these amendments to bring the provisions of the Fishery Zones legislation into conformity with the constitutional division of power between the States and national government, at a distance of 12 miles from the island baselines, as set forth in Article IX of the FSM Constitution. Article IX, Section 2(m) of the FSM Constitution clearly grants exclusive control of natural resources beyond 12 miles from island baselines to the national government, and the States residually retain control of the entire area within 12 miles from their respective island baselines.

The Committee Report accompanying Public Law IC-3 states that concerns were raised at public hearings regarding the division of fees and proceeds from penalties between the MMA and the States. Thus, the Committee stated that it was amending the bill to provide "a more equitable formula for division between the [MMA] and the state concerned of the fees charged on the foreign catch as well as monetary fines imposed as penalties." SCREP No. IC-12, House J. of Intrm. Cong., 1st Sess. 271, 272 (1978). With respect to the fees, the Committee stated that the "division shall be as mutually determined by the [MMA] and the state involved." Id. (emphasis in original).

The States argue that this language in the legislative history of Public Law IC-3 indicates that the Interim Congress intended that the States receive a portion of the Fishing Fees, or that the States be involved in determining how the Fees are distributed. However, this Committee Report does not distinguish between fees derived from foreign catches within or without the area 12 miles from island baselines.

The wording of the amendment itself demonstrates that the Interim Congress was concerned only about equitable distribution and mutual negotiation between the States and the MMA with respect to fees generated from within the 12 mile zone. The new law required that fees generated within the 12 mile zone be deposited in the general fund of the State legislature "as mutually determined by the Authority and the State affected." Pub. L. No. IC-3, § 18 (Intrm. Cong., 1st Sess. 1978). However, the remainder, Fishing Fees generated from 12 miles to 200 miles in the EEZ, were to be "deposited in the General Fund of the Interim Congress" of the FSM. Id.

The language of this amendment shows that the Interim Congress believed that all revenues from beyond 12 miles from island baselines belonged to the national government under the constitutional division of power between the States and the national government at a distance of 12 miles from island baselines. The expressed intent of this legislation was to bring certain provisions of the Fishery Zone legislation "into conformity with [the provisions] of the Constitution of the Federated States of Micronesia." SCREP No. IC-12, J. House J. of Intrm. Cong., 1st Sess. 271 (1978).

In summary, within two years after the States ratified the FSM Constitution, the legislation related to Fishing Fees was amended twice,17 with the result that the States went from receiving all of the revenue from offshore fishery resources in the EEZ to receiving none of the revenue derived from beyond the area 12 miles from island baselines. However, the legislative history of the statutes indicates that the intent of the legislation was to conform the division of jurisdiction over fishing zones, and at the same time control over the Fishing Fees, to the Constitutional division of state and national power at the distance of 12 miles from the island baselines.

To accept the States' argument, the Court would have to find that the early Congresses acted unconstitutionally when they amended the Fishery Zones legislation to exclude the states from receiving Fishing Fees from beyond the 12 mile island baselines. Acts of Congress are presumed to be constitutional. FSM v. Otokichy, 1 FSM Intrm. 183, 190 n.6 (App. 1982); Mackenzie v. Tuuth, 5 FSM Intrm. 78, 82 (Pon. 1991). Further, because of the continuity of representation in the early Congresses of the FSM, this Court can give some weight to the early Congresses' understanding of Constitutional provisions. Robert, 6 FSM Intrm. at 398.

The early Congresses clearly interpreted Article IX, Section 2(m) as a grant of power to the national government to collect and distribute Fishing Fees as a function of the national government's regulatory authority over offshore fishery resources. In fact, the history of the amendments which excluded the states from receiving a share of the Fishing Fees clearly states that the amendments were intended to conform the legislation to the applicable provisions of the Constitution. These acts carry a presumption of constitutionality, and this Court finds that Congress acted within its authority when it excluded the States from directly receiving Fishing Fee revenues derived from the EEZ.

The fact that the States currently are dissatisfied with the national government's power over the Fishing Fees does not change the constitutional division of powers that each of the States agreed to when it ratified the FSM Constitution and entered the Federated States of Micronesia. The States clearly delegated all power over offshore fishing resources beyond 12 miles from their baselines to the national government in the Constitution. Thus, the Court finds that the FSM has the power to collect and distribute the Fishing Fees under Article IX, Section 2(m).

Having determined that the national government is empowered to collect and distribute the Fishing Fees under the express delegation of power contained in Article IX, Section 2(m) of the Constitution, the Court need not reach the issue of whether the power to do so is "indisputably of a national character." The Court nevertheless finds that, under Article VIII, Section 1 of the FSM Constitution, the national government's authority to collect and distribute the Fishing Fees derived from

the FSM EEZ is also indisputably of a national character and beyond the ability of a single State to control. The Court reaches this conclusion based upon the numerous national powers which the national government is required to exercise in order to effectively regulate and control the FSM EEZ, and based upon the Court's conclusion that the individual States are incapable of regulating and controlling the EEZ.

First, management and control of the FSM's fishing resources in its EEZ requires the national government to exercise its exclusive treaty powers under Article IX, Section 2(b) of the FSM Constitution. The FSM national government has specific international rights, and has undertaken specific international obligations, with respect to its EEZ under certain treaties. As a nation which has acceded to the Convention on the Law of the Sea, the Federated States of Micronesia, through its national government, must comply with the Convention in the management, control and regulation of fishery resources in the EEZ.

Specifically, with respect to living resources in the EEZ, the FSM national government is required to determine the allowable catch of the living resources, and take measures to maintain or restore populations of harvested species at levels which can produce the "maximum sustainable yield." U.N. Convention on the Law of the Sea art. 61 ("Convention"). Without compromising these conservation principles, the FSM also is required to promote the objective of optimum utilization of these living resources. The Convention sets out detailed rules requiring the FSM to permit nationals of other countries to fish in its EEZ, as long as the FSM does not have the capacity to domestically harvest the entire allowable catch of its living resources. Convention art. 62. Thus, the Convention compels the FSM to grant access to the surplus of the allowable catch to other nations "through agreements or other arrangements." Convention art. 62(2).

Nationals of other countries who enter into agreements with the FSM to fish in the FSM EEZ are required by the Convention to comply with the terms and conditions of these agreements, which must be consistent with the Convention. The Convention specifically provides that these agreements may contain provisions related to licensing of vessels, including payment of fees and remuneration. Convention art. 62(4)(a).

Thus, under the Convention on the Law of the Sea, it is mandatory for the FSM national government to conserve the resources in its EEZ and negotiate agreements with foreign nationals for the right to fish in the EEZ. Negotiating agreements with foreign governments and foreign companies necessarily involves foreign affairs, another exclusive national power. See FSM Const. art. IX, §§ 2(b), 2(g). The States do not have power in these areas, and thus are incapable of conducting activities which are necessary to ensure the regulation and exploitation of the FSM EEZ as required by international treaty.

Additionally, the FSM has presented evidence by way of affidavit that the States and national government were incapable of monitoring the entire EEZ at the time that the FSM Constitution was drafted. Thoulag Aff., Def. Mot., Ex. 1. At the time that the Constitution was drafted, in order to comply with the Law of the Sea Convention which was then being negotiated, the national government was required to establish mechanisms to police the EEZ for illegal fishing activities, and otherwise insure that the fishery resources in the EEZ were not depleted. Further, the Journal of the Constitutional Convention reflects the drafters' recognition that the national government, not the State governments, was better equipped to deal with foreign governments and implement comprehensive national policies and programs in the EEZ. SCREP No. 33, II J. of Micro. Con. Con. at 813-15.

character. The Court finds that the national government, not the States, has the power to collect and distribute the Fishing Fees under Article VIII, Section 1 of the FSM Constitution. Kotobuki Maru No. 23(I), 6 FSM Intrm. at 71-72; Edwards v. Pohnpei, 3 FSM Intrm. 350 (Pon. 1988).

Plaintiffs also argue that 24 F.S.M.C. 510 and 24 F.S.M.C. 502(5), which, like former Section 205 of Title 24, provide that the national government must share revenue from fines and forfeitures with the states, demonstrate that national government is legally required to share Fishing Fees with the States. See Pl. Mot. at 23-26; Def. Mot. at 21-22.

The Court does not find this argument persuasive. The legislative history of legislation related to fines and forfeitures expressly states that sharing revenues from fines and forfeitures is intended to encourage the States to participate in policing the EEZ by providing a financial incentive to the States. See SCREP No. 5-358, J. of 5th Cong., 4th Reg. Sess. 465 (1988). It is not, as plaintiffs assert, any admission or indication that the States are the owners of the underlying resources.

Plaintiffs also argue, without citing any authority, that the fact that the Board of the MMA is composed of one delegate from each of the four states supports the States' claim to ownership of the natural resources in the EEZ. This argument is not persuasive, given that all of the States have representation on several nationally-created boards.18

The Court finds that the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the defendants are entitled to judgment as a matter of law on plaintiffs' claim that the Fishing Fees belong to the States under the FSM Constitution. FSM Civ. R. 56(c); Adams, 6 FSM Intrm. at 582; Kyowa Shipping Co., 7 FSM Intrm. at 95; Kihara Real Estate, Inc., 6 FSM Intrm. at 52. Accordingly, plaintiffs' motion for summary judgment on this issue is denied, and defendants' cross motion for summary judgment is granted.

Plaintiffs argue that the States are owners of the offshore marine resources according to Micronesian custom and tradition. In response to plaintiffs' argument that Micronesian custom and traditional practice vest ownership of offshore ocean resources in the state, defendants assert (1) that there are issues of fact which preclude summary judgment, (2) that the question of ownership of the marine resources within the EEZ is not an issue that is amenable to determination by relying on custom and tradition, and (3) that the State is not entitled to serve as the representative for its residents.

Before discussing whether there are issues of fact which preclude summary judgment, the Court must address the other two arguments raised by the FSM, which would preclude the States from asserting ownership of the fishery resources in the EEZ based upon a claim of custom and tradition.

Article XI, Section 11 of the FSM Constitution states that: "Court decisions shall be consistent with this Constitution, Micronesian customs and traditions, and the social and geographical configuration of Micronesia." This provision of the Constitution, commonly referred to as the Judicial Guidance Clause, requires that the Court utilize the following analytic method. First, if a constitutional provision bears upon an issue, that provision will prevail over any other source of law. Second, any applicable Micronesian custom or tradition must be considered, and the Court's decision must be consistent therewith. If there is no directly applicable constitutional provision, or custom or tradition, or if these sources are insufficient to resolve all issues in the case, then the Court may look to the law of other nations. Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131, 139-40 (Pon. 1985).

The Court must first look to the FSM Constitution to determine whether any of its provisions are applicable to the dispute between the parties in the instant case. As discussed above, the Court finds that Article VIII and Article IX, Section 2(m), read together, grant the national government exclusive control over the FSM EEZ, including the power to collect and distribute the Fishing Fees obtained from commercial foreign fishing agreements. Thus, as between the States and the national government, this constitutional provision must "prevail over any other source of law," as long as this Constitutional interpretation is consistent with applicable Micronesian customs and traditions. Semens, 2 FSM Intrm. at 140.

The Court previously has recognized that certain issues are not of a local or traditional nature, and not amenable to determination based upon custom and tradition. Defendants cite a number of cases they argue demonstrate that the Court has refused to apply custom and tradition to determine issues involving transactions or distinctly non-customary and non-local behaviors. These cases have involved issues related to business ventures in the FSM by non-citizens, Mailo v. Twum-Barimah, 2 FSM Intrm. 265 (Pon. 1986), foreign shipping agreements, Semens v. Continental Air Lines, Inc., 2 FSM Intrm. 131 (Pon. 1985), and international extradition, In re Extradition of Jano, 6 FSM Intrm. 23 (App. 1993).

The dispute between the States and the national government in this case essentially is which level of government, State or national, is legally entitled to receive the Fishing Fees derived from commercial fishing contracts, and collected primarily from foreign companies pursuant to agreements negotiated by the MMA. The Court finds that these transactions and behaviors are distinctly non-customary and non-local. It is significant that fishing for highly migratory fish stocks typically takes place more than 12 miles from island baselines. Also significant is that plaintiffs' claims based upon custom and tradition are made on behalf of the States rather than on behalf of individuals, clans, or families. Finally, this dispute revolves around issues of federalism that are constitutional in nature, and implicates powers which are indisputably national. Thus, the Court concludes that this dispute between the two different levels of government cannot be adequately determined by relying on custom and tradition.

Traditional claims of exclusive ownership of marine resources have been recognized only in areas immediately adjacent to an island or submerged reef: "The lagoon area and sea near the shore are the exclusive property of the island or atoll. Islands also maintain exclusive rights in all known submerged reef areas." Micronesian Navigation, Island Empires, and Traditional Concepts of Ownership of the Sea at 78, Pl. Ex. I.

The Journal of the Constitutional Convention also recognized that: "Mindful of the fact that Micronesian custom generally recognizes family, clan, or individual ownership of fishery resources within lagoons and for several miles beyond reefs, [the] Committee concluded that the state

government ought to regulate the ownership and use of such resources." SCREP No. 33, II J. of the Micro. Con. Con. at 819. Thus, claims involving custom and tradition were recognized by the drafters of the Constitution, but were restricted to areas within lagoons and near reef areas.

The Law of the Sea Convention first recognized that the Federated States of Micronesia as a nation has the exclusive right to exploit resources in its 200-mile EEZ. The FSM Constitution was drafted to vest authority over the EEZ in the national government with this newly recognized national commercial resource in mind.19 The Interim Congress of the FSM enacted fishery zones legislation based upon the Law of the Sea Convention, and the rights and obligations of the Federated States of Micronesia which are recognized therein. See 24 F.S.M.C. 101 et seq. Thus, issues related to the EEZ cannot be determined by relying on custom and tradition, as the commercial value of the EEZ to the Federated States of Micronesia was first realized when the nation acceded to the Law of the Sea Convention. Further, while it is undisputed that nationals of other countries have engaged in commercial fishing ventures in Micronesian waters for some time, plaintiffs have not presented any evidence that the State, as a governmental entity, was customarily entitled to share in any fishing revenues. The States were represented in the Constitutional Convention, and through representatives, delegated to the national government all authority over natural resources in the EEZ. The "States" as such did not exist until the formation of the federation of states in the FSM.

Thus, this Court must conclude that the issue of whether the States or national government is legally entitled to the Fishing Fees is not an issue that is amenable to determination by reliance on custom and tradition. All of the evidence presented by both parties has been limited to discussion of islands, clans, families, or groups of people. Thus, while the rights of individual Micronesians, families and clans to living marine resources under particular circumstances might be amenable to determination by custom and tradition, the States' legal entitlement to share in Fishing Fees derived from commercial fishing ventures, extending to 200 miles from island baselines, is not.

Plaintiffs also assert that the States have standing to represent their respective citizens as parens patriae. The Court rejects this argument.20 Allowing the States to invoke the doctrine of "in parens patriae" would extinguish potentially valid claims of individuals, clans, or families who are not party to this action. Individuals, families and clans claiming customary rights of ownership of a particular reef

The States also assert that they are entitled to represent their residents because the States, not the national government, are primarily responsible for the health, education, and welfare of their citizens. However, the national government is also responsible for its citizens' health, education, and welfare, and for protecting the FSM's marine resources. The States' argument that they are the best representative for their residents based is not convincing based upon these considerations.

The Court finds that any claim to resources in the EEZ based upon custom and tradition must rest with clans, families and individuals rather than with the States. Thus, the issue as currently framed before the Court, as a suit between the States and the national government, is not amenable to determination by custom and tradition. See Semens, 2 FSM Intrm. at 139-41 (where court determined that business activities which giving rise to lawsuit were not of a local or traditional nature, but were rather of a markedly non-local, international character, the court's responsibility to consider custom and tradition under the Judicial Guidance Clause was satisfied).

The States' second claim is that, even if the FSM is found to have control over marine resources in the EEZ, the States are still entitled to 50% of the FSM's Fishing Fee revenues because these revenues are "taxes." The States assert that, under Article IX, Section 5 of the FSM Constitution, if the Fishing Fee revenues are "taxes," not less than 50% must be paid into the treasury of the State where the tax is collected.22

Plaintiffs submit several exhibits to support their contention that the Fishing Fees bear the characteristics of a tax. In particular, plaintiffs' exhibits demonstrate that the Fishing Fees are primarily based upon 5% of the value of the estimated landed catch of a vessel, that the Fishing Fees are deposited in the General Fund, and that the revenues generated by the Fees consistently far exceed MMA's annual budget.

Plaintiffs argue that, because the Fishing Fees are based upon a set formula, and primarily are designed to generate revenue for the government, they are "taxes" within the meaning of Article IX, Section 5 of the FSM Constitution. In support of this argument, plaintiffs cite a number of United States cases, as well as FSM case law and a letter written by an Assistant FSM Attorney General.

Defendants argue in response that the Fishing Fees are revenues from the sale of national assets, just like any other property disposed of by the national government. They contend that revenue from the sale of assets should not be considered a tax. In the alternative, defendants argue that legislation

Before the Court analyzes whether the Fishing Fees are taxes or another form of payment, it is necessary to set forth the structure of legislation under which the Fishing Fees are collected. Under 24 F.S.M.C. 402, entitled "Fees for foreign fishing permits," the MMA is empowered to set "fees and other forms of compensation" by entering into FFA's under 24 F.S.M.C. 401, 402, 404 and 405. Section 401 requires foreign fishing vessels to obtain a permit in order to fish in the FSM's EEZ. Under Section 402, the MMA can establish fees and other forms of compensation in the FFA's, which can include "compensation in the field of refinancing, equipment and technology relating to the fishing industry" under the Law of the Sea Convention. Convention art. 62 § 4(a). Section 404 sets forth the minimum criteria for inclusion in an FFA. Section 405 requires the approval of the FSM Congress if an FFA covers more than ten vessels.

Evidence produced by both parties indicates that the Fishing Fees generally are set at 5% of the value of the estimated weighted catch of the permitted vessel. However, both parties also presented evidence that Fishing Fees may be higher or lower than 5% depending on certain factors, for example rebates or special treaties. Plaintiffs acknowledge that agreements with the United States differ from this general rule because they are negotiated through the Forum Fisheries Agency and include provisions for distribution of the resulting Fees among the nations who are members of that Agency. Pl. Mot. at 6. Agreements with Japanese companies also differ, as those agreements use a "per-vessel-per-trip" method for calculating Fees. Defendants also presented evidence by way of affidavit that the Fishing Fees can be as high as 11% of the value of the estimated weighted catch. Thoulag Aff., Def. Mot., Ex. 1.

Plaintiffs rely on Wainit v. Weno, 7 FSM Intrm. 121, 123 (Chk. S. Ct. Tr. 1995), to support the proposition that a "tax" is defined as any assessment the primary purpose of which is to raise revenue. The opinion in Wainit recognized that the Weno Municipal Ordinance at issue, which required businesses to purchase a wholesale business license, was not imposed in conjunction with any regulation. Thus, it found that the provision was "a licensing fee for revenue purposes." Id. at 123. The opinion concludes that, if the payment is construed as a tax, it is not an unconstitutional tax. However, it does not define "tax," set forth criteria for determining when an exaction is a tax, or explain how a tax is distinguishable from a regulatory fee.

In Truk Continental Hotel, Inc. v. Chuuk, 7 FSM Intrm. 117, 119-20 (App. 1995), the Court found that a ten percent state tax on rent revenue was an "income tax," and thus violative of the FSM Constitution, which vests in the national government the exclusive authority to tax income. The Court focused its inquiry on whether the tax was an "income" tax, and did not provide any definition or criteria that would assist in determining whether the Fishing Fees are "taxes."

Plaintiffs also rely upon Actouka v. Kolonia Town, 5 FSM Intrm. 121 (Pon. 1991). In Actouka, the Court struck down a municipal fee levied against banking and lending institutions and insurance companies. Id. at 122. However, the Court never characterized the fee as a tax; it merely noted that the fee was unconstitutional because the national government exclusively has authority to regulate banks and insurance companies under Article IX, Section 2(g) of the FSM Constitution.

The only FSM source cited by either party which discusses the definition and criteria of a "tax" is a letter from an FSM Assistant Attorney General, dated May 22, 1990. See Pl. Mot., Ex. T. In that letter, the FSM Assistant Attorney General opined that an airport fee, designated a "five dollar utilization fee," levied on departing passengers was a "tax" that foreign ambassadors and other diplomats were not required to pay. The criteria used by the FSM Assistant Attorney General to determine that the airport fee was a tax were (1) that the payment was a forced contribution exacted pursuant to legislative authority, (2) that the payment was not for a special privilege or service rendered by a public officer, and (3) that the primary purpose of the payment was to raise revenue.

This letter is not binding on the Court. While it is instructive, in that it discusses certain criteria which can be used to distinguished a "tax" from a "fee," it relates to a completely different set of facts, under completely different circumstances, than are present in this case. The letter was issued solely for the purpose of determining whether foreign dignitaries should be required to pay a five dollar departure fee at the airport. Thus, the Court finds that no clear precedent establishing criteria for when a particular exaction constitutes a tax exists in the FSM. The Court will look to precedents from other jurisdictions for guidance. Semens, 2 FSM Intrm. at 139-40.

United States cases provide several different tests and distinctions for determining when a payment is a tax. Under U.S. law, a tax is distinguished under various circumstances from a fee, a toll, a rate or charge for services, or a penalty. Generally, under U.S. law, "[t]he name or designation given a particular financial burden by the legislature or other public body authorized to impose it is not conclusive in determining whether or not it is a tax." 71 Am. Jur. 2d State and Local Taxation § 14 (1973). "[T]he character or nature of a particular tax must be determined by its operation, practical results, and incidents, and by the substance and natural and legal effect of the language employed in the statute or law imposing it." Id. § 22 (footnotes omitted). It is recognized under U.S. law that a governmental unit "frequently receives income from sources other than taxation, so that all forms of public revenue cannot with accuracy be called taxes." Id. § 11.

Plaintiffs assert that, under this definition, the Fishing Fees should be considered a tax, even if a special benefit is received by the party from whom the Fee is collected, because the revenues support the general government rather than a specific program. While these criteria are helpful, this Court finds that this test provides criteria which are too broad under the circumstances of this case. See Bidart Bros. v. California Apple Comm'n, 73 F.3d 925, 930 (9th Cir. 1996) (stating that the specialized goal of the bankruptcy law, to equitably distribute assets, makes this broad definition of "tax" inappropriate in some contexts).

Plaintiffs also characterize the Fishing Fees as "excise taxes" or "privilege taxes," which require a payor to submit payment to the government in order to engage in a regulated activity. Examples are charges for engaging in certain trades or occupations, or corporate or official privileges.

Plaintiffs further argue that the Fishing Fees are also like "severance taxes," which are excise taxes charged for extraction of natural resources. Plaintiffs cite Commonwealth Edison Co. v. Montana, 453 U.S. 609, 101 S. Ct. 2946, 69 L. Ed. 2d 884 (1981), in which the U.S. Supreme Court upheld a state ruling that a state's exaction of a percentage of the value of coal extracted in that state was a severance tax, because the revenues were used for the general support of government. Other cases cited by plaintiff also support the proposition that one criterion for determining that a charge is a "tax" is whether the amount received by the government exceeds the government's cost in regulating that activity.

Defendants argue that the Fishing Fees are properly construed not as taxes, but as revenues from the sale of a valuable government asset, or, in the alternative, as regulatory fees. Defendants rely upon United States v. River Coal Co., 748 F.2d 1103 (6th Cir. 1984), in which the court implied that a coal mining permit was not a tax, because (1) the mining permit was voluntary, and (2) it bestowed an individual benefit on the person seeking the permit. Defendants cite other cases to emphasize that a tax cannot exist where the individual paying the assessment receives a privilege or benefit therefrom. Under the test proposed by defendants, three criteria must be met before a charge is called a tax. First, the money collected must be imposed by the government without the consent of the payor; second, the money collected must not provide any special benefit to the payor; and, third, the money collected must be spent for the support of the government.

The criteria proposed by both parties are helpful in assisting the Court to determine whether the Fishing Fees are more properly characterized as taxes or fees. This Court finds most instructive those cases which compare regulatory fees to taxes, and will proceed with criteria taken from those cases in particular.

Under this factor, an assessment imposed directly by the legislature is more likely to be a tax than one imposed by an administrative agency. Id. In San Juan Cellular Telephone. Co. v. Public Service Commission of Puerto Rico, 967 F.2d 683 (1st Cir. 1992), the court surveyed a number of cases that had examined whether assessments were "taxes" or "fees," and concluded in part that, "[t]he classic `tax' is imposed by a legislature upon many, or all citizens . . . [t]he classic `regulatory fee' is imposed by an agency on those subject to its regulation." Id. at 685.

This Court finds that this factor is relevant in the instant case. Here, the MMA, as an administrative agency, individually enters into FFA's with foreign companies who seek to remove fish from the FSM EEZ. The MMA has the authority to "determine the allocation among foreign parties of the total allowable level of foreign fishing which is permitted," and to set fees and other forms of compensation in FFA's. 24 F.S.M.C. 102(24), 402, 403. The FSM Congress is not involved in negotiating the agreements or establishing the Fishing Fees.24 Since the Fishing Fees are imposed by an administrative agency, rather than the legislature, this factor weighs heavily in favor of defendants' argument that Fishing Fees are fees rather than taxes.

Under this factor, an assessment imposed on a broad class of parties is more likely to be a tax than one imposed on a narrow class. Bidart Bros., 73 F.3d at 932. An often cited U.S. case distinguishing taxes from fees is National Cable Television Ass'n, Inc. v. United States, 415 U.S. 336, 94 S. Ct. 1146, 39 L. Ed. 2d 370 (1974). In that case, the United States Supreme Court explained that one distinguishing characteristic of a fee is that: "The public agency . . . normally may exact a fee for a grant which, presumably, bestows a benefit on the applicant, not shared by other members of society." Id. at 340-41, 94 S. Ct. at 1149, 39 L. Ed. 2d. at 375.

This Court finds that this also is a relevant consideration in the instant case. Here, the class of parties paying the Fishing Fees is very narrow, and is limited primarily to a small number of foreign companies which seek to remove fish from the FSM EEZ. Fishing Fees are collected only from those parties who enter into FFA's, not from the general public. This factor also weighs heavily in defendants' favor.

Taxation is a legislative function, and Congress, which is the sole organ for levying taxes, may act arbitrarily and disregard benefits bestowed by the Government on a taxpayer and go solely on ability to pay, based on property or income. A fee, however, is incident to a voluntary act, e.g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station.

Id. at 340, 94 S. Ct. at 1149, 39 L. Ed. 2d. at 375 (footnote omitted). The Court stated that "[a] `fee' connotes a benefit," and found that a charge against cable television companies based upon the "value to the recipient" was a fee rather than a tax. Id. at 341, 94 S. Ct. at 1150, 39 L. Ed. 2d. at 375.

In this case, the FSM charges a fee to foreign fishing vessels in exchange for the right to remove valuable resources from the FSM EEZ. Companies negotiate with MMA and enter into written contracts, or FFA's, which allow permitted company vessels to fish in the FSM EEZ. The companies that enter into FFA's clearly do so voluntarily.

The Fishing Fees, unlike a tax, cannot accurately be characterized as an "arbitrary" assessment which disregards the benefits conferred on the payor. The companies clearly receive value from these agreements, and a levy based upon a percentage of the value of the estimated catch is a reasonable measure of the value of the FFA to the payor. Because the foreign companies enter into FFA's voluntarily, and receive a benefit in exchange for these Fishing Fees, this Court finds that this factor also weighs heavily in favor of defendants' position.

Cases cited by both parties, as well as other cases reviewed by the Court, recognize that one characteristic of a fee is that "it must be no greater than the government's costs." National Railroad Passenger Corp. v. City of New York, 695 F. Supp. 1570 (S.D.N.Y. 1988) (citing National Cable Television). Thus, this Court will examine whether amount of Fishing Fees collected bears some relationship to the cost to the national government of allowing foreign companies to fish in the FSM EEZ.

It is clear from plaintiffs' evidence, which has not been controverted, that the amounts received yearly by MMA from the Fishing Fees far exceed MMA's annual budget. The issue is whether MMA's budget is an accurate measure of the cost to the national government of allowing foreign fishing in the FSM EEZ. This Court finds that MMA's budget is only a small part of the costs of foreign fishing to the national government. It is also appropriate to consider the "real cost" to the government, which is not limited to the government's actual expenditures, i.e., the budget of the MMA. The "real costs" to the FSM government include costs incurred in monitoring fishing stocks and illegal fishing throughout the EEZ, and costs incurred in relinquishing valuable FSM resources to nationals of other countries.

The concept of "real costs" as a measure for a fee is discussed at great detail in National Railroad Passenger Corp. v. City of New York, 695 F. Supp. 1570 (S.D.N.Y. 1988), in which the court found that rental payments for use of parcels of land by a railroad were "user fees" rather than taxes. Applying the test set forth in the National Cable Television case, supra, the court in the National Railroad case had to consider whether the payments by the railroad bore any relation to the government's costs in providing the service. The court noted that, "[a] tax need not have any relation to government costs . . . [a] user fee, on the other hand, must be no greater than the government costs." Id. at 1575. The court then found that the cost to the City of New York in providing the railroad a right of way was not limited to a consideration of actual expenditures, or out-of-pocket costs. Rather, the court found that, where the property being used was owned and controlled by the government entity, use of that property "impose[d] a real economic cost" which was greater than actual expenditures. Id.

On that basis, the court found that governmental charges should be construed as user fees rather than taxes "where necessary to allow governments to obtain compensation for the opportunities lost to them when providing the payor with a benefit." Id. at 1576. The court in National Railroad relied on City of Vanceburg v. Federal Energy Reserve Comm'n, 571 F.2d 630 (D.C. Cir. 1977), cert. denied, 439 U.S. 818 (1978), an analogous case in which the federal government sought to impose a user fee on a local government for use of federal dams. In that case, the court recognized that a fee for use of property which is controlled by the government is not necessarily a tax, because the government is entitled to receive the benefits of its property just like any private landowner. Thus, the court in City of Vanceburg stated:

As a sovereign, the Government levies taxes, but as property owner it may charge fees for the use of its property . . . . These fees are paid by choice and in exchange for a particular benefit, the use of government property, just as rents are freely paid for the use of private property.

This factor distinguishes the instant case from cases cited by plaintiffs. In the cases plaintiffs cite, the primary criterion analyzed is whether the money collected is deposited in a general fund, because such revenues do not represent a real cost to the government or an exchange for real value with the government. For example, a professional, e.g., a doctor or lawyer, who must pay to enter a regulated field, is merely receiving the right to enter that field. In such cases, the government or regulatory authority does not actually relinquish anything, though it may incur certain administrative costs in regulating that profession. Thus, courts have imposed the requirement that the amount of the fee to engage in a certain activity must relate to the costs of administering the related regulatory program.

In this case, however, the payors receive the right to retrieve millions of pounds of valuable fish from the FSM EEZ. Although the Fishing Fees are placed in the FSM General Fund, the Fee itself is not set at a certain level in order to raise revenue for general government purposes. Rather, the level is set at a measure of the value of the asset to the payor, a percentage of the value of the estimated weighted catch. As the United States Supreme Court has stated, the measure of the value of the service to the payor can be an appropriate measure for a fee. See National Cable Television Ass'n, 415 U.S. at 342-43, 94 S. Ct. at 1150, 39 L. Ed. 2d. at 376. The fact that the value received by the government exceeds the cost of administration is not dispositive here, where a valuable resource is being removed from the government's control by payors of the Fishing Fees, and the government is

Defendants' characterization of the Fishing Fees as revenue from the sale of national assets is accurate. The amount of the Fee is set to compensate the national government based upon the amount of fish taken from the EEZ, just as the national government would be allowed to receive remuneration for any other asset. The FSM national government has the exclusive right to harvest living marine resources in its EEZ, just as it has the exclusive right to harvest offshore mineral resources. As the holder of this exclusive right, the national government is allowed to dispose of this resource and receive revenue in return. Under the Convention on the Law of the Sea, each nation is entitled to exploit its marine resources to the extent it is able to achieve a "maximum sustainable yield." Convention art. 61. To this end, the FSM has the exclusive right to profit from the marine resources in its EEZ, subject to conservation limitations. Thus, when the FSM does not fully exploit its own resources, it is entitled to compensation at the appropriate market rate from foreign fishing vessels which it allows to fish in its waters.26

The MMA negotiates individually with a narrow class of payors, and the MMA receives a fee that is (1) a measure of the value that is bestowed on the payor, and (2) a measure of the value of the fishing revenue that is being given up by the FSM. This is not in the nature of a tax under the criteria set forth above. Thus, even though the amount of revenue generated annually by the Fishing Fees greatly exceeds the MMA budget, the Court finds that this factor weighs in defendants' favor because the Fishing Fees are related to "real costs" to the government.

The FSM Constitution contains a provision by which the net revenues from offshore mineral resources are to be divided equally between the States and the national government, FSM Const. art. IX, § 6. The existence of this express provision is further evidence that revenues from natural resources are not taxes. There would be no need for the Constitution to specify the division of such income from such resources if such revenues were to be automatically divided under Article IX, Section 5 of the Constitution, which addresses the division of tax revenues.27

The Court should consider all provisions of the Constitution in interpreting any specific provision, because different sections may relate to the same subject matter and give the questionable provision added meaning. See Tafunsak, 7 FSM Intrm. at 347. Reading Article IX, Section 5 in conjunction with

Additionally, to accept the States' argument, the Court would have to find that the Congress acted unconstitutionally when it authorized the MMA to impose a "tax" that is not uniform. As stated above, acts of Congress are presumed to be constitutional. Otokichy, 1 FSM Intrm. at 190 n.6; Mackenzie, 5 FSM Intrm. at 82.

This Court finds that the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the defendants are entitled to a judgment as a matter of law on plaintiffs' claim that the Fishing Fees are taxes under the FSM Constitution. FSM Civ. R. 56(c); Adams, 6 FSM Intrm. at 582; Kyowa Shipping Co., 7 FSM Intrm. at 95; Kihara Real Estate, Inc., 6 FSM Intrm. at 52. Accordingly, plaintiffs' motion for summary judgment on this issue is denied, and defendants' cross motion for summary judgment is granted.

For the foregoing reasons, plaintiffs' motion for summary judgment is denied, and defendants' cross-motion is granted in its entirety. Accordingly, judgment is now granted on Counts I (for declaratory judgment that the States own the living resources in the FSM EEZ), II (for declaratory judgment that the Fishing Fees are taxes under Article IX, Section 5 of the FSM Constitution), III (for injunctive relief requiring defendants to distribute the Fishing Fees to the States), and IV (for damages equal to the amount of the Fishing Fees collected from 1979 to present, plus interest) of Plaintiffs' Second Amended Complaint. This case is hereby dismissed with prejudice.

1. The States filed their original complaint on July 28, 1995, seeking only a declaratory judgment. They subsequently amended the complaint to include claims for injunctive relief against the Secretary of the Department of Finance, compelling him to pay the funds to which the States contend they are entitled into the respective States' treasuries. See Am. Compl. paras. 25-28. Because the relief requested against the Secretary is dependent upon a finding of liability against the FSM national government, for purposes of this Order the Court refers to the defendants collectively as "the FSM."

5. Plaintiffs assert that the FSM collected a total of $164,535,426 between 1979 and 1996. However, it is not clear from what source plaintiffs derive this sum. Plaintiffs' Exhibit A relates only to Fiscal Years 1990-96. Plaintiffs' Exhibit B indicates that the FSM collected fees totalling $128,372,196 between 1979 and 1994. Some of the yearly totals in Exhibit B are different from the yearly totals contained in Exhibit A.

7. Defendants admit that the Fishing Fees were deposited in the General Fund, but denied in their answer that these revenues were used for general government purposes. Defendants' Answer, para. 22. No evidence has been introduced which demonstrates the ultimate disposition of these revenues from the General Fund. It is clear from plaintiffs' Exhibit B, the 1994 MMA Annual Report, that the amount of Fishing Fees collected far exceeds the annual budget of the MMA.

8. Defendants also assert that the excerpts from reports which plaintiffs submit in their motion are not competent evidence. Plaintiffs respond that these documents fall within an exception to the hearsay rule because they are official government documents that were submitted to Congress. The Court agrees with plaintiffs that these documents fall within an exception to the hearsay rule.

9. It should be noted that, during the hearing on December 16, 1997, plaintiffs' counsel objected to Mr. Thoulag's affidavit because plaintiffs contend they were not provided with any FFA's which demonstrated that the Fishing Fees ranged as high as 11% of the value of the estimated landed catch during discovery. This was the first indication the Court received of a discovery dispute since the Court ordered the parties to meet and confer and notify the Court of any discovery disputes in its Order dated August 30, 1996. To date, no motions regarding this matter have been filed with the Court.

10. The defendants assert that the Law of the Sea Convention allows coastal nations rights over fishing and exploitation of non-living resources, as well as concomitant limited jurisdiction in order to recognize those rights. However, the convention also requires that other nations must be allowed access to resources which the coastal nation does not exploit, and traditional freedoms of the high seas must be maintained. See Def. Br. at 14-15.

12. For example, the boundary divisions in Article I, Section 2 are important in determining how offshore mineral resource revenues are to be divided between the States and the national government under Article IX, Section 6 of the FSM Constitution, which states that net revenue from exploitation of ocean floor mineral resources is to be divided equally between "the national government and the appropriate state government." FSM Const. art. IX, § 6.

13. In support of this argument, Plaintiffs cite international cases that are not readily available; however, it should be noted that the titles of these cases suggest that they are boundary disputes between countries rather than between states within a country. Such cases likely would not address the issue of federalism that is presented here, where federal and state entities may concurrently possess different interests in resources within the same physical boundary.

14. Reference to the "Fishing Fees" includes only those fees which have been generated from within the EEZ, and not within the States' 12 mile Territorial Sea. The MMA is empowered to issue permits for fishing in these zones if a State enacts an appropriate State law authorizing such action, and any fees derived from such licenses are transferred to the State for which the permit was granted. 24 F.S.M.C. 117. This legislation is not in dispute in this case.

16. The Court notes that nothing in the legislative history of Public Law IC-3 supports plaintiffs' contention that the drafters of this legislation considered Article XII, Section 1 of the FSM Constitution in conjunction with their decision that all of the Fishing Fees should be deposited in the FSM General Fund.

17. In 1979, the Fishery Zones legislation again was amended. These amendments provided that no fishing was to take place "in state waters" unless the state issued a permit. See SCREP No. 1-44, II J. of 1st Cong., 1st Reg. Sess. 271 (1979). The new Section 151 read in part that, "[n]o foreign fishing is permitted in the Territorial Sea and Exclusive Fishery Zone of a State except by valid and applicable permit issued by the State." Pub. L. No. 1-34, § 10 (1st Cong., 1st Reg. Sess. 1979).

This legislation obviated the need for the national government to distribute revenues derived from foreign fishing within the 12 mile zone. Thus, Section 206 related to Fishing Fees again was amended to provide that "[f]ees collected by the [MMA] shall be deposited in the General Fund of the Congress of the Federated States of Micronesia." Pub. L. No. 1-34, § 16 (1st Cong., 1st Reg. Sess. 1979). Congress has not significantly amended this legislation since 1979.

19. The Committee on Governmental Functions stated that, "cognizant of the fact that the developing law of the sea is likely to recognize Micronesian resources jurisdiction up to 200 miles beyond the reef . . . regulatory authority over both mineral and fishery resources beyond 12 miles of an island ought to rest in the national government." SCREP No. 33, II J. of Micro. Con. Con. 813, 819 (emphasis added).

20. During oral argument, plaintiffs asserted that this Court had impliedly recognized that the States have standing to assert the claims of their residents in a previous Order dated August 30, 1996. In that Order, the Court found that plaintiffs had standing to assert their tax claim, and denied defendants' motion to dismiss on that ground. The question of whether the States have standing to represent their residents under the doctrine of parens patriae was not an issue at that time, and was not previously addressed by the Court.

21. This statement is not to be construed as acknowledgment by the Court that any individual, clan or family has a right to resources in the EEZ. The Court does not rule on this issue. The Court merely recognizes that, insofar as plaintiffs argue that the States can claim ownership of these resources under custom and tradition, plaintiffs' claims must fail. As stated above, a claim of ownership based on custom and tradition made by individuals, clans, or families likely would be restricted to areas within lagoons or near reef areas.

25. The case cited by plaintiffs, Commonwealth Edison Co. v. Montana, 453 U.S. 609, 101 S. Ct. 2946, 69 L. Ed. 2d 884 (1981), is inapposite, because the state was charging coal miners for the value of coal extracted from the state, even though the state did not own the coal or have rights to the coal.

27. Plaintiffs asserted during oral argument that the drafters of the FSM Constitution did not include a similar provision requiring the national government to share offshore fishery resources with the States, because the United States did not support some provisions in the Law of the Sea Convention, and the drafters did not want to contradict the United States by claiming offshore fishery revenues in the FSM Constitution. Plaintiffs' counsel based this argument on conversations he had had with individuals involved in drafting the Constitution. This evidence is hearsay, and the Court has been directed to no competent evidence in the record, or in the Journal of the Constitutional Convention, to support counsel's assertion.