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ISBN 978-92-5-105624-0 ISSN 1014-6679
Modern water rights
Theory and practice
FAO
LEGISLATIVE
STUDY
92
ISSN 1014-6679
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This publication offers a fresh look at the theory and practice of modern water
rights, from a comparative law angle. It sheds light on a number of key features of
such rights, and draws out and discusses the relevant problematic issues. It will be of
inspiration and use in the process of reforming water laws in general, and the laws
concerning water rights in particular.
F
A
O
FAO
LEGISLATIVE
STUDY
92
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
Rome, 2006
Modern water rights
Theory and practice



Stephen Hodgson
for the
Development Law Service
FAO Legal Office
©
'"0
1he desighaIiohs employed ahd Ihe presehIaIioh o! maIerial
ih Ihis ih!ormaIioh producI do hoI imply Ihe expressioh o! ahy
opihioh whaIsoever oh Ihe parI o! Ihe Food ahd AgriculIure
OrgahizaIioh o! Ihe UhiIed NaIiohs cohcerhihg Ihe legal or
developmehI sIaIus o! ahy couhIry, IerriIory, ciIy or area or o!
iIs auIhoriIies, or cohcerhihg Ihe delimiIaIioh o! iIs !rohIiers or
bouhdaries.
All righIs reserved. ReproducIioh ahd dissemihaIioh o! maIerial ih Ihis ih-
!ormaIioh producI !or educaIiohal or oIher hoh-commercial purposes are
auIhorized wiIhouI ahy prior wriIIeh permissioh !rom Ihe copyrighI holders
provided Ihe source is !ully ackhowledged. ReproducIioh o! maIerial ih Ihis
ih!ormaIioh producI !or resale or oIher commercial purposes is prohibiIed
wiIhouI wriIIeh permissioh o! Ihe copyrighI holders. ApplicaIiohs !or such
permissioh should be addressed Io Ihe Chie!, LlecIrohic Publishihg Policy ahd
SupporI 8rahch, Ih!ormaIioh Divisioh, FAO, Viale delle 1erme di Caracalla,
00153 Rome, IIaly or by e-mail Io copyrighI©!ao.org
IS8N 978-92-5-105624-0
FOREWORD

Much contemporary discourse on water resources governance - i.e. a system and
structure for the allocation of water resources to competing users, and for the
protection of the resource from depletion and from pollution - is underpinned
by the law of water resources in general, and by the law governing modern
ȩwater rightsȩ in particular. Indeed, theoretically it is hard to conceive of ȩgood
governanceȩ goals outside a legal frame of reference where water rights play a
central role, and where a functioning system of modern water rights is the
lifeblood of governance itself. In practice, a key focus of contemporary water
law reforms virtually anywhere in the world has been and is the introduction of
formal and explicit, i.e. modern, water rights, which enable the orderly allocation
and sustainable use of valuable water resources.

This publication offers a fresh look at the theory and practice of modern water
rights, from a comparative law angle. It sheds light on a number of key features
of such rights, and contrasts these to traditional forms and kinds of water rights.
It teases out and discusses the relevant problematique, including in particular
that elicited the sale and leasing of water rights. Finally, a stock-taking and
assessment of modern water rights systems impacts are volunteered. This
publication complements two earlier issues featured in the FAO Legislative
Studies series, i.e. Water rights administration - Experience, issues and guidelines
(No. 70 of 2001), and Preparing national regulations for water resources
management - Principles and practice (No. 80 of 2003). The former illustrates
and discusses the practicalities of implementing and administering the modern
systems of water rights which are at the centre of this publication. The latter
provides a systematic account of the administrative lifecycle of modern water
rights, as reflected in regulatory legislation. These three publications combined
provide a rounded review and, in part, a critical analysis of the theory and
practice of modern water rights. It is hoped that they will be of inspiration and
use in the process of reforming water laws in general, and the laws concerning
water rights in particular.

This publication has been prepared by Mr Stephen Hodgson for FAO. The
author gratefully acknowledges the assistance of Dr Stephen Merritt, Andreas
Charalambous and Peter Garratt.


Stefano Burchi
Officer-in-Charge
Development Law Service
Table of Contents v

TABLE OF CONTENTS

Foreword ......................................................................................................................... iii
List of Acronyms ........................................................................................................... viii

1. INTRODUCTION............................................................................................. 1
2. TRADITIONAL APPROACHES TO WATER RIGHTS ..................... 4
2.1. What are water rights? ......................................................................................... 4
2.2. Traditional land-based approaches to water rights ....................................... 9
2.2.1. Rights to surface water ...................................................................... 10
2.2.1.1. The common law tradition ................................................. 11
2.2.1.2. The civil law tradition ......................................................... 14
2.2.2. Rights to groundwater ........................................................................ 16
2.2.2.1. The civil law tradition ......................................................... 16
2.2.2.2. The common law tradition ................................................ 16
2.2.3. Rights to water in artificial water courses ...................................... 18

3. REASONS FOR MOVING TO A SYSTEM OF
MODERN WATER RIGHTS ...................................................................... 20
3.1. Ill-adaption of traditional land based approaches
to specific climatic conditions ......................................................................... 21
3.2. The inadequacies of traditional land based approaches ............................. 22
3.3. The need to take account of environmental considerations ..................... 23
3.4. The need to better recognise the economic value of water ...................... 24
3.5. The transformation from socialist to market based economies .............. 25
3.6. Regional initiatives ............................................................................................. 25
3.7. To support or entrench wider economic reforms ...................................... 26
3.8. To support other reforms ................................................................................ 26
3.9. The promotion of social goals ........................................................................ 27
3.10. The completion of earlier reforms ................................................................. 28
3.11. Pressure on water resources ............................................................................ 29

4. THE CONSULTATION AND EDUCATION
PROCESS INVOLVED ................................................................................. 31
5. THE LEGAL AND REGULATORY BASIS .......................................... 36
5.1. The need for primary legislation ..................................................................... 36
5.2. The ‘nationalisation’ of water resources ........................................................ 37
5.3. Institutional arrangements for water resources management ................... 39
Table of Contents vi

5.3.1. Stakeholder involvement ................................................................... 40
5.3.2. Specialized water management entities .......................................... 41
5.3.3. Water administration tasks and powers ......................................... 43
5.4. ȨFreeȨ uses of water ............................................................................................. 45
5.5. The introduction of water rights ..................................................................... 46

6. THE INITIAL ASSIGNMENT OF RIGHTS ......................................... 49
6.1. The recognition of existing rights and uses at the time
of the reform ....................................................................................................... 49
6.2. The grant of new rights .................................................................................... 51

7. EXPERIENCE WITH PROCEDURES FOR
REGISTRATION OF RIGHTS .................................................................. 56
8. THE DEFINITION OF RIGHTS ............................................................. 60
8.1. The volume of water that is subject to the right ......................................... 60
8.2. Duration ................................................................................................................ 61
8.3. The conditions to which the right is subject ................................................ 64
8.3.1. General conditions ............................................................................. 65
8.3.2. Specific conditions .............................................................................. 67
8.4. The formal mechanisms that guarantee the security of the right ........... 69

9. THE SALE AND LEASING OF RIGHTS -
PROCEDURES AND IMPLICATIONS .................................................. 72
9.1. Experience to date ............................................................................................. 73
9.2. Concerns, perceptions and trends .................................................................. 80
9.2.1. Number of trades ............................................................................... 83
9.2.2. Benefits and conclusions ................................................................... 85

10. ENVIRONMENTAL ALLOCATIONS ................................................... 87
11. DISPUTE RESOLUTION MECHANISMS ............................................ 88
12. SAFEGUARDING THE INTERESTS OF
THE DISADVANTAGE ............................................................................. 93
13. THE IMPACTS OF THE RIGHTS BASED ALLOCATION
SYSTEM IN TERMS OF EFFICIENCY, EQUITY,
TRANSPARENCY AND THE ENVIRONMENT .............................. 94
13.1. Efficiency ............................................................................................................. 94
13.2. Equity ................................................................................................................... 95
Table of Contents vi i

13.3. Transparency ....................................................................................................... 96
13.4. The environment ............................................................................................... 97

14. CONCLUSION ................................................................................................ 98
BIBLIOGRAPHY ....................................................................................................... 105

Figure 1 - Change of water right process ................................................................. 79



ix

LIST OF ACRONYMS

ACP African Caribbean and Pacific
ABS Access and benefit-sharing
AI Artificial Insemination
AIA Advanced Informed Agreement
AMS Aggregate Measurement of Support
AnGR Animal Genetic Resources
AoA Agreement on Agriculture (WTO)
BSE Bovine Spongiform Encephalopathy
BV Breeding Value
CAC Codex Alimentarius Commission
CAP Common Agriculture Policy
CBD Convention on Biological Diversity
CBPP Contagious Bovine Pleuopneumonia
CGIAR Consultative Group on International Agricultural Research
CGRFA Commission on Genetic Resources for Food and
Agriculture
COP Conference of the Parties
DAD Domestic Animal Diversity
EAGGF European Agricultural Guidance and Guarantee Fund
EFSA European Food Safety Authority
EPAs European Partnership Agreements
ET Embryo Transfer
EU European Union
FAO Food and Agriculture Organization of the United Nations
FFPs LMOs intended for direct use as food or feed or
for processing
FMD Foot and Mouth Disease
FVO Food and Veterinary Office
GATT General Agreement on Tariffs and Trade
GATS General Agreement on Trade in Services
GSP Generalised System of Tariff Preferences
GMOs Genetically Modified Organisms
IARCs International Agricultural Research Centres
IGC Intergovernmental Committee
IP Intellectual Property
IPRs Intellectual Property Rights
ITPGRFA International Treaty on Plant Genetic Resources for Food
and Agriculture
IVM/IFM in vitro maturation and fertilization
x

LMOs Living modified organisms
MAFF Ministry of Agriculture, Forestry and Fisheries (Japan)
MERCOSUR Mercado Común del Sur
MFN Most Favoured Nation
MTA Multilateral Transfer Agreement
NC National Coordinator for the Management of AnGR
NCC National Consultative Committees for the State of the
World’s AnGR
NDP National Development Plan
NGOs Non Governmental Organizations
OAU Organization of African Unity
OIE Office International des Epizooties
OPU Ovum Pick-Up
PGR Plant Genetic Resources
PIC Prior Informed Consent
SARD Sustainable Agriculture and Rural Development
SACU Southern Africa Customs Union
SBSTTA Subsidiary Body on Scientific, Technical and Technological
Advice
SCP Standing Committee on the Law of Patents
SoW-AnGR State of the World's Animal Genetic Resources
SPLT Substantive Patent Law Treaty
SPMs Sanitary and Phytosanitary Measures
SPS Agreement on the Application of Sanitary and
Phytosanitary Measures
TBT Technical Barriers to Trade Agreement
TK Traditional Knowledge
TRIPS Agreement on Trade-Related Intellectual Property Rights
Agreement
UNCED United Nations Conference on Environment and
Development
UPOV International Union for the Protection of New Varieties of
Plants
WIPO World Intellectual Property Organization
WTO World Trade Organization
WWL-DAD World Watch List for Domestic Animal Diversity (FAO)

1. INTRODUCTION

Throughout history the fugitive nature of water has posed conceptual and
practical challenges to lawmakers. The vital importance of water to human
activity is such that most societies and cultures have sought to establish legal
rules over its use and allocation. But its fluidity and constant renewal as part
of the hydrologic cycle has necessarily limited the appropriateness of
traditional legal approaches to natural resources such as the concept of
ownership.

Consequently in most jurisdictions legal rights to use water - water rights -
have traditionally been linked to land tenure rights and in particular to land
ownership rights. More specifically such rights have been conferred on the
owners of land with direct physical access to a stream, river or other natural
water source. Very often the only way to sell the right to use water was to sell
the associated land right.

Driven mainly by increased pressure on water resources, but also by other
factors that are discussed in this paper, a number of countries have recently
undertaken substantive water law reforms. In some places such reforms are
part of a process that began a hundred or more years ago. Elsewhere they
represent a radical re-ordering of the status quo.

A key focus of such reforms has generally been the introduction of formal
and explicit water rights that clearly specify the volume of water that is
subject to each right (here after referred to as "modern water rights"),
together with the associated institutional arrangements for their allocation,
registration, monitoring and enforcement. Modern water rights are not
intrinsically tied to specific land plots and in an increasing number of
jurisdictions they are transferable and thus may be traded on a temporary or
permanent basis. Long term, clearly defined and secure, they amount to a
form of property right over the use of water.

From the perspective of society, modern water rights permit the orderly
allocation and sustainable use of valuable water resources. From the
perspective of the right holder they confer the necessary security to invest in
activities entailing the use of water. More importantly they provide an
effective mechanism for ensuring the proper management of water resources.
As they are legally backed the state has an interest in ensuring that they are
correctly implemented. Right holders in turn have a genuine and actionable
interest in ensuring that this happens. In other words right holders are more
Modern water rights – theory and practice 2
likely to take steps to ensure that their property rights to water are respected
and that the state agencies involved fulfil their legal obligations in this
connection thus making compliance with the applicable legal regime more
likely. This contrasts with, for example, legal regimes that seek to govern
natural resource use through short term licences that do not confer
substantive benefits in the form of property rights or quasi property rights on
resource users. If for whatever reason, including a lack of resources or
political will, the state fails to implement such a regime other resource users,
even those who hold the necessary licences, have little interest or incentive in
seeing it enforced.

As pressure on water resources increases water rights become increasingly
valuable. Indeed as the economic value of water becomes more widely
understood the possibility of trading transferable rights is seen by some as
providing an opportunity to allow markets to determine the "true" value of
water, as uses migrate from lower value to higher value activities.
1

It should be noted that the introduction of tradable rights is not a
phenomenon that is restricted to the water sector. In the fisheries sector, for
example, there is increasing interest in the use of individual transferable
quotas that may be traded among licence holders (see, for example,
FAO, 2004). And tradable rights are not necessarily restricted to the taking
and use of natural resources: they may also relate to rights to pollute. Both
Chile and California, jurisdictions considered in this paper, have considerable
experience in the trade of air emission permits (See for example Bolt, K. et al.,
2001) and the concept of emissions trading entered upon the world stage
with the entry into force of the Kyoto Protocol.

Within the water sector support for the introduction of market based solutions
to the allocation of water resources is taken from recent reforms such as those
of Chile as well as the experience of the western United States where the
practice of trading water rights has existed for many years. At the same time,
however, such experiences clearly show potential pitfalls that need to be
avoided and it is to be noted that the trade in water rights is not permitted in all
jurisdictions, even those where modern water rights have been introduced.

1
This migration is almost invariably from agriculture to industry or to satisfy urban
needs.
Modern water rights – theory and practice 3
This paper reviews international experiences of the introduction and use of
modern water rights. It is based on a survey of relevant primary and
secondary legislation, published literature (including articles in academic and
professional journals and specialist publications), unpublished texts and
internet sources as well as practical experience.

The paper is set out in 14 sections beginning with a description of the
traditional approaches to water rights of the two dominant legal traditions.
Thereafter the reasons why so many jurisdictions have moved to establish
modern water rights systems are considered. There follows a discussion of
the consultation and education processes used to promote acceptance of
reforms and behavioural change. Next the type and nature of legal reforms
necessary for the introduction of modern water rights systems are considered
and followed by a description of the basis on which water rights are initially
allocated.

Experience shows that notwithstanding the difficulties of piloting the
necessary legislative reforms necessary to introduce modern water rights, this
stage is relatively straightforward compared to the practical and
administrative procedures for rights definition and registration, procedures
which must be taken into account from the very beginning of any reform
process. Thereafter experience of the procedures for the sale and leasing of
such rights, where permitted, will be considered as well as the implications of
such transactions for third parties and the environment.

The issues of environmental allocations and dispute resolution mechanisms
in connection with modern water rights are next considered followed by an
examination of the, admittedly relatively few, cases in which specific steps
have been take to safeguard the interests of the disadvantaged in connection
with the introduction of such schemes.

Following an analysis of the impacts of modern water rights in terms of
efficiency, equity, transparency and environmental impacts this paper seeks to
draw out some basic lessons from international experience.
Modern water rights – theory and practice

4
2. TRADITIONAL APPROACHES TO WATER RIGHTS

2.1. What are water rights?
At the outset it is important to clarify what is meant by the term "water
right". Answering this question is complicated by the fact that there is no
universally agreed definition. Indeed the term "water right" is actually used in
different contexts and different jurisdictions to mean quite different things.

In part this is because conceptions of water and water rights vary so
dramatically around the world. Water law, and thus water rights, reflect
economic, social and cultural perceptions of water. Such perceptions are in
turn shaped by a range of factors including geography, climate and the
extreme variability in the availability of water resources as well as the uses to
which water is put. In more temperate climates primary uses may include
navigation, hydropower and recreational uses. Public perceptions of water are
often focussed on excessive quantities in rivers and streams and the risks of
flooding, particularly in low lying areas. In more arid climates, where
irrigation is necessary, problems of water scarcity and levels of rainfall are
matters of public interest and concern.

Consequently in discussing water rights it is important to clearly recognize
that each country faces unique water issues. What is normal and reasonable in
one country as regards both the use and regulation of water may appear quite
strange or even irrational elsewhere. This observation applies equally to water
rights and should be borne in mind in the discussion that follows.

Furthermore, because of the dynamic complexities of the qualitative and
quantitative aspects of the hydrologic cycle, human intervention in that cycle
and the many historical, social, ecological, economic and political
circumstances that influence the use of water resources, water law and the
rules governing water rights tend to be rather complex (FAO, 2001).

So just what is a water right? In its simplest conception a water right is
frequently understood to be a legal right to abstract and use a quantity of
water from a natural source such as a river, stream or aquifer.
2
But water

2
Water rights may also exist in respect of lakes, of course, but due to the lack of
hydraulic gradient pumping is likely to be necessary meaning that the abstraction of water
is more expensive.
Modern water rights – theory and practice 5
rights frequently go beyond an entitlement to a mere quantity of the simple
chemical compound which is water: the flow of the water is also an important
component of a water right.
3
Consequently a water right may confer a legal
right to impound or store a specified quantity of water in a natural source
behind a dam or other hydraulic structure. This may be as a precursor to
abstraction or, as in the case of hydropower generation, it may relate to the
use of water within the water course. This type of use is usually known as a
"non-consumptive" use.

In addition a range of other activities involving water and water courses are
generally regulated either as part of a water rights regime, or at least in close
co-ordination with it. Thus, depending on the specific legal rules in force in a
given jurisdiction a water right may be necessary:

x to divert, restrict or alter the flow of water within a water course;
x to alter the bed, banks or characteristics of a water course, including the
construction (and use) of structures on its banks and adjacent lands
including those related to the use and management of water within that
water course;
x to extract gravel and other minerals from water courses and the lands
adjacent to them;
x to use sewage water for irrigation;
x to undertake fishing and aquaculture activities;
x for navigation; and/or
x to discharge wastes or pollutants to water courses.

Why is this? The reason lies in the fundamental degree to which such
activities are inter-connected. For example, those who abstract for irrigation
or drinking purposes require relatively clean water, whereas industrial water
users may be able to make do with water of a lesser quality. Consequently in
authorizing the discharge of wastes or effluent to a water course it is
necessary to take account of other existing uses of water. At the same time,
the amount of water that is abstracted will affect the ability of a given water
course to dilute and disperse wastes and effluent. Thus abstracted uses,
particularly in times of low river flow, are likely to impact on the extent to
which the discharge of wastes and effluent should be permitted. Even when
3
Indeed in many countries the flow of water has historically been more important
than its quality when used, for example, to power water mills or for hydropower
generation.
Modern water rights – theory and practice 6
such activities are "non-consumptive", as described above, they frequently
still affect other water uses. For example while the operation of a hydropower
dam may not actually result in the removal of water from a river
4
, the
operating regime of that dam will affect flows at different times of the year.
Similarly constructions on river banks for whatever purpose may affect
navigation. And again in times of low flow depending on the particular river
priority may be afforded either to navigation or to water abstraction. It
follows that just as the entire range of activities involving the use of water
may have a negative impact on the quantity, quality and flow of water in a
given water course or aquifer, the legal rights which govern such activities will
invariably also impact on each other.

Having considered what they regulate, the next question is what is the status
of water rights? The key point to note is that they are legal rights: they are
created pursuant to a country's formal legal system and thus they have legal
consequences. Specifically they are capable of being asserted against the state
and third parties. In the case of a dispute, a right holder can legitimately
expect a valid right to be upheld by a court and as necessary enforced
through the machinery and coercive power of the state.
5
Loss of, or damage
to a water right is prima facie subject to the payment of compensation and
the right to such compensation is enforceable in the courts.

The corollary is that a person who undertakes an activity that requires a water
right without holding such a right will be subject to legal action from the right
holder and or the state body responsible for water rights administration and
possibly criminal/administrative proceedings.

So far this discussion has focussed on the taking and use of water from
natural sources whether from surface water bodies or groundwater. It is
important, however, to note that the existence of another category of "water
rights", those which relate to the supply of water through a canal for irrigated
agriculture or industrial use. Such supplies are usually made on the basis of an
express or implied contract the effect of which is to give the beneficiary the
legal right to receive a quantity of water at a specified time, usually in return
for the payment of a charge or fee. Such rights – legal entitlements to
4
Disregarding for the purpose of this argument the possibility of increased rates of
evaporation concerning the water stored behind the dam.
5
Through the use, for example, of state-sanctioned force such as the use of court
bailiffs to recover unpaid fines and even imprisonment for failure to comply with court
orders.
Modern water rights – theory and practice 7
specified volumes of water - are effectively a form of "water right". But
obviously they are of a quite different nature to those described above. In
some jurisdictions the person to whom the water is delivered may also hold a
classical water right that relates to the initial abstraction of a quantity of water
at the natural source prior to its diversion into the relevant canal. Very often,
however, while the supplier holds an abstraction water right, the person to
whom the water is delivered does not. The legal basis of their "water right" is
the applicable contractual or quasi contractual arrangement with the supplier.
Indeed a closer analysis shows that the right in question is not merely to take
a quantity of water but rather the right to a service, namely the delivery of
water through the canal system. At best these are "contractual water rights"
(the right to a service). Whether or not rights created in such circumstances
are "water rights" the point remains that they are quite different in nature to
abstraction water rights.
6

This point deserves to be emphasized as too often the literature, particularly
that which advocates the use of tradable water rights, conflates abstraction
type water rights with contractual water rights.
7
The point is that they are
legally, conceptually and operationally quite different particularly as far as
transfers are concerned. Once water has been taken from a natural source
and diverted into an irrigation system it is effectively temporarily removed
from the surface water cycle and confined to an artificial space. Once in the
system, within known limits, the water can be moved around from land plot
to land plot in accordance with an agreed schedule. Apart from conveyance
losses the sale of a water right at, say, the tail of the system to a land plot at
the head of the system has little practical impact on the system as a whole or
the rights of other land owners. The legal form, issues relating to the grant,
administration and even the trade in such rights are thus substantively quite
different to those that arise in connection with water rights relating to natural
water courses. Put another way if a modern water right, in the sense
described above, is a right to remove water from the natural environment, a
contractual water right creates an entitlement to receive a delivery of water
through artificial structures, water that has previously been removed from the
6
In fact in many developing and transition countries farmers enjoy rather weak
contractual rights to water that confer little in the way of security. This, though, is a
discussion that is beyond the scope of this paper (see FAO, 2005).
7
For example, World Bank, 1999a, Technical Paper describes the trade in what are
described variously as water rights or water titles in the Siurana-Riudecanyes Irrigation
Subscribers Association and Water Market system as a successful example of tradable
water rights.
Modern water rights – theory and practice 8
natural environment. Therefore while the experience of trading in such rights
is of some interest in that it demonstrates that provided the appropriate legal
and institutional arrangements are in place farmers and other water users may
trade water entitlements, its relevance to the tradability and transferability of
modern water rights is ultimately rather limited.

Otherwise water rights, as the term is commonly understood, have nothing to
do with the so-called "right to water", a putative human right which is
claimed to exist either as a right in itself or as an ancillary aspect of the "right
to food" created by article 11 of the International Covenant on Economic,
Social and Cultural Rights,
8
or to provisions contained in progressive
constitutions such as the "right of access to water" found in that of South
Africa.
9
Clearly drinking water supplied through a reticulation system has
some similarities to irrigation and industrial water supplied through a canal.
But this sector too does not really involve a discussion of water rights.
Instead the individual consumer may rely on a statutory duty imposed on the
supplier to supply water to an individual reticulation system or communal
stand pipe. An interruption to such a supply may amount to a breach of the
notional human right to water but will not per se concern water rights.
10
It
follows that the introduction of private expertise and financing in the urban
water supply and sanitation sector through public private partnerships has
little direct relation to the issue of water rights, although private actors will
want to hold water rights as much as state or local government water supply
entities.

Finally given its prominence in the literature about economic incentives in
water resources management it is important to note that groundwater
markets, in which land owners sell typically groundwater that they have
abstracted to their neighbours for irrigation or to private or state purchasers
8
Article 11 of the International Covenant on Economic, Social and Cultural Rights,
provides that everyone has a right to an adequate standard of living for himself and his
family including adequate food, clothing and housing. The "Right to water" was
developed in General Comment 15 on the Covenant by the Committee on Economic,
Social and Cultural Rights. Such "General Comments" constitute authoritative
interpretations of the provisions of the Covenant to clarify the normative contents of
rights, states parties" and other actors" obligations, violations and implementation of the
rights at national level (FAO, 2003).
9
Article 24. Although as will be seen this right of access to water is actually translated
into substantive form in the South African water legislation.
10
Of course the supplier may and usually will require its own water right to secure its
source of water.
Modern water rights – theory and practice

9
(often by the tanker load) for on-sale elsewhere and which are particularly
prevalent in a number of parts of India, generally have nothing to do with
water rights or the trade in water rights except to demonstrate that farmers
and other water users understand that water has an economic value.

2.2. Traditional land based approaches to water rights
Throughout history all societies in which water is used have had their own
approaches to regulate access to water, their own conceptions of water rights.
Such influences are still found in so-called "customary" or "local" law
practices as well as influences from religious law such as the Hadiths of Islam.
Customary or local law continues to play an important role in water allocation
decisions in many developing countries, particularly in rural areas.
Nevertheless, as already mentioned, the focus of this review is on formal
water rights and the approach of formal legal systems.

In this connection it is important to emphasize that European conceptions of
water and water law have strongly influenced the development of formal
water laws around the world, through the two principal European legal
traditions: the civil law tradition and the common law tradition.

The civil law tradition, which sometimes described as the Romano-Germanic
family, is found in most European countries (including the former socialist
countries of Eastern and Central Europe), nearly all countries in Latin
America, large parts of Africa, Indonesia and Japan as well the countries of
the Former Soviet Union. The common law tradition emerged from the law
of England.
11
Countries in which the common law tradition applies include
Australia, Canada, India, New Zealand, Pakistan, Singapore, and the United
States, and the remaining African countries that are not in the civil law
tradition as well as other Commonwealth countries and a number of
countries in the Middle East.
12


While the colonial period explains the reason why European water law was
"received" into the legal systems of so many countries, it is not the only
reason. A number of countries that were never occupied by the colonial

11
Strictly speaking the English jurisdiction includes Wales and thus all subsequent
references to England should be understood to mean England and Wales.
12
Some jurisdictions, such as Cameroon and South Africa, are influenced by both the
civil law and common law traditions.
Modern water rights – theory and practice

10
powers looked to European and subsequently North American law in
revising or modernizing their own legislation.
13


A full discussion of the differences between the two legal traditions is beyond
the scope of this paper. A key difference, however, is the role of the courts in
the development of the common law, through so-called "judge-made law",
alongside the enactment of legislation by the relevant legislatures. In general
terms the laws of the civil tradition have been subject to a much more
significant degree of codification and the courts are perceived as having a
more interpretative role.

This section looks at the traditional approaches of the two main legal
traditions to surface water rights, ground water rights and contractual water
rights.

2.2.1. Rights to surface water
Under both the common law and civil law traditions, the right to use water
depended primarily on the use or ownership of land or structures built on
such land. The logic of this approach lies in the fact that historically most
water rights, apart from those relating to "instream" uses, related to the use of
water on land.

This approach, of conferring a privileged position on the owners of land
adjacent to water courses, was one of the elements of Roman water law
which had a major influence on the development of water law under the two
European legal traditions, prior to the introduction of modern water rights
regimes.
14
Indeed some of these influences can still be observed.

Roman law, for example, denied the possibility of private ownership of
running water. The Institutes of Justinian published in 533-34 held that
running water was a part of the "negative community" of things that could
not be owned along with air, the seas and wildlife.
15
It was nevertheless

13
For example Japan's 1896 Civil Code was heavily influenced by the German Civil
Code.
14
It should be noted, however, that there were (a) regional variations within Roman
water law and that (b) like any legal system, the rules were varied and modified over time.
15
Roman law is not the only legal system that rejects the idea of private ownership of
running water. Islamic law, which also takes this approach plays an important role in
shaping legal rules about the use of water.
Modern water rights – theory and practice

11
recognized that things in the negative community could be used and that the
"usufruct" or right to use the benefit of the resource needed to be regulated
to provide order and prevent over-exploitation (Getches, 1997).

Roman law distinguished the more important, perennial streams and rivers
from the less important. The former were considered to be common or
public while the latter were private. The right to use a public stream or river
was open to all those who had access to them.
16
Roman law, however,
recognized the right of the government to prohibit the use of any public
water and required an authorization for taking water from navigable streams
(Teclaff, 1985).

2.2.1.1. The common law tradition
The countries of the common law tradition did not follow the distinction
between public waters and private waters.
17
The common law did, however,
maintain the principle of Roman law that flowing waters are publici juris. From
this basic principle, two divergent approaches to water law and water rights
developed: the doctrine of "riparianism" and the doctrine of "prior
appropriation".

(a) The doctrine of riparianism

The doctrine of riparianism was developed gradually over the years through a
series of court decisions and reached its zenith, in terms of its development,
in England and the New England states of North America in the course of
the nineteenth century.
18
Riparian rights were not considered to be subsidiary
land rights, such as easements or servitudes, but were instead an integral part
of the right of ownership of the land in question.
19



16
Since Roman law did not provide for involuntary servitude of access, it could to that
extent be considered a riparian system.
17
Except to the extent that a distinction is made between the ownership of the banks
and bed of tidal and non tidal waters. The banks and bed of former are generally in the
private ownership of the riparian land owner while the banks and bed of the latter are
owned by the Crown (i.e. the state).
18
It should, however, be noted that riparian doctrine which was developed by the
courts, replaced an earlier conception of water rights based on priority of use which was
not as closely tied to land ownership (Scott and Coustalin,1995).
19
A the same time riparian rights were considered to be interests in real property as
opposed to personalty. See Getches, op cit.
Modern water rights – theory and practice 12
Regarding its substantive content, the riparian doctrine held that a riparian
right holder had the right to make "ordinary" use of the water flowing in the
watercourse. This encompassed the "reasonable use" of that water for
domestic purposes and for the watering of livestock and, where those uses of
water were made, abstraction could be undertaken without regard to the
effect which they might have had on downstream proprietors
(Howarth, 1992). In addition a riparian land owner also had the right to use
the water for any other purpose provided that it did not interfere with the
rights of other proprietors, upstream or downstream. Such purposes were
categorised as being "extraordinary" uses of water. The limits of
"extraordinary" water use have never been precisely defined, and are indeed
probably incapable of full definition. But it is clear that they are subject to
significant restrictions. Specifically, the use of the water must be reasonable,
the purpose for which it is taken must be connected with the abstracter's land
and the water must be restored to the watercourse substantially undiminished
in volume and un-altered in character.

The question whether a particular extraordinary use is reasonable is a
question of fact which must be determined by reference to all the
circumstances. In addition to such natural riparian rights, a riparian owner
could acquire additional rights in the nature of "easements", which are types
of land tenure right, in accordance with relevant rules of land tenure.

Notwithstanding its complexity, the doctrine of riparianism spread throughout
the English speaking world. As already mentioned, important developments
took place in the damp climate of New England, where it still applies in some
states. However when the doctrine reached the dry and arid climates of the
American West and South West its practical limitations were clearly recognized
leading to the development of a new doctrine, that of prior appropriation.

(b) The prior appropriation doctrine

The prior appropriation doctrine was developed in the nineteenth century to
serve the practical demands of water users in the western United States. It
originated in the customs of miners on federal public lands who accorded the
best rights to those who first used water just as they had accorded mining
rights to those who first located ore deposits. In any event given that their
gold washing activities were taking place on federal public lands and not on
private land they simply could not seek to apply the doctrine of riparianism.

Modern water rights – theory and practice 13
Nevertheless the prior appropriation doctrine was later extended to farmers
and other users, even on private lands. The flexibility of the common law
tradition is such that this new, more suitable water rights doctrine, was
accepted as the law in a number of states and indeed it continues to apply in
the states of Alaska, Arizona, Colorado, Idaho, Montana, Nevada, New
Mexico, Utah and Wyoming (Getches, 1997). In addition a number of states,
including California, have hybrid systems under which both the prior
appropriation and riparian doctrines apply simultaneously.
20

The key significance of the prior appropriation doctrine is that it
comprehensively severed the linkage between land and water rights. Water
rights are acquired on the basis of beneficial use, rather than land ownership.
More specifically, water rights are granted according to where a person
applies a particular quantity of water to a particular beneficial use. Those
rights continue as long as the beneficial use is maintained.

Most appropriation jurisdictions consider water to be a public resource
owned by no one. The right of individuals to use water under the prior
appropriation system is based on application of a quantity of water to a
beneficial use.

The traditional elements of a valid appropriation are:

x the intention to apply the water to a beneficial use;
x an actual diversion of water from a natural source;
x the application of the water to a beneficial use within a reasonable time
period.

The date of the appropriation determines the user's priority to use water, with
the earliest user having a superior right. If water is insufficient to meet all
needs, those who hold the earliest appropriations (senior appropriators) will
obtain all of their allocated water; those who appropriated later (junior
20
The other states are Kansas, Mississippi, Nebraska, North Dakota, Oklahoma,
Oregon, South Dakota, Texas and Washington. To take the example of Texas, after
independence from Mexico the state adopted the riparian water doctrine and for well over
a century there was genuine confusion over water law and water rights. In 1889 Texas
returned to a modified prior appropriation law, passing an Irrigation Act under which all
un-appropriated water became the property of the state. A person could claim water
rights from the state on first-in-line first-in-right depending on whether the water was put
to beneficial use (Bath, 1999).
Modern water rights – theory and practice 14
appropriators) may receive only some, or none, of the water over which they
have rights.

All of the states in which the prior appropriation doctrine applies have
statutory administrative procedures to provide an orderly method for
appropriating water and regulating established water rights (Getches, 1997).
In some states appropriators have the option of: (a) applying for a permit; or
(b) perfecting a common law appropriation by posting a notice and diverting
water. Nowadays it is, however, more typical for state law to require a permit
as the exclusive means of making a valid appropriation.

A number of criticisms are made against the prior appropriation doctrine.
One criticism is that it tends to discourage water saving by senior
appropriators who know that their entitlements are relatively more secure.
Furthermore, users have been able to continue seizing water as long as a
single drop remained in the stream or aquifer (Freyfogle, 1996). While these
and other issues have led to calls for water law reform, little progress has
been made to date. Indeed what is perhaps most interesting is the fact that
being divorced from land tenure rights, trades in water rights have long been
accepted, or even encouraged. In fact most of the world's experience of
transferable water rights derives from the western states.

It follows that while references are made to the experience of the western
states in the discussion that follows, rights created under the common law
doctrine of prior appropriation are not really modern water rights in the sense
used in this paper, save to the extent that they do specify the volume that may
be abstracted. Nevertheless the experience of the western states does offer a
number of useful insights into the issues of water law reform and the
tradability of transferable water rights.

2.2.1.2. The civil law tradition
The Roman law distinction between public and private waters retained an
influence in the countries of the civil law tradition even until quite recently.
Generally speaking, while an administrative permission was necessary for the
use of public waters this was not necessary in the case of private waters.

For example, the influential French Civil Code, the Code Napoleon, which
was promulgated in 1804 after the French Revolution, maintained this
distinction. Public waters were those which were considered to be
Modern water rights – theory and practice 15
"navigable" or "floatable"
21
and belonged to the public or national domain.
Their use required a government permit or authorization.

Private waters, which were those located below, along or upon privately
owned land, could be freely utilized subject to certain limitations of a
statutory nature such as servitudes and rights of way. The right to use such
private waters, both surface and underground, derived from land ownership
which recognized the owner's right to use at pleasure the water existing upon
his land without any limitation.
22

Similarly the Spanish Water Act of 1886 considered as private all surface
waters, that is waters springing in a private property and rainfall waters, but
only for its use on that land and not beyond the limits of that estate.
23
This
approach was largely repeated throughout the "civil law" world in Asia, Latin
American and parts of Africa. In the Democratic Republic of Congo, for
example, the beds of every lake and of all navigable water courses, whether
floatable or not, are part of the public land domain and the water of such
lakes and water courses as well as groundwater also belongs to the state.
24

Subject, however, to any legal and administrative measures which regulate use
or the granting of concessions, the right to use such water is open to
everyone.

Finally, the difficulties of accommodating different and competing uses of
private waters led the courts to limit the absolute right of use by making it
subject to numerous restrictions, particularly as regards the prohibition to
pollute water, etc. Gradually the concept of private waters began to lose its
force (Caponera, 2000).

It should, however, be noted that in connection with "public waters" a
concession has always been required in most jurisdictions of the civil law
tradition. Such concessions can be seen as the precursor of modern water
21
A river is "floatable" if logs can be floated down it.
22
Ius utendi et abutendi.
23
However there was a possibility of some administrative control reflected in
articles 413, 415, 420–422 which defined private waters as "special property" subject to
some restrictive covenants (FAO, 1999).
24
In the civil law tradition a distinction is typically made between state owned property
in the "public domain" and state property in the "private domain". Property in the latter
may, in accordance with specific legislation be privatized. Property in the former may not
unless and until it is transferred to the private domain.
Modern water rights – theory and practice

16
rights in the countries of that legal tradition. Of course significant variations
existed from jurisdiction to jurisdiction with regard to the constraints placed
on the users of private waters but this in outline is the basic position.

2.2.2. Rights to groundwater
Historically most of the focus of water law and water rights has been on
surface water resources. It is only relatively recently, over the last hundred or
so years, that specific legal responses have been formulated in water
legislation to the issue of groundwater management. As regards the use of
ground water both the common law and civil law traditionally also conferred
specific benefits on adjacent or, to be more precise, super-adjacent land
owners.

2.2.2.1. The civil law tradition
Traditionally, within the civil law tradition, in accordance with the basic
principles of Roman law, groundwater was seen as the property of the owner
of the land above it. This basic approach is reflected in article 552 of the
French Civil Code which states that:

Ownership of the ground involves ownership of what is above and below it.
An owner may make above all the plantings and constructions which he
deems proper, unless otherwise provided for in the Title Of Servitudes or
Land Services. He may make below all constructions and excavations which
he deems proper and draw from these excavations all the products which they
can give, subject to the limitations resulting from statutes and regulations
relating to mines and from police statutes and regulations.

2.2.2.2. The common law tradition
Although the conceptual approach taken by the common law tradition was
slightly different, the effect was largely the same. Under the common law
there is no property in water percolating through the sub-soil until it has been
the object of an appropriation.
25
The effect is that a land owner is entitled to
sink a borehole or well on his land to intercept water percolating underneath
his property, though the effect is to interfere with the supply of underground
water to nearby springs.
26
Yet at the same time, the owner of land through

25
Ballard v Tomlinson, 1885, 29 Ch. D. 115, Howarth, op cit.
26
An exception is made, under the common law, for underground water flowing in a
defined channel in which case the riparian doctrine applies (Howarth, op cit.).
Modern water rights – theory and practice 17
which ground water flows has no right or interest in it which enables him to
maintain an action against another landowner whose actions interfere with
the supply of water (Howarth, 1992).

In practice, however, as a result of the development and use of modern well
drilling techniques and pumps, the approaches of the main legal traditions no
longer offer a viable means of effectively regulating the use of groundwater,
even though they continue to apply in a number of jurisdictions. In the state
of Texas, for example, the common law rules described above, sometimes
described as the doctrine of "capture", still apply.

In the United States most western states still apply the prior appropriation
doctrine toward all or some of the groundwater within their jurisdictions,
providing individuals with relatively secure rights to the use of specified
amounts of this resource. Other states follow variations of the "beneficial
use" doctrine, allowing overlying landowners to pump unspecified amounts
of groundwater as long as they do not engage in wasteful uses or interfere
with the rights of other overlying owners. Because the doctrine does not
confer rights on individuals to abstract specific quantities, ground water is
essentially an "open-access" resource for overlying owners (Blomquist et
al., 2001). In Arizona, for example, until 1980 when the Arizona
Groundwater Management Act was enacted groundwater use was governed
by the beneficial use doctrine whereby a land owner can pump as much water
as s/he can reasonably use on the overlying land. (Blomquist et al., 2001).

In California, where it will be recalled both riparian and prior appropriation
doctrines apply, the position is a little complicated and must be determined
on the basis of court decisions with little or no statutory guidance. In outline:

x overlying land owners have rights to the reasonable use of groundwater
on their land;
x relative to each other, overlying land owners have correlative rights to
water, and share proportionately in water supply reductions in the event
of shortages;
x appropriators (those pumping water who do not own overlying land) have
a seniority system with respect to one another, with reductions in water
use imposed first on junior rights holders; and
x overlying owners have a superior right compared to appropriators to the
amount of water for their reasonable use, and appropriators have a right
to the surplus remaining, if any.
Modern water rights – theory and practice 18

Increasingly, however, problems of groundwater overdraft have led to the
introduction of statutory controls over groundwater abstractions in the
western United States.

2.2.3. Rights to water in artificial water courses
Under the traditional approaches of both of the main legal traditions, it is
only with regard to water in artificial water courses that adjacent land owners
are not treated as being in a beneficial position.

The common law is quite clear that the owner of land adjacent to a canal or
other artificial water course has no rights whatsoever to the water in the
absence of some form or "grant or arrangement".
27
Indeed to take water
from such a canal would probably amount to theft (Howarth, 1992). This is
because when once abstracted or appropriated, the existence of a property
right in the water has the consequence that it is capable of being the subject
of theft. The position taken by the civil law tradition is broadly similar.

As already described, it is the operator of the canal or scheme, the person
who abstracts water from a natural source, who will usually require a water
right. Furthermore, as a matter of logic it is difficult to see how an ordinary
statutory water right could be conferred on the land owner as that person is
not responsible for the abstraction of the water in the first place. A mere
"right to water" would not be of much use without the ability to enforce it
against the operator of the irrigation scheme. In the case of state funded
schemes this is usually a state body such as an irrigation agency. As a result
the study of irrigation water rights is a somewhat neglected area.

In some jurisdictions irrigation water is supplied by a state agency on the
basis of a detailed formal contract. In California, for example, water user
associations may hold 25 to 30 year contracts with the Federal Bureau of
Reclamation (FBR) or the State Water Department for the supply of water. In
a recent decision the Federal Court found that compensation was payable to
farmers for breach of such contracts following a re-allocation of water for
conservation purposes (Eilperin, 2004). Similar contractual arrangements are
27
Rameshur Pershaud Narain Singh v Koonj Behari Pattuk (1878) 4 A.C. 121 P.C.
Modern water rights – theory and practice 19
being introduced in the former socialist states in conjunction with major
irrigation sector reforms.
28

Another complication as regards the relevance of water rights for many
irrigators is the fact many irrigation systems in South Asia and parts of China
have absolutely no physical direct link with the types of water resources that
are subject to water rights regimes. Instead monsoon rainwater is collected in
reservoirs or tanks from which it is distributed through canals to irrigate
crops during the dry season. Such irrigation systems can find themselves
effectively beyond the scope of statutory water rights and the formal water
management framework.

28
For example in Azerbaijan and Romania.
Modern water rights – theory and practice 20
3. REASONS FOR MOVING TO A SYSTEM OF MODERN
WATER RIGHTS

The introduction of modern water rights is usually part, albeit an important
part, of more substantive water sector reforms. Driven largely by concerns
over pressure on water resources as a result of such factors as population
growth and, increasingly, climate change the last thirty or so years have seen a
great deal of international activity concerning water reform. This is
demonstrated by the creation of a range of new initiatives and bodies
concerned with the water sector as well increasingly large and elaborate
international summits and meetings. Indeed it is arguable that "water reform"
has become something of an industry in itself.

The "Dublin Principles", which were concluded in the run-up to the United
Nations Conference on Environment and Development (UNCED) held at
Rio de Janeiro in 1992 have been influential in guiding the shape of water
sector reforms, including reforms to water rights. In an attempt to concisely
state the main issues and thrust of water management (Solanes et al., 1999)

they provide that:

x freshwater is a finite and vulnerable resource, essential to sustain life,
development and the environment;
x water development and management should be based on a participatory
approach, involving users, planners and policy-makers at all levels;
x women play a central part in the provision, management, and
safeguarding of water; and
x water has an economic value in all its competing uses, and should be
recognized as an economic good.

Sufficiently vague to allow widespread agreement these principles leave their
substantive content, in respect of which there may be wide disagreement, un-
stated. The first two Principles may have had some indirect effect on water
rights reform; the central role of women, however, remains largely
unrecognized as far as water rights regimes are concerned. The fourth
Principle has been in many ways the most controversial. It is reflected in the
introduction of charges for the use of water that is subject to water rights and
also in the ongoing debate about tradable water rights.

Much of the heat of this debate has centred round the basic question as to
whether water is a "public good" thus meriting special treatment or whether it
Modern water rights – theory and practice 21
can be treated as a form of commodity and regulated through market forces.
Inevitably this debate has impacted on questions of water rights and
particularly the question of their transferability and tradability.

Leaving aside the overall process of water reform and focussing on the issue
of water rights reform it is clear that each country has its own specific reasons
for moving to formal and explicit rights based systems. These include:

x the ill-adaption of traditional land based approaches to specific climatic
conditions;
x the inadequacies of traditional land based approaches;
x the need to take account of environmental considerations;
x the need to better recognize the economic value of water;
x the transformation from socialist to market based economies;
x regional initiatives;
x to support or entrench wider economic reforms;
x to support other reforms;
x the promotion of social goals;
x the completion of earlier reforms; and
x pressure on water resources.

Clearly these reasons are very often inter-linked in a given context. For
example, the recent reforms in South Africa sought to respond to most of
these issues. Nevertheless, for the purpose of analysis it is still useful to
examine these different headings individually.

3.1. Ill-adaption of traditional land based approaches to specific
climatic conditions
As already described, the application of the riparian doctrine in arid climates
through its adoption in colonial and post colonial jurisdictions caused a
number of practical difficulties. As mentioned much of the development of
the riparian doctrine took place in damp and water rich climates of England
and New England, and indeed much of the case law on riparian rights related
to disputes over the situation and operation of water mills rather than water
abstraction. Such principles transferred with difficulty to more arid climates.

In Canada, for example, the riparian doctrine effectively prohibited irrigation
on any large scale in the southern regions of the prairie provinces which have
Modern water rights – theory and practice 22
an arid desert like climate.
29
After "considerable unrest" the Federal
Government passed comprehensive water legislation in 1894 in the form of
the North West Irrigation Act, S.C. 1893, chapter 30.

Similar problems were faced in Australia where a move to formal licence
based regimes began in the 1880s, when Victoria introduced new water laws
based on the recommendations of a Royal Commission chaired by
Alfred Deakin. He proposed that water allocations should be tied to the land,
that rights to water should be vested in the Crown (the equivalent of the
state), and that allocations to landholders should be the responsibility of the
state governments. Riparian owners retained limited common-law rights for
domestic use, stock watering, gardens and a maximum of two hectares of
irrigated land for fodder crops. Over the next fifteen years, similar legislation
was introduced in the other states.

3.2. The inadequacies of traditional land based approaches
Even in their original jurisdictions the traditional approaches had begun to
run into difficulties both as far as individual users were concerned as well as
in ensuring the effective management of water resources.

As already noted the riparian doctrine raises a number of difficult conceptual
points such as the nature of "reasonable use" and the limits of "extraordinary
water use". In practical terms whatever legal logic the doctrine may have the
simple fact is that it does not provide the means to clearly specify how much
water a right holder may abstract and use at a given point in time, in times
either of full river flow or of drought. In short, the doctrine fails to provide
the legal certainty necessary to make investments. Indeed even during the
nineteenth century as the doctrine reached the zenith of its development, its
limits had become clear. To take the example of England, some 4 500 Private
and Local Acts of Parliament were adopted between 1800 and 1947 that gave
rights to use water as well as comparable numbers concerned with land
drainage, river improvement and inland navigation. In other words there were
effectively two separate and largely uncoordinated water rights regimes in
place making it increasingly difficult to plan and manage the use of water
resources. Consequently all uses on the basis of statutory and riparian rights
were brought into a formal water rights regime with the enactment of the
Water Resources Act 1963.
29
They have an average precipitation of 28 centimetres per year.
Modern water rights – theory and practice

23
At the same time in many of the eastern United States a modified approach
to the riparian doctrine has been introduced through the introduction of a
licences that specify the volumes of water that may be taken.
30


Similar difficulties arose with the traditional approach of the civil law
jurisdictions. Whatever logic it may have held for the legal scholars of old, the
idea of distinguishing private waters from public waters is nonsense from a
hydrological perspective. The difficulty of reconciling the different activities
of neighbouring landowners over their separate yet connected "private
waters" led to innumerable court disputes and piecemeal legislative reforms.
The response has been the systematic introduction of formal and explicit
water rights.

Another clear example of the inadequacies of traditional land-based
approaches is provided by the experiences of their inability to prevent the
depletion of aquifers, for example in Texas where groundwater provides
about 60 percent of the water that is used each year particularly for irrigated
agriculture and urban water supply (Kaiser, 2004). While the courts have
made some modest modifications to the rule of capture, described above, by
limiting pumping when it is: (1) wasteful; (2) maliciously done to harm a
neighbour; or (3) causing land subsidence to another property it is clear that
these minor developments in the law are not of themselves sufficient to
prevent over abstraction of groundwater.

3.3. The need to take account of environmental considerations

Traditional approaches to water rights allocation failed to take account of the
environment. If the volumes of water that are subject to traditional water
rights are not quantified it is difficult to make provision for the ecological
requirements of rivers. The mere quantification of rights does not
automatically resolve this issue. As already mentioned the prior appropriation
doctrine permits the appropriation of all water in a given water course.

Early attempts to introduce formal water rights regimes in the pre-
environmental era similarly neglected the ecological and aesthetic functions of
rivers and water bodies. However, now that environmental issues are so

30
Not all though, in some states it is sufficient for water users simply to notify their use
to the water administration. Evidently these are states that do not suffer from water
shortages.
Modern water rights – theory and practice 24
much higher up national agendas, all recent reforms to water rights regimes
have simultaneously sought to take them into account.

Thus a key objective of the recent Australian reforms described in this paper
has been to promote environmental objectives in part by reducing the need
for major new infrastructure by better using the existing water resources. In
addition reductions in agricultural overuse should have a positive
environmental effect through a reduction in water logging, salinization and
biocide dispersion.

Similarly environmental concerns have largely influenced the development of
the water policy and legislation of the European Community.

3.4. The need to better recognize the economic value of water

Where water rights are less than clear damaging economic consequences can
follow. These involve a much reduced incentive to augment the value of the
water, of farmland and other infrastructure which uses it, as well as reduced
incentives to conserve it.

A desire to prevent the waste and over-use of water through the introduction
of tradable transferable water rights was one of the main reasons behind the
recent reforms to water law and water rights in Australia. Australian interest
in tradable transferable water rights (TWR) began to surface in the mid-1970s
and the state of Victoria first introduced such rights in the early 1980s. For
some, their introduction seemed to offer a new flexibility to existing
arrangements, with clear economic and environmental advantages.

First, the maturing of the Australian water economy in recent decades is
associated with high average total cost for the long-term supply curve. So
TWR potentially offered a new direction that, by reallocating water supply,
would reduce the pressure for aggregate supply expansion. This reallocative
effect would not be merely within the farming sector. There was also the
prospect of reducing agricultural overuse to open up supplies for a range of
urban and industrial uses.

Secondly, supply reallocation within agriculture was a major objective. There
was a widespread belief by the mid-1980s that TWR would switch water from
lower to higher productivity uses in the farming sector. In Australia, at that
time, the agricultural sector accounted for 80 percent of total water use. In
Modern water rights – theory and practice 25
Victoria, each year, up to a third of irrigators were using less than their full
water right allotment. Specific switches into river red gum watering, salinity
dilution and dairy farming were forecast.

In 1995 the Council of Australian Governments introduced its water reform
process, according to which all of the state governments committed
themselves to introduce a "system of water allocations or entitlements backed
by the separation of water property rights from land title and clear
specification of entitlements in terms of ownership, volume, reliability,
transferability and, if applicable, quality."

3.5. The transformation from socialist to market based economies

While most of the former socialist countries of Eastern Europe and the
former Soviet Union had water legislation in place under socialism, this
seldom created formal and explicit water rights. Instead annual licences were
issued for the use of water resources. Given that the state controlled or
owned both the water resources and enterprises undertaking economic
activity this mattered little in practice.

The shift to a market based economy has clearly altered the situation and
both national and foreign investors will require water rights. So far, however,
and unlike the situation with regard to land tenure rights, progress in this area
has been relatively slow particularly in the former Soviet Union with only
Armenia and Kyrgyzstan having enacted legislation that creates substantive
water rights.

3.6. Regional initiatives

In some European countries the introduction of formal water rights is a
result of European Community legislation, specifically the Water Framework
Directive.
31
Scotland, for example, notwithstanding its damp climate has
forty to fifty thousand abstractions and between five and ten thousand
impoundments, but until the recent introduction of the Water Environment
and Water Services (Scotland) Act 2003 most of these were not controlled by
legislation but were regulated on the basis of traditional principles
(Allan, 2003).
31
Directive 2000/60/EC of the European Parliament and of the Council of
23 October 2000 establishing a framework for Community action in the field of water
policy.
Modern water rights – theory and practice 26
3.7. To support or entrench wider economic reforms

In some jurisdictions water rights reforms have been enacted to support or
entrench other economic reforms. For example in New Zealand the
Resource Management Act was adopted in 1991 in the wake of a radical re-
ordering of the roles of state entities: economic development was to be the
primary responsibility of the private sector through the use of market forces
with the role of the state to be restricted to the management of resources.

This form of economic re-ordering was even more evident in Chile following
the seizure of power by General Pinochet in a coup in 1973. This was
followed, inter alia, by a fundamental shift in the management of water
resources. In a break with the socialism of President Allende, the new
government moved to a market-orientated economic policy. In the
agricultural sector, land and water rights were shifted to private ownership,
property rights in water were introduced or clarified, and market allocation of
the good was envisaged. This can in turn be seen as a backlash against the
1967 Agrarian Reform Law which had greatly expanded government
authority over water use and water management, at the expense of private
rights (Bauer, 2004).

State-owned water rights were terminated and the 1981 Water Code entitled
secure, transferable water rights reforms which can be seen as ideological to
the extent that they sought to retrench and concretise the land and water
(counter) reforms.

3.8. To support other reforms

Historically through to the end of the 1980s the structure of property rights
for water and land in Mexico was consistent both with the country's
centralization of political and economic power as well as with the strong role
played by public sector institutions in allocating resources and producing
goods and services.

In particular, following the Mexican Revolution of 1910, the agricultural
sector, including its land and water rights, had an exceptional nature, with a
strong social welfare role. With the exception of small farms, the farm sector
consisted of ejidos, land in social property and owned in common by the
farmers living there. In the ejidal system, state irrigated land was managed in
Irrigation Districts.
Modern water rights – theory and practice 27
The bulk of surface water for irrigation was distributed directly by the
National Water Commission or Comisión Nacional del Agua (CNA)
headquartered in Mexico City. Water allocations could not be sold, rented or
used on other lands beyond the 20 hectare maximum per farmer. In fact
there was a short-term water rental market, illegal but facilitated by local
officials, where larger farmers were active. But because of the discretionary
power of the CNA and the Ministry of Agriculture, there existed great
uncertainty in access to water concessions – they could be reduced or
revoked for a wide variety of reasons. This system of water allocation went
hand-in-hand with low water productivity and economic efficiency as well as
ejido dependence on central subsidy of the Irrigation District. By the 1980s
the time seemed to be ripe for a shift from central controls to local freedoms
and this was seen to make a strong case for the introduction of water rights
held by farmers themselves alongside the transfer of responsibility for the
operation of irrigation infrastructure from the state to farmer-operated water
user associations.

This enactment of Mexico's National Water Law in 1992 coincided with a
series of policy reforms initiated in the late 1980s which included:

x the privatization of communal land holdings (ejidos) through the1992
Agrarian Law;
x the transfer of the operation of canal systems to farmer-controlled water
user associations;
x the revision of the role of the CNA; and
x the introduction of more liberal trade policies in conjunction with the
conclusion of the North American Free Trade Agreement (NAFTA)
(World Bank, 1995a).

3.9. The promotion of social goals

In relatively few cases have water rights reforms had social goals. An
exception is South Africa where water law reforms were a direct result of the
historic elections of 1994, the first involving universal suffrage. The
Government of National Unity embarked on a Reconstruction and
Development Programme aimed at ending poverty. The 1998 Water Act
sought to implement the two key principles of the 1997 National Water
Policy, "sustainability" and "equity".

Modern water rights – theory and practice 28
With 83 percent of agricultural land previously in the hands of white farmers
and the majority of water for irrigated agriculture also controlled by them
through the white-dominated irrigation boards both land tenure reform and
water reform were necessary to right the injustices of the apartheid era
(World Bank, 2000). One of the key features of the Water Act was the
abolition of riparian rights and its replacement with a modern permitted
water rights regime with the specific objective of removing the privileged
position of riparian land owners.

3.10. The completion of earlier reforms

In a number of cases recent water rights reforms have sought to complete
and perfect earlier reforms. In the Australian state of Queensland, for
example, the water entitlement provided by a water licence was often poorly
specified. That is, the licence did not make clear the extent of the entitlement.
In particular the absence of a volumetric cap on the amount that could be
taken led to unreal expectations by licensees and the potential for actual use
to expand in an unconstrained way causing negative impacts on neighbours
and the environment. Water users also had no specification of the reliability
of supply that could be expected under a licence. In surface water systems
licensees sometimes found that although their licence did not change, the
amount of water that could be obtained under the licence was progressively
reduced by the construction of new dams (Cox, 2002).

Similar problems existed with regard to the water legislation of the other
states, legislation which provided for administrative water rights, albeit rights
that were generally tied to specific land plots. In 1994 the Council of
Australian Governments (CoAG) endorsed a strategic framework for the
efficient and sustainable reform of Australia's water industry. One of the key
elements the framework addressed was water rights. The CoAG agreed that
each member government would clearly specify rights in terms of ownership,
volume, reliability, transferability and, if appropriate, quality (Productivity
Commission, 2003).

Turning to Mexico, one of the objectives of the reforms described earlier was
to complete a process begun by the first Federal Water Law, enacted in 1972.
However no implementing regulations had ever been issued in connection
with that law. It provided "national waters" to be used exclusively on the
basis of a concession granted by the Federal Executive. It was estimated that
there were about 300 000 users by 1992 but only 2 000 concessions had been
Modern water rights – theory and practice 29
issued mainly because this power could be exercised solely by the President
(FAO, 2001).

3.11. Pressure on water resources

Last, but not least, underlying all of these issues is the simple fact that around
the world pressure on water resources has hugely increased. The reasons are
well known and include population growth, the rise of mega-cities, rising
affluence leading to greater water demand as well as new industrial and
commercial processes.

Already, around one third of the world's population live in countries that
suffer from moderate to high water stress. Continued population growth
and the effects of climate change, a phenomenon whose eventual impacts
are not yet fully understood, suggest greater pressure still. It is reckoned
that the demand for water will increase by around 50 percent in the next 30
years and that around 4 billion people, one half of the world's population
will live in conditions of severe water stress by 2025.
32

A lot of this increased demand will come from irrigated agriculture which is
particularly sensitive to small temperature variations. The agriculture sector is
already the main water use sector in many countries around the world and
some forty percent of world food production is currently produced on
around 250 million hectares of irrigated land (Bogdanovic, 2002), an increase
of some 200 million hectares over the course of the twentieth century. This
increase is a result of major investments in the sector that have the effect that
on average some 73 percent of all water abstractions are for irrigation, with
an even higher share in lower income countries (World Bank, 1992): in India
irrigation accounts for 93 percent of the gross amount of water used (World
Bank, 2003).

Furthermore, the level of demand for irrigation water is unlikely to decrease
in the near future. At least 17 percent more freshwater than is currently
available will be needed by 2025 to produce sufficient food for the 8.8 billion
people who it is estimated will populate the planet, even if everything is done
to make irrigated agriculture more water efficient. If this is not done, it is
estimated that at least 55 percent more freshwater will be needed.
32
With conditions particularly severe in Africa, the Middle East and South Asia (World
Bank, 2003).
Modern water rights – theory and practice 30

From time to time newspapers talk in turns of an increasing scarcity of water.
In fact, unlike oil and other non-renewable natural resources, the volume of
freshwater has remained remarkably constant over the millennia (McCaffrey,
2001). What is needed is better and more efficient management.

It has been suggested that the single greatest problem in water resource
management in the developing world is that property rights in water are very
insecure and ineffective. But pressure on water resources is not limited to
developing countries. In Texas, for example, it is estimated that the
population of the state will almost double in the next 50 years from 19 to
almost 36 million (Pitts et al., 1999) a pattern that is repeated throughout the
American West and Southwest (Blomquist et al. 2001).

Given that in many jurisdictions few additional resources remain to be
exploited - there are few viable dam sites left in Australia for example - better
management and allocation of water resources is really the only available
option. In modern societies law plays a key role in this process of allocation
and management, primarily through the mechanism of water rights. It follows
that the introduction of modern water rights in particular and water rights
reforms in general will continue to be on national agendas in most countries
around the world for the foreseeable future.

Modern water rights – theory and practice 31
4. THE CONSULTATION AND EDUCATION PROCESS
INVOLVED

Having identified the need for water rights reform, this section examines the
consultation and education processes that have been undertaken in
connection with the reforms themselves.

Each jurisdiction has its own particular formal procedures for the adoption of
new legislation. In common law jurisdictions, a consultation paper
(sometimes known as a "green paper") is typically circulated by the
sponsoring ministry for comment from other ministries/state agencies as well
as civil society (including the business community and non-government
organizations (NGOs). Based on the responses received a more formal
legislative proposal (sometimes called a "white paper") is then circulated for
comment, sometimes following cabinet approval. Draft legal text is then
prepared by the sponsoring ministry, government legal service or
parliamentary counsel for inter-ministerial consultation followed by cabinet
approval prior to submission to the legislature.

In contrast, in the civil law jurisdictions of the countries of the
Commonwealth of Independent States the first step is usually for the
sponsoring ministry to prepare and circulate a draft legal text through two
rounds of "inter-service" or inter-ministerial consultation before submission
to the government (cabinet or council of ministers). Such formal procedures
are determined by custom, law or government instruction but in any event a
detailed comparison can really only be of academic interest as far as the
enactment of legislation for the introduction of modern water rights is
concerned.

What is of more interest is to consider the consultation and education
processes that have been undertaken before the start of the formal
procedures as well as the extent to which formal procedures create genuine
opportunities for public consultation.

In a number of the jurisdictions considered in this paper little in the way of
consultation and education took place in connection with the introduction of
water law reforms.

For example, a consultation and education process was not seen as a
fundamental requirement for the shift to market institutions by the
Modern water rights – theory and practice 32
authoritarian government of President Pinochet in Chile. The government,
before assuming power, had developed a clear notion that private rights in
property were the key to economic success. What consultation took place
concerned the modalities of the new code prior to its inception in 1981.

The lack of consultation is not confined to more authoritarian regimes. Water
law reform was one of the flagship legislative reforms of the Socialist
government that was elected in Spain in 1982. While the concepts and draft
texts were carefully but rapidly prepared by a large and competent team of
experts there was little public debate on the matter as the administration
favoured an internal discussion process in order to meet tight legislative
deadlines.
33

Generally speaking, however, there is now a trend towards genuine consultation
by governments with a wide range of stakeholders before substantive reforms are
undertaken in natural resources sectors such as the water sector.
34

There are a number of benefits of taking such an approach. First of all
widespread consultation has a very valuable educational function: those who
are affected by eventual reforms will be relatively more familiar with their
effects and objectives not least by reason of having directly or indirectly
participated in their final development. Secondly, experience suggests that
widespread and genuine consultation leads to the preparation of better and
more effective legislation, particularly in respect of complex sectors such as
water. Thirdly, while consultation is sometimes dismissed as but a form of
"political correctness" the fact is that substantive reforms may have important
and complex socio-economic impacts on livelihoods that legislative
procedures may have difficulty capturing. In other words there is a form of
moral case for listening to the voices of those affected. Finally, and arising
from the points just made, experience shows that if a broad consensus can be
reached as a result of a genuine consultation process it is ultimately much
easier at the political level to enact legislation particularly with regard to vital
natural resources such as water.

33
Similarly in Mexico the shift towards liberalization in the early 1990s offered the
farmer greater control in his access to water. But the process of liberalization was a top-
down movement and so the consultation and education process for the introduction of
modern water rights was minimal (FAO, 1999).
34
Even in England recent and ongoing water sector reforms have undergone a lengthy
and elaborate consultation process.
Modern water rights – theory and practice 33
For example, in the Australian state of Victoria the consultation and
education process with respect to the most recent reforms designed to
introduce effective transferable water rights involved the production of
background documentation on transferable water rights, questionnaire and
interview surveys on farmers" interest in the subject, the launch of research
projects on prior experience in other parts of the world (such as northern
Colorado), and conferences between farmers and the state government on
the opportunities offered by a new system. Similar, quite intensive
consultation work took place in the other Australian states.

In South Africa the formal step of issuing a Government White Paper
in 1997 on water law reform was the product of two years of extensive study
and wide consultation. The first outcome was the production of the
"Fundamental Principles and Objectives for a New Water Law in South
Africa" which were approved by the Cabinet in November 1996. These
Principles in turn guided an intensive programme of work involving the
Minister and other political leaders, officials from the Department of Water
Affairs and Forestry and other government departments, organized user
groups and South Africans from all walks of life and from all provinces in a
process of consultation, research and synthesis.

The process of consultation began with the distribution, in May 1995, of the
booklet "You and Your Water Rights" for public comment. A Water Law
Review Panel then produced a set of principles for a new water law, taking
into account the comments from the public. These principles were further
refined and released on 17 April 1996 as the basis for further public
consultation. Consultative meetings were held in all nine provinces of South
Africa, organized in such a manner that the voices of the rural poor and the
disadvantaged would be heard.

Other interest groups such as agriculture, industry, mines, municipal users
and environmental groups were encouraged to arrange their own meetings to
discuss the principles. They also took part in the consultative meetings and in
bilateral meetings with the minister and department. Other national
government departments and both provincial and local spheres of
government were also consulted.

The consultations ended in a Water Law Review National Consultative
Conference in October 1996 which discussed practical approaches to
implementation as well as the principles that would guide the drafting of the
Modern water rights – theory and practice 34
law. The final Fundamental Principles and Objectives for a New Water Law
for South Africa ("the Principles") were approved by Cabinet in
November 1996.

Eleven technical task teams were then appointed to translate the Principles
into practical proposals which informed the policy positions of the White
Paper. The draft National Water Bill was subsequently drafted on the basis of
the White Paper, which was tabled in Parliament during the course of 1997.
The new National Water Act was finally adopted in 1998.

A similar but somewhat simpler approach was undertaken in Kyrgyzstan in
connection with the preparation of the recently enacted Water Code. One of
the key objectives of the sponsoring ministry, the Ministry of Agriculture and
Water Economy, was to establish a system of modern water rights to
complete and complement the land tenure and irrigation management
reforms already undertaken (agriculture is the country's largest economic
sector). The notion of modern water rights was almost entirely novel in a
culture that was influenced both by rather top-down soviet bureaucracy as
well as Islamic notions that water is a "Gift from God". The process, which
was supported by the United States Agency for International Development
(USAID) began with a concise review of the deficiencies of existing (soviet
style) legislation
35
and the related obstacles to effective water management.

Next a short paper was prepared on the contents of a typical modern water
code based on international experience alongside ten issues papers describing
the "hard" or key policy issues that would need to be agreed on. These
documents were widely circulated among government ministries, local and
regional government, NGOs concerned with water and environment issues,
as well as water users.

A series of discussion meetings were held around the country and experts
from the Food and Agriculture Organization of the United Nations (FAO)
were invited to make a presentation at a high level seminar attended by
ministers and senior officials. Next an inter-ministerial working group was
established composed of senior experts as well as NGO representatives to
work through and reach a consensus on the "hard" and key issues. The
findings of these working groups were presented at a further national high
35
The law, the 1995 Water Law, was essentially the Water Code of the former Soviet
Socialist Republic of Kyrgyzia with the words "soviet socialist" removed.
Modern water rights – theory and practice 35
level workshop which, with the approval of the Minister, then mandated the
preparation of the first draft text.

Meanwhile the government had requested FAO's assistance in starting to
prepare the ground for the implementation of the new code, and in particular
the implementation of the water rights regime. Those findings, coupled with
a series of workshops and widespread consultation on the draft led to the
development of a text that the Ministry could then submit to the formal pre-
legislative approval procedure. Throughout, the key issues being addressed
and the content of the code were described in a water law bulletin (published
in Kyrgyz and Russian) published four times a year and with a print run of
15 000 that was widely distributed around the country. Finally, mention
should be made of a study tour to South Africa that was organized by FAO
for senior government officials and which enabled them to experience at first
hand the substance and effects of the South African reforms.

Modern water rights – theory and practice 36
5. THE LEGAL AND REGULATORY BASIS

In this section the legal and regulatory basis for the introduction of formal
and explicit water rights is considered. After examining the formal source of
the "legal rules" for the introduction of such rights, the substantive
conceptual content of the different steps in the process is considered.

5.1. The need for primary legislation

In all of the examples considered, modern water rights have been established
on the basis of primary legislation. More specifically, and depending on the
jurisdiction and legal tradition involved, such rights have generally been
introduced through the enactment of new legislation in the form of a water
or water resources "act", "law" or "code".

In connection with the notion of integrated water resources management
there is a trend towards enacting comprehensive water legislation that
addresses all aspects of the hydraulic cycle thus including ground water and
surface water (and even cloud seeding and rainwater harvesting).
Nevertheless in some jurisdictions groundwater continues to be regulated
under separate legislation. This tends to be either because groundwater is
overwhelmingly more important than surface water (in countries with little
rainfall for example) or, as in the case of several American states, because a
specific response is needed to ground water over-abstraction which does not
require amendment of the surface water regime.

The need for primary legislation is explained as follows. New water rights
regimes invariably affect existing water rights including traditional rights. In
most jurisdictions existing traditional water rights, whatever deficiencies they
may have, are a form of property right. Indeed in the case of private waters
under the civil tradition such rights are in fact a form of ownership right.

If such rights are to be modified, or even cancelled, this can only be done on
the basis of primary legislation and even then only on the basis of very clear
wording. New water legislation can, and often is, subject to challenge by
those adversely affected. For example provisions in the 1985 Spanish Water
Law concerning pre-existing groundwater rights were challenged as
amounting to an illegal "taking" up to the level of the Constitutional Court.

Modern water rights – theory and practice 37
Equally if new legislation is to establish modern water rights as a form of
property right, an issue returned to below, this too can only be done on the
basis of primary legislation.

In the case of federal states the level at which primary legislation is enacted
will depend on the provisions of the relevant constitution. In all of the cases
considered with the exception of Mexico, such laws are enacted at state level,
for example in the cases of Australia and Canada. The effect is, of course,
that water legislation, and thus approaches taken to water rights, in different
jurisdictions within a federal state can be markedly different. While this
observation is true for those jurisdictions in which this issue is addressed
primarily in legislation, it is, as already seen, even more marked in the United
States where the two common law doctrines continue to play such an
important role.

Indeed Mexico is perhaps unusual in that responsibility for waters is a Federal
competence. But it is not unique. For example, a Federal Water Resources
Law was recently adopted by the Russian Federation.
36

5.2. The "nationalization" of water resources

In many jurisdictions the first step in establishing a system of formal rights is
to bring water resources within the ownership or control of the state.
Because, as described above, the common law has not generally recognized
the concept of ownership over flowing water resources even by the state,
water legislation in common law jurisdictions has tended to declare a superior
state control right over water.

This is done through a variety of different legal techniques. These have
included:

x a declaration (or sometimes a reiteration) of state ownership, as in
Albania's Law on Water Resources of 1996;
x the inclusion of water within the public domain of the state, as happened
in Italy in 1994 and Morocco in 1995 in connection with groundwater
reforms;
x a declaration that water is "national property for public use" as is the case
in the Chilean Water Code;
36
Water Code of the Russian Federation No. 74-FZ, dated 3 June 2006.
Modern water rights – theory and practice 38
x a declaration that water is "public property" as provided for in section 1 of
the Israeli Water Act 1959 and in respect of groundwater in New Mexico's
1927 groundwater legislation;
x the vesting water resources in the President of the State on behalf of and
in trust for the people, as provided for in Ghana's Water Resources
Commission Act of 1996;
x the placing of national water resources under the trusteeship of the
National Government as in South Africa under the National Water Act
1998;
x bringing water resources under the superior use right of the State in
Uganda's 1995 Water Resources Act and the Australian state of Victoria's
Water Act of 1989.

Usually, such state ownership or control applies to all of the water resources
within a state's territory thus including both surface water and groundwater.
37

Having placed water resources under state ownership or control the next step
is to address the validity of existing water rights. Apart from provisions that
either continue such rights on a deemed basis or provide for their conversion
into the new form, an issue returned to below, this is usually achieved by a
simple statutory declaration.

Two examples from different Australian jurisdictions are instructive.

Section 8(7) of the Victorian Water Act provides:

ȩThe rights to water conferred by or under this Act on a person who has an
interest in land replace any rights:
(a) to take or use water;
(b) to obstruct or deflect the flow of water; or
(c) to affect the quality of any water; or
(d) to receive any particular flow of water; or to receive a flow of water of a
particular quality
that the person might otherwise have been able to enforce against the Crown
or any other person because of , or as in incident to, such interests.ȩ

This is in those cases where the existing rights would be replaced through the
transitory provisions in the new law.

37
Although Spain's recent water legislation omits fossil groundwater.
Modern water rights – theory and practice 39
A simpler means of achieving a similar but less comprehensive result appears
in section 7(9) of the South Australian Water Resources Act 1997. It
provides:

ȩRights at common law in relation to the taking of naturally
occurring water are abolished.ȩ

5.3. Institutional arrangements for water resources management

Having placed water resources under state control or ownership and dealt
with the status of existing water rights, logically the next legislative step is to
create the institutional arrangements for the management of those resources,
including the issue of water rights.
38

Typically the ultimate responsibility for water resources management,
together with necessary legal powers, is formally conferred on a minister,
usually acting through a statutory Director or Director General of Water
Resources, such as the Department of Water Affairs and Forestry in South
Africa, or some other statutory body such as an authority (such as the
Jamaica Water Authority) or agency (such the Environment Agency in
England) or General Directorate of Waters such as the Dirección General de
Aguas in Chile. For the purposes of this paper the generic term "water
administration" will be used.

While a water administration typically has overall responsibility for water
resources management, including the administration of water rights,
throughout the relevant jurisdiction there is an increasing trend for water
management to be undertaken on a drainage basin approach. South Africa
with its statutory Catchment Management Agencies, provides one example
while the European Community provides another.
39

In other words water is managed by reference to the shape or form of the
land that forms the catchment of a major river, and its tributaries, from the
upper watersheds down to the sea, or other final "terminus" (such as a lake).

38
The word "institution" is used in the sense used by lawyers. Social scientists would
probably use the word "organization" as law is itself is seen as an institution.
39
The Water Framework Directive requires water to be managed on the basis of river
basin districts (article 3).
Modern water rights – theory and practice 40
The following factors are cited in support of this approach:

x its hydrological unity from a management perspective;
x the interdependence of different parts of each river basin;
x the river basin provides a natural forum for conflict resolution;
x the river basin is an obvious focus for data collection and analysis;
x many externalities are internalized at the river basin level;
x there are opportunities for optimizing water development and operation
at the river basin level. (Winpenny, 1997)

While this approach is correct from a hydrological perspective, given that
surface water within the basin will naturally flow in a common direction
towards that terminus, it does mean that water resources management is
undertaken in what can be a very large land area that usually does not accord
with administrative boundaries. After all, rivers and lakes make good natural
borders, both internal and external.

As such it can become a rather complex process. It can also make it more
difficult to accommodate groundwater management within surface water
basins, as aquifer boundaries often do not follow the latter. Nevertheless, the
trend is certainly in this direction and it is a trend that is increasingly provided
for in water legislation.

5.3.1. Stakeholder involvement

The complexity of water resources management and the need to involve so
many stakeholders means that legislative provision is often also made for co-
ordinating and/or decision-making mechanisms at the central level as well at
the level of individual basins or catchments.

Such arrangements typically seek to give effect to the second of the Dublin
Principles, namely that water development and management should be based
on a participatory approach, involving users, planners and policy-makers at all
levels.

An example of the former kind of body is the inter-ministerial National
Water Council provided for in the Albanian Water Law which is chaired by
the Prime Minister. A similar entity was introduced into the Tunisian
legislation in a 2001 amendment to the 1975 Water Code.

Modern water rights – theory and practice 41
Examples of the latter include the river basin councils of France, Spain and
Mexico. While South Africa's Catchment Management Agencies operate
under the overall supervision of the Department of Water Affairs and
Forestry, each is governed individually by a management board comprised of
water users and other stakeholders. While the range of roles and tasks of such
bodies vary from jurisdiction to jurisdiction, their establishment goes beyond
mere rhetoric.

Particularly as regards planning activities and decisions on water rights issues,
it very frequently happens that "hard decisions" have to be made that may
negatively affect rights holders. Apart from the fact that participatory
approaches arguably lead to better decisions being made, the fact remains
that the negative impacts of hard decisions are much more easily
implemented if those affected have played a part in reaching them.

5.3.2. Specialized water management entities

In addition to providing for the establishment of a water administration,
there is an increasing trend for water legislation to devolve responsibility for
aspects of the management of individual water resources at risk of depletion
or contamination to specialized water management entities such as water user
associations, which are typically established on the basis of generic enabling
legislation,
40
or resource specific statutory bodies which are typically
established individually on the basis of a specific act or law.

Water user associations, which are legally independent entities controlled in a
participatory and democratic manner by water users have a long history in
water management around the world. Best known historically for operating
irrigation and drainage systems, recent years have seen a significant
broadening of their activities (FAO, 2004).

For example in Spain the 1985 Water Law made the establishment of
groundwater user associations (GUAs) compulsory in overexploited aquifers.
Like water user associations in most jurisdictions GUAs are established as
bodies of public law or public corporations pursuant to the 1985 law which
also sets out their relationship with the water administration, under whose
overall supervision they remain. The fact that they function on a democratic
40
In other words all water user associations within a given jurisdiction are established
on the basis of the same enabling legislation.
Modern water rights – theory and practice 42
basis and are controlled by users means that GUAs have a greater inherent
authority when it comes to making "hard" decisions such as, for example,
restricting groundwater abstractions.

A similar approach is found in California, Texas and a number of other
western states in the form of groundwater districts. In Texas, for example, in
response to concern about the over-extraction of groundwater some
88 groundwater districts, a form of water user association, have been
established in respect of around 89 percent of the state's groundwater. They
are locally controlled by local voters. These districts may, but are not required
to, set limits on pumping and wells. They have been described as "planning
giants and regulatory dwarfs": while they have extensive powers to study,
report, disseminate and plan they have been limited in their ability to disturb
the basic rule of "capture" described above (Kaiser et al., 1998).

In response to concerns over the effectiveness of the groundwater districts,
coupled with continued fears over the state of the important Edwards
Aquifer in 1993 the Texas legislature enacted the Edwards Aquifer Authority
Act to establish the Edwards Aquifer Authority (the Authority) as a special
statutory body. The Authority is a regulatory agency charged with preserving
and protecting the Edwards Aquifer in an eight-county region. However,
legal challenges prevented the Authority from operating until 28 June 1996.

The Act created a 17-member board of directors that sets policy to manage,
conserve, preserve and protect the aquifer, and works to increase the recharge
and prevent waste or pollution of the aquifer. The board has 15 selected
members from the eight-county region and two non-voting appointed
members to carry out the duties set out in the Act. The Act also established
the South Central Texas Water Advisory Committee made up of
representatives from down stream counties to interact with the Authority
when issues related to downstream water rights are discussed. The tasks of
the Authority are inter alia:

x to fully implement the requirements of the Edwards Aquifer Authority
Act;
x to develop an effective, comprehensive management plan based on sound,
consensus-based scientific research and technical data;
x to maintain continuous spring-flow;
x to protect and ensure the quality of ground to surface water in the
Authority's jurisdiction
Modern water rights – theory and practice 43
x to promote healthy economies in all parts of the region;
x to research and develop additional sources of water; and
x to provide strong, professional management of groundwater resources.

Crucially, with the exception of some wells used to abstract water for
domestic and livestock purpose, any well that withdraws water from the
Edwards Aquifer is required to have a properly installed water flow meter.
The flow meter measures the amount and velocity of the water that is
discharged through the well and these are verified periodically by the
Authority's technicians.

The Authority's activities are conducted on the basis of its Groundwater
Management Plan (GMP) that includes a set of nine goals with appropriate
management objectives and performance standards necessary for the
effective management of the Edwards Aquifer.

5.3.3. Water administration tasks and powers

While a full discussion of the structure and tasks of water administrations is
beyond the scope of this paper their basic tasks usually include:

x planning;
x the organization of stakeholder fora (as described in the previous sub-section);
x monitoring of water quality and water quantity ;
x the issue and administration of rights, including the maintenance of
registers;
x the enforcement of water law and water rights regimes including
prosecution activity.

In other words, much of their practical activity relates directly or indirectly to
water rights.

First of all, as already mentioned, the level and flow of water varies in most
watercourses primarily as a result of climatic variations. The first task for a
water administration is to monitor the level and flow of waters throughout
the length of a water course as this will have impacts on both the quality of
water and the amount that can be abstracted or otherwise used pursuant to
water rights. This requires the costly installation and operation of measuring
equipment, and if the river or stream in question is fed from glaciers or
snowfields may also require monitoring conditions in the high mountains.
Modern water rights – theory and practice 44
The measurement of water rights themselves is also a relatively complex
matter requiring continued activity. Particularly in times of drought, when
pressure on water resources is likely to be at its highest, the temptation to
"cheat", to abstract more than permitted by the water right or any restriction
placed upon it, is likely to be at its greatest.

But the quantity of water in a watercourse is not the only matter that requires
constant measurement. Since time immemorial humans have disposed of
wastes to rivers and streams, with or without treatment, and while
increasingly regulated the practice continues. Solid and liquid wastes from
urban sewerage systems, from factories and other pollutants from surface
water run-off (particularly fertilizers and pesticides) contribute to lowering
the level of water quality in rivers and streams and in groundwater formations
and thus the quality of water that is subject to water rights.

The importance of monitoring and enforcement cannot be over-emphasized:
where they are ineffective the value of water rights will be diminished
(Productivity Commission, 2003). Furthermore it is necessary for the legislation to
confer on the officials of water administrations the necessary inspection and
enforcement powers. Such powers may include the right to enter privately
owned land to undertake inspections and monitoring activities as well as the
right to take enforcement measures. Such measures may in turn include a
power of arrest as well as the power to impose fines, to initiate prosecutions
under criminal or administrative law and to impose administrative penalties
such as the suspension or cancellation of water rights. Criminal prosecutions
may lead to a range of penalties including imprisonment. Typically powers
may also be conferred on water administration officials to direct how specific
activities involving the use of water are undertaken or to order certain
activities to be stopped or remedied.

In short, apart from the need for constant measurement and monitoring
activity water rights are dependent on the active management of
watercourses. Such activities, indeed all of the activities mentioned in this
section clearly have human resource and financial costs. Indeed the costs of
setting up the institutional arrangements of this type have led some to
question whether institutional models for integrated basin management, of
the sort pioneered in Australia and Europe are really replicable in developing
countries, particularly given the huge catchments of many Asian rivers (see,
for example, Shah, 2002). There is clearly substance to these arguments. On
the other hand, hydrology cannot simply be ignored and it may well be the
Modern water rights – theory and practice 45
case that in particularly large river basins administrative or provincial actors
have of necessity to be involved for example through the use of inter-
province river, or in federal jurisdictions, inter-state, commissions. A full
discussion on this point is, however, beyond the scope of this paper.

5.4. "Free" uses of water

Water legislation typically provides a range of exemptions for activities that
would otherwise require a water right. Indeed such entitlements are
sometimes described in legislation in terms of "rights".
41
Typically, this is
done by reference to the type of activity, the volume of water used or a
combination of both.
42

In Spain, for example, such uses are classified as "common uses" and include
the use for drinking, bathing, and other domestic purposes as well as
livestock watering. In the province of Saskatchewan, Canada, the exemption
derives from the size of the parcel of land to be watered, while recent water
law reforms in England exempt abstractions of up to 20 cubic metres per day
from the water rights regime.
43

In Ghana it is an offence to exploit or in any way use natural water resources
without a water right granted by the Commission except for water use for the
fighting of fire or where water is abstracted by mainly manual means.
44

Until recently the legislation of Alberta in Canada provided that riparian land
holders could continue to use water for "domestic purposes" which were
defined in section 1(g):

ȩHousehold requirements, sanitation and fire prevention, the
domestic watering of animals and poultry and the irrigation
of a garden not exceeding one acre adjoining a dwelling
house on the land of a riparian owner.ȩ

41
Article 13 of the Albanian Water Law, for example, provides that "Everyone has the right
to use surface water resources freely for drinking and other domestic necessities and for
livestock watering without exceeding its use beyond individual and household needs …"
42
Nevertheless water legislation usually provides that such "free uses" of water may
also be subject to restriction in times of drought.
43
Similarly, agricultural irrigation is exempt from permit requirements in Kentucky and
Maryland (up to 10 000 gallons a day) (Getches, op cit.).
44
Opoku-Agyemang in Bogdanovic, 2002.
Modern water rights – theory and practice 46
In practice this provision caused problems on stressed river systems with
such riparian owners consuming the entire stream-flow. It is also difficult to
quantify the quantity of water to which riparians are entitled and there were a
number of exaggerated claims. The new legislation restricts such "domestic"
rights up to a limit of 1 250 cubic metres per year per household and gives
such uses highest priority in times of shortage.

There is no great theoretical justification for exempting such uses from
formal water rights regimes. Instead, a value judgement is made by the
legislature that takes account of the increased administrative and financial
burden of including such uses within the formal framework, their relative
value to individual users and their overall impact on the water resources
balance.

Similarly as regards groundwater rights, legislation typically provides that a
formal right to abstract and use groundwater is not necessary in connection
with certain specified purposes provided relatively small volumes of water are
used. In Australia, for example, a formal water right is not necessary for the
abstraction and use of groundwater for stock and domestic purposes
(including household garden irrigation). Such exemptions are usually justified
on the basis that their use will have little impact on the total available water
supply as well as the administrative burden of seeking to regulate them.
However, the sheer number of individual wells can ultimately have a
significant negative impact on the quantity (and quality) of groundwater and
related surface water resources (see Drennan, 1997, and Caldwell, 1998).

5.5. The introduction of water rights

The next step is to introduce modern water rights. As to their legal form,
water rights are mostly now created on the basis of a legal instrument issued
by the water administration. Such instruments are variously described in
legislation as "licences", "permissions", "authorizations", "consents" and
"concessions". From a general legal perspective such terms are synonymous.
Having said that, in those cases where the word "concession" is used in water
Modern water rights – theory and practice 47
legislation this generally relates to cases where a particularly long term of use
is envisaged coupled with major investments in infrastructure.
45

As to their substance, modern water rights are administrative use or
ȩusufructoryȩ rights. The question arises as to whether or not they are property
rights.

Some modern water legislation seeks to make this explicit. For example South
Australia's Water Resources Act 1997 states that "a licence (including the water
allocation of the licence) is personal property vested in the licensee and will
pass to another person under Division 3 [which deals with the trading of
licences] or…in accordance with any other law for the passing of property".

In Chilean law while water is considered a public good, individuals can obtain
rights of use over water by receiving a grant from the state, by prescription or by
purchasing water rights. Although these are use rights, rather than ownership
rights, they are governed by private as opposed to public or administrative law.

In other jurisdictions the question as to whether or not modern water rights
are a form of property is not specified. The fact that they gain their existence
from an administrative or regulatory procedure does not by itself preclude
them from being property rights. After all, intellectual property rights in the
form of trademarks and patents are usually acquired through an
administrative procedure.

In conceptualising property both of the main legal traditions differentiate
between personal (movable) property such as chattels and real (immovable)
property such as land tenure rights. It is also important to note that property
rights do not necessarily equate with ownership rights.

Therefore, the fact that water rights may be subject to restrictions, even
restrictions on their sale or transfer in some jurisdictions, does not necessarily
45
The word "concession" is in any event a somewhat slippery term with several
different meanings some of which are also used in the water sector. For example a person
may hold a "concession", in the sense of an exclusive right, to operate a pop-corn stand in
a cinema. Similarly, following the so-called French model, a private water supply company
may hold a concession, in the sense of an exclusive right, to operate an urban water
supply network. In a sense a water right that is described as a concession confers an
exclusive right on the holder to use a given volume of water at a given location, but then
this can said of any water right.
Modern water rights – theory and practice 48
mean that they are less than property rights. No one would seriously argue,
for example, that a right over, say, premises conferred on a lessee pursuant to
a lease is anything other than a (real) property right even though it is of
limited duration, may specify what the leased premises may be used for and
may prevent or restrict assignment of the term.

Consequently it can be said with some confidence that provided they are
sufficiently secure and for a sufficiently long duration such water rights are
indeed a form of property right.
46
These issues of duration and security are
considered below in the section on the definition of rights.

Finally, it should be emphasized that such rights exist entirely independently
to land tenure rights.

46
Joseph Sax, in the context of American water rights, has no doubt that they are
property rights even when created by permit (Sax, 1990).
Modern water rights – theory and practice 49
6. THE INITIAL ASSIGNMENT OF RIGHTS

Once new legislation is in force, and the necessary institutional arrangements
are in place, the question arises as to how initial rights are assigned. In fact
this question needs to be broken down into two separate parts. The first
question concerns how pre-existing uses and water rights are brought within
the fold of the new water rights regime (the actual mechanics of registration
are considered in the next section). The second question is how new rights
are established under the new regime.

6.1. The recognition of existing rights and uses at the time of the
reform

The treatment of existing rights can be a delicate subject, as mentioned
above, due to the risk that those adversely affected will seek to argue that
their extant rights have been expropriated. From a legal perspective the
simplest solution is to recognize all existing lawful uses at the time
immediately before the new legislation enters into force.

Thus in England, following the initial introduction of a system of formal
water rights with the entry to force of the Water Resources Act 1963,
established uses were treated as vested proprietorial rights and their holders
were entitled to a "licence of right". This meant that the holders of all
statutory rights to abstract water, as well as those riparians who could show
that they had been abstracting water in the five years before the system came
into force became entitled to a licence as of right, irrespective of whether it
would have been possible for a new licence to have been granted because of
the environmental impact of such abstractions. This meant that no-one lost
the right to continue an established use of water and so no question of
compensation arose.

In Mexico, upon the introduction of a new water rights regime the
fundamental basis for the initial allocation of water-rights was the formal or
informal water concessions already held during the 1910–1992 period.

In Chile the situation was a little different as previous water law reforms had
seen the creation of a range of earlier water rights. In 1975, two years after
taking power, the government through administrative orders and transitory
laws, froze the actual use of water at 1975 levels to establish a base for the
assignment of water rights. Most water users therefore had a good basis for
Modern water rights – theory and practice 50
obtaining water rights by prescription, although as will be seen below
problems of recording remain.

In New South Wales, Australia, existing licences issued under the Water
Act 1912 are being converted automatically into water access licences under
the Water Management Act 2000. In Alberta, Canada, the 1996 Water Act
provided that existing licences, which are known as "deemed" licences,
continued to be valid. Section 18(2) states (Percy, 1999).

ȩA person who holds a deemed licence under this section may continue to
exercise the right to divert water in accordance with:
(a) the priority number of the deemed licence, and
(b) the terms and conditions of the deemed licence and this Act, and if a
term or condition of the deemed licence is inconsistent with this Act,
that term or condition prevails over the Act.ȩ

A similar but more restricted approach was taken in the South African
legislation. Following the entry into effect of the new regime in a given area,
only two types of use could be carried out without a licence:

x reasonable domestic use, domestic gardening, animal watering, fire
fighting and recreational use;
x continuation of an existing lawful water use.

Existing lawful uses are uses that have taken place within the previous two
years and must be registered as such - they are not licensed unless the
responsible authority decides they should be, but must be registered so that
their lawfulness can be verified.

When legislative reforms have the effect only of modifying existing formal
rights these are typically recognized in the new legislation. The Australian
state of Victoria assigned the initial rights on the basis of the rights held
under the legal arrangements existing prior to 1987/1988.

Following the establishment of the Edwards Aquifer Authority in Texas, pre-
existing users were required to apply for permits based on their claimed
historical water usage for the period June 1972 to May 1993. In addition they
were given priority over new users through a guaranteed water supply.

Typically, though, existing rights and existing uses of water are subject to a
formal review at some stage after the entry into force of the new water rights
Modern water rights – theory and practice 51
regime. At this stage they can be adjusted to take account of other recognized
rights and planned uses of the water resource in question.

6.2. The grant of new rights

With regard to applications for the grant of new water rights the key point to
note is that such rights can only be issued to the extent that they do not
conflict with existing water rights and any environmental restrictions on the
level of abstractions. It follows that after the introduction of modern water
rights, as described in the previous section, there may be no water left in
respect of which future rights can be issued.

The discussion that follows therefore only addresses those situations where
there is sufficient water for new rights to be granted. The complexity of the
process of determining such allocations can be usefully shown by the
statutory procedures whereby water rights are allocated and reviewed. Such
procedures, which are usually spelt out in primary legislation amplified as
necessary by regulations, typically provide for:

x the making of a written application accompanied by specified
documentation (such as a plan) and, depending on the size and nature of
the proposed use an environmental impact assessment. Such applications
are usually required to be made in a standard form but this is not true of
Chile;
x the payment of an application fee;
x an inspection by the water administration;
x the publication of the application in a local or national newspaper.
Sometimes those directly affected such as right holders are to be notified
individually;
x a period during which objections may be filed by third parties (such as
existing water users who may fear that their rights may be adversely
affected by the proposed use or environmental NGOs concerned, for
example, by the negative environmental impacts of a proposed use of
water);
x a review of the application by the water administration, and the holding of
a public hearing if appropriate; and
x a decision.

Modern water rights – theory and practice 52
In many jurisdictions it is now no longer necessary to be a riparian land
owner in order to make such an application. Instead, in most jurisdictions it is
sufficient simply to provide evidence that the applicant has some form of
access right to the water resource. But in some jurisdictions even this is un-
necessary. The South African Water Act, for example, entitles a person who
is authorized to use water to claim a "servitude of aqueduct" over land
belonging to another person for the purpose of abstracting or conveying
water. Such a servitude may be acquired on the basis of an agreement or a
court order and in accordance with ordinary land law principles a court may
order the payment of compensation.
47

The question next arises as to the basis on which such decisions are to be
made. In other words how are water rights allocated?
48
To ensure that such
decisions are not made on an arbitrary basis by the water administration,
modern water legislation typically requires the use of one or more
mechanisms to promote rational and effective decision-making. Of these the
most important is probably planning.

The legislation of a number of jurisdictions requires the preparation and
periodic revision of river basin plans. In France, for example, the 1992 Water
Act introduced a complex water resources planning system based on General
Water Plans (Schémas directeurs d"aménagement et de gestion des eaux) covering one
or more basins and Detailed Water Plans (Schémas d"aménagement et de gestion des
eaux) covering one or more sub-basins (or an aquifer) (FAO, 2002).

Other jurisdictions whose legislation requires the preparation of plans include
Spain 1985, Italy 1989, Morocco 1995, South Africa 1998, Uganda 1995,
South Australia (Australia) 1997 and Texas (USA) 1997. Furthermore, the
European Community Framework Water Directive means that the
preparation and periodic review of River Basin Management Plans is
mandatory for European Community Member States.
49

47
National Water Act, Act No. 36 of 1998, Chapter 13, Part Two.
48
In addition in the states of the western United States where the prior appropriation
doctrine applies continued beneficial use of appropriated water is a condition of the
continued existence of a water right. See Part 5 below.
49
Article 13.
Modern water rights – theory and practice 53
Typically, the legislation also specifies the minimum content of such plans.
For example the minimum contents of Spain's National Water Plan are
specified in the Water Law. The Plan must include:

x measures necessary for the co-ordination of the basin plans;
x preferred option to possible alternatives regarding the above;
x plans and conditions for inter-basin transfer;
x any foreseen changes in the uses of the resource which may affect existing
uses for the supply of towns or irrigation.

The purpose of such plans goes beyond the simple allocation of water
rights.
50
They may set development and management priorities and
increasingly a key concern is to strike an appropriate balance between the
needs of societies to use water and the protection of the environment.

Nevertheless, such plans do generally set out priorities for the use of water.
This is required, for example, by the Spanish Water Law which states that
priorities are to be determined in the relevant "Basin Hydrological Plan".
However, in the absence of such a plan, the priorities should be: (1) drinking
water supply; (2) irrigation of land and agricultural uses; (3) industrial uses for
electricity production; (4) other industrial uses; (5) aquaculture;
(6) recreational uses; (7) navigation and water transportation; and (8) other
uses.
51
In the event that two applicants are competing for the same water
resources, the water administration is bound to have regard to and apply the
relevant priorities for water use.

In some jurisdictions priorities themselves are set out in water legislation. The
problem with that approach is its inflexibility. Changes in perceptions of
priority cannot be accommodated without a change to the law.

In order to ensure both support for such types of plan as well as to ensure
that key interests are not omitted during the course of their preparation, as
described above, modern water legislation typically provides for the creation
of various basin or sub-basin level fora, such as basin councils or committees,
50
Indeed in New Zealand the relevant plans are "regional resource management plans"
which are prepared on the basis of the Resource Management Act 1991 and which require
regional councils to prepare comprehensive plans for the management of all natural
resources including water.
51
Article 65 of the Water Law, as amended.
Modern water rights – theory and practice 54
in which stakeholders can participate in their development and or review.
Sometimes such bodies hold additional functions such as determining
applications for particular categories of water rights.

Other mechanisms that assist in preventing arbitrary decision-making in the
context of the allocation of water rights include:

x the setting of statutory minimum flow requirements for rivers from which
no derogation is permitted as is the case in France, England and Spain;
x the establishment of water "reserves", whereby specified volumes of water
are set aside for priority purposes, including environmental needs as in the
case of Armenia, Jamaica, Mexico, Victoria (Australia) and South Africa;
x the development of "water sharing plans" that seek to protect water
resources and dependent ecosystems and set overall abstraction limits as
in New South Wales (Australia);
x the requirement for an environmental impact assessment as required in
the member states of the European Union and South Australia (Australia);
x the satisfaction of a test of public welfare in a number of jurisdictions in
the western United States.
52


A range of other statutory tests may be provided for. Thus in New Zealand
the water administration must consider "any actual or potential effects on the
environment of allowing the activity".
53
In South Africa the water
administration is required to address a broader range of considerations in
determining applications for water rights, including the need to redress the
results of past racial and gender discrimination, the efficient and beneficial
use of water in the public interest and the strategic importance of the water in
question.
54

In England above the minimum thresholds, all abstractions require a licence.
These are issued on a "first come first, served basis" up to the level which the
aquatic environment can sustain. The water administration exercises its
discretion within the framework of a catchment management plan - which is
52
This test is commonly required by legislation in connection with applications for
permits for water rights under the prior appropriation in the western United States. It is
the second test to be applied, the first being whether or not there is sufficient un-
appropriated water (Getches, op cit.).
53
Resource Management Act, section 104(1)(a).
54
National Water Act, section 27(1).
Modern water rights – theory and practice 55
a comprehensive review of the water resources and water use in a given
catchment or group of catchments that is prepared on a consultative basis –
and the statutory "minimum acceptable flows" that must be defined and
secured for all waters.

The procedure is a little different in Chile. Essentially if the water
administration determines that there is water available it is bound to issue a
water right to whomsoever asks for it. If there is more than one applicant for
the same water right then the issue is determined on the basis of an auction.
In Mexico too, the water administration may auction water rights in the case
of competition for the same water.

Once allocated, details of water rights are usually recorded in official registers
maintained by the water administration and it is the register. Article 30 of
Mexico's National Water Law, for example, requires the water administration
to maintain a "Public Registry of Water Rights". Typically it is such a register,
and not the individual document held by the right holder such as a permit,
that is conclusive as to the existence and scope of each water right. It follows
that the process of initial registration is a key part of the process of
introducing a system of modern water rights.

Modern water rights – theory and practice 56
7. EXPERIENCE WITH PROCEDURES FOR
REGISTRATION OF RIGHTS

Following the introduction of a new water rights system the main practical
challenge is the systematic registration of water rights. Surprisingly, perhaps,
the issue of water rights administration, which comprises the initial
registration and subsequent management of water rights, has attracted
relatively little attention from academia or research institutions.

The importance of registration should not be under-estimated. As De Soto
argues the presence or absence of clear title has huge impacts on the value of
property and thus on economic activity (De Soto, 2001). In Chile one of the
hindrances to the water market has been the incomplete registration of water
rights (Briscoe et al. 1998).

In some jurisdictions where good records of existing water rights are
available, such as the example of New South Wales in Australia this can be a
relatively straightforward administrative task. Problems arise, however, when
existing water rights, existing water uses or both are not formally registered.
One commentator argues that success in implementing and enforcing
modern water rights, not only in developing countries, is extremely difficult
to achieve. He goes on to state that "probably the most complex challenge
water laws pose is the ȩadministration of water rightsȩ, i.e. the granting of
licences, concessions, permits and other comparable legal titles for the
abstraction of water from watercourses, lakes and other expanses of surface
water, and for the extraction of groundwater; and the granting of licences,
permits, and other comparable instruments for the discharge of waste and
wastewater directly to or indirectly into a water body or onto the soil."
(Garduno, op cit.)

Why is this the case? The sheer number of water rights involved is one
common reason. Next, the process is necessarily time consuming – to register
one water right it is effectively necessary to consider the impact of that right
on other rights as well as the environment.

In Mexico prospective rights holders had first to establish evidence of
previous rights in the application for a concession, which included: the name
and address of the applicant; basin, region, and locality to which the
application referred; the site from which national water was to be extracted;
the volume of water required; the initial use to which the water was to be put;
Modern water rights – theory and practice 57
the point of discharge; details of investments necessary to extract and use the
water; and the period for which the concession was sought. Previous water
use could be established by certification from an irrigation district or ejido
administrator as to the individual's land and water rights under the previous
law.

Consequently it is necessary to accept that the implementation of a water rights
administration system is "a lengthy process whose duration must be measured in
decades, not in years." (Garduno, op cit.) In Texas the process of adjudicating
surface water rights took twenty years, and it relied on public and private
organizations with strong capacity. Furthermore several universities in the state of
Texas supported the process (Garduno, op cit.). This is perhaps an extreme
example: the reasons why this process was so time consuming included the fact
that each water right was subject to a field inspection as well as final
determination by a court.

In other jurisdictions the process is often simpler. Typically new water
legislation requires existing water users to register their rights within a given
period. On the basis of experience it is clear that it is necessary to confer
relatively long grace periods and for the water administration to take a
"generous" approach to the process. Specifically it is necessary to be very
realistic about the likely timetable for registration even in the early design
stages of new legislation.

The Albanian water law gives a typical example of an approach that was not
likely to succeed. All existing water users were required to register their use of
water within 60 days of the entry into force of the law or face criminal or
administrative penalties. The combination of a short grace period coupled
with the mere threat of sanctions almost guaranteed failure. And indeed this
is exactly what happened. Similarly in Uganda following the enactment of the
Water Statute in 1995 the Water Resources Regulations provided only one
year for existing users to register and the Water Discharge Regulations did
not provide for a transition period at all. This was unrealistic not least
because the draft effluent standards did not take account of laboratory
capacity in the country (Garduno, op cit.).

Experience shows that in such circumstances few water users will respond
and that it will be necessary to revise such time periods. For example in
Alberta, Canada, the Water Resources Act 1970 required non-domestic users
of groundwater to obtain a licence. The initial two yearsȨ period of grace was
Modern water rights – theory and practice 58
ultimately extended to seven years and even after that time many ground
water users had failed to make the necessary application (Percy, op cit.).

The Mexican water law and regulations came into effect in December 1992
and January 1994, respectively (the day after their publication in the Official
Gazette) and provided for only a three year period to register the estimated
370 000 users. This period was insufficient and so in 1995 and 1996 the
President of the Republic issued decrees and pardoned the arrears of water
charges of those who applied for water abstraction and waste water discharge
permits.

In South Africa two important features of the National Water Act assisted in
its implementation. One is that water use permits were initially required in
water stressed areas, thus providing for a realistic and gradual approach to the
regulation of water resources abstraction. The other is that the Act
empowered the Minister to bring different sections into force at different
times. This allowed more than one year for preparation.

In order to encourage people to bring their uses of water within the rights
regime active publicity using all available popular media is a pre-requisite. At
the same time even the use of generous grace periods and effective publicity
is likely to be ultimately unsuccessful if it is based simply on a threat of
prosecution for non-compliance. Lessons learned in the context of the
Mexican experience were applied in South Africa. These included the need to
plan the implementation aspects of the introduction of a new water rights
regime at an early stage. Thus implementing regulations were developed
alongside the primary legislation. In addition a separate implementation team
was established to anticipate what the implementation of the bill would
require (Garduno, op cit.).

Finally the case of Mexico, which is believed to be the largest systematic
water registration undertaken thus far, shows that an impressive number of
water rights can be issued even if some formal "corners" have to be "cut".
Garduno notes that:

"Thanks to the Presidential decrees, mass media campaigns and hundreds of
meeting with water users, by March 1999, 241 000 users had been granted
abstraction permits, which were recorded in the Water Rights Register. At
that time it was expected to complete the registration of existing water users
by the year 2000. The fact that all applicants were granted permits without
carrying out water balance studies may be considered an "ecological price"
Modern water rights – theory and practice 59
that had to be paid because in some of the river basins and aquifers where
permits were granted water is scarce. This "ecological price" will make it
possible to register all existing users in order to be able to set the stage for
sustainable water resources development and management."

The background to this comment is that the water legislation provided for
five to 50 year permit duration. However, according to the 1996 decrees all
applicants were initially issued with ten year permits. This was a short enough
duration for the government to be able to rectify a grant when users asked
for a permit renewal, but long enough to improve information on water
availability (taking into account both quantity and quality) and on water uses,
in order to make a decision based on adequate studies.

Modern water rights – theory and practice 60
8. THE DEFINITION OF RIGHTS

This section looks in more detail at the definition and substance of modern
water rights. What are the features of such rights that enable them to be
classified as property rights? Key features include:

x the description of the volume of water that applies to the right;
x the duration of the right;
x the number and content of conditions attached to the right; and
x the mechanisms that guarantee the security of the right.

The key objectives are to promote certainty and security on behalf of the
right holder. Such attributes directly affect the value of the right irrespective
of whether or not it is tradable or traded.

8.1. The volume of water that is subject to the right

The key benefit of modern water rights over the traditional approaches
described above is that the volume of water that is subject to the right is
clearly specified.

Typically if the flow of water in a watercourse is regulated (by a dam or a
weir) a water right specifies the volume of water that may be abstracted
and/or used. Most rivers, however, are not regulated and the volume of water
available for abstraction varies from year to year depending on the availability
of water resources. Similar variations may exist with regard to the volume of
water that is contained in aquifers.

If the flow is not regulated then a water right will specify a fraction of the
flow that may be abstracted by reference to the overall flow rate of the water
course. In the Australian states of New South Wales, Queensland and
Victoria, for example, annual allocations are announced each year as a
proportion of the entitlement of each water right. In other words the water
rights are made up effectively of two separate components. This proportion
can vary significantly from year to year and from to state to state depending
on the legacy of past allocation policies and from resource to resource
depending on availability during each irrigation season (Bjornland and
O'Callaghan, 2003).

Modern water rights – theory and practice 61
In Chile, although the law defines water use rights as a volume of flow per
unit of time, in practice rights are a share of stream flows, since variability
renders the volumetric/time specification impractical (Rosegrant et al., 1996).
Similarly in Mexico while water rights are technically specified in volumetric
terms, rather than in proportion to the stream flow, in practice the allocation
of streamflow converts this volumetric flow to a proportion of streamflow
right.

While each right holder will usually be required to maintain a record of the
volume of water used or abstracted as a condition of his/her water right, the
accuracy of such records must be routinely verified by the water
administration through physical inspections. Particularly in times of drought,
when pressure on water resources is likely to be at its highest, the temptation
to "cheat", to abstract more than permitted by the water right or any
restriction placed upon it is likely to be at its greatest.

It follows from the above that the correct monitoring of river or aquifer flows
or storage by the water administration is in fact a key contributing factor to the
effective administration of a water rights regime. Without careful monitoring of
natural flows and the level of abstractions by rights holders the security offered
by a water rights scheme is lost. Such monitoring activities can be an expensive
process and in part this explains why in a number of developing countries
formal water regimes are simply un-implemented. For example research
conducted in the Pangani River Basin in Tanzania in 1994 revealed that of
2 265 abstractions of the time that should have been licensed only 171 were
subject to formal water rights (Dinar et al., 1997).

8.2. Duration

With regard to the duration of water rights there are two basic options: either
they are time limited or they are of indefinite duration. While rights of
indefinite duration do exist in a number of jurisdictions, including California,
Chile and Colorado the general trend is clearly towards time limited water
rights.
55

The reason for setting rights with a fixed term is to maintain sufficient
flexibility to re-allocate water in accordance with future needs. The key issue
55
In Texas, for example, administrative water rights are not time limited and nor were
those introduced in England following the entry into force of the Water Resources Act
of 1963.
Modern water rights – theory and practice 62
for policy makers is to strike an appropriate balance between the security
needed to encourage investment and the need for flexibility as regards future
allocations of water. Too short a term and the right does not confer a
sufficiently long period over which to recoup the value of investments. Too
long a period and future re-allocation of water resources is exceedingly
difficult.

This is because compensation would have to be paid if the right were
cancelled. It is one of the reasons why Chile faces difficulties with regard to
water re-allocation. The simple logic is that once indefinite rights are
conferred they are conferred forever. Any mistake, of whatever sort, in the
allocation process will be costly to remedy and this is one of the reasons why
reform of prior appropriation rights in the American West is not really on the
political agenda.

Indeed the issue of duration poses something of a policy dilemma as far as
tradability is concerned. A fixed term right is a wasting asset whose economic
value, all else being equal, diminishes by the year. A person wishing to acquire
water may decide to wait until a future re-allocation takes place rather than
purchasing an existing right. At the same time the price that could be
expected for a fixed term right is much less than might be expected for an
indefinite right. In other words the introduction of fixed term rights is likely
to reduce the effectiveness of water trades.

Nevertheless it is the desire to maintain flexibility with regard to future water
needs that has led most jurisdictions to limit the duration of rights. Typically
over a range of jurisdictions modern water rights last for 15–20 years in
respect of ordinary activities and up to 50 or even 70 years in respect of
major investments such as the construction of a new hydropower dam.
56

Thus in Spain an administrative concession may not exceed 75 years while in
Mexico they last for between five and 50 years and in South Africa they may
last for up to 40 years.

In Queensland water rights last for ten years subject to ten yearly reviews. In
England, for example, following recent amendments to the legislation new
water rights will be time limited, usually to a term of 12 years. As mentioned
56
This is because it usually takes longer to make a return on larger water sector
investments.
Modern water rights – theory and practice 63
in the previous section in Mexico water rights may last for between five and
50 years. In South Africa the duration of rights depends on the nature of the
use but there is a maximum of 40 years reviewable every five years.

Sometimes the duration of water rights may depend on the degree of
information available about the resource. For example, the legislation of the
American State of Iowa restricts the term of the right to ten years if the
aquifer capacity is uncertain.

Another approach is that taken in New South Wales (Australia). Water rights
under the Water Management Act 2000 are of an indefinite duration. But
while the unit share in the water resource that the right applies to is fixed, the
total amount of water that can be abstracted from that resource is determined
on the basis of ten year water sharing plans. In other words while the unit
share of each water right may remain fixed in practical terms the amount of
water which that share relates to may be significantly altered over time.

Once a water right has been issued, the holder can expect to be able to rely
on that right throughout the period of its duration. While at the end of that
period the right holder may have an expectation that the right will be
continued, he/she has no legal guarantee in this respect. In other words no
compensation is payable if a water right is not renewed, either in full or in
part.
57

Apart from the issue of tradability does the fact that a water right is for a
fixed term reduce the degree of security that it confers on the holder? At first
sight the longer the duration of a right then prima facie the greater should be
the degree of security. By analogy with land tenure rights one of the key
attributes of the strongest type of right, the right of ownership, is that it is
unlimited in time. Use rights created in respect of land may also be
indeterminate or for a fixed term, while as already mentioned, rights created
under leases are generally for a "certain" or fixed term.

Nevertheless, the fact that such rights are time limited may not matter too
much as far as security is concerned. As one commentator has observed in
the context of land tenure rights, "in situations where land users and the
private sector are confident that the government will honour contracts, long-
57
Generally a water administration is bound to act in a fair manner and will usually, all
else being equal, try to ensure that existing rights holders can continue their use of water
even if at a lesser amount.
Modern water rights – theory and practice 64
term and secure lease rights that are fully transferable can become virtually
indistinguishable from private ownership. For example in Israel most land is
state owned and leased to farmers for terms of 49–99 years without any
negative impact on the functioning of land or credit markets."
(Deininger, 2003). The key issue would appear to be whether or not the right is
likely to be respected. In this connection the problems in Chile with regard to
weak enforcement and recording of rights mentioned above may actually
mean that they are less secure than fixed term rights elsewhere.

In conclusion, it does not necessarily follow that water rights of indefinite
duration provide a greater degree of certainty. Nor, it must be added, does
the fact that water rights are time limited necessarily mean that the water
administration will have that much greater flexibility in the re-allocation of
water following their expiry. More specifically, while the law may grant the
necessary legal powers to enable water to be transferred from one category of
use to another, say from agriculture to urban use, in practice political
considerations may render such powers academic. As always there is no
simple legal solution to disputes over scarce resources. Nevertheless, given
the every increasing pressure on water resources, coupled with the impacts of
climate change, time limiting water rights does at least remove one potential
legal obstacle to the re-allocation of water even if it does not provide a
complete "fix".

8.3. The conditions to which the right is subject

A popular modern conception of rights sees them as comprising a bundle of
both rights and obligations. Water rights are no exception: they are typically
subject to a range of conditions. Breach of such conditions usually has legal
consequences which may include enforcement action pursuant to criminal or
administrative law or the temporary suspension of even the cancellation of
the water right. Only in the case of Chile are water rights not subject to
conditions.

Modern water rights are typically subject to two separate types of conditions,
general conditions and specific conditions.

Modern water rights – theory and practice

65
8.3.1. General conditions
General conditions, which are usually set out in primary or secondary
legislation, typically apply to all water rights within a jurisdiction or to water
rights that relate to a particular water body or a particular type of water use.
For example all water rights relating to the agricultural use of water may be
subject to a general condition that may not apply to the use of water for, say,
hydropower generation. Examples of general conditions include the
following:

(a) To pay fees relating to the water right

Conditions requiring the payment of water use fees give effect to the "user
pays principle" as well as the fourth of the Dublin Principles. They can also
be a useful source of revenue. Criteria for the setting of the rate of charges
vary and include:

x the volume of water abstracted, the area in which it is used and source
from where the abstraction takes place (France and Arizona);
x the volume of water abstracted (Victoria, Australia);
x the kind of use to which the water is put and the source of the
abstraction (Germany);
x the type of source from which the water is abstracted (The Netherlands);
x the "profit" made by the water user (Spain) ;
x the administrative costs of water rights administration relating to the
issue and management of water rights (England); and
x the kind of use to which abstracted water is put (Italy and Mexico).

Prompt payment of such charges is usually a condition of the water right and
non-compliance with such a condition may lead to the right being suspended
or cancelled. The payment of fees or charges may also be prescribed in
connection with applications to the water administration for new water rights
or the modification of existing rights. In Chile, however, no taxes or fees are
payable by rights holders either in connection with the issue of new rights or
holding rights over time.

Modern water rights – theory and practice 66
(b) To make use of the water that is subject to the water right

This kind of condition is almost a standard feature of modern water rights.
The effect is that a failure to use the water that is subject to the right for a
specified period, say three years, may lead to the right being forfeited.
Examples include the German Water Law as amended on 23 September 1986
and the Spanish Water Law of 1985 (as amended). Also in Chile, as a result of
significant amendments to the 1981 Water Code which were passed by
Congress in 2005, failure to use water under a water right for a given period
leads to forfeiture of the right.

Indeed, in those jurisdictions in which the "prior appropriation" doctrine
applies the fact of use is not itself sufficient: the water that is subject to the
right must be put to "effective and beneficial use". The objective of this kind
of condition is to allay concerns over the risks of speculation and the
"hoarding" of rights to water resources. Some support for these concerns is
provided by the Chilean experience particularly in so far as non-consumptive
hydropower rights are concerned.

(c) To use the water for the purpose for which it was allocated

Such a purpose will usually be specified as a special condition to each water
right. The use of this kind of condition permits the allocation of water
between different water user sectors in accordance with an agreed water
resources plan.

(d) To measure the volume of water that is abstracted and/or used

This type of condition is also commonly found in modern water legislation.
Its purpose is to assist in the monitoring of water use by the water
administration. As such it is a form of self monitoring. An associated
condition, which may be impliedly or expressly stated, is that such
information be transmitted to the water administration.

(e) To take measures to protect water resources

Such conditions are typically found in connection with rights to groundwater,
for example by restricting or prohibiting specified activities near the well head
or borehole so as to prevent contamination of the aquifer.

Modern water rights – theory and practice 67
(f) To treat any waste water prior to its discharge

Again the particular type of treatment that is to be used, and any parameters
for the quality of the waste water that is discharged, will usually be set out as a
specific condition to each water right.

(g) To return unused or excess water to the water course from
which it was abstracted.

In many cases the same volume of water may be used by more than one user,
for example where excess irrigation water returns to the water course from
which it was extracted. Such flows can be a valuable source of water. In
California and Colorado under the prior appropriation doctrine downstream
rights-holders can appropriate and therefore lay legal claim to such return
flows, provided they can demonstrate that the return flows are put to a
beneficial use and that the upstream rights holders would not be injured by
the appropriation. Once constituted, such rights create an obligation on
upstream water users to undertake their activities in such a manner as to
ensure that the downstream rightholders are not harmed. Thus an upstream
right holder would not be entitled to transfer his water right, or to increase
the efficiency of his use of water, in such as a manner as to reduce the
volume of return flows and thus the downstream water rights. On the other
hand in Chile, because water rights are not subject to conditions,
neighbouring land owners have no rights to return flows, unless these are
formally constituted.

8.3.2. Specific conditions
Such conditions are, as their name suggests, specific to each individual water
right. They are usually spelt out in the instrument that creates the right. Such
conditions form an integral part of the water right itself and allow the water
administration to exercise a degree of control over how the water is used.

There are a number of relatively common specific conditions. Although
modern water rights no longer arise as an incidence of land ownership, a
number of specific conditions typically concern land. It is, for example,
common for a condition to specify the point on land at which water is to be
abstracted. This may be a point on the banks of a river or a specific location
above an aquifer. Sometimes this is simply described on the face of the
instrument that creates the water right. Elsewhere, such as under the new
Modern water rights – theory and practice 68
water rights regime in New South Wales, this matter is addressed by way of a
description of the "nominated works", the structures or equipment through
which the water that is subject to the right is to be taken. Another condition
typically concerns the point at which any water is to be returned to a surface
water body. Finally a third specific condition that concerns land specifies the
land on which the water is to be used. In other words it is a condition of the
relevant water right that the water is to be used only on or in connection with
a specific parcel of land.

Another example of a specific condition is one that indicates the use to which
the water is to be put, as is the case in California and Colorado. This has
impacts on transferability to another use as the instrument creating the right
will first need to be amended. As already mentioned Chilean water rights are
not subject to any conditions and water rights in New South Wales do not
specify the use to which the water that is subject to the water right is to be
put.

Other examples of specific conditions include those that specify how the
water is to be used (for example for spray irrigation as opposed to surface
(flood) irrigation), the time or periods in which the right may be exercised
and any variations in the volume that may be abstracted as well as how
wastewater is to be treated. In some jurisdictions, such as Germany, the
scope and content of water rights may be varied by the water administration
after the right has become effective.

If properly applied, specific conditions have the effect of making each water
right separate and uniquely adapted to the resource to which it relates.
Nevertheless, the more specific the conditions are, the more difficult it may
make it to trade or transfer a particular water right. In general terms it may be
considered that the more conditions to which a right is subject the less secure
it is: the greater the number of conditions, the greater chance of one being
breached and the right being brought to an end. On the other hand, to the
extent that conditions are inserted to minimise adverse effects to third parties
including other water rights holders it could be argued that they in fact
contribute to security by strengthening water rights. Put another way the
security of a water right depends not only on the conduct of the water
administration but also on the conduct of other water users.

Modern water rights – theory and practice 69
8.4. The formal mechanisms that guarantee the security of the right.

Once a water right has been issued, the right holder can expect to be able to
rely on that right throughout the period of its duration against both third
parties and the state.

At the expiry of the right while the right holder may have an expectation that
the right will be continued he/she has no legal guarantee in this respect. In
other words no compensation is payable if a water right is not renewed, either
in full or in part.
58

During the duration of the water right it can be difficult for the right holder
to identify who is interfering with the flow of water and thus his water
right.
59
Indeed it may be impossible for an individual to do this and
consequently the primary responsibility for the enforcement of water rights
lies with the state rather than with the right holder. Consequently the water
administration is the primary guarantor of each water right. At the same time,
however, the other main possible source of insecurity as far as a water right is
concerned is the state itself.

The rights and duties of the water administration are usually spelt out in
water legislation. The effect is that a water administration may not re-allocate
water that is subject to a water right to a third party, except in circumstances
specified in the applicable legislation and on payment of compensation or the
provision of an equivalent volume of water from another source.

In England, for example, the water administration is instructed not to grant
any new licence that would permit an abstraction that would derogate from
an existing protected right. If the licensing authority breaches this duty then it
has to pay compensation.
60
Such compensation is payable irrespective of
proof of negligence on the part of the authority - it is sufficient to prove that
the licensing authority has in fact allowed an abstraction that has adversely
affected the claimant's protected right. However the minister can over-rule
58
Generally a water administration is bound to act in a fair manner and will usually, all
else being equal, try to ensure that existing rights holders can continue their use of water
even if at a lesser amount.
59
Not always of course. The impact on existing right holders of the construction
upstream of, say, a major new dam would be quite evident.
60
Sections 29(2) and 50 of the Water Resources Act 1963 now sections 39(1) and 60 of
the Water Resources Act 1991.
Modern water rights – theory and practice 70
this instruction and compensation, which may be from central funds, will be
payable.

The circumstances in which water that is subject to an existing water right
might lawfully be re-assigned to another use can be force majeure or the need, in
the "public interest", to re-allocate water for some other use in accordance
with the applicable basin plan. The effect, at the end of the day, is broadly
similar: rights may not be arbitrarily suspended or re-allocated by the state.

In England licences can be revoked and compensation is payable unless the
licence holder has effectively abandoned the licence by making no use of it
for seven years or by refusing to pay the annual charges. Although this
solution could be a method of solving problems of unsustainable abstraction,
in practice this power has not been used as most problems have been
resolved through negotiation.

Similarly section 42 of the Saskatchewan, Canada Water Corporation Act 1984
confers power on the Water Corporation subject to the approval of the
Lieutenant Governor in Council to cancel any water right where it considers this
to be in the public interest. The licence holder is entitled to compensation:

"for the actual value, at the time of the cancellation, of any structures or works that:
(i) were used by the holder of that licence to secure water and transport it
to the point of use; and
(ii) are of no use to the holder and are surrendered to the Crown."

However, in practice, the scope of this power is so broad that it will probably
never be used due to the political outcry that cancelling a water right would
cause (Percy, op cit.).

Finally, all water rights suffer from an inherent degree of uncertainty.
Evidently each right can only be exercised to the extent that there is sufficient
water present in the source, and the probability of an entitlement being met
at all times and, eventually, the security and dependability of a water right will
increase with flow regulation.

Therefore water legislation usually makes provision for a waiver of
government liability for failure to satisfy the water right holder's requirements
stipulated in the instrument of the water right, and for the suspension or
limitation of water rights on a stream or river in times of drought or low
water flow. Such provisions are usually contained in a condition to the water
Modern water rights – theory and practice 71
right. With the exception of water rights created under the prior
appropriation doctrine, under which senior appropriators are placed in a
superior position, such reductions are usually made proportionately across all
rights in a given basin or district.
Modern water rights – theory and practice 72
9. SALE AND LEASING OF RIGHTS – PROCEDURES
AND IMPLICATIONS

As described above the assignment of new water rights typically takes place
on the basis of a relatively complex process that is designed to promote the
rational and planned allocation of water as well as reducing the risks of
arbitrary decision-making by the water administration. Nevertheless, whatever
its merits, the fact remains that this is ultimately an administrative process
and one that can be somewhat bureaucratic. By its nature, such a system is
not particularly flexible. Nor is it necessarily very efficient. It does not create
incentives for the holders of water rights to reduce their consumption of
water and once all of the available water in a given water body has been
allocated, a situation that is increasingly common around the world, there is
little that can be done until existing water rights expire and, following the
conclusion of a new water resources planning exercise, new rights are
allocated. It is true, as described in the previous section, that water
administrations typically hold the necessary powers to re-allocate the water
that is subject to existing water rights to some other purpose in the "public
interest". But apart from the fact that this is usually a costly solution, as
compensation will usually be payable, it is also likely to be controversial.

An apparently cheaper and more effective solution is to permit the sale or
lease of such water rights. The sale or leasing of water rights would appear to
have a number of benefits. For a start if water rights holders can sell or lease
any water that they can save through using water more efficiently this should
lead to more water being made available. Furthermore, apart from ensuring a
more economically efficient allocation in place of the planned approach of
most water rights regimes, tradable water rights are also seen as a relatively
painless means of re-allocating water rights, and thus water, from less to
more economically productive uses.

In fact the transfer of water rights is not in itself a new phenomenon. Such
transfers are invariably permitted on the death of the right holder, by way of
succession, or following the sale of any land to which the right was
appurtenant. But what is being discussed here is different. Notwithstanding
the separation of modern water rights from land tenure rights, the question
ultimately comes back to the relationship between the right and land.
Specifically, if a water right is to be sold or leased it must be necessary not
only to use the water that is subject to the right at a new location but also to
abstract it from a new location – further up or down a river or from a
Modern water rights – theory and practice 73
different point above the surface of an aquifer.
61
Such rights are commonly
described as "transferable water rights" or "tradable water rights".

9.1. Experience to date

The starting point as regards water rights trades is whether they are permitted
at all. In a number of jurisdictions, such as France, they are not. Elsewhere,
such as Chile and South Africa, as well as the Australian jurisdictions, the
legislation makes it clear that they are. Similarly the Mexican National Water
Law contains a chapter on the transfer of water rights. Elsewhere the scope
of potential trades is limited. In Kyrgyzstan, article 30 of the new Water Code
permits the transfer of water rights for uses other than for irrigation.
Irrigation permits are not transferable separately to the land to which they
relate.

In England, trades in water rights are possible, although not specifically
provided for in the legislation. Indeed under the current legislation it is
usually necessary for the parties to make an application to the water
administration for a new or varied licence in order to complete a trade. Is this
a genuine trade of a water right? Clearly it will require the amendment of the
licence that creates the right but arguably the right to a quantity of water - the
legal right itself - is being transferred.

Similarly under the New South Wales Water Act 2000 it is expressly
envisaged that changes will be necessary to "licences" - the instruments that
create water rights to enable such rights to be used at a different location
following a transfer or sale. Similarly amendments to an existing licence will
be necessary if the benefit of part of a water allocation is transferred
elsewhere or if a licence is subdivided or consolidated. Again the point
remains that the water right derives from the licence but the licence is not
itself the water right.

Section 25(2) of the South African National Water Act provides that:

ȩTransfer of water use authorizations
25. (1) A water management institution may, at the request of a person
authorized to use water for irrigation under this Act, allow that person on a
temporary basis and on such conditions as the water management institution
may determine, to use some or all of that water for a different purpose, or to
61
And in the case of surface water to discharge any residue or waste water to another point.
Modern water rights – theory and practice 74
allow the use of some or all of that water on another property in the same
vicinity for the same or a similar purpose.
(2) A person holding an entitlement to use water from a water resource in
respect of any land may surrender that entitlement or part of that entitlement -
(a) in order to facilitate a particular licence application under section 41 for
the use of water from the
same resource in respect of other land; and
(b) on condition that the surrender only becomes effective if and when
such application is granted.ȩ

In other words the transfer effectively requires the issue of a new entitlement
but specifically permits a person to surrender an existing authorization to
enable a transfer to take place, but on the basis that the surrender is only
effective if the transfer application is approved. In addition the section makes
it clear that some or all of the entitlement may be transferred on a permanent
or temporary basis.

In all of the cases considered in the preparation of this paper some degree of
scrutiny by the water administration is required in connection with water
rights trades. This is because of the external impacts such trades might have:
(a) on the environment and hydrology of the water course to which the right
relates; and (b) on other third parties including other water rights holders.

In some jurisdictions the degree of state scrutiny is quite low. In Chile, for
example, to assure rights of third parties, any transfer of the rights of use of
natural watercourses requires authorization from the water administration;
and in artificial watercourses from the water user association responsible for
its operation. The most frequent transactions in water rights are "rentals" or
temporary trades between nearby farmers with different water requirements
during different periods. Such trades offers greater flexibility and, unlike
permanent transactions, do not require formal registration in the water rights
register.

At the other end of the scale, section 81(7) of the Alberta Water Act provides that

ȩAn application for a transfer of an allocation of water under licence may be
considered only if
(a) the ability to transfer an allocation in the area of the province
referred to in the application has been authorized
(i) in an applicable approved water management plan, or
(ii) if there is no applicable approved water management plan, by an
order of the Lieutenant Governor in Council. ȩ

Modern water rights – theory and practice 75
In other words there can effectively be no transfer of water rights without the
direct or indirect consent of the Cabinet. Furthermore the legislation provides
for the scrutiny of applications to transfer water rights. Section 82(3) of the
Water Act provides:

ȩ… (3) The Director may approve a transfer of an allocation of water under a
licence only if
(a) the volume of water to be transferred does not exceed the volume of water
under the licence from which the allocation is to be made.
(b) the transfer of the allocation, in the opinion of the Director does not
impair the exercise of rights of any household user, traditional agriculture user
or other licensee… and
(c) the transfer in the opinion of the Director, will not cause a significant
adverse effect on the aquatic environment.ȩ

The involvement of high level politicians in the process means that Alberta's
transferability provisions are far from ideal. However, the legislation provides
one example of accommodating public fears about the transfer of water
rights, while at the same time incorporating the essential elements of a system
which will allow transfers to take place if the political will is present (Percy,
op cit.).

In between there are a range of procedures with approval typically being
conferred by the water administration. In Mexico, for example, the basic
position is that while simple changes in the title holder that do not involve
any alteration to the water right are to be concluded by simple notice of
registration, in all of those cases where, in accordance with regulations, "the
rights of third parties may be affected or the hydrological or ecological
conditions of the pertinent basins or aquifers altered or modified", the prior
approval of the water administration is necessary. There is, however,
provision for relatively straightforward transfers to take place on the basis of
a simplified procedure within, say, a given basin. As regards the transfer of
rights relating to groundwater, the law provides that this is generally to be
undertaken jointly with the transfer of the relevant land although provision is
made for separate transfers in accordance with regulations issued under the
National Water Law.
62

62
Interestingly the relevant provision, article 35, provides that in such cases the
transferor and transferee are jointly and severally liable for the costs of capping wells that
are no longer used.
Modern water rights – theory and practice 76
Formal or informal restrictions usually guide the decision-making process.
Thus in England in practice trades are generally only possible if the licences
involved are located within the same catchment or groundwater unit. The
water administration also needs to be satisfied that water rights trading does
not result in environmental damage where a new licence or a variation to an
existing licence is required. This could occur, for example, in an
environmentally stressed catchment if as a result of a trade the holder of a
new licence uses a significantly greater proportion of the volume of water
authorized on their licence than the holder of the original licence. There may
also be potentially damaging local impacts that need to be considered, for
example the location of the new abstraction. The water administration may
therefore place conditions on licences in order to prevent damage to the
environment occurring as a result of trading. Similarly in New Zealand the
legislation does allow water rights to be traded but only if the transfer is
expressly allowed in the relevant regional plan or if it has been approved by
the water administration (Peart, 2000).

In the jurisdictions of the western United States, where there is the greatest
experience of trading water rights, such transfers are generally subject to
rather elaborate approval procedures. For example, in the American state of
Colorado, all transactions involving water rights are embedded in a legal and
administrative structure that carefully regulates external effects. Each district
has its own specialist Water Court and the office of State Engineer
investigates all technical aspects of proposed transactions (Perry et al., 1997).

In a review of practice in the western States Colby et al. identified four types
of change for which one can apply regarding a water right. These are a
change in: (1) nature or person of use, (2) place of use, (3) point of diversion,
and (4) season of use. These types of change are not mutually exclusive and
the four aspects may be simultaneously changed in any combination.

The basic procedure, which is set out in schematic form in Figure 1, is as
follows:

(a) Filing of the application

Applications are usually evaluated by an administrative unit: a department of
water resources or state engineer's office if the water right is within the
jurisdiction of the state, a water district governing board if the transfer is
Modern water rights – theory and practice 77
within a district or the Bureau of Reclamation for transfers involving the use
of federal project water (Colby et al. 1989).

The first step is to file an application in the prescribed form, accompanied by
the prescribed fee. Colorado approvals are much more likely to be contested
requiring the retaining of lawyers and other specialists at an early stage.

(b) Processing the application

Each application is then reviewed by the relevant agency for accuracy,
completeness and consistency with water rights records. Routine applications
are dealt with at local level. More complicated ones require review at the state
level.

(c) Public notice

All states require some form of public notice of the application to alert all
parties who may be interested in the outcome. This is usually done by
publication in a newspaper circulating in the relevant counties. In some states
the publication costs are borne by the agency, elsewhere by the applicant.
Sometimes specific individuals, including holders of adjacent water rights or
public officials, must also be notified individually.

(d) Filing of protests

Next, persons who believe that their interests may be adversely affected are
entitled to file written protests against the proposed transfer.

(e) Processing protests

Each individual protest is then reviewed by the water administration for
accuracy and completeness.

(f) Resolving protests

The next step is the resolution of filed protests. This is generally achieved in
one of two ways: either privately through negotiations between the parties
concerned or formally through an administrative hearing. In Idaho, for
example, pre-hearing conferences are routinely scheduled to seek to promote
negotiated solutions.
Modern water rights – theory and practice 78
(g) Administrative hearing

If a negotiated solution cannot be reached, then the matter proceeds to an
administrative hearing. Such hearings may be held in a formal or informal
manner, the former generally being more costly and time consuming.

(h) Ruling

Following the hearing, or a negotiated agreement, the water administration
must issue a ruling. Sometimes the time limits within which these must be
issued are specified in the legislation. Outcomes are typically confined to:
(a) approval of the transfer application as requested; (b) approval of the
transfer applications subject to modifications to take account of protests; or
(c) the rejection of the transfer application.

(i) Appeal of Ruling

Parties who are dissatisfied with the ruling are generally entitled to appeal
against it, within specified time limits. Such appeals may be to the ordinary
courts or to a higher level appeal body within the water administration.

(j) Proving/certifying the transfer

Following the ruling, and the outcome of any eventual appeal, the transfer
application is formally issued and certified.

One of the reasons why transfers may lead to extensive negotiations and
disputes in the western states is because of the negative effects that they may
have on return flows and thus on downstream water rights as described
above. In essence it is up to the proposed transferor to prove that the
transfer will not harm downstream rights.
Modern water rights – theory and practice 79
FIGURE 1 - CHANGE OF WATER RIGHT PROCESS
(Colby et al. 1989)

change application submitted

reviewed by state agency; modifications,
supporting materials are requested and submitted




change application filed



legal notice published
protests filed no protests filed




private resolution hearing




state agency rules on change application
approving, modifying, or denying the application



agency ruling appealed no appeal of ruling




judicial review of agency ruling




change in water use implemented and certified
Modern water rights – theory and practice 80
Even more complex procedures are necessary in connection with interstate
water trading, as for example in Australia's Murray Darling Basin. This is
because in contrast with intra-state trades, inter-state trades involve a
complex adjustment of rights between states under the (interstate) Murray
Darling Basin Agreement, to reflect the water traded between individuals.
Part of the complexity arises also as a result of the different levels of security
that water rights hold in each state, differences which in turn reflect the
conservative or speculative water allocation philosophy that underlies the
relevant legislation, the extent to which water rights are supported by the
availability of large water storages, the location within the catchment and
climatic conditions. South Australia, being the downstream state, and thus the
beneficiary of upstream water storages, has much more secure water rights
(which were also allocated in a relatively conservative manner). Consequently
inter-state trades have taken place only on a "pilot" basis to date.

9.2. Concerns, perceptions and trends

Although a number of influential commentators consider that the marketing
of water rights offers a way to increase the efficiency of water use and
allocation and to allow resources to move from lower to higher value uses
(Bogdanovic, op cit. See also Briscoe, 1997), not everyone is convinced that
markets offer a real solution to issues of water allocation (Dellapenna, 2000).

Some of these concerns about markets are as much shaped by ideological
opposition to free market models as anything else. Some of the criticisms of
modern water rights are simply ill-informed, confusing as they do the
involvement of the private sector in urban water supply (through the use of
concessions, lease contracts, etc.) with the "privatization" of water as a
resource. As described above, no water rights reform seeks to achieve this
outcome.

Other concerns that have been identified include the following:

x cultural or religious objections to the notion that water should be bought
and sold;
x equity and monopoly concerns regarding acquisition of water rights by
large organizations and the exclusion of the poor from access to water;
x concern that small-scale operators will sell their rights cheaply and lose
their livelihoods;
Modern water rights – theory and practice 81
x fears that water transfers will damage the environment, cause aquifer
depletion, and/or the degradation of river systems;
x fear of change and loss of public sector control over water;
x the need for new legal, regulatory and institutional frameworks;
x difficulty of defining, measuring and enforcing water rights;
x changes needed to infrastructure and delivery systems;
x difficulties of establishing or strengthening public and private institutions
to facilitate a properly-functioning water market; and
x the challenge of convincing governments that the potential benefits from
trading water in a market are sufficient to offset the costs of establishing
tradable water rights. (Thobani, 1997)

In fact a closer examination shows that a number of these objections are not
so much to the introduction of transferable water rights but to the
introduction of modern water rights. For example, as outlined above, new
legislation is usually necessary for the introduction of modern water rights
and the task of defining, measuring and enforcing them can indeed be
difficult. Cultural and religious objections to the sale of water may be more
difficult to counter, but in fact modern water legislation typically addresses
rights over water rather than the water itself. Finally, as outlined above, the
relatively complex procedures in place for reviewing trades in water rights
should mean that the state, acting through the water administration does not
"lose control" over the use of water. Nor, provided such procedures are
correctly applied, should there be negative environmental or third party
impacts.

On the other hand, a number of other concerns do merit further
consideration. First of all there is the concern over the potential impacts of
water trades on rural communities. In Australia and the western United States
many rural communities have opposed transfers of water to users out of the
community in part on the assertion that such transfers can impose significant
economic and social costs on the community. For example, where farming
land is fallowed as a result of an external transfer, jobs can be lost, and tax
revenue can decline (leading in turn to a reduction in governmental support
services). In a community's worst nightmare, the social fabric of the
community itself might begin to unweave as local residents sensing economic
trouble leave the area (Thompson, 1998).

Modern water rights – theory and practice 82
On the other hand, third party effects exist whenever significant resources are
allocated or re-allocated or removed from a community, for example when a
mine or factory closes down (Thompson, 1998). Should water be treated any
differently? Some argue that it should, as it is a fundamental resource that
once lost cannot be replaced.

Reflecting community concerns a number of water user associations in
Australia do not permit trades out of their territory or, if so, for only a limited
volume of water. This is because communities realise the value of the water
and want to retain that value within the community (House of
Representatives, 2004). And indeed only South Australia introduced trades in
water rights from the outset, whereas New South Wales, Queensland and
Victoria first introduced trades in annual allocations (also called annual or
temporary trades). This was due to significant community concerns about the
effects of large scale sale of water out of certain areas on the ability of
farming communities to survive.

While trades of groundwater rights are permitted within the Edwards Aquifer
in Texas such transfers may only take place within the boundaries of the
aquifer region. Furthermore irrigators may only market (lease) up to
50 percent of their water while other permit holders are entitled to market the
entire right (Kaiser and Phillips, 1998).

Another concern relates to the risk of speculation and hoarding. There is
some evidence that this has happened in Chile where available non-
consumptive rights have been acquired on a speculative basis by the
hydropower companies. Recent (2005) amendments to the 1981 Water Code,
however, have undone the legal bases for this to happen. Chile is unusual,
though, in that water rights used not to be subject to a condition requiring
that the water to which they relate be put to use. In other jurisdictions this
type of condition should reduce the risks of "pure" speculation in that to be
maintained such rights would have to be put to use. Nevertheless this issue
remains a concern and the Australian Parliamentary committee recently
recommended further research into this area. Indeed, after some twenty years
experience, the Australian governments remain bullish about the potential for
water rights trades to promote a more efficient use of water resources while
recognizing environmental needs. Problems are still being faced and one
argument is that in fact the issue of tradability and transferability was not
sufficiently considered when the current legal frameworks were put in place.
In other words, some have argued that, irrespective of whether or not they
Modern water rights – theory and practice 83
subsequently take place (for only market conditions can determine this) the
design of reforms designed to permit the trade in water rights should
carefully and comprehensively anticipate all of the key aspects of future
trading activity including its impacts on the environment and third parties.
Transferability and tradability should not be conceived as a simple "bolt on"
attachment to more traditional water legislation.

So much for the concerns, perceptions and trends in this sphere, what of the
experience of water rights trades?

9.2.1. Number of trades
Remaining with the example of Australia, notwithstanding the complexity of
the procedures involved a recent review of inter-state water trades found that
some 51 trades had taken place between 2000 and 2002 which involved
9.5 MCM of water moving across state borders to be used to grow high value
crops in South Australia's warmer climate (IUCN, 2002).

Turning to in-state trades, trading in water licences has occurred on regulated
rivers in New South Wales since the early 1980s. Initially introduced as a
drought relief measure and on a temporary (seasonal) basis, trade was
somewhat restrained. Permanent transfers were introduced in 1989 and
trading on unregulated streams is permitted under new rules announced in
1998. Despite the incremental easing of restrictions on trades in water rights,
one commentator described the water market in 1999 as "essentially thin"
with transactions being almost totally confined within the irrigation sector.
Inter-sectoral transfers such as trades from rural to urban water use, were rare
(Pigram, 1999).

In addition, it was noted that in southeast Australia the water market remains
incomplete, in part because of transaction costs and inadequate information.

Some less desirable features can be noted, including:

x the sale of large quantities of water at low prices by those with salinity
and other problems;
x buyers purchasing large amounts of water are the most prominent market
participants and pay the lowest price; and
Modern water rights – theory and practice 84
x buyers acquiring small quantities of water to maximise the efficiency of
their irrigation are willing to pay high prices, as are irrigators in urgent
need of water to finish a crop.

Taken together these features suggest that a "thin, immature market" is
erratic and does not necessarily direct water in the most efficient, socially
equitable manner. Irrigators in financially stressed circumstances may even be
"forced" to sell their water at a discount, or dispose of their licensed
allocation totally, under such market conditions (Pigram, op cit.).

Nevertheless, although there is clearly scope for improvement an Australian
Parliamentary Committee recently found, that "having considered all the
evidence … water trading is a key mechanism in ensuring that water is used
more efficiently. Water markets allow industries to make better and more
flexible use of limited water resources and provide the opportunity for new
investment in high value-added agriculture".

But these are relatively small scale examples. In terms of sheer numbers it is
necessary to look to the experience of the western United States. A survey of
water rights transactions in 19 western states between 1990 and 2000 showed
that an impressive 1 065 sales had been concluded during that period
together with 552 leases ((Czetwertynski, 2002). However, a more detailed
examination shows that overall relatively few sales of water rights took place
during this period. The average number of transactions was less than three in
all states except Colorado and Nevada. Indeed the figures are somewhat
distorted by the large number of transactions that took place in Colorado,
particularly those involving the sale of essentially contractual water rights in
one major irrigation project (the Colorado Big Thompson Project). If the sale
of contractual water rights is disregarded the figures show that in terms of the
average annual number of transactions, leases dominated in all states except
Kansas and Utah.

Another interesting point that emerges from the survey is that in all of the
states, farmers were very seldom the buyers of water rights. Even within the
Colorado Big-Thompson Project farmers were buyers in only 15 percent of
the 848 recorded transactions. In the main, buyers of water rights in western
water markets are providers of municipal/industrial water supplies; farmers
are typically the seller of such rights. While farmers as lessees of water rights
were much more common they were nevertheless a minority in most states. It
Modern water rights – theory and practice

85
is also interesting to note that by far the greatest number of trades in this
period were concerned with surface water rather than groundwater rights.

Nevertheless active markets in groundwater rights do exist. Within the
Edwards Aquifer, for example, the Authority staff has processed 1 192 partial
sales and lease transfers representing 270.7 MCM of groundwater withdrawal
rights, of which only 803 are currently active representing 175.3 MCM. Active
transfers include 113 sub-leased transfers representing 33.2 MCM. In
addition, nine changes of ownership or miscellaneous transfers represent
4.35 MCM of Edwards Aquifer groundwater.

Turning to the example of Chile, the experience of the last twenty years
shows that the frequency of water rights transactions remains limited to a few
areas of the desert north and the metropolitan area of Santiago (Bauer, op
cit.). Full data are not available for Mexico or South Africa although the
evidence suggests that some limited trades are taking place.

In conclusion, therefore, it seems to be the case that notwithstanding the
quantity of literature that it has generated, the actual volume of trades in
water rights remains relatively low even in the western United States. Equally,
though, it is clear that a "market" does exist for water rights in those
jurisdictions, witnessed by the existence of water rights brokers and Web sites
that advertise water rights that are for sale. Some caution is, however, merited
in connection with the United States experience, particularly as regards its
replicability. Specifically, the prior appropriation doctrine with its indefinite
water rights in some senses encourages water rights trades as it is effectively
the only means of re-allocating water to different uses. Elsewhere water rights
markets are clearly in the process of development. But in any event, as argued
below, the sheer number of trades should not in itself be seen as a particularly
important measure of the success or otherwise of transferable water rights.

8.3.2. Benefits and conclusions
Recent research from South Africa on the limited and heavily regulated
trading officially sanctioned by the water administration since 1992 on the
Lower Orange River found that water rights had moved to farmers who had
achieved the highest estimated return per unit of water supplied. Similarly the
research in the inter-state trades in the Murray Darling Basin found that trade
does cause water to be used for higher value uses, as well as causing it to
move down stream (Briscoe, op cit.).
Modern water rights – theory and practice 86
Research by Hearne in Chile suggests that water markets had led to economic
benefits in some areas, including economic benefits due to transfers to higher
value users (namely form rural to urban use) although the supporting research
suggested that water rights sales and transactions were the exception rather
than the rule.

A full evaluation of the economic arguments in favour of tradable water
rights is beyond the scope of this paper. Indeed in a lot of the economic
debate concerning transferable water rights empirical data tends to be used in
a selective manner in order to substantiate whatever argument is being made.
In broad terms, however, the experience appears to show positive economic
benefits from water rights transfers. Indeed some of the best examples relate
to trades in contractual water rights (such as in the Colorado Big Thompson
Scheme) in respect of which transaction costs tend to be relatively low. Too
often, however, assessments of the economic benefits of transferable water
rights have taken place in somewhat abstract terms by reference to notionally
perfect market conditions.

Nevertheless a number of preliminary conclusions can be drawn. The first is
that the efficiency gains, the gains from trade, are always reduced by the
transaction costs that occur during the rights trading process. Thus, the
greater the security, simplicity and clarity in the arrangements for trading
rights, the smaller the transaction costs and the greater will be market activity.
Cumbersome trades, insecurity or uncertainty in their meaning, the possibility
of legal challenge, the complexity that arises from rights to return flows and
third party challenge and so forth all make for a narrower market. On the
other hand, the fact remains that water is a unique resource. By reason of the
potential third party and environmental impacts of water rights transactions,
water rights markets are unlikely ever to achieve theoretical perfection in so
far as transaction costs and the existence of complete information is
concerned. Put another way, the likely need for some form of ongoing state
approval, to prevent harm to the environment and third party rights holders,
means that the relatively high transaction costs of individual trades will tend
to negate some of the more optimistic claims for the power of markets
(Bauer, 1998).

So the first conclusion is that the design of the trading process, particularly its
legal content and structure, must be carefully undertaken and that in the
context of the introduction of a new water rights regime the practical
mechanisms of trading should be borne in mind from the outset. In this
Modern water rights – theory and practice 87
connection the relevant legal and policy framework can assist in defining
more carefully which types of trades are more likely to be approved, for
example, those within the same basin, aquifer or sector within an aquifer. Of
course the market alone will determine if trades subsequently take place.

The second conclusion concerns trades within the agriculture sector. When
rainfall is limited, or when there is need for additional water in the short term
to expand output of a specific crop, experience shows that inter-farm trades
can be beneficial. So temporary sales of water, for a season for example, can
be advantageous in terms of farm productivity and higher gross margins. The
second lesson is that the design of tradable water rights that can take place
within the agricultural sector and for a season or a year can help increase crop
output and farmer income. Trading between farmers in long-term or
permanent contracts can also lead to a switch from irrigation that has a low
gross margin per unit of water consumed to higher efficiency crops.

The third conclusion is that water used in an urban location has a
predominantly higher value than that used for irrigation. In such
circumstances the gains-from-trade can be high. This is because irrigation
consumes large quantities of water in terms of evaporative losses. The third
lesson is therefore that in efficiency terms rural-urban transfers are likely to
be particularly beneficial and that the design and administration of tradable
water rights should facilitate such transfers in willing seller-willing buyer
situations.

The fourth conclusion is that the introduction of tradable water rights can
make it possible to deploy the existing supply of water more effectively,
rather than committing to the large-scale infrastructures of long-distance,
inter-basin transfers. The same point holds for demand management
initiatives. Indeed, tradable water rights are themselves a form of demand
management. Lesson five is that demand-management and institutional
change in the form of transferable water rights deserves consideration as
possibly a superior mechanism to purely civil engineering solutions.

Modern water rights – theory and practice 88
10. ENVIRONMENTAL ALLOCATIONS

The basic advantage of modern water rights as far as the environment is
concerned is the simple fact that they explicitly specify the volumes of water
that may be abstracted or used. This means that it is possible to measure the
total amounts of water taken from a given water course or aquifer and thus to
calculate the volume of water that is, or should be, left to meet ecological
requirements. Such requirements may include ensuring the sustainability of
aquatic ecosystems and the use of dilution flows for the enhancement of
water quality. Additional benefits may arise from improved riverine ecologies
including the possibility of recreational uses as well as aesthetic values.

As already noted, two basic legal techniques are used to ensure that sufficient
water is left in a water body.

One is to impose a statutory definition of minimum flows of which the water
administration must take account in the issue of new water rights. In Mexico,
for example, a minimum streamflow must be established for rivers pursuant
to the National Water Law of 1992.

The other technique is to designate a reserve for environmental purposes.
Thus the South African National Water Act creates a buffer to protect two of
its fundamental tenets – that of ensuring that water is allocated equitably and
used beneficially in the public interest, while promoting environmental values.
Consequently, pursuant to section 16 the Minister must determine the
"Reserve" for all or part of each water course. As far as environmental
protection is concerned the Reserve is defined to mean "the quantity and
quality of water required to protect aquatic ecosystems in order to secure
ecologically sustainable development and use of the relevant water resource".

Once it has been determined for a given water course the Minister, as well as
any other state body including the water administration, must give effect to
the Reserve when exercising any power or performing any duty pursuant to
the Act (section 18).

Of course these kinds of techniques can only be effective as long as the initial
assessment of the environmental requirements of a given water body are
correct in the first place and do not change significantly over time. Clearly in
the context of climate change the requirements of surface water bodies may
indeed need to be modified in the future. If water rights are time limited then
Modern water rights – theory and practice 89
such revisions can take place when they fall to be renewed or varied. This
kind of consideration may militate against the grant of perpetual water rights.

On the other hand, on many water courses around the world, even those on
which formal water rights have been granted, it is too late to consider leaving
a reserve of minimum stream flow: all of the water is subject to existing water
rights.

What solutions are available? In the case of time limited water rights,
depending on the urgency of the situation, one solution is simply to wait for
the rights to expire. A more costly alternative would be for the water
administration to cancel a number of existing rights, partially or wholly, in the
public interest so that the water can be re-allocated for environmental ends.
However, given that in many jurisdictions compensation would be payable
such an approach would likely be expensive. It would also no doubt be
controversial not simply because the right holders may be unwilling to give
up the water rights in question but also due to the difficulty of agreeing the
level of compensation payable. As the experience of compulsory acquisition
of land shows, this kind of valuation exercise is invariably difficult and
contentious although it is by no means impossible to conclude.

The situation becomes more problematic in those jurisdictions where water
rights are of indefinite duration. Thus in Chile given the existence of vested
property rights in the use of water it is virtually impossible to reassign water
or to develop effective river basin institutions to take account of environment
and ecosystem protection.

Indeed in Chile and the jurisdictions of the western United States, where
water rights are also of indefinite duration and the water administration has
no residual power to cancel water rights and reallocate water, this purchase of
water rights is the only practical means of ensuring that sufficient water is
made available for the environment.

Thus in a number of the western United States environmental non-
consumptive uses have been found to have economic values that compete
with traditional consumptive uses of water. These non-consumptive uses
include water for recreation, such as rafting and fishing, fish and wildlife, and
water quality maintenance. Both private and public entities have begun to
acquire environmental water rights. For example, an NGO called the Nature
Conservancy has begun to acquire environmental water rights in Arizona,
Modern water rights – theory and practice 90
Colorado and Nevada. The Washington State Legislature has established a
"water trust" for the Yakima River and several other rivers to help restore in-
stream flows (Moore and Willey, 1991). What is particularly interesting is that
these uses are starting to compete in the marketplace for traditional water
rights demonstrating that there is a genuine willingness on the part of North
American society to pay for environmental water uses.

In other words, these examples tend to show that transferable water rights can be
used creatively to conserve water resources for environmental and other ends.
Similarly in the Edwards Aquifer in Texas the Aquifer Authority has begun a
programme of buying back groundwater rights to retire them from use.

Modern water rights – theory and practice 91
11. DISPUTE RESOLUTION MECHANISMS

Disputes are inevitable from time to time in connection with the use of any
natural resource, water being no exception. One of the benefits of
introducing a system of modern water rights is that, provided the institutional
arrangements are sufficiently simple, the legislation is sufficiently clear and
the water administration is sufficiently honest, in theory the number of
disputes should be reduced.

Nevertheless, it remains the case that disputes do arise and indeed, depending
on just how it is done, the level of disputes may actually increase initially as
the new system is introduced. Equally, as described above the transfer of
water rights can be a contentious process if other holders fear that their rights
may be negatively affected. Indeed while the relative complex formal
procedures for reviewing water rights trades in the western United States are
designed to rigorously examine all transfer applications, experience shows
that the more legally complex a procedure is the easier it becomes to
challenge its legality as a means of challenging the substance of an
unfavourable outcome.

Given that modern water rights are legal rights, the courts are the natural and
ultimate arbiter of disputes involving their allocation and use. In most
countries, though, court proceedings are expensive and time consuming. This
can have implications for the transfer of water rights through trade. For
example Briscoe et al describe how the lack of effective dispute resolution
mechanisms in Chile has contributed to unnecessary high levels of conflict
between water rights holders in the Maule Basin. Specifically the lack of a
river basin management institution means that there are information
symmetries and gaps, that there is no institution able to act as an "honest
broker" and there is no low financial and transaction cost arbitration
procedure available.
63
Furthermore, "it is evident that the judicial process is
unsatisfactory from several perspectives. Disputes take years to come to
conclusion and are costly" (Briscoe et al., 1998).

The situation is exacerbated by the fact that the courts, which in Chile are
general courts in that there are no public/private court divisions, have in the
63
Some care is needed with regard to the costs of arbitration. Commercial and
international arbitration procedures have numerous advantages over court resolution
including speed and flexibility over time tabling. Cost however is not always one of them
not least because the arbitrators must themselves be paid.
Modern water rights – theory and practice 92
face of what are really rather complex and possibly irreconcilable difficulties,
taken to hiding behind narrow and formalistic interpretations of the rights
and responsibilities of the parties.

In some jurisdictions, such as New Zealand, specialist environment courts are
responsible for resolving disputes concerning water rights. In Colorado there
is a specialist water court while South Africa has a statutory water tribunal.
The National Water Act provides for the establishment of a Water Tribunal
as an appeal and dispute resolution mechanism in connection with the
implementation of Act. This Tribunal is designed to create a more accessible
forum than the rather obscure Water Court that previously existed. What is
interesting is that the members of the tribunal, who are appointed by the
Minister on the recommendation of the Judicial Service Commission, need
not necessarily be legally qualified. The Act simply says that they must have
knowledge in law, engineering, water resource management or related fields
of knowledge.

Specialist courts and tribunals offer a number of advantages including the fact
that their members are familiar with the relevant law as well as the
complexities of water management. Consequently they may be a quicker and
more efficient means of resolving disputes.

What about less formal procedures? Briscoe compares the situation in Chile
with that of New Mexico where the state engineer acts as a specialized
arbitrator of water disputes (Briscoe et al., 1998). The role of the state
engineer in arbitrating disputes in New Mexico is mentioned above and again
this type of solution can be effective. Typically such decisions are subject to
ultimate review by the courts.

Finally, though, such dispute resolution mechanisms do not have to be
located solely at the level of the water administration. Specific local resource
management bodies, such as Spain's underground water user associations,
described above, can play a vital local level role in quickly resolving disputes
among water users.

Modern water rights – theory and practice 93
12. SAFEGUARDING THE INTERESTS OF THE
DISADVANTAGED

Generally speaking water rights reforms have had few re-distributive or
socio-economic objectives. For example neither the Chilean nor the Mexican
water legislation made any special provision for safeguarding the interests of
the disadvantaged.

An exception is South Africa whose recently enacted Water Act seeks to
implement the two key principles of the 1997 National Water Policy,
"sustainability" and "equity". With 83 percent of agricultural land previously
in the hands of white farmers and the majority of water for irrigated
agriculture also controlled by them through the white dominated irrigation
boards both land tenure reform and water reform were necessary to right the
injustices of the apartheid era (World Bank, 2000).

One of the key features of the Water Act was the abolition of riparian rights
and its replacement with a modern permitted water rights regime. However,
notwithstanding this achievement the fact remains that until substantive land
reform takes place that also confers de facto access to water sources to non-
white farmers, water rights reform risks having only a limited impact
regarding the socio-economic objectives.

Indeed, many uses of water by the very poor will frequently fall within the de
minimis exceptions to the need to hold a formal water right. Recognizing this,
one of the purposes of the "Reserve" required to be established under the
National Water Act (apart from the environmental objectives described
above) is to ensure that sufficient water is kept available for such users.

Another notable approach of the South African act is the provision that it
makes for the establishment of suitable participatory mechanisms to ensure
that the poor along with other stakeholders can participate in decision and
policy making in connection with water resources management.
Unfortunately, recent research suggests that, notwithstanding the
government's efforts, it is proving more difficult to include in the reform
process black communities in the former homelands who operate in the
"informal" water sector (Shah, et al., 2000).

Modern water rights – theory and practice 94
13. THE IMPACTS OF THE RIGHTS BASED ALLOCATION
SYSTEM IN TERMS OF EFFICIENCY, EQUITY,
TRANSPARENCY AND THE ENVIRONMENT

13.1. Efficiency

As already described, throughout history all societies in which water is used
have had their own systems for allocating rights to use water. Provided such
approaches permitted the rational allocation of water while conferring
sufficient security on water users then it seems reasonable to conclude that
the manner in which this was does was not particularly important.

History suggests that some of these systems actually worked very well at least
for a time. Indeed in many parts of the world customary or local law water
rights regimes continue to operate in a manner that is effective and
satisfactory for their users.
64
Similarly the traditional approaches of the
common law and civil law traditions were not irrational at the time when they
developed. Before the industrial revolution their relatively simple rules
coupled with a relative lack of competition for water made them reasonably
effective. Indeed the fact that no administration was required and that they
were essentially self-implementing can be seen as a positive benefit compared
with the costs of funding a water administration.

However, as described above, these traditional approaches do not work
today. Times have changed. Thus for example, while the doctrine of capture
may have worked perfectly well in, say, the scarcely populated Texas one
hundred years ago, increases in population and water demand, coupled with
more efficient well technology clearly shows that this doctrine is obsolete and
redundant as a tool of water management.

In this sense, therefore, an assessment of the overall efficiency of modern
water rights arrangements is ultimately a comparison with the traditional
approaches which by and large now simply do not work. Overall, and given
that they provide the means of regulating access they must be a more efficient
64
While a full discussion of customary or local law approaches to water right is beyond
the scope of this review, experience shows the limits to such approaches. Specifically the
rules that they provide for only apply within the relevant local community. Therefore
while intra-community water rights may work quite successfully they cannot influence of
control the relationship between the community and other water users.
Modern water rights – theory and practice 95
way of allocating and managing resources, even though they do have their
own costs.

Clearly among water rights regimes, some may be less costly to administer
than others and careful design should seek to minimise administration and
transaction costs. To the extent that trades in water rights can improve the
efficiency of water use then this too must be a net gain to society, provided
negative third party and environmental impacts are prevented.

As regards the possibility of improving the efficiency of modern water rights,
the evidence reviewed above suggests that notwithstanding the restrictions in
place, trade in water rights can lead to a more economically efficient use of
water resources.

13.2. Equity

This issue of equity is also hard to objectively assess. At first sight the
introduction of a system of modern water rights may appear unfair,
particularly in cases where existing users operate on the basis of vague or
unclear rights or even in the absence of specific rights. Why should they be
granted rights? Is it not the case that such persons are granted a windfall
simply because they had the good fortune to be using the water at the time
when modern water rights are introduced?

There is of course a grain of truth in this argument but it is difficult to see
any other realistic approach. In many legal systems ownership rights are
conferred on those who use or capture a particular resource. Fishing is an
example. Indeed the question could be put the other way. Why should rights
be conferred on those who have not invested in using the resource? Where is
the equity in that? Of course part of the problem is that those who have been
using the resource are often land owners and thus richer members of society.
But this is to address deeper questions of social equity that go far beyond the
question of water law reform.

Measures can be taken in designing modern water rights to promote fairness
among rights holders and other stakeholders and to ensure that wider social
and environmental impacts are minimised or prevented. For example the
inclusion of users and other stakeholders in decision-making will generally
result not only in better decisions being made on "hard" issues but also fairer
and more acceptable decisions being made.
Modern water rights – theory and practice 96
As regards the form and substantive content of water rights there is therefore
clearly an appropriate balance to be struck between the private interests of
individual rights holders and the wider public interest. The point is that
irrespective of whether or not it is categorised as an economic good water
quite clearly has an inherently public character (Getches, 1996). This is likely to
mean that for reasons of equity the state, acting through the water
administration, should continue to play a significant role in water resources
management, as is the case in Australia, Mexico and South Africa. The effect
of such state involvement may well have the effect of reducing the potential
notional benefits of allowing markets to determine the allocation of water
through tradable water rights. But in terms of equity, both as regards existing
rights holders as well as society at large together with the environment, this
may well be the price that has to be paid.

13.3. Transparency

The introduction of a system of modern rights is likely to result in water
allocation and, ultimately, management being more transparent, provided it is
done in an appropriate manner. A number of key factors can contribute in
this respect. These include:

x setting clear, objective and verifiable standards for decision-making in
connection with the issue, modification or transfer of water rights;
x involving water users and other stakeholders in decision-making fora;
x establishing clear and effective procedures for the recording and
registration of water rights;
x making sure that information is made available to the public and other
water rights holders including ensuring public access to inspect registers
of water rights.

In general terms all of the jurisdictions reviewed in this paper seek to a
greater or lesser extent to promote transparency through the use of such
techniques. A key point to note is that transparency benefits the use of
economic mechanisms such as the trade in water rights both by making sure
that sufficient information is available to potential buyers and sellers and in
ensuring that transfers and trades are correctly recorded.

Modern water rights – theory and practice 97
13.4. The environment

To the extent, as described above, that by clearly defining total permitted
abstractions environmental needs are taken into account, modern rights must
almost by definition be better for the environment than traditional water
rights. This initial observation is subject to a number of caveats including
most importantly that the relevant water rights regime is actually
implemented correctly.

Time limiting new water rights appears to offer the greatest degree of
flexibility as far as future environmental needs are concerned and provided
the rights concerned are of sufficiently long duration they should provide
sufficient security for the purposes of investment. As described above, in
most jurisdictions procedures for the sale or trade of water rights seek to
ensure that environmental issues are taken into consideration. Indeed water
rights trades may have positive environmental impacts, for example by
reducing salinity and water logging as a result of over watering.

Modern water rights – theory and practice 98
14. CONCLUSION

The key points that emerge from the analysis contained in this paper can be
summarized as follows.

First of all traditional land based approaches to water rights, including rights
to groundwater, no longer provide a sound basis for the sustainable
management and use of water resources. Consequently the need to better
manage water resources is usually the underlying reason why modern water
rights regimes are introduced.

Effective and widespread consultation can greatly facilitate the introduction
of reforms that involve the introduction of modern water rights while at the
same time ensuring that those reforms better serve the needs of society and
stakeholders.

The fact that water rights are property rights, or quasi property rights, means
that primary legislation is usually necessary for sector reform and the
introduction of modern water rights. The first formal step in the process of
introducing modern water rights is to place water under state ownership or
control through such legislation. New institutional arrangements are
necessary for the administration of modern water rights. Such arrangements,
in the form of a water administration, should include mechanisms for
stakeholder participation. A water administration may have competence
throughout the relevant jurisdiction. It may alternatively be established
specifically to manage a given aquifer or water body. Clearly it is necessary to
confer the appropriate powers and legal duties on such an entity if it is to be
able to operate effectively.

Modern water rights are invariably established on the basis of administrative
instruments such as licences, authorizations or permissions. They apply to the
use and abstraction of both surface and groundwater.

Following the introduction of a modern water rights regime some minor uses
of water may usually continue without needing a formal water right, although
some care is needed in this connection as an excessively large number of
"free" water uses may still negatively impact on a given water resource.

With the introduction of a modern water rights regime, rights are typically
issued to existing water users on the basis of their declared historical use. If
Modern water rights – theory and practice 99
following this exercise any remaining water resources remain for allocation,
new water rights are issued by the water administration on the basis of a
range of statutory steps and measures, including the use of management
plans, which are designed to promote rational water use and to prevent
arbitrary decision-making. Following the enactment of the necessary
legislation, the process of registering water rights is a major administrative
and logistical task that may take many years to complete. It is necessary to
bear this process in mind during the design of legislation and to take such
measures as may be necessary to actively encourage existing water users to
claim and register their water rights.

In order to be effective, modern water rights must confer a sufficient degree
of security upon right holders both as regards other water users and the state,
acting through the water administration. Thus typically water rights may not
be modified or cancelled in the absence of fault on the part of the right
holder unless compensation is paid. Nevertheless no water right can provide
an absolute guarantee that a specific volume of water will always be available
in a given resource irrespective of climatic and other natural conditions.

As to their substance, modern water rights typically specify the volume of
water that may be abstracted. This may be expressed as a fixed amount or as
a proportion of the available water. There is a trend towards limiting the
duration of water rights as this makes future re-allocation possible even at the
expense of security for rights holders. Furthermore, modern water rights are
typically subject to a range of general and specific conditions, including a
condition requiring the payment of water fees or charges. Breach of such
conditions can lead to the right being lost.

In an increasing number of jurisdictions water rights may be traded. Water
rights trades are, however, generally rather carefully regulated by the water
administration to minimise negative impacts on third parties and the
environment. Most trades in water rights have involved rights relating to
surface water. Nevertheless trades in rights to groundwater have taken place
in a number of jurisdictions. The evidence suggests that transferable water
rights can lead to the economically more efficient use of water resources.
Leaving aside arguments over the efficiency of markets for water rights, the
fact remains that provided that trades are freely entered into and perceived as
Modern water rights – theory and practice 100
beneficial by both parties
65
they do ultimately offer a relatively un-
contentious means of re-assigning water from low value to high value uses.

Given that they specify the volume of water that may be abstracted from a
given water resource, modern water rights should make it possible to set
overall limits on total abstractions so as to permit sustainable resource use.

With the exception of recent reforms in South Africa few modern water
rights regimes have taken account of social equity considerations. However,
provided it is undertaken in a fair and transparent manner, the introduction
of modern rights should lead to a more efficient, equitable and transparent
use of water resources that better takes account the needs of the
environment. In short the introduction of modern water rights is beneficial.

Notwithstanding these positive conclusions, the fact remains that many
countries have yet to introduce modern water rightsȨ regimes. Why is that? Of
course the precise reasons for this will vary from country to country but such
reasons are worth considering in that they may suggest actual, or perceived,
dis-benefits of moving towards the introduction of modern water rights.

The key issues are probably cost and administrative capacity. It will not have
gone un-noticed that many of the examples cited in this paper are from richer
countries. The costs in question are not so much those relating to the
preparation and adoption of legislation but those of registering and recording
water rights as well as the costs of monitoring water resources and enforcing
the legislation relating to a water rights regime. Furthermore, implementing a
modern water rights regime is a relatively complex process that requires
efficient administrators as well as other technical skills.

At first sight, the large number of water users that may be involved
(particularly farmers dependant on small land plots) may make the idea of
introducing modern water rights in developing countries appear even more
daunting. As regards surface water rights, however, if farmers are supplied
with water through irrigation schemes, as is often the case, then whatever
rights to water they should have are not modern water rights, of the type
being discussed here, but rather contractual water rights as discussed in
section 2.1 above. There may still be a strong case for the grant of water
65
In other words provided the vendor considers s/he has made a good deal and has
not been forced to sell at an unfairly low price out of, say, economic necessity.
Modern water rights – theory and practice 101
rights to the operators of such schemes if only to safeguard abstractions for
irrigation.
66

As regards rights to groundwater, the sheer number of actual or potential
abstraction points, the issue of cost together with consequential difficulties of
monitoring and enforcing abstractions takes on a greater significance. Indeed
it seems reasonable to conclude that as concerns groundwater, water rights
reforms need to pay particular attention to governance and enforcement
mechanisms that involve right holders and other stakeholders in decision-
making.

Ultimately, though, the costs of introducing a modern water rights regime,
and the relative complexity (and thus cost) of whatever regime is chosen,
have to be set against the potential costs of inaction. The limitations of
traditional water rights are not restricted to richer countries: examples exist in
developing countries that do not have modern water rights regimes of new
irrigation schemes being built in the upper catchments depriving existing
downstream schemes of "their" water
67
as well as of water being diverted
from reservoirs built for irrigation to quench the needs of thirsty cities.
Needless to say ordinary farmers tend to be the ones who suffer in such
cases. As competition for water increases such kinds of conflict are likely only
to increase.

In such circumstances policy makers in developing countries may well
determine that the costs and resource implications of introducing a modern
water rights regime are justified even if for no other reason than to protect
the interests of existing water users. Nevertheless even in countries where
there is overall water scarcity it will often make sense to focus initially on
those basins or aquifers where there are particular problems such as over-
abstraction/over use. From a legal perspective this can be done through
specific (primary) legislation that applies only to the basins/aquifers in
question. Alternatively it may be preferable to enshrine a water rights regime
in national (or state) legislation but to provide for its staged implementation
(basin by basin, for example
68
) so as to ensure the best use of limited
financial and administrative resources.
66
A full discussion of the limitations of contractual water rightsȨ regimes, typically
found in developing countries, is beyond the scope of this paper.
67
"Theirs" on the basis of a moral rather than a legal right.
68
Or aquifer by aquifer.
Modern water rights – theory and practice 102
Even, however, if the hydraulic and economic arguments in favour of the
introduction of a modern water rights regime are accepted by policy makers
the potential political challenges should not be overlooked, notwithstanding
consultation and education exercises undertaken. The first challenge concerns
the notion of water privatization. As outlined in this paper, although modern
water rights are a form of property right, reforms leading to their adoption do
not legally constitute the privatization of water. Indeed in most cases they
simply reflect and reinforce existing water rights or uses of water. Nor does
the introduction of a system of modern water rights have anything to do with
private investment in the urban water sector.

Nevertheless the point is sensitive particularly in developing countries where
land and water are the primary livelihood resources. How to allocate water
rights on a fair basis that takes account of existing uses of water is a key issue
that needs to be addressed from the very beginning (although again most
farmers whose land is supplied with water through irrigation schemes need
secure contractual water rights rather than modern water rights of the type
being discussed here) while safeguarding the interests of the disadvantaged.
Another key issue is to distinguish between the notional right to water for
personal, household use and the concept of modern water rights. Again, as
argued in this paper, they are quite different.

The issue of tradability or transferability may pose a greater challenge
particularly in countries where a large proportion of the population relies on
agriculture. Tradability (or the prospect of tradability), which for resource
economists may be one of the principal attractions of modern water rights,
can be one of the main practical political obstacles to the introduction of
such a regime. Indeed, unless the circumstances in which trades can take
place, if at all, are carefully regulated from the outset so as to safeguard the
interests of the agriculture sector in general and the poor in particular then
the introduction of a modern water rights regime may be difficult to achieve.
This is not to contradict the findings concerning tradability made earlier in
this study but simply to question the extent to which these can be easily
translated into the situation of many developing countries.

Indeed this leads to the final observation of this paper. Although
international experience appears to point to a broadly common approach to
modern water rights, based on a shared set of assumptions and outcomes, it
must be clearly emphasized that there is no a single best practice model. As
recently noted by the Australian Productivity Commission, the "choice of
Modern water rights – theory and practice 103
arrangements depends, to some extent, on the economic characteristics of
water, the unique features of each jurisdiction, including its legal frameworks
and existing organizational arrangements catchment hydrology within
jurisdictions" (Productivity Commission, op cit.). In other words the design of a
system of modern water rights for a given jurisdiction will need to take
account of its specific cultural, hydrological/hydrogeological, economic and
sociological conditions. There is no blueprint.


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Modern water rights
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This publication offers a fresh look at the theory and practice of modern water
rights, from a comparative law angle. It sheds light on a number of key features of
such rights, and draws out and discusses the relevant problematic issues. It will be of
inspiration and use in the process of reforming water laws in general, and the laws
concerning water rights in particular.
F
A
O

Modern water rights
Theory and practice

FAO LEGISLATIVE STUDY

92

Stephen Hodgson for the Development Law Service FAO Legal Office

FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS Rome, 2006

624 0

These three publications combined provide a rounded review and. Indeed. theoretically it is hard to conceive of good governance goals outside a legal frame of reference where water rights play a central role. and the laws concerning water rights in particular.is underpinned by the law of water resources in general. Water rights administration .e. This publication has been prepared by Mr Stephen Hodgson for FAO. as reflected in regulatory legislation. a system and structure for the allocation of water resources to competing users. from a comparative law angle. and where a functioning system of modern water rights is the lifeblood of governance itself. 80 of 2003). modern.i. i. i. and contrasts these to traditional forms and kinds of water rights. a key focus of contemporary water law reforms virtually anywhere in the world has been and is the introduction of formal and explicit. water rights. which enable the orderly allocation and sustainable use of valuable water resources. including in particular that elicited the sale and leasing of water rights. a stock-taking and assessment of modern water rights systems impacts are volunteered. It sheds light on a number of key features of such rights. This publication complements two earlier issues featured in the FAO Legislative Studies series.Experience. Stefano Burchi Officer-in-Charge Development Law Service . Andreas Charalambous and Peter Garratt. 70 of 2001). and Preparing national regulations for water resources management . issues and guidelines (No. It is hoped that they will be of inspiration and use in the process of reforming water laws in general. and for the protection of the resource from depletion and from pollution . in part.e. The author gratefully acknowledges the assistance of Dr Stephen Merritt. Finally. This publication offers a fresh look at the theory and practice of modern water rights. In practice. a critical analysis of the theory and practice of modern water rights. The latter provides a systematic account of the administrative lifecycle of modern water rights. It teases out and discusses the relevant problematique. and by the law governing modern water rights in particular.Principles and practice (No.FOREWORD Much contemporary discourse on water resources governance . The former illustrates and discusses the practicalities of implementing and administering the modern systems of water rights which are at the centre of this publication.e.

.............................. Rights to groundwater ................................. The completion of earlier reforms .............. The transformation from socialist to market based economies ................................................... 18 REASONS FOR MOVING TO A SYSTEM OF MODERN WATER RIGHTS .................................... 2. 27 3........... 26 3.... 16 2...2............Table of Contents TABLE OF CONTENTS v Foreword ... 11 2......................... Ill-adaption of traditional land based approaches to specific climatic conditions .........................1......................................10............................................................... 25 3. iii List of Acronyms ....................................... 9 2................................... The need to better recognise the economic value of water .......... 31 THE LEGAL AND REGULATORY BASIS .................... The promotion of social goals ....................... 4 Traditional land-based approaches to water rights .. 10 2...............3...........2..2...................................... 22 3.............................2.......... 2..................2................ 21 3......................................................................... 16 2....2............ The common law tradition ... 24 3...... Pressure on water resources ........ To support other reforms .................................... 23 3............ The civil law tradition ................................. 28 3................................ Rights to surface water .................... 5... 3................................... 29 4....5.9..... 26 3...................................................................................2.......................2....................................1................................ Rights to water in artificial water courses ............... 39 ...................................................................... 25 3.............. 20 3........1.. 16 2..............11...1...................................................3.....3..1............................... INTRODUCTION ... The inadequacies of traditional land based approaches .............. 14 2...............8............................................................2................................. Regional initiatives .... 36 The ‘nationalisation’ of water resources .2..1...6................ 4 What are water rights? ....2........... To support or entrench wider economic reforms ...... 37 Institutional arrangements for water resources management . 5... THE CONSULTATION AND EDUCATION PROCESS INVOLVED ........................7........2..............2............................2... 36 The need for primary legislation ...................................4..................................... 1 TRADITIONAL APPROACHES TO WATER RIGHTS ............................................... 2........ viii 1......... The need to take account of environmental considerations ........... The common law tradition .. The civil law tradition .......................................1. 5................................ 5.......................................................................1...2..

................. 67 The formal mechanisms that guarantee the security of the right ...............3............................................................................................ 64 8..... 94 13.... 60 The volume of water that is subject to the right .......... Water administration tasks and powers .................. 46 THE INITIAL ASSIGNMENT OF RIGHTS ........1............................... 8.................... 9.. Benefits and conclusions ............................. 56 THE DEFINITION OF RIGHTS ........................................2. TRANSPARENCY AND THE ENVIRONMENT .............. 7............................................................................. 43 Free uses of water ....... 73 80 83 85 5.. 8...........................1..............1............ 51 EXPERIENCE WITH PROCEDURES FOR REGISTRATION OF RIGHTS .................... 61 The conditions to which the right is subject .2........2..............................................3....................................................2.... Specific conditions ............. 13................ 10.......... Stakeholder involvement ...2... 45 The introduction of water rights ....2.....1.............................. EQUITY..3... 60 Duration ............................................................ 6............................................. 5.......................3...2...............................................3................. General conditions . perceptions and trends .............................................................2........................................................................................ 93 THE IMPACTS OF THE RIGHTS BASED ALLOCATION SYSTEM IN TERMS OF EFFICIENCY............... 9..................................... ENVIRONMENTAL ALLOCATIONS .......3....................... 12... 6.............1............................ 9...............................................3......................... 40 5........................................... 8... 49 The recognition of existing rights and uses at the time of the reform ..4............................... 69 THE SALE AND LEASING OF RIGHTS PROCEDURES AND IMPLICATIONS .............. 88 SAFEGUARDING THE INTERESTS OF THE DISADVANTAGE . 49 The grant of new rights ....vi Table of Contents 5.............1.........5........1..................... 11..... 94 13.................................................................................. 9.................................... 95 ............. 65 8..4................... 87 DISPUTE RESOLUTION MECHANISMS ..................................................................... 8........................................................................... Equity ........ 41 5........................ Number of trades ....................................... Concerns................................................. Efficiency ............ Specialized water management entities ...... 72 Experience to date ..............................2............... 9.......................... 8.... 6.

....................................................... 79 .......... CONCLUSION ................ Transparency . 105 Figure 1 ..............................................................3........... 96 13...................................................................................... The environment ................................................................................................4...............Table of Contents vii 13.................................Change of water right process .......................................................... 98 BIBLIOGRAPHY ....... 97 14...................

ix LIST OF ACRONYMS ACP ABS AI AIA AMS AnGR AoA BSE BV CAC CAP CBD CBPP CGIAR CGRFA COP DAD EAGGF EFSA EPAs ET EU FAO FFPs FMD FVO GATT GATS GSP GMOs IARCs IGC IP IPRs ITPGRFA IVM/IFM African Caribbean and Pacific Access and benefit-sharing Artificial Insemination Advanced Informed Agreement Aggregate Measurement of Support Animal Genetic Resources Agreement on Agriculture (WTO) Bovine Spongiform Encephalopathy Breeding Value Codex Alimentarius Commission Common Agriculture Policy Convention on Biological Diversity Contagious Bovine Pleuopneumonia Consultative Group on International Agricultural Research Commission on Genetic Resources for Food and Agriculture Conference of the Parties Domestic Animal Diversity European Agricultural Guidance and Guarantee Fund European Food Safety Authority European Partnership Agreements Embryo Transfer European Union Food and Agriculture Organization of the United Nations LMOs intended for direct use as food or feed or for processing Foot and Mouth Disease Food and Veterinary Office General Agreement on Tariffs and Trade General Agreement on Trade in Services Generalised System of Tariff Preferences Genetically Modified Organisms International Agricultural Research Centres Intergovernmental Committee Intellectual Property Intellectual Property Rights International Treaty on Plant Genetic Resources for Food and Agriculture in vitro maturation and fertilization .

Forestry and Fisheries (Japan) Mercado Común del Sur Most Favoured Nation Multilateral Transfer Agreement National Coordinator for the Management of AnGR National Consultative Committees for the State of the World’s AnGR National Development Plan Non Governmental Organizations Organization of African Unity Office International des Epizooties Ovum Pick-Up Plant Genetic Resources Prior Informed Consent Sustainable Agriculture and Rural Development Southern Africa Customs Union Subsidiary Body on Scientific.x LMOs MAFF MERCOSUR MFN MTA NC NCC NDP NGOs OAU OIE OPU PGR PIC SARD SACU SBSTTA SCP SoW-AnGR SPLT SPMs SPS TBT TK TRIPS UNCED UPOV WIPO WTO WWL-DAD Living modified organisms Ministry of Agriculture. Technical and Technological Advice Standing Committee on the Law of Patents State of the World's Animal Genetic Resources Substantive Patent Law Treaty Sanitary and Phytosanitary Measures Agreement on the Application of Sanitary and Phytosanitary Measures Technical Barriers to Trade Agreement Traditional Knowledge Agreement on Trade-Related Intellectual Property Rights Agreement United Nations Conference on Environment and Development International Union for the Protection of New Varieties of Plants World Intellectual Property Organization World Trade Organization World Watch List for Domestic Animal Diversity (FAO) .

A key focus of such reforms has generally been the introduction of formal and explicit water rights that clearly specify the volume of water that is subject to each right (here after referred to as "modern water rights"). Consequently in most jurisdictions legal rights to use water .water rights have traditionally been linked to land tenure rights and in particular to land ownership rights. From the perspective of society. More specifically such rights have been conferred on the owners of land with direct physical access to a stream. More importantly they provide an effective mechanism for ensuring the proper management of water resources. monitoring and enforcement. In other words right holders are more . In some places such reforms are part of a process that began a hundred or more years ago. modern water rights permit the orderly allocation and sustainable use of valuable water resources. Modern water rights are not intrinsically tied to specific land plots and in an increasing number of jurisdictions they are transferable and thus may be traded on a temporary or permanent basis. a number of countries have recently undertaken substantive water law reforms. clearly defined and secure. Elsewhere they represent a radical re-ordering of the status quo. But its fluidity and constant renewal as part of the hydrologic cycle has necessarily limited the appropriateness of traditional legal approaches to natural resources such as the concept of ownership. INTRODUCTION Throughout history the fugitive nature of water has posed conceptual and practical challenges to lawmakers. registration. they amount to a form of property right over the use of water. From the perspective of the right holder they confer the necessary security to invest in activities entailing the use of water. As they are legally backed the state has an interest in ensuring that they are correctly implemented. Long term. river or other natural water source. The vital importance of water to human activity is such that most societies and cultures have sought to establish legal rules over its use and allocation. but also by other factors that are discussed in this paper. Very often the only way to sell the right to use water was to sell the associated land right. together with the associated institutional arrangements for their allocation.1. Right holders in turn have a genuine and actionable interest in ensuring that this happens. Driven mainly by increased pressure on water resources.

2004). as uses migrate from lower value to higher value activities. As pressure on water resources increases water rights become increasingly valuable. Indeed as the economic value of water becomes more widely understood the possibility of trading transferable rights is seen by some as providing an opportunity to allow markets to determine the "true" value of water. for example. FAO. Both Chile and California.. even those who hold the necessary licences. 1 This migration is almost invariably from agriculture to industry or to satisfy urban needs. there is increasing interest in the use of individual transferable quotas that may be traded among licence holders (see. even those where modern water rights have been introduced. . 1 It should be noted that the introduction of tradable rights is not a phenomenon that is restricted to the water sector. have little interest or incentive in seeing it enforced. legal regimes that seek to govern natural resource use through short term licences that do not confer substantive benefits in the form of property rights or quasi property rights on resource users. This contrasts with. jurisdictions considered in this paper. including a lack of resources or political will. for example. K. for example. such experiences clearly show potential pitfalls that need to be avoided and it is to be noted that the trade in water rights is not permitted in all jurisdictions. If for whatever reason. et al. At the same time. And tradable rights are not necessarily restricted to the taking and use of natural resources: they may also relate to rights to pollute.2 Modern water rights – theory and practice likely to take steps to ensure that their property rights to water are respected and that the state agencies involved fulfil their legal obligations in this connection thus making compliance with the applicable legal regime more likely. have considerable experience in the trade of air emission permits (See for example Bolt. 2001) and the concept of emissions trading entered upon the world stage with the entry into force of the Kyoto Protocol. Within the water sector support for the introduction of market based solutions to the allocation of water resources is taken from recent reforms such as those of Chile as well as the experience of the western United States where the practice of trading water rights has existed for many years. In the fisheries sector. the state fails to implement such a regime other resource users. however.

The paper is set out in 14 sections beginning with a description of the traditional approaches to water rights of the two dominant legal traditions. There follows a discussion of the consultation and education processes used to promote acceptance of reforms and behavioural change. will be considered as well as the implications of such transactions for third parties and the environment. It is based on a survey of relevant primary and secondary legislation. The issues of environmental allocations and dispute resolution mechanisms in connection with modern water rights are next considered followed by an examination of the. Thereafter experience of the procedures for the sale and leasing of such rights. equity. cases in which specific steps have been take to safeguard the interests of the disadvantaged in connection with the introduction of such schemes. published literature (including articles in academic and professional journals and specialist publications). unpublished texts and internet sources as well as practical experience. admittedly relatively few. . Thereafter the reasons why so many jurisdictions have moved to establish modern water rights systems are considered. this stage is relatively straightforward compared to the practical and administrative procedures for rights definition and registration. procedures which must be taken into account from the very beginning of any reform process. where permitted. Following an analysis of the impacts of modern water rights in terms of efficiency. Experience shows that notwithstanding the difficulties of piloting the necessary legislative reforms necessary to introduce modern water rights.Modern water rights – theory and practice 3 This paper reviews international experiences of the introduction and use of modern water rights. Next the type and nature of legal reforms necessary for the introduction of modern water rights systems are considered and followed by a description of the basis on which water rights are initially allocated. transparency and environmental impacts this paper seeks to draw out some basic lessons from international experience.

4 Modern water rights – theory and practice 2. water law and the rules governing water rights tend to be rather complex (FAO. because of the dynamic complexities of the qualitative and quantitative aspects of the hydrologic cycle. In part this is because conceptions of water and water rights vary so dramatically around the world.1. Such perceptions are in turn shaped by a range of factors including geography. 2 But water 2 Water rights may also exist in respect of lakes. Indeed the term "water right" is actually used in different contexts and different jurisdictions to mean quite different things. particularly in low lying areas. . economic and political circumstances that influence the use of water resources. and thus water rights. TRADITIONAL APPROACHES TO WATER RIGHTS What are water rights? At the outset it is important to clarify what is meant by the term "water right". of course. Furthermore. stream or aquifer. Public perceptions of water are often focussed on excessive quantities in rivers and streams and the risks of flooding. hydropower and recreational uses. So just what is a water right? In its simplest conception a water right is frequently understood to be a legal right to abstract and use a quantity of water from a natural source such as a river. climate and the extreme variability in the availability of water resources as well as the uses to which water is put. 2. problems of water scarcity and levels of rainfall are matters of public interest and concern. reflect economic. but due to the lack of hydraulic gradient pumping is likely to be necessary meaning that the abstraction of water is more expensive. Answering this question is complicated by the fact that there is no universally agreed definition. This observation applies equally to water rights and should be borne in mind in the discussion that follows. social and cultural perceptions of water. In more arid climates. Consequently in discussing water rights it is important to clearly recognize that each country faces unique water issues. What is normal and reasonable in one country as regards both the use and regulation of water may appear quite strange or even irrational elsewhere. where irrigation is necessary. 2001). human intervention in that cycle and the many historical. In more temperate climates primary uses may include navigation. Water law. ecological. social.

Thus abstracted uses. banks or characteristics of a water course. to alter the bed.Modern water rights – theory and practice 5 rights frequently go beyond an entitlement to a mere quantity of the simple chemical compound which is water: the flow of the water is also an important component of a water right. to power water mills or for hydropower generation. to use sewage water for irrigation. This type of use is usually known as a "non-consumptive" use. depending on the specific legal rules in force in a given jurisdiction a water right may be necessary: x x to divert. or at least in close co-ordination with it. In addition a range of other activities involving water and water courses are generally regulated either as part of a water rights regime. Even when 3 Indeed in many countries the flow of water has historically been more important than its quality when used. including the construction (and use) of structures on its banks and adjacent lands including those related to the use and management of water within that water course. This may be as a precursor to abstraction or. Thus. 3 Consequently a water right may confer a legal right to impound or store a specified quantity of water in a natural source behind a dam or other hydraulic structure. to undertake fishing and aquaculture activities. x x x x x Why is this? The reason lies in the fundamental degree to which such activities are inter-connected. for example. as in the case of hydropower generation. and/or to discharge wastes or pollutants to water courses. whereas industrial water users may be able to make do with water of a lesser quality. Consequently in authorizing the discharge of wastes or effluent to a water course it is necessary to take account of other existing uses of water. for navigation. those who abstract for irrigation or drinking purposes require relatively clean water. . are likely to impact on the extent to which the discharge of wastes and effluent should be permitted. particularly in times of low river flow. For example. restrict or alter the flow of water within a water course. the amount of water that is abstracted will affect the ability of a given water course to dilute and disperse wastes and effluent. At the same time. it may relate to the use of water within the water course. to extract gravel and other minerals from water courses and the lands adjacent to them.

the operating regime of that dam will affect flows at different times of the year. Specifically they are capable of being asserted against the state and third parties. those which relate to the supply of water through a canal for irrigated agriculture or industrial use. So far this discussion has focussed on the taking and use of water from natural sources whether from surface water bodies or groundwater. a right holder can legitimately expect a valid right to be upheld by a court and as necessary enforced through the machinery and coercive power of the state. 5 Through the use. Having considered what they regulate. It follows that just as the entire range of activities involving the use of water may have a negative impact on the quantity. . usually in return for the payment of a charge or fee. the next question is what is the status of water rights? The key point to note is that they are legal rights: they are created pursuant to a country's formal legal system and thus they have legal consequences. to note that the existence of another category of "water rights". In the case of a dispute. The corollary is that a person who undertakes an activity that requires a water right without holding such a right will be subject to legal action from the right holder and or the state body responsible for water rights administration and possibly criminal/administrative proceedings. Such rights – legal entitlements to 4 Disregarding for the purpose of this argument the possibility of increased rates of evaporation concerning the water stored behind the dam. or damage to a water right is prima facie subject to the payment of compensation and the right to such compensation is enforceable in the courts. For example while the operation of a hydropower dam may not actually result in the removal of water from a river 4 . as described above. It is important. however. the legal rights which govern such activities will invariably also impact on each other. Similarly constructions on river banks for whatever purpose may affect navigation. for example. quality and flow of water in a given water course or aquifer. of state-sanctioned force such as the use of court bailiffs to recover unpaid fines and even imprisonment for failure to comply with court orders. they frequently still affect other water uses.6 Modern water rights – theory and practice such activities are "non-consumptive". Such supplies are usually made on the basis of an express or implied contract the effect of which is to give the beneficiary the legal right to receive a quantity of water at a specified time. 5 Loss of. And again in times of low flow depending on the particular river priority may be afforded either to navigation or to water abstraction.

Whether or not rights created in such circumstances are "water rights" the point remains that they are quite different in nature to abstraction water rights. At best these are "contractual water rights" (the right to a service). however. The legal basis of their "water right" is the applicable contractual or quasi contractual arrangement with the supplier. Indeed a closer analysis shows that the right in question is not merely to take a quantity of water but rather the right to a service. Once water has been taken from a natural source and diverted into an irrigation system it is effectively temporarily removed from the surface water cycle and confined to an artificial space. a contractual water right creates an entitlement to receive a delivery of water through artificial structures. namely the delivery of water through the canal system. though. 6 This point deserves to be emphasized as too often the literature. conflates abstraction type water rights with contractual water rights. say. the person to whom the water is delivered does not. In some jurisdictions the person to whom the water is delivered may also hold a classical water right that relates to the initial abstraction of a quantity of water at the natural source prior to its diversion into the relevant canal. But obviously they are of a quite different nature to those described above. conceptually and operationally quite different particularly as far as transfers are concerned. water that has previously been removed from the 6 In fact in many developing and transition countries farmers enjoy rather weak contractual rights to water that confer little in the way of security. Apart from conveyance losses the sale of a water right at. 7 The point is that they are legally. the water can be moved around from land plot to land plot in accordance with an agreed schedule. 7 For example. This. 2005). Very often. is a discussion that is beyond the scope of this paper (see FAO. The legal form. . administration and even the trade in such rights are thus substantively quite different to those that arise in connection with water rights relating to natural water courses. within known limits.are effectively a form of "water right". Technical Paper describes the trade in what are described variously as water rights or water titles in the Siurana-Riudecanyes Irrigation Subscribers Association and Water Market system as a successful example of tradable water rights. Once in the system. while the supplier holds an abstraction water right.Modern water rights – theory and practice 7 specified volumes of water . the tail of the system to a land plot at the head of the system has little practical impact on the system as a whole or the rights of other land owners. in the sense described above. particularly that which advocates the use of tradable water rights. Put another way if a modern water right. is a right to remove water from the natural environment. issues relating to the grant. World Bank. 1999a.

8 Modern water rights – theory and practice natural environment. Social and Cultural Rights. 10 Of course the supplier may and usually will require its own water right to secure its source of water. 2003). its relevance to the tradability and transferability of modern water rights is ultimately rather limited. Such "General Comments" constitute authoritative interpretations of the provisions of the Covenant to clarify the normative contents of rights. 9 Article 24. 9 Clearly drinking water supplied through a reticulation system has some similarities to irrigation and industrial water supplied through a canal. Social and Cultural Rights. states parties" and other actors" obligations. Therefore while the experience of trading in such rights is of some interest in that it demonstrates that provided the appropriate legal and institutional arrangements are in place farmers and other water users may trade water entitlements. Finally given its prominence in the literature about economic incentives in water resources management it is important to note that groundwater markets. But this sector too does not really involve a discussion of water rights. violations and implementation of the rights at national level (FAO. clothing and housing. provides that everyone has a right to an adequate standard of living for himself and his family including adequate food. . in which land owners sell typically groundwater that they have abstracted to their neighbours for irrigation or to private or state purchasers 8 Article 11 of the International Covenant on Economic. Otherwise water rights. Social and Cultural Rights. Instead the individual consumer may rely on a statutory duty imposed on the supplier to supply water to an individual reticulation system or communal stand pipe. although private actors will want to hold water rights as much as state or local government water supply entities. An interruption to such a supply may amount to a breach of the notional human right to water but will not per se concern water rights. 8 or to provisions contained in progressive constitutions such as the "right of access to water" found in that of South Africa. have nothing to do with the so-called "right to water". a putative human right which is claimed to exist either as a right in itself or as an ancillary aspect of the "right to food" created by article 11 of the International Covenant on Economic. The "Right to water" was developed in General Comment 15 on the Covenant by the Committee on Economic. Although as will be seen this right of access to water is actually translated into substantive form in the South African water legislation. 10 It follows that the introduction of private expertise and financing in the urban water supply and sanitation sector through public private partnerships has little direct relation to the issue of water rights. as the term is commonly understood.

12 While the colonial period explains the reason why European water law was "received" into the legal systems of so many countries. The common law tradition emerged from the law of England. and the United States. The civil law tradition. 12 Some jurisdictions. it is not the only reason. nearly all countries in Latin America. Pakistan. Canada. and the remaining African countries that are not in the civil law tradition as well as other Commonwealth countries and a number of countries in the Middle East. Customary or local law continues to play an important role in water allocation decisions in many developing countries.Modern water rights – theory and practice 9 (often by the tanker load) for on-sale elsewhere and which are particularly prevalent in a number of parts of India. 2. Such influences are still found in so-called "customary" or "local" law practices as well as influences from religious law such as the Hadiths of Islam. as already mentioned. particularly in rural areas. Indonesia and Japan as well the countries of the Former Soviet Union.11 Countries in which the common law tradition applies include Australia. through the two principal European legal traditions: the civil law tradition and the common law tradition. In this connection it is important to emphasize that European conceptions of water and water law have strongly influenced the development of formal water laws around the world. are influenced by both the civil law and common law traditions. large parts of Africa. Traditional land based approaches to water rights Throughout history all societies in which water is used have had their own approaches to regulate access to water. A number of countries that were never occupied by the colonial Strictly speaking the English jurisdiction includes Wales and thus all subsequent references to England should be understood to mean England and Wales. the focus of this review is on formal water rights and the approach of formal legal systems. which sometimes described as the Romano-Germanic family. such as Cameroon and South Africa. is found in most European countries (including the former socialist countries of Eastern and Central Europe). New Zealand. their own conceptions of water rights.2. Nevertheless. generally have nothing to do with water rights or the trade in water rights except to demonstrate that farmers and other water users understand that water has an economic value. 11 . Singapore. India.

14 Indeed some of these influences can still be observed. which also takes this approach plays an important role in shaping legal rules about the use of water. of conferring a privileged position on the owners of land adjacent to water courses. Roman law. This approach. ground water rights and contractual water rights.1. through so-called "judge-made law". the right to use water depended primarily on the use or ownership of land or structures built on such land. was one of the elements of Roman water law which had a major influence on the development of water law under the two European legal traditions.10 Modern water rights – theory and practice powers looked to European and subsequently North American law in revising or modernizing their own legislation. 15 Roman law is not the only legal system that rejects the idea of private ownership of running water. 13 .2. Islamic law. is the role of the courts in the development of the common law. This section looks at the traditional approaches of the two main legal traditions to surface water rights. 15 It was nevertheless For example Japan's 1896 Civil Code was heavily influenced by the German Civil Code. 2. related to the use of water on land. denied the possibility of private ownership of running water. The Institutes of Justinian published in 533-34 held that running water was a part of the "negative community" of things that could not be owned along with air. however.13 A full discussion of the differences between the two legal traditions is beyond the scope of this paper. however. that there were (a) regional variations within Roman water law and that (b) like any legal system. 14 It should be noted. the rules were varied and modified over time. In general terms the laws of the civil tradition have been subject to a much more significant degree of codification and the courts are perceived as having a more interpretative role. for example. prior to the introduction of modern water rights regimes. alongside the enactment of legislation by the relevant legislatures. the seas and wildlife. apart from those relating to "instream" uses. The logic of this approach lies in the fact that historically most water rights. Rights to surface water Under both the common law and civil law traditions. A key difference.

op cit.17 The common law did. maintain the principle of Roman law that flowing waters are publici juris. . in terms of its development.1995). the state). perennial streams and rivers from the less important. 19 A the same time riparian rights were considered to be interests in real property as opposed to personalty. See Getches. 1997). The common law tradition The countries of the common law tradition did not follow the distinction between public waters and private waters. The banks and bed of former are generally in the private ownership of the riparian land owner while the banks and bed of the latter are owned by the Crown (i. however. 18 It should.2. 2.19 16 Since Roman law did not provide for involuntary servitude of access. (a) The doctrine of riparianism The doctrine of riparianism was developed gradually over the years through a series of court decisions and reached its zenith. however. two divergent approaches to water law and water rights developed: the doctrine of "riparianism" and the doctrine of "prior appropriation".18 Riparian rights were not considered to be subsidiary land rights. but were instead an integral part of the right of ownership of the land in question. it could to that extent be considered a riparian system. recognized the right of the government to prohibit the use of any public water and required an authorization for taking water from navigable streams (Teclaff. in England and the New England states of North America in the course of the nineteenth century.1. The former were considered to be common or public while the latter were private. 16 Roman law.Modern water rights – theory and practice 11 recognized that things in the negative community could be used and that the "usufruct" or right to use the benefit of the resource needed to be regulated to provide order and prevent over-exploitation (Getches.e. replaced an earlier conception of water rights based on priority of use which was not as closely tied to land ownership (Scott and Coustalin. be noted that riparian doctrine which was developed by the courts.1. however. The right to use a public stream or river was open to all those who had access to them. such as easements or servitudes. 1985). Roman law distinguished the more important. From this basic principle. 17 Except to the extent that a distinction is made between the ownership of the banks and bed of tidal and non tidal waters.

As already mentioned. the doctrine of riparianism spread throughout the English speaking world. Such purposes were categorised as being "extraordinary" uses of water. In addition a riparian land owner also had the right to use the water for any other purpose provided that it did not interfere with the rights of other proprietors. This encompassed the "reasonable use" of that water for domestic purposes and for the watering of livestock and. the riparian doctrine held that a riparian right holder had the right to make "ordinary" use of the water flowing in the watercourse. the purpose for which it is taken must be connected with the abstracter's land and the water must be restored to the watercourse substantially undiminished in volume and un-altered in character. where those uses of water were made. It originated in the customs of miners on federal public lands who accorded the best rights to those who first used water just as they had accorded mining rights to those who first located ore deposits. that of prior appropriation. a riparian owner could acquire additional rights in the nature of "easements". which are types of land tenure right. Notwithstanding its complexity. abstraction could be undertaken without regard to the effect which they might have had on downstream proprietors (Howarth. . and are indeed probably incapable of full definition. But it is clear that they are subject to significant restrictions. Specifically. where it still applies in some states. In addition to such natural riparian rights. In any event given that their gold washing activities were taking place on federal public lands and not on private land they simply could not seek to apply the doctrine of riparianism. (b) The prior appropriation doctrine The prior appropriation doctrine was developed in the nineteenth century to serve the practical demands of water users in the western United States. upstream or downstream. The limits of "extraordinary" water use have never been precisely defined.12 Modern water rights – theory and practice Regarding its substantive content. in accordance with relevant rules of land tenure. The question whether a particular extraordinary use is reasonable is a question of fact which must be determined by reference to all the circumstances. 1992). However when the doctrine reached the dry and arid climates of the American West and South West its practical limitations were clearly recognized leading to the development of a new doctrine. important developments took place in the damp climate of New England. the use of the water must be reasonable.

those who appropriated later (junior 20 The other states are Kansas. rather than land ownership. Texas and Washington. The flexibility of the common law tradition is such that this new. Those rights continue as long as the beneficial use is maintained. The right of individuals to use water under the prior appropriation system is based on application of a quantity of water to a beneficial use. Montana. Oklahoma. If water is insufficient to meet all needs. Mississippi. South Dakota. even on private lands. A person could claim water rights from the state on first-in-line first-in-right depending on whether the water was put to beneficial use (Bath. In addition a number of states. those who hold the earliest appropriations (senior appropriators) will obtain all of their allocated water. 1999). including California. New Mexico. more suitable water rights doctrine. Water rights are acquired on the basis of beneficial use. Idaho. an actual diversion of water from a natural source. was accepted as the law in a number of states and indeed it continues to apply in the states of Alaska. Arizona. Colorado. 1997). passing an Irrigation Act under which all un-appropriated water became the property of the state. Most appropriation jurisdictions consider water to be a public resource owned by no one. with the earliest user having a superior right. In 1889 Texas returned to a modified prior appropriation law. Nevada. Oregon. To take the example of Texas. North Dakota. water rights are granted according to where a person applies a particular quantity of water to a particular beneficial use. Nebraska. 20 The key significance of the prior appropriation doctrine is that it comprehensively severed the linkage between land and water rights. the application of the water to a beneficial use within a reasonable time period.Modern water rights – theory and practice 13 Nevertheless the prior appropriation doctrine was later extended to farmers and other users. More specifically. Utah and Wyoming (Getches. The traditional elements of a valid appropriation are: x x x the intention to apply the water to a beneficial use. have hybrid systems under which both the prior appropriation and riparian doctrines apply simultaneously. . after independence from Mexico the state adopted the riparian water doctrine and for well over a century there was genuine confusion over water law and water rights. The date of the appropriation determines the user's priority to use water.

1. Indeed what is perhaps most interesting is the fact that being divorced from land tenure rights. however. A number of criticisms are made against the prior appropriation doctrine. or even encouraged.2. of the water over which they have rights. 2. While these and other issues have led to calls for water law reform. One criticism is that it tends to discourage water saving by senior appropriators who know that their entitlements are relatively more secure. rights created under the common law doctrine of prior appropriation are not really modern water rights in the sense used in this paper. more typical for state law to require a permit as the exclusive means of making a valid appropriation. Public waters were those which were considered to be . or (b) perfecting a common law appropriation by posting a notice and diverting water. It follows that while references are made to the experience of the western states in the discussion that follows. users have been able to continue seizing water as long as a single drop remained in the stream or aquifer (Freyfogle. Nowadays it is. or none. Generally speaking. In fact most of the world's experience of transferable water rights derives from the western states. which was promulgated in 1804 after the French Revolution.2. All of the states in which the prior appropriation doctrine applies have statutory administrative procedures to provide an orderly method for appropriating water and regulating established water rights (Getches. For example. Nevertheless the experience of the western states does offer a number of useful insights into the issues of water law reform and the tradability of transferable water rights. trades in water rights have long been accepted. In some states appropriators have the option of: (a) applying for a permit. 1996).14 Modern water rights – theory and practice appropriators) may receive only some. the Code Napoleon. little progress has been made to date. maintained this distinction. save to the extent that they do specify the volume that may be abstracted. Furthermore. The civil law tradition The Roman law distinction between public and private waters retained an influence in the countries of the civil law tradition even until quite recently. 1997). the influential French Civil Code. while an administrative permission was necessary for the use of public waters this was not necessary in the case of private waters.

both surface and underground. 21 22 . Latin American and parts of Africa. Finally. that is waters springing in a private property and rainfall waters. It should. for example.Modern water rights – theory and practice 15 "navigable" or "floatable" 21 and belonged to the public or national domain. 23 However there was a possibility of some administrative control reflected in articles 413. Gradually the concept of private waters began to lose its force (Caponera. 420–422 which defined private waters as "special property" subject to some restrictive covenants (FAO. derived from land ownership which recognized the owner's right to use at pleasure the water existing upon his land without any limitation. Their use required a government permit or authorization. the beds of every lake and of all navigable water courses. 24 In the civil law tradition a distinction is typically made between state owned property in the "public domain" and state property in the "private domain". along or upon privately owned land. the right to use such water is open to everyone. 1999). particularly as regards the prohibition to pollute water. the difficulties of accommodating different and competing uses of private waters led the courts to limit the absolute right of use by making it subject to numerous restrictions. 2000). 415. Property in the latter may. In the Democratic Republic of Congo. however. which were those located below. to any legal and administrative measures which regulate use or the granting of concessions. The right to use such private waters. are part of the public land domain and the water of such lakes and water courses as well as groundwater also belongs to the state. but only for its use on that land and not beyond the limits of that estate. etc. be noted that in connection with "public waters" a concession has always been required in most jurisdictions of the civil law tradition. Private waters. 22 Similarly the Spanish Water Act of 1886 considered as private all surface waters. 23 This approach was largely repeated throughout the "civil law" world in Asia. however. Property in the former may not unless and until it is transferred to the private domain. could be freely utilized subject to certain limitations of a statutory nature such as servitudes and rights of way. Ius utendi et abutendi. in accordance with specific legislation be privatized. Such concessions can be seen as the precursor of modern water A river is "floatable" if logs can be floated down it. 24 Subject. whether floatable or not.

2. that specific legal responses have been formulated in water legislation to the issue of groundwater management. the owner of land through 25 26 Ballard v Tomlinson. Rights to groundwater Historically most of the focus of water law and water rights has been on surface water resources.2.2. The common law tradition Although the conceptual approach taken by the common law tradition was slightly different. Of course significant variations existed from jurisdiction to jurisdiction with regard to the constraints placed on the users of private waters but this in outline is the basic position. 115. The civil law tradition Traditionally. As regards the use of ground water both the common law and civil law traditionally also conferred specific benefits on adjacent or. unless otherwise provided for in the Title Of Servitudes or Land Services. though the effect is to interfere with the supply of underground water to nearby springs. An exception is made. 1885. D. in accordance with the basic principles of Roman law. This basic approach is reflected in article 552 of the French Civil Code which states that: Ownership of the ground involves ownership of what is above and below it.2.2. Under the common law there is no property in water percolating through the sub-soil until it has been the object of an appropriation. under the common law. over the last hundred or so years. 29 Ch. . subject to the limitations resulting from statutes and regulations relating to mines and from police statutes and regulations. op cit. super-adjacent land owners.2.2. Howarth. groundwater was seen as the property of the owner of the land above it.1. He may make below all constructions and excavations which he deems proper and draw from these excavations all the products which they can give. op cit. An owner may make above all the plantings and constructions which he deems proper.16 Modern water rights – theory and practice rights in the countries of that legal tradition.2. 2.26 Yet at the same time. 2.25 The effect is that a land owner is entitled to sink a borehole or well on his land to intercept water percolating underneath his property. for underground water flowing in a defined channel in which case the riparian doctrine applies (Howarth.). It is only relatively recently. within the civil law tradition. to be more precise. the effect was largely the same.

In practice. ground water is essentially an "open-access" resource for overlying owners (Blomquist et al. (Blomquist et al. allowing overlying landowners to pump unspecified amounts of groundwater as long as they do not engage in wasteful uses or interfere with the rights of other overlying owners.Modern water rights – theory and practice 17 which ground water flows has no right or interest in it which enables him to maintain an action against another landowner whose actions interfere with the supply of water (Howarth. In the United States most western states still apply the prior appropriation doctrine toward all or some of the groundwater within their jurisdictions. where it will be recalled both riparian and prior appropriation doctrines apply. for example. x relative to each other. 2001). the approaches of the main legal traditions no longer offer a viable means of effectively regulating the use of groundwater. if any. In California. overlying land owners have correlative rights to water. even though they continue to apply in a number of jurisdictions. however. 2001). and share proportionately in water supply reductions in the event of shortages. . In outline: x overlying land owners have rights to the reasonable use of groundwater on their land. providing individuals with relatively secure rights to the use of specified amounts of this resource.. In Arizona. still apply. sometimes described as the doctrine of "capture". and appropriators have a right to the surplus remaining. x appropriators (those pumping water who do not own overlying land) have a seniority system with respect to one another.. the position is a little complicated and must be determined on the basis of court decisions with little or no statutory guidance. 1992). Because the doctrine does not confer rights on individuals to abstract specific quantities. Other states follow variations of the "beneficial use" doctrine. and x overlying owners have a superior right compared to appropriators to the amount of water for their reasonable use. In the state of Texas. with reductions in water use imposed first on junior rights holders. until 1980 when the Arizona Groundwater Management Act was enacted groundwater use was governed by the beneficial use doctrine whereby a land owner can pump as much water as s/he can reasonably use on the overlying land. the common law rules described above. as a result of the development and use of modern well drilling techniques and pumps. for example.

This is because when once abstracted or appropriated. 2004). As a result the study of irrigation water rights is a somewhat neglected area. The position taken by the civil law tradition is broadly similar. 2. In California. . water user associations may hold 25 to 30 year contracts with the Federal Bureau of Reclamation (FBR) or the State Water Department for the supply of water. problems of groundwater overdraft have led to the introduction of statutory controls over groundwater abstractions in the western United States. it is the operator of the canal or scheme. 1992). In a recent decision the Federal Court found that compensation was payable to farmers for breach of such contracts following a re-allocation of water for conservation purposes (Eilperin. for example.2. In the case of state funded schemes this is usually a state body such as an irrigation agency. as a matter of logic it is difficult to see how an ordinary statutory water right could be conferred on the land owner as that person is not responsible for the abstraction of the water in the first place. 27 Indeed to take water from such a canal would probably amount to theft (Howarth.C. it is only with regard to water in artificial water courses that adjacent land owners are not treated as being in a beneficial position. The common law is quite clear that the owner of land adjacent to a canal or other artificial water course has no rights whatsoever to the water in the absence of some form or "grant or arrangement".18 Modern water rights – theory and practice Increasingly. the existence of a property right in the water has the consequence that it is capable of being the subject of theft.3.C. Furthermore. 121 P. Rights to water in artificial water courses Under the traditional approaches of both of the main legal traditions. In some jurisdictions irrigation water is supplied by a state agency on the basis of a detailed formal contract. however. A mere "right to water" would not be of much use without the ability to enforce it against the operator of the irrigation scheme. who will usually require a water right. Similar contractual arrangements are 27 Rameshur Pershaud Narain Singh v Koonj Behari Pattuk (1878) 4 A. As already described. the person who abstracts water from a natural source.

Modern water rights – theory and practice 19 being introduced in the former socialist states in conjunction with major irrigation sector reforms. 28 Another complication as regards the relevance of water rights for many irrigators is the fact many irrigation systems in South Asia and parts of China have absolutely no physical direct link with the types of water resources that are subject to water rights regimes. Such irrigation systems can find themselves effectively beyond the scope of statutory water rights and the formal water management framework. Instead monsoon rainwater is collected in reservoirs or tanks from which it is distributed through canals to irrigate crops during the dry season. . 28 For example in Azerbaijan and Romania.

20

Modern water rights – theory and practice

3.

REASONS FOR MOVING TO A SYSTEM OF MODERN WATER RIGHTS

The introduction of modern water rights is usually part, albeit an important part, of more substantive water sector reforms. Driven largely by concerns over pressure on water resources as a result of such factors as population growth and, increasingly, climate change the last thirty or so years have seen a great deal of international activity concerning water reform. This is demonstrated by the creation of a range of new initiatives and bodies concerned with the water sector as well increasingly large and elaborate international summits and meetings. Indeed it is arguable that "water reform" has become something of an industry in itself. The "Dublin Principles", which were concluded in the run-up to the United Nations Conference on Environment and Development (UNCED) held at Rio de Janeiro in 1992 have been influential in guiding the shape of water sector reforms, including reforms to water rights. In an attempt to concisely state the main issues and thrust of water management (Solanes et al., 1999) they provide that: x x x x freshwater is a finite and vulnerable resource, essential to sustain life, development and the environment; water development and management should be based on a participatory approach, involving users, planners and policy-makers at all levels; women play a central part in the provision, management, and safeguarding of water; and water has an economic value in all its competing uses, and should be recognized as an economic good.

Sufficiently vague to allow widespread agreement these principles leave their substantive content, in respect of which there may be wide disagreement, unstated. The first two Principles may have had some indirect effect on water rights reform; the central role of women, however, remains largely unrecognized as far as water rights regimes are concerned. The fourth Principle has been in many ways the most controversial. It is reflected in the introduction of charges for the use of water that is subject to water rights and also in the ongoing debate about tradable water rights. Much of the heat of this debate has centred round the basic question as to whether water is a "public good" thus meriting special treatment or whether it

Modern water rights – theory and practice

21

can be treated as a form of commodity and regulated through market forces. Inevitably this debate has impacted on questions of water rights and particularly the question of their transferability and tradability. Leaving aside the overall process of water reform and focussing on the issue of water rights reform it is clear that each country has its own specific reasons for moving to formal and explicit rights based systems. These include: x x x x x x x x x x x the ill-adaption of traditional land based approaches to specific climatic conditions; the inadequacies of traditional land based approaches; the need to take account of environmental considerations; the need to better recognize the economic value of water; the transformation from socialist to market based economies; regional initiatives; to support or entrench wider economic reforms; to support other reforms; the promotion of social goals; the completion of earlier reforms; and pressure on water resources.

Clearly these reasons are very often inter-linked in a given context. For example, the recent reforms in South Africa sought to respond to most of these issues. Nevertheless, for the purpose of analysis it is still useful to examine these different headings individually.

3.1.

Ill-adaption of traditional land based approaches to specific climatic conditions

As already described, the application of the riparian doctrine in arid climates through its adoption in colonial and post colonial jurisdictions caused a number of practical difficulties. As mentioned much of the development of the riparian doctrine took place in damp and water rich climates of England and New England, and indeed much of the case law on riparian rights related to disputes over the situation and operation of water mills rather than water abstraction. Such principles transferred with difficulty to more arid climates. In Canada, for example, the riparian doctrine effectively prohibited irrigation on any large scale in the southern regions of the prairie provinces which have

22

Modern water rights – theory and practice

an arid desert like climate. 29 After "considerable unrest" the Federal Government passed comprehensive water legislation in 1894 in the form of the North West Irrigation Act, S.C. 1893, chapter 30. Similar problems were faced in Australia where a move to formal licence based regimes began in the 1880s, when Victoria introduced new water laws based on the recommendations of a Royal Commission chaired by Alfred Deakin. He proposed that water allocations should be tied to the land, that rights to water should be vested in the Crown (the equivalent of the state), and that allocations to landholders should be the responsibility of the state governments. Riparian owners retained limited common-law rights for domestic use, stock watering, gardens and a maximum of two hectares of irrigated land for fodder crops. Over the next fifteen years, similar legislation was introduced in the other states.

3.2.

The inadequacies of traditional land based approaches

Even in their original jurisdictions the traditional approaches had begun to run into difficulties both as far as individual users were concerned as well as in ensuring the effective management of water resources. As already noted the riparian doctrine raises a number of difficult conceptual points such as the nature of "reasonable use" and the limits of "extraordinary water use". In practical terms whatever legal logic the doctrine may have the simple fact is that it does not provide the means to clearly specify how much water a right holder may abstract and use at a given point in time, in times either of full river flow or of drought. In short, the doctrine fails to provide the legal certainty necessary to make investments. Indeed even during the nineteenth century as the doctrine reached the zenith of its development, its limits had become clear. To take the example of England, some 4 500 Private and Local Acts of Parliament were adopted between 1800 and 1947 that gave rights to use water as well as comparable numbers concerned with land drainage, river improvement and inland navigation. In other words there were effectively two separate and largely uncoordinated water rights regimes in place making it increasingly difficult to plan and manage the use of water resources. Consequently all uses on the basis of statutory and riparian rights were brought into a formal water rights regime with the enactment of the Water Resources Act 1963.
29

They have an average precipitation of 28 centimetres per year.

Whatever logic it may have held for the legal scholars of old. If the volumes of water that are subject to traditional water rights are not quantified it is difficult to make provision for the ecological requirements of rivers. for example in Texas where groundwater provides about 60 percent of the water that is used each year particularly for irrigated agriculture and urban water supply (Kaiser. While the courts have made some modest modifications to the rule of capture. in some states it is sufficient for water users simply to notify their use to the water administration. As already mentioned the prior appropriation doctrine permits the appropriation of all water in a given water course. The response has been the systematic introduction of formal and explicit water rights. 3. described above. the idea of distinguishing private waters from public waters is nonsense from a hydrological perspective.30 Similar difficulties arose with the traditional approach of the civil law jurisdictions. by limiting pumping when it is: (1) wasteful. .3.Modern water rights – theory and practice 23 At the same time in many of the eastern United States a modified approach to the riparian doctrine has been introduced through the introduction of a licences that specify the volumes of water that may be taken. The mere quantification of rights does not automatically resolve this issue. The need to take account of environmental considerations Traditional approaches to water rights allocation failed to take account of the environment. However. Early attempts to introduce formal water rights regimes in the preenvironmental era similarly neglected the ecological and aesthetic functions of rivers and water bodies. 2004). now that environmental issues are so 30 Not all though. Evidently these are states that do not suffer from water shortages. or (3) causing land subsidence to another property it is clear that these minor developments in the law are not of themselves sufficient to prevent over abstraction of groundwater. Another clear example of the inadequacies of traditional land-based approaches is provided by the experiences of their inability to prevent the depletion of aquifers. The difficulty of reconciling the different activities of neighbouring landowners over their separate yet connected "private waters" led to innumerable court disputes and piecemeal legislative reforms. (2) maliciously done to harm a neighbour.

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Modern water rights – theory and practice

much higher up national agendas, all recent reforms to water rights regimes have simultaneously sought to take them into account. Thus a key objective of the recent Australian reforms described in this paper has been to promote environmental objectives in part by reducing the need for major new infrastructure by better using the existing water resources. In addition reductions in agricultural overuse should have a positive environmental effect through a reduction in water logging, salinization and biocide dispersion. Similarly environmental concerns have largely influenced the development of the water policy and legislation of the European Community. 3.4. The need to better recognize the economic value of water

Where water rights are less than clear damaging economic consequences can follow. These involve a much reduced incentive to augment the value of the water, of farmland and other infrastructure which uses it, as well as reduced incentives to conserve it. A desire to prevent the waste and over-use of water through the introduction of tradable transferable water rights was one of the main reasons behind the recent reforms to water law and water rights in Australia. Australian interest in tradable transferable water rights (TWR) began to surface in the mid-1970s and the state of Victoria first introduced such rights in the early 1980s. For some, their introduction seemed to offer a new flexibility to existing arrangements, with clear economic and environmental advantages. First, the maturing of the Australian water economy in recent decades is associated with high average total cost for the long-term supply curve. So TWR potentially offered a new direction that, by reallocating water supply, would reduce the pressure for aggregate supply expansion. This reallocative effect would not be merely within the farming sector. There was also the prospect of reducing agricultural overuse to open up supplies for a range of urban and industrial uses. Secondly, supply reallocation within agriculture was a major objective. There was a widespread belief by the mid-1980s that TWR would switch water from lower to higher productivity uses in the farming sector. In Australia, at that time, the agricultural sector accounted for 80 percent of total water use. In

Modern water rights – theory and practice

25

Victoria, each year, up to a third of irrigators were using less than their full water right allotment. Specific switches into river red gum watering, salinity dilution and dairy farming were forecast. In 1995 the Council of Australian Governments introduced its water reform process, according to which all of the state governments committed themselves to introduce a "system of water allocations or entitlements backed by the separation of water property rights from land title and clear specification of entitlements in terms of ownership, volume, reliability, transferability and, if applicable, quality." 3.5. The transformation from socialist to market based economies

While most of the former socialist countries of Eastern Europe and the former Soviet Union had water legislation in place under socialism, this seldom created formal and explicit water rights. Instead annual licences were issued for the use of water resources. Given that the state controlled or owned both the water resources and enterprises undertaking economic activity this mattered little in practice. The shift to a market based economy has clearly altered the situation and both national and foreign investors will require water rights. So far, however, and unlike the situation with regard to land tenure rights, progress in this area has been relatively slow particularly in the former Soviet Union with only Armenia and Kyrgyzstan having enacted legislation that creates substantive water rights. 3.6. Regional initiatives

In some European countries the introduction of formal water rights is a result of European Community legislation, specifically the Water Framework Directive. 31 Scotland, for example, notwithstanding its damp climate has forty to fifty thousand abstractions and between five and ten thousand impoundments, but until the recent introduction of the Water Environment and Water Services (Scotland) Act 2003 most of these were not controlled by legislation but were regulated on the basis of traditional principles (Allan, 2003).
31 Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy.

26

Modern water rights – theory and practice To support or entrench wider economic reforms

3.7.

In some jurisdictions water rights reforms have been enacted to support or entrench other economic reforms. For example in New Zealand the Resource Management Act was adopted in 1991 in the wake of a radical reordering of the roles of state entities: economic development was to be the primary responsibility of the private sector through the use of market forces with the role of the state to be restricted to the management of resources. This form of economic re-ordering was even more evident in Chile following the seizure of power by General Pinochet in a coup in 1973. This was followed, inter alia, by a fundamental shift in the management of water resources. In a break with the socialism of President Allende, the new government moved to a market-orientated economic policy. In the agricultural sector, land and water rights were shifted to private ownership, property rights in water were introduced or clarified, and market allocation of the good was envisaged. This can in turn be seen as a backlash against the 1967 Agrarian Reform Law which had greatly expanded government authority over water use and water management, at the expense of private rights (Bauer, 2004). State-owned water rights were terminated and the 1981 Water Code entitled secure, transferable water rights reforms which can be seen as ideological to the extent that they sought to retrench and concretise the land and water (counter) reforms. 3.8. To support other reforms

Historically through to the end of the 1980s the structure of property rights for water and land in Mexico was consistent both with the country's centralization of political and economic power as well as with the strong role played by public sector institutions in allocating resources and producing goods and services. In particular, following the Mexican Revolution of 1910, the agricultural sector, including its land and water rights, had an exceptional nature, with a strong social welfare role. With the exception of small farms, the farm sector consisted of ejidos, land in social property and owned in common by the farmers living there. In the ejidal system, state irrigated land was managed in Irrigation Districts.

there existed great uncertainty in access to water concessions – they could be reduced or revoked for a wide variety of reasons. the transfer of the operation of canal systems to farmer-controlled water user associations. and the introduction of more liberal trade policies in conjunction with the conclusion of the North American Free Trade Agreement (NAFTA) (World Bank. rented or used on other lands beyond the 20 hectare maximum per farmer. The Government of National Unity embarked on a Reconstruction and Development Programme aimed at ending poverty. "sustainability" and "equity". The promotion of social goals 3. But because of the discretionary power of the CNA and the Ministry of Agriculture. In relatively few cases have water rights reforms had social goals. The 1998 Water Act sought to implement the two key principles of the 1997 National Water Policy. An exception is South Africa where water law reforms were a direct result of the historic elections of 1994. This system of water allocation went hand-in-hand with low water productivity and economic efficiency as well as ejido dependence on central subsidy of the Irrigation District. the first involving universal suffrage. . In fact there was a short-term water rental market. the revision of the role of the CNA. where larger farmers were active.9. By the 1980s the time seemed to be ripe for a shift from central controls to local freedoms and this was seen to make a strong case for the introduction of water rights held by farmers themselves alongside the transfer of responsibility for the operation of irrigation infrastructure from the state to farmer-operated water user associations.Modern water rights – theory and practice 27 The bulk of surface water for irrigation was distributed directly by the National Water Commission or Comisión Nacional del Agua (CNA) headquartered in Mexico City. Water allocations could not be sold. illegal but facilitated by local officials. This enactment of Mexico's National Water Law in 1992 coincided with a series of policy reforms initiated in the late 1980s which included: x x x x the privatization of communal land holdings (ejidos) through the1992 Agrarian Law. 1995a).

one of the objectives of the reforms described earlier was to complete a process begun by the first Federal Water Law. 2003). reliability. In particular the absence of a volumetric cap on the amount that could be taken led to unreal expectations by licensees and the potential for actual use to expand in an unconstrained way causing negative impacts on neighbours and the environment. It was estimated that there were about 300 000 users by 1992 but only 2 000 concessions had been .28 Modern water rights – theory and practice With 83 percent of agricultural land previously in the hands of white farmers and the majority of water for irrigated agriculture also controlled by them through the white-dominated irrigation boards both land tenure reform and water reform were necessary to right the injustices of the apartheid era (World Bank. The completion of earlier reforms In a number of cases recent water rights reforms have sought to complete and perfect earlier reforms. Water users also had no specification of the reliability of supply that could be expected under a licence. One of the key elements the framework addressed was water rights.10. volume. Turning to Mexico. In surface water systems licensees sometimes found that although their licence did not change. Similar problems existed with regard to the water legislation of the other states. the amount of water that could be obtained under the licence was progressively reduced by the construction of new dams (Cox. the water entitlement provided by a water licence was often poorly specified. if appropriate. the licence did not make clear the extent of the entitlement. quality (Productivity Commission. enacted in 1972. It provided "national waters" to be used exclusively on the basis of a concession granted by the Federal Executive. However no implementing regulations had ever been issued in connection with that law. 2000). transferability and. for example. In the Australian state of Queensland. 3. 2002). In 1994 the Council of Australian Governments (CoAG) endorsed a strategic framework for the efficient and sustainable reform of Australia's water industry. The CoAG agreed that each member government would clearly specify rights in terms of ownership. One of the key features of the Water Act was the abolition of riparian rights and its replacement with a modern permitted water rights regime with the specific objective of removing the privileged position of riparian land owners. albeit rights that were generally tied to specific land plots. That is. legislation which provided for administrative water rights.

but not least. with an even higher share in lower income countries (World Bank. 2002).11. the level of demand for irrigation water is unlikely to decrease in the near future. even if everything is done to make irrigated agriculture more water efficient. It is reckoned that the demand for water will increase by around 50 percent in the next 30 years and that around 4 billion people. 32 With conditions particularly severe in Africa. one half of the world's population will live in conditions of severe water stress by 2025.8 billion people who it is estimated will populate the planet. 2003).Modern water rights – theory and practice 29 issued mainly because this power could be exercised solely by the President (FAO. 2001). Continued population growth and the effects of climate change. it is estimated that at least 55 percent more freshwater will be needed. the rise of mega-cities. a phenomenon whose eventual impacts are not yet fully understood. 1992): in India irrigation accounts for 93 percent of the gross amount of water used (World Bank. At least 17 percent more freshwater than is currently available will be needed by 2025 to produce sufficient food for the 8. This increase is a result of major investments in the sector that have the effect that on average some 73 percent of all water abstractions are for irrigation. Already. Pressure on water resources Last. around one third of the world's population live in countries that suffer from moderate to high water stress. the Middle East and South Asia (World Bank. suggest greater pressure still. an increase of some 200 million hectares over the course of the twentieth century.32 A lot of this increased demand will come from irrigated agriculture which is particularly sensitive to small temperature variations. The agriculture sector is already the main water use sector in many countries around the world and some forty percent of world food production is currently produced on around 250 million hectares of irrigated land (Bogdanovic. The reasons are well known and include population growth. If this is not done. underlying all of these issues is the simple fact that around the world pressure on water resources has hugely increased. Furthermore. 3. 2003). rising affluence leading to greater water demand as well as new industrial and commercial processes. .

It has been suggested that the single greatest problem in water resource management in the developing world is that property rights in water are very insecure and ineffective. What is needed is better and more efficient management. It follows that the introduction of modern water rights in particular and water rights reforms in general will continue to be on national agendas in most countries around the world for the foreseeable future. .30 Modern water rights – theory and practice From time to time newspapers talk in turns of an increasing scarcity of water. In fact. 2001).better management and allocation of water resources is really the only available option. primarily through the mechanism of water rights. 1999) a pattern that is repeated throughout the American West and Southwest (Blomquist et al. the volume of freshwater has remained remarkably constant over the millennia (McCaffrey. In Texas. it is estimated that the population of the state will almost double in the next 50 years from 19 to almost 36 million (Pitts et al.. Given that in many jurisdictions few additional resources remain to be exploited . In modern societies law plays a key role in this process of allocation and management.there are few viable dam sites left in Australia for example . 2001). But pressure on water resources is not limited to developing countries. unlike oil and other non-renewable natural resources. for example.

In a number of the jurisdictions considered in this paper little in the way of consultation and education took place in connection with the introduction of water law reforms. government legal service or parliamentary counsel for inter-ministerial consultation followed by cabinet approval prior to submission to the legislature. sometimes following cabinet approval. Each jurisdiction has its own particular formal procedures for the adoption of new legislation. Draft legal text is then prepared by the sponsoring ministry. For example. in the civil law jurisdictions of the countries of the Commonwealth of Independent States the first step is usually for the sponsoring ministry to prepare and circulate a draft legal text through two rounds of "inter-service" or inter-ministerial consultation before submission to the government (cabinet or council of ministers). a consultation paper (sometimes known as a "green paper") is typically circulated by the sponsoring ministry for comment from other ministries/state agencies as well as civil society (including the business community and non-government organizations (NGOs). What is of more interest is to consider the consultation and education processes that have been undertaken before the start of the formal procedures as well as the extent to which formal procedures create genuine opportunities for public consultation. a consultation and education process was not seen as a fundamental requirement for the shift to market institutions by the . law or government instruction but in any event a detailed comparison can really only be of academic interest as far as the enactment of legislation for the introduction of modern water rights is concerned. In common law jurisdictions. this section examines the consultation and education processes that have been undertaken in connection with the reforms themselves. Such formal procedures are determined by custom. In contrast. THE CONSULTATION AND EDUCATION PROCESS INVOLVED Having identified the need for water rights reform. Based on the responses received a more formal legislative proposal (sometimes called a "white paper") is then circulated for comment.Modern water rights – theory and practice 31 4.

The government. But the process of liberalization was a topdown movement and so the consultation and education process for the introduction of modern water rights was minimal (FAO. Secondly. First of all widespread consultation has a very valuable educational function: those who are affected by eventual reforms will be relatively more familiar with their effects and objectives not least by reason of having directly or indirectly participated in their final development. What consultation took place concerned the modalities of the new code prior to its inception in 1981. while consultation is sometimes dismissed as but a form of "political correctness" the fact is that substantive reforms may have important and complex socio-economic impacts on livelihoods that legislative procedures may have difficulty capturing. 33 .32 Modern water rights – theory and practice authoritarian government of President Pinochet in Chile. there is now a trend towards genuine consultation by governments with a wide range of stakeholders before substantive reforms are undertaken in natural resources sectors such as the water sector. Water law reform was one of the flagship legislative reforms of the Socialist government that was elected in Spain in 1982. however. 33 Generally speaking. In other words there is a form of moral case for listening to the voices of those affected. Thirdly.34 There are a number of benefits of taking such an approach. 34 Even in England recent and ongoing water sector reforms have undergone a lengthy and elaborate consultation process. Similarly in Mexico the shift towards liberalization in the early 1990s offered the farmer greater control in his access to water. experience suggests that widespread and genuine consultation leads to the preparation of better and more effective legislation. While the concepts and draft texts were carefully but rapidly prepared by a large and competent team of experts there was little public debate on the matter as the administration favoured an internal discussion process in order to meet tight legislative deadlines. experience shows that if a broad consensus can be reached as a result of a genuine consultation process it is ultimately much easier at the political level to enact legislation particularly with regard to vital natural resources such as water. and arising from the points just made. had developed a clear notion that private rights in property were the key to economic success. Finally. The lack of consultation is not confined to more authoritarian regimes. particularly in respect of complex sectors such as water. 1999). before assuming power.

Other national government departments and both provincial and local spheres of government were also consulted. These principles were further refined and released on 17 April 1996 as the basis for further public consultation. organized in such a manner that the voices of the rural poor and the disadvantaged would be heard. These Principles in turn guided an intensive programme of work involving the Minister and other political leaders. municipal users and environmental groups were encouraged to arrange their own meetings to discuss the principles. officials from the Department of Water Affairs and Forestry and other government departments. in May 1995. research and synthesis. in the Australian state of Victoria the consultation and education process with respect to the most recent reforms designed to introduce effective transferable water rights involved the production of background documentation on transferable water rights.Modern water rights – theory and practice 33 For example. and conferences between farmers and the state government on the opportunities offered by a new system. The consultations ended in a Water Law Review National Consultative Conference in October 1996 which discussed practical approaches to implementation as well as the principles that would guide the drafting of the . Similar. quite intensive consultation work took place in the other Australian states. They also took part in the consultative meetings and in bilateral meetings with the minister and department. organized user groups and South Africans from all walks of life and from all provinces in a process of consultation. of the booklet "You and Your Water Rights" for public comment. mines. the launch of research projects on prior experience in other parts of the world (such as northern Colorado). The first outcome was the production of the "Fundamental Principles and Objectives for a New Water Law in South Africa" which were approved by the Cabinet in November 1996. questionnaire and interview surveys on farmers" interest in the subject. In South Africa the formal step of issuing a Government White Paper in 1997 on water law reform was the product of two years of extensive study and wide consultation. A Water Law Review Panel then produced a set of principles for a new water law. taking into account the comments from the public. Consultative meetings were held in all nine provinces of South Africa. Other interest groups such as agriculture. The process of consultation began with the distribution. industry.

The process. as well as water users.34 Modern water rights – theory and practice law. the 1995 Water Law. The draft National Water Bill was subsequently drafted on the basis of the White Paper. Next a short paper was prepared on the contents of a typical modern water code based on international experience alongside ten issues papers describing the "hard" or key policy issues that would need to be agreed on. Next an inter-ministerial working group was established composed of senior experts as well as NGO representatives to work through and reach a consensus on the "hard" and key issues. The notion of modern water rights was almost entirely novel in a culture that was influenced both by rather top-down soviet bureaucracy as well as Islamic notions that water is a "Gift from God". the Ministry of Agriculture and Water Economy. NGOs concerned with water and environment issues. These documents were widely circulated among government ministries. Eleven technical task teams were then appointed to translate the Principles into practical proposals which informed the policy positions of the White Paper. The final Fundamental Principles and Objectives for a New Water Law for South Africa ("the Principles") were approved by Cabinet in November 1996. which was supported by the United States Agency for International Development (USAID) began with a concise review of the deficiencies of existing (soviet style) legislation 35 and the related obstacles to effective water management. A similar but somewhat simpler approach was undertaken in Kyrgyzstan in connection with the preparation of the recently enacted Water Code. One of the key objectives of the sponsoring ministry. which was tabled in Parliament during the course of 1997. local and regional government. . was to establish a system of modern water rights to complete and complement the land tenure and irrigation management reforms already undertaken (agriculture is the country's largest economic sector). was essentially the Water Code of the former Soviet Socialist Republic of Kyrgyzia with the words "soviet socialist" removed. The findings of these working groups were presented at a further national high 35 The law. The new National Water Act was finally adopted in 1998. A series of discussion meetings were held around the country and experts from the Food and Agriculture Organization of the United Nations (FAO) were invited to make a presentation at a high level seminar attended by ministers and senior officials.

. Finally. and in particular the implementation of the water rights regime. the key issues being addressed and the content of the code were described in a water law bulletin (published in Kyrgyz and Russian) published four times a year and with a print run of 15 000 that was widely distributed around the country. with the approval of the Minister. mention should be made of a study tour to South Africa that was organized by FAO for senior government officials and which enabled them to experience at first hand the substance and effects of the South African reforms. then mandated the preparation of the first draft text.Modern water rights – theory and practice 35 level workshop which. coupled with a series of workshops and widespread consultation on the draft led to the development of a text that the Ministry could then submit to the formal prelegislative approval procedure. Those findings. Meanwhile the government had requested FAO's assistance in starting to prepare the ground for the implementation of the new code. Throughout.

This tends to be either because groundwater is overwhelmingly more important than surface water (in countries with little rainfall for example) or.1. whatever deficiencies they may have. subject to challenge by those adversely affected. as in the case of several American states. In connection with the notion of integrated water resources management there is a trend towards enacting comprehensive water legislation that addresses all aspects of the hydraulic cycle thus including ground water and surface water (and even cloud seeding and rainwater harvesting). New water legislation can. After examining the formal source of the "legal rules" for the introduction of such rights. More specifically. THE LEGAL AND REGULATORY BASIS In this section the legal and regulatory basis for the introduction of formal and explicit water rights is considered. Nevertheless in some jurisdictions groundwater continues to be regulated under separate legislation. are a form of property right. "law" or "code". such rights have generally been introduced through the enactment of new legislation in the form of a water or water resources "act". For example provisions in the 1985 Spanish Water Law concerning pre-existing groundwater rights were challenged as amounting to an illegal "taking" up to the level of the Constitutional Court. The need for primary legislation is explained as follows. and depending on the jurisdiction and legal tradition involved. The need for primary legislation In all of the examples considered. this can only be done on the basis of primary legislation and even then only on the basis of very clear wording. If such rights are to be modified. New water rights regimes invariably affect existing water rights including traditional rights. the substantive conceptual content of the different steps in the process is considered. 5.36 Modern water rights – theory and practice 5. modern water rights have been established on the basis of primary legislation. and often is. . because a specific response is needed to ground water over-abstraction which does not require amendment of the surface water regime. Indeed in the case of private waters under the civil tradition such rights are in fact a form of ownership right. In most jurisdictions existing traditional water rights. or even cancelled.

But it is not unique. x the inclusion of water within the public domain of the state. This is done through a variety of different legal techniques. of course. the common law has not generally recognized the concept of ownership over flowing water resources even by the state. as already seen. this too can only be done on the basis of primary legislation. an issue returned to below. In all of the cases considered with the exception of Mexico. a Federal Water Resources Law was recently adopted by the Russian Federation. Indeed Mexico is perhaps unusual in that responsibility for waters is a Federal competence. it is. as in Albania's Law on Water Resources of 1996. such laws are enacted at state level. 36 Water Code of the Russian Federation No. These have included: x a declaration (or sometimes a reiteration) of state ownership. as happened in Italy in 1994 and Morocco in 1995 in connection with groundwater reforms.2. In the case of federal states the level at which primary legislation is enacted will depend on the provisions of the relevant constitution. and thus approaches taken to water rights. The effect is. even more marked in the United States where the two common law doctrines continue to play such an important role.Modern water rights – theory and practice 37 Equally if new legislation is to establish modern water rights as a form of property right. dated 3 June 2006. Because. as described above. water legislation in common law jurisdictions has tended to declare a superior state control right over water. x a declaration that water is "national property for public use" as is the case in the Chilean Water Code. While this observation is true for those jurisdictions in which this issue is addressed primarily in legislation. for example in the cases of Australia and Canada. The "nationalization" of water resources In many jurisdictions the first step in establishing a system of formal rights is to bring water resources within the ownership or control of the state. . that water legislation. 36 5. 74-FZ. in different jurisdictions within a federal state can be markedly different. For example.

Section 8(7) of the Victorian Water Act provides: The rights to water conferred by or under this Act on a person who has an interest in land replace any rights: (a) to take or use water. Two examples from different Australian jurisdictions are instructive. or (c) to affect the quality of any water. or (d) to receive any particular flow of water. x the vesting water resources in the President of the State on behalf of and in trust for the people. Apart from provisions that either continue such rights on a deemed basis or provide for their conversion into the new form. (b) to obstruct or deflect the flow of water. 37 Having placed water resources under state ownership or control the next step is to address the validity of existing water rights. x bringing water resources under the superior use right of the State in Uganda's 1995 Water Resources Act and the Australian state of Victoria's Water Act of 1989.38 Modern water rights – theory and practice x a declaration that water is "public property" as provided for in section 1 of the Israeli Water Act 1959 and in respect of groundwater in New Mexico's 1927 groundwater legislation. as provided for in Ghana's Water Resources Commission Act of 1996. or to receive a flow of water of a particular quality that the person might otherwise have been able to enforce against the Crown or any other person because of . 37 Although Spain's recent water legislation omits fossil groundwater. x the placing of national water resources under the trusteeship of the National Government as in South Africa under the National Water Act 1998. This is in those cases where the existing rights would be replaced through the transitory provisions in the new law. such state ownership or control applies to all of the water resources within a state's territory thus including both surface water and groundwater. this is usually achieved by a simple statutory declaration. an issue returned to below. or as in incident to. Usually. such interests. .

Institutional arrangements for water resources management Having placed water resources under state control or ownership and dealt with the status of existing water rights. Social scientists would probably use the word "organization" as law is itself is seen as an institution. 39 The Water Framework Directive requires water to be managed on the basis of river basin districts (article 3). 38 . including the administration of water rights. It provides: Rights at common law in relation to the taking of naturally occurring water are abolished.Modern water rights – theory and practice 39 A simpler means of achieving a similar but less comprehensive result appears in section 7(9) of the South Australian Water Resources Act 1997. The word "institution" is used in the sense used by lawyers. throughout the relevant jurisdiction there is an increasing trend for water management to be undertaken on a drainage basin approach. including the issue of water rights. 5. South Africa with its statutory Catchment Management Agencies. from the upper watersheds down to the sea. is formally conferred on a minister. together with necessary legal powers. such as the Department of Water Affairs and Forestry in South Africa. usually acting through a statutory Director or Director General of Water Resources. While a water administration typically has overall responsibility for water resources management. or some other statutory body such as an authority (such as the Jamaica Water Authority) or agency (such the Environment Agency in England) or General Directorate of Waters such as the Dirección General de Aguas in Chile. and its tributaries. For the purposes of this paper the generic term "water administration" will be used. or other final "terminus" (such as a lake). logically the next legislative step is to create the institutional arrangements for the management of those resources. provides one example while the European Community provides another. 38 Typically the ultimate responsibility for water resources management. 39 In other words water is managed by reference to the shape or form of the land that forms the catchment of a major river.3.

Such arrangements typically seek to give effect to the second of the Dublin Principles. the interdependence of different parts of each river basin. After all. As such it can become a rather complex process. A similar entity was introduced into the Tunisian legislation in a 2001 amendment to the 1975 Water Code. . (Winpenny. the river basin provides a natural forum for conflict resolution. Stakeholder involvement The complexity of water resources management and the need to involve so many stakeholders means that legislative provision is often also made for coordinating and/or decision-making mechanisms at the central level as well at the level of individual basins or catchments. involving users. it does mean that water resources management is undertaken in what can be a very large land area that usually does not accord with administrative boundaries. the trend is certainly in this direction and it is a trend that is increasingly provided for in water legislation. It can also make it more difficult to accommodate groundwater management within surface water basins. both internal and external.3. as aquifer boundaries often do not follow the latter. namely that water development and management should be based on a participatory approach. Nevertheless. given that surface water within the basin will naturally flow in a common direction towards that terminus. rivers and lakes make good natural borders. many externalities are internalized at the river basin level. the river basin is an obvious focus for data collection and analysis.40 Modern water rights – theory and practice The following factors are cited in support of this approach: x x x x x x its hydrological unity from a management perspective. An example of the former kind of body is the inter-ministerial National Water Council provided for in the Albanian Water Law which is chaired by the Prime Minister.1. 1997) While this approach is correct from a hydrological perspective. 5. there are opportunities for optimizing water development and operation at the river basin level. planners and policy-makers at all levels.

Water user associations. the fact remains that the negative impacts of hard decisions are much more easily implemented if those affected have played a part in reaching them. Best known historically for operating irrigation and drainage systems. which are typically established on the basis of generic enabling legislation. 2004). which are legally independent entities controlled in a participatory and democratic manner by water users have a long history in water management around the world. 5. recent years have seen a significant broadening of their activities (FAO.3. Specialized water management entities In addition to providing for the establishment of a water administration. Spain and Mexico. Particularly as regards planning activities and decisions on water rights issues. . The fact that they function on a democratic 40 In other words all water user associations within a given jurisdiction are established on the basis of the same enabling legislation.Modern water rights – theory and practice 41 Examples of the latter include the river basin councils of France. For example in Spain the 1985 Water Law made the establishment of groundwater user associations (GUAs) compulsory in overexploited aquifers. Apart from the fact that participatory approaches arguably lead to better decisions being made.2. While the range of roles and tasks of such bodies vary from jurisdiction to jurisdiction. 40 or resource specific statutory bodies which are typically established individually on the basis of a specific act or law. it very frequently happens that "hard decisions" have to be made that may negatively affect rights holders. Like water user associations in most jurisdictions GUAs are established as bodies of public law or public corporations pursuant to the 1985 law which also sets out their relationship with the water administration. While South Africa's Catchment Management Agencies operate under the overall supervision of the Department of Water Affairs and Forestry. each is governed individually by a management board comprised of water users and other stakeholders. their establishment goes beyond mere rhetoric. under whose overall supervision they remain. there is an increasing trend for water legislation to devolve responsibility for aspects of the management of individual water resources at risk of depletion or contamination to specialized water management entities such as water user associations.

set limits on pumping and wells. A similar approach is found in California. x to protect and ensure the quality of ground to surface water in the Authority's jurisdiction . a form of water user association. The Act also established the South Central Texas Water Advisory Committee made up of representatives from down stream counties to interact with the Authority when issues related to downstream water rights are discussed. for example. The Act created a 17-member board of directors that sets policy to manage. 1998). The Authority is a regulatory agency charged with preserving and protecting the Edwards Aquifer in an eight-county region. conserve. coupled with continued fears over the state of the important Edwards Aquifer in 1993 the Texas legislature enacted the Edwards Aquifer Authority Act to establish the Edwards Aquifer Authority (the Authority) as a special statutory body. preserve and protect the aquifer. report. for example. They have been described as "planning giants and regulatory dwarfs": while they have extensive powers to study. have been established in respect of around 89 percent of the state's groundwater.. disseminate and plan they have been limited in their ability to disturb the basic rule of "capture" described above (Kaiser et al. comprehensive management plan based on sound. in response to concern about the over-extraction of groundwater some 88 groundwater districts. These districts may. In Texas. x to maintain continuous spring-flow.42 Modern water rights – theory and practice basis and are controlled by users means that GUAs have a greater inherent authority when it comes to making "hard" decisions such as. but are not required to. In response to concerns over the effectiveness of the groundwater districts. consensus-based scientific research and technical data. Texas and a number of other western states in the form of groundwater districts. legal challenges prevented the Authority from operating until 28 June 1996. x to develop an effective. The board has 15 selected members from the eight-county region and two non-voting appointed members to carry out the duties set out in the Act. and works to increase the recharge and prevent waste or pollution of the aquifer. restricting groundwater abstractions. However. The tasks of the Authority are inter alia: x to fully implement the requirements of the Edwards Aquifer Authority Act. They are locally controlled by local voters.

.Modern water rights – theory and practice x to promote healthy economies in all parts of the region.3. This requires the costly installation and operation of measuring equipment. professional management of groundwater resources.3. 43 Crucially. the level and flow of water varies in most watercourses primarily as a result of climatic variations. In other words. any well that withdraws water from the Edwards Aquifer is required to have a properly installed water flow meter. and x to provide strong. x to research and develop additional sources of water. and if the river or stream in question is fed from glaciers or snowfields may also require monitoring conditions in the high mountains. the issue and administration of rights. x the enforcement of water law and water rights regimes including prosecution activity. with the exception of some wells used to abstract water for domestic and livestock purpose. The flow meter measures the amount and velocity of the water that is discharged through the well and these are verified periodically by the Authority's technicians. the organization of stakeholder fora (as described in the previous sub-section). much of their practical activity relates directly or indirectly to water rights. First of all. as already mentioned. including the maintenance of registers. The first task for a water administration is to monitor the level and flow of waters throughout the length of a water course as this will have impacts on both the quality of water and the amount that can be abstracted or otherwise used pursuant to water rights. monitoring of water quality and water quantity . Water administration tasks and powers While a full discussion of the structure and tasks of water administrations is beyond the scope of this paper their basic tasks usually include: x x x x planning. 5. The Authority's activities are conducted on the basis of its Groundwater Management Plan (GMP) that includes a set of nine goals with appropriate management objectives and performance standards necessary for the effective management of the Edwards Aquifer.

Since time immemorial humans have disposed of wastes to rivers and streams. There is clearly substance to these arguments. of the sort pioneered in Australia and Europe are really replicable in developing countries. hydrology cannot simply be ignored and it may well be the . from factories and other pollutants from surface water run-off (particularly fertilizers and pesticides) contribute to lowering the level of water quality in rivers and streams and in groundwater formations and thus the quality of water that is subject to water rights. when pressure on water resources is likely to be at its highest. the temptation to "cheat". for example. to abstract more than permitted by the water right or any restriction placed upon it. Particularly in times of drought. Such activities. Criminal prosecutions may lead to a range of penalties including imprisonment. indeed all of the activities mentioned in this section clearly have human resource and financial costs. The importance of monitoring and enforcement cannot be over-emphasized: where they are ineffective the value of water rights will be diminished (Productivity Commission. Such measures may in turn include a power of arrest as well as the power to impose fines. Indeed the costs of setting up the institutional arrangements of this type have led some to question whether institutional models for integrated basin management. Shah. Such powers may include the right to enter privately owned land to undertake inspections and monitoring activities as well as the right to take enforcement measures. Solid and liquid wastes from urban sewerage systems. But the quantity of water in a watercourse is not the only matter that requires constant measurement. Furthermore it is necessary for the legislation to confer on the officials of water administrations the necessary inspection and enforcement powers. On the other hand. In short.44 Modern water rights – theory and practice The measurement of water rights themselves is also a relatively complex matter requiring continued activity. particularly given the huge catchments of many Asian rivers (see. 2002). and while increasingly regulated the practice continues. 2003). apart from the need for constant measurement and monitoring activity water rights are dependent on the active management of watercourses. with or without treatment. to initiate prosecutions under criminal or administrative law and to impose administrative penalties such as the suspension or cancellation of water rights. Typically powers may also be conferred on water administration officials to direct how specific activities involving the use of water are undertaken or to order certain activities to be stopped or remedied. is likely to be at its greatest.

beyond the scope of this paper. the domestic watering of animals and poultry and the irrigation of a garden not exceeding one acre adjoining a dwelling house on the land of a riparian owner. 44 Until recently the legislation of Alberta in Canada provided that riparian land holders could continue to use water for "domestic purposes" which were defined in section 1(g): Household requirements. 42 In Spain. the volume of water used or a combination of both. bathing. op cit. In the province of Saskatchewan.). while recent water law reforms in England exempt abstractions of up to 20 cubic metres per day from the water rights regime. Indeed such entitlements are sometimes described in legislation in terms of "rights". 43 In Ghana it is an offence to exploit or in any way use natural water resources without a water right granted by the Commission except for water use for the fighting of fire or where water is abstracted by mainly manual means. provides that "Everyone has the right to use surface water resources freely for drinking and other domestic necessities and for livestock watering without exceeding its use beyond individual and household needs …" 42 Nevertheless water legislation usually provides that such "free uses" of water may also be subject to restriction in times of drought. sanitation and fire prevention. agricultural irrigation is exempt from permit requirements in Kentucky and Maryland (up to 10 000 gallons a day) (Getches. 41 Article 13 of the Albanian Water Law. the exemption derives from the size of the parcel of land to be watered. 2002. A full discussion on this point is. commissions. 5. such uses are classified as "common uses" and include the use for drinking. 44 Opoku-Agyemang in Bogdanovic. Canada. 41 Typically. for example. 43 Similarly. . this is done by reference to the type of activity. "Free" uses of water Water legislation typically provides a range of exemptions for activities that would otherwise require a water right. inter-state. however. and other domestic purposes as well as livestock watering. for example.Modern water rights – theory and practice 45 case that in particularly large river basins administrative or provincial actors have of necessity to be involved for example through the use of interprovince river. or in federal jurisdictions.4.

a formal water right is not necessary for the abstraction and use of groundwater for stock and domestic purposes (including household garden irrigation). a value judgement is made by the legislature that takes account of the increased administrative and financial burden of including such uses within the formal framework. "permissions". Similarly as regards groundwater rights. Such instruments are variously described in legislation as "licences". The new legislation restricts such "domestic" rights up to a limit of 1 250 cubic metres per year per household and gives such uses highest priority in times of shortage.5. in those cases where the word "concession" is used in water . legislation typically provides that a formal right to abstract and use groundwater is not necessary in connection with certain specified purposes provided relatively small volumes of water are used. It is also difficult to quantify the quantity of water to which riparians are entitled and there were a number of exaggerated claims. However. 5. water rights are mostly now created on the basis of a legal instrument issued by the water administration. Instead. their relative value to individual users and their overall impact on the water resources balance.46 Modern water rights – theory and practice In practice this provision caused problems on stressed river systems with such riparian owners consuming the entire stream-flow. The introduction of water rights The next step is to introduce modern water rights. "consents" and "concessions". 1998). Such exemptions are usually justified on the basis that their use will have little impact on the total available water supply as well as the administrative burden of seeking to regulate them. As to their legal form. In Australia. for example. There is no great theoretical justification for exempting such uses from formal water rights regimes. "authorizations". the sheer number of individual wells can ultimately have a significant negative impact on the quantity (and quality) of groundwater and related surface water resources (see Drennan. and Caldwell. Having said that. 1997. From a general legal perspective such terms are synonymous.

Some modern water legislation seeks to make this explicit. the fact that water rights may be subject to restrictions. following the so-called French model. In a sense a water right that is described as a concession confers an exclusive right on the holder to use a given volume of water at a given location. even restrictions on their sale or transfer in some jurisdictions. to operate a pop-corn stand in a cinema. In Chilean law while water is considered a public good. Therefore. In other jurisdictions the question as to whether or not modern water rights are a form of property is not specified. does not necessarily 45 The word "concession" is in any event a somewhat slippery term with several different meanings some of which are also used in the water sector. rather than ownership rights. in the sense of an exclusive right. to operate an urban water supply network. in the sense of an exclusive right. For example South Australia's Water Resources Act 1997 states that "a licence (including the water allocation of the licence) is personal property vested in the licensee and will pass to another person under Division 3 [which deals with the trading of licences] or…in accordance with any other law for the passing of property". but then this can said of any water right. they are governed by private as opposed to public or administrative law. The fact that they gain their existence from an administrative or regulatory procedure does not by itself preclude them from being property rights. a private water supply company may hold a concession. For example a person may hold a "concession". intellectual property rights in the form of trademarks and patents are usually acquired through an administrative procedure. by prescription or by purchasing water rights. individuals can obtain rights of use over water by receiving a grant from the state. In conceptualising property both of the main legal traditions differentiate between personal (movable) property such as chattels and real (immovable) property such as land tenure rights. Although these are use rights. modern water rights are administrative use or usufructory rights. The question arises as to whether or not they are property rights. It is also important to note that property rights do not necessarily equate with ownership rights. . Similarly.Modern water rights – theory and practice 47 legislation this generally relates to cases where a particularly long term of use is envisaged coupled with major investments in infrastructure. 45 As to their substance. After all.

it should be emphasized that such rights exist entirely independently to land tenure rights. No one would seriously argue. say. in the context of American water rights. 46 Joseph Sax. has no doubt that they are property rights even when created by permit (Sax. Finally. that a right over. premises conferred on a lessee pursuant to a lease is anything other than a (real) property right even though it is of limited duration. Consequently it can be said with some confidence that provided they are sufficiently secure and for a sufficiently long duration such water rights are indeed a form of property right. for example. may specify what the leased premises may be used for and may prevent or restrict assignment of the term. 1990).48 Modern water rights – theory and practice mean that they are less than property rights. 46 These issues of duration and security are considered below in the section on the definition of rights. .

upon the introduction of a new water rights regime the fundamental basis for the initial allocation of water-rights was the formal or informal water concessions already held during the 1910–1992 period. Most water users therefore had a good basis for . In Chile the situation was a little different as previous water law reforms had seen the creation of a range of earlier water rights. irrespective of whether it would have been possible for a new licence to have been granted because of the environmental impact of such abstractions. 6. the question arises as to how initial rights are assigned. following the initial introduction of a system of formal water rights with the entry to force of the Water Resources Act 1963. In fact this question needs to be broken down into two separate parts. as mentioned above. In 1975. due to the risk that those adversely affected will seek to argue that their extant rights have been expropriated. This meant that the holders of all statutory rights to abstract water. The first question concerns how pre-existing uses and water rights are brought within the fold of the new water rights regime (the actual mechanics of registration are considered in the next section). From a legal perspective the simplest solution is to recognize all existing lawful uses at the time immediately before the new legislation enters into force. established uses were treated as vested proprietorial rights and their holders were entitled to a "licence of right". froze the actual use of water at 1975 levels to establish a base for the assignment of water rights. the government through administrative orders and transitory laws.1.Modern water rights – theory and practice 49 6. and the necessary institutional arrangements are in place. THE INITIAL ASSIGNMENT OF RIGHTS Once new legislation is in force. as well as those riparians who could show that they had been abstracting water in the five years before the system came into force became entitled to a licence as of right. In Mexico. The second question is how new rights are established under the new regime. The recognition of existing rights and uses at the time of the reform The treatment of existing rights can be a delicate subject. Thus in England. two years after taking power. This meant that no-one lost the right to continue an established use of water and so no question of compensation arose.

existing rights and existing uses of water are subject to a formal review at some stage after the entry into force of the new water rights . A similar but more restricted approach was taken in the South African legislation. Canada. and if a term or condition of the deemed licence is inconsistent with this Act. When legislative reforms have the effect only of modifying existing formal rights these are typically recognized in the new legislation. Following the entry into effect of the new regime in a given area. 1999). A person who holds a deemed licence under this section may continue to exercise the right to divert water in accordance with: (a) the priority number of the deemed licence. In addition they were given priority over new users through a guaranteed water supply.50 Modern water rights – theory and practice obtaining water rights by prescription. but must be registered so that their lawfulness can be verified. continued to be valid. although as will be seen below problems of recording remain. that term or condition prevails over the Act. preexisting users were required to apply for permits based on their claimed historical water usage for the period June 1972 to May 1993. the 1996 Water Act provided that existing licences. The Australian state of Victoria assigned the initial rights on the basis of the rights held under the legal arrangements existing prior to 1987/1988. animal watering. In New South Wales. x continuation of an existing lawful water use. Existing lawful uses are uses that have taken place within the previous two years and must be registered as such . Australia. Following the establishment of the Edwards Aquifer Authority in Texas. Section 18(2) states (Percy.they are not licensed unless the responsible authority decides they should be. and (b) the terms and conditions of the deemed licence and this Act. though. Typically. In Alberta. only two types of use could be carried out without a licence: x reasonable domestic use. domestic gardening. existing licences issued under the Water Act 1912 are being converted automatically into water access licences under the Water Management Act 2000. which are known as "deemed" licences. fire fighting and recreational use.

which are usually spelt out in primary legislation amplified as necessary by regulations. for example. x an inspection by the water administration. and x a decision.2. The complexity of the process of determining such allocations can be usefully shown by the statutory procedures whereby water rights are allocated and reviewed. At this stage they can be adjusted to take account of other recognized rights and planned uses of the water resource in question. . by the negative environmental impacts of a proposed use of water). The discussion that follows therefore only addresses those situations where there is sufficient water for new rights to be granted. typically provide for: x the making of a written application accompanied by specified documentation (such as a plan) and. 6. as described in the previous section. It follows that after the introduction of modern water rights. Sometimes those directly affected such as right holders are to be notified individually. x the publication of the application in a local or national newspaper. Such procedures. The grant of new rights With regard to applications for the grant of new water rights the key point to note is that such rights can only be issued to the extent that they do not conflict with existing water rights and any environmental restrictions on the level of abstractions.Modern water rights – theory and practice 51 regime. there may be no water left in respect of which future rights can be issued. x a review of the application by the water administration. x the payment of an application fee. x a period during which objections may be filed by third parties (such as existing water users who may fear that their rights may be adversely affected by the proposed use or environmental NGOs concerned. Such applications are usually required to be made in a standard form but this is not true of Chile. depending on the size and nature of the proposed use an environmental impact assessment. and the holding of a public hearing if appropriate.

See Part 5 below. entitles a person who is authorized to use water to claim a "servitude of aqueduct" over land belonging to another person for the purpose of abstracting or conveying water. 36 of 1998. Italy 1989. 47 The question next arises as to the basis on which such decisions are to be made. modern water legislation typically requires the use of one or more mechanisms to promote rational and effective decision-making. the European Community Framework Water Directive means that the preparation and periodic review of River Basin Management Plans is mandatory for European Community Member States. for example. Morocco 1995. Uganda 1995. South Australia (Australia) 1997 and Texas (USA) 1997. in most jurisdictions it is sufficient simply to provide evidence that the applicant has some form of access right to the water resource. South Africa 1998. In addition in the states of the western United States where the prior appropriation doctrine applies continued beneficial use of appropriated water is a condition of the continued existence of a water right. The South African Water Act. for example. But in some jurisdictions even this is unnecessary. Part Two. Furthermore. the 1992 Water Act introduced a complex water resources planning system based on General Water Plans (Schémas directeurs d"aménagement et de gestion des eaux) covering one or more basins and Detailed Water Plans (Schémas d"aménagement et de gestion des eaux) covering one or more sub-basins (or an aquifer) (FAO. Of these the most important is probably planning. In other words how are water rights allocated? 48 To ensure that such decisions are not made on an arbitrary basis by the water administration.52 Modern water rights – theory and practice In many jurisdictions it is now no longer necessary to be a riparian land owner in order to make such an application. Instead. 49 Article 13. 49 National Water Act. Such a servitude may be acquired on the basis of an agreement or a court order and in accordance with ordinary land law principles a court may order the payment of compensation. In France. Other jurisdictions whose legislation requires the preparation of plans include Spain 1985. The legislation of a number of jurisdictions requires the preparation and periodic revision of river basin plans. Act No. 47 48 . 2002). Chapter 13.

51 Article 65 of the Water Law. Nevertheless. the water administration is bound to have regard to and apply the relevant priorities for water use. For example the minimum contents of Spain's National Water Plan are specified in the Water Law. (3) industrial uses for electricity production. (7) navigation and water transportation. and (8) other uses. . plans and conditions for inter-basin transfer. In some jurisdictions priorities themselves are set out in water legislation. (5) aquaculture. Changes in perceptions of priority cannot be accommodated without a change to the law.Modern water rights – theory and practice 53 Typically. in the absence of such a plan. such as basin councils or committees. The problem with that approach is its inflexibility. as amended. any foreseen changes in the uses of the resource which may affect existing uses for the supply of towns or irrigation. such plans do generally set out priorities for the use of water. for example. (2) irrigation of land and agricultural uses. In order to ensure both support for such types of plan as well as to ensure that key interests are not omitted during the course of their preparation. 50 They may set development and management priorities and increasingly a key concern is to strike an appropriate balance between the needs of societies to use water and the protection of the environment. However. the priorities should be: (1) drinking water supply. by the Spanish Water Law which states that priorities are to be determined in the relevant "Basin Hydrological Plan". preferred option to possible alternatives regarding the above. modern water legislation typically provides for the creation of various basin or sub-basin level fora. The purpose of such plans goes beyond the simple allocation of water rights. the legislation also specifies the minimum content of such plans. (6) recreational uses. 51 In the event that two applicants are competing for the same water resources. 50 Indeed in New Zealand the relevant plans are "regional resource management plans" which are prepared on the basis of the Resource Management Act 1991 and which require regional councils to prepare comprehensive plans for the management of all natural resources including water. as described above. (4) other industrial uses. This is required. The Plan must include: x x x x measures necessary for the co-ordination of the basin plans.

section 27(1). . Jamaica. all abstractions require a licence. 53 Resource Management Act. including the need to redress the results of past racial and gender discrimination. Victoria (Australia) and South Africa. the first being whether or not there is sufficient unappropriated water (Getches. 54 In England above the minimum thresholds. 54 National Water Act.54 Modern water rights – theory and practice in which stakeholders can participate in their development and or review. Sometimes such bodies hold additional functions such as determining applications for particular categories of water rights. 52 A range of other statutory tests may be provided for. It is the second test to be applied.). served basis" up to the level which the aquatic environment can sustain. x the development of "water sharing plans" that seek to protect water resources and dependent ecosystems and set overall abstraction limits as in New South Wales (Australia). These are issued on a "first come first. whereby specified volumes of water are set aside for priority purposes. x the establishment of water "reserves". Thus in New Zealand the water administration must consider "any actual or potential effects on the environment of allowing the activity". Mexico. x the requirement for an environmental impact assessment as required in the member states of the European Union and South Australia (Australia). including environmental needs as in the case of Armenia. x the satisfaction of a test of public welfare in a number of jurisdictions in the western United States. The water administration exercises its discretion within the framework of a catchment management plan . England and Spain.which is 52 This test is commonly required by legislation in connection with applications for permits for water rights under the prior appropriation in the western United States. Other mechanisms that assist in preventing arbitrary decision-making in the context of the allocation of water rights include: x the setting of statutory minimum flow requirements for rivers from which no derogation is permitted as is the case in France. the efficient and beneficial use of water in the public interest and the strategic importance of the water in question. 53 In South Africa the water administration is required to address a broader range of considerations in determining applications for water rights. section 104(1)(a). op cit.

If there is more than one applicant for the same water right then the issue is determined on the basis of an auction. . Essentially if the water administration determines that there is water available it is bound to issue a water right to whomsoever asks for it. Article 30 of Mexico's National Water Law. requires the water administration to maintain a "Public Registry of Water Rights". In Mexico too. and not the individual document held by the right holder such as a permit.Modern water rights – theory and practice 55 a comprehensive review of the water resources and water use in a given catchment or group of catchments that is prepared on a consultative basis – and the statutory "minimum acceptable flows" that must be defined and secured for all waters. that is conclusive as to the existence and scope of each water right. for example. Typically it is such a register. details of water rights are usually recorded in official registers maintained by the water administration and it is the register. Once allocated. It follows that the process of initial registration is a key part of the process of introducing a system of modern water rights. The procedure is a little different in Chile. the water administration may auction water rights in the case of competition for the same water.

He goes on to state that "probably the most complex challenge water laws pose is the administration of water rights . Surprisingly. such as the example of New South Wales in Australia this can be a relatively straightforward administrative task. the issue of water rights administration. the site from which national water was to be extracted. the initial use to which the water was to be put. EXPERIENCE WITH PROCEDURES FOR REGISTRATION OF RIGHTS Following the introduction of a new water rights system the main practical challenge is the systematic registration of water rights. Problems arise. and locality to which the application referred. lakes and other expanses of surface water. region.e.56 Modern water rights – theory and practice 7. the volume of water required. op cit.) Why is this the case? The sheer number of water rights involved is one common reason. however. permits and other comparable legal titles for the abstraction of water from watercourses. not only in developing countries. has attracted relatively little attention from academia or research institutions. In Chile one of the hindrances to the water market has been the incomplete registration of water rights (Briscoe et al. is extremely difficult to achieve. the process is necessarily time consuming – to register one water right it is effectively necessary to consider the impact of that right on other rights as well as the environment. and the granting of licences. 1998)." (Garduno. As De Soto argues the presence or absence of clear title has huge impacts on the value of property and thus on economic activity (De Soto. when existing water rights. which included: the name and address of the applicant. existing water uses or both are not formally registered. concessions. The importance of registration should not be under-estimated. which comprises the initial registration and subsequent management of water rights. and for the extraction of groundwater. basin. the granting of licences. and other comparable instruments for the discharge of waste and wastewater directly to or indirectly into a water body or onto the soil. In some jurisdictions where good records of existing water rights are available. permits. Next. One commentator argues that success in implementing and enforcing modern water rights. perhaps. i. In Mexico prospective rights holders had first to establish evidence of previous rights in the application for a concession. 2001). .

And indeed this is exactly what happened. and the period for which the concession was sought. Consequently it is necessary to accept that the implementation of a water rights administration system is "a lengthy process whose duration must be measured in decades. not in years. This was unrealistic not least because the draft effluent standards did not take account of laboratory capacity in the country (Garduno. Specifically it is necessary to be very realistic about the likely timetable for registration even in the early design stages of new legislation.). Previous water use could be established by certification from an irrigation district or ejido administrator as to the individual's land and water rights under the previous law. op cit. details of investments necessary to extract and use the water. All existing water users were required to register their use of water within 60 days of the entry into force of the law or face criminal or administrative penalties. This is perhaps an extreme example: the reasons why this process was so time consuming included the fact that each water right was subject to a field inspection as well as final determination by a court. Experience shows that in such circumstances few water users will respond and that it will be necessary to revise such time periods. Furthermore several universities in the state of Texas supported the process (Garduno. For example in Alberta." (Garduno. The Albanian water law gives a typical example of an approach that was not likely to succeed. Canada. On the basis of experience it is clear that it is necessary to confer relatively long grace periods and for the water administration to take a "generous" approach to the process.Modern water rights – theory and practice 57 the point of discharge. Similarly in Uganda following the enactment of the Water Statute in 1995 the Water Resources Regulations provided only one year for existing users to register and the Water Discharge Regulations did not provide for a transition period at all. op cit. In other jurisdictions the process is often simpler. the Water Resources Act 1970 required non-domestic users of groundwater to obtain a licence. The initial two years period of grace was . The combination of a short grace period coupled with the mere threat of sanctions almost guaranteed failure.). and it relied on public and private organizations with strong capacity. Typically new water legislation requires existing water users to register their rights within a given period. op cit.) In Texas the process of adjudicating surface water rights took twenty years.

This period was insufficient and so in 1995 and 1996 the President of the Republic issued decrees and pardoned the arrears of water charges of those who applied for water abstraction and waste water discharge permits.). At the same time even the use of generous grace periods and effective publicity is likely to be ultimately unsuccessful if it is based simply on a threat of prosecution for non-compliance. This allowed more than one year for preparation. Garduno notes that: "Thanks to the Presidential decrees. 241 000 users had been granted abstraction permits. mass media campaigns and hundreds of meeting with water users. respectively (the day after their publication in the Official Gazette) and provided for only a three year period to register the estimated 370 000 users. In addition a separate implementation team was established to anticipate what the implementation of the bill would require (Garduno. by March 1999.). At that time it was expected to complete the registration of existing water users by the year 2000. which is believed to be the largest systematic water registration undertaken thus far. Finally the case of Mexico. which were recorded in the Water Rights Register. These included the need to plan the implementation aspects of the introduction of a new water rights regime at an early stage. shows that an impressive number of water rights can be issued even if some formal "corners" have to be "cut". In order to encourage people to bring their uses of water within the rights regime active publicity using all available popular media is a pre-requisite. thus providing for a realistic and gradual approach to the regulation of water resources abstraction. One is that water use permits were initially required in water stressed areas.58 Modern water rights – theory and practice ultimately extended to seven years and even after that time many ground water users had failed to make the necessary application (Percy. op cit. The Mexican water law and regulations came into effect in December 1992 and January 1994. Lessons learned in the context of the Mexican experience were applied in South Africa. Thus implementing regulations were developed alongside the primary legislation. op cit. In South Africa two important features of the National Water Act assisted in its implementation. The fact that all applicants were granted permits without carrying out water balance studies may be considered an "ecological price" . The other is that the Act empowered the Minister to bring different sections into force at different times.

This was a short enough duration for the government to be able to rectify a grant when users asked for a permit renewal.Modern water rights – theory and practice that had to be paid because in some of the river basins and aquifers where permits were granted water is scarce." 59 The background to this comment is that the water legislation provided for five to 50 year permit duration. . but long enough to improve information on water availability (taking into account both quantity and quality) and on water uses. However. according to the 1996 decrees all applicants were initially issued with ten year permits. This "ecological price" will make it possible to register all existing users in order to be able to set the stage for sustainable water resources development and management. in order to make a decision based on adequate studies.

. In other words the water rights are made up effectively of two separate components. If the flow is not regulated then a water right will specify a fraction of the flow that may be abstracted by reference to the overall flow rate of the water course. Most rivers.1. What are the features of such rights that enable them to be classified as property rights? Key features include: x x x x the description of the volume of water that applies to the right. the duration of the right. In the Australian states of New South Wales.60 Modern water rights – theory and practice 8. for example. 2003). The key objectives are to promote certainty and security on behalf of the right holder. Such attributes directly affect the value of the right irrespective of whether or not it is tradable or traded. The volume of water that is subject to the right The key benefit of modern water rights over the traditional approaches described above is that the volume of water that is subject to the right is clearly specified. however. Typically if the flow of water in a watercourse is regulated (by a dam or a weir) a water right specifies the volume of water that may be abstracted and/or used. THE DEFINITION OF RIGHTS This section looks in more detail at the definition and substance of modern water rights. Queensland and Victoria. and the mechanisms that guarantee the security of the right. 8. the number and content of conditions attached to the right. This proportion can vary significantly from year to year and from to state to state depending on the legacy of past allocation policies and from resource to resource depending on availability during each irrigation season (Bjornland and O'Callaghan. Similar variations may exist with regard to the volume of water that is contained in aquifers. are not regulated and the volume of water available for abstraction varies from year to year depending on the availability of water resources. annual allocations are announced each year as a proportion of the entitlement of each water right.

While rights of indefinite duration do exist in a number of jurisdictions. in practice the allocation of streamflow converts this volumetric flow to a proportion of streamflow right. Chile and Colorado the general trend is clearly towards time limited water rights. rather than in proportion to the stream flow.. Without careful monitoring of natural flows and the level of abstractions by rights holders the security offered by a water rights scheme is lost.Modern water rights – theory and practice 61 In Chile. 55 The reason for setting rights with a fixed term is to maintain sufficient flexibility to re-allocate water in accordance with future needs. the accuracy of such records must be routinely verified by the water administration through physical inspections. to abstract more than permitted by the water right or any restriction placed upon it is likely to be at its greatest. It follows from the above that the correct monitoring of river or aquifer flows or storage by the water administration is in fact a key contributing factor to the effective administration of a water rights regime. 1997). Particularly in times of drought.. . administrative water rights are not time limited and nor were those introduced in England following the entry into force of the Water Resources Act of 1963. The key issue 55 In Texas. when pressure on water resources is likely to be at its highest.2. 8. Duration With regard to the duration of water rights there are two basic options: either they are time limited or they are of indefinite duration. although the law defines water use rights as a volume of flow per unit of time. 1996). the temptation to "cheat". since variability renders the volumetric/time specification impractical (Rosegrant et al. Such monitoring activities can be an expensive process and in part this explains why in a number of developing countries formal water regimes are simply un-implemented. Similarly in Mexico while water rights are technically specified in volumetric terms. for example. in practice rights are a share of stream flows. While each right holder will usually be required to maintain a record of the volume of water used or abstracted as a condition of his/her water right. For example research conducted in the Pangani River Basin in Tanzania in 1994 revealed that of 2 265 abstractions of the time that should have been licensed only 171 were subject to formal water rights (Dinar et al. including California.

all else being equal. In Queensland water rights last for ten years subject to ten yearly reviews. It is one of the reasons why Chile faces difficulties with regard to water re-allocation. As mentioned 56 This is because it usually takes longer to make a return on larger water sector investments. in the allocation process will be costly to remedy and this is one of the reasons why reform of prior appropriation rights in the American West is not really on the political agenda. Too short a term and the right does not confer a sufficiently long period over which to recoup the value of investments. In other words the introduction of fixed term rights is likely to reduce the effectiveness of water trades. diminishes by the year. At the same time the price that could be expected for a fixed term right is much less than might be expected for an indefinite right. A fixed term right is a wasting asset whose economic value. . usually to a term of 12 years. In England. Indeed the issue of duration poses something of a policy dilemma as far as tradability is concerned. Nevertheless it is the desire to maintain flexibility with regard to future water needs that has led most jurisdictions to limit the duration of rights. Typically over a range of jurisdictions modern water rights last for 15–20 years in respect of ordinary activities and up to 50 or even 70 years in respect of major investments such as the construction of a new hydropower dam. 56 Thus in Spain an administrative concession may not exceed 75 years while in Mexico they last for between five and 50 years and in South Africa they may last for up to 40 years. This is because compensation would have to be paid if the right were cancelled.62 Modern water rights – theory and practice for policy makers is to strike an appropriate balance between the security needed to encourage investment and the need for flexibility as regards future allocations of water. Too long a period and future re-allocation of water resources is exceedingly difficult. following recent amendments to the legislation new water rights will be time limited. Any mistake. The simple logic is that once indefinite rights are conferred they are conferred forever. for example. A person wishing to acquire water may decide to wait until a future re-allocation takes place rather than purchasing an existing right. of whatever sort.

the total amount of water that can be abstracted from that resource is determined on the basis of ten year water sharing plans. For example. rights created under leases are generally for a "certain" or fixed term. Sometimes the duration of water rights may depend on the degree of information available about the resource. In South Africa the duration of rights depends on the nature of the use but there is a maximum of 40 years reviewable every five years. is that it is unlimited in time. In other words while the unit share of each water right may remain fixed in practical terms the amount of water which that share relates to may be significantly altered over time. By analogy with land tenure rights one of the key attributes of the strongest type of right. while as already mentioned. the legislation of the American State of Iowa restricts the term of the right to ten years if the aquifer capacity is uncertain. . the right of ownership. Use rights created in respect of land may also be indeterminate or for a fixed term. 57 Apart from the issue of tradability does the fact that a water right is for a fixed term reduce the degree of security that it confers on the holder? At first sight the longer the duration of a right then prima facie the greater should be the degree of security. But while the unit share in the water resource that the right applies to is fixed. the fact that such rights are time limited may not matter too much as far as security is concerned. try to ensure that existing rights holders can continue their use of water even if at a lesser amount. As one commentator has observed in the context of land tenure rights. Water rights under the Water Management Act 2000 are of an indefinite duration. While at the end of that period the right holder may have an expectation that the right will be continued. the holder can expect to be able to rely on that right throughout the period of its duration. In other words no compensation is payable if a water right is not renewed. "in situations where land users and the private sector are confident that the government will honour contracts. Nevertheless. he/she has no legal guarantee in this respect. Another approach is that taken in New South Wales (Australia). Once a water right has been issued. all else being equal. long57 Generally a water administration is bound to act in a fair manner and will usually.Modern water rights – theory and practice 63 in the previous section in Mexico water rights may last for between five and 50 years. either in full or in part.

Nor. given the every increasing pressure on water resources. For example in Israel most land is state owned and leased to farmers for terms of 49–99 years without any negative impact on the functioning of land or credit markets. it must be added. Breach of such conditions usually has legal consequences which may include enforcement action pursuant to criminal or administrative law or the temporary suspension of even the cancellation of the water right. The key issue would appear to be whether or not the right is likely to be respected. Nevertheless. As always there is no simple legal solution to disputes over scarce resources. 8. in practice political considerations may render such powers academic. Only in the case of Chile are water rights not subject to conditions. The conditions to which the right is subject A popular modern conception of rights sees them as comprising a bundle of both rights and obligations. Modern water rights are typically subject to two separate types of conditions. does the fact that water rights are time limited necessarily mean that the water administration will have that much greater flexibility in the re-allocation of water following their expiry. In conclusion. time limiting water rights does at least remove one potential legal obstacle to the re-allocation of water even if it does not provide a complete "fix". it does not necessarily follow that water rights of indefinite duration provide a greater degree of certainty. general conditions and specific conditions. while the law may grant the necessary legal powers to enable water to be transferred from one category of use to another.64 Modern water rights – theory and practice term and secure lease rights that are fully transferable can become virtually indistinguishable from private ownership. In this connection the problems in Chile with regard to weak enforcement and recording of rights mentioned above may actually mean that they are less secure than fixed term rights elsewhere. . say from agriculture to urban use.3. Water rights are no exception: they are typically subject to a range of conditions. 2003). coupled with the impacts of climate change. More specifically." (Deininger.

Prompt payment of such charges is usually a condition of the water right and non-compliance with such a condition may lead to the right being suspended or cancelled. the kind of use to which the water is put and the source of the abstraction (Germany). In Chile.3. the "profit" made by the water user (Spain) .1. which are usually set out in primary or secondary legislation. the volume of water abstracted (Victoria. the administrative costs of water rights administration relating to the issue and management of water rights (England). Criteria for the setting of the rate of charges vary and include: x x x x x x x the volume of water abstracted. They can also be a useful source of revenue. no taxes or fees are payable by rights holders either in connection with the issue of new rights or holding rights over time. say. and the kind of use to which abstracted water is put (Italy and Mexico). the area in which it is used and source from where the abstraction takes place (France and Arizona). Australia).Modern water rights – theory and practice 8. the type of source from which the water is abstracted (The Netherlands). General conditions 65 General conditions. Examples of general conditions include the following: (a) To pay fees relating to the water right Conditions requiring the payment of water use fees give effect to the "user pays principle" as well as the fourth of the Dublin Principles. . For example all water rights relating to the agricultural use of water may be subject to a general condition that may not apply to the use of water for. The payment of fees or charges may also be prescribed in connection with applications to the water administration for new water rights or the modification of existing rights. typically apply to all water rights within a jurisdiction or to water rights that relate to a particular water body or a particular type of water use. however. hydropower generation.

Also in Chile. An condition. Indeed. The effect is that a failure to use the water that is subject to the right for a specified period. . Examples include the German Water Law as amended on 23 September 1986 and the Spanish Water Law of 1985 (as amended). Some support for these concerns is provided by the Chilean experience particularly in so far as non-consumptive hydropower rights are concerned. which may be impliedly or expressly stated. failure to use water under a water right for a given period leads to forfeiture of the right. may lead to the right being forfeited. the water associated that such This type of condition is also commonly found in modern water Its purpose is to assist in the monitoring of water use by administration. is information be transmitted to the water administration. (c) To use the water for the purpose for which it was allocated Such a purpose will usually be specified as a special condition to each water right. As such it is a form of self monitoring. (e) To take measures to protect water resources Such conditions are typically found in connection with rights to groundwater. (d) To measure the volume of water that is abstracted and/or used legislation. in those jurisdictions in which the "prior appropriation" doctrine applies the fact of use is not itself sufficient: the water that is subject to the right must be put to "effective and beneficial use". for example by restricting or prohibiting specified activities near the well head or borehole so as to prevent contamination of the aquifer.66 Modern water rights – theory and practice (b) To make use of the water that is subject to the water right This kind of condition is almost a standard feature of modern water rights. The objective of this kind of condition is to allay concerns over the risks of speculation and the "hoarding" of rights to water resources. as a result of significant amendments to the 1981 Water Code which were passed by Congress in 2005. say three years. The use of this kind of condition permits the allocation of water between different water user sectors in accordance with an agreed water resources plan.

Once constituted. or to increase the efficiency of his use of water. They are usually spelt out in the instrument that creates the right. unless these are formally constituted. in such as a manner as to reduce the volume of return flows and thus the downstream water rights.2. There are a number of relatively common specific conditions. specific to each individual water right. neighbouring land owners have no rights to return flows. Sometimes this is simply described on the face of the instrument that creates the water right. Such flows can be a valuable source of water. provided they can demonstrate that the return flows are put to a beneficial use and that the upstream rights holders would not be injured by the appropriation. and any parameters for the quality of the waste water that is discharged. It is. Such conditions form an integral part of the water right itself and allow the water administration to exercise a degree of control over how the water is used. such rights create an obligation on upstream water users to undertake their activities in such a manner as to ensure that the downstream rightholders are not harmed. will usually be set out as a specific condition to each water right. for example. because water rights are not subject to conditions.Modern water rights – theory and practice (f) To treat any waste water prior to its discharge 67 Again the particular type of treatment that is to be used. (g) To return unused or excess water to the water course from which it was abstracted. In many cases the same volume of water may be used by more than one user. as their name suggests. Although modern water rights no longer arise as an incidence of land ownership. 8. Thus an upstream right holder would not be entitled to transfer his water right. Specific conditions Such conditions are. for example where excess irrigation water returns to the water course from which it was extracted.3. In California and Colorado under the prior appropriation doctrine downstream rights-holders can appropriate and therefore lay legal claim to such return flows. This may be a point on the banks of a river or a specific location above an aquifer. a number of specific conditions typically concern land. common for a condition to specify the point on land at which water is to be abstracted. Elsewhere. such as under the new . On the other hand in Chile.

the time or periods in which the right may be exercised and any variations in the volume that may be abstracted as well as how wastewater is to be treated. the greater chance of one being breached and the right being brought to an end. the scope and content of water rights may be varied by the water administration after the right has become effective.68 Modern water rights – theory and practice water rights regime in New South Wales. Another condition typically concerns the point at which any water is to be returned to a surface water body. such as Germany. Another example of a specific condition is one that indicates the use to which the water is to be put. This has impacts on transferability to another use as the instrument creating the right will first need to be amended. Put another way the security of a water right depends not only on the conduct of the water administration but also on the conduct of other water users. the structures or equipment through which the water that is subject to the right is to be taken. as is the case in California and Colorado. In general terms it may be considered that the more conditions to which a right is subject the less secure it is: the greater the number of conditions. the more difficult it may make it to trade or transfer a particular water right. specific conditions have the effect of making each water right separate and uniquely adapted to the resource to which it relates. As already mentioned Chilean water rights are not subject to any conditions and water rights in New South Wales do not specify the use to which the water that is subject to the water right is to be put. this matter is addressed by way of a description of the "nominated works". Nevertheless. Finally a third specific condition that concerns land specifies the land on which the water is to be used. . Other examples of specific conditions include those that specify how the water is to be used (for example for spray irrigation as opposed to surface (flood) irrigation). On the other hand. If properly applied. In other words it is a condition of the relevant water right that the water is to be used only on or in connection with a specific parcel of land. the more specific the conditions are. to the extent that conditions are inserted to minimise adverse effects to third parties including other water rights holders it could be argued that they in fact contribute to security by strengthening water rights. In some jurisdictions.

At the expiry of the right while the right holder may have an expectation that the right will be continued he/she has no legal guarantee in this respect. either in full or in part. 59 Not always of course. Consequently the water administration is the primary guarantor of each water right. In England. Once a water right has been issued.Modern water rights – theory and practice 8. In other words no compensation is payable if a water right is not renewed. 59 Indeed it may be impossible for an individual to do this and consequently the primary responsibility for the enforcement of water rights lies with the state rather than with the right holder. 60 Sections 29(2) and 50 of the Water Resources Act 1963 now sections 39(1) and 60 of the Water Resources Act 1991. The impact on existing right holders of the construction upstream of. try to ensure that existing rights holders can continue their use of water even if at a lesser amount. however. At the same time. 58 During the duration of the water right it can be difficult for the right holder to identify who is interfering with the flow of water and thus his water right.it is sufficient to prove that the licensing authority has in fact allowed an abstraction that has adversely affected the claimant's protected right. 60 Such compensation is payable irrespective of proof of negligence on the part of the authority . all else being equal. The effect is that a water administration may not re-allocate water that is subject to a water right to a third party. . However the minister can over-rule 58 Generally a water administration is bound to act in a fair manner and will usually. 69 The formal mechanisms that guarantee the security of the right. the water administration is instructed not to grant any new licence that would permit an abstraction that would derogate from an existing protected right. say. the other main possible source of insecurity as far as a water right is concerned is the state itself. the right holder can expect to be able to rely on that right throughout the period of its duration against both third parties and the state. If the licensing authority breaches this duty then it has to pay compensation. a major new dam would be quite evident.4. The rights and duties of the water administration are usually spelt out in water legislation. for example. except in circumstances specified in the applicable legislation and on payment of compensation or the provision of an equivalent volume of water from another source.

in the "public interest". Canada Water Corporation Act 1984 confers power on the Water Corporation subject to the approval of the Lieutenant Governor in Council to cancel any water right where it considers this to be in the public interest. at the time of the cancellation.). in practice this power has not been used as most problems have been resolved through negotiation. of any structures or works that: (i) were used by the holder of that licence to secure water and transport it to the point of use. to re-allocate water for some other use in accordance with the applicable basin plan." However. is broadly similar: rights may not be arbitrarily suspended or re-allocated by the state. will be payable. which may be from central funds. eventually. the scope of this power is so broad that it will probably never be used due to the political outcry that cancelling a water right would cause (Percy. the security and dependability of a water right will increase with flow regulation. Similarly section 42 of the Saskatchewan. at the end of the day.70 Modern water rights – theory and practice this instruction and compensation. Although this solution could be a method of solving problems of unsustainable abstraction. The circumstances in which water that is subject to an existing water right might lawfully be re-assigned to another use can be force majeure or the need. In England licences can be revoked and compensation is payable unless the licence holder has effectively abandoned the licence by making no use of it for seven years or by refusing to pay the annual charges. Finally. Evidently each right can only be exercised to the extent that there is sufficient water present in the source. in practice. all water rights suffer from an inherent degree of uncertainty. and for the suspension or limitation of water rights on a stream or river in times of drought or low water flow. op cit. and (ii) are of no use to the holder and are surrendered to the Crown. The licence holder is entitled to compensation: "for the actual value. and the probability of an entitlement being met at all times and. The effect. Therefore water legislation usually makes provision for a waiver of government liability for failure to satisfy the water right holder's requirements stipulated in the instrument of the water right. Such provisions are usually contained in a condition to the water .

under which senior appropriators are placed in a superior position. such reductions are usually made proportionately across all rights in a given basin or district. . With the exception of water rights created under the prior appropriation doctrine.Modern water rights – theory and practice 71 right.

It does not create incentives for the holders of water rights to reduce their consumption of water and once all of the available water in a given water body has been allocated. Notwithstanding the separation of modern water rights from land tenure rights. Nevertheless. new rights are allocated. there is little that can be done until existing water rights expire and. SALE AND LEASING OF RIGHTS – PROCEDURES AND IMPLICATIONS As described above the assignment of new water rights typically takes place on the basis of a relatively complex process that is designed to promote the rational and planned allocation of water as well as reducing the risks of arbitrary decision-making by the water administration. By its nature. if a water right is to be sold or leased it must be necessary not only to use the water that is subject to the right at a new location but also to abstract it from a new location – further up or down a river or from a . as described in the previous section. a situation that is increasingly common around the world. or following the sale of any land to which the right was appurtenant. by way of succession. whatever its merits. For a start if water rights holders can sell or lease any water that they can save through using water more efficiently this should lead to more water being made available. Nor is it necessarily very efficient.72 Modern water rights – theory and practice 9. that water administrations typically hold the necessary powers to re-allocate the water that is subject to existing water rights to some other purpose in the "public interest". In fact the transfer of water rights is not in itself a new phenomenon. The sale or leasing of water rights would appear to have a number of benefits. apart from ensuring a more economically efficient allocation in place of the planned approach of most water rights regimes. tradable water rights are also seen as a relatively painless means of re-allocating water rights. it is also likely to be controversial. the fact remains that this is ultimately an administrative process and one that can be somewhat bureaucratic. Such transfers are invariably permitted on the death of the right holder. following the conclusion of a new water resources planning exercise. But apart from the fact that this is usually a costly solution. the question ultimately comes back to the relationship between the right and land. An apparently cheaper and more effective solution is to permit the sale or lease of such water rights. Specifically. as compensation will usually be payable. and thus water. from less to more economically productive uses. such a system is not particularly flexible. But what is being discussed here is different. Furthermore. It is true.

Similarly amendments to an existing licence will be necessary if the benefit of part of a water allocation is transferred elsewhere or if a licence is subdivided or consolidated. to use some or all of that water for a different purpose. Similarly the Mexican National Water Law contains a chapter on the transfer of water rights. Experience to date The starting point as regards water rights trades is whether they are permitted at all. as well as the Australian jurisdictions. Elsewhere the scope of potential trades is limited. Similarly under the New South Wales Water Act 2000 it is expressly envisaged that changes will be necessary to "licences" . Elsewhere. they are not. article 30 of the new Water Code permits the transfer of water rights for uses other than for irrigation. Irrigation permits are not transferable separately to the land to which they relate.is being transferred. . In Kyrgyzstan.Modern water rights – theory and practice 73 different point above the surface of an aquifer. 61 Such rights are commonly described as "transferable water rights" or "tradable water rights". allow that person on a temporary basis and on such conditions as the water management institution may determine. at the request of a person authorized to use water for irrigation under this Act. although not specifically provided for in the legislation.the instruments that create water rights to enable such rights to be used at a different location following a transfer or sale. 9. trades in water rights are possible. (1) A water management institution may. Indeed under the current legislation it is usually necessary for the parties to make an application to the water administration for a new or varied licence in order to complete a trade. Again the point remains that the water right derives from the licence but the licence is not itself the water right.1. In a number of jurisdictions. Is this a genuine trade of a water right? Clearly it will require the amendment of the licence that creates the right but arguably the right to a quantity of water .the legal right itself . or to 61 And in the case of surface water to discharge any residue or waste water to another point. such as France. In England. the legislation makes it clear that they are. Section 25(2) of the South African National Water Act provides that: Transfer of water use authorizations 25. such as Chile and South Africa.

section 81(7) of the Alberta Water Act provides that An application for a transfer of an allocation of water under licence may be considered only if (a) the ability to transfer an allocation in the area of the province referred to in the application has been authorized (i) in an applicable approved water management plan. At the other end of the scale. unlike permanent transactions. In all of the cases considered in the preparation of this paper some degree of scrutiny by the water administration is required in connection with water rights trades. . and (b) on condition that the surrender only becomes effective if and when such application is granted. Such trades offers greater flexibility and. and (b) on other third parties including other water rights holders. and in artificial watercourses from the water user association responsible for its operation. In addition the section makes it clear that some or all of the entitlement may be transferred on a permanent or temporary basis. The most frequent transactions in water rights are "rentals" or temporary trades between nearby farmers with different water requirements during different periods. In some jurisdictions the degree of state scrutiny is quite low. by an order of the Lieutenant Governor in Council. or (ii) if there is no applicable approved water management plan. (2) A person holding an entitlement to use water from a water resource in respect of any land may surrender that entitlement or part of that entitlement (a) in order to facilitate a particular licence application under section 41 for the use of water from the same resource in respect of other land. to assure rights of third parties. do not require formal registration in the water rights register. but on the basis that the surrender is only effective if the transfer application is approved. In other words the transfer effectively requires the issue of a new entitlement but specifically permits a person to surrender an existing authorization to enable a transfer to take place. This is because of the external impacts such trades might have: (a) on the environment and hydrology of the water course to which the right relates. any transfer of the rights of use of natural watercourses requires authorization from the water administration. for example.74 Modern water rights – theory and practice allow the use of some or all of that water on another property in the same vicinity for the same or a similar purpose. In Chile.

the basic position is that while simple changes in the title holder that do not involve any alteration to the water right are to be concluded by simple notice of registration. in all of those cases where. the prior approval of the water administration is necessary. Furthermore the legislation provides for the scrutiny of applications to transfer water rights. In Mexico. for example. in the opinion of the Director does not impair the exercise of rights of any household user. As regards the transfer of rights relating to groundwater. "the rights of third parties may be affected or the hydrological or ecological conditions of the pertinent basins or aquifers altered or modified". provision for relatively straightforward transfers to take place on the basis of a simplified procedure within. traditional agriculture user or other licensee… and (c) the transfer in the opinion of the Director. the legislation provides one example of accommodating public fears about the transfer of water rights. will not cause a significant adverse effect on the aquatic environment. The involvement of high level politicians in the process means that Alberta's transferability provisions are far from ideal. However.Modern water rights – theory and practice 75 In other words there can effectively be no transfer of water rights without the direct or indirect consent of the Cabinet. (b) the transfer of the allocation.). Section 82(3) of the Water Act provides: … (3) The Director may approve a transfer of an allocation of water under a licence only if (a) the volume of water to be transferred does not exceed the volume of water under the licence from which the allocation is to be made. op cit. In between there are a range of procedures with approval typically being conferred by the water administration. article 35. 62 62 Interestingly the relevant provision. a given basin. however. say. in accordance with regulations. . the law provides that this is generally to be undertaken jointly with the transfer of the relevant land although provision is made for separate transfers in accordance with regulations issued under the National Water Law. There is. while at the same time incorporating the essential elements of a system which will allow transfers to take place if the political will is present (Percy. provides that in such cases the transferor and transferee are jointly and severally liable for the costs of capping wells that are no longer used.

1997). The water administration also needs to be satisfied that water rights trading does not result in environmental damage where a new licence or a variation to an existing licence is required. all transactions involving water rights are embedded in a legal and administrative structure that carefully regulates external effects. such transfers are generally subject to rather elaborate approval procedures. for example the location of the new abstraction. in an environmentally stressed catchment if as a result of a trade the holder of a new licence uses a significantly greater proportion of the volume of water authorized on their licence than the holder of the original licence. In the jurisdictions of the western United States. in the American state of Colorado. Similarly in New Zealand the legislation does allow water rights to be traded but only if the transfer is expressly allowed in the relevant regional plan or if it has been approved by the water administration (Peart. and (4) season of use. The water administration may therefore place conditions on licences in order to prevent damage to the environment occurring as a result of trading. for example. The basic procedure. In a review of practice in the western States Colby et al. For example. 2000). There may also be potentially damaging local impacts that need to be considered. a water district governing board if the transfer is .76 Modern water rights – theory and practice Formal or informal restrictions usually guide the decision-making process. These types of change are not mutually exclusive and the four aspects may be simultaneously changed in any combination. Thus in England in practice trades are generally only possible if the licences involved are located within the same catchment or groundwater unit. which is set out in schematic form in Figure 1. where there is the greatest experience of trading water rights. These are a change in: (1) nature or person of use. (2) place of use. is as follows: (a) Filing of the application Applications are usually evaluated by an administrative unit: a department of water resources or state engineer's office if the water right is within the jurisdiction of the state. identified four types of change for which one can apply regarding a water right.. Each district has its own specialist Water Court and the office of State Engineer investigates all technical aspects of proposed transactions (Perry et al. This could occur. (3) point of diversion.

1989). accompanied by the prescribed fee. (f) Resolving protests The next step is the resolution of filed protests. More complicated ones require review at the state level. elsewhere by the applicant.Modern water rights – theory and practice 77 within a district or the Bureau of Reclamation for transfers involving the use of federal project water (Colby et al. This is generally achieved in one of two ways: either privately through negotiations between the parties concerned or formally through an administrative hearing. In some states the publication costs are borne by the agency. including holders of adjacent water rights or public officials. persons who believe that their interests may be adversely affected are entitled to file written protests against the proposed transfer. Routine applications are dealt with at local level. The first step is to file an application in the prescribed form. must also be notified individually. Colorado approvals are much more likely to be contested requiring the retaining of lawyers and other specialists at an early stage. In Idaho. . for example. (d) Filing of protests Next. completeness and consistency with water rights records. (e) Processing protests Each individual protest is then reviewed by the water administration for accuracy and completeness. (b) Processing the application Each application is then reviewed by the relevant agency for accuracy. (c) Public notice All states require some form of public notice of the application to alert all parties who may be interested in the outcome. pre-hearing conferences are routinely scheduled to seek to promote negotiated solutions. Sometimes specific individuals. This is usually done by publication in a newspaper circulating in the relevant counties.

within specified time limits. (j) Proving/certifying the transfer Following the ruling. the former generally being more costly and time consuming. or a negotiated agreement. (b) approval of the transfer applications subject to modifications to take account of protests. (i) Appeal of Ruling Parties who are dissatisfied with the ruling are generally entitled to appeal against it. Sometimes the time limits within which these must be issued are specified in the legislation.78 Modern water rights – theory and practice (g) Administrative hearing If a negotiated solution cannot be reached. and the outcome of any eventual appeal. Outcomes are typically confined to: (a) approval of the transfer application as requested. (h) Ruling Following the hearing. In essence it is up to the proposed transferor to prove that the transfer will not harm downstream rights. then the matter proceeds to an administrative hearing. or (c) the rejection of the transfer application. One of the reasons why transfers may lead to extensive negotiations and disputes in the western states is because of the negative effects that they may have on return flows and thus on downstream water rights as described above. Such appeals may be to the ordinary courts or to a higher level appeal body within the water administration. the water administration must issue a ruling. Such hearings may be held in a formal or informal manner. the transfer application is formally issued and certified. .

modifications.CHANGE OF WATER RIGHT PROCESS (Colby et al.Modern water rights – theory and practice 79 FIGURE 1 . modifying. supporting materials are requested and submitted change application filed legal notice published protests filed no protests filed private resolution hearing state agency rules on change application approving. 1989) change application submitted reviewed by state agency. or denying the application agency ruling appealed no appeal of ruling judicial review of agency ruling change in water use implemented and certified .

As described above. the extent to which water rights are supported by the availability of large water storages. op cit. confusing as they do the involvement of the private sector in urban water supply (through the use of concessions. Other concerns that have been identified include the following: x x x cultural or religious objections to the notion that water should be bought and sold. Some of these concerns about markets are as much shaped by ideological opposition to free market models as anything else.) with the "privatization" of water as a resource. Concerns. equity and monopoly concerns regarding acquisition of water rights by large organizations and the exclusion of the poor from access to water. This is because in contrast with intra-state trades.2. Consequently inter-state trades have taken place only on a "pilot" basis to date. . etc. Some of the criticisms of modern water rights are simply ill-informed. South Australia. and thus the beneficiary of upstream water storages. no water rights reform seeks to achieve this outcome. being the downstream state. differences which in turn reflect the conservative or speculative water allocation philosophy that underlies the relevant legislation. See also Briscoe. concern that small-scale operators will sell their rights cheaply and lose their livelihoods. 1997). as for example in Australia's Murray Darling Basin. perceptions and trends Although a number of influential commentators consider that the marketing of water rights offers a way to increase the efficiency of water use and allocation and to allow resources to move from lower to higher value uses (Bogdanovic. 2000).80 Modern water rights – theory and practice Even more complex procedures are necessary in connection with interstate water trading. not everyone is convinced that markets offer a real solution to issues of water allocation (Dellapenna. to reflect the water traded between individuals. 9. Part of the complexity arises also as a result of the different levels of security that water rights hold in each state. has much more secure water rights (which were also allocated in a relatively conservative manner). the location within the catchment and climatic conditions. inter-state trades involve a complex adjustment of rights between states under the (interstate) Murray Darling Basin Agreement. lease contracts.

. difficulties of establishing or strengthening public and private institutions to facilitate a properly-functioning water market. (Thobani. provided such procedures are correctly applied. fear of change and loss of public sector control over water. cause aquifer depletion. On the other hand. and/or the degradation of river systems. but in fact modern water legislation typically addresses rights over water rather than the water itself. as outlined above. new legislation is usually necessary for the introduction of modern water rights and the task of defining. Nor. In Australia and the western United States many rural communities have opposed transfers of water to users out of the community in part on the assertion that such transfers can impose significant economic and social costs on the community. In a community's worst nightmare. where farming land is fallowed as a result of an external transfer. a number of other concerns do merit further consideration.Modern water rights – theory and practice x x x x x x x 81 fears that water transfers will damage the environment. should there be negative environmental or third party impacts. and tax revenue can decline (leading in turn to a reduction in governmental support services). the social fabric of the community itself might begin to unweave as local residents sensing economic trouble leave the area (Thompson. measuring and enforcing water rights. measuring and enforcing them can indeed be difficult. Cultural and religious objections to the sale of water may be more difficult to counter. and the challenge of convincing governments that the potential benefits from trading water in a market are sufficient to offset the costs of establishing tradable water rights. 1998). the relatively complex procedures in place for reviewing trades in water rights should mean that the state. Finally. First of all there is the concern over the potential impacts of water trades on rural communities. jobs can be lost. the need for new legal. For example. as outlined above. For example. 1997) In fact a closer examination shows that a number of these objections are not so much to the introduction of transferable water rights but to the introduction of modern water rights. regulatory and institutional frameworks. difficulty of defining. changes needed to infrastructure and delivery systems. acting through the water administration does not "lose control" over the use of water.

as it is a fundamental resource that once lost cannot be replaced. Reflecting community concerns a number of water user associations in Australia do not permit trades out of their territory or. Queensland and Victoria first introduced trades in annual allocations (also called annual or temporary trades). for example when a mine or factory closes down (Thompson. 1998). however. And indeed only South Australia introduced trades in water rights from the outset. Chile is unusual. Nevertheless this issue remains a concern and the Australian Parliamentary committee recently recommended further research into this area. in that water rights used not to be subject to a condition requiring that the water to which they relate be put to use. after some twenty years experience. In other words. for only a limited volume of water. have undone the legal bases for this to happen. the Australian governments remain bullish about the potential for water rights trades to promote a more efficient use of water resources while recognizing environmental needs. third party effects exist whenever significant resources are allocated or re-allocated or removed from a community. Should water be treated any differently? Some argue that it should. Recent (2005) amendments to the 1981 Water Code. if so. some have argued that. whereas New South Wales. 1998). There is some evidence that this has happened in Chile where available nonconsumptive rights have been acquired on a speculative basis by the hydropower companies. This was due to significant community concerns about the effects of large scale sale of water out of certain areas on the ability of farming communities to survive. Problems are still being faced and one argument is that in fact the issue of tradability and transferability was not sufficiently considered when the current legal frameworks were put in place. though. irrespective of whether or not they . In other jurisdictions this type of condition should reduce the risks of "pure" speculation in that to be maintained such rights would have to be put to use. Furthermore irrigators may only market (lease) up to 50 percent of their water while other permit holders are entitled to market the entire right (Kaiser and Phillips. While trades of groundwater rights are permitted within the Edwards Aquifer in Texas such transfers may only take place within the boundaries of the aquifer region. Another concern relates to the risk of speculation and hoarding. This is because communities realise the value of the water and want to retain that value within the community (House of Representatives. Indeed. 2004).82 Modern water rights – theory and practice On the other hand.

perceptions and trends in this sphere. it was noted that in southeast Australia the water market remains incomplete. Transferability and tradability should not be conceived as a simple "bolt on" attachment to more traditional water legislation. Turning to in-state trades.Modern water rights – theory and practice 83 subsequently take place (for only market conditions can determine this) the design of reforms designed to permit the trade in water rights should carefully and comprehensively anticipate all of the key aspects of future trading activity including its impacts on the environment and third parties. buyers purchasing large amounts of water are the most prominent market participants and pay the lowest price. 2002). one commentator described the water market in 1999 as "essentially thin" with transactions being almost totally confined within the irrigation sector. in part because of transaction costs and inadequate information. So much for the concerns. trade was somewhat restrained. 1999).1. Number of trades Remaining with the example of Australia. and .5 MCM of water moving across state borders to be used to grow high value crops in South Australia's warmer climate (IUCN. Initially introduced as a drought relief measure and on a temporary (seasonal) basis. In addition. notwithstanding the complexity of the procedures involved a recent review of inter-state water trades found that some 51 trades had taken place between 2000 and 2002 which involved 9. were rare (Pigram. including: x x the sale of large quantities of water at low prices by those with salinity and other problems. trading in water licences has occurred on regulated rivers in New South Wales since the early 1980s. what of the experience of water rights trades? 9. Inter-sectoral transfers such as trades from rural to urban water use. Some less desirable features can be noted. Despite the incremental easing of restrictions on trades in water rights.2. Permanent transfers were introduced in 1989 and trading on unregulated streams is permitted under new rules announced in 1998.

A survey of water rights transactions in 19 western states between 1990 and 2000 showed that an impressive 1 065 sales had been concluded during that period together with 552 leases ((Czetwertynski. buyers of water rights in western water markets are providers of municipal/industrial water supplies. as are irrigators in urgent need of water to finish a crop. farmers are typically the seller of such rights. While farmers as lessees of water rights were much more common they were nevertheless a minority in most states. But these are relatively small scale examples. or dispose of their licensed allocation totally. Water markets allow industries to make better and more flexible use of limited water resources and provide the opportunity for new investment in high value-added agriculture". although there is clearly scope for improvement an Australian Parliamentary Committee recently found. The average number of transactions was less than three in all states except Colorado and Nevada. a more detailed examination shows that overall relatively few sales of water rights took place during this period. In the main. Even within the Colorado Big-Thompson Project farmers were buyers in only 15 percent of the 848 recorded transactions. In terms of sheer numbers it is necessary to look to the experience of the western United States. If the sale of contractual water rights is disregarded the figures show that in terms of the average annual number of transactions. It . However. particularly those involving the sale of essentially contractual water rights in one major irrigation project (the Colorado Big Thompson Project). under such market conditions (Pigram.84 Modern water rights – theory and practice buyers acquiring small quantities of water to maximise the efficiency of their irrigation are willing to pay high prices.). op cit. Irrigators in financially stressed circumstances may even be "forced" to sell their water at a discount. socially equitable manner. that "having considered all the evidence … water trading is a key mechanism in ensuring that water is used more efficiently. Another interesting point that emerges from the survey is that in all of the states. leases dominated in all states except Kansas and Utah. Nevertheless. 2002). immature market" is erratic and does not necessarily direct water in the most efficient. Indeed the figures are somewhat distorted by the large number of transactions that took place in Colorado. farmers were very seldom the buyers of water rights. x Taken together these features suggest that a "thin.

the actual volume of trades in water rights remains relatively low even in the western United States. therefore. for example. the prior appropriation doctrine with its indefinite water rights in some senses encourages water rights trades as it is effectively the only means of re-allocating water to different uses. But in any event. Similarly the research in the inter-state trades in the Murray Darling Basin found that trade does cause water to be used for higher value uses.2 MCM.35 MCM of Edwards Aquifer groundwater. Some caution is. op cit. nine changes of ownership or miscellaneous transfers represent 4. Full data are not available for Mexico or South Africa although the evidence suggests that some limited trades are taking place. of which only 803 are currently active representing 175.). 8. Benefits and conclusions Recent research from South Africa on the limited and heavily regulated trading officially sanctioned by the water administration since 1992 on the Lower Orange River found that water rights had moved to farmers who had achieved the highest estimated return per unit of water supplied. Equally.2.). Turning to the example of Chile. however. Within the Edwards Aquifer.Modern water rights – theory and practice 85 is also interesting to note that by far the greatest number of trades in this period were concerned with surface water rather than groundwater rights. as well as causing it to move down stream (Briscoe. In addition. the Authority staff has processed 1 192 partial sales and lease transfers representing 270.3.7 MCM of groundwater withdrawal rights. Nevertheless active markets in groundwater rights do exist. Elsewhere water rights markets are clearly in the process of development. it is clear that a "market" does exist for water rights in those jurisdictions. though.3 MCM. merited in connection with the United States experience. Active transfers include 113 sub-leased transfers representing 33. . as argued below. Specifically. op cit. it seems to be the case that notwithstanding the quantity of literature that it has generated. witnessed by the existence of water rights brokers and Web sites that advertise water rights that are for sale. particularly as regards its replicability. In conclusion. the sheer number of trades should not in itself be seen as a particularly important measure of the success or otherwise of transferable water rights. the experience of the last twenty years shows that the frequency of water rights transactions remains limited to a few areas of the desert north and the metropolitan area of Santiago (Bauer.

Indeed in a lot of the economic debate concerning transferable water rights empirical data tends to be used in a selective manner in order to substantiate whatever argument is being made. 1998). In broad terms. the likely need for some form of ongoing state approval. the complexity that arises from rights to return flows and third party challenge and so forth all make for a narrower market. In this . water rights markets are unlikely ever to achieve theoretical perfection in so far as transaction costs and the existence of complete information is concerned. So the first conclusion is that the design of the trading process. Put another way. the experience appears to show positive economic benefits from water rights transfers. the fact remains that water is a unique resource. however. means that the relatively high transaction costs of individual trades will tend to negate some of the more optimistic claims for the power of markets (Bauer. are always reduced by the transaction costs that occur during the rights trading process. the gains from trade. On the other hand. however. By reason of the potential third party and environmental impacts of water rights transactions. the greater the security. particularly its legal content and structure. to prevent harm to the environment and third party rights holders. Too often. Indeed some of the best examples relate to trades in contractual water rights (such as in the Colorado Big Thompson Scheme) in respect of which transaction costs tend to be relatively low. Cumbersome trades. insecurity or uncertainty in their meaning. A full evaluation of the economic arguments in favour of tradable water rights is beyond the scope of this paper. the smaller the transaction costs and the greater will be market activity. Nevertheless a number of preliminary conclusions can be drawn. The first is that the efficiency gains. assessments of the economic benefits of transferable water rights have taken place in somewhat abstract terms by reference to notionally perfect market conditions. simplicity and clarity in the arrangements for trading rights.86 Modern water rights – theory and practice Research by Hearne in Chile suggests that water markets had led to economic benefits in some areas. including economic benefits due to transfers to higher value users (namely form rural to urban use) although the supporting research suggested that water rights sales and transactions were the exception rather than the rule. must be carefully undertaken and that in the context of the introduction of a new water rights regime the practical mechanisms of trading should be borne in mind from the outset. the possibility of legal challenge. Thus.

those within the same basin. Trading between farmers in long-term or permanent contracts can also lead to a switch from irrigation that has a low gross margin per unit of water consumed to higher efficiency crops. So temporary sales of water. The second lesson is that the design of tradable water rights that can take place within the agricultural sector and for a season or a year can help increase crop output and farmer income. can be advantageous in terms of farm productivity and higher gross margins. When rainfall is limited. The second conclusion concerns trades within the agriculture sector.Modern water rights – theory and practice 87 connection the relevant legal and policy framework can assist in defining more carefully which types of trades are more likely to be approved. The third lesson is therefore that in efficiency terms rural-urban transfers are likely to be particularly beneficial and that the design and administration of tradable water rights should facilitate such transfers in willing seller-willing buyer situations. rather than committing to the large-scale infrastructures of long-distance. for example. In such circumstances the gains-from-trade can be high. aquifer or sector within an aquifer. experience shows that inter-farm trades can be beneficial. The same point holds for demand management initiatives. The fourth conclusion is that the introduction of tradable water rights can make it possible to deploy the existing supply of water more effectively. The third conclusion is that water used in an urban location has a predominantly higher value than that used for irrigation. or when there is need for additional water in the short term to expand output of a specific crop. . tradable water rights are themselves a form of demand management. inter-basin transfers. Lesson five is that demand-management and institutional change in the form of transferable water rights deserves consideration as possibly a superior mechanism to purely civil engineering solutions. This is because irrigation consumes large quantities of water in terms of evaporative losses. Indeed. for a season for example. Of course the market alone will determine if trades subsequently take place.

for example.88 Modern water rights – theory and practice 10. Consequently. Thus the South African National Water Act creates a buffer to protect two of its fundamental tenets – that of ensuring that water is allocated equitably and used beneficially in the public interest. Additional benefits may arise from improved riverine ecologies including the possibility of recreational uses as well as aesthetic values. As far as environmental protection is concerned the Reserve is defined to mean "the quantity and quality of water required to protect aquatic ecosystems in order to secure ecologically sustainable development and use of the relevant water resource". One is to impose a statutory definition of minimum flows of which the water administration must take account in the issue of new water rights. a minimum streamflow must be established for rivers pursuant to the National Water Law of 1992. This means that it is possible to measure the total amounts of water taken from a given water course or aquifer and thus to calculate the volume of water that is. Of course these kinds of techniques can only be effective as long as the initial assessment of the environmental requirements of a given water body are correct in the first place and do not change significantly over time. Once it has been determined for a given water course the Minister. Such requirements may include ensuring the sustainability of aquatic ecosystems and the use of dilution flows for the enhancement of water quality. ENVIRONMENTAL ALLOCATIONS The basic advantage of modern water rights as far as the environment is concerned is the simple fact that they explicitly specify the volumes of water that may be abstracted or used. or should be. The other technique is to designate a reserve for environmental purposes. pursuant to section 16 the Minister must determine the "Reserve" for all or part of each water course. as well as any other state body including the water administration. In Mexico. left to meet ecological requirements. As already noted. If water rights are time limited then . while promoting environmental values. must give effect to the Reserve when exercising any power or performing any duty pursuant to the Act (section 18). two basic legal techniques are used to ensure that sufficient water is left in a water body. Clearly in the context of climate change the requirements of surface water bodies may indeed need to be modified in the future.

On the other hand. Both private and public entities have begun to acquire environmental water rights. fish and wildlife. in the public interest so that the water can be re-allocated for environmental ends. For example. an NGO called the Nature Conservancy has begun to acquire environmental water rights in Arizona. even those on which formal water rights have been granted. Thus in a number of the western United States environmental nonconsumptive uses have been found to have economic values that compete with traditional consumptive uses of water. given that in many jurisdictions compensation would be payable such an approach would likely be expensive. one solution is simply to wait for the rights to expire. it is too late to consider leaving a reserve of minimum stream flow: all of the water is subject to existing water rights.Modern water rights – theory and practice 89 such revisions can take place when they fall to be renewed or varied. and water quality maintenance. depending on the urgency of the situation. Indeed in Chile and the jurisdictions of the western United States. A more costly alternative would be for the water administration to cancel a number of existing rights. The situation becomes more problematic in those jurisdictions where water rights are of indefinite duration. As the experience of compulsory acquisition of land shows. It would also no doubt be controversial not simply because the right holders may be unwilling to give up the water rights in question but also due to the difficulty of agreeing the level of compensation payable. However. such as rafting and fishing. These non-consumptive uses include water for recreation. Thus in Chile given the existence of vested property rights in the use of water it is virtually impossible to reassign water or to develop effective river basin institutions to take account of environment and ecosystem protection. this purchase of water rights is the only practical means of ensuring that sufficient water is made available for the environment. where water rights are also of indefinite duration and the water administration has no residual power to cancel water rights and reallocate water. partially or wholly. on many water courses around the world. What solutions are available? In the case of time limited water rights. This kind of consideration may militate against the grant of perpetual water rights. . this kind of valuation exercise is invariably difficult and contentious although it is by no means impossible to conclude.

1991). Similarly in the Edwards Aquifer in Texas the Aquifer Authority has begun a programme of buying back groundwater rights to retire them from use.90 Modern water rights – theory and practice Colorado and Nevada. What is particularly interesting is that these uses are starting to compete in the marketplace for traditional water rights demonstrating that there is a genuine willingness on the part of North American society to pay for environmental water uses. In other words. . The Washington State Legislature has established a "water trust" for the Yakima River and several other rivers to help restore instream flows (Moore and Willey. these examples tend to show that transferable water rights can be used creatively to conserve water resources for environmental and other ends.

experience shows that the more legally complex a procedure is the easier it becomes to challenge its legality as a means of challenging the substance of an unfavourable outcome. court proceedings are expensive and time consuming. 1998). For example Briscoe et al describe how the lack of effective dispute resolution mechanisms in Chile has contributed to unnecessary high levels of conflict between water rights holders in the Maule Basin. which in Chile are general courts in that there are no public/private court divisions. water being no exception. Specifically the lack of a river basin management institution means that there are information symmetries and gaps.Modern water rights – theory and practice 91 11.. the legislation is sufficiently clear and the water administration is sufficiently honest. One of the benefits of introducing a system of modern water rights is that. though. In most countries. Disputes take years to come to conclusion and are costly" (Briscoe et al. in theory the number of disputes should be reduced. "it is evident that the judicial process is unsatisfactory from several perspectives. Equally. This can have implications for the transfer of water rights through trade. the level of disputes may actually increase initially as the new system is introduced. as described above the transfer of water rights can be a contentious process if other holders fear that their rights may be negatively affected. provided the institutional arrangements are sufficiently simple. Indeed while the relative complex formal procedures for reviewing water rights trades in the western United States are designed to rigorously examine all transfer applications. depending on just how it is done. 63 . have in the Some care is needed with regard to the costs of arbitration. Given that modern water rights are legal rights. DISPUTE RESOLUTION MECHANISMS Disputes are inevitable from time to time in connection with the use of any natural resource. that there is no institution able to act as an "honest broker" and there is no low financial and transaction cost arbitration procedure available. The situation is exacerbated by the fact that the courts. Nevertheless. 63 Furthermore. Cost however is not always one of them not least because the arbitrators must themselves be paid. it remains the case that disputes do arise and indeed. the courts are the natural and ultimate arbiter of disputes involving their allocation and use. Commercial and international arbitration procedures have numerous advantages over court resolution including speed and flexibility over time tabling.

specialist environment courts are responsible for resolving disputes concerning water rights. described above. Consequently they may be a quicker and more efficient means of resolving disputes. In Colorado there is a specialist water court while South Africa has a statutory water tribunal. such as Spain's underground water user associations. Finally. Typically such decisions are subject to ultimate review by the courts. In some jurisdictions.. taken to hiding behind narrow and formalistic interpretations of the rights and responsibilities of the parties. engineering. This Tribunal is designed to create a more accessible forum than the rather obscure Water Court that previously existed. What about less formal procedures? Briscoe compares the situation in Chile with that of New Mexico where the state engineer acts as a specialized arbitrator of water disputes (Briscoe et al. What is interesting is that the members of the tribunal. who are appointed by the Minister on the recommendation of the Judicial Service Commission. The role of the state engineer in arbitrating disputes in New Mexico is mentioned above and again this type of solution can be effective. such as New Zealand. such dispute resolution mechanisms do not have to be located solely at the level of the water administration. water resource management or related fields of knowledge.92 Modern water rights – theory and practice face of what are really rather complex and possibly irreconcilable difficulties. Specific local resource management bodies. can play a vital local level role in quickly resolving disputes among water users. Specialist courts and tribunals offer a number of advantages including the fact that their members are familiar with the relevant law as well as the complexities of water management. though. The National Water Act provides for the establishment of a Water Tribunal as an appeal and dispute resolution mechanism in connection with the implementation of Act. 1998). need not necessarily be legally qualified. . The Act simply says that they must have knowledge in law.

one of the purposes of the "Reserve" required to be established under the National Water Act (apart from the environmental objectives described above) is to ensure that sufficient water is kept available for such users. 2000). many uses of water by the very poor will frequently fall within the de minimis exceptions to the need to hold a formal water right. recent research suggests that.. water rights reform risks having only a limited impact regarding the socio-economic objectives. However. it is proving more difficult to include in the reform process black communities in the former homelands who operate in the "informal" water sector (Shah. An exception is South Africa whose recently enacted Water Act seeks to implement the two key principles of the 1997 National Water Policy. . notwithstanding this achievement the fact remains that until substantive land reform takes place that also confers de facto access to water sources to nonwhite farmers. 2000). Another notable approach of the South African act is the provision that it makes for the establishment of suitable participatory mechanisms to ensure that the poor along with other stakeholders can participate in decision and policy making in connection with water resources management. With 83 percent of agricultural land previously in the hands of white farmers and the majority of water for irrigated agriculture also controlled by them through the white dominated irrigation boards both land tenure reform and water reform were necessary to right the injustices of the apartheid era (World Bank. et al.Modern water rights – theory and practice 93 12. notwithstanding the government's efforts. Unfortunately. Indeed. Recognizing this. For example neither the Chilean nor the Mexican water legislation made any special provision for safeguarding the interests of the disadvantaged. One of the key features of the Water Act was the abolition of riparian rights and its replacement with a modern permitted water rights regime. SAFEGUARDING THE INTERESTS OF THE DISADVANTAGED Generally speaking water rights reforms have had few re-distributive or socio-economic objectives. "sustainability" and "equity".

the scarcely populated Texas one hundred years ago. experience shows the limits to such approaches. therefore. In this sense. increases in population and water demand. as described above. Indeed in many parts of the world customary or local law water rights regimes continue to operate in a manner that is effective and satisfactory for their users. . these traditional approaches do not work today. while the doctrine of capture may have worked perfectly well in. Times have changed.94 Modern water rights – theory and practice 13. Therefore while intra-community water rights may work quite successfully they cannot influence of control the relationship between the community and other water users. THE IMPACTS OF THE RIGHTS BASED ALLOCATION SYSTEM IN TERMS OF EFFICIENCY. and given that they provide the means of regulating access they must be a more efficient 64 While a full discussion of customary or local law approaches to water right is beyond the scope of this review. throughout history all societies in which water is used have had their own systems for allocating rights to use water. 64 Similarly the traditional approaches of the common law and civil law traditions were not irrational at the time when they developed. However. Indeed the fact that no administration was required and that they were essentially self-implementing can be seen as a positive benefit compared with the costs of funding a water administration. say.1. Provided such approaches permitted the rational allocation of water while conferring sufficient security on water users then it seems reasonable to conclude that the manner in which this was does was not particularly important. an assessment of the overall efficiency of modern water rights arrangements is ultimately a comparison with the traditional approaches which by and large now simply do not work. Thus for example. Before the industrial revolution their relatively simple rules coupled with a relative lack of competition for water made them reasonably effective. EQUITY. Overall. Efficiency As already described. TRANSPARENCY AND THE ENVIRONMENT 13. coupled with more efficient well technology clearly shows that this doctrine is obsolete and redundant as a tool of water management. History suggests that some of these systems actually worked very well at least for a time. Specifically the rules that they provide for only apply within the relevant local community.

But this is to address deeper questions of social equity that go far beyond the question of water law reform. To the extent that trades in water rights can improve the efficiency of water use then this too must be a net gain to society. 13. Measures can be taken in designing modern water rights to promote fairness among rights holders and other stakeholders and to ensure that wider social and environmental impacts are minimised or prevented. Fishing is an example. Indeed the question could be put the other way. For example the inclusion of users and other stakeholders in decision-making will generally result not only in better decisions being made on "hard" issues but also fairer and more acceptable decisions being made. In many legal systems ownership rights are conferred on those who use or capture a particular resource. Clearly among water rights regimes. trade in water rights can lead to a more economically efficient use of water resources. Why should rights be conferred on those who have not invested in using the resource? Where is the equity in that? Of course part of the problem is that those who have been using the resource are often land owners and thus richer members of society. As regards the possibility of improving the efficiency of modern water rights. Equity This issue of equity is also hard to objectively assess. the evidence reviewed above suggests that notwithstanding the restrictions in place. provided negative third party and environmental impacts are prevented. At first sight the introduction of a system of modern water rights may appear unfair. . some may be less costly to administer than others and careful design should seek to minimise administration and transaction costs.2. particularly in cases where existing users operate on the basis of vague or unclear rights or even in the absence of specific rights.Modern water rights – theory and practice 95 way of allocating and managing resources. even though they do have their own costs. Why should they be granted rights? Is it not the case that such persons are granted a windfall simply because they had the good fortune to be using the water at the time when modern water rights are introduced? There is of course a grain of truth in this argument but it is difficult to see any other realistic approach.

involving water users and other stakeholders in decision-making fora. 13. But in terms of equity.96 Modern water rights – theory and practice As regards the form and substantive content of water rights there is therefore clearly an appropriate balance to be struck between the private interests of individual rights holders and the wider public interest. This is likely to mean that for reasons of equity the state. should continue to play a significant role in water resources management. acting through the water administration. provided it is done in an appropriate manner. ultimately. making sure that information is made available to the public and other water rights holders including ensuring public access to inspect registers of water rights. The effect of such state involvement may well have the effect of reducing the potential notional benefits of allowing markets to determine the allocation of water through tradable water rights. The point is that irrespective of whether or not it is categorised as an economic good water quite clearly has an inherently public character (Getches. A number of key factors can contribute in this respect. this may well be the price that has to be paid. modification or transfer of water rights. In general terms all of the jurisdictions reviewed in this paper seek to a greater or lesser extent to promote transparency through the use of such techniques. A key point to note is that transparency benefits the use of economic mechanisms such as the trade in water rights both by making sure that sufficient information is available to potential buyers and sellers and in ensuring that transfers and trades are correctly recorded.3. establishing clear and effective procedures for the recording and registration of water rights. . objective and verifiable standards for decision-making in connection with the issue. 1996). These include: x x x x setting clear. Mexico and South Africa. management being more transparent. both as regards existing rights holders as well as society at large together with the environment. as is the case in Australia. Transparency The introduction of a system of modern rights is likely to result in water allocation and.

This initial observation is subject to a number of caveats including most importantly that the relevant water rights regime is actually implemented correctly. Time limiting new water rights appears to offer the greatest degree of flexibility as far as future environmental needs are concerned and provided the rights concerned are of sufficiently long duration they should provide sufficient security for the purposes of investment. modern rights must almost by definition be better for the environment than traditional water rights.4. The environment 97 To the extent. As described above. that by clearly defining total permitted abstractions environmental needs are taken into account. for example by reducing salinity and water logging as a result of over watering. . as described above. in most jurisdictions procedures for the sale or trade of water rights seek to ensure that environmental issues are taken into consideration. Indeed water rights trades may have positive environmental impacts.Modern water rights – theory and practice 13.

no longer provide a sound basis for the sustainable management and use of water resources.98 Modern water rights – theory and practice 14. First of all traditional land based approaches to water rights. New institutional arrangements are necessary for the administration of modern water rights. Modern water rights are invariably established on the basis of administrative instruments such as licences. or quasi property rights. CONCLUSION The key points that emerge from the analysis contained in this paper can be summarized as follows. They apply to the use and abstraction of both surface and groundwater. The fact that water rights are property rights. Effective and widespread consultation can greatly facilitate the introduction of reforms that involve the introduction of modern water rights while at the same time ensuring that those reforms better serve the needs of society and stakeholders. A water administration may have competence throughout the relevant jurisdiction. It may alternatively be established specifically to manage a given aquifer or water body. rights are typically issued to existing water users on the basis of their declared historical use. With the introduction of a modern water rights regime. Clearly it is necessary to confer the appropriate powers and legal duties on such an entity if it is to be able to operate effectively. The first formal step in the process of introducing modern water rights is to place water under state ownership or control through such legislation. Following the introduction of a modern water rights regime some minor uses of water may usually continue without needing a formal water right. should include mechanisms for stakeholder participation. If . including rights to groundwater. means that primary legislation is usually necessary for sector reform and the introduction of modern water rights. Such arrangements. although some care is needed in this connection as an excessively large number of "free" water uses may still negatively impact on a given water resource. Consequently the need to better manage water resources is usually the underlying reason why modern water rights regimes are introduced. authorizations or permissions. in the form of a water administration.

Most trades in water rights have involved rights relating to surface water. including a condition requiring the payment of water fees or charges. Nevertheless no water right can provide an absolute guarantee that a specific volume of water will always be available in a given resource irrespective of climatic and other natural conditions. modern water rights must confer a sufficient degree of security upon right holders both as regards other water users and the state. the process of registering water rights is a major administrative and logistical task that may take many years to complete. modern water rights typically specify the volume of water that may be abstracted. It is necessary to bear this process in mind during the design of legislation and to take such measures as may be necessary to actively encourage existing water users to claim and register their water rights. Thus typically water rights may not be modified or cancelled in the absence of fault on the part of the right holder unless compensation is paid. including the use of management plans. The evidence suggests that transferable water rights can lead to the economically more efficient use of water resources. Water rights trades are. modern water rights are typically subject to a range of general and specific conditions. however. the fact remains that provided that trades are freely entered into and perceived as . acting through the water administration. This may be expressed as a fixed amount or as a proportion of the available water. Following the enactment of the necessary legislation. In order to be effective. Breach of such conditions can lead to the right being lost. In an increasing number of jurisdictions water rights may be traded. which are designed to promote rational water use and to prevent arbitrary decision-making. As to their substance. Leaving aside arguments over the efficiency of markets for water rights. There is a trend towards limiting the duration of water rights as this makes future re-allocation possible even at the expense of security for rights holders.Modern water rights – theory and practice 99 following this exercise any remaining water resources remain for allocation. Furthermore. Nevertheless trades in rights to groundwater have taken place in a number of jurisdictions. generally rather carefully regulated by the water administration to minimise negative impacts on third parties and the environment. new water rights are issued by the water administration on the basis of a range of statutory steps and measures.

The key issues are probably cost and administrative capacity. of the type being discussed here. The costs in question are not so much those relating to the preparation and adoption of legislation but those of registering and recording water rights as well as the costs of monitoring water resources and enforcing the legislation relating to a water rights regime. As regards surface water rights. the large number of water users that may be involved (particularly farmers dependant on small land plots) may make the idea of introducing modern water rights in developing countries appear even more daunting. Notwithstanding these positive conclusions. the introduction of modern rights should lead to a more efficient. or perceived. modern water rights should make it possible to set overall limits on total abstractions so as to permit sustainable resource use. economic necessity. as is often the case. At first sight. There may still be a strong case for the grant of water 65 In other words provided the vendor considers s/he has made a good deal and has not been forced to sell at an unfairly low price out of. It will not have gone un-noticed that many of the examples cited in this paper are from richer countries. equitable and transparent use of water resources that better takes account the needs of the environment. dis-benefits of moving towards the introduction of modern water rights. the fact remains that many countries have yet to introduce modern water rights regimes. However. say. Furthermore. then whatever rights to water they should have are not modern water rights. Given that they specify the volume of water that may be abstracted from a given water resource. if farmers are supplied with water through irrigation schemes. Why is that? Of course the precise reasons for this will vary from country to country but such reasons are worth considering in that they may suggest actual. . In short the introduction of modern water rights is beneficial. provided it is undertaken in a fair and transparent manner. With the exception of recent reforms in South Africa few modern water rights regimes have taken account of social equity considerations. however. implementing a modern water rights regime is a relatively complex process that requires efficient administrators as well as other technical skills.1 above. but rather contractual water rights as discussed in section 2.100 Modern water rights – theory and practice beneficial by both parties 65 they do ultimately offer a relatively uncontentious means of re-assigning water from low value to high value uses.

Nevertheless even in countries where there is overall water scarcity it will often make sense to focus initially on those basins or aquifers where there are particular problems such as overabstraction/over use. As competition for water increases such kinds of conflict are likely only to increase. water rights reforms need to pay particular attention to governance and enforcement mechanisms that involve right holders and other stakeholders in decisionmaking. 67 "Theirs" on the basis of a moral rather than a legal right. Ultimately. The limitations of traditional water rights are not restricted to richer countries: examples exist in developing countries that do not have modern water rights regimes of new irrigation schemes being built in the upper catchments depriving existing downstream schemes of "their" water 67 as well as of water being diverted from reservoirs built for irrigation to quench the needs of thirsty cities. In such circumstances policy makers in developing countries may well determine that the costs and resource implications of introducing a modern water rights regime are justified even if for no other reason than to protect the interests of existing water users. the sheer number of actual or potential abstraction points.Modern water rights – theory and practice 101 rights to the operators of such schemes if only to safeguard abstractions for irrigation. typically found in developing countries. for example 68 ) so as to ensure the best use of limited financial and administrative resources. Alternatively it may be preferable to enshrine a water rights regime in national (or state) legislation but to provide for its staged implementation (basin by basin. From a legal perspective this can be done through specific (primary) legislation that applies only to the basins/aquifers in question. Indeed it seems reasonable to conclude that as concerns groundwater. 66 As regards rights to groundwater. and the relative complexity (and thus cost) of whatever regime is chosen. 68 Or aquifer by aquifer. though. the issue of cost together with consequential difficulties of monitoring and enforcing abstractions takes on a greater significance. the costs of introducing a modern water rights regime. Needless to say ordinary farmers tend to be the ones who suffer in such cases. is beyond the scope of this paper. A full discussion of the limitations of contractual water rights regimes. 66 . have to be set against the potential costs of inaction.

however. if the hydraulic and economic arguments in favour of the introduction of a modern water rights regime are accepted by policy makers the potential political challenges should not be overlooked. Indeed in most cases they simply reflect and reinforce existing water rights or uses of water. unless the circumstances in which trades can take place. As recently noted by the Australian Productivity Commission. Again. How to allocate water rights on a fair basis that takes account of existing uses of water is a key issue that needs to be addressed from the very beginning (although again most farmers whose land is supplied with water through irrigation schemes need secure contractual water rights rather than modern water rights of the type being discussed here) while safeguarding the interests of the disadvantaged. it must be clearly emphasized that there is no a single best practice model. although modern water rights are a form of property right. are carefully regulated from the outset so as to safeguard the interests of the agriculture sector in general and the poor in particular then the introduction of a modern water rights regime may be difficult to achieve. they are quite different. The issue of tradability or transferability may pose a greater challenge particularly in countries where a large proportion of the population relies on agriculture. as argued in this paper. which for resource economists may be one of the principal attractions of modern water rights. the "choice of . Nor does the introduction of a system of modern water rights have anything to do with private investment in the urban water sector. Although international experience appears to point to a broadly common approach to modern water rights. Nevertheless the point is sensitive particularly in developing countries where land and water are the primary livelihood resources.102 Modern water rights – theory and practice Even. As outlined in this paper. Tradability (or the prospect of tradability). The first challenge concerns the notion of water privatization. Indeed this leads to the final observation of this paper. based on a shared set of assumptions and outcomes. notwithstanding consultation and education exercises undertaken. Another key issue is to distinguish between the notional right to water for personal. reforms leading to their adoption do not legally constitute the privatization of water. if at all. Indeed. household use and the concept of modern water rights. can be one of the main practical political obstacles to the introduction of such a regime. This is not to contradict the findings concerning tradability made earlier in this study but simply to question the extent to which these can be easily translated into the situation of many developing countries.

to some extent.). on the economic characteristics of water. the unique features of each jurisdiction. economic and sociological conditions. op cit. including its legal frameworks and existing organizational arrangements catchment hydrology within jurisdictions" (Productivity Commission.Modern water rights – theory and practice 103 arrangements depends. hydrological/hydrogeological. . There is no blueprint. In other words the design of a system of modern water rights for a given jurisdiction will need to take account of its specific cultural.

.

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.Availability: November 2006 Ar C E F S – – – – – Arabic Chinese English French Spanish Multil– Multilingual * Out of print ** In preparation The FAO Technical Papers are available through the authorized FAO Sales Agents or directly from Sales and Marketing Group. FAO. Italy. Viale delle Terme di Caracalla. 00153 Rome.

06/1200 . and the laws concerning water rights in particular. and draws out and discusses the relevant problematic issues.This publication offers a fresh look at the theory and practice of modern water rights. ISBN 978-92-5-105624-0 ISSN 1014-6679 9 789251 056240 TC/M/A0864E/1/11. from a comparative law angle. It sheds light on a number of key features of such rights. It will be of inspiration and use in the process of reforming water laws in general.

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