Tuesday, 23 July 2013

No one can own the fish in the sea: part two

In my last blog post, I laid out the background to this month's historic quota battle in the UK High Court. This week, I'm going to talk about the ruling in detail: the particulars of UKAFPO's case, and how the judge, Mr Justice Cranston, responded to them. You can read the full High Court Judgement here.
Boats like the under-ten that supplies this small shop in Aldeburgh
will now find themselves with more quota
So what exactly happened, and why were the government taken to court by the UK association of fish producers organisations? In 2012, the Secretary of State for the Environment, Food and Rural Affairs proposed that a subsection of "consistently unused" quota would be taken from the PO sector (those large-scale boats whose quota is not managed by the government - see last week's post for an overview) and redistributed to the small-scale fleet. As UK fisheries management is now regionally devolved (to England, Wales, Scotland and Northern Ireland), and the reallocation decision was an English one, the government intended to take quota only from English vessels. However, as they did not have full information on quota holdings per vessel, the government used PO membership as a proxy for nationality.

As discussed last week, despite the originally geographic intention of POs, membership is now widely spread throughout the UK regions (and even further afield, with many non-UK owned vessels members of UK producer organisations). Geography can have very little bearing on PO membership (and even on licensing, as boats fishing at Brixham - or even Bilbao - could be licensed "Banff"). In early 2012, therefore, the English producer organisations chosen as the victims of reallocation not only represented 301 English licensed vessels, but also 60 Scottish licensed vessels and 11 Welsh.  The government excluded these Scottish and Welsh licensed vessels in English POs from the reallocation scheme. However, 27 English vessels also happened to be members of Scottish or Northern Irish POs, and these lucky boats also didn't have any of their quota reallocated. This meant the costs of the policy fell only on those English licensed boats that were also in English POs.

How much quota was to be reallocated? The small-scale fleet quota holdings are only a tiny proportion of those held by the large-scale fleet. DEFRA's proposal was to reallocate a proportion of those species that had been consistently underused (so neither caught, leased or swapped for a number of years in a row; with 2007 to 2010 as the reference period), if those species were also consistently highly-used by the small-scale fleet (considered to be the case if over 90% of the under-ten pool allocation had been caught). After all these calculations, the amount of quota to be reallocated stood at around 0.1% of total UK FQAs - that's 0.4% of the FQAs held by the English producer organisations who were to fall prey to reallocation.

UKAFPO's claims

1. The crux of UKAFPO's grievance was that the Government's 'gift' of quota to the small-scale fleet in 2012 deprived a section of the large-scale sector, without compensation, of a valuable entitlement. This deprivation went against the legitimate expectations of quota owners and interfered with their property rights. Since introducing FQAs, the government had stated, and acted as if, FQAs were the property and possessions of fishers on repeated occasions. They had classed them as assets, assented to their use for security as bank loans, and used them for the purposes of calculating capital gains tax. The government had also explicitly stated that unused quota would not be taken away from fishers. Because of this, fishers had a legitimate expectation that no reallocation would occur.

2. The high value of this entitlement was further stated by UKAFPO. They had the quota to be reallocated valued three times: the first valuation was £1.9 million; the second £1.065 million; and the third £1.405 million (and that's only 0.1% of total FQAs! Big business indeed). This meant that reallocation represented a considerable cost to quota owners, UKAFPO argued, many of whom had invested significant amounts of money - often borrowed - in purchasing their quota holdings.

3. UKAFPO completed their triptych of greivences with the claim that the reallocation was also discriminatory, as it only taking quota from those English licensed vessels that were members of English POs, and not from all UK vessels or even all English licensed vessels. This was unfair discrimination against a section of the industry.

Greenpeace and NUTFA's position

Greenpeace and the small-scale fishers' association NUTFA (standing for new under tens fishermen's association) intervened in the case in support of the government. NUTFA's position was clear - they wanted a more generous distribution of quota to the under ten-metre fleet, for past wrongs to be redressed, and for quota allocation to take into account the environmental and social criteria that smaller boats can often fulfil. Greenpeace, who in 2012 had formed a historical alliance with NUTFA, also argued that small scale boats were inherently more sustainable, and that as the Common Fisheries Policy recognised the importance of sustainability in its preamble, redistributing quota in that direction was simply follow the edicts of the CFP. Furthermore, Greenpeace importantly argued that the right to fish was a common property belonging to the nation, so could not be 'possessed', and treating FQAs like property was therefore against UK law.

The Judge's decision

Below I'll go over the key reasons Judge Cranston gave for his verdict in favour of the government.

1. Legitimate expectation: Judge Cranston observed that it was true the government had both indicated, and acted as though, quota holdings were inviolable property on numerous occasions. However, he argued that since 1999, despite repeated assertions of this nature, the government had not been consistent or unambiguous in these assertions. Indeed, the government message had been rather confused: the government had, on numerous occasions, also contradicted and qualified these assertions of quota-holders/ rights. 

A legitimate expectation, Cranston argued, "can be based only upon a promise which is clear, unambiguous and devoid of relevant qualification". This means that although the government had stated - and acted as if - quota holdings were property, neither these statements or actions had been "clear, unambiguous or devoid of relevant qualification". This is because both in official government documents, the government had emphasised ministerial discretion regarding the future management of quota. Here, Judge Cranston drew both on EU jurisdiction and on Greenpeace's arguments, arguing that "there was "some force in the Interveners’ point that statements about fishing quota and the fixed quota allocation system have always to be understood against the background that fish are a public resource".

 2. Deprivation of a valuable asset: Interestingly, Justice Cranston concluded that he believed FQAs were a possession, and could be legally recognised as such. However, he questioned the over-a-million pound valuations of the quota holdings to be reallocated. This is because only unused quota was to be reallocated, and the owners of this quota had thus clearly made the "business decision" to neither catch, lease, sell or swap this quota - in fact, to do nothing with it - the high valuation could only be "purely theoretical". In effect, as the amount to be reallocated had, year on year, actually sat dormant, in reality it must have had no market value.

So, although the FQAs were possessed assets, the claimants would only have grounds for grievance of them being taken away if there had been "material economic consequences”. In this case, as the reallocated quota had been consistently unused, and thus provided no economic benefits for the entirety of the reference period, there had been no negative economic consequences of reallocation. He further argued that although English PO members had had an asset taken away from them, this asset was in its nature an unstable one, and the reallocation had been done by the government in a fair and well-considered manner, based on ample consultation with the POs in question.

3. Discrimination: UKAFPO's discrimination case rested on the fact that only English licensed vessels in English POs had their FQAs reallocated. In response to this, Justice Cranston pointed out that this unsatisfactory state of affairs was as much the fault of the POs as it was the fault of government. DEFRA had tried to obtain data from POs in order to identifying the vessels that had consistently left quota unused, but none of the POs had responded to these requests.

Neither environmental sustainability, or the all-important property rights argument, were given any bearing in the decision. As such, the Greenpeace reporting of their victory with the soundbite "judge: no one can own the fish in the sea" was somewhat disingenuous, as Cranston only used these words to summarise the environmental charity's own position, and not as his own views. Nevertheless, the results were the same, and there are suggestions that the Judge was swayed by the Interveners' case, even it wasn't used in his concluding judgement.

The outcome of this important case is that, when it could easily have gone either way, the right to fish in the UK has not been privatised. This is very good news for those that would have lost out (the government, the public, non-quota owning fishers) and very bad news for those who (with good reason) believed the right to fish already had been privatised, and had invested as such in the future (quota-owners, and the banks that used quota as collateral).

Importantly, the judge's admission that FQAs could be considered possessions, and his conclusion that it was the non-economically significant nature of the unused quota in question that justified reallocation, still leaves us in somewhat murky waters. It's therefore important that we continue to pay close attention to the management of our seas.