QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| The United Kingdom Assocation of Fish Producer Organisations
|- and -
|Secretary of State for Environment, Food and Rural Affairs
|- and -
|Marine Management Organisation
|- and -
|New Under Ten Fishermen's Association
Jonathan Swift QC and Deok-Joo Rhee (instructed by Treasury Solicitors) for the Defendant
Kassie Smith QC and Elizabeth Kelsey (instructed by Harrison Grant) for Greenpeace/ NUTFA
Justine Thornton (instructed by Browne Jacobson) for the Marine Management Organisation
Hearing dates: 1-3 May 2013
Crown Copyright ©
Mr Justice Cranston :
The fishing fleet
III EU COMMON FISHERIES POLICY
"The objective of the Common Fisheries Policy should therefore be to provide for sustainable exploitation of living aquatic resources and of aquaculture in the context of sustainable development, taking account of the environmental, economic and social aspects in a balanced manner."
"3. Each Member State shall decide, for vessels flying its flag, on the method of allocating the fishing opportunities assigned to that Member State in accordance with Community law. It shall inform the Commission of the allocation method."
Article 20(3) is the source of the Secretary of State's power to allocate fishing quota. Because of devolution the Secretary of State has conferred the power on Scottish, Welsh and Northern Irish administrations in relation to their fishing fleets. The discretion conferred on Member States under the article is bounded by the requirement that it be exercised in accordance with principles of European law.
"38. First, the Member States' obligation to inform the Commission of their chosen allocation method is intended merely to ensure a degree of transparency as regards Member States' choices and does not imply that the Commission has the right to oppose the methods which Member States propose. Accordingly, that obligation does not preclude alterations in the methods for allocating fishing quotas at national level. Nor does the fact that a Member State has regularly resorted to a particular allocation method make any difference to this analysis of the situation.
39. Secondly, the choice of an allocation method by no means leads the discretion enjoyed by Member States under Article 20(3)…to be exhausted and does not preclude Member States from adapting the distribution of fishing quotas to the particular circumstances that may arise from one year to the next, as in the present case where the need to allocate new quotas arose as a result of the illegal landings made by some members of the national fleet entitled to fish for mackerel.
40. Accordingly, neither the obligation to inform the Commission under the second sentence of Article 20(3) …nor the temporary choice of a method for allocating fishing quotas ensures that the fishermen of a Member State will have a particular allocation method applied to them or be assigned a particular quantity of fishing quotas…"
"in accordance with detailed rules to be determined by the Member State, taking account of the areas used for dairy production or other objective criteria and, where applicable, any agreement between the parties."
The Court held that under that provision a Member State may provide that part of the reference quantity is not to be transferred with the holding but is to be added to the national reserve by means of a deduction mechanism. Such a measure had to be in accordance with the general principles of European Union law such as legitimate expectations: . Moreover, a Member State implementing its obligations under European law had to do so:
"with unquestionable binding force and with the specificity, precision and clarity necessary to satisfy the requirements flowing from that principle …Mere administrative practices, which by their nature are alterable at will by the authorities and are not given appropriate publicity, cannot be regarded as constituting the proper fulfilment of a Member State's obligations under Community law, since they maintain, for the persons concerned, a state of uncertainty as regards the extent of their rights in an area governed by Community law": .
IV THE FIXED QUOTA ALLOCATION SYSTEM
Background to the fixed quota allocation system
"[Both] had the advantage that if a group or vessel underfished its allocation in one year it would not be penalised in subsequent years. This would reduce the pressure to fish to maintain track records and would also allow groups to gift quota allocation to those who might be able to make use of it."
The working group noted that most under 10 metre quota allocations were subject to underpinning, a form of top slicing. The fixed quota allocation system would constitute a safeguard for the inshore fleet since its allocation would be based on its track record for the reference period.
The scheme and its operation
"85. The sense of ownership resulting from the purchase of quota is somewhat misleading as the legal owner of licences and of quota remains the UK Government. There is naturally some unease among fishermen at the uncertain status of their agreements to buy or to lease from other vessel owners. At the moment, the UK Fisheries Departments have to approve and register changes in licences. The situation on quota is more complicated, particularly with the trend towards leasing. Although fishermen draw up legal agreements which are endorsed by the relevant producer organisations and notified to the Government, what is being exchanged is not a property right … There is a genuine concern here. The fishermen who have invested so much capital in their business need to be certain that what they have bought is legally their own. The Government has recognised this anxiety in part by ratification of all the transactions undertaken in the last year at the end of 1998, a procedure it now intends to repeat on an annual basis. It has also indicated that licences and quota entitlements are assets which could be accepted by banks as security for loans. Yet, as Mr Morley [the Fisheries Minister] stressed, 'in the end, the title does belong to the state.' This means, as the [Sea Fish Industry Authority] observed, that 'there is the risk that the licence, will at some point, become valueless.'"
The committee noted that licences and quota entitlements were assets which could be accepted by banks as security for loans and that many banks saw fishing as a very good investment.
"The arrangements for the renewal, transfer and aggregation of fishing vessel licences and the allocation of quota, are the subject of close consultation between industry and Fisheries Departments in the UK and are understood by most fishermen. There are no plans to change the existing position whereby licences and quotas apply at the discretion of Ministers but with fishermen's interests protected by the legal concept of legitimate expectation … With the new system [of] fixed quota allocations fishermen and their producer organisations have greater certainty regarding quota allocations and more flexibility to adopt quota management arrangements best suited to their needs."
"Quota will continue to be allocated at the discretion of Ministers irrespective of any changes which may be made to the fixed quota allocations system. Fisheries Departments will be issuing guidance for industry on entitlement to both quota and fishing vessel licences."
"[Fixed quota allocation] units represent catches made in the defined reference period and are used solely for allocation purposes. Fishermen do not, therefore, have property rights over fixed quota allocation units or quota. Nonetheless they are afforded a substantial degree of protection and certainty through the development and operation of the UK's quota management rules and the Ministers' assurance that significant changes will not be made to existing arrangements without full and proper consultation."
Tax etc. treatment
"Fish quota (that is, an allocation of quota to catch fish stocks, which derives from the Total Allowable Catches set in pursuance of Article 8(4) of Council Regulation (EEC) No. 3760/924 and under annual Council Regulations made in accordance with that Article, or under any replacement EU Instruments)."
The 2007 decommissioning scheme
"The quota is not ours to take back. Quotas are set, and they are owned by the skippers of the vessels, who can transfer them to another boat. We are not able to take that quota back, but we have reduced the quota year on year …"
Almost immediately the claimant published a press statement to the effect that such an unequivocal statement provided some comfort to fishermen, although it noted their vulnerability when, at the same time, Defra had engaged in a swap with Germany to the benefit of only the under 10 metre fleet. A briefing note published by the claimant along with the press release asserted that the owners of fixed quota allocation units had legitimate expectations.
"[Fixed quota allocation] units can move in association with any fishing vessel licence entitlement that is being transferred or aggregated onto another vessel, or separately in the following circumstances:
(i) The holder of a licence entitlement may transfer his [fixed quota allocation] units, in their entirety or in part, at any point during the life of the entitlement…
(ii) A vessel owner wishing to acquire a replacement vessel may transfer the [fixed quota allocation] units from his licence to an "[fixed quota allocation] holding statement" pending the acquisition of the licence for the replacement vessel, and may subsequently transfer units from the statement under a one-off option during the life of the statement.
(iii) The owner of a [under 10 metre] vessel, who is required to dispose of [fixed quota allocation] units…may transfer the units from his licence.
(iv) Where licences are used for the purposes of the correction or modification of engine power the [fixed quota allocation] units may be transferred to other licences."
Under paragraph 3.4 quota allocations (appropriately adjusted, as provided for in the rules) were to be made to each group in proportion to the total quota units for each stock associated with the group. Where fixed quota allocation units were being transferred separately from licences under any of the arrangements described in paragraph 3.3, allocation calculations were generally to take account of transfer requests received by the fishing administrations by 31 December of the preceding year. Allocation to the under 10 metre fleet was underpinned: paragraph 3.9. Provision was made in paragraphs 3.10-3.11 for under 10 metre vessels where fixed quota allocation units were being acquired; in paragraph 3.12, for fixed quota allocation units, where vessels had had their licences suspended; and in paragraph 3.15, where vessels were decommissioned.
"18.1 The rules set out in this paper are subject to review and amendment to respond to changes in circumstances, for example as a result of decisions made by the Council of Ministers.
18.2 [Fishing Administrations] reserve the right, after consultation wherever possible, to depart from these rules should the need arise."
The 2012 Concordat
"The Administrations reiterate that [fixed quota allocations] do not provide any right to a share of UK quota. Administrations acknowledge nonetheless that [fixed quota allocation] holdings involve at present a general expectation of receiving a share of UK annual quotas. Administrations also acknowledge there is a trade in [fixed quota allocations]."
V THE CONTESTED DECISION
""Fishermen do not have property rights over [fixed quota allocation] units or quota and this has been the case since their inception. Furthermore, [fixed quota allocations] do not guarantee a set tonnage of fish but rather give holders access to a share of quotas which fluctuate year on year."
At several points Appendix 1 referred to under-utilised quota as being a missed opportunity.
VI SUBSTANTIVE LEGITIMATE EXPECTATION
(a) Domestic law
"although this is a relevant consideration in deciding whether the adoption of a policy in conflict with the promise might be justified in the public interest, particularly in the area of what Laws LJ called "the macro-political field": see R v Secretary of State for Education and Employment, ex p Begbie  1 WLR 1115 , 1131":.
In Begbie Peter Gibson LJ said obiter that it would be very much the exception, rather than the rule, that detrimental reliance would not be present: 1124 B-C. Sedley LJ said that it was difficult to see how reliance would not be necessary where the basis of the claim was that a person-specific discretion would be exercised, by contrast to cases where the government had made known it intended to exercise powers affecting the public at large: 1133 D-F.
"… there was nothing more than the scheme's existence: at most a factual expectation that it would continue in effect until rational grounds for its cessation arose. As I have sought to explain, such an everyday state of affairs is categorically inadequate to generate a legitimate expectation which the courts will enforce": .
The Master of the Rolls agreed with Laws LJ's judgment.
"…[B]oth these types of legitimate expectation are concerned with exceptional situations … [A] public authority will not often be held bound by the law to maintain in being a policy which on reasonable grounds it has chosen to alter or abandon… There is an underlying reason for this. Public authorities typically, and central government par excellence, enjoy wide discretions which it is their duty to exercise in the public interest. They have to decide the content and the pace of change. Often they must balance different, indeed opposing, interests across a wide spectrum. Generally they must be the masters of procedure as well as substance; and as such are generally entitled to keep their own counsel…
 But the court will (subject to the overriding public interest) insist on such a requirement, and enforce such an obligation, where the decision-maker's proposed action would otherwise be so unfair as to amount to an abuse of power, by reason of the way in which it has earlier conducted itself…What is fair or unfair is of course notoriously sensitive to factual nuance."
1. The undertaking must be clear, unambiguous and without relevant qualification: Bancoult, .
2. On ordinary principles an undertaking can derive from a representation or a course of conduct. However, the mere existence of a scheme is inadequate in itself to generate a substantive legitimate expectation: Bhatt Murphy, .
3. Whether there is such an undertaking is ascertained by asking how, on a fair reading, the representation or course of conduct would reasonably have been understood by those to whom it was made: Patel, -, applying Paponnette, .
4. Although in theory the defined class being large is no bar to their having a substantive legitimate expectation, in reality it is likely to be small if the expectation is to be made good: Bhatt Murphy, . In Paponette the successful class to whom a collective promise had been made was some 2000.
5. Detrimental reliance is not an essential requirement. However, it may be necessary where the issue is in the macro-political field or a person-specific undertaking is alleged: Bancoult, ; Begbie, 1124 B-C, 1133 D-F.
6. To justify frustration of a substantive legitimate expectation, the decision maker must have taken into account as a relevant consideration the undertaking and the fact that it will be frustrated: Paponette, -.
7. Legitimate expectation is concerned with exceptional situations: Bhatt Murphy, .
8. Justification turns on issues of fairness and good administration, whether frustrating the substantive legitimate expectation can be objectively justified in the public interest and as a proportionate response. Abuse of power is not an adequate guide: Nadarajah, .
9. The intensity of review depends on the character of the decision. There will be a more rigorous standard than Wednesbury review, with a decision being judged by the court's own view of fairness. A public body will not often be held bound to maintain a policy which on reasonable grounds it has chosen to change. There will be less intrusive review in the macro-political field. As well, respect will be accorded to the relative expertise of a decision-maker: Bhatt Murphy, ,; Patel,-, .
10. Transitional arrangements, and whether there has been a warning of possible change, are not essential but may be relevant to the court's assessment of justification: Bhatt Murphy -,-,-,-; Patel,, .
(b) European Union law
"However, if a prudent and circumspect trader could have foreseen that the adoption of a Community measure is likely to affect his interests, he cannot plead that principle if the measure is adopted": .
"[A] prima facie legitimate expectation may be trumped by an overriding public interest. The Court, has therefore, sought to balance the need of the EU to alter its policy for the future, with the impact that such alteration might have on traders who based their commercial bargains on pre-existing norms:".
No legitimate expectation
VII DEPRIVATION OF /INTERFERENCE WITH, POSSESSIONS
Are fixed quota allocations possessions?
An unjustifiable interference or deprivation
VIII UNLAWFUL DISCRIMINATION