Council wins battle with Brussels over attempt to claw back £1.5m of small grants to fishermen

Shetland Islands Council has scored a significant victory on behalf of the isles’ fishing industry in its battle with the European Commission over an attempt to force fishermen to pay back almost £1.5 million-worth of small grants made to them by the local authority over a 10-year period.

The Commission had been trying to force the SIC to recover 78 grants made under a first-time shareholder scheme between 1994 and 2003. Following months of negotiations with the EU and the Scottish and UK governments, agreement has been reached that the council only needs to claw back £55,097 rather than the initial £1.5 million.

The original sum included compound interest and risked bankrupting some smaller concerns. But the council said the smaller sum had now been recovered after a period of “intensive negotiation”, the outcome of which had the effect of “significantly limiting the potential impact on all the individuals concerned and on the fishing industry”. The case has now been closed.

SIC convener Sandy Cluness said the council was thankful for the assistance of the Scottish government in particular for resolving the dispute. When the ruling was made in late 2007, there was heavy criticism locally of the UK government’s refusal to step in and launch an appeal, despite it being the nation state against which the Commission’s state aid ruling was made.

If the Commission had not reneged, the council could have had to spent up to £250,000 on funding the appeal in the European Court of Justice.

The payments were originally made on the basis that the application of de minimis rules, under which states can dish out payments of around £24,000 to companies in the fishing industry over a three-year period, would mean the grants did not constitute state aid.

“All in all it was a victory, mainly thanks to the staff involved,” said Mr Cluness. “Originally we were having to ask folk to pay back grants over £1 million. We lodged a defence in court, though fortunately it never got there.

“We were very annoyed on the principle of it, because it seemed to us Ireland was building new boats, the same with France and Spain. [All we were doing] was giving fishermen £7,500 each as a grant to try and keep the industry going. Then we got this state aid decision by the Commission against us, so particularly Josie [Simpson, vice-convener] and myself have met with commissioners and argued the moral side of the case together with the Scottish government. Eventually they’ve decided it wasn’t worth the candle.”