The Scottish Government

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Chapter 5 - The Licensing System

Question 10: Do you agree with our proposals to identify Scottish vessels as part of establishing arrangements tailored to Scotland's requirements?

• For the purposes of operating a distinct Scottish licensing system, it will be a condition of Scottish licences that vessels must carry a Scottish Port Letter Number ( PLN), be administered at Scottish Fishery Offices and in membership of a Scottish recognised Producer Organisation ( PO) or managed directly by the Scottish Government Marine Directorate.
• The Scottish Licensing System will not exclude other fishers from the Scottish zone. These vessels will continue to be able to fish as they do presently, fishing against their quota allocation in the Scottish fishery zone and landing catches into Scottish ports. Our arrangements will simply allow us to manage more effectively the activity of the Scottish fishing fleet and, by definition, those vessels which we directly licence.
• Allow a period of two months, for those owners who need to take some administrative action to comply with the new definition, from the announcement of results of the consultation exercise in which to advise the Scottish Government Marine Directorate on how they plan to ensure that their vessel fully meets the criteria to be licensed as a Scottish fishing vessel.
• Allow a further two month period for the necessary work to be completed.

Summary of views received :

In general, the establishment of a Scottish Licensing System was supported with its creation viewed as central to the package of measures put forward. Though supported by most, the proposals on recognising Scottish vessels did receive some opposition with some questioning the actual conditions of recognition. Concern tended to centre on the issue of PO membership in Scotland. It was suggested by some that commercial reasons were often behind the choice to belong to one PO over another and that the option to be part of a PO elsewhere in the UK should remain open. Questions included:-

• Would vessels registered and administered in Scotland be required to join a Scottish PO?
• What of vessels registered and administered outside of Scotland but resident in a Scottish PO: could some solution be found for them to continue in their current PO membership?
• In the future would a vessel administered and registered in the rest of the UK be able to join a Scottish PO?

Concerns were also raised about the possible negative impact on the ability to sell Scottish vessels to other parts of the UK. There were some fears that identifying all Scottish vessels could reduce the benefits of an open and permeable market.

Scottish Government response:

We are clear about the need for clarity in defining a Scottish vessel. To qualify, a vessel will have to satisfy three criteria. It must be registered in Scotland, administered in Scotland and either is in membership of a Scottish PO or under the direct management of the Scottish Government Marine Directorate ( SGMD) as part of the non-sector or 10 metre and under fleets. Any vessel which does not meet these criteria will be given the option of selecting which quota management and licensing system it wishes to operate under before Scottish quota is identified. These vessels will have two months from receipt of a letter from SGMD to decide under which management system they wished to belong to and a further two months for the necessary work to be completed. It is the FQAs not the licence or the vessel to which the once-and-for-all aspect will apply. We are not proposing a prohibition on the future sale of a vessel or licence.

The link to Producer Organisations is a vital element in this identifying criteria providing a clear context in the management of their activities through quota management rules. POs are a central element of Scotland's fishing communities and are recognised as being Scottish through a variety of objective criteria, for example through measuring the value of landings and activity of member vessels within geographical areas of Scotland. Scottish Ministers have devolved competence in relation to Scottish POs. These organisations are already actively involved in the management of quota and we believe that they should continue to do so and assist in delivering future management measures promoted by the Scottish Government. It is on this basis that it is deemed appropriate in defining a Scottish vessel that the inclusion of membership of a Scottish recognised PO is a fair and reasonable expectation.

In cases where Scottish POs have in membership vessels administered and registered in other parts of the UK, these POs will continue to operate fully under Scottish Government quota management rules and these vessels if choosing to remain in membership of Scottish recognised POs will do so in the knowledge that the PO is operating under Scottish quota management rules. For such vessels there will be no requirement to have their FQA units identified as Scottish and neither will their vessels be classed as Scottish. We propose that it will be for the relevant POs to decide internally how to, if required, disassociate these member vessels from any group obligation placed on the PO by Scottish Quota Management rules. If, for example, a group fails to use quota (and clearly will not be able to use this quota) under the quota incentive scheme, it will be for the PO to decide how any temporary redistribution of quota is managed in the PO. The PO may well, for example, adopt the approach that the redistribution will only come from the holdings of some or all of their Scottish member vessels.

Question 11: Do you agree that we should establish a Scottish economic link requirement to ensure a beneficial connection to Scotland's fisheries dependant populations and associated industries?

Proposals :

• The requirement to demonstrate an economic link to the UK will be varied to require an economic link to Scotland, and the option to demonstrate that link by landing at least 50% of quota stock catches in the UK, will be varied to require a Scottish licensed vessel to land a percentage of this required catch level into Scottish ports so that there is a more defined benefit to our fishing dependent communities.
• This will also apply to FQA units with a Scottish identifier (unique serial number) even if they are not directly attached to Scottish licences (i.e. where these FQA units may have been sold to non-Scottish interests).
• The economic link will be subject to further detail consultation as part of the formulation of further detailed Scottish quota and licensing rules.
• Vessels and/or licences will continue to be able to transfer from Scotland to other Fisheries Administrations within the UK, but it is envisaged that transactions in future will be governed by the rules in force by the Administration in whose jurisdiction the licensing is being completed.
• Seek reciprocal agreements with other Fisheries Administrations to avoid any potential distortion where differences in licensing rules apply.

Summary of views received :

Proposals on economic link arrangements were the subject of lively debate though broadly supported.

On the first proposition - Scottish vessels having to land a percentage of their catch into Scottish ports - advocates saw this as a way of maintaining the economic benefit of fishing for the nation and helping to ensure secondary fishing jobs remain in Scotland's fishing dependent communities. Questions were asked though about the perceived negative business impact. The chief concern here was that vessel owners could be placed at a disadvantage by having to satisfy economic link criteria at the expense of market price- either in respect of landings or the price obtained for their FQAs. Questions of validity also arose given that most Scottish vessels are already dependent on Scottish markets.

To some extent or another the vast majority supported the general principle of delivering an economic benefit back to Scotland. There was some concern over its application in relation to having a potential devaluing effect on licences by some groups, but interestingly other groups with a significant crossover in membership were strongly in favour.

Supporters of attaching economic link criteria to Scottish FQA units saw this as a way of retaining at least some benefit of FQA units if they left fishing communities on a permanent basis. In broad terms the split arose between those who appear to be purely market focussed and those who were concerned with maintaining a link between business and community. It was notable for example that notwithstanding the split of opinion within the fishing industry, Local Authorities and community representatives, and onshore interests dependent on access to landings in Scotland, were entirely supportive of the proposal.

Scottish Government response:

The economic link requirements currently being proposed can be split for ease of understanding into two distinct categories.

Vessel Centred: Firstly an obligation applying to the actual activity of a Scottish licensed fishing vessel. Here the option of landing at least 50% of the catch into the UK will change to 50% of the catch must be landed into Scotland.

FQA Centred: Secondly an obligation on the holder of any "Scottish" designated FQA units permanently sold out with Scotland to ensure that, in respect of these units, some economic benefit continues to be delivered back to the fishing communities of Scotland.

Economic Link Activity based (Vessel centred)

To ensure that Scottish communities benefit from quota landed by Scottish vessels, economic link criteria will be placed on Scottish licensed vessels. These provisions will work in a similar way to the current well established UK economic link arrangements. This is designed to accurately and fairly reflect current practices whilst allowing businesses continuing flexibility in their choice of operations going forward. This is not an attempt to increase activity into Scotland. Currently all Scottish administered vessels with the exception of the small number of flag of convenience vessels would comfortably meet the proposed obligations. The current 50% requirement to the UK will therefore be replaced by a 50% requirement to Scotland. The economic link obligations currently in use (with the exception of crewing) and which are all options within the Scottish system will be retained in a Scottish licence.

It will still be possible to trade vessels and licences with other parts of the UK providing reciprocal arrangements are agreed with other Fisheries Administrations to avoid any potential distortion arising where differences in licensing rules apply. We envisage that, where differences may exist, the receiving administrations rules will prevail and this is the approach we intend to take in Scotland.

Economic Link Obligation ( FQA centred)

We propose to attach an economic link criteria to FQA units attached to vessels registered and administered in Scotland and in membership of a Scottish PO, and FQAs held on Scottish recognised PO holding licences, to ensure that Scottish fishing communities retain benefit for any "Scottish" designated FQA units. Taking on board comments received regarding the option described in the consultation paper we now propose to consult further with stakeholders on two different ways of operating such a system. We therefore now seek views on the following two options.

The first option is to implement arrangements where if it is proposed for Scottish FQA units to be permanently transferred out of Scotland, these units will have to be placed onto an active Scottish licence. Those seeking to acquire units would be permitted to enter into leasing arrangements whereby the in-year quota associated with the identified FQA units would be transferred to a recipient vessel on an annual basis. The permanent transfer of FQA units out of Scotland would therefore be prohibited.

The second and alternative option is to allow the permanent transfer of FQA units, and in seeking to maintain the principle that the quota that derives from these units delivers an economic benefit back to Scotland, introduce a system of dual licensing. This economic link would apply to the identified key stocks of main commercial value to Scotland (See Annex A). For the stocks identified for ICES areas IV and VII these have been identified as stocks which contribute more than £1m of landings into Scotland in 2008. For ICES area VI, these stocks have been identified as the traditional species targeted by Scottish vessels operating in this area, and in relation to ever decreasing TAC levels, represent either at least 50% of the total UK landings made by Scottish vessels or contribute in value terms more than £1m of landings into Scotland in 2008. The same criteria will be applied in future to any new stocks that may be given full TAC status. We recognise that the vast majority of these key stocks are actually fished in the Scottish Zone.

The dual licensing proposal therefore is that any non Scottish vessel that acquires Scottish FQA units, and seeks to fish in the Scottish Zone for the stocks identified in Annex A shall be required to apply for an additional licence from the Scottish Government. It would be within the conditions of this licence that an economic obligation would be placed on the non-Scottish vessel in relation to the FQAs acquired.

These measures are designed to protect and preserve the future of the Scottish fishing industry and associated communities. The Scottish industry is a very different industry in terms of activity and dependent stocks to those in the rest of the UK. We believe that the imposition of such restrictions is reasonable and proportionate. We will consider in what circumstances, if any, exceptions to these restrictions should be allowed. It is likely that any exceptions may only be justified in a very narrow set of circumstances, for example, where a business physically moves outwith Scotland and it is not deemed practical to sell the current FQA units and acquire new replacement FQA units from out of Scotland. Acknowledgement of such circumstances may be associated with a transfer penalty, much in the same design as vessel licensing in seeking to recognise the permanent loss to the Scottish fishing industry.

Question 12: Do you have any other views on our proposals for a Scottish licensing system?

Proposals :

• Following establishment of a Scottish licensing system, we intend to ensure management arrangements that maintain proper controls that are light touch, effective, and business friendly.
• Set up a Scottish Licence Review Body and implement the full recommendations for changes in licensing made by the current UK joint government/industry Licence Review Working Group ( LRWG). It is our intention to implement these measures immediately upon the introduction of a Scottish licensing system.
• Establish a Scottish Licence Review Working Group. One of the first issues we will be looking to consider is the role of capacity benefits in licence transactions and simplification of the current rules.

Summary of views received:

There was near universal support for the intention to create management arrangements that maintained proper controls that were light touch, effective and business friendly.

A majority of those who responded on establishing a Scottish Licence Review Body did so positively and there was near universal support for the introduction of the recommendations made by the UK joint government/industry Licence Review Working Group ( LRWG) with repeated comments that this was overdue.

Stakeholders were almost of one voice in supporting any arrangements to simplify licensing arrangements which were seen as having grown excessively complicated over time. There was also support for considering the continuing role of capacity penalties.

Scottish Government response:

Fully implement the recommendations of the previous UK Licence Review Working Group. A Scottish Licensing System will be introduced as well as a Scottish Licence Review Body, which will consider and report on the wide range of issues surrounding current licensing rules from appropriateness of categories and flexibility to simplicity and the continuing use of capacity penalties as a valid management measure.

In all areas related to Quota Management and Licensing the Scottish Government strives to implement controls which are as business friendly as possible.

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