Faroese Auction Act was valid and did not involve expropriation

Case no. 50/23
Judgment delivered on 6 March 2024

Føroya Reiðarafelag
vs.
Føroya Landsstýri,
Fiskivinnu- og samferðslumálaráðið

Until 2016, fishing quotas were allocated by executive order in the Faroe Islands. In 2016, the so-called Auction Act (Parliamentary Act no. 30 of 12 April 2016) gave the Minister the authority to sell a small part of the Faroese fishing quotas at auction as part of an experiment.

Section 7(2) of the Auction Act stipulated that expenses for quotas purchased at auction could not be deducted from the sales value of the catch when fees were calculated and paid to the crew. Section 7(2) of the Act thereby disregarded Clause 17(3) of the agreement between Føroya Reiðarafelag (Shipowners’ Association) and three Faroese crew organisations, according to which expenses for, among other things, fishing permits could be deducted in the calculation of the crew members’ share of the profit from fishing.

The case primarily concerned whether Section 7(2) of the Auction Act was contrary to Article 11 of the European Convention on Human Rights, Article 4 of ILO Convention No. 98 and Article 1 of Protocol No. 1 to the Convention on Human Rights, and if so, whether the provision was invalid as a result. If this was not the case, the second question was whether the provision entailed expropriation in relation to the members of the Shipowners’ Association.

With regard to Article 11 of the Human Rights Convention, the Supreme Court noted that there do not appear to be any judgments from the European Court of Human Rights that provide a basis for holding that the protection afforded by Article 11 covers a case such as this, which involves a limited interference with a single provision in a collective agreement. Regardless of whether the present case is covered by Article 11, the Supreme Court found, among other things referring to the fact that it was a legislative measure justified by objective considerations and did not go beyond what was necessary, that Section 7(2) of the Auction Act fulfilled the conditions for the lawfulness of restrictions set out in Article 11.

The Supreme Court further held that Section 7(2) of the Auction Act also complies with Article 4 of ILO Convention No. 98 and Article 1 of Protocol No. 1 to the Human Rights Convention.

Finally, the Supreme Court ruled that Section 7(2) of the Auction Act did not involve expropriation in relation to the members of the Shipowners’ Association. In this connection, the Supreme Court noted, among other things, that the Act applied to all shipowners who chose to buy fishing quotas at auction covered by the Act, that the provision did not imply that a right was transferred to others, but was in the nature of a prohibition against passing on an expense to the crew members, and that it had not been established that the provision had had significant negative financial consequences for the members of the Shipowners’ Association.

The High Court had reached the same conclusion.