Class action against the State as a consequence of reduction of production capacity

| Insight

All the 25 salmon and trout farmers in the production area from Nordhordland to Stadt recently brought legal action against the State represented by the Ministry of Trade, Industry and Fisheries. The background to the action was the companies’ claim that there is no scientific basis for ordering a reduction in production capacity in the area.

The traffic light system

A system known as the traffic light system forms the backdrop for the legal action. The system was introduced in 2017 through the Production Area Regulations in an attempt by the State to achieve profitable growth and predictability in the industry. The traffic light system divides the coast of Norway into 13 production areas, and the production of salmon, trout and rainbow trout in each area is regulated on the basis of sustainability indicators. The only indicator at present is the impact of salmon lice on wild salmon. The name of the system is based on the area’s environmental status, defined as the mortality rate in wild fish: acceptable (green light), moderate (yellow light) and unacceptable (red light). The colour determines whether production capacity is to be increased, frozen or reduced, respectively.

Fish farmers in production areas 4 and 5 have now been instructed to reduce their production capacity

Earlier this year, the Ministry of Trade, Industry and Fisheries decided that production areas 4 and 5 (Stadt to Hustadvika) would be labelled red in the traffic light system. This means that all fish farmers in the area must reduce their production by six per cent by 5 August 2020. Operators in Area 4 have attempted but not succeeded in engaging in dialogue with the State about alternative solutions. It has been proposed to reduce production by 12 per cent in spring (April–August), the most vulnerable period for wild salmon smolt migration. On the other hand, the companies have proposed making up for the loss of production in autumn, when the migration is completed.

Lack of scientific and legal basis

The background for the lawsuit and the claim for liability in damages on the part of the State is that the fish farmers believe they have found major flaws in the scientific and legal basis on which the decision is based. First of all, the companies have claimed that the decision suffers from a material lack of competence and that this makes it invalid. The claim is based on the argument that a downward adjustment will not be ‘necessary due to environmental considerations’, which is the material condition under Section 9 third paragraph of the Aquaculture Act. In other words, there is no legal basis for the downward adjustment.

The other ground for invalidity invoked is that the decision suffers from, among other things, an inadequate and incorrect factual basis. One basis for this is that the claim that salmon lice from fish farming facilities lead to a mortality rate of more than 30 per cent in wild salmon is both undocumented and unlikely. Another basis for the claim is that the lice situation in the facilities is very good.

The third reason for claiming that the decision is invalid is that it suffers from fundamental procedural errors because the Ministry has not taken into account the fish farmers’ right to make adversarial submissions in relation to the grounds for the downward adjustment.

The final argument is that the decision is arbitrary and comes across as grossly unreasonable to the companies. It is claimed that the downward adjustment entails an unlawful recall and an unwarranted intervention into an ongoing, lawful activity.

Major consequences for the industry

The fish farmers refer to how they have implemented a number of coordinated, targeted measures that have proven to be highly effective. As mentioned, this work has resulted in lice numbers far below the official threshold. The order to reduce production capacity thereby appears to be highly invasive in relation to the operators, which have also made big investments in technology. This comes on top of the very negative financial consequences of the coronavirus pandemic.