MORE than 70 fishermen, 20 trawler owners and a fish processing company have been ordered by Brussels bureaucrats to repay almost £1 million in grants to Shetland Islands Council - even though the local authority does not want to claw back the cash.
The repayment of sums from 7,000 to 100,000 has been ordered by the European Commission following a ruling that Shetland Islands Council (SIC) grants dating back to 1994 breached state aid rules.
There are mounting fears that further grants totalling an estimated 3 million paid out to fish farming and processing companies and a livestock marketing group could also be under threat, jeopardising the future development of the islands' fragile economy and planned infrastructure investments.
Councillor Sandy Cluness, the convener of the islands council, said yesterday that the ruling, which followed a complaint to Brussels, had come as a "devastating blow". And he vowed the authority would fight tooth and nail to reverse the decision.
Mr Cluness said 78 young fishermen, 20 fishing vessel owners and a fish processing factory had been ordered to repay upwards of 1 million, including compound interest, for grants they had received from the council over the past 13 years.
The money was paid out of the authority's oil reserve fund - established with profits made from running the harbour at the Sullom Voe oil terminal - through economic development schemes operated by the islands' council and the Shetland Development Trust.
The commission has ruled that the grants constitute a breach of state aid rules because they gave the recipients an unfair advantage over other EU citizens.
Mr Cluness said: "These investments were made by previous councils in good faith to encourage first-time fishermen to get started, to assist in improving the standard of fishing vessels and to help modernise our fish factories.
"I cannot believe European politicians ever intended to use state aid rules in this way, crippling the development of our traditional industries and threatening the sustainability of a peripheral community like Shetland. This is particularly galling in that individuals and businesses are being punished for the council deciding to use its oil funds for the specific purposes for which they were intended."
He explained young fishermen were given grants of 7,000 to enable them to get shares on boats, but compound interest was likely to mean they would have to repay between 13,000 and 14,000. The largest single grant was likely to be 100,000. The council also gave grants to vessel owners for replacement engines and to factories to help buy equipment.
Mr Cluness said: "This wasn't European Union funds. This was Shetland's own funds. The EC is saying these people we encouraged to take grants should repay the money to us, plus interest, which we are very reluctant to do."
The council plans to enlist the aid of Tavish Scott, the local MSP, and Alistair Carmichael, the local MP, and MEPs in its fight to overturn the ruling.
Mr Cluness said: "Not only are we concerned with this outcome, but for the consequences to other investment schemes. And unless we can find a way to use our oil reserves to assist the development of our local economy, I fear for the future of this community."
A spokesman for the authority said that following further complaints loan assistance schemes for fish farming and fish processing, the Shetland Livestock Marketing Group and a proposed abattoir were under investigation by the EC.
Elspeth Attwooll, the Liberal Democrat MEP for Scotland and vice-president of the European Parliament fisheries committee, said: "I very much regret the commission decision. The fact that state aid rules require compound interest seems particularly harsh. I am sure I speak for my fellow MEPs in saying we are ready to do anything we can to assist the council in this regard and in ensuring that future schemes are commission-proofed."
• Ministers are to ask the European Union for an increase in the cod quota amid concerns about the rising number of dead fish being dumped back in the North Sea. The fishing industry is warning that it faces ruin as it is forced to throw away thousands of tonnes of fish to comply with Brussels regulations.