Mixed ruling in UK-EU fishing dispute as Britain seeks Brexit reset

BRUSSELS (Reuters) -Arbitrators asked to settle a dispute between Britain and the European Union over post-Brexit fishing rights have given a mixed ruling, the Permanent Court of Arbitration said on Friday.

The case, which could complicate Britain's planned "reset" of relations with the bloc, concerned whether a British ban on fishing sandeels in its North Sea waters breaches the EU-UK Trade and Cooperation Agreement (TCA).

Britain argues that the fishing ban is necessary, given the role sandeels play in the food chain of predators - larger fish, marine mammals, and seabirds such as puffins.

British boats do not fish for the sandeels, but the small eel-like fish are caught by Danish fleets and used as animal feed and as a source of oil.

The three-person panel of arbitrators found that the ban in English waters was not "proportionate" and breached Britain's obligation to grant access to its waters to fish sandeels. Britain therefore needs to take the necessary measures to comply with its ruling.

However, the panel dismissed the EU's arguments against the ban in Scottish waters, as well as EU claims that the fishing ban as a whole was discriminatory and not based on the best available scientific advice.

Britain said the ruling fully upheld its decision to close Scottish waters and did not necessarily mean that it was obliged to reverse the closure of English waters. 

"We will undertake a process in good faith to bring the UK into compliance on the specific issues raised by the tribunal," a British government spokesperson said. 

The European Commission said it welcomed the ruling, noting the finding that the fishing ban in English waters breached Britain's obligations.

"While the EU fully supports the protection of the marine ecosystem and the long-term sustainability of fisheries, it is essential that any unilateral measures are consistent with the commitments and principles in the TCA," it said.

The EU executive said Britain had to inform it within 30 days of the measures it plans to take to comply with the ruling.

In financial terms, the case is trifling. Britain puts the revenue loss for non-UK vessels at 45 million pounds ($60 million) in a worst-case scenario.

Politically, it could prove awkward.

Britain and the EU are preparing a summit on May 19 that could lead to closer defence cooperation and pave the way for agreements to ease agricultural and food trade. The EU wants fishing rights in UK waters to be part of the discussions.

($1 = 0.7524 pounds)

(Reporting by Philip Blenkinsop. Editing by Bart Meijer, Mark Potter and Elaine Hardcastle)