Shetland Catch was also fined £150,000 for its role in helping skippers to get round quota regulations with an elaborate and secret electronic measuring system which concealed how much fish was actually processed at its factory.
Prosecutors had claimed that helping to land mackerel and herring which it did not declare to the authorities earned the Lerwick plant more than £6 million. Using legislation more usually directed against drug barons, the Crown demanded that the money be confiscated.
Shetland Catch challenged the demand and Lord Turnbull heard a week of evidence and legal argument at the High Court in Edinburgh earlier this year before announcing his decision on Wednesday.
The ruling marks the end of almost two years of argument and negotiation since August 2010 when Shetland Catch admitted its part in breaching European Union quota rules between January 2002 and March 2005.
The firm connived with skippers on more than 700 occasions, the court heard, and during that time illegal landings of mackerel and herring – more than a third of the total – were valued at £47.5 million.
Defence QC Murdo Macleod pleaded for leniency, pointing out the vital role Shetland Catch – one of the largest fish processors in Europe – played in the local community.
The company had been founded in 1989 to fight off the challenge of klondyker ships from Eastern Europe, said the lawyer, and gave full-time employment to 70 people, with an extra 50 or so employed for seasonal work.
The £3 million annual wage bill allowed workers to stay in Shetland who would otherwise have to go to the mainland.
Shetland Catch also sponsored a scholarship in fish conservation and, since the quota offences, had played a lead role in setting up a group to ensure future sustainability of fish stocks.
Mr Macleod also said the company had been helpless to resist the demands of the skippers, who would otherwise have gone to competitors.
“Shetland Catch would not have survived if it refused to accept the black fish. The vessels would simply have landed elsewhere.”
Mr Macleaod continued: “It is not putting it too strongly to say there was a position of helplessness Shetland Catch found itself in.”
Imposing the fine, Lord Turnbull said it was right to distinguish between the company and the fishing boat masters who were landing black fish for their own financial advantage.
The company’s co-operation with the investigation into the illegal landings – and plea of guilty – also allowed him to reduce the fine. The offence was also committed seven years ago.
“It is perfectly obvious the present company has an approach and set of attitudes which are entirely commendable and utterly different from the circumstances which pertained in that period,” said the judge.
Deciding the level of the £1.5 million pound confiscation order, Lord Turnbull noted that the volatile market for herring and mackerel had affected Shetland Catch which expected a loss of about £4 million during the financial year which ended in March.
The firm had also suffered because of cuts in quotas in later years to make up for the “black fish” landings.
Lord Turnbull said the confiscation should reflect Shetland Catch’s position in the local economy and its ability to pay.
In a statement, Shetland Catch said the directors regretted the company’s involvement in the scam and emphasised that it had changed.
“Long before this matter reached the court, the entire Scottish pelagic industry voluntarily agreed to participate in an unprecedented quota payback scheme whereby over quota landings were deducted from future years’ quotas,” the firm said.
“This payback resulted in reduced raw material to the factory which was a serious challenge for our company. The financial adjustment whereby the benefit of over fishing was cancelled out by voluntary payback has been recognised by the level of confiscation order made.
“Shetland Catch has played a crucial role in securing MSC accreditation for the entire Scottish mackerel and herring catch, proving the sustainable way these fisheries are now conducted. The contrast with the era of over quota landings of almost a decade ago cannot be over emphasised.
“Payment for all landings of over quota fish has been made and processed through the respective seller and buyers accounts with tax paid on it.
“Marine Scotland now has a challenge to match the responsible pelagic fishery in Scotland with the political will to preserve this economic activity for its coastal communities. The contrast with the Icelandic and Faroese governments setting their own mackerel quota for national advantage could not be more stark.
“Today draws a line under Shetland’s involvement in this long-running investigation. We look forward anew to the forthcoming fishing seasons and thank our customers, suppliers and staff for their fortitude during this long term.”