The Department of Fisheries and Oceans has won a court decision upholding its right to prevent the corporate takeover of inshore fisheries in Atlantic Canada and Quebec.

"It was a challenge of the government's power to manage the fishery for all Canadians," said Graeme Gawn, a lobster fisherman from Nova Scotia's Digby County and a representative of the Maritime Fishermen's Union.

The federal victory came in a May 5 ruling released Monday from Justice Cecily Strickland of the Federal Court of Canada in the case of Kirby Elson, a fisherman from Labrador.

Strickland ruled the federal fisheries minister was entitled to strip a snow crab fishing licence from Elson after he refused to exit a controlling agreement with two fish processors.

'Awful lot at stake'

The federal government contended the agreement was an effort to get around long-standing policies to preserve the independence of the region's inshore fishery.

"What was at stake in the Elson case was the ability for the department and the minister to ensure that the licences are held in the hands of harvesters and the benefits from these licences stay with the harvesters and flow to the communities where they live," said Morley Knight, assistant deputy minister for fisheries policy at DFO.

"For Atlantic Canada and Quebec, there was an awful lot at stake."

Company controlled licence even in death

Although the licence was in Elson's name, he was a placeholder only.

The 2003 agreement gave Quinlan Brothers and Labrador Sea Products Ltd. total control over every aspect of the licence.

Kirby Elson

Kirby Elson (centre) of Cartwright, N.L., said he was too poor to fish without the controlling agreement. (CBC)

The companies provided the vessel, the crew, financed the boat and reaped the profits.

Even in the event of Elson's death, his estate would have been compelled to transfer his licences to a designate of the fish processors.

Elson was the only fisherman in Atlantic Canada to formally refuse to exit his controlling agreement by a May 2014 deadline.

Minister has 'absolute' licensing discretion

Elson appealed to the Federal Court, seeking a judicial review of a licence appeal board that upheld the minister's refusal to renew his snow crab licence.

The companies — through Elson's appeal — argued the minister had no right to interfere in what was a commercial contract.

Strickland rejected that argument on the key point.

"The minister's absolute discretion in licensing ... permits him or her to validly consider social, cultural or economic goals or policies when deciding whether or not to issue fishing licences," the judge wrote in the 87-page decision.

Elson has refused to say who paid for his legal challenge.

The Cartwright, N.L., fisherman — who said in an affidavit he was too poor to fish — was represented by one of Canada's biggest law firms, McCarthy Té​trault of Toronto.

Justice rejects corporate claims

DFO and some inshore fishing groups assert controlling agreements undermine the fleet separation and owner-operator policies put in place in the 1970s to stop a corporate takeover of the region's inshore fisheries.

The fleet separation policy ensures new licences for fisheries pursued by vessels under 19.8 metres are not issued to corporations involved in the processing sector of the industry.

The owner-operator policy ensures licences are issued to individual fishermen who are required to fish their licences personally.

"Going forward, we will be stepping up our efforts to implement the policy as it stands."  - Morley Knight, DFO assistant deputy minister for fisheries policy

DFO explicitly banned controlling agreements in a new policy. It said licences cannot be renewed if the fisherman is in a controlling agreement.

Strickland upheld the policy as a relevant factor "for the minister to consider in issuing licenses to fish harvesters."

"If it turned out the minister didn't have the power and corporations can control licences, then in very short order we would have a few big companies, multinational companies, owning all the access to the fishery," said Gawn.

DFO to step up efforts

Inshore fishermen like Gawn say there are dozens of other controlling agreements still in place in Atlantic Canada.

That claim has not been verified.

Since 2015, the department has launched audits and investigations of licences it considers suspicious and last fall, DFO disclosed two Maritime fishermen lost their licences as a result.

Knight said since then "there have been quite a number" of additional audits, reviews and hearings launched in the Maritimes, Quebec and Newfoundland and Labrador.

The Elson decision will intensify that scrutiny.

"Going forward, we will be stepping up our efforts to implement the policy as it stands," he told CBC News.

"We will be moving forward, based on the result of this decision, with a little more certainty."

No response from industry

CBC News contacted Quinlan Brothers and the Association of Seafood Producers in Newfoundland and Labrador for a response to the Elson decision and to ask if an appeal is planned.

Neither responded immediately.

Strickland did uphold one industry legal argument, finding that in denying Elson's appeal, the minister's decision letter limited his discretion.

The letter identified the new policy as the only avenue open to an exemption, when the minister had broader authority to grant Elson relief in an appeal.

However, Strickland concluded it did not matter because the minister "could not reasonably reach a different outcome on the facts and law."