UK: Common Agricultural Policy Reform & The "Golden Ticket"

It has been widely reported over the last few months that the first draft of the Common Agricultural Policy ("CAP") reform was published in Autumn 2011. The reforms are due to come into effect in 2014, but it seems increasingly likely that their implementation will be pushed back to 2015 at the earliest.

The reforms will introduce a new Basic Payment Scheme to replace the existing Single Payment Scheme and will impose new requirements on the claimant in order to be able to qualify for receiving the payment. These changes have been covered in depth elsewhere, but to summarise, the key points are:

1. The "Golden Ticket" whereby to claim the new payment the claimant must have been a successful claimant in the 2011 Single Payment Scheme year.
2. The introduction of the "active farmer" test under which a claimant's Basic Payment Scheme claim must exceed 5% of their "non-agricultural receipts".
3. "Greening", which imposed obligations on:
   
   3.3. use of arable areas;
   
   3.4. permanent pastures; and
   
   3.5. imposing "ecological areas".
   
   

As well as practical challenges for the claimant, the proposed changes raise a number of legal issues to consider. In this issue we will consider the "Golden Ticket".

The need to have a "Golden Ticket" will have a significant impact on two types of person:

Under the CAP reforms at present the "Golden Ticket" can be transferred by one farmer to one other farmer i.e. a claimant who successfully claims entitlements in 2011 can transfer that right he acquired to a third party, but only to one third party, and in doing so he will himself lose his "Golden Ticket".

The transfer of the "Golden Ticket" can, it appears, only be implemented on a sale or lease of land. This poses a number of additional problems.

The Type A person will need to ensure that the drafting of the Sale Contract contains carefully drafted provisions to ensure that he can make a claim under the Basic Payment Scheme. Or, as is quite likely, if the Seller does not wish to sell his "Golden Ticket" the Buyer will need to seek advice on alternatives to allow him to claim the Basic Payment Scheme payments.

Similarly, a seller to a Type A person who has no intention of giving up his "Golden Ticket" will need to ensure that the sale contract does not unwittingly oblige him to give up this valuable right.

As drafted, it appears that the CAP reforms do not allow the "Golden Ticket" to revert to the Landlord on the termination or surrender of his tenancy. If the tenancy is due to expire before the implementation of the CAP reforms and the landlord wishes to let the land to a new tenant together with a right to claim for the new Basic Payment Scheme he will not be able to simply rely upon the clause in the tenancy agreement that the tenant will transfer the entitlements to the landlord or whomever he so directs. The Landlord will need to take advice on ways to plan around this apparent stumbling block. This provision will also have an impact on the landowner who bought a farm with an intention to take on the farming himself in the future but in the interim has let the land out to a tenant.

While measures to ensure that the landowner has a "Golden Ticket" may be quite complicated, especially as significant concessions or monetary stimulation may need to be given to the "Golden Ticket" holder, landowners will need to take into account the possibility of the financial implications on their farming businesses if they are unable to claim the Basic Payment Scheme.

Therefore planning and drafting are key for those wishing to claim the new Basic Payment Scheme and who are not already "Golden Ticket" holders. As it is possible that the 2011 reference year may be changed to 2012 it is also something that farmers must bear in mind when entering into new arrangements this year as even the simplest of arrangements may have a lasting impact on their entitlements claims.