Overfished: The trade in quotas works against sustainable fishing / Getty Images

Fishermen who flout conservation rules still receive millions in subsidies through a failed European quota system

Two companies run by Spanish fishing tycoons are set to receive one of the largest ever fines for illegal fishing – expected to be more than £1m – when they appear in a British court this week. Manuel Vidal Suarez and Maria Dolores Vidal Marino, from Galicia, Spain, together with two fishermen who served on their boats, will appear at Truro Crown Court, Cornwall, on Wednesday, following charges against their companies that they "recklessly furnished false information" – falsified log books and landing declarations to hide the amount of fish their boats had caught in UK waters.

The case has fuelled the claims of critics who say foreign fishermen are repeatedly flouting EU rules designed to halt overfishing, and threatening the survival of the British fishing industry, as well as driving up the price of fish. Campaigners are demanding an end to public subsidies paid to companies found guilty of illegal fishing.

Fishing experts say the case is also clear evidence of a mounting crisis in the European Common Fisheries Policy (CFP), which not only fails to police unsustainable overfishing in the Atlantic and Mediterranean, but actually encourages it through subsidies.

The Spanish directors, who pleaded guilty to fishing offences on behalf of their companies, are part of the extended Vidal family, who operate a network of fishing companies that received almost €16m (£12.5m) in European subsidies including UK contributions, between 2002 and 2009. According to court evidence, one of their boats was sailing under a British flag, had an English fishing licence and a UK quota allocation.

The European Commission, responsible for the CFP, admits the policy is failing. It says 88 per cent of fish stocks in the Mediterranean and 63 per cent in the Atlantic are overfished, and estimate that more than 90 per cent of fish will reach unsustainable levels by 2022. Critics say that the EU's failed policy now means that ravenous European fleets, of which Spain's is the biggest, are now plundering fish stocks in seas off Africa and the Pacific. Spain and France repeatedly fail to provide accurate data on fish landings, according to the International Council for the Exploration of the Seas (ICES).

Companies connected to the Vidal family continue to receive European subsidies, despite a recent Greenpeace report that at least seven of their vessels have been convicted for offences, with fines totalling more than £2.4m and confiscation of three vessels. Ramon Garcia Gallardo, a lawyer for Hijos de Vidal Bandin, the Spanish holding company at the centre of the Truro case, confirmed that while there were no "legal, economic or financial" connections between the defendants and the Vidal network, they were all part of the same extended family.

Ariana Densham of Greenpeace, said: "Rich, powerful industrial-scale European fishing barons are subsidised by European taxpayers and permitted to fish under the British flag, using UK quota allocations, with none of the proceeds ever feeding back into the UK economy. Meanwhile, sustainable inshore fishermen are dying out." Smaller, more sustainable vessels, which make up 77 per cent of the UK fleet, receive just 4 per cent of the quota.

The case also highlights the lack of transparency around the UK's fishing quota scheme. One of the vessels in the court case, O Genita, has an English fishing licence and a UK quota allocation. Under UK regulations, British fishermen who were given individual quotas in the 1980s can sell their allocation on to the highest bidder. This has led to the creation of "quota traders", leading to some of the British quota ending up in the hands of overseas companies. While the Department for Environment, Food and Rural Affairs says it is unable to provide a breakdown of UK fishing licence holders by nationality, the Marine Management Organisation (MMO) notes that there are currently 13 vessels listed as being based in Spanish ports. A spokesman added that there could be many more that are registered to the UK, but have foreign interests.

Jeremy Percy, chief executive of the New Under Ten Fishermen's Association, which represents Britain's inshore fishing fleet, said the current system is a "mess of epic proportions". "Quota is going into the hands of the Spanish, or Dutch, quite legally, but then people abuse the system for private gain. Quota has become a commodity – people can buy it and sell it, but those of us who need access to this public resource, but who have got no money to buy it, have no hope at all. Whenever these public goods are given private value, it's the small guys that end up getting screwed." he said.

He believes the case in Truro is just "the tip of the iceberg". Another Spanish-owned Cornish vessel, Liper Dos, also from Galicia but operating under the British flag, was charged in 2010 for illegal fishing practices. Last year, a confiscation order was made for £1,163,180 against Liper Dos Ltd – the largest court order since the MMO's creation in 2010.

Maria Damanaki, the European Commissioner for Fisheries, told The Independent on Sunday that she "wants to change the subsidy system, so that it is only given to instruments that support the system of sustainable fishing". She added: "I am proposing a new fund that will foster fisheries reform to make our fishing activities sustainable and innovative, support the selectivity of fishing, end discards and support better science while strongly focusing on local fishing communities."