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Live animal export companies could be given compensation after the High Court today ruled a ban at the Port of Ramsgate was illegal.
Thanet District Council brought in the temporary suspension in September 2012 after 45 sheep died in chaotic scenes.
But it has now been decided the authority did not have the power to impose the ban on live animal exports, which was in force for more than two months.
The legal ruling means the council is now liable to pay compensation to exporters to cover loss of income.
It comes days after a company and its boss were fined thousands of pounds after the dozens of sheep had to be slaughtered.
The animals had to be shot after been found severely lame during export on lorries.
"We took this action at the time to protect the welfare of animals and to protect our members of staff as there are no suitable facilities in place at the port..." - Cllr Michelle Fenner
Thanet council said it is now exploring options for appeal with its legal advisors.
Cllr Michelle Fenner, cabinet member for business, corporate and regulatory services, said: "We're extremely disappointed by today's ruling, especially given the recent convictions of some of the exporters for animal cruelty.
"Our position has always been to work within the legal framework to ensure the welfare of animals and to highlight the ill-treatment of animals in transit.
"The decision to impose the temporary ban in 2012 was not taken lightly and was supported by legal advice following the horrific slaughter of more than 40 animals at the port.
"We took this action at the time to protect the welfare of animals and to protect our members of staff as there are no suitable facilities in place at the port.
"There is little change in the fact that we know our hands are tied by central government and Defra, however we will explore the options for appealing the decision and consider this trade to be morally wrong."
It is not yet clear how much the council might have to pay out in damages.
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