By Robert Kozak

OTTAWA Canada warned on Wednesday that it was prepared to seize a second Spanish vessel fishing in a disputed area off the coast of Newfoundland in a move that would worsen already deteriorating relations with the European Union.

The Spanish vessel moved into a rich fishing zone known as the Nose and Tail of the Grand Banks on Tuesday, despite warnings from Canada that it will seize any vessel found fishing there.

"We have every intention of taking enforcement action against the vessel," Fisheries Minister Brian Tobin said. "We are serving notice that the vessel should leave the Nose or it will be seized."

Tobin said that an "operational plan" was being put in place by the government, which in the past has meant the government was planning to seize the boat.

Canada and the European Union have been at loggerheads since last Thursday when Canadian patrol boats fired shots across the bow and seized the Spanish vessel, the Estai, in international waters.

The government arrested the captain on charges of illegal fishing for Greenland halibut, also known as turbot.

The boat and crew were take to St. John's, Newfoundland, where the court case against them began on Tuesday.

The move infuriated the European Union, which froze formal contacts with Canada and demanded the immediate release of the Estai before any negotiations over the future of the fish stocks could take place.

"There will be no negotiations while Spanish vessels are fishing on the Nose and Tail," Tobin said.

Other Spanish ships resumed fishing just outside disputed areas on Tuesday, a move the Canadian government called "provocative."

Several Canadian fishing vessels and aircraft are tracking the Spanish boats in the Atlantic.

In Madrid, the owners of the Spanish fishing boat held by Canada confirmed on Wednesday they would not post a bond to secure its release and did not recognise Canadian jurisdiction over the vessel.

Spain has not ruled out a break in diplomatic ties with Ottawa and has already said it will reintroduce visas for Canadian tourists and halt all official visits between the two countries.

EU Fisheries Commissioner Emma Bonino said in Strasbourg there would be no formal talks with Canada on Wednesday as the Estai had not been freed by the 0800 GMT deadline.