Ministers broke law over £200m CalMac ferry contract, say lawyers

By ALASTAIR DALTON
Published on 13/10/2012 00:00

MINISTERS may have acted illegally in awarding state-run ferry operator CalMac a three-year contract worth more than £200 million, lawyers said last night.

The claim follows the European Commission confirming to The Scotsman yesterday that it had not been officially informed of the decision, and had also not authorised subsidies of more than £70m a year to run the west coast route network.

Legal experts said CalMac might be faced with having to pay back the cash if the contract was declared unlawful.

The Scottish Government last month handed CalMac a new contract from autumn next year – half the length of its current one – without a competition.

Ministers said this would enable the “necessary detailed preparation work” for the next full CalMac contract from 2016, which is expected to be expanded to include some council-run ferry routes.

Transport minister Keith Brown said: “To facilitate a thorough procurement for the new contract, CalMac are to be awarded a new three-year interim contract to deliver services when the current contract expires next autumn.”

However, the European Commission said yesterday it had not been told of the move, which has to be approved under European competition rules because of CalMac’s monopoly.

A spokeswoman said: “The commission has not received a formal notification from the UK authorities regarding a possible interim prolongation of the current public service contract with CalMac and has not authorised any possible state funding to be granted on this basis to CalMac.”

Competition law experts said the revelation should ring alarm bells.

David Flint, a partner at law firm MacRoberts in Glasgow, said: “Given the obvious previous interest both in transport circles and, more importantly, in the communities served by the west coast ferry services, I find it very curious that no-one in the Scottish Government thought to seek the views of the European Commission before embarking on this interim contract extension to a state-owned entity. Whatever the alleged political justification for the extension, the fact that the appropriate consents have not been sought means that, should the commission find in due course that the aid granted to CalMac were unlawful in terms of the state aid rules, CalMac would be required to repay the aid. It is unclear where CalMac would find the money to do so and its only shareholder [Scottish ministers] could not be a source of funds.”

The Scotsman has been in contact with two other lawyers who have also expressed doubts about the legality of the Scottish Government’s approach.
They claimed that regulations being used by ministers to award the interim contract were inappropriate.

The 2011-12 annual report of the David MacBrayne Group, of which CalMac is part, which was published yesterday, showed CalMac’s grant from the Scottish Government was £72m.

A spokesman for the Scottish Government’s Transport Scotland agency said: “The extension to the contract with CalMac is being carried out in accordance with EU rules on procurement and state aid.

“In light of the importance of these ferry services to Scotland’s remote and island communities, discussions with the European Commission have already taken place, the most recent of which was this week in Brussels between the transport minister and [commissioner with responsibility for transport Siim Kallas’s cabinet.”