This week's debate in the Highland Council's Community Services Committee about whether to increase fares on the Corran Ferry by four per cent, threw up our old friend 'state aids' as a reason why the council must act.

Having sought advice from Transport Scotland, council officials have been concerned for a couple of years now that the authority could be in breach of European state aids regulations, if it continued to subsidise the Corran Ferry as a loss-making service.

That suggests there is certainty on the matter. But there has been a fog of confusion surrounding how state aids affect Scottish ferries for a decade and a half now.

Senior civil servants in Edinburgh laid down the line many years ago that CalMac's routes would have to tender to avoid breaching state aid rules.

However in 2003 there was a ruling by the European Court of Justice in a case about German bus company Altmark Trans.

The European Court ruled government payments for essential services should not be considered state aid as long as they were clearly defined and covered the costs of providing the service. It even removed the onus on governments to notify European Commission regulators of payments.

In 2004 CalMac received senior legal opinion that the Altmark ruling allowed the then Labour/Lib Dem Scottish Executive to stop tendering without fear of legal consequence.

The Executive's legal advisers disagreed.

However in 2007, in response to an inquiry from Alyn Smith, the SNP MEP, Jacques Barrot, the European Transport Commissioner said of public support for ferry services: "If this subsidy complies with the four criteria laid down by the court of justice in its judgment in the case of Altmark Trans - then this subsidy would not constitute state aid."

Indeed he said that the Altmark principles were not only relevant to the question of ferry services like the CalMac network, it was essential that the Altmark principles be complied with if subsidies to these services were not to be treated as illegal state aid.

Professor Neil Kay, emeritus professor of business economics at Strathclyde University, said at the time: "The commission's response quite clearly indicates the executive was completely wrong to dismiss the Altmark criteria."

But the Executive insisted that the European Commission had made clear there was no alternative to tendering.

However it had long appeared that officials advising ministers had closed their ears and minds to any alternative approach.

Professor Kay, an internationally recognised expert on business economics, was invited to give evidence to the Scottish Parliament's inquiry on the issue, and in the spring of 2005 submitted a proposal to the committee and the executive based on the Altmark ruling by the European Court. The proposal showed how basic principles outlined in the Altmark case could enable CalMac's lifeline ferry services to be made compliant with EC rules without the need for tendering.

The then Transport Minister, Nicol Stephen, appeared to give an undertaking to the Transport Committee that Professor Kay would be given an opportunity to discuss his proposal with the executive.

That never happened. Instead, just before the debate in the Scottish Parliament in September 2005, a briefing document appeared from the Scottish Executive which attempted to discredit the proposal on the apparently spurious grounds that Altmark was not relevant to the tendering of Scottish lifeline ferry services.

Professor Kay's argument was that the ferry routes be treated as essential services, which could be subsidised by way of Public Service Obligations (PSOs) which are recognised by the European Commission, and strengthened by the application of the European Court's Altmark ruling . Throw in a ferry regulator similar to that operating in previously nationalised industries and the European Commission would be happy.

But as far as we can gather these ideas were never really given the time of day in Edinburgh. This remains curious as two senior sources within the European Commission independently made clear to the Herald at the time that Professor Kay knew what he was talking about, and his contribution certainly should not be dismissed. This was sort of Euro speak for he is right.

But the SNP Scottish Government has inherited the official thinking on this, and we are about to embark on another costly retendering of CalMac's routes.

Part of the problem is the idea the European Commission says you must do A, B or C to avoid state aids; whereas principles are set down and it is up to governments to come up with ways of conforming with them.

So if you go to Europe and ask will tendering do the job, they will say yes. But it has never precluded other approaches.

The Community Services Committee, under the chairmanship of the estimable Graham MacKenzie (a gentleman and scholar of this particular political parish), is now to seek independent legal advice on state aids in respect of the Corran Ferry.

Councillors and officials would do well to ask their lawyer how it can be that the likes of Orkney Islands Council can subsidise inter-island air services through a PSO contract with Loganair, but Highland Council can't do something similar on the Corran Ferry.

Orkney justifies the PSO thus: "The scheduled air service between the Orkney Mainland (Kirkwall) and the islands of Papa Westray, North Ronaldsay, Westray, Sanday, Stronsay, and Eday is essential to the archipelago of islands in order to promote and encourage economic growth and to meet the Government's transport objectives for accessibility and social inclusion."

Exactly the same argument could be made in respect of the communities of Ardgour, Morvern and Ardnamurchan. The proposed four per cent increase would have taken the cost from £7.90 to £8.20 per car for the 500-yard crossing, which campaigners say makes it one of the shortest and most expensive ferry services in the UK. A book of 30 tickets for a car or small van would increase from £69.50 to £72.00.

People on the western side depend on the ferry to get to Fort William for work, hospital appointments, etc. The alternative is a lengthy detour along the A861 single track road on the west side of Loch Linnhe round the head of Loch Eil.

It is difficult to see that an argument for a PSO could not be framed for Corran, albeit possibly with the creation of an arms-length company to operate such a contract. It seems exactly the sort of essential service PSO's were established to protect.

The Scottish Government already recognise ferries to remote peninsular communities as being lifeline services. So it is certainly worth a try, because the one thing that is sure about state aids is that nothing is as certain as some would have us believe.