The Scottish Government company which owns most of CalMac’s ferries and many of its terminals, has been warned the way it levies harbour charges could breach European law.
This could leave Caledonian Maritime Assets Ltd (CMAL) open to a commercial operator seeking to bid for one or more of CalMac’s routes, raising an action at the European Court. This could also apply to the Gourock--Dunoon service which will be tendered separately.
CMAL was established by the former Labour/LibDem Scottish Executive in 2006 in a major restructuring of Caledonian MacBrayne. This was to allow the publicly owned ferry operator to bid for its own routes as CalMac Ferries Ltd, when they went out to competitive tender.
As part of this exercise CMAL was created as a stand-alone body with Scottish Ministers the sole shareholders. Its function is to lease the ferries and the 24 ports it controls from Wemyss Bay on the Clyde to Tarbert in Harris, to whoever won the tender.
The routes currently are being put to tender again, which has been the focus of industrial action by the ferry crews. Ministers say that European regulations on competition and public subsidy leave then with no alternative but to tender.
However one leading academic authority who has consistently challenged that claim, is now warning that it is CMAL’s regime of port charges which could run foul of European law.
Professor Neil Kay, Emeritus Professor of Economics at Strathclyde University who most recently has been working at the University of California (UCLA Berkeley), points to CMAL’s Strategic Plan 2012-2022 as being a source of the potential market distortion. In particular its declared goal of “making ports and harbours self-funding”.
Professor Kay has written to CMAL and the Scottish Government’s agency Transport Scotland saying that while self-funding is a commendable ambition, CMAL’s application of the same charging formula for frequent users like CalMac to all its ports, presented a real problem.
“The highly skewed nature of operator economic activity on the network means that some ports would be highly profitable through application of the CMAL port charges formula to users, while others would be major loss makers with the latter being largely financed by the former.
“This extreme skewness is consistent with a prima facie case that the CMAL port pricing formula would almost inevitably lead to excessive pricing at some ports.”
This could amount to millions of pounds over the life of a contract.
CMAL’s ownership of many ports, where they are the Harbour Authority, also meant that it would be held by Europe to be in “dominant” position in the eyes of the European Commission. The commission would also see each CMAL harbour individually as constituting a market.
According to Professor Kay, the net effect of it all could be seen as a breach of Article 82 of the EC Treaty which prohibits “Any abuse by one or more undertakings of a dominant position.”
He warned it could: “increase the likelihood that they will render unprofitable, ferry services that are inherently profitable.”
This would undermine any legitimate case for at least some of CalMac’s routes to be tendered by themselves. single route tendering.
“So in turn, it could create barriers to other EU operators (particularly smaller ones) on services served by the CalMac bundle by helping maintain the Clyde and Hebrides as a single large multi-route entity in which all routes may require subsidy. This would discriminate against other EU operators by putting up barriers to market access for potentially profitable services.”
CMAL officials are taking the points raised by Professor Kay seriously and are currently receiving further legal advice, so say it is inappropriate to comment further until this process is complete.
However Lorna Spencer, Director of Harbours at CMAL, did say:
“No decision has been made with regard to increasing or decreasing the berthing dues and harbour charges due at ports where CMAL is the Harbour Authority. However , as part of the CHFS tendering process, we are reviewing the revenue and cost requirements needed to operate, maintain and improve our Harbours in line with our obligations as a Harbour Authority as required by the Harbours Act 1964.”
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