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Petition to prevent award of Northern Isles subsidised ferry contract refused

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Petition to prevent award of Northern Isles subsidised ferry contract refused


10 May 2019

Pentland Ferries v Scottish Ministers

State aid – Public Service Contracts

Orkney and Shetland are presently served by a subsidised ferry service between Scrabster and Stromness and Aberdeen to Kirkwall and Lerwick. The current public service contract ends in October 2019. The petitioner is a private operator of ferry services on the Pentland Firth. It challenged the lawfulness of the proposed contract from October 2019. The challenge was to the offer of subsidy on the Scrabster and Stromness route, with which it competes, and the bundling of the two routes into one contract.

The Petitioner argued that its profitable operation on a competing route was evidence that there was no market failure on the Pentland Firth and therefore any subsidy would amount to unlawful State Aid. In refusing the petition, the court considered the Altmark criteria, manifest error, EU decision regarding subsidy of ferry routes and adequacy of transport services.

It was held that the Scottish Ministers had a margin of appreciation when assessing the adequacy of transport services. They were entitled to consider the need for individual routes. The court was satisfied that there was sufficient evidence to justify the designation of the Scrabster to Stromness route as a Service of General Economic Interest. It was not disputed that this route was well used and required subsidy in order to operate. Market failure was therefore present. No manifest error, which was equated to Wednesbury unreasonableness, was found to have occurred and the Altmark criteria were satisfied.

Mark Lindsay QC appeared for the Petitioner and Ruth Crawford QC and Ewen Campbell appeared for the Respondents. The petitioner has marked a reclaiming motion.