Shetland Islands Council has agreed to stump up nearly £5 million in compensation to Lerwick Port Authority, finally resolving a dispute relating to the Bressay bridge fiasco which has rumbled on for years.
It was confirmed at a joint press conference this afternoon that an out of court settlement of £4,825,727 had been agreed. The sum is just over £1 million less than the LPA had been seeking in redress for the millions it lost when the council’s actions forced it to temporarily abandon plans to dredge Lerwick Harbour.
It averts the spectacle of the two organisations coming face to face in an Edinburgh court of law later this year, which both sides agreed would have severely damaged Shetland’s standing in the wider world.
Confirmation of the long-expected hit to the public purse comes at a bad time for the SIC, which is likely to shed hundreds of jobs in making roughly £30 million of spending cuts between now and 2014.
The council had already parted with the bulk of £2 million on plans for a bridge between Lerwick and Bressay before the idea was ditched, meaning a total of nearly £7 million has been lost with no bricks and mortar to show for it. The local authority is instead now looking at building tunnels to link Bressay and other islands to the Shetland mainland.
Relations between the two organisations unravelled spectacularly in summer 2005 when the council obtained a last-minute interim interdict, halting the dredging work. Lord Reed subsequently ruled overwhelmingly in the port authority’s favour.
The council says it has secured the best deal in a set of bad circumstances. Elected members were advised in private on Monday that, once legal costs and interest payments were factored in, the damage could have been as high as £8 million had the matter gone all the way to the Court of Session.
Although he recognised that the settlement comes at a time of “severe budget pressures”, SIC political leader Josie Simpson said it had been in Shetland’s best interests to resolve the lengthy saga.
Both sides talked up the importance of working more closely together to secure numerous business opportunities for the islands, including oil activity to the west of Shetland and potentially lucrative rig decommissioning work.
“This has been a difficult time and a long running sore between the two organisations, but the settlement agreed between us means that a line can be drawn in the sand and both can move ahead,” Mr Simpson said.
Although the LPA has settled for less than the full amount it had been seeking, its chief executive Sandra Laurenson said the port authority was concerned with more than just money. She is pleased that by keeping it out of court, Shetland’s reputation won’t be further besmirched.
Ms Laurenson said: “There would have been huge reputational damage, as there was during the dispute. There’s no getting away from that, Shetland was seen to be a place that didn’t seem to be able to get its act together.
“This is a new chapter, it’s out of the way and we’ll be able to engage with the council on future projects that the port is doing in a meaningful way, and we really look forward to that engagement.”
The SIC sought the fateful interdict due to its fears that the dredging work, which the LPA viewed as vital to attract bigger vessels to the harbour, would hamper its plans for the £22 million bridge. Among those involved in the decision were SIC convener Sandy Cluness and former chief executive Morgan Goodlad.
But when Lord Reed conclusively backed the LPA’s position in early 2007, that gave it the green light to resume dredging. It sparked the long, drawn-out legal negotiations as the port authority sought recompense from the council having had to abandon the original contract with Belgium firm Jan de Nul, and other subsequent losses and expenses.
Asked for his thoughts on what had gone wrong and who was to blame, Mr Simpson responded: “I don’t think there’s anybody at fault. People acted on the best advice at the time and we are where we are, but what the agreement is today, I think we saw this coming and there’s a contingency fund set up. It’ll not be another £4.8 million that we have to find, that’s taken care of.”
He went on to thank former SIC official Gordon Greenhill, who has continued to represent the council as an adviser during the LPA negotiations, for his efforts.
There are no plans to stage an inquiry into the debacle, though SIC chief executive Alistair Buchan said there were undoubtedly “lessons to be learned”.
Mr Buchan believes new governance arrangements already put in place since 2010 will help to minimise the risk of a repeat, in particular referring to the “gateway process” major capital projects now have to go through.
He also explained that the SIC had been given outside legal advice that it was not insured against the claim because, having scrutinised the project “with a fine-tooth comb”, its insurers had been “unable to find any evidence of negligence on the part of council officials or elected members”.
Ms Laurenson said the LPA would be holding talks with its bank to see whether it can retain the £4.8 million to spend on a host of important new projects, including a new quay and fish market at North Holmsgarth and the replacement of its tug Kebister.
Most significant of all could be the “massive” deepwater decommissioning facility at Dales Voe, which would be “the biggest project the port has ever undertaken if it goes through”, Ms Laurenson pointed out.
LPA deputy chairman Brian Anderson paid tribute to Ms Laurenson and Mr Greenhill for their hard work bringing the matter to an end in a “very professional manner”. He wants to see “much more contact” between the two organisations, particularly with an eye on new oil developments west of Shetland.