Business loses legal challenge over £370m Northern Isles ferry subsidy

The Pentland Ferries vessel Pentalina B arrives in St Margarets Hope, South Ronaldsay. Photo: Tom O'Brien/courtesy of the Orcadian

A family firm has lost a legal challenge against a Scottish government plan for a £370 million subsidy for ferry links between the mainland and the Northern Isles.

Pentland Ferries raised a judicial review of the decision taken last year at the Court of Session in Edinburgh claiming that it was unlawful.

When the challenge was brought there was some speculation that it could derail plans to award a new contract of the North Isles ferry routes. But during a brief hearing on Friday a judge said he had decided to refuse the petition brought by the firm which runs a route between Gills Bay in Caithness and St Margaret’s Hope, on South Ronaldsay, in Orkney.

Lord Boyd of Duncansby rejected claims that the decision was unlawful and that aspects of it were irrational. The judge’s full decision will be released later.

Mark Lindsay QC told the court during an earlier hearing that the firm viewed the process as “an existential threat” and feared it might no longer be able to trade.

He argued that the subsidy amounted to unlawful state aid and would disturb the market.

Three firms, Calmac Ferries, Forde Reederei Seetouristik and the current operator Serco NorthLink, emerged as contenders for operating ferry routes between Orkney, Shetland and the Scottish mainland following the Scottish government decision last year.

Pentland challenged the provision of subsidy for the route between Scrabster, in Caithness, and Stromness, in Orkney, and the “bundling” of it with ferry links between Aberdeen and Kirkwall, in Orkney and Lerwick, in Shetland.

The firm, which provides the fastest car and passenger sea link between the mainland and Orkney across the Pentland Firth, is profitable and receives no subsidy.

It maintained that the proposed subsidy paid to the successful tendering company for the routes would be unlawful and in breach of obligations imposed on Scottish ministers by European regulations. It also maintained that there was no justification provided for including the Scrabster to Stromness route with other routes in the same subsidised public service contract.

The Scottish government contested the action brought by Pentland Ferries and after Lord Boyd’s decision its counsel, Ruth Crawford QC, sought its expenses for the case following its success.

The move was opposed by Mr Lindsay who said that it was only during the course of the judicial review hearing that accurate figures over the subsidy on the Scrabster to Stromness route were provided.

But Lord Boyd said: “I have decided that the normal rule about expenses should apply in this case and the respondents (the Scottish government) are entitled to their expenses.”

Agency copy by Dave Finlay

• Reaction to the judgment and what it means for the North Isles routes will be included in next week’s Shetland Times.