A Parliament select committee has questioned the legality of the government contract awards to three ferry companies, particularly Seaborne Freight which is proposing a Ramsgate/Ostend service, for additional Post-Brexit crossings.
The awards, revealed in December, total £107million with £13.8million of that going to Seaborne for extra ferry capacity in the event of a no deal Brexit on March 29 – despite being a start-up company with no vessels or track record as yet.
The firm says operations will start in late March – to coincide with the UK withdrawal from the European Union – initially with two ships.
However, despite prolonged negotiations no announcement has yet been made that a deal has been signed with Thanet council or Ostend for the route, with Ostend mayor Bart Tommelein saying Seaborne Freight had been unable to provide him with required financial guarantees.
The aim of the contracts is to alleviate pressure on Kent’s roads which would come with a ‘hard border’ and could lead to a backlog of traffic, particularly HGVs, trying to access Dover Port and the Eurotunnel.
But Transport Select Committee chairman Lilian Greenwood MP has written to Secretary of State, Chris Grayling MP, demanding answers over the legality of awarding the contracts without a competition process and questioning whether emergency powers applied when a No Deal Brexit was a foreseeable event.
She has also raised numerous questions in regard to the Seaborne contract, asking what due diligence was carried out, whether steps were taken to establish the experience of the firm’s directors, whether Seaborne ability to deliver was examined, whether there are RoRo vessels available that are suitable for Ramsgate, whether assessment has been made of the work that will need to take place at Ramsgate Port and the funding for it, what border and customs checks will be in place and whether support of a British start-up raises questions of illegal state aid.
Submissions published by the Transport Committee from two experts conclude the contracts are not legal.
Dr Andrew Watt states the ‘emergency powers are nor applicable, stating: “The Department for Transport cannot reasonably claim that the current circumstances are “unforeseeable” so cannot lawfully award the three “ferrygate” contracts.”
A submission from Dr Albert Sanchez-Graells, a former Member of the European Commission Stakeholder Expert Group on Public Procurement, agrees that emergency powers would not apply to the contracts and adds: “the award to Seaborne Freight (UK) Ltd still raises issues of potential illegality. The Secretary of State for Transport has justified the award as an act of support for a new British start-up business. This fact, coupled with the lack of readiness of the port infrastructure from which Seaborne plans to operate, undercuts the rationale of the extreme urgency of the procurement and heightens the likely illegality of the award. 6. All contracts, and Seaborne’s in particular, raise potential risks of illegal State aid that require further investigation
He adds: “Not only does the company not currently operate a ferry line, but the infrastructure of the UK port from which it plans to provide the emergency services requires adaptation. Even if the company is reported to have provided reassurances that the dredging of the port will allow it to be ready by the end of March, the Department for Transport is unavoidably accepting a risk of unavailability of the emergency services if that is not the case.
“Additionally, the Secretary of State for Transport, the Rt Hon Chris Grayling MP, has made public declarations that indicate a different—and illegal—rationale for the Seaborne award. Indeed, in a BBC Radio 4 Today interview, he expressed that he would ‘make no apologies for supporting a new British business’. He further indicated that ‘[Seaborne is] a new start-up business, government is supporting new British business and there is nothing wrong with that’
“This is a clear indication that the Department for Transport may have illegally decided the Seaborne award as part of a post-Brexit industrial policy. This would breach the requirement for the contracting authority seeking to rely on the ‘extreme urgency’ exemption to act diligently and be in the position to legitimately hold that the conditions for recourse to this procedure were in fact satisfied.”
Standing by the contracts
In response Mr Grayling says: “The Department stands by the award of these contracts as a responsible measure to secure capacity in the public interest in conditions of extreme urgency.”
He added that due diligence had been carried out on Seaborne Freight, that “management has extensive experience in the shipping and maritime sector including operation of ferry services “ and “The Department is working closely with Thanet and Seaborne to help ensure that the necessary physical preparations are undertaken.”
Mr Grayling says the Ramsgate/Ostend service is expected to be in operation by April and “Border Force has been in discussions with Thanet council as operator of the Port of Ramsgate, and with Seaborne Freight, on customs, excise and immigration checks over a period of months, and plans are well developed.”
He denied the contract was a way of giving Seaborne State Aid.
Chair of the Transport Select Committee, Lilian Greenwood MP, said: “The Government told the House of Commons that it was necessary to arrange these contracts using an emergency measure exemption to bypass the normal procurement process. The Secretary of State said there were ‘reasons of extreme urgency brought about by events unforeseeable by the contracting authority’.
“Shortly after the Secretary of State’s announcement that the contracts had been awarded, the Transport Committee received two written submissions to our inquiry into Freight and Brexit, which alleged the Department acted illegally in securing these contracts without a full procurement process. The authors of the evidence raised significant concerns which led us to write again to the Secretary of State, asking him to respond to the allegations.
“It seems extraordinary to me that the Government’s response fails both to provide any additional insight into why the Department used emergency powers in the award of the contracts, and to respond to the substance of our questions about the Department’s process for securing them. This was an opportunity for the Secretary of State to put the record straight.
“This cursory reply is no way to respond to the Committee’s efforts to scrutinise the Government’s decision to use emergency powers to award contracts worth hundreds of millions of pounds.”
Thanet council funding
Thanet council is set to stand down ‘a state of readiness’ at Ramsgate Port if no deal is signed with Seaborne Freight in time for the Full Council budget meeting on February 7.
Cabinet members at Thanet District Council have agreed a draft budget for 2019-20 which includes axing £630,000 – or £730,000 for a full year – from spending at Ramsgate Port.
The council needs to find savings of £1.8 million in order to balance the books and so proposes dropping £500,000 that had been spent in this financial year “keeping the port in a state of readiness for a ferry operation” plus an extra £130,000 of cuts which could involve staff redundancies.
Thanet council has denied claimed from Ramsgate Action Group (RAG) that debts at the Port and prolonged negotiations with Seaborne have pushed the authority into ‘crisis.’
A statement from RAG says: “If no agreement is signed between Ramsgate/Ostend and Seaborne Freight by February 7, Thanet District Council will be in crisis. Just a few hours later, the Corporate Management Team will have to inform all TDC staff of serious impending further cuts and redundancies in 2019/20.”
The group is calling for the resignation of council leader Bob Bayford, who last year took on responsibility for the port and ferry negotiations.
However, Thanet council has rebuffed the claims of crisis, saying: “Thanet District Council is not facing bankruptcy or entering into “special measures”. It’s extremely disappointing that irresponsible individuals are fabricating facts.
“TDC like many local authorities faces a sizeable budget gap due to significant reductions in central government funding received each year. The budget report due to be considered by the council on 7 February identifies a gap of £1.8m and sets out the measures to meet this to ensure the council can deliver a balanced budget for the year ahead.
“A planned gathering of all staff on February 7 is not an emergency meeting organised to announce redundancies. Any redundancies would always be discussed with officers directly affected in the first instance. The event is a long-planned, internal staff conference.”
RAG is holding a protest march on February 6 at 3.30pm from Pier Yard, outside Weatherspoon, the marching from Customs House to the Port and Harbour Offices.